Iran said on September 2 that it is prepared to take a “stronger step” in reducing its commitments under the 2015 nuclear deal if European countries do not act to shield its economy from heavy US sanctions.
Also on September 2, Iran’s government spokesman said that Iran and France’s views on the deal have moved closer, particularly because of phone calls between Iranian President Hassan Rouhani and his French counterpart Emmanuel Macron.
On August 29, it was reported that Tehran’s latest standpoint on the future of the nuclear deal is that Europe can save it either by persuading Washington to restore sanctions waivers for Iran’s oil exports or by arranging a credit line for the Islamic Republic. Iran’s deputy foreign minister, Abbas Araghchi, outlined the position in an interview with state TV on August 29.
The options, according to Araghchi, were presented to Macron during the phone calls Hassan Rouhani. Macron has been active in exploring how to prevent Iran abandoning the nuclear accord, which the US unilaterally walked out of in May 2018 as President Donald Trump opted to switch to a heavy sanctions regime designed to wreck Iran’s economy to the point that Tehran comes to the table to accept a stricter agreement. Iran, France, Germany, the UK, Russia and China remain signed up to the existing deal but Iran says its trade and investment spheres have received so little protection from US sanctions from the signatories—and particularly from Europe’s major powers whom the Iranians had most pinned their hopes on—that the remaining part of the accord will soon not have any real value.
The impact of US sanctions on Iran’s economy is projected to peak this year, with growth resuming in 2020, according to the June issue of the World Bank’s twice-yearly Global Economic Prospects report. Iran was thrown back into recession last year by the Trump administration’s decision to reapply sanctions, suffering an economic contraction of 1.9%, following 2016 growth of 13.4% and 2017 growth of 3.8%. The World Bank’s latest forecast is for Iranian GDP to contract 4.5% in 2019, but to grow 0.9% in 2020.
Some international economists put Iran’s inflation rate a good deal higher than what is portrayed by the country’s official statisticians. Iran’s annual inflation rate rose sharply from about 10% in mid-2018 to about 52% in April 2019.
The Central Bank of Iran (CBI) on August 21 updated the official exchange rates. Several currencies weakened against the Iranian rial (IRR). The pound dropped to IRR50,921 while the euro declined to IRR46,560 on the official CBI exchange rate board,Under the changed list of official rates, the US dollar remained at IRR42,000.The US dollar, now essentially on official lockdown in Iran, remained fixed at IRR42,000. Iran continues to remove the greenback from daily transactions, partly to get around the US sanctions.
Iran should work to eliminate the gap that currently exists between the Iranian rial (IRR) market exchange rates and official exchange rate, according to the IMF, which will help tame and control inflation and reduce pressure on the exchange rate. The IRR is around two-thirds weaker against the dollar on the unofficial market compared to where it stood before it became clear early last year that the US was switching its Iran policy back to a sanctions-led approach.
Meanwhile, Iran’s redenomination bill was sent to the Iranian parliament by the cabinet on August 21 for debate among MPs, according to ICANA.
Iran is set to remove four zeros from its currency, the Iranian rial (IRR) in the next two years, provided all relevant bodies, including the Guardian Council, government committees and parliament give their blessing. As part of the new currency, to be officially called the “toman”, a new sub-currency named the “parseh”, equal to 100 toman, will be legislatively introduced.
Turkey on August 18 introduced another shock rate cut. The USD/Turkish lira (TRY) pair, which had been testing the 18-level for around a month, crashed through the 18/$ threshold towards 18.15.
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