· Iran is reeling under the impact of reimposed sanctions after the U.S. walked out of the nuclear deal in May.
· But the crisis is exposing the strains between the moderate and hardline sections within the Islamic Republic’s leadership.
· Masoud Karbasian, who was removed as Finance Minister, is the latest high-profile political casualty in Iran’s attempts to counter the effects of a weakening currency and crippling U.S. sanctions.
· The rial has lost over 50% of its value this year, pushing up prices and compelling consumers to convert their savings into gold and other assets.
· With mounting public anger over high inflation and alleged corruption, any additional squeeze could worsen domestic tensions.
· President Hassan Rouhani had in July dropped Valiollah Seif as the central bank governor, for incompetence in handling the fallout from the currency crisis.
· It is only because of the relief from punitive sanctions after the nuclear deal had taken effect, Tehran managed to double its oil exports, climb out of a deep recession and contain inflation.
· With the return of economic sanctions, Iran has been prohibited from using the U.S. currency, and faces a bar on trade in cars, metals and minerals.
· In an effort to mitigate their impact, Abdolnaser Hemmati, the new central bank chief, has announced a relaxation of foreign exchange rules, creating access to subsidised hard money for purchase of essential commodities.
· He also declared the reopening of currency markets.
· But more difficult times loom, with the next round of sanctions that kick in by November aimed at impeding Iran’s energy exports and financial dealings with its central bank.
· The global community must weigh in to ease U.S.-Iran tensions.
· There remains the risk of an Iranian blockade on the Strait of Hormuz, the passage for about a third of global seaborne oil shipments.
· It would disrupt supplies and cause panic in global markets.
· With much to lose from Iran’s international isolation, the European Union should exert diplomatic pressure to renew talks.
· A fresh nuclear agreement appears to be a remote possibility at this stage. Conversely, even small relief from economic sanctions would bring some leverage at home for the beleaguered Mr. Rouhani.
Source : The Hindu