The Rise Of Iran's Rial Can Signal A Nuclear Deal Or Intransigence

Iran’s currency has surprisingly risen by 7 percent in recent days despite no improvement in the economy and no clarity over the prospects of a nuclear deal.

The latest round of nuclear talk in Vienna ended on August 8 with the European Union presenting what it called the draft of a final agreement to Iran and the United States for reviving the 2015 nuclear deal, the JCPOA. The Iranian delegation returned to Tehran saying the EU document is not a final deal, but a proposal that Iran will study.

Nevertheless, the rial rose against the US dollar. It traded at almost 300,000 on Sunday, August 14, rising from a low of 320,000 to the dollar.

Since the US left the JCPOA in 2018 and the rial fell ninefold in the following years, its exchange rate has fluctuated with news about the prospects of a nuclear deal, because that would lift crippling US sanctions. In the absence of any sign that Tehran is about to accept the EU proposal, the rial’s rise is hard to explain.

One possibility is that the top leadership intends to accept the offer, which is reportedly very generous. Since the biggest economic players in the country are the same leaders who control 80 percent of the centralized economy, it is possible that insider information is helping the rial to regain some territory.

The other possibility is quite the opposite. The government is pumping dollars into the currency market to defend the rial, which has a direct impact on soaring prices. If the Islamic Republic intends to reject or postpone a nuclear deal, it wants to signal to its restless population that all is well, and the national currency is not about to fall to new lows.

Tehran has also been keen to tell the world that it can survive under US sanctions and is not desperate for a nuclear deal. A stable, though weak currency, can also be a signal to the West that Iran is not under economic pressure to make concessions.

But the economic news is not good and those who follow the ups and downs of the situation in Iran can point to ample evidence of a persisting crisis.

On Sunday, a member of parliament pleading with the Speaker, Mohammad Bagher Ghalibaf (Qalibaf), asked for clarity about the nuclear talks. Speaking about galloping prices, MP Shahbaz Hassanpur said, “Prices are so out of control that talking about them brings shame to us.”

Latest official figures show the annual inflation rate stands at 54 percent, while food prices have risen by more than 100 percent since last August.

There have been almost continuous protests in different parts of the country, but nothing that the regime cannot control with overwhelming military force, killings, arrests and disappearances.

Meanwhile, it has increased the export of its sanctioned oil since the US entered nuclear talks in early 2021. From a low of 250,000 barrels per day in 2019-2020, Tehran is now shipping more than three times that quantity, mostly to China. Higher oil prices have also helped, although Iran offers discounts and undergoes high costs to make illicit shipments.

Having some financial cushion, the regime can hope to maintain its grip on power without getting rid of US sanctions, and even stabilize its currency at low levels.