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Iran's Currency Faces Pressures Beyond the US-Led Sanctions

Is the continuing plunge in the Iranian rial due to more than the US-led sanctions? Mohammad Ali Shabani argues that these may also have become a convenient scapegoat as President Ahmadinejad consolidates control over sectors of the Iranian economy, including its currency market.  
Iranian rial banknotes are seen at a currency exchange shop in Kerbala, 110 km (70 miles) south of Baghdad January 27, 2012. In the money changing shops dotted around Baghdad's Karrada district, Iraqi merchants dabble in many currencies, but these days some joke that banknotes from neighbouring Iran and Syria are only worth plastering on windows as decorations. Picture taken January 27, 2012. To match Feature IRAQ-SANCTIONS/     REUTERS/Mushtaq Muhammed (IRAQ - Tags: SOCIETY BUSINESS)

The Iranian rial, after plunging 18% in just three days, hit an all-time low against the US dollar this week [Sept. 10]. But despite conventional wisdom, there are other factors behind this sudden drop besides the growing impact of U.S.-led sanctions on Iran.

Although Western-led sanctions have made Iran’s nuclear drive increasingly costly, the rial plunge may also be the firing shot of a broad effort by the Mahmoud Ahmadinejad administration to use the punitive measures as a cover to gain control over more sectors of the Iranian economy. This move may go hand in hand with a wider effort to deflect blame for the country’s economic malaise. The rial drop came only days after the Iranian president acknowledged the adverse effects of the sanctions on live TV after having largely denied such effects for years.

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