Economic expert: Parallel currency threatens Iran's economy
Azerbaijan, Baku, Jun.4 / Trend D.Khatinoglu/
On June 3, the U.S. president signed unilateral sanctions against Iran that for the first time targeted the country's currency, the rial.
The official statement reads that the sanctions target any "foreign financial institutions that knowingly conduct or facilitate significant transactions for the purchase or sale of the Iranian rial, or that maintain significant accounts outside Iran denominated in the Iranian rial."
Economic Advisor for the companies in the European Union, Mehrdad Emadi told Trend Agency that sanctions against Iran's rial, will lead to a sharp fall in the currency's value, as well create parallel currency inside the country.
Iran's national currency, the rial, has lost about 50 percent of its foreign exchange value in comparison to the U.S. dollar from the beginning of 2012.
After tightening economic sanctions on Iran, especially in the second half of 2011, Iranian media outlets reported that citizens intended to convert their assets to foreign currencies.
According to the reports, Iranian people hold $18 billion and Euro in their homes. This figure shares 12 to 18 percent of Iran's total foreign currency reserves.
Emadi, also an expert in the field of investment in the EU, said that when a national currency loses its validity in international banking systems, a parallel currency will gradually take its place inside the country, just like what happened to Mexico's national currency or the Soviet Union's currency after interfering in Afghanistan's internal affairs. Even after the first Persian Gulf War, Iraqis began to use foreign currencies for trading inside the country.
Economic expert further added that Iranians will also be forced to use parallel currencies for their savings. In other words, they'll have to take out their savings from the banks and convert them to euro or dollar. This issue will deliver a though blow to Iran's banking system and will decrease the value of the country's national currency sharply.
According to Iranian Deputy Minister of Industry, Mine, and Trade Hamid Safdel, Iran has also about $100 billion worth foreign reserves blocked aboard due to sanctions.
According to Emadi, the Iranian rial lost its credit after the U.S. imposed sanction on Iran in 2002 following the previous sanctions in 1997. In other words, the Iranian rial was no longer used in transactions as an accredited currency. The situation was not so bad before the sanctions, so that the rial was accepted in Turkey, the Persian Gulf states, and even in Afghanistan.
The new U.S. sanctions, which were endorsed on Monday by Barack Obama, have given a new dimension to the issue, to the extent that all the individuals and financial entities have been legally banned from doing transaction based on the Iranian rial.
After being sanctioned by the U.S. and the EU in 2012, Iran has always said that it will replace the dollar with local currencies in foreign trade and bartering.
When Iran concludes a bartering deal, it stipulates that the value of the deal will be calculated in the dollar or the euro based on their exchange rates against the rial, Emadi said, but after the new imposed sanctions, signing this sort of contractions is impossible.