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For Iran sanctions doubters, a question: Why is currency value plummeting? comments ()

By Tod Robberson / Editorial Writer 11:49 am on October 2, 2012 | Permalink

Mitt Romney and his pal, Benjamin Netanyahu of Israel, face an increasingly uphill battle arguing that the tough sanctions regime put in place by the Obama administration isn’t working. The pressure on Iran’s government to cease its uranium-enrichment program and abide by its international treaty obligations has never been more severe than it is today. The value of Iran’s currency, the rial, is in free fall. According to Reuters, the rial reached a record low value of 37,500 to the dollar on the free market. A week ago it traded at about 24,600. Between 2010 and 2011, the rial’s value remained relatively steady at between 10,300 and 10,800 to the dollar. According to one report, Iranians lost 660 trillion in rial-based assets because of the plummeting market. This marks an enormous financial crisis for the country. Heck, things are so bad that, instead of sightseeing in New York last week, the Iranian delegation headed by President Mahmoud Ahmadinejad went on a shopping trip to Costco to buy stuff like shampoo that they can’t get in their own country. One member of his delegation reportedly has defected. What has happened since last year to make the currency plummet to less than half its 2011 value? Sanctions, that’s what. The Obama administration worked closely with America’s European and Arab allies to steadily tighten the noose on Iran. Europe, Canada and the United States approved a freeze on Iranian government assets held in

foreign banks, blocking the government from repatriating any earnings it made off foreign sales of petroleum, the lifeblood of Iran’s economy. Without the ability to repatriate hard currency, Iran has no way to pay for products it imports from abroad. It can’t get letters of credit. It really has no way to pay for anything. The United States and Europe also threatened penalties against companies that cooperated in exporting Iranian oil. Shippers can’t get insurance if they carry Iranian crude. Anyone who does business with Iran risks being frozen out of U.S. markets and could risk having their own assets frozen or facing criminal penalties. The result: According to the Treasury Department, Iranian crude-oil exports have dropped from 2.4 million barrels a day last year to 1 million a day or less. With the loss of Iranian crude exports, why haven’t world petroleum prices skyrocketed? Because Saudi Arabia, Kuwait and other allies have boosted their production to fill the gap. This confluence of factors didn’t just happen by coincidence. It required coordination and discipline to make keep everyone in line and hold tight with their commitments to keep the sanctions in place. Try as Romney might to accuse the Obama administration of being ineffective or inept, the record is clear that these sanctions are holding tight because the administration quietly weaved together — and held together — an international coalition. And now, there can be no argument that the sanctions are taking a steep toll on Iran’s government. This helps explain why Israel’s foreign ministry issued a report last week calling for the government to give sanctions more time — in spite of the constant drumbeat of war coming from Netanyahu and Romney. Yes, Romney can ask for proof that Iran has curtailed its uranium enrichment program as a result, and that’s a fair question. The answer almost certainly is: There is no proof — yet. That’s what the sanctions are all about. At a certain point pretty soon, Iran’s isolation and economic strife are going to reach a breaking point, at which time Tehran will seriously enter negotiations on inspections and agree to international limits on its enrichment activities. Sure beats war. Romney is going to have to come up with another argument heading into tomorrow’s debates. He can’t even rely on backing from Netanyahu, who appears to be backing away from the hard-line stance he had maintained barely three weeks ago. Read more on that at

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