The rise of the Iranian rial may signal a nuclear deal or intransigence

Iran’s currency has risen a staggering 7 percent in recent days, despite the economy not improving and the prospects for a nuclear deal unclear.

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

However, the rial rose against the US dollar. It was trading at nearly 300,000 on Sunday, August 14, from a low of 320,000 to the dollar.

Since the United States abandoned the JCPOA in 2018 and the rial has appreciated ninefold in the following years, its exchange rate has fluctuated on news of the prospects for a nuclear deal, because that would lift the crippling sanctions of the USA In the absence of any sign that Tehran is close to accepting the EU’s proposal, the rise of the rial is difficult to explain.

One possibility is that upper management intends to accept the offer, which is said to be very generous. Since the country’s main economic players are the same leaders who control 80 percent of the centralized economy, it’s possible that insider information is helping the rial regain some ground.

The other possibility is the opposite. The government is pumping dollars into the foreign exchange market to defend the rial, which has a direct impact on rising 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 that the national currency is not about to fall to new lows.

Tehran also wanted to tell the world can survive under US sanctions and he is not desperate for a nuclear deal. A stable, if weak, currency may also signal to the West that Iran is not under economic pressure to make concessions.

But the economic news is not good, and those following the ups and downs of the situation in Iran can point to ample evidence of a lingering crisis.

On Sunday, a member of parliament who pleaded with the president, Mohammad Bagher Ghalibaf (Qalibaf), asked for clarity on the nuclear talks. Speaking of galloping prices, MP Shahbaz Hassanpur said“Prices are so out of control we’re embarrassed to talk about them.”

The latest official figures show the annual inflation rate stands at 54 percent, while food prices have risen 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, murders, arrests and disappearances

Meanwhile, it has increased exports 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 now sends more than three times that amount, mainly in China Rising oil prices have also helped, although Iran offers discounts and suffers high costs for making illicit shipments.

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

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