Iran's currency in freefall; leaders panicking

From Reuters:

Iran's currency has slid 20 percent against the dollar in the last week despite central bank intervention, and Iranians concerned about the economy said on Tuesday attempts to send text messages using the word "dollar" appeared to be blocked.

The central bank reportedly pumped $200 million dollars into the market last Wednesday after new and much tougher U.S. sanctions prompted nervous Iranians to change rials into hard currency, accelerating a rise in the price of dollars on the open market.

Saying it would act to stabilise the currency, the Central Bank of Iran (CBI) imposed a rate of 14,000 rials to the dollar - up from record lows of around 18,000 rials - but many exchange offices would not sell at that price.

By Tuesday the exchange rate had risen again to around 17,000 rials, according to exchange bureaus, 50 percent more than the CBI's "reference rate" of 11,240 rials.

The currency slide is a huge risk for consumer prices in a country where the official inflation rate - considered an underestimate by many economists - is already around 20 percent and rising.

In a hint of political sensitivity over the issue, Iranians, long used to controls over Internet and mobile communications, said they were unable to send text messages containing the word "dollar".

"My colleagues and I tried to text each other in the office and to our surprise we found that texts that included words like 'dollar' and 'foreign currency' could not be delivered," said Malek, a 45-year-old government employee in Tehran.

Newspapers reported on the problem, adding that officials had denied filtering text messages. Reuters calls to officials went unanswered.

The head of the Iran-China Joint Chamber of Commerce, Asadollah Asgaroladi, estimated that annual inflation stood at 40 percent this month and that it would have been 27 percent without the currency slide, Khabaronline, a website close to the government, reported.

There is nothing in the official Iranian press about this.

In related news, India is set to cut Iranian oil imports:

The union government [in India] has told refiners to reduce Iranian oil imports and find alternatives as New Delhi may not seek a waiver that would protect buyers of Tehran's oil from a fresh round of U.S. sanctions, two industry sources said on Wednesday.

India, Iran's second largest oil buyer after China, is already struggling to pay for the crude due to existing sanctions, and fresh U.S. measures aimed at isolating Iran over its nuclear programme will make payment even harder.

The South Asian country buys from Iran about 12 percent of its oil needs, or 350,000-400,000 barrels per day (bpd) and worth $12 billion annually.

Indian oil firms were told by officials at a meeting on Monday that the government was not planning to seek an exemption from the U.S. sanctions, and were advised to reduce dependence on Iran and be ready with alternative supply sources.

It looks like the increased Western sanctions against Iran - and threats of new sanctions - are finally starting to take effect. It is a shame that they were not in place years before.

Is this a case of better late than never?

(h/t Yoel)