“Trigger Mechanism” Strikes the Rial’s Migraine; Historic Record for Dollar Price
With the United States announcing the activation of the trigger mechanism, the value of Iran’s national currency against the dollar fell 2.5 percent compared to the previous day. Coinciding with the historic record for dollar prices, Tehran’s stock exchange index also fell approximately three percent.
Mike Pompeo, the U.S. Secretary of State, as expected, announced on Sunday morning, the 30th of Shahrivar, Tehran time, that with the expiration of the thirty-day deadline for activating the trigger mechanism, all international sanctions against the Islamic Republic that had been suspended by the nuclear agreement would be re-imposed.
With this announcement, the fever in Tehran’s currency and stock market, which had begun in recent days, reached a new peak, meaning a new record decline for Iran’s national currency against credible foreign currencies.
The Sana System, belonging to the Central Bank of the Islamic Republic, at the end of Sunday’s trading session registered the selling price of each U.S. dollar at 27,300 tomans and the price of each euro at 32,150 tomans.
Historic Record of Rial’s Decline
This is a historic record in the decline and depreciation of the rial’s value, showing a decrease of approximately 2.5 percent compared to the previous day. The price of the dollar in the free market was 100 tomans higher, and the price of the euro was close to 300 tomans higher than the Sana System price.
Reuters estimates that the value of the rial has declined approximately 49 percent from the beginning of this calendar year to now. The dollar price has increased six and a half times compared to Farvardin 1397 (April 2018), when the First Vice President, Eshaq Jahangiri, announced it as a single-digit figure of 4,200 tomans.
With the announcement of the return of international sanctions, Iran’s overall stock exchange index also fell more than 45,000 units, meaning a decline of nearly three percent compared to the previous day.
Abdolnasser Hemmati, the Governor of the Central Bank, in recent days and weeks repeatedly promised to implement policies to establish stability and calm in the currency market and prevent further depreciation of the rial’s value.
These measures have so far yielded no results, and the injection of large amounts of foreign currency into the market that Hemmati promised is not an easy task given the sharp decline in exports, oil prices, and the government’s foreign exchange revenues.
Hemmati had said some time ago that approximately 280 billion dollars in foreign currency had been injected into the market over the past 15 years. On this basis, on average, more than 18 billion and 600 million dollars in foreign currency entered the market each year.
Currently, the government faces serious difficulties in providing this amount of foreign currency. The International Monetary Fund estimates that Iran’s foreign exchange reserves inside and outside the country will reach 85 billion dollars this year with a decrease of 19 billion dollars, and next year will also decrease by 16 billion dollars.
Rouhani’s Claim about America’s Day of Defeat
Despite the unprecedented decline in the rial’s value against the dollar and the sharp decrease in the stock exchange index, Hassan Rouhani, the President, in the cabinet meeting on the 30th of Shahrivar, claimed: “Today, America was defeated.”
According to ISNA news agency, Rouhani described America’s use of the trigger mechanism as having no legal basis and said: “It was completely clear that America would face inevitable defeat in this regard, but at the same time, the method adopted by the Security Council in this matter was valuable, and that too was the method of disregard for America’s letter and request, and did not even hold a session to review it.”
Although most members of the Security Council did not welcome the American action and the five remaining parties to the nuclear agreement also say that America, by withdrawing from the agreement, is not a participating member of the JCPOA and cannot activate the trigger mechanism, Washington has another plan for reimposing international sanctions.
Reuters reported on Friday, citing several informed sources, that Donald Trump, the President of the United States, will sign an executive order in the coming days to enforce penalties for sanctions violators against the Islamic Republic.
America’s Pressure Lever and Rouhani’s Implicit Confession
The main axis of American sanctions is the imposition of “secondary sanctions.” Secondary sanctions mean imposing penalties against real and legal persons from third countries that violate American sanctions against a country like Iran.
Given the powerful position of the United States in the global economy, secondary sanctions and deprivation of access to American markets are considered an effective and powerful lever for applying pressure and advancing the White House’s policies.
Apparently, Hassan Rouhani, despite his claim about America’s “inevitable defeat,” knows and implicitly admits that Washington can, through solutions such as secondary sanctions, prevent economic cooperation and trade and financial exchanges with Iran.
The head of the twelfth government said in the cabinet meeting that if America “wants to use its bullying” and takes practical steps to reimpose international sanctions, “it will definitely face Iran’s decisive response.”
He did not provide further explanation about how the Islamic Republic’s “decisive response” would work, but said that any effort by the United States to reimpose these sanctions “will be accompanied by Iran’s response, and the responsibility for its consequences will rest with America.”
Mohammad Baqer Qalibaf expressed Rouhani’s implicit confession more clearly in Saturday’s public session, the 30th of Shahrivar. He said that the “political and legal failures” of America should not be celebrated too much because “if some negligences continue, the enemy will step by step move forward in intensifying sanctions to give sanctions a new form.”
Source: DW
