Iranian currency plunges in wake of US sanctions
Here's a bit of holiday cheer for you. The riyal, Iran's main currency, has dropped about 10% in value due to US sanctions on Iran's central bank.
Iran's currency value has fallen more than 10% in less than a week to record lows, after a US move to tighten financial sanctions against the Islamic republic.
The riyal lurched to as low as 16,800 to the dollar, down from 15,200 at the end of last week. It was valued at 10,500 just a year ago.
The slump was blamed on US sanctions which target the Iranian central bank. The White House move to blacklist any company or institution that trades with the Central Bank of Iran aims to make it harder for Iran to sell its oil.
Iranian officials on Monday downplayed the new US sanction, with the economy ministry's Shamseddin Hosseini quoted as saying that targeting the central bank was an "unsuccessful choice".
President Mahmoud Ahmadinejad said last week his administration will do everything it can to stave off further steep depreciation in the riyal's value, signalling the use of hard currency reserves.
Oil sales have allowed Iran to build up a nest egg of tens of billions of dollars. The country earns more than $70bn from exporting crude oil each year, 80% of its annual foreign revenue.
Ahmadinejad has already come under fire for cutting subsidies on fuel and food. The step is aimed at reducing state spending while also distributing money directly to the poor. Critics contend the cuts will do little more than stoke inflation.
Forcing the Iranians to use their reserve cash to buttress their currency is exactly what the central bank sanctions are supposed to do. This means fewer dollars to buy weapons with, as well as less money to supply terrorists like Hezb'allah and Hamas.
As inflation rears its head, Ahamdinejad is rapidly becoming the most unpopular politician in Iran. The parliament has already been making noises about impeaching him for corruption and the economic distress being caused is not likely to help him.