The Collapse of Iran's Rial

Gatestone Institute 25 February 2013
By Steven Plaut

The Iranian banking system is rife with corruption and embezzlement. Of loans to public entities, over 90% are non-performing. The Ayatollahs seem to understand that the real threat to their hold on power comes from Iranians on the street and in the bazaar – people who understand that the government, not sanctions, has ruined the country's economy

"Wealth comes like a turtle and goes away like a gazelle." -- Persian Proverb

The Iranian economy has been imploding, at times even nudging news of Iran's nuclear program off of the front pages. In the first ten months of 2012, the Iranian currency, the rial, lost more than 80% of its exchange value. In a single day, on October 1, 2012, it dropped by 15%, and, after a brief reprieve, resumed its trend downwards in early 2013. At least one commentator has compared Iran's economic meltdown with that in Zimbabwe.[1]

Although many, including in the media, have interpreted Iran's economic woes as proof that economic sanctions are at last "working," there are reasons to believe that the economic disaster inside Iran has little, if anything, to do with the sanctions, and -- more generally -- that sanctions cannot possibly "work" against Iran. The collapse of the Iranian currency is largely the byproduct of internal Iranian economic policy. (continue reading...)