Some Iranian traders and exchange offices held off transactions on Monday after Washington reinstated sanctions following the dissolution of the 2015 nuclear deal.
Several exchange offices told The National they had stopped trading on Monday afternoon, refusing to provide an exchange rate. However, according to online exchange rate monitoring website Bonbast.com, each dollar was sold for 148,000 rials, a 1,000-rial drop compared to the day before.
The market has yet to react specifically to the sanctions, according to one expert. "So far, the market is responding to the reports of waivers the US will grant to Iran's oil customers," a professor of economics in Tehran told The National.
The US named 300 new elements to the sanctions including Iran’s oil, shipping, insurance and banking sectors. But Washington said late on Monday UAE time it would temporarily allow eight importers to keep buying oil from Iran. They are China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea. The exemptions will last up to 180 days and have been granted on the basis that importers have already reduced imports and will consider further cuts.
“The waivers will last only a few months. So, we might see more psychological impact in the future,” the professor said, requesting anonymity. “The government has also been successful to have some control over the market.”
The rial has lost 70 per cent of its value since last year, in what many attribute to the impact of Washington’s tough stance and fear over the reimposition of sanctions, among other reasons. The government has introduced various measures to shore up the currency, including a crackdown on traders, ever since the rial began to lose value. But those measures have so far been ineffective.
Meanwhile, European countries have moved to reduce the impact of sanctions in an effort to save the nuclear deal, which they say works perfectly to curb Iran’s nuclear activities. They have introduced a “special purpose vehicle” as an alternative to sanctions on Society for the Worldwide Interbank Financial Telecommunication (SWIFT) transactions. Curbs on financial transactions are a matter of concern for businesses in particular.
Prices in Iran have rocketed in the past few months, due mostly to the increasing cost of imported goods, sparking further discontent amid protests that started in January over economic grievances. Businesses are also concerned, albeit still hopeful, that this could be a short-lived shock.
"I think we will encounter some problems in the short run. But hopefully then things will go back to normal," the chief executive of a trade company told The National, who did not wish to be named. "This is too much pressure the US is putting on us. This is unacceptable."
Iran said on Monday it would defy the unilateral sanctions, labelling them “economic war”.