All tagged Central Bank of Iran
◢ Over the last 18 months, the Iranian rial has lost nearly 70 percent of its value, hammered by the Trump administration’s decision to reimpose secondary sanctions on Iran in violation of the JCPOA. But new interventions by the Central Bank of Iran appear to have helped stabilize the currency, leading some commentators to proclaim that the rial is no longer vulnerable to Trump’s maximum pressure campaign.
◢ Reform-minded Iranians, especially those inside the ailing banking system, are worried that the US government’s step to designate Iran’s Islamic Revolutionary Guard Corps (IRGC) as a terrorist organization has doomed a years-long effort to get the Islamic Republic off a consequential global blacklist.
◢ Despite mounting evidence that the Iranian government’s policy of allocating subsidized foreign currency for the importation of essential goods has failed, the Rouhani administration has signaled that it plans to maintain the policy for at least another year. But lawmakers and Rouhani’s own cabinet ministers may force the administration to change course.
◢ A new draft framework put forward by the Central Bank of Iran proposes a ban on the use of global cryptocurrencies for payments within the country, disappointing members of Iran’s burgeoning “crypto” community. The central bank has given the community one month to offer feedback on the proposed rules and now members are hard at work trying to reach a consensus to solve a thorny problem of monetary policy.
◢ With US sanctions on Iran’s banking sector due to come into effect soon, European countries are now considering measures that would facilitate trade transactions with Iran through a new legal and institutional structure. European governments have been reviewing this legal entity, known as a Special Purpose Vehicle (SPV), for months. The timing of this public announcement suggests that they have a degree of confidence that the SPV can become operational, and that Europe can use the model to showcase its ability to deliver on its commitments.
◢ In the coming weeks, the US administration will intensify its economic pressure on Iran through sanctions designed to curtail the country’s oil exports. Given that these exports account for a significant percentage of state revenue, the measures will hit Iran hard. Yet the sanctions will also have an impact on energy markets far beyond Iran, and may lead to a rise in global oil prices.
◢ In an op-ed published in the German newspaper Handelsblatt, German Foreign Minister Heiko Maas declared that the “the US and Europe have been drifting apart for years.” In order to defend the JCPOA and protect European companies active in Iran from U.S. sanctions, Maas has outlined three initiatives: “establishing payment channels independent of the US, a European monetary fund, and an independent SWIFT [payments] system.” This has given many in Iran hope that Europe might still be able to create an “economic package” to save the JCPOA. But Maas’s vision is not an economic package. It is an economic process, which may prove transformative, but only in the long term.
◢ On Monday, the Iranian rial sank to a historic low. But those Iranians who scrambled to convert their rials into dollars found it difficult to do so—as they have for months. This important detail of the current crisis has gone largely unexamined. While the determinants for demand for foreign exchange are well understood, the second determinant of market prices—foreign exchange supply—remains subject to mere passing mention. This is a mistake. Iran’s currency crisis is a supply-side story.
◢ Iran is facing the end of a four month extension given by the Financial Action Task Force (FATF) for the reform of the country’s AML/CFT regulations. Iran will be hoping for a further extension of the suspension of countermeasures at the June plenary of the FATF. Some FATF members have sought to characterize such extensions as exceptional. However, extensions are a common procedure, and FATF ought to treat Iran’s case in fair recognition of this fact.
◢ The governor of the Riksbank, Sweden’s central bank, is visiting Iran on April 5th on the invitation of Iran’s central bank governor Valiollah Seif. With an agenda focused on technical exchanges, a spokesperson for the Riksbank confirmed to Bourse & Bazaar that Ingves will give a presentation entitled “Central Banking and Financial Crisis: Lessons Learned.”