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Hard times for Iran's black market currency dealers

January 18, 2012 |  7:14 am

REPORTING FROM TEHRAN AND BEIRUT— Business is anything but usual for Tehran’s black market money dealers after an order from Iran’s Central Bank to clamp down on the underground network in an effort to stem a sharp slide in the nation's currency against the U.S. dollar.  

The order, which reportedly took effect Sunday, left the streets around the city’s stock market, where black market currency hawkers usually wave bundles of cash, eerily quiet and empty of dealers. Some veteran dealers hung out in nearby alleys, griping over why the government was tightening its grip on them amid Western efforts to expand economic sanctions over Iran's nuclear program.

“They say that if the police find hard currencies in our pockets and we have no valid invoice then it is regarded as ‘smuggled-in hard currency,’ and I will be fined for as much as I have in my pocket,” said Hassan, a longtime black market dealer who says he was detained for more than three months and fined in a similar government clampdown back in the 1990s.

There has been no official word from the government regarding the clampdown. A recent report published on Iran’s semiofficial Fars News Agency (link in Persian) cited Central Bank Deputy Governor Ebrahim Darvishi as saying Thursday that banks and authorized foreign exchange offices can sell and buy foreign hard currencies, but that petty dealers in the sidewalks will be “removed.”

Many black market dealers link the clampdown order to what they say are the widening gaps in the official exchange rate for the U.S. dollar and that of the black market. On Tuesday, a U.S. dollar cost about 17,000 rials on the black market while Iran's Central Bank listed the dollar as costing 11,290 rials on its website.

Earlier this month, the Iranian currency was trading at about 18,000 rials to the dollar by money changers in Tehran, a dramatic slump compared to a few months ago. In September last year, the rial was selling at 9,900 to the greenback and 10,500 against the dollar in December 2010.

An employee in Tehran’s foreign currency exchange office said it had halted U.S. dollar trading. “We are waiting until the Central Bank can give us a stabilized legal rate,” said the employee, who asked not to be named. "The rate of the Central Bank is far lower than that of the black market."

The recent devaluation of the Iranian rial comes as Iran faces increasing Western economic pressure. The dramatic drop came days after President Obama this month signed a bill that will bar all foreign financial institutions doing business with Iran’s Central Bank from conducting corresponding business in the U.S. 

Iranian authorities denied the currency slide was related to new U.S. sanctions against the Islamic Republic's nuclear program. The U.S. and its allies suspect that Iran is trying to develop nuclear weapons but Iran insists its program is exclusively for peaceful purposes.

Some petty dealers complained they were being treated as scapegoats. But they are more discreet these days, whispering “U.S. dollar” or “euro” instead of flaunting bundles of hard cash under the noses of passers-by.

“I cannot help working,” said Ali, a money exchange street dealer. “Dealership is our way of earning" a living.


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-- Alexandra Sandels in Beirut and Ramin Mostaghim in Tehran