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Iran says big slide in currency value unrelated to new sanctions

January 3, 2012 |  1:27 pm

REPORTING FROM TEHRAN AND BEIRUT -- Iranian authorities denied Tuesday that the sharp slide in the value of its national currency against the U.S. dollar over the last few days was related to new U.S. sanctions against the Islamic Republic, local media reports said Tuesday.

Ramin Mehmaranpast, spokesman for Iran's Foreign Ministry, said there "is no relation" between the two events, noting that the new U.S. penalties "have yet to be put into practice,"according to the Islamic Republic News Agency.

On Saturday, President Obama signed a bill barring all foreign financial institutions that are doing business with Iran’s central bank from conducting corresponding operations in the United States. The move was the latest in a string of measures by Western powers to tighten the screws on the Iranian government over its contested nuclear program.

The U.S. and its allies accuse Iran of trying to develop nuclear weapons. Iran insists its program is only for peaceful purposes.

The devaluation of the rial appears to be the latest economic difficulty Iran is in embroiled in as the West ratchets up pressure. By late Monday, 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. It was selling at 9,900 to the greenback in September and 10,500 rials against the dollar in December 2010.

By Tuesday, the rial appeared to have recovered some and was selling at about 16,900 on the unofficial market. The central bank's website listed the exchange rate at 11,181 rial to the dollar. 

Some currency exchange offices in Tehran said trading had been halted until further notice, citing concern about unpredictable price trends in the near future.

Iranian President Mahmoud Ahmadinejad said last week that his government would do everything it could to hinder further devaluation of the rial, hinting that the government may prop up the currency by using some of its hard currency reserves. The Islamic Republic reportedly has tens of billions of dollars in reserves from its oil sales and the country is said to earn more than $70 billion per year from exporting crude.

Ahmadinejad has come under criticism for cutting subsidies on fuel and food in a bid to reduce  government spending, a move his critics say does little but increase inflation.

The currency slump comes in a week of heightened rhetoric between Iran and the U.S.

Iran reportedly concluded 10 days of war games in the Persian Gulf near the Strait of Hormuz with a naval parade Tuesday and has threatened to close the vital oil route, through which a sixth of the world’s oil passes, if the U.S. enacts further economic sanctions against Iran. Observers and analysts, however, have downplayed the threat, and several Iranian officials have gone back and forth on the warning.

In the most recent escalation, the head of the Iranian army said Tuesday that  a U.S. aircraft carrier that had recently left the Persian Gulf should not return.

"We recommend to the American warship that passed through the Strait of Hormuz and went to Gulf of Oman not to return to the Persian Gulf," Gen. Ataollah Salehi was quoted as saying in local news reports.

Salehi said the Iranians "have no plan to begin any irrational act, but we are ready against any threat."

The Pentagon, meanwhile, responded to the warning by saying U.S. warships  will continue to be deployed to the strategic passageway on a regular basis.

Also on Tuesday, Iran announced that it is waiting for decisions on resuming talks between Iran and world powers concerning its nuclear program  

"We are just waiting for the date and venue to be clarified by [European Union foreign policy chief Catherine] Ashton," Mehmaranpast told reporters in Tehran, according to Iranian news reports. "After that [Iran‘s chief nuclear negotiator Saedi] Jalili and his team would clarify Iran‘s position."


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-- Ramin Mostaghim in Tehran and Alexandra Sandels in Beirut

Photo: The U.S. aircraft carrier John C. Stennis transits the Strait of Hormuz on Nov. 12. The Pentagon said Tuesday that American warships will continue regularly scheduled deployments to the strategic waterway. Credit: Petty Officer 3rd Class Kenneth Abbate / U.S. Navy