Voices from the Arab press: Iran and the temptations of dollarization

Iran and the temptations of dollarization

Asharq Al-Awsat, London, April 14

The question of whether Iran should transition to the US dollar as a de facto second currency has been gaining traction among the ruling elite in Tehran. With the national currency, the Roman, continuing its fifth year of a downward trajectory, Iran has just ended its fourth year of negative economic growth and is entering its fifth year with no clear prospects of a turnaround.

Mohammad Reza Farzin, the newly appointed governor of the Central Bank of Iran, attributes this poor performance to three factors: a liquidity tidal wave that has led to an inflation rate of nearly 50% annually; a lack of discipline within a technically bankrupt banking sector; and widespread fears about the future, which have created an insatiable demand for the US dollar.

The Central Bank of Iran profits 15% on dollars sold to semiprivate banks. Given these circumstances, the debate over whether Iran should switch to the US dollar as a de facto second currency has become increasingly urgent. This decision will have far-reaching implications for the country’s economic and political future.

In the last year, Iranians converted much of their savings into US dollars due to the devaluation of their national currency. According to Farzin, the Central Bank is expected to provide $65 billion to the government to cover its expenditures over the next 11 months. This has resulted in private Iranian investors investing or buying real estate in countries such as Turkey, Georgia, Oman, Dubai, and Kazakhstan.

However, it is not known how much of this money will come from printing more local currency and selling US dollars to private Iranian investors. The government is the primary source of US dollars, which it obtains from oil exports, and it benefits from the depreciation of the national currency. This has created an imbalance in the government’s economic strategy, as it needs to print money to make up for the lack of growth and tame inflation to encourage investment and productivity.

This currency devaluation can boost domestic production, but it can also lead to increased exports, thus exacerbating supply problems at the national level. The worsening situation in Iran is compounded by government subsidies that offer private companies the opportunity to re-export gasoline and petrochemical products at subsidized prices to Turkey, Armenia, and Iraq.

Official reports indicate that despite negative economic growth, gasoline consumption in Iran is increasing annually at a rate of 9%. This is due to the semiofficial export of gasoline to neighboring countries with the intent of obtaining US dollars. China, which receives a 20% reduction in the global price per barrel, accounts for 30% of Iran’s oil exports, with this percentage set to exceed 50% by 2028.

Farzin and President Ebrahim Raisi’s new economic team have suggested an increase in domestic gasoline prices, potentially leading to countrywide riots similar to those witnessed nearly a decade ago. The Tehran Stock Exchange recently approved the establishment of 90 new investment funds, using the US dollar as their currency to incentivize local traders to invest in public businesses and properties for privatization.

Talk about shifting to the US dollar to tame inflation and stabilize the economy has prompted numerous public and private sector trade unions to officially call for wages and salaries to be calculated in dollars, rather than in the national currency. The relative stability of the dollar compared to the national currency could shield wage earners from the devastating impacts of hyperinflation.

This could also persuade private investors to invest their funds into newly privatized companies and properties, which had suffered huge losses in the Tehran Stock Exchange between 2010 and 2015. However, it may be challenging for President Raisi’s economic advisers to obtain approval from Supreme Leader Ali Khamenei’s inner circle for full dollarization, like the one that aided countries such as Argentina to tame inflation and reestablish economic growth.

This group is instead exploring an alternative idea to peg the Iranian economy to China and Russia, to a lesser extent, as part of a strategy to reduce the US’s economic influence worldwide. The initial step toward this was Iran’s acceptance of the Chinese currency in exchange for a portion of its oil imports.

The problem is that while the value of the US dollar is determined by the market, the value of China’s currency is dictated by the Central Committee of the Communist Party. This puts China in a position of monopoly power, allowing it to pay Iran any amount it sees fit.

Meanwhile, the inner circle of the supreme leader has been refining its economic strategy, transitioning from an economy based on Islamic principles to one that is presented as the economy of Islamic resistance. It will not be easy to introduce the US dollar into this system, but with those who don’t regard economics as a science with its own set of rules, anything is possible. – Amir Taheri

Nasrallah threatens Israel with a ‘major war’

An-Nahar, Lebanon, April 15

Last Thursday, I had the opportunity together with some of my colleagues to host Lebanon’s ambassador to France, Rami Adwan, at a private meeting at his home in Paris. Foreign Minister Abdallah Bou Habib was also present, as he conducted a private visit to France during which he did not meet with any French officials.

The regional situation was top of mind, as we sought to gain further insight into the situation between the “axis of opposition” that violated southern Lebanon’s sovereignty, and Israel, whose positions have been vacillating between threats and calm.

In order for the Lebanese minister to feel comfortable speaking and for us to obtain a few insights, we agreed to not attribute any of what he said in the private session to him. We regret that decision now.

The only thing the Lebanese foreign minister revealed was that, when it comes to Hezbollah, there is no difference between elected Lebanese officials and the average Lebanese citizen, as they both have access to the exact same information, make the same guesses, share the same opinions, and fear the same consequences.

Despite our long experience of this reality, the thought of it is deeply troubling, particularly in this critical moment for Lebanon. How can Lebanon’s allies take our elected officials seriously when they appear helpless at every crossroad? Without violating the protocol of the closed session with the minister, I can share that Habib confirmed the notion that war and peace in Lebanon is fully in the hands of Hezbollah. Its actions in recent days, such as claiming that the rockets fired at Israel were fired by Palestinian factions, demonstrate that this imbalance of power will remain in place.

In his speech for International al-Quds Day, Hezbollah Secretary-General Hassan Nasrallah mocked Israel by claiming that its airstrikes only destroyed “bananas.” Maj. Gen. Hossein Salami, the commander of the Iranian Revolutionary Guards, also addressed Israeli Prime Minister Benjamin Netanyahu, warning him of a “major war.” In his address to the Israeli premier, Nasrallah highlighted the current helpless state of Lebanon, which is being manipulated by Hezbollah at the behest of the Iranian Revolutionary Guards.

This comes at a time when Saudi Arabia and Iran have signed the Beijing Agreement, which is seen to be isolating Israel. As a result of this, a political battle has sprung up in Lebanon between anti-Hezbollah forces over the extension of municipal and elective councils. This battle symbolizes the distraction of the Lebanese political class from the main challenge on our national agenda: restoring the Lebanese state and ensuring its survival. – Fares Khachan

God bless you, Sudanese generals

Okaz, Saudi Arabia, April 17

Warplanes screeching overhead, firing their missiles; tanks and armored vehicles traversing the streets, leaving pools of lava in their wake; military forces barricading roads and dividing regions; bullets whizzing through the air; dead and injured piling up; and citizens, frightened of impending death, holed up in their homes, eking out whatever provisions and water remain.

This is not a foreign invasion but a devastating civil war waged between two parties that were entrusted with the nation – but are now tearing it apart with extreme ferocity, searing hatred, and sinister violence.

The conditions in Sudan recently did not appear promising and no breakthrough was in sight, yet no one anticipated the sudden and alarming escalation that began on Saturday. We had expected that despite the differences between the president of the Transitional Military Council and his deputy, the national conscience would prevail and they would ultimately act with responsibility and integrity toward the Sudanese people, who have been suffering for decades due to the decisions of successive politicians.

However, it was evident that this was not the case, and it was clear that the participants in governance have no reservations when it comes to exploiting their people, even though they claim to have their best interests in mind.

We, as Arabs, have become increasingly hopeful in recent times due to the relative calm in some conflict hotspots, and the concerted efforts to extinguish the flames of strife. Nevertheless, there remain individuals who continue to deliberately and maliciously undermine the prospects of regional stability. Sadly, they often find supporters from within our ranks, either through political naivety or a desire to avenge their opponents, even if it means their country descends into chaos.

O wise men of the Arabs, O wise men of Sudan, let us not allow our beloved homeland and its people to succumb to such a bleak fate. Let us put aside our differences, heed the advice of our counselors, and respond to sincere attempts to safeguard our nation from complete destruction. – Hamoud Abu Talib

Alliance, not dependency

Al-Masry Al-Youm, Egypt, April 15

French President Emmanuel Macron’s recent remarks about the US and Europe’s alliance, not subordination, were met with admiration around the globe. The French president emphasized his support for his prior statements about Taiwan and Europe’s autonomy, which were interpreted differently in Europe and the US.

Nevertheless, he maintained that Europe is independent, and France is no exception. Macron’s words were a reminder that France remains the core of Europe. France is committed to the protection of freedoms and human rights around the world, particularly in its own country.

In recent days, France witnessed a wave of demonstrations that almost paralyzed the country, yet the government has not responded with suppression. Macron recently declared in Amsterdam that “being an ally does not mean being a follower or forgoing the right to independent thought.”

He addressed the situation in Taiwan, affirming the status quo and the One China policy, and expressing his desire for a peaceful resolution with Taiwan. France’s policy on this issue, he said, “is fixed and has not changed.”

There are those who interpreted Macron’s statements as a rejection of the US – leaving it to its own devices in the face of the East. In response, former president [Donald] Trump accused Macron of “groveling” to China. Macron, however, is determined to take a different approach to diplomacy than his predecessors.

In the days of former British prime minister Tony Blair, Europe routinely followed America’s lead, leading Blair to be dubbed “the poodle” for his unwavering loyalty. This dynamic led to the Iraq War, despite British documents indicating that Saddam Hussein did not possess nuclear weapons.

Macron is working to break this cycle of mindless wars and destruction, stating that “we are allies, not followers.” Europe desperately needed a leader like former German chancellor Angela Merkel and Macron. Merkel was a woman who was decisive; her word was her bond, and she was independent. During her time, Germany was a country that made decisions and retained its independence with composure and without a fuss.

In summary, Macron’s bold moves to protect Europe sent shock waves across America, but he was simply safeguarding his country’s autonomy from recklessness when he declared that they were allies, not dependents or “poodles.”  – Mohammad Amin

Translated by Asaf Zilberfarb.