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Saving a collapsed economy: Tehran takes loans from Moscow after the fall of the Iranian rial

Saturday 23/February/2019 - 01:26 PM
The Reference
Mohamed Shaat

As the Iranian economy continues to collapse, Tehran has resorted to external borrowing, with arrest campaigns taking place against hard currency traders following the collapse of the rial. Tehran police chief Hussein Rahimi announced that the police arrested 20 traders of hard currency in Tehran following the recent collapse of the local currency, which fell to 13,000 rials per US dollar.

Saving a collapsed

Rahimi stressed that all unlicensed exchange shops were closed, as well as the speculators market in Ferdowsi Square and other parts of Tehran. He pointed out that more than 190 foreign currency traders were arrested and put in jail for manipulating exchange rates.

Saving a collapsed

Taking loans from Russia

Iranian media confirmed that the Iranian regime has filed a request to borrow $5 billion from Russia to support the country's budget deficit of about $10 billion, according to a report issued by the Central Bank of Iran. This came following the decline of Iranian oil exports after the US implemented the second phase of sanctions against Tehran.

At the same time, the Iranian regime is witnessing further divisions over the vote on whether to interrogate Iranian President Hassan Rouhani after Iran's Supreme Leader Ali Khamenei accused him of trying to push Iran to sign the European mechanism that was prepared by France, Germany and Britain to circumvent the US sanctions, which Khamenei sees as a fundamental threat to the interests of his regime.

According to Iranian reports, the parliament approved the request for the $5 billion loan from Russia in light of the commodity prices increasing to about 33 percent (9 percent higher than the rate predicted by the World Bank), the deterioration of the economic situation in the country, and the high rate of crime due to poverty, addiction and unemployment at a time when the country is witnessing more protests and labor strikes.

Osama al-Hitimi
Osama al-Hitimi

Tightening the rope

Iranian affairs researcher Osama al-Hitimi said in a statement that Iran's tendency to borrow from abroad under the current economic conditions is natural, especially with its large budget deficit, which was announced a few weeks ago. However, this relies on Iran's ability to export about 1.5 million barrels of oil per day, which is not possible in light of the sharp decline in Iranian oil exports.

The researcher pointed out that Iran resorting to Russia to borrow reflects the extent to which the rope is tightening on Iran. On the one hand, it is difficult for Iran to find a party willing to grant it loans, as it is considered an unsafe risk, especially since tension still exists between Iran and the US.

Hitimi explained that what distinguishes the Russian side is that it is one of the most important forces opposed to American influence. On the other hand, this means that Iran is compelled to make more concessions to Russia in many files, most notably the Syrian file. Recently, there had been fierce competition between Russia and Iran, both seeking the largest piece of Syria.

Distributing roles

Iran will seek to convince the Russian side of the importance of distributing roles and to prove the principle of the inability of Russia and the Assad regime to dispense with the Iranian role in Syria, Hitimi said. He added that Tehran is not intent on making or even pushing the Assad regime to deal with the Russian forces in Syria as foreign forces, which entrenches Russia’s feet more strongly in Syria.

Hitimi pointed out that this reveals the extent of the Iranian regime’s pragmatism in dealing with US forces and others as foreign occupying forces, while at the same time opening the door wide open to Russian forces, without even paying attention to Russian policies, which are not very different from American policies except for different means and methods. Iran’s leaders are only concerned with their own interest