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Iranian leader: western sanctions hit currency

Wednesday, October 03, 2012    

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TEHRAN, Iran - President Mahmoud Ahmadinejad yesterday blamed the steep drop in Iran's currency to "psychological pressures" linked to Western sanctions over Tehran's nuclear programme.

The remarks were part of his attempt to deflect criticism from political rivals that his government's policies also have contributed to the nosedive of the Iranian rial, which has lost more than half its value against the US dollar this year and has sharply pushed up costs for many imported goods.

The price hikes have added to the burdens on Iran's economy as it struggles with tougher sanctions targeting its crucial oil exports and measures blocking it from key international banking networks. The US and its allies have imposed the punishing measures to try to persuade Iran to negotiate over its nuclear program, which the West says is aimed at developing atomic weapons. Tehran insists the programme is for peaceful purposes.

An Iranian parliament member, Mohammad Bayatian, was quoted on the chamber's website, icana.ir, as saying that enough signatures have been collected to force Ahmadinejad to face questioning before lawmakers over the currency's tumble.

Iran's currency fell again yesterday, hitting a record low of 34,500 rials against the US dollar on the unofficial street trading rate, which is widely followed in Iran. It was 29,500 rials to the dollar Sunday. Two years ago, it was close to 10,000 rials for US$1.

"Are these (currency) fluctuations because of economic problems? The answer is no," Ahmadinejad told reporters in his first public comments in Iran since returning from the UN General Assembly. "Is this because of government policies? Never ... It's due to psychological pressures. It's a psychological battle."

Ahmadinejad described the sanctions as part of a "heavy battle" that has succeeded in driving down oil exports "a bit," but he gave no precise figures. Some oil analysts estimate exports have fallen by more than 30 per cent since July, when the 27-nation European Union halted purchases of Iranian crude.

Iranian officials have insisted that Iran can ride out sanctions by expanding oil contracts with Asian markets such as China and India.

But the currency nosedive could bring even more political heat on Ahmadinejad, who has been left severely weakened after challenging Supreme Leader Ayatollah Ali Khamenei over the powers of the presidency. Ahmadinejad now could come under increasing domestic attacks before elections in June to pick his success.

Earlier this year, Ahmadinejad became the first president hauled before the 290-seat parliament for questions over his public feud with Khamenei.

The rial's sharp decline is blamed on a combination of Western sanctions and government policies, such as holding down bank interest, which prompted many people to withdraw their rials to exchange for foreign currency.

—AP

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