Iran's rial drops 10% as EU bans oil imports

January 23, 2012 15:23

TEHRAN - Iran's rial currency plunged 10 percent to a new record low on Monday as the EU imposed a ban on Iranian oil imports, posing a major headache for President Mahmoud Ahmadinejad who has said sanctions will not hurt the economy.

European Union governments agreed to an immediate ban on all new contracts to import, purchase or transport Iranian crude oil and petroleum products, EU officials said, in a move aimed at ramping up pressure on Tehran to curb its nuclear activities.

The ban, which comes on top of new U.S. sanctions aimed at hampering Iran's oil exports around the world, sent Iranians rushing to convert their savings into hard currency as efforts to curb black market trading failed.

The price of dollars rose 7 percent from Saturday, the last working day, to 20,500 rials, up 15 percent from last week. It has rallied almost 50 percent from a month ago, according to the financial website Mesghal.

The rial's slide is likely to exacerbate inflation which is already at 20 percent and rising, as Iran is heavily reliant on imported consumer and intermediate goods whose prices have surged as the rial has depreciated.

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