Intelligence Agencies Minister Dan Meridor worked with French leaders in Paris on Wednesday to stiffen sanctions against Iran, as riot police in Tehran clashed with demonstrators rallying against the plunge in their country’s currency.

“Now is the time to increase international pressure on Iran, so that the Iranian regime understands that continued nuclear development endangers its existence,” said Meridor as he addressed an institute for strategic studies in Paris.

Meridor spoke about increased sanctions with French Foreign Minister Laurent Fabius and Defense Minister Jean Yves le Drian.

Fabius agreed that harsher sanctions were necessary, according to Meridor’s spokesman.

France, along with the Netherlands, Germany and Italy, has proposed harsher sanctions to the EU in advance of its October 15 meeting of 27 foreign ministers in Brussels.

The issue of stiffer Iran sanctions is likely to be raised when the Italian cabinet and prime minister come to Israel later this month. It is also likely to be on the agenda when Netanyahu leads his cabinet to Germany in December.

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In Tehran on Wednesday, protesters denounced President Mahmoud Ahmadinejad as a “traitor” whose policies had fueled their country’s economic crisis. Police fired tear gas to disperse the demonstrators, who were protesting a 40% drop in their currency’s value against the dollar in a week, witnesses said.

In a clampdown on the unofficial foreign currency market, a number of traders selling dollars were arrested after authorities ordered security forces to take action against those they see as speculators.

The rial has hit record lows against the US dollar almost daily as Western economic sanctions imposed over Iran’s disputed nuclear program have cut the country’s export earnings from oil, undermining the central bank’s ability to support the currency.

Panicking Iranians have scrambled to buy hard currency, pushing down the rial – the increasing weakness of which is hurting living standards and threatening jobs.

“Everyone wants to buy dollars, and it’s clear there’s a bit of a bank run,” said a Western diplomat based in Tehran.

“Ahmadinejad’s announcement of using police against exchangers and speculators didn’t help at all. Now people are even more worried.”

The protests are seen as posing a threat to Ahmadinejad rather than to the government, which is expected to put a stop to the foreign exchange black market, pump in funds to stabilize the currency and prevent the protests from spreading.

Foreign Minister Avigdor Liberman, who has predicted that the collapsing economy could lead to the regime’s demise, did not issue any additional statements on the matter after he returned to Israel Wednesday evening from a visit to the US.

Tehran’s main bazaar, whose merchants played a major role in the country’s 1979 revolution, was closed on Wednesday. A shopkeeper who sells household goods told Reuters that currency chaos was preventing merchants from quoting accurate prices.

A computer dealer said he had halted sales because of the volatility in the currency market.

“The same product can change price within an hour,” he said by telephone.

Protesters slam 'traitor' Ahmadinejad

The protests centered around the bazaar and spread, according to the opposition website Kaleme, to Imam Khomeini Square and Ferdowsi Avenue – the scene of bloody protests against Ahmadinejad’s reelection in 2009.

Protesters shouted slogans like “Mahmoud the traitor – you’ve ruined the country” and “Don’t fear, don’t fear – we are all together,” the website said.

The semi-official Mehr news agency said the largest gatherings were around the currency-trading centers of Ferdowsi Avenue, the Istanbul intersection, and Imam Khomeini Square. It said security forces had been deployed to disperse the protests.

Iranian authorities currently do not allow Reuters to report from inside the country.

The national currency dived to a record low on Tuesday, to 37,500 rial to the US dollar in the free market from about 34,200 rial at the close of business on Monday, foreign exchange traders in Tehran said. On Monday last week, it traded at around 24,600.

Ahmadinejad on Tuesday blamed the crisis on the US-led economic sanctions against Iran and insisted the country could ride out the crisis. He said security forces should act against 22 “ringleaders” in the currency market.

Iran’s Supreme Leader Ayatollah Ali Khamenei, meanwhile, struck a defiant note in a speech on Wednesday.

“The Iranian nation has never submitted to pressures and never will, and this is why the enemy is angry,” he said.

Mehrdad Emadi, an Iranian- born economic adviser to the EU, said the slide in the rial had prompted many Iranians to try to limit their losses by buying dollars.

“The rush out of the rial shows that everyone wants to sell. But clearly it is going to make the life of ordinary Iranians very painful and difficult,” he said.

The rial’s slide suggested the Western sanctions were having a serious impact.

Many businessmen and ordinary citizens say the government is at least partly to blame for the currency crisis, and Ahmadinejad has been criticized by enemies in parliament.

The rial’s losses accelerated in the past week after the government launched an “exchange center” to supply dollars to importers of basic goods. Businessmen say the center failed to meet demand for dollars.

Websites providing rates for the rial stopped updating on Tuesday, and Dubai money changers said they were not selling it because they had lost contact with their Tehran counterparts.

US Secretary of State Hillary Clinton held out the possibility on Wednesday that sanctions on Iran could be eased quickly if Tehran were willing to work with major powers to address questions about its nuclear program.

“They have made their own government decisions – having nothing to do with the sanctions – that have had an impact on the economic conditions inside of the country,” Clinton told reporters when asked about protests sparked by the collapse of Iran’s currency.

“Of course the sanctions have had an impact as well, but those could be remedied in short order if the Iranian government were willing to work with the P5+1 and the rest of the international community in a sincere manner,” she added, referring to a group that includes the five permanent members of the UN Security Council – the UK, China, France, Russia and the US – as well as Germany.

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