The Obama administration accused the elite of Iran’s regime and the Iranian Revolutionary Guard Corps (IRGC) on Tuesday of profiting “on the back of the average Iranian” as the nation’s currency plunges under pressure from international sanctions.
The new allegation coincided with the decline in the market value of the Iranian rial, which has dropped about 15 percent against the dollar in the past five weeks and 35 percent since March, according to Tehran’s independent
Donya-e-Eqtesad newspaper. The 39 percent difference between the central bank’s official rate and market rates on Dec. 21 was the largest in almost two decades, economists in Tehran and Washington said in interviews.
RELATED:'Speculation that Israel nuclear-armed deters Iran'US Treasury Undersecretary David Cohen said the gap between the two rates has provided an arbitrage opportunity exploited by officials and businesses affiliated with the IRGC, the elite military arm that’s under international sanctions for suspected nuclear weapons work and terrorism. They are among regime elements able to obtain foreign currency at the favorable official exchange rate and sell it for a profit in exchange bureaus at the market rate, he told the Senate Foreign Relations Committee in written testimony Dec. 1.
“Ordinary Iranians are urgently seeking out foreign currency such as dollars or euros for safety, yet they are having trouble accessing hard currency, and when they can, they have to pay the unofficial market rate,” said Cohen, the Treasury undersecretary for terrorism and financial intelligence.
“At the same time, senior government officials and preferred businesses, including IRGC-owned and controlled operations, are able to access foreign exchange at the official rate, essentially engaging in profitable arbitrage on the back of the average Iranian,” according to Cohen.
The assertion that the IRGC and senior regime members are profiting from
the rial’s fall raises questions about whether sanctions are having the
unintended effect of enriching entities involved in nuclear and missile
proliferation, said Ken Katzman of the non-partisan Congressional
Research Service in Washington and author of a book on the IRGC.
“Clearly sanctions are hurting the economy, but are the sanctions
putting pressure on the key institutions they are intended to pressure,
or could it be making the government more powerful relative to the
population than it was before?” Katzman said in an interview.