Iran currency plunge an omen for change?

October 2, 2012

In recent days Iranians all over the country have been rushing to dealers to change their rials into hard currency. The result has been a spectacular plunge in the rial which has lost a third of its value against the dollar in the past week. Traders in Teheran estimate in fact that it has lost two-thirds of its value since June 2011 as U.S and European economic sanctions bite hard into the country’s oil exports. The government blames the rout on speculators.

According to Charles Robertson at Renaissance Capital,  the rial’s tumble to record lows  and inflation running around 25 percent may be an indicator that Iran is moving towards regime change.  Robertson reminds us of his report from back in March where he pointed out that autocratic countries with a falling per capita income are more likely to move towards democracy. (Click here for what we wrote on this topic at the time)

He says today:

The renewed collapse of the currency recently suggests sanctions are working towards that end.

Iran’s 2009 per capita income of over $10,000 would put it among the countries that have a 5.1 to 15.5 percent chance of democratisation if incomes shrink, according to Robertson’s calculations in March, based on past regime changes in other countries. (Iran itself could argue, reasonably enough, that it is the most democratic country in the region — everyone over the age of 18, including women, are allowed to vote, though the choice of candidates is restricted)

Furthermore, 17% of the population is comprised of young men aged 15-29 (more than in the Arab Spring countries of Tunisia, Egypt, Syria or Libya)  — another underlying factor that could trigger unrest, according to his research.

Now that Iran is feeling the sting of the sanctions, it remains to be seen whether income levels will reach levels low enough to trigger the regime change anticipated by the report.

So far the government remains defiant. At a news conference today, President Mahmoud Ahmadinejad ascribed the troubles to “psychological war” by enemies.

— By Shadia Nasralla

One comment

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This is the biggest load of crap I have heard yet. You think the government of Iran will change??? Hahahahaha

The government of the US will fall before Iran’s. So keep waiting….

Posted by KyleDexter | Report as abusive