Iran president blames ‘psychological war’ for dropping rial

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As the Iranian rial tumbled to new lows on Tuesday, Iranian President Mahmoud Ahmadinejad blamed the plummeting value of the currency on a “psychological war” waged against his government by the United States and his domestic critics.

The Tuesday news conference marked an unusually open admission by Ahmadinejad of the pain inflicted by Western sanctions, imposed to press Iran to curb its nuclear program.

The economic restrictions are “a hidden and heavy war on a global scale,” Ahmadinejad said, arguing that the West had targeted Iran’s people, not its government.

The president also complained that critics such as parliamentary speaker Ali Larijani had wrongly laid the blame for the sinking rial with government mismanagement instead of “the economic war of the enemy.” He singled out Fars News Agency, which is close to the Revolutionary Guards and interviewed Larijani, arguing it had attacked his government for the past six months. When “the enemy has thrown a rock on our path,” he said, “everybody needs to help throw the rock back to the enemy.’

While Ahmadinejad fired back at his critics, street traders said the rial was trading Tuesday at a new low of 37,000 to the dollar, a stunning drop from just five days ago, when 26,900 rials bought a dollar. The street value is far lower than the official trading rate of 12,260 rials per dollar used by its central bank for essential goods, which most Iranians cannot access.

As the rial has plunged, Iranians have been forced to fork over more and more money in the marketplace, with prices reportedly soaring for food and clothing. Cheese costs almost 50% more than six months ago. Cosmetics have doubled in price over the past month.

Ahmadinejad also contended that 22 unnamed ringleaders in the currency markets were responsible for the fluctuating value of the rial, saying security and intelligence forces should intervene. His words, broadcast live on television and radio, set off a panic among illegal street dealers that a police crackdown might be in the works. Only licensed shops accredited by the central bank are legally allowed.

Arresting the street dealers would only accelerate the plunge in the rial, said currency dealer Esmaeel, identified by only a portion of his name. “At this stage, any crackdown is counterproductive,’ he argued. The United States and other world powers have targeted Iran with economic sanctions over suspicions that it is trying to gain the capacity to build a nuclear weapon. Iran says its nuclear program is solely for peaceful purposes.

The question of how much pressure the existing sanctions are exerting on Iran is key to the debate over whether the U.S. should take tougher action against the country, setting a “red line” to trigger military action as Israeli Prime Minister Benjamin Netanyahu has urged.

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-- Ramin Mostaghim in Tehran and Emily Alpert in Los Angeles

Photo: Iranian President Mahmoud Ahmadinejad speaks at a news conference in Tehran on Tuesday. Credit: Vahid Salemi / Associated Press