The unprecedented rise in the dollar price should be seen as the outcome of the overlap of a series of policy errors, structural weaknesses and exogenous shocks—a trend that not only has roots in monetary variables but is also directly shaped by developments in the oil sector and the way the country’s foreign-currency revenues are managed.
At the first level, the sharp decline in oil revenues has played a key role in weakening the supply of foreign currency. The fall in global oil prices from around $80 at the start of the calendar year to close to $60—at a time when Iran’s oil is sold at substantial discounts—has led to an approximately 30% reduction in the government’s foreign-exchange resources. This drop has put direct pressure on the country’s external balance and curtailed the policymaker’s capacity to intervene in the foreign-exchange market.
However, the issue is not limited to oil prices alone. Structural and policy changes at the Ministry of Oil, particularly in marketing and oil sales, have resulted in a sharp decline in sales volumes and the loss of a significant share of Iran’s markets. International reports indicate that under current conditions around 100 million barrels of Iranian oil remain unsold and floating at sea—a meaningful figure that points to serious disruption in the sales chain, logistics and settlement of oil transactions. The blocking of such a volume of oil effectively means locking up potential foreign-exchange resources and exacerbating the currency shortage in the economy.
Alongside this factor, disclosures by some members of parliament regarding the performance of certain trusts and intermediaries involved in oil sales have revealed more troubling dimensions of the currency crisis. According to these reports, part of the foreign currency generated from oil exports has either not returned to the country or has been subject to so-called “empty reporting” and declarations of fictitious sales. This situation has not only eroded the country’s actual foreign-exchange earnings but has also severely undermined confidence in opaque oil-sales mechanisms, fueling an unprecedented currency crisis.
At the level of fiscal and monetary policy, the consequences of the war and the costs imposed by it cannot be overlooked. To compensate for infrastructure damage, rebuild affected areas and cover urgent military expenditures, the government was forced to borrow from the Central Bank. The result of this emergency approach was an increase of around 280 trillion tomans in the monetary base over a short period—growth that, lacking productive and foreign-exchange backing, quickly spilled over into the currency market and intensified inflationary pressure.
Another fundamental factor is the persistence of a multi-rate exchange-rate system. The deep gap between administered rates and the free market has created a rent-seeking structure in which exporters are compelled to supply foreign currency at price differentials sometimes reaching 60,000 tomans below the free-market rate. This policy has turned the repatriation of export proceeds into an imposed cost and reduced incentives to return foreign currency to the formal economic cycle.
Finally, inflationary expectations have acted as a catalyst for all these factors. Weak transparency in policymaking and repeated experiences of exchange-rate shocks have intensified precautionary and speculative behaviour, turning the dollar into a safe haven for negative expectations.
Overall, the surge in the dollar price is the product of a dangerous combination of mismanagement of oil revenues, disruptions in oil sales and the return of export proceeds, expansionary monetary policies, a flawed exchange-rate structure and entrenched inflationary expectations. Containing this crisis requires, above all, transparent and accountable reform of the oil-sales structure, the repatriation of export revenues, monetary discipline and an end to the multi-rate exchange-rate system; otherwise, the currency market will remain trapped in a cycle of instability.
NOURNEWS