Iran’s Supreme Leader has closed off the Government’s talks with European countries, seeking trade and investment links to prop up the economy amid US sanctions.
Meeting President Hassan Rouhani and the Cabinet on Wednesday, Ayatollah Khamenei said, “There is no problem with negotiations and keeping contact with the Europeans, but you should give up hope on them over economic issues or the nuclear deal.”
Khamenei threatened Tehran’s withdrawal from the 2015 nuclear agreement, following the Trump Administration’s departure in May with the order for comprehensive sanctions from November.
With Rouhani sitting to his left, the Supreme Leader explained, “The nuclear accord is a means, not the goal, and if we come to this conclusion that it does not serve our national interests, we can abandon it.”
#JCPOA is not a goal but a means; naturally, if we conclude that it is impossible to protect national interests with JCPOA, we will put it aside. Europeans should understand from Iranian govt officials' words and actions that their measures will receive proper reactions by #Iran.
— Khamenei.ir (@khamenei_ir) August 29, 2018
Even before the US withdrawal, the Government strategy was to secure European trade and investment. The European Union has said that it will shield firms from US punishment, threatened against any company with American links which maintains business with the Islamic Republic; however, the EU has struggled with guarantees for large enterprises and banks.
As a result, many of Europe’s leading companies have drawn down or suspended their involvement in Iran. They include the French energy giant Total, French and German auto manufacturers PSA and Daimler, the world’s largest shipping container firm Maersk, French aircraft manufacturer Airbus, German engineering and rail firm Deutsche Bahn, and airlines Air France, KLM, and British Airways.
There was a bit of relief for Rouhani, a day after he was censured by MPs for unsatisfactory answers in four of five economic areas. The Supreme Leader put the emphasis on unity against US pressure, and said publicity of differences within the regime would only make the nation more unhappy.
Without referring to the censure, Khamenei said, “The Parliament members question a president who has been elected with more than 23 million votes, and the president also answers the questions in a calm and dignified manner, and this means religious democracy.”
Khamenei called for round-the-clock effort to solve the economic crisis: “We need to be strong in the economic field ….The officials should work hard day and night to resolve the problems.”
The economy is at a critical point because of a combination of long-term internal problems and US sanctions. Production, investment, and trade are all under pressure, and inflation, which had brought down from more than 40% to single digits, is rising again.
The currency, which has fallen 60% this year against the US dollar — from an already-historic low of 45,000:1 to about 105,000:1 — is sliding again, with fighting between Parliament and the Government and the approach of US sanctions on the energy and financial sectors.
On Thursday morning, the rial is at 109,600:1 against the dollar.
Rouhani closely followed the Supreme Leader’s line yesterday, including the rejection of any talks with the US:
In the current situation, we have no political solution ahead of us, because the government that has imposed sanctions on Iran against all international regulations is not committed to anything. They want to undermine Iran’s independence once again and dominate the people of Iran, but our nation will never accept such a thing and will demonstrate this by resisting.
He insisted, “The entire Iranian nation will follow the Supreme Leader of the Islamic Revolution and will never let enemies plots to be successful….Although we have faced problems in the recent months, especially in the currency market, we will overcome these problems as we have in the past.”
2 Ministers Gone, 2 More Under Threat
Having dismissed two of Rouhani’s ministers, Parliament is threatening two others.
Labor Minister Ali Rabiei was removed in mid-August and Economy Minister Masoud Karbasian fell by a 137-121 vote on Sunday.
On Wednesday, the Majlis announced steps to impeach Education Minister Mohammad Bathai within the next 10 days, with the motion tabled by 20 MPs.
Industry Minister Mohammad Shariatmadari faced a motion signed by 60 legislators, criticizing him for failure in 17 areas, including a sharp rise in commodity prices.
The signatories also accuse Shariatmadari of wasting billions of dollars by allocating subsidized foreign currencies to individuals or companies who did not use the funds for imports, or who imported goods at the low rate and sold them on the Iranian market at inflated prices.
As the rial sank this summer, the Government reorganized the foreign exchange market with a managed open-market rate and a discounted rate of 42,000:1 for importers, exporters, and some travellers.
In late July, Rouhani replaced the head of the Central Bank, and the deputy head has been arrested as the regime blames “enemies”.