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Sanctions Have Squeezed Iran's Finances

Iran appears to be having a currency problem because it is bartering more and more of its oil, especially to Asia, against consumer products to circumvent sanctions on its banking sector. Tehran is reported to be spending $3-4 billion a month to shore up its currency, the rial, and to pay handouts to population to compensate for energy and food subsidies that were cut last year. As a possible indication of the problem, the rial has made several drastic movements downward in recent months despite the stated goals of the central bank to maintain currency stability.

Another symptom appears to be delays piling up in government payments to suppliers, mainly because the state is believed to be drawing money from ministerial budgets to pay the public handouts, according to parliament. For example, the energy ministry is thought to be $2.7 billion behind in its payments, according to the head of the parliamentary committee on energy, Hamidreza Katouzian.

Source: Arab Times, Kuwait, October 17, 2011

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