Iran's Elite Guard Urges "Revolutionary Actions" To Halt Rial's Death Spiral

Iran's rial continues its death spiral which started in earnest Saturday after being on a steady slide since April, now hitting a historic low this week. Over the weekend the rial took a stunning 12.5% dive, falling from 98,000 IRR/USD on Saturday to 116,000 IRR/USD by the close of Sunday. As Forbes suggests this kind of classic death spiral hasn't happened since September 2012.

But even more unusual is that Iran's elite Islamic Revolutionary Guard Corps (IRGC) has just published a confrontational statement addressed to President Hassan Rouhani, urging him to prop up the falling Rial ahead of US sanctions implementation

“The unique and extensive backing you benefited from in past weeks shouldn’t preclude you from taking revolutionary actions to control prices and prevent the enormous increase in the price of foreign currency and gold,” IRGC commander Mohammad Ali Jafari said in an open letter to Rouhani, published by the privately owned Tasnim news agency. “Decision-making in today’s difficult circumstances necessitates revolutionary determination and decisiveness in dealing with certain managers’ weaknesses.”

Professor Steve Hanke via Forbes: "The chart shows the downward roller coaster ride the rial has been on during the past six months, as well as this weekend’s free fall. As the chart indicates, the official IRR/USD rate is 44,030; whereas, the rate in the black market (read: free market) is 112,000. That widespread rate is now measured by a huge black-market premium of 154%. This means that those who are privileged and have access to the official exchange rate can turn handsome profits of 154% in the blink of an eye."

Underscoring the dire nature of the situation, Bloomberg notes Jafari's language is "unusually pointed" as Iran finds itself in its worst economic crisis in decades at the moment new US sanctions loom. 

The letter from Iran's most powerful military leader further urges stronger coordination among different sectors of the government to curb economic decline, saying as paraphrased by Tasnim, "the people are impatient to see revolutionary decisions by their president."

Previously in June, economic protests hit Tehran's Grand Bazaar for the better part of a week, as at that time the official government-set exchange rate of 42,000 rials to $1 was quickly surpassed in the black market earlier that month (as the true rate spiked to as much as 90,000 rials), translating into the simple math of merchants losing money merely by staying open.

Professor Steve Hanke via Forbes: "With the collapse of the rial, inflation has taken off. The chart shows that ugly picture. By using the IRR/USD exchange rate, which represents the most important price in Iran, I measure Iran’s inflation rate. Indeed, the black-market exchange rate can be reliably transformed into accurate measurements of countrywide inflation rates (for those who want to read about the methodology in Farsi). The chart below shows how, with the collapse of the rial’s value against the U.S. dollar, Iran’s implied annual inflation rate has surged to 203%. That is almost twenty times higher than the official inflation rate of 10.2%."

And as of Monday with the true rate at 119,000 according to Bonbast, authorities have begun to make a show of cracking down on black market sales by rounding up dozens of merchants and making arrests since the weekend

Bloomberg explains further of the rare nature of the IRGC's statement

The call to revolutionary action comes from a powerful military organization that controls a range of local companies. It also plumbs ordinary Iranians’ growing frustration with the Rouhani government’s response to the tumbling of the rial and the poor state of the economy. If senior Iranian officials have in the past expressed support for Rouhani’s efforts to shield Iran from the sanctions’ fallout, then the Guards’ language on Tuesday was harsher, demanding that he immediately take more forceful action to deliver results.

Such early signs of potential visible fissures within the Iranian regime come as President Trump said on Monday that he is willing to meet with Iranian President Hassan Rouhani with "no preconditions," exactly one week after he blasted out a fiery all-caps threat to the regime over Twitter. 

“I would certainly meet with Iran if they wanted to meet. I don’t know if they’re ready yet,” Trump said in a statement that shocked reporters. 

Well, we might speculate... it appears Tehran is preoccupied at the moment.