In response to the escalating regional tensions, Iran’s concern turned to the influence of Donald Trump’s win in the 2024 US presidential election.
Iran’s money, the rouble, fell to an all-time lower on November 6.2024 – trading at above 700, 000 liras to the money.
But how are Trump’s get and Iran’s financial difficulties related? The Conversation US turned to Nader Habibi, an expert on the Egyptian market at Brandeis University, to discuss.
What has happened to Iran’s dollar?
The lira hit a new record reduced as Donald Trump claimed victory, investing above the symbolic figure of 700,000 rubles to the dollar, as expected, just as the effects of the US election were being released.
However, it is important to point out that Iran’s currency has been gradually losing value in recent months. This has largely been because of higher inflation in the country, which throughout 2024 has been above 30 % on a year-to-year base, and because the state has had to move large budget deficits. The current upheaval of conflicts and a new round of weapon exchanges between Iran and Israel have also contributed to it.
In response to these concerns, Iranians have significantly started converting the majority of their savings to US dollars or metal. This, in switch, has led to a loss of the dinar.
But this pattern predated Trump’s earn?
Yes. Due in large part to the continuous effects of US-led restrictions on Tehran and the growing concern over the Middle East conflict, the Egyptian market was already in a risky position. In truth, the lira hit an earlier small a couple days before the election.
In contrast, Iran’s officials have been directing more and more of the country’s oil revenue toward protection. They just announced a 200 % planned increase in military spending, and some members of the ruling elite have called for setting the defence budget as a predetermined share of the GDP to ensure adequate financing for military objectives.
This plan has added to the private sector’s worry about the finances gap for various government expenses, which can result in more prices.
How did Trump’s defeat further this money fall?
Political experts predict that a second Trump administration will result to a change in US policy toward Iran and a transfer to a “maximum stress” strategy that included imposing harsh financial sanctions and threatening military action to make Iran abandon its nuclear ambitions.
Washington also engaged in back-channel discussions with Tehran, which suggested a diplomatic solution and potential an arrangement that had, one day, relieve those sanctions, despite the fact that the Biden administration definitely kept the sanctions in place against Iran under Trump and even increased them.
And despite the restrictions still in effect, the Biden administration half rolled back some of those restrictions as an opportunity for Iran during these back-channel discussions. Washington, for instance, has never prevented Iran’s continued direct fuel exports to China in recent years.
Iranian oil exports increased to 2 million barrels per day thanks to Biden’s looser policy toward sanctions protection, with the majority of that crude going to China. Under Trump’s “maximum force” plan, Iranian oil imports were down to 100, 000-150, 000 barrels a day.
How is Trump’s connection with Israel taken into account?
Iranians have differing opinions about how the next Trump administration will impact the Iran-Israel conflict. Some are concerned that it will lessen any force the United States may have on Israel to stop the Middle East’s recent conflict.
The issue is that Israel will launch more military operations in Iran without this kind of force from Washington. Many Iranians are also concerned that Trump might permit Israel to attack Persian infrastructure and oil assets, which may cost the country’s economy even more.
Israel’s prime minister, Benjamin Netanyahu, was one of the first world leaders to applaud Trump, noting that the success represented” a strong recommitment to the great alliance between Israel and America.”
Many Iranians worry that Trump’s win may damage relations between Tehran and Washington. Although there are no immediate diplomatic relations between the US and Iran, it has been broadly reported that direct and secret negotiations have taken place under Biden. The issue is that Trump will not use the same plan, which is perceived in Tehran as being more uncertain than Biden.
Some Iranians even think that Trump might attempt to de-escalate the conflict in Gaza, which will also lower the level of hostility between Iran and Israel. This team points to Trump’s repeated calls for the Middle East and Ukraine battle to be resolved. If this group of Iranians ‘ views prevail, the worry that has caused a fresh reduction in the rial’s value may be temporary.
What has Tehran said about Trump’s win?
Iran’s economy has been minimized by the effects of the US election. Fatemeh Mohajerani, a spokeswoman for Iranian President Masoud Pezeshkian’s administration, said on November 6, 2024, that the election of a US president “does n’t have anything specifically to do with us”, adding that the “major policies of America and the Islamic Republic are fixed, and they wo n’t heavily change by people replacing others”.
But this appears to be posturing by Iran’s officials. They are attempting to calm the local market and reduce the potential impact of Trump’s victory. However, this might not be successful, and the Persian money may experience even more depreciation in the upcoming weeks.
Nader Habibi is a Middle Eastern economics teacher at Brandeis University.
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