The Collapse of Iran’s Rial

As has been noted on Global Geopolitics several times, third-world economies have no bottom. They will always find another needy country to sell oil to — and there are plenty. They will always find another bank to clear payments with — and there are plenty. They will always find another currency and country to exchange goods and services with — and there are plenty countries dumping the US Dollar.

Although many, including in the media, have interpreted Iran’s economic woes as proof that economic sanctions are at last “working,” there are reasons to believe that the economic disaster inside Iran has little, if anything, to do with the sanctions, and — more generally — that sanctions cannot possibly “work” against Iran. The collapse of the Iranian currency is largely the byproduct of internal Iranian economic policy.

Economic sanctions are not the cause of the collapse of the Iranian rial. Economic sanctions never “work.”[17]Rhodesia held out many years even with near universal sanctions against it. Sanctions can have some symbolic value and demoralize the targeted populations. But even nations seemingly subjected to the harshest sanctions — Rhodesia, South Africa, North Korea, Cuba — managed to function and trade in world markets quite well in spite of them. In Cuba and North Korea, their domestic poverty and misery are produced by rigid central planning more than by any sanctions. Continue reading