News / Middle East

    Iran's Currency Slumps on Sanctions Fears

    Handout photo showing the front of the new Iranian 100,000 Rials bank note (2010 file photo).
    Handout photo showing the front of the new Iranian 100,000 Rials bank note (2010 file photo).

    Reports from Iran say the nation's currency has slumped to a record low against the U.S. dollar, two days after U.S. President Barack Obama signed into law new sanctions that could affect Iran's central bank and financial system.

    Traders said Monday the exchange rate dipped to around 17,000 rials to the dollar, which is about a 10 percent slide from Thursday's exchange rate.

    The new U.S. sanctions will target financial institutions that deal with Iran's central bank, and if fully implemented could affect Iran's ability to sell oil on international markets.  The step is part of a push to hamper Tehran's ability to finance its nuclear and missile programs.

    The United States and the European Union contend Iran is secretly trying to develop nuclear weapons under the guise of its civilian nuclear program.  Iran says its nuclear intentions are peaceful.

    The European Union is expected to consider additional sanctions later this month, possibly including an embargo on Iranian oil imports.

    Iran has threatened to respond to such wider sanctions by closing the Strait of Hormuz, a vital export route for the other oil-producing countries of the Persian Gulf.   The U.S. Navy's Fifth Fleet, based in Bahrain, says it will not allow disruptions to Gulf shipping.  

    Meanwhile, Iran says it successfully tested a ground-to-sea cruise missile near the Strait of Hormuz Monday.

    Iran says its 10-day naval exercises also included the test-firing of a medium-range surface-to-air missile on Sunday.

    Iran also reported Sunday an advance in its nuclear program, saying it had successfully tested and produced fuel rods for use in nuclear power plants.

    Middle East analyst Stephen Zunes of the University of San Francisco in California said that the step does not present a major security threat, and that Iran still has a long way to go in developing a nuclear weapon.

    "Whether or not it's true, it's not that critical from a security perspective, because we're talking about the concentration of uranium that is far below what is necessary for nuclear weapons," he said. "If true, it does shows that their program is advancing, but it's been slowly advancing for years and they're still probably at least several years away from actually being able to create a nuclear weapon."

    Some information for this report was provided by AFP and Reuters.

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