Iran's Central Bank Denies Plans for Large-Denomination Currency
Iranian Central Bank officials are denying that the government is considering introducing a large-denomination bill into its circulation.
Iranian Central Bank officials are denying that the government is considering introducing a large-denomination bill into its circulation.
As the country’s currency, the rial (IRR), continues to depreciate, reports surfaced suggesting the government may bring in a 5 million rial banknote, approximately valued at $7.
Valued at 2 million Rials, the country’s highest banknote in circulation, is barely sufficient to purchase goods worth slightly over three dollars.
For years, inflation and currency fluctuations have eroded the purchasing power of the Rial when compared to other major currencies.
The rial has undergone dramatic devaluation over the decades. Before the 1979 Islamic Revolution, for instance, one US dollar could buy 70 rials.
By early 2018, this surged to about 40,000, and it has since skyrocketed to 670,000.
This depreciation accelerated following the US exit of the nuclear deal in May 2018 and the reimposition of economic sanctions, including on oil exports and international banking activity.
As of August, the country’s monetary base has grown at a rate of 41%, resulting in the government printing about $460 million monthly.
Since taking office in 2021, President Ebrahim Raisi has increased the growth of the monetary base by about 10%.
The monetary base refers to the amount of money in circulation plus the reserves by the Central Bank. Its expansion can lead to inflation.
The introduction of larger banknotes would have social implications, particularly for foreigners exchanging money in Iran who often receive large quantities of rial banknotes for relatively small amounts in dollars or euros, which can be inconvenient or cumbersome to manage.
The complaint against CEO Sitki Ayan and Gent Electricity Energy stems from the company's decade-long failure to settle debts related to Iranian electricity imports, according to Tavanir, the Foreign Trade Office of Iran's state electricity company.
Ayan, a friend of Turkish President Recep Tayyip Erdoğan, previously brokered sales for the Islamic Revolutionary Guard Corps’ Quds Force. This activity led to him and the Gent company being placed on the US Treasury’s sanction list.
The US Treasury states that Ayan used his extensive business network to facilitate and conceal the sale and shipment of Iranian oil on behalf of the IRGC-QF.
The statement, published on December 8, 2022, added that Ayan had established business contracts to sell Iranian oil worth hundreds of millions of dollars to buyers in China, East Asia, the United Arab Emirates, and Europe. He also helped arrange the transportation of Iranian oil and funneled the proceeds of these sales back to the IRGC-QF.
The Turkish private company signed a contract with Iran's Energy Ministry in 2009 to import electricity. Turkey ceased importing Iranian electricity in 2017, but the reasons for Iran's delay in suing Ayan and his company remain unclear.
From 2009 to 2017, Iran exported 11.5 terawatt-hours (TWh) of electricity to Turkey, although the specific share imported by Gent Electricity Energy company is not known.
Despite all measures taken, including negotiations between Tavanir and the Turkish private company, as well as diplomatic efforts through various channels, the debts remain unpaid, according to Tavanir director Mehrdad Eglimi.
Iran will now refer the case to the Swiss Chambers' Arbitration Institution, Eglimi said.
Electricity exchange plan
Meanwhile, the Turkish Minister of Energy and Natural Resources, Alparslan Bayraktar, visited Iran earlier this month, and the sides agreed to initiate an electricity exchange in the coming months.
Turkey is set to deliver electricity during Iran's peak consumption period in the summer and receive Iranian electricity during other seasons.
Currently, Iran imports electricity from Armenia, Azerbaijan, and Turkmenistan and exports to Afghanistan, Pakistan, and Iraq. Iran was a net electricity exporter until early 2023, but its power trade balance has now reached zero due to a worsening domestic electricity shortage.
Until the mid-2010s, Iran was exporting 12 TWh of electricity and importing 4 TWh annually. In recent years, its net export volume has decreased significantly due to delays in developing new power plants and rapid domestic consumption growth.
In 2022, it exported less than 5 TWh (a 13% year-over-year decline) and imported about 3.9 TWh (a 28% increase year-over-year). This means Iran’s net electricity export declined from 8 TWh in the mid-2010s to 1.1 TWh in 2022 and reached zero last year.
This time, spurred by revolutionary slogans and the demands of his supporters, Supreme Leader Ali Khamenei shifted his strategy and accepted the risk of direct confrontation, launching missile attacks on Israeli territory.
A week ago, during Eid al-Fitr prayers, Khamenei declared that "Israel must be punished and will be punished". Similarly, commanders of the infamous Islamic Revolutionary Guards had vowed a "decisive and regrettable response" to Israel’s attacks on Iran’s purported consulate in Syria.
While on the surface the promise of revenge appears to be a strategic mistake, it raises the question as to why the state would pursue such a course of action – despite the international, political, and economic consequences.
The religious approach appears rigid and uncompromising, not open to diverse methods or interpretations. It emphasizes demonstrating resilience, with resistance seen as crucial to victory. In this view, persisting with a "fighting" strategy, even if mistaken, signifies a steadfastness in belief and faith.
The policymaking process in the Islamic Republic, however, does not follow the pattern of rational choice or the model of a prudent actor.
Rationality in foreign policy is a model in which the government acts coherently, and policymaking and decisions are based on clear goals and national interests, defined priorities, sufficient information, and understanding of options to achieve those goals, provided that the likelihood of success and the benefits and costs of each chosen policy are examined and evaluated in advance.
Role of Cognitive Maps in the Decision-Making of the Supreme Leader of the Islamic Republic of Iran
One characteristic of policymaking in the Islamic Republic is the existence of hierarchical and non-systematic decision-making procedures.
The hierarchical decision-making pattern in the Islamic Republic indicates that the Ministry of Foreign Affairs or governments do not have a decisive role in foreign policy policymaking.
Former President Hassan Rouhani and former Foreign Minister Mohammad Javad Zarif frequently criticized the marginalization of the Ministry of Foreign Affairs from foreign policy decision-making and expressed concerns about the military's dominance over diplomacy.
In response to these criticisms, Khamenei asserted in a speech on April 30, 2021, that "foreign policy is determined in high-level forums around the world, not in the Ministry of Foreign Affairs. The Ministry of Foreign Affairs participates in setting policies but is not the decision-maker; it is the executor."
Khamenei even considers the Supreme National Security Council – a key body responsible for overseeing national security affairs – to have a consultative role rather than a policymaking role.
Therefore, the primary determinant of foreign policy decisions is Ali Khamenei, as the only leader of the Islamic Republic.
In such decision-making structures, understanding the mindset of the Supreme Leader is key to comprehending the policies and decision-making model of the Islamic Republic system.
In his book "Perception and Misperception in International Politics," Robert Jervis argues that understanding the cognitive map of the decision-maker can provide insights into their mistakes.
Thus, this means the creation of a diagram of the relationships that the decision-maker perceives to exist between phenomena. By understanding the causal relationships they have in mind, and analyzing their decisions based on these perceptions, we can assess how closely this perceptual understanding aligns with external reality. Additionally, it allows us to determine whether the effects and impacts anticipated by the decision-maker have actually occurred.
But before that, the elements influencing the cognitive perception of the decision-maker must be understood.
Here, our aim is to illustrate the factors influencing Ali Khamenei's cognitive perception regarding the issue of hostility towards Israel.
These factors constitute the backdrop of the cognitive map of the Supreme Leader of the Islamic Republic:
Islamic Revolution Slogans: The destruction and elimination of Israel are merely slogans and not the primary goal of the Islamic Republic. The existence of Israel serves to justify the Revolutionary Guards' extraterritorial operations. Enmity with Israel is necessary for the Islamic Republic to establish a sphere of influence in regional politics and gain credibility with the international community. However, this enmity is often used as a cliché and serves the propaganda of the system.
Unchanging religious beliefs: It is a collection of ingrained patterns in the mind of Ayatollah Khamenei that remain unchanged. Khamenei's interpretations of Quranic and religious matters are subjective and personal. For instance, he asserts that hijab is a religious obligation and unveiling is religiously prohibited, a stance that reflects solely his personal interpretation. In the context of the Israel issue, the "End-time view" serves as a smokescreen, hindering our ability to objectively understand the issues and equations from a rational and logical perspective.
The Eschatological Perspective: The narratives surrounding the end times, particularly concerning the appearance of the Twelfth Imam among Shiites, adopt a geostrategic approach, pinpointing the emergence in Syria and Lebanon. Traditionally, Shiites were expected to await the reappearance passively, but in the new Mahdism, it is argued that they should actively pave the way for the Imam's return. From an eschatological perspective, one of the actions required for the reappearance is the weakening of Israel and Zionist ideology. Equipping fighters against Israel is considered a religious and unequivocal duty for all Muslims worldwide.
Pressure from allied groups and internal systemic pressures are deemed influential factors in Khamenei's cognitive perception. In this regard, hardliners, pressure groups, seminaries, the Revolutionary Guards, and proxy groups all wield significant influence in shaping Khamenei's perception and decision-making process.
International imperatives should also be considered among the factors influencing Khamenei's cognitive perception. Currently, one of the reasons that have made revenge and emotional reactions costly and challenging for Khamenei is these international imperatives.
If we prioritize Khamenei's cognitive map, the people’s interests and the economic welfare of Iranians would be relegated to the bottom row. The interests of the people and public satisfaction exert the least influence on Khamenei's decisions.
All the factors mentioned form the foundation of Khamenei's cognitive perception. However, it's important to note that Khamenei's decisions may not always stem from rational and collective reasoning.
Therefore, despite the significance of international imperatives, the influence of hardliners and Islamic Revolutionary Guards commanders, and the demands of proxy groups for direct engagement with Israel, the system could potentially be led into a significant gamble.
Khamenei in a State of Absolute Inaction
It seems that Khamenei's pieces on the regional chessboard have entered a state of inaction. Under the influence of his supporters' demands, he made a strategic mistake by emphasizing revenge. Khamenei has accepted the risk of attack to leave a historical legacy and proudly show the supporters of the Islamic Republic that the sky of Israel was showered with missiles. Even if Israel does not suffer serious damage, they are proud to have been sincere in their promise to punish Israel.
Another question arises: Why did the Islamic Republic feel compelled to attack Israel?
Commander Salami, the head of the Islamic Revolutionary Guards, announced after the attack, "We have decided to create a new strategy, and that is from now on, if Israel attacks our interests and personalities anywhere, we will counterattack from the origin, the Islamic Republic of Iran".
Could the reason for this change in strategy be the reluctance of proxy groups during Israel’s attack on the purported Iranian consulate, as these groups had no interest in supporting or incurring costs for the Islamic Republic?
