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Iran’s policy of maintaining a dual exchange rate has become a catalyst for unprecedented corruption, exacerbating economic instability and pushing the country toward deeper crises. Recent revelations, particularly the scandal surrounding the Debsh Tea Company, illustrate the extent to which corruption has permeated government and financial institutions due to currency manipulation and allocation of cheap government-subsidized dollars.
Economic expert Hossein Raghfar recently warned that imported gold is currently traded at an implied dollar rate between 110,000 to 120,000 tomans, significantly higher than official government rates. “When gold is converted into coins, the implied dollar rate is around 110,000 tomans,” Raghfar stated, highlighting a severe discrepancy between the government’s stated rates and actual market conditions.
This gap between the official exchange rate and the real market rate has fueled a widespread black market, where insiders profit enormously from buying foreign currency at artificially low official rates and reselling it at significantly inflated prices. According to Raghfar, this crisis stems directly from flawed economic policies, widespread corruption, and rampant mismanagement by governmental bodies.
Watch and judge how the regime in #Iran justifies the systemic #corruption of its leaders pic.twitter.com/N2RAWUoz0k
— NCRI-FAC (@iran_policy) January 12, 2024
The Debsh Tea Company scandal vividly demonstrates how corruption thrives under this dual exchange rate system. Investigations revealed that between 2019 and 2022, Debsh Tea Group received approximately 3.7 billion dollars from government sources at preferential rates, far exceeding typical allocations for vital imports like medicine or essential food items. Much of this currency disappeared or was misused, including re-exporting Iranian tea under the guise of imported tea and mixing spoiled imported tea with fresh products, compromising public health.
State-affiliated economists, including Mehdi Nosrati and Hossein Salahvarzi, criticize the dual rate system, describing it as a fertile ground for “golden signatures” and rampant corruption. Nosrati emphasizes that the dual exchange rates inherently create artificial demand for subsidized dollars, thus promoting corruption. “In such conditions, specific individuals or entities decide who receives cheap dollars, and this decision-making power itself breeds corruption,” Nosrati noted.
The deep-rooted corruption within Iran’s clerical regime is further entrenched by a culture of systemic opacity and institutional impunity. The multi-rate currency system, epitomized by the notorious “4200-toman” subsidized exchange rate, has facilitated massive theft of public resources under the guise of controlling inflation. Prominent cases like Babak Zanjani’s embezzlement of billions in oil revenue, or the extensive corruption within the “Bonyad-e Shahid” (Martyrs Foundation) and “Bank Dey,” reveal a pattern where senior regime figures exploit preferential currency allocations for personal enrichment. These institutions, shielded from genuine oversight, operate freely, diverting billions from public funds into private pockets.
Delving into #Iran’s Corruption Chronicles – Part 1https://t.co/3uRDWFAqxD
— NCRI-FAC (@iran_policy) December 18, 2023
Moreover, the severity of corruption is exemplified by the regime’s declining global ranking on Transparency International’s Corruption Perceptions Index (CPI). Once ranked 86th in 2005, Iran plunged to 168th under Ahmadinejad and now sits at a troubling 150th, reflecting growing international recognition of rampant corruption. Judiciary Chief Mohseni Eje’i recently underscored the regime’s complicity when he confessed to systemic inability to prosecute powerful figures involved in fuel smuggling networks, who operate openly “from airports to seaports,” highlighting how deeply embedded and protected corruption networks are within Iran’s ruling structure.
Currency manipulation has led to corruption across numerous sectors, from banking to customs. Experts argue that the lack of transparency and accountability allows state-affiliated entities and powerful individuals within the regime to divert vast sums of public resources for personal enrichment.
The regime’s ongoing economic mismanagement, exacerbated by sanctions and unchecked corruption, has resulted in skyrocketing inflation, diminished purchasing power, and widespread social unrest. As long as the dual exchange rate system persists, the Iranian economy will remain vulnerable to systemic corruption and continued economic deterioration.