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Iran: On the Downhill Slide

Yesterday there was this BBC report, "Iran currency crisis: Sanctions detonate unstable rial":

In the past seven days, Iran's rial has has lost 25% of its value; it is now, at best, worth only a quarter of what it was 18 months ago. And the freefall seems to have no end in sight.

Recent days in Iran have seen runs on foreign currencies and on gold - assets that are easily liquefied in the domestic market or transferable overseas.

On the one hand Iranians have lost their trust in their government's grip over the economy, and on the other they fear their country may end up in a military confrontation with Israel over its nuclear programme.

Therefore, they have good reason to change whatever they have in hand into currencies whose value is sustained internationally, or into gold bullion which they can throw into a suitcase if they want to hop aboard a flight and leave the country.

And, logically, as the wheels fall off Iranian people are a tad vexed with their government, as set out in the NY Times report,Violence and Protest in Iran as Currency Drops in Value

The first outbreak of public anger over Iran’s collapsing currency and other economic maladies jolted the heart of the capital on Wednesday, with the riot police violently clamping down on black-market money changers, hundreds of citizens marching to demand relief and merchants in the sprawling bazaar closing their shops in protest.

I leave it up to you to decide whether the Iranian economic free fall is destabilizing in itself or simply the sign of a wreck of a country, screwed by the incompetence of those in charge and their thugs.

As for me, I would hazard a guess that the failing bosses will strike out sooner rather than later. You know, while they still have their heads attached to their shoulders. They have little to lose. In short, I go with the gloomy crowd. I hope they do something stupid sooner rather than later and that they get their deserved reward. My hope is that any calmer heads in the Iranian military (if any remain after all this time) can step in a quash these bozos before a whole lot of unnecessary destruction is unleashed.

Some Countries Offering "Insurance" Money for Evading the Iranian Sanctions

Short report from PennEnergy on a couple of countries offering "insurance" money to support tankers which evade economic sanctions against Iran at India offers $50MM in coverage for Iranian tanker runs:

Indian oil transportation companies will be able to receive some limited coverage from the government for oil tankers making trips to Iran, according to Reuters. The recent sanctions imposed against Iran for its continuing efforts to develop its nuclear program, and as many Western nations fear nuclear weapons, have largely prevented Indian oil companies from finding insurance for their oil ships.
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In response, the Indian government has offered to insure as much as $50 million for any "Indian flag carriers" traveling to Iran. This amount falls well short of the actual liability incurred by oil tankers on any given trip, but it comes to more than six times as much as the Japanese government has offered its companies, illustrating India's interest in continuing the flow of Iranian oil.

Insurance Insight provides some background:

The concern for Asian nations such as India, China and Japan has been that their ships, which are highly dependent on the International Group of Protection & Indemnity Clubs and its reinsurance programme, will be unable to sail if they cannot obtain cover.

Another Insurance Insight report on limitations placed by Japanese insurers on tankers carrying Iranian crude:

Japanese oil buyers will be forced to coordinate schedules after insurers warned they will cover only one tanker transporting Iranian oil at a time after the 1 July sanctions deadline.
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According to Reuters, the three insurers together can provide only up to ¥30bn ($370m) at one time in hull and machinery cover, which protects vessels against physical damage, without relying on the European reinsurance market to hedge the risk.

This is enough to cover insurance for only one tanker travelling in the Gulf with Iranian crude oil, Insurance Insight understands.

So, India and Japan as "sanction busters?"

Earlier report here, where China is added to the list of Iranian oil carriers.