Iran's Foreign Deposits Decrease by $3.5 Billion; 'Economic Tsunami' on the Horizon

According to the Bank for International Settlements, Iran's deposits in foreign banks decreased by $3.5 billion to approximately $12.7 billion at the end of the third quarter of 2023. In the previous report, Iran's foreign deposits were reported to be over $18 billion at the end of the second quarter of 2023. The report indicates that the largest portion of this decrease relates to deposits held in non-banking financial institutions, which experts link to the transfer of Iran's blocked assets from South Korea to Qatar. The Iranian government's blocked assets, which were transferred from South Korea to Qatar with U.S. permission, remain inaccessible to the Islamic Republic. Despite repeated claims by Iranian officials of full access to the resources transferred to Qatar, the government's economic spokesman stated on Tuesday, January 30, that access to the country's foreign resources in Qatar has faced delays due to the commitment of the Western side to cooperate. According to Ehsan Khandozi, the first letter of credit has been opened, but other letters of credit are facing delays. Reports indicate that in December of this year, the U.S. House of Representatives passed a bill calling for the blocking of $6 billion of Iran's assets in Qatar. Following that, the Washington Post reported that the U.S. and Qatar agreed to prevent the Islamic Republic of Iran from accessing the $6 billion in Qatari banks until investigations into Hamas's attack on Israel are completed. Mohammad Reza Farzin, the head of the Central Bank of the Islamic Republic, reacted to these matters by claiming that according to the agreement, all payments are made by Qatari bank brokers and via SWIFT, and an official letter has been received from Qatari officials. Sheikh Bandar bin Mohammed bin Saud Al Thani, the head of the Central Bank of Qatar, stated a few days after the Washington Post report during a meeting with Farzin in Morocco, held on the sidelines of an international conference, that Qatar is committed to all its obligations to Iran and that there are no obstacles to the development of banking relations between the two countries. He described the 'rumors' in this regard as lacking 'real value' and a 'media game.' However, a review of statements and reports indicates that the Islamic Republic's access to these resources has encountered problems. Since the use of Iran's resources in Qatari banks is only possible for permitted items such as food and medicine, the Central Bank had directed currency payments for the import of animal feed to these resources, and now, with the blockage created, currency supply in this sector has faced difficulties. In this regard, on January 30, the government news agency Fars reported that animal feed importers have complained about the prolonged process of currency allocation for imports. Fars, a media institution affiliated with security agencies in Iran, wrote that the Union of Animal Feed Importers has informed the First Vice President of the President about the halt in the allocation and supply of currency for animal feed since early December, to the extent that the queue for currency allocation for animal feed barley has exceeded 5 months and for animal corn has reached about 4 months. This situation, according to an economic journalist, could soon lead to an increase in chicken prices in the market. Reza Ghaibi stated in this regard to VOA that the decrease in Iran's reserves and deposits in foreign banks indicates an 'upcoming economic tsunami' for Iran 'because the Central Bank does not have reliable foreign reserves domestically, sanctions are persistent, and there is a possibility of their intensification.' According to Ghaibi, in such conditions, currency supply will soon be done in a 'rationed' manner as there is no prospect for improving conditions and opening up economic avenues for Iran's foreign revenues, and Iran's current deposits will only suffice for 6 months of imports of essential goods and medicine. Experts believe that the decrease in foreign deposits and restrictions on currency supply and allocation in a short period will increasingly impact people's livelihoods in the spring of 1403 (2024).