Iran’s rial, Russia’s ruble and Turkey’s lira are disintegrating despite a rush into risk elsewhere in world markets. Stocks and commodity prices are jumping after Chinese leader Xi Jinping’s statesmanlike speech last night, but the Unholy Three are faring badly.
Western countries engineered a collapse of Russia’s ruble (which usually trades with oil prices) by imposing sanctions that prevent targeted companies like Rusal from obtaining foreign exchange. Rusal may miss a tiny (US$13 million) bond payment this week simply because the sanctions deny it access to the financial system. Russia’s ruble has plunged as a result, from 58 to the dollar last Friday to 63 this morning.
Iran’s rial fetches 60,000 to the dollar on the black market, up from 35,000 at the end of 2016. Iran’s government has declared that it will hold the line at Rial 42,000 to the dollar, but state-sponsored foreign exchange dealers have stopped selling dollars.
Turkey’s embattled lira hit a new low of around 4.10 to the US dollar shortly after 8:00 am. Turkey suffers from 10% inflation driven by an enormous internal credit bubble, a current account deficit of nearly 6% of GDP, and a US$220 billion corporate debt load in foreign currency.
Is it a coincidence that these are the three countries whose leaders met last week in Istanbul to carve up Syria? Evidently the Western powers still have the capacity to make life miserable for aggressive regional powers who also need to borrow heavily from Western financial markets.