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Iran tensions: Nuclear advancement and missile tests, but currency weakens

Updated On: Jan 03, 2012

In a sign of heightening tensions between Iran and the West, Iran claimed to have produced their first nuclear fuel rod in the face of sanctions, and test fired a cruise missile during naval exercises. However, the Iranian currency slumped against the US dollar after US sanctions targeting the Iranian central bank were signed into force.

Iran says first nuclear fuel rod produced

Iran’s nuclear agency said Sunday that its scientists have produced their first nuclear fuel rod, in spite of UN sanctions and measures by the West to halt its nuclear programme over fears that Iran was developing nuclear weapons.

Iran has long said it is forced to seek a way to manufacture its own fuel rods since sanctions ban it from buying them on foreign markets. Iran’s atomic energy agency said on its website that the domestically made fuel rod had already been inserted into the core of Tehran’s research nuclear reactor, but the claim could not be confirmed.

The US and its Western allies have accused Iran of using its nuclear programme as a cover to develop nuclear weapons. Iran has forcefully denied this, asserting that the programme is for peaceful purposes such as electricity generation and cancer treatment.

Sanctions were signed into law by President Barack Obama on 31 December aimed at closing dealings with Iran’s central bank. The European Union, which is considering a ban on imports of oil from Iran, will be ready by 30 January to take a decision on extending sanctions, according to spokesman for the EU Michael Mann.

Nonetheless, Iran appears open to possible further talks. Iran’s top nuclear negotiator, Saeed Jalili, was reportedly planning to send a letter to EU foreign policy chief Catherine Ashton, which could be followed by a new round of talks. Mr. Mann said the EU continues to pursue a “twin-track approach” and is “open for meaningful discussions on confidence-building measures, without preconditions from the Iranian side.”

Report: Iran Says It Has Produced Its First Nuclear Fuel Rod (NY Times, 1 Jan 2012)

Report: Iran Makes First Nuclear Fuel Rod (Bloomberg, 2 Jan 2012)

Iran test-fires cruise missile

Coming hot on the heels of the nuclear announcement came Iran’s announcement on Monday that it had test-fired a cruise missile during naval exercises near the Strait of Hormuz that have ratcheted tensions with the West over Tehran’s nuclear programme.

Iran’s state news agency IRNA said the missile, known as “Qader” with a striking range of 125 miles and capable of countering US presence in the Persian Gulf, was successfully test-fired on Monday, one of the final days of 10 days of naval wargames near the Strait, the vital waterway for one-sixth of the world’s oil supply.

Iran previously said it would test a missile during the exercises, raising fears that it might try and block the Strait as a reprisal against international sanctions. However, Admiral Mahmoud Mousavi, a spokesman for the exercises said on Sunday that Iran has no intention to “disrupt traffic through the Strait of Hormuz.”

The Iranian Navy also said that it had tested a short-range surface-to-air Mehrab missile on Sunday. Iran’s naval chief Admiral Habibollah Sayari said the message of the war games was “peace and friendship for all countries in the region.” At the same time, he emphasised, “We conducted the [missile test] ... to let everybody know that Iran’s defence and deterrence powers on the open seas and the Strait of Hormuz are aimed at defending our borders, resources and our nation.”

French Foreign Ministry spokesman Bernard Valero said on Monday that his country “regrets the very bad signal to the international community sent by the latest missile tests announced by Iran.”

Defence Minister of Israel Ehud Barak said the Iranian exercise was a demonstration of strength intended “to deter the world from continuing sanctions against it,” but voiced doubts that Iran would shut down the Strait because such a move would only invite harsher international sanctions.

Report: Iran Tests Naval Cruise Missile (NY Times, 2 Jan 2012)

Report: Iran’s navy test-fires cruise missile during drill near strategic waterway(Washington Post, 2 Jan 2012)

Iranian currency weakens against US dollar after US tightens sanctions

On Monday, Iran's currency hit a record low against the US dollar two days after President Obama tightened restrictions against Iran’s central bank.

The semi-official Mehr news agency said the Iranian currency's exchange rate was at around 17,800 riyals to the dollar late Monday, an approximately 12% slide in value compared to Sunday’s rate of 15,900 riyals to the dollar. The report added that Iran's central bank has called on experts to meet on Wednesday to discuss the turmoil in the currency market.

Despite having strengthened sanctions against Iran, the Obama administration is looking to soften the impact of the measure over fears of skyrocketing oil prices and pressure on key allies that import Iranian oil.

Iranian officials have scoffed at the US sanctions. Shamseddin Hosseini, Iran’s Economy Minister, reportedly said targeting the central bank was an “unsuccessful choice.” Iran's trade and industry minister Mahdi Ghazanfari argued that the “enemies of Iran will not achieve any result through imposing sanctions,” while the central bank’s governor, Mahmoud Bahmani said “the world will laugh at the US for imposing sanctions on Iran's Central Bank.”

President Mahmoud Ahmadinejad said last week his government will do whatever it takes to prevent further sharp depreciation in the riyal's value, indicating that it could shore up its currency using hard currency reserves.

Report: Iran's Currency Slumps (Wall Street Journal, 2 Jan 2012)







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