On 27 March 1978, the International Monetary Fund (IMF) formally recognised the Iranian Rial as one of the world's credible reserve currencies, incorporating it into the basket of Special Drawing Rights (SDRs). At the time, this elite group comprised only sixteen major currencies, including the US dollar, the Deutsche mark, the French franc, and the Japanese yen. The Rial, once dismissed by many as peripheral, had now become a tradable, exchangeable, and convertible monetary unit on the world stage, backed by the structural legitimacy of the IMF (UN, 1978). It could be stored in foreign reserves, transacted across international banks, and used in global financial centres without the need for conversion. This brief but monumental recognition marked Iran's entry into a transnational economic order built upon institutional credibility, macroeconomic discipline, and monetary integration.

 

Reserve-currency status is not conferred by resource endowment alone. Iran’s 1970s economy demonstrates that the Imperial government had assembled an economic apparatus that was, by international standards, technically capable: a monetary authority able to manage reserves and external payments, a planning and budgetary bureaucracy able to translate oil receipts into a broadly coherent fiscal stance, and a professionally trained technocratic stratum for whom inflation control, exchange arrangements, and external credibility constituted policy objectives rather than mere political theatre. These routines did not eliminate structural fragilities or distributional tensions, but they did sustain a level of predictability that made the rial usable for settlement, pricing, and cross-border holding. On that empirical basis, the Imperial government merits more than passing acknowledgement for technocratic stewardship, and it is this institutional competence that renders the subsequent deterioration intelligible as a rupture in governing practice rather than an automatic consequence of oil dependence (UN, 1978; UN, 1979).

 

 

It did not last

"There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose” (Keynes, 1919, pp. 235–236).[1]

 

The 1979 Western and Israeli-orchestrated Islamic revolution in Iran (Suren-Pahlav, 2000), presented as a revolt of the “oppressed”, delivered an economic death sentence to a country on the cusp of fiscal modernity. Within two years, the Islamic regime in Iran had eroded the imperial government’s currency credibility, painstakingly established over years. The systematic expulsion, imprisonment, or assassination of economic elites, technocrats, and industrialists ushered in a new era of clerical economic misrule. Those who understood balance-of-payments dynamics, international lending mechanisms, or central bank independence were replaced by dogmatists whose primary intellectual preoccupations revolved around ritual purity and the semantics of ablution. The country's monetary system was handed over to men who treated economics not as a science, but as a sinful distraction from theology.

 

By 1980, the Iranian Rial had lost all semblance of global confidence. The same currency once honoured as a global reserve unit had become what it remains today: a textbook case of hyperinflationary collapse. As of 2010, one US dollar equalled over 30,000 Iranian Rials, compared to just 66 in 1978 (Fleur-de-Coin, 2010). The IMF, which had previously held Iran as a serious player within the international financial system, now treated it as a cautionary tale. The contrast with Saudi Arabia, admitted to the SDR basket in the same year and still holding its position, is not incidental. It is structural. Both were rentier states, both hydrocarbon-rich. Yet while Saudi Arabia anchored its economic model in global capital and preserved its institutions, Iran’s post-revolutionary state declared war on modernity itself. The difference lies in what each regime did with its sovereign wealth: Riyadh, like the former imperial government in Iran, protected its sovereign wealth through strategic continuity and technocratic stewardship, placing experts at the helm of fiscal and monetary governance. Tehran, by contrast, subordinated economic management to ideological fidelity, staffing key institutions with non-experts and, at critical junctures, yielding decision-making to an ochlocratic political culture in which organised factions and street pressure displaced competent administration. It also treated sovereign wealth as spoil, folding public revenue into kleptocratic networks that converted national income into private exit (Suren-Pahlav, 2010).

 

The UN's 1978 Annual Report makes clear the seriousness of Iran's prior economic stature. It details the reconfiguration of the SDR basket to include the Iranian Rial and the Saudi Riyal, while excluding the Danish krone and South African rand (UN, 1979: 1136). The Rial was not merely included for symbolic purposes. It had met the IMF’s stringent criteria for credibility, convertibility, and stability. This was a currency that had weight. It was backed by an oil-exporting state with functioning financial institutions, an internationally active central bank, and a relatively diversified economy. Iran's accession to the SDR basket coincided with its increasing integration into the global system of credit, reserves, and liquidity management. This was not a country on the periphery. It was becoming central.

 

That centrality was violently undone. The post-revolutionary regime’s disdain for economic rationality was not merely rhetorical; it was performative. In one infamous scene from the early 1980s, Amir Abbas Hoveyda, the Imperial State’s long-serving Prime Minister, stood before a revolutionary tribunal that had already determined his fate. When a cleric demanded to know what his thirteen years in office had achieved, Hoveyda silently held up a Bic pen. ‘This cost five Rials when I became Prime Minister,’ he said. ‘It still costs five Rials today.’ His answer, a quiet, precise assertion of monetary stability, sailed over the heads of the clerics and ideologues presiding over the trial. The courtroom reportedly erupted in laughter. They could not grasp that fiscal discipline, not ideological theatrics, is the true measure of statesmanship.

 

That mentality was later echoed, and ultimately cemented, when the regime’s founding figure, Ruhollah Khomeini, delivered a now-notorious dismissal of economic concerns. In his words:

‘آن‌هایی که دم از اقتصاد می‌زنند و زیربنای همه چیز را اقتصاد می‌دانند از باب اینکه انسان را نمی‌دانند یعنی چه، خیال می‌کنند انسان یک حیوانی است که همان خورد و خوراک است... این‌هایی که زیربنای همه چیز را اقتصاد می‌دانند، این‌ها انسان را حیوان می‌دانند. حیوان هم همه چیزش فدای اقتصادش است. زیر بنای همه چیزش، الاغ هم زیر بنای همه چیزش اقتصادش است.’

(Soroush Magazine, 1980: 6–8)

 

Roughly translated: ‘Those who talk about economics and see it as the foundation of everything, do not understand what a human being is. They think man is just an animal concerned with eating, this one eats chelow kebab, that one eats straw, but both are animals. Those who see the foundation of everything as economics, see man as an animal. For animals, everything revolves around their economy. Even a donkey’s foundation is its economy.’

 

​

 

With this declaration, Khomeini did not merely dismiss economic reasoning. He dehumanised those who saw economic foundations as essential to society. This was not ignorance. It was deliberate epistemic sabotage. It announced a new order, in which theology superseded empiricism, and divine command replaced institutional memory. The result was not only an ideological shift, but the systematic dismantling of the economic state. And from that moment, the rule of law gave way to the rule of theocratic mobs. Economics, once grounded in institutional rigour, became hostage to theological populism and revolutionary vengeance. Policy would no longer be anchored in fiscal logic or institutional continuity. It would be forged in the crucible of absolutist belief. Khomeini's aphorism was not ignorance. It was doctrine.

 

This doctrine, and the mentality that sustains it, is rooted in a pathological veneration of a 7th-century past. Islamic fundamentalists in the revolutionary regime do not see the future in terms of development, innovation, or global integration. They see it in the mirage of Hijaz and Najd, in the sand dunes of 1400 years ago, where tribal codes and theological absolutism dictate the course of history. Their blueprint for the future is written in the ink of regression. Rather than envisioning a technologically sovereign and globally respected Iran, they idolise a mythic past where inquiry is blasphemy, and governance is revelation.

 

In economic terms, the destruction of the Rial's global standing can be read as both symptom and symbol . Symptom of the regime’s broader war on technocratic knowledge, and symbol of its wholesale rejection of international norms. A regime that cannot keep the lights on in its own cities, or guarantee the value of its own banknotes, has no place in the SDR basket. Nor should it. What was lost in the post-1979 period was not simply a monetary status, but the very conditions of possibility for national dignity in the global financial order. The Rial was devalued because the state that backed it had become institutionally bankrupt.

 

Saudi Arabia, meanwhile, retained its position in the SDR basket. As of 2010, the Saudi Riyal maintained its value, with one US dollar equalling approximately 3.7 Riyals, almost identical to its 1978 figure of 3.4 (CUHK, 2010). This endurance is not an accident. It is a testament to political systems that, despite their autocratic structure, preserved institutional memory and fiscal prudence. Where Iran fell into the abyss of theological fundamentalism, Saudi Arabia, under a monarchic system, maintained a coherent state apparatus. The lesson is not about the nature of monarchy or republicanism per se. It is about the ruinous consequences of allowing Islamic dogma to overtake economic rationality.

 

The collapse of the Iranian Rial is thus neither accidental nor inevitable. It is the direct outcome of political choices made in the early years of the Islamic regime. The destruction of economic institutions, the severing of international ties, the militarisation of the economy, and the dominance of revolutionary ideology over material pragmatism all contributed to the currency’s demise. To mourn the Rial's fall is not to indulge nostalgia. It is to recognise what was possible before clerical rule rendered it impossible.

 

To this day, the Iranian Rial ranks among the world’s most worthless currencies, alongside the Zimbabwean dollar and the Venezuelan bolivar. This fact should haunt not just economists, but every citizen whose savings have evaporated, whose purchasing power has collapsed, and whose dignity has been tethered to a currency that no longer commands respect. The tragedy of the Rial is, at root, the tragedy of a nation whose leadership turned its back on the world, and in doing so, turned its people into economic hostages.

 

Conclusion

As long as the Islamic regime remains in power, the Iranian economy will remain in freefall. The structural roots of this decline are not merely technical or cyclical; they are ideological. A regime that venerates a mythical past over empirical governance, that equates economic expertise with treachery, and that weaponises monetary policy for ideological survival, cannot arrest its own collapse. It would not be surprising, indeed, it is entirely foreseeable, that in the not-so-distant future, Iranians may be forced to pay 100,000 Rials at least for a single US dollar[2]. Such a trajectory is not hyperbole but the logical consequence of economic illiteracy entrenched in political power.

 

The consequences of this monetary degradation are severe. Hyperinflation erodes real wages, destroys savings, and pushes much of the labour force into chronic precarity. Capital flight accelerates, investment contracts, and productive capacity is steadily hollowed out. A state that cannot fund itself through credible taxation turns instead to monetary financing, which deepens the inflationary spiral. What remains is not an economy so much as a managed collapse, sustained by repression, propaganda, and a black-market dollar rate scrawled on alleyway walls. Under such conditions, the longer the regime endures, the more painful the eventual adjustment is likely to be. The Rial’s decline, then, is not merely a currency story, but a mechanism through which economic failure can be translated into political fragility, since sustained material exhaustion may succeed where external coercion and formal opposition have, thus far, failed.

 

Neither an external military intervention, of the kind pursued by the United States and its allies in Iraq, nor the present configuration of organised opposition appears sufficient, on its own, to precipitate regime collapse in Iran. External force can consolidate authoritarian coalitions and furnish justificatory narratives for repression, while opposition networks remain fragmented, leaderless, and widely distrusted, which limits their capacity to convert dissent into a credible governing alternative. A more plausible pathway runs through the regime’s own economic failure. Sustained inflation, currency depreciation, and employment insecurity erode the state’s distributive capacity and, over time, strain the coercive apparatus that depends upon it. When households are pushed from deprivation into hunger, grievance can harden into high-risk collective action, and episodes of mass protest may become less containable, with violence more likely. In that sense, the contemptuous claim that ‘the economy is for donkeys’ reads not merely as rhetoric, but as strategic miscalculation, one that may yet furnish the proximate conditions of the regime’s downfall.

 

 

Footnote:

1 - John Maynard Keynes (1883-1946) was a British economist and Treasury adviser who reshaped twentieth-century macroeconomics and the practice of economic policy. He gained prominence with The Economic Consequences of the Peace (1919), a fierce critique of the post-war settlement. His writing often couples monetary argument with a technocratic, occasionally paternalistic register, as in his warning that debauching the currency can ‘overturn’ society while remaining opaque to most observers. Keynes also worked within British state institutions, including imperial administration, which situates parts of his policy thinking inside the structures of colonial  power.

 

2 - Using the current market rate (about 30,000 Rials per US dollar) as a baseline, and modelling depreciation as a compound process, a relatively benign path, consistent with partial stabilisation and slower inflation differentials, would place the parallel-market rate on the order of 100,000 Rials per dollar by 2020 and around quarter or even half a million by 2030, conditional on regime continuity. These figures are conditional scenario ranges, not point forecasts.

 

 

References

• Fleur-de-Coin (2010) Worthless Money. Available at: https://www.fleur-de-coin.com/articles/worthless-money (Accessed: 16 June 2010).

• Gatestone Institute (2013) Iran's Currency Collapse. Available at: https://www.gatestoneinstitute.org/3597/iran-rial-collpase (Accessed: 16 June 2010).

• Keynes, J.M. (1919) The Economic Consequences of the Peace. London: Macmillan, Chapter VI, pp. 235–236.

• Soroush Magazine (1980) Issue 75, 17 Aban 1359, pp. 6–8.

• Suren-Pahlav, S. (2000) ‘A Death in Exile, A Nation in Chains- Remembering HIM Mohammad Reza Shah Pahlavi, Shāhanshāh Āryāmehr’, Available at: https://www.suren-pahlav.com/en/a-death-in-exile-nation-in-chains-remembering-shahanshah-aryamehr.html (Accessed: 16 June 2010).

• Suren-Pahlav, S. (2010) ‘Pillaging Iran: Islamic Regime Embezzling Billions, Concealing Funds Overseas’. Suren-Pahlav. Available at: https://www.suren-pahlav.com/en/pillaging-iran-islamic-regime-embezzling-billions-concealing-funds-overseas.html (Accessed: 16 June 2010).

• The Chinese University of Hong Kong (2010) Exchange Rate Regime Database. Available at: https://intl.econ.cuhk.edu.hk/exchange_rate_regime/ (Accessed: 16 June 2010).

• UN (1978) The International Monetary Fund: Activities in 1978, Yearbook of the United Nations 1978, United Nations, New York, p.1136. Available at: https://digitallibrary.un.org/record/139628?ln=en&v=pdf (Accessed: 16 June 2010).