Iran is stockpiling gold. That's the way David Cohen sees it. He's undersecretary of the Treasury, and the Treasury's point man for the banking sanctions the U.S. has imposed on Iran.
"Iran is attempting to hoard gold, both by acquiring it and by preventing the export of gold from Iran, in a somewhat desperate attempt to try and defend the value of its currency," Cohen says.
Iran faces an oil embargo from many Western countries, and the U.S. has also imposed tough banking sanctions. Iran still manages to sell some oil, although a reduced amount, to neighboring Turkey. Turkey is paying Iran in Turkish lira, which is not a strong currency, notes Muhammad Sahimi, who writes for the website Tehran Bureau.
"Turkish lira cannot really be converted to dollars or euros in the international market. And in addition, because of sanctions on Iranian banks, any such transaction is difficult," Sahimi says. "So what Iran does is that when it receives local currency, it buys gold or silver in the same market using the local currency that it has received, and then transfers [the gold and silver] to Iran."
According to Turkish trade data, Iranians have bought about $2 billion worth of gold a month since July, when the latest U.S. banking sanctions went into effect along with a European boycott of Iranian oil.
It is not known who the Iranian buyers are, nor where the gold is going in Iran. But the Iranians are using Turkish lira to buy it.
The gold is sold in the form of bullion. It is apparently being carried by hand in suitcases, by air to Dubai, and then most likely by boat across the Persian Gulf to Iran.
Two billion dollars' worth of gold weighs more than 30 tons. This suggests a large number of carriers and trips to move that much gold into Iran.
This gold trade has caught the eye of the U.S. Treasury and is not an activity that the U.S. looks upon favorably, Cohen says.
"The sale of gold to the government of Iran, whether by Turkey or any other country or citizen of any other country, is subject to sanctions under our law," Cohen says.
At the same time, the Central Bank of Iran is acting to prevent any gold from leaving Iran. What this adds up to is an effort to hoard gold in order to prop up the value of the rial, the Iranian currency. Its value collapsed dramatically earlier this fall.
The gold story emerged just as Iranian authorities arrested several currency traders and accused them of undermining the rial. Then another curious wrinkle to this story emerged in government newspapers and websites — the allegation that a single currency trader named Jamshid Besmillah was responsible for the collapse of the rial. Sahimi thinks this story is pure fiction.
"If there is such a guy, which I doubt, that is probably his nickname, not his true name. I have never heard of him before," Sahimi says.
His last name, Besmillah, means "in the name of God."
Worsening Economic Crisis
Nader Hashemi, an Iran analyst at the University of Denver, believes this story and the arrest of other currency traders are symptoms of a serious crisis in Iran.
"These are all, I think, signs of desperation by the regime, concocting a story that one individual is allegedly responsible for the collapse of the Iranian rial," Hashemi says. "It does seem quite bizarre, but I think it just points to the reality of how the Iranian regime now is in deep crisis."
Cohen also believes that Iran's economy is in crisis, brought on by pressure from the sanctions. As for Iran's newfound interest in the gold trade, Cohen says the U.S. will take action.
"You can be certain that we are looking carefully at this issue, and where we see an individual or an entity that may be involved in activity that violates our sanctions, we investigate that very aggressively," Cohen says.
The combined effect of the banking sanctions and reduction of Iran's oil revenues, Cohen says, have been powerful. There's no certainty Iran's gold purchases can save its currency.