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Rouhani Condemns Nazi ‘Crime’ as Iran’s New Face Seeks Thaw

Sept. 24 (Bloomberg) -- Iranian President Hassan Rohani speaks about the country's nuclear program and relationship with the U.S. Rohani speaks before the United Nations General Assembly meeting in New York. (This report is in Farsi with English translation. Video courtesy of United Nations. Source: Bloomberg)

Iranian President Hassan Rouhani’s latest break with predecessors, condemning the killing of Jews in the Holocaust, extends a makeover of the Islamic republic’s diplomacy that’s driving a currency revival back at home.

Elected on a pledge to ease Iran’s global isolation, Rouhani took over last month from Mahmoud Ahmadinejad, who repeatedly denied the reality of the World War II killings. The new leader has used this week’s trip to the United Nations in New York to emphasize how he’s different, and prepare the ground for renewed talks on Iran’s nuclear program. The prospect of a thaw has helped Iran’s currency recover from the record low it reached under U.S.-backed sanctions.

“As to the massacre of Jews by Nazis, we condemn it completely,” Rouhani told reporters at a breakfast meeting in New York. “We never want to sit side by side with Nazis. The Nazis committed a crime against the Jewish people.” The president made similar comments in a CNN interview. At the UN on Sept. 24, he referred to the Torah, a core of the Jewish faith, and also said that it’s “imperative that we remove any and all reasonable concerns” about Iran’s nuclear work.

The softened rhetoric, even though it hasn’t been accompanied by major policy shifts, has pared a slump in the rial that saw the currency lose more than half its dollar value in the 12 months before Rouhani’s election. The slide came as Western sanctions squeezed the economy, cutting oil output to the lowest level since 1990, and the U.S. and Israel warned they may use force to stop Iran from getting nuclear weapons.

Photographer: Timothy A. Clary/AFP via Getty Images

Hassan Rouhani, President of the Islamic Republic of Iran, addresses the audience during the 68th session of the United Nations General Assembly in New York on September 24, 2013. Close

Hassan Rouhani, President of the Islamic Republic of Iran, addresses the audience... Read More

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Photographer: Timothy A. Clary/AFP via Getty Images

Hassan Rouhani, President of the Islamic Republic of Iran, addresses the audience during the 68th session of the United Nations General Assembly in New York on September 24, 2013.

‘Currency Bubble’

The rial is up almost 20 percent on unofficial markets since the June 14 vote, easing the plight of Iranians who have seen prices surge as import costs rose under the sanctions regime. Inflation exceeded 43 percent last month, according to central bank data, and some staples have become hard to find.

The relief is limited because rial’s rebound hasn’t brought “corresponding gains in the real economy,” said Mehrdad Emadi, senior economist at BetaMatrix, a U.K.-based analysis group that studies Iran. Iran’s gross domestic product shrank 5.4 percent in the year through March, according to official figures.

“What we’re seeing with Rouhani’s election is a currency bubble,” Emadi said. He said Iran’s finance industry has pushed for a stronger rial, while manufacturers would be happy to see further depreciation that helps them compete with Malaysian and Korean imports.

Photographer: John Moore/Getty Images

U.S. President Barack Obama addresses the United Nations General Assembly in New York. Obama said voters had given Iranian President Hassan Rouhani a “mandate to pursue a more moderate course,” welcomed the new president’s commitment to diplomacy and said it may lead to “meaningful agreement.” Close

U.S. President Barack Obama addresses the United Nations General Assembly in New York.... Read More

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Photographer: John Moore/Getty Images

U.S. President Barack Obama addresses the United Nations General Assembly in New York. Obama said voters had given Iranian President Hassan Rouhani a “mandate to pursue a more moderate course,” welcomed the new president’s commitment to diplomacy and said it may lead to “meaningful agreement.”

Opposing Sides

For Rouhani, economic recovery depends on loosening sanctions, and key to that is defusing the U.S.-Iranian standoff that dates to the Islamic revolution of 1979 and has overshadowed much of the Middle East’s recent history. The two countries are backing opposing sides in the Syrian civil war, as they did in the Lebanese conflict of the 1980s, while Iran supports some of the most militant Palestinian groups that U.S. ally Israel is fighting.

A reconciliation may require concessions that are opposed by some factions in Iran. Mohammad Kowsari, a senior lawmaker and member of parliament’s Security and Foreign Policy Commission, this week warned Rouhani not to hold talks with President Barack Obama. That shouldn’t happen until “the U.S. has returned confiscated assets, the sanctions are removed, and they have apologized for the crimes they have committed against Iran,” Kowsari said in an interview with Etemaad newspaper.

Rouhani didn’t depart from the policy of Ahmadinejad and other Iranian leaders on Iran’s entitlement to peaceful nuclear technology, which he affirmed at the UN this week. He also spurned a U.S. initiative to arrange a handshake with Obama, citing possible opposition at home, according to U.S. officials.

‘Market’s Coma’

In Iran, businesses are still waiting to see whether “serious changes happen or not,” meaning the economy is largely stagnant, said Rouzbeh, 35, who runs his father’s timber and furniture factory in Tehran. Like most Iranians talking to international media, he declined to give his surname because of concern over official reprisals.

“Even now, in the market’s coma, our situation is better than the last two years of Ahmadinejad,” said Rouzbeh, who’s been in the business since he was 18. “The recent stability in the dollar’s exchange rate had positive psychological effects.”

The currency was trading at 30,600 per dollar today, according to data on a Facebook page used by traders and companies in Iran and abroad. That’s 18 percent higher than when Rouhani was elected.

The currency’s surge prompted authorities, who have spent much of the past year discussing measures to strengthen the rial, to warn that it’s becoming too strong. Central Bank governor Valiollah Seif said on Sept. 24 that any gains beyond 30,000 “wouldn’t be beneficial” or rational, according to the official Fars news agency. His verbal intervention, at a meeting of Iran’s Chamber of Commerce, helped the rial pare gains.

Selling Carpets

Obama, in his own UN speech, offered something for Iranians seeking a new era of ties, while tempering his optimism. He said voters had given Rouhani a “mandate to pursue a more moderate course,” welcomed the new president’s commitment to diplomacy and said it may lead to “meaningful agreement.”

Obama also said Iran’s “conciliatory words will have to be matched by actions that are transparent and verifiable.” In the search for a negotiated solution, he said, “the roadblocks may prove to be too great.”

It was the earlier part of the message that resonated with Amir-Hossein, who works in Tehran’s Grand Bazaar. He was clear about the reasons behind the rial’s recent revival.

“Because Hussein is coming,” the 35-year-old said, referring to Obama by his middle name. “Our situation will be good again. We will sell oil and carpets again.”

To contact the reporters on this story: Yeganeh Salehi in Tehran at yalehi@bloomberg.net; Kambiz Foroohar in New York at kforoohar@bloomberg.net; Matthew Winkler in New York at mwinkler@bloomberg.net.

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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