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Iran's Khamenei warns of government divisions after rial plunge

By Yeganeh Torbati

DUBAI (Reuters) - Supreme Leader Ayatollah Ali Khamenei told Iranian officials on Wednesday to stop bickering over mounting economic woes as Tehran grapples with Western-imposed sanctions, voicing concern heightened by the collapse of the rial currency.

His comments touched on divisions between Iranian government agencies and political factions exacerbated by the rial's fall over the past several weeks, fanning an atmosphere of crisis in the world's No. 5 oil-exporting state.

"The country's officials should know and accept their responsibilities and not blame each other," Khamenei said in a televised speech in the northeastern city of Bojnourd. "They should be united and sympathize with each other."

The rial plunged some 35 percent in the free market to a record low against the U.S. dollar over the 10 days to October 2, reflecting a decline in Iran's oil income wrought by tightened sanctions imposed over its disputed nuclear program.

Iranian savers have rushed to convert their rials into hard currency, and riot police briefly clashed with crowds protesting against the rial's slide near Tehran's Grand Bazaar last week.

By selling its remaining petrodollars to importers of basic goods at state-controlled rates, the government could succeed in preventing the currency crisis from crippling the economy.

But the rial's depreciation has hurt the government's credibility and threatens to aggravate inflation, which is already officially estimated at around 25 percent and believed by private economists to be cresting much higher.

The debacle has fed criticism of President Mahmoud Ahmadinejad by political enemies eager to pin Iran's economic difficulties on his administration. Parliament speaker Ali Larijani, seen as a possible presidential candidate in elections next year, has been trading barbs with Ahmadinejad.

Senior clerical figures close to Khamenei were fiercely critical of Ahmadinejad's economic management in sermons delivered at last week's Friday prayers, Iranian media reported.

In his speech on Wednesday, Khamenei said: "The illogical sanctions of the West are barbaric," and he acknowledged that inflation and unemployment were pressing problems.

IRAN CAN WITHSTAND SANCTIONS, KHAMENEI SAYS

But he insisted Iran could withstand the sanctions and brushed off last week's street protests, saying they consisted of a few people setting trash cans on fire.

He added that Tehran's merchants, who as a class were instrumental in the 1979 Islamic Revolution, should be praised for distancing themselves from the demonstrations.

Khamenei also denounced Western officials who thought the rial's plunge showed Iranian weakness. U.S. Secretary of State Hillary Clinton said last week that the depreciation arose from decisions by the Iranian government, an allusion to Tehran's refusal to curb its nuclear program.

"Are we worse off or you? In the streets of major European countries there are demonstrations day and night ... The problems of the West are much more complicated than ours," Khamenei said, alluding to Europe's debt crisis.

"The West's economy is frozen. You are worse off and you are moving towards collapse and recession. These problems cannot bring the Islamic Republic to its knees."

Legislators announced on Wednesday that they had collected 102 signatures in favor of questioning Ahmadinejad in parliament and presented the motion to the deputy speaker. But there was no word on when this might happen.

Political infighting is not new in Iran's ungainly multipolar power structure and there is no sign that the discontent poses a threat to Khamenei, who is Iran's highest authority but has avoided blame for economic problems.

However, there are signs that government agencies are taking aim at each other over the crisis and this could backfire badly if it restricts Tehran's ability to respond to economic issues.

Armed forces chief Hassan Firouzabadi said this week the central bank was primarily responsible for the currency crunch.

"The problems in the last few days were caused because some in the banking system did not pay attention and the central bank took some issues lightly," Firouzabadi said on Monday, according to the Fars news agency.

Intelligence Minister Heydar Moslehi was quoted as blaming the rial's descent on poor coordination between government bodies and a government failure to heed predictions made by his ministry as long ago as April 2011, Mehr news agency said.

(Additional reporting by Zahra Hosseinian; Editing by Andrew Torchia and Mark Heinrich)

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