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Iran's Ailing Economy: Presidential Candidates Long On Rhetoric, Short Of Answers

June 14, 2013

by Charles Recknagel

As Iranians go to the polls on June 14, the country's weak and sanctions-hit economy weighs heavily on their minds.

The question of what to do about it has dominated the presidential campaign and all the candidates have said they have solutions. But all their programs have sounded vague and, ultimately, remarkably alike.

According to Jamshid Assadi, an Iranian economist at the ESC Groupe Business School in Dijon, France, there are good reasons for the uniformity:

"They all see there is an economic problem but they don't offer anything especially different, one from the other," he says. "They all accept the very huge and heavy weight of the state in the economy."

He notes that all the candidates were carefully vetted for loyalty to the establishment ahead of the election. And that includes accepting what has always been the central feature of the Islamic republic's economic system: its dominance by state and quasi-state organizations.

But accepting the state's monopoly of many sectors of the economy -- despite the possibilities for inefficiency and corruption it entails -- is only one reason the candidates sound the same.

Assadi maintains that another reason is their inability to address the other big source of Iran's economic woes -- the pressure of Western-imposed sanctions.

"Even if they were different, as long as the supreme leader does not approve, they cannot do anything about the sanctions, which is the source of many problems in Iran," he says.

So far, Supreme Leader Ayatollah Ali Khamenei appears to have accepted UN and Western sanctions as the price for continuing Iran's controversial nuclear activities. Publicly, he claims the sanctions are not effective. He has called for Iran to maintain a "resistance" economy, and shown no intention of changing course.

Ali Vaez, Iran analyst at the Brussels-based International Crisis Group, suggests it is impossible to know how much of Iran's economic problem is structural and how much due to sanctions. But as sanctions have tightened, the country's economic situation has dramatically worsened.

"There is no doubt that sanctions have been devastating for the Iranian economy." He says. "Iran's oil production and exports have plummeted to historic lows -- this amounts to approximately 3 to 5 billion dollars of lost oil revenue every month. Inflation is at 40 percent if not more. Basic staple prices have quadrupled during the past year. And the most devastating of all is the free fall of Iran's currency, the rial, which has lost almost 80 percent of its value during the past year."

Tough Times For Manufacturing

Vaez notes that the sanctions have had a powerful effect on Iran's manufacturing sector, including its flagship automotive industry, the country's second-biggest foreign-revenue earner after oil and gas.

"The auto industry, because of sanctions on steel and other metals, is facing serious challenges for manufacturing and has lost 40 to 45 percent of its production in comparison to the previous year," he says. "And that represents an important sector of the Iranian economy with about 1 million workers working in the auto industry."

But if Iran is now caught in a trap of ever-rising costs and ever-shrinking job opportunities, none of the candidates seemed able to identify a bold way out.

All promised to reduce inflation, increase employment, and run a less corrupt and more efficient administration. But when it came to specifics, they mostly just asked Iranians to work harder.

Ali Akbar Velayati said last week that he would ease the rising cost of consumer goods by making customs officials work more quickly. He said that would reduce backups of imported consumer goods in ports so that they could reach the market faster.

Mohammed Baqer Qalibaf called last week for increasing Iran's own production of goods. He blamed the current decline in production on "mismanagement," and added that "we in Iran are like a family that has money but does not know how to spend it."

While campaigning, Said Jalili called for "reforming the government's structure and increasing the speed in which tasks are accomplished so we can attain significant progress."

Mohammad Gharazi said "the country can continue its existence if it introduces the forces of its youth to advanced technology."

And Mohsen Rezai said, "We have everything in this country and no shortage of resources and mines" to create an economic 'wonder.'"

Only rarely did any of the candidates mention sanctions as part of Iran's economic burden.

Open Question

Hassan Rohani, a moderate conservative who has received the endorsement of Iran's reformist movements, was the most direct. He told supporters early in his campaign that "Iran is in the middle of sensitive days, hard days. It is because of regional and international situations as well as sanctions."

But it is an open question whether any of the candidates -- including Rohani -- could improve Iran's economy so long as it continues to be weighed down by state monopolies and the supreme leader refuses Western terms for lifting sanctions.

Many analysts believe Iran's economy needs major restructuring and foreign investment if it is to bounce back. But both are unlikely given the establishment's stance today.

In Assadi's view, that stance is best illustrated by the election exclusion of former President Ali Akbar Hashemi Rafsanjani, who is known for his preference for market-based economic growth.

"The new president cannot do anything special for reforming [the economy], because if he could reformism would not have been excluded from the competition for the election in the form of Hashemi Rafsanjani, even though he was a very moderate reformist," he says.

That could leave the next president with the unenviable task of trying to meet the supreme leader's own assessment of what to do.

"If we can shore up the economy," Khamenei has said, "the enemy will be left defenseless in its confrontation with the Iranian nation."

However, the supreme leader has not proposed how this can be done.


Copyright (c) 2013. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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