“Iran’s oil, gas condensate exports to rise to 3m bpd by Mar. 2017,” “Iran’s oil sales to Europe top 700,000 bpd” every twenty-four hours, “60 deals signed with foreigners after JCPOA: Industrial official” [the so-called “Iran deal”, here’s full text]: triumphalist tones stand out in Iranian media in recent weeks. The refrain keeps the same beat as in the past few months: 2016 is Tehran’s year zero, it represents the post-sanctions era, when the agreement between the 5 + 1 countries, together with the EU, and Iran has been implemented. The restrictive measures imposed by the European Union and the United Nations [the US was the first country to start] against the Islamic Republic have been (partly) lifted.
Although not all the sanctions have been removed [see here], Iran is back on the international market as it has not been for years, and its banks have been readmitted to the Swift system.
On November the 8th, news reported about the French company Total’s recent activities. In fact, it is at the starting line, ready to enter the country and contribute to the development of the world’s largest gas field, South Pars. China National Petroleum Corp. will also participate in the project.
Propaganda aside, within a geopolitical framework all seems well underway. Yet, in reality, the domestic situation is much more complex, especially if one uses a different focus. Indeed, Iranians have been waiting for a long time the moment when they will overcome this enduring crisis they are experiencing.
A country still struggling. At what point is Rouhani?
Today’s Iran, led by President Hassan Rouhani, and its economic difficulties have a twofold explanation: one internal and one external. On the one hand, a bad management of the public sector has to be taken into account, together with economic policies carried out by former President, Mahmoud Ahmadinejad, who cut public fuel subsidies and also led to price increases on gas and electricity, leaving the country – after two terms – with an inflation rate over 40% and unemployment at 12.3%. On the other hand, it is impossible to ignore international sanctions, which have been blocking Tehran’s entry to the financial sector and trade with Europe, as well as the export of energy resources, trade relations in the tech sector, gold and jewels [here’s all the measures, editor’s note].
In was 2013, when Rouhani, a pragmatic and moderate who has taken responsibilities of leading Iran into a new economic and political phase, arrived. So far, he has achieved three positive results: 1) he was able to handle the difficult relations with conservative factions and, primarily, with the Supreme Leader, Ali Khamenei; 2) he took home the nuclear deal and sanctions relief; 3) he reduced the inflation rate to 9.5%, which represented a record in twenty-five years.
On other fronts, however, the situation is not so promising: 1) unemployment remains quite high of 11.8%; 2) poverty and social inequality is still a problem [here’s the World Bank’s data]; 3) the industrial sector is still struggling to recover: production fell by 2.9% at the beginning of 2016; 4) the other two crucial centers of power in the political life of the Islamic Republic, such as the Guardian Council and the Revolutionary Guards, have still to show their next moves. As written here by Nader Habibi, professor of “Economics of the Middle East” at the Crown Center for Middle Eastern Studies (Brandeis University), the Guards will most likely reject any economic reform that might undermine their role (and influence) in the economy. Yet, since the beginning of his mandate, Rouhani has presented himself as the man ready to overturn the paradigm: from Khamenei’s the economy “of resistance”, which is more focused on domestic affairs, to the economy of reforms, which is open to foreign investments and exchanges [here’s the focus on “EastWest” November / December].
From crisis to change: The Islamic Republic’s economic stages
An economic crisis, a turning point: if one wants to sum up Iran’s post-revolutionary economic history in five words, this would probably be the most accurate formula. From the 1979 revolution to Rouhani the pattern systematically repeated itself.
1) The Shah Reza Pahlavi’s regime, was paralyzed and eventually overthrown in 1979 by non-stop strikes against the bad economic conditions and inflation peak. As explained by famous historians, Ahmad Ashraf and Ali Banuazizi, “when the industrial workers finally joined the revolutionary coalition, their contribution was significant. Together with white-collar and professional employees, they closed down many essential services and industries and eventually paralyzed the state apparatus”. By late 1970s, as widely explored by academics, such as Ervand Abrahamian, the economic conditions were worsening as the Shah’s opulence was at odds with the living standards of poor people (foqara in Farsi).
2) Iran-Iraq war period (1980-1988), and the misery which pervaded millions of Iranians’ lives, led to the election of a pragmatic president, Hashemi Rafsanjani, who started the “reconstruction age”, by taking Tehran towards neo-liberal policies (despite the closure outside) throughout the 90s. Was this period crucial for the country? Or, have these new policies widened the social gap between the new rich and poor?
In 1997 Mohammed Khatami was elected as the first reformist President. According to his critics – he has focused more on politics and public participation rather than on his “economic (non-) agenda”, as Sohrab Behdad argued.
3) At that point, there was a fertile ground for Ahmadinejad’s populism, who was for eight years at the helm of a country at the mercy of international sanctions, while he was mismanaging the economy. For all the above mentioned reasons, Iranians were prompted to the election of Rouhani. And, just elected in 2013, he had promised to reduce Tehran’s dependence on oil exports (run-in the system since the 70s), because this subordination exacerbated the “political patronage” that took Iran on the brink of bankruptcy, as explained here by researcher Anisseh Baziri Tabrizi.
What’s next?
In today’s Iran, which is too often and wrongly described as a monolith, the perception of social and economic distress is pressing. Impatience, in fact, has been rising for months. And, if Rouhani will not intervene to quell the discontent, the crisis could lead to another (slow) transformation (also in terms of electoral support). At the moment, the economy seems to be a pounding obsession with ordinary people and President’s critics. For example, Tehran’s mayor, Mohammed Bagher Ghalibaf, recently claimed that the unofficial taxi drivers’ rise in the capital’s streets is the result of a bad economic situation.
Frustration over the lack of progress on the government’s work and wages is a fact that cannot be neglected. In July, IranPoll for the University of Maryland, found out that 74% of Iranians are not convinced that living conditions have improved with the nuclear deal. Even considering the small number of people interviewed (only a thousand people), the survey gives an idea about how unstable the consensus in Iran is at the moment, despite Rouhani’s “ability” to mediate between different factions in the Parliament.
As always, Iranians can overturn the situation, against all odds. Peyman Jafari, historian and Iran expert who teaches at the University of Amsterdam, believes that “the reality is that the political and economic system of the Islamic Republic is full of contradictions that will throw up new political crises”.
