The presidential election in Iran: what impact on the economy?

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By Mohammad Amin*

Of the six candidates (out of more than 1,600 hopefuls) selected to contest the presidential election by the Council of Guardians on the orders of the "Supreme Guide", the main rivalry was between the two favourites: white-turbaned Hassan Rohani, the outgoing president who has occupied the highest security functions for more than quarter of a century, and black-turbaned Ebrahim Raissi, the judge who ordered the massacre of thousands of political prisoners, a key figure in the judicial apparatus since 1980 and the head of one of the world's largest financial and religious foundations, Astan-e Qods Razavi.

The economic crisis dominated the TV election debates. The candidates attacked each other with rare violence, telling tales of misappropriations of public money. Mohammad-Bagher Qalibaf, the current mayor of Teheran, denounced the smuggling of "several tonnes of Italian clothing" by the daughter of Rohani's education minister. Rohani responded by lambasting the Ahmadinejad government for incompetence in delaying the withdrawal of Iranian assets from banks in Luxembourg, which this year allowed US courts to freeze two billion dollars as compensation for the victims of Iranian-sponsored terrorist attacks.

However, neither side had a word to say about the three key issues on which they all agree: total compliance with the nuclear agreement (JCPOA) with the 5+1, the control of whole swathes of the Iranian economy by the Revolutionary Guards (Pasdaran) and EIKO, a vastly rich conglomerate controlled by the Supreme Guide, and the financing of the colossal spending on the war in Syria, Bachar Assad and dozens of militias like Hezbollah in Lebanon, the Houthis in Yemen and the Hachd al-Chaabi in Iraq.

First, compliance with the JCPOA means that all the factions agree on the need to persuade western firms to enter and invest in the Iranian market while taking care to avoid the slightest change to the Iranian government's political or strategic options.

Second, the stranglehold of the Pasdaran and EIKO on the economy is now such an integral part of the country's economic structure that calling it into question is unthinkable.

Third, the spending on military interference in the region is embedded in the theocracy's overall strategy and was a taboo subject during the campaign.

The convergence of views on these three issues results from the total adherence of both factions to the policies and orientations on which the Supreme Guide has a complete monopoly.

Consequently, it is hard to see how the outcome of the election could lead to any real opening up of the Iranian economy, as the experience of the last four years confirms.

The JCPOA had given the regime an excellent opportunity to do just that. Paris and Rome rolled out the red carpet for Hassan Rohani. Dozens of commercial and diplomatic delegations flocked to Teheran, especially from France. Many preliminary agreements for investment projects were concluded during these visits after the lifting of sanctions which pushed oil exports back to their previous level of 2.4 million barrels per day.

But the benefits have been meagre indeed: although inflation has fallen, the recession has worsened. Western firms have been put off by acute unemployment (officially 12.5% but more like 40% according to Iranian economists, representing 10 million unemployed), the failure of 14 out of the country's 31 public and private banks, bankrupt pension funds and government paralysis due to empty coffers and public debt in excess of $212 billion.

The record of Rohani's government at the end of its term is awful: "the country's economic problems will not be solved even in a hundred years", laments one official agency.

There is considerable capacity in the Iranian economy, given a market of 80 million impatient consumers, an urgent need to repair infrastructure, a skilled labour force and copious natural resources including 9.3% and 18.2% respectively of the world's oil and natural gas reserves. But opening up the Iranian economy to the rest of the world will require a policy shift in the ruling theocracy and not just a change in the colour of turbans on 19 May.

* Mohammad Amin is a research fellow at the Fondation d'Etudes pour le Moyen-Orient (Foundation for Middle Eastern Studies, FEMO).

1- See https://www.fondationfemo.com/images/femo-2105/Mohammad-Amin.pdf 2- Tasnimnews: https://www.tasnimnews.com/fa/news/1396/01/21/1375244