By Leigh Catherine Miles
Editor, Iran Election Bulletin
Dear Reader,
Iran’s economic problems – rampant inflation, unemployment and the depletion of financial reserves – have become a central focus of political debate during the presidential campaign. President Mahmoud Ahmadinejad is bearing the brunt of public frustration, with blame placed squarely on his economic policies of the last four years. In campaign speeches, his political rivals – both reformists and fellow conservatives – forcefully attack economic mismanagement and his self-proclaimed populist credentials. While international analysts tend to concur with the negative assessment of Ahmadinejad’s economic performance, the domestic criticism reflects political strategy as much as bread and butter issues.
The governing system of the Islamic Republic, which places primary power in the hands of unelected regime leaders, largely hampers the president’s ability to set a broad policy agenda. However, economic policy is the one area in which the president does exert influence. As such, those vying to unseat Ahmadinejad see the economy as his political Achilles’ heel, and they can attack him there without necessarily being accused of also attacking the regime.
Thus far the hard-line establishment, perhaps wanting to distance itself from the country’s economic hardships, has not closed ranks to defend the president. Ahmadinejad, however, appears to be repositioning himself in greater alignment with Iran’s Supreme Leader Ayatollah Ali Khamenei. If the political winds shift with the approach of the election, hard-line conservatives may decide to line up behind Ahmadinejad and push other issues to the forefront of political debate.
Whatever agenda comes to dominate the campaign, the electorate is hoping for clear policies and will hold whoever is elected accountable for improving their daily lives. Ahmadinejad’s opponents will need to balance speaking to specifics with not over-promising results – or they may find themselves similarly in the political cross-hairs in the future.
I hope you enjoy reading this issue of the Iran Election Bulletin, and welcome you to
email me [3] with any questions or comments you may have.
Sincerely,
Leigh Catherine Miles
Editor
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Published on April 10, 2009
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By Geneive Abdo
Iran Analyst, The Century Foundation
President Mahmoud Ahmadinejad is fighting for his political life as never before. In early April, conservative heavyweights said they would decide among themselves who would compete against him for the presidency. He is at war with Iran’s parliamentary speaker Ali Larijani, a fellow conservative, pitting the executive office against the parliament – a rare occurrence in Iranian politics. And, the country’s chief economists are blaming Ahmadinejad for record high inflation and unemployment.
Known as an agenda-setter and independent-minded politician, Ahmadinejadhas crafted a new strategy to try to counteract all the criticism. While a shift in tack is not unusual given the volatile and unpredictable world of Iranian politics, it is surprising that Ahmadinejad has apparently decided to take his cues directly from Supreme Leader Ayatollah Ali Khamenei.
In early April, just after the Iranian New Year holiday ended, Ahmadinejad adopted a platform identical to the ideas proposed by Khamenei in a widely-publicized address given in the holy city of Mashhad on March 21. Now that Ahmadinejad’s fellow conservative leaders and the parliament have publicly come out against him, he needs to appear to be linked with Khamenei. In addition, the president wants to draw the support of the Supreme Leader, who has suggested lately that he remains undecided in whom to back for president in the June 12 poll. Ahmadinejad is justifiably worried that Khamenei might soon reach the conclusion that the president is too unpopular to be re-elected.
Ahmadinejad displayed his new campaign strategy in a speech on April 2 in Khuzestan, where he drew upon Khamenei’s own words to emphasize the need for justice and progress. “Progress in the absence of justice is not true progress from an Islamic point of view,” Khamenei had said in his wide-ranging March 21 speech. “If our GDP national wealth reaches a high point, but our people suffer from inequality and discrimination, or if there is a group of people who live in luxury while some others live in poverty, then this is not true progress from an Islamic point of view.” Ahmadinejad outlined three primary issues to address – bread, water and electricity – which also appeared explicitly in the Supreme Leader’s remarks. He also vowed to fight the status quo and adopt new economic policies, saying that “the correction for a new framework to stop waste and expenditures needs to be revolutionary and we won’t get there with the status quo practices.”
Ahmadinejad also went as far as to tone down his aggressive rhetoric, which has inspired severe criticism from leaders across the political spectrum who accuse the president of alienating Iran from the international community. While not mentioning the United States by name, the president said Iran favors “peaceful” and “rational dialogue” as the West moves toward exercising a new approach and tone with the Islamic Republic.
In addition to the influence Khamenei can wield over the Guardian Council, the body appointed by the Supreme Leader that will decide the final slate of presidential candidates, Ahmadinejad also needs the Leader’s endorsement to fend off his aggressive critics. On April 3, three prominent conservative politicians – Tehran Mayor Mohammad Bagher Ghalibaf, Secretary of the Expediency Council Mohsen Rezai, and senior adviser to Khamenei Ali Akbar Velayati – announced they are considering running for president to ensure Ahmadinejad’s defeat. Since then, Ghalibaf has announced he will not run, possibly in favor of one of the other two men. The three conservatives say they favor a coalition government, which would include reformists and principlists (so named for their devotion to the principles of the 1979 Islamic revolution) as a way to unify the country. The idea, which Ahmadinejad’s supporters say is designed to “bypass” him, is gaining momentum.
The conservatives’ idea of a coalition government comes on the heels of a major political defeat for Ahmadinejad. In March, the president engaged in open warfare with parliament as a whole over its decision to amend the president’s $298 billion budget bill, and with parliamentary speaker Ali Larijani in particular, who supports the idea of a coalition government to defeat Ahmadinejad. Ahmadinejad, whose political fortunes depend upon continued support from the underclass, proposed to raise energy and utility prices and compensate low-income families with direct cash payments. Parliament rejected his economic plan. In response, on March 14 the president sent a letter to Larijani accusing the parliament of violating Iran’s constitution. Larijani snapped back that Ahmadinejad was overstepping the authority of the presidency – itself a constitutional violation.
On March 18, the Guardian Council, which reviews and approves all laws based upon their adherence to Islamic principles, dealt a final, significant blow to Ahmadinejad when it approved the amended 2009-2010 budget. The decision demonstrated a degree of democracy in Iran, as checks and balances within the system prevailed, but it also showed the limits of Ahmadinejad’s power within the conservative-dominated parliament. Perhaps more importantly, three months before the election, it demonstrated to the president’s core political base that he may not be able to deliver for them in the future.
Ahmadinejad has been losing parliamentary support for some time now. In February, his increasingly isolated supporters felt forced to respond, and 40 members of parliament formed the Islamic Revolution Caucus with the stated objective of re-electing the president. The Caucus, however, represents a small portion of an estimated 200 conservatives in the parliament.
If these political setbacks were not enough, Iran’s leading economists have routinely criticized Ahmadinejad for the country’s economic crisis. His economic failings are a problem for him not only among political elites, but also among Iranian voters, who have been hard hit by the crisis. With the economy figuring as the primary election issue, the criticism has not been good for Ahmadinejad as he seeks re-election.
When Ahmadinejad first recommended a plan for cutting government subsidies of fuel, natural gas and electricity in exchange for distributing cash payments to low-income families, the former governor of Iran’s Central Bank told Tabnak newspaper that the plan would further increase inflation. Tahmasb Mazaheri said on March 7 that, despite cash distributions, those who would be most affected by the cuts would have no way of compensating for the price increases. Other economists said Ahmadinejad’s plan was flawed because it did not include decentralizing Iran’s economy, which is a necessary step to decrease unemployment and inflation. Of the estimated 3 million unemployed Iranians, 2.3 million in 2008 were under the age of 30.
Ahmadinejad’s critics accuse him of failing to develop the private sector and encouraging a centralized economy. Oil and gas exports dominate Iran’s economy, constituting 70 percent of government revenue and 80 percent of export earnings as of 2008. Iran has a large public sector, and the state directly controls and centrally plans an estimated 60 percent of the economy. When oil prices are high, Iran increases its purchases of imports and fails to encourage local production. Some economists have suggested using oil revenues to encourage investment in the private sector.
Despite Iran’s economic crisis, the other major candidates for president still have not offered their own specific economic programs. They discuss the failing economy, but only in general terms. Analysts inside Iran believe that the candidates and voters have only a superficial understanding of how the economy works.
As the presidential election draws near, the assaults on Ahmadinejad are likely to continue. His opponents hope that when the Guardian Council decides on the final slate of candidates in May, they will have discredited the president to such a degree that it will be apparent to the regime’s inner circle that his re-election is not in Iran’s best interest.
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Published on April 9, 2009
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By Kaveh-Cyrus Sanandaji
Middle East Center, St. Antony's College, University of Oxford
Nearing the end of his term, President Mahmoud Ahmadinejad continues to face criticism over his political, economic and social agenda. In the past four years, his policies have increased dissatisfaction not only among segments of Iranian society but also among members of the ruling establishment. As a result, Ahmadinejad's support base has become increasingly fragile. Indeed, some view the upcoming election as a referendum on both his presidency and the increasingly marginalized radical, populist-Islamic conservative approach.
The past four years can be characterized by Ahmadinejad’s efforts to export the revolution, establish Iran as a regional power and pursue a confrontational nuclear policy. He has framed the sixth administration’s politics in combative terms. The majority of his speeches, contrary to those of former president Mohammad Khatami, have focused on a continued challenge against Iran's “oppressors” and “enemies,” both internal and external, who intend to dominate the Persian Gulf and deny Iran’s right to sovereignty and self-determination. These speeches are filled with revolutionary rhetoric intended to justify his administration’s bellicosity toward the West within the context of the formative period of the Islamic Republic and the policy of exporting the Islamic revolution.
One of the main slogans of Ahmadinejad’s 2005 electoral campaign was implementing economic justice (edalat). His time in office, however, has been marked by a period of stagflation—characterized by the simultaneous existence of hyperinflation and recessionary conditions, including the persistence of high rates of unemployment and the lack of growth—causing a deterioration in living conditions.
Ahmadinejad’s economic policies may have directly fueled inflation, resulting in a spike in the price of basic commodities such as flour, milk, eggs, meat and rice. Rather than capitalize on the rapid rise in liquidity from record oil prices by investing in long-term structural development, Ahmadinejad’s administration has injected large amounts of cash into the economy to provide need-based loans for families and small businesses, fund small-scale local infrastructure projects, and subsidize domestic energy consumption. Although official figures are seldom released, in April 2008 the Central Bank of Iran reported that the country’s year-on-year inflation rate reached 24.2 percent. These unrealistic appropriations have overextended the government. Rather than replenish the country’s Oil Stabilization Fund—a fund designed as a safety net to shore up the government when oil prices fall below the amount assigned in the national budget—Ahmadinejad has depleted this fund since 2005 to supplement his spending. In light of the global economic downturn, falling oil prices that have reached lows of $30.28 per barrel and increasing international isolation, Iran is now facing a liquidity crisis and the threat of a prolonged recession.
Economic mismanagement has amplified domestic criticism of the incumbent administration, with reformists and moderate conservatives speaking out against Ahmadinejad. Even the Supreme Leader, who has throughout Ahmadinejad’s presidency remained a silent supporter of his policies, rebuffed the President for his handling of the worsening crisis created by gas shortages in the winter of 2006-07. This criticism from conservatives and reformists alike indicates a mutual understanding among the political elite of the potential threat that continued economic grievances pose. With rising inflation, widespread unemployment and persistent negative growth, the danger of popular unrest—as previewed during the fuel-rationing riots in June 2007 and more recently in October 2008 during the country-wide bazaar strike over the introduction of a 3 percent sales tax—has certainly alarmed the clerical establishment.
This economic upheaval has dove-tailed with a far-reaching clampdown on freedom of expression, evidenced by the closure of newspapers, arrests of student protesters and the crackdown on those who do not wear full hejab (Islamic dress code). While these actions can be interpreted in a variety of ways, they can most plausibly be explained as Ahmadinejad and his radical allies feeling politically vulnerable.
In an attempt to reduce the negative impact of the increasing criticism Ahmadinejad faces, the government has pursued an active campaign through the press courts to censor the most outspoken and critical newsprint and Internet outlets. Historically, journalists close to the regime’s conservative leadership have been allowed to criticize presidential administrations. However, reflective of the insecurity that broad dissatisfaction with the incumbent administration has produced, the closures have not only affected reformist outlets but also conservative ones. This insecurity has also adversely affected Iran’s ethnic minorities who are increasingly accused of undermining national security by stirring separatist sentiments, which has resulted in the arrests and executions of various prominent journalists from Khuzestan, Sistan and Baluchestan, and other peripheral non-Persian provinces.
Ahmadinejad’s administration has simultaneously reinforced strict social controls, particularly concerning attire, originally introduced following the establishment of the Islamic Republic. In April 2007, Iranian law enforcement agents launched a campaign to confront women who did not observe hejab. IRNA, the official state news agency, reported that women wearing short overcoats, tight outer garments and head scarves that did not conceal hair would be ‘notified’ by police patrol officers, oftentimes leading to public harassment and imprisonment. Although the degree of enforcement of such cultural measures wavers in Iran and tightening of social restrictions became apparent in 2002-2003 prior to the current administration, under Ahmadinejad’s administration there has been an increasing emphasis on ensuring moral security in society.
This tightening of social restrictions has resulted in a notable increase in socio-cultural grievances among the urban middle-class that is particularly evident among women and youth. While socio-cultural grievances have traditionally existed among Iran’s ethno-linguistic minorities, despite Ahmadinejad’s much-publicized provincial tours, these grievances have been aggravated by the issue of autonomous control over local councils that Tehran has been reluctant to provide. In sum, since 2005 Ahmadinejad has turned back many of the reforms that placated segments of the middle-class and ethno-linguistic minority populations, producing widespread societal frustration.
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Published on April 10, 2009
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By Masih Alinejad
During the Iranian Islamic Revolution, the fair distribution of wealth was the most eminent slogan that created hope in the hearts of many Iranians. Those who prior to the Revolution felt the division of poverty – and not the distribution of capital – in their lives, somehow not only managed to survive the hard times of the war era through the Islamic Republic’s economic policies, but also looked toward a brighter future. That hope faded slowly, however, leaving Iran behind other countries in the region and the world.
The Iran-Iraq war left much destruction behind. Hashemi Rafsanjani’s administration was named “the government of construction” to cure the sick economy for eight years and to build up a ruined country. Though Rafsanjani’s government had its shortcomings, the country slowly moved toward development. Other necessities beyond the economy emerged, namely reform and political expansion, bringing Mohammad Khatami and his “government of reform.” After the reformists, the Council of Guardians and other conservative institutions became concerned about a loss of revolutionary values. Consequently Iran’s military forces provided material and moral support to Ahmadinejad’s government to defend the Islamic Revolution, resulting in what has been called the “Islamic government.”
Following the “government of construction,” the “government of reform” and the “Islamic government,” Iranians today desire a government based on economic improvement. While economic slogans may have accompanied other campaign slogans in the past, “better economy” is now the main campaign promise. Both the reformists and the conservatives agree that the economy has come to a dead end, and they have no choice but to come up with a solution. Even the chairs of some of the most conservative parties admit that the economic policies of the government and the parliament have taken Iran to critical economic lows and the main focus, for now, has to be on providing people with basic necessities. The parliament, or Majlis, has warned the government about inflation, staggering prices, unemployment, drug addiction and corruption. The government, in turn, points the finger at the Majlis, blaming the parliament for these problems.
The economic crisis of the last few years has twice led 50 economists and academics to send a letter to Ahmadinejad’s government raising the alarm about the economy. They believe Iran is capable of more rapid growth, but that actual growth in 2005-2006 fell short of both global standards and Iran’s fourth expansion plan. Experts have warned that if the economy grows less than 2 percent in a five-year period, it would cost Iran one-third of its current gross production of about $70 billion.
During 2005 and 2006, $80 billion was injected into the Iranian economy, according to a report from Iran’s Central Bank. There is no doubt that natural resources need to be converted to physical capital, but the problem arises when, on the one hand, the income is wasted and, on the other hand, it disables the society from learning to handle economic challenges to achieve sustainable growth. Throwing oil money at the problems is the easiest way to address these challenges, but is not necessarily the wisest path. It postpones an otherwise inevitable recession, but is like prescribing painkillers for the sick economy instead of searching for a permanent cure. The patient, and with it the society, still suffers.
For example, marriage loans, employment loans, lowering of the interest rate, forgiving of debts to the bank system and other policies of the current government have slowed the economy and raised the inflation rate. According to members of the Majlis, the inflation rate for the 2009 budget is over 24 percent, and if current economic policies are executed without a course correction, the inflation rate will reach as high as 40 percent.
People expect the next president to promote a moderate policy toward the world that reduces the impact of sanctions, absorption of foreign investment and improvement in domestic production and industry. People also expect and hope for job creation, but the main concern remains the loss of jobs in the last few years. Many have taken their complaint to the street in demonstrations in front of government buildings or the Majlis, demanding job creation, job security and an expansion of social services. In addition, teachers, laborers, bus drivers and other workers want the next president to have the expertise to execute civil programs and create the proper atmosphere for private sector workers.
The lack of attention to the private sector has drawn dissatisfaction and protests from private companies and institutions. The damage has been so profound that senior officials of the Islamic Republic have been forced to intervene and pass amendments to the 44th article of the constitution, giving the private sector a bigger role in the economy. Unfortunately, the government has been slow to implement these measures. Presidential candidates are now trying to win votes by promising to privatize the economy and renouncing the ambivalence displayed by the previous administrations.
Poverty and inequality are the direct product of the current social, economic, political and cultural system and cannot be resolved by slogans alone. Ahmadinejad’s slogan that “oil money must be seen on the table of the people” not only did not result in a greater share of oil income, but the money used to buy food and bread and fruits also disappeared from Iranians’ tables. That is why Iranians want the presidential candidates to avoid empty slogans and replace them with solid plans for the economy. Maybe this time around the candidates will prevent false hopes based on unrealistic promises and solutions.
When victims of poverty and inequality buy into campaign promises and then become disappointed and disillusioned, the harm is irreparable. It won’t be easy any more to get them excited about a candidate. Today, Iranians, at the height of their disillusionment and discouragement, will be for the one who, instead of having a big mouth and using it to promise big things, has a realistic vision for the huge task of reforming the Iranian economic and social system.
Note: This article was translated from Farsi. The opinions expressed reflect those of the author, and not necessarily those of the National Democratic Institute or The Century Foundation.
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Published on April 9, 2009
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“Enemies of the Islamic Republic are contemplating a soft overthrown and are after installing a president who is closer to them and their goals.”
– Secretary of the Council of Guardians Ayatollah Ahmad Janati in a speech in Bushehr, quoted in Rooz, March 29
Ahmad Janati, in remarks that may indicate that the Guardian Council is prepared to support incumbent Mahmoud Ahmadinejad in the presidential elections, stressed to members of the election administration that the June 12 polls would be used by those in Iran seeking a soft revolution. Janati, an outspoken supporter of Ahmadinejad, further told election staff that they would have a role in determining the outcome of the election. While he might have been referring to the duty of the election administration to ensure the validity of the results, his words are being analyzed closely given the alleged manipulation of past election results.
“The government should answer an important question that people have, ‘What has become of the $270 billion the government has gained selling oil over the past three to four years?’”
– presidential candidate Mir-Hossein Mousavi in the right-leaning newspaper Tabnak, April 3
Following the announcement of former president Mohammad Khatami’s withdrawal from the presidential race and subsequent speculation that Mir-Hossein Mousavi is now the leading reformist candidate, Mousavi hit the campaign trail hard. While drawing upon his popular tenure as Prime Minister during the 1980s, Mousavi has sought to provide greater clarity regarding his policy positions after nearly two decades away from the political limelight. Building upon his economic credentials, he has spoken in support of greater transparency in economic policy, particularly the national budget, public tenders and oil deals. Contrasting himself with current President Mahmoud Ahmadinejad, Mousavi stated that he would focus on bringing diverse viewpoints into his cabinet and technocrats and management experts into his larger administration, rather than political cronies. He has called for a policy on freedom of information to insure that the government adheres to the constitution and current laws. In addition, Mousavi is positioning himself as the candidate who can bring managed change to Iran – appealing to his reformist base that want to see greater social and political freedoms, as well as to more conservative factions who fear losing control if reform happens too quickly.
“Currently, the reformist groups are more inclined towards the candidacy of Mir-Hossein Mousavi and it seems that Mousavi is more hopeful than Karroubi to be selected as the reformist’s candidate in the upcoming election.”
– Deputy Director of the Baran Foundation Hassan Rasouli quoted by Mehr News Agency, April 5
As anticipated, many of former president Mohammad Khatami’s supporters have begun to shift their support to Mir-Hossein Mousavi after Khatami stepped out of the presidential race. The Khatami-led Baran Foundation appears poised to declare its support for Mousavi, and Mousavi has been holding meetings with Khatami supporters in an attempt to solidify an electoral base. However, the reformist faction is not uniform in backing Moussavi, and many organizations, including the Association of Combatant Clerics, remain undecided as to whether they will support Mousavi or his reformist rival Mehdi Karroubi. For many reformists, Mousavi’s attempts to bridge the reformist and moderate conservative camps fall short of the sweeping change they desire. They are particularly troubled by his references to adhering to the values of the Islamic revolution.
“After examining the situation, at present, I am not a contender for the tenth presidential election.”
– Mayor of Tehran Mohammad Bagher Ghalibaf quoted by Mehr News Agency, April 6
On April 6, Mohammad Bagher Ghalibaf, who had been viewed as a leading contender among pragmatic conservatives, announced that he would not compete in the June 12 presidential elections. Ghalibaf appeared to be stepping aside for either Mohsen Rezai or Ali Akbar Velayati, fellow pragmatic conservatives who have supported the notion of a coalition government. Velayati, who is an advisor to Supreme Leader Ali Khamenei, had previously stated that he would not run for president, leaving Rezai as the most likely candidate to lead the coalition. However, in a sign that political decisions in Iran are never final until the last moment, recent news reports posit that Ghalibaf withdrew his candidacy as an individual to open the door to standing as the candidate for a coalition government. There is clearly debate taking place within the pragmatic conservative faction over who would be best positioned to head an election campaign and how leadership within a coalition government might be divided. Whoever runs as the coalition candidate is expected to announce his cabinet during the campaign, which has leaders within the faction jockeying for position.
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Published on April 9, 2009
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By Kristin Kooiman
National Democratic Institute
Given that Iran is the second-largest oil producer among the Organization of Petroleum Exporting Countries (OPEC), has 10 percent of the world's proven petroleum reserves and the second largest reserve of natural gas, the Islamic Republic should be a very wealthy country, but Iran’s per capita gross domestic product (GDP) ranks among other middle income countries in the Middle East. While Iran’s poverty rate is relatively low, inflation rates are at 23 percent (international estimates bring the rate closer to 30 percent), factories operate below capacity, major cities have rolling power blackouts and real estate prices have tripled. Seventy percent of the population is under 30 and unemployed, and many face increasing social welfare problems, including drug addiction.
International sanctions hamper foreign direct investment, and starting a domestic enterprise or maintaining a business in Iran is not easy. Iran ranks 135 out of 175 countries on the World Bank index of ease of doing business. State ownership of the economy has been estimated as high as 80 percent.
Entrants to the economic sector must compete with Agah-zadehs, or the sons of clergyman who own the major businesses and have ties to the government. They make lucrative deals with little transparency or accountability, based upon their ties to leaders who seized private assets during the revolution. Outside of the Agah-zadehs, private enterprise is limited to small-scale workshops, small businesses, services and farming. The informal market is flourishing as price controls and other rigidities that undermine private-sector-led growth are circumvented.
Since President Mahmoud Ahmadinejad’s election in 2005, Iran’s economic situation has deteriorated. While the president holds limited powers, subject to oversight from unelected regime leaders, economic policy is one of the few areas that do fall within his purview. In an attempt to implement his populist agenda, the president broke from the 4th five-year economic development plan (2005 – 2010) and the 20-year economic outlook, which were designed by his predecessor’s administration to reduce state ownership in the economy. Instead, he expanded the state’s central role and spent heavily.
Ahmadinejad has blamed budget constraints on various semi-independent institutions. In 2007, he dissolvedthe 60- year-old Management and Planning Organization, charged with allocating the budget, as well as the Credit and Money Council (CMC), responsible for supervising the Central Bank of Iran and monetary decisions. The CMC had previously rejected Ahmadinejad’s plan to reduce interest rates below the inflation rate. Since the dissolution of the CMC, Ahmadinejad has intervened in Central Bank decisions, pushing the bank to reduce lending rates.
Another criticism of Ahmadinejad’s economic management has been his granting of contracts worth billions of dollars to Iran’s Revolutionary Guard Corps (IRGC) and other paramilitary groups. Contracts have been issued without a bidding process and are funded by the Oil Stabilization Fund, Iran’s version of a sovereign wealth fund. In the implementation phase, many contract recipients have been forced to hire subcontractors to finish projects due to a lack of internal expertise. As the IRGC is only responsible to the Supreme Leader, controversy revolved around how subsequent profit from these business deals would be allocated and whether or not the profit would be added to the general budget revenue or be earmarked for military spending.
Perhaps the most debated policy of the current administration has been the expansion of subsidies, including oil, water, food and basic commodities, which have quadrupled under Ahmadinejad and are now equivalent to 25 percent of GDP. As oil prices dropped, Ahmadinejad borrowed heavily from the Central Bank and the Oil Stabilization Fund, adding to inflation and reducing purchasing power.
Lately, Ahmadinejad has attempted new programs to reform the economy. Last June, he announced a program to cut subsidies in his 2009-2010 budget, coupled with cash handouts. The conservative-led parliament was at first willing to negotiate the reform, but faced with an unwilling administration, finally rejected the entire plan. Ahmadinejad also clashed with the Central Bank of Iran, which warned that revenues could be cut by $54 billion due to falling oil prices. Ahmadinejad now faces the option of increasing the money supply or cutting the budget, but with high inflation and unemployment rates, neither option seems politically viable.
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Published on April 10, 2009
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By Kristin Kooiman
National Democratic Institute
Given that Iran is the second-largest oil producer among the Organization of Petroleum Exporting Countries (OPEC), has 10 percent of the world's proven petroleum reserves and the second largest reserve of natural gas, the Islamic Republic should be a very wealthy country, but Iran’s per capita gross domestic product (GDP) ranks among other middle income countries in the Middle East. While Iran’s poverty rate is relatively low, inflation rates are at 23 percent (international estimates bring the rate closer to 30 percent), factories operate below capacity, major cities have rolling power blackouts and real estate prices have tripled. Seventy percent of the population is under 30 and unemployed, and many face increasing social welfare problems, including drug addiction.
International sanctions hamper foreign direct investment, and starting a domestic enterprise or maintaining a business in Iran is not easy. Iran ranks 135 out of 175 countries on the World Bank index of ease of doing business. State ownership of the economy has been estimated as high as 80 percent.
Entrants to the economic sector must compete with Agah-zadehs, or the sons of clergyman who own the major businesses and have ties to the government. They make lucrative deals with little transparency or accountability, based upon their ties to leaders who seized private assets during the revolution. Outside of the Agah-zadehs, private enterprise is limited to small-scale workshops, small businesses, services and farming. The informal market is flourishing as price controls and other rigidities that undermine private-sector-led growth are circumvented.
Since President Mahmoud Ahmadinejad’s election in 2005, Iran’s economic situation has deteriorated. While the president holds limited powers, subject to oversight from unelected regime leaders, economic policy is one of the few areas that do fall within his purview. In an attempt to implement his populist agenda, the president broke from the 4th five-year economic development plan (2005 – 2010) and the 20-year economic outlook, which were designed by his predecessor’s administration to reduce state ownership in the economy. Instead, he expanded the state’s central role and spent heavily.
Ahmadinejad has blamed budget constraints on various semi-independent institutions. In 2007, he dissolvedthe 60- year-old Management and Planning Organization, charged with allocating the budget, as well as the Credit and Money Council (CMC), responsible for supervising the Central Bank of Iran and monetary decisions. The CMC had previously rejected Ahmadinejad’s plan to reduce interest rates below the inflation rate. Since the dissolution of the CMC, Ahmadinejad has intervened in Central Bank decisions, pushing the bank to reduce lending rates.
Another criticism of Ahmadinejad’s economic management has been his granting of contracts worth billions of dollars to Iran’s Revolutionary Guard Corps (IRGC) and other paramilitary groups. Contracts have been issued without a bidding process and are funded by the Oil Stabilization Fund, Iran’s version of a sovereign wealth fund. In the implementation phase, many contract recipients have been forced to hire subcontractors to finish projects due to a lack of internal expertise. As the IRGC is only responsible to the Supreme Leader, controversy revolved around how subsequent profit from these business deals would be allocated and whether or not the profit would be added to the general budget revenue or be earmarked for military spending.
Perhaps the most debated policy of the current administration has been the expansion of subsidies, including oil, water, food and basic commodities, which have quadrupled under Ahmadinejad and are now equivalent to 25 percent of GDP. As oil prices dropped, Ahmadinejad borrowed heavily from the Central Bank and the Oil Stabilization Fund, adding to inflation and reducing purchasing power.
Lately, Ahmadinejad has attempted new programs to reform the economy. Last June, he announced a program to cut subsidies in his 2009-2010 budget, coupled with cash handouts. The conservative-led parliament was at first willing to negotiate the reform, but faced with an unwilling administration, finally rejected the entire plan. Ahmadinejad also clashed with the Central Bank of Iran, which warned that revenues could be cut by $54 billion due to falling oil prices. Ahmadinejad now faces the option of increasing the money supply or cutting the budget, but with high inflation and unemployment rates, neither option seems politically viable.
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Published on April 10, 2009
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The leading candidates to emerge in the 2009 Iranian presidential election are:
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In his successful 2005 presidential campaign, Ahmadinejad took a populist approach, with emphasis on his own simple life. He is a self-described “principlist”, that is, one whose politics are based on Islamic and revolutionary principles. He is known for promising to “put the petroleum income on people’s tables,” referring to distribution of Iran’s oil profits among the poor. Since 2008, he has pushed to remove subsidies from the state budget, which he believes have bloated the system, in exchange for cash distributions to the public.
Ahmadinejad has been the only presidential candidate to characterize relations with the United States and the United Nations as being one-sided and against Muslims. He has defended Iran’s nuclear program and has accused the West of trying to limit Iran’s industrial and technological developments. He supports fighting terrorism in order to improve foreign relations and has called for greater ties with Iran's neighbors by ending visa requirements between states in the region.
He has been known to crackdown against women’s attire and activity, homosexuals and minority religious sects. Freedom of expression has been limited in order to further national security.
Ayatollah Mohammad Taghi Mesbah Yazdi, a senior cleric from Qom, is Ahmadinejad’s ideological mentor and spiritual guide.
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Karroubi is a critic of the Guardian Council but supports the Supreme Leader. He calls himself a follower of Ayatollah Ruhollah Khomeini, as he was an advisor to Khomeini and a member of the Expediency Discernment Council, before he resigned in the belief that non-elected conservative factions were interfering in society. Karroubi considers himself a pragmatic reformist. In his first term as speaker of parliament, he was among the maktabi or “radical” faction of the majlis who contested the policies of President Akbar Hashemi Rafsanjani, such as foreign investment and market reforms. Karroubi sought to promote mass political participation and maintain state control of the economy.
Karroubi differs from Ahmadinejad over almost all domestic issues, especially the management of the economy and the nuclear issue. He embraces all classes within society – students, workers, professionals and the clergy – while operating within the general framework of the constitution of the Iranian Republic. He has stated that he believes that many articles of the constitution pertaining to rights of the people have not been implemented. Karroubi has also stated that he will appoint women as ministers and presidential aides if he wins the June presidential election – a move that would break the barrier women have faced in holding ministerial posts.
During his campaign for the 2005 presidential elections, Karroubi vowed to pay 500,000 rials ($50 dollars) monthly to every Iranian above 18. Since his campaign was announced for the 2009 election, Karroubi has said he will offer shares in Iran’s state oil and gas industry to the public.
Karroubi’s campaign slogan is “Change”, hoping to “bring about change in Iran’s Executive Body”.
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Mousavi has vowed to follow former president Mohammad Khatami’s path not only to pursue democratic reforms, but also to stay true to the country’s Islamic values and the revolution. Mousavi, a former conservative, does not believe in Western-style economic and political reforms. However, he does believe in press and individual freedoms and intends to establish a special dialogue to increase social cohesion. Mousavi believes the society’s mindset must be transformed in order to increase women’s participation in social life. While praising the technological and nuclear advancements, he criticizes current president Mahmoud Ahmadinejad’s planning and budgeting. He further believes Iran needs to improve human resources and management. He is widely lauded by Iranians for his management of the economy as prime minister during the Iran-Iraq war. Many believe he can attract principlists and reformers.
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Published on March 27, 2009
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|
Right-Wing Principlists |
|
|
EXPECTED |
Mahmoud Ahmadinejad |
|
CONSIDERING |
Mohammad Jahromi |
|
CONSIDERING |
Mostafa PourMohammadi |
|
Moderate Conservatives |
|
|
CONSIDERING |
Mohsen Rezai |
|
CONSIDERING |
Gholamali Haddad-Adel |
|
CONSIDERING |
Ali Akbar Nategh Nouri |
|
CONSIDERING |
Mohammad Nahavandian |
|
CONSIDERING |
Hassan Rowhani |
|
NOT RUNNING |
Mohammad Bagher Ghalibaf |
|
NOT RUNNING |
Ali Akbar Velayati |
|
Reformists |
|
|
ANNOUNCED |
Mehdi Karroubi |
|
ANNOUNCED |
Mir-Hossein Mousavi |
|
CONSIDERING |
Abdollah Nouri |
|
NOT RUNNING |
Mohammad-Reza Aref |
|
NOT RUNNING |
Mohammad Khatami |
|
NOT RUNNING |
Mohamad-Ali Najafi |
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Updated on April 8, 2009
Links:
[1] http://www.accessdemocracy.org/node/15391
[2] mailto:lmiles@ndi.org
[3] mailto:lmiles@ndi.org