Successes and Failures of Rouhanomics


According to President Rouhani, the recession in Iran is definitely over: Inflation is down from 40% to 15%, economic growth rose from minus 6.8% to 4% and Iran is ready to weather the dropping oil prices instigated by “some countries” (those who supported Iraq in Iran-Iraq war according to parliament speaker Larijani) to hurt Iran.

Others look at the same economy and can only see a nightmare which is becoming more volatile daily: they see an economy crashing along with oil prices, stock market and currency rates and a budget whose goals are not focused on economic successes but political survival. Or as an article in the WSJ put it –”Rouhanomics, in other words, is less about growth than it is about regime self-preservation.”


Rouhani’s 2015 budget soothes hard liners and allies

LEBANON-HEZBOLLAH-PARADE-ASHURAA country’s budget is a blue-print of its political agenda: It puts numbers on ideas and shows us not only what the government “thinks” but just how serious it is about issues that made it into the budget and those that didn’t. Since a country’s budget is “the walk behind the talk”,  let’s take a look at where Rouhani’s walk is taking Iran.

Take, for instance, a 48% hike in the IRGC’s budget in 2015. For the past few weeks, Rouhani attacked the IRGC, albeit never directly, for promoting corruption and for blocking sanctions relief which would hurt IRGC businesses. Despite these attacks, he found a way to give the IRGC a raise. Similarly, the Intelligence Ministry received a whopping 40% budget increase.

Why would a moderate president allocate so much money to military might? Because his foreign policy which began as a rapprochement to the West to lift sanctions has evolved into a joint manifest destiny with his neighbors and allies, namely Syria, Lebanon, Iraq and Gaza.

  • Damascus needs Tehran to end the civil war – a defected Syrian commander put it succinctly: “Assad sold Syria to the Iranians“.
  • Baghdad needs Tehran to end ISIS’s rampage – Iraqi officials, especially Shi’ite ones, praise Tehran while 7,000 IRGC troops moved into Baghdad.
  • Beirut & Gaza, Hamas & Hezbollah all need Tehran to continue to operate politically and militarily.

And all are eyeing Iran’s roller-coaster economy with fear and trepidation knowing that the flow of Rials, oil and ammunition could end in a flash despite this year’s budget.


The link between oil and sanctions

oilAlthough some economists explain the crash of oil prices on increased production of shale fuel in the US, Tehran, and most of the world, believe that the blame should be aimed at Saudi Arabia and the US. Although many Westerners scoff at “oil plot“, there is probably some truth to it: The Saudis don’t trust the UN nor the West to seriously hinder Tehran’s development of a nuclear bomb and regional domination and are hitting back effectively where sanctions have failed. As oil prices crashed by about 50%, so did Tehran’s stock market and its Rial and suddenly, Tehran, on the brink of a major economic turnaround brought on by the nuclear negotiations and deals which effectively circumvented sanctions, found itself crashing back down.

Tehran’s search for partners to circumvent sanctions was placed on high priority with Russia heading the list. Moscow had extended a hand to Tehran since the beginning of the nuclear negotiations last year but as time went by, that hand was filled with Rubles. High level deals of trading oil for food went on simultaneously with deals to build new Russian nuclear reactors in Iran. Moscow had found a business partner who was willing to settle for lower prices due to sanctions and possibly a political and military partner in Moscow’s never ending cold war with Washington. And then, the oil crash hit Russia and the Ruble followed the Rial’s catastrophic drop and suddenly it looked like two shipwrecked sailors helping each other on a life raft.

Rouhani may be a moderate but he is a politician first and he understands the need for hardliners to support him at least until a nuclear deal is signed. Without them, Khamenei could pull the plug on his foreign policy, sanctions would remain and Rouhani’s promise of moderacy would be shelved as an election slogan much like George Bush’s infamous “read my lips” promise on taxes.


Rouhani taxes his electorate, the middle class

iran-economy-rial-2012-1-26Rouhani won the election through a middle class who had had enough of Ahmadinejad’s anti-West rants and the resulting crippling sanctions. He offered them hope to lift all sanctions and preserve national dignity. Now, over a year and a half later, he will be stabbing them in the back with a 23% increase in taxes and hefty reductions in subsidies to the poor. Word leaked out that even Khamenei’s huge financial empire might be taxed for the first time but everyone is still holding their breath for Khamenei to accept such a move.

Yes, Rouhani is also initiating a move to approve of “hundreds” of projects in the oil and gas industry, as well as railways and trade ports but all of these projects might be abandoned if the oil prices don’t rise to give Rouhani the breathing space he needs to keep these projects alive. Rouhani might be tempted to slim the infamously bloated Iranian bureaucracy which absorbs nearly 80% of fiscal expenditure in wages but instead, he decided to increase the budget for the judicial system which is repeatedly under fire for abusing human rights.

And in any case, there are serious doubts whether the relief of sanctions would benefit the Iranians since corruption is so rampant that most of the relief will benefit mullahs and IRGC officials.


Minister ImpeachementAny way you look at it, it seems that Rouhani’s façade as a moderate is crumbling down as fast as oil prices: Rouhani was voted in to strike a deal with the West but when that deal remained elusive, he turned to the East and to his neighbors who seemed more eager to cooperate than the demanding and unsatisfied West. And now, as the economic crunch is being felt, he is focusing inwards, to the Iranian people to help him survive. Meanwhile, the Iranians who had believed that Rouhani would save them from the economic disaster they had felt under Ahmadinejad, will have to keep on paying the bill for a regime which continues to place national pride over well-being.


Syria key to Iran…and to Russia

iran syria

Syria is Key to Iran’s Foreign Policy

One of the most important issues on the agendas of world leaders right now is the still raging Syrian civil war. Its importance goes far beyond the suffering of the Syrian people and the great number of casualties quite simply because Iran is involved.

Make no mistake, it is not the fate of the Syrian people that is of interest to Iran. It is the fate of Assad, one of Tehran’s staunchest allies who is key to Iran’s growing influence in the Middle East.

Iran supports Assad with its own IRGC forces and Hezbollah troops on Syrian battlefields as well as financially. That’s why it seemed strange to invite Iran to the peace talks with Syria since Iran obviously has a vested interest in this equation. In the meantime, Foreign Minister Javad Zarif visits Assad, doing all he can to maintain a high profile as a legitimate mediator while trying not to seem too pushy insisting that Iran would participate in talks only “if we are invited” while stipulating his own precondition against preconditions.

So while Zarif “innocently” maintained that “only Syrians should shape their future“, he waited for the invitation, got the invite from UN Secretary Ban Ki-Moon, and then got disinvited the next day.

The Tehran-Moscow-Damascus Axis

The question of whether Iran should play a part in the talks over Syria’s future is openly backed by Russia: The Russians believe that Iran is “key to Syria peace efforts” and a “Tehran-Moscow-Damascus” axis is being promoted by none other than President Putin himself.

The Russians have a lot to gain in supporting Tehran. Although they claim that they have no hidden agendas, they are focused on the “post-nuclear-deal” stage in order to reap a cool $1.5 Billion a month in oil-for-goods trade as well as sales of military equipment in the billions.

So it seems natural that Russia joined Iran in criticizing the “disinvite” to the talks regardless of the questionable legitimacy of Iran’s role as a mediator.

Needless to say, the growing ties between Iran and Russia are ruffling feathers in the West because they undermine any pressure that could have been placed by Europe and the US in the nuclear issue.

In the meantime, the Syrian people are suffering from being disposable pawns in a much larger game.

Related post: Rouhani Needs to Clean Iran of Syria

Message from Iran on World Press Freedom Day

May 3, 2012 is World Press Freedom Day.
To mark the occasion Iran180 spoke with a range of thinkers about the importance of a free press, and the realities of practicing journalism in Iran.

Roya Hakakian, Gissou Nia, Banafsheh Zand-Bonazzi speak about freedom of Press in Iran

Iran nuclear sites: an animated guide for making a bomb

This clip turns to be really relevant to to the another upcoming Summit of 5+! in 13th of May

Global powers are urging Iran to open a sensitive nuclear site to international inspectors as fears grow over Tehran’s race to obtain nuclear weapons.
This animation highlights several key installations that comprise Iran’s nuclear program.