Iran: The Economics Of A Failing Regime – OpEd

Seventeen economists close to the Iranian government, possessing different and sometimes hostile views regarding the current economic situation in Iran, met with President-elect Ibrahim Raisi. These economists offered quite contrary to each other. Massoud Nili, Rouhani’s former economic advisor, advocated for the idea of a free economy as the path to salvation. Others thought the idea of a free economy would be hellish for Iran. Based on the published excerpts of their speeches, the variety of solutions presented to the nation’s current economic catastrophe is overwhelming. Since Raisi lacks any financial knowledge and background, nor has he ever experienced executive affairs in economics, his ability to filter these solutions and choose one is limited at best.

A pro-regime newspaper writes, “The reality is that the president-elect must use the element of foreign policy and use the force behind it to get the Iranian economy through the vortex in which it has fallen. Iran’s economy will not be able to reach a point where citizens will not be disturbed in the short term until 1404, without achieving at least $50 billion in oil exports.” According to the newspaper, this amount of foreign exchange earnings should be for purchasing raw materials, food production, purchasing raw materials for factories, and investment in infrastructure, so the economy does not collapse. This is a seemingly urgent solution to prevent a social explosion caused by poverty, hunger, dehydration, and lack of electricity.

This newspaper has forgotten the mid-November 2019 widespread uprising in Iran. Following the 2015 nuclear deal, the Iranian regime had gained access to $150 billion in foreign exchange reserves. It was able to sell up to 2.5 million barrels of oil a day before the U.S. withdrew from the JCPOA in 2018. Despite this financial windfall for the government, the mid-November 2019 uprising spread throughout many cities in Iran due to increasing poverty and unemployment. Only Iran’s use of force and the killing of more than 1,500 protesters stopped the protests from spreading further, and the regime escaped collapse.

The cause of poverty, unemployment, high prices, and shortages of water and electricity, contrary to what the Iranian regime wants to instill through its lobbies in Europe and the United States, is not the sanctions. It is the widespread and institutionalized corruption in all four corners of this regime.

The astronomical embezzlement and corruption woven into the fabric of Iran’s ruling apparatus led to the economic takeover by the armed government rivals and factions and heading for complete collapse. Numbers no longer have the capacity to express these astronomical embezzlements and the level of corruption. This corruption ripples through the budget of a country and all its infrastructure, including schools and universities.

An economist close to the regime, who worked hard for the re-election of Rouhani, introduced a new indicator of corruption in Iran. “Imagine having a 40,000-kilometer strip of 1,000-toman banknotes (the length of the earth’s circumference) that fastened around the earth like a belt,” he said. The name “Banknote Belt Around the Earth” is abbreviated to “Code” (KAD). The total value of corruption in the privatizations for the 30 years (after the Iran-Iraq war) is about 1440 KADs. The banknote belt could fasten around the globe 1440 times. Now, let’s consider the degree of administrative corruption today as equal to the past corruption and not more. We can say that the bill of “public and private participation,” which is now quietly approved by the parliament, creates “corruption capacity” equivalent to 1560 thousand billion tomans in the country. It is equivalent to 6,000 KADs, more than four times the total corruption of 30 years of post-war privatization.

Contrary to the Iranian regime’s blame game of the unparalleled poverty and misery on U.S. sanctions, its corrupt and unbridled structure has turned a country into a developing country where up to 80% of its citizens live below the poverty line. This reality exists, despite Iran having the world’s second-largest gas resources and fourth-largest oil resources.

The effectiveness of the sanctions is gauged by how domestic production capacity is affected as a result. In Iran, the production capacity, from the ninth government onwards (way before the beginning of U.S. sanctions), has fallen into the path of deterioration. As a result, the country became heavily dependent on imports. Consequently, imports increased from $16 billion in 1984 to $90 billion in 1990.

Under the pretext of privatization, Iran’s manufacturing was destroyed, and the level of embezzlement grew larger and larger, making the country’s market very dependent on imports. The profits from these imports are in the pockets of the institutions controlling more than half of Iran’s economy and the country’s imports and all of Iran’s piers, including the Islamic Revolutionary Guard Corps (IRGC). Regardless of how wealthy it is, the IRGC is unwilling to give up these vast profits to benefit its fellow citizens. Instead, it destroys the production sources in Iran by importing goods, leading the people to more poverty and misery.

Even if all international sanctions and any other economic barriers against Iran are lifted, and Iran can export much more oil than it predicted in the year 1400 (2021) budget, which is 2.3 million barrels per day, the corruption remains. The whole source of the problem is the regime has milked the Iranian economy, leaving the society paralyzed, grabbling with challenges incapable of facing. Due to the corrupt fabric of this regime, the injection of loads of money and the lifting of the sanctions will bear no fruit for the miserable living conditions of more than 60 million Iranians.

In 1997 and 1998, according to the Central Bank, Iran exported $180 billion in goods, but it is not clear where these funds were allocated. According to studies, it was possible to supply essential goods and products for three years with those funds.

Massoud Khansari, head of Tehran’s chamber of commerce in Tehran, said that between 2011 and 2009, about $90 billion flowed out of the country. In the last ten years, 35 percent of the country’s population were pushed below the poverty line. In Iran, unlike all other countries, the regime gained power first and then wealth. For the regime in Iran, power is the source of wealth. 

Ibrahim Raisi, who Amnesty International says was involved in the 1988 massacre of 30,000 political prisoners, is the product of this regime’s power grab. He has held top positions within the government for the past 30 years. His job is to strengthen the regime’s oppressive machine by silencing and eliminating the ordinary people who are drowning in more poverty and have to deal with lack of water and power outages, among a host of other social and economic issues to pass by their daily lives. Raisi is one of the most loyal officials to Khamenei. He symbolizes a uniform and united government while implementing more suppressive measures to control, tame, and destroy any expression of the Iranian people’s outrage and discontent. As long as the regime in Tehran travels on its suppressive course, the living metrics of the people of Iran will continue to plunge. With Raisi becoming the head of Iran’s government, one should not expect anything else but the worsening of Iran’s economy and the continuation of miserable living for the people of Iran.