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The Economy Flames Anger in Iran

The protests in Iran will not bring about regime change, but they may force political elites to address economic corruption that has gone on far too long.

Iranians marked the end of 2017 by pouring into streets across the country to protest against the government of President Hassan Rouhani in what has become the largest nationwide demonstrations since 2009. After almost two weeks of unrest, over 1,000 of “seditionists,” as Supreme Leader Ayatollah Khamenei calls them, have been arrested and at least 21 killed. Even though it is unclear if there was a single event that triggered the widespread protests, the outbreak of dissent should come as no surprise. Iranian society was a pressure cooker ready to explode, for all the same reasons that inspired the Arab Spring protests that rocked the Middle East.

Lack of economic opportunities, growing inflation, corruption, a widening gap between the people and the elites seem have pushed Iranians over the edge. They are bolder, more fearless and have shown tremendous resilience in the face of a growing crackdown by authorities. The 2009 Green Movement protests erupted in response to the fraudulent elections that pitted reformist Iranians against the hardline government were largely confined to the capital Tehran and made up of the middle class. This latest round of demonstrations is different: Protests erupted among low-income Iranians in the religious centers of the country like Mashad and Qom that align more closely with conservative hardliners than leftist reformists.

Red Lines

While the Green Movement (named after the color of Mir-Hussein Mousavi’s presidential campaign) was largely composed of pro-democracy activists, both moderates and conservatives are taking part in today’s protests. Economic grievances have provided Iranians with a common message to unite under. Both conservatives and reformists are channeling their economic frustrations toward the government and the establishment as a whole, seen in slogans like “Death to Rouhani!” and “Death to Khamenei!” Many consider criticizing the supreme leader as a red line that few in 2009 have dared to cross.

Iranians understand that declining living standards are not the fault of the president alone. While some of the country’s economic woes can be attributed to Rouhani’s policies, many have been institutionalized within the system of government and long precede his presidency. This past summer during a radio interview, the son of a reformist leader Mohammad Reza Aref credited his business success to “good genes” from his parents, sparking public outcry and reopening a debate on nepotism in Iran. Iranians took to Twitter to mock the children of elites, or aghazadeh Persian for “noble-born.” One tweet particularly captured the sentiment of Iranians well: “What is aghazadeh? A person who’s had nothing to do with success in his life and was only at the right place, at the right time.”

Nepotism propels economic corruption in Iran and has long been a source of grievance toward the government, not to mention a hindrance to economic growth. Both hardliners and reformists alike benefit from the entrenched culture of nepotism as demonstrated by a report from IranWire, which revealed the high positions held by relatives of some of Iran’s most affluent elites.

Nepotism is only one contributing factor to what is rampant economic corruption in Iran. News reports expose that while millions of employees of the Central Insurance Company earned only a few hundred dollars a month, at least eight of its managers received yearly bonuses over $50,000; others received interest-free loans from state-owned banks, many of which have not been paid back since the days of Mahmoud Ahmadinejad’s presidency. With 80% of the economy owned by the state, the most stable jobs are the government ones. However they are difficult to come by and secure because of low turnover rates, with priority often given to those with connections to political elites or the Islamic Revolutionary Guard Corps (IRGC).

One report claims that embezzlement and corruption cost Iran almost $18 billion between 2011-2015, which spans the last two years of the Ahmadinejad administration and first two years of Rouhani’s. According to Transparency International, Iran’s average corruption ranking largely remained the same throughout Ahmadinejad’s and Rouhani’s respective terms, demonstrating how both hardliners and reformists have perpetuated the practice.

“My life for Iran!”

Economic corruption, while widespread, is not the only challenge to Iran’s economy. The misappropriation of funds is another. Since the 1979 Islamic Revolution led by Khamenei’s predecessor Ayatollah Ruhollah Khomeini that overthrew the Pahlavi monarchy, the new Islamic Republic has sought to expand its sphere of influence in the region and establish itself as a regional hegemon.

While at first Khomeini hoped to inspire resistance to Western influence, exporting the values of the revolution eventually narrowed down to the Muslim world. Iran has expanded its influence in the Middle East by helping fund Hamas in Gaza, Hezbollah in Lebanon, the Houthis in Yemen, the Shia-led government in Iraq and Bashar al-Assad’s regime in Syria. While “exporting the revolution” has been a powerful instrument to curry nationalism among Iranians, the latest demonstration has shown that Iranians are quickly losing their support for its expansionist foreign policy, especially as it comes at their expense. Iran’s extensive proxy network comes at a heavy price, and Iranians are tired of footing the bill. Among the many slogans chanted throughout the nationwide protests include “No Gaza, no Lebanon, no Syria — my life for Iran!”

Tehran’s funding of proxy groups abroad has also consolidated the status of the Revolutionary Guards, which is responsible for training these groups, as an economic powerhouse in Iran. The IRGC has taken advantage of its indispensable role in executing the country’s foreign policy by expanding its control over the Iranian economy. It is not uncommon for those with ties with the IRGC to be awarded non-bid government contracts, and for competitors to be disqualified on arbitrary grounds. The economic footprint of the IRGC has been a hurdle for privatization efforts, making it hard for entrepreneurs and ordinary businessmen to compete. By continuing to invest money in an ambitious foreign policy while neglecting the economic plight of their own people, the government is emboldening the IRGC and, consequently, undermining the economy.

Widening Gap

The ongoing protests emerged outside of the historically urban center of dissent in Iran that was home to the 2009 Green Movement, the 1999 student protests and even the 1979 revolution — Tehran. Instead, they have taken place throughout the country while the capital has remained uncharacteristically quiet.

President Rouhani’s recent proposed budget for 1397 (Iran’s new year that begins in March) ignores the needs of the millions of Iranians living outside of the capital by dramatically slashing cash subsidies and infrastructure projects. Despite promising to increase the budget for infrastructure projects by $31 billion, if approved by parliament Rouhani’s new budget will cut them by $3.1 billion — a 16% decrease from the previous budget. Infrastructure projects have been a key source of jobs for many Iranians, especially those living in rural areas. Economics aside, infrastructure development is crucial outside of Tehran, including new paved roads and buildings capable of withstanding the country’s frequent earthquakes. Rouhani’s cuts to subsidies will affect an estimated 30 million Iranians, who rely on cash handouts to supplement their living costs. With the price of eggs increasing 40% over the past six months alone, it is difficult to imagine how they will manage without government assistance.

From 2007 to 2015, the average household budget has fallen 15%, meaning that Iranians have become 15% poorer. However, the average budget of an urban household in Tehran has increased around that same time period. According to BBC Persian, the gap between Tehran and virtually everyone else in the country has nearly doubled over the past few years. Economic corruption and the misappropriation of funds have played a role in pooling a disproportionate chuck of government money into the capital, the home of economic and political elites, hardliner and reformist alike. Iran beyond Tehran has grown restless from this economic inequality, and Rouhani’s recent budget announcement confirmed that it will only get worse.

The Nuclear Deal’s Broken Promise

Compounding the litany of economic grievances is the disappointment with the nuclear deal signed in 2015. After years of crippling sanctions, the Joint Comprehensive Plan of Action (JCPOA) offered hope that Iran could finally join the global economy, which would attract foreign investment, spur economic growth, lower inflation and, most importantly, create jobs. However, the nuclear deal has failed to live up to its promises as the US under President Donald Trump continues to renege on its commitment to sanctions relief. After threatening to rip up the deal during his presidential campaign, Trump has lobbied even more sanctions against Iran as president.

Trump’s hostility toward Iran has made many foreign companies, not to mention American ones who fear decertification, reluctant to do business with Iran. Iran’s highly educated population, advanced technology and vast resources make it a highly desirable market. However, America’s aggressive stance carries a risk for private companies. Those that have managed to navigate around the sanctions language in the US and elsewhere have resorted to signing memorandums of understanding instead of actual contracts, leaving the Iranian signatories vulnerable and uncertain.

Foreign direct investment stands at only $3.5 billion since the signing of the nuclear deal, which is relatively minor compared to other countries. Iranians are becoming increasingly pessimistic that the nuclear deal will live up to its promises, and many believe that the US is preventing other countries from opening economic channels. Over 70% of Iranians voted for Rouhani in last year’s presidential elections, largely as a mandate for the nuclear deal, in hop that it would eventually usher in economic growth. The countrywide demonstrations suggest that this hope is quickly dissipating.

In line with Iran’s history of dissent, all protests eventually turn political. What began as a protest against rising inflation and declining employment has exploded into a nationwide demonstration of dissent against the government as a whole. What is unclear is what role reformists will play in the protests. Even though the economy affects rural, low-income Iranians more than middle-class Tehranis, unemployment is high throughout the country, especially among young people who make up at least half of the population. The pro-democracy activists who made up the Green Movement have the same grievances against the government and are also disappointed in Rouhani — not just for his annual budget proposal but for failing to live up to his political and economic promises he campaigned on.

Rouhani’s control over the government is limited, however, and change can’t come from his office alone. Chants on the streets are directed toward the government that includes Rouhani, the supreme leader Ali Khamenei and the Islamic Republic as a whole. While curbing Trump’s threats of decertifying the nuclear deal and reversing new sanctions may be beyond Tehran’s sphere of influence, it can start by not neglecting “the other Iran” and adopting reforms that promote economic equality. Addressing economic corruption is just a starting point and will without doubt bring more positive outcomes than a military crackdown that will only incite more Iranians to take to the streets.

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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