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Dwindling hope in Iran’s economic recovery

Several Iranian governments have promised the Iranian people they would improve the economy, but have ultimately failed. What about Rowhani's government?

Dr. Majid Rafizadeh

Published: Updated:

The fundamental reasons that led millions of Iranian people to the ballot box to vote for President Hassan Rowhani were the staggering conditions of the economy, high inflation, the high rate of unemployment, and more freedoms including expression, speech, press and the protection of human rights.

However, the condition of human rights has deteriorated in the nation, based on every standard of the United Nations Human Rights Council, Amnesty International and other independent human rights organizations. This led to the United Nations Human Rights Council deciding, during its annual meeting in Geneva, to extend the term and to renew the mandate of the monitor Ahmed Shaheed for another year in a 21-9 vote. India, China, Pakistan, and Russia opposed the renewal and extension, with Tehran scorning the decision.

The moderate Rowhani government was frustrated by the Council’s vote on resolution to extend Mr. Shaheed’s term, as its efforts to present itself as more benevolent, as gentler, and as a kinder administration had failed. This action has elicited harsh criticism and a reaction from Iran’s ambassador to the United Nations in Geneva, Mohsen Naziri Asl, who pointed out: “In reality the claim by the main sponsors of this resolution on human rights advocacy has proved to be a myth, as they have on numerous occasions, put on display their fully politicized approach to human rights issues.”

Yet, the major question beyond the issues of human rights and political repression is how has President Rowhani moved to fulfill his promises for economic recovery? Are there any initial signs of economic rehabilitation that would alleviate the severe conditions that millions of Iranian people are encountering on a daily basis? Has Rowhani’s administration, with all the recruited technocrats, managed the economy and carried out policies efficiently?

Hopes fading away

The matter of the fact is that more than six months after Rowhani took office, the hope for economic recovery in several sections of society, including for the ordinary Iranians, unemployed, small business owners and investors is fading away.

Jafar Zadeh, a computer engineer in the city of Karaj pointed out regretfully: “My two children with graduate university degrees are still unemployed. We just gave up on all the promises we hear from these politicians. We did not vote for Hassan Rowhani for more political freedom, we voted for him so he could improve the economy.”

Several Iranian governments have promised the Iranian people they would improve the economy, but have ultimately failed

Dr. Majid Rafizadeh

It is acceptable to argue that the Rowhani administration has been capable of forging a provisional and temporary nuclear deal, which has provided some relief from sanctions, slightly stabilized Iran’s national currency (Rial) and faintly reduced the inflation down from 40 percent.

Nevertheless, the actual fulfillment of economic growth and economic recovery appears to be much more difficult in comparison to what Rowhani has promised the Iranian people, investors and small business owners.

If we look at the main economic indicators like Iran’s stock market, it becomes clear that although the Iranian market rose when Rowhani was elected on the grounds of hope and optimism, it has been on a steady decline over the last three months. Iran’s stock market has declined roughly 13 percent since December and has evidently lost hope in the capability of the Iranian government to spur economic growth to recover the economy.

The argument that Rowhani does not have the final say in Iran’s foreign policy, and the point that Supreme Leader Ayatollah Ali Khamenei enjoys that power, might be accurate. However, it is difficult to buy the argument that Rowhani does not have power in managing the economy. Iran’s president enjoys the power and flexibility to take initiatives regarding the direction of the domestic economy as Rowhani’s predecessors have conducted.

The other indicator is Iran’s national currency. Although the currency value was raised and stabilized at the beginning of President Rowhani’s rule, it has been dropping to approximately 3.9 percent against the U.S. dollar in the last few months. Currently, the Rial is above 30,500 Rial (or 3050 Toman) in the black market for one U.S. dollar. Some Iranian economist have even been pointing out that for the first time, the Rowhani government has also started to sell dollars on the open market in order to stabilize its Rial value.

Realizing the threat of people’s disenchantment with the economy, the strenuous task of regaining the economy (and the danger of severe economic conditions that citizens have encountered), even Supreme Leader Ayatollah Ali Khamenei has lately drawn on issues such as the importance of wealth distribution for the poor. Yet, he is still advocating for what he calls a “resistance economy” or self-sufficient economy that stands against economic liberalization and the open market.

Iran’s economic drawback is systematic

Several Iranian governments have promised the Iranian people they would improve the economy, but have ultimately failed. In fact, at the end of each administration’s term, the economic conditions, inflation, unemployment, and gap between the rich and poor have worsened.

In addition, Rowhani’s recently announced plan is not any different from the ones that his predecessors have taken. His government will be phasing out subsidies on some industries such as the energy sector. According to economists, this economic policy might console the public for the short-term, but in the long-term it will significantly increase the prices of major utilities, gasoline and electricity, by nearly 95 percent.

The real underlying problem with Iran’s economy is that the problem is systematic and embedded in the politico-economic structure of the Islamic Republic. The state-owned and state-generated economy, coupled with corruption, the resistance to liberalize the economy and lure foreign investment and the hold of wealth by some main institutions linked to the supreme leader and the top elite will always exacerbate the economic conditions of the lower class, add to poverty, increase the gap between rich and poor, retain high a rate of unemployment and sustain the systematic budget deficit of the country.

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Dr. Majid Rafizadeh is an Iranian-American scholar, author and U.S. foreign policy specialist. Rafizadeh is the president of the International American Council. He serves on the board of Harvard International Review at Harvard University and Harvard International Relations Council. He is a member of the Gulf 2000 Project at Columbia University, School of International and Public Affairs. Previously he served as ambassador to the National Iranian-American Council based in Washington DC.

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