What future for the economy of a failing regime?


To outline his new economic policy, Iranian President Ibrahim Raisi received seventeen economists close to the regime. The two had different views on the country's deteriorating economic situation and disagreed on the action plan for an economic revival. Rohani's former economic advisor, Massoud Nili, is a supporter of the free economy as a way to economic salvation. Others felt that this path would only worsen the situation. In short, according to published excerpts from their speeches, a variety of visions and solutions were expressed. And given Ibrahim Raisi's lack of knowledge and experience in financial matters, the question arises as to his ability to evaluate these solutions and choose the one that will best benefit Iranians and lead them out of the current economic disaster.

A pro-regime newspaper writes: "Foreign policy and its strength is the card that the president-elect must use to pull the Iranian economy out of the vortex into which it has fallen. This economy can only reach that level where citizens are no longer disadvantaged in the short term by 1404 and by reaching at least 50 billion in oil exports". According to this newspaper, the allocation of these foreign exchange earnings to food production, the purchase of raw materials for factories and investment in infrastructure is the key to avoiding the collapse of the economy and the social explosion caused by poverty, hunger and lack of electricity.

This newspaper has forgotten that the Iranian regime had access to $150 billion in foreign exchange reserves as a result of the 2015 nuclear deal. It was able to sell up to 2.5 million barrels of oil a day before the US withdrew from the JCPOA in 2018. And despite this benefit the government cashed in, rising poverty and unemployment led to the mid-November 2019 uprising that spread to many Iranian cities. Only the regime's use of force, which resulted in the deaths of more than 1,500 protesters, prevented the protests from spreading further and causing the collapse of the regime.

Poverty, unemployment, soaring prices, water shortages and power cuts are caused by widespread and institutionalised corruption, not by sanctions, as the Iranian regime would like to convince the world through its lobbyists in Europe and the US.

Embezzlement and colossal corruption entrenched in the Iranian power apparatus has led to economic takeovers by rivals and armed factions of the government and is driving the regime towards total collapse. Numbers no longer have the capacity to express these astronomical embezzlements and levels of corruption. They affect the country's budget and all its infrastructure, including schools and universities.

To illustrate this monstrous figure, an economist close to the regime introduced a new indicator of corruption in Iran. "Imagine a 40,000-kilometre band (the length of the earth's circumference) of 1,000-tonne banknotes tied around the earth like a belt," he said. This belt named "Belt of Banknotes around the Earth" is abbreviated as "KAD". The total value of corruption in privatisations during the three decades after the Iran-Iraq war is about 1,440 KAD, i.e. a belt of banknotes that can go around the world 1,440 times. And today, if we consider that administrative corruption does not exceed that of the past, the draft law on "public and private participation", quietly passed by parliament, creates a "corruption capacity" of 1560 billion tomans. This is equivalent to 6,000 KAD, i.e. more than four times the total corruption of the 30 years of post-war privatisation.

Contrary to the Iranian regime's blame game on the unprecedented poverty and suffering caused by US sanctions, it is the corrupt structure that has transformed a country that ranks second in gas resources and fourth in oil resources into a developing country where 80 per cent of citizens live below the poverty line.

The effectiveness of sanctions is assessed in terms of how the country's production capacity is affected. In Iran, production capacity has been declining since the ninth administration (long before US sanctions began). As a result, the country is heavily dependent on imports, which rose from $16 billion in 1984 to $90 billion in 1990.
Factors in Iran's dependence on imports include the destruction of manufacturing industry in Iran under the pretext of privatisation, as well as the high level of embezzlement. The profits from these imports go to institutions that control more than half of the Iranian economy, including the Islamic Revolutionary Guard Corps (IRGC). Whatever its wealth, the IRGC is willing to make these huge profits at the expense of its citizens. In doing so, it destroys Iranian industry and increases the poverty and misery of the Iranian people.

And despite the fact that all international sanctions against Iran have been lifted, and that it can now export far more than the 1400 (2021) annual budget allows, i.e. 2.3 million barrels per day, corruption persists. This reaffirms that the corrupt fabric of the system is at the root of the economic and social paralysis and the undignified living conditions of more than 60 million Iranians.

According to the Central Bank, Iran exported $180 billion worth of goods in 1997 and 1998. However, the reallocation of these resources remains a gap. Studies estimate that these funds could have provided goods and commodities for three years.

Massoud Khansari, head of the Tehran Chamber of Commerce, said that between 2009 and 2011 some $90 billion left the country. In the last ten years, 35 per cent of the country's population has fallen below the poverty line. In Iran, unlike in any other country, the regime first acquired power and used it as a means to create wealth.

According to Amnesty International, Ibrahim Raisi was implicated in the massacre of 30,000 political prisoners in 1988. His rise to the presidency is a product of the regime's power grab. For the past 30 years he has held important positions in the government. His job is to reinforce the regime's oppressive machinery by silencing and eliminating ordinary people who are trapped in poverty, facing a range of social problems such as water shortages and electricity cuts in their daily lives. Raisi is one of Khamenei's most loyal officials. He symbolises a unified and united government, while implementing more repressive measures to control, tame and destroy any expression of anger and discontent among the Iranian people. And as long as the regime in Tehran continues to repress the Iranian people, their standard of living will continue to decline. With Raisi's accession to the Iranian presidency, people should expect a deterioration of the country's economy and a miserable life.

Hamid Enayat is an Iran expert and writer based in Paris, where he has written frequently on Iranian and regional issues for the past thirty years.