Restive Iran reeling from ailing and stagnating economy

Analysis: Centrists believe unrest organised by hardliners to derail Rouhani government

A university student protests inside Tehran University amid the effects of a smoke grenade thrown by anti-riot police. File photograph: AP

A university student protests inside Tehran University amid the effects of a smoke grenade thrown by anti-riot police. File photograph: AP

 

Inflation has fallen, the economy is finally growing after years of recession and, thanks to the easing of some international sanctions, Iran’s crude oil is once again being sold overseas.

But many in the Islamic Republic believe that, if anything, the economic situation has worsened.

Despite high hopes that the nuclear deal agreed with western powers in 2015 would deliver an economic bonanza, daily life remains hard and there are not enough jobs for an army of unemployed youth.

Proposed fuel increases of as much as 50 per cent, unveiled in December’s budget, only added to this sense of impoverishment.

“My concern is not about higher prices of petrol but its impact on everything else,” said Mandana, a 42-year-old teacher. She considers herself middle class, but only just. “I sold my car last year after more than 20 years of driving under economic pressure. But I cannot endure more difficulties and have zero savings.”

This weekend, thousands of Iranians poured on to the streets, the first protests of their kind in almost a decade. By Monday the number of people killed as a result of the unrest had reached at least 15, according to local media.

Protesters called for the change of a regime that they blame for economic woes, massive corruption and political and social restrictions. “Our country is a house of thieves; it is exemplary in the world” and “Get lost clerics” were among the slogans chanted by protesters.

The immediate trigger for the protests appeared to be economic.

Rising prices

The biggest anti-regime demonstration since 2009 started with a supposedly peaceful rally in the northeastern city of Mashhad – Iran’s second-biggest city – on Thursday in protest at rising prices.

Reformists say hardliners organised the protests in Mashhad and perhaps in other cities to undermine centrist president Hassan Rouhani’s government, seeking to capitalise on discontent over the economy.

“It is very strange that protests swept through the whole country over a very short period of time. There must be some organisation behind it,” said Mohammad-Sadegh Javadi-Hesar, a reformist politician in Mashhad. “This could be part a scenario to prove Mr Rouhani is inefficient.”

When Mr Rouhani took power in 2013, he inherited an economy shattered by the populist policies adhered to by his hardline predecessors and international restrictions over the nuclear programme.

While progress has been made – inflation is now 10 per cent, far lower than the 45 per cent seen in 2013, and after years of recession, gross domestic product is 6 per cent – youth unemployment remains at 25 per cent. An estimated 830,000 more people are expected to join the job market in the next Iranian year, which begins in March, 70 per cent of them university graduates.

The government acknowledges that much more needs to be done. Mohammad-Bagher Nobakht, Iran’s vice-president for budget and planning, said on Saturday that Iran needed to invest at least 734 trillion Iranian Rials (€17 billion) in transport networks, housing and loans. Analysts, however, say there is no budget for development.

Discontent over inequality in society has also been vented on social media, since the submission of the budget to parliament made clear how much state organisations and religious institutions received.

A renowned hardline cleric, Ayatollah Mohammad Taghi Mesbah Yazdi, is expected to receive 280 billion Iranian Rials next year, eight times as much as he received a decade ago.

At the same time, the government is planning to cut monthly subsidies (455,000 Iranian Rials per person) for those who earn more than seven million per month. This could directly affect 30 million people, many of whom are already struggling to get by. On top of this, fuel prices are expected to rise.

All this comes amid huge uncertainty about the financial sector, particularly the illegal credit institutions affiliated to religious and military organisations, such as the Revolutionary Guards.

Bankruptcy fears

Millions of Iranians keep their money in these institutions, which have mushroomed over the past decade. They handle about 25 per cent of banking operations. Iran’s central bank has shut down a few this year and is urging others to increase transparency. Many fear there will be bankruptcies and their savings will be lost.

“For two years a few million people who had deposited all their savings in financial institutions have been demanding their money back,” Ali Khorram, a commentator told Shargh, a reformist newspaper. “The government treats them as if ‘you have made a mistake and now pay the prices for that’.”

Tasnim news agency, close to the elite Revolutionary Guards, on Sunday cast doubt on the official inflation and growth figures, a scepticism shared by many people.

“The government’s inability to communicate with people has paved the way for recent protests,” said Mohammad-Ali Abtahi, a reformist former vice-president. “Protesters also think attacking the government has no price, thanks to the greater political freedom they enjoy under Mr Rouhani and bigger access to social media and hence more public awareness.” – Copyright The Financial Times Limited 2018

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