Donkey-Side Economics of Islamic Republic

"Economics Is For Donkeys"--Ayatollah Khomeini 1978


WE DID not make the revolution to lower the price of watermelons”. Ayatollah Khoeimini’s observation was prescient.

The revolutionary era that began in 1979 has proved an economic catastrophe for Iran. US sanctions, colossal capital flight both under the Shah and the clerical regime, gasoline subsidies, erratic policy making, corruption, mismanagement of state companies, the economic monopolies of the bonyads (foundations) and the Revolutionary Guards, the international banking credit freeze engineered by US Treasury and the devastation from the war with Saddam’s Iraq have all contributed to Iran’s economic sclerosis.

Even though Iran earns more than $40 billion in oil revenues, Bank Markazi has $60 billion in central bank reserves and NIOC pumps more oil than any state owned oil company in the Gulf other than Saudi Aramco, the economic metrics of revolutionary Iran are pathetic. The state influences 80 per cent of the Iranian economy. Iran pumps a third less oil in 2007 than in the last year of Reza Shah Pahlavi’s reign in 1978. The jobless rate is estimated above 25 per cent. Gasoline rationing, unpaid wages low teacher salaries have triggered riots and street protests. Iran barely attracts $1 billion in FDI, one tenth the level of Turkey or Egypt, both comparable economies. The stock market has crashed since the election of President Ahmedinijad and his subsequent attack on the economic reforms and the business elite of the Khatami and Rafsanjani era. Iran’s uranium enrichment programme has only provoked US sanctions and deepened its international isolation. Even though Iran enjoyed a petrodollar windfall with $75 crude oil, no less than 150,000 Iranian university graduates emigrate each year and wealthy Iranians are desperate to find offshore nest eggs for hidden cash.

President Ahmedinijad campaigned on a platform of economic populism, fulminating against “oil mafias” and “capital speculators”, the cynical elite of past-Shah Iran, often the progeny of top Iranian officials and clerics. Yet the president’s erratic decisions have only worsened Iran’s economic malaise. Ahmedinijad ordered banks to slash interest rates during a time of high inflation without even consulting the governor of central bank or the minister of planning. The president also ordered the minimum wage to be increased by 50 per cent, thus ensuring that endemic unemployment became worse. His calls for “justice shares” for the poor in Iran’s state owned companies have been the kiss of death for the private sector’s interest in the regimes embryonic but deeply flawed privatisation programme.

Ahmedinijad has also strengthened the economic power of the Revolutionary Guards, awarding them valuable concessions, monopolies and a $2.3 billion contract to develop the South Pars natural gas oilfields. Now that the Bush White House has designed the Revolutionary Guards a terrorist organisation, vast swathes of the Iranian economy are off limits to foreign investors. International banks UBS, Deutsche, HSBC, Credit Suisse and Barclays have also ended their financial ties to Iran under American pressure. The US Treasury has also blackballed Bank Saderat and Bank Sepah from the international money markets, accusing the banks of financing arms shipments to Hezbollah and nuclear component smuggling.

Iran’s economic failure cannot be blamed on President Ahmedinijad alone. US sanctions have prevented Iran from importing American technology to develop its industrial base or oil infrastructure. While oil sales account for 80 per cent of Iranian exports, Teheran’s buyback terms and corrupt bureaucrats have inhibited production joint ventures with even Indian, Chinese and Russian oil companies.

The IMF estimates that Iran state subsidies on gasoline, food, housing, bank credit and fertiliser account for 25 per cent of GDP, a recipe for economic disaster. Government spending in Iran has gone ballistic with the rise in crude oil prices. The gasoline subsidy ensures Iran has the cheapest petrol in the world, a major factor that explains Teheran’s clogged traffic, pollution and oil smuggling syndicates. The billions of dollars Iran wastes in subsidising gasoline should have been used to build local refining capacity or upgrade ageing oilfields in a rational world but the economics of revolutionary Iran is anything but rational.

The state owned foundations (bonyads) wield extraordinary power in Iran, owning hundreds of companies whose output is 25 per cent of the national GDP. They enjoy tax subsidies and preferential access to the banking system that enable them to simply “crowd out” the private sector. Privatisation in Iran has proved an illusion, a mere reshuffle of state assets among companies owned by rival fractions in the theocratic elites of Qom and Teheran. It is ironic that though the merchants of the Teheran bazaars were the financiers of Ayatollah Khomeini in the last decade of the Shah’s regime and the pistachio magnate Ali Akber Hashemi Rafsanjani became the president of Iran and is still the regime’s eminence grise and power broker, no pro-business political party exists in Iran’s political constellation. The arbitrary intervention and quixotic decision making of President Ahmedinijad has dealt a serious blow to investor confidence. Iran’s economic failure is all the more poignant given the financial success and wealth creation in the GCC. The economic malaise of revolutionary Iran has hit its young hardest, 800,000 of who graduate from university each year in an anemic job market. This is a political time bomb for the regime in the years ahead.

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Iran's own politics - not Western sanctions - keep out investments

Recently I stumbled upon an article by a so-called Iran experts linked to the "reformers"( as it is obvious from her unsubstantiated stance), trying to blame the U.S. for Iran's utter mismanagement of its economy. In this relentless endeavor, she exploits the plight of the Iranian poor to deceive the American 'useful idiots' who are complicit in preserving the reformers' 'spoils-trough' directly connected to the ruling mullahs.

As it turns out, Western Sanctions have little to do with keeping out investments from Iran but you won't ever hear that from the IRI's apologists or the "benevolent" reformers. The IR is a victim of "arrogant powers" in perpetuity.

Iran's economic problems are intrinsic to its military clientalism power structure. A flourishing viable economy will not emerge anytime soon without complete overhaul of the system. Yes, the "economies" of the reformer profiteers and their cohorts might be affected by these sanctions but it is not going to affect those who already live in abject poverty in drug infested areas of Niavaron, and South Tehran:

The United States is on a concerted campaign to discourage foreign energy companies from doing business in Iran. But analysts say Iran's investment woes are its own fault - it could dodge international pressure and attract more foreign money by simply offering better deals.

"They are doing the embargoing for us," said Mikkal Herberg, a former oil executive now with the National Bureau for Asian Research, a think tank partially funded by the US government.

"The terms they offer (to foreign energy companies) for these deals are very poor, with low rates of return against the geopolitical risk," he said.

Even Chinese firms, eager to invest in troubled countries like Sudan, have been slow to follow through on energy deals in Iran.

The situation shows how domestic politics often hamper Teheran's ability to withstand Western efforts to curb the country's controversial nuclear program
And here is the rest of it...Read the rest

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Freedom Flight

Greenville online: The Freedom Flight was born from the long-term effort of reaching out to Iran's young generation who lost hope for a better future in a society where human rights are deserted.
In addition to setting the world flight record for the first Iranian-born pilot to fly a single-engine airplane around the globe, Freedom Flight's mission was formulated to encourage Iran's young generation to realize their ability to accomplish what appears to be impossible, to reach for the greatest potential of their ability and eradicate the fear that is deeply-seated within the society. It was hoped that this will stimulate their courage to push for a change in government.
Since the revolution of 1979, the Islamic Republic in Iran adopted the strategy of creating fear within Iranian people to maintain a strict isolation of the population from the outside world in order to maintain a tight grip on power. Within the structure of Iran's theocratic regime, human rights are nonexistent for ordinary citizens. The principles of human rights are unknown to the people due to their long-term isolation.
Iran's government sustains a constant supply of internal fear by publicly executing political prisoners, stifling freedom of speech, and suppressing self-expression and modern democratic ideals. The government also uses financial dependency to bind the middle class to the government sectors.


Additionally, the Islamic government finds it crucial to create and maintain an external enemy to assure their own long-term survival. By doing so, the public will stay focused on the security which a government can provide from an external enemy, distracting the population from the oppression perpetrated by that government.
Painted graffiti on the street and anti-American slogans are an invariable reminder of how desperately the government officials are concerned about their own survival. Yet it is very apparent that the young generation, which comprises nearly 70 percent of the population, no longer pays attention to the government charade and generally likes American and Western culture.

The core survival of theocracy is solely dependent on the government to sustain a fearful society, where the internal fear of authorities and the external fear of foreign enemies are in constant supply.

If we have any hope for a democratic movement to sprout in Iran, a fearless, open society is a "must-have component." With the young generation's self-confidence and the support of the international community, Iranians are more likely to take a step forward toward establishing a democratic government.

Freedom Flight had many symbolic destinations such as the Statue of Liberty, the Liberty Bell, the Eiffel Tower, the Berlin Wall and the tomb of Gandhi, all of which are either a symbol of freedom or historically a sign of long-term struggles for freedom.
More importantly, Freedom Flight had many challenging components that required taking tremendous amounts of risk. This trip was about going against all odds and yet coming out on top, which is very similar to what Iran's young generation needs to face to confront the current regime.
Crossing the frigid waters of the North Atlantic with a single engine airplane is a high-risk adventure. Losing the only engine of the aircraft during the cross-Atlantic flight could only mean ditching the aircraft in the water. If you are lucky enough to survive the crash, manage to get out of the sinking plane, overcome the sub-zero temperatures of the North, and deploy the life raft you saved from the sinking aircraft, the Coast Guard may find you and take you home safely.
Flying the Freedom Flight over Iran's airspace was potentially the highest risk, while it openly encouraged young Iranians to bring about changes. An American registered aircraft and prior knowledge of the Islamic regime, who issued an over-flight permit, will bring a certain level of discomfort for any pilot flying that aircraft. Iran's high mountainous terrain also adds to the challenge of the flight.
Flying through the torrential rainy season of the monsoon in India, Bangladesh and Indonesia, and the typhoon season in the western Pacific was clearly a challenge against weather.
Flying against the wind and downdraft of Mount Everest, the highest mountain in the world, was also a challenge against Mother Nature and high altitude.
Seventeen hours of flight over the North Pacific Ocean against headwind and fuel limitation was a test of endurance and human determination.
However, with proper planning and management all challenges that appeared to be impossible could be accomplished, regardless of any high-risk objective.
A self-confident generation of young Iranians with realization of their own ability to accomplish what appears to be impossible, coupled with the support of the international community, could bring about a change that also guarantees Middle East regional stability. There may be a price to pay by standing against a theocratic regime, but nothing is impossible.
All free societies struggled to gain their independence and freedom. There is a price to pay for freedom.

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Iran's ex-PM breaks silence to warn on poverty

Yahoo News: Mir Hossein Moussavi, seen as close to revolutionary leader Ayatollah Ruhollah Khomeini, served in the now-defunct post of prime minister from 1981 to 1989, but has largely stayed out of politics ever since.

In a speech quoted by most of the reformist newspapers, he complained the country was becoming immune to pictures of impoverished minors and statistics which he said showed that 20 percent of Tehran children were homeless.
"It seems that we have distanced ourselves from the revolution's vision and thoughts," said Moussavi.

"It seems like we think that our responsibility is over. Uprooting poverty and meeting human needs, while preserving their dignity, is what the Islamic republic's economy is based on," he added.
Moussavi, who also served as foreign minister, noted that article 43 of Iran's constitution said it must aim to provide all the basic needs and food to its people.

"The Islamic republic's legitimacy depends on these principles. It means that this system, as long as it is an Islamic republic and accepts this constitution, cannot abandon this goal and settle for less."

Iran's reformists -- including the outgoing government -- were keen for Moussavi to run for president in the 2005 elections as a popular moderate who still enjoys great legitimacy owing to his closeness to Khomeini.

However he refused, for reasons that were never publicly disclosed, and conservative Mahmoud Ahmadinejad went on to thrash the more pragmatic Akbar Hashemi Rafsanjani in the run-off.

With Khomeini's backing, the leftist Moussavi managed to haul the country through a bloody war with Iraq and international isolation. After Khomeini's death in 1989, the post of prime minister was scrapped.

His comments come at a time of increasing concern about Iran's economy, with MPs and economists warning that the policies of Ahmadinejad risk further fuelling rising inflation.

The country is also grappling with problems of unemployment for its booming youth population as well as drug addiction and juvenile delinquency

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Hundreds march in Iran labour protest

TEHRAN (AFP) - Hundreds of Iranians took part on Tuesday in a demonstration in Tehran to mark labour day, accusing President Mahmoud Ahmadinejad's government of failing to improve their working conditions.

The workers converged on a stadium in central Tehran in the officially sanctioned demonstration to mark May Day but were dispersed by anti-riot police when the march moved out into the street, witnesses said.

"Some 600 workers demonstrated at the exit to the stadium and shouted slogans against the minister of labour," Mohammad Jahromi, the semi-official labour news agency Ilna reported.
"Incapable minister. Resign!", "Government, parliament, stop your slogans and act," and "Death to the oppressors", the protestors shouted, according to the agency.

Scuffles followed when anti-riot police dispersed the demonstration as people moved into the street outside the stadium, just south of Haft-e Tir Square, a major Tehran traffic nexus.
Witnesses told AFP that they hoisted a coffin symbolising their demands which the police then tried to break but the demonstration dispersed without any major clashes.
State television's main afternoon news bulletin also reported that hundreds of people took part in the march and broadcast comments from unnamed workers complaining about their conditions.

"We are pursuing the workers' legal demands. We expect the officials and the government to follow up on our demand," said one, while another fumed: "I have worked for 21 years and am now unemployed, what should I do?"
"This is the workers' situation: no job security, very low wages and numerous problems," said a third man.

Low-earning workers and civil servants in have been especially hard hit by a sharp rise in prices of staple foods and services over the past months.
Ahmadinejad rose to power in elections two years ago on the back of a wave of support from poorer sector of society generated by his promises to make all Iranians benefit from the country's oil wealth.

But the country continues to be dogged by low salaries and unemployment for its overwhelmingly youthful population.

A member of parliament's social commission, Moussal-Reza Servati, said earlier this week that the number of Iranians living under the poverty line had increased by 13 percent to 12 million -- more than one in seven people.

The demonstration came after hundreds of teachers held three protests outside Iran's parliament in April, resulting in the arrest of a dozen education union leaders from Tehran and the central city of Hamedan.

Iran's teachers are due to mark their national day on Wednesday and Ahmadinejad at a ceremony in Tehran called on the education ministry "to remove teachers' problems", state television reported.

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