Iran International
President Ebrahim Raisi in an interview on Monday insisted the government could phase out cheap dollars for selected imports without "a shock to the market."
An exchange rate of 42,000 rials to the dollar is applied to imports of ‘essential’ commodities while the dollar trades in the open market at over 270,000 rials. The hugely discounted dollar for importers of essential goods was meant to keep down the cost of the commodities facing consumers.
In April 2018, as the United States readied ‘maximum pressure’ sanctions and as the rial fell to a then record market low of around 60,000 against the dollar, the government of President Hassan Rouhani introduced a rate of 42,000 rials to the dollar to facilitate imports of essential goods.
The government's foreign exchange subsidy not only failed to prevent the further fall of the rial or stabilize the market but also it soon became a new problem as allegations of corruption in the distribution of the cheaper dollar began to haunt the government in a matter of months. Much of the valuable was being spent on importing luxury items, from cars to household appliances while subsidized food, medicine, and animal feed was being smuggled out of the country.
According to the Tasnim news agency, Economy Minister Ehsan Khandouzi this week said the government's economic team was considering allocating the resources currently channeled into supporting essential imports into direct payments to citizens.
Such a move could bolster the ability of recipients to pay higher prices, but economists have argued in recent days that price inflation will accelerate if cheap dollars stop, and the cash handouts would never make up the difference.
That would carry a serious risk of political unrest for the government, as events in November 2019 showed. A sudden hike in gasoline prices led to spontaneous widespread protests. Security forces used military weapons to fire on unarmed protesters, killing hundreds in three days.
The government of President Ebrahim Raisi faces a budget deficit of around $12 billion. A recent report from the Planning and Budget Organizationput Iran’s debt at 30 percent of GDP: this compares to 40 percent in Turkey, 67 percent in Egypt, 117 percent in the US, and 171 percent in Lebanon, but is onerous where denominated in dollars.
Due to demand on foreign exchange − and with the rial at a market rate of 140,000 against the dollar − a meeting of the president with the heads of parliament and judiciary in April 2019 fixed the subsidized rate at 42,000 and limited its allocation to imports such as food and medicine.
The Central Bank, accordingly, constrained the allocation. By July 2021, reports emerged that 1.3 million metric tons of ‘essential’ goods in Iranian ports could not be unloaded because importers lacked dollars to pay foreign vendors.
Sugar was dropped from the list of eligible items in November 2020, while cooking oil remained. Since late March the government has allocated at least $6.9 billion for importing ‘essential’ goods at the set rate, including $1.5 billion for cooking oil.
Nonetheless the price of cooking oil has almost doubled in a year, given rising inflation put at close to 50 percent annually by the Statistical Center of Iran. The IMF projects consumer price inflation of 39 percent in 2021, and 28 percent in 2022.
The highlight of what he said was a point that was not new: "I am not going to tie the people's livelihood to the nuclear negotiations."
This has been one of his persisting slogans in recent weeks, meaning Iran will not make concessions to the West to get sanctions relief. Instead, it will try to deal with its economic crisis through self-reliance and closer relations with China and Russia.
Conservative news website Alef, however, wrote in a commentary on Tuesday that the president can solve problems only if he has the right middle managers.
Alef wrote: "Some 75 days after taking office as President, still many seats remain vacant in Raisi's administration." Citing the government's own website, Alef wrote that parts of the government including the President's Office and the Interior Ministry still do not have the right officials that can bring about the changes planned by Raisi. The Ministry of Education has still no minister more than a month after the beginning of the new academic year.
Alef noted that "the least degree of overhaul has taken place in the economic ministries, where changes are most needed." The website observed that with all the tough economic problems the government faces, there is no one to carry out orders coming from the top.
As an example, according to moderate conservative Khabar Online website, Raisi once again issued orders to three ministries on Tuesday to take measures "to give peace of mind to the people about their livelihood and to put an end to inaction within the government and to sort out the instability in the markets." Like always, Raisi called for "immediate, serious and revolutionary measures" while observers say there is no one to carry out these orders.
In an interview with reformist daily Arman, right-of-center former lawmaker and Tehran City Council member Sharbanu Amani said that the most important problem for Raisi is that his government "has no plans and roadmaps and that is why it seems to be confused about many things."
Ms. Amani charged that neither Raisi, nor his aides have ever told the people about the details of their plans for solving the country's problems. She added that "although Raisi has been part of the Iranian government for at least 40 years, he still does not have a full team to support him. There was no team even when he was running for the office."
The outspoken politician said: "Raisi was elected in an extremely low-turnout election. He was expected to be in a hurry to seek the nation's support by acting quickly to solve problems. But we see that he has set up one of the weakest administrations in Iran when we look at his top officials. Most of his managers, who are mainly the former aides of Mahmoud Ahmadinejad, look at problems from a military and security perspective. This comes while we expected him to behave in a way that would return the public's trust in the government."
Amani said Raisi may find it difficult to restore public trust. In his visit to Bushehr Province, he asked the local governor to solve long-standing problems within ten days while everyone knows that would be impossible as economic problems cannot be solved by issuing orders.
Ms. Amani warned that Iran's economic crisis is serious, yet, the Raisi administration has not taken any positive step to solve Iran’s nuclear dispute and help lift sanctions, while the Covid pandemic is also taking its toll. The parliament, packed by hardliners, which was supposed to help the likeminded president has done nothing. In the meantime, useless decisions such as a planned 20-year deal with Venezuela, a country with its own severe economic crisis is questionable. Selecting Mohammad Eslami as nuclear chief and Hossein Amir-Abdollahian as Foreign Minister were also wrong decisions. They do not know the basics of their job, she maintained.
However, Ms. Amani said: We cannot blame Raisi for all the problems. Those who omitted all other candidates and narrowed down the people's choice to Raisi are also to be blamed for the situation.
While authorities have been making every effort during the past years to keep the Day of Cyrus the Great a low-key event and to dissuade Iranians from visiting his tomb at Pasargadae, blunders by President Ebrahim Raisi and one of his ministers alerted everyone in Iran that Cyrus Day (October 29) is approaching.
Last week, during a visit to Fars Province in southern Iran, where the 6th century BC Achaemenid monuments Persepolis and the Tomb of Cyrus the Great (circa 600-530 BC) the celebrated Achaemenid king is located, Raisi denounced the Achaemenids as "oppressors" while the ancient dynasty, particularly Cyrus the Great are internationally known as champions of human rights and toleration for religious and ethnic diversity.
Culture and Tourism Minister Ezatollah Zarghami made a bigger and more controversial blunder during his visit to Pasargadae last week. In the countryside, where digging too many wells as well as mismanagement of other water resources, have created massive sinkholes across the Iranian plateau, Zarghami suggested that the government should allow more wells around the historic site.
Critics in the press and on social media pointed out that even without new wells, the tomb of Cyrus may disappear in a deep sinkhole any day. Others charged on social media that Zarghami has forgotten that his role is protecting cultural heritage rather than boosting agricultural products.
A commentary on the Asr Iran news website reminded Zarghami that what he suggested was like "planting carrots on a gold mine." Zarghami soon retracted his comment when attacks escalated on social media, but the damage was done.
Social media users such as cultural activist Mohammad Bagher Tabatabai warned Zarghami that "The tomb of Cyrus the Great has a place in the heart of every Iranian. You can never destroy it."
During the past years, particularly after the 1979 Islamic revolution and despite Iranian officials' violent crackdown on pro-monarchy demonstrations, thousands of Iranians visited Pasargadae to pay tribute to the great ancient king. The celebration became a political event in October 2016 when thousands of visitors to the tomb began chanting slogans against the Islamic Republic.
The following year and every year since, the Revolutionary Guards (IRGC) deployed forces to the region and blocked all roads to Pasargadae to prevent the celebrations. But still, thousands of young men and women somehow managed to gather around the monument and sing patriotic hymns.
The commentary in Asr Iran website noted that "Zarghami has never been a tourist or a tour leader and has no experience about protecting cultural heritage. He is a former IRGC officer who has studied urban planning and industrial management. Although he has been deputy culture minister for cinema for a while, yet, surprisingly, someone like him is assigned to protect the country's cultural heritage."
The commentary reminded Zarghami that tourism can produce more financial resources than agriculture. The website suggested that Zarghami should look at Iran's neighbors such as Turkey and see how they make money from tourism. "Turkey's income from tourism is more than Iran's income from oil. Last year Turkey earned $29.5 billion from tourism," claimed the website citing Anatolia news agency.
In 1979, "hanging judge" Sadeq Khalkhali, who killed hundreds after the revolution, had a plan to destroy all monuments including Persepolis as heretic idolatry, but intellectuals and patriotic Iranians prevented the destruction of the sites. Later, most Iranian officials, particularly former President Mahmoud Ahmadinejad realized that they could count on public interest in Iran’s historical heritage to garner support. The blunders by Raisi and Zarghami could signal a return to the ideas of the hanging judge.
Iranian media including Etemad daily and Rouydad24 website noted that only 74 days after his inauguration as Iran's new President Raisi (Raeesi) faced serious opposition in the parliament on Sunday.
A day before that, pro-administration news agency ISNA had lashed out at Majles Speaker Mohammad Bagher Ghalibaf for criticizing the Raisi administration and calling it "an incompetent government with inefficient managers.” Only one day after that hardline daily Kayhan, that often speaks for Supreme Leader Ali Khamenei's office, criticized the Raisi administration over the rising price of home appliances.
The media were surprised that it was the like-minded conservative camp and not his political rivals in the reform camp who have started criticizing Raisi's government without even giving him a hundred days for trial and error.
Hardline lawmaker Elias Naderan on Sunday warned Raisi not to try to circumvent the Majles. He made the comment in response to the administration's decision to amend the budget bill to meet some of the long-standing salary demands of Iranian teachers who have been taking to the streets to voice their grievances in recent months. Naderan attributed "most of the country's problems" to "lack of coordination in Raisi's economic team." He asked: "Who is responsible for the situation of the country's economy?"
Meanwhile, Naderan warned Raisi that "The decline of the national economy will inevitably entail an uncontrollable rate of inflation."
Other lawmakers said it was regrettable that they had to address the Raisi administration with the same critical rhetoric they used against the Rouhani administration, Etemad reported. The daily also quoted the lawmakers as saying that "regrettably, Raisi's responses to criticisms is the same as his predecessor's and the problems in question remain the same."
The media agreed that some of the criticism may be motivated by factional and individual expectations but at least part of it highlights demands that have remained unmet as more than two months have passed since Raisi's promises to tackle them.
Ironically, the president was in a meeting of the government's Economic Coordination Board exactly at the same time his economic policies were being questioned by the Majles. The parliament first discussed issues of foreign policy with Foreign Minister Hossein Amir-Abdollahian at a session behind closed doors and then started an open session about the economic and financial issues, including the teachers' case.
According to reports, the general mood at the session was one of disagreement with Raisi's economic policies. One of the MPs close to Ghalibaf even said that the attempt to unify the government has effectively "slaughtered” the revolution. Hardline supporters of Khamenei have taken over all three branches of the government since 2020, with promises that united “revolutionary forces” would work efficiently to solve mounting problems.
One of the advocates of the ‘revolutionary’ brand, Ruhollah Izadkhah, called for "purging the country's management of godfathers and those who pursue their own political goals rather than following the interests of the nation." Izadkhah had earlier warned Raisi to get rid of red tape and not allow wrapping a revolutionary title around inefficient approaches." He told Raisi: "Hand over the government to the people and the youths."
Also in Sunday's session, Ghelich Shadmehr, another lawmaker, harshly criticized the Raisi administration for creating security problems in parts of the country by changing provincial boundaries which he said is an unnecessary measure. Mansur Arami, a lawmaker from Hormozgan Province also raised the same concern about his constituency.
In another development, hardline daily Kayhan referred to Khamenei's order to ban the import of Korean-made home appliances and said the way the government enforced the ban has led to an unusual rise in the price of Iranian-made home appliances. According to Kayhan, as the government did not oversee the operation of Iranian companies, they increased the price of their products without increasing their output and improving quality.
Ezzatollah Zarghami told reporters on the sidelines of an exhibition that the government wanted to address farmers’ problems but would not allow wells near the historic monument dating from the 6th-century BC. Zarghami said he had been misunderstood by critics since he said last week, on a visit to the Unesco World Heritage site of Pasargadae, that that the issuing of well permits needed to be reviewed, given problems of irrigating land.
"Zarghami has backtracked and denied his previous remarks about agriculture in Pasargadae and like other authorities has claimed that his remarks were distorted,” the reformist Aftab-e Yazd newspaper said Sunday.
Etemad newspaper wrote in a commentary Sunday that studies had shown “the only way to save Pasargadae is to shut down wells,” while the minister had defended the “extraction of water within the limits of historical monuments instead of worrying about…wells and limitless water extraction."
President Ebrahim Raisi (Raeesi) last week visited the ruins at Persepolis, the ceremonial capital of the Achaemenid Empire close to Pasargadae. Raisi said the palace complex was both a relic of Iranian art and "a message to oppressors to behold the fate of those who oppress the people."
Raisi critics have slammed the idea that the Achaemenids were "oppressors" and accused the president of undermining national identity. Persepolis and Pasargadae were both destroyed by Alexander the Great after the Achaemenid empire collapsed to the Greeks, Macedonians and their allies in 330 BC, some 200 years after the empire was founded in the 6th century BC by Cyrus.
The Achaemenid empire, which was strictly hierarchical and covered a variety of ethnic groups under the Persians, is minimally represented in school history books in Iran.Persepolis was a “dynastic, perhaps ritual, center,” wrote historian Richard Frye, where the priestly caste was influenced by the teachings of Zoroaster.
“Raisi and Zarghami's remarks showed they have no knowledge of and no interest in Iran's ancient history,” Morteza Kazemian, Iran International analyst, said Sunday. "They don't relate to that history and the symbols of Iranian identity in any way."
Esmail Kahrom, an environmentalist known internationally for his jointly edited book The Lion and the Gazelle, has warned that Cyrus tomb could sink into land holes caused by water extraction 40 years from now if agriculture expands. Kahrom, a former adviser to the head of the department of environment, has argued the local economy should rely on expanding tourism.
Kahrom has drawn a comparison to the historic Khajou Bridge in Esfahan, where the transfer of water from Zayandeh Roud to other provinces, and for use in agriculture and industry, has dried up the river over 20 years and led to cracks in the surrounding groundand the bridge’s structure.
There is also land subsidence at Esfahan’s airport, historic monuments, and residential and commercial buildings. Experts say Iran has under ten years to deal with land subsidence.