Iran's Parliament Approves Budget Outline Amid Warnings Of More Inflation

The rial fell to around 305,000 against the US dollar in early December as prospects for an agreement over Iran’s nuclear program dimmed in Vienna. Tehran has been negotiating with world power since last April to revive the 2015 nuclear agreement (JCPOA) that limited its uranium enrichment in exchange for lifting international sanctions.

On Sunday the US dollar was trading at 278,000 rials in Tehran’s non-official currency exchanges which reflect the street value of the currency.

Since the United States withdrew from the agreement in 2018 and imposed its own sanctions, the rial began falling with little support, as Iran lost most of its oil exports. It fell from 34,000 in late 2017 to 305,000 one month ago against the dollar.

It is not clear if rial’s partial recovery is supported by government intervention in the market or is purely psychological due to more optimistic statements by diplomats that the Vienna talks are making headway. If an agreement is reached, most US economic sanctions will be lifted providing Tehran with desparately needed foreign currencies.

Voters on Chess.com, an internet server, news and networking website with 77 million global users, chose him as the ‘Rising Star’ of 2021, and ranked him second as ‘Player of the Year.’ Firouzja’s game against Hungarian grandmaster Richard Rapport was judged the third best game of 2021.

Magnus Carlsen, the 31-year-old world chess champion, was voted Player of the Year. In December, Carlsen in a blog post wrote he was unlikely to play another match defending his title unless against someone from the “next generation,” which was taken to mean Firouzja, second in world rankings.

Firouzja won the Iranian championship aged 12 and was a grandmaster at 14. He is the second-youngest player ever to reach a rating of 2700, which he did at 16. In December 2019 Firouzja became the first-ever Iranian male chess player to come second in the World Rapid Chess Championship in Moscow.

Firouzja renounced his Iranian citizenship in 2019 over pressure to forfeit matches with Israeli competitors, and now competes as a French citizen at international tournaments.

Iran is among states that do not recognize the state of Israel, a refusal that goes back to the pronouncement by 1979 Revolution leader Ruhollah Khomeini that Iran could have formal relations with any state in the world other than Israel or apartheid South Africa. Tehran prohibits sportspeople from playing against Israeli competitors or pressures them to intentionally lose games so as to avoid competing with Israelis.

Ali Khamenei, Iran’s supreme leader, has often praised Iranian athletes who refuse to play against Israelis, and in September 2021 said they should continue to do so even if facing punishment by international sports bodies.

In November 2020, vice-President of the International Chess Federation Nigel Short warned Iran's Chess Federation that it could be banned from international events if Iranians were not allowed to compete against Israelis.

There have been other sporting and cultural boycotts of Israel in recent years. In 2018 Argentinian soccer players including Lionel Messi refused to play a friendly game in Jerusalem because the ground was on the site of a razed Palestinian village. This week, more than 20 acts withdrew from the Sydney Festival because of Israeli funding. But the Islamic Republic’s ideological basis for its boycott is much more radical. Iranian officials have often called for Israel’s destruction and are supplying arms and money to militant groups.

Among dozens of Iranian athletes who have emigrated over the past two decades, some said they did so because officials forced them to lose titles by refusing to compete against Israelis.

The internationally renowned chess player Ghazal Hakimifard gave up Iranian nationality in 2020 in protest and plays for Switzerland.

Some female athletes say they have left the national team because of mandatory hijab (dress code). Grandmaster Mitra Hejazipour was expelled from the chess team for removing her headscarf during international tournaments.

Political observers in Iran and abroad are waiting to see how true is the alliance between the hardliner government and the likeminded "revolutionary" parliament.

During the past weeks, many observers, including some prominent lawmakers have been criticizing the budget bill, characterizing it as " incoherent, risky and chaotic." According to moderate-conservative new website Khabar Online, the issue of doing away with the preferential rate of exchange of 42,000 rials per US dollar will be the focal point of the differences between the Majles and the administration.

This is the rate by which the government allocates dollars for importing essential commodities, such as basic food staples and medicines. The government is planning to cut what is regarded as a subsidy, except for buying wheat and medicine. The result is expected to be further inflation that some fear an end to the patience of low-paid Iranians who could launch protests.

In November 2019, a hike in fuel prices immediately led to nationwide protests that ended with security forces using military ammunition to kill at least 1,500 unarmed people.

According to Khabar Online, critics at the Majles say this is a high-risk budget bill that is not likely to curb the rising poverty rate in Iran. The lawmakers also fear that higher prices might prompt potential voters not to support them in the next election. The administration's daily newspaper, Iran, however, dismisses any criticism by the Majles simply as tactic by lawmakers for extracting concessions from the administration and share the power with the executive.

Raisi has said that he does not believe subsidizing essential commodities can help the country survive the current economic crisis. His critics at the Majles argue that the government should not try to bridge its huge budget deficit at the expense of the people. They further suggest that Raisi should start to reform the country's administrative structure.

Many parliamentarians have pointed out the perils of doing away with the preferential rate of exchange, and Majles Speaker Mohammad Bagher Ghalibaf has said that "the problem is not money, it is about not having good governance and not getting the people involved in the country's management."

Meanwhile, experts at the Majles Research Center have said that the budget for the year starting in March has a deficit between 3,000 to 6,000 trillion rials. They called on the government to reform its economic and administrative systems.

Meanwhile, as moderate conservative Aftab News website pointed out, Raisi's economic team does not appear to have a roadmap for the country's economy. Like many other media outlets and politicians, Aftab News has also highlighted the lack of coordination among the members of Raisi's economic team.

During the past six months when Raisi was putting together his team, many in and out of the Majles warned him about the danger of having people from different walks of life and little experience in managing the economy as a team.

Khorasan daily pointed out in September that the members of this team come from many different offices and that they have never worked with each other before. Most of them never had challenging executive jobs and have been simply spending hefty state budgets at their disposal in their previous posts.

Hardline lawmaker Elias Naderan has said that lack of coordination among the members of Raisi's economic team is a major cause for concern. Naderan also called on Raisi to announce who is in charge and who determines policy. Another hardliner economist, Ahmad Tavakoli also criticized the lack of coordination in an interview with Sharq daily and warned that "The people can tolerate high prices and inflation only up to a point.”

Videos published on social media on Saturday show groups of workers on strike and protesting in front of the provincial offices and departments of the Judiciary in several cities.

Quite ironically, the protesters are chanting slogans asking for justice.

There are also reports of strikes by judicial staff and judges in capital Tehran that is expected to last about a week.

In some cities, the employees of the Judiciary have started to resign from their jobs en masse, with photos of their collective resignation letterscirculating in twitter.

The nationwide protests were triggered following the rejection of a special plan to increase salaries for the judiciary staff by the parliament a few days ago.

People with different professions are holding regular protest rallies to demand better work conditions and salaries with teachers holding the largest number of demonstrations.

Food prices have risen by more than 60 percent this year, on top of high inflation in the previous three years. Government figures show that prices for 83 percent of basic food staples have reached a critical level. People living on salaries have cut back on consumption of nutritious food, such as meat, fruits and dairy products.

Mohsen Khojastehmehr told Fars news website affiliated with Iran’s Revolutionary Guards that the government is trying to boost production to the pre-sanction levels until March, as stockpiles of exportable oil bi-products are dwindling.

Iran was producing 3.8 million barrels a day before the United States pulled out of the 2015 nuclear agreement (JCPOA) in May 2018 and imposed sanctions on Iran’s oil exports. For a while Iran continued to produce more as its exports declined from 2.1 million barrels per day to around 200,000 in 2019 and excess inventories began building up by early 2020 and production had to be cut back.

Khojastemehr said that since August when hardliner president Ebrahin Raisi has assumed officie, oil exports have increased, and Tehran is receiving the money. “I cannot mention any numbers on exports, but I can say that the situation has improved,” he said. “Revenues from oil exports return to the country…We have a duty in the oil company to sell the oil and give the money to the central bank, which decides what to do with it,” Khpjastemehr added.

Iran’s oil exports began increasing in September 2020, before the presidential elections in the United States, reaching from 200,000 bpd to around 600,000 according to monitoring groups. The claim that exports increased further since Raisi took office and the proceeds received in cash cannot be verified.

Looking at Iran’s financial situation, with annual inflation holding at around 45 percent and a weak national currency that has fallen further since Raisi came to office, it is not clear if Tehran has been able to repatriate foreign currency generated by oil exports.

Iranian analysts have been saying that most illicit oil which is shipped to China is compensated for by Chinese goods through middlemen who reap huge profits.

A business representative, Masoud Daneshmand told Iran’s Labour News Agency (ILNA) on January 3 that Iran gives China oil and receives “inferior quality products”. The chairman of Iran-Switzerland Chamber of Commerce, Sharif Nezam-Mafi, on December 24 criticized the government's plans to increase barter transactions with other countries and pointed out that Iran needed technology which developed countries are not likely to transfer to Iran through barter.

But there is little doubt that in 2021 Iran increased its oil exports, as some believe the Biden Administration has stopped enforcing sanctions rigorously as it tries to restore the JCPOA and has said it is willing to lift most economic sanctions if Tehran stops the expansion of its nuclear program.