Published on June 9, 2021 | 11:08 pm
Updated 10 minutes ago
Tehran, Iran (AP) – Almost six years ago, Iranians took to the streets to celebrate Tehran’s nuclear deal with world powers. They saw this as a chance for the Islamic Republic to return to the global economy and create opportunities such as buying aircraft and selling its oil on the international market.
Today, that dream has turned into a daily nightmare of high inflation, a constantly weakening national currency and high unemployment, exacerbated by the coronavirus pandemic.
The West sees Iran’s nuclear program and tensions in the Middle East as the most important challenges facing Tehran, but those living in the Islamic Republic have repeatedly pointed to the economy as the main challenge it will face ahead of the June 18 presidential elections.
Whoever becomes president after the relatively moderate President Hassan Rouhani will face the unenviable task of trying to reform Iran’s largely state-controlled economy. Attempts to privatize it have led to allegations of corruption as many lose their savings and protests rage across the country.
“They once said that the nuclear deal was accepted, everyone was happy, the dollar fell in one day,” said Mohammad Molai, a 50-year-old commodity trader. – Then things start to happen. Rockets are launched. The nuclear deal has failed. One rips it apart, the other burns it. Only people lose. “
The free fall of Iran’s economy accelerated when then-President Donald Trump unilaterally pulled America out of Tehran’s nuclear deal with world powers in 2018. This led to devastating sanctions against Iran, damaging its already ailing economy.
Perhaps nothing illustrates the crisis that gripped the Iranian economy, as well as the fall of its currency, the rial. In July 2015, about 32,000 riyals were purchased for $ 1 amid high-profile celebrations of the nuclear deal. Today, $ 1 can buy 238,000 riyals.
The weakening of the rial has increased the value of the money the Iranians are holding as a result of bankruptcy, as well as a decrease in the number of pension benefits. The price of milk rose 90%, while the cost of imported foreign goods such as mobile phones and electronics rose sharply.
Iranians, who can exchange their riyals for foreign currency, have bought precious metals like gold or invested in real estate. These real estate purchases sparked a spike in home values, forcing people to withdraw from the market.
“In the past, buying a home was a dream for people,” said Salimi, a 48-year-old man who declined to give his name to speak freely to Associated Press reporters at Tehran’s Grand Bazaar. “But … unfortunately, now renting a house has also become a dream because of the inefficiency of officials, especially the president, who made empty promises and deceived people.”
Salimi added, “Why? Are land, housing materials and workers sanctioned? “
The Tehran Stock Exchange was another haven sought after by investors, whose value rose to 2 million points in August 2020 as the government encouraged the public to buy. But the value has almost halved and is now hovering around 1.1 million points as some investors are still stuck with stocks they cannot sell.
“The biggest challenge for the next president is to restore confidence and confidence in the stock market,” said Mahdi Samavati, a prominent economic analyst who runs his own investment firm. “It is very difficult to restore confidence in the market. People have seen their money melt for nine to ten months. The longer the accident lasts, the longer it will take to correct the situation and regain confidence. “
It is not immediately clear how the next Iranian president will deal with the economy, especially if hardliners come to power and if Tehran does not reach agreement on a return to a nuclear deal that limits its nuclear program and reinstates sanctions relief. President Joe Biden says he is ready for a US return, but negotiations in Vienna over several weeks have not yet led to social progress.
In the past, Iranian leaders have relied on populist programs such as cash giveaways and housing subsidies. Without a hard currency, Iran’s oil sales will likely need to print more riyals to fund these programs, which in turn will further reduce the value of the rial. This is fueling high inflation in Iran, making goods even more expensive.
“If the (next) government prints money to fulfill these promises, there is no doubt that we will have a provoked rise in inflation,” Samavati said.
During the first televised presidential debate in Iran, former central bank governor Abdolnasser Hemmati warned that as an economist he saw no way to fund his rivals’ “colorful and captivating promises”.
“These friends are not talking about the distribution of wealth, they are talking about the distribution of poverty,” he said.
Hemmati, considered the only surrogate for the outgoing Rouhani in the election, was heavily criticized by the majority. The exception was the head of the judiciary, Ebrahim Raisi, a supposed favorite who was eager to speak out over the fray.
“Various classes of people started screaming about inefficiency, brutality, poverty, discrimination and corruption.” – said Raisi.
Former Revolutionary Guard commander Mohsen Rezai spoke about Iran’s difficult economy, repeatedly referring to desperately poor people who “eat from trash cans.” But none of the candidates, other than Hemmati, expressed any specific thoughts on economic policy other than promising a lot of help to the poor.
Salimi, the man in the bazaar, said he will continue to vote for hardliners and support Iran’s theocracy despite the challenges ahead. He blamed Rouhani for the nation’s troubles and said he would vote for Raisi.
“I am not worried about my children. … They are the children of the revolution, he said. “They will not bow to difficulties.”
Molai, a commodity trader, said he hopes to send his children overseas for a better life, like many other Iranians.
“We were wasted. When I opened my eyes (after birth), there was a revolution, and then came the (Iranian-Iraqi) war, murder and bloodshed, ”he said. “Since then I have been working.”
Follow Mehdi Fattahi on Twitter at www.twitter.com/mfat.