It’s (Iranian) Economy Stupid or Is It Us?

Caspian Weekly

Last year, following the rigged presidential election that gave president Ahmadinejad his second term, Iran was in turmoil. Millions of Iranians poured to the streets in protest. The brutal crackdown and the dramatic pictures of protests have captured the world’s imagination and sympathy. Following a few months of protests and failed hopes, the streets became quiet – but perhaps not for long.

Last Friday Hussein Sajedi-Niya, security forces chief of Greater Tehran announced a “neighborhood security plans” in where security officials will practice in more than 2000 (!) neighborhoods in greater Tehran. He too senses that this relative calm is hiding more than what meets the eye. The Islamic regime is in the midst of an economic turmoil, the likes of which has never been seen in its tumultuous 31 years of history. While the regime desperately seeks a way out of it, the Iranian people are already paying a very heavy price, perhaps more than they can afford. Unless this course is altered, masses of Iranians will soon have far less to lose. And that spells trouble to an already weakened and politically fractured Islamic regime.

Iranians, from the ultra rich to the poor are increasingly worried about their economic prospects. Inflation, despite the regime’s denials, is as high as 30%. New shipping and insurance restrictions on Iran-bound cargo – a direct result of the imposed sanctions – are translated into higher prices passed on to consumers. An industrial-machinery importer told the WSJ that operating costs have risen at least 30% in the past few months alone. Hamid Abd ol-Vahab, Iranians deputy labor minister said that unemployment in Iran has risen to 14.6 percent in August, an increase of .5% from the winter and of 3% from last year. The true numbers are believed to be much higher.And this toll is beginning to show. Iran is a country which has thus far provided very generous subsidies to basic products such as food, electricity, water, medicine with a cost of $70 to $100 billion a quarter of Iran’ s total GDP. Long lines in front of Gas stations have become the norm rather than the exception in many cities.

Prices have skyrocketed despite Islamic regime’s official claims of self sufficiency. Sporadic riots have been reported in long Gas stations lines. Prices of meat, rice, cooking oil, sugar and many other basic food stables have already increased dramatically while the subsidies remain in place. Lamb meat is now about 20,000 Toman or roughly around 20 US dollars per Kilogram, unaffordable by many Iranian family standards. Airline tickets have also increased by 30 percent. Many Airlines are facing mounting debt and many economists believe that even this 30 percent increase may not be enough to save them.

Last month on closing days in September, Rial, Iran’s basic currency took a dive even against the weakening Dollar, dropping nearly 15 percent in a single day. Banks and private currency dealers refused to sell their dollar reserves. Faced with a panic in the market, Iran’s central bank which for three days refused to even acknowledge the crises was finally forced to intervene and inject massive amount of US dollars in cash form into the market to stabilize the falling Rial. Even with the massive interjection of dollars, exchange rates didn’t go back to its previous levels. Long lines have been reported in front of banks to buy dollars at the official price which is lower than the free market price! The demand has been so high that the government now limits the purchase to $2000 for travelers only after they submit a valid ticket and passport. Mr. Behrooz Moradi, the head of the government office in charge of implementation of redistribution of subsidies, estimated that 700 Iranian factories dealing in textile, petrochemistry, copper, aluminum and sugar, will no longer be able to compete and sell their products if the subsidies on fuel are ended. This will result in another mass loss of jobs and the psychological effects of these published statements are already taking their toll. Strikes have already been reported in many factories around the country.

The streets of Tehran are quiet for now, but with these economic forecasts, the moment might soon be perceived as the eye of a Hurricane that will soon storm away the tenuous calm. Last year’s lack of proper international response to the Iranian peoples’ uprising was explained as that of being genuinely caught by surprise. That excuse, however, will not work the next time, when signs are obvious for all to see. Those who seek change will soon have another chance to act. Let’s hope they will not be left alone.

Nir Boms a co-founder of the CyberDissident project. Shayan Arya is an Iranian activist and a member of Constitutionalist Party of Iran (Liberal Democrat).

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