Regime corruption to cause further decline in Iran’s economy

Regime corruption to cause further decline in Iran’s economy

The World Bank recently indicated that Iran’s economy would shrink 3.8 percent this year, worse than its January prediction of a 0.2 percent contraction. (AFP)

Iran’s leaders have been underplaying the country’s economic crisis, despite many Iranian people continuing to suffer financially.

Supreme Leader Ali Khamenei last month highlighted his optimism in a pre-recorded video broadcast on Iran’s state TV. He said: “In the face of severe, and according to them unprecedented, sanctions from America and Europe, the Iranian people showed a strong and powerful reaction both in the field of politics and the economy.”

The reasons for the Iranian government’s determination to conceal the truth about the nation’s economy are numerous. They include avoiding showing economic and political weakness to the countries Tehran views as its rivals, keeping the regime’s militias and terror groups loyal to the Islamic Republic, and evading taking responsibility or being held accountable for the crumbling economy.

In addition, the Iranian authorities are promoting the idea that this will be a year of confidence and productivity. As President Hasan Rouhani stated on the occasion of Nowruz — the Persian New Year — last month: “The new year is a year to boost production and create jobs for our dear young people.”

But, in the year 2019, Iran’s economy will most likely continue its downtrend trend. International financial institutions, such as the World Bank and International Monetary Fund (IMF), have recently indicated they are pessimistic about the direction that Iran’s economy is heading. For example, the World Bank has amended its forecast for Iran’s economic growth. It released its latest report on Iran’s economy this month and indicated that its gross domestic product (GDP) would shrink 3.8 percent in 2019. That is 0.2 percent worse than its prediction in January, and almost 8 percent below its forecast from June 2018. The IMF is even more pessimistic — it predicted this month that Iran’s economy would contract 6 percent in 2019.

Annual GDP growth is measured by calculating how much more production a country has fulfilled in comparison to the previous year. In an ideal economy, GDP growth is between about 2 and 3 percent. The World Bank’s forecasts for other countries in the Middle East and North Africa are mostly positive, with only Sudan and Iran’s economies expected to contract. It predicts that the GDPs of Algeria, Bahrain, Djibouti, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, and the UAE will all grow this year.

One of the reasons for the growing pessimism on Iran’s economy is the renewed US sanctions. After US President Donald Trump last year withdrew from the Joint Comprehensive Plan of Action, also known as the Iran nuclear deal, the US Treasury Department reimposed the primary and secondary sanctions that were lifted under the Obama administration. These include sanctions on Iran’s automotive and shipping sectors, the energy industry, and currency transactions.

One of the reasons for the growing pessimism on Iran’s economy is the renewed US sanctions

Dr. Majid Rafizadeh

The largest impact of these sanctions came from the pressure the Trump administration imposed on Iran’s oil exports. Although the US granted a six-month waiver to eight countries — China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece — that allows them to continue buying oil from the Islamic Republic in limited quantities, Iran’s oil exports have plunged by more than 50 percent in comparison to 2017. According to a report by OPEC, Iran’s crude oil production sank to 2.754 million barrels per day in January, which was considered to be the lowest rate in the last five years. It is currently exporting about 1 million barrels per day.

Although some policy analysts, scholars and politicians may blame Washington for Iran’s crumbling economy, the core factors behind the country’s economic crisis are the widespread corruption within the theocratic establishment, its mismanagement of the economy, embezzlement and money laundering within the banking system, and the hemorrhaging of the nation’s wealth on militias, terror groups and proxies across the region. Corruption is ingrained in the political and financial institutions that are the country’s backbone.

Considerable parts of the economy and financial systems are owned and controlled by Iran’s Islamic Revolutionary Guard Corps and the office of the supreme leader, since they enjoy the final say when it comes to decision-making. The so-called moderate President Rouhani has also totally failed to tackle corruption as he promised to. In fact, figures across the political spectrum, including members of the president’s office, often engage in corruption for their own political and financial benefit.

In conclusion, Iran’s economy will only be dragged down further as the nation’s leaders have shown no sign that they are willing to change and adequately address the regime’s incompetent, aggressive and corrupt policies.

Dr. Majid Rafizadeh is a Harvard-educated Iranian-American political scientist. He is a leading expert on Iran and US foreign policy, a businessman and president of the International American Council. Twitter: @Dr_Rafizadeh

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