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Amidst Corruption and Smuggling, Economy Worsens for Majority of Iranians

The NCRI points out that 50 percent of workers’ income goes to housing alone, and that purchasing power in the Islamic Republic fell by 73 percent this year.

Ali Rabi’i, the Iranian minister of labor and social welfare admitted that 12 million Iranians are currently suffering from food poverty, and Deputy Health Minister Ali Akbar Sayari said that some 78 percent of the Iranian population lacks adequate access to fruits and vegetables.

But the comments of other Iranian officials raise questions about the government’s interest in these economic problems and its willingness to address them. IranWire reported earlier this month that Deputy Minister of Labor and Social Affairs Hossein Taee had referred to the country’s seven million unemployed citizens as “loafers.”

In a speech in Paris on February 8, NCRI President Maryam Rajavi explained these disparate official attitudes in terms of the Iranian regime’s efforts to control popular dissent throughout the country. She suggested that popular protests would result from either neglect of the “economic implosion” or an attempt to address it by deferring financial resources away from security forces and other structures of social repression.

Tehran’s compulsion to keep spending on government monitoring, state media, weapons development, and so on severely limits the regime’s options for how to address economic problems that are increasingly harmful to the vast majority of citizens. What’s more, some of Tehran’s long-term economic plans promise to only increase the short-term negative effects.

This may be the case with regard to the Iranian oil industry, which Oil Minister Bijan Zanganeh has described as being in a “catastrophic” state amidst the effects of depressed oil prices, economic sanctions, and past mismanagement. The current strategy for both Iran and its close ally Iraq is to embrace low prices in an effort to penetrate new markets, specifically Asian markets.

Arutz Sheva reported on Thursday that both Iran and Iraq are now selling their oil at their lowest prices in 12 to 15 years, reflecting discounts to Asian customers. Currently, Iran relies on oil revenue for more than half of its national budget, but recent revisions to the budget for the forthcoming year will drop that figure below the 50 percent mark.

Supporting Rajavi’s interpretation of the regime’s economic policy, Iranian President Hassan Rouhani has given no indication that he intends to scale back on increased spending for the Iranian Revolutionary Guard Corps. A 33 percent increase in budget for the organization, which has a hand in both internal security and foreign interventionism, was announced when the original draft budget was introduced, based on oil price estimates that were twice as high as the current global price.

The increase in power and funding for the IRGC speaks to additional reasons why economic reform may be extremely difficult to attain in Iran under the current regime. Al Monitor reported last week that smuggling operations in the Islamic Republic costs the government billions of dollars’ worth of revenue every year, but that the IRGC is a major driver in the increase in smuggling, owing to how much it and border security forces personally benefit from that smuggling. Considering that the IRGC is looking forward to a higher proportion of national revenue in addition to this illicit cash flow, it seems clear that the organizations power, and thus its ability to further support the black market economy is only growing.

Al-Monitor notes that the Rouhani administration is unlikely to resist the IRGC over the issue of smuggling, although it would have to do so in order to recoup crucial lost revenue. Rouhani has, however, made public statements blaming some economic troubles on the monopolies, presumed to be a veiled reference to the IRGC. His predecessor, Mahmoud Ahmadinejad had directly criticized the organization for its smuggling, and the IRGC shot back, according to Al Monitor, accusing the regime of personally benefiting from such accusations.

But no government initiatives have been introduced to address the issue under either administration, and the public dialogue may simply allow the two groups to maintain mutual deniability, pointing to the other as the real cause of the people’s economic hardship.

In another report published on Tuesday, Al Monitor pointed to broader patterns of corruption affecting the Iranian economy. The article gives some credit to the Rouhani administration for attempting to address this problem, but its initiatives have thus far been aimed only at corruption that took place under the prior presidential administration – a move that arguably serves the purposes of public relations more than it does the issue of persistent government graft.

Indeed, Al Monitor indicates that the problem is severely entrenched throughout the Iranian regime, and it quotes Iranian politician Gholamali Jafarzadeh as saying that “we are scared it could cause social shock” if any serious efforts were put forth to root out that corruption. Al Monitor argues that doing so would “paralyze the decision-making processes in the country.”

In public statements, virtually all Iranian leaders including Ayatollah Khamenei are supporting anti-corruption and transparency measures. But in practice, they are doing little to nothing to challenge the state and semi-state structures that stand in the way of improvements to the private sector. Al Monitor notes that while it is vaguely possible that the government could be downsized for this purpose, doing so may actually lead to the enlargement of the “semi-state sector,” already closely associated with the IRGC and its expansion of both political and economic power.

Within these circumstances, it will be difficult for Tehran to muster either the will or the political resources to alleviate a situation that is enriching state-affiliates but throwing more and more private citizens into poverty.