Iran Says Foreign Currency Revenues Rose By $10 Billion

Ayatollah Ahmad Jannati, the chairman of the Assembly of Experts, who is in the list of Iranian politicians sanctioned by the US, has spoken about the approaching Iranian New Year on March 20 and warned that “It would be a miracle if we can fill the people’s bellies.”

Jannati was echoing President Ebrahim Raisi’s call two days ago when he said the government should lift everyone from poverty in the two weeks remaining to the New Year.

The comment led to a lot of ridicule on social media by Iranians who said the Islamic Republic has plunged millions into poverty over the years and now the president wants to eliminate poverty in two weeks.

Jannati and other senior clerics appointed by Supreme Leader Ali Khamenei to constitutional bodies that control decisions and elections are seen as responsible for electoral manipulations that have narrowed popular choice even further in the past two years.

The Guardian Council in charge of vetting candidates for elections, eliminated all serious challengers to Ebrahim Raisi last June, making it all but certain that Khamenei’s choice for the post could breeze through, albeit in an election with the lowest turnout.

As Jannati called for bread for the people on the eve of the New Year, the parliament decided to hand out 1.3 million barrels of oil to government entities and individuals to export as they see fit, without a clear mechanism of accountability.

Afteb News, a Tehran website somewhat critical of the government published the headline, “Raisi’s Help to Economic Mafia” on Tuesday. It said the decision to allow various ministries and departments to enter the oil business creates the danger of massive corruption, enriching the “economic mafia” of regime insiders.

Iran’s oil and gas reserves belong to the state and the Iranian National Oil Company has always been the sole proprietor managing production and exports, even before the 1979 revolution. In the past three decades some of its operations have been ceded or leased to ‘private operators’ that are mainly quasi-state, semi-private entities owned and run by regime insiders, notably by the Revolutionary Guard.

Overall annual inflation has been hovering around 40 percent and food prices have risen much faster. Just over the weekend, the parliament eliminated a $9 billion subsidy for food imports, which will drive prices even higher local media and economists warn.

Amid these hard circumstances, the public hopes that a nuclear agreement will be reached with the United States, which can lift sanctions and at least marginally improve their livelihoods. Negotiations to restore a 2015 nuclear agreement have been going on for almost a year, so far without a result, except diplomats heralding progress on daily basis.

Raisi who assumed office last August made generous promises to the people to resolve the economic crisis with or without US sanctions. Seven months later there is little improvement, except more oil exports to China without any visible financial improvement in the government’s huge budget deficit or higher salaries for tens of millions of citizens, whose purchasing power has been wiped out by inflation.

Pundits have been warning of a social explosion in the coming months if there is no tangible improvement. So far, people from different professions including teachers have been holding protests with an increasing antigovernment mood.

The idea to eliminate the subsidy emerged after hardliner president Ebrahim Raisi (Raeesi) assumed office in August and could count on backing from conservatives and ultra-conservatives in control of Iran’s parliament.

The subsidy was introduced in April 2018 when former US president Donald Trump signaled his intention to withdraw from the Obama-era nuclear agreement with Iran known as JCPOA, and Iran’s national currency began to nosedive. Prices for imported goods skyrocketed and the government decided to provide cheap dollars to importers of essential goods to keep prices low.

But the measure proved to be controversial as reports emerged of large-scale corruption. Many entities applied to receive the cheap dollars for importing food, animal feed and other essential goods but ended up importing luxury cars or nothing at all. Some have charged that billions of dollars went to waste at a time when US sanctions slashed Iran’s foreign currency revenues, making US dollars crucial for the survival of the economy.

Hardliners picked up the banner of opposition to the subsidy, also as a weapon against centrist president Hassan Rouhani. Once they formed a majority in parliament in 2020 and took the presidency in 2021, they made it a priority to scrap the indirect subsidy.

However, it was not an easy decision to make. Annual inflation has been hovering around 40 percent for more than a year and food prices have risen much faster than that. Consumption of many food items such as meat and fruits have sharply declined as the impoverished middle calls had to slash spending amid declining purchasing power.

Politicians and reportedly security agencies have been concerned that eliminating the subsidies, with no prospect of lower inflation, would lead to political unrest, endangering the entire regime.

The danger could not be underestimated. A hike in gasoline prices in November 2019 led to serious nationwide unrest with authorities deciding to use brute force to suppress protesters. Security forces were ordered to shoot live ammunition, killing hundreds of unarmed people.

Perhaps for this reason the parliament itself did not vote to eliminate the subsidy, rather it agreed to allow the presidential administration to do as it wants. Some Iranian newspapers said the legislature decided to pass on the buck to the government.

But this is not the end of massive subsidies the state provides to consumers. While the 9 billion dollars was a heavy burden on the government’s budget of around $40 billion, Iran provides massive energy subsidies, which are called “hidden subsidies.” These take the form of cheap gasoline, electricity and gas, which are regarded as domestic resources, offered to an underpaid population, much like the old Soviet system, where housing and energy were cheap, but people earned small salaries compared with their counterparts in many other countries.

The energy subsidies were estimated to total around $60 billion annually before the Iranian currency lost its value against the US dollar. The Raisi government would love to eliminate these subsidies too and they have started reducing the gasoline subsidy on an experimental bases in the free trade zone on Kish Island. By raising prices, the government will earn around $5 billion more annually.

Currently a gallon of rationed gasoline sold by the government is around 22 US cents, while unrestricted gasoline is 44 cents. This is multiple times cheaper that the going rates in other Persian Gulf oil producing countries.

Eliminating these subsidies will lift a drag on the economy, but the question is that it might backfire amid high inflation when people have lost so much of their purchasing power.

The public relations manager of the Ministry of Communications and Information Technology, Mehdi Salem, made the announcement in twitter on Saturday.

He said that according to the country’s network operations center, this “400 gigs” were provided by Russia’s largest digital services company Rostelecom through Ukraine and has been cut off since Saturday evening.

Salem added that since the network routes from Ukraine remain disrupted and takes a long time to reconnect, the ministry is seeking to establish alternative links through other international routes.

As Ukraine's internet service has been disrupted by Russia's invasion, Elon Musk’s company SpaceX has activated global satellite internet constellation Starlink for the Ukrainians.

Internet services on mobile phones and landlines were also disrupted Friday morning in the Iranian capital Tehran and the nearby city of Karaj.

The Iranian government has been blocking thousands of websites and top social media apps for years in a bid to control the flow of information.

Iranians were outraged last week when a group of 18 hardliners in a parliament committee claimed that they had ratified a bill to further restrict internet and social media access.

Some people reacted to the Friday disruption by blaming the authorities, saying the outage was a trial run for the plan to further restrict internet and social media.

Khamenei planted the fruit tree saplings on Sunday morning, on the occasion of the national tree planting day.

He urged all government institutions to take measures to preserve the country’s water, soil, and wildlife.

Khamenei said, "The destruction of forests and the environment and vegetation is the destruction of national interests" and called on the authorities to protect trees from profiteers.

Despite Khamenei’s public expression of support for the environment, successive Iranian governments have left a bad record in protection of natural resources.

In December 2021, the head of the forestry scientific association, Ali Banagar, expressed concern about the speed of deforestation in Iran, enumerating the factors that fuel the trend, including the country’s aggressive pursuit of development projects through often illegal constriction of luxury vacation houses, wood smuggling and illegal logging, encroachment on forests and land grabs, forest fires, as well as pollution and landfills.

Hit by the most severe drought in decades, Iran is reportedly increasingly losing its forests and vegetation, with forest acreage having decreased from 19 million acres to 14.4 million between 1900 and 2012, and further shrunk to 10.7 million by 2015.

Their conversation with Sharq newspaper, published on March 5, was recorded before the Russian invasion of Ukraine, obviously, without considering developments sparked by the ensuing international crisis.

Both diplomats are now working in academic and energy fields. Ali-Akbar Salehi was Iran's Foreign Minister (2009-2010) and (2011-2013) and nuclear chief (2013-2021). Abbas Maleki was the head of the Foreign Ministry's think-tank, the International Studies Center and deputy foreign minister (1980-1997).

Sharq's reporter Zeynab Esmaili, asked whether in 30 years Iran will be a developed country or a poor state crippled by water shortages and environmental crises, as current condition point to. Salehi said it is difficult to predict, however, it is a matter of good governance. If the government is not bothered by the needs of the people, one could say for sure that the country has no future.

In the 1979 revolution the people wanted a change in the style of governance and wanted to get rid of despotism, Salehi said. The chaos brought about by the revolution continued with debates about whether political reforms were more important or economic development. Should progress be put before economic justice? Or justice before freedom? Was freedom more important than security?

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Salehi’s emphasis on good governance belies a general perception in Iran that the Islamic Republic has pursued harmful policies for too long and its ability to propel the country toward prosperity is highly questionable.

Salehi emphasized that having large oil reserves is not a substitute for good governance.

“Our roadmap to the future should be based on good governance, knowledge, democracy and attending to the needs of the middle class,” he said.

Maleki also emphasized good governance and the importance of planning. “Plans tell us where we are headed,” he said. So, if we wish to be at a certain point in 2050, we should start working today. But Maleki stressed that government control is better than leaving affairs in the hands of the private sector, claiming that Iran’s response to natural disasters have been more efficient than in the United States where private companies run the infrastructure, such as power and water.

International surveys of economic performance contradict the view that Iran’s government and economic system perform reasonably well.

Maleki also emphasized that developing fossil fuel resources are important for Iran’s near future.

Salehi agreed with Maleki by saying that oil and gas can revive Iran. “We have one percent of the world's landmass but 11 percent of its oil and 17 percent gas resources,” he said. There is no value in these resources unless we turn them into an engine of development. There are gigantic gas and oil reserve under Bandar Lengeh, but the port city has no pipelines. We should turn the reservoirs of Yadavaran and Azadegan oil fields into money. And there are a lot of resources still untouched in the northern part of Iran. Energy is capital but it is not endless. It will end one day. So, Iran should use it rationally.

However, looking at the record, Iran has sold well over one trillion dollars of oil in the past four decades but because of its centrally controlled economy and inefficient governance it has little to show for it compared with regional counties such as Turkey that has no oil or the United Arab Emirates.

Asked why Iranians believe that the government has left them to their own devices or in other words has let them down. Salehi expressed hope that the system can still correct itself, but the young generation is mostly hopeless about the future of the country and they blame policies pursued in the past three decades since Supreme Leader Ali Khamenei has ruled the country.