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Iran's economy 'will eventually change regime'

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Iran's economy 'will eventually change regime'

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Falling economic indicators; more poverty and unemployment and the fall in the value of Iran’s currency, the rial – these are just part of the negative economic record of Mahmoud Ahmadinejad during his two terms as president. In spite of all the these indications, can the Iranian economy still hope to improve? We posed this and other questions to Professor of Economics at the American University in Paris Shahin Fatemi. But first, here’s a brief look at the economic record of the Ahmadinejad government.

Mahmoud Ahmadinejad came to power in 2003 promising social justice and oil revenue perks for ordinary Iranians. In the last months of his first term in office, he announced he would enforce targeted subsidies, calling this a “surgery of the Iranian economy”. The aim was to help lower income earners and the poor.

When Ahmadinejad’s presidency began, Iran was enjoying a huge profits from oil, as the second-biggest OPEC member exporter. Cash circulating in the national economy increased sixfold in a period of eight years. But with this the inflation rate also increased. Officially, it reached 40 percent in the last year Ahmadinejad was in office. But some economists say the real figure was as high as 70 percent.

Unemployment also went up. According to Iran’s official statistics, in the past five years, more than 700,000 people have joined the job market and nearly one quarter of the total work force are jobless.

In the past eight years, economic production and exports dropped. This included oil, the sale of which fell dramatically under the coordinated pressures of American-and- European-led sanctions. Before they struck, Iran was exporting 2.2 million barrels per day. In the past few months, however, it’s been less than one third of that.

What is left for the next government to manage, after Ahmadinejad’s eight years at the helm, is a seriously depleted economy – which shows little sign of turning any time soon.
Falling economic indicators; more poverty and unemployment and the fall in the value of Iran’s currency, the rial – these are just part of the negative economic record of Mahmoud Ahmadinejad during his two terms as president. In spite of all the these indications, can the Iranian economy still hope to improve? We posed this question and others to Professor of Economics at the American University in Paris Shahin Fatemi. But first, here’s a brief look at the economic record of the Ahmadinejad government.

Mahmoud Ahmadinejad came to power in 2003 promising social justice and oil revenue benefits for ordinary Iranians. In the last months of his first term in office, he announced he would enforce targeted subsidies, calling this a “surgery of the Iranian economy”. The aim was to help lower income earners and the poor.

When Ahmadinejad’s presidency began, Iran was enjoying huge profits from oil exports, as the second-biggest OPEC member. Cash circulating in the national economy increased sixfold in a period of eight years. But with this the inflation rate also increased. Officially, it reached 40 percent in the last year Ahmadinejad was in office. But some economists say the real figure was as high as 70 percent.

Unemployment also went up. According to Iran’s official statistics, in the past five years, more than 700,000 people have joined the job market and nearly one quarter of the total work force are jobless.

In the past eight years, economic production and exports dropped. This included oil, the sale of which fell dramatically under the coordinated pressures of American-and- European-led sanctions. Before they struck, Iran was exporting 2.2 million barrels per day. In the past few months, however, it’s been less than one third of that.

What is left for the next government to manage, after Ahmadinejad’s eight years at the helm, is a seriously depleted economy – which shows little sign of turning around any time soon.

Reihaneh Mazaheri, euronews, speaking to Shahin Fatemi in Paris: “According to the latest report by the International Monetary Fund, Iran’s economic growth rate has fallen from 2 percent last year to 0.09 percent. Looking at all Iran’s economic indicators over the past eight years, what is your assessment of the country’s economy during Ahmadinejad’s two terms?”

Shahin Fatemi: “In my view, the trend has been very negative. The international atmosphere and the internal situation have minimised or totally eliminated all the factors needed for continuous economic growth. Regarding the fact that Ahmadinejad did have more than 700 billion dollars of oil income at his disposal, his presidency is one of the worst periods in Iran’s history since the 1980-88 War against Iraq – and since the Revolution.”

euronews: “The sanctions led to a rise in inflation, and Iran’s currency, the rial, was also targeted. Last year, its value halved against the world’s hard currencies. What future do you foresee for the rial?”

Fatemi: “There is an inverse relationship between a currency’s value and inflation. As inflation goes up, the currency’s value falls and it becomes dependent upon international factors. When the economy of a country like Iran is solely dependent on the oil trade, which is currently under sanctions, we should expect to see the value of the national currency go even lower within the coming year. The sanctions are especially affecting Iran’s currency. Inflation will continue to rise, and such problems cannot be solved by empty talk.”

euronews: “Economic experts look at the past eight years as a time of poverty and unemployment. How far do you think Iranian society can cope with the economic pressure?”

Fatemi: “These events would not have happened if Iran had been a free society,because, in a free society, people, with their votes, would make the government change its policies, and if that did not happen, they would change the government. But in the absence of freedom in Iran, people have no share in the government. As long as the force and the pressure of the government is greater than that of the people, this trend will continue. In general, we can say that Iran’s economy is the Achilles Heel of this regime; and it is the economy that will eventually change this regime.”

euronews: “The presidential candidates have tried to attract more votes through economic pledges. How do you assess their proposed programmes? Do you see any effective solution to Iran’s economic crisis in the plans they’ve talked about?”

Fatemi: “All of them are speaking in general terms. The Iranian economy is currently being determined by international context more than anything else. And the international circumstances are not something on which the candidates can make any decision. As long as Iran fails to normalise its ties with the world, we should not expect any of the candidates to be able to do anything. They just make prescriptions without being able to propose a solution for the problems, because they know very well that they would not have any authority over macro-policies. They also know very well that the fundamental problems of Iran’s economy are political in nature; the solution lies in solving the problems with the international community.”