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Iran: economic crisis and fear of general uprising

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By Amir Basiri

Reports from inside Iran indicate a mounting economic crisis despite a windfall of billions pouring into Iran following the nuclear deal sealed with the P5+1 as the international community bent over backwards in mullahs’ favor. After waves of spurious promises ultimately failing to provide and allow people to reap benefits, the government of Iranian President Hassan Rouhani – with a faux pas catchphrase of “moderation” – is engulfed in major calamites, with fears simmering of growing dissent that can be construed as the roots of general uprisings in the making across the country.

Dismal Report Card for Rouhani

During the past few years Iran’s economy has experienced skyrocketing inflation rates, according to a parliament report, alongside an unemployment tsunami. Politicians are pressuring the banks to decrease profit rates (to numbers lower than inflation rates). Moreover, the banks have taken their own action to safeguard resources by investing in financial markets of real estate and production lines. Various governments in Iran, especially that of Rouhani, have through the years issued specific instructions to the country’s banks, aimed at decreasing their profits. As this trend continued, the banks gradually failed to live up to their duties as financial mediators and liquidity directors.

The Liquidity Plight

However, the main problem in this regard is the lack of liquidity. Liquidity is running rampant at 20% in Iran and plaguing the economy for years now. On the other hand, the true portion of Iran’s economy is suffering from liquidity shortage. Despite the fact that Iran’s economy is based on banks, it appears the issue of divert liquidity and its quality have raised startling concerns.

“The main reason behind liquidity shortage lies in unpaid bank loans, and the government – as the main party in debt to banks – must take action on this matter,” said Mohammad Mehdi Reiszadeh, an advisor in Iran’s Chamber of Commerce.

Scape Goat

Whenever governments face any type of shortages they focus their pressures on the banking system and the country’s central bank. The remaining unpaid bank loans belong to the senior elite in the regime, with a list of 30 individuals controlling a large portion of such unpaid bank loans. In fact, the main reason behind a shortage in liquidity is unpaid bank loans. If this money was actually recoverable, the banking system would have actually been able to provide investment for production units. There are no such trends or endeavors in Iran today.

Doomed Policies

Media outlets associated to the camp of former Iranian president Hashemi Rafsanjani and Rouhani are pointing fingers at the government of firebrand Mahmoud Ahmadinejad for squandering oil revenues – provided after years +$100 a barrel oil prices – in homes and the construction industry. When this industry faced major problems, it had its toll on Iran’s now parched economy as more than 200 to 300 industries linked to road and construction are facing major rollbacks, and the entire economy a recession. Thus, the real estate industry that provided profits for banks all went into complete recess and the bank’s resources became locked, raising efficacy over such practices.

Such counterproductive and plundering policies adopted by the mullahs’ regime in Iran have spiked anger amongst the people, surfacing especially amongst the youth. Mardom-Salari, a newspaper affiliated to the camp Rafsanjani-Rouhani camp, have conveyed a similar message over the breadth of escalating public unrest.

“… two issues that can enormously destroy the Rouhani’s government, and may even deliver a significant defeat in the 2017 presidential elections, is the continuing state of economic recession, and no improvements in the lower class’ daily living conditions… the economic recession, developing from 2014 onward to this day, has yet to provide room for any positive signs.”

In fact, indications show such economic circumstances continuing into 2016 and early 2017… another challenge for Rouhani’s government… will also be the lower class’ lack of participation in the political trend, especially in Tehran and other large cities… this alarm bell should be sounded for Rouhani’s government.

This is a country where a significant percentage of the economy is all but monopolized by the Revolutionary Guards, a military force parallel to the army; dismayed people are resorting “street-vendoring” to make ends meet; and families have become so poor they are literally renting their children for $5 a day, or even selling them for less than $700.

As long as the regime in Iran is established on the central tenets of domestic crackdown, plundering the people’s wealth, exporting terrorism and fundamentalism, the ruling mullahs in Tehran and their military/security brass will remain terrified of possible nationwide uprisings brewing under the ashes. Galvanizing dissent in Iran is a force to be reckoned with.


Basiri is an Iranian human rights activist and supporter of democratic regime change in Iran. Follow him on Twitter: @Amir_bas


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