The truth behind Iran’s ‘impressive economic recovery’

This week, Iran’s financial achievements received considerable coverage in Persian-language state-owned newspapers. The news was triggered by the International Monetary Fund’s (IMF) recent report on Iran’s economy, which commended Iranian authorities for “achieving an impressive recovery in economic growth after the lifting of nuclear sanctions in 2016.” The major reason for this growth was the lifting of four rounds of UN sanctions.

Tehran’s use of “moderates” in negotiating with the West paid off well for the ruling political establishment. Iran quickly reintegrated into the global financial system, which is bringing billions of dollars of additional revenue to the country. It has also received hundreds of millions of dollars from the US.

Iran has significantly increased its oil exports, from 1 million barrels per day (bpd) to approximately 4 million bpd. Its oil exports to Asia have risen by nearly 92 percent, state news outlets report. Oil sales to Turkey and other European nations have risen also. Iran has become the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC), and has expanded its trading in other industries, including mining and metals.

Iran’s President Hassan Rouhani did not hesitate to celebrate the news in an attempt to score political points for his government. Ahead of presidential elections, he boasted about the IMF report and said Iran’s economic achievements were due to his administration’s policies. He also capitalized on the achievements to ensure the blessing of Supreme Leader Ali Khamenei for the elections, without which Rouhani and his technocratic team are less likely to win.

But the intriguing thing missing from the IMF report and Tehran’s announcements is that ordinary Iranians have not yet benefitted. According to Afkar newspaper, roughly 11 million Iranians live under the poverty line, nearly 15 percent of the population. Unemployment has been steadily increasing, and is around 30 percent among the youth.

Even Rouhani recently acknowledged on Iranian television: “Employment is the most important issue in the country… and unemployment can be a big dilemma for our country and our community.” He added: “It’s too worrying to have one, two or three unemployed youth in each family.”

If the Iranian people are not seeing the fruit of sanctions relief and additional revenues, who is reaping the profits? Since Iran’s economy is predominantly state-controlled and state-generated, additional revenues are likely being deposited in the bank accounts of those who run the government. Two organizations have significant control over the economy: Iran’s Revolutionary Guard Corps (IRGC) and the office of the supreme leader.

The IRGC and Khamenei own large firms in every industrial sector, including oil, mining, telecommunications, gold and construction. Competition and the private sector are not permitted because the more closed the economy, the easier Iran’s military and supreme leader can monopolize it. Financial growth appears to benefit Iran’s military, the IRGC and Khamenei, which will likely ensure his blessing for Rouhani in the upcoming elections. 

Also, large deals signed with Western or Asian corporations since the lifting of sanctions, such as Airbus or oil contracts, are conducted on the state level. In other words, foreign firms are only allowed to do business with the government and its affiliated corporations.

The other issue to address is linked to pro-Iran advocates who repeatedly say its economic growth will empower moderates such as Rouhani, and thus alter foreign policy. This simplistic argument, which reflects either a lack of knowledge of Iran’s politics or represents pro-Iran lobbying efforts for financial gain, has clearly failed.

Not only has financial growth not moderated its foreign policy or empowered moderates, it has emboldened Tehran to ratchet up its military adventurism, pursuit of ballistic missiles and regional provocations. Iran’s moderates and hard-liners pursue the same objectives but with different tactics.