Posted on 07/10/2020 1:41:33 AM PDT by hassan.mahmoud
By Hassan Mahmoudi
Crippling sanctions together with a plunge in oil revenue plus the expenses needed to fight the coronavirus, taken in the context of the Iranian regime’s inefficiency in solving economic crises, has painted the livelihood of the Iranian people as deepest dark.
The International Monetary Fund (IMF) has estimated the status of Iran’s economy till the end of 2020 as caught in deep inflation and recession. According to the IMF, Rouhani’s budget deficit in 2020 will, for the people, translate into a high cost of goods, instability of the national currency and lower purchasing power.
On June 10, 2020, Rouhani said: “Under the immense pressure of sanctions we have had a yearly drop of 50 billion dollars in revenue… This is twice the previous year’s budget.”
Payman Jabali, Deputy of the Broadcasting Organization in Foreign Affairs, said on June 10, 2020: “After 40 years of activity, Dari Radio in Afghanistan is closed due to its debts. Eutelsat has stopped broadcasting the Al-Kothar Network on the pretext of its debts. Press TV, Al-Alam and I-Film both in English and Arabic languages are no longer being broadcast on satellite.”
Fred Fritz, Iran specialist in the Institution of Security Policies, posted in the National Review saying: “the maximum-pressure strategy has succeeded even though Iran continues to stubbornly refuse to participate in negotiations on an agreement to replace the JCPOA. Iran’s economy is suffering under unprecedented economic pressure from U.S. sanctions, leading to protests against the regime in Iran. Protests against the Iranian government have also taken place in Iraq, Lebanon, and Syria, as U.S. sanctions have denied Tehran funds for pro-Iran militant groups and political allies in these countries. This includes members of Hezbollah, Iran’s terrorist proxy in Lebanon, going without paychecks”
In early 2020, the Majlis’s (parliament) Research Center predicted the budget deficit for 2020 as 86,000 billion tomans (currently each dollar is 20,000 tomans). If this deficit is compensated for by the Central Bank, 20% inflation will be added to the predicted inflation for the years 2020 and 2021. Rouhani’s administration can only stop this inflation by subsidizing the oil revenue with taxes, selling government assets, or selling bonds. In the event that it compensates by borrowing from the central bank, this would inject intense inflation into society. The official inflation rate in Iran is reaching 40%. In its latest report, Iran’s Census Organization announced Iran’s yearly inflation indicator as 38.6%; 70% in edibles, 23% in housing, 26.4% in Healthcare, and 46.6% in transportation.
A glimpse at the regime’s revenues The price of oil has reached its lowest level in 2020. For allocating the annual budget, Rouhani’s administration had counted on a price of $50 for each barrel of oil, while currently, this figure is just $37. In addition, the quantity of oil that Iran exports is trivial as the US threat to bring Iran’s export to zero is almost actualized. The regime has tried to find a light at the end of this tunnel by exporting oil to Venezuela, but it faces a hard wall. The segment of this year’s budget that is predicted to be provided by selling government assets such as land, the property, or machinery, about 50,000 billion tomans in total, is ten times the previous year’s quota. However, there is serious doubt that the administration can achieve this.
Looking at another aspect of this economic crisis, as the National Council of Resistance of Iran (NCRI), has reported, the coronavirus casualty figures in Iran have passed 65,000 with 11 provinces on Red Alert; this means a reduction in production and closure of many productive units. This makes the regime’s revenues even more insignificant and unstable. And people’s livelihood?
The unprecedented fall in national currency, joblessness, and a shaky market as a result of the coronavirus pandemic combined with high prices have resulted in the novel, but highly catastrophic, phenomena for Iranian citizens. As a particular instance, one can point to the issue of housing in Iran. Mohammadreza Mahboubfar, a member of Iran’s Association of Spatial Planning, recently stated that 38 million Iranians live on the outskirts of cities, and, of these, 7.6 million live near cemeteries. Iran’s tattered economy and its abysmal economic crisis is the fire under the ashes that will undoubtedly flare high in the cities of Iran not very long from now. that is why the Iranian diaspora prepares for its annual Free Iran Global Summit scheduled for July 17 to announce their platform for the future of Iran.
To bundle this up and be understandable...around 10 to 15 years ago...Iranian businessmen started to trade currency for dollars, Euro, and UAE Dirham. Then they’d shift the money around to countries outside of Iran. Trust in Iran banks and economic policy was crap.
Years pass, and the Iran banks have less and less capital, and the Iranian currency is worthless (even the public comments on this). So even the smaller business guys got into this habit.
You go and talk about a jobs-situation, and it’s dismal. You talk about a public works project...with what money?
Some bought gold in Dubai, or condos, or just lumped it into international schemes. So if you needed bank loans in Iran, even for a house, it became impossible to arrange.
The open oil market idea? Well, prices dropped, and that strategy didn’t go anywhere. The Covid-19 crisis? Simply icing on the cake.
The mullahs are running a stagnant economy, with zero hope for bank loans, and marginal views of the future for the general public. If you had to pick an opportune time for a military coup, it’s the best time since 1979.
Looks like Israel will get a respite. Hamas not so much. Hopefully regime change in Iran will return it to a secular society.
Here’s hoping the Navy seizes Iranian tankers.
Beyond the current economic crises of the pandemic and collapse of oil revenue, the Iranian economy suffers from extensive institutional corruption and inefficiency.
The mullahs and Revolutionary Guards (Pasdaran) have muscled the lion’s share of the economy’s assets and wealth into their control; rather than the control of those who are successful at running businesses and investments. Their economic decisions are largely driven by corrupt and political considerations, more than sound business or economic considerations.
So-called religious charities (Bonyads) are in practice just fronts for central control over a huge chunk of the economy, to benefit the political power (and personal wealth) of a small group of regime elites. They waste much of the potential for growth in the Iranian economy, even during good times.
Bkmk
In my view, it’s only a matter of time before these economic conditions cause the mullahs to strike out against Israel to divert attention from the current domestic mess.
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