People who protest for economic reasons need to know that the problems will slam them in the face, said Iranian Senior Vice President Eshaq Jahangiri. “When a social and political movement is launched on the streets, those who started it will not necessarily be able to control it in the end,” he said.
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Like his boss, President Hassan Rohani, Jahangiri and cabinet members including Iran’s defense minister are wrestling with an appropriate response to the mounting protests that have claimed 12 lives, according to official figures. Jahangiri’s warning that the protesters should beware of “foreign elements,” mainly Western ones, that could take a ride on the protests, also targeted Rohani’s supporters in the reformist movement. The vice president was hinting that conservative circles and the Iranian Revolutionary Guards Corps could decide to crush the protests with a heavy hand, taking the authority to negotiate with the protesters away from Rohani. Indeed, conservative spokesmen, including parliamentarians from the radical factions, no longer settle for just accusing the United States and Saudi Arabia of fomenting the protests: they are urging the government to crack down. They interpret Rohani’s comments on Sunday, that citizens have the right to protest as long as they do it nonviolently, as a sign of weakness. Worse, his remarks could even encourage the protests to continue, so Rohani can leverage them to accelerate the economic and social reforms the conservatives oppose.
To push these reforms, mainly the economic ones, on Monday Rohani convened the heads of the major parliamentary committees in order to reopen the budget for 2018 and the sixth five-year plan, which focuses on diversifying the country’s revenue sources, encouraging foreign investment by changing the investment laws, improving the banking system and softening the effects of planned tax hikes.
The 2018 draft budget, which has been approved by the relevant parliamentary committee, is around $104 billion, just 6 percent more than the budget for 2017. It includes $4.5 billion in spending to create 450,000 jobs — in part by canceling direct payments of around $10 a month to some 25 million to 30 million people. That alone is enough to trigger public rage, since it targets the weakest members of society. In addition, the draft budget increases the price of gasoline from 23 to 35 cents per liter, triples the foreign-travel tax to $60 and imposes additional fees that will raise the cost of living and imperil Rohani’s greatest economic achievement, reining in inflation to 10 percent in 2017, from 40 percent in 2013.
The need to reduce Iran’s $5.3 billion budget deficit by increasing tax revenue and slashing benefits suggests that despite a significant increase in oil exports and numerous contracts with Western countries in the last two years, as well as upbeat macroeconomic data including gross domestic product growth of 12 percent, the positive developments are not trickling down. Unemployment remains high, at 12 percent overall and considerably more among the young. Hence the urgency to show the public immediate solutions that could shut down at least the economic protests before it morphs into a political protest that would require a much heavier, more violent reaction.
With “reforms” having become an obscenity even among Rohani’s supporters, the realistic solution is to reinstate some of the subsidy cuts, or defer their implementation; to increase direct welfare payments and unemployment benefits and cut government fees. But any decision like that, which flies in the face of Rohani’s own policy, would further cripple the economy unless it is accompanied by a practical recovery program.
When Rohani was elected president in 2013, he had to continue the subsidy regime he inherited from his predecessor, Mahmoud Ahmadinejad, but he rightly predicted that the nuclear agreement would enable him to expand employment, which would enable the subsidies to be cut back. Still, not all the sanctions were lifted, and based on the declared intention of the U.S. president and Congress to impose new ones, the movement of foreign investment to Iran, which could also have reduced unemployment, halted. Moreover, the investments that were carried out can’t create enough new jobs to assuage the public. It could be that the demonstrations, which are apparently connected with the budget discussions, will leave Rohani no choice but to adopt part of Ahmadinejad’s policy, though that will bear a heavy cost in the future.
It isn’t just Rohani who has no magic solutions for the economy. Neither does Supreme Religious Leader Ayatollah Ali Khamenei and his conservative supporters, aside from their usual voodoo such as direct payments, to buy peace and quiet with money.
Everybody, including Khamenei, the parliament and the IRGC need to hold join together and back Rohani, despite their differences. The Iranian “method” doesn’t allow incumbent presidents to be tossed out, or even set aside after a single term. The tradition of two terms is part of the concept of stability that the supreme leadership has always sanctified.
But this time, even backing may not be enough. So far Khamenei has given Rohani a free hand on economic issues, but shackled him when it comes to social and political reforms such as human rights. The slogans on the streets attest that the demonstrators want more than economic solutions, they want social changes that the conservative leadership will not permit. The question now is how aware the demonstrators are of the limitations of Rohani’s power, and whether they believe they can institute revolutionary change — of a kind that won’t make everything even worse.