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It’s the Iranian Economy, Stupid: Regime Asks Voters to Swallow Another Bitter Pill

A photo of Dr. Zvi Bar'el.
Zvi Bar'el
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An Iranian man in Tehran walks past campaign posters.
An Iranian man in Tehran walks past campaign posters in the run-up to parliamentary elections on February 21, 2020.Credit: Atta Kenare/AFP
A photo of Dr. Zvi Bar'el.
Zvi Bar'el

On Friday, when polling places open for Iran’s parliamentary election, voters will face a tough dilemma: whether to continue supporting the regime by voting for conservative slates, or casting their votes for reformist options candidates, or staying home as a sign of their lack of faith in the electoral system and the regime. The election has already been described as critically important, because it is the first since the United States withdrew from the nuclear accord and since the severe sanctions that were then imposed on Iran. It also follows turbulent demonstrations in November in which somewhere between 350 and 1,500 people were killed.

It would be realistic to predict that the conservatives in Iran will maintain their hold on power, controlling most of the parliamentary committees, along with the legislative process. But it will be a parliament that has to grapple with complex economic challenges that will continue to worsen as the sanctions take an ever bigger bite out of whatever financial cushion Iran has left. With 40 percent inflation and a 30 percent unemployment rate that mostly affects young Iranians, the civilian revolt that has purportedly subsided would be expected to heat up again, confronting the regime with new clashes ahead of next year’s presidential election.

Haaretz Weekly Ep. 63

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While the Iranian protests have attracted global press coverage, no less important have been strikes this year and last at a number of workplaces following the shuttering of factories, the layoff of thousands of workers and after salaries were paid months late. According to data from Iran’s central bureau of statistics, the country’s unemployment rate in December 2019 was 10.8 percent, but the agency considers unpaid interns, part-time housekeepers, workplace apprentices and anyone working at least an hour a week as employed.

The latest information on Iranian workers’ rights from the Amsterdam-based opposition website Radio Zamaneh includes reports that construction plants in the Balochistan region have been closed and that automotive plants, which are among the country’s largest employers, have laid off thousands of workers due to a shortage of parts. In January, nurses in the city of Mashhad reportedly staged a protest over the lengthy delays (of up to 14 months) in the payment of their salaries, and that 2,500 staffers at Al-Zahra Hospital in Isfahan have not been compensated with overtime pay and other benefits for the past nine months.

In December, retirees demonstrated in front of the Iranian parliament demanding that their pensions be brought in line with workers’ wages and that a commitment be kept that their pension benefits at least not fall below the minimum monthly wage of $154. These are just a few of the long list of strikes, protests and sit-ins that have been staged in various sectors in Iran against plans for staff cutbacks and outsourcing to subcontractors that offer dreadful employment conditions. The subcontractors also fail to comply with labor laws requiring that workers be provided with detailed agreements define their positions, as well as their salaries and benefits.

About 6,000 people who distribute medicine to pharmacies and hospitals have been laid off because medical insurance companies have failed to pay the pharmacies. The impact has not been confined to the workers, extending to patients who have had to resort to getting their prescriptions filled privately.

But the labor unrest has not yet resulted in a complete collapse of the Iranian economy, mostly due to Iran’s capacity to continue selling oil to China and Russia and thanks to Iran’s large foreign currency reserves and its institutional capital funds, the size of which is not known.

The oil factor

In an article this month on the Oilprice website, journalist and writer Simon Watkins reported on oil and gas deals worth tens of billions of dollars that Iran has inked with Russia and China. The Russians and Chinese, he wrote, are bypassing American sanctions (to which they are not bound) by establishing local partnerships with Iranian companies, some of which are straw corporations established to conceal the companies’ real identity.

Watkins wrote that Iran is losing billions of dollars from these deals, which provide excessive benefits to the Chinese and Russian companies. That was the case, for example, with a transaction signed with the Russians in 2018, when it was clear that the United States planned to withdraw from the nuclear accord. The deal provided Iran $50 billion over five years, which was to cover the cost of renewing and developing Iranian oil fields, but in return, Russia was given the right to purchase oil produced by fields that the Russians would develop at just 55 to 72 percent of the global market price.

These bypass routes are now being disrupted by the coronavirus, which has led to a significant drop in Chinese oil purchases from Iran, as well as worrisome uncertainty over when normal purchasing will resume. Iran might pray that the Israel Institute for Biological Research, which Prime Minister Benjamin Netanyahu has directed to try to develop a vaccine against the virus, is successful in its efforts, so that China, along with its purchase of Iranian oil, recovers.

Until then, Iran will continue to negotiate with European countries to find an alternative to the sanctions bypass mechanism proposed by the French government, which was never implemented. That was mostly due to the refusal of companies to go along with it out of concern that they would suffer harm from the sanctions.

Iranian President Hassan Rohani speaks during a session of parliament in Tehran, Iran, Dec. 8, 2019. Credit: Official presidential website/Reuters

Iran’s supreme leader, Ali Khamenei, is calling on his fellow citizens to embrace a “resistance economy,” meaning further belt-tightening at a time when there is little room left for greater austerity. The upcoming parliamentary election could signal just how willing the public is to swallow another bitter pill.

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