Crazy Inflation, Stalled Diplomacy: Iran Marks One Year of President Raisi

Experts say President Ebrahim Raisi has fallen short of economic promises since replacing Hassan Rohani, but a last-minute breakthrough in nuclear talks could yet mark a turning point

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Iranian President Ebrahim Raisi gesturing after speaking in the Russian Parliament in Moscow last January.
Iranian President Ebrahim Raisi gesturing after speaking in the Russian Parliament in Moscow last January.Credit: /AP

Ultra-conservative hard-liner Ebrahim Raisi won the Iranian presidential election last June, succeeding Hassan Rohani with promises to lift sanctions, curb the housing crisis, stamp out corruption, cut the unemployment rate and restore economic stability in a country with an inflation rate hovering around 40 percent.

But while inflation has diminished slightly to 38.7 percent – in part due to increased oil revenues and lax U.S. sanctions enforcement – Iran’s domestic and foreign policy challenges remain aplenty.

Food prices skyrocketed across Iran last month after the government cut subsidies for staples like eggs and dairy products, sparking street protests. And a revived nuclear deal between Iran and six world powers, which would lead to sanctions relief and alleviate some of Iran’s economic woes, shows no sign of materializing after U.S. President Joe Biden refused to remove the Islamic Revolutionary Guard Corps from a terror blacklist.

Ali Alfoneh, senior fellow at the Arab Gulf States Institute in Washington, says that a year since his election triumph (he actually entered office last August), Raisi’s vision for Iran remains unclear.

“Heavy election engineering and endorsement by [supreme religious leader] Ali Khamenei and the IRGC, rather than popular support, secured Raisi’s path to the president’s office,” Alfoneh says. “A year on, he still relies on support from those quarters and has not managed to mobilize the Iranian public for his cause or vision for Iran, which remain unknown.”

Sanam Vakil, senior research fellow at the Chatham House international affairs think tank in London, offers an equally damning assessment of Raisi’s first year in office, noting that he is yet to yield any major policy achievement. “With the JCPOA [nuclear deal] in limbo, Iran’s economic situation will continue to deteriorate – and the knock-on effect will be felt by ordinary Iranians who are already protesting and suffering at the hands of poor decision-making and macroeconomic mismanagement,” Vakil says.

Iranian President Ebrahim Raisi visiting the site where a 10-story building collapsed in Abadan, Iran, last week. Raisi has numerous domestic problems.Credit: WANA NEWS AGENCY/REUTERS

Auditioning for the main role

Assessments of Raisi’s first year in power are magnified not just because he holds the second most powerful post in Tehran, but because he may be positioning himself to one day be the natural successor to the aging Khamenei.

“Ebrahim Raisi’s election last year was a reflection of the growing need for supreme leader Khamenei to appoint someone who could serve as a credible successor once he passes from the scene,” says Ilan Berman, senior vice president of the American Foreign Policy Council in Washington. “Raisi’s tenure needs to be understood in those terms: as a prelude to taking over Iran’s most important ideological post. But whether he can is bound to be influenced by how well he can deal with some of the country’s most pressing problems, including a looming water crisis and declining religious authority.”

Indeed, there were demonstrations in several Iranian cities last summer over water scarcity. Writing on the Fikra Forum last month, Massaab Al-Aloosy stated that Tehran’s “mismanagement of the country’s water resources will only be amplified by other factors. Global warming and population growth are an added burden on water availability and can cause social disturbances.” Al-Aloosy added that according to the Islamic Republic of Iran Meteorological Organization, about 97 percent of the country is experiencing drought to some degree.

A boy jumping across one of the arches of the "Si-o-Se Pol" (33 arches) bridge, along the Zayandeh Rood (river) in Iran's central city of Isfahan last month. On most days, the stone arches span just sand and rocks, not water.Credit: ATTA KENARE - AFP

Regional experts agree that Iran’s social and economic situation at home will continue to top Raisi’s priority list. “Economic issues are the number one priority and the number one challenge,” says Raz Zimmt, an Iran expert at Tel Aviv University’s Institute for National Security Studies.

Iran hiked prices for basic food items by as much as 300 percent last month – in part due to global supply chain challenges, but also as a result of import restrictions of cooking oil from Ukraine and wheat from Russia.

More than a quarter of Iran’s 85 million citizens currently live below the poverty line, according to Iran’s Statistics Center, although some reports place that figure as high as 60 percent. The food shortages and price hikes led to protests breaking out in several Iranian regions, with demonstrators reportedly chanting “Death to the dictator!” and “Death to Raisi!”

Zimmt notes that although some progress has been made in Iran’s ability to adapt its economy around the crushing sanctions, “as long as there’s still 40 percent inflation, a budget deficit and unemployment among young, educated Iranians, the main priority not just of the Iranian government but of the broader population will center on social and economic grievances.”

Nuclear options

A rapprochement between Iran and the United States over the nuclear deal, which many consider unlikely at this point, could mark a turning point in the public’s perception of Raisi’s first year in power.

A renewed agreement could unfreeze up to $120 billion of Iranian funds trapped in foreign accounts because of U.S. sanctions, offering Raisi an avenue to begin tackling the country’s economic woes.

“The bottom line is that Raisi hasn’t been able to address Iran’s immediate problems – namely inflation and the public’s grievances,” Zimmt says. “Without sanctions relief, it’s very unlikely he’d be able to address these issues. If Iran can significantly increase its oil exports and use most of its frozen assets, that’ll certainly help Raisi improve Iran’s economic situation, and will also help boost his popularity – which is important for someone who likely considers himself as the next possible supreme leader.”

But Iran is likely looking past the current U.S. administration to determine the long-term viability of a possible nuclear deal and lifting of sanctions. “If the regime anticipates a quick return of the sanctions under the next U.S. administration, it is less likely to sign a deal,” says Sara Bazoobandi, Iran expert and Marie Curie fellow at the German Institute of Global and Area Studies in Hamburg.

“Tehran is cautiously monitoring the U.S. midterm elections in November and the presidential election in 2024, with the expected result of a Republican majority House – or even a president. Under both scenarios, Iran’s nuclear deal may be jeopardized,” Bazoobandi says.

Even if there is no return to the nuclear deal, Raisi and Khamenei have both pledged to pursue a foreign policy centered on regional ties rather than the JCPOA, with a particular focus on normalizing relations with regional adversaries in the Gulf.

Iranian President Ebrahim Raisi meeting with Qatari Emir Sheikh Tamim bin Hamad al-Thani in Tehran last month.Credit: WANA NEWS AGENCY/REUTERS

In early February, Raisi was quoted saying that Iran was ready for reconciliation talks with Saudi Arabia, despite severing diplomatic ties with the Sunni kingdom in 2016. And at the World Economic Forum in Davos last month, Saudi Foreign Minister Prince Faisal bin Farhan al-Saud said the kingdom’s hands are “stretched out to Iran,” with direct talks taking place between Iranian and Saudi diplomats in Baghdad over the last year.

But even attempts to revive Iran’s economy by circumventing the JCPOA and focusing on potential regional allies have been “upended by the geographic ripple effects of Russia’s invasion of Ukraine,” according to Trita Parsi, executive vice president of the Quincy Institute for Responsible Statecraft and founder of the National Iranian American Council.

Tensions have remained high with Israel during Raisi’s time in office, but provided the shadow war between Israel and Iran remains just that – more covert than full-blown – experts believe domestic concerns will remain the president’s top priority.

“As long as there isn’t a significant escalation toward full-scale military conflict [with the United States and/or Israel], then social and economic issues will remain a top priority for Raisi,” Zimmt says.

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