Iran Engulfed in Economic Crisis, Elite Fear General Uprising

Reports from inside Iran indicate a mounting economic crisis, despite a windfall of billions pouring into Iran following the nuclear deal sealed with the P5+1 following negotiations in which the international community bent over backwards in the mullahs’ favor.

After waves of spurious promises, which ultimately failed to provide or allow the people to reap any form of benefit from this deal, the government of Hassan Rouhani -- with a faux pas catchphrase of “moderation” -- is engulfed in a series of major calamities, with fears simmering among the leadership of growing dissent that can only possibly be construed as the roots of general uprisings in the making across the country.

Dismal Report Card for Rouhani

During the past few years, Iran’s economy has experienced skyrocketing inflation rates, which according to a parliamentary report is running alongside an unemployment tsunami. Politicians are pressuring the banks to decrease profit rates (to numbers lower than inflation rates). Moreover, the banks have taken their own action to safeguard resources, by investing in financial markets of real estate and production lines.

Various governments in Iran, especially that of Rouhani, have throughout the years issued specific instructions to the country’s banks, aimed at decreasing their profits. As this trend continued, the banks gradually failed to live up to their duties as financial mediators and liquidity directors.

The Liquidity Plight

The main problem – as was the case internationally in the 2008 slump -- in this regard is lack of liquidity. Liquidity is running at 20% in Iran, and has plagued the economy for many years now. On the other hand, the true portion of Iran’s economy is suffering from liquidity shortage. Despite the fact that Iran’s economy is based on banks, it appears the issue of diverting liquidity and its quantity have raised startling concerns.

“The main reason behind liquidity shortage lies in unpaid bank loans, and the government -- as the main party in debt to banks -- must take action on this matter,” said Mohammad Mehdi Reiszadeh, an advisor in Iran’s Chamber of Commerce.

The Banking Scapegoat

Whenever governments face any type of shortages, they focus pressure on the banking system and the country’s central bank. The remaining unpaid bank loans belong largely to the regime’s senior elite, with a list of 30 individuals said to be controlling a large portion of such unpaid bank loans. If this money was actually recoverable, the banking system would have been able to provide investment for production units. There is no such thing occurring in Iran today.

Doomed Policies

Media outlets associated with the camp of former Iranian president Hashemi Rafsanjani and Rouhani, are pointing fingers at the government of firebrand Mahmoud Ahmadinejad for squandering oil revenues -- made available to him through years of oil prices in the range of $100+ a barrel -- in the housing and construction industry.

With this industry facing major problems, it had its toll on Iran’s now parched economy, as more than 200 to 300 industries linked to road and construction now face major rollbacks, with the entire economy threatened by recession. A collapse of the real estate industry that provided profits for the banks resulted in an effective lockup of bank funds.

Such counterproductive plundering adopted by the mullahs’ regime have spiked anger amongst the people, surfacing especially among the youth. Mardom-Salari, a newspaper affiliated to the Rafsanjani-Rouhani camp, has conveyed a similar message over the breadth of escalating public unrest.

“… two issues that can enormously destroy the Rouhani government, and may even deliver a significant defeat in the 2017 presidential elections, is the continuing state of economic recession, and no improvements in the lower class’ daily living conditions… the economic recession, developing from 2014 onward to this day, has yet to provide room for any positive signs.”

In fact, indications show that in the present fiscal climate, an effective recession will continue into 2016 and early 2017.

Another challenge for Rouhani’s government will is the lower class’ lack of participation in politics and support for government policies, especially in Tehran and other large cities. This should ring alarm bells for Rouhani’s government.

Iran is a country where a significant percentage of the economy is all but monopolized by the Revolutionary Guards, a military force running parallel to the regular army, while in other sectors of the country, desperate people are resorting to “street-vendoring” to make ends meet, and families have become so poor they are literally renting out their children for $5 a day, or even selling them for less than $700.

As long as the regime in Iran is established on the central tenets of domestic crackdown, plundering the people’s wealth, and exporting terrorism and fundamentalism across the globe, the ruling mullahs in Tehran and their military/security top brass will continue to rule in a state of paranoia, forever terrified at the possibility of nationwide uprisings brewing under the ashes of a failing economy in a nation where the seeds of revolt are fast beginning to materialize after years of violent repression. With the mullah’s grip beginning to loosen, galvanized dissent within Iran is becoming a force to be reckoned with.

Amir Basiri is an Iranian human rights activist and supporter of democratic regime change in Iran. Follow him on Twitter: @Amir_bas