- To help readers better understand the nuances of foreign policy, CFR staff writers and Consulting Editor Bernard Gwertzman conduct in-depth interviews with a wide range of international experts, as well as newsmakers.
With a troubled economy and uncertainty about the next president, Iran is facing considerable political tension, says Iranian political expert Farideh Farhi. Though sanctions seem to be having effect, many critics inside the country say "the economic mismanagement on the part of the Ahmadinejad government and the incompetence of those who are running the Iranian economy are also at fault," she says. There are a number of people who could run to replace President Ahmadinejad when his term runs out next June, Farhi says, "but it’s not at all clear in terms of the political orientation of the candidates." She says that potential candidates are "hesitant to come forth at this particular moment when the economic situation is quite unstable, as well as with the nuclear issue that is hanging in the air."
Iran’s currency, the rial, keeps plummeting. It has lost 40 percent of its value in the past week. What’s going on in the economy in Iran? Is it really that affected by the sanctions?
President Ahmadinejad, in a press conference, acknowledged that the drop in oil revenues as well as the difficulty that the Iranians are having with the transfer of their currency is having an impact in terms of the ability to infuse currency into the Iranian market. Because of the budget commitments in the Iranian economy, there is suspicion that the government itself is involved in the devaluation of the Iranian currency in order to be able to generate enough rials to pay for its commitments. It is not clear whether this dynamic has gone out of control. They had tried to put a stop to it by creating a currency exchange market, but once they did that, the market reacted in a very volatile fashion. The government and the central bank have suggested that the country should give them about two weeks before some sort of stability comes back to the market.
The reality is that the Iranian currency was overvalued, and the sanctions regime has effectively forced the government to do a devaluation. The problem necessarily is not the devaluation that many exporters, for example, in Iran wanted, it’s the volatility. And we will just have to wait and see whether the government will be able to manage and bring some sort of stability to this market.
The Associated Press has a story saying that a manifesto complaining about Iran’s stumbling economy has circulated secretly among factories and workshops, and so far some 10,000 names were attached to the petition protesting the low wages and the difficulties for people to make ends meet, given the inflation. So does this indicate that the economy is really suffering right now?
There is no doubt that the economy is suffering. There is no doubt that many factory workers have not been paid. It’s not only the question of not being paid, it’s also the question of their wages not having kept up with inflation. Workers’ protests have continuously occurred in Iran, and there is no doubt that the sanctions regime has had an impact in terms of the ability of the economy to perform.
The reforms that were introduced by the government in terms of trying to get rid of subsidies have created a situation where the government has managed to pay cash subsidies to individuals but in terms of the kind of support that it was supposed to give to factories in order to counter rising costs it has not been able to do so. So there have been quite a few bankruptcies in the industrial sector as well as in the agricultural sector, leading to higher unemployment.
Is the government of President Mahmoud Ahmadinejad held responsible?
There is no doubt that sanctions are having an impact on the Iranian economy. The issue that is being discussed in Iran, however, is whether sanctions are the only source of the problems and whether the management of the economy by the Ahmadinejad administration is also a problem. Obviously, Ahmadinejad himself has a stake in blaming the sanctions for Iran’s economic woes. But others in Iran, whether they are members of the parliament or Iranian economists or commentators, have repeatedly argued that sanctions do have an impact but the economic mismanagement on the part of the Ahmadinejad government and the incompetence of those who are running the Iranian economy are also at fault.
Ahmadinejad’s term runs out next year and there’ll be a new presidential election. I’ve been fascinated by speculation about Ayatollah Akbar Hashemi Rafsanjani being in the limelight again.
The Iranian election will happen in June 2013, and at this particular moment it’s not at all clear who the candidates will be. But there is no doubt that, given the kind of dynamics that have occurred in Iran and the reality that Ahmadinejad’s presidency has raised questions about the management of the economy, accountability, as well as better relations with the outside world, have come to the fore. Individuals like Rafsanjani, who are known in Iran for essentially representing the technocratic approach to the management of the economy as well as better relations for Iran abroad, have gained more prominence. People have begun speculating about whether the Iranian election would essentially be an election that would bring forth a candidate that would represent ideas that are similar to Rafsanjani’s and whether that candidate would be a successful one.
Will Rafsanjani actually run for office?
I’m not sure whether Mr. Rafsanjani himself would end up being a candidate. He is in his late seventies and I’m not sure he would appreciate running the country again. But it is speculated that the arrest of his daughter, who was convicted for insulting or propagating against the regime and has a six-month sentence, and the return of his son, whose charges are not yet clear but is in prison and under investigation, essentially are moves to allow him to separate himself from all the charges that have been directed against him and his children, and free him to be much more prominent in expressing his views about what the direction of the country should be. So his prominence essentially should be viewed that way.
The hardliners in Iran have consistently said that Rafsanjani is a problem and his children are a problem because they have engaged in illegal activities. The argument is being made that, by the judiciary making a move against the children, Rafsanjani now will have a freer hand in having an influence in the direction of the economy. Whether that is true, of course, will be played out in the coming months.
That’s a fascinating scenario you’ve just laid out. I assume that the daughter and son are not put into a torture chamber in Evin prison, and that they have decent accommodations there.
Yes, Evin Prison has actually become an environment in which there are other political activists. You have former deputy ministers in prison, and it is an interesting dynamic because it used to be that in Iran, if you were imprisoned, that was sort of a mark of shame. But in recent years, especially after the 2009 election, it is essentially a badge of honor. Rafsanjani’s daughter has specifically said, "Please do not make any attempt to get me out," and there are reports that she is already engaged in translating a book. The situation of her brother is not exactly clear, because he is in the process of being investigated. We do not even know what the charges will be. And in fact, today there were reports that his lawyer has actually lodged complaints in the judiciary against two newspapers for identifying his charges, because according to the Iranian law that should not happen.
I didn’t realize being in prison could be a political asset.
Iranian politics is becoming extremely interesting, and political prisoners in Iran are not necessarily completely shut out of the political process. Of course, I’m talking about high-profile political prisoners. We have, for example, an interior minister who is in prison, and every once in a while he releases letters that are very critical against the Islamic Republic and they are publicized in various websites in Iran.
The interesting issue here is the role of the judiciary because the judiciary, by arresting the children of a prominent ayatollah and also arresting a prominent adviser to the president of the country, is trying to give the impression that it is a fair judicial system because in effect, it is treating prominent individuals from all walks of political life in a similar fashion. The problem with that approach is that it still does not entail due process.
Who are the possible other candidates for the Iranian presidency. Is it the parliament leaders?
The Iranian parliament’s speaker, Ali Larijani, may run, but I personally doubt it. There are many names that have been mentioned, the most prominent of which, of course, is the mayor of Tehran, Mohammad Baqer Qalibaf. But you also have former speaker of the parliament Gholam Ali Haddad-Adel mentioned, [and] Iran’s current nuclear negotiator Saeed Jalili. There are even some candidates that are identified with the reformist camp, such as former first vice president Mohammed Reza Aref. There are some candidates that are close to Ahmadinejad that are being mentioned.
So there is a very unclear picture in terms of who will eventually come forth. Clearly, there will be several candidates, but it’s not at all clear in terms of the political orientation of the candidates and the number of the candidates that would come forward from the hardline camp, or the pragmatic middle camp or perhaps even the reformist camp. None of that is clarified at this point. Everybody is hesitant to come forth at this particular moment when the economic situation is quite unstable, as well as with the nuclear issue that is hanging in the air. I would say it will take a few more months, well into February or March of 2013, before things begin to clarify.
Given the economy and the unsettled political scene, is there any indication that Iran might seek out some compromise with the outside world on the nuclear issue?
I think that the Iranians have already hinted that they are open to compromise, but they have certain bottom lines, and those bottom lines include acceptance of uranium enrichment in Iran. They have, in the past, suggested that they will agree to limitations as well as more intrusive inspections. It is the other side of the equation, namely the United States, that is sort of in a limbo at this particular point. So, yes, I do think there is a possibility of compromise on the Iranian side. The Iranians want to move on beyond this. But they have certain bottom lines that they cannot move away from. We’ll just have to wait until after the November election in the United States to see whether all sides are ready to engage in a process that would allow for some sort of give and take.