The Iranian Election - An Economic View
In the next Iranian election in June former president Khatami will likely run as a candidate against the current president Ahmadinejad. The 'western' view on the differences between these two men is clouded as it is looking solely at Iran's nuclear project or its rhetoric against U.S. imperialism and Israeli zionism.
The Iranian president is simply not the one deciding about those issues. That is the prerogative of the supreme leader Khamenei and the power structures around him. (For a deeper description of the power structure and his personality this portrait - Reading Khamenei: The World View of Iran's Most Powerful Leader (pdf) may be helpful.)
But the Iranian president can direct interior and economic policies in Iran. So unless distracted by some 'shiny object' conflict the voters will naturally look at those policies to decide whom to give their votes.
I asked Moon of Alabama commentator Parviz, who is an Iranian and lives in Iran, to explain the differences between Khatami and Ahmadinejad in economic policies. Here is his response.
The Iranian Election
by Parviz
If ex-President Khatemi decides to run (which is highly probable now that his pragmatist rival Moussavi has withdrawn) he will almost certainly win the election on June 12th with about 65% of the popular vote, which is less than his astonishing 80% vote in both 1997 and 2001 but nonetheless sufficient to prevent the need for a run-off a week later.
The above prognosis assumes that the U.S. and Israel will keep very, very quiet and not take any dramatic measures to affect the outcome: Ironically, if the U.S. were to make substantial concessions to Iran during the next few months it would merely legitimize Ahmadinejad’s hardline policies of the past 4 years, while if the U.S. were to exhibit increased hostility it would scare the regime into putting its full weight behind Ahmadinejad and possibly even ‘fixing’ the election results in his favor. So any interference of any kind by the U.S., whether positive or negative, will torpedo Khatemi’s election efforts.
Khatemi’s renewed popularity is partly by default, meaning that most of the population is fed up with Ahmadinejad; and partly by design, meaning that Iranians have now come to appreciate the solid economic, social and diplomatic gains achieved during Khatemi’s 8-year presidency. When Khatemi was elected in 1997 Iran had near-zero growth, a massive short-term debt of $30 billion and only $10 billion annual oil revenues. Non-oil export revenues were a mere $1 billion. 8 years later GDP growth had risen to above 6%, Iran had become a net international creditor to the tune of $30 billion and had repaid its entire foreign debt. True, oil had risen from below $10/bbl in 1998 to around $30/bbl when Ahmadinejad was (s)elected in 2005, but the real reasons behind Khatemi’s success were the solid economic reforms he introduced, whose main features were:
- Slashing of the top income tax and corporate tax rates from 55% to 35%.
- Ratification in 2002 of the first Foreign Investment Law in Iran’s history, guaranteeing foreign corporations the right to own up to 100% of domestic companies and to repatriate not just the principal investment but all profits, including property appreciation, copyright, goodwill and other value added assets. This boosted foreign direct investment (FDI) from a 20-year annual average of $25 million to a whopping $2 billion in 2003 alone.
- Establishment of the Oil Stabilization Fund which in 2005 had reached $40 billion, to provide a cushion against falling oil prices. The Fund was plundered by the Ahmadinejad administration to pay current budget expenses despite massive windfall forex revenues of $100 billion in 2008 and is now close to zero.
- Establishment of the first private banks in Iran’s post-Revolutionary history, which within their first 2 years of operation constituted 6% of total banking turnover and which, equally significantly, placed pressure on the state banks to modernize and reform.
- Massive investment in the non-oil sector, thereby increasing non-oil forex revenues from petrochemicals, agriculture, manufacturing and the service industry (including income from overseas engineering contracts) from just $1 billion in 1998 to $15 billion in 2005.
- Issued the first ever sovereign bond (EUR 500m) in 2002, yielding 8.5%, which was so successfully received that it issued a 2nd bond of EUR 450m just a few months later at a substantially lower yield.
The results of the above economic reforms was that the Iranian Rial strengthened 25% against the U.S. Dollar from 1997 – 2005, inflation was kept at a manageable 13%, Iran’s OECD Investment Risk rating was upgraded from 5 to 4 (with Fitch upgrading to B+) and the Silent Confirmation fee on Letters of Credit dropped from 8% to just 1.5% p.a., dramatically lowering Iran’s import costs (The a/m fee is now 14% p.a., which is what foreign banks charge to ‘guarantee’ payment of Iranian L/Cs to their domestic exporters).
The above summarizes merely Khatemi’s economic reforms. Barflies know what Khatemi achieved politically and culturally from the many posts on this subject, all of which have since been reversed by Ahmadinejad. Even the incumbent’s popularity in the provinces, generated by flooding rural areas with cash and hand-outs, has been tempered by the realization that inflation has risen from 15% to 50%, unemployment has doubled to 25% and corruption has reached unprecedented levels. Drug addiction and prostitution are among the highest levels anywhere on the globe, yet another indictment of the ‘Islamic’ Republic.
Khatemi is now very much appreciated in retrospect, which is why many Iranians disappointed that Khatemi did not change the Islamic system completely now realize that his achievements in the highly restrictive circumstances have been underestimated, and that hostility and pressure by the U.S. in the aftermath of 9/11 (for which Iran was blameless) limited his ability to achieve even more.
Undoubtedly the Islamic Republic is a 7th century anachronism that hinders Iran’s economic, social and political progress, but if the choice is between Ahmadinejad and Khatemi the populace will choose the lesser of two evils.
Posted by b on February 11, 2009 at 13:05 UTC | Permalink
« previous pageThanks, r'giap.
Now: Was it a coup or wasn't it?
;-)
Posted by: Parviz | Feb 15 2009 22:22 utc | 102
Parviz,
This thread has been very interesting and has made me think much deeper about the region. This thread is a good example of how challenging it is to express opinions to others so they understand what you believe and why.
I've always liked using the color blue as an example... when I tell you something is "blue" am I talking emotion or color? And if color, what color blue do I mean? The way this web page is on my computer there are three variations of the color blue, each very different, but each "blue". Color is a simple concept, how do we describe difficult emotions like love, hate, hope?
I worked with a guy (american) who spent a few years living in Iran while growing-up, his dad was a military adviser or something in the '70's, but he said life there wasn't what I thought it was (this was 1991 and I was more closed minded and believed Iran a dangerous place.) He was an anal kook and a "safety first" sort of dude and by him telling me Iran was safe, it has gnawed at my prejudice.
Unless there is some magical snap of the fingers which can remove america from the middle east, it's in the country's best interest to develop regional partners that are stable. I feel if america and iran were to come to terms it would dramatically change the middle east. I wish america could/would develop peaceful dialog with all countries, because wars and killing are helping nobody. At least nobody I like...
Thanks to Parviz for keeping the thread going and presenting good argument supporting his beliefs. I feel equally grateful for all the critical examinations others posted to counter Parviz's arguments. I wish there were more discussions such as this and less Limbaugh wannabes shouting loudly trying to cover their ignorance about subjects they haven't the foggiest notion about.
Posted by: David | Feb 15 2009 23:20 utc | 103
one scenario thats not been covered is that sometime in the next few years, it becomes fact that Iran has the capability to produce nuclear weapons. If & when this happens, its over & the USA will have no choice but to re-write its Iran strategy from scratch. The Middle-East is going to keep serving up turbulent events for a while and this might be the one that forces a major positive correction.
Posted by: jony_b_cool | Feb 16 2009 0:56 utc | 104
Parviz,
Thanks for taking the time to respond to so many posters here and to my criticism. I have moved the thread somewhat off-topic and for that I apologize.
Awhile back, there was a thread asking “Where is the [US] Left?” I didn't bother to post because I don't consider myself on the “Left”, and besides, Dan of Steel wrote some good posts there and my views were very similar.. I despise powerful, controlling governments, even those where the leaders are 'democratically' elected. Where others here fear the “right” as those who wish to control, my anxiety against being controlled by a socialist state in both an economic and personal sense is more frightening in my frame of mind. And the more the control is moved from a local to national level, the more frightened I become. A democratic socialist government is something I dread whether it be national, provincial or local. The inalienable rights of an individual trump the votes of a majority. A strong Constitution protects an individual from the tyranny of a majority. I do not expect the government to meet my needs nor do I desire that. (However I do expect the right of personal participation where there is personal taxation.) I find satisfaction in my own labor and obtaining the fruits of that labor. I find contentment in the security of private property where I can live with my family secure from government intrusion or even an unwanted neighbor's intrusion. Using a good analogy from another recent thread, I feel secure in knowing that it is my decision whether or not to trade one of my two cows for a bull and not continually worry that a local or national government may take my cow against my will after every new election or vote. So from this perspective, it is only natural to separate an individual's needs from the needs of his or her government. Those on the Left may see the needs of an individual and the needs of a democratic socialist government as fairly congruent. Regardless, this is a meaningless argument in this instance as neither Iran nor the US is a democratic socialist government. Both the people in the US and the people of Iran play such minor roles in the decisions of their respective governments that it is logical to separate the people from their government, even a duly elected government, at least as far as people's needs are concerned. Sure the actions of those in power change the lives of their citizens. I did not deny this premise in my original reply.
You said: “Of course the U.S. is now suffering, having overstretched itself, and now needs Iran to extricate it from this mess on several fronts and in several battlefields. The prices it will have to pay are regime recognition, increased Iranian regional influence and the termination of sanctions...
These 'costs' to the US that you mention (regime recognition, increased Iranian influence, termination of sanctions) are not “US needs for Iran's help” by any definition of the word 'need' as these things may just as easily come to pass whether Iran helps the US leave the Middle East or not. Using the word 'need' literally, it is difficult to believe that the US has become so impotent that it is incapable of removing most of its soldiers from Middle East soil without Iran's help. Could some other country help or must it be Iran?
I don't see where my closing comment: "Full economic ties with the US involves non-government foreign trade between private entities (that is, individuals/corporations)" is contradictory. The key item in that sentence is “non-government” foreign trade. Neither Malooga nor I have disagreed that such trade can be beneficial, and that such trade is desired by the people of both Iran and the US. The disagreement is that such trade is unlikely in the near term due to the policies of the current US Administration. Again and again, I say look at Obama's staff and past actions for answers.
Posted by: Rick | Feb 16 2009 4:31 utc | 105
David: Your penultimate paragraph is so fundamentally crucial to this debate that I could write a book on it (which thankfully for MoAers I won't, but it's going to be a lengthy reply anyway which hopefully doesn't get me red-carded or sent to the dugout):
"I feel if america and iran were to come to terms it would dramatically change the middle east. I wish america could/would develop peaceful dialog with all countries, because wars and killing are helping nobody. At least nobody I like..."
Agree with you 100 % on both counts: a) rapprochement between the two would indeed 'dramatically' change the M.E., though probably not in the way Debs, Malooga, Obamageddon and others would like, because it would create a regional economic boom that would encourage swaggering Capitalism with a Capital 'C'. 'Simple' millionaires would become multi-billionaires overnight, foreign corporations and financial institutions would instigate their predatory investment and lending practices (complete with bribes and kickbacks) to "exploit the land" at the cost of the natives. The 'independence' of Iran would be endangered and THE last bastion of support against U.S. hegemony would drown in money and decadence, etc.,. But I believe that the advantages (regional peace and cooperation and widespread economic benefits that would be greater than mere 'trickle-down') would outweigh the disadvantages.
b) As you correctly write, "wars and killing are helping nobody, so the U.S. (responsible for 95 % of the killing) would do both itself and everyone else a favour by gradually and gracefully withdrawing from the area, leaving in place a small but effective deterrent for Israel (not that it needs one).
I know this is generally a Left-leaning thread, but I despair sometimes at the expectation some posters have of the need for Iran to fight Capitalism and U.S. regional hegemony on its own and ad aeternam. The attitude seems to be: To Hell with your economic development; to Hell with your 25 % unemployment (in one of the world's potentially wealthiest nations); to Hell with 50 % inflation caused by sanctions that have closed many factories and created an annual imported inflation rate of 50 %; to Hell with your underdeveloped South Pars gas field which Qatar is siphoning off at your nation's expense because they are at peace with the U.S. and Iran isn't; to Hell with human rights that would be boosted by peace between the U.S. and Iran resulting in cultural exchanges and the positive influences of a tourist boom; to Hell with your best brains who leave for better job opportunities in Capitalist countries (even China and India) because jobs don't exist at home .......... Further afield, to Hell with Pakistan and India that desperately need funds and peace to develop the IPI natural gas "Friendship Pipeline", and to Hell with Europe that desperately needs a major energy supply alternative to the Big Bad Russian Bear.
NO! Iran, you are expected to remain under-developed, because if you adopt Capitalism and FDI your people will 'suffer' .....
??????????????????????????????????
Sorry for the rant, but now you know why I called the otherwise brilliant Debs 'elitist' and why I was slightly offended at being called a capitalist tool (#42, Malooga, that really hurt, because if my being poor would guarantee the welfare of my nation I would give everything I own away and go live on a mountain top right away).
Posted by: Parviz | Feb 16 2009 8:09 utc | 106
jony_b_cool (104), Rick isn't going to like this, but it's over already bar the shouting. With or without nuclear weapons Iran's influence is growing inexorably.
Posted by: Parviz | Feb 16 2009 8:11 utc | 107
Rick, I think I answered most of your points in my post to David. Your criticisms are less about Iran than about the evils of Capitalism and centralized government control. But remember, decentralization would also mean a return to feudalism which would simply replace one central power by 100 mini-dictatorships with less regulation, less oversight (you can't have it both ways), more arbitrary justice and far less national security, since it would be easier for Big Powers to exploit regional and local divisions as the U.S. is trying to do with the Kurds.
Which do you think I prefer?
Posted by: Parviz | Feb 16 2009 8:16 utc | 108
Parviz-
My natural political beliefs are closer to Rick@105- I'd love pure political anarchy – no government and a population that didn't require one. But there is that damnable human nature that has allowed us to progress in so many areas yet holds us back from achieving peace. And honestly, any place so peaceful would be boring, regardless of our illusions.
As a single guy, a peaceful existence would be pretty easy to enjoy; just slink-off into the deep woods and live, pretty damn simple (for me I suppose) but I'd have to give-up social interactions (the easiest path to "peacefulness.)
Humans are social animals, we live socially, and so there is a need to develop a "society" with rules and division of labor so that everyone's basic needs can be met, taking into account the "greater good" of the group. Someone living upstream in a watershed must be aware of those living below when dealing with their waste or how much water they divert from the "natural flow" to their neighbors. The only reason we have a civilization is that our ancestors were able to harvest water's potential with gravity and farm crops, making it possible to stay in one spot rather than wondering around like packs of wild animals.
So I realize, sans a major epidemic reducing the earth's population, political anarchy is just a dream... Better to deal with the reality, which is that we're all very interconnected regardless of where we live on the planet. Unfortunately, the bull elks of the pack rise to power in every country and they don't mind who they stomp in the process of rising to the top. Generations are similar in that they care more about today then what might face any future generations.
I think Parviz's post are trying envision a probable future rather than the elusive magical happily-ever-after future we'd all like to live-in, as kris kristofferson put it, "in this best of all possible worlds..."
Iran, brought back into the west, would probably end-up screwing many poor people, and I doubt the Iranians suffer from a lack of Britney Spears, even now. But face-it, there are poor people being screwed in Iran right now, as there are everywhere in the world. Iran aligning with the West is not going to change that.
And, at least in the short-term, any peace with Iran is better than a war, regardless of how many peasants sleep in the dirt. Iraq should be proof enough of this.
I may be turning into some kind of pinko commie socialist the way I'm thinking these days :) But I'm beginning to feel I might rather fancy a spot of socialism. I'm paying enough in taxes I'd like to see more of that money supporting social works rather than bombs and bullets to kill people I'd never met. My government wants to take my guns and then have me buy them even more... Gosh, how many guns a government need?
It seems to me ironic that keeping america's nose out of other countries business was once a conservative value and anymore it is considered business as usual. Ol' Thomas Jefferson, George Washington and Ben Franklin are sitting and smoking their hemp while disgustedly shaking their heads watching how we've ruined their dream.
Sorry if this is so off post, maybe it's because I'm somewhere between sleep and caffeine (still an hour before the shop opens – dreaming of Brooklyn and a corner Dunkin' Donuts)
I've been trying to think why I have a sudden fascination with Iran, must be be due to the hostage crisis and all the weird crap I remember from that year... California quakes and living on beans and rice, I would have been six or seven years old... But I think I'd actually be willing to go through the stupid human tricks required to get onto a plane to visit the place someday. Maybe someday...
Posted by: David | Feb 16 2009 12:45 utc | 109
Superb Op-Ed in today's NYT on peace overtures by Ahmadinejad, arguing that this maverick might just be the right person to break the ice:
Posted by: Parviz | Feb 23 2009 8:14 utc | 110
P.S., I don't agree with the conclusions, and especially with the prospect of having to live with Ahmadinejad for another 4 years, but I submitted the Op-Ed to provide a well argued alternative view.
Significantly, it's not just the pragmatists but now the hardliners that want to make peace with America, so those on this Blog opposed to any kind of rapprochement are pissing against the wind. It will happen sooner rather than later. Both nations need each other's strong and active assistance to avoid M.A.D..
Posted by: Parviz | Feb 23 2009 8:17 utc | 111
The comments to this entry are closed.
Rick (96), you can't totally separate the people from their governments. Whatever governments decide affects their citizens. You write as if governments and citizens act in a vacuum, which is diametrically opposed to everything everyone else has written on this thread. Example:
Khatemi encouraged FDI, the world began to invest, Iranians became more prosperous, and voilà! The citizens (and not just the Haves)were generally far happier than they are today with sanctions resulting from stupid government policies on both sides.
You write: "In my opinion, the US government doesn't "need" to be involved in wars in the Middle East so what real "need" are you talking about?" Now it is I who have to reply in a similar vein to yours: "Silly me, I thought the U.S. needed wars to scare the Arabs out of their tits, sell more arms to every client state in the region, enrich U.S. corporate predators like Haliburton with no-bid contracts, control the oil flow and protect Israel from potential future enemies".
Of course the U.S. is now suffering, having overstretched itself, and now needs Iran to extricate it fom this mess on several fronts and in several battlefields. The prices it will have to pay are regime recognition, increased Iranian regional influence and the termination of sanctions, which will (duh!) benefit the Iranian people as they are currently forced to import their needs at double the price through middlemen (= the Super-Haves who are madly in love with U.S. sanctions). Scrapping of sanctions will also benefit the U.S. economy and create 500,000 high-value-added export jobs (= not hamburger-flippers).
As for your closing comment: "Full economic ties with the US involves non-government foreign trade between private entities (that is, individuals/corporations)", all I can say is that U.S. sanctions have totally destroyed Iran's private sector as well as NGOs and placed the entire economy back into the hands of the Government, so your comments and complaints are in fact totally self-contradictory.
Malooga, in agreeing with Rick you don't offer examples as to how ordinary American and Iranian citizens would FAIL to benefit economically from a rapprochement. I see it as a win-win situation for all, unless we get into that deep discussion again about the casino nature of capitalism and selling out to the West!
Posted by: Parviz | Feb 15 2009 22:17 utc | 101