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Iran’s economy in crisis

February 01, 2013 - 2:26:21 am



Khalid Al Sayed



Most analysts expect Iran’s economy to collapse before the presidential election as the US widens sanctions, blacklisting more Iranian companies. Earlier this month, The Washington Post quoted a US official as saying: “While some previous US sanctions targeted individuals and firms linked to Iran’s nuclear industry, the new policies are closer to a true trade embargo, designed to systematically attack and undercut Iran’s major financial pillars and threaten the country with economic collapse.” 

The plunge in Iran’s currency, by 50 percent last year, has caused inflation to soar to record highs. Staple commodities have gone wild. The country’s foreign reserves have fallen sharply as well.

Hard currency shortages have taken their toll on people as prices have shot up and some commodities have even vanished from the markets. 

Forex reserves and sovereign gold at Iran’s central bank are used to bridge the gap in the country’s budget deficit, which has hit $45bn in the fiscal year 2012/2013, according to Gholamreza Mesbahi Moghadam, the head of the Iranian parliament’s Economic Commission. Iran’s fiscal year begins on March 21. 

Moghadam is in doubt if Iran’s reserves and gold will be enough to cover its budget deficit and fix the financial turmoil caused by the economic sanctions. 

Last week, Iranian President Mahmoud Ahmadinejad told the parliament that his country had to slash reliance on oil revenues to overcome sanctions imposed by the West. 

Economic turmoil has sent shockwaves across the country, causing public discontent. Some of the country’s political figures have called on the government to concentrate on economic issues that affect the man on the street, rather than back Hezbollah in Lebanon and Nouri Al Maliki in Iraq and support Bashar Al Assad’s regime financially and militarily. 

Iran has handed out $10bn in aid to Assad’s regime, according to Western press reports. 

Meanwhile, Ali Akbar Velayati, an aide to Supreme Leader Ayatollah Ali Khamenei, was quoted by Reuters as saying that Syria has a very basic and key role in the region for “promoting the firm policies of resistance”. 

“For this reason an attack on Syria would be considered an attack on Iran and Iran’s allies,” Velayati said. 

“When Iraqis were resisting Saddam, or when they were resisting US occupation, Iran supported them,” he added. 

Undoubtedly, the economic crisis will cast its shadow on the coming presidential election as Iranians seek their daily bread, not to get nuclear power or to export their revolution. With reformists away from the political scene, some analysts do not expect a free vote as long as Ahmadinejad and the clerics are in power. 

Major General Yahya Rahim Safavi, the supreme leader’s senior military advisor, has admitted that the vote will determine Iran’s political and economic future in the coming eight years.

The Peninsula