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Iran: Between economic jihad and suicide | ASHARQ AL-AWSAT English Archive 2005 -2017
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When the political scene in Iran became even further complicated in 1978, on the eve of the revolution, the then ailing Shah tried to placate the angry Iranian street by naming Jafar Sherif-Emami as prime minister, on account of his background, being a member of a prominent clerical family, as well as for his ties to certain Iranian clerics. Sherif-Emami started off by repealing the decisions previously made by the Shah, which had caused Iran’s clerics and religious scholars to turn against him. He therefore closed down casinos, repealed the imperial calendar, dissolved the ruling Rastakhiz Party, and opened the door for political activism as well as for new political parties to be founded. However, all his attempts met with failure because of the state of civil disobedience, the persistence of strikes, and the armed clashes with demonstrators; this prompted the silent majority [of Iran] to stand with the revolutionary youth after Iran’s economy and society grinded to a halt. At this time, Sherif-Emami – commenting on the crisis of credibility faced by the government – issued his most famous quote, saying “if we say it is daytime when it is daytime, people will deduce it is night-time.”

Last Sunday (November 27), the Iranian parliament passed a draft resolution aiming to downgrade diplomatic relations with Britain in response to the new financial sanctions imposed by the United Kingdom on Iran. Members of the Iranian parliament enthusiastically chanted the phrase: “Death to England”. Meanwhile, Britain banned all banking transactions with Iran, including with the Iranian Central Bank. If more sanctions are added to the series of sanctions imposed by the US – along with those expected to be imposed by the UN Security Council – then the Iranian Central Bank, which receives the revenue of 2.2 million oil barrels a day, might find itself facing a difficult situation reminiscent of the economic crisis Iran faced in the summer of 1988 and which served as an indirect reason for Tehran accepting a ceasefire with Iraq.

The announcement made by the US administration last week of additional draft resolutions targeting the Iranian Central Bank might urge international banks and corporations to stop their transactions with Iran. This would directly expose business owners, and even ordinary Iranian citizens, to the halt of international money transfers, not to mention disrupting the country’s daily import and export operations. Robert McNally of the Rapidan Group said that this “would force any country to choose between doing business with Iran and doing business with the United States.”

Some have argued that there is nothing new about sanctions being imposed on Iran, and that the Iranian regime is capable of circumventing them as it did in the past. They point out that there are countries which have become accustomed to living under economic sanctions, and there are two reasons that allow this. Firstly, the bulk of the economy of these countries is conventional and focuses on the local market and domestic products, therefore the chances that this economy will be affected or brought to a halt by some western states cutting off its financial transactions are fairly slim. Other markets are capable of making up for that economy’s shortage of equipment and spare parts. Secondly, as time went by, these countries developed mechanisms and methods for circumventing these sanctions. For the worst thing that can happen is that a number of the country’s economic sectors are harmed or retarded, but ultimately the country is able to weather the crisis. There are many examples in this respect. When Britain banned Iran Air from refuelling at Heathrow Airport, the Iranian airliner resorted to a clever trick to extricate itself from this fix. It cut a deal with the New Zealand based “Infratil” company that owns Manston – Kent’s International Airport, for its aircraft to stopover and refuel at this airport, before resuming their trips to Tehran.

Moreover, Iran continues to establish nominal enterprises in Asian, Arab, and European countries, as it finds hundreds of Western companies that are willing to play the role of middleman for imports and exports between Iran and the West. Despite of all this, the current crisis seems to be more severe than its predecessors. The Iranian Central Bank has always been uninvolved with the political wrangling of the Iranian regime. Tehran has always been cautious about not involving the National Iranian Oil Company or the Iranian Central Bank in any of its foreign activities, for these are two major arteries of the Iranian economy. Hence, targeting both entities with sanctions could be regarded by Iran as a direct violation of its sovereign state and a deliberate intention to disrupt its economy until Tehran yields to western pressure. Furthermore, these sanctions represent bad news when compared to what the Iranian government has achieved in terms of structural reforms in economic institutions, something that has received praise even from the International Monetary Fund (IMF). Last March, while marking the Iranian New Year [Nowruz], Supreme Guide of the Islamic Republic of Iran Grand Ayatollah Ali Khamenei called for the new Persian year to be named the “year of economic jihad”. Over the past two years, President Ahmadinejad’s government has managed to cut expenditures by restructuring some foodstuff and diesel oil subsidization programs, and by directly transforming these funds into social aid for the poor. Despite all this, Iran remains a country incapable of achieving economic growth due to its internal ruling system, the international sanctions imposed upon it, and the cost of government support programs which equal or exceed the revenues from oil exportation (The Economist, June 23, 2011). In addition to this, there is an unemployment rate that exceeds 16 percent and an overall incapacity to increase production despite all government propaganda promoting autarky and local manufacturing.

Iran’s per capita income has decreased by 30 percent compared to the era of the Shah. The industrial economy, including military manufacturing, which Iran claims to be doing, does not exceed reassembling or proposing industrial adjustments to a technology nearly three decades old. Even Iran’s missiles belong to the Cold War era, lacking accuracy, satellite guiding system and advanced reconnaissance systems as well as counter-missile defence capabilities. Does this mean we are playing down the threat represented by Iran? No, the most recent report by the International Atomic Energy Agency (IAEA) proves the Iranian regime’s intention to develop – or even purchase – nuclear weapons. As for the attempt on the life of the Saudi ambassador to Washington, this further strengthens the idea that the Iranian regime won’t hesitate to carry out any operation to destabilize the region. Thus, focusing on the economic weak-points of the Iranian regime is bound to force Tehran into withdrawing from its subversive track and accepting international inspection of its nuclear project. We must remember that following the Iran-Iraq War (1980 – 1988), Iran faced severe economic crises, and on each occasion, the regime would choose to bend to the storm and accept change instead of committing suicide. It did so, as mentioned earlier, in 1988. Back then the regime accepted the ceasefire terms it had persistently refused since 1984. During the tenure of former President Hashemi Rafsanjani, the regime feverishly endeavoured to adopt an open-door economic policy with Europe and the Gulf which saved Iran from post-war economic collapse. In 1996, when the sharp decline in oil prices affected unemployment rates among the youth – with this reaching 29 percent – the regime even accepted the election results which brought Khatami and reformists from within the regime to power, following an uprising by university students.

In the “Memoirs of Jafar Sherif-Emami” (1999), Habib Ladjevardi recounts that Sherif-Emami’s decision to accept the role of forming the 1978 cabinet was tough because the economic reforms undertaken by his predecessor Jamshid Amouzegar (1977 – 1978) had thrown the Iranian economy into stagnancy. Sherif-Emami believes that there were a number of reasons which led to the success of the Iranian revolution, however the decisive factor for the collapse of the Shah’s regime at such an accelerating rate was the financial breakdown and the economic paralysis which hit the country due to the oil workers’ strike, as well as Iran’s major service institutions grinding to a standstill. Even the army found itself overstrained and unable to keep the economic conditions under control as its morale sagged and economic transactions came to a halt across the country. The present Iranian regime thinks that its power to withstand pressure surpasses that of the Shah. However, the deteriorating economic conditions in Iran might ignite a new revolution outstripping what the country witnessed in the wake of the 2009 presidential elections. By then, resorting to war or closing the Strait of Hormuz will not help the regime; indeed this would be tantamount to economic suicide. Karim Sadjadpour, an associate at the Carnegie Endowment for International Peace, said: “we have to differentiate between regimes which are homicidal and regimes which are suicidal. The Iranian regime brutally suppresses its own population. It has homicidal tendencies at home. But it’s a regime which ultimately wants to stay in power. That’s what’s paramount for them. They’re not suicidal.”