Hassan Rouhani and the Economy of Iran; A Man Who Knows but Cannot Act

Hassan Rouhani, the head of Iran's executive branch, begins the last year of his presidency amid significant public skepticism and criticism regarding his economic record. His televised interview on Tuesday night, August 2, was filled with statistics to defend his achievements but ultimately failed to alleviate doubts and criticisms. It is evident that the President of the Islamic Republic of Iran has shifted from an aggressive economic stance to a defensive one, largely losing the initiative. The weakness of his televised dialogue did not stem from the inaccuracies of the numerous statistics he emphasized. The significant reduction in Iran's inflation rate, which he cited from official sources, has not been questioned by independent Iranian experts or international sources, although there is much debate about the methods used to achieve this goal. His statements about the substantial increase in Iran's oil production and exports following the lifting of sanctions are also beyond reproach. In other areas, Rouhani did not hesitate to cite statistics to defend his record, even to an extent that is usually not customary in a televised interview for ordinary audiences. For example, the detailed enumeration of non-oil exports and imports from 2009 to the present, or referencing the increase in electricity consumption and the rise in the number of insured individuals to prove the country's economic growth, likely resulted in boredom and confusion for a large segment of the population. In his televised interview on Tuesday night, Rouhani found himself in a weak position because his hopeful discourse did not align with the harsh realities currently facing Iran's economy. He did not address these realities or explain why the country, despite resolving the nuclear issue and the hopes stemming from the signing and implementation of the JCPOA, is grappling with one of the most severe and profound economic recessions in recent decades. The depth and severity of this recession are felt by Iranian households, especially considering the massive unemployment affecting millions of educated young people, whose forced idleness has created a significant social disaster in the country. The shrinking economy due to Iran's overall negative growth rate during the 2010s has broken the backs of the people. Last year, with a negative growth rate of less than two percent in the industrial and mining sectors, coupled with the collapse of foreign trade, the bankruptcy of numerous businesses, and the fall of their production capacity below fifty percent, Iran has increasingly sunk into the quagmire of economic difficulties. Masoud Khansari, the head of the Tehran Chamber of Commerce, recently described the current economic situation in the country as follows: 'The recession is like an uncontrollable fire that is burning the country's industries, and our behavior is such that we seem to be trying to extinguish this volcano with rainwater.' In his Tuesday night interview, Rouhani expressed hope for a five percent growth rate for the Iranian economy in the coming year. Achieving this goal is not impossible, and predictions from the World Bank and the International Monetary Fund fluctuate around this figure. The issue is that this five percent growth, even if realized, would largely stem from increased oil production and exports following the lifting of sanctions, provided that oil prices do not decrease in the global market. A growth rate that originates from oil production and exports, rather than from the internal dynamism of the economy, will have little impact on the labor market. Why has Hassan Rouhani, in the last year of his presidency, lost the initiative in the economic arena and found himself in a defensive position? We should not forget that the President of the Eleventh Government prioritized resolving the nuclear issue and overcoming economic difficulties at the beginning of his presidency. Rouhani's economic discourse during the first two years of his administration was marked by great confidence. He boldly criticized the economic policies of Mahmoud Ahmadinejad's era and proposed plans to exit the crisis. His peak initiative was the presentation of two 'policy packages' by the 'Economic Coordination Headquarters of the Government' aimed at overcoming the recession, which were presented to the country in July 2014 and October 2015. However, for about a year now, Rouhani's government has lost the initiative in the economic sphere and has become mired in day-to-day management. No one knows what happened to the two 'policy packages' that generated so much noise, or what became of the work of the 'Economic Coordination Headquarters of the Government.' Among all those who have held the presidency of the Islamic Republic since the revolution, none are as familiar with the economic issues of Iran and the world as Hassan Rouhani. His statements and writings over the years, as well as the advisors and colleagues he chose after being elected president, attest to this. The current head of the executive branch knows well that Iran's economy needs to escape the current deadlock by breaking free from the grip of the government. After the Islamic Revolution, inspired by the 'model' of Third World socialist economies, Iran set out to destroy the private sector and scatter its employers, just as many other countries have sought to limit the role of the government in the economy. Show me an economy anywhere in the world that has reached a point without respecting property rights, accepting individual initiative in activity and wealth creation, and allowing competition and breaking monopolies. Hassan Rouhani knows this truth well and has no doubt that breaking state and quasi-state monopolies to provide free enterprise and give space to innovators, investors, and entrepreneurs is the most fundamental reform that Iran's economy needs. Years before him, a considerable number of senior managers in the Islamic Republic reached the same conclusion and brought up the process of privatization. However, in the atmosphere of the Islamic Republic, as one of Rouhani's ministers put it, privatization has become a 'joke,' and state-owned enterprises have mostly been transferred to other public institutions or quasi-state entities, including the Islamic Revolutionary Guard Corps. According to various accounts, only eleven percent or even just three percent of the privatizations carried out in Iran have been real. Naturally, Hassan Rouhani, due to his position within the Islamic Republic, faces this bitter reality more than anyone else. In his televised interview on Tuesday, he mentioned that instead of transferring these assets to the people, they were handed over to public non-governmental institutions, creating a two-fold problem: neither did the government have oversight, nor was there actually a private sector. A large part of the corruption also stemmed from this. In the same interview, he referred to the presence of 'security agencies' in the country's economy, saying: 'Agencies that should actually maintain the country's security and bear the main responsibilities of the country should not enter the economy.' Behind such admonitions lies the fundamental question of why, in Iran, unlike almost all countries in the world, the public sector is expanding day by day, and the so-called 'quasi-public' sectors, including military-related monopolies, are gaining such influence in the economic arena? Why did Rouhani's government, during the first three years of his administration, not take any initiative to extricate Iran's economy from the grip of the government and the so-called 'quasi-public' institutions? Which institutions and personalities have blocked the path to reforms in Iran? It is evident that Hassan Rouhani, despite his deep familiarity with Iran's economy and the world, cannot address the fundamental obstacles that hinder Iran's development without crossing 'red lines.' Unless he confines himself to preaching or alluding to them. Behind terms like state and quasi-state economies lie enormous interests that confronting them requires a steely political will. A will that prioritizes development and progress as the country's main priority and organizes the country's foreign relations based on this priority.