The Economic Record of Hassan Rouhani Under Scrutiny

Hassan Rouhani's economic program, which is the basis for his successor's candidacy at the helm of the executive power of the Islamic Republic, relies on what was implemented during his first term in office. In other words, by closely examining the record of the eleventh government, the main lines of the country's economic policy can be outlined in the event of his reelection in the presidential elections. The economic record of the eleventh government cannot be analyzed abstractly and without considering the conditions under which executive power operates in the specific political environment of Iran, both domestically and internationally. Hassan Rouhani was born and raised in 'Islamic House' in Tehran, has had an active and influential presence in sensitive centers of power (Parliament, National Security Council, Strategic Research Center, Expediency Discernment Council), knows the mechanisms of the 'system' at the best possible levels, and is fully aware of its limitations and red lines. Hassan Rouhani is a 'product' of the Islamic Republic, but unlike many other 'products' of the same system, he is well acquainted with both the world of the 21st century and the limitations of the Islamic Republic in harmonizing with modernity. In this regard, it is worth emphasizing three points: 1) Hassan Rouhani, in terms of economic thought, is a continuation of Hashemi Rafsanjani's path. Rafsanjani, relying on experiences from the first decade of the Islamic Republic, cleverly realized that his beloved system was going astray economically and that insisting on this deviation would eventually lead to a deadlock. He dreamed of reproducing the Turkish experience of Turgut Özal or the Chinese experience of Deng Xiaoping, but we know that his various efforts to realize this dream ended in failure, and the spread of corruption and the dominance of the IRGC over a large part of the economy, rightly or wrongly, was attributed to him. Hassan Rouhani has the same goal in 'developmentalism,' but compared to Hashemi Rafsanjani, he has a stronger theoretical foundation. Despite this advantage, Hassan Rouhani has also been unable to create a tangible transformation in the country's economic structures so far. 2) Rouhani's statements and writings indicate that he is well aware of the role of the economy in the current world and its impact on internal conditions of countries and international relations. The most important work of the current president in this regard is an 830-page book titled 'National Security and Iran's Economic System,' published under his name (and with the collaboration of several of his close associates) by the Strategic Research Center of the Expediency Discernment Council in August 2010, which has been reprinted several times. This book provides a comprehensive look at internal and external economic issues in Iran, ranging from employment and inflation to international trade and foreign investment. 3) The way Rouhani selected members of the eleventh government also shows that he prioritizes economic issues. His 'economic team' mainly consists of officials who have served alongside Hashemi Rafsanjani and Mohammad Khatami or, like his senior economic advisor (Masoud Nili), possess substantial academic and practical capabilities in economic policymaking. Achievements The reader is likely to wonder why the eleventh government, despite having these theoretical and practical advantages, has been unable to bring about a transformation with tangible results in the country, so tangible that his rivals cannot criticize Rouhani's economic record as a weakness. In fact, despite the figures and statistics that the president and his colleagues frequently include in their discourse to defend their record, it cannot be denied that the country is grappling with a severe economic crisis, the most significant consequence of which can be clearly seen in the labor market. Contrary to the claims of the staunch critics of the eleventh government, the 'JCPOA' lifted Iran's economy from a very dangerous crisis that could have placed the country in a situation perhaps similar to Venezuela. Does the evident continuation of the crisis mean that Rouhani's economic policies have completely failed? In the current electoral atmosphere, Rouhani's 'principlist' rivals (affiliated with the factions that placed Mahmoud Ahmadinejad in the presidency for eight years) tend to make this one-sided judgment: a) Contrary to the claims of the staunch critics of the eleventh government, the 'JCPOA' lifted Iran's economy from a very dangerous crisis that could have placed the country in a situation perhaps similar to Venezuela. In fact, the return of Iran's oil production and exports to pre-sanction conditions, as one of the results of the 'JCPOA,' should not be underestimated. Additionally, the country's access to some of its blocked foreign currency assets is another consequence of the same agreement. Moreover, it was due to the signing of this agreement that Iran was able to regain part (albeit small) of its maneuvering range on the international stage and sign contracts with renowned Western companies. Of course, there is no doubt that the 'JCPOA' could not fulfill the great hopes it raised, especially regarding Iran's return to the global economy. However, this failure is more a product of the constraints present in the overall domestic and foreign policies of the Islamic Republic than a result of Rouhani's government’s orientations. b) In terms of several macroeconomic variables in Iran, Rouhani's government has achieved positive results. Iran's inflation rate has dropped from around forty percent in the last year of Ahmadinejad's presidency to below ten percent. Severe fluctuations in the currency market have currently stopped. The Iranian economy, which faced an eight percent negative growth and a twenty percent national income drop in 2012 and 2013, reached an eight percent growth in 2016. However, these achievements can be questioned for various reasons. The single-digit inflation rate lacks solid foundations, and signs of its resurgence can already be seen. The currency market has mainly stabilized artificially due to the injection of dollars by the Central Bank, and further jumps in the near future are by no means out of the question. The announced eight percent growth rate for 2016 was also achieved due to a significant increase in Iran's oil exports as one of the consequences of the 'JCPOA' and is not sustainable due to its non-endogenous nature. Despite the validity of these criticisms, there is no doubt that the economic policymaking of the eleventh government, especially compared to the disaster that Mahmoud Ahmadinejad's government brought upon Iran, is not deserving of the severe attacks that Rouhani's rivals are launching against it. c) Iran's position over the past four years in terms of several international indicators (business environment, economic freedom, misery index...) has improved, but only to a very limited extent and without significantly improving the country's image on the global stage. The failures of Rouhani's government in the economic sphere are the result of the core of the Islamic Republic's system's stubborn resistance to any fundamental changes in Iran's internal and international policies. Since the end of the Iran-Iraq war, Hassan Rouhani is the third president to come to power with reformist slogans after Akbar Hashemi Rafsanjani and Mohammad Khatami, facing the barriers arising from the core resistance of the system. The 'JCPOA' and its economic consequences, despite the existing obstacles to implementing this agreement, are the most significant achievement of the eleventh government. In contrast, Hassan Rouhani has not made any progress in implementing fundamental reforms to change the defective economic structures of the country. A very large part of Iran's economy is under the control of foundations and military institutions. The country remains trapped in widespread corruption. The privatization process, aimed at ending the dominance of state and quasi-state entities over Iran's economy, has effectively reached a deadlock. In many other vital areas for the country's future, no action has been taken, from addressing environmental crises, especially water, to reforming the banking system, reforming cash subsidy payments, reforming labor laws, reforming the currency system, reforming pension funds, and so on. In all these areas, Hassan Rouhani's government has acted very conservatively and has retreated at the slightest obstacles (liberalizing prices, reforming the subsidy system, and recently reforming labor laws...). One of the most important levers for advancing development in Iran, especially ensuring sustainable growth and combating unemployment, is building trust in international relations to attract investment and technology and benefit from facilities in foreign trade. This trust-building (which in the Islamic Republic's literature is called 'interaction with the outside') requires making very serious changes in the Islamic Republic's foreign policy. The issue is that the dogmas inspired by the Islamic Republic's worldview block this trust-building. It is surprising to see that in the current electoral competition, presidential candidates do not have the right to engage in foreign policy. Hassan Rouhani also does not enter this topic, just as he cannot address the dominance of foundations and institutions over a large part of Iran's economy or the real roots of corruption in the country. But with strict adherence to these red lines, can anything be done for Iran's economy? Despite the signing of the 'JCPOA,' there has been no change in the anti-Israeli and anti-American rhetoric of the main leaders of the Islamic Republic. On the other hand, Iran's armed forces (sometimes as the foot soldiers of Russia) are involved in Middle Eastern crises and have significant issues with a large part of the Western world in this regard. In this situation, can Iran achieve a 'normal' position in international economic relations and use cooperation and 'interaction' with the world as an effective lever for its development? It is surprising to see that in the current electoral competition, presidential candidates do not have the right to engage in foreign policy. Hassan Rouhani also does not enter this topic, just as he cannot address the dominance of foundations and institutions over a large part of Iran's economy or the real roots of corruption in the country. But with strict adherence to these red lines, can anything be done for Iran's economy?