The Economic Team of 'Rouhani II': Who is at the Helm?

Except for one individual, all the ministers proposed by Hassan Rouhani for his second term passed the parliamentary vote of confidence, thus clarifying the final list of figures who will significantly influence economic policymaking in Iran over the next four years. Regarding the program and capabilities of the twelfth government, the question arises as to how much coordination and cohesion its economic team possesses. The primary duty of the economic team is to prepare and implement the government's economic policy. Economic policy encompasses the initiatives and decisions that the government executes to achieve its short-term and long-term economic goals. For the economic team of the government, two different definitions can be provided based on its dimensions: 1) The central circle - from the pre-Islamic Revolution era to the present, the core of the government's economic team includes the triangle of the Ministry of Economic Affairs and Finance, the Management and Planning Organization, and the Central Bank. The missions and duties of these three institutions are deeply intertwined. For example, budget preparation involves identifying resources and allocating them within the Management and Planning Organization's jurisdiction, while resource acquisition (including taxes and customs duties) and distribution are under the Ministry of Economic Affairs and Finance. In other words, any lack of coordination between these two institutions (which has occurred multiple times in the Islamic Republic) paralyzes economic policymaking. The heads of the Management and Planning Organization and the Central Bank, Mohammad Baqer Nobakht and Valiollah Seif, who do not require parliamentary approval, retain their positions in the twelfth government. In contrast, the Ministry of Economic Affairs and Finance, which was held by Ali Taebnia in the eleventh government, has now been assigned to Masoud Karbasian. Various rumors regarding Ali Taebnia's departure (or dismissal) circulate in economic circles, ranging from his heart condition to his lack of coordination with other economic figures in the government, or even his disloyalty to Hassan Rouhani in the last presidential election. 2) The broader circle - in defining the economic team in the broadest sense, logically one can and should go beyond the triangle of the central circle and consider other institutions that are directly and indirectly involved in the country's economic policymaking, especially the ministries of oil, industry and mining, trade, labor and social welfare, and agricultural jihad. In this spectrum, only one change is observed: the departure of Mohammad Reza Nematzadeh from the Ministry of Industry, Mining, and Trade and the appointment of Mohammad Shariatmadari in his place. However, beyond the limited and broad definitions of the government's economic team, there are other opaque institutions that significantly influence the country's economic policy without being under government control. Institutions affiliated with the Islamic Revolutionary Guard Corps and various religious-economic foundations monopolize a significant portion of the country's gross domestic product without their activities and accounting being supervised by official bodies. Thus, one can refer to the 'gray circles' that influence the country's economic policymaking and lead it in a direction different from, or even contradictory to, the government's desired orientations. The issue of creating coordination within the central circle and the broader circle of the government's economic team, due to the ambiguity regarding the main decision-maker or helmsman who can arbitrate among various institutions and assert their final opinion, has always weighed heavily on the economic policymaking of the Islamic Republic. In the eleventh government, which came to power with the slogan of reforms aimed at economic liberalization, no transformation that could genuinely impact Iran's long-term economic outlook took place. Of course, the chaos that prevailed over economic policymaking, which brought the country to the brink during Mahmoud Ahmadinejad's presidency, was curtailed, and the management of ministries and economic institutions was largely entrusted to figures who had gained experience within the Islamic Republic's technocracy for over three decades. Hassan Rouhani relied on this experience during his first term to somewhat curb inflation without being able to eradicate its roots. Additionally, achieving a nuclear agreement under the framework of the JCPOA allowed him to access new financial resources and gain greater maneuverability. Nevertheless, the initial leap, which was accompanied by the announcement of a new economic policy in the form of 'policy packages,' quickly lost momentum. No fundamental reform that could genuinely reconstruct the country's economic structures was undertaken. Cash subsidies continued, and the policy of reforming the subsidy system, especially to realistically price energy carriers, was left half-finished. The so-called privatization policy continued to strengthen the quasi-public sector, particularly the 'government with a gun.' The state bureaucracy remained untouched. The Management and Planning Organization, which had been dissolved by Mahmoud Ahmadinejad, was reestablished without any miraculous outcomes. The country's currency system remained unchanged, and the artificial maintenance of the exchange rate continued. In the chaotic Ministry of Industry, Mining, and Trade, Mohammad Reza Nematzadeh (who was replaced by Mohammad Shariatmadari in the twelfth government) continued a strongly state-controlled and protective policy in both commercial and industrial arenas, contrary to Hassan Rouhani's official slogan of economic liberalization. By the middle of the eleventh government, it was clear that the country's economic policy lacked cohesion and strategy, and its helmsman was unclear. For his second term, Hassan Rouhani has presented an advanced economic plan within the framework of his electoral program titled 'Iran Again.' Will the composition of his economic team (in the limited or broad sense) be able to implement this program? The answer to this question is negative. Masoud Karbasian (who has taken over the Ministry of Economic Affairs and Finance from Ali Taebnia) and Mohammad Shariatmadari (who has replaced Mohammad Reza Nematzadeh as Minister of Industry, Mining, and Trade) are not figures who can bring fresh air to the Iranian economy. Moreover, even within the ranks of the officials responsible for economic policy, there is no observed coordination. One example highlighted in Tehran's economic media is that Mohammad Shariatmadari, the new Minister of Industry, Mining, and Trade, states that the current dollar rate benefits importers but harms domestic production, thus it needs to be corrected. In other words, Mr. Shariatmadari, in agreement with the Chamber of Commerce and a large segment of economic and expert circles, supports an increase in the dollar price. In contrast, Masoud Karbasian, the new Minister of Economy, believes that the necessary conditions for unifying the currency rate (which necessarily leads to an increase in the dollar rate) are not yet in place. Who is the arbiter? Which pole of governance? To create cohesion in economic policy, the president of the twelfth government has recently appointed Masoud Nili (who was previously the senior economic advisor to the president) as the special assistant to the president for economic affairs and secretary of the economic coordination headquarters. Masoud Nili is a prominent economist, but it seems highly unlikely that he possesses the necessary political weight to influence the influential figures who hold the economic ministries. On the other hand, Mohammad Nahavandian, who was previously the head of Hassan Rouhani's office, has been appointed as the vice president for economic affairs. These appointments do not indicate the emergence of a new mechanism and structure for creating coordination in the government's economic policy. Let us assume that a miracle occurs and the twelfth government achieves the necessary cohesion in the economic sphere. Even if this miracle happens, the issue of cohesion between the government's economic policy and the interests of the 'gray circles' arises. If we are to use the terms of Mr. Rouhani himself, the question arises: what can a 'gun-free government' do in the face of a 'government with a gun'? How can Hassan Rouhani's 'outward-looking economy' be reconciled with Ayatollah Khamenei's 'resistance economy'? Masoud Nili, the special assistant to the president for economic affairs, raises the necessity of consensus and proposes a 'second JCPOA.' In his view, just as the agreement between the 'Leader's Office' and the president paved the way for the nuclear agreement and saved the country from an international crisis, a new agreement between the two poles of governance, this time in the economic sphere, could pave the way for fundamental reforms that Iran needs to address significant challenges, especially unemployment. The issue is that the weight of the two poles of governance is not equal, and they do not have a unified view on key national issues, including economic matters. In this context, the consensus proposed by Mr. Nili must be realized in favor of which pole of governance?