Iran: Escalation of Economic Crisis and Surge of Public Discontent

Published On June 18, 2018 | By P. Daryaban, CWI | World Events

P. Daryaban, CWI

Three months after the December-January protests that shook the country, Iran is still a smouldering fire. Despite killing dozens of protesters and the arrest of thousands, the regime has not been able to push back the anger in society and to intimidate the masses.

Every week reports on strikes and protests are published. The recent protest rally of retired miners in Tehran over unpaid pensions, the protest rally of sacked workers of South Pars gas field in Bushehr over unemployment, the strike in Qazvin steel factory in protest against the firing of 100 workers, the rally of Bank Melli’s retired staff in Tehran, civic services workers’ protest in the southern city of Omidieh and the victorious strike at the  Ilam gas refinery in the west of the country, are a few examples of labour protests in big and small enterprises.

Several cities in Iran’s Kurdish area were also the scene of a strike of small shopkeepers over the Iranian government’s closure of border crossings with Iraq and blocking of trading paths to Iraq. The government did this to prevent outflow of foreign exchanges, while the exchange flowing out in this way is tiny as compared to the regime’s wastage. The economies of these cities are mostly based on imports from Iraq. Rasul Khezri, an MP for the Kurdish city of Sardasht, said the blockade has destroyed the business of six million shopkeepers and caused the unemployment of 75,000 porters.

Protests against other forms of tyranny are still alive. In February, the bloody clashes between a Sufi order and the police in Tehran left three policemen killed. Women, despite facing the morality police’s harsh treatment, continue their daring protests against the compulsory hijab. About 150 ethnic Arabs in Khuzestan were arrested during protests against ethnic oppression and humiliation sparked off by a show on the Iranian TV which missed out the Arab minority. Farmers in the central Isfahan Province marched in the streets of the third largest city of the country and disrupted the Friday prayers and chanted against the government. In Kazeroun, in the southern Fars Province, the protesters, in a similar move, seized the Friday prayers compound and did not allow the prayers to be held as normal. These moves are extremely important because Friday prayers have used to be the centre of state propaganda and propagation of the regime’s policies.

Khamenei’s representatives lead the prayers, and the people’s slogans against these fanatic Mullahs means undermining the ‘Supreme Leader’.

In March, poor peasants in Isfahan Province, whose business is dying because of water shortages, engaged in clashes with the police. During May, the International Workers’ Day rally was held outside the parliament despite the police brutality. A number of workers were arrested and released later.

Previously in April, teachers staged nationwide rallies. The most striking fact with the teachers’ rallies was that it was a coordinated action in various cities, and secondly their slogans included “bread, job, freedom” that show the protests are not limited just to economic demands.

For the moment, workers of railway maintenance have gone on strike in different cities, while workers of Hepco Company in Arak blocked the railway to the city to compel the government to consider their demands. Thousands of workers who have not been paid for months can no longer tolerate the situation and this has risen the workers’ militancy.

Discontent from below ruptures the top

The regime’s factions, which temporarily concealed their in-fighting in the face of unprecedented December-January riots, have restarted their power struggle. Hardliners, led by the Islamic Revolution Guards Corps (IRGC) Intelligence Organisation, attacked the Rouhani administration by putting pressure on Tehran mayor, to the point that he had to resign. Before that, they arrested a number of environmentalists and officials on the charges of espionage. The pressures caused the personnel at the Environment Protection Organisation to flee the country for the fear of arrest.

In mid-May, Vice-President Jahangiri rebuked former President Ahmadinejad for his remarks on an “imminent revolution” that could flush out the entire regime like a flood. Ahmadinejad has distanced himself from the establishment more than ever before. Two of his aides were arrested early this year.

In reaction to the increasing role of the IRGC in political disputes, Rouhani implicitly approved the regular army against the Guards and accused them of involvement in corruption. The IRGC immediately responded to Rouhani, and without mentioning his name, blamed the internal forces who provide fodder for the cannon of “enemies”. Rouhani also bitterly reproached the government officials for yielding to pressures by the conservative-led judiciary and the institutions affiliated to Khamenei.

As it is observed, the regime’s main poles of power – Khamenei, the IRGC and the moderate-reformist block led by Rouhani – cannot reach an agreement. The gap between them grows unless a major threat to the regime appears.

Roots of the crisis

The Iranian regime acknowledges that the economy is ailing. The regime leaders have underlined various reasons, from war to sanctions. However, their baffling answers have always missed the main cause; the crisis has roots in the capitalist system. This is a crisis, which started in mid-1970s and, except for very short-lived quasi-boom period, has dominated the economy.

The recent foreign currency crisis revealed the story much better. Under the Rouhani administration, the money in circulation has risen to 14,450 trillion rials (about 350 billion dollars). This huge liquidity moves around like a flood and captures every sector it enters. Interestingly, Rouhani blamed his predecessor Ahmadinejad for the uncontrolled rise of liquidity, which amounted to 4,910,000 billion rials (about 98 billion dollars). A growth by three times!

In the past, the regime tried to control and manage this wandering money by setting a high interest rate, around 20 per cent, which was one of the highest in the world. In turn, the banks lent the money with high interest rates to investors – mostly the people inside the regime or having close ties with them – who poured the money into housing development projects in the brisk market of 2000s. However, the falling purchasing power of wage-earners caused many of these projects to be left incomplete, or the completed projects failed to realise a profit by selling houses to buyers. Now, in the corrupt Iranian system, there are a couple of thousands of debtors who owe millions to the banks. They brazenly do not pay the debt and this has put banks on the verge of bankruptcy.

Rouhani’s administration tried to encourage manufacturing by reducing the interest rate to 15 per cent. What was the result in this “ailing” economy? They money poured into the foreign currency market and the rial exchange rate versus the dollar hit the record of 60,000. After employing the police and arresting street dealers and closing some foreign currency shops, the government announced the new rate of 42,000 rials. This was a cunning way to depreciate the national currency by about 20 per cent at the expense of the people. And this was an end to Rouhani administration’s promise that it would relax the government’s grip on the economy and would stimulate a boom. Musa Ghaninejad, a pro-capitalist liberal economist, described the government’s new policy “declaration of war against laws of economics” and a “a return to the rationing policies of 1980s”.Now, the regime has to increase interest rates even more or let the liquidity remain outside of its country.

Driest year

Environmental crises and the regime’s inaction have intensified the economic crisis and the masses’ anger. Unwise construction of dams, the failure to rehabilitate water distribution lines and giving permits for digging wells beyond the capacity of ground waters has led to a severe water shortage. Iran will experience one of its worst droughts of recent years. The government’s priority is to keep industries running and this requires allocating water resources to big industries. This has had a detrimental impact on poor farmers who have lost access to water resources. The enraged farmers destroyed a pipeline which transfers water from Isfahan to Yazd. Furthermore, MPs for Isfahan city announced five million people in the city would not have even drinking water in summer.

Dying nuclear deal?

US President Donald Trump has announced the US’s withdrawal from the 2015 nuclear deal with Iran, also known as the Joint Comprehensive Plan of Action (JCPOA). Trump said the US would reinstate the strongest sanctions on Iran. Iran’s regime had frequently threatened that it would leave the deal if the US exited it formally. However, the regime has resorted to looking to the main European powers, as well as China and Russia, to keep the deal alive. Iran has asked the European Union (EU) to give necessary guarantees that Iran will benefit from the deal. This means that the EU allowing European companies and banks to cooperate with Iran at the expense of a confrontation with their historical ally, the United States. But even this will not be risk free because European leaders have openly criticised Iran’s missile programme and its expansionist policy in the Middle East. The Iranian regime has reiterated that its missile programme, its intervention in Syria and its support for Yemeni Huthi rebels will not be open to negotiations with the West. Iran has set a 60-day deadline for Europe to make a decision on how the JCPOA could be implemented without the US.

The main loser in Trump pulling out of JCPOA is the Rouhani administration that hoped to restore the crippled economy. The US’s withdrawal was a blow to Rouhani, and encouraged the hard-line faction to renew its attack on the moderate-reformist administration. Towards the end of May, the Assembly of Experts, a watchdog body which choses the Supreme Leader, blamed Rouhani for signing the JCPOA and said he must make an apology for the failure.

The regime’s maneuverers and options

The Rouhani administration that predicted Trump’s exit has started to enforce strict monetary policies. It suddenly depreciated the national currency and introduced a unified rate, as well as banning foreign exchange trade in order to prevent capital flight. It also sold about seven million gold coins in an attempt to control the unprecedented liquidity that is the driving force for unchecked inflation. Nevertheless, all these actions are to preserve the status quo, which means the persistence of current poverty, unemployment and falling life standards for the working class. A government spokesman said to have an economic growth rate of 8 per cent the country needed resources amounting to 7,000bn rials (165bn dollars) a year, and ridiculously added that this money could not be earned even in the most favourable conditions!

The regime is struggling to find a shelter in the gap between the US and Europe. Furthermore, it tries to approach Russia and China more than before. Though it has recently collaborated alongside Russia in regional developments, the Tehran regime is not sure that Moscow will not use Iran as a trump card in the power game amongst imperialist powers in the Middle East.

Expanding strikes

Contrary to expectations that the regime’s anti-American nationalist rhetoric might dissuade people from their struggles, the working class has expanded its strikes on a massive scale. In May, lorry drivers in more than 150 cities went on strike. Teachers held demonstrations in a number of cities and some of their leaders were arrested. The campaigns by clients of bankrupt private banks continue. Protest against bad living conditions and low payments even include military pensioners who call for a rally.

The main characteristic of this stage of the struggle is that working class is trying to carry out its campaign nationally. This was the case with the drivers and teachers. It seems the movement is overcoming some of its two shortcomings; isolation and lacking political perspectives. While the masses are coordinating their actions through modern means of communications, creating a political vehicle still remains the unfulfilled task of the Left. What is emerging in Iran now is a widespread union movement, though the regime obstinately refuse to recognise it. These new conditions provide a suitable space for the Left to combine class consciousness with strengthening the autonomous movement.

The regime, war and imperialism

The US withdrawal from the JCPOA has brought up new questions about Iran’s future, alongside new re-alingments in the world (which is beyond the scope of this article). For the Iranian left, the question is whether the regime is in the position to take advantage of the clash with the US to mobilise the masses behind it and lengthen its life. Perhaps the best evidence is to look at arguments by the regime’s factions. Moderates and reformists boast that Rouhani could save Iran from a possible war by reaching an agreement with the world powers. While hardliners deny such a threat exists and describe such scenarios as their moderate opponents’ propaganda used to intimidate people and win votes.

The regime does not want to continually harp on about the threat of war as it also strives to show that Iran is in a normal condition and that the regime is strong enough to prevent an imminent war.

The regime’s approach is two-sided. First, it really believes that the US is not in a position to engage in a new war, and, of course, some truth resides in this analysis. Another side of this analysis stems from a fear from a growing mass movement since last year. The regime does not have a plan to relieve the economic crisis and therefore it does not want to aggravate the situation by fear-mongering about a possible war. So, it tries to ensure the people that there will be no war, let alone capitalizing on war because the masses are fed up with the regime’s anti-American and anti-Western rhetoric.

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