by Amir Taheri
The sorry state of the Iranian economy and the inflation that is increasing the number of poor Iranians by an average of 10 percent a year is rooted in a political strategy that puts the interests of the dominant ideology ahead of the interests of Iran as a normal country
Today's inflationary crisis in Iran may be more political in nature than economic.
The sorry state of the Iranian economy and the inflation that is increasing the number of poor Iranians by an average of 10 percent a year is rooted in a political strategy that puts the interests of the dominant ideology ahead of the interests of Iran as a normal country.
As repeatedly put by the "Supreme Guide," that strategy has two key aims: driving the United States out of the Middle East, or "West Asia" that Khamenei has borrowed from Russian political lexicon, and wiping Israel off the world map. In pursuit of those aims, Tehran is forced to maintain increasingly costly surrogates in Iraq, Yemen, Lebanon, Syria, Gaza, and, more recently in a number of pro-Russian African states. The problem is that those surrogates don't want the Iranian national money, rial, and insist on getting crisp greenbacks. Thus, Iran needs a constant flow of American dollars, precisely the currency that they claim they want to dethrone as the global money.
The Islamic Republic of Iran doesn't spend its dollars as wisely as private citizens. Its dollars end up in the pockets of Hezbollah, Islamic Jihad, Hamas, Hashed al-Shaabi, Asaeb ahl el-Haq and militant Shiite groups in Afghanistan, Pakistan and West Africa. The dollars that the "Supreme Guide" earns with so much difficulty are also used to pay what is left of Bashar al-Assad's army, party and administration.
Fasten your seat-belts for the first hyperinflationary freak-show caused by ideological lunacy.
Is Iran heading towards hyperinflation?
Until a few months ago, decision-makers in Tehran would have dismissed the question as another "Zionist conspiracy" against the regime in Iran. Now, however, as the annual inflation curve heads towards the 100 mark, even the "Supreme Guide", Ayatollah Ali Khamenei, is forced to show concern and demand that "someone do something about it". The question is: who is that someone who is supposed to act and what is the something that must be done?
The "Supreme Guide" has already tried to answer the question by saying that "if we produce more, we could supply more goods and services and that could halt the rise in prices." In other words, he believes that the current inflationary spiral has purely economic causes. Up to a point this makes sense. Thanks to US President Joe Biden's decision to loosen sanctions on Iran, the country's oil revenues have risen by more than 60 percent since 2018, partly thanks to China buying more Iranian oil, offered with unprecedented discounts.
However, other mullahs, albeit gingerly, disagree with the "Supreme Guide" on this issue.
Ayatollah Muhammad-Taqi Mudarresi, a big turban in the holy city of Qom, blames "the sinful behavior" of some Iranians, meaning women who have discarded the mandatory hijab, for skyrocketing prices. The Qom seminary, or "howzah," demands closer attention to "growing spiritual deficiencies" as the root cause of Iran's economic problems, and offers to provide "theological remedies" based on the teachings of "Imam" Ruhollah Khomeini, the Islamic Republic's founding father.
Let's ignore the offer by the howzah to save Iran's sinking economy with "theological remedies". But even then, the economic diagnosis may not offer all the answers we need. Today's inflationary crisis in Iran may be more political in nature than economic.
In other words, what we see in Iran today isn't like the hyperinflationary crises that struck the Weimar Republic or, in different contexts, several Latin American nations between the 1960s and the new century. In almost all those cases, the affected economy was unable to supply the minimum requirements of society for food and energy while the state increased demand by printing and distributing money.
Iran, however, is still self-sufficient in food production while it has abundant energy sources of its own. And, yet, prices of both food and energy keep rising. A mystery? Not necessarily, if you look closer at what is going on. The sorry state of the Iranian economy and the inflation that is increasing the number of poor Iranians by an average of 10 percent a year is rooted in a political strategy that puts the interests of the dominant ideology ahead of the interests of Iran as a normal country.
As repeatedly put by the "Supreme Guide," that strategy has two key aims: driving the United States out of the Middle East, or "West Asia" that Khamenei has borrowed from Russian political lexicon, and wiping Israel off the world map. In pursuit of those aims, Tehran is forced to maintain increasingly costly surrogates in Iraq, Yemen, Lebanon, Syria, Gaza, and, more recently in a number of pro-Russian African states. The problem is that those surrogates don't want the Iranian national money, rial, and insist on getting crisp greenbacks. Thus, Iran needs a constant flow of American dollars, precisely the currency that they claim they want to dethrone as the global money.
But where could one get hold of those greenbacks?
China and India, the two biggest buyers of Iran's discounted oil, don't pay in dollars but in yuans and rupees. Thus, Iran's eventual earning is reduced further when it exchanges those yuans and rupees for the US dollar on the black or brown markets.
To complicate matters further it is not Iran's regime alone that is thirsty for dollars. Millions of Iranians, including those with small savings, instantly exchange whatever rials they get into dollars. According to a Central Bank of Iran study in 2019, there were informal -- though not necessarily illegal -- money-changing bazaars in over 300 Iranian towns and cities. In one town in Charmahal province, the old animal market, selling sheep and goats brought by local tribes, has given way to a foreign exchange center with scores of dealers.
Another way for the private sector to get dollars is to export goods of all kinds, notably food, to neighboring countries, with Iraq at top of the list. The Iraqis love it because prices are in denominated the Iranian rial, which is becoming increasingly cheap. Iranian exporters also love it because they get US dollars from the Iraqis. The dollars never reach Iran, ending up in private bank accounts in a dozen countries in the region, the European Union and financial "safe havens".
These exports contribute to further cause shortages in Iran, which raise prices of basic goods.
Another way to secure dollars is through the sale of property, including state assets, to foreign investors paying in dollars. Iraqis are buying real estate at prices beyond imagination. Last week, even the Taliban, which appear to have an endless supply of US dollars, entered the banquet by investing $50 million in plum resort land along the Caspian Sea. Many Iranians go for a similar strategy by using their dollars to buy real estate in Turkey, Armenia, Georgia, Cyprus and Serbia.
The Islamic Republic of Iran doesn't spend its dollars as wisely as private citizens. Its dollars end up in the pockets of Hezbollah, Islamic Jihad, Hamas, Hashed al-Shaabi, Asaeb ahl el-Haq and militant Shiite groups in Afghanistan, Pakistan and West Africa. The dollars that the "Supreme Guide" earns with so much difficulty are also used to pay what is left of Bashar al-Assad's army, party and administration.
Fasten your seat-belts for the first hyperinflationary freak-show caused by ideological lunacy.
This article originally appeared in Asharq Al-Awsat
Amir Taheri was the executive editor-in-chief of the
daily Kayhan in Iran from 1972 to 1979. He has worked at or written for
innumerable publications, published eleven books, and has been a
columnist for Asharq Al-Awsat since 1987. He is the Chairman of
Gatestone Europe.
Source: https://www.gatestoneinstitute.org/19804/iran-the-greenback-curse
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