For Iran, 2012 will go down as the year of economic woes. The mantra of the “enemy’s psychological war against Iran” will no longer be blamed more than internal mismanagement even by the most ardent supporters of Mahmoud Ahmadinejad and the Leader, Ali Khamenei. The “resistance economy” against the “economic war unleashed against Iran” has become the name of the game. Several years of expansionist fiscal and monetary policies — underwritten by high oil prices and government spending and accentuated by liberal import policies — clashed directly with the ferocious sanctions regime imposed by the United States and its allies. Highly contested politics continued to reign as well. A nationwide election — the first after the contested 2009 election — was held; domestic and international objections regarding the government’s treatment of Iranian citizens continued; the attempt to delineate the qualification and age limit of presidential candidates failed. I am not particularly good at ranking events based on importance, but upon Jasmin Ramsey’s request, here are my top 10 picks for Iran in 2012.
1. The Rial’s Freefall
The gradual drop in the value of Iranian currency, the rial, begun at the end of 2011 and continued until about September when the bottom literally fell off, registering a 50 percent drop in one month. The government eventually cracked down on the unofficial market, which as economist Djavad Salehi-Isfahani pointed out, is a limited currency market, and created a foreign exchange center for importers and exporters based on a managed floating system. It also continued to maintain a much lower fixed rate for the import of critical goods such as medicine and some foodstuff. By the end of the year, the foreign exchange rate stood a bit below 25,000 rials per dollar (in comparison to about 15,000 rials per dollar in the unofficial market in January 2012 and about 10,000 a year before).
The cause of the deprecation consumed much public commentary. Some accused the government of cynically manipulating the market in order to sell its dollars at a higher rate and using the generated money to cover its budget deficit. Others lamented the Central Bank’s incompetence while Ahmadinejad blamed unknown market manipulators as well as US-led measures despite his previous dismissal of sanctions as nothing but “torn paper.” But no matter who or what was at fault, the rial’s drastic drop was the most significant event of the year, not necessarily because of its economic impact, but because all the government’s talk about everything being dandy despite sanctions could no longer be listened to with a straight face. Of course, many outside observers’ predictions that the rial’s crash would lead to the collapse of the Iranian economy did not materialize either. Ultimately, the rial devaluation showed that the Islamic Republic is hurting, but far from dying.
2. Sanctions, Sanctions, and Even More Sanctions
Since its onset, the Islamic Republic of Iran has faced sanctions, including some imposed by the United Nations and unilaterally by various countries. However, 2012 should be marked as the year that the US-led and promoted sanctions regime went after the Iranian economy’s jugular. In January, US pressures led the EU to impose an oil embargo on Iran and the freezing of Iran’s Central Bank’s assets. In March 2012, all Iranian banks identified as institutions in breach of EU sanctions were disconnected from the world’s hub of electronic financial transactions, SWIFT. This was followed by the EU placing sanctions on Iran’s best technical university, Sharif, in December.
The EU seems determined to prove Ahmadinejad’s 2007 claim that “In addition to the closure of our country’s nuclear centers, they were after the closure of universities and research centers connected to peaceful nuclear research, including classes in physics and mathematics and they had announced this officially.” At present, both EU and US institutions look like bodies filled with what can only be described as sanctionholic politicians and bureaucrats desperately in need of a 12-step program. Unable or unwilling to offer Iran a nuclear package that it can accept, they act like people who cannot help themselves because they are addicted to just one thing.
In Iran, sanctions began to bite not only because oil exports dropped significantly (by about 40 percent) but more importantly because banking restrictions prevented the transfer of currency into the country. People are complaining that even vital drugs — not on the sanctions list — have become difficult to import because of payment restrictions. There is, meanwhile, little evidence that Tehran is reconsidering its position or that it’s willing to accept a nuclear deal that it previously rejected. Perhaps 2013 will be the year that the Iranian leadership will finally crack and cry uncle, but I wouldn’t bet on it.
3. The Parliamentary Elections
Elections for the 9th Islamic Consultative Assembly or Majlis were held on March 2 with a second round on May 4 in the 65 districts where candidates did not receive 25 percent or more of the votes cast. Stricter qualification criteria saw fewer candidates registering than in previous elections. Still, more than a third were disqualified by the Guardian Council, leaving about 3,400 candidates to run for the 290 seats that represent Iran’s 31 provinces. This was the first election held since the contested 2009 presidential election and much was made of it being an eventless event which nevertheless registered a respectable participation rate for the legitimacy of the Iranian state. Posters exhorted people to vote as a means to prevent military attacks and displayed emphatic declarations by Khamenei that in this “critical” election, high turnout would be a “slap” in the face of the enemy.
Official figures showed a 7 percent increase in voter turnout compared to the last parliamentary election in 2008 — from 57 to 64 percent – but many doubt the veracity of this figure. Participation rates in parliamentary elections have ranged from 51 to 71 percent and, given the disaffection of many voters after what happened in 2009, the likely turnout was probably on the lower end. Turnout in large cities such as Tehran has historically been much lower. Despite the failure of more than 65 percent of sitting MPs to return to the new session (the incumbency rate is historically low in Iran and only between 30 to 35 percent), the election was mostly a competition between conservatives and ultra-conservatives wherein the latter did not do as well as the more traditional conservatives. This outcome assured the re-election of Ali Larijani as Speaker along with deputy speakers who are also traditional conservatives. Historically, parliamentary elections held right before the president’s second term is over have been harbingers of trends for the next presidential election. So, although Iranian presidential elections have proven unpredictable the last few times, a lackluster election with slim pickings will likely be the name of the game for June 2013. Still, even disgruntled non-voters will probably be hoping for a move away from the radicalism and erratic conduct of the current president.
4. The Majles Questions, Ahmadinejad Mocks
After weeks of wrangling, in a first for the Islamic Republic, President Ahmadinejad was called to the Majles in March to answer questions regarding his refusal to implement legislation passed by the Parliament, controversial cabinet appointments, and a tense relationship with Khamenei. Ahmadinejad’s responses turned out to be both evasive and dismissive; they were performed by a man safe with the knowledge that he would not be impeached. Members of parliament complained that he insulted and mocked their questions but did nothing given the costs of bringing him down during the midst of all the external pressures Iran is under. A second attempt in November to question Ahmadinejad regarding the devaluation of the rial was suddenly halted by Khamenei, who once again expressed his wishes for the president to finish his term without too many disturbances. Still, nothing is over until it is over and Khamenei and the whole country will have to endure much more heartburn in 2013 before Ahmadinejad leaves his post by August. Given the support he has given to Ahmadinejad’s presidency, Khamenei deserves the stress, but the country doesn’t.
5. The Suspension of the “Great Economic Surgery”
The Parliament was manhandled by Ahmadinejad on many occasions but did manage to strike back at the heart of his economic program. Fearing greater inflation than the official 25 percent, and concerned about the unauthorized use of foreign exchange to cover the budget deficit, the Parliament suspended the second phase of the Targeted Subsidies Reform Act of 2010 — the center-piece of Ahmadinejad’s “Great Economic Surgery” — in November. This suspension halted more public utility price increases and further rises in monthly welfare cash payments to households, as was planned by the Ahmadinejad Administration. The parliament also voted in a new law which explicitly states that “all money received from the sales of oil and gas proceeds at new higher exchange rates is part of the government’s general revenue, and no part of it can be used to raise monthly cash payments.”
6. Death and Resistance in Iran’s Prisons
This year forcefully disproved the assumption that imprisoning political and civil society activists and critics silences them and fixes the Islamic Republic’s dissident problem. Former presidential candidates Mir Hossein Mousavi and Mehdi Karroubi remained incarcerated in their homes (the former along with spouse Zahra Rahnavard) without being charged and remained mostly without any kind of access to the outside world. But letters written by political prisoners about prison conditions and solidarity among prisoners — as well as the woeful state of the country’s politics — made it out of the prisons and were sufficiently covered by external news and activist outlets for many inside Iran to become aware of them.
Beyond letters, prisoners also staged hunger strikes. Of particular note was the 49-day hunger strike by Nasrin Sotoudeh, a human rights lawyer serving a sentence for “acting against national security.” She ended her strike after judicial authorities acceded to her demand to lift a travel ban imposed on her 12-year old daughter. Her mistreatment and courage was widely reported outside of Iran (Sotoudeh and filmmaker Jafar Panahi were awarded the EU’s Sakharov Prize for Freedom of Thought), but also received publicity inside Iran. The dynamic between prisoner resistance inside the country and the persistent coverage of government mistreatment by Iran-focused non-governmental organizations outside of Iran — such as the International Campaign for Human Rights in Iran (ICHRI) — has proven effective in keeping civil rights at the center of the country’s political discourse. Sadly, this did not prevent the death of Sattar Beheshti, a working class blogger who reportedly died soon after he was beaten by members of the cyber police. His mistreatment was immediately reported in a letter written by 41 fellow prisoners that was smuggled out of prison and his death created an uproar leading to the dismissal of the chief of the cyber police and a parliamentary investigation. In the words of the ICHRI’s Hadi Ghaemi, the Beheshti case marked a milestone in showing that ordinary Iranians risk much harsher treatment by security services than those with name recognition. But the publicity also showed that “the culture of human rights is really taking root in Iran – that they can’t cover it up and run away like they did before.”
7. The UN and Human Rights in Iran
The year of 2012 was also a bad year for Iran’s human rights record at the United Nations. The UN Human Rights Council renewed the mandate of the special rapporteur on Iran that it had established in 2011 (it was the first country-specific rapporteur established by the Council since its inception in 2006). UN actions this year included two damning reports by the Special Rapporteur, Ahmad Shaheed, a rebuke of Iran’s rights record by the UN’s Social, Humanitarian and Cultural Committee, and a call by the UN High Commissioner for Human Rights for Iran to release a prominent human rights activist from detention. The year ended with a rebuke at the General Assembly, which condemned human rights violations including arbitrary detentions, the persecutions of minorities, efforts to interfere with the freedom of expression, and inhumane conditions in Iran’s prison system where torture and cruel punishments have been used. Tehran charged that the GA resolution was politically motivated. Politically motivated or not, Iran’s troubles at international forums intensified with its leadership caught in the paradox of wanting to be a respected member of the international community while protesting the alleged manipulation and bullying of international institutions in the same community by bigger powers.
8. The NAM Showcase
It must be considered pure fortuity for the Islamic Republic of Iran that the decision to hold the Nonaligned Movement (NAM) summit in Tehran was made three years ago in Sharm el-Sheikh, Egypt. Although the previous summit took place shortly after Iran’s contested 2009 presidential election, it’s unlikely that anyone could have predicted the significance of the summit in light of systematic Western efforts to squeeze and isolate Iran. The extraordinary effort put into the event by the government was intended to showcase Iran’s global role and offer concrete evidence that the US-led initiative to isolate Iran has failed — but it did not go as smoothly as was hoped. The unpopularity of Iran’s support for the Syrian government became evident when the Iranian television mistranslated Egyptian President Mohamed Morsi’s denunciations of the tragedy in Syria.
The summit did, however, have some positive aspects for the Iranian leadership. For instance, the large economic contingent that accompanied Indian Prime Minister Manmohan Singh’s visit underscored the reality that while the opportunity costs of the sanctions regime are huge for Iran, the country’s location and resources are countervailing forces that cannot be ignored. Quite a few countries look at Iran’s economic strangulation as a prospect for positive gains. This dynamic is likely to continue as the US actively tries to impose new ways of restricting Iran’s trade while other countries collude with Iran in finding ways to get around them.
9. No More Birth Control Policy
In a major reversal in August, with what was considered one of the most successful post-revolutionary plans, the budget for the national birth control program was eliminated. The Health Ministry will instead get funding for “fertility health” with a focus on the health of mothers and children to come. According to Farzaneh Rouhi:
Iran has stood out for lowering its fertility in a short time without coercion or abortion. The fertility rate dropped from 6.6 births per woman in 1977 to 2 births per woman in 2000 and to 1.9 births per woman in 2006. The decline was particularly striking in rural areas, where the average number of births per woman dropped from 8.1 to 2.1 in a single generation. (European countries took about 300 years to experience a similar decline.)
But Iran’s population is now aging rapidly. The latest census figures show that only 23.4 percent of the country is under 14 (a steep drop from 44.5 in 1986) and the median age has increased from 17.4 in 1976 to 27. The policy reversal unofficially began a couple of years ago when the Ahmadinejad administration began to give financial incentives for child birth. But the official abandonment of birth control policies occurred without parliamentary action and upon the words of Khamenei, who said that he had made a mistake in supporting the policy for too long. Reversal may nevertheless be hard to implement in practice. In Rouhi’s words, “Iran may not be able to reverse public practices, in part because small family size is now enshrined in the psyche of both men and women. The public is now used to having control over reproductive rights and may continue to do so, whether through government-sponsored health services or the private sector.”
10. Threats of War and the Ongoing Nuclear Soap Opera
It would have been easy to place the continuing conflict over Iran’s nuclear program at the top of this list. It certainly was the most reported news regarding Iran. But “ongoing” is the operative word here. Yes, there were three rounds of talks in Istanbul, Baghdad and finally Moscow. Yes, these talks were described by Hillary Clinton as “perhaps a last chance to demonstrate a way forward” that can satisfy the international community’s concerns about Iran’s nuclear program. Yes, there was another report by the International Atomic Energy Agency (IAEA) detailing how Iran used the summer to double the number of centrifuges installed deep under a mountain near the holy city of Qom, while allegedly cleansing another site — Parchin — where suspicions persist about past explosive experiments that could be relevant to the production of a nuclear weapon. And yes, there was a lot of war talk, underwritten by Israeli Prime Minister Benjamin Netanyahu’s efforts to use the US presidential election to pressure the Obama administration to establish a red line of intolerance for Iran’s nuclear activities.
From Iran’s standpoint, though, what happened was business as usual: lots huffing and puffing in order to sell sanctions as an “alternative to war.” Indeed, the business of selling alternatives to war became so prolific that even the covert war of sabotage and cyber warfare was sold as a substitute without any hint of irony or discomfiture. In reality, all the discussions of red lines and deadlines revealed more about the state of politics in both Israel and the US than in Iran. Netanyahu’s speech at the UN — armed as he was with a Roadrunner cartoon of a nuclear bomb — matched Ahmadinejad’s past craziness and signaled the extent to which radicalism has become the norm in Israeli politics. Meanwhile, in the US the limited appetite or outright distaste for yet another attack on a Middle Eastern country was clearly revealed along with much harder to deny distortions from lobbies backed by Israeli hardliners which have been inserted into the US foreign policy making process. (This tale continues with the frenzy surrounding former senator Chuck Hagel’s possible nomination for Secretary of Defense, because, in the words of Elizabeth Drew, “Iran more than any other single issue is at the core of the opposition.”)
The year of 2012 began with hopes for change in the battle over Iran’s nuclear program. It ended with more of the same and would have remained so even if the pressure on Iran was substantially increased. We begin the coming year with a keen understanding that more of the same may not be sustainable for too long. But the question of when there will finally be a change in this trajectory — and if so, whether it will be for better or worse — remains elusive, with the answer residing in Washington as much as it does in Tehran.
Cartoon: Peter Schrank, the Economist