December 27-2013
This is the last of three parts
By Jahangir Amuzegar
The official consumer-price index of 10.4 percent in 2005 began to rise steadily year after year, surpassing 40 percent – the world’s third highest – in the summer of 2013, when Ahmadinejad’s term ended.
Private estimates of the price rise were consistently higher. Significantly responsible for the steady rise in liquidity and consumer prices were the president’s three signature projects – financed primarily by the Central Bank’s new money creation:
(1) loans to the so-called ‘quick returns’ projects to create 2 million jobs, (2) lowcost housing in the periphery of large cities, and (3) the controversial cash-payment- based subsidies reform.18 All three are considered failed schemes. The hous- Corps (IRGC) rapidly took over an increasing ing project alone, according to the current housing minister, has been responsible for 40 percent of the new liquidity.
To combat inflation, instead of balancing the budget, reducing bank lending and controlling liquidity, Ahmadinejad opened the import gates for cheaper competing products. Thus, of the nearly $700 billion in oil-export revenue received during his eight-year tenure – 63 percent of all oil income during the last 108 years-some $440 billion was spent on imports, raising yearly purchases from $36 billion to $60 billion. The outcome, while benefiting low-income groups by decreasing prices, was the destruction of domestic industries. At the same time, precious foreign exchange received from the export of a depleting resource, instead if being reinvested to produce new wealth, was squandered in the import of petty consumer goods.
The government claims that, as a result of its populist projects, the Gini coefficient of income distribution improved. Although denied by other reports, even if it were true, relative poverty did not diminish, and still over 20 percent of the population languished in poverty.
On top of these policy errors, Iran’s economy experienced a sea change during Ahmadinejad’s tenure in the direction of economic militarization – comparable to the Indonesian and Egyptian cases. Already suffering from a large and inefficient state sector, it moved further in that direction, despite earlier promises to reduce it.
Initiated and supported by Ahmadinejad himself, the Islamic Republic’s Guardian 130 Corps (IRGC) rapidly took over an increasing segment of the Iranian economy.
The Khatamol-Anbia Corporation, and its sister, Khatamol-Ossia, the engineering arms of the IRGC, gradually became the largest and richest domestic contractors, spreading their wings over such sectors as oil, gas, petrochemicals, industry, mines, road building, irrigation and dam construction, Curiously enough, as the UN, U.S. and EU economic sanctions primarily targeted the Corps, they all inadvertently helped it to grow by overtaking the work of foreign contractors and by becoming the contry’s number-one smuggler.
And, despite frequent promises to reduce government’s role in the economy, and the budget’s reliance on oil revenues, the opposite occurred in both cases.
Recent information shows that the muchtrumpeted program of privatization during Ahmadinejad’s tenure was really a sham: only 17 percent of the state enterprises were sold to the true private sector, and 83 percent were taken over by the semi-public agencies.19
FOREIGN RELATIONS
In the foreign arena, just as Western frustration with the slow pace of negotiations on Iran’s nuclear program was building, and the Islamic Republic needed an experienced and astute leader to handle the situation, the opposite occurred. A narrowminded Islamic fanatic, who had never traveled outside Iran and was reflexively anti-Western, took the helm. Although not directly involved in the conduct of nuclear negotiations with the P5+1 group, his attitudes inflicted irreparable damage to Iran’s position. By being combative and provocative, and by repeatedly denying the Holocaust, he raised the ire of the civilized world and made it impossible for the Islamic Republic to pursue a serious foreign policy.
Oddly enough, toward the end of his tenure, he called his blatantly and damaging statement about Holocaust one of the ‘greatest achievements of his presidency’; he had raised ‘a taboo topic that no one in the West allowed to be heardÓ and thus Òbroke the spine of the Western capitalist regime’ !20 Enormously ambitious and highly self-confident, though a novice in diplomacy and foreign policy, Ahmadinejad lowered the international prestige of Iran had gained during the Khatami administration.
He forged an unholy alliance with a number of small, poor and wayward countries in Latin America and Africa against Washington, further contributing to Iran’s isolation and negative image. His fruitless confrontational pronouncements caused Iran’s national interest irreparable damage.
And, by assuming the role of Western ‘provocateur-in-chief’ pursuing confrontation with Washington, the European Union and the United Nations,21 he triggered one economic sanction after another, undermined Iran’s global standing, and ultimately turned it into a pariah state. Meaningless statements like Òwe do not need the world, the world needs us’ caused nothing but problems. Iran’s relations with Bahrain, Yemen, Lebanon, and Saudi Arabia badly deteriorated due to Tehran’s support of Shia minorities in those countries.
A SUI GENERIS PHENOMENON
By all indications, Ahmadinejad is intelligent, informed and politically astute.
He often brags about his advanced education often brags about his advanced education and his doctorate. He writes and speaks eloquently in Farsi. He is a master in debate.22 Yet some of his statements and proposed projects not only defy explanation, 23 but also smack of delusion:
– The Holocaust did not happen; it was a pretext by Western governments to justify the establishment of the Zionist regime.
– The September 11 tragedy in Washington and New York was orchestrated by Washington to combat U.S. economic recession, a fact accepted by the majority of American people and most nations around the world.
– The west created HIV in order to plunder Africa.
– Our Western enemies are preventing rain-bearing clouds from coming our way, causing draught.
– One of our 13-year-old students has been able to generate nuclear power in her basement. We have a sorcerer who, getting inspiration from the saints, can point to various mines by looking at the grass.
Equally astonishing have been some of his pet proposals. In a country with scant rainfall, frequent drought and water rationing, he proposed to give every citizen 2,000 meters of land for a vegetable garden to grow vegetables and sustain himself.
When he was reminded of the paucity of water for such a venture, he said, ‘God never created a land without enough water for it!’ In a country already importing 30 percent of its food, he proposed that Iran’s prize-winning population-control program be abandoned and that the government encourage every family to have four to six children, as the country could afford to sustain 150 million people.
A SORROWFUL FINISH
Ahmadinejad’s administration came to an end without even a whisper. There were no celebratory parties, no appreciative demonstrations, no praise of his tenure.
Members of the new government have taken turns pointing out his misdeeds. At a birthday party organized for him a few weeks after leaving office, only 70 people showed up. He has shunned public speaking since then. The only faint praise of his services has come from Supreme Leader Khamenei, who had backed him all along and found the ex-president’s ideas close to his own. At the last meeting of his cabinet with the Rahbar in mid-July 2013, Ayatol- lah Khamenei did praise his government for its ‘accomplishments,’ particularly for propagating and illuminating ‘revolutionary slogans.’24
Ahmadinejad’s spectacular fall from grace is best portrayed in his treatment at the hands of the most conservative newspaper, Kayhan, which normally reflects the views of the supreme leader. The lead editorial, which had initially labeled his administration ‘’ the most beloved government” since the Islamic revolution, changed its tune. On Tuesday, April, 23, 2013, it called the outgoing president “a coward, a bluffer and insincere.”
Amuzegar served the prerevolutionary government of Iran as minister of commerce, minister of finance and ambassador-at-large. He was on the Executive Board of the International Monetary Fund, representing Iran and several other member countries between 1974 and 1980. He has taught at UCLA, the University of Michigan, Michigan State University, the University of Maryland, American University and Johns Hopkins SAIS. He is the author of seven books and more than 100 articles on Iran, oil, OPEC and economic development.
