Iran elections have no quick fix for economy

Voters in Iran look for pragmatic solutions to their country’s economic problems ahead of elections.

President Mahmoud Ahmadinejad. Picture: AFP

DUBAI - If there is an issue at the core of Iran's presidential election next month, it is whether the next president can jump start the economy and ease the deep financial pressures facing the majority of Iranians.

Spiralling prices and constricted spending power have left millions of Iranians struggling against a virulent combination of Western economic sanctions and poor fiscal management.

The eight candidates are locked in a battle for voters over who could mend the economy, a much deeper problem than four years ago when urban masses disputed the election result and took to the streets in protest.

"With inflation and unemployment in an upwards spiral, the main concern of voters is bread and butter issues. The average Iranian voter is now 38-years-old and primarily concerned with securing a livelihood," said Mohammad Shabani, an independent Iran analyst based in Britain.

President Mahmoud Ahmadinejad cannot stand again and will be replaced by one of the eight candidates, all approved by the Guardian Council loyal to Supreme Leader Ali Khamenei. They all accuse Ahmadinejad of mismanaging the economy over his two terms in office.

"Our country is one of the most powerful in the region and our missiles can reach thousands of kilometres but we're in need of chicken meat," said candidate Mohsen Rezaie, former head of the Revolutionary Guards, during a campaign advertisement.

Hard-hitting sanctions imposed by the United States and its allies targeting Iran's oil and banking sectors nearly halved oil revenues in 2012 to around $50-60 billion. Iranian banks were disconnected from the global financial network, making payment transfers to or from Iran extremely difficult.

"LUDICROUS" PRICES

As a result, Iran's currency has plummeted in value, bringing soaring inflation and unemployment as businesses struggle to adapt. Iranians now pay up to three times more for staple foods than they did 12 months ago.

"It is ridiculous, I never had to worry about buying fruits or groceries before but now even the middle-class citizens have to be careful," the 37-year-old Azin, a housewife and mother of two, living in Tehran said by telephone.

Official figures say unemployment stands at around 12 percent but is double among young people. Independent analysts indicate real figures may be a lot higher.

Analysts say the combination of the economic ills and little fiscal expertise in government could be lethal over time.

PAYMENT FOR OIL

According to estimates by the International Energy Agency, Iran lost out on around $40 billion in export revenues in 2012. The IEA says sanctions halved the country's crude exports from levels of around 2.2 million bpd in 2011.

The issue is more one of foreign currency which Iran lacks.

Instead of hard currency, Iran now accepts alternative payment from key crude customers India and China, who supply a range of commodities and goods.

With little currency on hand, the government has tightened access to dollars at its standard rate of 12,260 rials. Dollars sell for three times as much on the open market.

Iran's car industry, which accounts for around 10 percent of GDP, can no longer invest in key equipment because of restricted access to government dollars; say officials quoted in Iranian media.

FUNDING SYRIA

Iran is spending more money abroad, prioritising support for close ally President Bashar al Assad of Syria to maintain what it views as existential strategic interests.

There is little reliable data at hand for how much the Islamic Republic spends on its commitments to aid Assad in a civil war that has killed 80,000 people over two years.

Iranians appear to be increasingly irritated by the extent of their charity. Last October, traders in Tehran's Grand Bazaar shut their shops and joined impromptu demonstrations, criticising their government's policies and support for Assad.

But with foreign policy strategy solely the preserve of Supreme Leader Khamenei, aid to Syria is one of the many areas in which the new president will have little say.

"The question is not who will be president, but if anyone could succeed despite sanctions and widespread mismanagement and structural deficiencies embedded in Iran's economy," said Ali Dadpay, an Iran-born assistant professor at Clayton State University in the US state of Georgia.

"Whoever comes to office needs to know his economics 101 pretty well."