Economy tops agenda in Iran

For the first time in many years, Iranians will turn away from the geopolitics which have dominated discourse since the Islamic revolution in 1979 and focus instead on the state of their economy.

In 1979, with the overthrow of the Shah and rise of the Ayatollahs still fresh in their memories, Iranians could not have imagined that a year later they would be locked in a bitter war with Iraq.

In the 1990s, Iran was part of the US administration's dual-containment policy and then became branded as a member of the axis of evil. After 9/11 Iran dominated world headlines as its nuclear programme became the springboard for all discussion on the Islamic republic.

However, as Iranians mark the 30th anniversary of the Islamic revolution, politics will be overshadowed by economic hardships which have arisen partly due to plummeting oil prices and the world banking crisis.

Iran under sanctions

Economy will overshadow the nuclear programme as an issue this year [GETTY]
In 2008, the UN Security Council passed two more resolutions on Iran's nuclear programme and international sanctions, bringing to five the total number of resolutions since the standoff with the West started.

Mahmoud Ahmadinejad, the Iranian president, remained defiant and said: "Issue as many resolutions as you want. Pass [and collect] resolutions until your 'resolution pouch' bursts."

Iran's Atomic Energy Organisation announced that it was planning to install 6,000 centrifuge machines to double its uranium-enriching capacity from the previous year.

While sanctions failed to coerce Tehran into curbing its nuclear programme they did, however, shield Iran's economy from the global economic recession - momentarily.

Nearly five years of record-high oil prices helped Iran's government increase public spending in an effort to protect the local economy from the global financial meltdown.

However, this policy was strongly criticised by many economists who warned about rising inflation and called for more economic discipline and less spending.

Controversial economic plans

In spite of the warnings, Ahmadinejad pressed on with his controversial economic plans, which included forcing banks to lower their interest rates and offer cheap loans to small businesses.

This led to a high-level resignation in the government's economic team.

Tahmasb Mazaheri, the governor of the Central Bank of Iran (CBI), who had successfully controlled the spiraling liquidity growth by tightening the grip on credit loans to government banks, resigned in September.

He had been in office for about a year and his resignation inflamed the already existing economic differences among the conservatives in power.

The conservatives, who had always praised Ahmadinejad's achievement on the international scene and his ability to march the masses against world powers' will to scupper Iran's nuclear ambitions, distanced themselves from his economic plans.

Ahmadinejad has become increasingly alone in his economic battle.

Parliamentary elections

Ali Larijani is one of the most vocal critic of Ahmadinejad's economic polisies [EPA]
In 2008, Iran held its eighth parliamentary elections since the Islamic revolution in 1979.

Reformists dominated the parliament between 2000 and 2004, but they were defeated by conservatives as many of their potential candidates were disqualified by the conservative Guardians Council, a 12-member constitutional watchdog.

It accused reformists of trying to "deconstruct" the Islamic government and roll back the ideals of the revolution.

Second-ranking reformist candidates failed to secure even a third of the 290-seat parliament.

However, despite winning parliament's majority for another four years, defections within the conservative camp left few reasons for celebration.

The new parliamentarians soon proved that they were not going to follow in the footsteps of the elders who had been at the heart of the revolution.

Damaging economic policies

The defections posed a challenge to Ahmadinejad who had enjoyed nearly unconditional support and was almost unquestioned when it came to his economic policies.

After the elections, many of the conservative MPs said his economic policies were damaging. This brought the critics closer to their reformist rivals and resulted in the election of Ali Larijani, Iran's former chief nuclear negotiator, as parliament's new speaker.

Larijani resigned from his position as nuclear chief over differences with Ahmadinejad in how to manage the country's longstanding nuclear row with the West.

Though he had never openly criticised Ahmadinejad, his resignation signaled the emergence of a more moderate conservative faction.

Showdown

Parliamentarians: Ahmadinejad is damaging Iran's legacy of conservatism [REUTERS]
On November 4, the Iranian parliament fired off the opening salvo of its confrontation with Ahmadinejad when it impeached and sacked his interior minister.

Ali Kordan, who was appointed only 90 days prior to his impeachment, was unanimously voted off his post because he had presented a fake degree from Oxford University to obtain parliamentary confirmation.

Legislators called him a disgrace to Iranian conservatism.

The parliament approved Ahmadinejad's next candidate for the post, his close ally Sadeq Mahsouli, in a display of unity with the government but the rift was beginning to shake legislators' confidence that the country was headed in the right direction.

Ahmadinejad is hoping parliament will pass an "economic revolution" plan which he hopes will eliminate most government subsidies and replace them with $40-70 cash payments per person per month.

A reformist newspaper has recently revealed that this plan is in fact a copy of the World Bank recommendation to save Iran's oil income for much needed development plans.

Few options

Though it may sound odd for a government that has constantly criticised World Bank policies, the government may not have much choice.

Oil prices that had sky rocketed to over $140 in July, are now below $50.

Saeed Leylaz, an economic analyst and vocal critic of Ahmadinejad's monetary policies, has said that the government now faces a deficit of $100 million a day.

The government is being forced to cut expenses including the $90 billion annually spent on subsidies.

Other experts believe the "economic revolution plan" will increase inflation at least in the interim; Larijani has said that parliament will stop any plan, bill or measure that fuels inflation.

Confrontation

The rift between conservatives in the parliament and those in the government is expected to widen in the coming year.

Ahmadinejad's critics say his economic revolution plan is merely a populist scheme to buy votes ahead of presidential elections on June 12. He has repeatedly denied the charge, saying this plan would only cost him his popularity.

Ironically, the plunge in oil prices may bring the nuclear issue back to the fore. Deprived of a major part of its income, Iran cannot afford to remain isolated from the rest of the world.

The government may feel forced to return to the negotiating table with world powers.

That, in turn, may cost the government dearly ahead of the election.

Ahmadinejad, who came to power with promises of improving the lives of the poor and maintained his popularity by defying world powers in Iran's nucelar stand-off with the West, faces the risk of losing on both fronts.

His economic revolution plan might be a way out. The impact of the economic plan on Ahmadinejad's popularity remains to be seen, but there is little doubt that his position among his conservative allies has waned since he won office in 2005.