Iran has the world’s largest gas reserves and is fourth in the world in terms of oil reserves after Venezuela, Saudi Arabia and Canada. It also possesses a number of mines including zinc, copper and iron ore which are among the richest in the world.
Iran’s natural and historic treasures can render the country one of the most attractive tourist destinations in the world. Its population is one of the youngest on the planet, and the business traditions coupled with its history can provide the basis for entrepreneurial growth.
Unfortunately, despite all this, Iran’s economy is crumbling. Iran is in a crisis that government figures call a “super challenge” to fix; it involves the water and environmental crisis, corruption, social inequalities, the continued decline of the national currency, bankrupt factories, unemployment especially among university graduates, as well as embezzlement and the systematic looting by top government figures, reported Iran News Wire.
In order to review Rouhani’s five-year economic report card, it is enough to examine the state of the economy after the US dropped out of the JCPOA four months ago. These four months shows the depth of the disaster.
The dollar exceeded the 155,000 mark to the rial, tolling the bells of inflation
The exchange rate in the Iranian market is a phenomenon that faces unexpected fluctuations every day and the government has no solution to the crisis.
On September 16, the US dollar was bought at a price of 143,000 rials, while it was 40,000 rials in February. The Rial has lost its value by 72% over the past 7 months.
Foreign contracts canceled while companies leave Iran
With the start of the new round of US sanctions against Iran, many companies active in the oil, energy, automobile, banking and airlines industry have left the country.
According to the French Le Monde, “the second phase of the US sanctions will be enforced on November 4th”. Reports indicate that more Western companies will leave Iran, including the French Total, Peugeot, Renault, and British Airways.
Iran’s industries go bankrupt as factories close down
Thousands of Iranian factory workers lost their jobs as a result of rising dollar prices, as well as new policy announcements by Rouhani’s government. According to a September 9 report by the state-run ILNA News Agency, after the removal of the 420,000 rial currency quota, factories lost their purchasing power and cannot import raw materials which has stalled their production lines.
Most important Iranian factories shut down
According to the state-run Eghtesad News website, the Mazandaran Textile Company which has three large factories, and had once turned Iran’s northern region into the textile pole in the country, is on the verge of complete closure. A part of the factory is now being used as storage for another company. Reports indicate that from its 7,000 employees, only 300 are still working.
The Ahwaz National Steel Factory is another industry that has seen protests by its workers. The company’s CEO was fired after he embezzled 3,000 billion tomans and the future of the large company was put in the hands of a bank.
The Hepco factory in Arak started its work in 1975 with the cooperation of international companies in the field of manufacturing and assembling industrial machinery. The factory is currently on the verge of closure and its workers are concerned about their future. The production of Hepco, which was once 2,400 industrial machinery units per year has now reached only 8 machines per year.
The Haft Tappeh Sugarcane Agro-Industry Company, located 15km from the town of Shush in southern Iran, is the oldest sugar production company in Iran with its 50 year history. The company privatized from the public sector in late 2015. Its workers have protested over the last two years, but none of their requests were met and the company is now facing closure.
The reason behind the economic crisis
The main cause of Iran’s economic crisis is not sanctions. An economic expert in Iran affiliated with the government confirmed this saying that the problems in Iran’s economy were not sanctions, citing that there were structural problems in the economy. These include the infighting, liquidity, foreign exchange policies, corruption, and organized smuggling.
According to Mostafa Moin Najaf Abadi, the former Minister of Higher Education, “people are facing problems and this cannot be hidden”.
“But to put is frankly, the problems stems from the inside and not from outside the borders… (The problems are) liquidity, introducing billions of dollars in new banknotes into the system without financial backing, while corruption has no limits”.
The economic crises in Iran will not be solved by changing ministers or removing Rouhani from office.
The economic crisis is the byproduct of the 40 year rule of a system that has systematically robbed Iranians from their most basic rights and denied their freedoms.
A fundamental change in the system of Islamic Republic of Iran is in the works more than ever.