July 11th 2009

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Articles from this issue:

EDITORIAL: Boat people: Labor's policy backfires

CANBERRA OBSERVED: Malcolm Turnbull's reckless gamble

COVER STORY: Behind the turmoil in Iran

ECONOMIC AFFAIRS: Economic crisis parallels the Great Depression

NATIONAL AFFAIRS: Limit foreign ownership of key industries: NCC

INTERNATIONAL TRADE: Promised benefits from free trade fail to materialise

NATIONAL AFFAIRS: Rudd's emission trading scheme hits roadblock

SRI LANKA: Defeated, friendless Tamils face annihilation

MEN'S HEALTH: Male suicide - the silent epidemic

ENVIRONMENTALISM: Green doctrine spells death to humanity

CIVILISATION: The battle we are still fighting

Tasmania's sources of renewable energy (letter)

Justin Madden, a man for all seasons? (letter)

Euthanasia I (letter)

Euthanasia II (letter)

AS THE WORLD TURNS: Europe's political realignment / Marginalisation of fatherhood


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Behind the turmoil in Iran

by Peter Westmore

News Weekly, July 11, 2009
The urban protests and violence in Iran - triggered by allegations of vote-rigging in the presidential election which saw the return of President Mahmoud Ahmadinejad - are not simply a contest between the moderate former Prime Minister, Mir Hosein Mousavi, and the extremist President Ahmadinejad.

Both Mr Mousavi and President Ahmadinejad were personally "vetted" by the real ruler of Iran, Grand Ayatollah Ali Khamenei, the leader of the Shi'ite branch of Islam in the country.

After the Iranian revolution of 1979, led by the late Ayatollah Khomeini, Iran was transformed from a secular monarchy led by the Shah of Iran into a clerical regime headed by the grand ayatollah, who is commander-in-chief of the armed forces, as well as head of a number of government bodies which enforce the Islamic regime's authority.

(An ayatollah is a religious leader who wields authority on religious law and its interpretation and who has political power as well. The word literally means "sign of God" in Persian.)

Since the Iranian revolution in 1979, the political leadership of the country has operated beneath the authority of the grand ayatollah, whose authority in Iran cannot be questioned.

Limited differences

The clerical authorities permit limited political differences, and the election was a reflection of those differences within the ruling class, but not a reflection of true democracy.

The election outcome showed that there are deep divisions within Iranian society, principally over the economic direction of the country.

A well-placed observer, Ehsan Abdoh, has recently "noticed a disturbingly grim mood gripping the country. The social atmosphere and political situation leave much to be desired, but the greatest challenge threatening Iran's stability lies within its exhausted economy".

He says the economy of Iran is "in a very bad shape" and, along with many countries, is in recession. While this is officially denied by the Iranian government, recent reports of Iran's central bank indicate a sharp decrease in new investment, an increase of imports and a decline of the stock market, all signifying growing stagnation within the economy.

Abdoh notes that, even before the international economic recession began in 2007, Iran had been coping with stagflation (i.e., a combination of economic stagnation, growing joblessness and rapid inflation).

He says: "The dire state of Iran's economy is quite evident within its internal markets, namely the housing sector. In the past, real estate was considered a safe investment with low costs and high interest. Since 2006, prices of real estate and housing went sky-high while the capability to buy went to an all-time low.

"In addition, ordinary Iranians had to deal with other detrimental financial issues. According to official estimates, Iran has the highest inflation rate in the whole region at 25.6 per cent. Many experts are sceptical of this figure and estimate the inflation to be somewhere between 35 to 40 per cent. There is no doubt, however, that in the last two years foodstuffs have experienced more than 40 per cent inflation.

"Iran's shrinking middle-class were the main recipients of these shocks while at the same time government subsidies suffered from decreased value due to inflation."

This is surprising, as Iran is a country with massive oil reserves, which are among the largest in the world, comprising 10 per cent of proven global reserves.

At current rates of extraction, and without including new discoveries or improved technology, Iran's oil fields have an expected life of about 95 years.

Yet the country's oil industry is desperately under-developed, with relatively little refining taking place in Iran, a consequence of the nationalisation of the oil industry in the 1950s.

Although traditionally being an agricultural economy, Iran has undergone a steady process of industrialisation over the past 80 years. Currently, the country's major manufactured goods are petrochemicals, steel and copper products.

Other important manufactures include automobiles, home and electrical appliances such as television sets, refrigerators, washing machines and other home appliances, telecommunications equipment, cement, industrial machinery (Iran has the largest operational stock of industrial robots in West Asia), paper, rubber products, agricultural products and processed foods (including refined sugar and vegetable oil), leather products and pharmaceuticals.

Textile mills, based on domestic cotton and wool, employed about 400,000 people in 2000.

Despite this, President Ahmadinejad's spendthrift economic policies, coupled with his threatening international behaviour, have plunged Iran into an economic nightmare.

Among Ahmadinejad's actions have been direct payments to millions of social welfare recipients, as well as subsidies for use of motor fuel, electricity, cement, steel, pharmaceuticals and wheat, creating a massive government deficit of around $US50 billion.

Additionally, he introduced low-interest loans and low-cost housing for lower-income people, and distributed shares in the major state-owned companies to poor families, making him widely popular among the impoverished and lower-income classes of the society. This has created for him a strong base of support in rural areas, where most of the people still live.

At the same time, his sabre-rattling directed towards his neighbours, including Saudi Arabia, and plans to produce plutonium from Iran's nuclear reactors, have led to sanctions being imposed by the European Union and the United States, effectively restricting the entry of private capital from abroad.


Ahmadinejad's virulent criticism of the United States is believed to go back to his role in the Iran hostage crisis in the late 1970s.

According to an article in the New York Times (July 1, 2005), six former hostages of the 1979 attack on the US embassy in Teheran remember Ahmadinejad playing a major role in their captivity. During that crisis, 52 American hostages were held for over a year, enduring repeated humiliation and interrogation.

While Ahmadinejad's rival, Mir Hossein Mousavi, has been the focus of media attention in the West, Mousavi is not regarded in Iran as being distinctly different from Ahmadinejad.

Mousavi was a student activist at the time of the 1979 Iranian revolution which overthrew the Shah, and was a co-founder of the Iranian Republic Party, which was established to overthrow the monarchy and turn Iran into an Islamic state.

He became the political secretary of the party and editor of the party's newspaper before being appointed by Ayatollah Khomeini to the Iranian Council of the Islamic Revolution.

He became Prime Minister of Iran in 1981, and held the post until it was abolished in 1989.

After the Iran-Iraq war, he was a trenchant opponent of the proposal of Iranian parliamentary speaker Rafsanjani that Iran should accept Western economic aid for the reconstruction of the country. He retired from public life in 1989.

Most Iranians preferred as candidate for the presidency Seyed Mohammad Khatami, who was Iranian president from 1997 until he stepped down in 2005.

During his term in office, his "dialogue of civilisations" initiative was very well received in the Western world, and his attempt to crack the "tall wall of mistrust" between Iran and America was approved both at home and abroad. However, his encouragement of freedom of speech in Iran ended in student protests in 1999 which led to a clampdown by the religious authorities on all reformist organisations, including newspapers and political parties.

After announcing last February that he would stand for president, he later declared that he would withdraw and instead support Mir Hossein Mousavi, who had previously announced his candidature.

After the presidential elections on June 12, both Mousavi and Ahmadinejad declared they had won; but the announced poll result showed Ahmadinejad had won by a huge margin.

There was a widely-held perception that the result had been rigged; but the huge margin made it unlikely that even large-scale fraud would have changed the outcome.

In the event, Grand Ayatollah Khamenei has confirmed the election outcome, effectively throwing his weight behind the incumbent president.

The long-term effects of this are likely to be a further decline in Iran's economy, as confidence collapses, with further discontent among young people and students who see few prospects for their future under Ahmadinejad.

The current problems of massive government subsidies, corruption, out-of-control inflation, excessive government regulation and taxes on the productive sections of the economy are only likely to worsen the current unemployment rate of 13 per cent and add to the ranks of the fifth of the population living in poverty.

Although, up to the 1970s, Iran's traditional rural economy underwent substantial industrialisation, subsequent misgovernment by the clerical regime has squandered many of the opportunities which were open to the country.

At the same time, agricultural production has fallen consistently since the 1960s. By the late 1990s, Iran was a major food importer, and economic hardship in the countryside drove vast numbers of people to migrate to the largest cities.

So Ahmadinejad's term in office is likely to be accompanied by continued political unrest, state-sponsored violence to suppress the unrest, and a downward spiral in Iran's national economy.

The end result of this process could be an even more authoritarian regime, which will deepen Iran's isolation and its economic decline, or a popular revolution which will overthrow the current regime, with unpredictable consequences.

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