Page 3 of 3 Ahmadinejad held hostage to bazaar
politics By M K Bhadrakumar
Western media that the nuclear file had
been taken away from Ahmadinejad's government by
the Supreme Leader.
The paradox is that
behind the rhetoric, Iran actually possesses a
vibrant political life. The political spectrum is
constantly mutating. The latest indication that
the regime could get its act together came last
weekend when Supreme Leader Ali al-Khamenei made
the stunning proposal to the visiting secretary of
Russia's National Security Council, Igor Ivanov,
that Iran is willing to form with
Russia a grouping like the
Organization of Petroleum Exporting Countries for
gas-producing nations.
Khamenei has
dispatched a heavily loaded message for European
capitals not to be misled by the US and Israel
into illusions regarding Tehran's capacity to
think and act purposively. It came as a body blow
to anyone who fancied that in comparison with
Ahmadinejad, Khamenei "preferred low-level
confrontation with the West", as an American
scholar recently wrote.
The domestic
political challenges for Ahmadinejad come on the
issues of economic policy, and not on account of
what he has said about the Holocaust (which
Khamenei publicly endorsed) or on account of his
so-called "hard line" on the nuclear issue (on
which there is vehement public opinion supportive
of Iran's "natural rights"). The prospects of his
re-election in 2009 will depend on how he wards
off challenges on the economic front.
The
point is, Iran has had a windfall in recent years.
Income from oil and gas exports shot up from US$23
billion in 2002-03 to $55 billion in 2005.
Foreign-exchange reserves reached $47 billion,
which is more than twice the size of Iran's
foreign debt.
The New York Times noted
recently, "Iran's overall rate of growth is
healthy and rising." Iran predicated its budget
last year on the estimation that the price of oil
would be about $44.1 per barrel, while it is
estimating that for the coming year oil prices
will average $33.7 per barrel. Evidently, the
Iranian economy has a lot of cushion to absorb any
unforeseen resource crunch.
Ahmadinejad
told Parliament last week, "The future cannot be
predicted. It is possible our enemies want to
reduce oil prices to hurt us. That is why we have
set the price at $33.7 per barrel to show we are
ready for anything. Even if they reduce oil
prices, we will be ready to handle it."
Harnessing the windfall from oil income,
however, Ahmadinejad has resorted to a policy of
government spending to rachet up domestic
production. He has pumped oil money into
government-run projects for creating jobs. This
has been a successful populist measure and it
explains the popularity that Ahmadinejad enjoys in
poorer communities. Unemployment fell last year to
an eight-year low of 10.3%. But there has been a
downside.
First, his policy of low
interest rates drove up lending and led to
inflation. The government spending put more money
in the hands of consumers, driving up demands for
goods and services and further fueling inflation.
Housing prices rocketed by more than 100%. There
are political implications.
Ahmadinejad 's
policy, which puts emphasis on the public sector,
virtually sidelines the Iranian bazaar. Now, the
bazaar in Tehran has traditionally called the
shots in the country's political economy. The
nexus between the bazaar and the clergy has begun
reacting to Ahmadinejad's redistributive economic
policies. The bazaar has shown it wields clout
within Parliament. Rafsanjani has openly called
for privatization and a market-oriented economy.
"We should harmonize our economy with the
global economy as soon as possible ... We should
activate the private sector in such a way that
people can feel assured that the government will
fully support their major investments ... We
should take the private sector seriously," he
recently said.
Rafsanjani added that there
is an enormous amount of private capital in Iran,
"but we haven't been able to use it properly
because we have not adopted the policies necessary
... We should draft regulations that guarantee
security [for private capital] and eliminate the
laws that could create obstacles for it."
The bazaar has signaled to Ahmadinejad in
unmistakable terms.
Iranian media reports
show that from January to late August last year
prices of fruit and vegetables in urban areas rose
by 20%. During the Ramadan season, the price of
fruit doubled and that of chicken increased by
20%. By October, in the run-up to the recent
elections that Ahmadinejad "lost", his approval
rating dropped to 35%.
A situation is
developing on the ground - even if much of it is
the accumulated debris of past economic
mismanagement under Ahmadinejad 's predecessors.
The big sharks in the Tehran bazaar seem to be
hoarding consumer goods and creating artificial
price increase so that they can sell at inflated
prices. (The large-scale export of Iranian produce
to Iraq is also creating shortages in the market.)
"This price rise is the result of an organized
move," Ahmadinejad said last week. He warned that
the Interior Ministry will crack down on economic
crimes.
This is a tough call. The logic
behind the US thinking on bringing about a regime
change in Tehran is: if economic sanctions could
somehow bring the bazaar under pressure, the
bazaar would go lamenting to the clergy, and once
the clergy were upset, that would be the time to
sit and watch the fun.
The nexus between
Shi'ism and the bazaar is age-old. What prospects
does Ahmadinejad have by tilting at the windmills
of this historic nexus? Gripes over the price of
tomatoes could after all form part of a critique.
Note 1. Ali Qapu is a
grand palace in Isfahan, Iran. It is on the
western side of Naghsh-i Jahan Square opposite
Sheikh Lotf Allah Mosque. - Wikipedia
M K Bhadrakumar served as a
career diplomat in the Indian Foreign Service for
more than 29 years, with postings including
ambassador to Uzbekistan (1995-98) and to Turkey
(1998-2001).
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