On Monday, the newly elected president of Iran, Hassan Rouhani, outlined just how terrible the economic situation in his nation is. He's got the perfect culprit: departing president Mahmoud Ahmadinejad and his failing administration. While this could easily be seen as a ploy by Rouhani to alienate the people of Iran from their ex-leader and gain their support as a fresh face, the Iranian economic situation is just as horrific as Rouhani described, and the Ahmadinejad administration certainly made little-to-no efforts in restoring it. Yet, the election of Rouhani appears reassuring as he has promised to avoid many blunders and corrupt schemes that the Ahmadinejad government partook in, Rouhani seems likely to restore some semblance of normal relations between Iran and the U.S.
Most of Iran's economic troubles are related to the harsh EU and U.S. international sanctions aimed at Iran's growing nuclear programs. While these nuclear plans have yet to cause any harm in the Middle East, many Western countries have often suspected that Iran could possibly be creating weapons of mass destruction. In particular, Israeli prime minister Benjamin Netanyahu has expressed concerns over Iran's nuclear situation, describing the condition as an "existential threat" and urging the Obama administration to intensify sanctions.
However, the much more moderate Rouhani could potentially save Iranian nuclear relations with the U.S. On Monday, 29 former American government officials, diplomats, officers, and national security experts sent a letter to President Obama asking him to attempt to resolve the conflict with Rouhani, given the signals from the new Iranian president-elect that he is ready to come to the table. These diplomatic efforts could seriously reduce sanctions against Iran that include the restriction of Iranian overseas oil sales and the barring of transactions in Iran's currency through western banks, granting serious opportunities for the economy to get back on track.
It is still impossible to ignore all the harm and ignorance Ahmadinejad has heaped upon his country since he took office back in 2005. While Ahmadinejad claimed to produce hundreds of thousands of jobs during his tenure as president, Rouhani's team of experts have discovered that the departing administration created solely around 14,000 jobs per year on average. Rouhani also stated that four years from now, around 4.5 million college-educated citizens will be unemployed because of the lack of viable jobs.
In one notable moment during his presidency, Ahmadinejad transferred the largest plot of buildable land in the capital of Tehran to the Voice and Vision organization, Iran's state broadcaster. Thus, instead of acting upon a ripe economic opportunity, Ahmadinejad was granted with a ceremony lauding him organized by the broadcaster, essentially adding nothing to the economy and wasting money.
The two most horrible ailments of the Iranian economy, however, are the massive inflation that has struck the country recently and the contraction which has occurred in the past two years, the first time this has happened since the Iran-Iraq war in the 1980s.
While Ahmadinejad had officially listed the nation's inflation rate at 32%, Rouhani found that the correct statistic was actually 42%, acting hand-in-hand with the central bank's decision to cut the official value of Iran's national currency, the rial, in half, meaning that a dollar officially buys 24,500 rials up from 12,260. Economists have argued that the true value could even exceed 30,000 rials to the dollar, but this inflation has helped the government pay off outstanding bank debts — even though this has also raised the prices of basic goods for civilians.
The strangest part of this situation is that Iranian supreme leader Ayatollah Ali Khamenei and Hossein Shariatmadari, the editor-in-chief of the state newspaper, Kayhan, have both previously defended Ahmadinejad. Khamenei has publicly called the Ahmadinejad government corrupt and inept, and Kayhan has just recently accused the president of mismanaging the economy, indicating that this change of attitude might be the direct cause of a behind-the-scenes compromise, according to analysts.
Even though Ahmadinejad may have run the Iranian economy into the ground, leaving it with a GDP most likely southwards of $500 billion, Rouhani's government offers a very promising change for the country. His possible efforts to negotiate sanctions with the West could open up Iran's economy tremendously, but as he has said himself, there is "much work to be done."