Economic pressure grows on Iran’s president as nuclear deal nears

It is unusual for teachers, or any other group, to defy an official ban on protests in Iran.

Yet tens of thousands of teachers gathered on Sunday for a “silent” protest outside the parliament in Tehran and other cities against wages they say have pushed them into poverty.

“We are struggling to pay [state employees],” a government official acknowledged. “The government is under massive financial pressure and has resorted to many lay-offs.”

The peaceful demonstrations do not constitute a crisis for Iran’s government. But they are a reminder of the pressure on President Hassan Rouhani as talks with leading world powers over the country’s nuclear programme reach a crunch point.

International sanctions over Iran’s nuclear programme have slashed Tehran’s income from oil sales and drastically reduced its access to hard currency. Despite seeing some success from his ambitious economic reform programme, Mr Rouhani must deliver a deal to lift sanctions if he is to alleviate hardship in Iran and avert the risk of wider social unrest.

Analysts and western diplomats say Iran and the so-called P5+1 group — the US, UK, France, Russia, China and Germany — have made significant progress in the latest round of meetings in Switzerland, bridging key differences. Tehran is thought to have compromised on several points, including the number of centrifuges it will be permitted to continue operating. The number of centrifuges is an issue that helped scupper an agreement in November.

The two sides have pledged to secure a consensus by the end of March, which could lead to a comprehensive deal by July.

Whether they will be successful is unclear. Benjamin Netanyahu, Israel’s prime minister, made a politically charged trip to Washington this week to lobby against an agreement with Iran, warning Congress that it should “insist on a better deal and keep up the pressure on a very vulnerable regime”. “They need the deal a lot more than you do,” he told the US Congress.

The Iranian president is also under pressure from religious hardliners at home who are reluctant to see compromises on the nuclear issue and are trying to make political capital ahead of parliamentary elections early next year. They have sought to highlight that the president’s economic reform programme has failed to alleviate the hardship faced by ordinary Iranians. They are also capitalising on disappointment in Iran that an interim nuclear deal signed last year had failed to ease the country’s economic woes.

Falling oil prices, which have roughly halved since the summer, have further added to budgetary pressures and forced the government to find other sources of income.

These include a plan approved by parliament allowing young Iranians, or their families, to pay between 10m and 50m rials ($3,600-$18,000) for exemption from military service — which could cover up to 1.5m conscripts. The judiciary has also vowed to step up the collection of tax revenues, which many businesses have long tried to evade.

Mr Rouhani‘s reforms have also yielded some success. The country’s soaring inflation, which was about 40 per cent when the president took power in 2013, has dropped to roughly 16 per cent today. After contracting for two successive years, the economy has shown signs of growth in the past year, according to the central bank — although the business community is sceptical about this claim.
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Yet despite macroeconomic improvements, life for ordinary Iranians can be difficult. Basic goods are often expensive and joblessness remains chronically high. Youth unemployment is close to 26 per cent, according to official figures.

Iran’s precarious finances were highlighted in recent remarks by Bijan Namdar Zanganeh, oil minister, who described the “horrendous” state of the industry. “This ministry has problems paying employees, let alone making investments [in oilfields],” he told parliament.

The government insists it is sticking to its plans to reduce inflation and stimulate growth, without fanning consumer prices. But economists fear that if a nuclear deal is not reached, the economy could suffer. “These policies could reverse if nuclear negotiations fail,” one analyst said.

FT.com