Iran’s Majles Strikes a Blow to Ahmadinejad’s Economic Plans

Farideh Farhi

While most of the recent Iran news has focused on the prospect of an Iran-US rapprochement, the country's domestic scene has been consumed with a major fight over economic policy. This week the fight came to a head as the whole Majles began deliberating on the country’s budget for the next fiscal year as well Ahmadinejad’s attempt to reform the country’s bloated subsidy system.


The best evidence for how contentious economic policy has become is the fact that only about 10 days left before the Iranian New Year – after which the whole country literally comes into a stand still for a couple of weeks – the details of the budget for the upcoming fiscal year beginning on March 21 are yet to be approved.

The set up for a confrontation began when Ahmadinejad introduced his budget bill to Majles rather late and he did so along with his very ambitious targeted subsidies bill which calls for the suspension of all energy subsidies, their replacement with direct cash subsidies to the lowest 7 income brackets, and sharp prices increases particularly for gasoline and diesel fuel.

Majles deputies, particularly those with a long history of expertise on economic issues, not only found the budget numbers unrealistic, at times even fabricated, but also worried about the connection between the proposed budget and presumed savings generated from ending subsidies and the inflationary impact of the government’s proposed hikes in energy prices.

Economists have been even more critical of government numbers. Mohammad Sattarifar, the former head of the Planning and Budget Organization, went as far as to say that the budget was not even worth analyzing because the administration will be forced to come back to Majles with many amendments and changes. He pointed out that the projected revenues from increasing energy prices does not even take into account the amount of energy consumption by the largest consumer of energy in Iran which is the government itself!

The proposed budget assumes revenues of about $34bn from price hike and subsidy cuts and a distribution of about ¼ of that amount as cash deposited directly to people’s bank accounts immediately after the June election. This time frame was promised to allay the fear that cash subsidies were intended to buy votes.

The large combined Majles committee created to examine the two bills considered government assessment of revenues as exaggerated but, after Ahmadinejad threatened to pull out his targeted subsidies bill in its entirety, agreed to lower the amount of expected revenues while still allocating the government the amount it said it needed to implement the cash subsidies program.

However, by the time the budget bill came to the floor of the whole Majles, prominent economists as well as the Majles Research Center had already voiced concern about the inflationary shock the drastic increase in energy prices would entail. The general outline of the budget was approved in a short session despite significant opposition but today the targeted subsidies component of the budget bill was rejected in its entirety in a 132-102 vote.

It must be considered truly ironic that a president elected on a social justice platform is now being accused by a coalition of prominent conservatives and reformists as the promoter of “shock therapy” that will harm the poor and middle class in significant ways (note the picture on top of this post reproduced from Alef website which is run by Ahmad Tavakoli, a prominent conservative deputy and head of Majles Research Center. It uses a hand to show the need to stop “shock therapy” written in Persian).

Left hanging is the fate of the budget which still needs to be approved in a more detailed fashion. As mentioned, Ahmadinejad's budget numbers are very much linked to subsidy cuts. His administration also took a “take it as is” attitude and refused to address Majles’ concerns about the inflationary impact of sudden price hikes. Now it is not clear how Majles' rejection will affect the budget and whether, as threatened, Ahmadinejad will abandon any attempt to make energy prices more realistic or begin working with Majles to reach a compromise on gradual price increases.

Timing is also a factor because the Guardian Council also needs to approve the budget by the end of the year. Its task is to make sure that - as demanded by the Constitution - all sources of spending are clearly specified. The Council’s spokesperson, Abbas-ali Kadkhodai, has already voiced his concern about the timing, stating that if the budget is not approved by the end of the year, by law the government cannot have any expenses on the first day of the upcoming year unless some sort of temporary appropriation is agreed upon on a monthly basis for necessary current expenses.

It is worth noting that the budget process in Iran is usually messy, quite raucous, and a source of open conflict between Iran’s legislative and executive branches. Even Akbar Hashemi Rafsanjani, without a doubt post-revolutionary Iran’s most powerful president, was often stunted in his budget plans by Majles. But the lateness and chaos that has characterized this year’s budget process – occurring in the midst of drastic drop in oil prices and global economic crisis - has taken the conflict to another level.

It has also highlighted the difficulty even conservatives have in accepting some of Ahmadinejad’s ideas and his rather aggressive style in dealing with people who worry about the impact of his policies.

Majles’ decisive rejection is a major setback for Ahmadinejad. The manner in which Ahmadinejad manages to work himself back into Majles’ good graces will be important in convincing key conservative players to back his candidacy for presidency. It is hard to believe that the events of this week have made conservative unity behind his candidacy more likely.




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Ahmadinejad: The Age of Nuclear Weapons is Over (OSC)

The USG Open Source Center translated an interview with Mahmoud Ahmadinejad published in El Pais of Madrid on March 4, 2008.

Iranian President Ahmadinezhad Says 'Age of Nuclear Weapons Is Over'
Interview with Iranian President Mahmud Ahmadinezhad by Angeles Espinosa and Javier Moreno in Tehran on 1 March: "'People of Iran Ready To Fight Enemy in any Situation'"
El Pais (Internet Version-WWW)
Tuesday, March 4, 2008
Document Type: OSC Translated Excerpt

. . . (passage omitted: background information on Ahmadinezhad)

(Angeles Espinosa) Your country is at the center of the international stage due to its nuclear program, its role in Iraq, and its regional ambitions. We have the impression that your relations with the United States, or rather the lack of them, have a lot to do with this situation. What prevents you from normalizing relations?

(Mahmud Ahmadinezhad) We do not accept the world's dominant and hegemonic regime. That is why the relations with the United States require certain conditions. They broke ties with us. They thought that they were thus punishing us but, in fact, it has benefited us because, thanks to that decision, Iran has been able to grow strong. We are interested in having relations with all of the countries in the world, apart from the usurping Zionist country.

(Espinosa) Do you think that there will be more possibilities to achieve this with the change of occupant in the White House?

(Ahmadinezhad) It will depend on the attitude and the behavior of the new president. If he changes his mind about the region and the people of Iran, then, perhaps.

(Espinosa) There are currently three candidates who might win the final race (McCain, Obama, and Clinton). Whom would you prefer to see in the White House?

(Ahmadinezhad) I think it is impossible for Obama to become president because of the United States' hidden powers. For us, it makes no difference who wins. The most important thing is that the one who does understands the international situation well and the problems its politics are causing.

(Espinosa) In any case, Obama has made an extraordinary statement for US politics by expressing publicly his will to meet you personally. Would you be willing to take an equally extraordinary decision and meet him, if he were elected president?

(Ahmadinezhad) Two and a half years ago, I expressed in New York my will to talk with Bush, but before the media. We do not have any problems talking, although it seems impossible to me that they will let Obama win. You know the US balance of power. It is based on aggression in foreign politics. The people's vote is a mere front.

(Espinosa) The misunderstandings between Iran and the United States began almost 30 years ago with the seizure of the US embassy in Tehran. What did you experience, as a young student, at that moment?

(Ahmadinezhad) When that incident happened, we accepted it gladly. It made us happy because the 25-year US hegemony over our country had not benefited Iranians. On the contrary, those years affected our culture, our independence, and our progress. That is why the break in diplomatic relations was considered to be an opportunity. If we had continued to walk that path, Iran would not have been where it is today.

(Espinosa) When you were elected president, some of the former hostages recognized you as one of their captors. Were you in any way related to the seizure of the embassy?

(Ahmadinezhad) They even published a photography of somebody and said it was me, but the person in the photo was 40 years old and I was 22 back then, besides, I did not wear a long beard as did the man in the image... I was really surprised that its secret services made such a crude mistake.

(Espinosa) In your letter to US President Bush, you made a very serious accusation: that the terrorist attacks on 11 September 2001 had required the involvement or infiltration of a secret service. Who were you thinking of?

(Ahmadinezhad) I made two accusations. There are many questions about that event that need to be answered. Books and reports have been written in the United States itself. We think that it is impossible that it happened without the involvement of part of the US security services. It is impossible that the planes were able to take off, fly over its territory, and crash into the towers without any contact with any secret service. And even more doubts have been aroused when the United States used the attacks on 11 September as an excuse to attack the Middle East and they continue to do so.

(Espinosa) Excuse me for insisting, Mr President, just to make sure that we have not misunderstood you. Are you therefore convinced that some kind of cooperation, even if passive, by the US secret services was necessary to commit the attacks on 11 September?

(Ahmadinezhad) Yes, at least by part of them. Some 4,000 people were killed. We regretted it and we condemned it. I even (in September 2007) wanted to pay tribute to the victims. But subsequently, thousands of people have been killed in Afghanistan and Iraq using that as an excuse. That is why we think it is important to carry out an international investigation to ascertain the roots of the event. Nobody has been hitherto convicted for it.

(Espinosa) You must acknowledge that it seems that the United States is doing the dirty work for Iran. It has freed you from the Taliban regime and Saddam Husayn (with whom Iran fought a tough eight-year war). Is it not contradictory that, despite having very similar interests in the region, you are incapable of overcoming your differences?

(Ahmadinezhad) The consequences of their actions are not completely negative. But the damage is 100 times greater than the accomplishments. Did they finish off the Taliban in Afghanistan? Did they finish off the terrorists? Are they weaker than five years ago? No, they are stronger. The United States has not been able to achieve its goals. Saddam left. Then, why do they continue to occupy Iraq? Because its main goal was not to get rid of Saddam Husayn. The people of Iran are very powerful. It has transformed these events into an opportunity, just as it turned the break in relations into an opportunity. This does not mean that the occupants intended to help Iran.

(Espinosa) You are about to start a historic trip to Iraq. What is the aim of this visit?

(Ahmadinezhad) Iran and Iraq are two friends and neighboring countries. We have a historical relationship. Only for a short period, instigated by Western countries, were the relations between us broken off. But there has always been profound ties between us. Many Iranians were born in Iraq and the other way around. We have a good relationship and must strengthen it even more. My visit intends to convey a message of respect to the Iraqis, to their election, to their national sovereignty, and to their independence.

(Espinosa) Why have you requested an audience with the Grand Ayatollah Al-Sistani?

(Ahmadinezhad) No, it is not planned. I am only going to Baghdad.

(Espinosa) Are you offering military aid to the Iraqi Government to replace the US troops?

(Ahmadinezhad) We do not have a military relationship with the Iraqis. Our relations are limited to politics, economics, and culture.

(Espinosa) The United States has accused the Revolutionary Guard, and especially the Al-Quds force (a special unit, which is under the direct command of the Supreme Leader of Iran, to export the Islamic revolution abroad), of meddling in Iraq's domestic affairs and providing weapons to certain militias. Could such a thing happen without your knowledge?

(Ahmadinezhad) The Unites States talks a lot, especially about the countries in which it has failed. It is normal that the people fight those who occupy their country. The Americans are occupiers and they know it. And the Iraqis do not like the occupiers. The United States' problem is that it does not understand the culture of the region. It thinks that every problem can be resolved with gunshots. The human beings must be taken into consideration.

(Espinosa) Excuse us for insisting. Could an Iranian military force opperate in Iraq without the knowledge of the Iranian president?

(Ahmadinezhad) If Iran wanted to confront the United States, the situation would change immediately. Iran is a very powerful country. We think that the United States has failed in the region and is currently looking for a justification before its public. It has 160,000 troops deployed in Iraq and only a few people make it feel defenseless? It is like the photograph linking me to the hostages.

(Espinosa) What kind of government would you like to see in Iraq?

(Ahmadinezhad) An independent government elected by the Iraqis. Their votes would be beneficial for the region.

(Espinosa) Even if they elect a government allied to the United States?

(Ahmadinezhad) We would respect the decision of the people. Hence, we will respect whatever the Iraqis decide. But you know that, in any place in the world, if the people are free they will not give their votes to a pro-US government. In freedom, people vote against the United States, something we must thank Mr Bush for.

(Espinosa) Do you think that the Iraqis have elected their government freely?

(Ahmadinezhad) Yes, the current Iraqi Government has been elected by its people. That is why the occupants are still there. If the government had been imposed by the United States, this country would have already left Iraq.

(Espinosa) But the Iraqi Government is a friend of Iraq and of the United States at the same time. Is this a contradiction or does it open a communication channel with Washington?

(Ahmadinezhad) We have relations with many countries that are also friends of the United States. This is not a problem.

(Espinosa) Now, during your trip to Iraq, your security will depend on the US army, as the Iraqi forces do not control their country yet. This puts you in the hands of the United States...

(Ahmadinezhad) It is the occupant country's responsibility in accordance with international law.

(Espinosa) The UN Security Council has unanimously endorsed two resolutions imposing sanctions on Iran and is preparing a third one. However, you keep on saying that Iran will not renounce uranium enrichment. Is there any way out?

(Ahmadinezhad) We are not at a dead end. The other parties to the conflict are. They made a mistake by adopting resolutions based on incorrect information. Now, the International Atomic Energy Agency's (IAEA) report has ratified our position. What will they do? In my view, they have three options. The first one, the most rational one, is to admit their mistake. This would suit everybody well. The second option is to keep silent, which is almost the same. And the third option is to attempt to cover up their mistakes by making new errors. This would harm us and them, too. They are free to choose. That is why we think that they have reached a dead end. But we are working within legality. Every new resolution is a shot into the UN's body. It diminishes its credibility. Hence, those who take the decisions should do so properly to prevent discredit. For our part, regarding this resolution, we will act the same way as we did with regard to the other two prior resolutions.

(Espinosa) Are you not surprised by the fact that the resolution was unanimously endorsed, even by Russia and China, which are Iran's allies and friends?

(Ahmadinezhad) How were the first two resolutions issued? We are on good terms with China and Russia, but we defend our rights (regarding the nuclear program).

(Espinosa) Have you not presented a very optimistic interpretation of the IAEA report? Experts and European diplomats have insisted that you have to explain your prior nuclear activities. What did they base their opinions on?

(Ahmadinezhad) This debate has a legal and a political aspect. The legal aspect has come to an end with this report. Now, it is the IAEA's duty to declare it closed. The report has clearly stated that the problem with Iran is over, that Iran has not diverted nuclear material for military purposes. Despite the US accusations, they have not found any evidence. The political aspect is linked to the enmity harboured by certain Western countries toward Iran. They have been against us for 30 years. They already supported Saddam Husayn against us. Their attitude is not new. Those countries are not satisfied with the fact that the IAEA has closed the Iranian dossier. When they talked about building trust, they were lying. They do not care about the nuclear program. They are only looking for arguments against Iran. We have learned to live without them. That is the advantage of this experience. They cannot treat Iranians this way. Iranians will not be expelled from the international stage because of those problems. Iran will continue to make progress and, in the future, they will have to cooperate with Iran, but the situation will be very different. Two and a half years ago, I proposed the creation of consortium to help us with the nuclear program. They did not accept it and now we have made that program on our own. We do not need that consortium any longer. If they do not accept our terms now, it will be more difficult for them to do so in the future. They can choose. We are giving them the freedom to do so.

(Espinosa) Do you not fear that this attitude might lead to a pre-emptive intervention by the United States or Israel?

(Ahmadinezhad) Who can do so?

(Espinosa) Perhaps, Israel...

(Ahmadinezhad) The Zionists cannot do anything, not even stand up by themselves. There is no power in the world that can even think of attacking Iran. We are 70 million united Iranians. Who would dare? But they are looking forward to doing it. Their desires are not a problem, but they cannot fulfil them. The people of Iran are ready to fight the enemy in any situation. The Iranians knows very well how to stand up for their rights, so do the Spaniards.

(Espinosa) Some of the missiles Iran has tested are only intended to carry nuclear warheads. This, without doubt, has fuelled the international preoccupation...

(Ahmadinezhad) Throughout its history, Iran has always been a peaceful country. We have not attacked anybody. Everything we are doing is aimed at defending the country. We think that the age of nuclear weapons is over. If they were useful, the United States would not have the troubles it currently has and the Soviet Union would not have disappeared. The Zionists have atomic bombs, but they are failing against HAMAS. We not only think that the age of nuclear weapons is over, but we are also not interested in building them, because we consider that they are against human rights and dignity. Our security doctrine is a defensive doctrine. This missile that we have launched is an investigation missile, which is intended to carry a satellite. It is our right and we need to have a presence in space for communications. We announced it before launching it. We are working transparently, unlike other countries that work clandestinely and, even so, condemn us.

(Espinosa) You became president by promising that you would bring oil profits to the Iranians. However, in the taxis and in the bread queue, people complain about inflation, unemployment, and the difficulties to make ends meet. What has happened to prevent you from keeping your promise?

(Ahmadinezhad) What did you think? That we would carry an oil barrel to every house? Now, the government is distributing the shares of the companies that are being privatized. We are also working to reduce the income inequalities between the poorest, the middle class, and the rich people. Iranians are vivacious people, attentive to every issue. They are free to express their opinions and to criticize if something goes wrong. This helps us to correct problems. We do not consider this to be bad.

(Description of Source: Madrid El Pais (Internet Version-WWW) in Spanish -- center-left national daily) Read more on this article...

A Serious Political Blow to Ahmadinejad or an Election Maneuver?

Farideh Farhi

Something interesting happened in Iran yesterday that some, particularly outside of Iran, are interpreting as a serious political blow to Ahmadinejad. I am not sure whether it should be considered a serious blow or more of an election maneuver on the part of the current speaker of the parliament speaker, Gholamali Haddad Adel, trying to improve his standing among his conservative colleagues who have to decide soon who should lead their list of candidates for the next session of the parliament or his Tehrani constituency who will have to make a decision soon about whether or not he should be re-elected.

The story goes something like this. Apparently some time in the past week or so Mahmoud Ahmadinejad sent a letter to the speaker complaining about parliamentary legislation passed which mandate policies that, from his point of view, clearly infringe upon the prerogatives of the executive branch. Calling these legislations - which included retuning to daylight savings time after Ahmadinejad had rashly abandoned it or the law mandating the executive branch to specify budgetary lines for certain allocations – unconstitutional, he asked the speaker to stop these “evident” violations of the constitution. He also said that he would not implement a legislation to supply cheap gas to villages suffering power cuts in an unexpectedly harsh winter because the source of funding was not specified.

But in registering these complaints Ahmadinejad was standing on shaky grounds as the Iranian constitution has a rather clear and peculiar institutional set-up for finding which legislative acts are unconstitutional. The Guardian Council has the task of validating both the Islamic and constitutional nature of legislation (with the Expediency Council as the final arbiter if the parliament and Guardian Council cannot reach an agreement). Regarding the latter, it often sends back legislation it deems unconstitutional on the basis of Article 75 of the constitution which requires specification of compensation or source of funding for any legislation that leads to the reduction of public revenues or increase in public expenditures. By in effect proclaiming the executive branch a constitutional authority and then using that authority to not implement laws that couldn't have become laws unless the Guardian Council had agreed were constitutional, Ahmadinejad is walking on very thin legal reasoning as far as the parameters of the Islamic republic are concerned.

Haddad Adel decided to solve the problem by writing a letter to the leader, who, since the 1989 constitutional revision which significantly expanded the power of his office, is endowed with the responsibility of resolving conflicts among the three branches of the government. Ayatollah Khamenei responded immediately in a short, terse note, stating "All legal legislation that has gone through [the required] procedures stipulated in the constitution is binding for all branches of power."

Receiving the response, Haddad Adel immediately released all the relevant written exchanges, making a point that the leader had taken the side of the parliament.
As I mentioned above, some outsiders, perhaps looking for individual conflicts at the top as the explanation for why things happen in Iran they way they do (a sort of Kremlinology, if you will, applied to Iran) and trying to extract what these conflicts indicate about the direction of Iranian politics, saw this intervention as the “latest in a series of recent signals that Khamenei is losing patience with a president to whom he once showed staunch loyalty.”

In Iran, though, the commentary was much more skeptical and focused not on Khamenei’s action but Haddad Adel’s. Why did he publicize this? Why did he do it now? To some the move was a good one but rather late. After all, as one current reformist deputy put it, Ahmadinejad has repeatedly violated legislative authority on financial matters by making promises of major projects in his numerous provincial trips without going through the required funding process in the parliament. Even more problematic the parliamentary leadership had said nothing despite repeated complaints by various deputies.

A couple of conservative deputies, frustrated by the parliamentary leadership’s passivity, were more brutal, pointing out that Ahmadinejad’s unilateral moves had undermined and weakened the institution of the parliament which instead of “being behind the government was more held in its fist.” This is why to them what Haddad Adel did seemed more like a “propaganda move” to hide the lowering of the status or weakening of the parliament that had occurred under Haddad Adel’s own leadership.

Etemad newspaper saw the move less in terms of shaping public opinion and more as part and parcel of an attempt to force the conservative coalition to place Haddad Adel on top of its list of candidates for the city of Tehran, enhancing his chance of re-election but also for becoming a speaker again. This was more than anything else “a message about Haddad Adel’s spiritual influence and current position in the Islamic republic and that because of this influence the conservative leadership has no other choice but to accept him as the list leader and probably his leadership again in the 8th parliament.” One deputy quoted in the Etemad piece even goes so far as to suggest that the whole thing was a mere personal feud between the two men.

From his point of view, Ahmadinejad had not implemented many legislations in the past and will continue to do the same in the future (indeed even after the leader’s intervention, he went on and insisted that what the parliament was doing was still unconstitutional). His mistake this time around was simply to put his long-held position in writing, giving Haddad Adel an opportunity to capitalize and letting those making decisions about the candidate lists know about his clout and his ability to get the support of those who really matter in Iran.

Accepting Etemad’s version of what happened essentially implies that everyday politics in contemporary Iran, like everywhere else, may simply and merely be interesting, intricate and yes petty, nothing more and nothing less. Trying to read too much into everyday politicking of Iranian politicians interested in securing their position in relation to other politicians is increasingly looking like an over-interpretation intended to fit Iran into a narrative that implicitly or explicitly asks us to think of its politics as different from elsewhere in so far as some fundamental change about power relationships are about to happen.

Strangely despite all the economic problems, external pressures, and even the reality of a president who has antagonized a whole of array of elites in Iran and is deemed both incompetent and rash by many of them, Iran looks pretty settled to me; settled enough for dirty laundry to be washed in public for electoral gains. In any one day, the president can yell constitutional disaster; the speaker of the parliament can make big noises about parliamentary prerogatives; the all powerful leader can intervene presumably for the good cause of parliamentary vigor; commentators can look around for a second, detect manipulation and personal rivalries, note it and then get ready for commentary on the next public drama. Life goes on! Read more on this article...