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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Iran’s Eighth Majles Faces Its First Real Test

Farideh Farhi

In the parliamentary elections that took place in March 2008, the core issue was not whether reformists or conservatives would win – a conservative win was presumed - but whether the new elected Eighth Majles can act in a more effective manner in the face of an executive branch that had learned to play fast and loose with the constitutional requirements of checks and balances, particularly in the budget process where Iran's Parliament has traditionally played an important oversight role.

The previous Seventh Majles, after its first year, had become accused of being weak, repeatedly consenting to Ahmadinejad’s expansionary economic policies and raiding of the oil fund despite qualms and public criticisms, and closing its eyes to the executive branches numerous violations in the implementation of passed legislations. Last year, for instance, Ahmadinejad withdrew $1.2bl from the oil fund for food imports despite Majles’ explicit rejection as a budgetary line item and later went on to say in a television interview that he had received approval from Ayatollah Khamenei to do so.

So, when Ali Larijani was unanimously elected as the speaker of the new Majles, handily beating out the previous speaker, Gholamali Haddad Adel, most observers presumed that his leadership was itself a signal that the era of Majles submission was over, despite hints of a backroom deal between Ahmadinejad supporters and Larijani’s more traditional conservative allies. Larijani had resigned his post as Iran’s nuclear negotiator in an open conflict with Ahmadinejad and this singular act provided the hope for a changed environment in the new Majles when he was elected as speaker

The new Majles has not done much since its convening in late June because it has been mostly been in summer recess. With its return to session, however, the coming week will provide a good testing ground for assessing whether such an expectation was justified. The occasion for this is the confirmation process for three vacant ministries.

Currently there are three ministries – Economy and Finance, Interior, and Transportation - that are being run by caretakers after the firing or resignation of their ministers. The use of caretakers has been Ahmadinejad’s favorite instrument in going around the Majles regarding appointments for which he thinks he will have a hard time receiving approval. But Article 135 of the Iranian constitution is quite clear that the president can only appoint a caretaker for a maximum period of three months.

This is something Ahmadinejad did not do for the all important Ministry of Economy and Finance (and the deadline for the Ministry of Interior is approaching) essentially because he was worried that his caretaker appointee, Hossein Samsami - a rather young Najaf-born economics professor with not much experience in running a government bureaucracy - was not going to be approved by a parliament particularly worried about his newly touted Economic Transformation Plan; a plan whose details have yet to be spelled out beyond the idea of some sort of direct cash payments to the needy as a substitute for untargeted subsidies. A similar situation was brewing at the Interior Ministry where the caretaker, Mehdi Hashemi, is someone whose candidacy for minister of welfare was rejected by the parliament when Ahmadinejad first became president.

Parliamentary complains about the delay was temporarily solved last week by an intervention by Ayatollah Khamenei in the form of a publicly announced but yet unpublished “state order.” Through this order the leader allowed Ahmadinejad to extend the 3-month limit for the Economy and Finance Ministry. What was initially not clear was whether this order extended Samsami’s stay until Majles came back from summer recess (which was last Sunday), as maintained by Majles members, or another three months as claimed by Ahmadinejad’s liaison to Majles.

But it didn’t take long to become clear that support for a longer period and continued constitutional violation was not forthcoming and two days after deputies came back from summer recess, Ahmadinejad hastily introduced his three ministers. Interestingly, though, only the least controversial caretaker, for the Transportation Ministry, was offered as a candidate. For the other two ministries, Economy and Interior, Ahmadinejad was effectively forced to withdraw the names of the caretakers and offer two other candidates.

In the case of the Ministry of Economy and Finance, this withdrawal came after Samsami had a disastrous meeting with the members of the parliament which lasted only 20 minutes. In the case of the Interior Ministry, the withdrawal came after the caretaker had publicly announced that he will probably be the candidate! So there is no doubt that the parliament did manage a pushback.

And despite the last minute changes, Ahmadinejad’s troubles with getting his candidates approved may still not be over. Even Ruhollah Hosseinian, a well-known hard-line deputy from Tehran, is on record saying that he was shocked to hear the names of the candidates and did not see any of them as being effective.

Hosseinian does have a point. Samsami’s replacement is Seyyed Shamseddin Hosseini who seems even more inexperienced in the running of a bureaucracy. His latest portfolio is Secretary of the Working Group for Economic Transformation, which is more of a consultative position. Majles should have at least as much trouble with Hosseini as it did with Samsami unless a backroom deal has been made between Speaker Larijani and Ahmadinejad to ignore Hosseini's inexperience for the sake of trying to overcome at least the appearance of disarray that is plaguing Ahmadinejad’s economic agenda and team. The number of votes received by Hosseini will be a good test for Larijani’s leadership as well as a marker for the extent to which the new Majles is willing to go beyond talks and complains and actually act differently from the previous parliament.

Also to be watched is the vote for Ali Kordan, the candidate for the Interior Ministry. The sudden choice of Kordan is actually quite strange. His name gained prominence last October as someone who might be nominated the head the Petroleum Ministry but, given his low chances of approval, he was never introduced. Instead, despite his lack of experience in the oil industry, he was imposed on the newly approved Petroleum Minister, Gholamhossein Nozari, as his first deputy for human resources and management with rumors abound that he was really the one running the ministry. But Rajanews, which is close to Ahmadinejad, is reporting that his choice was a compromise because he is a friend of Larijani (Kordan was Larijani’s deputy both at the Ministry of Culture and Islamic Guidance as well as Islamic Republic of Iran Broadcasting.

We shall have to see if there is any truth to all these speculations and whether, if there has been some sort of backroom deal between Larijani and Ahmadienjad, the rest of Majles will agree to the deal. What is not speculation is the reality of Ahmadienjad working with a very limited pool of trusted appointees who are acceptable to both him and the Parliament. What has also been manifestly on display is the dysfunctional relationship Ahmadinejad has developed with the rest of the Iranian political system.

He was able to bully the Seventh Majles by either imposing his will on it or ignoring its legislative dictates on occasions it decided to stand against him. He managed to do it because he has essentially maintained, with quite a bit of righteousness, that there is really no other institution besides the office of the supreme leader that can prevent him from the routine ignoring of the constitutional mechanisms for legislative action and oversight.

Given his brazen attitude, even if the makeup of the new parliament translates into a stronger stance against Ahmadinejad, it will ultimately be Ayatollah Khamenei’s public and explicit orders that will allow Majles' stronger stance to place effective limits on Ahmadinejad’s policies and behavior. Given the record of the past three years, whether he chooses to do so is not at all clear. But this must not be a comfortable position for the supreme leader more used to subtle nudging and ambiguity as a means to maintain the appearance of his office staying above the partisan fray. Read more on this article...

Yet another Election Kickoff in Iran

Last week - a week that saw the arrest of several student activists peacefully commemorating the anniversary of 1999 student protests, abduction of labor leader Massour Osanlou by plainclothes men in broad daylight (after a few days he was reported to have appeared in Evin prison’s Ward 209 which is run by the Intelligence Ministry), and the stoning of a man to death for adultery in the Qazvin province despite the attempt by other judicial authorities to stop it (the judge who ordered the stoning is now under investigation) - Iran for all practical purposes also kick started its elections for the Eight Parliament (Majles) to be held on March 15.

The occasion for what I consider a kickoff was the deadline set by new election regulations that came to pass last week for high ranking government employees to resign their posts six months before the election if they wished to run. The deputy interior minister for parliamentary affairs reported that approximately 150 high ranking officials resigned for an election that among Iran's political classes is considered both important and contested. The actual registration and the subsequent Guardian Council vetting process will not begin until late December but election talk and maneuvering for the creation of slates of candidates have already begun.

The legitimacy of the Islamic Republic, for variety of reasons, is intimately tied to the exercise of elections and this will be the Islamic Republic’s 25th elections for various offices (added to the 3 elections held in the immediate post-revolution year regarding the change of regime, election for the Constitutional Assembly and the approval of the Islamic constitution) in its 28-year history. Since until last year these elections were never held jointly, there have been elections in Iran almost annually. It was the extensiveness of resources required to mobilize for nationwide elections that led to the decision to hold the December 2006 elections for the Assembly of Experts (every eight years) and municipal councils (every four years) together. Similar attempts were made throughout last year to synchronize presidential and parliamentary elections, both held every four years, but the Guardian Council declared unconstitutional every legislative attempt to either shorten the president’s term or lengthen that of the Majles. Unlike the terms for the Assembly of Experts and municipal councils, the Iranian Constitution is explicit about the four -year duration of the presidential and parliamentary terms, and on this particular technicality the Guardian Council has proven uncharacteristically a stickler to the letter of the law at least so far.

Given the power of non-elective institutions – office of the leader, the Guardian Council, and the Expediency Council – one can and should question the significance of elections in Iran in heralding any measurable change in the political system as a whole. But notwithstanding this fundamental issue, elections in Iran do involve a competition in which the outcome is not pre-determined and as such they are significant political games, involving all the machinations, organizational maneuvering, attempts at coalition building, and voter and vote manipulations that are prevalent in many countries that have competitive political systems. Like elsewhere, they may also entail shifts in policy direction (as it has happened in the shift from Khatami to Ahmadinejad), particularly in the economic and cultural arenas. Moreover, there is the added element of constant attempt to manipulate election rules in order to handicap opponents or those candidates which may challenge the system (this is again not unique to Iran but is currently practiced much more extensively than elsewhere). As such elections also provide an important space for conversation about the rules of the game, and criticism of how elections are conducted and ultimately how the Islamic Republic is run. These criticisms rarely get anywhere but elections are important vehicles for their airing. Whether the recent security-oriented created to confront U.S. pressures and UN Security Council sanctions will prevent the usual opening of the public space during elections times is yet to be seen

As to the manipulation of the rules, the world mostly knows about the vetting of the candidates by the Guardian Council - a body consisting of 6 clerics appointed by the supreme leader and 6 non-clerics nominated by the head of the judiciary and approved by the Majles - and how this very effective mechanism has been used since the early 1990s by the conservatives who control the Guardian Council to handicap their opponents. But this process has also received quite a bit of domestic and international criticism and for the upcoming elections new tactics are being tried by the Interior Ministry, which is in charge of conducting elections and since Ahmadinejad’s election has also been controlled by hard-line conservatives.

For instance, the new election regulations require those who occupy a significant number of government positions to resign from their positions six months before elections (hence the last weeks deadline). This rule is a clear disadvantage to those with higher chances of being vetted by the Guardian Council, i.e., the reformists/centrists. Since election registration and vetting do not begin until two months prior to the election, the very real possibility that a person may be disqualified and be out of a lucrative government job is likely to act as a significant barrier to candidacy. In recent years, the way to get around the vetting process, at least partially, has been by flooding the election market with candidates. This particular rule is intended to counteract that tactic. But ironically, given the fact that the conservatives now also control the executive branch, this may hurt them more by the mere fact that they now have more people in positions of power who are by law forbidden to run for the parliament unless they resign their positions. This is why the reformist and centrist political parties are claiming that they will have less difficulty in fielding sufficient number of candidates.

The second changed rule, an increase in the education requirement of candidates to a Masters degree (or a Bachelors degree and five years of managerial experience in the private or private sector) is likely to reduce the traditionally unwieldy number of candidates without little partisan impact over the long run. But in the short run the mere fact of the conservative controlled Interior Ministry becoming an arbiter of whether a candidate has enough combined education and experience adds another layer of vetting, hidden by the veneer of educational requirements. As such, it politicizes an already highly politicized electoral process even further. Finally, the decision to count each four-year stint as a member of the parliament as equivalent to one educational degree is undoubtedly intended to help the incumbent (mostly conservative) deputies retain their seats.

Despite all the rule manipulations, the process of forming slates of candidates for large cities is already in full gear. The past few elections have revealed a “hyper-fractionalization” of the political forces to the point that without some sort of concerted effort to form pre-election coalitions, organizations or political parties identified as either conservative or reformist will not have be able to declare any kind of victory in the upcoming Majles election. But in forming coalitions, the reformist/centrist and conservatives forces face different problems.

For the reformists/centrists the issue is registering enough candidates, particularly for the 30 seats of the city of Tehran, so that after disqualifications they would still have appealing slates in large cities (by appealing I mean that the top tiers of the slates are sufficiently well-known to attract the voters to come and vote and, when they do, vote for the whole slate). They also need to struggle against the urge among some reformists to boycott the elections if the vetting process becomes too extensive. Vetting clearly disadvantages the reformists/centrists but low voter turnout, likely in case of boycott by some reformists, assures a victory for conservatives (as it did in the 2003 municipal and 2004 Majles election) who can always rely on a solid base of supporters to show up on Election Day.

Even more important for the reformists/centrists is the need to overcome political divisions that have cost them several elections by offering slates that despite some variations essentially share a core of candidates that are acceptable to all the reformist and centrist forces. This strategy was tried during the 2006 municipal elections and led to significant gains in large cities. In the city of Tehran, for instance, the reformist/centrist council members now constitute a significant minority and because of this they were able to prevent the attempt on the part of hard-line conservative to dislodge the mayor of Tehran, Mohammad Baqer Qalibaf, who today is considered more moderate (and a more capable executive) than Ahmadinejad and the most likely person to successfully challenge him in the next presidential election of 2009.

The conservatives’ problem with political divisions is probably worse. Being in power and not facing the kinds of adverse moves that the reformists/centrists have faced in the past few years against their political survival, they will have a more difficult time overcoming their ideological and political differences, particularly over the running of the economy. They could of course make a marriage of convenience for the sake of maintaining power (something they were unable to do during the 2006 municipal elections). But given past experience, they know that this marriage will fall apart immediately after the election as it has during the current conservative Majles. In fact, several prominent deputies have already announced the formation of a group of independent conservatives, with the intent of offering its own separate slate for the city of Tehran.

The conservative inability to reach a compromise in order to maintain their solid control of all elective and non-elective institutions makes the urge to manipulate the electoral process stronger and the pre-election situation very fluid and unpredictable. But such fluidity and unpredictability (and wild electoral swings) have become almost the norm in Iranian politics and in all likelihood a function of a political system that, while endowed with bickering political elite, is lacking in a fully-formed party system based on competing platforms. As such, the next few months in Iran will again be literally consumed with intrigues and maneuvering about who should be on which list, along with accusations and counter-accusations, without much reference to what elections results will mean in terms of the country’s well being. What will matter is first how many people will show up to vote as a reflection of the continued support for the Islamic Republic as a whole (traditionally somewhere between 50 to 60 percent for Majles elections with the exception of 2000 election which resulted in a clear reformist victory when 67% turned out to vote), and second, the extent to which the results can be considered a rejection of the conservative political faction in power. Once the results are in, then it is time to begin bickering and maneuvering for the next election: the presidential election of 2009! Read more on this article...