New Year priorities: Tehran focused on turmoil at home, not nuclear program
In Washington and European capitals, top New Year priorities on Iran may be Tehran鈥檚 nuclear program, and the next round of talks in Istanbul in late January.
But for Iran鈥檚 leadership, 2011 promises to be a year of significant domestic challenges, as President Mahmoud Ahmadinejad presides over a precipitous series of subsidy cuts, imposed on an inefficient economy already under strain from a host of sanctions.
Undergirding the turmoil in the Islamic Republic are questions of legitimacy that remain unresolved since the contested June 2009 presidential elections, which brought millions of Iranians into the streets in sometimes deadly protests of fraud.
Economic reform
The most important challenge in Tehran in 2011 will be economic reform.
After decades of expensive subsidies that drained the treasury of anywhere between $30 billion to $100 billion per year, Tehran鈥檚 cold-turkey withdrawal of subsidies on gasoline, fuel, and bread 鈥� which last week quadrupled the price of gas overnight and made diesel prices skyrocket much higher 鈥� is an 鈥渆xtremely drastic鈥� measure, says Farideh Farhi, an Iran specialist at the University of Hawaii.
Indeed, the changes amount to the most serious economic retooling since the 1979 Islamic revolution, which toppled the pro-West Shah but created an oil-driven welfare system that provided cheap utilities and services. While there have been few reports of unrest so far, taking away such subsidies after a generation can be politically explosive.
The fact that prices have risen so abruptly 鈥� with the most needy Iranians set to receive a payment of just $40 per month from the government to fill the gap 鈥� has raised the risks.
鈥淪o much of the focus of this program has been on mollifying the population,鈥� says Farhi. 鈥淚t鈥檚 been done extremely systematically [but] there is a huge question to be asked: Why on earth, under these very difficult circumstances, with Iran under tremendous pressure from outside and a shaky position inside, the government would go for such a drastic effort?
鈥淎nd I don鈥檛 have an answer,鈥� adds Farhi. 鈥淚鈥檓 just holding my breath that it will work out. Because if it doesn鈥檛 work out, it has very, very serious consequences for Iran 鈥� we鈥檙e not just talking about the Islamic Republic.鈥�
A jump in inflation?
The new measures announced by Mr. Ahmadinejad seek to address longstanding problems in Iran that have existed for decades, and 2011 will prove a decisive year.
鈥淭his kind of inequality and accumulation and power has been here forever in this country,鈥� says Djavad Salehi-Isfahani, an economist at the Brookings Institution in Washington.
In some ways 鈥渋nflation is a good thing, it鈥檚 the lubrication you need to get the economy to adjust to the new reality,鈥� says Mr. Salehi-Isfahani, contacted in Tehran.
鈥淯nfortunately, even if the government wants to allow some inflation, it has to pretend it is not going to allow it, because Iranians have a low tolerance of inflation,鈥� which he says is now at 10 percent but perceived by average Iranians to be 50 percent.
鈥淧eople don鈥檛 know that food prices globally have increased by 30 percent,鈥� says Salehi-Isfahani. 鈥淭his is a globalized economy. You can鈥檛 just buy your cucumber here as if you are living in an African country; you are living in a neighborhood of very rich people.鈥�
Even if the price of just a few items goes up in Iran, he says, it can 鈥渃reate a panic,鈥� which could prompt the government to cap some prices 鈥渋n order to calm people.鈥�
Foreign policy challenges
Beyond domestic issues, Iran also has a complicated set of foreign policy challenges in the new year.
鈥淚ran鈥檚 first priority in foreign policy should be neighbors and the Islamic world,鈥� the newly appointed foreign minister Ali Akbar Salehi, who has a PhD from the Massachusetts Institute of Technology (MIT) in Cambridge, Mass., said last week at his first official press conference. 鈥淚n this regard, Saudi Arabia and Turkey have a special position. Iran and Saudi Arabia, as two effective countries in the Islamic world, can resolve many problems together.鈥�
Never mind that US diplomatic cables released by WikiLeaks have quoted the Saudi monarch calling on the Americans to bomb Iran and 鈥渃ut the head off the snake.鈥�
And of course there also remains Iran鈥檚 focus on perennial arch-foe the United States. Washington, in cooperation with European allies, has orchestrated four layers of UN Security Council sanctions against Iran, along with measures that have affected everything from selling jet fuel to Iran鈥檚 commercial airliners in Europe to investment from South Korea.
鈥淭he question is whether or not there is a possibility for a compromise, and that means on both sides 鈥� not just by Iran,鈥� says Farhi. It 鈥渕akes sense鈥� for Iran to strike a deal now that would still allow domestic uranium enrichment, though on a limited scale and with intrusive inspections and tighter safeguard measures, suggests Farhi.
鈥淣ow that the Iranians have declared victory after Geneva [talks in early December] 鈥� Iran stood its ground, and that itself was a victory 鈥� I think the path has been cleared for some sort of a compromise,鈥� says Farhi.
But any deal would also require a compromise from Washington, which until now has insisted that Iran stop all uranium enrichment 鈥� the process to make fuel for nuclear power, that refined to higher levels can also be used to make a weapon.
