Iran’s ongoing protests and Raisi’s economic surgery

Iranian regime President Ebrahim Raisi surrounded by his supporters in Kermanshah

Protests in various Iranian cities entered their seventh day on Tuesday. With anti-regime slogans, these protests are the broadest manifestation of an unstable society. But what are the origins of these protests?

Iran has seen various protests and at least eight large-scale uprisings since 2017. When the November 2019 uprising with more than 1,500 victims, the regime and the people knew that the situation would never be the same again.

While viewing the current protests as the result of Iran’s economic crisis would be parochial, ignoring these elements fails to fully appreciate that the country is going through a critical socio-economic transition.

The new round of protests began in Iran following the rapid rise of consumer goods, including bread and pasta. While prices have been on an upward trend in recent years, they spiked shortly after the government of Ebrahim Raisi abolished the preferential exchange rate.

The preferential rate was the country’s official exchange rate of 42,000 rials to the dollar since 2018, ostensibly to be used to import essential materials such as wheat and medicine. But regime insiders who received the currency imported goods at a lower price but sold them three times in the market. Prices did not decrease significantly, and since the regime did not have enough foreign currency, it started ticket printing.

Unsustained banknote printing has created liquidity well in excess of Iran’s low production rate of 3%. Raisi’s government abolished the official exchange rate after much fanfare over the “fight against corruption”.

Because Iran’s rate of liquidity was higher than its rate of production and employment, inflation became rampant, causing prices to rise steadily.

Since regime officials knew that removing the official exchange rate could certainly raise prices, they did a lot of flip-flopping to implement their so-called “economic operation.”

While many Iranian economists have warned that removing the prime rate would lead to a “monetary shock” and cause prices to jump, Raisi claimed on April 8 that his government “will not create a monetary shock by removing the prime rate.”

But the price spike speaks for itself. Since the preferential rate was removed, wheat is up 100% from three years ago. The price of flour has risen from 25,000 rials to almost 170,000 rials per kilo, and the cost of medicine has increased tenfold.

“Secret and overt subsidies to the Iranian economy should be eliminated based on growth in production, investment and revenue. Production is so dependent on the outside world that the price of tuna doubles as the dollar exchange rate increases,” said the the national daily Mostaghel wrote May 10.

So why did Raisi do this?

According to the public daily Eghtesad-e Ayandeh on May 14, Raisi’s government would gain about $8 billion by removing the prime rate and fixing a much higher exchange rate. The ruling theocracy in Iran needs every penny to fuel its warmongering and terrorist machine and use it as leverage in its talks with world powers.

Additionally, Raisi’s government is making billions of dollars as the prices of consumer goods continue to rise. “Raisi removes the prime rate just because his government wants five quadrillion rials [nearly $17 billion] difference in the price of consumer goods. The assertion of spending money on people is a bitter joke,” admitted the Mostaghel daily on May 10.

According to the state-owned Jahan-e Sanat, on May 14in four days, Raisi’s government “took three quadrillion rials out of the people’s pocket”, causing unprecedented price hikes.

The sudden price increase was followed by the recent protests. Raisi’s government has promised to give four million rials in subsidies to Iranians for two months to calm the society. But as the prices of consumer goods continue to rise, this amount of money would do nothing to help Iranians earn a living.

Moreover, even if the regime gave Iranians four million rials in subsidies, inflation would still increase, leaving Iranians with nothing to meet their basic needs.

Raisi refuses to say that if the government does not have enough money, how could it afford to pay the subsidies other than continuing to print banknotes, thereby increasing inflation?

“According to the latest monetary statistics from the Central Bank, the volume of cash with a growth of 39% at the end of last year reached 4.8 quadrillion rials. In other words, over the past year, 1.3 quadrillion rials of liquidity have been created. The monetary base also grew by 31.4% last year,” the state said.perform Jahan-e Sanat daily acknowledged May 10.

“This price increase is so significant that subsidies will not be able to cover it. People haven’t used that money, but they’re seeing new prices, forcing them to buy chicken, eggs, oil and dairy products at higher prices,” the state said.perform Jahan-e Sanat daily acknowledged May 12.

Hossain Raghfar, one of the regime’s economists, called the plan “a new episode of plundering the Iranian economy that the government is carrying out to compensate for the budget deficit”.

Yet Raisi’s government has so far failed to deceive the public. On May 15, the official IMNA news agency quoted Hojjat Abdolmaleki, Raisi’s labor minister, as saying, “There have been more than a million cases of protests” in just four days since the implementation of the so -so-called “subsidy modification plan”. ”

Raisi’s ‘economic surgery’ would ‘kill Iran’s ailing economy’, MP Moinoldin Saadi says, quoted by State-run ILNA on May 14.

Raisi is indeed devoid of any solution to the Iranian financial crisis. The only task of the “hanging judge” is to control Iranian society through oppression and further squander the national wealth on terrorism, missiles and nuclear projects to preserve the moribund regime. Its recent “economic surgery” and growing oppression testify to this.

But the ongoing and expanding protests leave a question: Could these maneuvers save Raisi and the ruling theocracy?