Rouhani calls for end to economy subsidising Iran’s adventurous foreign policy

In one of his most important speeches to date, Iranian President Hassan Rouhani has called for a reversal of the current situation in which the economy subsidises politics, critiquing hardline conservative approaches to Iranian foreign policy and possibly hinting at a referendum on his policies in this regard. He also declared that state and quasi-state economic foundations close to the country’s conservative establishment should be taxed and more transparent. Following in the wake of his 9 Dey speech, in which he appeared to distance himself from the Green Movement, this speech may be yet another sign that the Rouhani administration is, at least for the time being, continuing to emphasise economic reform and growth, as opposed to social and political reforms.

Iranian President Hassan Rouhani has made one of his most important and well-thought out speeches since becoming president, with a strong focus on the economy. At an event entitled the Iran Economy Conference, he entered into a detailed and critical discussions of the economy, one of the most – perhaps even the most – important issues on which he campaigned and was elected. The speech called for a reversal of the current situation in the Islamic Republic of Iran’s economy has “subsidises” politics, especially in the realm of foreign policy, and suggested that a popular referendum could even be useful to resolve differences of opinion among the elite in this regard.

Rouhani spent much of his speech to the assembled economic experts, officials, and entrepreneurs critiquing the way in which the economy had “subsidised” politics in the Islamic Republic, and willingness of hardline conservatives to sacrifice the economy and people’s material well-being for ideological objectives:

“We cannot say that because our religion is Islam, therefore we have put little effort into the area of material and economic domains so that spirituality increases. Spirituality and the material, the world and after-life, work and effort for the welfare of self, family, and the people of a society beside morality, purity, and virtue, are all in one direction.”

As if to underline this point, he raised the economic record of hardline President Mahmoud Ahmadinejad, citing a number of damning statistics. According to Rouhani, when he came to power the economy in a state of stagflation, with an economic growth rate of -6.8 and -1.9 percent for two consecutive years respectively, high government debt, inflation above 40 percent, and an economy that has “not been creating jobs”. On the latter point, the president said that in the period between the Iranian calendar years of 1384 to 1393 (2004/2005 – 2013-2014) the number of jobs had gone from 20.6 million to 21.5 million, a net increase of only 900,000 jobs, with a period of near zero job growth between 1385 to 1390 (2005/2006 – 2010/2011).

He criticised the previous administration for not sufficiently taking into account the perspective of economists, but assured his audience that this was the point of the present conference. Later in the speech he compared his record favourably versus that of the previous administration, citing Central Bank of Iran statistics which showed 4 percent growth in the first half of the current Iranian calendar year, inflation projected to finish under 20 percent in the current Iranian calendar year (better than his promise of under 25 percent), and promised single-digit inflation by the end of his first term.

He then attacked the notion that the economy should be sacrificed as a “subsidy” for politics, specifically foreign policy, going to the heart of one of Iran’s most important foreign policy problematiques since the revolution in 1979:

“You all know that in our country it has been years and decades that the economy has subsidised politics. Permanent subsidies are not possible. One day they must be cut. Well, here also let’s decide how long should our economy subsidise politics? [The economy] subsidises both foreign and domestic politics. For one decade let’s reverse this relationship. Let’s experiment for one decade, let foreign policy subsidise the economy and see what happens to the people, their life, livelihood, and youth employment?”

He returned to this theme later in his speech when discussing the how the economy had paid a high price for the country’s isolation due to its foreign policy, explicitly critiquing hardline critiques of ongoing nuclear negotiations:

“We cannot say in our country that we are economically developing while our foreign policy program is completely isolationist. Our political life experience tells us that the country cannot have continuous growth with isolation. This does not mean that we retreat from our ideals and principles. In negotiations, does anyone talk about ideals and principles? Some live in delusion. They do not discuss ideals and principles in negotiation tables. They [P5+1] do not want to talk about ideals and principles either. In today’s world the main debate is about interests, every country is after its own interest. Threats, opportunities, and mutual interests, or specific interests, these are the basis of foreign policy.”

He asserted that in the negotiations with the P5+1, the permanent five members of the United Nations Security Council plus Germany, Iran had gone to the negotiation table, discussed the issues, and been able to reduce sanctions, without necessarily compromising the country’s ideals: “Our ideal is not attached to a centrifuge, our ideal is connected to the mind, heart, and will, is not attached to a centrifuge.”

Perhaps the section of Rouhani’s speech most discussed in the media is his call for a referendum according to Article 59 of the Iranian Constitution, which would require approval by ⅔ of parliament. Speaking on his call to have foreign policy act as a subsidy for the economy, he asserted:

“Let’s ask and [pose the] question to the people. One principle of the constitution which from the first day until now has not been implemented, and I as the executive authority of the constitution would very much hope for a situation to come about so that even for once this article of the constitution is implemented.”

“The constitution tells us: In the important economic, social, political, and cultural issues, instead of laws being approved in the parliament, the plan of the law or program is put directly before a public vote of the people and referendum.”

“Even if for once, on an important issue, which may be contested, let us ask the people directly. Contestation is not important, because opinions are not always unified. Let’s directly ask the people about the important issue which matters for all of us and impacts our lives.” Reaching the climax of his speech, the president said “Now it has been 36 years, that this article of the constitution has not been executed and implemented”, asserting that perhaps it was time that it was.

It should be noted that the Islamic Republic has had three referendums since the Islamic Revolution of 1979: The first to approve the type of regime (an “Islamic Republic”, 1979), the second to approve the Iranian constitution (1979), and the third to revise the constitution (1989). However a referendum has never been used to deal with a legislative matter, as Rouhani has proposed to do here.

Shifting gears, Rouhani suggested that everyone engaged in economic activities, specifically powerful charitable and economic foundations that are often large conglomerates and do brisk business across every sector in Iran, should be more transparent and pay taxes. However, the president remarked that whenever such proposals are brought up, there is noise from some sectors, a likely reference to Iran’s conservative establishment.

Rouhani should be credited for such a bold and incisive speech on an issue which has plagued the Islamic Republic since its foundation, namely the economy being sacrificed for an adventurous foreign policy. This is not only a salvo toward hardline conservatives on the nuclear issue, but challenges Iran’s entire foreign policy framework, being particular relevance to Iran’s increasingly costly support for the Bashar al-Assad regime in Syria.

It is, as of yet, unclear whether his proposal to hold a referendum is pure rhetoric or something he may seek to implement, or what issue a referendum would be on specifically. One possibility is that the president would seek to use a referendum (or the threat of it) to challenge hardline obstructionism, but perhaps more importantly to lock in any final agreement in such a way as to make it difficult for a future hardline administration to reverse.

By challenging the entire set-up of Iranian foreign policy for much of the time since 1979, Rouhani has broken a taboo. But it remains to be seen to what extent he can actually achieve this outcome.