What’s Going On In Iran's Presidential Sci-Tech Office?

While the US dollar was trading for over 410,000 rial threshold on Thursday, President Ebrahim Raisi’s administration has not finalized the country's budget for the next Iranian year starting March 21, and the fate of the country’s Seventh Five-year National Development Plan (2022-2026) is still in limbo. 

Following weeks of buck passing between the administration and the parliament, in which lawmakers insisted that without a final new five-year plan the budget cannot be considered, the government is still dragging its feet. Some hardliner supporters of President Ebrahim Raisi argued Tuesday that both plans may be discussed simultaneously at the parliament, but Speaker Mohammad Bagher Ghalibaf opposes any change of procedures.

The law says that when a five-year plan comes to an end, the government should submit a new one, based on which the legislature can debate a new budget. But amid lack of economic and financial clarity due to sanctions and international isolation, the government has not finalized the next five-year plan, while the deadline to submit a budget passed in December 6.

Since 1989, the Islamic Republic has been devising five-year development plans. A lot of organizations and institutions are involved in designing and actualizing these plans, which mostly remain on paper, because they are full of general statements without planning for the needed monetary resources.

According to parliament rules, if the administration misses the December 6 budget deadline, it must attach an addendum to the budget bill that will earmark spending for quarterly portions of the year. This means demanding extra work from an administration that has already failed to perform its ordinary procedural duty. Quarterly allocations mean parliament will approve only three-month budgets, which will tremendously complicate operations not just for government departments, but all the businesses owned or controlled by the state, which constitute up to 80 percent of the economy.

Considering the steep fall of the rial and growing sanctions pressure, the administration cannot have a reasonable estimate of the dollar exchange rate and the amount of revenues from oil exports for the coming year to be able to finalize the details of the budget. On the other hand, the government is selling oil under the market price to small Chinese refineries and through illegal ship-to-ship transfers to circumvent sanctions. Now that Russia is also competing with Iran in sales to China, the government is not certain how much crude Tehran would be able to sell and at what price. 

In July, the Supreme Accounting Office released a report covering the period March 21- May 20 showing that except tax revenues, all other major sources of income grossly underperformed, which local media said was a serious warning for the government and the economy. The government’s revenues from taxes, oil exports, customs duties, etc. totaled 880 trillion rials or about $3.5 billion (average free market exchange rate at the time) in the 60-day period. This was just 37 percent of the projected budget revenues. It is important to note that only 15 percent of the projected oil income was collected. 

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All this chaos is happening on the backdrop of over 115 days of antigovernment protests, that have accelerated capital flight. Confirming the massive outflow of capital from the country, head of Tehran Chamber of Commerce, Industries, Mines and Agriculture, Masoud Khansari, said earlier in the month that the annual outflow of capital has reached about $10 billion. 

Opponents of the Islamic Republic have also urged people to withdraw their deposits from government banks to put further pressure on the government, which has been printing more money in recent years. The money supply has grown at an unprecedented pace since September. 

Banks have raised interest rates to attract deposits. In the past few days the Central Bank has given the go-ahead for up to 20-percent interest rates for banks to pay. Although the Central Bank says any rate more than 20 is a violation of the law and can lead to the firing of a bank manager, a many banks – especially semi-private institutions are giving 23 to 25 percent interest under the table. 

Talks to revive the JCPOA and lift most of the US sanctions have stalled since September when the last attempt by the European Union to broker a deal fell apart.

In its latest Global Economic Prospects report released on Tuesday, the World Bank also said that global growth is slowing sharply in the face of elevated inflation, higher interest rates, reduced investment, and disruptions caused by Russia’s invasion of Ukraine. 

It said it expected global GDP growth of 1.7% in 2023, one of the slowest paces since 1993 except for the 2009 and 2020 recessions. In its previous Global Economic Prospects report in June 2022, the bank had forecast 2023 global growth at 3.0%. The global economy is projected to grow by 2.7% in 2024.

The outlook for Iran’s GDP is reported as 2.9% in 2022, but it will decrease to 2.2% in 2023, and 1.9% in 2024. The figures pertaining to Iran seem too optimistic given the current 50-percent annual inflation rate and a currency that has dropped by 30 percent just since September.

For example, unlike Iran, most of the countries in the category of Emerging Market and Developing Economies, including Brazil, Mexico, Argentina, Saudi Arabia, India, Pakistan and South Africa, reported negative GDPs in 2020, posing a question about the validity of the figures about Iran, whose currency has fallen more than 10-fold since 2018 and tens of million of middle-class citizens are now considered poor.

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The outlook for 2024 for Saudi Arabia, whose consumer prices rose by 2.9 percent on a year-on year basis in November, is projected to be 2.3 percent, while Iran with 40-50-percent inflation in the past 24 months and food inflation recorded at above 70 percent in 12 provinces, is projected to have a 1.9-percent GDP growth. The answer most likely lies in lack of transparency and probably data fabrication by the regime’s authorities. 

In recent years, the Islamic Republic has officially stopped providing raw data to the public. Every now and then, officials announce some figures that often do not add up with the available facts or contradict each other. Moreover, the country is so isolated in the international community that the World Bank has to primarily rely on government data for its estimates.

Iran’s government having lost most of its vital oil income due to US sanctions has resorted to printing money, with liquidity and the money supply increasing exponentially, which in turn pushes inflation higher and the national currency’s exchange rate lower. Even pro-government Iranian politicians and lawmakers say that the economic situation is dire and no growth is expected.

According to the World Bank, the bleak outlook will be especially hard on emerging markets and developing economies as they struggle with heavy debt burdens, weak currencies and income growth, and slowing business investment that is now forecast at a 3.5% annual growth rate over the next two years -- less than half the pace of the past two decades.

World Bank Group President David Malpass said, “The crisis facing development is intensifying as the global growth outlook deteriorates,” adding “Emerging and developing countries are facing a multi-year period of slow growth driven by heavy debt burdens and weak investment as global capital is absorbed by advanced economies faced with extremely high government debt levels and rising interest rates.”

"Given fragile economic conditions, any new adverse development -- such as higher-than-expected inflation, abrupt rises in interest rates to contain it, a resurgence of the COVID-19 pandemic or escalating geopolitical tensions -- could push the global economy into recession," the bank said in a statement accompanying the report.

In a video message he released on social media Wednesday, Peyman Jebelli said he had seen his brother’s interview, adding that such incidents were not unprecedented.

The chief of the IRIB, the key state propaganda machine, also tried to raise suspicion over his brother’s remarks in the interview suggesting that Meysam (Maysam) may have been under some kind of pressure, purportedly by a foreign government or group. “I’m not sure he made these comments knowingly and of his own volition.”

The interview followed the Time’s disclosure Tuesday that one of the IRIB chief’s brothers, Meysam had defected in early 2020 along with another brother, Meghdad, and that they had sought asylum after their nephew Mohammad-Amin’s tragic death in IRGC's downing of a Ukrainian airliner on January 8, 2020.

The report and subsequent information did not indicate where the brothers asked for asylum. The United States and Canada are the two most likely countries.

The IRGC fired two missiles at Flight PS752 only minutes after it took off from Tehran’s Imam Khomeini Airport amid heightened tensions between Iran and the United States after firing dozens of ballistic missiles at a US military base in Iraq in retaliation of the targeted killing of Qods force commander Qassem Soleimani.

Supreme Leader Ali Khamenei appointed Peyman Jebelli, a close associate of his son Mojtaba, as the head of the IRIB, in September 2021. Jebelli was designated by the United States in November and by Canada in October for his role in the regimes violations of human rights including airing of confessions extracted under torture.

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Jebelli’s nephew, the 29-year-old Mohammad-Amin who was among the 176 passengers of the flight, had been pursuing a Master of Health Science at the University of Toronto since 2018. Not only his uncle but his own father, Mohammad Jebelli, also chose to take the regime’s side over the incident.

The tragic death, however, did not shake the loyalty of Mohammad-Amin’s father and his uncle, Peyman Jebelli, to the regime and they chose to remain silent about the IRGC’s responsibility in the incident, Meysam told Iran International. “He stepped in his own son’s blood,” Meysam says.

When Meysam tried to convince his brother Peyman that the plane had been struck by missiles as video footage that emerged on social media indicated, the IRIB chief denied the authenticity of the footage and claimed it showed Israeli air defense exercises.

When the truth came out three days later and Meysam confronted him again, the IRIB chief only said “Good for you that you realized that [before its public announcement]!”

Meysam says he was not pro-regime like his other brothers but after the downing of the plane, which he calls “murder by the Islamic Republic”, he decided to openly denounce the regime. “It was time to take sides.”

In a tweet after Meysam’s disclosure of his and his brothers’ disputes over the incident, Canada-based activist Hamed Esmaeilion, whose daughter and wife were killed in the crash, revealed that the two Jebelli brothers who have defected have been members of an association seeking justice for the victims of Flight PS752 for a long while.

“What matters about the Jebelli brothers, Meysam and Meghdad, … is not defection but their choosing the right side of the history. They did not remain silent,” Esmaeilion wrote.

Reports from Iran say many state organizations and industrial towns in different provinces have been forced to reduce working hours because of the energy shortage.

Shortage of natural gas in dozens of Iranian cities amid a cold snap has closed state offices and schools until Friday.

At the same time, regime’s Oil Minister Javad Oji has threatened people that their gas will be cut off if they consume more than the pre-defined pattern.

In the past few days, the shortage of natural gas has stopped the activities of schools and offices in several provinces of Iran, including Alborz, Khorasan Razavi, Golestan, Zanjan, Ardabil, Lorestan, Markazi, and others.

Iran has the world’s second largest gas reserves but has not been able to make the necessary investments to keep up production due to Western sanctions.

Some Iranian officials including Mohammad Marandi, who was a member of the Iranian nuclear negotiating team, have been sayingsince last summer that "a hard winter in Europe" will force European powers to come back to the negotiating table. Marandi had predicted: "The winter is coming, and the EU will have to face a paralyzing energy crisis."

Hard-line officials were making these claims while Europe needed natural gas due to the war in Ukraine, but Iran does not produce enough to export and has no way of shipping it to Europe.

He added that recent exploration had shown a diverse portfolio of uranium in the Arab state, the world's top oil exporter.

Saudi Arabia has a nascent nuclear program that it wants to expand to eventually include uranium enrichment, a sensitive area given its role in nuclear weapons. Riyadh has said it wants to use nuclear power to diversify its energy mix.

It is unclear where its ambitions end, since Crown Prince Mohammed bin Salman said in 2018 that the kingdom would develop nuclear weapons if regional rival Iran did.

"The kingdom intends to utilize its national uranium resources, including in joint ventures with willing partners in accordance with international commitments and transparency standards," Abdulaziz bin Salman said.

He told a mining industry conference in Riyadh that this would involve "the entire nuclear fuel cycle which involves the production of yellowcake, low enriched uranium and the manufacturing of nuclear fuel both for our national use and of course for export".

Atomic reactors need uranium enriched to around 5% purity, but the same technology in this process can also be used to enrich the heavy metal to higher, weapons-grade levels.

This issue has been at the heart of Western and regional concerns about Iran's nuclear program and led to the 2015 deal between Tehran and global powers that capped enrichment at 3.67%.

The pact unraveled after then-President Donald Trump exited the deal in 2018, and efforts to salvage the agreement have stalled since September.

Reporting by Reuters