The Realities And Challenges Facing Pezeshkian’s Economic Vision – Analysis
By Dr. Mohammed Al-Sulami
In most countries, the economy often acts as an independent force, guiding policy decisions and shaping political landscapes. However, in Iran, the economic situation is distinctly different. Here, the economy is not an autonomous force but a dependent factor, shaped and controlled by the ruling political system’s strategies. It is a variable closely tied to the decisions of the supreme leader and his inner circle.
During the recent presidential election, before Masoud Pezeshkian’s victory, economic issues were at the forefront of the candidates’ platforms, reflecting the centrality of economic and livelihood concerns among the Iranian population. As such, we should explore President Pezeshkian’s economic plans, including his strategies for addressing the current economic challenges, the obstacles he might encounter, his stance on international sanctions and his foreign policy approach, particularly in relation to the nuclear agreement and diplomatic relations with neighboring countries and the broader international community.
The policies implemented by the Iranian regime have significantly contributed to the severe economic crises currently faced by the Iranian people. This is reflected in the country’s ongoing isolation and the repeated imposition of sanctions over the past four decades, most notably the reinstatement of US sanctions in 2018. As a result, Iran has experienced widespread poverty, unemployment, corruption, nepotism and hyperinflation, with inflation rates surpassing 50 percent.
The national currency has devalued, purchasing power has dwindled and dollar-denominated incomes have dropped to a third of their previous levels. Additionally, local debt has surged, investment has declined, power outages are frequent, government budget deficits have become common and the country has had to adopt austerity measures and cut spending. Despite possessing significant oil reserves, natural resources and various economic assets, Iran has lost numerous development opportunities across multiple sectors.
Pezeshkian, a former minister during Mohammed Khatami’s presidency and a long-serving reformist parliamentary representative, holds a specific economic vision for Iran. He believes that the key to rescuing the country lies in adhering to the general policies and directives set by the revolutionary leader.
Pezeshkian has emphasized that the nuclear agreement is vital in alleviating economic issues. He argues that resolving the challenges associated with this agreement and lifting sanctions should be a priority, achievable with the expertise of local specialists. While he acknowledges that the country can endure under the current sanctions, he insists that true development is unattainable without their removal. In an article published on The Tehran Times website, Pezeshkian stated that the sanctions have inflicted hundreds of billions of dollars in losses on Iran’s economy.
Pezeshkian also supports internal reform measures, such as minimizing the interference of government and military entities in the economy, encouraging the private sector and cooperatives and allowing greater economic freedom, except in the health and education sectors.
Djavad Salehi-Isfahani, an Iranian economics professor at the University of Virginia, notes that Pezeshkian’s goals may align with those of President Hassan Rouhani, particularly regarding reconciliation with the West, but they diverge in terms of reliance on the market economy and the private sector. Consequently, Pezeshkian’s views are more closely aligned with former President Khatami’s ideas on social justice.
Pezeshkian has not yet outlined a detailed, actionable plan for solving Iran’s economic problems. However, he has shared broad outlines of his economic objectives. His approach involves consulting experts with experience in specific fields. One of his main goals is to lift economic sanctions on Iran, which he views as crucial for improving the country’s economic situation and attracting much-needed investments. To achieve this, he seeks the counsel of former Foreign Minister Javad Zarif. Pezeshkian also emphasizes the importance of Iran complying with the Financial Action Task Force’s recommendations and removing itself from the organization’s blacklist.
He aims to foster peaceful international relations, address inflation — a concern previously highlighted by Ali Tayebnia, the former economy minister under Rouhani — and oppose currency controls, mandatory pricing and monopolies, such as those in the car manufacturing industry. His economic vision also includes tackling issues like restricted freedoms and internet censorship, combating corruption, promoting social justice and creating incentives for the development of underserved and border regions.
As regards his vision for his country’s foreign relations, Pezeshkian emphasized his intention to address existing challenges with neighboring nations by focusing on shared interests and reducing tensions. He advocates for the creation of a nonaggression pact with neighboring countries to foster a connection based on common interests.
In the same article, Pezeshkian stated: “Tehran will prioritize strengthening relations with our neighbors. We will initiate cooperation with Turkiye, Saudi Arabia, Oman, Iraq, Bahrain, Qatar, Kuwait, the UAE and regional organizations to deepen economic ties, enhance trade relations, increase joint investment and tackle common challenges.” He also expressed a desire to “move forward toward establishing a regional framework for dialogue, confidence-building and development.”
Pezeshkian believes that Iran should maintain a neutral stance, avoiding aligning too closely with either the West or the East, while also refraining from hostility toward them. He promised to develop strategic and balanced relations with Russia and China. However, in an earlier article following his election victory, he accused Washington of “escalating the intensity of the conflict by waging an economic war against Iran and engaging in state terrorism through the assassination of the Quds Force commander.” The coming phase will undoubtedly serve as a practical test for these diplomatic visions.
The implementation of Pezeshkian’s economic goals faces numerous challenges, particularly as they conflict with the interests of Iran’s religious regime and its influential circles, notably the Islamic Revolutionary Guard Corps, which plays a significant role in the country’s economy. As a result, the new president is likely to face internal conflicts — assuming his convictions remain unchanged — with the conservative camp that controls both parliament and the regime’s Expediency Discernment Council, as well as the judiciary.
These interest groups are unlikely to relinquish their influence and advantages easily, as demonstrated by their resistance to previous reformist presidents like Khatami and Rouhani, who attempted to curtail their economic power. Furthermore, the Expediency Discernment Council opposes Iran’s compliance with the Financial Action Task Force’s recommendations to combat money laundering and terrorist financing. This opposition stems from concerns that such compliance could expose Iran’s foreign financial dealings, which are designed to circumvent Western sanctions, or its financial ties with armed groups abroad.
Alongside various technical economic challenges, the new president faces several significant hurdles. Controlling inflation, which hovers around 40 percent, is especially difficult amid ongoing US sanctions, particularly those targeting the oil sector. These sanctions have led to a shortage of foreign currency, production inputs and goods, contributing to rising local prices. Additionally, improving the business environment and attracting investments is challenging due to the competition and influence of revolutionary interest groups.
In his attempt to address the budget deficit and inflation, Pezeshkian may consider implementing austerity measures, such as cutting public spending, reducing subsidies or raising taxes and energy prices, which could exacerbate poverty and unemployment. However, if he resorts to deficit financing by borrowing from local banks at high-interest rates, the financial deficit cycle is likely to persist.
Iranians have long been troubled by issues like power outages due to insufficient local gas supplies, housing shortages and high property prices, which remain unsolved. Additionally, problems such as migration, drought, declining agricultural production and population growth require long-term strategies. The most pressing economic challenge for Iran in the short term remains the urgent need to lift sanctions on the Iranian economy.
The Iranian economy could face further deterioration if Donald Trump wins the US presidential election in November and reinstates stringent oil sanctions on Iran, similar to those imposed before President Joe Biden’s term. Such a scenario could reduce Iran’s oil exports from the current rate of about 1.5 million barrels per day to approximately 300,000 barrels per day. Trump’s return to power might compel the Iranian regime to expedite nuclear negotiations to prevent a complete depletion of its financial resources, which would exacerbate its existing economic crises.
In conclusion, the ability of the incoming Iranian president to address the country’s economic challenges is quite limited. Significant economic improvements are unlikely unless the supreme leader and his inner circle decide to fundamentally change their foreign policy approach.
•Dr. Mohammed Al-Sulami is the founder and president of the International Institute for Iranian Studies (Rasanah). X: @mohalsulami