Iran’s Economy After the Elections

LONDON – Recent gains by pro-government reformist candidates in Iran’s parliamentary elections have given President Hassan Rouhani a welcome midterm boost. But huge economic challenges remain. And in the coming months, these challenges are what will determine the battle lines between the president and his hardline adversaries inside and outside the parliament.

Elections are normally won and lost along political lines, and Iran’s recent vote is no exception. But, on this occasion, there is reason to believe that economic concerns were a major driver of political change, as evidenced by the massive turnout at the electoral booths. Ever since July, when Iran signed a landmark nuclear deal with the five permanent members of the United Nations Security Council and the European Union, popular expectations for an improvement in the state of the economy have reached a fever pitch.

Rouhani is well aware of the importance of economic expectations; indeed, they were what swept him into the presidency in 2013. The recent election campaign once again drew strength from the promise to fix an economy battered by years of tough economic sanctions and domestic mismanagement. That is why he placed a high priority on reaching a deal with the outside world that would close the nuclear file and pave the road to economic recovery.

The economy that Rouhani inherited from his predecessor, Mahmoud Ahmadinejad, had been distorted by years of generous redistributions of oil revenues to the president’s supporters and then hit with stagflation, as what US Vice President Joe Biden called the “toughest economic sanctions in history” began to take hold. In 2013, the year Rouhani assumed office, inflation exceeded 40%, and GDP contracted by 6%.