Editor’s note: While the Stimson Center rarely publishes anonymous work, the author of this commentary is a Tehran-based analyst who has requested anonymity out of legitimate concern for their personal safety. The writer is known to appropriate staff, has a track record of reliable analysis, and is in a position to provide an otherwise unavailable perspective.
A recent government reversal on budgeted tax increases for public servants and small retail shops is only the latest embarrassing debacle for the administration of President Ebrahim Raisi. From deadly air pollution to rising inflation, dwindling pension funds, and increased popular alienation from the system, the Islamic Republic of Iran is struggling to keep its equilibrium at home even as it touts its “Axis of Resistance” abroad.
Commentator Abbas Abdi in an op-ed on Nov. 28 wrote that these crises “are all the outcomes of a faulty decision-making system, which has worsened in the past few months and whose outcome is usually the intensification of the crisis. Worse, with the intensification, solving them will become costlier, eroding the political will to resolve them in the process.”
Climate Issues
As anyone who has visited Tehran in the winter knows, air pollution has become a permanent feature of the capital and many other big cities. So far this year, the number of days of clean air that Tehran has enjoyed has been in the single digits. Because of sanctions, there have been no significant investments in natural gas production. As a result, power plants around Tehran and other big cities have had to switch from natural gas to mazut, a dark and heavy, low-quality and highly polluting fuel oil. In addition to an estimated annual cost of $7 billion to the Iranian economy, pollution causes some 20,000 deaths every year. The only solution that the government has offered so far is closing schools, which it did for Tehran province again on Dec. 3 and 4.
Another catastrophe that is the result of years of failed policies is the drying out of Lake Orumieh, where the water level fell by 80% in the past year. At present, only 4% of the lake remains. Orumieh is the biggest lake in Iran and the sixth-largest saltwater lake in the world. Its impending death cannot be attributed solely to global warming since lakes in Iraq, Turkey, and Armenia that receive the same rainfall are in much better condition.
Social Security and Inflation
Another serious crisis involves Iran’s pension funds. Of the 17 active pension funds in Iran, 15 are technically bankrupt and the remaining two, including the Social Security Organization, are on shaky ground. These funds have been absorbing a growing share of the state’s general budget, amounting to 15% in the current Iranian fiscal year. In the past two decades, governments have paid their share to these funds in the form of overvalued stocks of state-owned enterprises. Prominent Iranian economist and academic Naser Zakeri wrote in an editorial on Nov. 26 that government mismanagement has resulted in huge losses to these funds without any accountability. This is happening at a time when Iranian society is aging and the number of employed people has not increased to compensate for the growing number of pensioners. Rather than improve the management of the funds, the Raisi government is planning to increase the age of retirement from 55 for women and 60 for men to 60 and 65, respectively.
Raisi was supposed to introduce the annual budget bill on Nov. 21 but parliament had not finished finalizing a seventh 5-Year Development Plan. Raisi’s economy minister Ehsan Khandouzi did disclose parts of the budget to the press. According to these media reports, taxes will increase by 49.8% while crude oil sales will account for 22% of the budget, a drop from 28% this year. Wages will rise by 18%, far short of nearly 40% inflation.
Parliament will be loath to cut spending in an election year, ensuring inflation will continue to rise.
Election Prospects
On March 1, Iranians are being called on to vote for a new parliament as well as the Assembly of Experts, an 88-seat body that will likely determine the next Supreme Leader after the incumbent, 84-year-old Ayatollah Ali Khamenei dies.
For 45 years, the Islamic Republic has tied its legitimacy to election turnouts. This year, however, the regime’s top decision makers seem to have decided that only a low turnout will guarantee their desired outcome and there is likely to be draconian vetting of candidates by the hardline dominated Council of Guardians. What moderates call “the purging process” started in 2021, when Raisi was elected with no viable challengers. Political activist Mohammad Sadegh Javadi-Hesar predicted the turnout in March would be the “lowest ever” and that this “will backfire and the top decision makers will have to pay the cost.”
A number of other prominent moderate and reformist figures, and even some conservatives, share this view. Former president Hassan Rouhani, whose registration for the Assembly of Experts election angered opponents, said he “must register to show that the country does not belong solely to a select group of people.” He questioned the legitimacy of a new Supreme Leader “chosen by an Assembly with only 10% turnout.”
Early opinion polls suggest a record-low turnout. A poll by the Iranian Students Polling Agency said only 27.9% of respondents would “definitely turn out” while 36% would “definitely not vote.”Commentator Abdi predicted that turnout among educated urban youth would be less than 7% and the general turnout in Tehran and other big cities less than 15%.
Prominent reformist journalist Mohammad Ghouchani said that an election with such a low turnout and pre-determined outcome “will erode the only difference between the Islamic Republic and the Pahlavi regime. The institution of the election has lost its effectiveness and relevance and other venues of peaceful change like protests have become useless. We must think of something new.”
Conservative journalist Mohammad Mohajeri has predicted that the purging process “is so extensive that soon it will include even Raisi himself. He will be the biggest victim of the purging process. When the 2025 presidential election season comes, these same radicals will move on and will leave Raisi behind.”
Social Tensions
These developments are taking place as social tensions rise again over efforts to impose the hijab. The “guidance patrols” that were disbanded after the death of Mahsa Amini in police custody in September 2022 have been re-established in a new form. Groups of enforcers have been posted in crowded centers across Tehran in what the regime calls “spontaneous reaction to loose hijab in the city.” After the reformist Etemad newspaper disclosed the text of a directive by the interior minister Ahmad Vahidi, the Tehran prosecutor filed a legal case against the newspaper for disclosure of confidential documents. However, the Interior Ministry has not denied the contents of the document.
The long list of crises facing the Islamic Republic is also reflected in record numbers of executions as the regime tries to profit from the international focus on the Gaza war. Corruption continues apace as does an alarming rise in the emigration of educated people and professionals. All these crises point to the failure of the system to solve urgent problems. As sociologist Mohammad Fazeli put it, “Iran is at the razor’s edge” with no clear path forward.
Iran Faces a Mountain of Unresolved Domestic Problems
By Anonymous
Middle East & North Africa
Editor’s note: While the Stimson Center rarely publishes anonymous work, the author of this commentary is a Tehran-based analyst who has requested anonymity out of legitimate concern for their personal safety. The writer is known to appropriate staff, has a track record of reliable analysis, and is in a position to provide an otherwise unavailable perspective.
A recent government reversal on budgeted tax increases for public servants and small retail shops is only the latest embarrassing debacle for the administration of President Ebrahim Raisi. From deadly air pollution to rising inflation, dwindling pension funds, and increased popular alienation from the system, the Islamic Republic of Iran is struggling to keep its equilibrium at home even as it touts its “Axis of Resistance” abroad.
Commentator Abbas Abdi in an op-ed on Nov. 28 wrote that these crises “are all the outcomes of a faulty decision-making system, which has worsened in the past few months and whose outcome is usually the intensification of the crisis. Worse, with the intensification, solving them will become costlier, eroding the political will to resolve them in the process.”
Climate Issues
As anyone who has visited Tehran in the winter knows, air pollution has become a permanent feature of the capital and many other big cities. So far this year, the number of days of clean air that Tehran has enjoyed has been in the single digits. Because of sanctions, there have been no significant investments in natural gas production. As a result, power plants around Tehran and other big cities have had to switch from natural gas to mazut, a dark and heavy, low-quality and highly polluting fuel oil. In addition to an estimated annual cost of $7 billion to the Iranian economy, pollution causes some 20,000 deaths every year. The only solution that the government has offered so far is closing schools, which it did for Tehran province again on Dec. 3 and 4.
Another catastrophe that is the result of years of failed policies is the drying out of Lake Orumieh, where the water level fell by 80% in the past year. At present, only 4% of the lake remains. Orumieh is the biggest lake in Iran and the sixth-largest saltwater lake in the world. Its impending death cannot be attributed solely to global warming since lakes in Iraq, Turkey, and Armenia that receive the same rainfall are in much better condition.
Social Security and Inflation
Another serious crisis involves Iran’s pension funds. Of the 17 active pension funds in Iran, 15 are technically bankrupt and the remaining two, including the Social Security Organization, are on shaky ground. These funds have been absorbing a growing share of the state’s general budget, amounting to 15% in the current Iranian fiscal year. In the past two decades, governments have paid their share to these funds in the form of overvalued stocks of state-owned enterprises. Prominent Iranian economist and academic Naser Zakeri wrote in an editorial on Nov. 26 that government mismanagement has resulted in huge losses to these funds without any accountability. This is happening at a time when Iranian society is aging and the number of employed people has not increased to compensate for the growing number of pensioners. Rather than improve the management of the funds, the Raisi government is planning to increase the age of retirement from 55 for women and 60 for men to 60 and 65, respectively.
Raisi was supposed to introduce the annual budget bill on Nov. 21 but parliament had not finished finalizing a seventh 5-Year Development Plan. Raisi’s economy minister Ehsan Khandouzi did disclose parts of the budget to the press. According to these media reports, taxes will increase by 49.8% while crude oil sales will account for 22% of the budget, a drop from 28% this year. Wages will rise by 18%, far short of nearly 40% inflation.
Parliament will be loath to cut spending in an election year, ensuring inflation will continue to rise.
Election Prospects
On March 1, Iranians are being called on to vote for a new parliament as well as the Assembly of Experts, an 88-seat body that will likely determine the next Supreme Leader after the incumbent, 84-year-old Ayatollah Ali Khamenei dies.
For 45 years, the Islamic Republic has tied its legitimacy to election turnouts. This year, however, the regime’s top decision makers seem to have decided that only a low turnout will guarantee their desired outcome and there is likely to be draconian vetting of candidates by the hardline dominated Council of Guardians. What moderates call “the purging process” started in 2021, when Raisi was elected with no viable challengers. Political activist Mohammad Sadegh Javadi-Hesar predicted the turnout in March would be the “lowest ever” and that this “will backfire and the top decision makers will have to pay the cost.”
A number of other prominent moderate and reformist figures, and even some conservatives, share this view. Former president Hassan Rouhani, whose registration for the Assembly of Experts election angered opponents, said he “must register to show that the country does not belong solely to a select group of people.” He questioned the legitimacy of a new Supreme Leader “chosen by an Assembly with only 10% turnout.”
Early opinion polls suggest a record-low turnout. A poll by the Iranian Students Polling Agency said only 27.9% of respondents would “definitely turn out” while 36% would “definitely not vote.”Commentator Abdi predicted that turnout among educated urban youth would be less than 7% and the general turnout in Tehran and other big cities less than 15%.
Prominent reformist journalist Mohammad Ghouchani said that an election with such a low turnout and pre-determined outcome “will erode the only difference between the Islamic Republic and the Pahlavi regime. The institution of the election has lost its effectiveness and relevance and other venues of peaceful change like protests have become useless. We must think of something new.”
Conservative journalist Mohammad Mohajeri has predicted that the purging process “is so extensive that soon it will include even Raisi himself. He will be the biggest victim of the purging process. When the 2025 presidential election season comes, these same radicals will move on and will leave Raisi behind.”
Social Tensions
These developments are taking place as social tensions rise again over efforts to impose the hijab. The “guidance patrols” that were disbanded after the death of Mahsa Amini in police custody in September 2022 have been re-established in a new form. Groups of enforcers have been posted in crowded centers across Tehran in what the regime calls “spontaneous reaction to loose hijab in the city.” After the reformist Etemad newspaper disclosed the text of a directive by the interior minister Ahmad Vahidi, the Tehran prosecutor filed a legal case against the newspaper for disclosure of confidential documents. However, the Interior Ministry has not denied the contents of the document.
The long list of crises facing the Islamic Republic is also reflected in record numbers of executions as the regime tries to profit from the international focus on the Gaza war. Corruption continues apace as does an alarming rise in the emigration of educated people and professionals. All these crises point to the failure of the system to solve urgent problems. As sociologist Mohammad Fazeli put it, “Iran is at the razor’s edge” with no clear path forward.
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