Operation Foreign Policy or
The important economic components that should be compared are GDP
growth, inflation rate
and exchange rate.
The 13th government is busy with measures it describes as ďcurrency reformsĒ
or ďeconomic surgery;Ē an action that is praised by the government fans and
its media, but it has caused concern in the society and is troublesome from
the criticsí point of view.
Ali Majedi, an economist and former diplomat, believes that without an
upturn in GDP growth and an upsurge in the foreign exchange income, any
economic surgery would not only be ineffective, but may have unfortunate
social implications. In this situation, the foreign policy discourse should
be based on de-escalation, interaction and understanding, which requires the
revival of JCPOA and acceptance of FATF by Iran.
Many economists believe that economic surgery is not possible without
foreign policy surgery. What is your opinion? Which one has priority:
Economic surgery or diplomatic surgery?
In order to answer this question, I need to give a brief introduction on the
division of the 40-year plus rule of the Islamic Republic of Iran. In the
following, I will compare the foreign policy discourse and approach as well
as three important economic components in the three periods that I will
The important economic components that should be compared are GDP growth,
inflation rate and exchange rate. These three components carry the
possibility of increasing income. In my opinion, three periods can be
explained in the 40-year history of the Islamic Republic of Iran: the first
period from the victory of the revolution to the reform period; the second
is the Reform Era; and the third is the post-reform period.
The first period is divided into two parts; the first part, namely the
premiership of Mr. Mirhossein Mousavi; the second part, the rule of the late
Ayatollah Hashemi Rafsanjani. During the first eight-year period, the
country was involved in a war with Iraq, and there was no opportunity to
explain foreign policy, and the country was focused on defending the cause
of the revolution.
But in terms of economic components, GDP growth was negative. The foreign
currencies were offered not in one but in two different rates. During the
second four-year term of Mr. Mousavi, I was the deputy of the Ministry of
Economic Affairs and Finance, and I knew very well that this situation was
not in the interest of the country, but during the war, no special action
could be taken. But the inflation was almost controlled and the most
important concern of Mr. Mousavi was to reduce the economic pressure caused
by the inflation and he was successful in this respect.
The exchange rate, as an important economic factor, has always
been a problem for the country.
During the era of the late Hashemi Rafsanjani, shifting eastward was brought
up and the political discourse in that period was inclined to the East. In
terms of political discourse, there was a good capacity for relations with
neighbors, especially the Arab states of the Persian Gulf, the turning point
of which was the relationship with Saudi Arabia. But relations with the
West, including Europe, were not very successful.
In relation to the mentioned basic components, the growth of the GDP was
relatively successful; the late president was looking for a single rate
currency and he was aware of the destructive effects of multi-rate currency.
He even ordered the exchange rate, which had reached 500 tomans (for one US
dollar), to be announced at 300 tomans (for one US dollar). But the economy
and the exchange rate cannot be instructed and have their own mechanisms. In
a short period of time, the multi-rate currency increased.
The second period was the eight-year reform era. During this period, the
political discourse changed and the Dialogue of Civilizations and detente
created a new space in the global scene. During this period, like all
previous years, diplomatic relations were not established with America.
Another important point was the expansion of relations with Europe. This
political approach produced its economic results. During this period, we
witnessed an increase in GDP growth, we had the lowest inflation rate, and
although the exchange rate went up but the rise was minimal in this
eight-year period. In addition to this, the currency became single rate in
the real sense not upon the decision of the government. Therefore, the
tension-causing foreign policy provided the basis for productivity of
foreign investment and success in the economy.
In the third period that began with the presidency of Mr. Ahmadinejad;
foreign policy took a different course. During this period, most sanctions
were imposed against the country. Ignoring international structures such as
the United Nations and making a mockery of the sanctions dealt the heaviest
blow on the economy. During his eight-year term, which coincided with the
highest foreign exchange income, the exchange rate went up, and once again
multiple rates prevailed. GDP growth was negative and inflation was
In the second part of this period, which started during the presidency of
Mr. Hassan Rouhani, in light of his pertinent background of the nuclear
issue and the shadow it had cast on the foreign policy and economy, they
focused all their efforts on solving this issue and succeeded. JCPOA
provided the basis for the development of economic relations in a way that
in a year and a half since the approval of JCPOA, many business delegations
from Europe came to Iran. But with the withdrawal and bad faith of the
United States, the economy resumed its previous course. Unfortunately, the
mistake that had been made since the time of the late Hashemi Rafsanjani was
repeated this time and with the mandated exchange rate of 4200 tomans, the
ground was opened for rent seeking and corruption.
But to conclude and answer your question, although one should not make hasty
judgments and conclusions for evaluation, it must be said that without an
increase in GDP growth and a rise in foreign currency income, any economic
surgery will not only be ineffective, but may also have unfortunate social
effects. In this situation, according to what has been described, the
foreign policy discourse should be based on de-escalation, interaction and
understanding, which requires the revival of JCPOA and acceptance of FATF.
According to some experts, considering the current conditions of the Iranian
economy, if the exchange rate is unified in the right way, there will be
advantages in the long run. In other words, as the macroeconomic environment
becomes more stable and less risky, the economyís access to currency will
increase and positive expectations will continue. What do you think?
If you ask any economist he would tell you that a single rate for currency
will prevent corruption and rent-seeking; moreover, the optimal allocation
of currency resources for different goods will be done faster; it will be
much easier to run the country; national savings will increase and finally,
capital flight will be avoided. The exchange rate, as an important economic
factor, has always been a problem for the country. Currently, this same
currency of 4200 tomans (for one US dollar) has made us to resort to
economic surgery today.
What caused the adoption of a single rate for the currency to be successful
during the reforms?
During the Reform Era, the type of interaction with the outside world,
especially with European countries, made foreigners to have a different
opinion on the economy of our country. The ďDialogue of CivilizationsĒ and
the policy of dťtente caused our relationship with the outside world (minus
America) to become relatively balanced. The reason is that during the reform
period, we managed to have a single rate currency, control the inflation
rate and attract foreign investment; that is why we started a balanced and
tense based political relationship. The type of policy and approach of the
reform government was a time of tranquility in the outside world and in
relation to neighboring countries.
During this period, we did not have diplomatic ties with America, but we had
a balanced and tension free relationship with the countries of the region
and with Europe. These two things cannot be ignored. So if we implement a
real detente we can achieve economic goals. It is wrong that we want to make
economic changes and have nothing to do with the JCPOA. We have tried this
several times and it has failed. You can create an economic transformation
when the GDP and subsequently the incomes of the people increase. When your
GDP is stagnant or has negative growth, inflation and unemployment will
increase no matter what you do. If we want to have a successful economy, we
must adopt a completely dťtente based foreign policy. When we work with the
outside world, foreign capital will enter the country, subsequently, oil
will be sold and the GDP will increase, and as a result, peopleís living
standards will improve.
Considering that dťtente in foreign policy means removing international
obstacles on the way of development and attracting international resources
for better development and strengthening of the country; Despite this, why
is the detente policy not implemented? What are the obstacles facing this
Two things must be done to relieve tension; we have to work with the West
(minus America) like we do with the East. We should at least work with
Europe. We have worked with Europe in the past. Some of these sanctions were
imposed during the time of Mr. Hashemi Rafsanjani and Mr. (Mohammad)
Khatami. During the time of Mr. (Mahmoud) Ahmadinejad, these sanctions
became more widespread. So, if our relationship with the world improves and
the JCPOA is revived and the world accepts it, America will not prevent
European investments in Iran.
We worked with Europe during the reforms. Total Company invested in the oil
field in Iran. But during Mr. Ahmadinejadís time, no country made any
investment in Iran. During Mr. Rouhaniís time, the investment was supposed
to start, but this did not happen due to Americaís bad faith and Trumpís
withdrawal from the JCPOA.
Therefore, the JCPOA must be revived. It has been said many times, I gave a
historical example. My advice is to look realistically at our 40-year-old
policies and use these 40-year-old policies wherever they have been
successful. Anyone can come and do it regardless of political divisions,
which I have nothing to do with; of course it might matter, but thatís not
my point. I am talking about the principle of policies, not people.