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Iran To Allow More Russian, Chinese, Indian Influence As Sanctions Loom

RUSSIA -- MOSCOW REGION, JULY 12, 2018: Ali Akbar Velayati, senior adviser to the Supreme Leader of Iran for international affairs, and Russia's President Vladimir Putin (L-R front) shake hands during a meeting at Novo-Ogaryovo residence.

Iran’s Planning and Budget Organization (PBO) has offered an “executive package” to President Hassan Rouhani as its plan to curb the impact of sanctions.

Implementing the package, however, might mean giving way to an increasing amount of Russian, Chinese, and Indian influence in the strategic depths of the Iranian economy.

In a letter to Rouhani, PBO Chief Mohammad Baqer Nobakhtsaid the “comprehensive plan” includes 12 executive packages, adding that what was offered to the president was only the first package.

“Experts at the PBO and other organizations, as well as a group of academics and economists, have contributed to the package that would facilitate a successful confrontation with sanctions based on a reliance on domestic resources,” Nobakht told Rouhani, adding his usual optimistic spin to the suggested solution.

It appears that Iranian bureaucracy has come up with the package as a road map to confront the sanctions that the United States will implement against Iran in November. The new anti-sanctions solution has been offered while the “resistance economy policies” favoured by Supreme Leader Ayatollah Ali Khamenei had already been put forward as an all-inclusive solution for the country’s economic crisis.

Several questions remain, though. What was so wrong with the resistance economy that the PBO had to come up with a complementary anti-sanctions packages? If the resistance economy failed to solve Iran’s economic problems over several years, how can the anti-sanctions package make Iran immune against sanctions within just a few months?

Khamenei introduced the general policies of the resistance economy in February 2014 after two years of discussing it and establishing a steering committee for its implementation. However, three years later, it doesn’t seem to be the bestremedy for Iran’s economic woes.

The introduction of the new anti-sanctions package signals the failure of the resistance economy. The Iranian government will make the economy immune to sanctions within three months, while the scope and severity of the sanctions remain unclear.

The government is supposed to combat sanctions and solve economic problems while the economy’s structural problems -- namely the lack of efficient and coordinated governance, dependency on oil revenues, a cash-flow crisis, a lack of transparency and accountability, widespread corruption and mismanagement, and the IRGC’s domination -- still prevail.

It is within the framework of these economic bottlenecks that sanctions can work more effectively. Therefore, the challenges to be tackled by state officials would include unemployment, inflation, widespread poverty, and the inefficiency of the banking system.

Regardless of how the anti-sanctions package looks on paper, the government’s most essential policy is expected to giveaway even more parts of the economy to Russia, China, and India in the hopes that the tripartite consortium can help the Islamic Republic to survive. This is partially because state officials know that the gigantic, inefficient, and unruly bureaucracy cannot easily and quickly adapt itself to the new situation.

This explains why, as a first step to implementing anti-sanctions policies, Khamenei sent top adviser Ali Akbar Velayati to Russia to negotiate an oil-for-goods deal and try to assimilate a $50 billion investment -- an attempt that was notsuccessful. Velayati was slated to pursue the same objective in a visit to China, while Deputy Foreign Minister Abbas Araqchi would be talking with Indian officials calling for economic cooperation.

It is no surprise that Iran has chosen to pursue this policy, as Iranian officials know the country’s economy cannot tolerate essential change in the absence of integrated and coordinated governance. Their only remaining option in a situation marked by the impact of sanctions would be to open more ways for Russian, Chinese and Indian influence to the strategic depths of Iran’s economy and give away more of the country’s resources to the three countries.