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Khamenei Intervenes In The Budget, Concerned About Threats

Iranian Supreme Leader Ali Khamenei in meeting with Rouhani's cabinet on Saturday August 26, 2017.
Iranian Supreme Leader Ali Khamenei in meeting with Rouhani's cabinet on Saturday August 26, 2017.

The intervention of Islamic Republic's Supreme leader has interrupted the process of presenting Iran's new budget bill for approval. Khamenei wants to review the budget himself before parliament takes it up.

A catalogue of problems including uncertainty about the Islamic Republic's future, perceived threats and vulnerabilities due to U.S. sanctions, and the Iranian leader's lack of confidence in the government’s ability to cope with the ongoing economic crisis appear to have led Khamenei to directly intervene in the budget.

Earlier this week, Khamenei warned state and military officials that the United States might be planning to take advantage of the Islamic Republic's weakness and conspire for a regime change in Iran in 2019. His rhetoric indicated grave concern about recurring protests similar to the unrest that challenged the Islamic Republic's legitimacy and threatened its existence in early 2018.

Meanwhile, according to Radio Farda analyst Ali Afshari, Khamenei's comments about 2019 reflect his concern about some U.S. officials' remarks about the end of the Islamic Republic in its 40th year. Afshari is referring to National Security Adviser John Bolton's comment in the gathering of an Iranian opposition group in Paris in July 2017 when Bolton expressed hopes that Iran's government would be overthrown "by 2019."

Afshari says that Khamenei perceives a threat from the Trump administration and has pinned his hope to its defeat in the 2020 elections. Khamenei believes that Trump in his last year in office will be too busy with the elections, but he will have enough time in 2019 to deal a hard blow against Khamenei's Islamic Republic.

Furthermore, increasing the defense budget by withdrawing money from the National Development Fund could also be the objective of Khamenei's intervention, as some MPs have pointed out.

Radio Farda's economic analyst Arash Hassan Nia says, "Next year is really a sensitive landmark in the life of the Islamic Republic because of pressures and limitations caused by U.S. sanctions and this could explain Khamenei's unusual interest in this year's budget."

The Rouhani administration prepared the budget bill at the usual time in early December and Rouhani was going to present it to the Parliament on Sunday December 16. But at least until December 11 when Planning and Budget Chief Mohammad Baqer Nobakht previewed the bill for reporters, no figure was yet finalized, and many reporters called the session "A preview in which nothing was viewed."

On Tuesday this week, Rouhani held a meeting with the heads of legislative and judiciary bodies to discuss the budget. At the end of the meeting, Judiciary Chief Sadeq Larijani said that they discussed "how to implement Khamenei's views about the budget." This was also unprecedented. Following the meeting, Rouhani said that the bill should be "probably amended."

All this meant that the presentation of the bill to the Majles may not take place on December 16. The news of the postponement came while earlier reports had said the bill was already presented to the parliament.

Meanwhile, Cabinet Secretary Mohsen Haji Mirzai told reporters that that the cabinet may have to discuss the implementation of Khamenei's views in several meetings.

One of the amendments could be about withdrawing sums from the Foreign Currency Reserve (aka National Development Fund). But whether the money will go to financing government operations or to the military, as Khamenei probably wants, is yet to be seen.

Other reports indicate that concern about the shortage of defense budget is one of the main reasons of the "review" by Khamenei.

Mohammad Hosseini, MP for Tafresh told Mehr News Agency on Thursday December 13 that "The 6th Development plan calls for an increase in the defense budget. But the growth in next year's budget is less than what has been planned."

He added that "a percentage of the foreign currency reserve fund should have been allocated to defense, but it has not been. We shall try to address that shortcoming in the Majles."

It should also be needed that when last December it became apparent that the military and religious establishments were taking a big share of the budget it contributed to the mood of anger among the people and probably help agitate them for protests in late December.

According to Nobakht, next year's budget is 12% more than the budget for the current year and should reach 4,330,000 billion rials. But with a higher dollar exchange rate they have set for the new budget, the figure in dollars will come to around $75 billion, $29 billion less than the current budget passed last December.

The budget is drawn based on selling one to 1.5 million barrels of oil per day (One million barrel less than the figure in the current year's budget bill) at a projected price of $54 per barrel (a dollar less than the price in this year's budget), but all this may change as a result of upcoming event and the way US sanctions affects Iran's oil export.

Most of the factors involved in oil sales are beyond Iran's control and shall depend on the U.S. government's resolve about sanctions, the buyers’ interest in purchasing oil from Iran and the practically of financial transactions with Iran.

In spite of the shortcomings and problems, according to Nobakht, the Iranian government is planning for an up to 20% pay rise for government employees during the next year in order to improve their purchasing power in the face of rising inflation.

Nevertheless, the most important characteristic of Iran's next budget is uncertainty about the ability to export oil and collect oil and tax revenues, says Hassan Nia.