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Rouhani's Promise Of Swift Compensation For Floods May Be A Bridge Too far

Iranian President Hassan Rohani visits flood-affected villages around the city of Aq-Qala in Golestan province, March 27, 2019

Islamic Republic President Hassan Rouhani has promised to "swiftly compensate" losses to flood victims, in a cabinet meeting on April 7.

Meanwhile, Rouhani called all his cabinet members to prepare an accurate assessment of damages to people's houses, industrial units, agricultural lands, orchards, and livestock farms.

However, Rouhani's first deputy, Eshaq Jahangiri had earlier admitted regretfully that the government has failed to compensate the flood-hit city of Shushtar three years ago, in the oil-rich province of Khuzestan, southwest Iran.

At the Sunday meeting chaired by Rouhani, the Council of Ministers also agreed to provide grants and loans to the people who are hit by the floods in some provinces.

Based on the government’s plans, households in villages will get about $2,000 in grants and $8,000 in loans. City residents will receive $2,100 in grants and $10,000 in loans. These dollar amounts are calculated based on the official exchange rate.

If the government’s aid pledges in local currency are calculated based on free market currency rates, grants will come to $740 and loans to around $3,000. Loans to commercial units is almost the same amount as loans for households. There will also be compensation to farmers.

Based on a rough calculation, in the six worst-hit provinces of Iran with a combined population of 20 million, the grants and loans the government has pledged, will come to at least $4 billion, if we assume just 10 percent of the people in these provinces qualify to receive flood aid.

This number will be billions of dollars more if we add 20 other provinces hit with floods. In the current situation of economic crisis and U.S. sanctions, Iran has to struggle to come up with billions of dollars, keeping in mind that there has also been a lot of damage to infrastructure, which needs to be repaired. Hundreds of kilometers of roads, railways and government-related buildings have sustained damage.

More than 2,000 cities and villages have been affected by floods and exceptionally heavy rains that began on March 19.

Only in Golestan province 300 schools have been severely damaged and cannot be used any longer. Golestan is a relatively small province with less than 2 million population. The number might be much higher in Khuzestan with close to 5 million residents.

The floods, which have so far killed at least seventy people, have left rescue workers and relief agencies struggling to cope, with the government and military coming under criticism for their slow and seemingly disorganized efforts.

Early estimates put flood losses in agriculture sector at 47 trillion rials (approximately $900 million, based on the official exchange rate), the head of the Agriculture Ministry’s Department of Crisis Management, Mohammad Mousavi was cited as saying by the government's official news agency IRNA.

While the government has assured citizens, and especially flood-stricken farmers, that all their losses will be compensated, the speaker of Majles (Iranian parliament), Ali Larijani, has acknowledged that this year’s budget would not suffice to pay for the losses.

This leaves Iran to dig into the national reserve fund, which has already been raided to supplement the inadequate government revenues and pay mostly for the military.

Given the past record of not fulfilling reconstruction pledges, such as in the case of the 2017 earthquake in western Iran and a previous flood in Khuzestan, the populace simply does not believe promises will be kept this time.

The government might be still thinking that making the pledge of cash assistance now will deflect public frustration until the disaster is somewhat forgotten and the danger of a political backlash is diminished.