Theocracy and Economic Development

America's Central Intelligence Agency describes Iran as a "theocratic Islamic republic". This means Iran has a religious leader, since 1989 the "Supreme Leader", Ali Hosseini Khamenei, and operates under a constitution that states "all civil, economic, administrative, cultural, military, political, and other laws and regulations are based on Islamic criteria". Khamenei is this powerful: he appoints virtually all government cabinet posts, the chief judge and chief prosecutor, members of national security councils responsible for defence and foreign affairs, and, perhaps most importantly, the twelve jurists of the Guardian Council who have the power to, among other things, approve or disapprove candidates for high office, including that of President.

And so it is, within this system of Iranian theocracy (quick primer: the theocracy emerged in 1979 when Ayatollah Khomeini overthrew Mohammad Reza Pahlavi, the Shah of Iran), that a new president was "elected" in June to replace Mahmoud Ahmadinejad, the always volatile, combative and usually beyond-radical public face of the regime. (Ahmadinejad frequently distinguished himself when, for example, he addressed the UN General Assembly, questioning all accounts of the Holocaust, or the 9/11 attacks on New York, and watching as most Western diplomats walked out in protest.)

There is some very early, very guarded optimism in the world (both West and East) that the new Iranian President, Hassan Rohani, may take a somewhat different approach to governing, notwithstanding the still iron framework dictated by Sharia law and the Supreme Leader, within which he must function. There is ample reason that he should.

The Iranian economy, once a brilliant emerging star, with a large, well-educated middle-class - and lots of oil - has foundered under the theocracy. Here's how a current Iranian economic minister, Mohsen Ranani, describes the current state of the economy: "“what we are facing today is an accumulation of 30 years of crises. Crisis in daily and temporary management, crisis in planning systems, crisis in financial and budget systems, crisis in banking systems, crisis in judicial systems and in prisons, crisis in education systems, crisis in production systems, crisis in health systems, and other crises”. Recent IMF reports indicate that, as Iran continues to focus on its nuclear program, and continues to bear Western sanctions, its economy shrank last year, and will do so again this year, while inflation - perhaps as high as 40% - rages. The country's crude-oil output is some 60% below the level in 2005, and its South Pars off-shore gas development is financially and technically dysfunctional.

President Rohani has begun to implement change. He has re-instated a former oil minister, Bijan Zanganeh, under whom, in a previous stint in 1997-2005, oil investment and production boomed. He is hiring back technocrats (to replace theocrats) for the oil ministry, and may even court, through production-sharing arrangements, the expertise of foreign private oil companies. How far he can push this process is the question - sanctions will prohibit significant involvement by the oil majors, and such sanctions will remain until/if there is a diplomatic breakthrough in the dispute over Iran's nuclear program. And, of course, there is now the additional complication of Syria -  Shia Iran fully supports the Assad regime.

As in so many other cases of inept political rule, it would seem that a resumption of growth, employment, and an improvement in Iranians' general welfare and freedom, will need to wait on a new revolution - perhaps an Iranian Spring?