November 14, 2020
It’s been years since the Supreme Leader began giving his catch-all solution to every economic problem presented to him. Whether it’s about the livelihoods of poor Iranians or more in-depth queries about a specific detail of economic policy, his answer is always the same: the resistance economy.
The leader made up the policy, and he made up the term, which really has no meaning, except in two places; North Korea and Iran. With regard to Iran, no one outside the country understands what it means, and the same could be said for Iranian citizens. In fact, it could be argued that not even the regime fully understands what the Supreme Leader’s term means.
Ayatollah Ali Khamenei and his advisers have an ideal to aim for: the establishment of an independent island in the Middle East with very minimal dependence on the outside world, a source of exports for everything from goods and services to revolutionary values, packaged and ready to go out to the region, and to the world.
But can this vision, the resistance economy, be compatible with the realities of Iran today, and with its economic and environmental capacities?
In reality, Iran depends on imports to provide all kinds of goods and services, food in particular. It is not possible or practical to break this dependence, and it is certainly not going to happen by making up a term for an economic strategy, whether it is “resistance economics” or any other descriptive phrase without any real meaning.
Real World Figures
Iran is 90 percent dependent on imported oil for cooking; 80 percent of the country’s livestock and poultry feed is also supplied through imports. This means that if animal feed, corn and barley are not imported for any reason, 80 percent of the country’s livestock and poultry will die of starvation and meat will become scarce.
Between 30 and 50 percent of the country’s rice consumption is met through imports. Although all Islamic Republic governments over the years have made it a chief aim to become self-sufficient in wheat production, due to limited water resources, this has not been possible. Iran has no choice but to import wheat.
In such a situation, talking about the resistance economy is a bitter and dangerous joke.
Iran could be in a situation where it is not able to provide the foreign exchange currency needed to import basic goods, either because it does not have enough money, or because its access to foreign exchange resources is blocked. Iran might not be able to trade with food exporters and food suppliers might not be able to trade with Iran because of blocked banking transactions or for fear of sanctions. In that case, the whole country will fall into the abyss of a food crisis, the mere thought of which is frightening.
In 2018, a few months after the return of US sanctions, meat supplies were so scarce in Iran that the country was on the brink of a full-blown crisis. At that time, of course, the problem was more about the devaluation of the national currency than the lack of foreign exchange resources. Since then, Iran has been plagued by intermittent crises of animal feed shortages, rice shortages and even flour and wheat shortages. Recently, cooking oil shortages in Iran have also made the headlines. According to experts, the main cause of the crisis is to do with foreign currency issues: ”More than 90 percent of the country’s vegetable oil consumption is dependent on imports,” one said. “Therefore, the most important problem for vegetable oil producers is the issue of foreign currency to supply raw materials, especially crude oil; if the problem of money transfer is not solved and crude oil cannot be imported, the supply of this product will be challenged.
Open Data Research Findings
Iran Open Data has provided research results to IranWire that show the problems occurred while the preferred currency rates (4,200 tomans for one dollar) allocated to crude oil and oilseeds was more than the amount allocated to medicine imports.
The study, citing an announcement by the Central Bank, states that from the beginning of the year [March 2020] to the end of October 2020, $1.544 billion had been provided at the rate of 4,200 tomans for the import of crude oil and oilseeds. The total volume of foreign exchange allocated for medicine was $985 million, medical equipment $615 million, wheat $330 million, animal feed $638 million, barley $240 million and corn $1.624 billion.
But who received these government dollars and who was in charge of importing cooking oil?
A search for the word “oil” in Iran Open Data’s interactive table shows the main field of activity of at least nine companies is edible oil. These nine companies received more than $1.425 billion with the preferred currency rate of 4,200 tomans from the Central Bank between March 2020 and June 2020.
But beyond that, there are documents that show the monopoly on cooking oil imports is above all in the hands of the government and the Parent Expert Company For Iranian State-Owned Trading.
This company has been given priority out of the 115,000 individuals and companies receiving foreign currency. To shield the food market from currency fluctuations, it received more than $2.188 billion of the government’s discounted rate foreign currency up until June 2020. In recent years, the Parent Expert Company For Iranian State-Owned Trading, which is a subsidiary of the Ministry of Industry, Mines and Trade, has been suspected of organized corruption.
The latest Statistical Monthly report, published in March 2020, states the number of cooking oil reservoirs in the country is 82 tanks, with a capacity of 261 thousand tons.
According to this official report, in the previous year the Parent Expert Company imported about 526,000 tons of crude oil worth about $315 million (280 million euros).
The company purchased 432,000 tons of oilseeds last year as part of the guaranteed deal with farmers, the value of which was about 1.4 trillion tomans.
According to the secretary of the Iranian Association of Vegetable Oil Industries, the total consumption of cooking oil is between 1.6 million and 1.7 million tons per year. On this basis, it can be concluded that at least one-third of the domestic oil market is in the hands of the government, which, despite the high cost of importing crude oil and buying oilseeds, has not been able to control the market to supply goods and control prices.
Interpretation of Resistance Economics
These data show that while the government and the central bank have used all their capacity to provide the currency needed to import crude oil and oilseeds, they have still failed to protect this basic commodity from fluctuations and a lack of foreign exchange resources. However, many countries in the world, even countries that are 100 percent dependent on food imports, never get into such problems. Countries that define their political and economic relations on reality never find themselves in a position where they are the target of international or unilateral US sanctions or where they close their financial ties to the world around them.
In Iran, however, political and economic relations are defined in the minds of leaders who think that by creating abstract terms such as “resistance economics,” they can divert the path of reality in their favor. The interpretation of this fantasy is the crises that affect Iranian people every day: the crisis of the devaluation of the national currency, the crisis of purchasing power, the crisis of people’s dwindling access to the food they need, the crisis of meat shortage, and the crises of rice and oil shortages.