FACTORING THE ECONOMY INTO IRAN'S PRESIDENTIAL ELECTIONS

C O N F I D E N T I A L SECTION 01 OF 03 RPO DUBAI 000244

SIPDIS

E.O. 12958: DECL: 6/11/2019
TAGS: PGOV ECON EFIN EINV EPET ETRD IR
SUBJECT: FACTORING THE ECONOMY INTO IRAN'S PRESIDENTIAL ELECTIONS

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CLASSIFIED BY: Timothy Richardson, Deputy Director, Iran
Regional Presence Office, Department of State.
REASON: 1.4 (b),(d)

1. (C) Summary: Conversations with Iranian businessmen and
financial consultants held in the past week reveal an
overwhelming preference among our contacts for Mohsen Rezai's
economic proposals, but most intend to vote for Mir Hossein
Mousavi for political and social reasons. Our contacts admit
that these non-economic issues may be more important to them
than the poorer or rural voters and note that the majority of
Iranians are less interested in the battle over economic
statistics and macro performance of the country and more focused
on their day-to-day situations. In general there are very low
expectations for any meaningful economic reform, but our
interlocutors hope that the election's focus on the economy will
cultivate a better environment for pursuing solutions after the
election. End Summary.




2. (C) In perhaps a fitting end to the candidates' debates, the
final match-up between former IRGC head Mohsen Rezai and
President Ahmadinejad focused almost exclusively on the economy,
which arguably is one of the key factors in this election.
Iranians we have spoken to all agree that the economy is
crucial. They note that Ahmadinejad's promise to put oil money
on people's tables really resonated with Iranians in 2005, and
any similar populist messages this time around will be
attractive. For all the time candidates spent arguing over
statistics and macroeconomic policy, however, our contacts did
not think that rural and less educated Iranians cared very much
about data on growth, investment, and production. Rather,
Iranians' concerns over their day-to-day finances would
determine their vote.




3. (C) A businessman in the oil and gas industry told us that
Ahmadinejad's support among the rural population -- built on
those promises of distribution of oil revenues -- may be
weakening because of unmet expectations. He cited incomplete
projects in some provinces, broken promises of Ahmadinejad's
provincial visits, and the poor results of the government's
housing loan program in some villages. These particular loans
were intended to allow rural Iranians to construct new homes,
contingent on their use of steel, concrete, and brick as
earthquake protection measures. Some Iranians, however, were
only able to complete parts of their home because of the rising
cost of cement, steel, and brick, and the simple insufficiency
of the USD 5,000 loans. He wonders if recipients question the
benefit of these low-cost loans if they were not enough to do
what was promised.




4. (C) Our contacts, ranging from financial consultants to
providers of industrial equipment, have echoed the key critiques
thrown at Ahmadinejad by his opponents. When asked if these
reproaches are accurate, exaggerated, or mask a deeper
grievance, they responded that the problems are real, but they
also note that Ahmadinejad in some cases has only aggravated
much deeper structural problems for which previous governments
must also be held responsible. Despite our contacts' consensus
on Ahmadinejad's failures and the claims of his opponents, they
hold decidedly different opinions about the candidates' economic
plans.



Candidates' Economic Advisors Important Symbols for Electorate

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5. (C) Most Iranians we talked to did not see much difference
between the three challengers. Our contacts maintained that
there is little difference between the economic platforms of
Mehdi Karroubi and Mir-Hossein Mousavi. One of the key
questions plaguing Mousavi, however, has been how sincerely he
has embraced economic reforms. Despite Mousavi's claims of
supporting the private sector and foreign investment, one
Iranian businessman labeled him a "pure socialist." He was very
leftist as prime minister, and Iranians are unsure whether to
believe his excuse that his nationalization of industries was
required by the war situation at the time. He has, however,
assembled a team of reform-minded economic advisors
--specifically well-known economist Farshad Momeni and the
former secretary of the Tehran bourse Hossein Abdeh-Tabrizi --
that suggests his views have evolved since the 1980s.

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6. (C) Karroubi has made various pledges that lead many
commentators to consider him as much an economic populist as
Ahmadinejad, including one to give USD 70 per month to every
Iranian. Nevertheless, most contacts described Karroubi as more
free-market than Mousavi. More than one contact dismissed
Karroubi's populist campaign tactics as only an election
maneuver to capture voters who may be swayed by Ahmadinejad's
stipends. Like Mousavi, he has a very strong economic team,
including former economic minister Davoud Danesh-Jafari and
former Tehran mayor, and "excellent manager", and Karroubi's
choice for first vice president Gholam-Hossein Karbaschi.




7. (C) Among our contacts, there is unanimous agreement that
Rezai's plan for the economy is the most fundamentally sound.
Iranians we talk to here say that expanding the private sector
and investing in capital projects is exactly what Iran needs.
They emphasize that Rezai's focus on the economy comes from his
powerful position as Secretary of the Expediency Council, a
platform from which he has used in the past to speak out against
Ahmadinejad and his short-term, populist policy and in favor of
long-term, investment-centered policy. An Iranian financial
consultant said that Rezai is the only candidate who talked
about freedom of the economy and deregulation and came across as
very professional and polished in his debates.



Candidates' Plans Unlikely to Take Shape After Election

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8. (C) Although the economy has dominated much of the
candidates' debates, has stirred much discussion in the press
and will heavily influence the outcome the election, our
contacts in Dubai doubt meaningful economic reforms will be
possible. Two businessmen did not think candidates' economic
promises resonated much with the private sector because Iran's
entrenched economic elite-Rafsanjani and the Revolutionary Guard
Corps for example-will see to it that their own interests are
not threatened by thwarting any initiative to undercut them.




9. (C) Likewise, our contacts said some of the promises
candidates are making are impractical or not fully thought
through. Karroubi's plan's pledge to give every Iranian USD 70
will be nearly impossible to implement given the decline in many
of Iran's economic indicators-notably GDP growth, unemployment,
oil prices, and a looming budget deficit. Mousavi's supporters
here note that it is laudable for him to talk about boosting the
private sector, but he has not mentioned liberalizing the
economy, without which the private sector will not flourish. For
Rezai's part, although he gets the most points from Iranians
concerned with the economy here, they do not see him as a viable
candidate because of the lack of trust Iranians have in him. One
contact said Rezai "is only talking about the economy because he
does not believe in political freedoms." Iran's private sector,
80 economists, and the administration of the Imam Reza Shrine in
Mashhad have published letters and editorials suggesting they do
not believe any of the candidates have presented economic
solutions.



Comment

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10. (C) For many Iranians, this election has come down to a
question of which candidate will do most to make life better,
and the candidates, including Ahmadinejad, have been promoting
the economic merits of their platforms heavily, as was seen
during the one-on-one debates. For most voters, the economy and
the possible betterment of their own financial situation will be
the basis of their decision for whom to vote. But the economy
should not be seen as the single defining issue of this
election. Our contacts, most of whom are highly educated,
financially better off, and business savvy, believe Rezai is the

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most qualified candidate to undertake meaningful economic
reform, but many of them will vote for Mousavi because they
consider political and personal freedoms as important to Iran's
future as reforming its economy.
ASGARD