TEHRAN (Reuters) - Hardline President Mahmoud Ahmadinejad’s failure to share out Iran’s oil income more fairly has raised doubts over his chance of securing a second-term in next year’s election.
Instead of ushering in the era of “economic prosperity” he promised in 2005, Ahmadinejad presides over an Iran which may struggle to balance its books despite enjoying windfall oil earnings for much of his first term, analysts say.
Political setbacks, including parliament’s sacking of the interior minister, a close ally to Ahmadinejad, over a forged degree have further dented the popularity of a president who has championed the poor and pledged to clean up government.
But, with most Iranians grumbling about inflation of more than 29 percent and unemployment, the economy is likely to be the main battleground in the June 2009 race when Ahmadinejad is expected to run for another four-year term.
“Iran’s oil revenue since Ahmadinejad was elected is equal to one-third of the country’s income since the (1979) Islamic revolution,” said Habib Shakurzadeh, a university lecturer.
“But the country is on the verge of economic collapse.”
Critics, who include both reformists and even conservative politicians, say Ahmadinejad’s spending is to blame for surging inflation that was about 11 percent in 2005.
“With falling oil prices, Ahmadinejad can not continue to hand out money to poor Iranians to win their support,” said an analyst, who asked not to be named, referring to big cash infusions made by Ahmadinejad during his provincial trips.
The price of crude has now fallen more than 50 percent from a July peak of $147. Iran depends on oil for 80 percent its revenues and last year oil income reached $70 billion.
An International Monetary Fund (IMF) report in August said under current policies, if Iranian crude fell to $75 a barrel the country would face current account deficits in the medium term, unsustainable for a country isolated from global finance.
Oil prices were trading around $60 a barrel on Tuesday.
But political analysts caution that whether Ahmadinejad retains the support of Iran’s ruling establishment may be a more decisive factor in securing victory in the presidential vote.
Supreme Leader Ayatollah Ali Khamenei, Iran’s top authority, has publicly supported Ahmadinejad and his adopted policies. His comments may sway millions of revolutionary loyalists in a vote.
Some 60 economists in a letter criticized Ahmadinejad for “extremist idealism” and the “absence of cost assessment” on his economic plans, warning that the global economic crisis “will impose heavy costs” on the Islamic state.
The government has used Iran’s Oil Stabilisation Fund (OSF), a rainy-day reserve that is mainly meant for spending on capital projects, to finance deficits.
Critics, including some conservative politicians who even supported his first presidential bid, have slammed Ahmadinejad’s lavish spending of oil income in the past three years.
In their letter published on Saturday, the economists said Iran’s government had spent $142.6 billion of Iran’s oil income since 2005 when it should have kept spending at $47 billion.
As a result, some lawmakers now say as little as $9 billion is left in the OSF although a central bank official was quoted by MPs as saying it was around $25 billion. Lawmakers say even if the higher figure is correct, the fund should have more.
“A report on the government’s withdrawal from the OSF has been handed to the leader ... We believe the fund has been overdrawn,” said the National Audit Office head, cleric Mostafa Pourmohammadi, a former minister sacked by Ahmadinejad.
The economy may be his Achilles heel but Ahmadinejad is still busy touring the country, particularly poor areas of cities and provinces, seeking to shore up support that analysts say might still deliver victory.
As the world reels from a financial crisis, Ahmadinejad insists Iran, under U.S. and U.N. sanctions because of its disputed nuclear program, is more immune than others.
Former President Mohammad Khatami, who has yet to announce whether he wants to relaunch his reform plans by competing in the next race, has said the economic malaise can only be addressed after substantial political reform.
Khatami fell out of favor with many Iranians for failing to take a firmer stand against Islamic hardliners during eight years in government.
Ahmadinejad still enjoys strong popularity in small towns and rural areas. But Khatami’s allies say opinion polls in various cities show strong support for him, although there are no independent or reliable opinion polls in Iran.