Examining Rentier State Theory in the Case of Iran before and after Revolution
Pooyan Fakhraei
11768118
Supervisor: Dr. Farid Boussaid
Second Reader: Mr. Said Rezaeiejan
June 2018
Master of Political Science / Public Policy and Governance
1
Contents Introduction ...... 3 Literature Review...... 5 Rentier State Theory...... 10 Democracy and Autocracies ...... 11 Research Question ...... 18 Methodology ...... 19 Case Study ...... 19 Case Selection ...... 20 Data ...... 20 Limitation of Study ...... 21 Background ...... 22 The Role and History of Oil in Iran ...... 22 Contemporary Political History of Iran ...... 23 Political System in Iran...... 28 Finding and Analysis...... 31 Democracy...... 31 Oil Rent ...... 33 Political Economy of oil rent in Iran before and after the revolution ...... 34 1957 to 1979 (before the revolution)...... 35 Political economy of oil rent of governments after the revolution ...... 39 1989-2007 (Presidency of Rafsanjani) ...... 39 1997 to 2005 (Presidency of Mohammad Khatami) ...... 43 2005 to 2013 (Presidency of Ahmadinejad) ...... 48 Discussion and Conclusion...... 53 Discussion ...... 53 Conclusion ...... 54 Suggestion ...... 55 Bibliography ...... 56
2
Introduction
Oil in the contemporary history of Iran is more than a source of production. It can be said to play a vital role in social and political history. Some examples are the role of oil as a key factor in the 1953 movement, when the U.S.S.R wanted the oil in northern Iran to balance power with the British, but instead the Parliament nationalized oil production. Later, the oil price shock became the reason of many changing policies under the Shah, which resulted in Dutch disease (Cammett, 2018). Many believe his policies in that era facilitated the revolution (Alikhani, 2013), which was heavily bolstered when staff and technicians of Iran’s oil company went on strike (Yazdi, Last attempts in the last days, 2007). Even when there were secret talks between Ayatollah Khomeini and United States government, the main question was the sale of the oil (Yazdi, 118 days in Neauphle-le-Château, 2013).
All of these incidents contribute to the popular belief that if Iran did not have oil, it might have become a democracy much earlier. And This is not only a popular belief among ordinary people. The relationship between oil rent and democracy has been discussed for years in academia.
An overview of this belief, came as an empirical literature, provided by Ross (2001), in which he explains that while many studies connect an increase in the revenue streams of a government to the development of a more democratic system, this trend has a notable exception in the case of rent.
This, however, is not the only view that has been discussed by scholars. Others such as Herbs (2004) believe it is not oil which causes this situation, pointing to other conditions that should be together understood as the origin of the authoritarian undemocratic rentier state. Some like Habermas and Lewis believe that Islam is the main factor. Others still like Bellin believe it is a lack of stable institutions in these countries. Finally, the heritage of colonization is commonly provided as the reason of undemocratic behavior of states that have oil (Martorell, 2012).
As a way to further understand the case of oil rent and its relationship with democracy and authoritarianism, Iran is a good candidate as a case for study. As a country whose budget is heavily dependent on oil revenue, it is categorized under rentier states. Today’s definition of
3 rentier state even originated in Iran’s situation during the period of 1973 to 1979 when oil prices were raised dramatically. However, after the 1979 revolution and especially after the Iran-Iraq war (1980-1988), Iran has had a different experience in struggling with democracy.
Although after the 1979 revolution Iran has experienced partly effective and meaningful periodic elections for members of parliament and the office of President and in some era had more published newspapers and media and developed in the sense of freedom of the press. Based on these two examples, it can be assumed there is a change in democratic indexes, over time. It should be mentioned when it is a talk about the level of democracy; there is a range from full democratic to full autocratic. Any country could be somewhere in between these two extreme and Iran is not an exception.
This study would look to Iran’s records of oil rent and its growth in democracy indexes to test if the rentier state theory was applicable to Iran in the timeline of this study. Moreover, it questions the various explanations offered by scholars and seeks to determine if the possibly harmful effects of oil rent can be connected to struggles with authoritarianism.
4
Literature Review
The relationship between oil rent and democracy has been discussed for years in academia. A study by Link, W. K. (1952) looks at the exploration history of the important oil areas of the world, proving conclusively that oil and gas seeps gave the first clues to most oil-producing regions. Many great oil fields are the direct result of seepage drilling. Iran as a country, which depends on oil selling, is categorized under rentier states. From 1981, Iran was considered an important subject by many scholars (Assareh,2010), making it one of a number of countries that were discussed under the same category. For instance, Nigerian political history shows that the oil economy can also be a site of successful contention and democratization—and that oil workers played a key role in these processes. Although struggling in a deeply unfavorable context of state fragmentation, chronic societal mistrust, corruption, and lengthy, brutal military rule, at key junctures, oil workers are able to exercise leverage far beyond their numbers. A study by Aslaksen, S., & Torvik, R. (2006) indicated that, after controlling for other factors, countries rich in oil have a higher probability of dictatorship than other countries. In general, it seems fair to say that the results from the abundant empirical literature indicate that oil, gemstones, minerals and other “lootable” resources are associated with civil conflict, but that less lootable (and less valuable) resources such as agricultural land do not appear to have a similar effect.
There are several studies on the issue of oil rent and its effect on democracy. Some scholars such as Ross (2001), who studied the effect of oil rent on democracy, and Tsui (2010), who examined the relationship between democracy and oil sources, believe there is a negative relationship between oil and democracy.
Ross uses cross-national data from 113 states between 1971 and 1997 to test the credibility of these claims: Does oil negatively affect democracy? Is it only the middle east and is it only oil rent that damage democracy or do other natural sources and other regions in the world also face the same relationship? Finally, if oil thwarts democracy, what is the causal mechanism? Ross finds that “the oil-impedes democracy claim is both valid and statistically robust, oil does hurt democracy.”
To test these claims, Ross designs a model “to predict regime types and test it using a feasible generalized least-squares method with a pooled time-series cross-national data set, which
5 includes data on all sovereign states with populations over one hundred thousand between 1971 and 1997. The model includes five causal variables that according to previous studies are the most robust determinants of democracy. It also includes variables that measure a state’s oil and mineral wealth to see if they add explanatory power.”
His dependent variable is the regime which drives from polity98 and his independent variables are oil and mineral supply. He also designed five control variables: income, Islam, OECD, the regime, and 26 dummy variables.
The result shows that both oil and minerals have a negative effect on democracy and also proves that oil and minerals damage democracy more in poor countries than in rich ones. His tests further show that the religion, culture, and age of countries are not valid excuses for less democratic states and the size of the country has only a tiny effect. “These tests support both the validity and the generality of the oil impedes-democracy claim. They suggest the following: that a state’s reliance on either oil or mineral exports tends to make it less democratic; that this effect is not caused by other types of primary exports; that it is not limited to the Arabian Peninsula, to the Middle East, or to sub-Saharan Africa; and that it is not limited to small states. These findings are generally consistent with the theory of the rentier state.”
As Ross explains to answer his last question, there are three mechanisms for this process: the government’s low taxation, prevention of the formation of independent social groups from the state, and failure to spend for modernization.
Tsui discusses the negative relationship between oil sources and democracy in non-democratic states. He uses the data of oil discoveries worldwide as evidence for the long-term effect of oil wealth on democracy. His work is the same as Ross but with a new piece of evidence. His hypothesis is the different effect that oil-discovery has in democratic and non-democratic states. His findings show that a larger oil discovery results in slower democratic transition. On the other hand, in democratic states oil discovery has no effect on democracy.
Democracy played the role of the dependent variable in his study and he used polity IV to measure democracy and oil discovery sources play the role of an independent variable. He tested these variables in 132 countries as his population. His result suggests that the discovery of more oil in reducing democratic values in less democratic countries has a more negative impact when
6 they found oil. “The oil-democracy interaction term is always positive, implying that the negative impact of oil discovery is larger the less democratic the country was before it found oil.”
There are other pieces of literature, such as Gawrich, Melnykovska, and Schweickert (2010), which reason that the main consequence of resource inflows is that the state is freed from the need to extract income from the domestic economy or from local citizens through taxes. The government can then embark on large public expenditure programmers without resorting to taxation.
As Ross (2011) suggests in his 2004 study, if taxes are raised, they demand democratization. “Citizens object to paying higher taxes if they do not receive commensurate benefits” (P67). In other words, citizens care about both benefit and taxes, and they want less tax for more benefit. Authoritarian governments, which can reduce taxes and provide efficiently are able to avoid democratization.
In addition, another study by Auty (1997) also indicates that the adverse effect of resource abundance on institutional quality is particularly strong in the case of easily accessible ‘point- source’ natural resources with concentrated production and revenues and thus massive rents, and oil, crops rather than agriculture. Auty (1997) believe Natural resource endowment, the state, and development strategy. Journal of International Development: The Journal of the Development Studies Association, 9(4), 651-663.
An important article by Herb (2003) examines “the link between rentier-ism and democracy using a cross-regional dataset,” and suggests that “there are both positive and negative effects of rentier-ism on democracy.” He argued, “Democracy scores in the surrounding region are strongly correlated with a country’s own democracy score.” He believes that Ross’s approach is not the best for understanding the effect of rent on democracy, reminding the reader that the main objective of rentier state theory is to prove a correlation between the absence of oil and better scores in democracy. To do so, he employs a counterfactual world, which replaces these countries’ per capita GDP figures with an estimation of what their per capita GDP figures might have been in the absence of oil rents. He believes if we “use this measure in place of standard per capita GDP, and if the measure of rentierism continues to be negative and statistically
7 significant,” then it can be concluded, “rentierism has a harmful net impact on democracy.” His results suggest that the theory of rentierism being harmful to democracy has not found consistent support. In explanation, he points to rentier states being among the most poor countries in the world, and in poor countries authoritarianism is typically more expected.
There are other studies which look for other reasons behind the assumed negative relationship between oil and democracy. For example, Gawrich, Melnykovska, and Schweickert (2010) argue that more than oil, geography and neopatrimonialism are a strong explanation of bad governance and autocratic stability in Central Asia. This paper was presented at the Neopatrimonialism in Various World Regions Workshop.
Coppedge, Gerring, Altman, Bernhard, Fish, Hicken, and Semetko, (2011) discussed the measurement of democracy/autocracy. They argued, “there is no consensus about how to conceptualize and measure regimes such that meaningful comparisons can be made through time and across countries.”
Alexeev and Conrad (2008) measure long-term growth via GDP per capita levels and show that oil and mineral resources did not inhibit long-term growth but enhanced it. In addition, they show that the impact of oil and minerals are largely neutral to the quality of institutions in the countries. To prove their point, they reason that based on their first agenda, the assuming relationship between GDP and natural resource endowment was not adequately accounted for in the literature on the issue. Based on their findings, they claim that the increase in GDP is the result of natural resources but does not significantly change the quality of institutions. “We demonstrate that “manna from heaven” wealth that causes an increase in GDP (i.e., “exogenous” growth) does not lead to better institutions, although it does not undermine the quality of the existing institutions either” (P5).
In an important book chapter, Mahdavi also discusses Iran’s situation before the revolution. In one his chapter titled “The Patterns and Problems of Economic Development in Rentier States”, he examines the definition of rentier state and proposed a pattern to understand the problems of a rentier state. In this chapter, he explained that in the oil producing countries, apart from Kuwait and Qatar, the added value of oil products from GDP varies between 10 to 55 percent, whereas in transit countries the added values of oil make up 2 to 4 percent of GDP. He then points to
8 countries such as Iran, Iraq, and Saudi Arabia, where the effect of oil production is significant, the other sectors are not of secondary importance. He believes the major contribution of oil industry is “to embark on large public expenditure programs without restoring on taxation and without running into drastic balance of payment or inflation problems that usually plague other developing nations” (Mahdavi, 1970, P432).
The historical point that he puts his finger on is the dramatic changes that occurred after 1955. The imports increased over five times which resulted in government expenditure to increase rapidly. He believes these changes, when compared to the first half of the 19th century, shows a new regime of governance had been established. However, these heavy investments did not change economic growth or development of the country. He believes the oil rent could not exclude a country such as Iran from underdeveloped countries based on the rate of economic growth in Iran from 1955 to 1965 was not more than two percent on an annual per capita basis. He suggests the reason behind suffering of Iran is socio-economic structure of these countries and argue the financial resources could not be used properly until socio-political barriers to be removed. When Iran in early 1960 had some level of reform, mostly land reform, it positively affected on its growth.
Mahdavi did not discuss (effect on oil) directly on democracy but he discussed people economic participation and effect of the oil rent on it. He believes oil rent did not significantly affect mass of people, despite huge amount of investment in development program. Therefore, participation of people in economy were extremely low and “the investment funds in industrial sector was not actually used to develop industries with the highest value-added per worker” (Mahdavi, 1970, P465). There was gap between rural and urban area and another gap was created between government staff and people who worked in private sector. In addition, people increasingly bought imported commodities, which is the result of oil rent, “at the same time, the level of economy’s technology, the nature of its socio-political organization and the standard of the people’s general education and training are such that little optimism is warranted as far as the long-run growth prospect of the country are concerned” (P466). Mahadavi concluded that Iran’s economy did not develop with flow of the oil rent over time, and it was still depended on oil price and weather condition for farmer. Clearly, there are two main theories here: one of them found a direct relation between oil and democracy and the other one denied a meaningful relationship between these variables. What
9
Mahdavi suggests about Iran follows the first theory and as what he described the oil revenue would not be ended to more public participation.
Rentier State Theory
A rentier state is a country that depends on rent of oil or natural resources, and their income affects economics, politics, and society. This theory is mostly known by a definition from Hossain Mahdavi, who described a rentier state as “a state that receives substantial rents from foreign individuals, concerns or governments” (cited in Sandbakken, 2006).
Mahdavi (1970) offers this theory to describe an era from 1970-1976 in the political history of the Middle East. In describing the rentier state, he explained that those countries that receive an amount of external rent by foreign individuals, concerns, or governments on a regular basis are contained in this definition. Based on this definition, payment by foreign countries, companies, or individuals who passed through a canal such as the Suez Canal or those who received payment for the pipeline would both be counted as examples of these external rents. The oil revenue of oil exporting countries is another form of rents.
On the other hand, the oil revenue in a rentier state has very little to do with the local economies of those countries, and its input is often not significant. “There is a lack of any meaningful relationship between the level of oil production and the local economy of the producing countries” (Mahdavi, 1970, P 435).
As he believed that oil revenue let governments spend on public programs without resorting to taxation or running into drastic balance of payment or inflation problems, this process also makes the government an important factor in the economy.
Hazem Beblawi suggested the rentier state is a state in which the economy is dominated by rent (Sandbakken, 2006). He describes the sources of rent (1) to come from abroad, (2) be accrued to the government directly, and (3) “only a few are engaged in the generation of this rent (wealth), the majority being only involved in the distribution or utilization of it.” (Herb, 2003)
10
In defining a rentier state Sandbakken (2006) believes “it is not equivalent to a state in which rent-seeking predominates among economic and political elites. Rent-seeking is the search for financial gain or profit from non-productive economic activities that are especially prevalent among those who depend on state privilege for access to credit, grants, licenses, contracts, and, often, monopoly markets.”
Democracy and Autocracies
When discussing rentier states, the question of how rent affects the democratic process or the transmission from authoritarianism to democracy naturally arises, but before turning to these questions, democracy and authoritarianism should be defined.
There is not universal agreement on the meaning of democracy (Ross 2011), but in a classic definition, democracy describes a method of ruling. In a general view, “all usages of the term also presume sovereignty. A polity, however large or small, must enjoy some degree of self- government in order for democracy to be realized” (Hicken, 2011).
Marshall and Jaggers (2002) defined democracy in Polity project. “Democracy is conceived as three essential, interdependent elements. One is the presence of institutions and procedures through which citizens can express effective preferences about alternative policies and leaders. Second is the existence of institutionalized constraints on the exercise of power by the executive. Third is the guarantee of civil liberties to all citizens in their daily lives and in acts of political participation. Other aspects of plural democracy, such as the rule of law, systems of checks and balances, freedom of the press, and so on are means to, or specific manifestations o f, these general principles” (P13).
As Ross mentions, Przeworski explains that there are four conditions that most would likely accept: that the chief executive of the government and the members of legislative branch should be chosen in an election, that there are at least two major political parties that have the chance to participate in elections, and that they can be defeated and replaced.
In defining democracy and distinguishing it from autocracy, different elements are involved. “The independent judiciary, the courts, the respect for law, or whatever other mechanisms ensure
11 that a democracy abides by competitive elections held according to law, necessarily also ensure that the citizenry has the freedom to do whatever is permitted under the law” (Clague, Keefer, Knack & Olson, 1996 , P6). On the other hand, the rights of women or people of color have not been secured in many established democracies, complicating these more general definitions, but nonetheless, a stable democracy could not be established without granting these kinds of rights and guarantees broadly.
Further, when it comes to measuring democracy, these debates go on to include some indexes that gauge freedom and plurality. Coppedge, Gerring and others (2011) stated “the Political Rights index includes questions pertaining to corruption, civilian control of the police, the absence of widespread violent crime, willingness to grant political asylum, the right to buy and sell land, and the distribution of state enterprise profits. The authors of the index would argue that it measures freedom, not democracy; nevertheless, it is frequently used as an index of democracy” (P 248-249)
On the other hand, authoritarianism is a form of absolute power in the hands of a central government, which limits political freedom (Sekiguchi & Masashi & Okawara, 2009, P92). Common features of authoritarian governments are limited political pluralism, minimal social mobilization, static executive power, and an emotional basis for political legitimacy (Casper, 1995, P 44-50).
In the polity project defined autocracy as kind of state that “sharply restrict or suppress competitive political participation. Their chief executives are chosen in a regularized process of selection within the political elite, and once in office they exercise power with few institutional constraints” (Marshall & Jaggers, 2002, P14).
In the Middle East, most governments are of an authoritarian format. There are four main theories used by scholars to explain the reason for the predominance of authoritarian rule in the Middle East, which are well categorized by Benjamin E. Martorell (2012).
The first theory comes from the cultural background of this region. Scholars like Samuel Huntington believe that the dominant culture of Islam in this region prevents the region from becoming democratized. In his 1993 theory on the clash of civilizations, Huntington wrote that “Islam has not been hospitable to democracy.” His reasoning is based on the role of Sharia in
12
Islam. Elie Kedourie discusses the democratic West as a result of the western culture and tradition of representative government and sovereign nation-states, which do not have ad Islamic equivalent. Other scholars, such as Lisa Anderson, have rejected this singling out of Islam and identify Islamic Sharia as merely exemplary of a common feature of many religions, which frequently have their own forms of Sharia.
The second reason comes from scholars like Bellin. He believes that the lack of “democratic prerequisites” in the Middle East’s institutions is the main reason behind the undemocratic situation of this region. The absence of strong civil societies, market-driven economies, high literacy rates, and representational government institutions accounts for the lack of democratic prerequisites. This can be seen as broadly inapplicable, given that many states in the region have institutions such as a parliament, an executive, political parties, and elections. “Stephen Cook (2005) argues that it is not a lack of institutions in the region that prevent democratic reform and development; rather, it is the flawed “nature” of the institutions themselves that “tend to restrict political participation, limit individual freedom, and vest overwhelming power in the executive branch of government.” The manipulated election in the region is very common, in Egypt, Syria, and Iran. In Egypt as an example, “party contested parliamentary elections began under late president Anwar Sadat in 1976. However, according to Posusney, Sadat ensured that the government-backed party would win the majority of the seats, which is what occurred. In 1984, President Hosni Mubarak led a new round election but the outcome remained the same: the ruling party, which came to be known as the National Democratic Party, won the majority of the seats, while only garnering 73% of the popular vote.”
The third explanation of authoritarianism in the Middle East comes from external colonialism in this region. The presence of British and French colonists because of oil and other factors and the way they split countries are one of the reasons authoritarian regimes have developed in this region.
The fourth explanation is rentier state theory. The Middle East is one of the richest regions for oil and gas deposits, but some scholars such as Ross and Tsui believe that oil rent and oil sources do not let democratic mechanisms take place. Ross (2001) had explained three main mechanisms by which an authoritarian government prevents the system to become democratic. The first mechanism is the taxation effect in which oil revenue allow governments to maintain low taxe
13 rates or take nothing as tax, placating the population and preventing them from demanding accountability or representation.
The patronage mechanism is the second, in which the government spends money on programs that their society demands and shifts focus away from democracy. In this mechanism, governments spend oil revenue on preventing the formation of independent social groups from the state that may be inclined to demand political rights. There are two explanations for this: independent social class such as an independent bourgeoisie helped to democratic demand of societies, and the other is “the formation of social capital—civic institutions that lie above the family and below the state—tends to promote more democratic governance.” There is, also, the linkage between authoritarianism and oil-democracy. As Ross concluded from different case studies, the demand of democracy is not different in countries but the rentier state has more sources to spend on internal security policies to protect the regime, itself, and the resources.
The last explanation of Ross comes from modernization theory, which claims that unlike the rentier and repression effect, modernization should work with a social mechanism, and if the wealth does not provide higher education level of society or greater occupational specialization, it will fail to bring democracy for that country.
Iran, as a country in the same region, should be understood in this context. Iran struggles with the same issues and had absolute ruling regimes for millenniums, leading any attempt to be democratic in the last 150 years to fail. However, any of these four categories could not explain the case of Iran on their own. Iran as an Islamic country has a common area with the first theory by Huntington and others that suggest Islam is preventing democracy in this region. Despite the fact that this theory was based on an orientalist perspective, the majority of Iranians are followers of the Shiite sect, and after the revolution, the entire system is based on this school. The Shiite school, which employs the Ijtihad method of Shariah law, has a different approach toward Islam, compared to the Sunni school, making it not as orthodox as most Sunni sects. In fact, the Shiite school is mostly known as the Iranian version of Islam, and as Shreen Haunter quoted Ada Bozman “if Islam conquered Iran, then Iran conquered Islam.” Iran also has a different ethnicity, language, and culture than most Islamic countries, which makes it a unique case (Hunter, 2017).
14
The second approach based on the lack of institutions also cannot wholly explain the lack of democracy in Iran. Iran has established institutions since the Constitutional Revolution in 1906. Since then, the parliament was formed and the head of the executive was chosen by members of parliament or directly choose by people. Iran has a rooted private sector in its traditional market and has a strong civil society and labor unions. The elections may not be fully free or ope n, but enough institutions are in place to render this explanation inadequate on its own.
The third approach focused on colonialism as an external factor in authoritarianism also cannot entirely explain the case of Iran, which has never been a colony since the decline of the Timurid Empire in Iran in 1506. Since 1507, Iran has had a central state ruled by the Safavid dynasty. Under that leadership, Iran has been invaded and even partly occupied by foreign super powers, but never colonized in the meaningful and long-term sense seen in other countries with colonial legacies. One the most famous examples is the 1953 coup against the democratically elected government of Dr. Mohammad Mossadegh by British and American intelligence services. Thus, colonialism is not an explanation for the lack of democracy even if super powers negatively influenced the path to democracy to a degree.
The last explanation is the role of oil rent, which is the main subject of this research. But one point that could reject this explanation is the timeline of the rise of oil rent in Iran, which took place in the 1970s, but Iran was an authoritarian state for all of its modern history. Therefore, this factor also cannot not explain the issue in its entirety, rather only elucidating the many influences that led to its unique current position.
It is worth noting that Iran has a complicated system of taxation through its history dating back to King Scyros. Before the Constitutional Revolution, there was only direct tax, but after the revolution, the Iranian government started to collect indirect tax on salt, opium, alcohol, and other goods (Shirinbakhsh, Bigdeli, Yusefifar & ,Sheikhnuri, 2017). After the 1979 revolution, the government continued to collect tax on property such as real state tax, capital gains tax, and the income of individuals. For example, a public sector employee pays about 10% of their income in tax to the government. There is also an indirect tax that the government collects on value added on goods and services, such as cigarettes and tobacco, petrol, and others (What is type of taxes in Iran, 2014).
15
There have also been modernization programs in Iran since 1960s. After the White Revolution of Shah and Nation, which was a referendum in 1963, the government started to enact a social transformation with four major programs. They shared farmland ownership with farmers. In the next step, teachers, experts and medics were sent to villages to reinforce them as the army of knowledge, the army of health, and the army of construction; these groups provided health, taught illiterate people, and modernized agriculture (White Revolution Law, 1961).
After the revolution, these policies continued under the Islamic Republic regime. 14 million out of a population of 36 million were illiterate in 1979. In 2015, as the head of movement for literacy reported, there are about ten million out of 80-million, that are illiterate or less educated (Bagherzade, 2015). As ex-chancellor of Tehran University reported, the number of graduates of universities after the revolution increased by 90 percent (Rahbar, 2013). The electricity rate, gas supply, access to telephone and internet and health services in villages after revolution had dramatically increased (Fallahi, 2014). All of these show that modernization was a program of Iranian regimes before and after revolution, and thus the lack of such programs could not a compelling case to explain the lack of democracy in Iran.
In Iran, regimes always try to make the social classes dependent on them. The formation of the Iranian middle class was the result of Reza Shah’s modernization that brought bureaucracy, universities, a modern army, a judiciary, and even scholarships for students to study abroad. The Shah continued these programs in his era. On the other hand, the main force for the 1979 revolution was the lower class, which after the revolution became the main target of government services and subsidies, including priority in becoming public services employees (Fakhraei, 2018). These strategies of the regimes in Iran were not based on oil, and Reza Shah began the programs long before oil even had a role in the Iranian economy.
The security forces in Iran had a very significant role in crushing and suppressing democratic forces in Iran both before and after the revolution, but it is again hard to link this factor to oil. SAVAK, the Organization of National Intelligence and Security, was established by Shah in 1957, when the oil of Iran was not in the control of the Iranian government (Abrahamian, 2008). Most of the successful attempts of SAVAK to find and crush anti-regime forces were before the oil shock in 1973. After the 1979 revolution, SAVAK was transformed to the intelligence ministry under the government, but Iranian security forces had expanded and some organizations
16 like the Iranian police, the Revolutionary Guard, and the Judiciary established their own security police (How many security agencies are active in the country?, 2014). However, there is no proof to link this diversification to oil rent, especially when the government was not in favor of this idea.
In summary, none of these theories can give a comprehensive understanding of the reason for the absence of democracy in Iran, but each of them can at least partially add to an understanding of the issue. As an Islamic country with powerful Islamic institutions, Iran has produced a powerful traditional market that does not act in favor of democracy. The democratically elected institutions are struggling with a lack of power and security forces restrict pro-democracy institutions such as civil society and unions. Foreign powers have played a negative role in Iran path to democracy and oil rent at least was not a positive and significant factor for democracy.
The main factor that has been underestimated by scholars is the role of geography in shaping Iran’s power distribution, social relations, and history. An Iranian theorist, Mohsen Ghane Basiri (2014), offered a theory based on four classical elements that suggested that the main factor in shaping a civilization in the Middle East is water, and all civilizations in this region were founded near a river or between rivers to establish agriculture. The Sumerians, Akkadians, Assyrians, and Babylonians are examples of this kind of civilization. In the water-based civilization, political establishment is formed before economic relations and it becomes the main factor of social interactions. Whoever controls the water also becomes the most powerful group in that region. On the other hand, the European civilization is based on soil because of the prevalence of rain. Under that system, anyone could have a piece of land and establish a farm. Thus, in European civilization, the right of ownership and trade produce economic relations that are the base for all subsequent social interactions (Ghanebasiri, 2016).
Authoritarian regimes in the Middle East are the heritage for this format of power shaping, which have influenced culture and society throughout the history of their political establishments. This model, despite all other factors, could explain why Iran as a country based on an agricultural economy with a very limited source of water has struggled with authoritarianism and never achieved full democracy.
17
Research Question
Ross claims that oil revenue is acting against democracy. The more a state has depended on oil revenue, the more issues they have reflected in their democratic index. Therefore, the relation between oil and democracy is an inverse relationship. It means that when oil rent rises, the democratic score should be drop.
On the other hand, Herb believes there are other factors involved in the relationship between the state and democracy, more than just oil rent.
Based on this conflict, what is the relationship of oil rent and democracy in Iran before the 1979 revolution and after the Iran-Iraq war? Does the rentier state theory explain the score of democratic indexes in Iran in different eras, such as 1970-1979 and 1988-2013? Has Iran changed before and after the revolution in democratic indexes in respect to the share of oil rent?
In this study, the democratic index is the dependent variable and oil rents and revenue during eight Iranian governments is the independent variable.
18
Methodology
The methodology of this study will be a qualitative approach. In an analysis of the case study, I will examine the relationship between oil rent and democratic indexes in two different eras.
The political economic approach of the Iranian government, different democratic indexes, and oil revenue are the main measurements employed in this study.
Case Study
“Case study”, as Cresswell (2008) categorized it, is a qualitative research strategy (P12), that goes through the past studies’ report to allow “the exploration and understanding of complex issues. It can be considered a robust research method particularly when a holistic, in-depth investigation is required” (Zainal, 2007). This method gives an opportunity to a researcher to examine data from the past researchers closely.
A definition of the case study research method by Yin (1984) stated, it is “an emp irical inquiry that investigates a contemporary phenomenon within its real-life context; when the boundaries between phenomenon and context are not clearly evident; and in which multiple sources of evidence are used” (cited in Zainal, 2007, P2).
Seawright and Gerring (2008) believe selecting a case to study is based on how the sample is representative (of a state with oil rent) and how useful is its variation on the dimensions of theoretical interests (P296), since there are various categories of cases such as typical case, influential case, and extreme and so on.
This study is an example of a typical case: “The typical case study focuses on a case that exemplifies a stable, cross-case relationship. By construction, the typical case may also be considered a representative case, according to the terms of whatever cross-case model is employed” (Seawright and Gerring, 2008, P 299). Iran, like many other producing oil countries have used oil rent in its economic approaches, so it is representing of a typical case for study.
19
Case Selection
To understand the relationship between oil and democratic indexes, Iranian governments before the revolution and after the Iran-Iraq war under different administrations and regimes would be the most appropriate case.
This timeline is an important period since Iran had an established and stable government with normal vartiations in the price of oil. Before the revolution of 1979, Iran was a classical rentier state from 1970 to 1979. From 1979 to 1989, Iran was engaged in revolution and war, and these two factors would not allow for a proper study. But after 1988, four presidents who have belonged to different blocs of power came to office and each served two terms: Rafsanjani who was then a conservative figure, Khatami as a reformist, and Ahmadinejad as a hardliner. In all of these governments, their budget was heavily dependent on oil revenue but their experiences in the democratic index have varied. The different approach in these eras to the role of democracy and government can be an alternative explanation for their different government’s results in the democratic indexes.
Data
To collect data for this study, data from the World Bank that measured oil rent is used. They measure the oil share in GDP of countries.
To measure democracy, Ross uses a model from the Polity 98 dataset constructed by Gurr and Jaggers. Gurr and Jaggers compile two extremes from 0 to 10 interval scale variables with 10 meaning democratic and 0 Autocratic. In this study, the Polity data series is also used, which is an established measurement of democracy. For each year and country, a "Polity Score" is determined which ranges from -10 to +10, with -10 to -6 being named autocracies, -5 to 5 corresponding to anocracies, and 6 to 10 to democracies.
20
Limitation of Study
This study is skipping 1979 to 1988, which was the period of Revolution and war, thus leading to Iranian governments without a stable situation.
Another limitation in the timeline of this study is the current President Rouhani administration. Because the data is not released on his government yet, his administration’s outcome is not traceable.
21
Background
The Role and History of Oil in Iran
Iran oil’s revenue was in the monopoly of a foreign oil company since the beginning. In 1901, Iran’s king had an agreement with a British man named William Knox D’Arcy that lasted 60 years to have a monopoly over the exploration and extraction of oil in most of regions in Iran, covering about 400,000 miles. In return, they had to pay 20,000 GBP worth of shares in the Anglo-Persian Oil Company (APOC) to the Shah and pay sixteen percent of revenue to Iran. If they could not find oil, Iran would not be included in the losses, but in 1908, oil was indeed discovered in the southern part of the country (D'Arcy Concession and Iran Oil, 2010).
When Britain charged Iran 500,000 GBP after an attack on the pipeline by German troops during the First World War, Iranians felt they had been cheated and were not happy with the condition of Iran under the D’Arcy concession. Reza Shah attempted to revoke that agreement, leading to a new negotiation, which concluded with the 1933 agreement. In this new agreement, the area which the British could explore for oil was limited to 100,000 miles and Iran’s share from any possible revenue rose to 20 percent. The company also became responsible for the security of pipeline, but in return, the new agreement added another 32 years to the sunset of agreement. The Parliament of Iran approved the deal as a result of pressure from the Shah, but it did not last long (Purjaafari, 2017).
The next attempt to change the condition happened in 1949 through an extension agreement, which again increased Iran’s revenue, but this agreement was not approved by the Iranian Parliament ( Gass-Golshaian contract was not approved, N.D). In 1951, the Iranian Parliament, under the leadership of Mohammad Mossadegh, passed a bill to nationalize oil. Based on this bill, only the Iranian government could explore, extract, and sell any of the Iranian oil (Details of the Oil Industry Nationalization Act, 2007). In the preceding political battle, he had the upper hand based on his popular support and became prime minister to carry out this law, but his effort was halted. Britain passed sanctions, using international law against Iran and giving Mossadegh a chance to make his case before the Security Council. The Security Council left the decision for the International Criminal Court and this court disqualified themselves, returning the decision to
22 the parties (I am the voice of Iranians, 2016). The two parties did not come to conclusion and in 1953, after two years, he was toppled by a coup that was staged by the American CIA and British MI6.
After that, Iran’s oil industry became a subject consortium of different American and European companies, and foreign countries gained the right to explore and extract oil, giving Iran 50 percent of the profits from production. Despite this, Iran did not have an effective role in consortium and had to pay compensation to British Petroleum (Maloney, 2015).
In 1957, the Iranian Parliament broke this monopoly over Iran’s oil and lured non-consortium actors into Iran’s oil industry. Iran found some parties to invest and seek opportunities in their industry. In the first contract, Iran found Italian firm ENI, which would receive 75% of all oil profits, shattering the prevailing fifty-fifty (Maloney, 2015). Maloney believes this was a paradigm shift in Iran’s oil sector, noting that “Over the next dozen years, Iran signed joint venture agreement with American, European and Japanese oil firm” (cited in Maloney, 2015, P 64).
Statistics show that since 1957 at least 50% of the Iranian government’s income comes from oil (Mazhabi & Amooei, 2008), meeting the requirement of Beblawi’s definition, which requires a rentier state to derives at least 42% of its income from oil revenue. Based on this statistic, other scholars such as Mahadavy have agreed that Iran is a classic example of a rentier state.
Contemporary Political History of Iran
As Baghi (2000) explained, there are two major incidents in that changed Iran’s direction in contemporary history in Iran: the Constitutional Revolution and the Islamic Revolution.
The constitution revolution, which took place from 1905 to 1911, featured Iranians unhappy with absolute rule by monarchs changing their political system to a constitutional monarchy. Therefore, the main objective of Iran was establishing a parliament and judiciary.
In the background of Constitutional Revolution, there were two important incidents. First, the Tobacco protest in 1891 was essential to the Constitutional Revolution (Rais-nia, 1971). When
23
Naser-al-Din Shah of Iran signed a 50 years contract with Major Talbot of the United Kingdom, he gave him a complete monopoly over the production, sale, and export of tobacco of Iran. In response, the Grand Ayatollah Shirazi issued a religious statement forbidding the use of tobacco for any Muslim. The reason behind this Fatwa was the essence of the contract, which was against the sovereignty of the Muslim nation. Shah tried to resist, but the strength of the wave of backlash across society ultimately overcame him, with even his wives intervening by refusing to allow Shah to smoke. Shah stepped back and the tobacco concession was revoked. This marked the first time that Iranians successfully acted against Shah and pushed him back on an issue (Madani, 2008).
The second was the publication of several newspapers outside of Iran in this era, which played a vital role in the Constitutional Revolution. Newspapers like Akhtar (“Star”), which was published in Istanbul; Qanun (“Law”), which was published in London; Habl-of-matin (“Solid Rope”) published in Kolkata; Hekmat (“Wisdom”), Soraya (“Universe”), and Parvaresh (“Training”) all published in Cairo were the main channels used to prepare and promote the Constitutional Revolution. They directly criticized the king and published news of revolutionary incidents in other countries, and years before the revolution began, the number of newspapers published outside Iran continued to drastically increase. Due to this, the government had to ban the reading of newspapers and detain many journalists. In response, journalist started to publish confidential papers (Roshan, 2005).
In fact, it was the consequences of a clash between traditional Iran and modernism. The Iranian people had witnessed the changes of the modern West while their own country remained stagnant, so they found a solution in the rule of law instead of the Shah (Fakhraei, 2018).
The first wave for the Constitutional Revolution was started when a tax collector, who took money to pay back the loan that Shah took from Russia to travel Europe, punished two merchants who charged extra for their goods. The public and clergy members protested and asked for the chief minister to be replaced and a judiciary established. After a month, Shah accepted the people’s wish but he had not acted quickly enough and a person had been killed. This became the reason for the second round of protests, which broke out when the government cracked down on protestors. Clergy members went from Tehran to the holy city of Qom and threatened Shah that they would leave the country and go to holy city of Najaf. The chief
24 minister stepped down, but the public wanted a parliament and constitutional monarch. In August, Shah signed the constitution law and an election held in Iran chose 156 members of Parliament (Madani, 2008).
Soon after, Mozafar-Al-Din Shah died and his son took over. Mohammad Ali Shah, with support of the Russian and British governments, dissolved the Parliament and abolished the constitution. A military resistance was formed in different provinces and took over Tehran. They forced the Shah to exile and his young son replaced him.
The British and Russians had conquered Iran during First World War. It leads to weaken central government and Iranians had suffered from lack of security and 1917-1919 famine, in which Kasrawi claimed one third of Iranian population lost their lives (Kasravi, 2003). These incidents pave the way for Reza Khan, head of Persian Cossack Brigade in 1921, to become War minister and later to his premiership. After that, while he enjoyed public support, he dissolved the Qajar dynasty, established Pahlavi Dynasty, and called himself Reza Shah (Ghani, 1998).
In his era, He successfully tried to raise security in the country and crack down on the heads of tribes in Iran who wielded considerable power. His next program was authoritarian modernism, using the model of Ataturk in Turkey. He established a modern bureaucracy, judiciary, university, and army. He had sent Iranian students to Europe with scholarships and made military service compulsory. On the other hand, he forced women to unveil and suppressed any political parties and journalists. He jailed and exiled many of his opponents and even killed some of them. His ruling continued until the Second World War. During the war, the British and Russians had decided that Reza Shah was in favor of Germans. They conquered Iran, removed and exiled him, and ensured that his son, Mohammad Reza, was sworn in as the new king (Baghi, 2000).
Mohammad Reza Shah’s reign can be separated into two periods. Before 1953, he was young and did not have a stable base of power. The society enjoyed a good amount of freedom and free newspapers and political parties played a vital role in this period. The opposition figures, such as Mossadegh or Ayatollah Kashani, had the chance to run and become members of parliament.
In this context, the parliament passed a bill to nationalize the oil against Sha h’s will and Mossadegh became prime minister to enforce this law. He ousted the British, but they responded with sanctions (Details of the Oil Industry Nationalization Act, 2007). Shah tried to remove
25
Mosadegh, but failed and fled to Rome. British and American intelligence services together ran a coup against him, toppling him. He was put on military trial and jailed. Later, he was put under house arrest until his death. His foreign minister had been executed and many of his followers jailed (Nejati, 1991).
Shah came back from his short exile and retook control with absolute power. The parliament was under his full control and prime ministers were chosen by him. In that period, he signed a consortium for oil with the Europeans and Americans. In the early 1960s, he accepted a moderate prime minister under the pressure of the Kennedy administration and ran his reform plan named the White Revolution. In this plan, he reformed land ownership, shared the land with farmers, and sent medics and experts to develop the rural areas and transfer the country from feudalism to industrialism (Abrahamian, 2008).
In this era, he put more pressure on his opponents by establishing SAVAK, cracking down on religious clergy members who opposed his reform plan, and sending Ayatollah Khomeini to exile. He also jailed all of the National Front’s leaders and put Mehdi Bazargan and his party members, Freedom Movement of Iran, on trial and jailed them. Later SAVAK crack down and executed youth movements who wanted to fight with arms (Nejati, 1998).
Shah appointed Hoveida as Prime minister for thirteen years, and as Alam, his nearest advisor and former prime minister, reported in his memories, he made all important decisions himself. He started many industrial plans after the oil price shock and said he wanted to pass the country through the doors of big civilization. His attempt was not successful and the economic consequences shocked the society and resulted in a wave of dissatisfaction (Nejati, 1191).
When Carter came to power in the United States, he was faced with critics over his human rights reputation. He started to change prime ministers and in two years, Iran had four prime ministers. Nevertheless, they could not solve his problem and the revolutionary forces became stronger. On the eve of 1979, he left the country, and Ayatollah Khomeini came back from his exile and appointed Mehdi Bazargan as the prime minister of the interior government (Yazdi, 2007).
The government of Bazargan was formed from mostly old nationalist and liberal technocrats but did not last long, due to disagreements between Bazargan and Khomeini in many cases and the intervention of the radical pro revolution youth and clergies who were near to Ayatollah
26
Khomeini. After nine months, when a group of Muslim students attacked the United States embassy in Tehran and took its staff as hostages, Bazargan and his government stepped down. Soon after, the first presidential and Parliament elections took place (Behnoud, 1998).
Abolhasan Banisadr was chosen as president, who was a Muslim socialist and most of the members of the parliament were chosen among members of the Islamic Republic party who were allies of the Ayatollah. In a couple of months, Iraq attacked Iran and took over many cities in the Khuzestan province. After about 20 months, the conflict between the parliament and the president intensified, and the parliament disqualified President Banisadr, and his prime minister, Mohamad Ali Rajai, won the election. On the other hand, clashes between MEK militia and government grew, and after disqualifying Banisadr, they bombed the headquarters of the Islamic Republic party, the offices of the president and the head of the judiciary; President Rajai, Prime Minister Bahanor, and many members of Parliament and at least six ministers were killed (Banisadr, 1999).
Ali Khamenei was the next President and Hossain Mousavi became his prime minister for about eight years. He enacted leftist policies and used coupon policies during war. During this era, the society was closed and no opponent parties and figures could run for election. Even Mehdi Bazargan was banned from running for election in 1985 (Reasons for Disqualifying Bazargan in the fourth Presidential Election, 2017). Many members of the militia groups were executed.
By the end of the war in 1988 and the death of Ayatollah Khomeini in 1898, President Khamenei was chosen as Supreme Leader to replace Ayatollah Khomeini, and Rafsanjani, the speaker of parliament, was chosen to replace the president. The economic policies of Rafsanjani were more pro-capitalism, but the social and political policies were still closed (Abrahamian, 2008).
In 1997, a liberal figure named Mohammad Khatami was chosen as president and he continued liberal economy policy and much more liberal cultural, social, and political polices. The forces against Mohammad Khatami were so strong that he was unsuccessful in many of his goals. The people who voted for him became disappointed, and many middle class voters did not participate in the presidential election in 2005 (Maloney, 2015). This move resulted in the presidency of Ahmadinjead, who was a hardliner who supported the Supreme Leader. He had populist economic policies and started to close the political atmosphere and push back on civil society.
27
His policies were not in favor of the middle class and his reelection was met with backlash and riots by the middle classes in Tehran, which had been cracked down on. In 2013, when his term finished, Hassan Rouhani, a moderate figure was chosen as president and his government is still in power (Fakhraei, 2015).
Political System in Iran
The system of politics in Iran is named the Islamic Republic and rests on two core principles, Islam and Republicanism, which regulate all the institutions in the state. In the constitution of Iran, article number one states this system is based on the “belief” and article number six indicates the country should be governed based on public opinion and vote through elections. These include the election of the President, members of parliament, members of boards and other such institutions, or a referendum in cases of other principles.
The Islamic Republic of Iran, like many other states in the world, has three top branches, the parliament, executives, and judiciary; however, unlike other countries, all three of these branches have to work under the ruling of a supreme leader. Article 57 states that the branches must “operate under the absolute rule of the Imam (supreme leader) according to Forthcoming articles of this Constitution; these branches are independent of one another.”
Source: bbc.co.uk
28
The supreme leader is a mufti, who is chosen by the votes of experts, and these experts are elected directly by the people. The experts would review and consult among themselves concerning all the fuqaha'(group of muftis) possessing the qualifications specified in Articles 5 and 109”. As is stated in Article 110, a supreme leader’s main responsibilities are determined by the general policies of the Islamic Republic of Iran after consultation with the Expediency Council and include supervising the general policies of the system, the Command referendum, Command of the Armed Forces, war and peace and mobilization, resolving differences between the three wings of the armed forces and regulation of their relations, and solving the problems which cannot be solved by conventional methods.
Assigning, discharging, and approving of the resignation of lower positions is part of the responsibilities of a supreme leader: A.) six Mufti for the Guardian Council. B.) Head of the judiciary. C.) The head of the Islamic Republic of Iran Broadcasting. D.) The Chairman of the Joint Chiefs of Staff E.) the chief commander of the Islamic Revolution Guards Corps. F.) the chief commanders of the Islamic Republic Army.
An Assembly of Experts, who are responsible for choosing a leader, is elected by the people from candidates who are approved by the Guardian Council, as is stated in Article 109: “The law sets out the number and qualifications of the experts, the mode of their election, and the code of procedures regulating the sessions during the first term. All these are drawn up by the fuqaha' on the first Guardian Council then passed by votes from the majority and then finally approved by the Leader of the Revolution.”
There are two other institutions, which work under the supreme leader to help the state to be Islamic. One is the Guardian Council, which has the duty “to safeguard the Islamic ordinances and the Constitution” and has 12 people as its members; the Islamic Consultative Assembly elects six expert clergies (mufti) chosen by the leader and the remaining six are jurists, specializing in different areas of law from among the Muslim jurists nominated by the Head of the Judicial Power.
As mentioned in Article 94, “All legislation passed by the Islamic Consultative Assembly must be forwarded to the Guardian Council. The Guardian Council must review them to be compatible with the criteria of Islam and the Constitution. In Article 99 states that “the Guardian Council is
29 responsible for supervising the elections of the Assembly of Experts for Leadership, the President of the Republic, the Islamic Consultative Assembly, and the direct recourse to popular opinion and referenda. The second institute is the Nation's Exigency Council which shall meet at any time the Guardian Council judges proposes a bill of the Islamic Consultative Assembly to be against the principles of Shariah or the constitution, and when the Assembly is unable to meet the expectations of the Guardian Council”.
After the 1979 revolution, the election was successful in forming legislation and executive branches, but these changes did not transform Iran from a full authoritarian system to a full democracy. However, it did make the system somewhat less authoritarian and somewhat more democratic. The reason behind it this the duality, which has been enshrined in the constitution. The supreme leader has the power to rule and through the Guardian Council, he controls the variance of candidates in elections. Further, there are other powerful forces, such as foundations, the army, and the revolutionary guards, which he controls to ensure that the balance of power will never shift away from him and toward elected institutions like the presidency and the parliament.
On the other hand, these elected institutions prevent the supreme leader from wielding the same power that the Shah had before the revolution. Because of the checks provided by social classes and political blocks, no one, neither the President nor the supreme leader, could claim absolute power.
30
Finding and Analysis
Democracy
There are two important sets of data on the matter of the relationship between democracy and oil rent. The democracy data comes from polity, and is shown in figure 1. The graph illustrates Iran’s different scores over time.
Figure 1
The mean Iranian democracy score is -6. Since 1953 coup against Dr. Mossadegh government until 1979 revolution Iran was a full authoritative regime with -10. After the revolution, the new Iranian regime’s score in democracy increased to -6, and then continued to rise until the Presidential election of 1977. During this period Iran experienced its best democratic rating of
31
+3, but from 2005, and the choosing of Ahmadinejad as President, Iran’s score fell to -6 and after the 2009 election, dropped further to -7.
This graph shows Iran has different scores over time, but to understand this graph better, it is helpful to compare it with some other countries. To do this comparison I chose four countries: Turkey, Pakistan, Saudi Arabia, and United Arab Emirate.
Countries such as Saudi Arabia, with a consistent score of –10, and the United Arab Emirates, scoring -8, highlight a disparity when compared to countries like Turkey or Pakistan, who score differently over time. This show’s how different countries are, in their path towards, and in struggling for, democracy. It can, therefore, be concluded that Iran’s data shows a progression towards democracy over time, and that their struggle is meaningful.
32
Oil Rent
The other important factor is oil rent over time. Iran, based on the World Bank data as shown in figure 2, illustrates a fluctuating percentage of oil share in GDP.
Figure 2
This graph shows Iran oil rent in 1973 rose dramatically. The rate of oil rent in Iran in 1970 was roughly 0.073% and by 1973 Iran is 0.304%. This score then suddenly rises up to 30.648% in 1974. After the first shock, the rate of oil rent gradually declined. For example, in 1975 it had sunk to 24.002% and by 1976, 23.244%. In 1979, the year of the revolution, oil rent jumps again to its highest score in history, peaking at 31.858%. after that, during the years of war, Iran oil rent declined gradually and dramatically. Again, from 1988, Iran’s oil rent climbed 7.371% to 20.064% in 1990. After its jump in 1990, it gradually declined to 16.775% in 1997, before dramatically declining to 9.755% by 1998. It once again recovers in 1999 with 15.549%, and dramatically rises in 2000 to 30.253%. Iran’s oil rent drops to about 20% in 2001 and 2003 and
33 rises again to 30.243% and 31.098% in 2005 and 2006 respectively. In 2007 it declines to 25.693%, before rising again to 29.424% in 2008. In 2009, it drops to 16.19% and goes to 19.362% and 23.323% in 2010 and 2011, respectively. In 2012 and 2013, Iran’s oil rent was 16.615% and 20.182% respectively.
These figures and numbers are showing how Iran’s oil rent has had ups and downs during the last 50 years. Under different administrations, Iran scores differently based on oil production rate, differences in the oil market and domestic production. The question could be asked, here, is the impact of this oil rent on the different administration policy.
Comparison between the oil rent and rate of democracy shows that in Iran there is not necessarily a direct correlation. When Iran’s oil rent was nearly peaking in 1974, the score in democracy was -10. This means Iran was an absolute authoritative state. In that era, Iran’s rate of oil rent was 30.648%. Another high score of oil rent was in 2000. In that year, Iran scored +3 in democratic rating, one of the best scores in Iran’s struggle for democracy.
Other interesting differences could be recognized between the eras. Iran’s rate of oil rent changes under different administrations, but Iran’s score of democracy is almost relatively consistent, unrelated to oil rent rate. Iran’s democracy score in the Rafsanjani era, (from 1989 until 1997) remained on -6 while at the same time Iran’s oil rent was at its lowest point at 13.362% and at its highest reached 26.217%. In the Khatami era, 1997 until 2005, Iran’s democracy rating was +3, yet experienced massive differences in oil rate, from the lowest of 9.775% to highs of 30.253%. In the Ahmadinejad era, (2005-2013) Iran’s democracy rate was -6 and below. During this period, his administration experienced oil rent lows and highs from 16.19% to 31.098% respectively.
Political Economy of oil rent in Iran before and after the revolution
To find out what is the relevance of oil rent and democratic practices, it is imperative to look at historical facts and reports in these different eras. Before the revolution, irrespective of who the prime minister was, Iran had one leader and that was the Shah himself. To understand the effect of oil on policies and oil indexes, it is necessary to go beyond the oil price shock of 1973, when
34 the oil rent added to economy of Iran. The main point was when Iran broke the monopoly over oil production by British and Americans, policies of government become so much under influence of oil rent.
1957 to 1979 (before the revolution)
After 1953 coup, sharp managed to secure a new deal which Iran better share of oil revenue subsequently money started to flow in and that had influenced on policies of government of Iran, how ever the main Impact was the shock of oil price in 1973, when its price increased four folds, from three U.S. Dollar (USD) per barrel to 12 USD per barrel. As well as increase in Iran production of oil from one million barrels per day in 1960 to six million barrels in 1974. This Resulted in increased Iranian oil revenue from one billion Dollars in 1970, and 5.6 billion Dollars in 1971 to 18.5 billion Dollar in 1973.
Economic Approaches
Abrahamian (2008) explains these changes of policies intelligence and secret police, and bureaucracy in his book:
According to the period between 1954 and 1977, the military budget raised twelvefold and its share of the yearly budget pass on from 24 to 35 percent – from $60 million in 1954 to $5.5 billion in 1973, and further to $7.3 billion in 1977. The number of people who work for army extended from 127,000 to 410,000. Through 1977, the regular army had in excess of 220,000 men, the air force 100,000, the gendarmerie 60,000, and the Navy 25,000 (P 124). By buying lots equipment and arms, in 1975, the Shah had the biggest navy in the Persian Gulf, the largest air force in Western Asia, and the fifth largest army in the whole world.
In the intelligence policies, Shah also established a secret police, which plays an effective role in the political atmosphere. Abrahamian (2008) describes it: SAVAK, in 1957, had been founded as a new intellect agency, by the help of the FBI and the Israeli Mossad. They eventually rose into some 5,000 operatives and an unknown number of part-time informers. Some claimed that one
35 out of every 450 males was a SAVAK informer. “SAVAK had the power to keep an eye on all Iranians – including high-ranking officers – censor the media, screen applicants for government jobs, even university appointments, and use all means available, including torture and summary executions, to deal with political dissidents” (P126).
The next noticeable change is in the numbers of employees of the government. “By 1975, the state was employed more than 304,000 civil servants as well as some one million white-collar and blue-collar workers, managing the Design and Budget Organization as well as the religious foundations, employed 24,000 by the prime minister’s office. Higher education and also The ministries of education and together employed 515,000 and administered 26,000 primary schools, 1,850 secondary schools, 750 vocational schools, and 13 universities. The interior ministry, with 21,000 employees, redrew the administrative map of the country, increasing the number of provinces from ten to twenty-three and dividing them into 400 administrative districts, each with a mayor, village headman, or rural council appointed from the center. By 1977, the state was directly paying one of every two permanent employees.” (126-127).
The extent of the influence of the government could be seen in many other areas. On the other hand, a number of quasi-government institutions financed indirectly also the Central Bank; Industrial and Mining Development Bank; and also the National Iranian media such as Radio and Television Organization; the National Iranian Oil Company; and the National Film Company.
Even in the private section, the state of the Shah has its own influence through government- funded foundations. The Pahlavi Charity, founded in 1958, as a tax-exempt charity, hold the landed-state of the previous shah. “It then incorporated most of the fixed assets of the current shah as well as those of his sixty-four family members, many of whom received lucrative commissions for serving on corporate boards. The foundation established a further boost when it began to siphon off substantial sums from the annual oil revenues. At its height, the Pahlavi Foundation had assets worth in excess of three billion USD, with shares in 207 companies active in such diverse fields as mining, construction, automobile manufacturing, metal works, agribusinesses, food processing, banking, insurance, and tourism (casinos, cabarets, and grand hotels). It also had shares in international corporations such as Krupp and General Electric. The
36 shah’s personal portfolio was estimated to be more than one billion USD. The royal family’s total assets were estimated to be in excess of 20 billion USD” (Abrahamian, 2008, P127)
Social Approaches
In the social matters, Shah had started a modernization program in 1963 by disso lving feudal families and tried to establish technocrat and industrial groups in the society.
Abrahamian (1982) believes the Shah started renewing the economic level of the society established a modern middle class and an industrial labor class, but he was not successful to renew the social level and the system blocks all communication channels between society and state, and so it resulted in a larger gap between society and state.
On the other hand, after 1973, he declares war against established traditional institutions: Iranian traditional marker and Iranian religious school.
“The Resurgence Party declared war on the bazaars in order to deal with increase that hit the country in late 1975. It imposed price controls on basic commodities; flooded the market with large quantities of wheat, sugar, and meat; and invaded the bazaars with some 10,000 goons known as “inspectorate teams” to “wage a merciless crusade against profiteers, tricksters, collector, hoarders, and unscrupulous capitalists.
The Resurgence Party supported out a simultaneous assault on the ecclesiastical establishment. It proclaimed the Shah to be a “spiritual” as well as a political leader – thus trespassing on hallowed ground; denounced the clergy as “black medieval reactionaries”; and, in declaring Iran to be on the road to the Countless Civilization, added the Muslim calendar, with Reza Shah’s solar model, with a new imperial calendar which allocated 2,500 years for the presumed length of the Iranian monarchy and another 35 years for Muhammad Reza Shah. Thus Iran jumped overnight from the Muslim year 1355 to the imperial year 2535.
All in sudden these moves works against him and it can be said they made him to face with a strong backlash by the revolution.
37
Political Approaches
As Maloney (2015) stated he start to suppress opposition in this era. He jailed members of national front, who were main bodies of under house arrest Prime Minister Mossadegh because they were against his reforming referendum. After that, his administration cracked down protest in Qom’s religious school by Khomeini’s students and other religious people in six cities and killed dozens. Later he jailed and exiled Ayatollah Khomeini. In a short time, He put on trial Mehdi Bazargan and members of Freedom Movement of Iran, a Liberal Muslim party, who later became the Prime Minister and members of the interior revolutionary cabinet (Meisami, 2008).
The youths who had been disappointed with lawful attempts to democratized Shah’s regime, after this attempt, start armful movements. Mojahedin-e-Khalgh and Fadaaian were two armed group which started a war with the regime. In the early of 1970s, before any serious attempt, Savak had crushed them and most of their leaders had been executed (Meisami, 2008).
In early of the 1970s, as Abbas Milani (2010), revealed Shah had proposed to one of the figures to establish a new opposition party in the system, but when he shocked by the first raising of oil price, he changed his plan and followed one-party-state solution. As Abrahamian (2008) described, “the Shah did a unexpected about-face in March 1975. Establishing, the Mardom and Iran-e Novin Parties, he declared with much fanfare the establishment of the brand new Resurgence Party (Hezb-e Rastakhiz). He announced that in upcoming Iran would be a one-party state; that all facets of party-political lifetime would come under the direction of the party; that all peoples had the responsibility both to vote in national elections and to join the party.”
He said anyone does not like one-party-state could leave the country. “Those reluctant to join must be “secret communists”; and that such “traitors” would have the choice of either going to prison or leaving the country – rather than the Soviet Union” (150).
Analysis
What can be concluded from these data and according to the consist -10 score of democratic values after 1953 coup, is that Shah and his policies were affected by oil rent, but it did not change his undemocratic approach and his desire to suppress all dissident and lawful movements,
38 which resulted in a popular uprising against him that ended his era. Many of the executions, incarceration, and tortures that was carried out by SAVAK happened before the oil shock of 1970 and 1971. His approach continued in the same vein after the oil shock as he declared one- party state, but it did not change the fact that he consistently was a dictator.
Political economy of oil rent of governments after the revolution
Iran after the revolution was subject to domestic unrest in Kurdistan and Khuzestan provinces, and after two years, faced with foreign invasion by Iraqi Army. This war took about eight years. In these 10 years, Ayatollah Khomeini was the first man in the country. Less than a year, after finishing Iran-Iraq war, Islamic Republic founder died.
A delegation of 25 Iranian clerics had been chosen by Late Ayatollah Khomeini to come with the second constitutional amendment in which the position of Prime Minister has been irritated, and Supreme Leader would gain more power.
1989-2007 (Presidency of Rafsanjani)
When Ayatollah Khomeini died in 1989, a political pact of a young Ayatollah Khamenei and Akbar Hashemi Rafsanjani take over the power by choosing Khamenei as new Supreme Leader and replacing Rafsanjani as new President with 94% of votes in battling with way unknown candidate (Abrahamian, 2008).
Economic Approaches
The President Rafsanjani era, as Maloney described it, is postwar reconstruction era. The situation that President Rafsanjani faced was the heritage of war. When eight years of war had been finished, Iran's economy was in a bad situation. Iran's manufacture capabilities were operating at 40 percent of their capacity. GDP per capita income reduced about 56 percent
39 compared to 1976 and inflation was approaching 29 percent. The damage of war was calculated at about 1 trillion USD.
On the other hand, Oil embargo by France, sanctions by U.S. and falling of oil price, the collapse of oil export by one fourth were parts of the issue. Iran port facilities and oil export facilities had been ruined during the war.
Rafsanjani started his project to rebuild war destructions. Gholamreza Aghazde, then oil minister told to a reporter in February 1989 that we have decided to the first priority of the country is the reconstruction of the economy. Rafsanjani tried to reform Iran's foreign investment system, hoping to attract western sources, to attract enough capital for postwar construction system. In 1992, the finance Minster announced a new policy, which gives permission to foreigners to own Iranian firms and providing indemnification against nationalization and protection for capital reparation. Later in 1995, the Council of Ministers made a series decision to allow foreign partners to own the majority of stakes in joint ventures. As Gasiorowski described he was relying on barter trade to start his mega project, such as Mobarakeh steel facility, in his early years, because political risk made it difficult to secure financing (cited in Maloney, 2015).
To advance his construction idea, the budget and planning office drafted the first development plan, which it was related to aggressive economic reform. The aim of this development plan was promoting economic growth, restraining deficit, targeting trade imbalance, and revitalizing the stagnant oil and gas sector. The focus of this plan was on “promoting industrial growth, curtailing the role of government, improving the tax system, and reopening the economy to foreign investors and capital.”
Also, 97 kilometers of roads and 1100 kilometer railroad had been constructed. 10 billion USD had been invested in heavy industry and 3.5 billion USD in oil filed to reconstruct war damages.
Abrahamian (2008), explained Rafsanjani’s economic approach into the two novel leaders stopped rationing; comfortable price controls; and tried to balance the budget. Meanwhile, they also tried to trim the bureaucracy, and, although they failed, they managed to decrease the total number of ministries from 25 to 21 by merging the ministries of heavy industry with industries, higher education with education, revolutionary guards with defense, and reconstruction with Islamic guidance.
40
In addition, they introduced and imported consumer goods as well as essentials to relieve shortages; stopped the anti-hoarding campaigns; returned some real estate to previous owners; printed less paper money; narrowed the gap between the official and the black-market price of the dollar; revitalized the national stock exchange; started five free trade zones; lowered business taxes; and, most important of all, reduced the defense budget, which was as in height as 17 percent of the gross national product in the shah’s last years, to less than two percent of GNP. Thus resources continued to flow into development programs: such as education, health care, electrification, countryside roads, urban regeneration, city parks, and the Tehran subways, as well as into capital-intensive projects such as steel, car manufacturing, and petrochemicals – even the nuclear package was picked up.
Another aspect of Rafsanjani economic era is famous for was freeing the economy from heavy state influence. The government starts privatization by selling off 400 of its enterprise. A quantity bounded only by firms remained off-limits because of constitutional mandates. In addition to privatization, his government liberalizes the exchange rate.
Social Approaches
When Rafsanjani took the office, millions of Iranians were and remained displaced in the cause of war, and meanwhile, Iran population growth was too high. The government in the time of war, involved in every aspect from industry to banking and finance, as central bank governor, Mohsen Nourbaksh, told in Parliament in 1992. But Rafsanjani had a different approach and “the basis of economic policy had been moved from commitment and the poor to championing expertise and the professional class” (Maloney, 2015, P202).
Despite his reputation, under his first five-year plan, 2.5 million new house units had been built, which one-third of them was in the rural area. In addition, he had two privatization plans, which they could be considered as his social policy. In the first wave of privatization (1990-1994) has resulted in the sale of 1.7 trillion IRR (Iranian Rials). In the second wave of privatization, (1995- 1997) 1.8 trillion IRI in shares was distributed only to workers and war veterans.
41
Political Approaches
In the political approach, Rafsanjani did not make any ease to the political sphere. Many of his opponents inside the political regime, who were Islamists leftists, had been banned from running in the Parliament election. Because of that, the left wing of Islamic republic did not participate in the fourth term of 1992 parliament and 1993 presidential elections (Alviri, 2009).
Outside of the political system, in 1990, when 90 Iranian dissidents, who are mostly members of National Front and Freedom Movement of Iran, criticized his economic approach, in an open letter, pushed back by his order to intelligence minister. One of them was Ezat Sahabi, head of Iran’s budget and planning office, in the interior government of Mehdi Bazargan, told they were against his plan to taking loans from foreigners. Later, they had been arrested and tortured and spent one to three years in jail (Sahabi, 2013).
Also, there are many other dissidents, such as intellectuals and writers and poets, who were arrested by intelligence minister. Someone of them forced to do interview against themselves, in Iranian state television (Pournejati, 2015). There was also a failed plan to kill members of Iran writers' association in a fabricated accident (Behnoud, 2007). Moreover, plenty of terrors of Iranian opposition outside and inside of Iran had happened during his time in office (Farahmand, 2017). Rafsanjani later told he was not aware of these plans and those who did it in inelegance ministry had not taken orders from him (Zibakalam, 2017).
The freedom of press in his era was so limited. As Abrahamian (2008) stated the number of Iranian national newspaper was only six. There are many restrictions on cultural freedom. As an example, there was no license to produce pop music or the level of censorship to publish books was too high (Sarkoohi, 2017). Because of these approaches, it does not make any surprise that score of his era in democracy was not good.
Analysis
The record of President Rafsanajani shows that the oil rent in his time was raised and at the same time, he had an oppressive government. He did not allow the political parties or the press to be active freely. He jailed many of his opponents and the Parliament election was restricted. But his
42 record, nonetheless, was not worth than his previous administrations. The democratic score was not improved during his time, and it was not really affected by the oil rent.
1997 to 2005 (Presidency of Mohammad Khatami)
In the 1993 presidential election when Rafsanjani run the second term, a young pro leader candidate shakes the polls. Ahmad Tavakoli, who was talking about social and economic unfair situation and corruption, won more than three million votes against 10 million votes of Rafsanjani. In the previous election, Rafsanjani enjoys from more than 15 million votes, and in respect to his prominent role in the regime, it was a huge challenge for the first time.
Mohammad Ghochani(2013) believe the change in the institution, and irritation of prime minister position put an end to the first republic and it is the start of the second republic. As changing the constitution bring more importance to president position and make it the subject of Competition.
Choosing of Khatami was the result of this change. In the most bipolar election, with the largest turnout of 79 percent of voters, which is the highest percentage for an election in Iran’s history, A cultural figure who talks differently than other had been chosen. Abrahamian believes in qualifying Khatami for the run for election was a calculation mistake by Guardian council because Khatami was not famous, and his opponent has the most influential supporter, so they let him run. But the middle class like his cultural-liberal reputation and as statistics shows, votes of women and youth send him to president office. From a political perspective, he was from left- wing of the Iranian political system and believe in Islamic socialism (P273).
Economic Approaches
The main idea of the reformist government of Khatami was prioritizing the political, social and cultural liberalization over economic development. Khatami administration published “Economic Recovery” Plan that contains his agenda for prioritizing social justice but looking for additional foreign investment and continue of privatization.
43
Very soon, he faced with economic crisis due to free fall of oil price. Due to Asia economic crisis, the price of per barrel of oil had dropped to less than 10 USD in late 1998 and oil revenue dropped from 19 billion USD in 1986 to 10 billion USD in 1998. This situation creates the deficit for the government because the budget was based on 17.50 USD per barrel.
Moreover, the specter of 1993 debt crisis haunted new administration, as the government struggled to service the same 5.9 billion USD package of European debt that Rafsanjani forced to reschedule in 1993. In another crisis, Iran rainfall average dropped 45 percent, which has a huge impact on the agriculture sector and government budget. “Over the course of its two terms, the Khatami Presidency managed to tackle several broad and complex issues. Such as privatization, significant enhancements to the trade and investment framework, exchange rate unification, and the establishment of sovereign wealth fund to hedge against oil revenue volatility.”
In 2000, the parliament passed a bill to allow the establishment of privet banks and in ove r five years four new bank received the license. In 2001, the government established the National Privatization Organization. Iran’s Oil Stabilization Fund, in respect to the experience of revenue plunges in the oil busts of 1986 and 1997-8 had been established. It was work as foreign currency account at Central Bank, intent to insulate Iran’s budget from oil price volatility.
The equilibrium in his government had been changed to foreign relation, and he tried to reduce tensions in the international and regional relationships of Iran. “In foreign affairs, Khatami launched a campaign to improve relations with the outside world. He paid state visits to Tokyo, Moscow, Madrid, Rome, and Paris, where, at the Pantheon, he laid wreaths for Rousseau, Zola, and Victor Hugo. He assured international lawyers that the courts would no longer resort to stoning and would be sparing in imposing corporal punishments. He hosted a conference on dialogue between civilizations, and a human rights delegation from the European Union. He told CNN how much he admired the West, especially America. “The secret of American civilization,” he opined, “lies on Plymouth Rock.” He even expressed “regret” for the student takeover of the US embassy. He invited foreigners to invest in Iran – especially in oil exploration, oil refining, and oil pipelines. He announced – in a clear break with precedent – that Iran would accept a two-state solution for Palestine if the Palestinians themselves agreed to such a settlement.”
44
In the response to Khatami Reforms, the World Bank – without US support – on loan Iran $232 million for medical services and sewage lines. Furthermore, European, Russian, and Japanese firms – again devoid of American approval – granted to invest $12 billion in the oil, gas, and automobile industries. Euros flowed into the stock exchange in Tehran. And the International Monetary Fund (IMF) gave Iran high marks in 2003 for its fiscal reforms – specially for balancing the budget.
Social Approaches
In the cultural and social area, the impact of Khatami’s pro-reform policies was significant. “The improvers channeled state funds into non-government organizations: local clubs, theaters, and cultural centers; newspapers – the number of dailies improved from five to twenty-six and their combined daily circulation rose from 1.2 million to 3.2 million. The number of journals rose from 778 to 1,375; and the number of book titles from 14,500 to 23,300 with a total circulation of 118 million.”
The resulted of these policies had been shown itself in changing the discourse of the society. As Abrahamian described: the key factors in public discourse had been imperialism, mostazafen, jihad, Mujahid, Shahid (martyrdom), khishtan (roots), enqelab (revolution), and Gharb-zadegi (Western intoxication). Now the key terms were the democracy, pluralism, moderniyat(modernism), Azadi (liberty), barbaric (equality), Jamee Madani (civil society), hoquq-e beshear (human rights), mosakerat-e siyasi (political participation), goft-ego (dialogue), and the brand new word shahrvandi (citizenship). This was a cultural turn almost as significant as that of the 1979 revolution. The novel intellects – a lots of whom had been started political vocations as aggressive revolutionaries – cited freely not only Rousseau, Voltaire, and Montesquieu, but also Hume, Kant, and Descartes.
Political Approaches
In the domestic politics, Khatami tried to open up the political sphere. For the first time Iran had the election of local elections and from 334,000 candidates, 5000 women had been competed to
45 represent people in cities and villages local councils. The election of the parliament enjoyed from a way better competition, due to restriction for guardian counsel. In result of this election, reformists won 80 percent of votes and took the absolute majority of the Parliament. They “passed more than a hundred reorganization bills. These contained within the explicit ban on all forms of torture and physical coercion, including sleep lack, blindfolding, and solitary confinement; the right of political prisoners to have legal counsel, right to use to their families, and trial by judges with at least ten years’ experience; the founding of a more special press court independent of the judiciary to deal with issues of libel and censorship; the right of all accused to jury trials with strict separated between judges and prosecutors; and the presidential authority to remove activist judges who blatantly interfere in politics and overextend their judicial powers. Furthermore, they tried to transfer the authority to direct elections and vet candidates since the Guardian Council to the interior ministry” Abrahamian, 2008, P190). They were not successful in changing many of rules because guardian council had vetoed many of them, and granted these bills are against the Sharia. On the other hand, they try to make changes in other areas. For example, “they sent parliamentary committees into prisons, removing some wardens, releasing more political inmates, and improving the conditions of others” (Abrahamian, 2008, P191).
In a huge development, after the murder of four political dissidents, intelligence ministry, publicly accept the responsibility and told its hard-line rebellious members have done it. This team had been arrested and their leader, who was deputy minister, committed suicide and died. The minister had stepped down and newspapers for months discussed the issues and other aspect and victims of this team in Rafsanjani era.
His opponent political centers try to sabotage his policies. Many newspapers had been banned. Eventually banning more than sixty publications in what became known as the “great newspaper massacre” (Abrahamian, 2008, P 191) Many political activists, such as members of Freedom Movement of Iran and Islamic Nationalist Front and some other individuals, Journa lists and Bloggers, student activists and some scholars had been jailed. Students protest, in July 1999, had brutally cracked down, and streets of the Capital Tehran faced with unrest for several days. As Abrahamian (2008) reported in his book A scholar indicated that he could not find traces of velayat-e faqih in the Koran or in understanding of the teachings of the Twelve Imams. Additionally, under arrest for noting that the veil pre-dated Islam and originated instead in
46 ancient pagan civilizations. Yet additional was imprisoned for publishing a community opinion poll, which exposed that the majority of Iranians required to recover and to improve relationships with the USA even though they distrusted Washington. One paper was even banned for reprinting a New Deal cartoon of FDR’s hand pressing down on white-bearded Supreme Court judges. Zan, edited by Rafsanjani’s daughter, was banned for a cartoon showing a husband pleading with a mugger to go after his wife with the caption that according to the shari’a her “blood money” would be only half that of his. The Liberation Movement was outlawed on the grounds it did not sincerely believe in the concept of velayat-e faqih. The mayor of Tehran – a Rafsanjani protégé – was tried on trumped-up charges of financial corruption. Moreover, the Revolutionary Guards – stayed by vigilantes – broken up a objection meeting in Tehran University injuring more than a hundred and ransacking the student dormitories. Khatami took the opportunity on December 7 both to celebrate that day and to warn that such clashes would weaken democracy and pave the way for the emergence of extremism.
Nevertheless, the reformist government and members of parliament stand against these moves and try to facilitate their freedom. When the time came for new elections, one after another, reformists lost elections. In the one of the freest election of city and villages, the lowest rate of people turn out and reformists lost in Tehran and all major cities. In the election of Parliament, the Guardian Council disqualified more than 2,000 candidates, including 87 deputies, from running for the elections. The barred deputies complained: “Our revolution brought freedom and independence in the name of Islam. But now our national rights are being trampled upon in the name of Islam” (Abrahamian, 2008, P192). Nonetheless, they did not have any chances to win the election. The next parliament was formed in the absence of reformist and less than 16 percent turnout of voters. The new Parliament with the absolute majority of conservative members, try to reverse the government’s reform policies, which it was in its last year.
Analysis
Over this situation, the improvement of political situation, cultural and social freedom were notable. The improvement of six scores in democratic indexes is justifiable. But even after this dramatic improvement, Iran score is still low and stay on +3, which is the highest in Iran's
47 contemporary history. The reason behind this barrier, as many Iranian analysts pointed out is duality in the core of power. The President and Parliament do not have enough power to change the state fundamentally. Some political figures, such as Behzad Nabavi, who is one of the leader of reformists, estimated the President has less than 20 percent of power in Iran, while non- elected parts of Iran’s regime, such as Supreme Leader and Guardian Council, hold more power.
2005 to 2013 (Presidency of Ahmadinejad)
Unsuccessful attempt to reform caused a mass disappointment among middle class, which is the main voters for reformist. In 2005 presidential election, turn out of voters had declined 20 percent since 1977 and only 59 percent participate in the election. Mahmud Ahmadinejad won the election with 17 million votes, against Rafsanjani with 10 million votes. Ahmadinejad was an unknown mayor of Tehran, who had been chosen by new unknown and mostly young conservative members of city council to work as Tehran mayor. He had a populist and pro leader approach, and the most unlikely candidate to win the presidency had been chosen 61 percent of votes and then he became the pop star of politic in Iran.
Economic Approaches
Economic policies in Ahmadinejad administration rhetorically were based on social justice. His understanding of these terms was the distributive economy. In his presidential campaign, he promised to shares oil revenue with people and enlarging economic opportunities, and fighting corruption, reorganizing the bureaucracy, criticized post-war economic policies as unnecessary increasing income inequality, and expressing his wish to do more investment and disperse more resources beyond Tehran. Policies that formed his legacy were like as cheap housing, subsidy reform and distributing stocks to lower class.
When he became president, the oil price had jumped to its best rate ever in history and his government’s oil revenue was more than all oil revenue in Iran’s history. “More than 700 billion USD in oil revenue accrued to Tehran during the President’s first term alone” (Maloney, 2015, P335).
48
He started to distribute this revenue in different forms such as Imam Reza Love Fund and Mehr Housing Project, with 10 billion USD loan fund to facilitate the construction of affordable residential units for first time buyers on unutilized land. His housing policies resulted in the growth of wealth in the economy. From the year 2005 to 2013 the growth of wealth was observed to be seven times bigger with an increment from 680,000 billion IRR to 4,700,000 billion IRR. The project of housing involved expenditure amounting to 430,000 billion IRR, which came from the central bank.
He introduced ‘justice share’ program and ask low-income families, war veterans and other revolutionary credentials to register for it. As economic minister reported, 49 million people registered for it and 39 million people received shares. The average value of these shares was only approximately 220 USD.
He had visited all provinces more than four times and on each trip, he committed for lots of new projects. Ahmadinejad's government took a commitment to reduce the debt to cover its 4,000,000 billion IRR projects, which started in the provinces and promised to pay 2,110,000 billion IRR. However, only 30% of the total was paid during his era, and the rest 70% was left for the coming governments.
Ahmadinejad expensive approach, especially during his first term, gained political support for him to run for the second term, but on other hands, these plans were so costly for the state. He runs subsidy reform plan, in his second term in office, to pay the subsidies directly to people. In this plan, the government is asked to pay 50% of revenue from cutting subsidies for goods and energy as subsidy payment directly or indirectly to people who were not high-income earners or registered for this plan. The other half of this income was expected to be generated from commercial businesses and industries.
But the government of Ahmadinejad paid a direct subsidy to everyone who had registered for the plan. All registered citizens had received 450,000 IRR every month. According to Ahmad Tavakoli, a member of parliament, this amount of money was 150% more than what was to be paid. Hence, it was clear that it was not obtained from cutting subsidy of goods and energy. The next president reported the subsidy plan would cost 350,000 billion IRR yearly from the
49 government and the reduction in subsidies on energy and goods provided about half of that amount.
There is other reason of rising wealth was debts of Ahmadinejad’s government to banks: 740,000 billion IRR, for the retirement and social security fund: 600,000 billion IRR, and to contractors: 550,000 billion IRR (Rouhani, 2013).
When the supreme leader in July 2006, mandate a plan to sell off 80 percent of all state-owned enterprise, the goal was full privatization of all industries permissible under the Constitution by end of the fourth- five-year plan, an anticipated of a total value of one-quadrillion IRR worth of state firms. As evidence suggests “the selling of state assists actually conceited recycling through a network of the public and semi-public institution within Iran. Significant shares in six petrochemical and power plants were floated by the government directly to the Armed Force Social Welfare Organization (a revolutionary Guard-affiliated pension fund), the international Conference Organization, to the pension fund in 2010, a majority share of the Telecommunication Company of Iran sold to Etemad-Mobin (an IRGC controlled consortium). The value of the sale was reported as high as nearly eight billion USD.
The main issue in Ahmadinejad foreign policy was under the influence of Iranian nuclear program. Iran, in 2003 accepted to halt its program according to 2003 Paris Accord, but in April 2005, the supreme leader ordered to resume the nuclear fuel activities. Iran and the Western power have not been successful to reach a new agreement after 2003 and Iran had been targeted by resolutions of the United Nation Security Council. In June 2010 Iran hit by 1929 resolution of UNGC under Article 41 of Chapter VII of the United Nations Charter, which imposed a complete arms embargo on Iran, banned Iran from any activities related to ballistic missiles, authorized the inspection and seizure of shipments violating these restrictions, and extended the asset freeze to the Iranian Revolutionary Guard Corps (IRGC) and the Islamic Republic of Iran Shipping Lines (IRISL), established Panel of Experts. The next hit came from Washington and European Union by imposing the sanction on Iran oil selling, the central bank of Iran, shipping industry, international trade, and working with the insurance companies. Iran’s currency lost its value to 300 percent and exchange rate against USD drop from 12,000 IRR to 36,000 IRR. Iran lost over 100 million USD of its oil revenue, in respect of sanctions. When Ahmadinejad came to office, the inflation rate was 10.4 percent and when he left the office, the inflation rate was
50 over 40 percent, with a 2.2 percent inflation increment every month. At the same time, Iran's economy experienced a deflation of minus 5.8 percent.
Social Approach
There is not much of analysis on the social policies of Ahmadinejad administration, but based on his economic policies, it can be said he tried to provide more for the lower class, whose are his main supporter in the election, by housing, subsidy reform and loan for creating job and young couples.
Political Approaches
In political aspect, the intelligence ministry starts to push back the partly freedom of Khatami era in political aspect. In his first term, they start to gradually ban gatherings and political public events. His cultural ministry revoked the license of newspapers (How many newspapers closed by Ahmadinejad Government?, 2017). Over hundred students and activists were barred from universities and some of their groups, such as leftist student group in 2007, had been crashed by intelligence ministry (Mahjoub, 2011).
The main political challenge that he faced was in the second term election. Mir Husain Mousavi, the last prime minister of Iran history from 1980 to 1988, and Mehdi Karroubi, speaker of Parliament from 1999-2003, run against him and reformists endorsed them. After the election, they did not accept the result and accused his government of violation and cheating. Three million of their supporters went to streets and marched in Tehran. About one week this marches and demonstrations continued. Ahmadinejad in his victory speech said these are dust and trashed and the supreme leader threaten if this unrest continues, it would be cracked down and the responsibility is with opponents (Farjami, 2010). The next day, unrest was brutally cracked down but unrest takes about eight months. As reported near one hundred people had been killed and thousands had been arrested and jailed (Arian, 2017).
51
Many political activists, among them ex-minister and ex-member of Parliament, had been arrested in the first week, and some month later they put them on trial. Many of them sentenced to the maximum of possible jail and served five to six years in jail. Some activists had been lashed because of insult to President (Pardis, 2010). There are also other mass arrests, such as the arrest of a group of journalists in 2013 (Mass Arrest of Journlaists in Tehran, 2013).
Analysis
Ahmadinejad Presidency demonstrated a regression in Iranian democratic indexes. He tried to revoke all achievements of Khatami administration. Iran’s democratic score in his presidency dropped to -6 and even above, the lowest score in Iranian post-revolution history. In addition, this change could explain why democratic indexes in Khatami era, never gain more than +3. However, the achievement of Khatami Presidency was not successful to change fundamentally the state.
52
Discussion and Conclusion
Discussion
These figures and data show there is no meaningful positive or negative relationship between democracy and oil rent, and rate of democracy is not a function of oil rent. Iran’s oil rent could be low or high and democracy rate will continue its progression under the rule of the administration, which is in the office, and social forces behind them. In addition, they are showing that, rather than oil rent, the government, and the ideas of the person who holds office, and people who voted for him, are more significant. The information from these different eras confirms the same thing. The Shah was a brutal dictator from 1953. His policies changed with the oil price, but it was not an influential change in the suppressive state of his regime, before or after adding of oil’s rent.
The issue is the same with the post-revolution governments. During this era, the nature of the revolution improved the democratic values and changed the state from an absolute monarchy to a semi-authoritarian state. The situation of democratic value, during the President Rafsanjani era, remained consistent and higher oil rent did not significantly change it. The same case would be applied to the President Ahmadinejad era. The people who voted for Ahmadinejad, in absence the pro democracy social forces, did not care about democracy. Therefore, the values of democracy went back to the same state as Rafsanjani’s governments and before him. In This case, Khatami was an exception. In the President Khatami era, from 1997 to 2005, the democratic values noticeably improved, but the main reasons that could be given are the man himself and people who push him. They had chosen a person who believed in democratic values, and was also more liberal, in comparison to other candidates, when people voted him to be in office. Therefore, his policies and ministers followed these beliefs and the situation changed. We can assume the situation of democratic indexes, in President Rouhani era, would be almost the same with Khatami era, with his policies improving the democratic indexes.
Hence, it is reasonable to come to the conclusion, that the main factors in improvement in democratic indexes are the social forces and a person who rules. If the president were a democratic figure, such as President Khatami, with any rate of oil rent, the state would
53 experience a better score in democracy, compared to a hardliner President Ahmadinejad, whereby under his rule Iran returns to its low rate of democratic indexes.
Perhaps what scholars propose about the relationship between oil rent in Iran and democracy from 1973 until the 1979 revolution, and whether this justifies a classic example of a rentier state, could be challenged with the understanding and evidence of this essay. This is nowhere more apparent than in the comparison between the score of Iran’s democracy before and after 1973. Iran’s score of democracy has remained consistent since the 1953 coup, and did not experience a change until the revolution, and it could challenge the assertion that dramatic difference in oil rent caused the more authoritative mannerisms of the Shah. It has been clearly illustrated that, in fact, the assumption that the raising of oil price was a crucial factor, does not have a solid basis in evidence.
Conclusion
Rentier State theory is a widely believed theory among scholars and people, and to challenge it is not an easy task, but this study disputes the claim of this theory.
This study looked at the historical background of Iran, and rentier state theory. It also looked at the different stands of scholars on this theory. Using the two sets of data on democratic indexes and oil rent, and each government function, this study concludes that Iran’s score in democratic indexes does not have any meaningful relationship with oil rent, but, rather, is related to the agenda of the administration.
Depending on which social classes played the main role in electing a president, and whether the president, and the political forces behind him, believed in democracy are crucial factors. If a president is liberal then he will use his resources to liberalize the situation. On the other hand, if the next president does not believe in democracy, and as a result of the difficulty in structural change, all progress could be reversed.
Since a president in office, and the social and political forces behind him, have the main role in pushing the country and the system towards or away from democracy, oil cannot play a major
54 role. It could, however, be argued it has an assistant role, which assists the president in giving a bigger budget for his plans, be they democratic or authoritarian.
Iran is not and never has been a classic case of a rentier state and this theory fails to satisfactorily explain why Iran is not democratic. This research, therefore, is standing with what Herbs stated in his article: “democracy scores in the surrounding region are strongly correlated with a country’s own democracy score” and is not related to oil rent (Herbs, 2004, P 307).
Suggestion
For the further study, it can be suggested the same question of the relationship of oil and democracy could be asked based on the share of oil in the annual budget of different governments rather than the oil rent, itself.
The role of oil, not in democratic indexes, but in preventing of democratization could be probed, in future studies. Behind the oil, lack of power of institutions, the culture based on geography and history, and …. could be investigate in future studies.
Also, this study could be done on different available democracy indexes. it is suggested to be done on the non-euro centric definition of democracy.
55
Bibliography
Abrahamian, E. (2008). A history of modern Iran. Cambridge University Press.
Alikhani, A. (2013, 09 10). Shah had deceive by oil revenue.
Alviri, M. (2009, 04 15). We should not run for foth term of Parliament.
Aslaksen, S., & Torvik, R. (2006). A theory of civil conflict and democracy in rentier states. The Scandinavian Journal of Economics, 108(4), 571-585.
Assareh, E., Behrang, M. A., Assari, M. R., & Ghanbarzadeh, A. (2010). Application of PSO (particle swarm optimization) and GA (genetic algorithm) techniques on demand estimation of oil in Iran. Energy, 35(12), 5223-5229.
Arian, S. H. (2017, 05 12). How many killed in unrest after 2009 election? Retrieved 04 12, 2018, from Kalame: https://www.kaleme.com/1395/03/27/klm-244766/
Bagherzade, A. (2015). There are over 10 million illiterate people in the country.
Banisadr, A. (1999). Lessons of Exprince. Berlin: Frankfourt.
Behnoud, M. (1998). 275 Days of Bazargan. Tehran: Elm.
Behnoud, M. (2007, 05 07). Political Murder.
Constitution of the Islamic Republic of Iran (1988).
Cammett, M. (2018). A political economy of the Middle East. Routledge.
Casper, G. (1995). Fragile democracies: the legacies of authoritarian rule. University of Pittsburgh Pre.
Clague, C., Keefer, P., Knack, S., & Olson, M. (1996). Property and contract rights in autocracies and democracies. Journal of Economic Growth, 1(2), 243-276.
Coppedge, M., Gerring, J., Altman, D., Bernhard, M., Fish, S., Hicken, A., ... & Semetko, H. A. (2011). Conceptualizing and measuring democracy: A new approach. Perspectives on Politics, 9(2), 247-267.
Details of the Oil Industry Nationalization Act. (2007, 03 20). Retrieved 06 07, 2018, from Asr Iran: http://www.asriran.com/fa/news/14023/%D8%AC%D8%B2%D8%A6%DB%8C%D8%A7%D8%AA- %D9%82%D8%A7%D9%86%D9%88%D9%86-%D9%85%D9%84%DB%8C-%D8%B4%D8%AF%D9%86- %D8%B5%D9%86%D8%B9%D8%AA-%D9%86%D9%81%D8%AA
Fakhraei, P. (2015). The Absence of Reformists . Roshan
Fakhraei, P. (2018). Otherization of the opponent . bbcpersian .
56
Faghigh, M (2014), Mossadegh and Formation of Rentier State in Iran, Journal of Society and Development, 1(2), 35-37
Fallahi, A. (2014). What are the achievements of the Islamic Revolution for the villages?
Farahmand, M. (2017, 1 1). Rafsanjani and Politica Murder Outside of Iran. Retrieved 3 12, 2018, from Radio Farda: https://www.radiofarda.com/a/f3-rafsanjani-terrorist-activities/28224106.html
Farjami, M. (2010, 03 23). What's happened in Khordad of 1388? Retrieved 03 30, 2018, from Asr Iran: http://www.asriran.com/fa/news/104595/%D8%A8%D8%B1- %D8%AE%D8%B1%D8%AF%D8%A7%D8%AF-88-%DA%86%D9%87-%DA%AF%D8%B0%D8%B4%D8%AA
Gass-Golshaian contract was not approved. (N.D). Retrieved 06 01, 2018, from Tarikh Irani: http://tarikhirani.ir/fa/events/3/EventsDetail/451/%D9%88%D9%82%D8%A7%DB%8C%D8%B9.%D9%88 .%D8%B1%D9%88%DB%8C%D8%AF%D8%A7%D8%AF%D9%87%D8%A7.html
Ghanebasiri, M. (2016). Analytical History of Industry in Iran. Tehran: Office of Cultural Studies.
Ghani, C. (1998). Iran and the Rise of the Reza Shah: From Qajar Collapse to Pahlavi Power. New York: I.B. Tauris.
Ghochani, M. (2015). Rescue Operation of Second republic, Seda. Retrieved 13/03/2016 from http://article.irna.ir/fa/NewsPrint.aspx?ID=616
Herb, M. (2005). No representation without taxation? Rents, development, and democracy. Comparative Politics, 297-316.
How many newspapers closed by Ahmadinejad Government? (2017, 02 13). Retrieved 02 12, 2018, from Baztab: http://baztab.ir/225965/%DA%86%D9%86%D8%AF- %D9%86%D8%B4%D8%B1%DB%8C%D9%87-%D8%AF%D8%B1-%D8%AF%D9%88%D8%B1%D9%87- %D8%A7%D8%AD%D9%85%D8%AF%DB%8C%E2%80%8C%D9%86%DA%98%D8%A7%D8%AF- %D8%A8%D8%B3%D8%AA%D9%87-%D8%B4%D8%AF%D8%9F/
How many security agencies are active in the country? (2014). Retrieved 08 09, 2018, from mashreghnews.ir: https://www.mashreghnews.ir/news/353915/%D8%AF%D8%B3%D8%AA%DA%AF%D8%A7%D9%87- %D9%87%D8%A7%DB%8C-%D8%A7%D8%B7%D9%84%D8%A7%D8%B9%D8%A7%D8%AA%DB%8C- %D8%A7%DB%8C%D8%B1%D8%A7%D9%86-%DA%86%DA%AF%D9%88%D9%86%D9%87- %D9%87%D9%85%D8%A7%D9%87%D9%86%DA%AF-%D9%85%DB%8
Hunter, S. (2017, 03 17). Iran’s Geopolitical Predicament And Its Consequences. lobelog.com .
I am the voice of Iranians. (2016, 10 04). Retrieved 03 21, 2018, from Shargh Daily: http://www.magiran.com/ppdf/nppdf/2387/p0238727030061.pdf
Kasravi, A. (2003). Shia'ism. Los Angles: Ketab corps.
57
Link, W. K. (1952). Significance of oil and gas seeps in world oil exploration. AAPG Bulletin, 36(8), 1505- 1540.
Madani, J. (2008). Contemporary political history of Iran. Tehran: Islamic Publisher.
Mahdavi, H. (1970). The Patterns and Problems of Economic Development in Rentier States. MA Cook. Studies in the Economic History of the Middle East.
Mahjoub, N. (2011, 12 7). Student Day: Prison and imprisonment and deprivation . Retrieved 03 04, 2018, from http://www.bbc.com/persian/iran/2011/12/111206_l21_student_iran_prison_university
Maloney, S. (2015). Iran's political economy since the revolution. Cambridge University Press.
Marshall, M. G., & Jaggers, K. (2002). Polity IV project: Political regime characteristics and transitions, 1800-2002.
Martorell, B. E. (2012). Oil, politics, society and the state in the middle east: Enduring authoritarianism in Iran and Saudi Arabia.
Mass Arrest of Journlaists in Tehran. (2013, 01 28). Retrieved 06 03, 2018, from Center for Human Right in Iran: https://persian.iranhumanrights.org/1391/11/journalists_arrest-2/
Mazhabi, M., & Amooei, A. (2008, 05 11). Oil Rents and Its Troubles. Zamaane , pp. 41-46.
Meisami, L. (2008). From Freedom Movement to Mojahadin. Tehran: Samadie.
Nejati, G. (1991). 25 Years of Iran Political History. Tehran: Rasaa.
Nejati, G. (1998). Memories of Mehdi Bazargan. Tehran: Rasa.
Pardis, S. (2010, 12 13). These three judges. Retrieved 05 30, 2018, from Kalame: https://www.kaleme.com/1389/10/10/klm-42448/
Pournejati. (2015, 12 28). Behind the scenes of broadcast a controversial TV program.
Purjaafari, M. (2017, 05 12). Reza Shah and Oil. Retrieved 05 25, 2018, from Haadi Research Center: http://www.haadi.ir/s/681
Rahbar, F. (2013). university graduated raise nine times after revolution.
Rais-nia, R. (1971). The Economic and Social Context of Constitutional Revolution. Tehran: IbneSina.
Reasons for Disqualifying Bazargan in the fourth Presidential Election. (2017, 05 06). Retrieved 06 16, 2018, from Islamic Revolution Document Center: http://www.irdc.ir/fa/news/875/%D8%AF%D9%84%D8%A7%DB%8C%D9%84- %D8%B1%D8%AF%D8%B5%D9%84%D8%A7%D8%AD%DB%8C%D8%AA- %D8%A8%D8%A7%D8%B2%D8%B1%DA%AF%D8%A7%D9%86-%D8%AF%D8%B1-
58
%D8%A7%D9%86%D8%AA%D8%AE%D8%A7%D8%A8%D8%A7%D8%AA- %D8%B1%DB%8C%D8%A7%D8%B3%D8%AA-%D8%AC%D
Research, I. f. (2010). D'Arcy Concession and Iran Oil. Retrieved 04 12, 2018, from moaser.iki.ac.ir: http://moaser.iki.ac.ir/node/696
Roshan, A. (2005). review of media in constitutional revolution. Shargh Daily. Retrieved 10/09/2015 from http://www.magiran.com/article.asp?AID=2183
Rouhani, H. (2013). 100 days with the President: Interview with the President. Iranian TV1: IRIB.
Rouhani, H. (2014). The share of Industry from Subsidy Press Conference. Tehran, Iran: Iranian Student News Agency.
Rouhani, H. (2014). yearly annual report President's office: President's office.
Ross, M. L. (2001). Does oil hinder democracy?. World politics, 53(3), 325-361.
Ross, M. (2012). The oil curse. How Petroleum Wealth Shapes the Development of Nations, Princeton, NJ, 5(10).
Sahabi, E. (2013). Half a century of memories and experiences. Paris: Khavaran.
Sarkoohi, F. (2017, 01 11). Rafsanjani played a significant role in one of the most violent cultural repressions in Iranian history.
Sandbakken, C. (2006). The limits to democracy posed by oil rentier states: The cases of Algeria, Nigeria, and Libya. Democratisation, 13(1), 135-152.
Seawright, J., & Gerring, J. (2008). Case selection techniques in case study research: A menu of qualitative and quantitative options. Political Research Quarterly, 61(2), 294-308.
Sekiguchi, Masashi, and N. Okawara. Government and Politics. Eolss Publishers Company Limited, 2009.
Shirinbakhsh, Z., Bigdeli, A., Yusefifar, S., & Sheikhnuri, A. (2017). The Fiscal Relationship between the Government and the Guilds during the First Pahlavi Era: Dissatisfaction with Guild Taxation. Social History Research , 7 (1), 155-188.
Taheri, A.; Saffari Aman, S. (2009). The effect of Rentier Government on Democracy in Iran (Pahlavi Dynasty), History Quarterly Journal,12(4), 91-121
What is type of taxes in Iran. (2014, 6 9). Retrieved 3 23, 2018, from Asrebank: http://asrebank.ir/news/1071/%D8%A7%D9%86%D9%88%D8%A7%D8%B9- %D9%85%D8%A7%D9%84%DB%8C%D8%A7%D8%AA-%D8%AF%D8%B1- %D8%A7%DB%8C%D8%B1%D8%A7%D9%86- %DA%A9%D8%AF%D8%A7%D9%85%D9%86%D8%AF%D8%9F
59
Yazdi, E. (2013). 118 days in Neauphle-le-Château. Online: Mizankhabar.net.
Yazdi, E. (2007). Last attempts in the last days. Tehran: Ghalam.
Zainal, Z. (2007). Case study as a research method. Jurnal Kemanusiaan, 5(1).
Zibakalam, S. (2017). Rafsanjani was not aware about political murder.
60