Rouhani Suffers Fresh Blow After Iran’s Parliament Ousts Economy Minister

Hard-liners have seized on Iran’s growing rich-poor divide and plummeting currency to gut Rouhani’s economic team

Source: Wall Street Journal (WSJ)

By Asa Fitch in Dubai and Aresu Eqbali in Tehran, Iran

Masoud Karbasian
Parliamentarians criticized Masoud Karbasian, above, for allegedly failing to address the currency crisis or tame high inflation. PHOTO: ANTON NOVODEREZHKIN/TASS/ZUMA PRESS

Iran’s parliament ousted the country’s economy minister Sunday, stepping up an overhaul of President Hassan Rouhani’s cabinet amid deep domestic opposition to his response to harsh new U.S. sanctions.

Mr. Rouhani, a relative moderate in Iran’s system, had surrounded himself with a cabinet of technocrats, vowing to fight corruption, promote transparency and open Iran’s economy to the West with the 2015 nuclear deal.

But after the economy faltered and the Iran deal came under threat from the Trump administration last year, hard-line opponents have seized on Iran’s growing rich-poor divide and plummeting currency to gut Mr. Rouhani’s economic team and undercut that strategy.

Slightly more than the required majority of 260 parliamentarians present on Sunday voted to fire the economy minister, Masoud Karbasian, state television reported. Parliamentarians criticized him for allegedly failing to address the currency crisis or tame high inflation, and for his unfitness to fight an economic war with the U.S. since Mr. Trump withdrew from the deal in May and began imposing new sanctions.

The move against Mr. Karbasian, who held his position for little more than a year, followed the parliament’s impeachment early this month of Mr. Rouhani’s labor minister on grounds that he failed to properly address unemployment, which the International Monetary Fund forecasts at around 12% this year.

Mr. Rouhani also removed and replaced the central bank governor, Valiollah Seif, last month after Iran’s currency fell to new lows against the dollar. It now takes around 105,000 Iranian rials to buy a dollar, compared with about 43,000 in January.

Adding to the president’s peril are waves of popular unrest that have erupted in recent months because of the economy, the largest of which took place in December and January. Labor unrest and women’s rights protests have also percolated in recent months.

Mr. Rouhani will face questions Tuesday from parliament, where some members have called for his impeachment—though any such effort would be a long-shot. It would require a two-thirds parliamentary majority and signoff by Iran’s Supreme Leader Ayatollah Ali Khamenei, who has final say in state matters and hasn’t signaled that he wants the president removed.

“Rouhani’s failure to respond to the economic crisis with gut and grit has further isolated him,” said Ali Vaez, the director of the Iran Project at the International Crisis Group, a Brussels-based think tank. “Even his erstwhile allies in the parliament are deserting what they believe is a sinking ship.”

Mr. Rouhani called for unity in a speech Saturday, saying the country had to come together to face external threats and renewing a promise to work to improve people’s lives. He didn’t immediately react to Mr. Karbasian’s removal.

The pressure on Mr. Rouhani has ramped up quickly since Mr. Trump withdrew the U.S. from the nuclear deal, which lifted sanctions on Tehran in exchange for curbs on its atomic program. The Trump administration began reimposing sanctions this month and is preparing to unleash potentially crippling restrictions on Iran’s oil sales and banks in November as it pushes for large-scale changes in Iran’s behavior in the Middle East.

Political support has swelled for a shake-up in Mr. Rouhani’s economic team. Many hard-liners oppose the president’s bid to modernize Iran and open it for business to foreign partners, preferring a more inwardly focused, self-reliant economy.

Parliament members have also called for the impeachment of the education and interior ministers, and others have said the industry and housing ministers should be impeached if Mr. Rouhani doesn’t shake up his economic team himself.

Iran’s economic outlook has darkened in recent months. Analysts at BMI Research in London project economic growth to slow to 1.8% this year, followed by a contraction of more than 4% next year.

Mr. Rouhani is responding by conferring with European countries to keep the nuclear deal alive without U.S. involvement while turning to China as an outlet for oil sales. The authorities have made dozens of arrests for illegal foreign-exchange dealings and economic crimes, although that and other measures have had limited success in fixing the currency.

Parliament’s moves against Mr. Rouhani’s cabinet underline what critics of Mr. Trump’s Iran policy have said is one of its flaws: by using sanctions to cripple Iran’s economy, the U.S. is weakening the political moderates who are in charge, while helping Iran’s hard-liners. Members of Mr. Trump’s administration, however, argue that Iran’s military reach and ballistic missile development must be contained using sanctions, no matter who holds power.

Mr. Rouhani now has three months to name a replacement for Mr. Karbasian.

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