The recent payslip scandal in Iran reveals the disconnect between the Iranian middle class and the political elites that hold high office within the government and state owned enterprises. Recent headlines in Iran were flooded with news of high-level civil servants being paid huge illegal sums of money. In addition, President Rouhani has emerged as a target of these corruption allegations due to his promises during his election in 2013. Throughout his campaign, the so-called ‘moderate’ Rouhani promised a resolution to Iran’s foreign nuclear issues and a crackdown on corruption. He delivered on the nuclear issues regarding sanctions with the Joint Comprehensive Plan of Action, which lifted nuclear related sanctions on Iran in exchange for a drawdown of Iran’s nuclear program (1). However, a new scandal confirms that corruption is still a problem in Iran.
In May, payslips of top government and bank officials were leaked to the media causing uproar within Iran, as the pay slips revealed extraordinarily large and illegal salaries paid to high-level officials in state owned companies (2).
The scandal first started when payslips of high government employees who were paid 50 times higher than the lowest government salary were released to the media anonymously. This infuriated the Iranian middle class because Iranian law dictates that the most a government official can be paid is 10 times the lowest possible salary (3). A government owned insurance company was one the main targets of the leaks, and its head regulator, Mohammad Ebrahim Amin, was forced to resign as a result (4). Allegations also surfaced accusing top executives of receiving further bonuses and staying in lavish 5-star hotels (2).
To give perspective to the corruption and the difference between the Iranian middle class and the political elites, many of Iran’s citizens struggle to make ends meet due to the economic conditions in Iran in the past decade, making this corruption scandal particularly offensive. The economic sanctions imposed by the West crippled Iran’s economy. Most Iranians face rising prices, high inflation rates, and low wages. After the EU sanctions in 2012—which banned purchase of Iranian crude oil—the Iranian economy descended into a recession. With EU and US sanctions, Iran’s oil revenue declined from $95 billion in 2011 to $69 billion in 2012. More importantly, the cost of living for Iranians increased dramatically. The price of beef increased by almost 500% from 2007 to 2013, while the price for a kilo of rice increased from around 5 cents in 2007 to over $2 in 2013 (5). All of this demonstrates how much the middle class of Iran struggled in the last few years as a result of their country’s political decisions to pursue nuclear weapons, and the payslip scandal indicates that the ruling elite class were largely immune to effects of the sanctions.
The scandal caused great strife amongst the middle class in Iran due to the lack of transparency. Iran’s nuclear ambitions were aimed at gaining power within in the Gulf region and a bargaining chip to bring to the table in order to negotiate reducing sanctions. The JCPOA brought about sanction relief and unfroze billions of dollars in Iranian assets around the world. However, the nuclear agreement did not lift sanctions regarding Iran’s funding of terrorist organizations or human rights abuses. In addition, American companies are still banned from doing business with Iranian companies.
Due to economic problems and sanctions, Iran has been plagued with high inflation in the past decade, evidenced by a Congressional Research Service report indicating that the Iranian economy is 15 to 20 percent smaller due to the 2010 sanctions (6). The decisions of the Iranian political elite class have been particularly harmful to the middle class, thus adding a level of corruption in the form of illegal excessive pay is politically harmful all the way up to President Rouhani.
All of the corruption exposed in the payslip scandal indicates that Iran still struggles with a disconnect between the political elites and the middle class. The scandal comes at an important time politically, as the next Presidential election is set for 2017. Some media outlets in Iran are attempting to make a connection between Ali Sedghi—a chairman of state run bank that had a pay slip released—and Hussein Fereydoun, the brother of President Rouhani (7). Whatever the connection between the President and the scandal may be, it is clear that the release of these pay slips was a political move against the Rouhani administration, and opponents are taking aim at Rouhani in the aftermath.
In the coming presidential election, opponents will have plenty to show in the form of corruption allegations; however, Rouhani will be able to boast the nuclear deal and an overall improvement of the Iranian economy. In 2014, the Iranian economy grew 3 percent after 2 years of economic contraction. Plus, Iran is hoping to reduce inflation to single digits by March 2017, which would be the lowest since 1990 (6). However, the most important issue for Rouhani will be showing that the improved economy did not strictly benefit the political elite class and that the decisions to pursue a nuclear program and then agree to the JCPOA will prove to improve Iran in the long-run.
Overall, when political elites in Iran choose to continue their actions that further sanctions, they often do not feel the consequences. Instead, the hardships fall on the middle class. This scandal indicates that President Rouhani may have a difficult re-election year ahead of him, and he will have to crack down on corruption in his administration in order to not lose the middle class vote.
(1) "Joint Comprehensive Plan of Action." U.S. Department of State. U.S. Department of State, n.d. Web. 13 Aug. 2016. <http://www.state.gov/e/eb/tfs/spi/iran/jcpoa/>.
(2) Azimi, Amir. "Iran's Payslip Scandal Spells Trouble for Rouhani." BBC News. N.p., 28 July 2016. Web. 14 Aug. 2016. <http://www.bbc.com/news/world-middle-east-36912006>.
(3) Dehghan, Saeed Kamali. "Fury Erupts in Iran over Vast Salaries Paid to Government Officials." The Guardian. Guardian News and Media, 17 June 2016. Web. 13 Aug. 2016. <https://www.theguardian.com/world/2016/jun/17/fury-iran-salaries-government-officials>.
(5) "Iran in Numbers: How Cost of Living Has Soared under Sanctions."BBC News. N.p., 7 June 2013. Web. 14 Aug. 2016. <http://www.bbc.com/news/world-middle-east-22765716>.
(6) Nas, Ladane, and Golnar Motevalli. "Iran Targets 25-Year Inflation Low by 2017 as Sanctions Removed." Bloomberg.com. Bloomberg, 14 June 2015. Web. 14 Aug. 2016.
(7) Sadeghi, Fereshteh. "Will Leaked Payslips Scandal Bring down Rouhani?" Al-Monitor. N.p., 04 July 2016. Web. 14 Aug. 2016. <http://www.al-monitor.com/pulse/originals/2016/07/iran-payslip-leaks-rouhani-administration-criticism-ndf.html>.
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Chadd Dunn is a senior at the University of Southern California double majoring in business administration and international relations. He focuses mainly on international economics,