The Economy Was Killed in Baharestan
The economy was killed in Baharestan. The bills and plans that the eleventh parliament has passed in the last three years have become the most controversial laws, leaving irreparable impacts on Iran’s economy. However, economists believe the recent parliamentary plan known as the Banking Law is separate from all the destructive legislations that revolutionary representatives have turned into law so far. The damage range of this law is such that some even believe that if this law is implemented, even the half-functional banking system that exists today in the country will be paralyzed.
In recent weeks, many prominent economists and banking experts have voiced strong criticisms of this plan. Among the most notable figures who expressed their objection to the Banking Law are Farhad Nili, Ahmad Azizi, Ahmad Hatami Yazd, Akbar Komijani, Bahaeddin Hosseini Hashemi, Alireza Tavakoli Kashi, Hojjatollah Seyedi, and others.
These criticisms were so sharp and biting that even Farhad Nili used the thought-provoking phrase of ‘the fate of citizens being decided in Baharestan Square’ in a meeting arranged to review this law. Iran Gate, in this report, explores the contentious aspects and criticisms of this controversial plan.
What Are the Main Flaws of the Banking Law?
1. Violation of Central Bank Independence
The biggest criticism economists have towards the Banking Law is deeply rooted and fundamental. Experts and banking sector activists believe that the approval and implementation of such a law will undoubtedly result in nothing but the discrediting of the Central Bank and the position of its presidency. Although the characteristics of Iran’s economy fundamentally do not recognize the independence of the Central Bank.
However, overall, we have witnessed constructive resistances from Central Bank governors at times, rooted in their insistence and persistence on implementing laws. But if this law is implemented, the groundwork for the legal and official independence of the Central Bank will be laid, and governments will no longer have any hesitations about dipping into the pockets of this institution.
With a closer look at this issue, it can be said that this plan places the managers of various governing institutions in the position of capitalists and the governor of the Central Bank in the role of a CEO facing them. In reality, Central Bank meetings will turn into a general assembly where government officials, as shareholders, can challenge the governor and each demand their share from him.
As mentioned, implementing such a plan primarily violates the independence of the Central Bank and then reduces the position of the Central Bank governor to the CEO of a financial firm that must answer to shareholders.
2. Intensifying Inflation with Government Dominance over the Monetary and Banking System
According to experts, the recent parliament plan strengthens the government’s dominance over the country’s monetary and banking system more than ever. As mentioned in the previous section, the violation of Central Bank independence is the most significant damage of implementing such a plan. However, it should be noted that violating independence means the government has control over monetary policy.
Simply put, the government can dip into the Central Bank’s resources whenever it wants to cover its budget deficit. In other words, the parliament’s plan will legalize and formalize the government’s dominance over the country’s monetary credit system, meaning budget deficits will be monetized by governments according to legal mechanisms if this plan is implemented.
So far, despite governments’ encroachments on Central Bank resources, this institution has ultimately published reports on these encroachments. On the other hand, some Central Bank governors have had the courage to stand against the irrelevant and illegal demands of governments. However, this plan marks the end of financial discipline and practically legalizes encroachments on national and public resources.
The tangible and concrete result of this very dangerous transformation is nothing but the intensification of inflation resulting from money printing. In fact, Ebrahim Raisi’s government intends to completely legalize climbing over people’s walls and remove obstacles in its path by enacting arbitrary laws. Many experts also believe that the appointment of Saleh Abadi as the governor of the Central Bank is precisely because he fully listens to the government and has no trace of the courage to stand against the government’s illegitimate demands.
3. Islamic Banking and the Intervention of the Fiqh Council in Policymaking
Another contentious clause of this law is the issue of expanding and promoting the principles of what is called Islamic Banking. The focus of this issue is the implementation of interest-free banking rules, which have been discussed in Iran’s economy for about 40 years but have never been fully implemented. However, economists believe that what is known as Islamic or interest-free banking in Iran is essentially not feasible.
On the other hand, experts attribute part of the banking system’s shortcomings to the incomplete implementation of interest-free banking principles, principles that, if fully implemented, could have widespread and destructive consequences for the country’s economy.
Perhaps this is why Farhad Nili referred to the approval of this plan as determining the fate of Iran’s children in Baharestan. In recent weeks, the presence of over 20,000 clerics in bank branches has been discussed, which stems from the provisions of this very law. On the other hand, if we witness the implementation of this law in the country’s banking system, a position equivalent to the Central Bank governor will be practically defined for the Fiqh Council, which can violate the independence of this institution.
On the other hand, implementing such a law means the implementation of unprofessional and destructive interest-free banking clauses in the country’s banking system. It should not be forgotten that economists believe one of the reasons Iran holds one of the highest interest rates in the world is the half-hearted implementation of these Islamic banking rules that were prepared and formulated in previous decades.
It should be noted that the Iranian-Islamic banking model implemented over the past four decades is not even accepted by Muslim countries. In other words, the inefficiency of the interest-free banking model is not only clear and evident, but the parliament’s insistence on its continuation and expansion is nothing but sheer ignorance.
Who Is Behind the Banking Law Disaster?
According to information available to Iran Gate, several names stand out among those who play a pivotal role in the preparation and approval of this plan. Among the most important of these names are Gholamreza Mesbahi Moghadam, head of the Fiqh Council, Mohammad Hossein Hosseinzadeh Bahraini, a member of the Central Bank’s Fiqh Council and Mashhad’s representative in parliament, Hassan Agha Nazari, a member of the Fiqh Council and the Society of Seminary Teachers of Qom, and also Ali Saleh Abadi, the current governor of the Central Bank and the son-in-law of Mesbahi Moghadam.
Observations from some informed sources from the parliament’s economic commission sessions indicate a pivotal role played by Mohammad Hossein Hosseinzadeh Bahraini, Mashhad’s representative and a professor at Ferdowsi University, in the process of preparing and approving the Banking Law. It seems that many representatives and even members of the economic commission do not agree with this plan, but due to the balance of power being in favor of Bahraini, no one has succeeded in stopping this plan.
On the other hand, the prominent role of Gholamreza Mesbahi Moghadam as the main orchestrator of this affair cannot be overlooked. It should not be forgotten that there are also rumors about a familial connection between Mesbahi Moghadam and Ali Saleh Abadi. Although Mesbahi Moghadam denied such a connection, sources within the government confirm it. However, a look at Saleh Abadi’s career history also strengthens the possibility of such a relationship.
Because during his presidency of the Stock Exchange Organization, he also created a committee called the Fiqh Committee of the Stock Exchange and Securities Organization. Many capital market activists believe that Mesbahi Moghadam played a pivotal role in creating this committee. In other words, in every position Saleh Abadi has worked, traces of Mesbahi Moghadam can clearly be seen, traces that are now clearly identifiable in the Central Bank, and if the Banking Law plan is finally approved, Mesbahi Moghadam, as the head of the Fiqh Council, will have complete control over the Central Bank and its governor.
In essence, it can be said that the Banking Law disaster is the handiwork of the Mesbahi Moghadam, Saleh Abadi, and Bahraini triangle, with Mesbahi Moghadam at its head. In short, if this triangle succeeds in implementing its plans, we will certainly witness the disintegration of the country’s monetary and banking system and consequently the economic collapse of the country in the not too distant future. Although the role of Ebrahim Raisi and Mokhber should not be overlooked in this context.
In fact, this plan will not only benefit the three mentioned officials but also make it easier than ever for Ebrahim Raisi and his government to encroach on Central Bank resources, resulting in nothing but corruption and economic collapse for Iran.
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