Three years after his landslide election in June 2005, Iranian President Mahmoud Ahmadinejad's popularity has declined markedly due to an economic malaise largely of his own making. With opposition to the president stiffening among both reformists and rival conservatives, his prospects for re-election next year are in doubt.
Ahmadinejad, a former mayor of Tehran, was elected to office with 62 per cent of the vote, nearly double that of his rival, former President Akbar Hashemi Rafsanjani. Capitalising on a wave of public disillusionment with the previous reformist administration of President Mohammad Khatami, and on growing hardships faced by rural and working class Iranians, Ahmadinejad ran on a platform that blended conservative social values, a populist economic agenda, and militant nationalism.
Although the newly elected president's wealth redistribution agenda irked those in the Iranian political system with entrenched financial interests, his initial popularity forced them to grudgingly accept it.
In keeping with his campaign promise to "put oil money on the tables of the people," Ahmadinejad greatly increased government spending to raise public sector salaries, expand commodity subsidies, and fund a range of projects and services for the poor. He forced banks to lower interest rates, while spending billions of dollars on debt forgiveness for poor farmers and credit for newlyweds and first time homeowners. He introduced a plan to offer shares in state-owned companies ("justice shares") to low income Iranians.
However, as 57 prominent Iranians economists warned in a June 2006 open letter, Ahmadinejad's policies "ignor[ed] the basic principles" of economics. His vast increases in government spending (by 27 per cent in 2006 alone) and slashing of interest rates caused inflation to surge from 11 per cent in 2005 to 25 per cent in May 2008. This resulted in steady price increases for housing, food, and other necessities, bringing greater hardship to most Iranians.
By 2007, public disaffection with Ahmadinejad was palpable, especially in urban areas. Refusing to raise the heavily subsidised price of gasoline, Ahmadinejad instituted rationing, leading irate citizens to torch 19 gas stations.
The president repeatedly blamed Iran's worsening economic crisis on corruption, but he has been mostly ineffective in tackling this issue. A recent parliamentary audit of the state treasury revealed that $35 billion in oil revenue was spent without the knowledge of parliament. Shortly thereafter, a mid-level government official supportive of Ahmadinejad made detailed accusations of corruption by more than 40 high-ranking government officials, but this was more an act of political revenge than reform (the president denied involvement in the leak, but was widely suspected of encouraging it).
Notwithstanding his frequent denunciations of rampant cronyism in Iran, the president's own appointments often aimed at rewarding his allies, at times irrespective of their qualifications. Former officers of the IRGC were especially favoured, particularly as provincial administrators.
His cabinet was regarded as so unqualified that the conservative-dominated parliament refused to grant it a full vote of confidence, rejecting four of his nominees. Notoriously unwilling to tolerate criticism, Ahmadinejad replaced nine members of the cabinet during his first three years. Most recently, the president dismissed Interior Minister Mostafa Pourmohammadi (allegedly for reporting electoral irregularities to Supreme Leader Ayatollah Ali Khamenei without the president's knowledge) and Finance Minister Davoud Danesh Jaafari (for publicly stating that the government had failed to control rising inflation).
As dismal economic conditions eroded public support for the president, Ahmadinejad came under mounting criticism from some of his fellow conservatives. Even the president's spiritual advisor, Ayatollah Mesbah Yazdi, said that the government had failed to deal with rising poverty.
There has also been a growing consensus that Ahmadinejad's anti-Western rhetoric and confrontational diplomatic approach to the nuclear crisis plays into the hands of Iran's enemies. Iran's head nuclear negotiator, Ali Larijani, resigned over irreconcilable differences with the president.
Two strong indications of Ahmadinejad's diminished political clout can be found in the December 2006 defeat of his "Scent of Service" (Boo-ye Khosh-e Khedmat) coalition in elections for municipal councils and the Assembly of Experts (the latter paving the way for the ascension of Rafsanjani as head of the body in September 2007).