Stratfor:
Summary
Over the past three months, a series of leaks and corruption allegations has rocked Iran's banking and financial sectors. The scandal has revealed, among other things, that civil servants and business executives are being paid as much as $230,000 a month. The revelation has provided President Hassan Rouhani's political rivals with new ammunition ahead of next year's election, planting yet another obstacle in Rouhani's path to re-election. Attempting to head off any further damage, Rouhani adviser Vice President Mohammad Bagher Nobakht announced July 26 that Tehran plans to cap government and private officials' monthly salaries at $3,200 and $6,200, respectively, a move that should put to rest the most controversial aspect of the entire affair.
The practice of generously compensating executives and government figures was in place well before Rouhani took office. But neither this nor the president's numerous economic achievements — inflation has fallen to single digits, oil exports have increased and foreign direct investment has risen to heights unseen in the past decade — will change the fact that the president has a hotly contested election ahead of him. With Iranian conservatives already leading a concerted effort to undermine Rouhani's social and economic reforms, another threat to the president's legitimacy may cut deep into his chances of securing a second term.
Analysis
The salary scandal first broke in May, when leaked pay stubs showed that Central Insurance Company of Iran executives make as much as $24,000 a month, well above the maximum salary permitted by Iranian law. The company claimed to be settling numerous old payments, some delayed by up to seven years, in one sitting. The explanation was not enough to keep Finance Minister Ali Tayebnia from having to investigate the firm, though, and the inquiry eventually resulted in the resignation of the organization's chief.
But that was not enough to lay the issue to rest. Instead, the Rouhani administration, Supreme Audit Court and other governmental bodies were forced to open their own investigations into other parts of the Iranian bureaucracy. Supreme Leader Ayatollah Ali Khamenei weighed in on June 22, voicing his disapproval of the exorbitant salaries and calling for quick action on Rouhani's part to resolve the situation. Eight days later, four of the country's biggest banks — Mehr, Mellat, Saderat Iran and Refah — became embroiled in the scandal and had their directors removed. Not long after that, the entire executive team of the National Development Fund of Iran resigned. Most of the employees accused of wrongdoing — so far over a dozen, though reports suggest several hundred may yet be let go — have been forced to return some of the money they were paid...
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