Saturday, October 25, 2008

Cleric says Iran cannot gloat in financial crisis

'First negative consequence of West's economic crisis is fall in oil prices,' Former Iranian President Rafsanjani says, 'we have to be alert and cooperate with each other to contain negative results'

An influential cleric said on Friday Iran should not gloat over the West in its financial crisis because one of the major consequences - tumbling oil prices - was also hurting the No. 2 OPEC producer. Former President Akbar Hashemi Rafsanjani's comments at Friday prayers in Tehran reflect mounting concern about prices that have more than halved since July. A central bank official said even before the latest slide that the drop rang an "alarm bell".

The world's fourth largest oil producer and second biggest in the Organization of the Petroleum Exporting Countries has become increasingly dependent on oil earnings since the 2005 election of President Mahmoud Ahmadinejad, Rafsanjani's rival.

"We should not think the financial crisis that hit the world is in our interest and so on and express joy," Rafsanjani, who heads a powerful clerical body, said in comments on state radio.

"It should not be that some say the crisis is very good for us and it is a miracle coming from God to punish them (the West)," said the cleric, who also said in September Washington was paying for its past policy mistakes.

"The first negative consequence of the wave is the fall in oil prices ... The drop in oil causes major damage to us. We have to be alert and cooperate with each other to contain the negative results of the next wave coming from this tsunami."

Benchmark US crude slid on Friday despite OPEC's pledge to reduce output by 1.5 million barrels per day - a figure lower than the cut Iran called for before the cartel met in Vienna.

'There is no other reserve'

Some analysts say US crude trading around $64, compared to $147 three months ago, is below what Iran needs to balance its books.

Already under fire for inflation of 29 percent, tumbling crude revenues will add to Ahmadinejad's woes before the June 2009 presidential race when he is expected to run again.

The president has blamed arch-foe Washington for the crisis saying it was reaping what it sowed from costly US military actions and said Iran - which is under US and UN sanctions -- was more immune than others to the turmoil.

Rafsanjani, president in the 1990s, lost to Ahmadinejad in his comeback bid in 2005. He is not expected to run again in 2009 but is an influential figure in one of the opposing camps.

Critics say Ahmadinejad has squandered windfall oil earnings and has depleted the rainy day reserve - the Oil Stabilisation Fund. The spending spree has sent prices soaring, the say.

Some economists say Iran, which a few years ago lived with oil around $20 to $25 a barrel, now needs $70 to $75 a barrel.

"That is the minimum the government needs in order to keep the government budget sustainable and not to withdraw reserves from the Oil Stabilization Fund which is already empty. There is no other reserve for the government," said one Iranian economist, speaking before the latest oil price plunge.

The International Monetary Fund has said that to keep the current account in the black Iran needs more than $75 a barrel for its crude. Others say Tehran may need as much as $100.

Analysts say the economy is likely to be a key battleground in the presidential race, although they say much will depend on whether Ahmadinejad has the backing of Iran's top authority, Supreme Leader Ayatollah Ali Khamenei, who has praised him.

Ahmadinejad may also be able to count on support from poor rural areas where his spending splurge has made visible changes, analysts say, even if inflation hurts the poor most. Ahmadinejad came to power vowing to share out Iran's oil wealth fairly.

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