Friday, October 31, 2008

Iran Early Bird-Friday

The 'tsunami waves' of the global economic crisis strike Iran – and its president

Until recently, the global economic crisis failed to concern the Iranian leadership. Iranian President Ahmadi-Nejad and senior members of his government and political camp even stressed that Iran was "immune" to the crisis due to the fact that it was not tied to the global market; and they expressed their satisfaction with the economic troubles that had befallen "the bastion of world arrogance." Conservative media outlets (Kayhan) heralded the "end of Imperialism" and the "beginning of the end of the United States and liberal democracy." Ahmadi-Nejad, for his part, spoke of two main reasons for the crisis – "the plundering of the energy sources of other countries [and the transfer of the money to the Zionists and other criminals] and a deviation from the sacred principles of religion."

Reality bites

The sharp drop in oil prices brought the Iranian leadership back down to the ground of reality in light of the potential implications of the loss of oil revenues on the 2009 Iranian budget (the Iranian fiscal year begins March 20) – and it appears the issue is set to play a central role in next year's presidential election campaign.

In his Friday prayer sermon of a week ago, Hashemi Rafsanjani, former Iranian president and current chairman of the Expediency Discernment Council and Assembly of Experts, harshly criticized the euphoria in the Ahmadi-Nejad camp, warning that "the tsunami waves" of the economic crisis were set to reach Iran, too. Considered one of Ahmadi-Nejad and his government's most outspoken critics, Rafsanjani said that Tehran should not be happy or express satisfaction about the global economic crisis or believe that it could play into the hands of Iran, stressing that the country had already been hit by the crisis in the form of the sharp drop in oil prices that had "caused Iran heavy losses" and was likely to have an influence on the weaker sectors of the Iranian population. Masoud Nili, head of the faculty of Economics at Sharif University, concurred, urging Iranians not to adopt an emotional attitude towards the crisis, and not to be encouraged by the U.S. predicament.

Rafsanjani also commented on previous global economic crises, warning that some had led to wars and that the United States may seek to externalize its problems in the form of "another adventure," and urging Iran to demonstrate caution and be on the alert (Basij Forces – IRGC volunteers – have been conducting extensive maneuvers in Iran's various provinces recently in preparation, inter alia, for such an eventuality). Meanwhile, other Iranian officials have also commented on the possibility of a U.S. strike on Iran, assessing that such an attack is unlikely in light of the economic crisis and the United States' previous commitments in Iraq and Afghanistan.

Hassan Ruhani, who heads the Expediency Discernment Council's Strategic Research Center, said that "the Iranian economy suffered a shock" in that it lost $54 billion due to the fall in oil prices; and Rafsanjani added that in light of the current situation, the Council had dedicated half of its recent session to a discussion on the implications of the economic crisis on the Iranian economy. In mid-October, the Council's secretary, Hosseyn Rezaee, sent a letter to the Majlis, urging an urgent convention of the three branches of government (executive, legislative and judicial) for a discussion on the severity of the economic crisis.

'Why shouldn't we be happy?'

Meanwhile, the editor-in-chief of the Conservative-affiliated Kayhan daily, Hosseyn Shariatmadari, published an article under the headline, "Why shouldn't we be happy?" in which he criticized Rafsanjani for his wavering opinions. Shariatmadari asserted that the Iranian economy was not dependent on the West and was therefore not affected by the crisis; and on another occasion, the newspaper expressed similar sentiments, determining that the "entire world has witnessed the defeat of Capitalism." As for Iran's economics minister, he went as far as to say that the crisis constituted an opportunity for the country in that capital was flowing from neighboring countries affected by the crisis "to the safe shores of Iran." And for his part, Ahmad Janati, the ultra-Conservative Friday prayer leader commented that "God has punished the United States because of its selfishness, its desire for strength and power, and its arrogance."

Nothing put aside for a rainy day

In contrast, the Reformist newspaper, Kargozaran, came out in support of Rafsanjani, slamming what it defined as the "government that chose to isolate itself from the crisis." According to the daily, the government now stands in "disbelief" in light of the sharp drop in oil prices, and is being forced to cope with a budget that was calculated and based on a price of $100 per barrel and is likely to have to deal with a budget deficit next year. The newspaper also criticizes the government vis-à-vis the rising inflation and the mishandling of Iran's foreign currency reserves, charging, too, that it failed to take advantage of the period in which oil revenues were at a high. Another Reformist daily, Aftab-e Yazd, also voiced criticism of the government on the backdrop of the drop in oil prices, stressing that "Iran has been left without sufficient foreign currency reserves for a rainy day."

The answer – committees to review the implications of the crisis

Meanwhile, Ahmadi-Nejad (the sickly?), who is facing increasing criticism from within, including from his own camp (there have even been calls not to name him as a candidate in the presidential elections), has ordered his economics minister to set up special taskforces to review the implications of the global crisis on the Iranian economy. Ahmadi-Nejad's move comes on the backdrop of the increasingly heated domestic debate and criticism surrounding the issue of the economic crisis and the drop in oil prices, but primarily in light of the response elicited by Rafsanjani's statements. "The crisis that has struck the West, due to its substandard performance, is getting worse by the day, and is influencing all functions and operations… Therefore, [the economics minister] would be well-advised to set up a taskforce that includes the governor of the Central Bank, the foreign minister, the deputy president for strategic planning affairs and the trade minister to review the effects of the global crisis on Iran's economy and coffers," read the order published by the president.

At the same time, another eight work groups have been established and charged, too, with reviewing the effects of the global economic crisis on the Iranian economy. Hamid Pur-Mohammad, deputy economics minister, outlined the committees: A monetary committee (comprising the Central Bank governor, and representatives of government and private banks and the Economics Ministry); an investments committee (comprising representatives of the stock exchange, the Economics Ministry and various companies); an oil and energy committee (comprising the oil minister and representatives of the Energy Ministry); housing, tourism and services committees; and another committee responsible for presenting Iran's position on the global economic crisis. The work carried out by the committees will culminate in a convention entitled "The global economic crisis – challenges and opportunities," which will take place shortly and at which the conclusions of the various work groups will be presented.

Budget deficit

The continued fall in the price of oil, or even its stabilization at its current level ($65 a barrel), is likely to have a negative effect on the Iranian budget for 2009 and further increase criticism of Ahmadi-Nejad's government. Former finance minister Ashak Jahangiri, who served under then-president Khatami, said that if oil prices were to remain below $70 a barrel, the government would be faced with a number of serious problems – first and foremost, a budget deficit. Jahangiri added that already today, as noted by the transportation minister, the government was struggling to pay contractors in the infrastructure sector. Problems with paying the wages of teachers, bankers and others were also expected, he added.

Even the Javan newspaper, which is affiliated with the Conservative camp and the IRGC, wrote that "the sharp drop in the oil prices have turned the dreams of the oil exporters into a nightmare," suggesting a series of measures that appear to contradict pre-election economics – a cutting back on imports, the planning of next year's budget based on the new oil prices, and the scrapping of budget-intensive projects.

Unfinished business

As aforesaid, Ahmadi-Nejad and his government are coming under fire from within their own camp too; however, the most significant, and perhaps most threatening, criticism is coming from the sources of emulation in Qom who still have accounts to settle with the president on a number of issues – the rising inflation that is harming the Iranian people; his decision to allow women to attend public sporting events; statements made by Deputy President Mashaee in favor of ties with the Israeli people and, this week, about the United States; and his tendency not to involve them in the running of the country.

How will Ahmadi-Nejad escape the political-economic-religious thicket in which he finds himself on the eve of the presidential elections? The answer may lie in the intensive training operations of the Basij Forces, who rounded up voters for Ahmadi-Nejad in the previous election and are likely to recruit the masses for the upcoming vote too – as another layer in the process of the IRGC's takeover of Iran. The British Guardian newspaper reported this week that even the residents of Ahmadi-Nejad's native city no longer believe in him and his promises.

Or perhaps the Mahdi who shows Ahmadi-Nejad the road to follow, as he claims, has mysterious ways of rescuing him from the mess in which he finds himself.

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