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Books on Iran
REPUBLICAN REFERENCE
Area (sq.km)
1.648 million
Population
66,128,965
Capital
Teheran
Currency
Iranian rials
President
Mohammad Khatami-Ardakani
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Update No: 052 - (24/03/06)
Time to slow down?
As the end of March approached, President Ahmadinejad found himself
increasingly isolated in his confrontation with the US over the Iranian nuclear
programme. Iran definitely abandoned negotiations with the Russians over having
them in charge of uranium enrichment, after the Russians bowed to US and
European pressure to drop their earlier proposal to let the Iranians continue
some "nuclear research". Much of the Iranian isolation appears to be
due to the lack of skills of the President and of the diplomats whom he chose to
handle the issue, one of who even threatened EU countries with the prospect of
losing the Iranian market for their goods, but Ahmadinejad is also clearly using
foreign policy as a tool to strengthen his position at home, where he is under
attack from reformers and conservatives alike. Nonetheless, neither the Russians
nor the Chinese appeared any keener to allow the Security Council a bigger role
in dealing with the crisis, contrary to US/European proposals, despite the Bush
Administration once again using belligerent language during February and March -
Condoleeza Rice accused Iran of being a "central banker to terrorism".
Supreme Leader Khamenei and other moderate members of the Iranian establishment
are trying to engage in damage limitation by conveying an image of Iran where
Ahmadinejad represents only a faction within the ruling elite. For example,
recently former President Khatami featured in a leading newspaper criticising
Ahmadinejad's remarks on the Holocaust. At the same time, Khamenei seems intent
in putting Ahmadinejad to good use to demonstrate to the world that Iran cannot
be ignored and that the US were wrong not to make a deal when that was possible
(i.e. under Rafsanjani and Khatami). More significantly, on 16 March Iran
announced that it accepted the offer of the Bush Administration, made several
months earlier, to hold talks about Iraq. This is a clear sign that the Iranians
have realised that they cannot increase pressure any further at this stage and
that the time for some easing of the tension has come. The Americans too sent
what was seen a signal of détente, when President Bush in person dropped his
opposition to the gas pipeline project between Iran, India and Pakistan during
his state visit to the latter country.
Ahmadinejad plays hard at home too
For all the role-playing in Iranian foreign policy, the clash of interests
in internal politics is real enough. Khamenei and his circle appear to be
thinking that Ahmadinejad would like to bring as many of his supporters as
possible to the Council of Experts, which will be elected by the end of the
summer. That could weaken Khamenei's position, since the Council of Experts is
the only institution in the country which is entitled to remove him from the
job. More in general, Ahmadinejad's persistence in appointing cronies from the
Revolutionary Guards and intelligence services in the state administration is
upsetting even many rightists MPs. After filling gubernatorial positions with
such people, he is now proceeding to replace all governor-generals too.
International investment prospects in oil industry get dimmer and dimmer
The new Oil Minister Vaziri-Hamaneh confirmed for the first time in public
that new plans have been developed for the oil industry. The plan is now to
increase production from the current 4 million plus bpd to over 5 million by
2010, in part through the modernization of installation and pipelines, but also
using gas injection and other technologies. The stress on using gas injection is
what is new compared to previous policies and might affect Iran's ability to
expand his presence on the world gas market. In any case, if Iran's oil
production has to increase, it does not seem likely at present that this will be
thanks to foreign investment. Until the end of February it appeared that at
least the oil-hungry Asian countries would not alter their relations with Iran,
with the Japanese promising to help Iran avoid international isolation. It was a
real surprise, therefore, when in March Nippon Oil, Japan's largest refiner,
announced its intention of cutting purchases from Iran by 15% this year, in
order to reduce the risk coming from the possibility of an interruption of
supplies. This is not the first sign that the nuclear dispute is harming Iran's
prospects of attracting foreign investment. Some oil and gas companies had
already shelved their Iranian plans in wait of better times, as in the case of
British Gas and Sasol (South Africa), both of which had been talking to Iran
about gas liquefaction projects. This however must not have been seen as a major
blow by the Iranians, given their intention to scale down gas export plans.
Although it is expected that other countries will step in to replace Nippon Oil,
the latter's move is a more serious signal and sources within the international
oil industry confirm that many buyers are beginning to see Iran as an unreliable
supplier. As a result of Nippon Oil's decision, Iran's share in Japan's imports
will fall by 4 percentage points.
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