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Do delaying tactics work?
The resolution of Iran's nuclear impasse appeared no closer in July. Teheran was speeding up the installation of centrifuge machines and cutting back co-operation with the IAEA, while the Security Council was heading towards strengthened sanctions. Many now believe the Iran's nuclear negotiator Larjani is trying to delay action against Iran by hinting a turnaround in Teheran's position, which regularly fails to materialise. In July Iran resumed cooperation with the IAEA, but refused to suspend uranium enrichment and kept adding new centrifuges to its enrichment plant. If Larjani is playing a game, the tactic is quite successful as the Security Council seems now inclined to postpone new sanctions until September, in the hope that the resumption of cooperation with the IAEA will bear some fruits. However, the delay is also likely to be due to other factors, such as the priority given to the debate on Darfur and the awareness that Russia is not ready yet to endorse sanctions.

An invisible siege
At the same time, there some evidence that US sanctions are having some effect on the Iranian economy, or at least definitely more than the UN-sponsored ones. American financial sanctions are considered to be in the main responsible for a 20% decline in German-Iranian trade last year (Germany is Iran's main trading partner). The Iranian business community seems to be hurt by restricted access to trade credit, even if Teheran might not be fully aware of it. Foreign investment is also lagging as multinationals are wary of American hostility. It has been confirmed that in May Société Générale pulled out of the US$5 billion South Pars project because of US pressure. Statoil and Total are also reportedly under pressure. Teheran's defensive move envisages the creation of an overseas investment fund in Bahrain or Dubai to raise cash for the South Pars project. The government is also trying to insulate itself from the dollar economy. Recently it approached its purchasers of oil in Japan, proposing that they pay Iranian supplies in yen rather than in dollars. The Japanese are considering the proposal. Teheran is also withdrawing its foreign currency reserves from European banks.

Is Ahmadinejad's base of support sliding?
As the economic climate in Iran gradually gets heavier, Ahmadinejad is coming under pressure. Recently a group of over 50 economists met him to convince him of the deficiencies of his economic management. Subsidies are estimated by the IMF to account for 25% of Iran's GDP, of which 17.5% alone is accounted for by energy subsidies and the recently implemented rationing of fuel appears an insufficient measure. Only in the field of privatisation the government seems to be making progress, but the rigid labour laws are likely to deter investors, as might do the lack of trust in Ahmadinejad's populist government among the business elite. More and more Iranian businessmen are establishing a foothold in Dubai, while the Teheran stock exchange has not recovered from Ahmadinejad's arrival to power. The only ones to be happy about the new situation appear to be the Revolutionary Guards, whose engineering arm has seen a trebling of the contracts awarded by the government to US$12 billion during the first year of Ahmadinejad in power.
On the political front, what should probably worry Ahmadinejad is that the conservative groups which originally supported him are fragmenting between his supporters and those who advocate his replacement with a more effective leader, such as Qalibaf, one of the other conservative candidates defeated in the presidential elections of two years ago. At the same time the reformist opposition is talking to the pragmatist centre in order to prepare the ground for the formation of an alliance. Their threat could however well be contained by the Council of Guardians, which will likely continue to disqualify reformist candidates in sufficient numbers to make their victory impossible.

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