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Books on Iran
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Update No: 065 - (26/04/07)
Is Ahmadinejad bluffing?
The nuclear diatribe continued in April with the UN Security Council’s
demand that Iran halts its nuclear enrichment program by May, unless it wants to
incur an extension of the tensions. President Ahmadinejad responded by
threatening a further acceleration of the nuclear program, although quite a few
experts believe that he is bluffing and that Iran does not really have the
capability to accelerate the program. In fact, some argue that Iran is
experiencing serious problems in running its centrifuges. The Bush
administration in the meanwhile continues to raise the stakes in the
confrontation with Iran over its alleged role in destabilising Iran. During
April, specific allegations were made that Iran trains Sadrist militiamen to
fight against American troops, while it was even claimed that an arms shipment
from Iran was seized in Afghanistan on its route to the Taliban insurgents.
Worried about sanctions, Teheran is trying to turn to the euro for its oil
transactions. They are now putting pressure on the Chinese to pay in euros,
while European clients are already largely paying in euros. Just 20% of Iranian
foreign reserves are currently in dollars, a figure which will likely not be
reduced much further as the country will need dollars for specific purposes in
the future.
Just propaganda?
The Iranian government continues to divulge figures aimed at showing that
its economy is not at all faltering under the weight of the sanctions. Last
non-oil exports are reported to have grown by 47% to US$16.3 billion, although
much of this increase was due to the rising prices of petrochemical products. It
also claimed that during the last year investment in the oil industry increased
to US$14 billion, from US$13 billion in the previous year. The government is
also making a big issue of the reduced role of foreign investors to the
advantage of Iranian companies, as in the case of the Azadegan oil field, where
the 75% share initially assigned to the Japanese state oil company was reduced
to 10% in order to make space for Iranian companies. The project was divided in
smaller projects in order to allow the comparatively small Iranians to take them
over. Certainly, Teheran still hopes to sign a lot of new oil contracts over the
next few years. Contracts worth US$38 billion have been signed over the last 18
months and contracts for another US$250 billion are expected to be signed over
the next 20 years. The government also claims that unemployment is declining.
The latest official estimates put it at 11.1%, down from 12.1% two years ago.
Concerns nonetheless
In any case, the government itself admits a number of problems. For example
it admits that domestic gas consumption is increasing far too fast and that low
prices are leading to ‘extravagant’ consumption levels. Households are
consuming 54% of Iran’s production, with industries taking another 13%,
leaving just 33% for exports. Fuel prices are unlikely to see much greater
increases, but rationing seems to be the preferred option of the government.
Iranian drivers are being allocated a certain quantity at low prices and will be
allowed to buy extras but at much higher prices, according to the most recent
plans. The latest figures about consumption show a further, strong increase in
the months preceding the imposition of rationing. Finally overdependence on oil
revenues is causing a rapid increase in liquidity, whose growth rate was up to
41.2% in 2006-7, from 37.4% in 2005-6, when it had already grown from the 34.3%
in 2004-5 fiscal year. Sensing that Ahmadinejad is running into trouble, the
reformists are now putting considerable effort in preparing a unified list for
the February 2008 parliamentary elections.
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