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IRAN

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Battle for oil ministry enters new phase
Oil Minister Kazem Vaziri Mahaneh and Industry Minister Ali Reza Tahmasebi were dismissed by President Ahmadinejad in August. The reasons for this move are not clear, but Mahaneh in particular was seen as not being Ahmadinejad's favourite. His appointment had come after Ahmadinejad's own candidates had been twice rejected by the parliament. Some observers think that Ahmadinejad might now try to exploit the fact that parliamentary elections are close (March), so to force the conservative majority in the parliament to approve a candidate more of his liking. The replacement of the ministers has not pleased Ahmadinejad's conservative allies. Chief Justice Ayatollah Mahmoud Hashemi Shahroudi criticised the move as 'unnecessary' and likely to affect negatively the Iranian economic system. How right he may be! For example, with the firing of Iran's oil minister, it appears that the recent agreements to supply cheap gas to India and Pakistan are thrown in doubt. This is not a small matter and with Iran on the edge of international blacklisting, they will need all the friends they can get and this would hardly seem the way to seek good will from Pakistan and India. 
Iran's oil and gas industry remains locked in a number of controversies as well as being affected by the consequences of the American embargo. In August the Iranians warned the UAE that unless the dispute on the price of gas is resolved quickly, it might sell its gas to others. It has not been only bad news for the Iranians recently, however. In July a deal with Turkey was announced, whereby Turkey will develop three gas fields in South Pars and export the gas to Europe, through two new pipelines to be built. The US$3.5 billion deal was immediately criticised by the Americans, who are of course unhappy to see economic links between Iran and Europe being strengthened. Adding to Washington's irritation, European firms RWE (Germany), Gaz de France and EGL (Switzerland) have all expressed interest in buying Iranian gas.

Revolutionary Guards in the US sight
The Bush Administration upped the stakes in August by requesting that the Iranian Revolutionary Guards be listed as a terrorist organisation. While this might just be yet another trick to put pressure on Iran, it has the 'feel' of a Cheney move and some fear that it might represent another step towards a military confrontation. The feeling that such a confrontation might be drawing closer is also shared by the Russians and the Chinese, who in recent weeks have repeatedly issued statements in defence of the Iranians. Most recently Russian foreign minister Lavrov called for improved relations between Iran and the West. 

Does rationing of fuel work?
The recent decision to start rationing the distribution of automotive fuel is according to Teheran beginning to bear fruit. Government sources mention that consumption declined initially by 25%, although the International Energy Agency believes that after an initial drop consumption bounced back, judging from the level of traffic on Teheran streets. In part this is confirmed by the latest government figures, which show consumption bouncing back during the summer and the reduction being cut to a more modest 17%. However, given that much fuel was being smuggled to the neighbouring countries, it might well be that looking at the level of traffic in the cities does not reflect actual consumption. The government hopes to save US$2.3 billion in subsidies this year, cutting the cost to US$3.8 billion. Other government figures released in August claim that the growth in electricity consumption this year has fallen to 1% from 4% last year. Given that the government was struggling to keep the pace with the demand for electricity, this would be welcome news, although it is not clear why it would have occurred. The latest official estimate of GDP growth for 2006/7 is 6%, up from 4.8% the previous year, while investment reportedly rose by 8.1% compared to 7% in 2004/5. Finally, foreign investment is said to have increased last year to US$10.6 Billion, from US$2.7 billion the previous year. However, external observers tend to believe that these figures might have been massaged for political ends.

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