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IRAN


 

 

Key Economic Data 
 
  2003 2002 2001 Ranking(2003)
GDP
Millions of US $ 136,833 107,522 114,100 34
         
GNI per capita
 US $ 2,000 1,710 1,680 110
Ranking is given out of 208 nations - (data from the World Bank)

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Update No: 074 - (23/01/08)

Private business under pressure
Slowly but surely, Iranís economy increasingly feels the pain of the sanctions. Increasingly foreign banks refused to open credit to Iranian businesses, pushing up the price of transactions. For example, South Korean paper costs now 25% more because of this. According to Bank Sedarat, Iranís most active bank in international transactions, says that a third of the 600 banks which used to deal with it are now refusing to do so; the number of correspondent banks declined from 29 to 8. Although Middle Eastern banks have been resilient against US pressure, some of them are stopping their deals with Iran too. One recent example is Ahli United Bank in Bahrain, despite the fact that the bank has strong interests in Iran. Others, however, are not likely to do, particularly in Dubai where 400,000 Iranian expatriates live and 9,000 Iranian firms operate. Most import deals have now to be done through Dubai, except for deals with Russian and Chinese companies, which however are not always able to fill the gap. Some observers in the West believe that the situation will ultimately lead Iranian businessmen to put such a pressure on the regime that it will have to modify its positions, although others believe that the regime will not be responsive. 

State sector unaffected
There is little sign that sanctions are affecting overall levels of foreign investment in Iran, largely because the Chinese have been offsetting a reduced inclination to invest elsewhere. China alone accounted for almost half of all foreign investment in 2000-2007 and that was mainly due to a massive growth towards the end of the period. France, Germany, Italy and Japan follow at great distance. To the extent that there are any problems in the state management of the economy, they are self-inflicted. The Central Bank of Iran admitted in January that liquidity in the countryís financial system continues to rise, giving rise to speculation concerning government plans to address the problem. A plan to strengthen the rial against the dollar was for example reported recently, as a tool to fight inflation, but the plan was denied by central bank officials. In fact, with presidential elections scheduled for 2009, inflationary pressure might even grow as Ahmadinejad plans a 17% increase in spending in order to boost his popularity by fulfilling the many promises which he made during his trip to the provinces. The budget plan is much less detailed and transparent than in the past, which could allow much discretionary spending and patronage.

Little appetite for war
Even when Middle Eastern Countries abide by American and UN sanctions, they are not at all keen to get entangled in a war between the Iranians and the Americans, even more so if Israel was to participate. Ahmadinejad was the first Iranian president to be invited to a summit of the Gulf Co-operation Council, held recently. Even the Saudis made a conciliatory move towards the Iranians recently, inviting Ahmadinejad to the pilgrimage, while another key US ally, Egypt, sent his first high-level delegation to Iran in many years. The feeling in Washington is that the Russians have been more willing to put pressure on the Iranians than the Chinese; the slow progress at the Bushir reactor construction site is seen as an attempt to strengthen leverage on Iran. By contrast the Chinese are trying hard to enter the Iranian oil sector, as shown by Sinopecís recent deal on the Yadavaran field, worth US$2 billion. 
The Iranians are aware of this lack of appetite for a war and seem to feel that this gives them some room of maneuver. In January Khamenei signaled once again that his current alliance with Ahmadinejad might not last forever, as he hinted that he would support a deal with the Americans if that was in the interest of the country. This can be seen as a confirmation that Khamenei uses Ahmadinejad to get the Americans to view him as a comparatively moderate figure with whom negotiations can be held. 

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