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Key Economic Data 
  2003 2002 2001 Ranking(2003)
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)

Books on Iran

Update No: 132 - (26/01/13)

Summary: the impact of international sanctions on the Iranian regime is causing them to increasingly argue over how to manage them, although not yet on how to get out of the present predicament. In addition two friendly regimes in Iraq and Syria are threatened, highlighting how isolated Iran is becoming. Still Teheran does not seem ready for accommodation yet.

Iran admits sanctions impact
Official figures (not fully trustworthy) put the inflation rate at the end of 2012 at 27.4%, that is rising strongly from 26.1% just a month earlier. A survey done for the Iranian parliament (itself not neutral at all, as it now predominantly opposes Ahmadinejad) has shown that production levels are falling, people are losing jobs and the production costs are rising due to the fall of the rial and the rising cost of imported components. Whether accurate or not, the survey shows how the sanctions-driven crisis is now a matter of public debate, after having been long dismissed by the Iranian government. The Oil Minister recently admitted that oil exports are down 40% and oil revenue is down 45%, the first open admission that the sanctions are biting hard on the oil industry. After reaching a low of under 900,000 bpd in the summer, Iranís oil exports have rebounded somewhat, to 1.3 million bpd in October, which is well below the over 2 million bpd Iran was exporting before the sanctions. In December exports were estimated at around 1 million bpd, despite major imports from China, which purchased almost 600,000 bpd, an increase of 39% on November. It is no surprise that Iranís imports are falling. In the current financial year, they are expected to fall by US$4-5 billion from the usual US$55-60 billion of recent years, but next year the gap is expected to rise to US$7 billion.

Getting nervous
In a display of nervousness, the Supreme Audit Court (controlled by the parliament) dismissed the Central Bank governor over allegations of mismanaging the rial in the face of economic sanctions. The fall of the rial appears once again the factor which Iranís political elite had not expected when it decided to charge on in the face of international sanctions. The rial lost about 70% of its value, while overdue loans now account for 104% of the deposits of Iranian banks and keep rising fast. Yet another indicator of rising friction within the Iranian elite, following the impact of sanctions, is the dismissal in January of the health minister, Vahid; she had complained that her colleagues in the cabinet were not allocating sufficient resources for the purchase of necessary medicines. Shortages of medicines are a major source of discontent in Iran at the moment.

Not being intimidated
In a sense the resilience of the Iranian elite is admirable, if perhaps ill-advised. Despite rising economic difficulties, there is no indication yet that the Iranians are ready for a nuclear deal anytime soon. Relations between Teheran and the IAEA remain tense as the two cannot agree on a new inspections regime; some observers believe that Teheran is leaving the door open to a deal on enrichment, but there seem to be little hurry to reach that. In the meanwhile Obama has signed a new layer of sanctions against Iran, further tightening the grip on its trading activities. Having embarked on a round of international policy brinkmanship not seen since the 1930s, the Iranian elite is risking everything for unclear and uncertain rewards. Increasingly isolated, the Iranian regime risks losing its two main international allies (Assad of Syria and Maliki of Iraq) pretty soon and cannot do much about it. Iran in the middle of major financial difficulties and now has even to help Assad, whose resources are modest not least because of the sanctions against his regime. Recently Teheran agreed to open a line of credit for US$1 billion to Syria for imports from Iran; it is far from certain that this money will ever be recovered. Even the gains made in recent years by Iranís regional diplomacy have been compromised by the hardline attitudes of Teheran and its support for the even more isolated Assad. The Egyptian government has been the target of Iranian blandishments, but the results have been meagre so far, despite the Islamist-leaning tendencies of the new Egyptian government.

Forecast 2013
Although the Iranian regime is much more solid than either Mubarakís in Egypt or Assadís in Syria, it seems to be doing its best to organise a perfect storm against itself. The policy choices of recent years are all converging towards putting pressure on Iranís strained resources.

Ahmadinejadís low cost house building projects are endangered by inflation, because the home buyers who paid an advance are about to find out that the agreed prices no longer apply and they will have to pay much more to finalise the purchase. The government has advanced the money to the builders and its buyers will not pay, the costs of that will all be added to the governmentís debt. In addition, Ahmadinejadís new cash handouts to the population are more expensive than the price subsidies which he has cut, which means even more government debt, unless he raises energy prices further. Given that elections are due in June and that inflation is already very high, it is unlikely that the government will be too keen to raise prices. It looks like what is going to happen in the short term are palliative measures, such as the recent ending of fuel subsidies for cars of 1800cc and above.

The impact of oil sanctions is probably stabilising, but leaving oil exports at 40-50% below the pre-sanctions level. If protracted long enough, this situation will dry up Teheranís financial resources.

Ultimately both Washington and Teheran would like to reach a deal on Iranís nuclear programme, but the terms which they are ready to accept do not coincide yet and might never coincide. The Iranians want a complete normalisation of relations with Washington, but in their effort to put pressure on Washington (having concluded years ago that blandishments would not work) they are making Obamaís task even more difficult: the more rogue Iranís look, the more difficult for Obama to hammer together a deal which American public opinion would accept. Time is ripe for a moderate Iranian president to take over and order a u-turn in policies, going back to where President Khatami was before Ahmadinejad. But is this Supreme Leader Khameneiís plan? For the moment being it is not clear whom he will endorse in the June 2013 presidential elections.

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