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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: 066 - (29/05/07)

How to punish Iran?
The increasingly beleaguered Bush Administration was facing in May the ever decreasing credibility of a military option in Iran, but struggled to come up with credible alternatives. The option of economic sanctions, once seen as very promising, is turning into a nightmare for Washington. To the extent that it puts pressure on European companies to stop investing in Iran, the Administration faces protests by European authorities which criticise the application of extra-territorial laws to companies belonging to member states. Some non-financial companies reportedly expressed their intention to postpone investment, but most of them show little interest. The Iranian government recently gave an additional four months to Total for deciding whether to invest in the South Pars gas fields after the company showed some hesitation, but Austrian OMV signed a US$18 billion deal last month. In Asia, American pressure on Malaysian and Chinese companies seems to be wielding even more modest results. Now that it has lost control of the Congress, failure to make much progress in the economic siege of Iran is opening Washington's flank to attacks from the Democrats, who have now a cheap opportunity to show how hawkish they can be. Among else, the Democrats have been making fun of the Administration for allowing imports to the US of Iranian caviar and carpets. An unlikely alliance between Republican hawks and Democrats is emerging to force the Administration into strong-arming allied governments to disincentivise investment in Iran, with the Department of State being accused of appeasement. The new sanctions announced by the EU are not likely to make much difference either. They will target branches of Iranian state companies involved in the nuclear program, but Teheran is likely to have taken counter-measures long ago. Although Iranian negotiator Larjani is reported to have been given by Khamenei the authority to strike a compromise, a month later it was still far from clear what the compromise could be. 

Washington needs help
One of the reasons for Washington's caution is the increasingly desperate situation in Iraq. As the Bush Administration has been recently trying to involve Teheran in some discussions, a really tough approach to the nuclear issue would likely have ended any chance of success. At the recent Iraq Conference in Egypt, the Americans accepted to meet Syrian representatives for the first time in years and released information according to which the Syrians were beginning to limit the flow of jihadi volunteers through the border. The Iranians also attended the meeting and there were talks of possible discussions, which however did not materialise. In the meanwhile in Iran the regime is increasingly adopting a nationalist propaganda, not only as far as Ahmadinejad is concerned, but even in the case of Khamenei, who in March rehabilitated nationalist former Prime Minister Mossadeq in a claim to national unity.

A foggy economic policy 
A rift seems to have emerged between the government and the parliament over the price of automotive fuel. The current budget stipulates that the price should increase by 25% and that rationing be adopted, but the government seems inclined to maintain the current, heavily subsidised price for fear of inflationary pressure and popular discontent. The parliament too is not so determined to reduce the waste deriving from excessive subsidies. After voting to increase the price of heating fuel by 200%, it then voted to annul the increase.
Some observers argue that Iran is already going through a major economic crisis, as the government prints trials to fund its poverty-alleviation programmes and capital flight is believed to have reached up to US$300 billion. The business sector is being discouraged by Ahmadinejad's business unfriendly moves. He abandoned the plans to join the WTO and has been trying to reduce imports. However, because imports of consumer goods and foods are controlled by the Foundations, in turn controlled by the clergy, his efforts only succeeded in limiting imports of raw materials and factory machinery, hurting in particular the textile industry. He also disbanded the Syndicate of Iranian Employers and announced plans to replace it with a government-appointed body.

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