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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: 073 - (19/12/07)

Inflation threat looms
Over the last two years liquidity grew by 87%, driving inflation up. While the actual level of inflation is debated, even Central Bank of Iran’s latest figures show that it has reached 19%. The government so far has tried to fight inflation with short term measures, possibly containing the rate but at the same time harming the economy in a number of other ways. For example, mandatory prices of some consumer goods and reduced import tariffs are likely making Iran more dependent on imports. The new governor of the Central Bank is restricting lending to slow the growth of liquidity. Some observers seem to think that measures like this ca have a real impact. The IMF, for example, predicts that inflation will peak at 19% this year, but decline to 17.7% next year. In the meanwhile, liquidity is hunting for investment opportunities and is finding them mainly in the real estate sector, where as a result prices are being pushed upwards. Over the last year, property prices have increased by 30% countrywide and by 50% in Teheran. Liquidity is probably also helping the stock exchange to appear healthy again after a period of crisis; it now stands 70% above its level a year ago. Certainly concern for the conditions of the economy is spreading, as is concern over President Ahmadinejad’s spending drift. In December the parliament voted down a US$1.2 billion dollars request for additional funding by the government, to be drawn from the already beleaguered Oil Stabilisation Fund. The government justified the request with the higher than expected costs of ongoing projects, due to high oil prices and the appreciation of the euro, but fear of inflation sufficed to gather a majority against the bill. 
Another factor militating against the funding request is criticism of the attitude of Ahmadinejad towards the Stabilisation Fund, which last December stood at US$7 billion, down US$3 billion on March despite the injection of US$12 billion during the ongoing year.

Return to bipolar politics
On the internal political front the only relevant development in December was the formation of a coalition of reformist and moderate parties to confront the conservatives in the forthcoming parliamentary elections. 21 parties have joined the coalition, including Rafsanjani’s supporters; only Mehdi Karrubi’s group has not, but it decided to run joint candidates with it in 80% of the constituencies. Contrary to expectations, though, the conservatives have managed to form their own united front, including both Ahmadinejad’s supporters and more traditional conservatives. Much of the outcome will depend on the vetting exercised on the candidates by the Guardian Council, which severely punished the reformists in the previous elections.

Teheran scores 2 on nuclear front
On the international front, December was marked by Russia’s decision to start delivering nuclear fuel to Iran. Although Russia guarantees that it will exercise close supervision on the fuel, the move can be seen as an Iranian victory.

The fact that the new National Intelligence Estimate produced in Washington assessed Iran’s nuclear military program as having been stopped in 2003, has transformed the international situation. It has also been interpreted as unexpected good news in Teheran, making US intervention vastly more difficult. The hawks in Washington indeed are in disarray. The obvious implication of the discontinuing of the military program four years ago, is that by elimination, the program must be civil, as the Iranians have claimed. Russia’s position following Putin’s visit, was that was exactly what the evidence indicated. With the US winding up to their critical election, which is bound to produce a new administrative team within eleven months, it is unthinkable that the outgoing administration could launch an attack, or facilitate Israel doing so as a proxy, with that National Intelligence Estimate now lying on the table.

The Chinese, who two days before the release of the Estimate were sending signals of being ready to discuss sanctions, have now backtracked using the new assessment as an excuse. Major rethinking is now necessary and it would be wonderful opportunity for any peacemakers on both sides to seek a break-through.

Business drifts eastwards
In response to Washington’s isolation policy, Teheran is strengthening its links to the SCO block. Not only its relations with the Shanghai Cooperation Organisation itself are friendlier and friendlier (Iran has already applied for full membership in the SCO), to the extent that Iran’s level of cooperation is hailed as ‘no lower than that of member countries’, but bilateral relations are also improving fast. China has already become the main foreign investor country in Iran, far outstripping France and Germany, respectively second and third ranking. The China Petroleum and Chemical Corp has just signed a new US$2 billion deal with Iran’s National Iranian Oil Company for the development of an oil field in Khuzestan. Russians are far behind but on the move too. Teheran is keen to show that it is talking to Lukoil and Gazprom about joint projects and that it is inviting them to invest in Iran. Gazprom has already invested in the South Pars gas fields and Iran talks of ‘prioritising’ further cooperation.

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