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Books on Iran
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Update No: 082 - (21/09/08)
Inflation fight starts heads rolling
The inflation rate rose further in August, to 27.6% from 26.1% in July. Staple
food items are being particularly affected, hitting hard the poorest strata of
the population. Since President Ahmadinejad draws support from such strata, he
must certainly be worried of the trend. As if that was not enough, Supreme
Leader Khamenei, in recent times quite supportive of Ahmadinejad, is now openly
calling on the government to contain the rise in prices. Khamenei’s
intervention should not necessarily be construed as an attempt to undermine the
President. At the end of August, he stated openly that Ahmadinejad should plan
to continue in power for another four years. Khamanei has been praising
Ahmadinejad in particular for his handling of the nuclear issue.
The inability to control inflation cost the governor of the Central Bank of Iran
his head in September, after having served just a year in the position. Despite
having been appointed as the replacement of a man more radically opposed to the
economic policies of Ahmadinejad’s government, Mazaheri was nonetheless in
favour of freeing up bank rates and tightening controls over lending, in order
to contain inflation. As such, he opposed the requests of some members of the
cabinet to loosen the loan policy to small companies, in order to expand
employment. A few days before his removal. Mazaheri had announced that banks
would be allowed to raise their interest rates over the existing ones, which are
limited to a ceiling established by the government.
Thanks to Georgia
Despite the obvious impact of the sanctions among multinationals, many of them
are still keen on not burning the bridges with Iran. French company Total, for
example, stressed recently that it has no plan to abandon its existing projects
in the country, which include a major oil field in Kharog Island, and is just
postponing investment because of the excessive risk involved as the situation
stands. Indeed, several observers believe that the worst might soon be over for
Iran, as the Bush Administration enters its last few months and the
international ‘correlation of forces’ is at least temporarily shifting in
Washington’s disfavour. After the row over Georgia, there seems to be no
chance whatsoever of Russia agreeing to new sanctions against Iran. The Chinese
are happy to let the Russian play the more assertive role, but are not far
behind. Indeed negotiations over a fourth sanctions package have so far led
nowhere. The Iranians are exploiting the situation by raising the stakes and
reducing their cooperation with the International Atomic Energy Agency, which
has recently complained about the lack of Iranian cooperation to its
investigation on the Iranian nuclear program, on top of the fact that Iran
refuses to halt its enrichment program as requested by the United Nations. The
IAEA has also recently released information concerning some evidence that the
Iranians are working at adapting one of their missiles for carrying nuclear
warheads.
Waiting for the real diplomacy next year?
Beyond the next few months, the expectation is that a new American president
might open a new page on Iran. Not only Senator Obama has publicly taken the
stand, that he would open talks to Ahmadinejad if he was elected, but such a
mood seems to be predominant in Washington and not just among Democrats. In
mid-September five former U.S. secretaries of state (Henry Kissinger, Warren
Christopher, Madeleine Albright, Colin Powell, James Baker) all stated in public
that they favour opening talks to Teheran as the best strategy to prevent the
development of an Iranian atomic bomb, even if they have different visions of
what the content of the talks should be.
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