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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: 110 - (24/01/11)

Ending a fuel addiction
The end of the fuel subsidies regime in Iran turned to be smoother than expected, without major disorders. The savings made by the Iranian government might not be the originally planned US$70 billion, due to the decision to use Iranian petrochemical plants to produce gasoline, but they are nonetheless substantial. What seemed to be an impossible task might therefore have been achieved. The immediate rationale is to defeat the sanctions regime, but the gains would go much beyond that if it is sustainable, freeing massive resources for investment. Following the subsidies cut, consumption reportedly fell from 61 million litres a day to 52-53 million litres, reducing the impact of sanctions on Iran considerably. In fact the Iranian government claims that it no longer needs to import any fuel due to the combined impact of reduced consumption and increased internal production. Teheran has also been using a series of tricks to remind the west of its potential for bringing disruption to its vulnerable neighbours. It blockaded fuel supplies to Afghanistan in January, creating a crisis in its eastern neighbour; it despatched Muqtada As-Sadr to Iraq to campaign against the US for a couple of weeks, before he returned to Iran.

Oil exports not threatened
China has renewed its oil import agreement with Iran, maintaining import levels at 460,000 bpd. Banking sanctions are making it difficult for European buyers to have access to Iranian oil, but some companies, like Italy’s ENI receive Iranian crude because of their investments in Iran. Also some Russian and Chinese banks trade with Iran and allow Iranian exports of oil. In total, Europe receives only about a quarter of Iran’s exports; almost another quarter goes to China and the rest to a range of Asian refineries. India, second only to China among buyers, is still locked in a payment row with Iran and it is not clear whether it will renew its deal; Indian refinery sources say that supplies of Iranian oil have not been disrupted and that the intention is to continue buying Iranian oil, probably using banks not concerned by the sanctions regime. South Korean and Japanese buyers reduced purchases last year but it is believed that they will not further reduce it this year.

In January Iran announced the discovery of a new huge gas field in Assaluyeh, Bushher province. Official sources estimate that it could wield as much as 7.4 trillion cubic feet of gas. This is only the last in a string of Iranian announcements concerning new discoveries; one gets the impression that the Iranians are trying to remind the world’s oil and gas industries what they are missing by abiding with sanctions against Iran.

Is the bomb around the corner?
The Israelis believe that following some technical problem with the nuclear programme, an Iranian atomic bomb might still be 3 years away. 2014 curiously enough was the CIA predicted date during the Bush/Cheney administration and vice–president Cheney, building up with the Israelis the imminence of an Iranian bid to take over the world (read the Iraq playbook), went ape at US Intelligence shooting his fox. At the time, some observers like us, thought that given the chaotic Iraq invasion discovering no WMDs being blamed on faulty intelligence, the CIA pre-emptively got the word out about Iran as they did. Indeed one wonders if the same phenomenon might be in play in Israel. The prediction that Iran was three years away from a nuclear weapon came from the retiring chief of Mossad. No doubt they too were embarrassed when no WMDs were found in IRAQ. Israelis are not all hawks, even if that is how they are often portrayed.

The Americans now believe that Iran has achieved the ability to produce highly enriched uranium, as required for the production of weapons. Now the focus of the effort to slow if not halt the programme is shifting towards preventing Iran from having access to other, important components such as centrifuges. It is believed that many of Iran’s first generation of centrifuges have been retired and that the model being used (of Pakistani design) has proved unreliable. If Iran could be prevented from developing a new, more advanced generation of centrifuges, the whole programme could be slowed considerably. Carbon fibre in particular is one centrifuge component that the Americans have been targeting for some time, trying to prevent it from reaching Iran. Another school of thought insists that clever Israeli geeks, or US hackers employed by the Pentagon for cyber-warfare, had sabotaged the programs of Iranian centrifuges and that this is the cause of the delay. If that is true than it would be logical to expect reprisals from clever Iranian hackers!

However, at the current rate of progress, even by then negotiations over a civilianisation of the nuclear programme might not have made much progress. The last Istanbul talk with the Western powers in January did not achieve anything. Iran insisted that it wants to enrich uranium and instead wanted (embarrassingly), to discuss Israeli nuclear weapons .

Forecast 2011
Iran enters 2011 with Ahmadinejad seemingly still in a solid position, despite his growing political isolation. How many Iranians see themselves as primarily linked to a political faction? It is hard to say, but the absence of firmly established political parties means that political sympathies are quite fluid. Ahmadinejad clearly has a base of support in the rural areas and among the poorer sectors of the population. Will it be enough to keep him going? Much depends on how far he is ready to push his confrontation with Washington. This game of brinkmanship might end in a resounding success, with Teheran becoming a nuclear power and forcing the western powers to come to terms with it, or in a disastrous failure, with Iran becoming the epicentre of a new regional war. After all, in just two years’ time the US might have a new Republican president, just in time to intervene before Iran’s nuclear weapons approach readiness.

The pressure exercised on Iran through the sanctions will not per se crush Ahmadinejad, or force him to bow, but it certainly has been creating trouble to him. His judgment is now questioned even by a majority of his fellow conservatives; in 2011 Ahmadinejad will very likely continue his efforts to build up a new conservatism in Iran, less clerical and more nationalist (which the Ayatollahs have spotted and voiced their disapproval). Apart from being a better fit for him, it would also make him increasingly autonomous from the wider conservative tendency.

Forecasting the Iranian economy is particularly difficult because of issues with the reliability of the data. The IMF forecast for the final 2010 GDP growth data is 1.6%, which is expected to rise to 3.1% in 2011. This will be mainly due to rising oil prices; the Iranian government continues to announce discoveries of new oil and gas fields, but its data about recoverable oil and gas are a bit suspect given the lack of foreign investors’ involvement. It is not clear whether Iran and its few remaining foreign friends have the capacity to exploit the new fields.

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