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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: 127 - (26/07/12)

Summary: As sanctions continue to tighten, the Iranians try to play tricks to smuggle their crude around, but they find it more difficult than they might have thought. Right now everything seems to converge against Iran: the Syrian crisis, the sanctions, the economic crisis - will the Iranian regime budge on the nuclear programme?

Lonely Iran
While originally the Iranian regime saw the Arab Spring as a largely positive development, which might reduce Iranís isolation in the Middle East, this attitude has been changing as a result of the not-very-friendly attitude towards Iran of the new regimes and coalition taking over in a number of Arab countries, as well as of the crisis of the Asad regime in Syria, one of Iranís main allies in the Arab world (the other being Iraq). The fall of Asad in Syria would also cut the supply line connecting Iran and Hezbollah on Lebanon.

In the meanwhile President Ahmadinejad, widely seen as a lame duck now that he has little influence left in the parliament, has been eclipsed in media reports by Supreme Leader Khamenei. Ahmadinejad was mainly notable during this period because of having been snubbed by Brazilian president Roussef while on an official visit to Brazil.

Sanctions delay some reforms, but not others
In addition, Teheran has to struggle against increasingly effective oil sanctions. President Ahmadinejad himself admitted that the new European Union sanctions implemented in July are the strongest yet against Iran. Oil production continues to fall and it is now estimated at 2.9 million bpd. The official inflation rate has accelerated to 24% in June and the government had to abandon plans to further cut energy and food subsidies in order not to stimulate inflation or to add to the pressure faced by the population. One bit of economic reform that is set to go ahead is the privatisation of the energy sector. The government has already privatised 17 of its 45 power plants in 2008-12 and now plans to privatise 28 more, hoping to reap US$11.4 billion before the end of this fiscal year. This is part of a wider programme to privatise, to sell to the private sector most of Iranís state-controlled industries, which were 70% of the total in 2007. Since 2005, assets worth US$63 billion have been sold.

More signs of economic crisis
The rial has suffered a new crisis after the implementation of the European sanctions and reached close to 20,000 for a dollar. This of course is going to have a major impact on the inflation rate in the coming months; even some representatives of the regime admit that in the coming 6 months the inflation rate could accelerate by 50 to 70%. The price of some imported goods has already trebled since the beginning of the currency crisis. The sanctions have prompted international organisations to revise economic growth estimates downwards: the World Bank foresees a 1% drop in the GDP this year and another 0.7% drop next year.

Playing tricks is not so easy
In order to sell its crude to Europe, the Iranian government has abolished its previous tight requirement that all oil be sold through the national oil company and it allows now private companies to trade it. European firms report being offered Iranian crude at discounted prices, often even with fake documentation showing a different country of origin, or mixing Iranian and other crude. Even these tricks, however, will not be enough to offset the inability to sell on official markets, the more so as banks, which are tightly controlled, refused to channel payments for Iranian oil. Iran is not being helped by the fact that oil prices are relatively low, a combination of the impact of economic recession, of rising internal production in the US and of growing Libyan and Iraqi production.

In this context it is easy to understand why the Iranians are so keen on completing a gas pipeline project with neighbouring Pakistan? While the project is being considered seriously by the energy hungry Pakistanis, it will in any case take a relatively long time before the pipeline is completed.

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