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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: 136 - (26/05/13)

Summary: Former president Rafsanjani had joined the electoral fray to seek a new presidential term, but he was ‘disqualified,’ the Iranian priestcrafts way of controlling politics and ‘the will of the people,’ in their theocracy. Finally there would have been a high profile candidate running. The risk for the establishment, which they didn’t take, is that Rafsanjani as a pragmatist might attract disaffected voters who want a change in foreign policy to rescue the ailing economy of the country. Ahmedinajad’s ally, Meshai also was vetoed, which probably spells the end of his own and his mentor’s political career. So the West will need to find a new ‘hate figure.’ Israel will probably oblige. Several others were disqualified and eight were allowed to proceed. The three favourites to win now appear to be Saeed Jalili, known to the world as their nuclear negotiator; Qalibaf, the mayor of Tehran; and Gholam Adel, former Speaker of the majlis, none of these known for being outspoken, or for ‘rocking the boat.’

In the economic field, a recent cut in subsidies suggests that the country’s foreign currency reserves are depleting and that the government is struggling to keep traders well supplied with dollars.

Ultimately both Washington and Teheran would like to reach a deal on Iran’s nuclear programme, but the terms which they are ready to accept do not coincide yet (and might never coincide). The time is ripe for a moderate Iranian president to take over and order a u-turn in policies, going back to where President Khatami was before Ahmadinejad. But is this Supreme Leader Khamenei’s plan? At this time, it is still not yet certain whom he will endorse in these June 2013 presidential elections..

Rafsanjani no longer in the game
The announcement of former president Rafsanjani that he intended to compete in the forthcoming presidential elections, has capsized with his candidacy being vetoed by the Guardian Council. Rafsanjani had hoped to attract voters to his pragmatic approach in foreign policy, in a country stuck deeper and deeper in a confrontation with western powers whose purpose few understand.

Having already served as a president, the Guardians finding a justification is not easy. We have not yet heard it. The spokesman of the Guardians council, who will vet the candidates, has already stated that a candidate able to work for just a few hours a day is not suitable, so maybe they will hold his age against him. The security services had warned Rafsanjani not to run, arguing that he had not been arrested in 2009 (when he expressed sympathy for the demonstrators), only because he remains close to the Supreme Leader Khamenei. But the Guardians are there to effect the head priest’s will, so we must assume that there is now some distance between them.

Rafsanjani and Khamenei in part already publicly made amends over the 2009 spat, as in March 2012 Rafsanjani was reappointed at the head of the Expediency Council, which he had been forced to leave in 2001. Many instead believe that Khamenei will endorse Jalili, Iran’s former nuclear negotiator, who is very loyal to him and would be easy to control for the Supreme Leader. There are also those who believe that the 79 years old mullah, who has big business interests, is the only cleric with the understanding required to fix Iran’s economy (he should live so long)!

The other candidate who had attracted some support from the opposition was Rahim Meshai, Ahmadinejad’s former aide and minister. A nationalist who argues in favour of better relations with the US and even with Israel, his anti-clerical stands could have made him popular, which is quite likely why he was vetted out by the Guardian Council before the electoral campaign has started.

Subsidies cut
The decision of the Iranian government to stop providing dollars at subsidised rates for the import of most basic goods is likely to stimulate inflation considerable in the coming months. The rial trades now at around 35,000 to a dollar, while the government was providing dollars at the rate of 12,260 rials. Now the subsidised rate will only be made available for the import of wheat, barley, corn and soybean. The standard rate for importers is 24,500 rials, still subsidised but not as much. The decision seems motivated by the desire to preserve foreign currency stocks, but prices are already rising on the decision. The inflation rate had already reached 31.5% in March, but in April it was reported to have fallen back to 29.8%.

Oil exports were estimated at 1.08 billion bpd n April, up from 0.81 million bpd in March, but well below the 1.5 million bpd estimated to be required for funding its budget. It could become worse, as pressure on importers of Iranian oil grows relentlessly. Turkey is still refusing to cut Iranian oil imports, despite intensifying US pressure. Turkish imports reached a 8 month high in April, at 140,000 barrels. The shortage of cash resulted in falling imports of even essential goods. Medicine imports, for example, fell by 54%. Official unemployment figures are believed to be unreliable, but official data show that even highly qualified professional categories are affected. There are for example almost 20,000 doctors who are either unemployed or not employed as doctors.

Smuggling through
An Indian company has volunteered to provide insurance for tankers carrying Iranian oil, allowing at least temporarily a resumption of imports. The Indian government is refusing to cap oil imports from Iran, but technical issues like insurance have been curtailing imports. Taiwan is also resuming crude imports from Iran in April. Although China remains the most dependable customer for Iranian oil, commercial considerations represent a growing obstacle. Recently a major Chinese ship insurer announced that it will halt indemnity cover for tankers carrying Iranian oil, making it more difficult for importers to buy Iranian oil.

The Iranians are still trying to reduce the impact of the sanctions by engaging in smuggling operations, but inevitably there is only so much they can discreetly smuggle without being spotted. Increasingly, smuggling operations are coming under scrutiny, as one involving the transfer of crude at sea between ships and rebranding it as Iraqi oil. In March crude exports from Iran touched a new low, but in April they are expected to rebound to over 1 million bpd. These estimates do not take into account smuggling operations, which are estimated to exceed 200,000 bpd. Production is also declining as Iran has no interest in extracting oil which it cannot export and it has difficulty storing; in March it was down to 2.68 million bpd. In part the losses are compensated by rising exports of fuel oil by Iran, which have now reached 200,000 bpd, up 15% on the previous quarter and almost 100% over a year earlier. Fuel oil too is moved to international waters and transferred to smaller vessels, which then take it to multiple locations, often after mixing it with fuel oil from other sources.

Coping is not enough
Nonetheless, an economy of the size of Iran’s cannot rely on smuggling operations to keep running and the sanctions are beginning to cause some social turmoil. Smuggling in fact is not the only strategy adopted by the Iranians to deal with the sanctions. The Iranian government also claims that not only oil exports are rising by over 10% in value this year, again partially offsetting the loss in crude exports. Among other things electricity exports to Iran’s neighbours rose 29% in one year. At the same time imports have declined by about US$5-7 billion this year, so that overall the Iranian trade deficit has not increased as much as it could have. Even these measures are not enough, however. The collapse of the rial means that imports are much more expensive once they reach the market. Consumers who rely on fixed salaries are struggling particularly hard, as measures taken to increase wages have not been enough to entirely offset the fall in purchasing power. Labour activism is on the rise even if it is always harshly repressed.

Conservatives divided
The line-up for the June 14th Presidential elections is down to the eight that qualified. The second choice of Ahmadinejad’s camp after the disqualified Rahim Meshai, would probably have been Ali Nikzad, the minister of housing, mainly because the homebuilding projects funded by Ahmadinejad are quite popular among the poorer sections of the population. But he didn’t get past the ‘Guardians’ either.

The conservative principalist front is split among many candidates, even if the best known among them claim they will collaborate in the electoral campaign.

Apart from the three we regard as front runners, Saeed Jalili, Mohammed Bagher Qalibaf, and Gholam Ali Hadad Adel, there are also amongst the eight: Ali Akbar Velayati - a former Foreign minister; Mohsen Rezai, the former IRGC commander; then another former nuclear negotiator Hassan Rowhani; Mohammed Reza Aref once Khatami’s deputy; and Mohamed Gharzai once minister for oil under Mousavi and Rafsanjani.

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