Economy Awaiting a Shock

Hamid Ahadi, Rooz Online: a pro-reformist website

Recent events such as the demonstrations outside the British embassy in Tehran, and the increase in security around the British, French, German and even Italian embassies, the propaganda against official residence and travel to these countries, especially the UK leads political observers to conclude that should Iran’s talks with the three European countries that are in the planning stage for the next two months, not succeed in their goals, relations between Iran and the big European states will again diminish to the way they existed before Mohammad Khatami was elected president some 8 years ago.

Two weeks ago, Iran’s ambassadors to the countries that have a seat on the governing body of the International Atomic Energy Agency were recalled to Tehran for consultations. In the corridors of the Foreign Ministry, where news travels fast, one hears that Sadegh Kharazi and Amir Hossein Adeli, ambassadors to Paris and London respectively will not be returning to their posts. It is also reported that one of the new deputy Foreign Ministers has asked the British embassy in Tehran to provide him with a list of those Iranian representatives in the UK who themselves or whose families have permanent or long-term residence permits there. The letter is reported to be unanswered.

Another report from Paris has it that Iranian representatives in France have been advised to restrict their activities to the confines of the embassy compound. The main justification that is provided for this extended monitoring of Iranian officials in Paris, London and Berlin is the government’s new policy of linking political and economic relations together and prevent the expansion of economic ties. This goal is seen as very difficult, if not impossible to achieve according to a specialist in Iran’s foreign economic relations. READ MORE

The same specialist remembers that 26 years ago during Rajai’s presidency, a similar executive order to reduce commercial relations with the very same three countries had been issued and which was implemented for a while. But since the largest industries in Iran are built or installed by either Germany, France or Britain, the large industries associated to the government soon faced a shortage of raw material, spare parts and thus a fall in output and unemployment. So once the 8-year war with Iraq ended, the three countries again returned to their previous commercial and economic volumes.

It is noted that these three countries which are among the principal buyers of Iranian crude oil insist on selling their products to Iranian officials who have been complaining against the imbalance of trade in their favor. Another reason for these countries being on the top of Iran’s commercial partners list is that the failure of policies to expand industrial and commercial relations with Russia, India and China.

In the more recent years the presence of two very active ambassadors in Moscow and Peking, a large number of contracts have been signed with Iran. One example is the nuclear power generation agreements, which have been shaken due to US pressure and sanctions, just as was the large petrochemical agreement between Iran and Japan. The agreements that were signed with China for small industries, on the other hand, were shaken because their implementation threatened the productivity and feasibility of the small domestic industries in the same fields. A similar outcome came about when the Iranian market was flooded with home appliances from Italy and Spain, thanks to the very easy credits provided by commercial banks of these countries, and led to protests from the domestic producers of the same products whose markets had rapidly shrunk due to the competition, with some even filing for bankruptcy. The same fate came over parts of the textile industry when Chinese shirts and clothing found its way to Iran’s markets and consequently consumers.

Such policies specialists believe demonstrate the inexperience of the new decision-makers that have taken the helm of affairs under president Ahmadinejad’s watch. Observers note that more than influencing the economic and commercial relations between Iran and the European three, the nuclear issue has in fact shaped the political infighting in the regime and its widespread propaganda.

After the recent events in Vienna, the media that is close to the government has been publishing news stories in a confrontational and threatening manner about former officials by using such terms as the “Oil Mafia residing in London” or publishing stories without writer by lines. Until last weeks IAEA resolution, criticism of former officials was confined to Piruz Naseri, the head of Iran’s nuclear negotiations team, whom conservative Kayhan and Javan newspapers even called criminal worthy of a trial. When recent photographs revealed to the critics that Naseri continued to be a member of the new negotiations team, the attacks diminished.

Armed with the same information or misinformation, when speaking to a group of clerics, president Ahmadinejad spoke of the influence of the oil mafia and of decision makers whose eyes are set abroad. Allegations that observers believe will remain in speeches. Ahmadinejad also claimed that there were no capital goods among the billion dollars of imports of the previous government. This comes just two months after the head of the judiciary which is charged with following economic and financial corruption and mismanagement, had announced that financial corruption in the sphere of foreign trade was insignificant when compared to corruption in general.

Government accusations of financial embezzlement pit hundreds of former managers and officials of against the government bureaucracy and officials. Former Oil Minister Bijan Zangane who also happens to be among the longest standing ministers of the Islamic Republic with membership in four governments, denied these accusations in the strongest possible terms, and called those publicizing it ignorant of national issues. Zangane, who is also a member of the Expediency Council led by Hashemi Rafsanjani, has the support of three other ministers (Mohammad Reza Nematzadeh of the National Petrochemical Plant; Torkan who was the Minister of the Passdaran Revolutionary Guards and the manager of Pars Oil Company; and, former ministers of Economy and Commerce). These individuals who have stayed out of politics enjoy a respectable position among the country’s decision makers and thus counteract the accusatory allegations that are made by the new government members.

In the words of another economic specialist “economic threats do not frighten Europeans, whereas they do send shock waves to the domestic economy.”

According to Baztab website which is close to the right wing hardliners, Paris’ displeasure with Iran in the nuclear issue has lead it to freeze the implementation of the Blue Persian Skies project on one hand and approving licenses to two media programs belonging to the Mojaheddin Khalg opposition group. Just a week ago, similar news was reaching Tehran from London and Rome. In the first instance the news came after the demonstrations outside the British embassy and in the latter case it was after the Italians cancelled Majlis Speaker Haddad Adel’s trip to that country. It is now reported that Germany has not welcomed the idea of inviting a group of Iranian academicians to visit German industrial sites, canceling the project. In another related news, the Iran British Business Association has announced in a meeting that it does not advocate the expansion of relations with Iran and cannot guarantee the investments made in this country. There are unconfirmed reports that similar views have been expressed to large Italian firms.

A former Iranian diplomat told Rooz that the news about complaints regarding official travel and residence of Iranian representatives and their families to London is usually greeted with a smile on the face of Iranian officials. This diplomat remembers that when ayatollah Sistani was taken to London for medical treatment, Iranians objected and disapproved on grounds that while the British army was in Iraq, it could imply indifference or approval. Sistani replied through an Iranian official as such: even Israeli newspapers did not take the harsh position that Iran’s government newspapers and magazines took regarding this; and, second that there happened to be two leading Iranian ayatollahs in London under medical treatment at the same time. The messenger then conveyed this question to Iranian officials: “Does the presence of the Iranian ayatollahs in London mean that they approve of Iraq’s military invasion?”