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Iran can only plan for uncertainty

Constant threats to Tehran prevent long-term planning

by Gareth Smith

Iran’s rulers, since Pahlavi times, have been attracted by the ‘Big Plan’, and in modern days this is as true as ever. The Islamic Republic’s five-year plans guide its governments, and the current one, for 2010 to 2015, sets an ambitious 8 percent target for annual economic growth and envisaged “eliminating the government’s dependence on oil and gas revenue for current expenditure” by 2015. Clear objectives may inspire confidence but their implementation is not always so easy.

Iktisaad Iran (‘Iran Economics’), the leading Tehran business magazine, recently reduced its growth forecast for the current Iranian year (March 2011-March 2012) from 4 percent to 3.1 percent, predicting just 2.5 percent growth in 2012-13.

The magazine cited not, as you might expect, United States-led sanctions as the culprit but global uncertainty linked to the Eurozone and the lack of sustained recovery after the 2007-8 world financial crisis.

“Contrary to some experts’ opinions, Iran has an ‘open economy’,” noted Iktisaad Iran. “Its trade ( including oil) ratio to GDP, exceeds many other countries’, including that of the United States.” 

The magazine’s model also predicts Iran selling oil at an average of only $80 a barrel this year and $75 next, and so undermining Iran’s income from energy exports, which generate around 60 percent of government revenue.

That again contradicts much “expert opinion” which paints near-doomsday scenarios of oil prices at $200 a barrel, up from the current $115, in the wake of Iran closing the Hormuz Straits in the event of US-Israeli military strikes.

And why do such “experts” have the jitters? Well, try and factor in the possibility of war. When an explosion last month killed 17 at a military base near Tehran, speculation was rife that General Hassan Moqaddam had been targeted by Mossad for his role in Iran’s missile program.

But was he? Officials said Moqaddam had died accidentally during routine duties, whereas back in July, they gave different accounts on whether foreign agencies were involved in shooting dead Dariush Rezaienejad, the third Iranian scientist murdered in two years.

Did the explosion make Tehranis nervous? No, said one friend I called. “There has been so much talk here of war that the public discounts the probabilities,” he said. “It may trigger, however, some price and exchange rate increases.”    
But what are those probabilities being willfully ignored?

January 2011 saw the demise of dialog between Iranian officials and representatives of the P5 plus 1 — the permanent members of the United Nations Security Council plus Germany — over Tehran’s nuclear program.
Around the same time, the Iranian government began to phase out subsidies on essentials. The International Monetary Fund applauded the move on fiscal grounds although it was dictated more by a desire to reduce dependence on imports. Despite the many holes in the tight blockade on Iran the most effective sanctions are Washington’s unilateral measures covering banking, coupled with its political pressure on all and sundry not to trade with Iran.

Despite the lack of sanctions on Iran’s oil exports, Washington has discouraged buyers. India and Iran have struggled through 2011 to find a route for New Delhi, Iran’s second biggest customer, to pay for crude, after the Indian central bank, under US pressure, in December 2010 forbade payments through a UN-established clearing mechanism. It is as of yet unclear if the latest route through Gazprombank, the banking arm of the Russian energy giant, is reliable.
And then there is political disquiet in Washington over China, Iran’s second-largest trading partner at $29 billion in 2010 behind only the European Union ($32 billion). China is one of Iran’s top three oil markets.

The Chinese, once keen to fill gaps in Iran left by Western energy companies, may be dragging their feet. As well as projects in a number of Iranian gas and oil fields, the state-owned China National Petroleum Company has a subsidiary, Petrochina, listed in New York and is therefore vulnerable to punitive US action.
How long will this uncertainty continue without a real crisis? Iran is no doubt encouraged by the botched US pre-hyping of last month’s report from the International Atomic Energy Agency whose proliferation accusations were undermined when a “foreign expert” turned out to have expertise on synthetic diamonds rather than nuclear bombs.

But when do grand plans ever go according to plan?

Gareth Smyth has reported from the Middle East for nearly two decades and was formerly the Financial Times correspondent in Tehran

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Gareth Smith

Gareth Smith was a distinguished journalist who reported from the Middle East for over two decades. He served as the Financial Times correspondent in Tehran, where he was the chief Iran correspondent from 2003, following his earlier role as Lebanon correspondent. Throughout his career, Smith covered Middle Eastern affairs for leading media outlets, including The Financial Times, The Guardian, and the BBC. He also contributed as an editor to Executive magazine. His work as a freelance journalist in the 1990s, focusing on the politics of Iran and Iraq, paved the way for his appointment at the FT. In 2009, he relocated to the west coast of Ireland, where he balanced freelance journalism with his passion for nature and the land.
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