Executive Magazine

Q&A: Mohammad Choucair

by Maya Sioufi October 1, 2012

written by Maya Sioufi

Kidnappings, blocked roads, robbed banks and travel warnings are among Lebanon’s latest upheavals. The country’s economy is feeling the pressure with stores and restaurants closing down, hotel occupancy rates plummeting and trading activity dwindling. The private sector is sounding the alarm. For a better understanding of the severity of the economic crisis, Executive sat with Mohammad Choucair, president of the Chamber of Commerce, Industry and Agriculture (CCIA) of Beirut and Mount Lebanon.

You have said that Lebanon is witnessing its worst economic crisis. What is leading you to such a gloomy observation?

Lots of companies are closing down; just in Solidere, 254 stores shut down since the beginning of 2011, so imagine how many closed in Lebanon over this period. We are witnessing crimes for money with people killing each other to steal 100,000LL or 200,000LL. That’s how bad the situation is. Lebanon has never seen six banks get robbed over a period of six months, neither has its minister of labor ever received requests for mass redundancies. The state can no longer enforce law and order. We are back to the language of threats and kidnappings. Now Qatar is threatening us and saying that if any Qatari gets kidnapped, they will kick out their Lebanese residents and there are more than 55,000 in Qatar. In the Gulf, there are 400,000 to 500,000 Lebanese workers. If Lebanon is still standing, it’s thanks to them. If they lose their jobs, we will eat each other.

Are there more companies at risk of bankruptcy going forward?

There are hundreds of companies in danger of bankruptcy and all sectors are being hit. The labor minister is telling me there are mass redundancies and this is what I was afraid of when the minimum wage increase was implemented. Trading activity in Beirut is down 50 to 70 percent so far this year over last year and outside Beirut, it is down from 70 to 85 percent. How [long] will companies last? I think not too long. I hope no company will close by the end of the year but if I look at bounced checks, at the 10,000 containers sitting in the ports of Beirut with owners unable to pay the costs of shipping, the taxes or the customs, I am concerned.

How much did the minimum wage increase contribute to heightened economic pressure faced by the private sector?

The minimum wage increase added 15 percent to the costs of the private sector. It was a huge mistake and the private sector takes responsibility. We couldn’t handle the political faction on this issue. We should have done strikes, we should have said no. Today we are all paying for it, the private sector, the workers and the government. The government can’t pay for the raise for employees of the public sector and if it does pay, there is a danger to the Lebanese lira.

The National Social Security Fund (NSSF) is calling for the salary ceiling of contributions to the healthcare fund to be raised from LL1.5 million to LL2.5 million. How will this be felt in the private sector?

The private sector can’t support anything anymore. When we raised salaries [as a result of the minimum wage increase], it brought in additional revenues of $250 million for the NSSF. When they wanted to raise the ceiling, we objected. The economic associations have now decided to raise the ceiling to LL2 million for two reasons: one is that this is a human issue and I won’t tolerate citizens being humiliated when receiving treatment and second of all, we can’t support more social troubles in Lebanon. With a LL2 million ceiling, the NSSF will no longer have extra hospital costs and it will be left with an additional $11 million.

You have recently called for opening the Qlaiaat airport. How essential is this in supporting the Lebanese economy?

From an economic point of view, it is essential for the north. The main airport will always be the Rafik Hariri International Airport in Beirut. We don’t want to eliminate it but we need the Qlaiaat airport for two goals: so that Lebanon becomes the regional hub of shipping and for the low cost airlines.

Wouldn’t the airport need significant investment to be ready to operate?

It doesn’t need further investments. Airbus 330 and Boeing 777 can land there. The land size is 5.5 million square meters (550 hectares) and it has a runway of 3.6 kilometers that can be increased by another 400 meters. The other airports have a size of three million square meters (300 hectares) and can only cater to small planes. I am preparing a letter on behalf of the CCIA asking the government to allow us to run this airport. The majority of airports in Europe are run by the private sector and we hope to do that too.

Are you willing to call for a strike if the economic situation does not improve?

Who are we going to strike against? Government officials? They are not here. Today, my priority is to have security as without it, we can’t have economic growth. I’m asking for the state to enforce law and order. I congratulated parliamentary speaker Nabih Berri on his decision [on August 22] to “cut the hands” of every person who cuts the road to the airport; if only they took this decision three months ago and broke the hands, legs and head of every person who cut any road and not just the one leading to the airport.

What do you want from government officials?

I have just one wish and it is for the state to enforce law and order without which we can’t bring back investors. There should be justice on the kidnappings. If every person who needs money goes off and kidnaps someone then half of the population would be kidnapped. This is a problem; it’s not a joke. I hope that the government officials will save what is left for the benefits of the Lebanese citizens. We are approaching elections and maybe some politicians can only focus on having an extra deputy here and there but you can’t enjoy ruling when the people are hungry and broke. The more people are hungry, the less they will let you rule. I am not afraid when a citizen demonstrates but has a job — I am afraid when he takes to the streets and he is unemployed.

Is there light at the end of the tunnel?

I wish I had a positive message for you. The kidnappings brought us back 20 to 30 years and it reminded people of the war. We have a responsibility as an economic association to bring back confidence for the foreign investor, but he will think a lot before coming back. From 2005 to 2010, foreign investments reached $4 billion to $5 billion a year and last year it was zero. This year, it will fall into negative territory as some projects are being withdrawn. It will take at least two to three years to bring back confidence. We need to focus on bringing back the Lebanese expat first. Despite all this we are staying in Lebanon. Hopefully it’s a phase that we will overcome in the quickest way possible; Lebanon will be on its feet again soon and we will see smiles on people’s faces.

October 1, 2012 0 comments

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Girls for sale

by Moe Ali Nayel October 1, 2012

written by Moe Ali Nayel

"I’m sheltering 20 women,” said Um Mohammad. A veiled woman in her 50s, she had sought me out at the refugee relief center I was visiting in Tripoli and asked to have a quiet word. “These women are widows, sisters and daughters of martyrs; they are all refugees who recently fled from Homs.”

“My son went to the mosque yesterday before the maghrib (sunset) prayers and announced that we have 20 Syrian women… looking for protection,” said Um Mohammad. “He asked that any Muslim man who would like to protect their honor by marrying one should come to the mosque after the isha (evening) prayers.”

The incident she described was just one example of what has recently come to light as a disturbingly widespread phenomenon amongst the growing number of Syrians who have fled to neighboring countries: ‘protection marriages’. Certain online social networks have become deluged with Arab men announcing their desire to marry a girl from the Levant (i.e. Syria). This practice has been encouraged by several religious leaders, among them the firebrand Adnan Arour, a hardline Syrian sheikh in exile in Saudi Arabia who has issued fatwas, or religious edicts, endorsing protection marriages as a means to offer Syrian women refugees a better life. Indeed, for some Syrian refugee families who have been forced to trade all their worldly possessions for tents in the desert, it must seem like a chance for their daughters to escape the misery.

This has opened the door, however, for women and girls in these refugee camps to become the victims of sexual exploitation under the pretext of ‘support for the Syrian revolution’. It has become ever more common for what are ostensibly modest requests for marriage posted online to morph into bidding wars between men offering up money for Syrian brides. In a recent editorial, Abdelbari Atwan, the editor-in-chief of the pan-Arab newspaper Al Quds Al Arabi, wrote that elderly Arabs from the Gulf have reportedly taken Syrian refugee girls younger than 15 years old. “Marriage of minors in refugee camps is a type of rape that must be stopped immediately,” he went on to say. “Perpetrators must be brought to justice.”

On August 31 a “wakeup call” campaign dubbed Lajea’at la Sabaya (roughly translated as ‘refugee women, not women for pillage’) began both online and offline, an independent initiative by young Syrian women and men. The group’s stated goals include upholding the rights of Syrian women, both in refugee camps and in Syria, preventing Syrian women from becoming a commodity for sale, and encouraging Syrian businessmen to invest and create jobs in the refugee camps to help better living conditions. Syrian women who joined the uprising did so in an attempt to assert the dignity of all Syrians, says the group, and thus they should not be sold like items in a market under the guises of ‘marriage’ or ‘protection’. The Facebook page for Lajea’at la Sabaya reached 10,000 ‘likes’ in its first 10 days.

So while human rights advocates have begun raising the alarm, it’s worth noting that Syrian opposition groups have been almost uniformly silent regarding the sexual exploitation and wholesale trade of refugee women. The issue is not new, having grown as the number of Syrians fleeing the country has risen, and yet even now as it becomes a public scandal the leaders of the opposition remain mute. This leads one to wonder what sort of “free” Syria the opposition has in mind for the future when already today they ignore these abuses against the most vulnerable Syrians.

The millions that have risen up over the course of the Arab revolutions did so demanding equal rights and justice. Women throughout the Arab world were, and still are, on the front lines leading the struggle. The true fight for equality, however, cannot be limited to toppling the tyrants and dictators that led the region’s repressive regimes — it must also confront the Arab world’s ingrained misogynist attitudes, rampant sexual harassment of women and ultimately religious and social institutions that treat women as inferior to men and facilitate their subjugation.

Moe Ali Nayel is a freelance journalist based in Beirut

October 1, 2012 0 comments

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Buy Lebanese, please

by Paul Cochrane October 1, 2012

written by Paul Cochrane

A new campaign was launched in September by the Ministry of Industry and the Association of Lebanese Industrialists (ALI) with the slogan “Your industry, your identity: Buy Lebanese.” It is aimed at giving the sector a boost in the current economic downturn, given that some 60 percent of the manufacturing industry’s sales are local.

It is a good move, but the sector could have done with greater recognition from the government of its contribution to gross domestic product (GDP), which has gone from 9 percent in 2009 to an estimated 19 percent today. Such a move could have included giving the ministry governing the sector a decent budget and pushing state agencies to actually buy Lebanese products.

The Ministry of Industry’s current budget is a measly $5.14 million, which is barely enough to pay for salaries yet alone have a decent marketing budget to promote Lebanese industry around the world. Indeed, ministerial employees have said that if they want to attend exhibitions abroad, they have to pay for flights out of their own pockets and then hope they get reimbursed.

Other countries have billion-dollar budgets to promote their industrial sectors globally, and set aside sizable allowances for trade fairs and expos, with dedicated stands to tout the nation’s wares. For instance Turkey’s Science, Industry and Technology Ministry has a budget of $1.2 billion, and the small island of Singapore, less than a 10th the size of Lebanon but with a similar population size, has a budget of $3.3 billion for the Ministry of Trade and Industry.

While these countries include commerce or trade in addition to industry, even if you combine the Lebanese Ministry of Economy and Trade’s $21 million budget with that of the industry ministry’s, it is still shockingly underfunded.

As an overall percentage of the $14.71 billion budget, the Ministry of Industry’s cut accounts for just 0.035 percent. The sector’s GDP contribution generates significant revenues for the government as well as being a major employer, accounting for an estimated 26 percent of the total 1.48 million Lebanese workforce, according to website Economy Watch. That works out to 370,250 jobs, meaning the ministry’s budget allocates just $13.5 per employee in the sector.

The Ministry of Agriculture has a budget of $59.3 million, while representing a quarter of the GDP contribution of industry, and the Ministry of Youth and Sports — that well known contributor to economic growth and prosperity — has a budget almost double that of industry, at $9.7 million. Tourism, an important economic sector, still contributes a third less to GDP than industry, but has triple the budget, at $14.6 million.

While there is the counter argument that some countries earmark billions for industry and are still not competitive, and others are competitive without much state assistance, it cannot be ignored that Lebanese industry is currently facing a lot of challenges. A higher budget for the industry ministry would no doubt help, but so would addressing other stumbling blocks, notably the endemic shortfalls in energy and infrastructure.

Where the government could show true support is by buying Lebanese. But according to industrialists, the government more often than not shuns Lebanese products for foreign brands, believing them better.

This has led to bizarre situations where the government has ordered products from France yet the good is actually made in Lebanon; the winner in this scenario is the middle man and the loser the Lebanese tax payer. One industrialist told how at a recent expo in Beirut, European companies placed orders for specialized products while the Lebanese government queried that same local company’s experience in the order application process — the deal later fell through.

Among the public there is also a certain snobbishness toward Lebanese products. “We export to 30 countries and the image of Lebanese industry is higher elsewhere than here,” said an industrialist. “A Lebanese would buy a Turkish made product over a Lebanese one, I don’t understand it.”

Whether the new “Buy Lebanese” scheme will work remains to be seen, but its effectiveness would certainly be bolstered if there was a bigger ministry budget for marketing, and the government itself began practicing what it preaches.

Paul Cochrane is the Middle East correspondent for International News Services

October 1, 2012 0 comments

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The Resistance goes on

by Nicholas Blanford October 1, 2012

written by Nicholas Blanford

President Michel Sleiman’s proposal for a national defense strategy, which includes placing Hezbollah’s arsenal of weapons under the command of the Lebanese army, is an attempt to fine tune an idea that was first aired around a decade ago.

The Sleiman proposal was unveiled at a meeting on September 21 that grouped most of the country’s top leaders for yet another of the seemingly interminable national dialogue sessions. Although the national dialogue began in early 2006 with the fate of Hezbollah’s arms as its chief raison d’être, the participants have only agreed on one item: closing the bases manned by Syrian-backed Palestinian factions in the Bekaa Valley and in Naameh south of Beirut.

However, despite unanimity on that decision it has yet to be put into effect and the Palestinian military bases continue to operate unmolested.

Sleiman’s proposal is unlikely to meet the approval of all participants to the national dialogue, let alone reach the stage of implementation. The bottom line is that Hezbollah will not voluntarily disarm nor hand over control of its weapons or decision-making capabilities to an external force. Ali Ammar, a Hezbollah Member of Parliament, was quite clear about this when he stated in June 2006 — a month before the war with Israel — that “the resistance will go on; the extent of the resistance is not the Shebaa Farms… nor the return of prisoners [from Israel], but its extent is when it becomes impossible for Israel to violate Lebanon’s sovereignty even with a paper kite.” In other words, the lifespan of the resistance is potentially infinite.

The late former MP Nassib Lahoud was an early proponent of blending Hezbollah into the army. With the onset of a debate on the fate of Hezbollah’s arms in the wake of the Israeli troop withdrawal from South Lebanon in 2000, Lahoud suggested that the resistance be turned into a paramilitary border defense force deployed along the southern frontier but placed under the command of the Lebanese army. His proposal was an attempt to find middle ground between the maximalist positions of Hezbollah, which wanted to keep the resistance intact, and the party’s critics, who wanted to see the resistance entirely disarmed.

Hezbollah argued that the success of the resistance in confronting Israel is that it has its own chain of command and is not part of the fabric of the army and therefore the state. The absence of a formal military chain of command and the relative degree of autonomy given to unit commanders (rare among Arab armies) allows the resistance to react more quickly to developments, ran Hezbollah’s argument. Furthermore, Hezbollah did not operate from open military barracks and bases such as those manned by the Lebanese army because of their vulnerability to attack. Instead it was a guerrilla force — fluid, mobile, stealthy — all the better to confront Israel’s conventional army.

Even as Hezbollah was advancing this argument a decade ago, its fighters were busy building secret underground fortresses in the hills of South Lebanon, a development that only became apparent with the advent of the 2006 war.
Before Syria’s political disengagement from Lebanon in April 2005, the future of the resistance was a largely academic debate: Hezbollah had no intention of disarming and the Syrians provided political cover. The national dialogue sessions first convened in 2006 when the debate over Hezbollah’s arms intensified and the party was compelled to at least accept the establishment of a forum to discuss the issue.

The key question, however, is who decides whether Lebanon goes to war or not — the state or the secretary-general of Hezbollah.

In 2006, the state was powerless to make such a decision as events on the ground moved too quickly. But if Israel was to launch a pre-emptive attack on Hezbollah in an attempt to degrade its military capabilities, would Sayyed Hassan Nasrallah look to the government for the green light to retaliate? Of course not. And he has implicitly stated that Hezbollah reserves the right to decide the manner of response to an attack by Israel in a series of “deterrence” speeches he has made in the past five years.

Sleiman’s proposal will continue to be discussed for many more months at future sessions of the national dialogue. But Hezbollah can probably rest assured that it will never proceed any further than the table in Baabda presidential palace.

Nicholas Blanford is the Beirut-based correspondent for The Christian Science Monitor and The Times of London

October 1, 2012 0 comments

The Buzz

The Innocence of Google

by Joe Dyke & Benjamin Redd October 1, 2012

written by Joe Dyke & Benjamin Redd

The decision by Google to restrict access to the hugely offensive anti-Islamic film “The Innocence of Muslims” in parts of the Middle East has proved almost as controversial as the film itself.

Click here or on the map below to see our exclusive infographic mapping how the film has been taken offline across almost the entire Middle East.

In some countries, such as Saudi Arabia, the film was clearly in breach of local laws and therefore the decision to ban it was semi-automatic.

In Sudan and Iran the decision to block the film came as part of a wider attack on Youtube and Google.

But in other countries — such as Egypt and Libya where demonstrations first broke out — the decision was made by Google after specific requests.

The company said the “very difficult situation” in those countries had led to the decision to “temporarily” restrict access.

The decisions have caused some free speech campaigners to worry about the precedent being set.

Jillian York, the Director of International Freedom of Expression at the Electronic Frontier Foundation, thinks the decision is a dangerous one.

She points out that the company had received no legal demand to remove the film, and YouTube itself said it did not violate its own rules.

“Had Google received a court order, I would be more understanding of their position — then the blame would be on the court, the government. But because Google made a decision for an entire nation, that’s scary,” she said.

York also blasted the company’s apparent disregard for the opinions of Egyptian civil liberties advocates, saying the company’s decision “ignored that fight and ignored their voices on the matter, instead attempting to determine what’s ‘best’ for Egypt.”

“The biggest long-term issue is that these companies — Google, Facebook, Twitter, etc. — have become the ‘virtual public square,’ but remain private companies with the right to make whatever decisions they want about content,” she added.”

October 1, 2012 0 comments

The Buzz

Morning briefing: 1 Oct 2012

by Executive Staff October 1, 2012

written by Executive Staff

Economics

Jordan, struggling to speed up its pace of economic and regulatory reforms, expects foreign direct investment to drop next year before ultimately rebounding, its industry and trade minister has said.

Jordan's economy has been hurt by regional protests and energy supply disruptions tied to the Arab Spring, Minister for Industry and Trade Shabib Ammari said in an interview.

"The last figure that I have in mind today with respect to FDI (foreign direct investment) during 2011 was a bit below $2 billion," he said on the sidelines of the International Economic Alliance symposium.

"I would expect 2013 to be maybe $1.5 billion, anywhere between $1 billion to $1.5 billion, 2014 may double this figure," he added.

Fiddling while Lebanon burns

by Yasser Akkaoui October 1, 2012

written by Yasser Akkaoui

The blatant disregard with which the government is treating the current economic crisis in the country is the height of irresponsibility. It is best characterized by the industry minister’s advice to the Lebanese to just need to relax because “we don’t need to make money every year.”

Indeed, for those among the political class who have been robbing the country blind for the past few decades, taking a year off to lay comfortably on their stolen wealth may be an option, but for those Lebanese who have worked hard to build their businesses and fight every day to make ends meet, this is not a luxury they can afford.

The Syrian situation is impacting Lebanon in a wash of negative ways: investments are evaporating, bank deposits are shrinking, the tourist season was a disaster, export market routes are cut and inflation is up. Gross domestic product growth is in decline while unemployment is growing.

In response the government has done nothing to help. Leaders from almost every sector of the economy are screaming for progressive policy reforms to help them survive. They don’t want handouts, they simply want the litany of government-imposed impediments to their business to be removed. If the government cannot provide the proper infrastructure the country needs — such as a functioning power grid — then it should not get in the way of the private sector doing so.

But instead our politicians have been mute, articulating no strategy forward for the country in the slightest. They have buried their heads in the sand, and it is time we kicked them in the ass.

October 1, 2012 0 comments

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Finally, a shred of hope

by Farea al-Muslimi October 1, 2012

written by Farea al-Muslimi

Yemen’s current president — formerly the quiet, powerless vice president — took office more than eight months ago, yet until recently those walking near his home would still say they were “near the vice president’s house.” Few took him or his new authority seriously. That, however, has now changed. Not only has Abdu Rabbu Mansour Hadi earned respect as a leader, he has aroused something many Yemenis had almost become allergic to, given how often it has let them down: hope.

Hadi came to power in February via a political deal brokered and backed by Gulf Cooperation Council states and the international community, which helped end more than a year of popular uprisings against the three-decade rule of Ali Abdullah Saleh. Few, however, thought Hadi could curb the heavy influence of the patronage networks and corrupt feudal systems that were the legacy of the former president.

Early August, however, President Hadi began a military reshuffling, removing key units from the command of Saleh’s son and a former Saleh ally, who headed the Republican Guard and the first Armed Division, respectively. This was welcomed as a step towards a comprehensive reconstruction of the army, which was one of the revolution’s main goals. To Saleh and his old friends, it was a medium-sized earthquake. A bigger shake-up came mid-September when Hadi targeted numerous governors, security officials and ministers for removal. Among these was the former head of National Security Ali al-Ansi, who had been Saleh’s most powerful ally behind the scenes. Yemen’s ‘National Security’ agency, like every dictator’s ‘intelligence department’, had been in charge of countering ‘terrorism’ and ‘anti-Saleh’ movements.

Hadi is the first president in Yemen’s history to take office with this level of local and international support, as well as having reached the presidency independently of the traditional political and tribal ladders. Since he was elected on February 21, he has surprised almost everyone with his intelligent use of power, while speaking publicly very infrequently and leaving traditional stakeholders on edge as to his next move. Before his election Hadi had the reputation as the weakest man in Yemen — today, after sacking air force commanders, southern district leaders and, equally importantly, civic leaders who were part of Saleh’s patronage networks, and doing so with utmost calm, one retired army officer said, “He is like a tank, very slow but very strong.”

Aside from military issues, Hadi established the Preparatory Committee for the National Dialogue, where Yemenis of all stripes will meet to negotiate the new Yemen they want for the future, and attempt to solve the country’s most critical conflicts and issues. President Hadi was also scheduled to be in New York last month to meet United States President Barack Obama and make the case for international aid at the ‘Friends of Yemen’ meeting.

At the same time, these successes Hadi has been enjoying need to be placed in the context of the massive challenges Yemen faces. Almost concurrently with the August sackings, a suicide bomb targeted one of the most secured areas in the capital, around the prime minister’s office. The attack — thought to have targeted the Minister of Defense who has already survived five assassination attempts in the last 6 months — killed 10 civilians, injured six of the minister’s guards, and underlined the fragility of the country which Hadi is trying to lead.

The hope that the new president has generated is also founded on people having had such low expectations when he came to office. The deal replacing the president was aimed at preventing all-out civil war — anything more than that is icing on the cake.

And while Al Qaeda in the Arabian Peninsula (AQAP) has suffered substantial losses so far during Hadi’s term, the group seems to have changed to strategies similar to Al Qaeda in Iraq, employing hit-and-run tactics and suicide bombings, successfully assassinating top military leaders, including the head of the army’s southern division. Abyan, Hadi’s home province, is still yet to see the return of the tens of thousands who fled the heavy fighting between AQAP and the army. Add to this that the secession movement in the south is gaining traction, while Sada, among other governorates, still remains outside government control. And then there’s the country’s massive food crisis, where almost half of Yemenis don’t have enough to eat.

Thus, it is safe to say that President Hadi is not likely to be ‘The Savior’ of Yemen, but for all the terrible news coming from the country, he is at least a step in the right direction.

Farea Al-Muslimi is a Yemeni activist and writer for Almasdar

October 1, 2012 0 comments

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Admitting it hurts

by Gareth Smith October 1, 2012

written by Gareth Smith

After months of denial that this year’s new United States and European Union sanctions were having any effect, Iran’s leaders have changed their tune and are acknowledging that moves to stifle oil exports are biting.

In August, state media reported rahbar (‘leader’) Ayatollah Ali Khamenei calling for an “economy of resistance” to use “the nation’s full potential” to “break the illusions of the arrogant powers”.

The theme was taken up by many analysts in the Iranian media, and last month Mohsen Rezaei, a weathervane loyalist and former commander of the Islamic Revolutionary Guard Corps, spoke of a “new economic system” involving barter deals with other countries, lower taxes and reduced dependence on oil.

It would have been impossible to deny much longer the effects of US sanctions that threaten to bar from the American market any country or entity dealing with Iran’s central bank, the usual conduit for trade including oil, and the EU embargo on buying Iranian oil or selling insurance for Iranian trade.

Iran’s oil sales have been fluctuating a little, but have basically halved to between 1 million and 1.1 million barrels per day from double that late last year, curbing a revenue stream that has accounted for some 80 percent of Iran’s foreign earnings and 50 to 60 percent of government revenue. And it gets worse. The depreciation of the rial, from less than 10,000 to the dollar in late 2009 to an estimated 18,265 over the Iranian year 2012-13, has slashed the international value of Iran’s gross domestic product: calculations by Iqtisad Iran, the leading Tehran-based monthly, have it down from $406 billion in 2010-11 to $350 billion in 2012-13.

Even according to official figures, inflation is running at 23.9 percent and unemployment at 28.6 percent. Probably the most serious consequence for Iran in the medium term is a shortage of funds for productive investment, because without this, unemployment will rise further. The Oil Stabilization Fund (OSF), established under the previous government of Mohammad Khatami to collect windfall oil revenues for investment, is treated as a matter of national security and shrouded in the secrecy that has grown as tensions have increased over the nuclear program. But many suggested the OSF has been emptied to cover current spending. And fears of alienating the wider public at a time of international pressure have dogged the International Monetary Fund-backed program, begun at the end of 2010, to phase out at least $50 billion worth state subsidies of everyday items. Hence subsidies on fuel and bread have been replaced with ‘targeted payments’ that, in going to almost all Iran’s 75 million people, are effectively cash handouts.

The government’s intention was to phase out subsidies and target payments only at the poor, and yet the current payment of 485,000 rials (around $40 by the official exchange rate) per person per month is, as a near-universal payment, contributing to fiscal imbalance.

Calculations from Iqtisad Iran, based on an Economy Ministry report from February, estimate that from the introduction of the program until last month the government has saved 400 trillion rials on subsidies while spending 700 trillion rials on ‘targeted payments’, giving an overall loss of $20 billion (at an average rate of 13,000 rials to the dollar). This is not to say the Iranian economy is likely to collapse any time soon. Remarkable figures on gold imports from Turkey — with $6.2 billion in gold sales in the first seven months of 2012, five times the total of 2011 transactions — suggest the central bank may be seeking yellow liquidity for the government and private businesses to pay for imports without the problems of using dollars. They also suggest Iranians are retreating to their traditional safe haven of cold coins stashed at home. Neither is Iran about to cave in on the nuclear program. As one would expect, Rezaei breathed defiance in an interview with the Financial Times last month, vowing that Iran’s reaction to an Israeli attack “would be so severe that nobody would ever dare think of attacking us again”.

The real question is: are sanctions a prelude to war or an alternative? The strategy of sanctions was put forward in the West, not least by the Obama administration, as a prelude to talks. So, as the measures bite, the time for a serious diplomatic initiative, if there is to be one, has come.

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

October 1, 2012 0 comments

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When best friends stray

by Ahmed Moor October 1, 2012

written by Ahmed Moor

The past three years have seen the ‘special’ relationship between Israel and the United States deteriorate in ways unseen since at least the George H.W. Bush presidency. While American subsidies and loan guarantees, along with American military technology, continue to flow to its client state, the personal antipathy between the countries’ two leaders is a fact that has helped make Israel a partisan issue. But just as significantly, the divergence between America and Israel’s interests has been growing more pronounced in recent years, particularly where Iran is concerned.

By all accounts US President Barack Hussein Obama is not regarded sympathetically in Israel, where his part-Muslim heritage is a source of suspicion in a country where Muslims are second-class citizens. Furthermore, his early exposure to members of the Palestinian and Arab-American communities in Chicago reinforced the pre-election impression that he would be less indulgent than both presidents Bill Clinton and George W. Bush had been.
When Obama decided to visit Cairo early in his administration many Israelis felt that their fears were validated. Indeed, his Cairo speech — as his address at Cairo University came to be called — condemned Israeli colonization in the West Bank. However mild and obvious the president’s statements may have been, Israeli leadership interpreted them as an early barb issued by a hostile administration.

Since then, tensions between America and Israel have only grown. Several recent incidents either contributed to or highlighted the erosion of the relationship.

In September, the American right and Israelis stridently criticized Democrats for omitting both the word “God” and mention of Jerusalem as Israel’s capital from their platform. The party leadership retreated in short order and engineered a rare amendment to the party platform on the second day of their convention. The vote to amend the platform failed three times before the moderator, Los Angeles Mayor Antonio Villaraigosa, made the unilateral decision to change the language. The moment highlighted the discontent with Israel among members of the Democratic party’s base — something party bosses are eager to conceal from major pro-Israel donors.

The Democrat’s initial decision to reinforce decades of official American policy came in the aftermath of an all-but-explicit Benjamin Netanyahu endorsement of Republican Mitt Romney’s campaign for president. The message was communicated to Democrats when Romney visited Jerusalem and declared his allegiance to a Likud vision for Palestine and Israel.

Netanyahu’s spectacular arrogance — which has undoubtedly contributed to the erosion in support — was on further display recently when he issued a stern public rebuke to the American president and his Secretary of State, a virtually unprecedented move by a leader of a client state.

“Those in the international community who refuse to put red lines before Iran don’t have a moral right to place a red light before Israel,” he said on the issue of Iran. Sharp condemnations of his unseemly behavior were quickly issued from all quarters.

When Netanyahu later requested a meeting with the president on a visit to New York, his request was denied. Obama’s decision had the two-force impact of dampening Israeli hopes that America would wage war on Iran on their behalf, and firmly situated Netanyahu in the backseat on Iran policy.

The worsening relationship between the American administration and the Israeli leadership carries several implications for the region. The most obvious is that war against Iran — which American neoconservatives and their Israeli counterparts have been working to develop for years — is not a certainty yet. To be sure, the crippling American pressure and sanctions that have been directed against the Islamic Republic will not likely be reduced in the near term, but the threat of war is greatly diminished nonetheless.

For the Palestinians however, the erosion in American support for Israel is unlikely to impact their near-term outlook for freedom. Obama is aware that he stands to gain little by prodding a recalcitrant Israeli public into adhering to civilized norms of behavior; apartheid is a fairly permanent part of that society now.

Change will hinge on the question of whether the recent diminution of mutual regard between America and Israel is a permanent feature of the political landscape, or whether it is an aberration. Is the erosion in support simply the consequence of a bad personal relationship or symptomatic of a deeper rift?

Ahmed Moor is co-editor of "After Zionism: One State for Israel and Palestine" and a Masters in Public Policy candidate at Harvard University's Kennedy School of Government

October 1, 2012 0 comments