By Farangis Najibullah, RFE/RL|
President Ahmadinejad's provincial visits frequently
include talk of cheap loans and other costly pledges
With much of the world grappling with government
bailouts and other fallout from financial turmoil, leaders in Iran have hailed
the ongoing crisis as the end of capitalism, saying the West is "being punished
by God with a recession."
They also insist that Iran's "independent economy" will be unscathed by the
But Tehran-based economic experts warn Iran's leadership against excessive
reliance on long-standing efforts to isolate their economy and the risk of
plummeting profits from the sale of fossil fuels.
Supreme Leader Ayatollah Ali Khamenei recently
suggested the crisis indicates that Western liberal democracy is on the verge of
Cleric Says Iran Cannot Gloat Over Financial
TEHRAN (Reuters) -- Ex-President and
influential cleric Ali Akbar Hashemi-Rafsanjani has said Iran should
not gloat over the West in its financial crisis because one of the
major consequences -- tumbling oil prices -- was also hurting the
No. 2 OPEC producer.
President Mahmud Ahmadinejad, who rode to power on a pledge to spread oil and
gas wealth equitably and who tirelessly denounces Western culture, described the
crisis as "the end of capitalism."
Talk of international market meltdowns and credit crises has likewise found its
way into Iranian mosques, too. In a sermon at Tehran's main mosque last week,
one ayatollah warned European and Arab countries not to tie their future to the
United States, "because the financial crisis shows the U.S.'s failure."
The perceived schadenfreude has gotten bad enough that it prompted influential
Ahmadinejad rival and ex-president Ali-Akbar Hashemi-Rafsanjani to
caution his countrymen against gloating over the global
Many Iranian leaders appear to believe the ongoing crisis will not affect Iran,
saying they'll escape turmoil because their economy has grown increasingly
independent since the 1979 Islamic Revolution.
Indeed, while world markets have plummeted this year, Iran's stock exchange --
the Tehran Bourse -- has been moving in the opposite direction. While share
prices have softened in the most recent days, Iran's market has broadly seen
prosperity all year, with share prices rising up to 20 percent in value.
Economists attribute the Iranian stock exchange's relative strength to a lack of
foreign investors and government control over the economy.
"The fact that the international crisis didn't have much impact on the Iranian
economy doesn't mean that the Iranian economy is strong -- it means it is an
isolated economy and separated from international development," says Mohammad
Ghuli Yusufi, a Tehran-based economist. "So successes in the world economy
wouldn't have an impact on the Iranian economy and likewise, the international
crisis wouldn't do any good to improve the situation in Iran. The situation
here, really, is not good. We have experienced many hardships and continue to
Despite their public cheers over the international financial dilemma, Iranian
officials acknowledge that the crisis is curbing world demand for oil and
pushing prices downward.
That's sobering news for an oil-rich country that depends heavily on
hard-currency revenues from the hydrocarbon exports.
While Ahmadinejad has appeared delighted by the worldwide financial crisis, the
fallout could adversely impact on his political future, too. Ahmadinejad came to
power promising to fairly distribute the country's oil wealth among the Iranian
people and improve living standards for the poor.
During the president's frequent trips to Iran's provinces, he regularly promises
cheap loans to the poor. Such pandering is criticized by detractors as
presidential pandering in an attempt to buy votes ahead of his bid for
reelection in mid-2009.
When oil prices skyrocketed last summer -- reaching nearly $150 a barrel -- Iran
reportedly made up to $7.5 billion a month from oil sales, and Ahmadinejad could
afford a public spending spree.
But with oil prices down to less than half that, Ahmadinejad is likely to have
less cash to dole out during his presidential election campaign.
Food prices have soared despite high unemployment
Yusufi notes that falling demand for oil "would
deprive our officials of the opportunity to spend lavishly to correct or cover
their mistakes, as they've grown accustomed to doing."
"With decreasing oil revenues, our officials are facing serious restrictions,"
Yusufi says, "they can no longer use oil money so abundantly in order to achieve
their political or economic goals or to keep people happy by importing the goods
The Iranian Central Bank warned this week that national oil revenues will have
fallen some $54 billion short of forecasts by the end of this year.
There have been reminders of the Iranian economy's vulnerability even absent any
obvious ties to the global crisis, however.
The official unemployment figure is 15 percent, although experts put the true
jobless rate at closer to 30 percent. Inflation is said to be running above 25
percent, but food prices alone have risen by 40 percent over the same period
last year. Even Iran's central bank acknowledged, in a virtually unprecedented
disclosure earlier this year, that more some 14 million Iranians -- nearly one
quarter of the population -- live in poverty.
Beyond decades of U.S. strictures on doing business in Iran, more recent UN
sanctions aimed at curbing the country's controversial nuclear program have
ensured that Western investors stay away.
Other investors are arguably more wary of political uncertainties in Iran.
"No one rushes to Iran to invest their money," says Mehdi Taghavi, a professor
of economics at a Tehran university, "because everything here depends on the
"Shares here are currently rising, but it's very possible that they could all go
down because of some incorrect political decision," Taghavi says. "There's too
much political risk involved here. And there is, of course, isolation. Hence,
foreign investors don't come to Iran."
Copyright (c) 2008 RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036. www.rferl.org
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