Stanislav Ivanov Rials collapse doesnt mean Iranian economics demise / SCO Shanghai Cooperation Organization

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Rials collapse doesnt mean Iranian economics demise
12.10.2012 13:33 Stanislav Ivanov

Sudden crash of Iranian currency in the beginning of October 2012, when one dollar cost about 37 thousand Iranian rials, caused spontaneous protest actions in the country and attracted attention of media and other countries to Iran. On October, 1, rial fell for 17% and for the last year it lost 80% of its cost.

Rapid crash of national currency lows down purchase power of Iranian rial, which causes damaging increase of prices i.e. hyperinflation. Such rapid damp of currency value usually leads to lowering of other economic indicators. Devaluation of rial led to price increase for almost all goods, including food and living essentials. According to the latest data from Iranian experts, published on the IRNA news agency website, another 20% of the population went below the poverty line. This social group includes 40% of the country population now.

In Teheran, in the largest trade center of the country, shop owners closed their shops as a protest action. They demand from the government to take immediate actions to stabilize currency rate. Iranian central bank decided to limit allowed amount of currency for currency import and export 5 thousand USA dollars, to stabilize currency market. We should note, that notwithstanding spontaneous protest actions towards financial policy of the country, Trade Unions Association of Iran expressed its loyalty to government, which tightened measures aimed to stop illegal currency trade. Situation in the country is under governmental control. Rial even won back several points and by the end of the first week of October 1 dollar cost 34 rials.

Washington is sure that these crisis indicators in Islamic Republic of Iran are caused by restrictive USA and EU sanctions against Teheran. Israel said that Iran is on the edge of the catastrophe (right before default). Israel was sure that damages from unsold oil by the end of current year will make 4050 bln USA dollars. Dramatic falling of Iranian currency made Israel government sure that sanctions may be an effective measure against further nuclear development in Iran. Washington and Tel-Aviv, hoping for further increase of domestic Iranian contradictions and overthrough of the regime from inside, started convincing their European and Asian partners in the necessity of further stiffening of sanctions towards Iran. And it seems that some countries leaders are about to agree. As was announced by French president François Hollande on the UN General Assembly, Paris is ready to pass new sanctions. Not to punish a great Iranian nation, but to show its governors that they must negotiate until its too late, he pinpointed. In fact its exactly vice-versa: its the Iranian people who took the main burden of latest EU sanctions and found themselves on the edge of humanitarian disaster. Under unprecedented pressure from USA after some hesitations Asian importers of Iranian oil (China, Japan, South Korea and others) started breaking their contracts with IRI.

Moscow thinks that one-legged sanctions from several countries only interrupt the process of negotiations, which is conducted by the six international mediators. Thus, the goal of the last meeting at the 67th UN Assembly was opinion exchange about how to stimulate Iran and IAEA Secretariat to improve collaboration and solve those questions concerning nuclear program of Teheran, said Sergey Lavrov, Minister of Foreign Affairs of Russia.

Introduction of sanctions, according to the Statute, is solely in the competence of the Security Council, reminded Lavrov in New-York. Decisions should be made collectively with understanding that they must help a country to start a dialogue and to solve questions which UN has, and not to isolate the country at all. Its known that USA and some other countries of the western world suspect Iran to develop nuclear weapon hiding this development under peaceful nuclear program and they are not satisfied with UN international unilateral sanctions towards this country. The latest include EU ban for Iranian oil export and financial operations with Iran since July, 1, 2012.

Teheran doesnt deny that it enriches uranium up to 20%, but it announces that the nuclear program is one of the national priorities and is aimed only at satisfaction of nations need in atomic energy. Its right to the enrich uranium Teheran considers to be consistent with the responsibilities to keep the regime of nonproliferation of nuclear weapon. Peaceful character of nuclear program is confirmed by special fatwah of spiritual leader of IRI Ayatollah Ali Hamenei, who is equal to the country leader.

But does this mean that Iran will not leave its position in the field of uranium enrichment? Before one of the stages of negotiations with the six Ayatollah Hamenei empowered the main Iranian negotiator Said Jalili: If you feel that refusal from uranium enrichment up to 20% will do good for Iranian republic you can accept this term. I know you as a real patriot and I approve your any decision in advance. And so? When Jalili asked his western opponents if they were ready to recall all sanctions from Iran if it stopped enriching uranium, he got a reply that sanctions would not be recalled completely, and that Iran would only get right to buy medicine and spare parts for civil aviation! So what do you want from us finally? Jalili asked. His question never got any reasonable answer, and this is easily explained. The ultimate goal of political-diplomatic, financial-economic and information-propagandist pressure of the West is not Iranian nuclear program at all. It serves only as a cause for further repressions of this country and for tightening the sanctions. The West needs the Islam Republic to stop existing as it is. To replace it with some subnational entity where transnational oil and gas companies would be the hosts, the regime would be democratized according to western standards and the foreign policy would be reduced to highest approval of Atlantic society politics.

American politologists, authors of the conception of Big Middle East dont exclude possible options of dividing the country according to nationalities: Persians, Azerbaijanians, the Kurds; formation of new countries instead of Iran (Great Kurdistan, Great Azerbaijan, Persia). It looks like Washington would be satisfied with a model of new Iran which would be wordly Islamic (like Turkey, Iraq, Turkmenistan). But for now these American projects are non-demanded. Notwithstanding all efforts of USA and their allies, they cant manage to organize Persian spring as a continuation of Arabic spring.

Iran president Makhmud Akhmadinejad admits that sanctions towards Islamic Republic of Iran influence country economic more and more in negative way, but he thinks that government will manage to overcome these temporary difficulties Iranian leader announced in the interview on the national TV, that the country has some problems concerning oil trade, but he is sure, - he said, - that the matter will be fixed. It is known that export of gas and oil brings to state budget up to 90% of foreign currency. Other leaders of the country also say that they have internal resources to change the financial-economic state of the country to the best. Thus, parliament speaker Ali Larijani announced that about 80% of Iranian problems were caused by misruling and only 20% were caused by international embargo. He also mentioned that the country has more important problems than international sanctions. For the last seven years liquidity had highly increased for 83%, - Larijani said. This increase means that investments are not possible, production is lessening, inflation is growing. As a result we take wrong decisions and make wrong steps. Many Iranian experts still express confidence that in spite of many objective and subjective difficulties and currency problems the country will avoid national economic collapse.

This is a point of view of Iranian economist Mohammed Masiney, in particular: Iranian economy has some problems but there is no crisis. Iran has large foreign exchange reserves. More than 100 bln USA dollars, according to estimations. Iran doesnt have any large debts to any country. Iranian economy is self-sufficient in many sectors. Of course, unemployment and inflation will have place, but no global crisis and collapse is going to happen, I dont see any signs of such possibility. Its impossible. Iran will try to compensate losses from termination of relationships with EU countries with the help of regional partnership with Southern Caucasus, Central and Southern Asia, Russia, Iraq, Turkey and other countries.

So we can say that crash of Iranian national currency and negative factors in economy became the most serious test for reliability of the current regime. Its directly connected with tightening of sanctions towards Teheran from USA and its allies, but we cant deny the fact that many financial and economic problems are hidden inside the country itself, particularly in non-effectiveness of state management. IRI has significant resources to overcome the crisis. Hopes of USA, EU and Israel that the sanctions will make Teheran refuse its nuclear program or even lead to change of ruling regime are too previous and groundless. One shouldnt forget that Iran with 80 million population and rich natural resources, developed manufacture and agriculture, infrastructure, scientific and technical potential, modern army, good geographic location and very united (on the Shiite ground) people is an influential regional country and plays an important role in Islamic world.

In the existing conditions of political ostracism to IRI from the West Russia could start active cooperation with this country in all fields without breaking any UN sanctions. In particular, it could reconsider its decision about cancellation of contracts for supplying Iran with defense systems such as air-defense missile system -300. UN sanctions do not touch it.

Such pragmatic approach would be in consistence with national interests of Russia and Iran. We shouldnt forget that Iran is our traditional regional trade partner in the field of trade and economy, science and techniques, energy and other fields, as well as in the field of regional safety. Due to Iranian authorities actions Caspian direction is the safest for Russia from illegal migration point of view (delivery of Arabian contractors) to Northern Caucasus, drug traffic from Afghanistan and Pakistan. To compare, according to international data, Iranian government manages to withdraw about 35% of drugs which go via Iranian border, while Russia can withdraw only 4% of drugs, which go from Afghanistan. Iran together with Russia wants Caspian sea to stay free from military presence of non-regional countries, and Iran also has a very stable position in all ecology problems, oil and gas sources and fish stock in Caspian sea, construction of new strategic oil pipelines and in the question about Nagorno-Karabakh.

It would be very profitable from economic point of view for Russian regions, state and private traders to take a niche which formed as a result of western ostracism in trade with Iran. In circumstances of financial- economic global crisis Iran could become a reliable partner for many Russian companies and enterprises.

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Comments(1)

Excellent Article! Good to find someone that really knows what they are talking about and can produce insightful material for us visitors. without a doubt looking forward to your next posting.

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