Saturday, November 3, 2007

Ahmadi-Nejad seeks tighter grip on revenue

Mahmoud Ahmadi-Nejad, Iran’s president, this week moved to consolidate further his government’s hold over the country’s main sources of revenue when he presented his nominees to take over as the oil and industries ministers to parliament. 

The move follows a recent cabinet reshuffle and the appointment two months ago of a central bank governor seen as more sympathetic to the president’s economic policy. Analysts suggest that, if his ministerial choices are approved, this will increase his influence over the top three organisations that administer the country’s resources.

Parliament will vote in the middle of the month on whether to approve the new candidates, both of whom have served as acting ministers following the resignation of their predecessors over the summer.

Gholam-Hossein Nozari is thought likely to win his vote of confidence as oil minister but there are doubts about the proposed industry minister, Ali-Akbar Mehrabian, an ally of the president, who may be blocked for lack of experience.

The oil ministry generates the lion’s share of Iran’s revenues, providing about 60 per cent of the government’s budget and has been the focus of several power struggles between the president and parliament.

The previous oil minister was imposed on the president after parliament rejected three of his nominees. Mr Nozari is believed to be less hostile to the government’s populist policies.

Analysts say he has been backed by one of the two main interest groups inside the oil ministry – the National Iranian South Oil Company (Nisoc) – which is the biggest subsidiary of the National Iranian Oil Company and deals with onshore projects in southern Iran.

Mr Nozari was head of the Nisoc’s intelligence department during the previous reformist administration and it was under his direction that Nisoc complained about an “oil mafia”, which it said awarded contracts to western oil companies, including Royal Dutch Shell, when it should have been giving them to local entities.

The oil ministry is projected to earn about $70bn (£34bn) by March 20 when this Iranian year ends – far beyond its budgetary needs. Many economists have blamed the government for failing to channel surplus oil revenues towards productive sectors, using them instead for day-to-day spending, which has led to record levels of liquidity.

The ministry of industries and mines oversees Iran’s biggest factories through two holding companies: the Industrial Renovation and Development Organisation, which handles car factories producing more than 1m cars annually, and the Iranian Mines and Mining Industries Renovation and Development Organisation.

The two ministries are set to carry out most of Iran’s privatisation programme, disposing of companies worth hundreds of billions of dollars. “Ahmadi-Nejad is trying to have as much control as possible on financial resources not to let them go to [critical] political groups in times of election,” said one economist.

Source: FT

Posted by Editors in 01:36:48 | Permalink | No Comments »

Thursday, November 1, 2007

Wider Iranian threat is feared

While the White House dwells on Iran’s nuclear program, senior U.S. diplomats and military officers fear that an incident on the ground in Iraq is a more likely trigger for a possible confrontation with the Islamic Republic. 

In one sign of their concern, U.S. military policymakers are weighing whether to release some of the Iranian personnel they have taken into custody in Iraq. Doing so could reduce the risk that radical Iranian elements might seize U.S. military or diplomatic personnel to retaliate, thus raising the danger of an escalation, a senior Defense official said. The Bush administration has charged that Iran is funding anti-American fighters in Iraq and sending in sophisticated explosives to bleed the U.S. mission, although some of the administration’s charges are disputed by Iraqis as well as the Iranians. Still, the diplomatic and military officials say they fear that the overreaching of a confident Iran, combined with growing U.S. frustrations, could set off a dangerous collision.

An unintended clash over Iraq “is very much on people’s minds,” said an American diplomat, who like others spoke on condition of anonymity because he was not authorized to publicly express his views. A U.S. attack on Iran’s nuclear infrastructure, despite recent heated rhetoric from the White House, today “seems more remote,” he added. An on-the-ground clash could be sparked, say current and former officials, by a confrontation along the 900-mile-long border between Iran and Iraq, or in the waters of the Persian Gulf. Or it could be ignited over one of the periodic U.S. attempts to arrest those the Americans assert are members of the Iranian Revolutionary Guard Corps in Iraq. The U.S. military might also retaliate if a bombing in Iraq killed a large number of U.S. troops and there was clear evidence of Iranian involvement, U.S. officials have warned.

One senior U.S. military official said the risk of war was now ever present in the Persian Gulf region. He described it as a “sleeping dog” that could be all too easily roused. This current of thinking appears to be widely shared among many operational-level U.S. diplomats and military officers. Though these American officials are not among the handful of senior aides with whom President Bush consults in making final policy decisions on Iran, they are nonetheless influential as debate continues between hawks and moderates on how to handle the issue. Many of them judge a U.S. attack on the Iranian nuclear program less likely because of the administration’s stated emphasis on diplomacy, the strained condition of the U.S. military, and worries that an attack could set off Iranian retaliation without halting Tehran’s nuclear program for long.

In the Pentagon, the shift in thinking has occurred in part because many in the department’s leadership — including Defense Secretary Robert M. Gates — have concluded that a strike against suspected Iranian nuclear sites could be counterproductive, senior Defense officials said. Washington charges that Iran is seeking to develop nuclear weapons, whereas Tehran says it is seeking to produce nuclear energy for civilian purposes. Gates believes that bombing the nuclear sites would probably slow but not stop the Iranian nuclear effort while building domestic support for the program in Iran and undermining the international diplomatic effort to pressure Tehran to give up its suspected nuclear ambitions, said the senior Defense Department official.

“The nuclear program is still clearly years down the road,” the official added. “The more immediate threat is Iranian meddling and arms supplies into Iraq.” J. Scott Carpenter, a former top State Department official in the Bush administration now with the Washington Institute for Near East Policy, said that despite warnings from some quarters that the administration was close to launching an attack on the nuclear facilities, “there is a lot of trepidation and circumspection” within the corridors of Washington power. On the other hand, the risk of a collision on the ground in Iraq has been growing since January, when Bush condemned Iran’s activities in Iraq, threatened to destroy Iranian networks he said were providing military gear to anti-U.S. forces, and dispatched additional warships and other military hardware to the region. Suddenly, U.S. officials who had been complaining publicly that Iran was broadly meddling were now accusing Tehran of responsibility for the deaths of hundreds of U.S. troops.

They focused especially on the activities of the Quds Force, an elite and ideologically motivated unit of the Revolutionary Guard Corps that the U.S. believes has sent hundreds of members across the porous border with Iraq to help train and provide weaponry to anti-American militias. U.S. intelligence officials continue to track the flow of weapons they say come from Iran, and believe that in addition to much-publicized explosively formed projectiles — roadside bombs that can penetrate armored vehicles — Iran is supplying rocket-propelled grenades, shoulder-fired antiaircraft missiles and large rocket launchers, according to a senior military official in Baghdad. However, U.S. military officials have provided limited evidence of these charges, and some outside analysts and foreign officials remain dubious of the extent of Tehran’s involvement. Military officials said U.S. concern about Iranian motives increased after members of the Revolutionary Guard Corps seized 15 British sailors and marines at gunpoint March 23 on disputed charges that they were in Iranian coastal waters. Although the British personnel were released after 13 days, the incident convinced the U.S. military that Tehran was willing to break international rules, the senior officer said. U.S. military commanders have since reviewed many of their procedures in an attempt to prevent American military personnel from falling into a similar situation.

The senior U.S. military official said that any American forces threatened with capture would be under orders to fight back, because capture would put their lives at risk. U.S. Navy officials worry in particular about the Quds Force, which they say is expanding a fleet of more than 1,000 small attack boats, and which is separate from the normal chain of command of the Iranian navy. They say the force, which is not believed to be under the full control of the Iranian leadership, could mount small-scale but provocative attacks. U.S. forces are themselves involved in high-risk operations considered provocative by Iranians and critics of the U.S. In January, when U.S. forces seized five Iranians from Iran’s northern consular office in Irbil, Iraq, their real goal was to pick up a senior official of the Revolutionary Guard Corps who they believed was with the group, according to two former U.S. officials.

If they had captured a senior official of the guard, “it would have raised the ante pretty high with the Iranians,” said Bruce Riedel, a longtime CIA analyst and a former White House National Security Council aide now with the Brookings Institution’s Saban Center for Middle East Policy. “The risk is that events on the ground can get out of the control of policy planners in Washington or Tehran and can create explosive situations that may go further than anyone on either side wanted,” Riedel said. Former officials say one goal of U.S. operations in Iraq is to provide convincing proof to an outside world that is often skeptical of American warnings about Tehran. But such an operation entails risks, analysts say. The Pentagon has insisted on keeping the five Iranians in jail all year, despite the protests of Iranian and Iraqi officials, and over the urgings of some State Department officials and U.S. allies. U.S. officials maintain that the five Iranians taken captive in Irbil were members of Iran’s Quds Force, but Iraqi and Iranian officials insist they were credentialed diplomats. The American military arrested a sixth Iranian in northern Iraq in September, saying he also was a Quds Force member who had supplied weapons and money to insurgents; Iraqis and Iranians said he was part of a business delegation traveling with the knowledge of the Iraqi government. Iraqi President Jalal Talabani has demanded his release. The Irbil operation was revealed because of a leak to the news media from an Iraqi source, and U.S. officials have hinted that more such operations are going on out of public view.

But U.S. officials appear to be coming to the conclusion that it is not worth holding some of the less valuable captives if it risks retaliation. “It might be useful to cut them loose so [the Iranians] don’t have an excuse to pick up someone as a bargaining chip,” said the senior Defense official. The senior military leadership also seems focused on the risks of retaliation in other ways. Although some lawmakers and conservative commentators have been proposing attacks on Iranian armament supply lines and training camps within Iran, some senior Pentagon leaders are cool to the suggestions.

The new chairman of the Joint Chiefs of Staff, Navy Adm. Michael G. Mullen, who has privately weighed in against an attack on Iranian nuclear sites, also in his first weeks has voiced opposition to striking supply lines inside Iran, saying interdiction efforts within Iraq are sufficient. “I just don’t think there’s any stomach for it, and there’s no need for it right now,” said one official familiar with Mullen’s thinking. Pentagon officials are hoping for a continuation of a recent gradual decline in attacks from Iranian-backed groups, notably the Shiite militia loyal to anti-American cleric Muqtada Sadr. Officials aren’t sure why there has been a falloff, but they hope it means that Iran has heard their warnings. Nevertheless, American officials say they remain keenly aware of the vulnerability of their 160,000 troops in Iraq and the 27,000 U.S. personnel in Afghanistan. “The military is going to be cautious about going after Iranians in Iraq, operations on the border or training camps in Iran itself,” said Suzanne Maloney, a former State Department Iran analyst now at the Saban Center. “I think they realize this could escalate; it’s the kind of war the military itself doesn’t want.”

Source: The Los Angeles Times

Posted by Editors in 14:51:18 | Permalink | No Comments »

Iran bank chief warns Ahmadinejad on money supply

Iran’s new central bank governor has warned the government of President Mahmoud Ahmadinejad over money supply growth, urging measures to prevent a further rise in inflation, the press reported Thursday.

“The government, the private sector and anyone who cares about the nation’s economy should prevent the increase of liquidity,” said Tahmasb Mazaheri, quoted by most moderate Iranian newspapers. “It has an inflationary impact and it will lead to higher prices,” said Mazaheri, who was appointed in September as part of a wide-ranging economic reshuffle by Ahmadinejad.

At the end of May 2007, the central bank said money supply had grown by a colossal year-on-year rate of 39.4 percent. Mazaheri said money supply in Iran is currently running at the equivalent of 140 billion dollars, double the average for the year 2005-2006 which was 70 billion dollars. He complained that the central bank in the past had dipped into its reserves to offer credit lines to Iranian banks — causing liquidity to rocket higher — and in future would be stricter with allocating loans. “The banks should not rely on the central bank when it comes to handing out credits since last year it caused the increase in the liquidity.” Mazaheri also cautioned: “The decrease in the liquidity will not happen overnight.”

The huge growth in money supply has added to fears over prices in the Islamic republic which have surged in recent weeks, especially for basic foodstuffs and services, hitting the poor hardest. Iran’s year-on-year inflation is currently 15.8 percent, according to the central bank. However, many economists dispute this and Iranian parliamentary research has estimated that inflation this year will be 22.4 percent. Many economists in Iran have accused Ahmadinejad of stoking inflation problems by ploughing windfall revenues from high oil prices into local infrastructure projects promised on provincial visits. But the government insists it is merely fulfilling Ahmadinejad’s election promises of making ordinary people feel the benefits of oil wealth and has inflation under control.

Source: AFP

Posted by Editors in 14:48:27 | Permalink | No Comments »

Russia and China block tough Iran sanctions: U.S.

The United States said on Thursday Russia and China had been blocking tough U.N. sanctions against Iran for months and pledged a drive to impose them if Iran did not halt nuclear activity within two weeks. Iran’s president said he was “not worried at all” about broader economic sanctions, dismissing them as ineffective.

Nicholas Burns, U.S. Undersecretary of State for Political Affairs, said China and Russia had been stalling a new United Nations Security Council resolution since late March. The five permanent powers on the Security Council plus Germany will meet in London on Friday to weigh the scope for more sanctions. Increased U.S.-Iranian saber-rattling has raised fear of wider Middle East war if diplomatic pressure fails.

Burns, in Vienna for consultations with the U.N. nuclear watchdog director, said Iran had been given a grace period since the last U.N. resolution on March 24. “Russia and China have been effectively blocking a third resolution since then,” he told reporters. Moscow and Beijing, two of the five veto-holders on the Council and both with big trade ties to Iran, have insisted on more time for diplomacy. Western powers agreed in September to delay seeking harsher sanctions after Iran agreed a deal with the watchdog International Atomic Energy Agency (IAEA) to answer questions about past secrets of its nuclear work within several months.

The Vienna-based IAEA will issue a report in mid-November. Burns said a clean bill of health from the IAEA alone would not spare Iran from exposure to stiffer U.N. penalties. “Our judgment is that if Iran has not suspended in the next couple of weeks, that’s not sufficient, it will remain a refusal to meet Security Council requirements. That will be a highly relevant factor for us,” he said. “Our hope is the following: first, a third sanctions resolution will be passed as soon as possible. Second, we’d very much support seeing the EU go forward with (its own) sanctions. Third, major trading partners of Iran should reduce trade to show Iran that this is not business as usual.”

LAVROV-RICE CONSULTATIONS

Russia said Foreign Minister Sergei Lavrov spoke by phone with U.S. Secretary of State Condoleezza Rice on Wednesday about diplomacy “aimed at resolving the Iranian nuclear problem.” The Kremlin, which argues harsher sanctions would push Iran into a dangerous corner, has tried to persuade Tehran with recent top-level visits to heed the international community and give a full account of its nuclear program. China on Thursday again urged a diplomatic solution to the issue, recognizing it had become difficult. Iran has defied three Council resolutions, two with modest sanctions attached, since last year demanding it stop enriching uranium. Iran says it wants nuclear-generated electricity, but Western powers suspect a disguised bid to build atom bombs. Tension over Iran’s nuclear activities has helped catapult oil prices to record highs of over $90 a barrels in recent days.

Iran’s Revolutionary Guards commander warned the United States on Wednesday that it would find itself in a “quagmire deeper than Iraq” if it attacked the Islamic Republic. President Mahmoud Ahmadinejad suggested new bilateral U.S. sanctions would mainly hurt European Union countries doing business with Iran, which has vast oil and gas reserves. “The weapon of sanctions does not work,” Ahmadinejad said in a speech inaugurating a petrochemical plant on Iran’s Gulf coast on Thursday. “We are not worried at all … American companies don’t have any business in Iran,” he said.

Source: The Reuters

Posted by Editors in 14:36:55 | Permalink | No Comments »