Until just a week ago estate agents in Tehran were marketing a housing project due to be launched at the end of the year by an Irano-Finnish company. Now, however, agents contacted over the telephone say the project has been “indefinitely postponed”. The reason? “Well, you know where the country is headed,” says one Tehran real estate dealer. Where the country is headed, of course, is toward a possible clash with the United Nations over its alleged plans to build nuclear weapons. The clash could lead to economic and other sanctions or, if the worst comes to worst, military conflict.
The Tehran leadership under President Mahmoud Ahmadinejad, however, appears confident that it can take on the UN and win.
• It has completed “emergency plans to face aggression” and is busy building a network of logistical support facilities in the western and southern provinces.“The time when Muslim leaders kowtowed to powerful infidel rulers is over,” Ahmadinejad said during a meting with visiting Indonesian Parliament Speaker Agung Laksono in Tehran Tuesday. “We will pursue out goals regardless of (any) threats.”
• Some $3 billion has been added to the regular defense budget in the form of a “supplement for emergency exigencies” under the direct control of the “Supreme Guide” Ali Khamenei.
• The “Supreme Guide” has also created a “High Council of Military Planning” under former Defense Minister Adm. Ali Shamkhani.
• A list of “high priority” sites that might be attacked has been established and their protection against air strikes or ground sabotage operations beefed up.
• Import of “sensitive goods” has been increased to build up stocks to face sanctions.
• The Central Bank of Iran (CBI) has transferred some $8 billion of its assets from the European Union to Asia to forestall the possibility of its accounts being frozen by the EU.
• The international network of radical organizations created and supported by Iran has been put on full alert.
Apart from the defensive measures already taken, Tehran has also issued a number of threats, some vague, some not. One vague threat has come from Defense Minister Mostafa Muhammad-Najjar who told a press conference in Tehran last week that Iran would “retaliate with double force” against the US and its allies in the region, presumably with missiles. Vague threats have also been made about unleashing terrorist groups against the US and its allies in the Middle East and Europe.
Tehran, however, had made two specific threats. One was to persuade the Organization of Petroleum Exporting Countries (OPEC) to cut production so as to raise prices and “create economic pressure on potential aggressors.” That has not happened. In its ministerial meeting in Vienna last week OPEC decided to maintain the present production levels and work to bring prices down to $28 a barrel (as opposed to the current average of $50). This was a signal that OPEC did not wish to encourage Iran.
The second specific threat made by Tehran was the launching of a new “expanded intifada” led by Hamas and Islamic Jihad against Israel. But with Hamas now trying to form the Palestinian government it is unlikely that it would wish to become involved in an Iranian strategy. As for Islamic Jihad, the Palestinian group closest to Tehran, it is not strong enough to take both Israel and Hamas, simply to please the Iranians.
The truth is that things are not going as well for the Islamic Republic as President Ahmadinejad claims. Here are some facts that he might want to consider:
• Over the past six months an estimated $300 billion, mostly belonging to small or medium investors, has been transferred from Iran to foreign banks, especially in the Gulf states. (The chief justice of the Islamic Republic Mahmoud Shahroudi puts the figure at $700 billion).The perception in Tehran is that the new administration is deliberately provoking an unnecessary conflict for ideological reasons by restarting a program to process uranium at a plant in Isfahan. Iran does not have any nuclear power station, and thus does not need any enriched uranium for at least another two years.
• Over 10000 Iranian companies have moved their headquarters from Iran to Dubai, Turkey, Cyprus and even Pakistan.
• At least 10 oil companies, among them British Petroleum (UK), Baker-Hughes (US), Halliburton(US), and Conoco-Phillips(US) have either withdrawn from Iran or are winding down operations, even in the Qeshm and Kish “free zones.”
• Several major Western companies have also started their withdrawal from Iran. These include Baker-Hughes (US), Siemens(Germany), General Electric (US) and Phillips (Holland).
• Some international banks are also winding down their activities in Iran. These include Standard-Charter (UK), ABN-Amro(Holland), Credit Suisse (Switzerland), UBS (Switzerland), and the insurance brokers AON Corps.
• The US Treasury Department has revived the long forgotten Iran-Libya Sanctions Act (ILSA) and is investigating 73 European, American, Canadian and Japanese firms that do business in Iran in violation of its provisions. Many of those firms are likely to withdraw from Iran rather than face being shut out of the US market.
• Iran imports nearly 40 percent of the refined petroleum products it needs from other OPEC members, including Iraq and Kuwait. The imports could stop if the United Nations’ Security Council imposes sanctions on Iran. That would lead to a severe rationing of petrol for private and commercial use at a time that the military’s demand would be on the increase.
There could be even more bad news for President Ahmadinejad even if the UN does not impose any sanctions immediately. The economic slowdown provoked by a flight of capital and the postponement of many projects has already destroyed thousands of jobs and job opportunities. It has also undermined the national currency that has lost 17 percent of its value against a basket of hard currencies since September. The Ahmadinejad administration has tried to cope by increased spending, including a depletion of the “Reserves Fund” set up by the previous government. The result is a new boost to inflationary tendencies that have been the bane of Iran’s economy since the 1970s. And that would hurt the masses of the poor most, the constituency that helped Ahmadinejad win the presidency.
Somewhere along the road, the very nuclear program over which the crisis is brewing could be in jeopardy. IranÂ’s imports of raw uranium, mostly from Gabon and Niger, through France, could be stopped by the UN. IranÂ’s own uranium deposits, believed to be among the largest in the world, would not be brought to production level anytime soon without the help of Western companies.
IranÂ’s nuclear program could also face difficulties from another direction. Even without specific UN sanctions, the seven-nation group of exporters of nuclear technology and equipment could decide to stop Iran from buying what it needs from them. And that could slow down the Iranian program, whether civilian or military, for years if not decades.
President AhmadinejadÂ’s macho talk may well sound good for propaganda purposes. But he sure needs a fallback position that he does not seem to have. The way he is going now may give the last laugh to the persons he defeated in last JuneÂ’s election.
