As Iran braces itself for coping with a new set of sanctions an unofficial debate on their possible effects is revealing deep divisions within the Islamic Republic.
So far, five views could be discerned from this debate.
The first view belongs to those who claim that the sanctions, imposed by the United Nations, the United States and the European Union, amount to a blessing in disguise and should therefore be welcomed.
The most eloquent exponent of this view is, no surprise, President Mahmoud Ahmadinejad himself, the man whose almost childishly provocative policies triggered the crisis in the first place.
One of the main planks of Ahmadinejad’s presidential campaign in 2005 was the concept of “khod-kafaie” or self-sufficiency inspired by the North Korean model. This means that the Islamic Republic should reduce its dependence on the outside world to the strictest minimum. The rationale for this is that since all other governments in the world consist of the enemies of the Hidden Imam they would never do anything good for the Iranian regime.
According to Ahmadinejad the longer sanctions lasts the faster would be Iran’ own industrial development. Necessity being the mother of invention, the shortage of many goods and services would force the Iranians to produce them themselves. The sanctions, and with them the freezing of Iran’s relations with scores, if not all, other countries will also protect the Iranian population against “contamination” by foreign, especially “infidel”, cultures.
Officials and religious grandees who live in a virtual world of political fantasies express the second view. These admit that the imposition of sanctions does represent a problem for the regime but claim that the overall effect is minimal.
Among those who make such a claim is Foreign Minister Manuchehr Mottaki. Ignoring the failure of his ministry to stop UN resolutions, Mottaki claims that the Islamic Republic has found ways to reduce the effect of sanctions. If we are to believe him more than 70 per cent of all sanctions approved by the UN since November 2006 were never imposed in practice.
Without naming them, Mottaki recalls the fact that a dozen or so countries, among them Turkey, Austria, Greece, Malaysia and Venezuela have helped the Islamic Republic bust many sanctions.
The message is: grin and bear it!
Those officials and managers of major state-owned corporations who share neither Ahmadinejad’s illusions nor Mottaki’s fantasies express the third view.
Chief among them is Ali-Akbar Salehi, the American-educated head of Iran’s nuclear programme. In a rare public statement, he has admitted that the new set of sanctions will significantly slow down the programme.
Alaeddin Borujerdi, who heads the security commission of the Islamic Majlis, Iran’s ersatz parliament, also admits that sanctions will hurt. He has gone even further by evoking the possibility that, given certain vague conditions, Iran would stop uranium enrichment up to 20 per cent.
Next, we have the fourth view expressed by the internal opposition and many ordinary citizens. One exponent of this view is Ayatollah Mahdi Karrubi, once a Khomeinist firebrand and now a critic of the regime.
According to this view the Islamic Revolutionary Guard Crops (IRGC) actually welcomes sanctions as an opportunity for making bigger profits.
The theory here is that sanctions hurt legitimate trade but encourage the black economy much of which is run by the IRGC. Thus, goods that cannot be imported legally will be brought in through smuggling IRGC’s rings operating in Turkey, Iraq, Afghanistan, Pakistan and Dubai. At the same time, IRGC will be able to take over or buy for a black farthing firms that go under because of sanctions.
Finally, we have the fifth view coming from what is left of Iran’s non-state business community. Earlier this month the Tehran bazaar, the hub of the nation’s trade with the outside world, pulled down its shutters for five days in protest. This was the first time in more than a decade that the bazaar, once the bastion of Khomeinism was openly defying a regime it helped bring to power over 30 years ago.
On surface, the bazaar’s complain was about a 70 per cent rise in value added tax announced by the government. However, bazaar spokesmen went out of their way to point out that many merchants faced bankruptcy as a result of the new sanctions.
The Tehran Chamber of Commerce estimates that t sanctions could lead to a 1.8 per cent fall in the annual growth of the gross domestic product. Because current growth is no more than three per cent at the moment, that, combined with other effects of the recession, could mean negative growth, mass unemployment and a drastic fall in demand.
The Labour Ministry has already released estimates claiming that up to 3000 jobs are being destroyed each day.
The big question concerns the positions of Ayatollah Ali Khamenehi, the “Supreme Guide” and still one of the major players in Iran’s complex politics. The best guess is that he shares at least part of Ahmadinejad’s analysis and would not frown if the IRGC commanders made an extra buck thanks to sanctions.
It is too early to judge what the eventual effect of the sanctions would be. The fashionable opinion in global circles is that sanctions do not work. Nevertheless, the truth is that sanctions hurt and weaken regimes against which they are imposed. According to one confidential study prepared for the Ministry of Commerce, over the next three years, more than 40,000 businesses, among them some large corporations, are likely to go under as a result of the new sanctions. Much of Iran’s industry depends on imported parts many of which may now enter the forbidden list because of suspected dual use. . Non-oil exports, which earned over $23 million last year, also face a sharp drop if access to parts is restricted or denied. Especially hit would be the energy industry at a time that some of Iran’s older oilfields need massive investment and new technology to continue in production.
What is surprising in all this is that the regime, unable to agree on a common analysis of the situation, does not appear to have any strategy either for ending the sanctions or minimising their effect. Four years ago, Ahmadinejad described his administration as a train surging ahead without either a brake or a back gear. It now seems that he was right. The only question is whether or not his train is heading for disaster.