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Iran: Nuclear Success and Economic Collapse | ASHARQ AL-AWSAT English Archive 2005 -2017
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There is a belief that the outcome of the US presidential elections may affect Iran’s political significance and even the outcome of the Iranian presidential elections that are due to take place next June.

If the Republican candidate John McCain is successful in the presidential race, the incumbent Iranian President Mahmoud Ahmadinejad will be re-elected. However if the Democratic presidential nominee Barack Obama wins the race then it is possible that a conservative, or let us say a moderate conservative since all officials in Iran are conservatives, would be elected, most prominently the mayor of Tehran, Mohammed Baqer Qalibaf who proposes himself as a pragmatic nominee who can correct the economy in the interest of the Iranian nation. There is also Mohammed Ali Najafi, the former minister of culture under Hashemi Rafsanjani and former minister of planning under Mohammed Khatami.

In addition, Dr. Mohammed Reza [Aref], who served as the first vice-president to former president Mohammed Khatami, is preparing himself and Mohammed Nahavandian, the head of Iran’s Chamber of Commerce, Industries and Mines, is another name that is being thrown around.

Those who are monitoring the developments in Iran from the West do not understand what is really taking place in the country especially that most of them do not know who is really ruling Iran. The ultimate decision lies in the hands of the Supreme Guide, Ayatollah Ali Khamanei. However, the Iran of today differs from ten years ago as it is run by two powers: the intelligence security apparatus and the Revolutionary Guards. On the political level, it has begun to slant even more towards the conservatives however the slogan of the Islamic Republic of Iran still remains: “Death to America, Death to Israel!”

Professor Hossein Askari from George Washington University, who has written a number of books on the Middle East and oil and the economy, explained that these slogans are used for [attracting] the masses: “Just as America has its own masses, where some of Obama’s opponents say that he is a Muslim, Iranian officials also have their masses.” However these slogans do not shackle Iran because it wants to be part of the international community.

Therefore, “If Obama is elected, the next president [of Iran] will not be Ahmadinejad,” as Ahmadinejad criticized the world in a negative manner so Iran can look forward to a fresh start. “But if the next president is John McCain, then Ahmadinejad would be the best [candidate] to face the United States and the war of ideology may continue because McCain is the antithesis of Obama; he wants to impose preconditions.” Professor Hossein Askari expects that the Iranian Islamic Republic would not accept any conditions because, “what distinguishes it from every other country in the world, including Russia and China, is that it will not bow to America so if this is its way of thinking how would it then allow America to set preconditions upon it? This will not happen. There will be a war of ideology and it will not progress.”

Perhaps the financial crisis in America has lowered the chances of Republican nominee John McCain winning the presidential race let alone the advantages that Democratic candidate Obama has over McCain that make him the better option.

The financial crisis has transformed into economic recession and started in the United States and trickled down to the rest of the world. However a number of Iranian officials, including the current president Mahmoud Ahmadinejad and former president Mohammed Khatami considered this crisis God’s curse upon the West and believe that God is protecting Iran from its harm.

But could the presidency of Ahmadinejad be considered a success? He challenged the world and America and dodged war and under his authority, Iran continues to develop its nuclear weapons program yet the Democrats in America want to open dialogue with Iran. With regards to Iranian pride, is this issue more important than the economic failure that has dominated Ahmadinejad’s rule?

Professor Askari admitted that most Iranians believe that it is within Iran’s right, under the Nuclear Non-Proliferation Treaty, to continue uranium enrichment. The Iranians do not want anybody to accuse them of working on developing a [nuclear] bomb “because nobody knows the train of thought of the Iranian regime.”

Perhaps many Iranians do not agree with Ahmadinejad on a range of political levels but are in agreement with him regarding the nuclear file. They consider him successful in playing mind games with the Western media and politicians and believe that Iran has not given in. Professor Askari said, “This is the successful part of the story; but if you go to Iran you would also see that what concerns most Iranians is the economic situation because from their perspective, their country has not been successful economically.”

For ten years, the rate of inflation has fluctuated between 20 and 25 per cent and the level of unemployment has reached over 15 per cent. It is common knowledge that over the past six years, oil prices have been extremely high and this should have been reflected, in an oil-producing country, by economic success. However, Iran has failed in this regard.

Why? Professor Askari answered, “The conclusion is the following: Iran printed [too much] money and this is what caused inflation. From another perspective, the Iranian currency remained pegged to the American dollar over the past ten years (to counter the black market) increasing inflation. Inflation is eating away at the value of the currency but Iran kept its currency pegged to the dollar so what happened? Inflation is increasing and more importantly the prices of properties soared in that one feddan of land in Tehran’s finest suburbs cost up to 40 million dollars.”

“The rate of inflation increased so what did the people do? They took risks in the sectors of real estate and property and converted any money that they earned in Iranian Rials into US dollars then they moved abroad. Why? Because the government froze the exchange rate.”

According to Askari, over the past six years, an amount of approximately 250 billion dollars has been moved out of Iran. As for Iranian oil revenues, the government used these to support the Iranian currency “and this is why dollars were taken out [of the country] because nobody with money wants to invest in Iran.”

Therefore, the statements made by the Iranian government that claimed that the western system is collapsing and that Iran is immune are false. Askari said, “If we look at Iran, it depends completely on the exporting of oil and because the West is suffering, the demand for oil is decreasing, and Iran is not able to change the forces of supply and demand. With the price of oil falling, Iran’s revenues are also decreasing.”

Professor Askari pointed out that Iran should have built up its reserve of hard currency when oil prices were high but that reserve was in fact decreased. Iran’s problem today is that if it wanted to support its currency and exports it will not be able to do so and if the price of oil drops below US $50 per barrel then Iran will have two options. Firstly, according to Askari, it could let the Iranian Rial float, which will lead to a decrease in its value and could even collapse. Secondly, it could stop importation and subsidizing foodstuffs. This will have an impact on Iran and reveal that the policy that it followed was flawed.

If the price of oil remains low for two years then Iran will be affected because an oil exporting country like Saudi Arabia for example, could borrow money if necessary in contrast to Iran that could not borrow money because of economic sanctions.

Professor Askari suggested that Iran tries to adapt itself to the oil revenues that it gains and that it may face internal problems if it stops subsidizing food or it will not be able to support the Rial. “Iran made a mistake; it shouldn’t have fixed the exchange rate.”

What will happen with regards to its projects? Askari said, “If we look back on history, no country with a weak economy has been able to impose its authority abroad. If we look at recent times, we can see that some OPEC countries aimed to stop oil prices from increasing as way to weaken Iran. If oil prices decrease, Iranian influence in the Gulf will be affected.”

But this will not affect the Iranian enrichment program as it is inexpensive. Iran’s economic problem will not necessarily change Iran; on the contrary, the hardliners will gain power.

There may be some in Washington who are beginning to comprehend the idea of living with a nuclear Iran especially that it has been able to live with a nuclear Pakistan, which is less stable than Iran.

Next week we will shed light upon the Iranian presidential candidates, one of whom will be victorious if Obama is victorious. But if McCain wins the presidential race then expect Ahmadinejad to be re-elected!