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IRAN UPDATE February 7, 2008 CRACKS IN IRAN’S ECONOMIC FACADE International Sanctions + Domestic Mismanagement = Economic Decline Publicly, Iran’s mullahcracy remains defiant over the nation’s nuclear program. Government officials greeted the latest round of United Nations sanctions – to which the United States, Russia, China, France, Great Britain and Germany agreed in late January – with jeers, calling the pressure “a waste of effort” and vowing to pursue their nuclear ambitions. At home, however, evidence is mounting that international sanctions are, in fact, starting to bite. Total imports into Iran rose by nearly 10 percent between March and November of last year, Iran’s official customs agency reported. Staples such as corn, rice, and sugar are among the goods increasingly acquired from abroad. In particular, the agency reported, imports of metal have soared, with the Iranian government reportedly spending some $4 billion during the period in question to ease pressure on the country’s metallurgical sector. Making economic matters worse in Iran is the questionable fiscal stewardship of its President, Mahmoud Ahmadinejad. He has implemented an array of destructive policies – such as arbitrary wage and benefit increases, cash infusions to politically popular but unproductive investments, and unnaturally low interest rates on Iranian banks – since taking power two-and-a-half years ago, says a comprehensive study of Iran’s economy in the January edition of Middle East Economic Survey. The predictable results of this dysfunctional package of “reforms”: inflation has officially topped 15 percent and, by some estimates, will eclipse 20 percent this year. Simultaneously, the study says, Iran’s economy apparently has succumbed to “Dutch Disease,” in which booming exports can lead to rapid currency appreciation. The rising value of Iran’s rial is making foreign goods cheaper and more competitive, crippling domestic industries and generating job cuts and bankruptcy for some domestic producers. The economic news out of Iran should prove heartening to policymakers in Washington. Despite Tehran’s official denials, economic pressure is having a pronounced effect. As their next logical step, U.S. officials should parlay these measures into a comprehensive economic strategy that signals to Iran’s leaders that the costs of their nuclear acquisition will be high indeed.

www.committeeonthepresentdanger.org. P.O. Box 33249, Washington DC 20003-3249 Contact: Larry Haas, larry@larryhaasonline.com. 202 257-9592

 

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