Monday, March 17, 2008

Meet the winner

THE parliament returned by Iranians in nationwide voting on Friday March 14th appears at first glance to be a replica of the outgoing one. Conservatives who claim stricter adherence to the 1979 Islamic revolution’s ideals, and adopt a more combative tone with the outside world, retained a majority almost as crushing as the one they gained in the last parliamentary election, in 2004. A claimed 60% of the electorate turned out for the vote, allowing Iran’s unelected supreme leader, Ayatollah Ali Khamenei, to declare that his people had foiled an enemy plot to foment voter apathy. But as with many aspects of life in the Islamic Republic, the election result is more nuanced than it may seem.

The conservatives, or principlists as they prefer to be called, are far from united behind their leading figure, Mahmoud Ahmadinejad, who has been Iran’s president since 2005. Their divisions reflect not only policy differences, but also jockeying by Mr Ahmadinejad’s rivals in advance of next year’s presidential election. Running on a separate list from the president’s supporters, powerful principlists such as Ali Larijani, Iran’s former nuclear negotiator, attacked Mr Ahmadinejad for the alleged incompetence of his economic management, which has pushed inflation close to 20%, and for needlessly antagonising foreign powers with inflammatory rhetoric. Aware that enthusiasm for the president has waned, even among the provincial poor who make up his strongest constituency, most conservative candidates tried to distance themselves from Mr Ahmadinejad, instead emphasising their closeness to Ayatollah Khamenei.

Although final results will not be known before run-off votes for some 60 of the 290 seats are held next month or so, it is clear that loyalists to the president will face a harder task in pushing through legislation than in the outgoing parliament. Some analysts say it is likely that the more pragmatic principlists may forge tactical alliances with outright opponents to Mr Ahmadinejad in order to keep him in check, particularly in regard to his populist economic policies.

The core of that opposition is made up of so-called reformists, whose aim is to broaden Iran’s heavily constricted democracy, expand the civic freedoms that have been greatly curbed under Mr Ahmadinejad’s rule, and present a friendlier face in foreign policy. Despite severe handicaps, including a sweeping ban that disbarred most of their candidates, press crackdowns that muzzled the reformist press, conservative charges of straying from Islam, blunt commands from the supreme leader that Iranians should back conservatives, and the decision by much of their natural constituency to boycott the vote, reformists appear to have succeeded in scoring modest electoral gains, increasing their foothold in parliament from just 40 to probably more than 50 seats.

Even with the possible aid of conservative pragmatists, that is far from enough to alter Iran’s course over such controversial issues as its nuclear programme. This, like Iran’s sponsorship of armed Shia factions in Iraq, and of Hizbollah, the Lebanese Shia group, is controlled by the supreme leader. In fact, it is Ayatollah Khamenei who appears to be the biggest winner from the election.

The owlish, black-turbaned cleric already controls important institutions such as the state broadcasting monopoly, hugely wealthy religious charities, the Basij, a paramilitary volunteer force with millions of members, and the Republican Guards, the shadowy, disciplined and well-funded elite corps that runs parallel not only to the national army and intelligence services, but dozens of large companies. He also appoints the 12 members of the Guardian Council, the body of clerics that vets both candidates and legislation for adherence to the principles of the Islamic revolution.

With Mr Ahmadinejad set for a testy relationship with the new parliament, Ayatollah Khamenei may find it even easier to bend policy to his will. Yet by patiently accruing power since he replaced the revolution’s founder, Ayatollah Khomeini, in 1989, the supreme leader also increasingly risks associating his position with the Islamic republic’s failures. As UN-imposed sanctions bite deeper, and even Iran’s middle classes struggle to make ends meet, the triumphalism of Iran’s conservatives is likely to ring increasingly hollow.

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Saturday, November 24, 2007

They think they have right on their side - Why the Iranians see themselves in a very different light

They think they have right on their side

Nov 22nd 2007 | TEHRAN
From The Economist print edition

Why the Iranians see themselves in a very different light


IT IS not hard to find examples of the peculiar divergence between how the world looks from Tehran, Iran's capital, and how it looks in the West. Take the recent release of a long-awaited report on Iran's nuclear programme by the International Atomic Energy Agency, the UN's nuclear watchdog. To Iran's state-controlled television, the report showed Iran's innocence and slapped its detractors in the face. In Washington, DC, the focus was on the report's doubts, which appeared to justify a push for further punitive sanctions.

But in many ways, the sparring capitals look more like mirror images than polar opposites. On different scales, both Iranians and Americans tend to take an imperial view. Both governments demonise the other. They use past resentments to reap political rewards by looking tough.

Yet in both America and Iran, currents of dissent are growing, even inside their administrations. In neither case do the dissenters differ much from their leader's stated objective: for Iran it is to claim a perceived right to nuclear technology; for America it is to perform an assumed duty to stop Iran making atomic bombs. In both cases, critics lambast their leaders for tactics that may take their countries to war.

In some respects, those leaders are oddly similar. George Bush and Mahmoud Ahmadinejad are both deeply religious, referring frequently to God's guiding hand. Both are idealists rather than pragmatists, and skilled at folksy populism. Both have replaced dozens of competent officials with like-minded conservatives. And both are now considered, by a large slice of their countrymen, to be bungling and dangerous. The difference is that it has taken Mr Ahmadinejad just two years in power to achieve the unpopularity Mr Bush has gained after six.

There are differences, of course. Mr Bush may be accused of curtailing civil liberties in pursuit of his war on terror. But his government does not drag women off the streets for maladjusting hijabs, the obligatory covering of head and shoulders, or jail student activists as dangers to national security or smear political opponents as traitors or muzzle their speech.

On the other hand, Mr Ahmadinejad may be bombastic but he has not implied he may bomb America—and could not, even if he wanted to. Oceans and an unparalleled armoury separate America from any conceivable enemy, except small bands of terrorists. The strategic view from Tehran, by contrast, is of guns pointing from every direction, at close range, and of potential treachery from within. Only a paranoid fringe in America thinks the country's constitution or the values underpinning it face an imminent threat of being overturned. That fringe is in charge in Iran.

Mr Ahmadinejad's inner circle consists of zealots determined to keep the flame of the 1979 Islamic revolution burning, no matter how much fuel it takes; in fact, it takes a great deal. Of the literal kind, hydrocarbons, Mr Ahmadinejad is lucky to have plenty to burn. For Iran has the world's second-largest reserves of natural gas and third largest of oil. This president's tenure has coincided with surging prices that have pushed Iran's oil income above $50 billion a year. By some counts, it has earned nearly as much under Mr Ahmadinejad as it did in the two four-year terms of his predecessor, Muhammad Khatami.

But to the dismay of Iranian economists, Mr Ahmadinejad has used this windfall to build immediate political capital rather than invest in the future. He has tirelessly toured the provinces, promising massive spending on local projects while maintaining subsidies that, by some estimates, devour a third of the government's budget and account for some 15% of GNP.

Not only has this postponed what many see as vital reforms. The flood of government cash has helped push annual inflation towards 20%. Property prices have risen even faster, sending rents in Tehran beyond the means of new households when the population pyramid's widest tier bulges in the 20-30 age bracket. Property owners have benefited, but sociologists note that the gap between rich and poor yawns as widely as under the hated shah whom the ayatollahs ousted.

Not that wealthy Iranians are very happy either. Businessmen, unlike ordinary citizens, are painfully aware of how international sanctions squeeze the economy and how tougher sanctions could hurt it far more. Until now, traders have generally found ways to keep going. They have switched en masse from Western to East Asian suppliers, such that in a few short years China has replaced Europe as Iran's main trading partner. They have also found ways to skirt the rather effective American pressure on international banks to avoid dealing with Iran, mostly by working through foreign intermediaries, and in non-dollar currencies.

But such means come at increasing expense. One economist reckons that extra charges to open letters of credit via Dubai add 10-20% to the cost of every transaction. Small businesses courier cash back and forth to the Gulf emirate, but should banking strictures tighten, bigger firms would face serious trouble. The local assembler of Peugeot cars, says a consultant, is not going to be able to pay for 100,000 French-made gearboxes in cash.

Government officials try hard to project confidence. They point, for instance, to a boom in house construction and to Iran's success at gaining self-sufficiency in such things as wheat, steel and cement. Petrol rationing, which sparked widespread protest when introduced in June, has, in fact, sharply cut imports. It is true, too, that despite the sanctions imposed by America since the revolution, Iran has enjoyed two decades of steady if unspectacular economic growth. The country seems mildly prosperous compared with its neighbours, with tidy parks, clean streets and impressive figures for schooling and health care.
We don't really need you anyway

Another common official refrain is that the world needs Iran more than Iran needs the world. There is some truth to this. With its 70m consumers, many of them young, Iran is a hugely tempting market. China and India thirst for Iranian energy, while Europe dreams of finding an alternative to dependence on Russia for its gas.

Yet it is hard, hearing tales of bureaucratic hurdles, corruption and Mafia-like interference by such privileged groups as the Revolutionary Guards, and seeing the level of talent displayed by many Iranian entrepreneurs, not to conclude that a country with such rich natural endowments is performing far below its potential.

Iranian analysts debate whether Mr Ahmadinejad's free-spending ways have bolstered or diminished his base of support. Some argue that the rural poor, long disregarded by the urban elite, have directly benefited from state handouts and still warm to his rhetoric of class retribution. Even the middle class, they say, can see for itself the improvements in infrastructure, such as the underground train systems being built in four provincial cities, as well as for the capital. Others note that in local elections last December, the president's men, who generally fared badly, fared worst in districts where Mr Ahmadinejad previously served in local government. The implication is that those who know him best believe him least.

Iranians grumble openly about the economy. They tend to be less vocal but more worried about Mr Ahmadinejad's other policies. Unbidden, many express dismay at his inflammatory questioning of the Nazi Holocaust, citing this as an example of antics that achieve nothing for Iran. When the mayor of Tehran, Muhammad Qalibaf, a pragmatic conservative, recently called for more “maturity and intelligence” in the handling of foreign affairs, the rumble of approval was almost audible over Tehran's traffic din. His voice joined a chorus that has spread across Iran's complex political spectrum, from the left wing of idealist reformers through the varied hues of conservatism in the centre and up to the margins of the usulgaran (fundamentalist) faction, whose radical right wing Mr Ahmadinejad represents.


Yet such criticism has tended to be muted. Iran is no longer as brutal a police state as in the revolution's early years nor even as oppressive as many of its neighbours. Though Iranians bemoan the ineffectiveness of the reformists who dominated the country under his predecessor, Mr Khatami, many do credit them with dispelling the mood of fear that permeated the 1980s and much of the 1990s.

But under Mr Ahmadinejad, selective repression has intensified just enough to signal that open dissent has again grown dangerous. His fellow fundamentalists who dominate such institutions as the judiciary, the state prosecution service and the police have gleefully carried out orders to harass reformist newspapers, stifle student and labour protests, and crack down on “bad hijab”, supposedly improper adherence to strict Islamic dress codes.

Their efforts have proved quite effective. Most Iranians probably resist the idea of returning to the supposed Islamic purity of the early revolution, yet most are far too preoccupied with getting by to protest. The hijab, even reformists admit, is not much of an issue to the broader public, even though many hate the bullying, hectoring ways by which it is imposed.

Indeed, most Iranians are probably quite proud of their experiment with Islamic-flavoured semi-democracy. Despite the flaws in the system, they tend to respect their institutions. As several young Iranians volunteered to this correspondent, having lived through one revolution, the last thing they want is another.
Knowing the right beards

Besides, Mr Ahmadinejad has had powerful allies. The supreme leader, Ayatollah Ali Khamenei, has directly blessed the fierce morality campaign, and said he considers this the best administration the Islamic Republic has yet seen, though a newspaper close to Mr Khamenei this week accused the president of treating his opponents “immorally”.

Surprisingly to outsiders, who tend to view Iran through the lens of its articulate dissidents, Mr Khamenei remains a revered figure; his office still basks in the shadow of the republic's founding father, Ayatollah Ruhollah Khomeini. Indeed, official portraits of the bearded head of state show a smaller inset of his famously glowering, even more lushly bearded predecessor peering over Mr Khamenei's shoulder.

The supreme leader cultivates an aura of aloofness from mundane affairs, but his backing carries more than moral weight. He directly controls the state broadcasting system and the 125,000-man Revolutionary Guards corps, which mans Iran's borders (so profiting, it is said, from smuggling rackets), liaises with overseas Islamist groups such as Lebanon's Hizbullah and the Palestinians' Hamas, and also runs hundreds of commercial enterprises.
AFP

Revering the president's favourite mosque

Mr Khamenei is also constitutionally charged with setting the broad foreign-policy agenda. He appoints top judges and half the members of the Guardian's Council, a body of clerics that, among other things, vets candidates for political office. The leader has access to a pool of funds that includes pious donations as well as income from several bonyads, holding companies tied to religious foundations.

Still, Mr Khamenei, a shrewd arbiter of Iran's bruising politics, has been careful not to allow the president full rein. Crucially, he has refrained from blocking the rise of conservative rivals of Mr Ahmadinejad, such as Hashemi Rafsanjani, a pragmatic former president, in key institutions.

Yet the supreme leader has so far concurred with Mr Ahmadinejad's hard line on one crucial issue, the nuclear file. This may reflect a similar world view: both deeply distrust Western intentions, sense that offence may be Iran's best defence, and feel that Iran is poised to regain its natural place as the region's strongman.

Iran has, after all, so far got away with defying the UN Security Council's order to stop enriching nuclear fuel. But his support on this score for the president also reflects Mr Khamenei's respect for the skill of a populist who has, far better than his rivals, conveyed to the public a link between possession of nuclear technology and a semi-sacred sense of national destiny.
Clever advertising jingles

This is important, because the nuclear programme is not easy to promote. Practically speaking, it makes little sense. Iran has poured an estimated $10 billion into building a complete, home-grown nuclear industry, yet it has just one nuclear power plant, the Russian-built Bushehr reactor, due to come on stream next year. The same money could have built ten conventional plants of the same capacity, fired solely by the natural gas that Iran currently flares off into the sky, because it has not invested in the technology to recover it. Russia has pledged a ten-year supply of fuel for the Bushehr reactor, meaning that there should be no use, any time soon, for the output of Iran's costly nuclear-enrichment plant at Natanz. The purpose of its heavy-water facility at Arak is even more obscure.

Yet the nuclear issue has been successfully portrayed to the Iranian public as a question not of economics but of national pride. Iranians bristle at the suggestion that they may not need nuclear energy. Why, they retort, should they not have it? The sole reason, as Mr Ahmadinejad insists, is that the West wants to keep Iran backward. Most Iranians appear convinced by their government's repeated assertions that the programme is entirely peaceful. Even if Iran produces a nuclear weapon, comes the common retort, so what? Neighbouring Pakistan, far less stable, has them. So does Israel. Those countries have only existed since the 1940s, whereas Iran has been home to a brilliant civilisation since history's beginning. So the rhetoric goes. Given Iran's sense of itself as a thwarted great power, it is easy to see how the issue has grown so touchy.

Yet unease persists among sophisticated Iranians. Even some religious conservatives understand that the nuclear question is not a Manichean one, pitting the good of Iranian progress against the bad of its enemies' ill will. Western countries, led by America, have been inept at explaining that they do not wish to deny nuclear know-how to Iran but simply do not trust its leaders. But the less outspoken opposition of nearly all Iran's neighbours, as well as of Russia and China (see article), is starting to focus Iranian minds.

The barrage of official praise for the latest report of the UN's nukes-watching agency cannot disguise the fact that it includes some pointed criticisms. True enough, Iran has co-operated pretty much to the letter with the agency. What is missing, the report strongly implies, aside from the required obedience to the Security Council's diktat over nuclear enrichment, is Iran's recognition that it could easily do more to dispel doubts as to its intentions.

It is this point that is starting to cause schisms in Tehran. In a brave move, Shireen Ebadi, a Nobel prize-winning human-rights lawyer, recently called in public for an immediate stop to the enrichment programme. Needless to say, Ms Ebadi is seen as anathema in Iran's ruling circles. Yet her point that Iran would lose little by such a step merely aired in public what more establishment figures say in private. It also served to underline the anxiety generated by another of Mr Ahmadinejad's brash gestures. Following a speech in which he blasted critics of his nuclear policy as traitors, his government announced it would press espionage charges against Hossein Mousavian, who served as Iran's chief nuclear negotiator under Mr Khatami. This, it seems, is what drew this week's sharp rebuke of the president from the supreme leader's camp.

The common explanation in Tehran is that the espionage charge was aimed at tarring the previous administration and reformists in general as dangers to the revolution. Mr Mousavian is known to be close to Mr Rafsanjani—some would say under his protection. Yet this kind of tough domestic politicking also showed up Mr Ahmadinejad's government as dangerously isolated in the world. If there is really nothing to hide about the Iranian nuclear programme, what could there be to spy on?

Mr Ahmadinejad may be correct in judging that, for the time being, he can brazen out his nuclear programme. Most Western countries plainly judge the risks of a military attack on Iran to be greater than its rewards. America is probably beginning to see the advantages of co-operation with Iran in resolving Iraq's woes. But Mr Ahmadinejad is wrong to think that he is home free. The danger of an unwanted outbreak of hostilities, provoked by some chance incident, remains great. Iran will continue to pay a high price, even without toughened sanctions, for its lack of openness on the nuclear issue.

Perhaps most distressing for Mr Ahmadinejad, he is likely to pay a high price in domestic politics for his lack of tact. Assuming there is no American attack on Iran to provoke a nationalist backlash, his radical fundamentalists may well get drubbed in the parliamentary elections in March. In the poll that brought him to power in 2005, some 20m Iranians refrained from voting. Many are itching to get in a word this time. Rather like his nemesis, Mr Bush, Mr Ahmadinejad may find himself facing a punchy parliament packed with people who want to get rid of him.

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Thursday, June 28, 2007

Iran and nuclear diplomacy: A yes or a no?

Iran and nuclear diplomacy

A yes or a no?
Jun 28th 2007

Diplomacy for diplomacy's sake

IF IRAN were to decide to end its high-wire defiance of the UN Security Council and open negotiations for a diplomatic solution to the stand-off over its nuclear work—telling all about its nuclear past and suspending production of potentially bomb-useable uranium and plutonium—it would need to find a ladder to climb down on. Constructing one has been the aim of European diplomats in months of off again, on again talks. So far, to no avail.

Suspension, Iran insists, is out. Instead, as the council has stepped up sanctions, Iran has speeded up the installation of centrifuge machines at its enrichment plant at Natanz and cut back co-operation with the International Atomic Energy Agency, the UN's watchdog. So what to make of a new offer from Iran's nuclear negotiator, Ali Larijani, to talk to the IAEA about answering its inspectors' persistent questions?

Last year, in an effort to avoid being referred to the Security Council for its egregious breaches of nuclear safeguards, Iran offered to clear up all outstanding issues in just three weeks. It never did. Inspectors want answers about undocumented imports of nuclear kit, unexplained traces of plutonium and enriched uranium, suspected military links to what is claimed to be a peaceful nuclear programme, and the possession of documents and the conduct of experiments that make little sense except as part of a weapons programme.

Sceptics note that Mr Larijani's latest offer (talks about ways to provide answers, rather than just giving them) comes as sanctions discussions—on the agenda of George Bush's meeting next week with Russia's Vladimir Putin—are set to resume at the UN. Yet for months Iran has insisted it would not co-operate in the inspectors' quest until its case was returned from the Security Council to the IAEA.

The agency's director-general, Mohamed ElBaradei, professes himself encouraged by the apparent change of heart. In a report to the IAEA's 35-nation board in June, Mr ElBaradei had called Iran's obstruction of the inspectors' work “disconcerting and regrettable”.

In his talks with European diplomats, Mr Larijani has also toyed with the idea of a time-limited suspension of enrichment work—only to be overruled by his bosses in Tehran, says Gary Samore of the New York-based Council on Foreign Relations. It was never clear whether his aim was to get negotiations started without too much loss of face or just to head off sanctions. Offering to dribble more information to inspectors may likewise be a play for time.

This week Mr Larijani praised Mr ElBaradei for an earlier controversial suggestion that Iran might as well be allowed to continue limited enrichment, since it had already mastered many of the skills. Mr Larijani also knows that both Russia and China are unenthusiastic in principle about sanctions. By sounding emollient rather than defiant, he may be hoping they will all help keep the UN off his back.

And if they don't, or won't? Pointing out what Iran needs to do to restore its nuclear reputation and searching for ways to get negotiations going may not be time wasted. Eventually, the diplomats hope, Iran, in an increasingly tight spot, will reach for both as its ladder to climb down on. But no one is holding their breath.


Copyright © 2007 The Economist Newspaper and The Economist Group. All rights reserved.

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Sunday, March 11, 2007

A predator becomes more dangerous when wounded

Washington's escalation of threats against Iran is driven by a determination to secure control of the region's energy resources

In the energy-rich Middle East, only two countries have failed to subordinate themselves to Washington's basic demands: Iran and Syria. Accordingly both are enemies, Iran by far the more important. As was the norm during the cold war, resort to violence is regularly justified as a reaction to the malign influence of the main enemy, often on the flimsiest of pretexts. Unsurprisingly, as Bush sends more troops to Iraq, tales surface of Iranian interference in the internal affairs of Iraq - a country otherwise free from any foreign interference - on the tacit assumption that Washington rules the world.

In the cold war-like mentality in Washington, Tehran is portrayed as the pinnacle in the so-called Shia crescent that stretches from Iran to Hizbullah in Lebanon, through Shia southern Iraq and Syria. And again unsurprisingly, the "surge" in Iraq and escalation of threats and accusations against Iran is accompanied by grudging willingness to attend a conference of regional powers, with the agenda limited to Iraq.

Presumably this minimal gesture toward diplomacy is intended to allay the growing fears and anger elicited by Washington's heightened aggressiveness. These concerns are given new substance in a detailed study of "the Iraq effect" by terrorism experts Peter Bergen and Paul Cruickshank, revealing that the Iraq war "has increased terrorism sevenfold worldwide". An "Iran effect" could be even more severe.

For the US, the primary issue in the Middle East has been, and remains, effective control of its unparalleled energy resources. Access is a secondary matter. Once the oil is on the seas it goes anywhere. Control is understood to be an instrument of global dominance. Iranian influence in the "crescent" challenges US control. By an accident of geography, the world's major oil resources are in largely Shia areas of the Middle East: southern Iraq, adjacent regions of Saudi Arabia and Iran, with some of the major reserves of natural gas as well. Washington's worst nightmare would be a loose Shia alliance controlling most of the world's oil and independent of the US.

Such a bloc, if it emerges, might even join the Asian Energy Security Grid based in China. Iran could be a lynchpin. If the Bush planners bring that about, they will have seriously undermined the US position of power in the world.

To Washington, Tehran's principal offence has been its defiance, going back to the overthrow of the Shah in 1979 and the hostage crisis at the US embassy. In retribution, Washington turned to support Saddam Hussein's aggression against Iran, which left hundreds of thousands dead. Then came murderous sanctions and, under Bush, rejection of Iranian diplomatic efforts.

Last July, Israel invaded Lebanon, the fifth invasion since 1978. As before, US support was a critical factor, the pretexts quickly collapse on inspection, and the consequences for the people of Lebanon are severe. Among the reasons for the US-Israel invasion is that Hizbullah's rockets could be a deterrent to a US-Israeli attack on Iran. Despite the sabre-rattling it is, I suspect, unlikely that the Bush administration will attack Iran. Public opinion in the US and around the world is overwhelmingly opposed. It appears that the US military and intelligence community is also opposed. Iran cannot defend itself against US attack, but it can respond in other ways, among them by inciting even more havoc in Iraq. Some issue warnings that are far more grave, among them the British military historian Corelli Barnett, who writes that "an attack on Iran would effectively launch world war three".

Then again, a predator becomes even more dangerous, and less predictable, when wounded. In desperation to salvage something, the administration might risk even greater disasters. The Bush administration has created an unimaginable catastrophe in Iraq. It has been unable to establish a reliable client state within, and cannot withdraw without facing the possible loss of control of the Middle East's energy resources.

Meanwhile Washington may be seeking to destabilise Iran from within. The ethnic mix in Iran is complex; much of the population isn't Persian. There are secessionist tendencies and it is likely that Washington is trying to stir them up - in Khuzestan on the Gulf, for example, where Iran's oil is concentrated, a region that is largely Arab, not Persian.

Threat escalation also serves to pressure others to join US efforts to strangle Iran economically, with predictable success in Europe. Another predictable consequence, presumably intended, is to induce the Iranian leadership to be as repressive as possible, fomenting disorder while undermining reformers.

It is also necessary to demonise the leadership. In the west, any wild statement by President Ahmadinejad is circulated in headlines, dubiously translated. But Ahmadinejad has no control over foreign policy, which is in the hands of his superior, the Supreme Leader Ayatollah Ali Khamenei. The US media tend to ignore Khamenei's statements, especially if they are conciliatory. It's widely reported when Ahmadinejad says Israel shouldn't exist - but there is silence when Khamenei says that Iran supports the Arab League position on Israel-Palestine, calling for normalisation of relations with Israel if it accepts the international consensus of a two-state settlement.

The US invasion of Iraq virtually instructed Iran to develop a nuclear deterrent. The message was that the US attacks at will, as long as the target is defenceless. Now Iran is ringed by US forces in Afghanistan, Iraq, Turkey and the Persian Gulf, and close by are nuclear-armed Pakistan and Israel, the regional superpower, thanks to US support.

In 2003, Iran offered negotiations on all outstanding issues, including nuclear policies and Israel-Palestine relations. Washington's response was to censure the Swiss diplomat who brought the offer. The following year, the EU and Iran reached an agreement that Iran would suspend enriching uranium; in return the EU would provide "firm guarantees on security issues" - code for US-Israeli threats to bomb Iran.

Apparently under US pressure, Europe did not live up to the bargain. Iran then resumed uranium enrichment. A genuine interest in preventing the development of nuclear weapons in Iran would lead Washington to implement the EU bargain, agree to meaningful negotiations and join with others to move toward integrating Iran into the international economic system.

© Noam Chomsky, New York Times Syndicate

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Monday, February 05, 2007

Puzzling over Iran

Puzzling over Iran

Feb 5th 2007 | NEW YORK
From Economist.com
Fears that the West may stumble towards another messy military confrontation in the Middle East

PESSIMISTS think they have seen something like this before. Iran has a nuclear programme that outsiders say is designed to produce a bomb, but which the Iranians insist is not. America is making threatening noises. Some outsiders—such as a group of British think-tanks which released a report on the matter on Monday February 5th—worry that a military confrontation could provoke a yet nastier situation in which civilians are the main victims once again.

There are as many differences as similarities this time around, when compared with Iraq. Whereas Saddam Hussein’s supposed chemical and biological weapons were among the stated reasons for America’s invasion of Iraq, Iran raises the scarier prospect of getting a nuclear bomb within a few years. Such a weapon in the hands of a leadership that rejects Israel’s right to exist concerns Westerners, just as an overly powerful Iran troubles many neighbours in the region. But nobody thinks America would invade Iran; far more likely, any strike would come only from the sky, and perhaps then conducted by America’s ally, Israel. America’s new secretary of defence, Robert Gates, was recently at pains to state that “we are not planning for a war with Iran.”

But some are worrying that increasing tension makes an unplanned war more likely. America has certainly piled on the pressure. The American government has made increasingly assertive remarks, notably about the influence of Iran inside Iraq. On Friday an American intelligence report cited “Iranian lethal support for select groups of Shia militants” there. Such remarks have been backed by the display of more military muscle in the region, including anti-missile batteries and a naval battle-group which are more suited for use against a conventional enemy than against Iraqi insurgents. In this tense atmosphere small incidents, such as the recent detention of Iranians by American soldiers in a diplomatic compound in northern Iraq, risk becoming an excuse for wider confrontation.

Iran is not shy of raising the temperature itself. On February 11th, the anniversary of 1979’s Islamic Revolution, it is believed that Iran will claim to have made a big step forward in its enrichment of uranium at a centrifuge facility in Natanz. Iran has already enriched small amounts of uranium; it may say (though many will yet doubt it) that production on an industrial scale is soon possible. This may encourage Americans and Israelis who think some sort of military intervention is needed to act sooner rather than later.

Many in America are certainly worried about blundering into Iran. In recent days two Democrats running for president in 2008, Hillary Clinton and John Edwards, made it clear that they are opposed to strikes (though nearly all American leaders, of both parties, say no option should be permanently taken off the table). Mrs Clinton wants more dialogue; Mr Edwards wants to work with European and other allies to isolate Iran.

But neoconservatives and some traditional conservatives who have Mr Bush’s ear say that Iran is irredeemably unreliable, and will use any diplomacy to play for time. They also warn that although Russia and China signed onto mild UN sanctions for Iran in December, diplomatic action will be blocked by the two powers (especially Russia) which remain loth to do much more.

An Iranian announcement of further nuclear progress could yet stiffen spines. Saudi Arabia said recently that it would try to keep oil prices stable at their current, lower levels. Besides worrying about the effects that the high prices have on the world economy, the Sunni kingdom may also be trying to put pressure on Iran, whose shaky economy depends on exports of hydrocarbons. Others see reason for optimism in recent criticism from within Iran of the president, Mahmoud Ahmadinejad. He was elected promising to improve the lot of the poor, but he may be losing support among both the masses, who have seen little gain in recent years, and in the clerical elite, who worry that he is too provocative of outside powers.

But there is no sign that Iran’s regime is tottering. Nor is Mr Bush’s administration wavering in its preference for confronting Iran. Any conflict could, at the least, further inflame troubles inside Iraq, Israel and the Palestinian territories, while driving up oil prices. It would also worsen relations between Muslims and the rest of the world. And though it may not be imminent, it is becoming easier to imagine.

Friday, January 26, 2007

Ahmadinejad’s Achilles Heel

Ahmadinejad’s Achilles Heel
The Iranian economy


Abbas Bakhtiar
January 25, 2007
iranian.com

Titus Livius (59 B.C.–A.D. 17) the Roman historian once said that men are only too clever at shifting blame from their own shoulders to those of others. These days Mr. Ahmadinejad, the man the West loves to hate, is in hot waters in Iran. He is blamed for almost everything that has gone wrong with Iran. Iranian newspapers and politicians of all colours are lining-up to criticize his leadership and economic policies. He is blamed for everything from shortage of dialysis machines in some clinics to high inflation and provocative speeches. Some politicians are even talking about impeaching not only some of his ministers, but also the president himself.

What a difference a year makes. It was in mid 2005 that Ahmadinejad won a land-slide victory (62%) in the presidential election. As a presidential candidate he had promised to improve the lives of the poor and the lower classes by “putting petroleum income on people’s tables”. His campaign motto was “it is possible and we can do it”.

Son of a blacksmith, Ahmadinejad was the fourth child of a working class family with seven children. He was brought up in the rough and poor neighbourhoods of south Tehran. He is therefore familiar with the problems facing the poor families and has tried to fulfil his election promises to them by increasing the minimum wage (under pressure was later reversed), the pensions, consumer loans for low-income families, loans for small enterprises in underdeveloped regions, and other popular projects. He has also been travelling around the country approving construction projects and distributing largesse.

This lavish spending has increased the double digit inflation rate even more and has caused concerns among politicians and economists that his economic policies coupled with his hard-line stance on nuclear dispute and approach to foreign policy may damage the country. Some economists argue that while the country’s economy is being pressured externally (sanctions), the government is spending money as though there were abundance of resources.

The Iranian senior economist Dr. Masoud Nili of Iran International points to an ever expanding government budget and increasing dependence on the oil revenues as a serious problem for the country. He argues that:

“in 1998, average oil price stood at 10.8 dollars per barrel and oil revenues grew fourfold in about 7 years. Meanwhile, state budget in 1998 was less than 71,000 billion rials, but Iran’s budget for 2006 has been estimated at 600,000 billion rials; that is, while oil revenues have quadrupled over a 7-year period, state budget has increased eightfold during the same period.

Before 2002, government spent an average of 15 billion dollars in foreign exchange. The figure increased to 21 billion dollars in 2003, to 30 billion dollars in 2004, and to 36 billion dollars in 2005. It seems that the figure will reach 45 billion dollars in 2006, which is indicative of serious budgetary dependence on petrodollars.

The Third Economic Development Plan aimed at reducing government’s dependence on oil revenues to less than 12 billion dollars, but it actually soared to more than 40 billion dollars in 2006. Therefore, the government’s budget experienced such a great leap in 14 months from January 2005 to march 2006, when the government was determined to offer Majlis with a budget supplement. Considering this reality, one can conclude that the country witnessed one of its biggest financial developments in the Iranian year, 1385.”[1]

As inflation is rapidly approaching critical levels, economists and politicians have began to sound the alarms. There are now open calls for impeachment of several government ministers and although not openly mentioned, the moderates and some conservatives would like nothing more than impeaching the president himself. The rallying cry for the opposition is “the economy”; a clever point of attack since they know that no president no matter how wise or prudent, can solve the existing economic problems of Iran without a comprehensive restructuring of the economy; something that many special interest groups and powerful economic entities are against. The following are some of the problems facing Iran.

Systemic Problems
Iran has a very young population. Almost 47 million of the nearly 70 million Iranians are bellow the age of 25. That is 67% of the population. Of this 47 million, 25 million are between 15 and 25 years old.

Age

million

0-6

10.9

7-14

10.9

15-19

13.7

20-24

10.8

25+

22.3

Total Population

68.6

Theoretically, a country with abundant natural resources and a young educated workforce should have no problem in economically growing rapidly. Alas Iranian economy, like most other oil dependant economies, is to a very large extent government owned and controlled. Hence all the pressure on the economy automatically becomes political pressure on the government.

For instance, the inflationary policies of the current government is the direct result of the government’s desire to reduce poverty and hence the growing inequality in Iran; which in itself is threatening not only the social fabric of the society but also the stability of the regime. In October 2006, the supreme leader of Iran Ayatollah Khamenei in a letter to the President and Cabinet demanded a reduction in the class gap. He stated that:

“Because of the class gap that has remained from former regime, now our country needs economic justice more than anything. The government should make profits more in this situation and move toward declared goals and mottos. The achievement of justice is too difficult and requires many preparations such as geographic and classic justice, justice in economic and cultural affairs, justice in substituting officials and granting responsibilities and justice in judgments. The execution of justice must be logically within the Islamic frame. According to article 44 and notes (A) & (B), the state should decrease its interferences in economy.” [2]

But reducing poverty and the gap between the rich and poor in the current economic system is extremely difficult. In a normal liberal economic system the government’s revenues come mostly from investments and taxes. Tax revenue is supposed to cover most of the government’s budget. Tax coupled with social security is also an instrument of wealth distribution. But collecting taxes is something that requires a formal and transparent economy, not to mention information on who earns what. Iranian government can only collate information about what it’s companies and some large corporations earn. The rest is a made up of series of guess works. For example, Bazzaries (Traditional merchants) seldom declare their true net worth or income to the authorities, and the authorities have no system of finding out the true income of these individuals and companies. Another problem is the informal economy. For example, major part of Tehran’s economy, a city of almost 12-15 million people, runs on an informal, off-the-book system, making taxation extremely difficult. Then we have the various tax exempt charity foundations that are involved in almost all aspect of the economy.

Bonyads (Charity Foundations)
In Iran, by some estimates, the Bonyads (charity foundations) control over 30% of the economy and yet pay no taxes at all [3]. They are involved in everything from vast Soybean and cotton fields to hotels to soft drinks to auto-manufacturing to shipping lines to... These foundations represent vast economic empires that are neither taxed nor are directly under government control.

As charity organisations they are supposed to provide social services to the poor and the needy. Yet since there are over 100 of these organisations operating independently, the government doesn’t know what, why, how and to whom this help and assistance is given. Lack of proper oversight and control of these foundations has also hampered the government’s efforts in creating a comprehensive social security system in the country.

These organisations also compete with other private actors in the country. Private companies find it exceedingly difficult to compete with such large corporations, since they (Bonyads) have both the political and financial muscle to compete in any given market segment for as long as they like without considering the profitability of their ventures. These Bonyads, by their very presence, are hampering healthy economic competition and growth.

Subsidies
Another problem facing the government is the subsidies. Subsidies in general are either paid in cash (like food-stamp in US) or child support allowance in Norway, or are paid to the manufacturers of goods/services to reduce the actual prices of goods/services. In the former case, the subsidies are targeted at a particular group, such as unemployed or families with children. In the latter the subsidies cover the whole of the population. This means that a person, regardless of his/her financial situation will benefit from those subsidies.

One of the most pressing issues in Iran today is the mushrooming energy use and the amount of hard currency that is going into subsidies. The government imports over $7 billion dollars worth of petrol per year. Yet the price of a gallon of petrol is only 33 cents. This subsidy does nothing more than encourage smuggling of petrol to the neighbouring countries where prices are higher. It also removes any incentive for the consumers to save on their energy consumption. These subsidies also create an environment in which manufacturers become complacent and not only do not conserve energy in their production activities, but also do not try to build energy efficient appliances and machines; simply because their consumers do not pay attention to the product’s energy consumption. Based on energy consumption, Iranian made cars, freezers, refrigerators, etc. will not be able to compete with the similar sized Japanese, American or European products.

Red Tape and Inefficiency
In Iran, if you want to do anything such as changing money at the bank or starting your own business or anything else for that matter, you have to fill-out many forms and spend hours going from office to office. Often a paper has to be signed by different individuals in different offices in different building in different areas of the town. One can easily spend several days trying to get different officials’ signatures for anything from starting a business to getting a driving license.

Much of the government’s information collection and processing is still paper-based and there are virtually mountains of files being kept in offices around the country. Computerisation is under-way, but for the time being millions of hours of people’s time are being spent taking forms from offices to offices, increasing inefficiency, traffic and frustration.

Couple this kind of red tape with state owned industries and you get a sure way of turning billions into millions. Government run industries usually are less efficient than the privately owned industries. Couple this with political interference, nepotism, cronyism and general corruption and you get industries that produce goods and services of questionable quality at the highest possible prices. Since the losses are covered by the government, the pressure to improve is minimal. The losses are either covered through the budget or through loans by state owned banks. In other words, the funds that could have been made available for economic growth through the private sector, is tied-up in keeping inefficient and loss-making industries alive. For instance it is calculated that each year over one billion dollar worth of electricity is wasted due to the inefficiency of the Ministry of Energy.

“Some 30,000 Gigawatt hour electricity equal to the total electricity generation of some 30 Boushehr-like nuclear power plants is wasted annually in Iran. Some 18.5 percent of the electricity produced in Iran is wasted before it reaches to consumers due to technical problems and mismanagement in the Energy Ministry, a former supervisory body in the ministry told BAZTAB.”[4]

Electricity wastage is not the only problem. Iranians use and waste water like never before. According to deputy head of Iran Water Resources Management Company for planning and economic affairs, Alireza Daemi, Iranians use almost double the amount of water as Europeans use. “It is no secret that water consumption level in Iranian metropolitan areas is higher than the average rate recorded for most developed cities in other parts of the world. For example, the per capita water consumption in European cities is 140 litres per day, while the related figure in Iran nears 300 litres. By raising public awareness on the cost of producing water, the government hopes to encourage people to rethink their consumption patterns. This is more like a cultural gesture. The UN Third-Millennium Development Goal for the water sector indicates that setting the value is one of the strategies for correcting water consumption models” Daemi further said that a major challenge for the government is to put in place optimum water consumption patterns in the household sector. “Potable water wastage in Iran is higher than the global rate, while the industrial sector is failing to properly manage its waste often allowing it to trickle down to rivers, causing irreparable damage to the environment.” [5]

Corruption
Voltaire once said that when it's a question of money, everybody is of the same religion. When it comes to corruption Iranians are no different than Saudis, Egyptians, Americans or Norwegians. Religion of corruption is the same all over the world: money and power. Corruption is usually the result of three things, lack of transparency, lack of regulations or too many regulations. Paradoxically, you’ll find all three conditions in Iran.

Transparency is vital in fighting corruption. In Norway for example, everyone’s total declared income and taxes paid is available to the public. All government contracts are similarly open to scrutiny. Also at the end of every year, banks issue each of their customers an end of the year statement, detailing how much money they have in their account(s). The customer is required by law to declare that to the government. In such circumstances, it is very difficult for someone to earn anything without paying taxes or hiding how he/she earned that money in the first place. No one is exempt. I know how much the Norwegian prime minister earned last year and what his net worth is. Unless he uses dummy companies, keep cash under his mattress, or carry a suitcase of cash out of the country (not possible because of high security levels at the airports), he has no way of avoiding declaring his income. This and other rules and regulations limit the level of corruption in the country.

Norway is ranked 8th in Transparency International’s Corruption Perception Index. Iran was ranked 105th out of 163. The most corrupt nation was Haiti (163rd). Iran’s ranking or its Corruption Perception Index does not show any sign of improvement. In 2003 when Iran was first included in the list, it was ranked as the 78th out of 133 countries examined. In 2004 it was ranked the 87th out of 145. In 2005 it was ranked 88th out of 158 countries and in 2006 it occupied the unenviable 105th place.[6]

The lack of transparency is one of the most important problems facing Iran. Only through complete transparency in financial affairs of the government and Bonyads (charity foundations) that Iran can begin to clean itself of this scourge of corruption. Corruption increases inefficiencies and hampers economic growth. Corruption eats at the social fabric of the society, changing people’s perception of important values such as honesty, loyalty and hard work.

Lack of financial regulations such as the ones described from Norway has allowed people to amass fortunes without anyone asking how these people have earned so much money in such a short time. Large sections of the economy (Bonyads) are beyond scrutiny. Other important sectors such as the traditional Bazzars are also opaque and often operate without proper supervision and regulations. There are virtually millions of people who do not pay taxes and hence operate outside the formal economy.

While lack of regulations has allowed individuals and chosen corporations to avoid taxes and scrutiny; the small private companies are being suffocated by myriad of paperwork and forms. In Iran, like in many other countries, it is the small companies that create the jobs and the economic growth. Yet they are being squeezed as never before. They have to deal with bureaucracy on one side and the competition from large, unregulated and supervised corporations on the other side. It is then not surprising to see that many choose to invest in real estate instead of manufacturing, transportation or farming. Getting necessary permissions, licences etc, is a nightmare. And god help you if you want to import components or raw materials necessary for your production.

Recently the Judiciary asked people (through advertisements) to report the wealth of the government officials to the said authority. [7] This financial scrutiny is based on the amended article 142 of the constitution, where the wealth of the Supreme Leader, the President, his cabinet members, other high officials and their families are to be examined by the judiciary both before and after their period in office. This is fine as long as the results are presented to the public.

Privatization
Iranian government is one of the biggest employers in Iran. It is involved in oil, gas, mining, construction, electricity generation, telecom, transportation and lots of other industries, many of which have not made any profits for a long time. These companies are a major burden on the government’s budget and on the economy. Privatisation seems to have been accepted as a solution to the problem. That is until Ahmadinejad came to power.

Ahmadinejad’s idea of privatisation was vastly different from the previous governments. He wants to distribute the shares of the companies equally between the people, while others would like to sell the companies to the highest bidders.

“The member of Tehran Chamber of Commerce (T.C.C.) representative board in an exclusive conversation with T.C.C. news site said: “The justice share is not a part of privatization. Maybe the result of division of 80 per cent of government share between people equally, is satisfactory but the people can not manage even 10 per cent of these shares because they have not expertise in management. So the government will manage the company again.”

“The main purpose of privatization is the change of management to increase returns and create additional value in economy for more development”, he added.

He said: “The government is against the privatization. The reason for delaying in this process is related to the reluctances of officials.”

“The privatization is a double side process: the private sector that should invest in economy and purchase the companies, and government sector that should accept to delegate its properties. Now the government throws a monkey wrench into privatization process. The government must be restricted for investment and can only invest in especial field such as security and information “, he added.” [8]

The problem with normal privatization in Iran is that majority of people do not have the money to participate in such auctions. Who has the money? The Bonyads and others who already have a stranglehold over the economy. Without proper laws and safeguards, privatization may lead to creation of huge monopolies in the country. We must not forget the Russian experience, where privatization was seen by the people as wholesale theft of the country’s resources by a few individuals.

Privatization is the best solution for Iran, but it can only be done after a systemic revision of laws. Anti-monopoly laws have to be strengthened and some large state owned companies have to be broken into parts before privatization.

Government must also strengthen its social security services before any large scale privatisation can take place. Any privatisation will definitely lead to large scale lay-off of part of the work-force which can lead to social upheaval. The country is already suffering from high unemployment and under-employment. Any sudden increase without social safety net (such as unemployment benefits, retraining programs, etc) may well result in large scale protest against the government.

Prior to any privatization, government owned companies have to be turned into limited liability companies with government as the majority share-holder. These companies should then be managed like other private companies. When the proper social security system along with anti-monopoly laws are in place, then the shares of these companies can be sold to the public. It would not be a bad idea for the government to have a closer look at the Nordic system of privatization.

Conclusion
Iran with its tremendous natural resources and a young educated population has the potential to become an economic power house for the whole region. It has the potential to grow at 8 to 10 percent per year for the next two decades. Yet, year after year it grows at a mediocre rate and even that growth is dependent on the price of oil. The country suffers from lack of transparency, lack of regulations where it counts and over regulation and heavy bureaucracy where it isn’t needed. In other words, Iran suffers from systemic problems that can not be addressed piecemeal. The current high inflation, unemployment, underemployment and corruption are symptoms of these systemic problems.

Ahmadinejad’s economic policies certainly can be blamed for the current increasing inflation and unemployment. But he can not be blamed for everything that has gone wrong in Iran. Factionalism, push and pull from special economic interest groups, pervasive corruption, smuggling, bad management of state owned companies, badly planned subsidies, lack of comprehensive social security and health plan, lack of proper system for economic information collection and taxation are just a few of the problems that have existed long before Ahmadinejad became president.

The first step in the right direction is to improve the economic data collection system of the country. It is vitally important for the government to know who (individuals and corporations) earns what. Only through access to this information can the government create a workable taxing system. Only through this can the government begin to reduce corruption, target subsidies, reduce inequality and plan for the future.

The next step is to create a comprehensive social security system where people do not have to rely on charity foundations. These foundations have to be sold-off and the proceeds included in a social security fund for the country; other wise over time, these entities will become so powerful that they will become the effective rulers of the country.

The Iranian economy is now in stable condition going towards critical. As long as United States is threatening Iran, and with Iraq as an example of what can happen, people are willing to accept any kind of hardship. But once that threat is removed, people will demand an improvement in their standard of living, something that current economic system is unable to deliver. In the current economic environment, increasing salaries only increases inflation and unemployment.

The last three Iranian presidents have tried to tweak the system in various ways to optimise it without any success. They all had learned men advising them on the best way to manage this sick economy. Yet none succeeded. It is perhaps time for learning from others. The current learned people in Iran may be masters of squeezing all that is possible out of the current economic system, but that is not enough. It is time to change the economic system and try new things. It is perhaps time to become a learner again, for as Eric Hoffer (writer) once said “in times of change, learners inherit the Earth, while the learned find themselves beautifully equipped to deal with a world that no longer exists.” Comment

Dr. Abbas Bakhtiar lives in Norway. He is a consultant and a contributing writer for many online journals. He's a former associate professor of Nordland University, Norway.

[1] Massoud Nili, “Picture of Iran’s Oil-Dependent Economy”, Iran International, May 2006, No. 40

[2] Tehran Chamber of Commerce and Industries & Mines, “Our country needs economic justice more than anything”, 14 October 2006

[3] Kenneth Katzman, “Statement of Kenneth Katzman”, Joint Economic Committee Hearing on Iran, July 25, 2006

[4] Baztab.com, “USD 1 Billion of Electricity Wasted Due to Energy Ministry Inefficiency”, 20 January 2007

[5] Iran Daily, “Water Challenges”, Economic Focus, March 25, 2006

[6] Transparency International, “Corruption Perception Index 2006”

[7] Baztab.com, “People are urged to report the wealth of the government officials”, 19 January, 2007

[8] Tehran Chamber of Commerce, “Justice Share is opposite to privatization”, 14 October 2006

Friday, January 19, 2007

A president under fire at home

A president under fire at home

Jan 18th 2007
From The Economist print edition

Is the country's controversial president in decline?

IN THE higher echelons of the Islamic Republic, people may be losing patience with President Mahmoud Ahmadinejad. Informed Iranians do not think he risks losing his job. But plainly he is not as safe as he was. Conservatives in Iran's parliament and press blame his extravagance at home and braggadoccio abroad for Iran's worsening economic malaise and for the unpleasant sense of being ever more squarely in the Americans' firing line.

In recent weeks, the United States has twice seized Iranians in Iraq, sent another aircraft-carrier into the Persian Gulf and armed Iran's Arab neighbours with Patriot missiles. Such moves have been accompanied by a barrage of verbal attacks from top Americans, including the president and his secretaries of state and defence.

Already cock-a-hoop over the defeat of Mr Ahmadinejad's allies in local elections last month, his domestic critics are keen to blame him for the latest round of American sabre-rattling as well as for last month's sanctions resolution passed against Iran in the UN Security Council. It seems that a clutch of senior figures in the regime, perhaps including the supreme leader, Ayatollah Ali Khamenei, have endorsed the criticism.

“Just when the nuclear issue was about to move away from the UN Security Council, the president's fiery speeches have resulted in the adoption of two resolutions,” said Hamshahri, a popular newspaper in Tehran, the capital. Such comments mark a departure from last year, when it was deemed unwise to challenge the government's performance on the nuclear issue.

Mr Ahmadinejad's anti-American bluster has also been attacked in light of his recent visit to Latin America, widely viewed as ill-timed and unnecessary. A reformist daily, Etemaad-e Melli, called the Venezuelan, Ecuadorean and Nicaraguan presidents, who embraced Iran's president, “left-wing friends, good for coffee-shop discussions but not for setting our security, political and economic priorities”.

During the trip, Mr Ahmadinejad announced he would put $1 billion into an Iranian-Venezuelan fund to help countries “free themselves from the yoke of American imperialism”. That sharpened the more serious criticisms he faces at home over Iran's economic performance.

A recent statement signed by 150 members of parliament imposed conditions on the president in drawing up the budget for the next Iranian year, which starts in late March. The MPs are now calling on him to defend his record before parliament.

It would not be Mr Ahmadinejad's first run-in with deputies who supposedly share many of his own convictions. In late 2005, conservative MPs caused a crisis by rejecting several of the president's nominees for oil minister, the cabinet's most important post. They have since repeatedly questioned his off-the-cuff economic style, which pleases the masses but is disliked by most economists.

A sudden decision last year to raise the minimum wage had to be reversed when it caused job losses and strikes across the country. On his weekly trips to the provinces, the president is in the habit of dishing out government largesse to petitioners for local causes. And parliament has accused the government of favouritism in giving big contracts to the Revolutionary Guards without going to tender.

This lavish and sometimes whimsical spending has pushed up inflation and made Iran more vulnerable to oil-price fluctuations. MPs are increasingly concerned, not least because they face re-election early next year and fear they will be blamed for the country's economic woes.

The president seems to thrive on controversy. But he may be in for an unusually rough few months. Taking his cue from the supreme leader, Mr Ahmadinejad may be well advised to dampen his oratory and submit a prudent budget to parliament. But that is not his usual style.