December 8, 2023

Iran’s President Puts New Focus on the Economy

In an acknowledgment of the growing toll that international economic restrictions connected to Iran’s nuclear program are having on the population, both Mr. Rouhani and Ayatollah Khamenei made the economy a major theme of their remarks.

“People called for change and improvement in their living standards, they want to live better,” Mr. Rouhani said.

But he and the ayatollah offered somewhat different solutions. Whereas Mr. Rouhani said that interactions with the world, meaning talks with Europe and potentially the United States, were a way out of the crisis, Ayatollah Khamenei, who as supreme leader has final word on all important issues, expressed pessimism that such overtures would yield fruit. “Some of our enemies do not speak with our language of wisdom,” he said, urging self-sufficiency.

As Mr. Rouhani takes his public oath of office on Sunday, Iran’s growing economic crisis sits atop his agenda. Sanctions have slashed oil exports and limited Iran’s ability to transfer money from abroad. The shortage has been aggravated by the profligate spending that is a legacy of the departing government of Mahmoud Ahmadinejad.

During most of Mr. Ahmadinejad’s two terms, Iran enjoyed an oil windfall, with a flow of dollars and euros that fueled huge imports on goods ranging from ice cream to Porsches.

But now Mr. Rouhani’s aides describe Iran’s economic situation as the worst in decades. Many blame what they call Mr. Ahmadinejad’s erratic economic policies, punctuated by slashed subsidies and unbridled inflation.

The signs of woe abound.

Lacking money, Iran’s national soccer team scrapped a training trip to Portugal. Teachers in Tehran nervously awaited their wages, which were inexplicably delayed by more than a week. Officials warned recently that food and medicine imports have stalled for three weeks because of a lack of foreign currency.

While Mr. Rouhani has asked for a hundred days to review the state of the economy and devise solutions, there are some voices who now say that the only way to solve the economic ills is to come up with a political settlement of Iran’s nuclear dispute. Those voices were barely heard during Mr. Ahmadinejad’s tenure.

“Rouhani’s economic success depends on the determination of Iran’s other leaders to find a solution for the nuclear support,” an economics professor, Mohsen Renani of the University of Isfahan, told the Web site Neco News.

In another sign of dissatisfaction over the consequences of Iran’s nuclear stance, an influential political professor publicly expressed doubt recently over the benefits of the nuclear program. “Why are we producing radioisotopes when we can import them much cheaper?” the professor, Sadegh Zibakalam of Tehran University, told the reformist weekly Aseman. “Why should we maintain a nuclear program when we have no economic justification?”

While those voices may have grown louder, they by no means represent the official position of Iran’s ruling establishment, which maintains that self-sufficiency in nuclear energy is nonnegotiable.

“Whatever happens, our nuclear stances will not change nor waver,” Mohammad Taghi Rahbar, a former member of Parliament and an influential Friday Prayer leader in Isfahan, said in an interview. “Our supreme leader, the nation and all officials from all factions believe this is our inalienable right so we will not retreat at all.”

But ignoring the increasing economic pressures, while promising a better future — a strategy favored by Iran’s leaders over the past years — is proving increasingly complicated. Almost everybody in Iran is feeling the pain.

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Iran Calls Threat of Sanctions From European Union ‘Economic War’

The strong words were the latest in a series of escalating military and diplomatic responses by Iran in recent weeks amid growing pressure from Western powers. On Tuesday, Iran warned the United States that it would take action if an American aircraft carrier that left the Persian Gulf through the Strait of Hormuz were to return. The United States has said that the threats would not cause it to alter military deployments.

Britain added its voice to the chorus on Thursday, with Defense Secretary Philip Hammond cautioning that any attempt by Iran to close the strait would be “illegal and unsuccessful.” His comments, delivered during his first visit to the Pentagon since he became the top defense minister last fall, appeared to indicate strong resolve by the West to keep the strategically important strait open for trade. “It is in all our interests that the arteries of global trade are kept free, opening and running,” he said, according to news reports.

The official news agency IRNA quoted one senior member of the Iranian Parliament as saying that pressure from “bullying nations” made the country “more resilient.” Press TV, an official Iranian news site, headlined its report with a warning against “saber rattling” by Britain.

Relations between Iran and Britain deteriorated after protesters stormed the British Embassy in Tehran in November. Britain responded by downgrading relations to their lowest level in 20 years, expelling Iranian diplomats from Britain and ordering the Iranian Embassy in London to shut down. 

Mixed in the with bluster on Thursday was tacit acknowledgment of the potential economic hardships that stronger sanctions could cause in Iran, where the economy is heavily reliant on oil exports, including through the Strait of Hormuz.

Iran will “weather the storm,” Foreign Minister Ali Akbar Salehi said on Thursday, adding that he was “not concerned at all” about the imminent ban on its oil by the European Union. The economic minister, Shamseddin Hosseini, likened the ban to “an economic war.”

“Iran, with divine assistance, has always been ready to counter such hostile actions, and we are not concerned at all about the sanctions,” Mr. Salehi said at a news conference in Tehran. “Just as we have weathered the storm in the last 32 years with the hold of God and efforts that we make, we will be able to survive this as well.”

But he also said that Iran would like to reopen talks with the West on its nuclear program, suggesting that renewed talks be held in Turkey. Mr. Salehi appeared at the news conference with the Turkish foreign minister, Ahmet Davutoglu, who said that Iran had responded favorably to the notion of resuming negotiations. That was interpreted by some in Europe as an effort by Iran to buy time to continue its program.

The European Union foreign policy chief, Catherine Ashton, has been waiting for Iran to respond formally to an October 2011 letter suggesting new rounds of negotiations, which broke off a year ago when Iran presented its own set of preconditions, including a lifting of sanctions, that the West considered unacceptable.

President Obama signed legislation last weekend imposing sanctions against Iran’s central bank intended to make it more difficult for the country to sell its oil. Europe took steps on Wednesday toward an oil embargo on Iran. In 2010, oil from Iran accounted for about 5.8 percent of total European imports of crude.

Steven Erlanger contributed reporting from Paris.

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Iran Threatens to Block Oil in Reply to Sanctions

The declaration by Iran’s first vice president, Mohammad-Reza Rahimi, came as President Obama prepares to sign legislation that, if fully implemented, could substantially reduce Iran’s oil revenue in a bid to deter it from pursuing a nuclear weapons program.

Prior to the latest move, the administration had been laying the groundwork to attempt to cut off Iran from global energy markets without raising the price of gasoline or alienating some of Washington’s closest allies.

Apparently fearful of the expanded sanctions’ possible impact on the already-stressed economy of Iran, the world’s third-largest energy exporter, Mr. Rahimi said, “If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,” according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.

In recent interviews, Obama administration officials have said that the United States has developed a plan to keep the strait open in the event of a crisis. In Hawaii, where President Obama is vacationing, a White House spokesman said there would be no comment on the Iranian threat to close the strait. That seemed in keeping with what administration officials say has been an effort to lower the level of angry exchanges, partly to avoid giving the Iranian government the satisfaction of a response and partly to avoid spooking financial markets.     

But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States — which Washington alleges received funding from the Quds Force, part of the Iranian Revolutionary Guards Corps — was in response to American and other international sanctions.

Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.

Oil prices rose above $100 a barrel in trading after the threat was issued, though it was unclear how much that could be attributed to investors’ concern that confrontation in the Persian Gulf could disrupt oil flows.

The new punitive measures, part of a bill financing the military, would significantly escalate American sanctions against Iran. They come just a month and a half after the International Atomic Energy Agency published a report that for the first time laid out its evidence that Iran may be secretly working to design a nuclear warhead, despite the country’s repeated denials.

In the wake of the I.A.E.A. report and a November attack on the British Embassy in Tehran, the European Union is also contemplating strict new sanctions, such as an embargo on Iranian oil.

For five years, the United States has implemented increasingly severe sanctions in an attempt to force Iran’s leaders to reconsider the suspected nuclear weapons program, and answer a growing list of questions from the I.A.E.A. But it has deliberately stopped short of targeting oil exports, which finance as much as half of Iran’s budget.

Now, with its hand forced by Congress, the administration is preparing to take that final step, penalizing foreign corporations that do business with Iran’s central bank, which collects payment for most of the country’s energy exports.

The sanction would effectively make it difficult for those who do business with Iran’s central bank to also conduct financial transactions with the United States. The step was so severe that one of President Obama’s top national security aides said two months ago that it was “a last resort.” The administration raced to put some loopholes in the final legislation so that it could reduce the impact on close allies who have signed on to pressuring Iran.

The legislation allows President Obama to waive sanctions if they cause the price of oil to rise or threaten national security.

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Libyan Rebels Aim to Revive Oil Exports

Oil industry officials, echoing claims made by a rebel leader, said Monday that they believed that Qatar had agreed to buy oil offered by the rebels and planned to ship it in leased tankers.

The Qatari government has not commented on the oil sales, but on Monday, Qatar became the first Arab country to formally recognize the legitimacy of the rebels as representatives of Libya. In addition, the recent military advances by the rebels were made possible by allied air support as well as critical logistical commitments from Qatar.

“There clearly appears to be some coordination, and money can buy you a lot,” said Michael A. Levi, a senior fellow for energy and the environment at the Council on Foreign Relations. “My guess is this will be more consequential for the conflict than for the oil markets.”

Over the last few days, the rebels have seized several towns with important oil installations that they said would enable them to produce and export crude. Although there is concern that the rebel advance may prove to be fleeting, oil traders responded to their victories by pushing down the price of most world oil benchmarks, albeit modestly.

On Monday, the price of the benchmark United States crude oil, West Texas Intermediate, fell by $1.48 a barrel, or 1.4 percent, to $103.92.  The benchmark is 7.3 percent higher than it was a month ago, and 30 percent higher than a year ago.

Although the Libyan government faces global economic sanctions and asset freezes, an official at the Treasury Department said that the United States would not seek to block oil sales by the rebels if they could prove the money was not going to any Libyan government authority, the national oil company or the Qaddafi family.

“Everything owned by or controlled by the government of Libya is subject to sanctions,” said the official, who spoke on the condition of anonymity because no official determination had been made about the proposed oil sales. “Anything that is not is not governed by U.S. sanctions.”

According to news reports, the rebels claimed they would be able to produce up to 130,000 barrels of crude a day, less than a tenth of what Libya exported before turmoil erupted last month.

But they also have access to millions of barrels stored in coastal oil terminals, which have been effectively closed to tanker traffic during the conflict. The rebels now control all five eastern oil export terminals, including Es Sider, Ras Lanuf and Zueitina, roughly two-thirds of the country’s export capacity and a majority of its production and refining capacity, according to a research note by the Eurasia Group, a consultancy firm.

Francois Gauthier, the Algeria country manager for the Italian energy company Enel, estimated that there could be as many as two million barrels of oil stored in just one rebel-controlled oil port, Tobruk, that could be exported quickly. At an estimated sale price of $100 a barrel, selling the oil in Tobruk could raise as much as $200 million, although the rebels would probably have to share the funds with Western oil companies that co-own the leases on the fields.

“It’s a lot of cash, but it won’t solve all of their problems over the long run,” Mr. Gauthier said.

Libyan oil is particularly valued on world markets because it is high quality, needs little refining and is particularly well suited for European diesel markets.

With allied planes and naval vessels patrolling the area, Col. Muammar el-Qaddafi could be powerless to stop tankers from sailing into and out of Tobruk and other rebel-held ports. However, forces loyal to Colonel Qaddafi could still sabotage critical pumping equipment needed to transport oil from the fields to the ports.

The rebels already have their own oil company, Agoco, which is based in rebel-held Benghazi and broke away from the main national oil company early in the conflict. Agoco controls fields that represent 40 percent of the country’s 1.6 million barrels a day of output and operates an oil terminal and refinery in Tobruk.

Aside from a few refinery storage tanks, little of Libya’s oil infrastructure has been damaged in the fighting so far. The pumps, hoses, metering, docks and storage tanks at the ports are intact, and the oil fields are ready to be pumped by local oil workers, according to oil experts.

“It’s only a question of flipping switches,” said Michael C. Lynch, president of Strategic Energy and Economic Research, a consultancy firm.

Details of the dealings between the rebels and the Qataris remain unclear, but several oil industry experts said the Qataris or the United Nations could place money from any Libyan oil sales in an escrow fund that would later reimburse Italian, French, Spanish and American oil companies that have investments in the Libyan oil fields. Those companies include Eni, Repsol, Total and Occidental Petroleum.

“The companies’ attitude may be ‘Don’t worry, we’ll settle up later,’ ” said Mr. Lynch, who has broad experience in international oil markets. “This is a good way for the companies to get on the rebels’ good side.”

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