Thursday, December 21, 2006

Iran's Oil Projects Suffering

While Mahmoud talks trash, there are some sobering realities hitting home in Iran.
Iran’s oil minister on Wednesday admitted that Tehran was having trouble financing oil projects, in a rare acknowledgment of the economic cost of its nuclear dispute.

“Currently, overseas banks and financiers have decreased their co-operation,” Kazem Vaziri-Hamaneh told the oil ministry news agency, Shana.

The statement underlined the impact of de facto financial sanctions on the Organisation of the Petroleum Exporting Countries’ second biggest oil producer. As the controversy over Iran’s nuclear programme has escalated, the US has applied pressure on European banks and financial institutions to curb dealings with Tehran.

The fact that the UN Security Council could soon impose the first – even if mild – sanctions against Iran has compounded the political uncertainty and risks of doing business with Tehran. Iranian officials insist there is international interest in investing in Iran’s oil industry and European executives play down any impact on companies seeking deals in Iran.

The National Iranian Oil Company has signed a memorandum of understanding with China’s CNOOC to develop the North Pars gas field. The memorandum, if it turns into a final deal, would bring $16bn worth of Chinese investments for the initial part of any deal, the semi-official Fars news agency reported on Wednesday.

But western officials hope the financial squeeze’s effect on the oil industry, the backbone of Iran’s economy, will help raise domestic pressure for a change of policy and persuade the regime to heed international calls for a suspension of its uranium enrichment programme.
“There’s a growing awareness that de facto sanctions are beginning to hurt and everyone understands the future of the economy depends on the development of oil and gas,” said a western diplomat. “Banks are not lending, partly because of US pressure, but the banks are also drawing their own conclusions.”

Meanwhile, in Iran’s Tectonic Elections, Hossein Askari notes how poorly Ahmadinejad fared.
President Mahmoud Ahmadinejad, and his thorough trouncing, was the headliner of Iran’s midterm elections last week. But while much attention, and glee, has been focused on the president and his defeat, there appears to be a more preponderant, slower moving back-story to the vote: a potential tectonic shift in a real center of power—the Assembly of Experts and, by association, the selection of the next Supreme Leader and in turn the Guardian Council.

In the elections for city council, which vote on cities’ mayors, Ahmadinejad fared poorly across Iran and, most significantly in Tehran, a bellwether indicator for the country. In Tehran, Ahmadinejad’s opponents took a clear majority of the seats and, by electing the next mayor of Tehran, will select an important player in Iranian national politics. The election clearly signals a weakening of support for Ahmadinejad after less than two years in office, but as tempting as it may be for the West to attribute that to a backlash against Ahmadinejad’s “inquest” into the Holocaust, lambasting of the United States and Israel, etc., the souring of public sentiment is more connected to local, pragmatic concerns.

Ahmadinejad ran on a populist platform of economic reform: better services for the poor, job creation, and the reining in of corruption. He has delivered little except for talk. The poor are still poor; the rich are getting richer and corruption is still rampant. Iranians clearly want better economic performance and with more widespread benefits for the poor, the base for Ahmadinejad’s political support. Ahmadinejad now apparently risks losing re-election to one of his principal opponents, Tehran Mayor Mohammad Bagher Qalibaf—whose supporters did very well in the elections.

Read the rest. I have a feeling the little guy's days in power may be few.

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