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Iran Democracy Monitor - No. 138

Edited by Ilan Berman
September 17, 2013

Western sanctions are having a pronounced effect on Iran's economic fortunes. According to a new report from the World Economic Forum, inflation in the Islamic Republic was the highest in the world last year. The Forum's study of 148 countries, based upon data compiled from the International Monetary Fund, found that Iran averaged an inflation rate of 30.6 percent in 2012, beating out other economically unstable actors, such as Ethiopia, Malawi, Venezuela, Tanzania, Guinea, Mongolia, Uganda, Sierra Leone, and Nigeria. This state of affairs, moreover, is getting worse. According to statistics compiled by the Central Bank of Iran itself, the average rate of inflation over the twelve months ending in the fifth Iranian calendar month of Mordad (August 22, 2013) is now nearly 10 percent higher, standing at 39 percent. (Radio Zamaneh, September 8, 2013; Iran Daily Brief, September 9, 2013)


Is Iran poised to make a signficant concession to the West on its nuclear program? Iranian officials continue to insist on their country's "inalienable right" to nuclear capability writ large. But intelligence sources tell Germany's Der Spiegel newsweekly that the Iranian regime is exhibiting a new willingness to shut down the operation of its pilot uranium enrichment facility at Fordo in response to Western pressure. Fordo, located outside of Iran's holy city of Qom, is a facility of particular concern to the international community because of its role in Iran's enrichment of uranium to 20% - making possible an Iranian "sprint" to the production of weapons-grade materiel. If speculation is to be believed, the Iranian regime would seek to barter a decomissioning of Fordo for a massive reduction of Western economic pressure, and "demand that the United States and Europe rescind their sanctions against the Islamic Republic, lift the ban on Iranian oil exports and allow the country's central bank to do international business again."

Experts, however, are urging caution. They point out that, even with Fordo shuttered, Iran has sufficient quantities of low- and medium-enriched uranium and working centrifuges to make possible the development of weapons-grade uranium, which means that the Iranian overture won't derail the regime's nuclear ambitions. Rather, “Iran will be looking at how little they can try and do to get sanction relief,” says David Albright of the Washington-based Institute for Science and International Security. (Hamburg Der Spiegel, September 16, 2013; Bloomberg, September 17, 2013)


Rising commodity prices and soaring inflation are presenting a growing challenge to the legitimacy of Iran's new president. During his presidential campaign this spring and summer, Hassan Rouhani promised to deal decisively with Iran's deteriorating economic conditions. Less than two months after taking office, however, Rouhani is being buffeted by rising popular discontent over his inability to fulfill his campaign promises and stabilize the country's economic ship of state.

In response, Rouhani has begun to turn to a familiar - and powerful - economic player within the Islamic Republic. In a recent public address, Iran's president called upon the country's elite Revolutionary Guard Corps, which has extensive economic holdings throughout the country, to “carry part of the burden on the government” created by international pressure on Iran over its nuclear program. (Financial Times, September 16, 2013)


Fresh off its brokerage of a diplomatic peace deal heading off U.S. military action against Iranian ally Syria, the Kremlin is moving to strengthen the Iranian regime's own defenses. Russia has announced a new, $800 million deal proffering to Iran new S-300 anti-aircraft missiles and the construction of a new nuclear reactor at Bushehr. The move represents a significant reversal; back in 2007, the two countries signed a deal for Iran to acquire the S-300, but the arrangement was cancelled three years later as a result of UN pressure (and Russian jitters over potential Israeli military action against Iran). The cancellation prompted a $4 billion lawsuit by Tehran against Russia’s state arms exporter, Rosoboronexport - a lawsuit that Tehran says will be tabled if Moscow makes good on the new S-300 offer. Russian president Vladimir Putin is due in Tehran in coming days to solidify the agreement, and reinforce his government's support for the Iranian regime and its nuclear program. (Tel Aviv Yediot Ahronot, September 11, 2013)

Related Categories: Russia; Terrorism; Radical Islam; Iran Freedom Initiative; Iran; Nuclear Proliferation

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