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Iran Democracy Monitor - No. 145

Edited by Ilan Berman and Daniel Lee
March 11, 2014

Even as negotiations over its nuclear program continue with the West, the Iranian regime is busy tightening its economic belt. Iran’s Supreme Leader, Ali Khamenei, has reportedly called anew for the creation of an “economy of resistance” to counteract Western sanctions. In a recent address, Khamenei termed Western sanctions – which have been partially eased as part of the Joint Plan of Action agreed to between Iran and the P5+1 powers back in November – to be tantamount to “full-fledged economic war,” and urged the Iranian government to tighten its fiscal belt still further as a strategic response. (Fox News, February 19, 2014)

[EDITORS’ NOTE: Khamenei’s call echoes an earlier bid on the part of the Iranian regime to limit its vulnerability to Western economic pressure. Launched back in 2012 and overseen by former president Mahmoud Ahmadinejad, that effort entailed curbs on the importation of luxury goods, a rise in barter trade with foreign countries, and “a new economic system” designed to promote fiscal austerity. Apparently, despite the current negotiations with the P5+1 powers over its nuclear program, Iran’s government is still working diligently to sanctions-proof its economy.]


Amid its scramble to solidify trade agreements with international partners previously constrained by Western sanctions, Tehran is paying particular attention to the country that has long served as its economic lifeline in Asia: China. Iranian officials and their Chinese counterparts have reportedly inked a new “strategic roadmap” for boosting bilateral cooperation in a wide range of areas, such as the industrial, oil, gas, petrochemical, mining, banking, transportation, energy, communications, and information technology sectors. The deal, signed in Tehran on February 23rd by Iranian Finance and Economic Affairs Minister Ali Tayyebnia and Chinese Commerce Minister Gao Hucheng, has as its goal a doubling of bilateral trade—now estimated at $36 billion annually—in the next year. (Tehran Times, February 24, 2014)


Iranian oil industry spokesman Mehdi Hosseini announced that Tehran has changed the requirements of international oil contracts from a buyback (requiring the host nation to pay the contractor an agreed-upon price for all volumes of hydrocarbons the contractor produces) to a joint venture investment system for crude oil and gas production. The change is intended to attract foreign investment in hydrocarbon extraction, a sector which has attracted substantial interest from international oil firms since the start of sanctions relief under the interim nuclear deal struck between Iran and the P5+1 back in November. (Tehran PressTV, February 26, 2014)


An update to the UN nuclear watchdog’s 2011 report on possible nuclear weapons activities in Iran was not published in late 2013 to avoid upsetting the new nuclear deal between Tehran and the P5+1 powers. Unnamed sources have suggested that the material in question could have reinforced international concerns about Iran’s pursuit of an offensive nuclear capability, and done so at a politically sensitive time. (Reuters, February 27, 2014)


In defiance of international constraints, Iran is expanding its military cooperation with neighboring Iraq. Tehran and Baghdad have reportedly hammered out eight contracts worth a total of $195 million for the purchase of ammunition for light and medium weapons, ammunition for tank artillery and mortars, light and medium weapons and mortar launchers and communications equipment, among other gear. The deals represent clear violations of UN Security Council Resolution 1747, passed in 2006 and aimed at curbing Iran’s military contacts abroad by prohibiting the Islamic Republic from supplying, selling or transferring “any arms or related material” to foreign nations. They reflect Tehran’s effort to capitalize upon Iraqi President Nouri al-Maliki's unhappiness with the Obama administration’s lackluster response to his request last Fall for added arms and ammunition to aid the Iraqi government in the fight against local militants. The contracts, which may have been in the works for some time, were signed in late November 2013, as Tehran was negotiating for sanctions relief with the P5+1. (Reuters, February 24, 2014)


Even as Iranian President Hassan Rouhani’s diplomatic charm offensive continues, his government is maintaining its support for militants in the Gaza Strip. The most recent indicator of this ongoing relationship was the interception by the Israeli navy, in early March, of a shipment of several dozen advanced Syrian M-302 missiles, with a range of up to 200 kilometers. The maritime seizure took place 1,500 kilometers from Israel’s coast, in the Red Sea, off the Sudanese-Eritrean border. Israel reportedly had been tailing the ship for several days before the operation was launched. (Times of Israel, March 5, 2014)

Related Categories: Middle East; Iran Freedom Initiative; Iraq; Iran

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