Iran Report: December 18, 2000

IRAN'S SKEPTICAL REACTION TO U.S. ELECTIONS. Tehran watched the process of determining the next U.S. president with a great deal of skepticism, and observers there have tended to regard the whole U.S. political system, as well as President-elect George W. Bush, with skepticism as well. Iranian commentary on the future of U.S.-Iran relations, furthermore, suggests that expectation of any changes may be premature.

Skepticism about the election (see also "RFE/RL Iran Report," 13 and 20 November 2000) arose during the 1 December Friday Prayers in Qom, when Ayatollah Abdullah Javadi-Amoli ended his sermon by referring to the "disgraceful" U.S. elections and praying that the American people will be "guided towards reason and justice."

During the second sermon of the 24 November Friday Prayers, Ayatollah Ali Akbar Hashemi-Rafsanjani was more expansive about the elections. He said that "God is taking revenge on an arrogant government which has been humiliating other nations and governments in the name of democracy." He went on to say that this "cannot be called government by the people" and recommended that the voting age be reduced to 15.

Hashemi-Rafsanjani also criticized Iranians who want to emulate the American model. "They think that paradise is over there, they think that it is there that they can find their model, and it is up to foreign radios to determine their fate."

The day of the election, 7 November, the hardline "Resalat" predicted that it did not really matter who got elected, because "[b]oth major American parties, Democrats and Republicans, follow similar principles in foreign policy, and any differences are down to their different tactics and methods for the implementation of those principles." The daily said that Washington is "not willing to establish relations on the basis of mutual respect and constructive talks."

Two days later, "Kayhan," which is associated with the Supreme Leader's office, ridiculed what it saw as low participation in the election and said that the election really reflected the interests of a minority: "an influential minority of six million Jews -- Zionists -- are in practice leading the only two political parties, ... and [they] have made the American national interests serve their own ends." The newspaper claimed that "today the Zionists control 225 main American media; for example, it is said that 75 percent of the Foreign Ministry [State Department] staff are of this background; you can assume this is the case with banks, economic corporations, and so on." Therefore, according to "Kayhan," "it does not make much difference whether the Republicans come to power or the Democrats."

"Resalat," citing the late American sociologist C. Wright Mills, struck a similar theme on 11 November, when it complained that a power elite consisting of party politicians, the military-industrial complex, and capitalists and business tycoons, really ran the U.S. It went on to say that "millions of Americans ... have accepted the collusion of their politicians with the Zionist lobbies." Another commentary in "Resalat" said Iranians are "indifferent" to what happens in Washington and they expect "renewed enmity, unless the new president were to break with tradition."

"Tehran Times," a conservative English-language daily, predicted on 28 November that "if Bush goes to the White House, U.S. politics will be in shambles." It accused Bush of having a criminal record, and it said he is inexperienced and insufficiently competent. Tehran University professor Houshang Amir-Mokri predicted U.S. sanctions against Iran are likely to be lifted because "Republicans are under the influence of big oil companies," "Dowran-i Imruz" reported on 19 November. And parliamentarian Elahe Kulayi said that it did not matter whether Democrats or Republicans ruled, they all operate on fixed interpretations of the national interest and are heavily influenced by the "Zionist lobby."

Jafar Golbaz, a member of the parliamentary foreign policy committee, predicted that "Iran would never extend the hand of friendship towards the U.S." and suggested that the U.S. "rethink its approach towards Iran," state radio reported on 20 November. The likelihood of this happening immediately is doubtful.

Richard Roth, the Deputy Assistant Secretary of State for Near Eastern Affairs, said at a mid-December conference organized by the Middle East Policy Council in Washington, DC, that U.S. officials have been preparing "transition" policy papers that could guide the new administration. Roth noted that, so far, the U.S. has seen a degradation in areas of U.S. concern, such as Iran's opposition to the Middle East peace process, its support for terrorist groups dedicated to undermining that process, and Tehran's development of weapons of mass destruction and long-range missiles.

The next U.S. president will have to decide whether to let the Iran-Libya Sanctions Act (ILSA) lapse when it comes up for renewal in August. The 1996 law punishes foreign companies which invest more than $20 million in the energy sector of either of the two countries. Roth said, "We are well aware of the opportunity costs of economic sanctions to ourselves. And the new Administration should carefully review a package of economic measures that could be identified as incentives to encourage greater political dialogue."

The expectation that a Republican administration would be more inclined to placate Iran -- because President-elect Bush and his running mate, Dick Cheney, have connections with oil companies -- was greeted cautiously by Ken Katzman of the Congressional Research Service. He told RFE/RL in mid-November that "Bush's position is that it is premature to start lifting any more U.S. sanctions unilaterally until Iran shows a change of behavior on key areas of U.S. concern. He said that he also welcomes a dialogue with Iran but that it is premature to start lifting any additional U.S. sanctions." (Bill Samii)

MOHAJERANI RESIGNATION ACCEPTED. The resignation of Islamic Culture and Guidance Minister Ataollah Mohajerani was finally accepted by President Mohammad Khatami, the Presidential Office announced on 14 December. A few days earlier, Mohajerani said that he had submitted his resignation in April, IRNA reported. Khatami supposedly refused to accept his original 50-page letter of resignation, so Mohajerani toned it down and submitted a one-sentence resignation letter instead.

The 46-year old Mohajerani was immediately appointed chairman of the new International Center for Dialog Among Civilizations. His interim successor is Islamic Culture and Guidance Ministry official Ahmad Masjid-Jamei. "Abrar" has mentioned Zahra Rahnavard, the wife of former Prime Minister Mir-Hussein Musavi, as a successor, but it is doubtful that a permanent replacement will be chosen with so little time before the next election,.

Mohajerani was elected to the parliament as Shiraz's representative twenty-years ago. He later served as an adviser for legal and parliamentary affairs to President Ali-Akbar Hashemi-Rafsanjani and as chairman of the Iranian Prisoner of War Committee. More recently, he was associated with the technocratic Executives of Construction Party that was behind Khatami's 1997 election. He barely received a vote of confidence in 1997 when being approved for his ministerial posting. Parliament's attempt to give him a vote of no-confidence in April 1999 failed. Mohajerani's efforts to liberalize Iran's intellectual and cultural activities won him praise among artists and writers, but he also incurred the wrath of the country's conservatives and was even criticized by Supreme Leader Ayatollah Ali Khamenei. (Bill Samii)

MAHDAVIYAT TRIAL BEHIND CLOSED DOORS. Originally scheduled to begin on 25 November, the trial of the Mahdaviyat group began on 9 December. The trial is being held behind closed doors, although it was announced earlier that the trial would be open (see "RFE/RL Iran Report," 27 November 2000). The 34 defendants are accused of trying to assassinate Tehran Justice Department chief Hojatoleslam Ali Razini and killing a bystander in the botched attempt. They also are accused of planning to assassinate other state officials and of stealing weapons from Basij bases in mosques, state radio reported on 9 December. (Bill Samii)

MOIS MISREPRESENTS ITS COMMERCIAL ACTIVITIES. Deputy Minister of Intelligence and Security Soltani announced on 23 November that his agency has "suspended all its economic activities" in order to be able to pay greater attention to its other responsibilities, "Jam-i Jam" reported. The same news was reported in Iranian newspapers in December 1999 (see "RFE/RL Iran Report," 27 December 1999). But this statement only indicates that MOIS is deceiving the public again. It is clearly continuing to use commercial enterprises as fronts for placing agents with unofficial cover and also acquiring products for military purposes. Meanwhile, the para-statal Oppressed and Disabled Foundation (Bonyad-i Mostazafan va Janbazan) has increased its international presence. In light of this organization's long-standing links with the Islamic Revolution Guards Corps and the MOIS, it is reasonable to speculate that its international subsidiaries would assume the duties that are supposedly being abandoned by MOIS fronts. (Bill Samii)

UNUSUAL APPOINTMENT TO CAIRO. President Mohammad Khatami recently stressed the importance of North Africa in a meeting with Iranian diplomats, IRNA reported on 9 December. The background of the new head of the Iranian Interests Section in Cairo, Seyyed Hadi Khosroshahi, provides some interesting indications of what Khatami meant.

Khosroshahi served in the Islamic Liberation Movements Office during the 1980s. This agency, which was tasked with exporting the revolution and was part of the Islamic Revolution Guards Corps initially, was responsible for Iranian activities in Lebanon and efforts to subvert Persian Gulf Arab states. Khosroshahi was a point of contact with Lebanese Hizballah and reportedly was in contact with the Saudi associates of that group in the mid- to late-1990s.

Duties that have received greater publicity include Khosroshahi's service as Iran's ambassador to the Vatican, international travel on behalf of the Ministry of Islamic Culture and Guidance, and leadership of an Iran-Egypt friendship group. Domestically, Khosroshahi has served in the Assembly of Experts and is a member of the central council of the hardline Tehran Militant Clergy Association (Jameh-yi Ruhaniyat-i Mobarez-i Tehran). Perhaps of greater relevance is that he was close to Father of the Revolution Ayatollah Ruhollah Khomeini and had a record of opposition to the monarchy.

To date, there have been obstacles to the development of full diplomatic relations and the exchange of ambassadors, so the choice of Khosroshahi may seem a strange one. The Egyptian government already believes that Iran supports the terrorist Islamic Group. Naming a major Tehran thoroughfare after Khalid Eslamboli, one of Egyptian President Anwar Sadat's assassins, has not helped the situation. The initial break in full diplomatic relations occurred in 1980, when Iran�s exiled monarch was granted refuge in Egypt.

Tehran sees Cairo's relations with Tel Aviv as the major stumbling block. Mohammad Reza Hafeznia, head of the African studies center at the Iranian Foreign Ministry, declared on 5 December that "the existence of the Zionist entity is the greatest obstacle in the way of naturalizing Iran's political ties with Egypt," IRNA reported. Discussing Iran-Egypt political issues at the Foreign Ministry's Institute for Political and International Studies (IPIS), Hafeznia predicted that "the further the Egyptian government would withdraw from its relations with the Zionist regime, the deeper it can get involved in restoration of political ties with Iran." In a similar vein, Iranian Foreign Minister Kamal Kharrazi said that "regional developments have upgraded the status of [Tehran-Cairo] relations." He added, in a 24 November interview with Cairo�s "Al-Musawwar," that "the two countries� relations are getting closer."

These views are heard from official religious and media platforms, too. In the 8 December Tehran Friday Prayers, Guardians Council secretary Ayatollah Ahmad Jannati commented that "the Israelis made a great deal of effort to establish relations with many Islamic countries. Many of those relations are now severed. Egypt is being obstinate and some other countries are being obstinate too." In the Qom Friday prayers on the same day, Ayatollah Ali Meshkini criticized Egypt for its refusal to sever ties with Israel. Former President and Expediency Council Chairman Ayatollah Ali Akbar Hashemi-Rafsanjani also criticized Egypt for this during the 24 November Friday Prayers sermon. And Iranian state radio's English-language broadcast on 26 November noted with approval the remark by Usamah Al Baz, an adviser to President Hosni Mubarak, that Israel was "the arch-enemy of the Islamic states. "

Although full diplomatic relations are absent, Cairo and Tehran communicate bilaterally and in multilateral fora, and they exchange academic and trade delegations. (Bill Samii)

STRENGTHENING TIES WITH AFRICAN STATES. President Mohammad Khatami discussed "cooperation with African states," "especially Algeria," in a meeting with a group of Iranian diplomats who were about to leave for their new assignments. Khatami added that expanding relations with African states is a "pivotal principle" of Iranian foreign policy, IRNA reported on 9 December.

Relations with Algeria are of particular importance to Iran because both countries are members of OPEC and have a shared interest in keeping oil prices high. Algiers severed relations with Tehran in March 1993 due to the belief that Iran supported the Armed Islamic Group (GIA), an extremist organization seeking to overthrow the government. Bilateral relations were restored in September 2000, after Khatami met with his counterpart, Abdelaziz Bouteflika, during his visit to the UN in New York.

The new Ambassador to Algeria is Seyyed Mohammad Reza Mavali-Zadeh, who represented Ahvaz in the parliament for two terms.

Moving south, another African country that seems destined for a strengthened relationship with Iran is Liberia. Liberian Foreign Minister Monie Captan visited Tehran in the first week of December. Captan met President Khatami, Foreign Minister Kamal Kharrazi, Cooperative Minister Morteza Haji, and Mines and Metals Minister Eshaq Jahangiri. Captan and Kharrazi signed a Memorandum of Understanding on 4 December that stressed "constant communications and contact between the private sectors of the two countries," expansion of trade relations, and trade exhibitions. The MOU also called for Iranian participation in the Liberian fisheries, reconstruction, and energy sectors, according to IRNA.

Finally, the Nairobi-based First American Bank of Kenya (FABK) and the Export Promotion Bank of Iran signed an agreement to provide Iranian non-oil exporters with a $6 million export credit line, IRNA reported on 13 December. If the FABK provides a guarantee from a third bank, the credit line's ceiling could reach $50 million.

Other participants in the December meeting with Khatami were Ambassador to Niger Seyyed Ahmad Shoyabi and Ambassador to Kenya Seyyed Ahmad Serajzadeh. (Bill Samii)

TEHRAN LOOKS TO LATIN AMERICA. President Mohammad Khatami told a group of Iranian ambassadors who were about to leave for their new assignments that expanding relations with Latin American states is a "pivotal principle" of Iranian foreign policy, IRNA reported on 9 December. Among the group was ambassador to Colombia Abdulazim Hashemi and Ambassador to Chile Safarali Islamian Kupaei. One week earlier, Iranian Deputy Foreign Minister for Euro-American Affairs Ali Ahani was in Mexico City for the inauguration of Mexican President Vincente Fox. Ahani met with Mexican political leaders, IRNA reported, and he held separate meetings with the new Peruvian Prime Minister, Javier Perez de Cuellar. Ahani also met with Panamanian Foreign Minister Jose Miguel Aleman and Venezuelan Foreign Minister Jose Vincente Rangel. Khatami himself visited Venezuela and Cuba in late-September and early-October.

The relationship with Havana seems particularly important to both countries. Cuban Vice-President Carlos Lage Davilla visited Tehran in early-October, presumably to follow up on discussions initiated during Khatami's visit. At the time, Lage told Vice-President Hassan Habibi that he hoped the two countries would "broaden their economic and scientific cooperation."

Cuban Light Industries Minister Jesus Perez Oton visited Iran in late-October. On a visit to Yazd Province he expressed admiration for the province's "industrial and textile capacity" but pointed out that "sea transportation and providing credits are the thorniest issues hurdling [hobbling?] expansion of Tehran-Havana economic ties." Yazd Governor-General Gholamali Sefid described biotechnology and pharmacology as areas in which Tehran and Havana could cooperate. Mohammad Hussein Modarresi, the director of the Yazd exports department, said that the province had exported $50,000 dollars worth of goods to Cuba in the March-September 2000 period.

Lage visited the Iranian pavilion at November's Havana International Trade Fair. While there he spoke with Iranian Ambassador Seyyed Davud Salehi and opined that Cuba could possibly become a customer of Iranian sanitary, ceramic and tile products. And on 10 December, the governors of Iran and Cuba's central banks, officials from Cuba's Ministry of External Trade, and some Cuban businessmen participated in an Iran-Cuba trade seminar in Havana.

Relations with Montevideo seem to be on the agenda, too. Uruguayan Foreign Minister Didier Opertti met with Iranian Deputy Foreign Minister for Euro-American Affairs Ali Ahani on 2 December. Also, Deputy Uruguayan Foreign Minister Guillermo Wais visited Tehran on 4 October, IRNA reported. He met with Foreign Minister Kamal Kharrazi and discussed the "dialog among civilizations." Deputy Foreign Minister for Euro-American Affairs Morteza Sarmadi attended President Jorge Batlle�s inauguration in Montevideo in March. Sarmadi met with Uruguayan officials, called for expanded trade between the two countries, and offered Iran�s help in development projects. Sarmadi also met with the president of Venezuela, the vice-presidents of Colombia and Peru, and the Chilean foreign minister. (Bill Samii)

COLOMBO SEEKS IRANIAN CREDITS. Sri Lankan Foreign Minister Lakshman Kadirgamar spent three days in Tehran during the first week of December. He met with President Mohammad Khatami, who extended an invitation to his counterpart, Chandrika Bandaranaike Kumaratunga. The Sri Lankan visitor also had discussions with Foreign Minister Kamal Kharrazi, Economic Affairs and Finance Minister Hussein Namazi, and Speaker of Parliament Hojatoleslam Mehdi Karrubi. Kadirgamar also had time for some tourism, visiting Shiraz and Persepolis.

Energy resources and financing for them seemed to be foremost on Kadirgamar�s mind. In an interview with the 3 December "Tehran Times" he said that Sri Lanka buys 52 percent of its oil from Iran, and he added that Sri Lanka may purchase Iranian gas that will be transferred to India via a pipeline through Pakistan. Kadirgamar also requested medium-term credit for oil purchases when he met with Namazi, IRNA reported on 29 November. Sri Lankan Commerce Minister Kingsley Wickremarante made a similar request for credit when he visited Tehran in August, IRNA reported on 4 September.

Editorials appearing in Colombo�s "Daily News" on 6 and 7 December pointed out that the recent rise in oil prices has had a negative impact on oil importing developing countries such as Sri Lanka. The widely-read English-language daily said that its developing industries depended on affordable oil if they were to continue to grow. And the newspaper reminded readers that Sri Lanka supported OPEC states during the price hikes of the 1970s. So now is the time for "mutual accommodation and understanding between Lanka and friendly oil-producing countries." (Bill Samii)

RISKY BUSINESS, REVISITED. A two part series that appeared in March issues of the "RFE/RL Iran Report" discussed Iran's international borrowing, its credit risk, and foreign investment in the Islamic Republic. The Iranian economy's international standing has changed since then, due to the recent and continuing upswing in oil prices. The country has a foreign exchange surplus, international lenders seem fairly confident that Iran will meet its repayment schedules, and it even appears that Iran's risk rating has improved. Yet legal and administrative disincentives for foreign investment have not changed.

During much of the 1990s, Iran kept renegotiating and extending its debt repayment schedule. As recently as 1999, Iran renegotiated its debts with Germany, Japan, Italy, and the European Union. Iran's ability to make its payments has been strengthened recently by the hike in oil and gas prices and by increases in non-oil exports. Tehran also reformed its foreign exchange regime and took measures that would encourage exporters to repatriate their earnings, according to the Economist Intelligence Unit. Central Bank reserves began to increase, too, and Iran may achieve a balanced budget or even a surplus. Also, Iran's external position with Western banks moved into surplus for the first time in the first quarter of 2000, IRNA reported in September. The surplus for 2000/2001 is expected to reach $6.5 billion, according to Deutsche Bank Research's September report.

Article 60 of the Third Five-Year Development Plan, which was passed in October, directed how the surplus should be spent. Former Management and Planning Organization official Masud Nili explained in the 14 October "Hamshahri" that the surplus would be used for capital investments, rather than for making up budgetary shortfalls that result from, for example, weak tax collection. Also, Nili said, some of the foreign currency would be available for lending, albeit only after budgetary needs are met.

A more precise breakdown on use of the money was reported by IRNA on 4 December. 1,700 billion rials will be distributed to executive bodies (such as ministries and state companies) because their foreign exchange allocation had increased. 2,400 billion rials will be to encourage production, 1,800 rials will go to exporters in the cooperative and private sectors, and 1,880 billion rials will be used as bonuses for retiring government employees. 200 billion rials will be spent on security measures in the eastern provinces, and 2,200 billion rials will be spent on repaying government debts to the banking system and for "other financial undertakings."

Beforehand, there was little agreement about how to use the surplus. There were proposals that the money should go to the bazaar, to the private sector, or to create jobs. There were other recommendations that the money should be used in less-developed regions of the country; it should go for scientific and industrial research; or it should be used for social welfare projects.

Dr. Bidabad, an Iranian economist, told "Khorasan" in September that there should be greater thought to the future, when oil revenues drop again. He recommended setting the money aside for use in deficit years, possibly by buying shares in large foreign firms as a hedge. Bidabad also recommended servicing Iran's external debts, which he put at $21 billion. Another economist, Bahman Arman, told the 7 October "Javan" that the government and the parliament are behaving in a factional rather than a practical way when seeking expert opinions on how to use the surplus.

These two economists, as well as several others interviewed by the Iranian media, agreed on the likelihood that the surplus would be spent on consumer goods. This would only have a short-term positive impact on the economy, but its impact would be negative in the long-run as the money leaves the country.

Deutsche Bank Research does not believe that repayment of external commitments will pose a problem for Iran. This is because "[t]he rescheduling of debt, the recovery of oil prices, and the increasing availability of new sources of finance have considerably improved Iran�s ability to meet its external debt obligations."

Iran, furthermore, was considered to be a high risk country for investors, and it was given a B-2 Moody's rating, indicating that assurance of timely interest and principal payments over any long period may be small. Now, international cover for investment in Iran appears to be on the upswing, according to Iranian sources.

HSBC (Hong Kong and Shanghai Banking Corporation) has arranged a $500 million credit line for Iran, IRNA reported on 20 November, following an agreement with Bank Melli Iran, Bank Saderat, Bank Tejarat, Bank Sepah, Bank Mellat, and the Export Development Bank. The loan reportedly enjoys cover from Germany's Hermes, France's COFACE, England's Export Credit Guarantee Department (ECGD), and Italy's SACE. The ECGD confirmed in October that it was restoring medium-term cover for Iran, according to IRNA. The ECGD's position will be reviewed at the end of 2000 in light of progress made on renegotiation of old debts and changes in the Iranian economy.

There are still many disincentives for foreign investors. Mehrdad Motamedi, deputy chief of the foreign investment department of the Chamber of Commerce, said that Iran ranks 154th out of 160 countries for foreign investment. Motamedi told the 13 December "Aftab-i Yazd" that Iran's share of the world's $800 billion in foreign investment is less that one-tenth of 1 percent. That is because regulations are enforced differently by different state agencies and officials often contradict each other. Furthermore, investors are taxed 54 percent. Finally, according to Motamedi, foreign investors are expected to export their manufactured goods and reinvest the money they make in Iran, while Iranian organizations import similar goods.

Yet the biggest problem facing the Iranian economy at the moment is its continuing dependence on oil revenues. Just as the recent rise in prices has been helpful to the economy, the reduction in prices that some Iranian economists believe is inevitable will be equally harmful. (Bill Samii)