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Analysis: Iran's Parliament Gets Involved In Foreign Economic Relations

Iran's parliament ratified a bill on 26 September obliging the government of President Mohammad Khatami to seek parliamentary approval before the implementation of two major foreign contracts, both with Turkish firms: to expand and run a new international airport in Tehran and to run a national mobile-phone network.

Parliament says it must check the deals to ensure they do not threaten national security. The bill is a watered-down version of an initial proposal that demanded legislative ratification of all contracts with foreign firms or firms with majority foreign ownership in the security-sensitive telecommunication and aviation sectors (see "RFE/RL Iran Report," 27 September 2004). The bill swiftly became law after winning approval from the Guardians Council, the conservative-dominated body of jurists that verifies bills to assure conformity with the constitution and religious laws.

The bill may reflect the distaste of conservative legislators for the large-scale intrusion of foreign business into the country, especially into Iran's mostly state-owned economy. Conservatives especially distrust alleged ties between the Turkish firms involved and Israel, Iran's enemy but an ally of Turkey.

The bill affects two firms. One, the Turkish-Austrian consortium Tepe-Akfen-Vie, built the first terminal of the Imam Khomeini International Airport, and was to staff and operate it and build a second terminal after signing a deal with the Iranian Transport Ministry. But the airport was closed on 8 May, its first working day, by the Islamic Revolution Guards Corps, which said the presence of foreign staff at the airport was a security risk (see "RFE/RL Iran Report," 17 May 2004).

The other firm, TurkCell, was to invest $3 billion and set up Iran's first private mobile-phone network. TurkCell was awarded the contract in February to operate the network under the name IranCell. Its operating license would take effect upon payment of 300 million euros ($369 million) to Iran's government, AFP reported on 24 September. The company now says it will make the payment if parliament approves the deal, "Aftab-i Yazd" reported on 30 September, citing the company website.

Reformers say the bill will frighten away foreign investors. President Khatami called it a legislative "innovation" and parliamentary interference in executive branch prerogatives. It would "paralyze government," he said, especially when negotiating with foreign partners, IRNA reported on 26 September. But parliamentary speaker Gholam-Ali Haddad-Adel said it is natural for parliament to be sensitive about foreign contracts, and the exercise of its supervisory prerogatives is not interference, IRNA added.
"Every contract has two parties, and...cannot be changed by one party or government."

Gholamreza Tajgardun, a deputy head of the Management and Planning Organization, the state planning and budget-allocation agency, said on 26 September that the new law will cause "many discrepancies" in the TurkCell deal, which was beginning to be implemented, "Aftab-i Yazd" reported on 27 September. Parliament, he said, "intends to make fundamental changes" to both deals, and Iran will have to pay compensation if the mobile-phone deal falls through. "Every contract has two parties, and...cannot be changed by one party or government," he said.

Mohammad Mehdi Purfatemi, parliamentary representative for Dashti and Tanguestan, said in Tehran on 26 September that, during a recent trip to France on behalf of parliament's Industries and Mining Committee, "most investors and important French companies expressed concern" about the bill, "Aftab-i Yazd" reported on 27 September.

Parliamentary speaker Haddad-Adel said in Tehran on 26 September that the bill does not automatically end the contracts, but "parliament must approve them," "Aftab-i Yazd" reported the next day. He said he believes it will not deter investors. He may be right. A South African mobile-phone operator, MTN, which also bid in the February tender won by TurkCell, has already expressed readiness to step in if the TurkCell deal falls through, AFP reported on 29 September. "If the rest of the conditions make sense, we are ready to work under the new regulation," AFP quoted MTN local representative Christopher Kilowan as saying.

Haddad-Adel believes, in any case, that it is "less financial corruption" and a strict "financial supervision system" that attracts investors to Iran, IRNA reported on 26 September.

The bill has affected Iran-Turkey ties. Khatami has postponed a planned 28-29 September visit to Turkey, reportedly accepting a parliamentary suggestion to wait until the fate of the contracts is clarified, Turkey's NTV reported. Reformist parliamentarians have welcomed the move as a fitting response to parliament's move, and consider a trip pointless when Khatami could not have struck a deal. "When Khatami has no power at the negotiating table, a trip to Turkey will have no results," "Aftab-i Yazd" quoted Qodratollah Alikhani, parliamentary representative for Buyin-Zahra and Avoj, as saying in Tehran on 26 September.

Parliament has given the government three months to win approval for the two contracts. On 29 September, Haddad-Adel wrote to Khatami to say parliament is ready to begin a "technical examination" of the two deals, Mehr news agency reported.

The head of parliament's research center, Ahmad Tavakkoli, a Tehran legislator and leading proponent of the bill, has also asked the Telecommunications Ministry and Management and Planning Organization for documents on the TurkCell deal, including contract details as well as "any documents clarifying" that the deal will use the maximum amount of Iranian-made equipment, transfer technology into Iran, and respect "security issues," reported on 29 September.

Iranian conservatives regularly assert that the economy and job creation are their priority. This bill shows that, beyond security concerns, they do not all favor free-market methods for economic growth and may be uncomfortable with initiatives that threaten the state-controlled economy and the state's preponderant role in public life. In contrast to government spokesman Abdullah Ramezanzadeh, who recently said Iran needs foreign investment, they may believe that high oil prices can successfully finance the Islamic republic's other intermittent temptation -- self-sufficiency.

Asked by "Aftab-i Yazd" if it is better to sign deals with Iranian firms than with Tepe-Akfen-Vie or TurkCell, Haddad-Adel said on 26 September, "It depends on the work, but the priority is with Iranian reality the priority is that we should build Iran at the hands of Iranians."