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Iran Report: March 27, 2000

27 March 2000, Volume 3, Number 13

HOSTILE OFFICIAL REACTION TO ALBRIGHT SPEECH. Foreign observers and the Western media have commented extensively about the implications of U.S. Secretary of State Madeline Albright's 17 March speech on Iran, but official commentary from Tehran was fairly restrained initially. Supreme Leader Ayatollah Ali Khamenei's response to the speech on 25 March, however, was openly hostile and seemed to dash hopes for a rapprochement between Iran and the U.S. in the near future. President Mohammad Khatami has remained silent on the subject thus far.

Albright's speech is seen by many in the West as an important step in the restoration of relations between Iran and the U.S. She announced that the U.S. will permit the import of some Iranian goods, facilitate contacts between Americans and Iranians, and increase efforts to settle outstanding legal claims. Albright also acknowledged the impact of the U.S. role in the 1953 ouster of Prime Minister Mohammad Mussadiq, and she admitted that the U.S. supported Iraq in its war with Iran.

Khamenei responded to Albright during a speech in Mashhad. He said that "The Iranian nation and its authorities consider the United States to be their enemy because America's past behavior is full of acts of hostility and treason." Khamenei added that "The U.S. proposal is deceiving and aimed at continuing enmity with Iran." As for Albright's statements about events in 1953 and 1980-1988, they "came too late and can in no way compensate the damages caused to the Iranian nation."

Khamenei's speech seems to put the stamp of finality on the issue, but there were some positive responses from Tehran beforehand. Iranian Foreign Ministry spokesman Hamid Reza Assefi said America can export grains and medicine to Iran (which it has been doing anyway), IRNA reported. And Expediency Council secretary Mohsen Rezai said the speech was "a new chapter" in the two country's relations, and he predicted major developments in the coming year, IRNA reported.

Mohammad Javad Larijani, of the parliament's Foreign Relations Committee, also welcomed aspects of the speech, but then he complained that "America's acts...are all negative...there has been no change in its policies." Larijani also criticized Albright's statement that Iran's last three elections (October 1998 Assembly of Experts election, February 1999 council elections, and February 2000 parliamentary elections) were increasingly democratic, because it implied that all the other elections were undemocratic. Larijani also complained about Albright's reference to the "Gulf," rather than the "Persian Gulf."

Supreme National Security Council secretary and deputy parliamentary speaker Hassan Rohani told state radio on 18 March that, "On the whole, [Albright] has repeated the same old belligerent policies." Her comments about domestic Iranian politics, he said, constituted "improper interventions in Iran's internal affairs and system." Even the removal of some trade sanctions, Rohani said, is "not at all a positive [step]; it is a negative step, which smacks of another act of intervention by America in the internal affairs of Iran."

State radio said on 19 March that "Albright's speech shows that the U.S.A. is still pursuing its expansionist policies." And the Islamic Revolution Guard Corps said that Albright's comments "are indicative of an intensifying conspiracy by the White House to create a series of crises in Iran," according to state television.

Some of Iran's neighbors, such as Turkey, Pakistan, and Armenia, welcomed the potential regional stability that improved U.S.-Iran relations could bring. Cairo's state-owned "al-Jumhuriyah," however, was less sanguine, warning on 19 March that "the Iranian desire to dominate the region has not withered yet." The Egyptian daily also wondered if Iran's attitude towards the Middle East Peace Process would change. Officials in the Israeli Prime Minister's office also questioned the wisdom of U.S. actions, telling the 20 March "Jerusalem Post" that "giving the Iranians the carrot does not work, and therefore by trying to encourage Iran with nice words and actions, the U.S. is making a grave mistake." An Israeli Foreign Ministry official, on the other hand, said U.S. actions are a good thing, but "there are many here who do not understand it and are frightened that when dialogue starts, issues we are concerned about will be left aside." (Bill Samii)

IRGC LINKED TO HAJJARIAN SHOOTING. Tehran reported on 20 March that the would-be assassins of Said Hajjarian, who was shot on 12 March, have been captured. But the government then attempted to control all commentary on the case, either to protect the Islamic Revolution Guard Corps (with which the assassins are supposedly linked) or to hide the system's shortcomings.

The secretariat of the Supreme National Security Council announced on 20 March that "following extensive investigations by intelligence, security, and law enforcement services of the country to trace the perpetrators of the cowardly assassination attempt on Mr. Said Hajjarian and as a result of extensive cooperation of the citizens in this regard, the real perpetrators of this crime have been fortunately arrested and the attacker has confessed to this criminal act."

An unnamed official from the Ministry of Intelligence and Security announced on 21 March that the gunman was Said Asqar, a chemistry student at Tehran's Islamic Azad University. Five others were arrested, too, but their names were not provided. The MOIS official said that efforts were underway to make sure that all the confessions tallied. As for the motorcycle used by the shooter--which is a class available only to the security forces--"the culprit claimed that the motorcycle he employed for the terrorist act had been private."

The next day, "an official familiar with the investigation" told state radio that Said Asqar had previously assassinated Qasem Shafii, an official with the Imam Khomeini Relief Committee. The motorcycle, furthermore, belonged to somebody who did not have a license for it. And on 23 March, an "informed source" told state television that the accomplices were Mohammad Ali Moqaddami, Hussein Moqaddami, Mohsen Majidi-Dorchei, Musa Jannesari and Mehdi Rowghani.

Releasing information about the case bit by bit and through unnamed sources is undermining public confidence in the investigation. Furthermore, the government has attempted to impose a news blackout on the case. The SNSC secretariat urged "the managing directors and editors of the Iranian media not to repeat any unsubstantiated report, rumors, partisan analysis, biased and hostile commentaries which have been reported by the foreign media, especially those items pertaining to the arrest of the perpetrators of Hajjarian's assassination attempt," IRNA reported on 21 March. An editor of a reformist newspaper said that journalists Akbar Ganji, Emadedin Baqi, and Abbas Abdi were pressured to abandon their investigations of the assassins' connections with the IRGC, London's "Al-Sharq al-Awsat" reported on 22 March.

But the attempt to stifle speculation on the case failed, and Tehran is full of rumors. There are rumors to the effect that Said Asqar is a member of the IRGC, the assassins are linked with an IRGC unit in Shahr-i Rey, and an IRGC commander has been relieved of his duties while his involvement in several other assassinations is investigated, according to "Al-Sharq al-Awsat." Furthermore, the Arabic daily reported, the attack on Hajjarian was the 15th carried out by the Islam Fighters Association (Hayat-i Ruzmandakan Islam), which is led by Colonel Abolqasimi, who formerly led the IRGC intelligence unit. Hojatoleslam Khaki is supposedly the group's spiritual guide. This group cooperates with the Prophet's Family Association (Hayat-i Karim Ahl al-Bayt), a group led by Shahr-i Rey municipal officer Habibian, which is also responsible for several political assassinations. When members of these groups tried to flee to Karbala, they were apprehended by the IRGC intelligence unit.

"Sobh-i Imruz" and Mosharekat" speculated that there have been more arrests by the IRGC. But the IRGC is not willing to turn the suspects over to other law enforcement organizations, possibly because it is trying to protect its own reputation. MOIS chief Ali Yunesi said that only one of the 10 people arrested was in the IRGC, and he had been tricked into joining the others.

This lack of transparency--most recently seen in the investigation of the serial murders of dissidents and journalists, the trial relating to the July attack on Tehran University, and the frequent use of scapegoats for such events--undermines trust in the government and the leadership. A commentary in the 22 March "Mosharekat" pointed out that whenever such cases occur, the first impulse is to blame foreign conspiracies.

But if the system is so easily penetrated by foreign agents then it must have some deep-rooted problems. By attributing such events to foreigners, "Mosharekat" said, "some of the officials want to shirk their responsibility and, by giving misinformation, to prevent domestic problems from becoming apparent. Although with good intentions, they think that if domestic corruption is exposed the people would no longer have faith in the system (and perhaps they, themselves)." The daily suggested that the officials focus on inner reform, rather than propaganda "which would not convince even our primary school children." (Bill Samii)

FURTHER IRGC SUPPORT FOR KHATAMI. 83rd Brigade commander Hojatoleslam Ruhollah Danesh said his troops love President Mohammad Khatami the same way they love Supreme Leader Ayatollah Ali Khamenei. He went on to say that anybody who opposes the president is an enemy of Vilayat-i Faqih (Guardianship of the Supreme Jurisconsult), "Iran" reported on 13 March. Meanwhile, the Iranian armed forces announced plans to sell its city garrisons and build new facilities in the suburbs, IRNA reported on 14 March. The first garrison to be moved are Qaleh-Morqi in southern Tehran and Birjand in the eastern part of the country. (Bill Samii)

MILITARY CONTROL OF TEHRAN POLICE CONTINUES. General Ahmad Alireza Beighi, formerly of the Islamic Revolution Guards Corps, was appointed deputy of the Law Enforcement Forces on 11 March and given responsibility for traffic control in Tehran, temporarily ending a debate that started in August over who would control the Tehran traffic police. Tehran Mayor Morteza Alviri threatened to resign in December if the municipality could not control the traffic police, according to "Iran," while LEF chief General Mohsen Ansari said the military should run the traffic police because it is both a security and a judicial organization, according to "Sobh-i Imruz." Alviri said the municipality must control the traffic police in an effort to reduce the city's extreme pollution.

Parliamentary debate on a bill giving control of the traffic police to the municipality did not get very far. Conservatives opposed to the bill had it struck from the agenda in early December. And in late December, when the parliament was to debate the bill, there were not enough parliamentarians present for a quorum.

While traffic control may seem unimportant, the issue should be seen in the context of efforts to give President Mohammad Khatami's administration some control over Iranian security forces. Last December Interior Minister Abdolvahed Musavi-Lari complained that he had trouble meeting his responsibilities because of a lack of cooperation from the LEF. Even now, during the trial of LEF officials for the July attack on a Tehran student dormitory, there are complaints that the individuals who are really responsible for the violence are not being tried. (Bill Samii)

PROTESTS OVER POLL RESULTS. Citizens from Minab, Jask, and Roudan staged a protest at the Interior Ministry building in Tehran over the annulment of election results in their Hormozgan Province towns, IRNA reported on 15 March. The Guardians Council had annulled results in these towns in the second week of March (see "RFE/RL Iran Report," 13 March 2000), but one of the 200 protesters complained that no documentary evidence had been provided. Another demonstrator told IRNA that he thought the results were annulled because a candidate belonging to the reformist 2nd of Khordad front was elected in the province. The Guardians Council, meanwhile, confirmed the election results in 11 constituencies, IRNA reported on 15 March. (Bill Samii)

ARMS PROCUREMENT MEETS SETBACKS. Aspects of Iran's weapons procurement program have had some legal problems recently. Japanese police accused Iran's former ambassador to Japan, Hussein Kazempur-Ardabili (currently a high-ranking adviser in the Foreign and Petroleum Ministries), and another Iranian diplomat of illegal weapons exports to Japan, Kyodo news service reported on 24 March. The Iranians are suspected of transferring 6.1 million yen (about $57,000) to the account of a Japanese trading firm called Sun Beam, which is suspected of shipping parts for anti-tank rocket launcher sights to Iran without proper export permits. The Japanese police said that the Iranian embassy has refused to cooperate with their investigation, citing diplomatic immunity.

Two Sun Beam officials pleaded guilty to shipping rocket launcher parts illegally, Kyodo news service and Tokyo's "Sankei Shimbun" reported on 14 March. The parts were shipped to an Iranian state enterprise called Iran Electronics Industries in 1995. One of the plaintiffs, Ichiro Takahashi, frequently traveled to Iran for direct negotiations. In 1996, Takahashi looked into shipping Chinese C-801 and C-802 anti-ship missiles to Iran at the request of Iranian businessman Massoud Momtahan. An arrest warrant is outstanding for Momtahan, Kyodo reported on 7 March.

The Stuttgart public prosecutor's office has launched an investigation of Eisen and Metallgrosshandel Fink GmbH in Boeblingen, Germany, according to the 13 March newsmagazine "Focus." The German firm allegedly bought more than 50 Lynx reconnaissance tanks from the Canadian army in 1993 and shipped them to Holland, from where they went to Iran. Another 40 tanks were shipped to Iran via Singapore. Company owner Gerhard Fink said that "I only found out later that the tanks were exported to Iran."

Eight officials from Iran's Ministry of Defense and Armed Forces Logistics are under a federal indictment in the U.S. for trying to obtain and smuggle out military secrets, AP reported on 11 March. The Iranian officials live in Tehran and operate through the Engineering Consortium of Iran. One of those under indictment, Houshang Amir Bagheri, will appear on the U.S. Customs Service's "Ten Most Wanted" list. Bagheri worked in the Iranian embassy in Washington during the 1970s.

But not all Iranian procurement--both official and unofficial--efforts have ended so unsuccessfully. Russian Security Council secretary Sergei Ivanov promised that Moscow will fulfill all arms delivery contracts that were signed before 1995, Interfax reported on 14 March. Ivanov said the two largest agreements were signed in 1992 and 1993, and Russia is about to sign another contract for a Tu-334 aircraft plant and aircraft shipments. Ivanov added that "we have come to a full understanding with the Americans that we will make no new arms deals with Iran at the present time, but we will continue to fulfill the contracts concluded before the signing of the appropriate Gore-Chernomyrdin document in 1995."

A Spanish official brought 200 machine guns and 300 handguns, all of which are equipped with silencers, to Tehran, "Sobh-i Imruz" reported on 16 March. The daily said the weapons were put at the disposal of "an individual suspected of leading [hardline] pressure groups." Such groups have been linked with leading figures in the regime.

Finally, the case against Eli Kohen, an Israeli suspected of selling military equipment to Iran, has been closed, Tel Aviv's "Maariv" reported on 10 February. Kohen had sold armored personnel carriers, engines, and spare parts to a Dutch firm, which sold them to Iran. But according to a 1993 Canadian Army document, all the equipment was demilitarized. (Bill Samii)

IMPACT OF CZECH LEGISLATION ON BUSHEHR DEBATED. Regarding the Czech parliament's ban on the export of goods or know-how for use in construction of Iran's Bushehr nuclear project, U.S. Secretary of State Madeline Albright said on 17 March: "it is a sign that the Czech Republic is adopting a responsible approach to one of the major problems of our time, which is the problem of proliferation." Albright's statement notwithstanding, the Czech reaction to this legislation is not altogether enthusiastic.

The Czech Senate returned the relevant bill to the lower house on 16 March with a request that affected companies receive compensation. Minister of Industry and Trade Miroslav Gregr stated that the government will only compensate firms that have suffered "concrete losses," Prague's "Radiozurnal" reported on 17 March. ZVVZ Milevsko, the company that was supposed to provide air conditioning equipment for Bushehr, is not eligible for compensation because it had not signed a deal with the Iranian government and therefore did not cancel any deal, according to Gregr.

Bohuslav Sobotaka, deputy chairman of the Social Democratic Party (CSSD) parliamentary group, told CTK on 17 March that the CSSD wants to convene the lower house in an emergency session to debate the bill. Chamber of Deputies Chairman and Civic Democratic Party leader Vaclav Klaus, however, said he sees "no reason" to debate the bill in an emergency session. He added that he does not believe the house will discuss the draft law before April, according to "RFE/RL Newsline."

Other Czech firms, such as Skoda Plzen, are concerned about the impact of such legislation, directly or through a general downturn in trade relations with Iran. Milan Sedlacek of Prvni Brnenske Stojirny, however, expressed the opposite view. Sedlacek said his firm is cooperating on construction of the Iranshahr thermal power plant and has not encountered any major problems, "Hospodarske Noviny" reported on 14 March.

The Czech Republic has "adopted a policy of following America unreservedly," Tehran's reformist "Sobh-i Imruz" daily complained on 8 March. The Czech ban against working on the Bushehr nuclear reactor, the daily said, is "in line with its policy of subordination." (Bill Samii)

RISKY BUSINESS, PART II. Iran's ability to meet some of its foreign debt obligations increased as a result of the recent reversal of a downturn in oil prices. Tehran's situation may gain even more because more foreign firms are showing an interest in investing in Iran. The poor risk status of Iran in the eyes of foreign risk insurance agencies, however, hampers such international investment efforts. This is caused by, first of all, Iran's difficulty in meeting its debt obligations (see "RFE/RL Iran Report," 20 March 2000), and secondly, the country's own laws, which limit foreigners' ability to participate fully in the economy.

Due to Iran's trouble with making timely debt payments, from 1994-1996 many state credit agencies, such as Germany's Hermes, France's COFACE, England's Export Credit Guarantee Department, and Italy's SACE, withheld export credit guarantees for firms that wanted to invest in Iran. As a result, Tehran turned to private insurance firms. London's Jardine Insolvency Insurance is one such firm, but an official there told RFE/RL that guaranteeing projects in Iran is "difficult" and that Jardine requires a "very firm commitment that it's a government-backed project." And even then, protection is provided only for short-term (less than two-year) projects.

Raquel Ajona, the Deutsche Bank Research Unit's expert on Iran and the Mideast, told RFE/RL that Iran "is regarded as a high-risk country. Iran was not rated by international trade agencies until very recently. Moody's has given Iran a B-2 rating recently." (B-rated bonds lack the characteristics of a desirable investment because assurance of timely interest and principal payments over any long period may be small. B-rated insurance companies offer poor financial security and assurance of punctual payment of policyholder obligations over any long period is small.)

Iran has aggressively encouraged other countries to improve its credit-risk standing. Iranian Deputy Minister of Industries Akbar Torkan urged the German government to push the OECD to improve Iran's poor credit rating when he was in Berlin in late-February. Soon thereafter, Dusseldorf's "Handesblatt" (9 March) reported that Hermes will issue export guarantees for deals up to 50 million marks (about $24.8 million), and the ceiling may even be moved up to 200 million marks (about $99 million). Current Hermes coverage for Iran totals 2.1 billion marks (about $1.04 billion), which is less than guarantees for India or Turkey.

And on the last day of a visit to Tehran, Italian Foreign Minister Lamberto Dini said he had received "repeated complaints from Iran" about Italian banks' failure to support investment in Iran, ANSA news agency reported on 6 March. Dini lambasted the banking system for "failing to...adequately support Italian projects." On the eve of his trip to Rome in February, Minister of Mines and Metals Eshaq Jahangiri announced that he would "call on the Italian side to the lower the risk ranking associated with trade in Iran," IRNA reported on 3 February. He added that he would make the same demand of the EU.

The head of the Mines and Metals Ministry's economic and international affairs department, Mohammad Taqizadeh, announced that SACE agreed to consider reducing the insurance premium from 30 percent to 15 percent, IRNA reported on 9 February. The same month, South Korea's state insurance company announced that it "provided special facilities for Iran," IRNA reported. (IRNA tends to exaggerate such claims; for an example, see "RFE/RL Iran Report," 18 October 1999.)

Other countries also have increased their coverage for business in Iran. Japan's Ministry of Trade and Industry announced in January that it will reintroduce trade insurance coverage for Iran after an eight-year hiatus. Coverage was suspended in 1992 after Iran defaulted on some of its debts. The first project to be covered is a 500 million yen (about $4.7 million) fiber-optic communications system. That same month, Switzerland extended $300 million in credits to Iran for Iranian industries to import Swiss goods, according to IRNA. And England's OEGD started a review of risk assessment for Iran.

Even Deutsche Bank is showing greater confidence in Iranian projects. The "Middle East Economic Digest" reported on 17 March that the German firm is arranging a syndicated $480 million medium-term finance line for Iran's National Petrochemical Company. Other German banks have indicated their interest, as has Hermes.

Tehran needs even more credit. Even though Washington announced in 1999 that it would permit the sale of U.S. wheat to Iran, it refused to provide export credits for such sales. Tehran, therefore, refused to buy American wheat, but it bought wheat from France and Canada, which did provide export credits. Iranian Commerce Minister Mohammad Shariatmadari summed this up when he said that "because American goods lack export credit coverage, they do not stand a chance to compete with other countries for our market."

Because of the state's dominant role in the economy and high levels of protectionism, Iran is still seen as a high-risk environment by potential investors. Article 44 of the constitution, which defines the economy's sectors (state, cooperative, and private), gives the state control over foreign trade; exploitation of mineral resources; banking; insurance; power generation; dams and irrigation; broadcasting; post, telegraph, and telephone; aviation; shipping; roads; and railroads.

The budget approved on 15 March makes some modifications to such regulations, permitting the establishment of private banks and the sale of up to 49 percent of state banks. Also, private mining may be permitted. But other incentives for privatization were blocked by the Guardians Council, which must approve all legislation. Government control of banks and insurance companies will continue, as will the state's monopoly in the transportation sector. Privatization in the telecommunications, power, and water industries was blocked, too.

Former President Ali-Akbar Hashemi-Rafsanjani said in a January speech that many of the legal blocks to investment were imposed in the early days of the revolution by those who were influenced by Marxism, and "Under such circumstances, it was a difficult task to implement the economic readjustment policy by involving the private sector in the economy." Now, he said, the same individuals "have adopted Western and nationalistic attitudes" towards the same issues.

The taxation system is a disincentive for foreign investors. Deutsche Bank's Ajona said that "10 percent of the total taxable income is deducted from any corporation, this is a priori, then there is a tax of 12 to 54 percent in addition to this on the taxable income." Then comes the multiple-exchange rate system: "foreign investors--someone operating in the economy...if they want to get foreign exchange, if they are not allowed to get the official or export rate, then they have to buy it on the black market. But, at the same time, the official rate is applied when they want to repatriate some income."

Commentator Mohsen Sazegara said in the 9 February "Iran-i Farda" that President Khatami's government is responsible for the failure to attract foreign investment. He pointed out that many officials in the Khatami government also served, in different posts, in previous governments. And it was under them that Iran accumulated so much foreign debt, "as a result of which the foreign credit rating and the financial reputation of the Iranian banking system and the Central Bank was completely lost." Sazegara rejected the suggestion that a conservative parliament opposed the government, because, he said, the government did not even try to introduce legislation that would encourage imports or exports. He added that there is no security for capital because certain institutions and individuals are beyond the law.

Even with a friendlier parliament, Sazegara predicted, the situation will not improve, because "the same strange rules and regulations that were imposed on industry are still in force." (Bill Samii)