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Iran Report: April 5, 1999

5 April 1999, Volume 2, Number 14

KHATAMI'S FRENCH TRIP CANCELED President Hojatoleslam Mohammad Khatami was scheduled to go to France in April. On 29 March, however, the Islamic Republic News Agency announced that the visit "cannot take place" because the French government failed to comply with the requirement that "Islamic rules be observed." Apparently, the "dialogue between civilizations" must be conducted according to Iranian demands.

Paris' "Liberation" daily reported on 29 March that the stumbling block is wine at the table. Hubert Dumont-Chastel of the French Parliament's France-Iran friendship committee said they had complied with all the Iranians' requirements regarding food preparation, but when they said there should not be even a bottle on the table, "we judged that to be unacceptable." Dumont-Chastel was very irritated by this "Iranian arrogance."

Another possible reason for the trip's cancellation is concern about the presence of Iranian oppositionists or others who might cause embarrassment for Khatami in France. Khatami was heckled and his car was pelted with eggs when he visited Rome in early March. Moreover, at the same time, condemned British author Salman Rushdie was receiving an honorary degree in Turin. Iranian officials and political observers reacted angrily to what they saw as a breach of protocol and warned that repetitions of the incident would not be tolerated. (see "RFE/RL Iran Report," 22 March 1999) And when Foreign Minister Kamal Kharrazi visited France in February, he canceled an appearance for what the Foreign Ministry referred to as inadequate security.

On the other hand, the concern over dinner table decorum might be linked to factional politics in Iran. Khatami's rivals may be trying to embarrass him and damage his international prestige. Or he may want to avoid the appearance of supporting the French role in the current Kosovo crisis. (Bill Samii)

IRANIAN REACTION TO KOSOVO CRISIS When NATO began airstrikes against Serbian military forces conducting ethnic cleansing against Kosovo Albanians, Iran found itself in what for some would be a quandary. From a multilateral perspective, as chairman of the Organization of the Islamic Conference (OIC), Iran has a responsibility to speak out for the world's Muslims. From a bilateral perspective, Iran is trying to support its Russian allies. From a unilateral perspective, Iran has been expanding its activities throughout the Balkans. But Iranian statements have been fairly consistent so far.

President Hojatoleslam Mohammad Khatami said on 27 March, according to Iranian state television, that "Iran, as a Muslim country concerned about the fate of Muslims and as head of the Organization of the Islamic Conference, would not tolerate the aggression against the rights of Muslims in Kosovo and the Balkans." He went on to say the NATO airstrikes are "illegal", and they would not benefit the "oppressed Muslims of Kosovo." They would, he said "only serve the interests of major powers who were seeking to impose their domination over the Balkans."

When the airstrikes began, Iran, in its role as head of the OIC, supported a request by the Bosnian UN representative to call for a Security Council meeting, the Islamic Republic News Agency reported on 27 March. And on 29 March, Muslim member of the Bosnian presidency Alija Izetbegovic asked Iran to intervene, which it promised to do.

When Iranian Ambassador to Tirana Mohammad Kazem Bigdeli met with Albanian Democratic Party leader Sali Berisha, Tirana's "Rilindja Demokratike" reported in late-February, the main topic was the Kosovo crisis. At that meeting, Bigdeli "expressed the readiness of his state and the Islamic Conference member countries to support the just demands of the Kosovar people in the international arena."

Bilaterally, Iran perceives the Balkans as part of Russia's sphere-of-influence. Russia has consistently opposed the threat of NATO airstrikes against Yugoslavia. And after the airstrikes started, Russian Foreign Minister Igor Ivanov said "Those who have unleashed the aggression against Yugoslavia must be prosecuted under criminal law," Interfax reported on 26 March.

Iranian state radio and television recognizes Russia's reasoning. In a 24 March broadcast, it commented "Another reason to [sic] Russia's strong opposition to NATO military action against Yugoslavia is their [sic] deep concern over the alliance's eastward expansion." The next day, Iranian state television commented: "[Moscow} is defending its own traditional sphere of influence. ... Yeltsin has threatened reciprocal action in areas of interest to the West."

Iran continues to communicate with Russia about the issue. Foreign Minister Kamal Kharrazi and Ivanov discussed the Kosovo crisis on 27 March, Itar-Tass reported, and they "called for an immediate end to the aggression." In their discussion the next day, Kharrazi called on Ivanov to "persuade Belgrade to respect the fundamental rights of the Muslim people of Kosovo. Russia's Defense Ministry also consulted with Iranian military officials, Itar-Tass reported on 31 March.

Of course, Iran has its own interests in the region. It has aided Muslims in the Balkans militarily, culturally, and religiously, and in recent years it has expanded its economic ties there. (see "RFE/RL Iran Report," 25 January 1999 and 15 March 1999) In April 1998 the Kosovo Liberation Army's main U.S. operative told the "Christian Science Monitor" that some members of his organization want to accept "offers of weapons and training" from Iran and other Islamic states. Then German Defense Minister Volker Ruehe claimed that Iranians were fighting alongside the Muslim Albanians, but Kharrazi promised that this was untrue, Agence France Presse reported on 15 July.

In January 1999, the English-language "Tehran Times," which is published by a branch of the Islamic Guidance and Culture Ministry, blamed the "bloody experiences" in the Balkans on "racist policies of Belgrade and double-standard of the European countries." The complaint at the time was that while the West is willing to bomb Iraq, it had done nothing about Serbian "oppression of ethnic Albanian Muslims." Therefore, said the daily, one can see that "the West is following a double standard policy which is always detrimental to the interests of the Muslims."

But even after NATO action began, Iranian state radio was dissatisfied. In a 27 March commentary, it said that "America, Britain, and France" had bypassed the UN because they knew Russia and China opposed military operations against Yugoslavia. The operation was being conducted, furthermore, without proper evaluation of its "outcome and ramifications." Iran's criticism has been even-handed. On 27 March, the Yugoslav charg� in Tehran was summoned to the Foreign Ministry to hear a protest "against the massacre of Muslim Albanians in Kosovo by Serbs," referring to the killings in Suva Reka and Orahovac.

Iran has committed itself to more than diplomatic initiatives. On 30 March IRNA announced that Iran will send food, medicine, clothes, and shelters to Kosovar refugees residing in Albania and Macedonia. (Bill Samii)

CREDIT REPAYMENTS AND LOANS DELAYED As part of the recent rescheduling of Iran's debt, Japan will provide approximately $820 million in low-interest loans to finance the construction of a hydro-electric power station in Khuzestan Province, Agence France Presse reported on 8 March. And in the last two months, credit agencies and banks in Italy, France, and Germany also have rescheduled Iranian debt repayments.

An article by officials in the Exports Office of the Sales Department of the Bank of China in Peking's "Guoji Shangbao" on 22 March , however, will not do much to inspire confidence in these current creditors or in firms that may want to do business with Iran. It used to take one month between arrival of a cargo in Iran and receipt of a payment for the letter of credit. But in the last six months the situation has worsened and can take from four to six months. Furthermore, the Bank of Iran often refuses to pay because of so-called "mistakes" in the letter of credit. The Bank of China was told that Iran's Central Bank must approve every payment, so it takes "almost one year from the time letters of credit are sent too the time payments are collected."

The Chinese bankers go on to write: "Conduct in violation of the international norms is not rare with banks in Iran." Examples include the Bank of Iran's refusal to pay a $1 million letter of credit because "post code" had been mis-spelled as "psot code." A common method of delaying payments is for Bank of Iran branch offices to say they are awaiting "instructions from the international department of the head office."

The article concluded by warning firms that trade with Iran "to fully take into account the risks of settling accounts when doing business with Iran recently, and reduce as much as possible the probability of suffering from losses."

Domestic creditors are facing difficulties, too. "Jomhuri-yi Islami" reported in February that members of a civil service retiree society are unable to collect loans from the retirement fund into which they paid membership fees and part of their salaries. A frequent excuse for the delay is that members' dossiers are incomplete or have been lost. An official from the retiree society said "These difficulties and delays stem from the excess in demand." Nor should people expect money soon. The official explained that because of "the lack of budget at the end of this year, loans will be paid next year." (Bill Samii)

"GREEN GOLD" TARNISHES ... Iran's economy is overly dependent on its "black gold" � oil. To lessen dependency on this literally and figuratively volatile commodity, there have been efforts to diversify through development of alternative industries. In the first three months of 1999, however, non-oil exports fell 2 percent to about $3 billion, according to Iranian customs chief Mehdi Karbasian.

"Green gold" � the pistachio � is Iran's third largest hard currency earner after oil and carpets, and it has the potential to have the major share of the pistachio market. Pistachios are "blood-producing, life-giving, and intelligence-increasing," "Zan" daily reported in February. Also, Iranian pistachios are viewed as tasty, have a high nutritional value, and are hearty, growing in desert conditions. Finally, they sell for about $2000 a ton, whereas their American competitors sell for about $3600 a ton, Reuters reports. Despite these strengths, pistachios have not fulfilled their potential yet for three reasons.

Growers in the main pistachio-producing region � Kerman Province � complain about insufficient help from the government ministries, such as the Agriculture Ministry or the Cooperatives Ministry. Pistachio producer Habib Etemadi said: "The Agriculture Ministry local office will not give us fertilizers, and for this reason we are obliged to obtain them on the open market," Rafsanjan's "Kosar-i Kavir" daily reported in November.

Despite this lack of help from the government, growers told "Kosar-i Kavir," government imposed costs are high and unreasonable. The most suspect one is a requirement for advance payments to the government to ensure that foreign currency earnings are repatriated. Other government charges are high taxes, high rates for water and electricity, high seasonal labor insurance charges, and restrictive customs practices.

Seyyed Mohammad Reza Jafari, the parliamentary deputy from Zarand, Kerman Province, told "Kerman-i Imruz" daily in November that although creation of the Rafsanjan Pistachio Producers Cooperative was a positive step, more help was needed from the Cooperatives Ministry. And those growers who are not members of the cooperative complain about difficulties in marketing their nuts.

The Rafsanjan Pistachio Producers Cooperative is, according to "Zan," Iran's main exporter of pistachios. But it is failing to meet growers' needs. For an unknown reason, the cooperative does not use the modern packaging equipment which is available in Iran, so the consumer does not get an appealing product. Also, the cooperative has not investigated "mechanization of agriculture, especially modern and healthy horticulture." Finally, the cooperative's advertising efforts have been ineffective "because they have been dispersed, disordered, and have lacked continuity."

Bottlenecks caused by poor planning are a second factor holding back pistachios, according to a report in Tehran's "Kar va Kargar" at the end of December. The daily said Iranian agricultural goods are not competitive on price; and they are of uneven quality, badly packaged, and do not conform with customer preferences. They are poorly marketed, and there is very little market research or pursuit of new markets. Finally, exporters face unreasonable risks due to an insufficient insurance system.

A third factor hindering the export of Iranian pistachios is contamination with the toxic aflotoxin mold. In 1997 the European Union briefly banned imports of Iranian pistachios due to alleged contamination, although Iranian officials denied that their nuts were contaminated. The EU now requires that all pistachio imports from Iran be tested, which delays market access. Iranian nut sellers told Reuters that they are facing politically-motivated discrimination, because the EU aflotoxin standard for American pistachios is 20 parts per billion, while for Iranian pistachios it is 4 parts per billion. (Bill Samii)

... AND TEXTILES FADE Another means by which Iran is attempting to decrease its dependence on oil as the economy's main driver is through development of the textile industry. Yet this too has failed to live up to its potential or make much of a contribution. Jamshid Basiri, head of the Iranian Textile Industries Association, said the volume of textile exports had decreased by 60 percent by the end of 1999, according to RFE/RL's Persian Service. From March to December 1998, he said, clothing exports decreased by 77 percent, carpeting exports were down 54 percent, artificial weaves were down 57 percent, and manufactured rugs were down 28 percent.

"The textile sector has problems that have reached crisis conditions," "Keyhan" reported on 14 February. These problems are typical of Iranian industry at large, and most of them, according to industrial managers and Iranian publications, can be traced to three factors.

A major factor, but one which rarely is discussed directly, is corruption. On 26 January, however, Tehran's "Imruz" daily took on this subject as it applies to the Iranian economy, which is "like an iceberg. Its visible part is the smaller part, and those who are the ultimate determinative are in hiding under the water. ... In Iran's economy, the rules of play are determined under water, and if a person does not know about swimming under water, he will probably ruin himself, and destroy his capital."

Part of this corruption is the unnecessary import of goods which crowd out domestic products. Professor Iraj Tutunchian of Qom's Al-Zahra University (Jamiat-i Az-Zahra) told "Imruz" he thinks most of those who import goods unnecessarily are "affiliated to the holders of power and influential men." Professor Fariborz Raisdana said "90 percent of importers are relations of officials." And Professor Ali Rashidi said "The personal and private profiteering mood is dominant in many foreign bargains, and this situation has slowed down the freeing of trade."

Basiri said that after the revolution cotton had be imported. So the Commerce Ministry established centers to buy cotton from abroad. Instead, said Basiri, "these units imported thread and cloth. Instead of cotton! This measure dealt the textile industry of the country an irreparable blow, and saturated the domestic market with foreign goods."

Also, the government fails to provide the necessary legal or investment support. The manager of the textile industries of the Oppressed and Disabled Foundation (Bonyad-i Mostazafan va Janbazan), the Tehran daily "Imruz" reported on 13 February, lays the blame "on the Central Bank for its foreign exchange policies, the Finance Ministry for its taxes, the Labor Ministry for its labor law, and the Commerce Ministry for importing thread."

An exporter complained to "Keyhan" about "parallel, similar, and confused regulations." Also, officials are unfriendly and unhelpful with exporters and investors, and the regulations allow them to get away with such behavior. Also, the sales manager of a Kermanshah textile factory told "Imruz," "owing to the lack of a special tariff on imports, imported thread is delivered to consumers much cheaper than the domestic product, and this difference had encouraged imports." A provincial official in Isfahan told "Keyhan" that the laws and regulations on industry and exports change frequently, so that "sometimes there are only a few weeks between the approval and cancellation of new laws." These changes affect foreign exchange, export and consumer laws, credit facilities, and opening letters of credit. Also, there are varying charges and duties, particularly on state-provided services like water and electricity.

A third factor hindering the textile industry is mismanagement. When eight textile factories belonging to the Oppressed and Disabled Foundation were threatened with closure in January, there were calls for regulatory changes. (see RFE/RL Iran Report," 18 January 1999) But a report in "Imruz" suggests the problems can be found within the Foundation itself. The article says "the role of trial and error in the management of this institute is out of the ordinary." Among the consequences of this were a "cashflow deficit, delayed debts, stockpiling of produced goods, [and] payment of enormous taxes."

Other managerial problems relate to the production methods. A manager told "Keyhan" that his firm tries to use modern methods, but in a country with extremely high unemployment, labor-intensive methods should be used instead. He also complained about unskilled manpower, insufficient training for personnel, and inappropriate marketing techniques.

All these shortcomings have not harmed only the exporting sector, although hard currency is essential for the Iranian economy. The Iranian consumer is directly affected, too. According to "Hamshahri" daily on 6 January, there is an increasing number of second-hand clothing stores selling goods from abroad. Until recently, only the most destitute would have used these stores, but they are now attracting a wider cross-section of society. And they also serve as unwelcome competition for domestic manufacturers. (Bill Samii)

GET YOUR STORIES STRAIGHT Officials and publications in Iran and its neighbors have, at different times in March, condemned RFE/RL, cited RFE/RL, and accused it of various malfeasances. The only consistent factor in these statements is their inconsistency. At the 26 March Friday sermon in Tehran, hardline Judiciary chief Ayatollah Mohammad Yazdi complained that "a few writers repeat the words � as some of you may have heard, read, or seen � of the enemy, ... Free Radio [RFE/RL]. They say that people are tired of the revolution. Who is tired of the revolution? They say that the people are not in line with the officials. Where in the world can you find officials so dear, holy, and so much respected in society?"

The ultraconservative monthly "Yalisarat Al-Hussein" reported recently that the Ministry of Islamic Culture and Guidance had issued a notice that RFE/RL should not be cited without additional cautionary commentary. Despite that, the Islamic Republic News Agency quoted RFE/RL news about the arrest of Islamic intellectual Hojatoleslam Mohsen Kadivar. "Keyhan" made the same complaint earlier in March. (see "RFE/RL Iran Report, 15 March 1999)

But Baku's "Khalq Gazeti" newspaper commented that RFE/RL is promoting Iranian interests. According to a 25 March article, the Azeri Service of RFE/RL is "trying to make it even easier for Iranian and Russian oil companies in the Caspian." Yet a few weeks earlier, "Tehran Times" said RFE/RL's Azeri service was anti-Iranian because it said food exported to Azerbaijan is taxed while food exported to Armenia is not. (Bill Samii)