Iran Report: December 7, 1998

Tehran Rejects Cooperation With West Against Iraq. Iranians have rejected U.S. statements welcoming their willingness to be involved in operations against Iraqi President Saddam Hussein. This stance is hardly surprising. Iran has a lot to lose if its tenuous relationship with Iraq is damaged: renewed trade ties and oil smuggling; access to Shia shrines; and prisoner-of-war exchanges. But it also is very unhappy with the renewed buildup of U.S. forces in the Persian Gulf.

The statements by Iraqi opposition figures, however, are perhaps more surprising. Ayatollah Baqir al-Hakim, leader of the Tehran-based Supreme Council of the Islamic Revolution in Iraq, said "We are not prepared to cooperate with the United States or the major powers to overthrow Saddam Hussein because their intervention would harm the Iraqi people and their future." This view was repeated by Jalal Talabani, head of the Patriotic Union of Kurdistan.

Three factors may explain such statements: an increase in anti-U.S. sentiment in Iran; memory of previous involvement with U.S. covert actions; or dissimulation.

First of all, these attitudes may reflect the recent increase in anti-U.S. sentiment driven by Iran�s conservative faction. A recent statement by Supreme Leader Ayatollah Ali Khamenei reflects this continuing anger at what he called American "arrogance." He suggested that this problem "will not be resolved" anytime soon. Other Friday Prayers leaders echo this position. Their sermons have significant influence among the majority of the population, which does not have good access to print media.

Few Iranian officials have been enthusiastic about any involvement with the U.S. Foreign Minister Kamal Kharrazi told IRNA that there is no need to establish relations with America. And Zabol deputy Abbas Nura, spoke for many conservative parliamentarians: "any form of dialogue or contact with America is unacceptable for all sectors of the public. "

When a group of American tourists in Tehran were attacked on 22 November by a group calling itself the Fadaiyan-i Islam (Devotees of Islam), the criticism of those who invited them was as loud as criticism of their attackers. A few days later a rally was held in Qum to protest the Americans� visit, and the attackers said they would take harsher actions against other American visitors.

When former American hostages said they would like to see Iran again, the Foreign Ministry had to deny visas to them. Abbas Abdi, a leader of the students who occupied the U.S. Embassy from 1979-81, was criticized by the conservative "Resalat" newspaper for meeting with a former hostage in Paris. In general, those Iranians who favor dialogue with the U.S. are retreating from any open advocacy of their views.

Second, direct opposition to cooperation with the U.S. against dialogue may also reflect previous experiences with Western-led covert operations. Covert actions sponsored by the U.S. and U.K. bring back the unpleasant memories associated with the ouster of Iranian Premier Mohammed Mossadegh in 1953. There is a great deal of popular mythology in Iran indeed associated with this event. Many Iranians see this episode as the beginning of a neo-colonialist period that ended only with the 1979 Islamic Revolution.

And third, this latest rejection of cooperation with the U.S may hide what is occurring behind the scenes. Such public statements permit deniability, both in dealings with Iraq and with the Iranian public. A February 1998 "New York Times" report says that in the early and mid-1990s Iran supported the Iraqi National Congress which also received money from the U.S. And the SCIRI�s leadership reportedly met with U.S. officials in Washington recently, according to the "New York Times."

Iran And Hizballah: Together Again? When it was founded, Lebanon�s Shia Hizballah party received inspiration, money, and weapons from revolutionary Iran, but events in the last two years suggest a widening gap. But the late-November visit to Tehran by a delegation from Hizballah marks the closure of a circle in the relationship between that party and Iran.

The beginnings of Shia political awareness in Lebanon can be traced to Sayyid Musa Sadr, an Iranian Shia clergyman who came to Lebanon in the late-1950s. Sadr disappeared in 1978, but Shia political activism that he had initiated increased, aided by the fact that theirs was the fastest growing part of the population. Sadr founded -- with help from the Iranian opposition -- a Shia militia called Amal, but by the 1980s splits appeared within its reach because of dissatisfaction with its leadership and with its deradicalization. Iran�s Islamic Revolutionary Guard Corps then supported Islamic Amal, a faction created by Hussein Musawi.

Hizballah was founded around that time with generous support from Iran. Meanwhile, Hizballah Secretary Sheikh Subih Tufaili and spiritual leader Sheikh Mohammad Hussein Fadlallah debated Ayatollah Khomeini�s concept of religious government. At that time, Hizballah was an extension of the Iranian revolution, and Iranian forces were active in the Bekaa Valley.

By the mid-1990s, some observers believe, Iran had reduced its financial subsidies, leading to Hizballah�s greater reliance on support from overseas Lebanese. Others suggested that Iran still pays about $100 million per year to Hizballah.

Other issues had arisen by 1994-95, such as Fadlallah�s recognition of Iraqi Ayatollah Ali Sistani, rather than Iran�s Supreme Leader Ayatollah Ali Khamenei, as the religious source of emulation. Also, Lebanon was developing independently in terms of religious education. As a result, when then-minister Hojatoleslam Mohammad Khatami visited Lebanon in 1996, he called on Amal�s chief, but he did not call on Fadlallah. That year Tufaili began building an organizational base, possibly with help from Iran. During a 1997 rally, Tufaili�s supporters chanted "Death to (Hizballah leader Sheikh Hassan) Nasrallah." The Hizballah leadership, which was trying to work within the Lebanese political system, saw Tufaili as a deviationist and expelled him from the party in January 1998. His supporters responded by attacking a Hizballah seminary. In February 1998, Tufaili went into hiding in the hills near Syria.

In the last six months, relations between Iran and Hizballah have started to improve. Nasrallah, in a September interview with London�s "Financial Times," said current Iranian events "present a model and an example." And he said that he "also believes that the rise of Mohammad Khatami, the reformist president of Iran, is a model of enlightened Islam which is sketching out a path for the region towards modernity and democracy." In a speech that month, he defended Iran�s position in its problems with Afghanistan. Around the same time, Tehran promised France that it will pressure Hizballah to cease military activities and complete its conversion to a political organization, and that if Israel withdraws from south Lebanon it will stop supplying equipment. Unconfirmed reports later said that Iranian officials actually attended meetings between Hizballah and Israel.

In October, the Chinese news agency Xinhua reported that an Iranian delegation led by Hojatoleslam Hijazi visited Lebanon to improve relations with Fadlallah. Apparently, this paid off. When Nasrallah visited Tehran, Khamenei received him and said "Your presence in that region is a great blessing for Islam." Parliament speaker Ali Akbar Nateq-Nouri met him, too, as did Expediency Council chairman Ali Akbar Hashemi-Rafsanjani. At these meetings, the common theme was condemnation of the Wye peace agreement and support for Palestinians.

Nasrallah also met with President Khatami, who said "Although the Hizballah�s primary objective is struggling against one of the centers of global terrorism ... it should not just fight in Lebanon on (the basis of) the concept of Jihad, but also through its intellectual, political, and cultural Jihad."

Also in November, a delegation representing the Iranian parliament and the Imam Khomeini Relief Committee visited southern Lebanon. Lebanese Premier Rafiq Hariri had meetings with Khatami and Hashemi Rafsanjani in Tehran for a day to discuss bilateral and regional cooperation.

Iranian Women Protest Discriminatory Laws. The Islamic Republic�s Constitution reserves a special place for women because of their role in the Islamic revolution: "The common sight of mothers with infants in their arms rushing towards the scene of battle ... indicated the essential and decisive role played by this major segment of society in the struggle." They will benefit greatly, "because of the greater oppression that they suffered under the old regime." vSo far, however, this promise has not been fulfilled. The 19 November "Zan" reported that a group of war widows staged a rally protesting laws preventing them from owning their homes in their own names. The law says that after the husband�s death, ownership reverts to male relatives, such as the father.

Hojatoleslam Mohsen Saeidzadeh has questioned such discriminatory laws and advocated reforms in women�s rights and family law. The Culture and Islamic Guidance Ministry refused to permit publication of his book, "Freedom of Women During the Time of Mohammad." He was detained in June 1998. An unconfirmed BBC report said Saeidzadeh had received a suspended prison sentence and was released in late November. Supporters and some human rights groups say the main reason for his arrest was his liberal views on women's issues.

President Khatami received strong support from female voters, but since his election, he has done little to advance women�s rights, according to a November United Nations declaration and a more recent report from Human Rights Watch. To counter such reports, the authorities are urging women to participate in the upcoming municipal elections and to serve as mayors and executive managers. Interior Minister Abdolvahed Musavi-Lari said the law permits this and "there is no difference between men and women and in our opinion, gender is not important. What is important is humanitarianism and the required level of intellectual and managerial competence."

The presidential advisor for press affairs, Jamileh Kadivar, said the upcoming election is an opportunity for women to show their influential role in the social and political arena of the country. She said "talented, powerful and efficient women" would be identified in the councils so they could "enter the managerial system of the society."

Living With The New Budget... Presented at the end of November, President Khatami�s draft state budget may seem unrealistically optimistic in light of Iran�s economic difficulties and declining world oil prices. But the government has taken steps to avoid shortfalls, according to state-run media. Among these are efforts to change public attitudes and consumer behavior, development of non-oil industries in the country, and strengthened economic ties with other countries.

The draft presented by Khatami for approval by the parliament and the Guardians Council calls for a 19.8 percent increase from this year�s budget, to about $91.6 billion. Revenues are expected to increase by 24.5 percent, while expenditures are expected to rise by 12.1 percent. Taxes will provide 31.1 percent of revenues, oil 22.8 percent, and 46.1 percent is to come from other sources.

The first step in improving the economic situation, Iranian officials believe, is to change consumer behavior. On 24 November, Khatami compared Iran�s per capita consumption with that in other countries, saying it is too high. For example, gasoline consumption was 5.6 percent higher than a year ago, necessitating imports of six to seven million liters of refined products in addition to the 31 million liters produced domestically. The budget proposes a 275 percent price hike to deter gasoline consumption, said Oil Minister Bijan Namdar-Zanganeh.

The consumer price index in urban areas in September - October increased by 20.1 percent compared to one year ago, the Central Bank of Iran reported. The index for food, beverages and tobacco rose 25.5 percent; textiles rose 6.6 percent; housing, fuel and light rose 20 percent; and household goods rose 7 percent. Other increases were 19.2 percent for the transportation and telecommunications sector; 25.5 percent in the health sector; 8.6 percent in recreation and education; and 20.5 percent in miscellaneous goods and services. Prices for basic commodities, such as cooking oil, imported rice, bread, and agricultural inputs are government controlled. To counter rising prices and prevent illegal price-fixing, Deputy Commerce Minister Fazlollah Arab Sarkuhi told "Afarinesh," a group of "honorary price supervisors" will be chosen to report overchargers.

The budget�s emphasis on decentralization and implementation of development projects is important to Khatami, who ordered money allocated for completion of 140 of the 1248 incomplete projects in Chaharmahal-Bakhtiari province. In theory, this should contribute to the already impressive growth of industries and the agricultural sector described in state media. During his visit to East Azerbaijan province, Khatami urged development of the tourist industry and transit routes.

Construction Jihad Minister Mohammad Saidi-Kia said the agricultural sector has grown to compensate for declines in oil revenues. In East Azerbaijan, 151 development projects will go on line throughout the province. Stone exports from the Sirjan Special Economic Zone are up, and production and processing of precious stones will be increased, said Mines and Metals Minister Eshaq Jahangiri. Gilan�s 51 mines provided coal, limestone and various construction stones. Khorasan exported petrochemical products, textiles, fruits, and foodstuffs.

The director general of the Textile Industries Department of the Industry Ministry, Golnar Nasrollahi, said 15 new textile production plants in the Chaharmahal-Bakhtiari, Yazd, Qazvin, Zanjan, Hamedan, Lorestan, Gilan, Khuzestan, and Ilam provinces would begin operations by March 1999, and another five would follow in September. Ahmad Kazemi, director general in charge of provincial trade affairs, said non-oil exports from Ardebil in the first six months of the year, at $18 million, equaled the total for the entire previous year.

Other countries are seen both as consumers of Iranian goods and as investors. Just in the last two weeks, Iranian trade fairs have been held in Riyadh, Sanaa, and Yerevan. Iranian officials traveled to Dubai and Ashgabat for trade negotiations, and officials from Greece and from Russia�s Sverdlovsk region visited Iran. In Kuala Lumpur, a $50 million insurance agreement to cover export of Malaysian goods and services to Iran was signed, and a contract is being negotiated with a South African firm to examine a gold mine in West Azerbaijan province. In addition, 80 agreements in principle to exploit mines in Sistan and Baluchistan province have been signed with international concerns, claims the director general of the provincial mines and metals department. And Kish Island will contribute to Iran�s prosperity by shipping horses to Europe and the Persian Gulf states by March 1999.

A reading of state-related publications, therefore, indicates that dealing with the new budget is possible if people consume less, if provincial production rises, and if exports increase.

...Won't Be So Easy For Some. While the central government has taken steps to diversify the Iranian economy and make it less dependent on the oil sector, the process will not be painless either for the state or for the public.

Some industries have been hurt by the general economic downturn. Carpet exports, which are Iran�s second largest hard currency earner, earned $1 billion in 1997, down almost 45% from five years ago. Forecasts indicate earnings will be between $700-800 million in 1998. Parliamentarian Mohammad Nobakht blames the sales decline on over-production and reduced quality. Problems for the carpet industry are particularly serious because it employs approximately 2.3 million people.

Other industries have not lived up to their potential. Speaking in Kerman province, Minister of Mines and Metals Eshaq Jahangiri said that despite the existence of 2,000 quarries throughout the country, the mining sector�s GDP share is now less than 2 percent.

Corruption may be a problem, too. In an interview with "Arzeshha, " Orumieh parliamentarian Shahrbanou Amani complained that imports of textiles and gunny sacks are hurting the domestic industry. She said some ministers and parliamentarians approve unnecessary temporary permits "to import commodities that are being produced in the country."

Unemployment is another problem, but steps have been taken to deal with it. In Kohkiluyeh and Boir Ahmadi provinces, where the unemployment rate is 14.8 percent, managers have been instructed to employ Iranians, said the head of the Provincial Labor Department�s Public Relations Office, Mahmud Soleymani. So far, 12 employers have been fined for hiring foreigners.

Even those who have jobs are still finding life difficult. On 18 November "Abrar," which portrays itself as an advocate of workers� rights, wrote that moonlighting is increasing. Retired government employees, the weekly "Atieh" wrote, sometimes have to take on two different jobs "to overcome inflationary costs and provide their families with essential commodities."

Some Iranian commentators dismiss complaints about the economy as a byproduct of Iran�s factional fight between conservatives and moderates supporting President Khatami. Rasul Montajabnia of the central council of the leftist Militant Clerics Association told "Salaam" that such complaints are based on false propaganda spread by the conservatives. "People did not make this (Islamic) Revolution with the aim of feeding themselves, nor did they create the epic of 23 May 1997 (presidential elections) for hens or eggs. People elected Khatami because they believed that he is qualified and concerned (about people's affairs)."

Ukraine Is Winner In Russia-Iran Nuclear Project. Last week Russia signed a protocol of cooperation to complete the Iranian nuclear reactors at Bushehr. This will earn Russia about $778 million. But now it seems Ukraine may benefit from the project -- possibly at the expense of the U.S.

Ukrainian companies are negotiating with the U.S. to receive compensation for not working on the project at the U.S.�s request. Russia wanted Turboatom, a Ukrainian state enterprise, to build two turbines for the Bushehr project, but in April 1997 Ukraine abrogated its agreement to do so. In the first week of December 1998, Turboatom Director Anatoly Buhayets met with William Taylor, the acting coordinator of assistance to the newly independent states, to discuss a compensation deal. After their meeting, Buhayets said he was dissatisfied because the American offer did not really make up for multimillion dollar losses or the damage to potential future projects.

Germany had completed about 85 percent of the project and had received $2 billion for this when it was persuaded to "curtail the construction and stop the supply of nuclear materials and equipment to Iran," according to a report in the Moscow newspaper "Kommersant."

Russia Energy Minister Yevgeniy Adamov told Expediency Council chairman Ali-Akbar Hashemi Rafsanjani that the contract was a mark of his country�s independent foreign policy. Gholamreza Aqazadeh-Khoi of Iran�s Atomic Energy Organization said completion of the project demonstrates "widening Russian-Iranian political, trade, and economic relations."

According to a Center for Nonproliferation Studies report, completion of the Bushehr reactors will give Tehran "substantial expertise for a military nuclear program ... and will potentially increase Tehran�s ability to produce weapons-grade fissile material and build a nuclear weapon over the long-term." The movement of personnel and materiel between Iran and Russia will also facilitate covert activities or smuggling.

Defenders of the contract argue that the reactor cannot produce weapons-grade plutonium; Iran�s nuclear projects are inspected by the International Atomic Energy Agency (IAEA); and Russia has promised to stop work if it doubts Iranian intentions. Others argue that Iran clearly intends to develop nuclear weapons, and the presence of foreign specialists will only help these efforts. They also argue that when the project is complete, Iran can cancel its IAEA agreements and expel the international inspectors.

Iran�s leaders, in public at least, oppose nuclear weapons proliferation, although their statements are usually criticisms of Israel. In July, Supreme Leader Ayatollah Ali Khamenei said: "The threat of nuclear weapons in the Middle East region is extremely serious." Later that month, for example, President Khatami said: "We regard nuclear arms and weapons of mass destruction as very detrimental to the region and are against proliferation of those arms." And in August, parliamentary speaker Ali Akbar Nateq-Nouri said: "the Islamic Republic of Iran is opposed to the proliferation of weapons of mass destruction."