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Iran Report: May 30, 2007

Concern Grows For Detained Iranian-Americans

By Golnaz Esfandiari

Azima Parnaz (right) and Haleh Esfandiari (file photos)

May 30, 2007 (RFE/RL) -- There is increasing concern over the fate of at least two Iranian-American scholars who have been detained in Iran in recent weeks. They have been charged with espionage and some worry they could be pressured into making false confessions.

Among them is Haleh Esfandiari, the head of the Middle East Program of the Woodrow Wilson Institute, and Kian Tajbakhsh a consultant with the Open Society Institute.

Esfandiari and Tajbakhsh were formally charged with endangering national security through propaganda against the system and espionage for foreigners.

U.S. Dismisses Charges

Human rights activists, colleagues, and relatives of the scholars have dismissed the charges as baseless and Washington has described them as "absurd."

U.S. State Department spokesman Tom Casey spoke to reporters in Washington on May 29.

"It's absurd to allege that they are American spies, American government employees, or that anything they've been doing in Iran is driven by American government concerns," he said.

Similar charges have in the past been brought against other intellectuals and human rights advocates who have been detained for long periods of time under difficult conditions.

Harsh Treatment

Political prisoners in Iran, particularly those considered to be a security threat, are isolated and denied access to the outside world. They are held in solitary confinement and subjected to multiple and protracted interrogations.

Former political prisoners in Iran have told RFE/RL that during their detentions they were questioned about their current and past activities, articles that in some cases had been published several years earlier, foreign trips, and other issues.

Mehrangiz Kar, a prominent human rights lawyer who was jailed in Iran in 2000 on security charges, told RFE/RL that she felt during interrogations that one of her "crimes" was her marriage to a well-known journalist, Siamak Purzand.

Kar, who now lives in exile in the United States, said she was held in solitary confinement for several weeks in Tehran's notorious Evin prison, where she had to sleep on the floor wrapped in her chador.

"The cell was very small, it was very dirty, the WC was inside the cell and it was also very dirty," she said. "There was a sink there; I drank the water from it for more than 20 days because I didn't know and then I found out that the water is contaminated."


Authorities denied Kar access to her family or to lawyers. The only window in her cell was blackened and the only people she would meet were prison guards and interrogators who subjected her to vicious verbal attacks and threats.

She continued: "There was mental pressure; there was pressure through long hours of interrogations; there was pressure through an emphasis [by interrogators] that we were working to please foreign elements; there was pressure in other forms, for example [interrogators] would not accept our written statements and we had to write them over [and over] many times."

Ali Afshari, a former student leader, was also subjected to long hours of interrogation during the several times he was detained in Iran in 2000 and 2003. During that time he spent 400 days in solitary confinement.

Afshari, who also resides in the U.S. now, told RFE/RL that he had to endure isolation as well as physical and mental torture. He said he was deprived of sleep and subjected to a mock execution.

He believes authorities use these measures to break the will of the prisoners and force them to act according to their wishes and admit "their crimes."

Threats And Intimidation

"First they describe very difficult circumstances for [the prisoner]," he said. "They say you face the death penalty, your family could face problems, they create fear through different ways. Then someone comes and says: 'there is one way that will prevent you from falling into this precipice, if you should cooperate with us. We're not going to do anything to you, you have become a toy,' and [say others such] things. In this atmosphere the accused [often] drops [his or her] resistance."

Interrogators made Afshari crack and in 2001 he "confessed" -- in front of TV cameras -- to having participated in a campaign aimed at overthrowing the Iranian regime. Shortly after the confessions were aired by Iranian state TV, Afshari publicly retracted them and said he made them under duress.

Abdolkarim Lahidji is the deputy director of the Paris-based International Federation of Human Rights, and he also heads the League for Defense of Human Rights in Iran.

He told RFE/RL he is concerned the 67-year-old Esfandiari and 45-year-old Tajbakhsh could face similar pressure.

"I'm pretty sure that both of them have been under all kinds of pressure and it is possible [authorities] have forced them into [false] confessions but we know that these confessions have no legal value," he said. "I hope they will be released soon and be able to return to their life and work."

Fear Of A 'Soft' Revolution?

Lahidji says he is also concerned with the fate of Radio Farda correspondent Parnaz Azima, who has been prevented from leaving Iran and charged with acting against Iranian security. Azima's U.S. passport was confiscated upon her arrival at Tehran's airport on January 25 to visit her mother.

Some believe the Iranian-Americans have become victims of the growing tension between Tehran and Washington. Others say the arrest of Iranian-American scholars is a sign of Iran's fear of a "soft" revolution.

Esfandiari was detained on May 8. She was about to leave Iran in December after having visited her 93-year-old mother when her Iranian and American passports were stolen. Authorities did not issue her a new passport and instead subjected her to multiple interrogations.

Tajbakhsh was detained around May 11. He has been involved in urban planning and humanitarian assistance and has worked with international organizations such as the World Bank.

A number of scholars and intellectuals in the United States and other countries have called for their release.

Iran: Talks With U.S. Could Draw Curtain On At Least One Taboo

By Vahid Sepehri
May 30, 2007 (RFE/RL) -- Talks in Baghdad on May 28 between the Iranian and U.S. ambassadors to Iraq were clearly a notable point in the history of those two states' troubled relations since Iran's 1979 revolution.

Conservative commentary in Iran has reflected a cautious view of the potential or significance of the talks. On the other hand, reformists have tended to see them as a possible opening for sustained dialogue and improved relations.

The circumstances of the meeting were reported in virtually all of Tehran's newspapers on May 29, with headlines or subtle phrasing providing clues to their editorial views.

The reformist daily "Etemad" described it as a "crack in the wall of distrust," referring to almost 30 years of antagonism between Iran and the United States. "Etemad" said the Iranian and U.S. envoys met in Baghdad's Green Zone to show that "one can overlook hostility" in order to safeguard state interests.

Another reformist daily, "Etemad-i Melli," headlined its news account of the tete-a-tete "Four Hours Of Talks After 27 Years Of Quarreling." The paper editorialized that "more than a quarter century of severed relations [had come] to a symbolic end." It suggested that while the meeting in itself might not be a breakthrough, it demonstrated that the United States gravitates nearer to Iran "whenever it prefers its national interests to vapid slogans and the principle of supporting Israel's regime." The editorial suggested that the talks might be the start of constructive interaction between Tehran and Washington if U.S. officials avoid a return to "axis of evil" rhetoric.

'Mistaken Conduct'?

Another daily, "Iran," which frequently reflects the positions of Iran's executive branch, took the official line -- that Iran was there simply to discuss Iraq. It commented that Iran remains opposed in principle to dialogue with the United States because -- it says -- Washington exploits dialogue to impose its will on an interlocutor and Iran cannot accept such an aim. "Iran" daily said Iran attended in order to inform the United States of its "mistaken conduct" in Iraq and reiterate that a continued U.S. presence in Iraq would perpetuate insecurity and violence. It echoed the recent remarks of Supreme Leader Ayatollah Ali Khamenei, describing the talks as conveying an "ultimatum" to the United States. The headline repeated Iranian Ambassador Hasan Kazemi-Qomi's remark that he had "clearly expressed all our concerns" to his U.S. counterpart.

The more right-wing daily "Kayhan" played up the Iranian ambassador's criticism in a news piece headlined "Iran Reads Out The Charges." The paper conveys the impression of a meeting at which Kazemi-Qomi chided the U.S. party across the table and then emphasizes his comments regarding Iran's "humanitarian measures." "Kayhan" accused U.S. envoy Ryan Crocker of repeating "empty [U.S.] accusations" against Iran regarding involvement with the Iraqi insurgency. "Kayhan" also appeared careful to present Crocker's remarks as "claims" rather than simply statements.

Questionable Progress

"Kayhan" Editor Hossein Shariatmadari appeared to take a dim view of the talks in a subsequent interview with ISNA, saying each side had merely restated its position. Shariatmadari said the approach "showed that we and the Americans do not have common interests in Iraq." He added that the Baghdad talks were not negotiations aimed at any compromise but rather an opportunity for the United States to try to extricate itself from what he dubbed the "Iraqi quagmire." Shariatmadari said Tehran had to ensure that the Americans could not use the talks to attain their aims at Iran's expense.

Parliamentarians and officials expressed views that generally followed the official line. One member of the parliamentary National Security and Foreign Policy Committee, Mahmud Mohammadi, urged the United States to use the occasion to "adopt a new perspective" on Iran and a more realistic regional policy to "resolve its problems in the region." Another committee member, Heshmatollah Falahatpisheh, said that U.S. charges of Iranian interference in Iraq merely indicated U.S. concern at Iran's regional influence. He said that such talks could nevertheless avoid an exacerbation of distrust between Iran and the United States. Ali Akbar Velayati, a foreign policy adviser to Supreme Leader Khamenei, meanwhile said that Iran's attendance was merely aimed at demonstrating its good will, and was a response to the "hostile discourse" and accusations that the United States had directed at Iran. He said the talks showed Arab states Iran's "effective and positive role" in the region.

Across The Aisle

Reformists appeared to take a more analytical line. Journalist and press-freedom activist Mashallah Shamsolvaezin argued that Tehran and Washington cannot reach agreement on Iraq without continuing relations of some sort, according to ISNA. He said both sides currently appear "ready to establish bilateral relations." But Shamsolvaezin warned that what he labeled Israeli and Arab "radicals" -- fearing damage to their regional positions or privileged ties with the U.S. -- might try to obstruct any Iranian-U.S. rapprochement. He suggested that Israel, in particular, stands to lose from improved ties between Iran and the United States. He described Israel as "the important and disruptive threat to possible future interaction between Iran and America."

Academic Sadeq Zibakalam, in comments published in "Etemad," called the talks a "turning point" in themselves -- in that they took place openly and without subterfuge. He suggested that Iran and the United States had common goals and needs in Iraq -- a strong state that would prevent Iraq's dismemberment and later allow Iran and the United States to do business in Iraq. Zibakalam argued that there was no inherent enmity between Iran and the United States, and said agreement on Iraq could lead to shared views on other issues. He also predicted that talks would continue because both sides wanted "stability in Iraq."

The circumspection of officials and parliamentarians and seemingly optimistic remarks by reformists hint at high interest in the talks among Iranian politicians.

It is appropriate to note that interest so far appears to lie more in the fact that the talks took place than in their substance. But they could signal an end to the "taboo" in Iranian politics of formal dialogue with the United States. Might it now be politically acceptable for Iranian and U.S. representatives to talk -- or simply trade accusations -- in a formal diplomatic setting? The public insults hurled against the United States by Tehran clerics might not end tomorrow; but it looks like Iran has a new -- and perhaps more effective -- channel for expressing what it really wants to say to the United States.

Iran: Independent Nuclear Physicist Evaluates Nuclear Program

Iran's heavy-water facility at Arak (file photo)

May 25, 2007 (RFE/RL) -- Frank Barnaby is a consultant on nuclear Issues for Oxford Research Group -- an independent nongovernmental group in Britain that works to promote a sustainable approach to global security.

A nuclear physicist by training, Barnaby began working on atomic-weapons research himself in 1951. He also works as an independent defense analyst and author on military technology. RFE/RL correspondent Ron Synovitz spoke with him about Iran's disputed nuclear program.

RFE/RL: The Iranian government says its nuclear program is only for peaceful civilian purposes. The United States and European Union countries allege it is trying to develop nuclear weapons in violation of its obligations under the Nuclear Nonproliferation Treaty (NPT). What does Iran still need to do to be capable of building nuclear weapons?

Frank Barnaby: Well, they need access to fissile material -- either highly enriched uranium or plutonium. You must have one of those two to make a nuclear weapon. Iran is enriching uranium at Natanz in what they maintain is a civil nuclear facility. They say they want to enrich it to 3.5 percent in uranium 235 to use as fuel in nuclear power reactors.

It would be crazy to drive Iran out of the Nonproliferation Treaty. It's much better to have them in because there are inspections going on. It is perfectly true that Iran may be hiding things. Who knows. But if they leave the Nonproliferation Treaty, there would be no inspections

They have a nuclear reactor just completed by the Russians and they plan to have several more at a place called Bushehr. On the other hand, if you are able to enrich uranium to that degree -- to the 3.5 percent -- you could theoretically simply send the uranium round and round the enrichment facility until it is enriched at over 90 percent, which is what you need for nuclear weapons. Iran does have facilities for enriching uranium. It has 1,300 centrifuges operating, according to the IAEA, and plans to have many more.

RFE/RL: Can Iran produce or obtain plutonium needed to build nuclear weapons?

Barnaby: So far as plutonium is concerned, Iran is building a research reactor using heavy water as the coolant at a place called Arak. And that reactor is to replace the old 1967 research reactor [sold to Iran by the United States], which is now at the end of its life. And they want to replace it with a heavy-water reactor, which is fair enough. They need isotopes for medical and industrial purposes. And that Arak reactor will produce those isotopes. On the other hand, a heavy-water reactor is an excellent reactor to produce good plutonium for nuclear weapons. So they would then have the facility to use that reactor to get plutonium for nuclear weapons. However, they would have to have a chemical reprocessing set up to remove the plutonium from the spent reactor fuel elements. So that's another stage in the process. But they could do that. And also, the Bushehr reactor which the Russians have just built -- and the Russians seem to be delaying the operation -- but when it operates, it will produce plutonium which, once again, could be chemically separated from the spent fuel elements and used for nuclear weapons. So Iran is on the trajectory which would give her both highly enriched uranium and plutonium, either of which they could use for nuclear weapons.

'More Likely 10 Years' From Weapons

RFE/RL: The head of the International Atomic Energy Agency (IAEA), Muhammad el-Baradei, said this week that Iran could be able to build nuclear weapons within three to eight years if it makes the political decision to focus on the process. Do you think Iran is three years away from that capability, or closer to eight years away?

Barnaby: They are quite a long number of years away from that. So I think it would take them longer than three to five years. I think it's more likely to be 10 years. So there is time for diplomacy to operate to try to prevent or delay the Iranians from getting nuclear weapons.

RFE/RL: What kind of delivery system would be able to carry the kind of nuclear weapon that you think Iran could produce in 10 years?

Barnaby: Once Iran is able to make a nuclear warhead, it then has to miniaturize that to be able to carry it on its surface-to-surface missiles. It's really the only sensible way of delivering a nuclear warhead. And that miniaturization process would take more time. So the time taken for Iran to get a deliverable nuclear weapon is significantly longer than the time that it would take to get a more primitive nuclear weapon.

RFE/RL: There are reports that while Russia is helping Iran to build nuclear reactors at Bushehr, it also is becoming upset about Iran's ability or willingness to finance projects there. What is your take on Russia's position?

Barnaby: The Russians have a great financial stake in Bushehr. Under the contract, the Russians are obliged to provide the fuel for it and also to take the spent fuel elements back to Russia and, maybe, reprocess them there. So it's a very odd situation. The Russians do argue that the Iranians are holding up the finances. But that's really a very hard thing to believe. And I imagine the Russians are under pressure from the United States and EU countries to delay the startup of the plant.

'A Relatively Small Step'

RFE/RL: How would the situation be changed by Russian deliveries of nuclear fuel for nuclear power reactors at Bushehr? Could Iran use that fuel to build nuclear weapons?

Barnaby: If they do deliver this fuel -- 3.5-percent-enriched uranium 235 -- for a nuclear weapon, you need 90-percent-enriched uranium. If you've got 3.5-percent-enriched uranium, that's a long way towards the 90 percent. About 75 percent of the energy required to go to 90 percent is used to go to 3.5 percent. To go from 3.5 percent to 90 percent is a relatively small step. Probably, countries are wondering whether if the Russians deliver this 3.5-percent-enriched fuel, Iranians would be able to take it and just complete the enrichment to 90 percent. That is a possibility. It's a very long shot. It seems to me very much better to take the Iranians at face value -- that they are interested, at the moment, in civil nuclear programs. We have no evidence that they are not and that that is untrue. We should negotiate, to stop them from going to get weapons-usable fissile material. That would be the most sensible plan. What else can you do? If you bomb them, if you try and destroy their nuclear facilities, then you will in fact accelerate the program. The Iranians would get nuclear weapons much [more quickly] if you bomb them because their program at the moment is fairly broad. It's a big program -- industrial-scale, almost. And if they are bombed, they may then focus on getting nuclear weapons. And that would be a small program. They would be able to do that rather rapidly. So it would be much better to leave them as they are -- not take any military action. But to try by diplomacy to prevent them from going for nuclear weapons.

RFE/RL: [Muhammad] el-Baradei has argued that steps should be taken to keep Iran in the Nonproliferation treaty -- that Iran should be allowed to continue its enrichment activities, but on a limited scale and under strict safeguards so that the uranium produced cannot be diverted to military use. Critics argue that Iran's refusal to allow inspectors to carry out all of their work already has underminded the Nonproliferation Treaty. What is your view?

Barnaby: It would be crazy to drive Iran out of the [Nuclear] Nonproliferation Treaty. It's much better to have them in because there are inspections going on. Now it is perfectly true that Iran may be hiding things from the inspectors. Who knows. But if they leave the Nonproliferation Treaty, there would be no inspections. We would have no information because most of the information we have at the moment is coming from the IAEA. If they are not there, we'll have no information at all and Iran may then rush towards a nuclear weapon capability and we wouldn't know about it. That's a much worse situation than have the inspectors there. Every effort should be made to keep Iran within the Nonproliferation Treaty.

Iran: Former U.S. Official Pessimistic On Bilateral Talks

Former U.S. Assistant Secretary of Defense Richard Perle (file photo)

May 25, 2007 (RFE/RL) -- Richard Perle was assistant secretary of defense under U.S. President Ronald Reagan and served on the Defense Department's Defense Policy Advisory Board from 1987 to 2004 and served as its chairman during the run-up to the war in Iraq. He is a member of a number of conservative think tanks and comments regularly on events in the Middle East. He spoke with Radio Farda correspondent Niusha Boghrati.

Radio Farda: Let's begin with the issue of democracy and democratization. Do you think that democracy, as a political framework, can be transferred from one place to another?

Richard Perle: No, I do not believe that democracy or any other system of public politics can be transferred from one country to another. But the ideas and concepts can be transferred.

I think the decision to press for democratic reforms in countries that are not democratic or fully democratic can only come from the citizens of that country.

"The thing that concerns Americans most is Iran becoming a nuclear-weapons state because of the threatening remarks that [Iranian President Mahmud] Ahmadinejad has made."

It can be encouraged from outside, as for example many Western countries encouraged Solidarity in Poland during the Cold War or as the democratic proponents in Spain or Portugal were encouraged at the time that those countries were dictatorships. But at the end of the day, the only people who can bring about democratic reform are the citizens of the country involved.

Radio Farda: Do you mean the transition to democracy cannot be transferred by force and that it has to be done peacefully?

Perle: I don't believe that democracy can be transferred by force, and I don't know anyone who does believes that democracy can be transferred by force. But I even have a problem with the concept of the "transfer of democracy." The better way to put it would be to say the adoption of democratic institutions by a society -- and that can only be accomplished peacefully and by the citizens of the country involved.

Now, sometimes in a dictatorship where a dictator rules with absolute power, it's necessary first to remove that dictator before the citizens of the country have any opportunity to choose their own government and to govern themselves.

Radio Farda: But "regime change" is inevitable in such situations....

Perle: Well, in undemocratic societies -- and unless the undemocratic regime can be persuaded to voluntarily to leave office -- there is really no way to move from a dictatorial structure to a democratic one without removing the dictators in power.

Radio Farda: If force is used to carry out such regime change and if it produces a democratic system, would you say that end justifies the loss of life involved?

Perle: I don't believe that we should be-- and I do not believe that are -- seeking to impose democracy by force. I think that is simply wrong.

If you are referring to Iraq, we went to Iraq [in March 2003] because we thought [former Iraqi President] Saddam Hussein posed danger, not to impose democracy. Once Saddam's regime was destroyed, obviously, we were going to do what we could to offer to the Iraqi people a chance to choose their own government. But we did not go into Iraq with a view of imposing democracy by force -- period. We just did not do that.

Radio Farda: Let us focus on the U.S. approach toward Iran. What is the United States looking for there?

Perle: The Unites States would like to see several things happen in Iran. One is movement in the direction of the democratic institutions and individual rights. Secondly, they would like to see Iran abandon its drive to acquire nuclear weapons, which is dangerous and wasteful [Editor's note: Tehran has steadfastly denied that it is seeking to develop nuclear weapons]. And third, they would like to see Iran abandon its support that it now gives to international terrorism. So we would like to see all of those things.

Radio Farda: Which of these things is the priority for the United States now, in your opinion?

Perle: Well, I think it varies from one observer to another. I think if you did an opinion survey, the thing that concerns Americans most is Iran becoming a nuclear-weapons state because of the threatening remarks that [Iranian President Mahmud] Ahmadinejad has made. But I believe most Americans would like to see democratic reforms as well.

Radio Farda: Do you think the system in Iran is capable of carrying out democratic reforms itself or is regime change there necessary for the country to become fully democratic?

Perle: I do not believe that the current regime in Iran can reform itself or has any desire to reform itself. So only regime change can lead the way to not only full democracy, but individual rights.

Radio Farda: Representatives of the United States and Iran are scheduled to hold direct talks soon in Baghdad. Do you think this meeting can have any effect on relations?

Perle: I don't think it would have any result at all. I think the decision on the part of the United States to offer the Iranian authorities yet another chance to show that they are ready to contribute to peace and to order in Iraq rather than violence and disorder is unwise. We will see no change in the Iranian position, which has been to make matters worse in Iraq.

I don't believe it would help because I don't believe there is any interest on the part of the mullahs in Tehran in changing the behavior of the government of Iran, which has been -- and I think will continue to be -- to encourage violence and disorder in Iraq.

Radio Farda: What do you think is the likelihood of any U.S. military action against Iran?

Perle: I don't believe that U.S. is planning or is likely to take military action against Iran. And if it did, I would not expect anything like an invasion of Iran, but rather the precise targeting of critical facilities associated with Iran's nuclear program.

There is a diplomatic process under way; but I don't believe that it is making any progress.

Iran: Officials Debate Rate Cuts To Curb Inflation

By Vahid Sepehri
May 23, 2007 (RFE/RL) -- Iran's current five-year development plan foresees a gradual cut in key interest rates to 10 percent or less by 2010.

A rate reduction is viewed in some government circles as a desirable end in itself, given Islam's prohibition on usury and related practices; they also see it as a means of curbing inflation. But others argue that progress against inflation should precede any interest-rate cut.

Iranian inflation is currently estimated at between 13 and 24 percent, depending on the source. The state-capped lending rate for banks is 14 percent, although private banks can charge significantly higher (17 to 19 percent) borrowing rates for technical reasons.

The 14-percent rate is equivalent to Iran's base rate, and there is presumably a range of rates pertaining to various loans or interests on deposits. A legislator and member of the parliamentary Plan and Budget Committee, Hasan Seidabadi, spoke on April 22 of 30-percent interest rates on loans.

Financial Divide

Proponents and opponents of interest-rate cuts broadly disagree over how rates can impact inflation, which officials want to curb. Those who believe higher rates can help curb inflation -- and they have recently come to include members of the Money and Credit Council, a body affiliated with the Central Bank -- have opposed a cut this year. Backers of annual cuts have cited the need to rigidly abide by the stipulations of the development plan and a related law (the Law to Rationalize Bank Profit Rates), which call for a decrease in rates of roughly 2 percent a year. Under that model, interest rates are regarded as "bank profits."

Broadly speaking, proponents of interest-rate cuts are those with an enduring faith in state economic planning. Their opponents, on the other hand, are more inclined to look to market mechanisms. The government appears to lie somewhere in between. In principle, it supports rate cuts; but it appears reluctant to impose them in the face of inflation of above 13 percent.

Mohammad Khosh-Chehreh, a member of parliament's Economic Committee, on April 22 described the government as "stuck" in its implementation of annual interest-rate reductions, Fars News Agency reported. He said the Money and Credit Council's April 21 decision, not to recommend a rate cut from 14 percent in the Persian year to March 2008, revealed inflationary concerns within the government. The head of the parliamentary Economic Committee, Mohammad Shahi-Arablu, said less than a week later that the government is obliged to implement laws on rate cuts and that avoiding an interest-rate cut this year simply forces greater rate cut the following year, Aftab news agency reported.

The Cons...

Opponents of rate cuts have warned that reducing rates to below inflation could deprive banks of precious resources, as major investors seek higher returns elsewhere.

Gholamreza Mesbahi-Moqaddam, a member of the Money and Credit Council, told ISNA on April 22 that rates could not be cut when the inflation rate had evidently risen in the year to March 2007. A former parliamentarian, Ahmad Meidari, cautioned (on April 28) that cutting rates would lead institutional investors to keep fewer assets with banks and instead channel them into areas like the real-estate market ("Aftab-i Yazd" reported the next day). That, he said, could fuel a rise in the cost of housing. Meidari added that there were already signs that major companies, like insurers, had begun diverting resources into the real-estate sector.

...And Pros

Supporters of interest-rate cuts argue that the reduced cost of borrowing will reduce production costs, bringing consumer benefits.

Parliamentarian Mohammad Shahi-Arablu claimed to Mehr agency on April 22 that reducing rates "has had positive effects on investment and increasing non-oil exports in the past two years." He said lower rates had led to an increase in demand for loans and financing, which he said had prompted banks to prepare themselves to provide financing. On April 28, he dismissed banks' concerns at financial losses. He said banks had warned they would go bankrupt when the 2004-05 law on bank rates was ratified, but they were evidently still in business, while rates had dropped from 24 percent then to 14 percent. Iran's Labor Minister Muhammad Jahromi told Mehr agency on May 21 that production and employment would increase proportionately with falling rates.

The proponents of cuts seem at times to regard the cost of money as the only factor impeding Iranians from investing. They appear to ignore the possibility that factors like uncertainty, policy, distrust of state bodies, or a reluctance to become involved with red tape or complicated taxes might also play a role. Distrust is arguably a discernible factor in the economic choices of many who lived through Iran's 1979 revolution -- which led to the confiscation of many estates, homes, and businesses. Iranians appear to favor liquid assets -- cash deposits, informal loans to acquaintances, gold coins, dollar or euro notes, apartments -- more than their counterparts in more developed states. A key element that is arguably absent in Iran is a systematic trust in the financial and legal system that permits "abstract" investments with deferred returns.

Tehran-based economist and lecturer Mohammad Qoli Yusefi said in April that interest rates were not a decisive factor in Iran, because bank loans were only available to those with connections to the state economic or political apparatus, according to ILNA. Yusefi warned that Iran's banking system and money market had become "a political instrument." He said Iranians kept their savings in banks despite relatively high inflation because they had few alternatives and believed Tehran's stock market to be too volatile.

Slow To Decide?

The reformist daily "Etemad-i Melli" commented on May 21 that "prolonging economic decisions have slowly become a habit for the government." The paper said the perceived trend was causing "confusion among the public and many officials." It compared the issue to another thorny economic problem with which the government has been struggling: how much to charge drivers for gasoline. A new two-tier pricing system for gasoline that was due to start on May 22 has been postponed over apparent technical glitches and the government's failure to set those prices.

The latest news concerning the interest-rate debate suggests Iranian public discord that is not uncommon when it comes to state decisions. Finance Minister Davud Danesh-Jafari said on May 20 that there would be no cuts for the time being, ISNA reported. "Etemad-i Melli" quoted a deputy head of the central bank, Akbar Komeijani, as saying the same day that the issue would have to be examined for another six months. But two days later, government spokesman Gholamhussein Elham announced a presidential decision to cut interest rates for all banks to 12 percent this year, according to Fars.

President Mahmud Ahmadinejad's government can appear as indecisive when it comes to economics as it is bold and fiery in its statements regarding foreign policy.

At the moment, the potential costs of that indecision -- and indeed the boldness -- might appear affordable in large part due to the billions of petrodollars that are flowing into the Iranian treasury.

Washington Denies Iran's Accusations Against U.S.-Based Scholar

By Golnaz Esfandiari
May 23, 2007 (RFE/RL) -- The United States has dismissed Iranian accusations that a detained American-Iranian scholar was trying to undermine the Islamic state.

Haleh Esfandiari, director of the Washington-based Woodrow Wilson Institute's Middle East program (and who is not related to the author of this report), was detained in Tehran on May 8 and has been accused of security crimes.

Washington's reaction followed a May 21 statement by Iran's Intelligence Ministry that accused Esfandiari of links to a U.S.-funded drive to topple Iran's Islamic establishment.

The ministry said the Wilson Institute's Iran-related activities are supported by the Soros Foundation, which it said had played a "key role" in the so-called color revolutions in former Soviet states.

The ministry also claimed that the 67-year-old Esfandiari has said in preliminary interrogations that the Soros Foundation has established an unofficial network in Iran whose main objective is "overthrowing" the Iranian government.

'Utter Nonsense'

On May 22, U.S. State Department spokesman Sean McCormack dismissed the Iranian accusations against Esfandiari. He also said she is no threat to the Iranian government.

"Whether or not the Iranian government actually follows through with these charges or not, they're just utter nonsense," McCormack said.

The Woodrow Wilson Institute has also denied Iranian suggestions that Esfandiari has been involved in efforts to promote a "soft revolution" in Iran.

Also on May 22, Wilson Center Director Lee Hamilton called on Iran to release the Iranian-American scholar.

"The Wilson Center's plea to the Iranian government is simple: Let Haleh go. Let her return to her husband, her family, and her work," Hamilton said.

Iran has said that the United States should not meddle in the detention of Esfandiari.

Iranian officials have said that the scholar -- who holds Iranian and U.S. citizenship -- will be treated based on Iranian laws. Iran does not recognize dual citizenship.

Nearly Incommunicado

Haleh Esfandiari

Iranian officials have also prevented Esfandiari's relatives and chosen lawyers from meeting her. She has reportedly only been allowed to make brief evening phone calls to her 93-year-old mother in Iran.

Abdolfatah Soltani -- a member of the legal team that intends along with Iranian Nobel Peace Prize winner Shirin Ebadi to defend Esfandiari -- told Radio Farda that judiciary authorities have so far denied them access.

"[The judge] told us, 'I've spoken to her, she didn't say she wanted a lawyer,'" Soltani said. "But we said that she had called her 93-year-old mother and told her she wants to have a lawyer. It was clear that, despite the laws, they aren't allowing Haleh Esfandiari to have a lawyer. We have practically no information about [Esfandiari's] fate."

Bizarre Circumstances

Esfandiari had been visiting her mother -- as she had done in previous years -- when her nightmare began.

When she was about to leave Iran in December, her American and Iranian passports were stolen. Authorities did not issue her a new passport, and instead a series of lengthy interrogations by security officials began. Finally she was taken to Evin prison, where she has been jailed for the past two weeks.

Several U.S. politicians, academics, and rights groups have called for her release. Many have praised her work and described her as a voice for tolerance and peace and an advocate for equal rights for women. They have also said that she has been active in promoting mutual understanding.

About 100 Middle East scholars and experts on Iran have, in a joint statement, described her arrest as the latest "distressing episode" in an ongoing crackdown by Iran's government against those who strive to bolster the foundations of civil society and promote human rights in Iran.

Other Cases

Esfandiari's arrest comes amid heightened tensions between Iran and the United States. It also comes as human rights advocates and activists in Iran face an apparent crackdown.

Esfandiari is not the only Iranian-American to have been prevented from leaving Iran in recent months. Iranian authorities have confiscated the passport of Radio Farda broadcaster Parnaz Azima and refused to return it even though Azima and her family have posted a bail bond worth approximately $440,000.

"The Washington Post" today reports that Iran has also imprisoned a consultant for philanthropist George Soros's Open Society Institute programs.

According to the report, Kian Tajbakhsh was picked up around May 11. He had reportedly worked with the Open Society Institute in Iran since 2004 and has also done some work for the World Bank.

On his website, decentralization, democracy, and urban local governance in Iran are listed among his key research areas.

It is unclear whether there is any alleged connection between Tajbakhsh's and Esfandiari's cases, on one hand, and the Intelligence Ministry's recent statement accusing the Soros Foundation of involvement in attempts to topple the Iranian government.

The Iranian Intelligence Ministry said in its May 21 statement that the head and representative of the U.S.-based Soros Foundation in Iran has been identified and will be prosecuted.

The Soros Foundation's network is run through the billionaire's Open Society Institute, which is active in many countries. "The Washington Post" reports that the institute has said that its activities in Iran are centered only on humanitarian relief, public health, and culture.