[A-List] FT: Sanctions Fail to Fuel Dissent on Iran's Streets + Iran Joins Iraq Security Committee

["Yoshie Furuhashi" <critical.montages@xxxxxxxxx>]

It's not over till it's over, but good signs on both the domestic and
foreign policy fronts for my dear Islamic Republic of Iran.
Economically, the government has been forced to do the right thing:
cut petrol consumption without letting the market set its price,
increase the South-South trade, turn more to domestic saving and
industry rather than foreign investment (if it could do so by taxing
more and better, it would be even better).  Despite its bellicose
rhetoric, Washington has been finally compelled to move into the
direction of treating Iran as it did China during the Vietnam War (no
thanks at all to leftists in the USA).  Will it go farther?  Now,
Tehran must make sure that it won't find itself becoming the direct
target of international jihadists even while pushing America to
normalize its relation with Iran. -- Yoshie

<http://www.ft.com/cms/s/481229ae-3948-11dc-ab48-0000779fd2ac.html>
Sanctions fail to fuel dissent on Iran's streets

By Gareth Smyth in Tehran

Published: July 24 2007 04:47 | Last updated: July 24 2007 04:47

When angry motorists torched petrol stations as Tehran introduced
rationing last month, Iran's opponents scented success. Ehud Olmert,
Israeli prime minister, said it showed "economic sanctions are working
increasingly well".

But after three weeks of rationing, riots have given way to grumbling.
Tehran's streets are less congested, its air more breathable, and the
government says it is on target to reduce a bill for imported petrol
that was due to hit $7bn this year.

Meeting parliamentarians on Sunday, interior minister Mostafa
Pour-Mohammadi claimed a "strategic, historic" decision had cut
consumption by between 11m and 16m litres from a daily pre-ration
figure of 75m litres.

Few analysts in Tehran doubt the action was prompted by a fear that
importing about 40 per cent of its petrol made Iran vulnerable to
international action as members of the UN Security Council consider a
third round of sanctions over its nuclear programme.

Tehran's response, analysts say, shows how sanctions do not undermine
government policy but rather reinforce its tendency to choose
state-led rather than market solutions. "These sanctions are like a
flood that overcomes the private sector but also strengthens the state
and all its network and agencies," says Mohammad Tabibian, a prominent
reform-minded economist.

"I would go as far to say Mr Ahmadi-Nejad welcomes sanctions," says a
second economist. "He says he believes in the private sector, but he
doesn't really, and the state is barely affected by these measures as
long as it sells oil."

The government opted to ration petrol rather than raise the price –
among the lowest in the world – to a market level, as Mr Ahmadi-Nejad
stuck to his promises to be "fair" to less affluent Iranians. "The
president thinks of quantity rather than prices, of 'social justice'
rather than markets," says Heydar Pourian, editor of Iran Economics, a
business monthly. Many private-sector companies face problems in
attracting investment after the US pressed international banks to
avoid dollar transactions with Iran.

But the bulk of Iran's state-owned economy rolls on with record oil
revenue that rose 13.6 per cent to $54bn in the Iranian year ending
March 20.

Iranian officials and analysts dispute US officials' suggestion that
sanctions will spark unrest and undermine the government. "The people
in the west who hope sanctions can lead to social unrest should know
that no nation revolts when it's hungry," says Mr Tabibian. Not that
Iranians are starving. They buy state-subsidised bread hot from
bakeries.

At the macro level, the IMF predicts 5 per cent growth in 2007;
overall international trade is growing as Tehran looks to the east.

Trade with Italy has fallen 20 per cent in six months. In 2006,
Germany's exports to Iran dropped 7 per cent and Japan's fell 13 per
cent.

But business with China is booming. Last year Beijing signed a $100bn
deal to import Iranian natural gas and Chinese companies will be 50
per cent stakeholders in the Yadavaran oil field.

China has also become the second biggest market for Iran's non-oil
exports, taking $1.72bn in 2006-7, after the UAE with $2.5bn. Iran's
overall non-oil exports rose 47.2 percent to $16.3bn. "The situation
over sanctions is a huge opportunity for China, former Soviet
republics and regional countries," says one Asian diplomat in Tehran.

The medium to long-term outlook may not be so rosy, he adds, if Iran
cannot overcome problems in oil and gas production, where contracts
often go to domestic companies with limited experience.

Some officials admit the energy sector faces difficulties. Akbar
Torkan, managing director of the Pars Oil and Gas Company that
oversees development of the South Pars gas field, said last month that
more than $4bn was needed this year to develop the field, up from
$2.7bn last year.

Iran faced "problems in attracting finance and foreign investment", Mr
Torkan said; a plan to sell $3.5bn bonds inside Iran, offering an 8-15
per cent return, had been sent to Mr Ahmadi-Nejad. But Iran has a poor
record in raising capital by privatisation; it is doubtful bonds can
replace investment offered by companies – including OMV of Austria,
Spain's Repsol and Royal Dutch Shell – which are hesitating over
involvement in Iran's energy sector.

<http://www.ft.com/cms/s/d471e84c-39c7-11dc-9d73-0000779fd2ac.html>
Iran joins Iraq security committee

By Steve Negus, Iraq Correspondent and Daniel Dombey in Washington

Published: July 24 2007 10:45 | Last updated: July 24 2007 19:10

The US and Iran will set up a joint committee with Iraq to discuss
Iraqi security issues, opening the way for a continuous dialogue
between two countries whose contacts have been limited since the 1979
Iranian revolution.

US and Iraqi officials announced the decision on Tuesday after a
seven-hour meeting in Baghdad involving the US and Iranian
ambassadors.

However, US officials also said that Iran had stepped up support for
radical Shia militia groups, and were still waiting to see "results
... on the ground" indicating that Tehran was co-operating to
stabilise Iraq.

"There was an agreement to form this top committee and to address
three key areas – one is reining in the militias, another is fighting
al-Qaeda terrorism, and a third is to address border security," said
Hoshyar Zebari, Iraqi foreign minister, who chaired the meeting.

Mr Zebari said that such committees could lead to exchanges of
intelligence between Iran and the US on issues that both countries
considered a threat.

Ryan Crocker, US ambassador, said after the talks that he had
confronted the Iranian ambassador with US allegations that Iran
provides weapons and other support for radical Shia militias in Iraq.

"The fact is, and we made very clear in today's talks, that over the
roughly two months we have actually seen militia-related activities
that can be attributed to Iranian support go up and not down," he
said.

He added that "there were several heated exchanges in the course of
the day" with the Iranian officials over US allegations of Iranian
support for terrorism. Iran denies these allegations.

"We're not here to prove something in a court of law, we are here to
let them know we know what they are doing and it needs to stop," Mr
Crocker said.

The two ambassadors first met on May 28. Mr Crocker also used that
opportunity to admonish Iran. However, the discussion of a committee
may indicate that the parties have moved beyond the exchange of
accusations. The formation of a trilateral security body meets Iran's
basic requirement for success of the talks.

Iraqi officials say they do not want their country to become a
"battlefield" where the two countries resolve their disputes.

Tehran meanwhile has become increasingly concerned at growing chaos in
Iraq and especially at the increasing strength of militant Sunni
groups, including al-Qaeda, that are deeply hostile to Shia Islam.

Iranian officials want a faster – but managed – handover of power from
the US to the Shia-led government in Baghdad. In an article on Tuesday
in Shargh newspaper, Sadegh Kharrazi, former Paris ambassador,
expressed Iran's backing for a negotiated strategy.

He wrote: "The Americans should not drag the situation to the point
where Iraqis and others in the region witness them escaping by
helicopters – as they did in Vietnam."

Iran's official IRNA press agency announced before the meetings the
attendance of two senior Iranian security officials, Reza
Amiri-Moghadam and Hossein Amir-Abdollahian, an indication of the
importance with which Iran views the topics.

Additional reporting Gareth Smyth in Tehran
--
Yoshie