Iran's Credit Squeeze

Iran's Credit Squeeze (NSI News Source Info) November 16, 2008: Economic problems are getting worse. In the United Arab Emirates (UAE), where much of Iran's foreign trade is handled, local banks are refusing to do business with the 10,000 Iranian trading firms based there. This has caused delays and cancellations of Iranian imports (over $9 billion worth from the UAE last year) and exports. This is being felt by the rule elite in Iran. There, the large extended families of the clerical leadership live the good life, and the goodies come in via the UAE. The sudden shortages of iPods, flat screen TVs, automobiles and bling in general, has been noticed in Iran, and is not appreciated. The falling price of oil is producing another problem, national bankruptcy. The government admits that if the price of oil falls below $60 a barrel (which it has) and stays there (which it may, at least until the current recession is over), the nation will not be able to finance foreign trade (which is already having problems with increasingly effective U.S. moves to deny Iran access to the international banking system), or even the Iranian economy itself. The latter problem is largely self-inflicted, as president Mahmoud Ahmadinejad desperately borrows money to placate his few (heavily armed and fanatical) followers (about 20 percent of the population). The rest of the population has been in recession for years, and is getting increasingly angry over Ahmadinejad's mismanagement. Some 80 percent of Iran's exports are oil. November 13, 2008: In northwestern Pakistan, an Iranian diplomat was kidnapped, and his bodyguard killed. Iran invoked the Vienna convention of political immunity of diplomats, and insisted the Pakistan take aggressive action to free the diplomat. November 11, 2008: The government claims to have test fired a new, two stage solid fueled ballistic missile, with a range of 2,000 kilometers. If true (and there are some doubts), this would not change much. Iran already has over fifty older Shahab 3, liquid fuel, ballistic missile, which also have a range of 2,000 kilometers. Iran has bought the technology to produce solid fuel rockets (basically slow burning explosives, but made in such a way that they provide precise power for any kind of rocket), and has been increasing its capabilities in this area for about a decade. November 10, 2008: There are still 2.8 million Afghans living in the country, and only 35 percent of them are there legally. The rest have come to Iran to take jobs Iranians won't do, or simply to escape the banditry and drug lords that dominate western Afghanistan. Many of these Afghans have lived most of their lives in Iran, having fled Afghanistan in the 1980s to escape the invading Russians. This large Afghan population provides cover for numerous criminal gangs, especially those involved in the heroin trade. Some 90 percent of the worlds heroin and opium comes from Afghanistan, and about a third of that is exported via Iran. This has led to a small war being fought in the Iran-Afghan border. November 8, 2008: Sixty Iranian economists (mostly academics) signed an open letter to president Mahmoud Ahmadinejad, criticizing his economic policies. The economists also criticized Ahmadinejad's nuclear weapons and foreign policy, which has brought about increasingly effective sanctions. The economists condemned current government policies that do little to promote economic growth. What was not mentioned in the letter was the corruption and diversion of vast sums to the few Iranians who support the government. But everyone already knows that. And those who talk about it in public go directly to jail. November 6, 2008: The U.S. has cut off all Iranian access the U.S. banking system. This is a big deal, because many transactions, like Internet traffic, have to at least pass through the U.S. banking system in order to be completed. Now it's even more difficult (time consuming and costly) for Iranians to do business overseas. Iran currently imports about $60 billion worth of goods a year (up from $21 billion in 2003). November 4, 2008: In another blow to the religious radicals that control the Iranian presidency, the more moderate parliament removed the Interior Minister, who had been caught claiming to have a degree from Oxford University, when he did not. Normally, this sort of resume enhancement would be overlooked. But president Mahmoud Ahmadinejad has made himself very unpopular with his radical policies (especially economic ones, which have been generally more destructive than constructive.) To make matters worse, a presidential aid was also dismissed, for attempting to bribe members of parliament to back off from impeaching the Interior Minister. Ahmadinejad rose to power by opposing corrupt practices. But since he has reached the top, he has changed. This has been noticed. November 3, 2008: Nationwide celebrations were held to commemorate the 1979 takeover of the U.S. embassy in the capital. This was a serious breach of international law, but is still celebrated in Iran as a national victory. This is one of the reasons why all subsequent attempts (numerous and frequent) to negotiate with the Iranians have failed. The Iranians believe that international law is an inconvenience, and does not really apply to a nation on a Mission From God (converting everyone on the planet to the Shia brand of Islam.) Foreign diplomats keep hoping the Iranian government will change its mind and play by the rules. But so far, no joy. November 1, 2008: The government is buying fifty An-148 transports from Ukraine. These aircraft are similar to the Boeing 737, and can carry about 80 passengers up to 5,000 kilometers. They cost about $20 million each. The An-148s can also move troops and military cargo around. October 31, 2008: Iranian merchant ships, which largely handle cargo moving between other countries (the many trade sanctions placed on Iran for misbehavior make trade directly with Iran difficult), have been ordered to obtain barbed wire, and place it on the railings of the main deck, if the ship is moving through the Gulf of Aden. Most Iranian cargo ships do, as most Iranian trade still moves through the Suez canal (which is reached by going through the Gulf of Aden and then into the Red Sea.) Crews have been ordered to post extra lookouts whenever the barbed wire is deployed, so the Somali pirates can be spotted in time to have the ship speed up and possibly outrun the pirates. October 29, 2008: The government announced the opening of a new naval base near the port town of Jask, which is located at the entrance to the Persian Gulf (the Straits of Hormuz). This is not a big deal, because the Iranian Navy is a patchwork of obsolete, and largely unreliable warships, and over 200 armed speedboats. There are fewer than 30 "major" warships (over 1,000 tons displacement), led by three Russian Kilo class subs and some ancient destroyers. Iran constantly announces new ships, built in Iranian shipyards, but intense searches via Google Earth (and travelers passing Iranian naval bases with cell phone cameras) have failed to detect most of these vessels. Given the Iranian tradition of announcing new weapons that never show up, it is believed that the Iranian navy is what it appears to be, not much. The hundreds of speed boats are, however, often manned by religious fanatics capable carrying out suicide missions. Many of these speed boats can carry several hundred pounds of explosives, in addition to several suicidal Iranian sailors. This makes each speed boat the equivalent of an anti-ship missile. However, all the Western and Arab warships in the region (which far outstrip the Iranians in numbers and combat power) practice dealing with suicidal speedboats. Thus the Iranian navy is a danger only if you are dumb enough to not plan and practice how you can deal with it.