Iran's political economy
Spengler writes in Asia Times Online that economic conditions in Iran are more awful than is generally reported, even when the reporting is done by the Iranian central bank.Worst of times for Iran
"Households in President Mahmud Ahmadinejad's Iran must suffer on a Dickensian scale, for they spend 10% more than their income, according to the country's central bank. Iran's data are more hilarious than reliable, to be sure, but they illustrate how ordinary Iranians are perishing in a sea of petrodollars."The price of oil more than doubled since I warned last year... that Iran's Islamic kleptocracy had reached the end of its rope. Despite the surge in oil revenues, conditions are worse than they were a year ago, as the price of necessities soars out of ordinary reach. Not only the theft of the oil windfall, but the manner of the heft, puts Adhmadinejad's political future in doubt... Changing the man at the top, however, is no cure for fecklessness of Central African proportions. Underneath Iran's imperial ambitions and messianic pretensions suppurates a pre-modern patronage system that corrupts everyone who comes near it...
"Half the country's oil revenues disappeared from the books. A great deal of it left the country for banks in Dubai in the United Arab Emirates and elsewhere; capital flight already was running at a $15 billion annual rate last year, by my estimate...
"During the past year, though, conspicuous consumption in the form of a luxury housing boom has absorbed even more of Iran's oil windfall. Luxury apartments in Tehran's better neighborhoods now sell for $15,000 per square meter... equal to the best neighborhoods in Paris or New York...
"Rather than a handful of officials siphoning state funds into bank accounts in Dubai, an entire class of hangers-on of the Islamic revolution is spending sums beyond the dreams of the average Iranian, and in brazen public view.
"Ahmadinejad's patronage system generates payoffs to the political class that have set in motion uncontrolled inflation - officially 25% per year but certainly much higher - and a rush into real assets..."
Labels: economics, Iran, politics
posted by Ken Wedding @ 8:40 PM
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Oil Cash May Prove A Shaky Crutch for Iran's Ahmadinejad
"Faced with rapid inflation and growing international concern about his country's nuclear ambitions, Iranian President Mahmoud Ahmadinejad is relying on huge increases in oil and gas revenue to insulate his government from internal and external pressures...
"Oil wealth, which funds 60 percent of the national budget, has allowed Iran's government to exercise its power to cut interest rates and ignore warnings from the country's Central Bank that overspending will worsen inflation...
"But the increasing oil revenue is causing a widening gap between rich and poor, as some businesspeople prosper while inflation eats away at consumers' purchasing power...
"A small coterie of developers, oil traders and businesspeople with lucrative government contracts are profiting from the oil boom. Shiny new BMWs crowd the streets of northern Tehran, where real estate prices have doubled or tripled and where luxury developments can command $2,000 per square foot.
"But the majority of Iranians have suffered from the inflation that analysts say is partly the result of government spending...
"The private sector, which makes up only 15 percent of the Iranian economy, could help with providing jobs. But businesspeople say they have been particularly hurt by sanctions that target international banking...
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