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Tensions in Iran over Nuclear Talks

Garrett Nada

On May 27, Supreme Leader Ayatollah Ali Khamenei appeared to rein in parliament after a heated exchange between a lawmaker and Foreign Minister Mohammad Javad Zarif. After the closed door parliament session on May 24, Mehdi Koochakzadeh accused Zarif of treason and ignoring Khamenei’s wishes to not hold talks on the nuclear dispute while under threat of sanctions. Zarif responded, saying Koochakzadeh has no right to speak for the supreme leader. In a meeting with lawmakers three days later, Khamenei warned against insulting ministers, saying they are all brothers.

The face to face argument on the floor of parliament, however, was indicative of the wider debate in Iran over the nuclear talks. Some hardliners have repeatedly accused Zarif and his negotiating team of making too many concessions in talks with the world’s six major powers —Britain, China, France, Germany, Russia and the United States. When criticism of Iran’s negotiating team has become particularly caustic, Khamenei has periodically stepped in. In 2013, he warned against calling the negotiators “compromisers.”

 
Despite Khamenei’s support for Zarif and his team, hardliner lawmakers have repeatedly criticized their conduct. For example, more than 100 lawmakers, students, academics and activists attended a conference in 2014 titled “We’re Worried” — advertised as “the great gathering of critics of a weak deal.”
 
Earlier in May, Iran’s negotiators were more optimistic about brokering an agreement by the end of June. But just before the latest round of talks began in Vienna on May 27, Deputy Foreign Minister Abbas Araqchi said the self-imposed deadline might be extended. The following are recent excerpted remarks by Iranian officials on the nuclear talks.
 
Supreme Leader Ayatollah Ali Khamenei
 
“There are many solutions to the nuclear issue all of which rely on the domestic capacities and reinforcing [domestic] production.
 
“If we boost production and use domestic potentialities, this will not only solve internal problems, but also facilitate settlement of foreign issues such as the nuclear one.”
—May 27, 2015 in a speech to lawmakers 
 
Foreign Minister Mohammad Javad Zarif
 
“Time and again, members of the [Iranian] negotiating delegation and I have stressed that [we] will certainly not allow the Western side to make excessive demands in the nuclear negotiations.
 
“Definitely, the negotiating team feels obliged to abide by the [Islamic] establishment’s red lines in all issues in the nuclear talks.”
—May 22, 2015 in an interview
 
“The Americans have adopted a carrot-and-stick policy over the past 30 years. We promise to effectively and properly defend Iran’s nuclear achievements.”
—May 24, 2015 in a closed door session of parliament

“The Iranian negotiating team will definitely abide by the Leader’s views on all issues pertaining to the nuclear negotiations.”
—May 25, 2015 according to Press TV 
 
“The nuclear negotiations can yield results if the other side shows pragmatism.”
—May 26, 2015 in a meeting with Omani Foreign Minister Yusuf bin Alawi
 
Deputy Foreign Minister Abbas Araqchi
 
“The deadline might be extended and the talks might continue after the June 30 [deadline]. We are not bound to a specific time. We want a good deal that covers our demands.”
 
“The talks are serious, complicated and detailed. The pace of talks is slow as we have entered final stages.”
 
“Some solutions have been proposed and we are working on them. For us, the principle of simultaneity is very important.
 
“The final text of the deal will be about 60 pages including 20 pages of the main text and five attachments.”
 
“This question [of timing and phasing] is still under discussion. We need a timetable to start implementing the measures that both sides have undertaken, and that may take some months. First of all, we have to wait for – something about two months – for the American Congress and probably Iranian Majlis to review the agreement and decide, and whenever the U.S. government, the European governments and the Iranian government express their readiness to start the implementation of the agreement, we [will] actually start doing what we are supposed to do. And that may take two months before we do anything because of these initiatives by the Congress and Majlis.
 
“So we have already two months of waiting and then we need a timetable that we are still working on that. We should do something, the other side should do something. We insist on the principal of simultaneity. Everything that both sides are supposed to do should be at the same time and simultaneous. Of course, we have some differences here – how to manage that, how to fix everything in a simultaneous way. We’re working on this timetable and this is one of our differences that we have still kept in brackets and we are trying to resolve that.
 
“It [the agreement] will still be based on the principal that all economic and financial sanctions should be removed at once.”
—May 27, 2015 to the press via Reuters and Press TV
 
“Removal of sanctions in the economic sector is being discussed so that the other side will remove the sanctions structures in a document and declare that if Iran acts upon its undertakings, they will remove the sanctions.”
—May 24, 2015 in a closed-door session of parliament
 
Parliamentary Speaker Ali Larijani
 
“It is the duty of Parliament to support the nuclear [negotiation] team” but the “Additional Protocol [of the International Atomic Energy Agency] has to be approved by Parliament.”
—May 24, 2015 following the argument between Koochakzadeh and Zarif
 
Supreme Leader's Deputy Representative to the Islamic Revolution Guards Corps Brigadier General Mohammad Ali Asoudi
 
“Tehran's strategy is resistance, and we will make the U.S. bow to Iran by using this strategy.
 
“The enemy has always made use of threats in negotiations, and negotiation under the shadow of threat is meaningless.
 
—May 24, 2015 in a speech
 
Member of Parliament Mehdi Koochakzadeh
 
“Mr. Zarif considers himself to be at the center of the world, and yelled that ‘those who compromise our unity call me a traitor.’”
 
 “We were just reminding him about the Supreme Leader's instructions.”
—May 24, 2015 in an interview with Shargh Daily

U.S.-Iran Trade After Sanctions

Garrett Nada

A gradual lifting of sanctions on Iran could reopen the Middle East’s second largest economy (after Saudi Arabia) to U.S. and Western companies. Many European companies were active in Iran until 2010, but American companies have avoided doing business in the Islamic Republic for decades, either by choice or due to sanctions.
 
As negotiators from Iran and the world’s six major powers work to finalize a nuclear deal by June 30, businesses are investigating their prospects in Iran. An agreement that lifts even some sanctions might, over time, allow American firms access to a consumer-rich market.
 
Iran’s population, at about 80 million, is the third-largest in the region, after Turkey’s 81 million and Egypt’s 86 million. Its consumer base is also young and well-educated. And the middle class has had a taste for U.S. goods dating back to the days of the Shah.
 
 
However, if a nuclear deal is signed, international companies are unlikely to flood Tehran immediately. The lifting of sanctions is likely to be a lengthy and uneven process for the United States and European countries. And some sanctions—imposed in response to alleged human-rights abuses and support for extremist groups by the Iranian government—will remain in place. The difficult business climate, rife with corruption, could be an additional obstacle.
 
Historical Context
 
Before the 1979 revolution, the United States and Iran had a close relationship based on energy trade and common Cold War-era security priorities. Bilateral trade peaked in 1978, when the United States exported $3.7 billion worth of goods to Iran and imported $2.9 billion worth of goods from Iran.
 
On the eve of the revolution, the United States and West Germany were Iran’s largest trading partners. Nearly 50,000 Americans worked and lived in Iran. In turn, American goods—mainly arms, industrial equipment, technology, and agricultural and consumer goods—accounted for some 16% of Iranian imports. Iran bought between 50% and 75% of its imported rice, wheat, and cereals from the United States in the 1970s.
 
U.S.-Iran trade plummeted after the 1979 revolution, especially when American hostages were held for 444 days at the U.S. embassy compound in Tehran. The Carter administration suspended Iranian oil imports in late 1979, and severed diplomatic relations with Tehran in 1980. But U.S.-Iran trade resumed in 1981 after the hostages were released. U.S. exports totaled $300 million in 1981—down from $3.7 billion in 1978. Iranian exports to the United States totaled $64 million—down from $2.9 billion in 1978.
 
Through subsidiaries, American energy companies continued to buy Iranian oil—worth up to $3.5 billion a year—off the international market in Rotterdam until the mid-1990s, when sanctions were broadened.
 
Over the years, Washington has imposed waves of sanctions on Tehran over three broad issues: support for terrorism, failure to comply with United Nations on its nuclear program, and human-rights violations. Yet American companies have legally continued to export a wide array of goods under equally broad exceptions that covered food, medicine, and humanitarian goods.
 
U.S. Interests and Non-Oil Trade
 
Trade has fluctuated from year to year. It dipped after the Clinton administration imposed new sanctions in 1995. But trade increased slightly in 2000 when sanctions on carpets and caviar were lifted in modest outreach to Iran’s reformist government.
 
Major U.S. exports to Iran in recent years have included wheat, rice, soybeans, corn, dairy, pulpwood, plastics, medical equipment and pharmaceuticals. Iran is the region’s second-largest grain importer after Saudi Arabia. U.S. exports to Iran in 2014 ranged from medical instruments to chocolate, even bull semen.
 
The following is a sampling of American products exported to Iran in 2014, which totaled $182.1 million:
 
Butter
$35,535,582
Non-electric medical instruments
$24,863,265
Seeds, fruits and spores (for sowing)
$19,992,618
Pharmaceutical products
$8,958,871
Bull semen
$8,036,388
Computers
$869,000
Essential oils, perfume and cosmetics
$827,892
Toiletries and cosmetics
$802,000
Chocolate and products containing cocoa
$253,970
Live Cattle
$216,000
Rice
$141,000
Plastic tableware and other household articles
$52,000
Live chickens
$46,197
Lamps, lighting fittings and parts
$34,673
 

U.S. and Western businesses are already interested in reentering the market. “Iran is the last, large, untapped emerging market in the world,” Ramin Rabii of Turquoise Partners, an Iran-based investment firm, told the BBC. About 65% of the population is under 35 years old, and literacyamong 15- to 24-year-olds is 98%. Total adult literacy is 85%. About half of all Iranian households reportedly have internet access.

As of 2013, the World Bank classified Iran as an “upper middle-income” country. It estimated that per capita income—based on purchasing power parity (PPP)—was $15,610. Even under sanctions, Iran’s economy has been the second largest in the region, once again after Saudi Arabia, and its gross domestic product (GDP) was ranked 32nd worldwide in 2013.
 
Iran’s consumer culture has long been heavily influenced by Western trends. Western-style grocery stores and shopping malls have been gaining popularity over the past decade. American and European luxury brands are popular with the elite in major cities, especially Tehran, because of their reputations for quality.
 
Iconic beverage brands such as Coca-Cola and Pepsi have prospered in Iran for years at the expense of local rival Zamzam Cola. The presence of bootleg versions of American restaurants and coffee shops—from “Mash Donald’s” to “Pizza Hat”—suggests opportunities for U.S. franchises to expand and thrive.
 
American electronics brands, such as Apple and Dell, are still smuggled into Iran. Computer stores in Tehran are modeled after their U.S. counterparts and stock the latest merchandise. Apple iPods, iPhones, and iPads are particularly popular. An Iranian company that resells Dell products even offers warranties. Both Apple and Dell reportedly contacted potential Iranian distributors in 2014.
 
Iran is also one of the largest car markets in the Middle East. American cars were popular before the revolution. General Motors partnered with an Iranian company to produce cars for several years before 1979. The auto industry has historically been Iran’s largest non-oil industry. Domestic production peaked in 2011, at about 1.6 million vehicles per year, before tightened sanctions cut off imports of car parts and bank transfers that halved output. But auto sales rose 32% in 2014 over 2013. American cars and trucks have already begun to make a comeback.
 
 
With a female population of nearly 40 million, Iran is reportedly the second-largest cosmetics market in the Middle East. For more than a decade, Iranian merchants have sold big American clothing brands, such as Victoria’s Secret, in storefronts that mimic their U.S. counterparts—but without legal franchises.
 
Iran also represents a promising market for U.S. tobacco producers.Marlboro has especially been popular for years. Until 2006, cigarettesmade up a large share of American exports to Iran. Western brands are commonly smuggled into Iran to meet demand. About a quarter of Iran’s annual $11 billion cigarette imports are smuggled.
 
Until fall 2014, sanctions had prevented U.S. companies from selling aerospace parts to Iranian airlines. Iran Air’s aging fleet includes 12 Boeing aircraft, some of which are more than 30 years old. Boeing’s small sale of aircraft manuals, drawings and navigation charts to Iran Air in Oct. 2014 carried symbolic weight as the first publicly acknowledged transaction between U.S. and Iranian aerospace companies since the 1979 U.S. hostage crisis.
 
Iran has reportedly signed three contracts with Boeing since an interim nuclear deal was negotiated in late 2013. Two were extensions of existing agreements and one was a new contract between Iran Air and the American company. So far, Boeing has repaired seven of Iran Air’s plane engines, according to Iran Air CEO Farhad Parvaresh.
 
American music and movies are still popular in Iran. Bootlegging of Western tapes and later discs—especially of material that might otherwise be banned by the Iranian government for perceived immorality—has been common since the revolution. Smuggling DVDs and CDs has given way to illegal downloading, so some movies are now sold on memory sticks on Tehran’s streets. The latest American releases, even ones still in theaters, are popular. If Iran and the United States were to recognize each other’s copyrights, the American movie and music industries could benefit hugely.
 
Costs and Obstacles
 
For more than a year, Iran has been courting investors, hosting foreign trade delegations, and dispatching envoys abroad to investigate new business opportunities. But Western businesses are not likely to enter Iran too quickly if a nuclear deal is reached. American companies may hesitate to make serious investments until they are convinced of the long-term durability of any agreement, experts predict.
 
The complex layers of U.S. and European sanctions would also take time to unravel. Western sanctions linked to Iran’s support for terror and its human rights abuses will remain in place until Tehran’s behavior changes. And some two dozen U.S. states have enacted their own punitive measures on companies operating in certain sectors of Iran’s economy, according to Reuters. In more than half of those states, sanctions will remain in place unless Iran is removed from the list of state sponsors of terrorism or if all federal sanctions on Iran are lifted.
 
International companies that have operations in the United States and European Union risk facing sanctions or punitive fines if they move into Iran before sanctions are lifted. Violating sanctions can be expensive and damage a company’s reputation.
 
In 2014, the French bank BNP Paribas pleaded guilty to two criminal charges for violating sanctions against Iran, Sudan, and Cuba. It ended up agreeing to pay $9 billion to the U.S. government, a record fine for violating U.S. sanctions. U.S. regulators banned the bank from conducting certain transactions in U.S. dollars for a year.
 
Western companies would also initially face difficulties starting businesses or partnerships in Iran. Widespread corruption and significant government involvement in the economy have created a challenging business environment, even for European companies that were active in Iran before sanctions were ramped up in 2010. The line between the private and public sector also is not always clear because the Revolutionary Guards have affiliated companies working in many major industries.
 
Iran ranked 130 out of 189 economies in the 2015 World Bank report on business regulations and property rights protections. The Islamic Republic performed worse than the regional average in most categories. It ranked 62nd for starting a business, 89th for acquiring credit and 172nd for obtaining a construction permit.
 
 
Data from World Bank
 
U.S. producers may face difficult obstacles to selling and investing, but the Iranian market is too large to ignore, especially given the dearth of other emerging markets with a middle class eager and able to buy imported goods. “I am already seeing a rush to market by U.S. and E.U. companies,” a director of the British-Iranian Chamber of Commerce told The Wall Street Journal“And no one wants to be left behind.”
 
Garrett Nada is the assistant editor of The Iran Primer at USIP. This article first appeared on Quartz. 
 
*Values converted to real 2015 dollars using the average annual Consumer Price Index
 

Khamenei vs. Rouhani on Non-Muslims

Garrett Nada

Iran’s supreme leader and president take two different approaches to interfaith outreach. While extolling the qualities of shared prophets with Christianity and Judaism, Ayatollah Ali Khamenei often censures other countries or groups for supposedly not living up to the high standards set by Jesus, Moses and others. President Hassan Rouhani, on the other hand, focuses on shared values and faith rather than politicizing his messages to or about Jews, Christians and Zoroastrians.

For Christmas 2014, postings on Khamenei’s official Twitter account mixed praise of Jesus and Mary with backhanded condemnation of the West. Some of the remarks were more than two decades old, repurposed from the pre-Twitter age. Many of his tweets included trending hashtags referring to racial issues in the United States, such as #BlackLivesMatter and #Ferguson — references to the killing of unarmed African-Americans by white police officers in New York and Missouri. Even the caption under a picture of Khamenei visiting with a Christian family (above) had a political overtone. The tweet invoked martyrdom and Jesus because the couple's son died in the 1980-1988 war with Iraq.
 
President Hassan Rouhani, however, did not mix politics or criticism with his Christmas outreach. The tweet posted on his account was a simple wish for a merry Christmas and a blessing from Jesus, a prophet of "peace and love." Rouhani also visited with elderly Christians at Tehran’s St. Mary Hospice on New Year’s Day. Instead of referring to the Iran-Iraq War, Rouhani used the opportunity to emphasize that all citizens, regardless of age or faith, deserve proper services.
 
The difference in tone between the two leaders' words is a microcosm for how they view the outside world. Khamenei dwells on past grievances and tends to be confrontational, while Rouhani is more interested in dialogue and real outreach. During his first press conference after winning the 2013 presidential election, Rouhani called Iran's relationship with the United States an "old wound" that needed healing. "Wisdom tells us both countries need to think more about the future and try to sit down and find solutions to past issues and rectify things," he said. Rouhani's outlook has played a critical role in advancing negotiations between Iran and the world's six major powers on Tehran's controversial nuclear program.
 

Religious Minorities

Iran may be the world's only modern theocracy, but three religious minorities are actually woven into the political fabric under the constitution. Muslims account for some 99 percent of the country's 80 million people. Yet Christians, Jews and Zoroastrians all have seats in the 290-seat parliament proportionate to their populations:
 

Two seats for Armenian Christians (who number between 40,000 and 80,000)
One for Assyrian Christians (who number between 10,000 to 20,000) and Chaldean Christians,
One for Jews (who number 20,000 to 25,000)
One for Zoroastrians (who number between 25,000 to 60,000)

 
The following is a collection of tweets from Iran's supreme leader and president related to these faiths.
 
 
Christianity
 
In his tweets, Khamenei has frequently used word “arrogants.” The term refers to Western powers or Israel.
 

 
President Rouhani's Christmas tweet, on the other hand, was a more tolerant attempt at outreach.
 
The president's website also published several pictures of his visit to a facility for elderly Christians. 
 
 
 
Judaism
 
In his tweets on Judaism, Khamenei has differentiated between the religion and Zionism. 
 
In a March 2014 speech marking Nowruz, the Persian New Year, Khamenei questioned the veracity of the Holocaust. This issue has long been a controversy. Iran's only Jewish member of parliament challenged Mahmoud Ahmadinejad's denial of the Holocaust in 2005.
 
 
In September 2013, President Rouhani wished Jews around the world and in Iran a happy new year on Twitter. He also called the Holocaust a "reprehensible" crime against the Jewish people during an interview with CNN. Weeks later, Rouhani invited Iran’s only Jewish lawmaker to accompany his delegation to the 2013 U.N. General Assembly in New York. These moves sharply contrasted with former President Mahmoud Ahmadinejad's Holocaust denial. Rouhani has since twice donated more than $150,000 in government funds to the country’s only Jewish hospital. 
 
In late 2013, the head of Tehran’s Jewish Association told AP that Rouhani’s government had listened to the community’s grievances and requests. “That we are being consulted is an important step forward,” said Homayoun Samiah. “Under former President Mahmoud Ahmadinejad, nobody was listening to us. Our requests fell on deaf ears.” Rouhani’s government has also agreed to allow Jewish schools to be closed on Saturday to mark the Sabbath.
 
Zoroastrianism
 
In December 2013, Rouhani sent a message to the 10th International Zoroastrian Congress held in Mumbai, India. He proudly referred to Iran as the birthplace of the ancient Prophet Zoroaster. Excerpts of the letter were also tweeted. 
 

Photo credits: Khamenei.ir and President.ir

Economy in 2014: Some Fixes, Few Solutions

Garrett Nada

            President Hassan Rouhani made significant headway in stabilizing Iran’s economy in 2014. During his first full calendar year in office, he began addressing mismanagement and corruption from President Mahmoud Ahmadinejad’s tenure. His policies brought inflation down from 39 percent to 17 percent. After two years of recession, Iran’s economy was expected to grow by 1.5 percent.
     But the Islamic Republic still faced daunting challenges. General unemployment was 10 percent and youth unemployment was more than double the national average, reaching 24 percent. Some seven million Iranians, about eight percent of the population, were also living in extreme poverty.
      Rouhani took a pragmatic approach to domestic reforms, in contrast to the inefficient populist policies of the Ahmadinejad years. In April, the government cut subsidies on gasoline, which sent prices soaring by 75 percent. It also appealed affluent and middle-class Iranians to forego $18 monthly handouts initiated under Ahmadinejad. Although 73 million people, or about 95 percent of the population signed up, Tehran projected monthly savings of $482 million because 2.4 million waived the payments.
            Nuclear diplomacy offered a slight reprieve too. The interim deal—implemented in January and extended twice in July and November—suspended some sanctions and allowed repatriation of oil revenues frozen in banks abroad. Iran gained access to $4.2 billion in frozen assets during the first six months, then another $2.8 billion from July to November.
            Anticipation of a nuclear agreement that eased sanctions generated international commercial interest in Iran. At the World Economic Forum, Rouhani appealed for new investment. Dozens of groups from Europe, Asia and Latin American visited Iran to assess opportunities and build relationships. In October, Boeing’s small sale of aircraft manuals, drawings and navigation charts to Iran Air carried symbolic weight as the first transaction between U.S. and Iranian aerospace companies since the 1979 U.S. Embassy takeover.
            But Tehran’s failure to get a deal with the world’s six major powers—and in turn ease more sanctions—was a major impediment to generating new jobs, new investment and new revenues. Recovery would require increased access to foreign exchange, oil markets and global financial flows.
            In 2014, Rouhani targeted corruption to account for billions lost during the Ahmadinejad years. An investigation of celebrity businessman Babak Zanjani revealed a deep network of corruption that extended from Iran to Turkey, Tajikistan to Malaysia. Zanjani also owed Iran’s oil ministry $2 billion. The Ahmadinejad administration reportedly had Zanjani help evade sanctions and sell oil abroad and transfer money through overseas banks. But Zanjani apparently never transferred the money back to the oil ministry.
            Plummeting oil prices were Iran’s biggest challenge. In December, Rouhani was forced to present a budget for 2015 based on an average oil price of only $70 per barrel, slashed from $100 per barrel in the 2014 budget. He also vowed to reduce Iran’s dependence on oil from an average of 45 percent of all revenues to about 31.5 percent.
            At the same time, however, the Rouhani government proposed a 33 percent hike in defense spending. The proposal notably included a 50 percent increase, to about $6.5 billion, for the Revolutionary Guards, a reflection that Iran had begun to build diplomatic bridges but still had broad and basic security concerns.

Highlights

● Inflation was down to about 17 percent in December from about 39 percent in January.
 
● Under the interim nuclear deal, Iran was granted moderate sanctions relief and access to some $7 billion in frozen assets held overseas.
 
● Joblessness remained a key problem, with youth unemployment at 24 percent and general unemployment at 10 percent.
 
● Dozens of political and business delegations visited Iran in 2014. But most companies held back from investing or signed memorandums of understanding stipulating that business would begin only when sanctions are lifted.
 
● At various points during the year, The World Bank, the International Monetary Fund and The Economist projected Iran’s economy to grow at least 1.5 percent by the end of 2014.
 
● Rouhani’s government took some steps toward domestic reform, including cutting the subsidy on gasoline and tackling corruption.
 
Chronology
 
Jan. 7 Minister of Science, Research and Technology Reza Faraji Dana estimated that brain drain cost Iran’s economy some $150 billion annually as a result of 150,000 highly skilled individuals emigrating each year. 
 
Jan. 14 In its Global Economic Prospects, The World Bank estimated that Iran’s economy shrunk by 1.7 percent in 2013. The bank projected a growth rate of 1.5 percent for 2014. 
 
Jan. 23 President Rouhani announced Iran’s intention to “reopen trade, industrial and economic relations” with all of its neighbors in an address at the World Economic Forum. He claimed Iran’s economy “has the potential to be among the world’s top 10 in the next three decades.”

Feb. 5 In a televised interview, President Rouhani expressed regret for problems with distribution of food rations, after three people reportedly died waiting in line in subzero weather. His administration had extended the food aid program from 3 million people to 17 million to counter inflation. Rations included cheese, chicken, cooking oil, eggs and rice.

Late Feb. India’s January oil shipments from Iran more than doubled compared to December, resulting in the highest monthly shipments since February 2012, due largely to Indian purchases after sanctions were eased.

March 12 Iran sealed a deal to export 10 billion cubic meters of gas per year to Oman during President Rouhani’s first visit to Muscat. The 25-year deal was valued at some $60 billion. Oman committed to building an underwater pipeline to Iran.
 
April 14 The Statistical Center of Iran reported that the average unemployment rate for the Persian year that ended on March 20 was 10.4 percent, down from 12.2 percent in March 2013. Female unemployment was 19.8 percent, more than double the rate for men at 8.6 percent. Youth unemployment was even higher at 24 percent for those between ages 15 and 24.
 
April 14 Deputy Energy Minister Rahim Meydani warned that water shortfalls could impact nearly half of Iran’s population, some 37 million people, in the summer if consumption wasn’t cut by up to 20 percent.
 
April 16 The IMF said Iran’s economy showed signs of stability under President Rouhani, but noted that the “near-term economic outlook remains uncertain,” in its first comprehensive report in two years.

April 23 73 million citizens — some 95 percent of Iranians — signed up for cash handouts, despite government attempts to discourage affluent and middle-class families from registering for the $18 monthly payments. Tehran was projected to save some $482 million per month after some 2.4 million waived the handouts.
 
April 25 Subsidy cuts on gasoline raised the price of gasoline 75 percent to 7,000 rials for the first 60 liters, up from 4,000 rials. The price of each additional liter beyond 60 was raised to 10,000 rials from 7,000.
 
April 27 – Rostam Ghasemi, head of the Iran-Iraq Economic Development Committee and a former oil minister, traveled to Erbil and signed an agreement with Iraq’s Kurdish Regional Government to build oil and natural gas pipelines. The Kurdish government would receive 3 to 4 million liters of refined oil and natural gas in return for pumping crude oil to Iran.
 
April 29 – The National Iranian Oil Company cancelled a $2.5 billion deal with China National Petroleum Corporation for developing the giant South Azadegan oil field. The project had been stymied by repeated delays.
 
May 6- 9 – Tehran hosted its 19th annual International Oil, Gas, Refining and Petrochemical Exhibition, drawing some 600 energy companies from 32 countries. Some 1,200 domestic companies attended the show.
 
Mid-May – The IMF projected real GDP growth rates of 1.5 percent for 2014 and 2.3 percent for 2015.
 
May 24 Billionaire businessman Mahafarid Amir Khosravi was executed at Evin prison over a scandal that cost 14 state-owned and private banks almost $2.6 billion, reportedly the largest fraud in Iran’s history.
 
Late May  Tehran and Islamabad extended the deadline to complete the multi-billion-dollar gas pipeline from December 2014 to December 2015. The nearly 1,000 mile pipeline would help Pakistan deal with its overwhelming energy needs.
 
June 9-10Iran and Turkey signed 10 cooperation agreements on tourism, joint ventures and customs cooperation during President Rouhani’s visit to Ankara, the first official visit by an Iranian president in 18 years. Turkey sought a discount on Iranian gas but the two sides failed to agree on a price.
 
June 23 Iran announced that Russia’s state nuclear power company Rosatom will build two more nuclear reactors at the Bushehr power plant. Rosatom expects to start construction before the end of 2014. The announcement came as the company’s deputy director general, Nikolai Spassky, visited Tehran.
 
June 23 Foreign tourist visits to Iran climbed 215 percent in spring 2014 compared to 2013, according to the deputy director of Iran’s Cultural Heritage, Tourism and Handicrafts Organization. “Over 23,600 foreign tourists visited Iran in the three-month period, compared with 7,500 last year,” said Morteza Rahmani-Movahed.
 
June 26 India paid Iran $550 million to partly clear pending oil dues, in accordance with the interim nuclear deal that allows Tehran to repatriate blocked funds across the world.
 
June 29 Iran transferred about $776.3 million worth of shares of state-run companies to the private sector in spring 2014, according to Tasnim News Agency.
 
June 29 Iran started exporting cars to Russia for the first time in five years. Iran-Khodro stopped shipping vehicles to Russia in 2009 when it adopted stricter Euro-5 emission standards. Iran’s largest auto manufacturer revealed plans to export 10,000 cars to Russia by 2015.
 
July 8 India paid a second tranche of $550 million to Iran in oil payments under the interim nuclear deal.
 
July 24 – India paid a third tranche of $550 million to Iran in oil payments under the interim nuclear deal. India imported 281,000 bpd of Iranian crude oil from January to June, up by a third compared to the same period last year, according to Reuters.
 
July 29 – The cumulative impact of U.S. sanctions since 2011 cost Iran some $120 billion in oil revenues as of July, according to the Treasury Undersecretary for Terrorism and Financial Intelligence David S. Cohen. “Iran's currency, the rial, has depreciated by about 50 percent since January 2012 and has declined by about 7 percent since the JPOA was announced last November,” he told the Senate Committee on Foreign Relations.
 
July 31China, Iran's biggest oil buyer, imported nearly 50 percent more in the first half of 2014 than in 2013, according to data collected by Reuters. Purchases by Japan and Korea were down compared to 2013. But the combined purchases of China, India, Japan and Korea were up nearly 25 percent from last year, at 1.2 million barrels per day versus 961,236.
 
Sept. 25 The Central Bank of Iran announced that the economy grew for the first time in two previous Persian years. The economy expanded 4.6 percent in the first quarter of the year that started on March 21.
 
Oct. 4 Iran exported $16.7 billion worth of non-oil goods during the first half of the current Iranian calendar year. Exports to Asia, which accounted for 93 percent of total exports, increased by nine percent in comparison to the same period last year. And exports to Europe increased by 33 percent.
 
Oct. 9 Iran’s economy was projected to grow 2.2 percent in terms of real gross domestic product in 2015, according to the IMF’s World Economic Outlook for October.
 
Oct. 22 Boeing, a U.S.-based aerospace and defense company, announced that it sold aircraft manuals, drawings, navigation charts and data to Iran Air. The sale marked the first publically acknowledged transaction between U.S. and Iranian aerospace companies since the 1979 U.S. Embassy takeover.
 
Oct. 26 Some seven million Iranians, about eight percent of the population, were living in extreme poverty, according to Minister of Labor, Cooperatives and Social Welfare Ali Rabiei.  
 
Oct. 29 Crude oil revenues were cut by about 30 percent, according to President Rouhani. The president was likely referring to falling market prices worldwide.
 
Oct. 29  Iran was ranked 130 out of 189 economies by the World Bank in its new Doing Business report, two positions higher than last year. The report measured regulations affecting 11 areas of the life of a business.
 
Nov. 10Government spokesperson Mohammad Bagher Nobakht told the state news agency that the Supreme Administrative Council approved the reinstitution of the Planning and Budget Organization, which was merged with another organization in 2000 under President Mohammad Khatami and dissolved by President Mahmoud Ahmadinejad in 2007. 
 
Nov. 20 India paid another $400 million to Iran in oil payments under the interim nuclear deal.
 
Nov. 26 South Korea transferred $500 million to Iran in oil payments.
 
Dec. 1 The government implemented a 30 percent increase in bread prices. Mojtaba Khosrotaj, the deputy minister of industry, mines and trade, said the decision was made after some 70,000 bakeries complained about low prices.
 
Dec. 1 Iran’s trade deficit increased by less than $3 billion in the first eight months of the Iranian year that started in March, according to official customs data. Iran imported some $34 billion worth of goods, mainly food and automobiles, from China, India, South Korea and Turkey while it exported about $31 billion worth of goods, mainly to Afghanistan, China, India, Iraq and the United Arab Emirates.  
 
Dec. 1 Tehran hosted an international auto conference, which gathered more than 500 representatives from some 250 companies and 30 countries. The French ambassador to Tehran, who attended the event, said that his country’s companies are just waiting for constrains imposed by sanctions to loosen before investing.
 
Dec. 2During a visit to Tehran, Qatar’s minister of labor signed a memorandum of understanding that would send Iranian workers to the Gulf country. The move was aimed at helping Iran with its unemployment problems by providing Qatar with skilled workers. 
 
Dec. 3 President Rouhani attended the inauguration of a new 570-mile railroad connecting Iran to Turkmenistan and Kazakhstan that took seven years to build.
 
Dec. 4Parliament passed a resolution that would allow the taxing of religious foundations and military-linked companies, including those overseen by the supreme leader.
 
Dec. 7President Rouhani presented his budget of some 8,400 trillion rials, or about $312 billion at the official exchange rate, to parliament. It was based on an average oil price of about $70, down $30 compared to last year. The budget also included a 33 percent hike in defense spending.
 
Dec. 9Iran and Pakistan signed five memorandums of understanding to increase cooperation and enhance trade ties. One memorandum aimed to establish a sisterhood relationship between Iran’s ports of Shahid Rajaee and Chabahar with Pakistan’s ports of Karachi and Gwadar.
 
Dec. 11More than 722,300 cars were reportedly manufactured since March, indicating nearly a 70 percent growth compared to the same period last year.
Tags: Economy

From Baby Boom to Baby Shortage

Garrett Nada

            Iran has a numbers problem. Over the past 35 years, Tehran’s family planning policy has gyrated so radically—from encouraging too many babies to producing too few—that the Islamic Republic faces existential economic dangers.
 
      The origin of the problem dates to the 1979 revolution. Ayatollah Ruhollah Khomeini called on women to produce a new Islamic generation for both cultural and security reasons. Khomeini wanted to create a paramilitary force of 20 million religious volunteers to protect Iran from foreign influence. Over the next decade, a baby boom almost doubled the population from 34 to 62 million.
 
      But the theocracy, drained by the costs of the 1980-1988 war with Iraq, gradually realized that it could not feed, cloth, house, educate and eventually employ the growing numbers. So with the supreme leader’s approval, Tehran enacted one of the world’s most progressive family planning programs to slow population growth.
 
            The program broke many taboos in a culture that favored large families. Clerics gave sermons on reducing family size, while female volunteers were sent door-to-door to encourage women to have fewer children. New billboards declared, “Fewer Children, Better Life.” Before marriage, couples had to take family planning classes. Health centers dispensed free birth control pills and condoms.
 
            Ironically, the world’s only modern theocracy was home to the only state-supported condom factory in the Middle East, which reportedly produced 45 million condoms a year in 30 different shapes, colors and flavors by 2006. The United Nations and population organizations cited Iran’s program as a model for the Islamic world and developing nations. The United Nations bestowed awards on Iranian practitioners three times from 1999 to 2011.
 
           The program worked. The fertility rate plummeted—from 5.5 births per woman in 1988 to about 2.22 births in 2000.
 
      But the initiative was almost too successful. By 2006, the birthrate dropped to 1.9 births per woman—below replacement rate. As a result, Iran’s population is aging. The average age is now 28.3 years. It is expected to increase to 37 years by 2030, according to a U.N. projection. An increasingly elderly and dependent population would heavily tax public infrastructure and social services.
 
      Last year, the government began debating steps to prevent the kind of population crisis facing Japan, where sales of adult diapers are expected to exceed baby diapers this year. So far, however, the executive and legislative branches have not agreed on how to raise the birthrate. Some lawmakers want to criminalize permanent forms of birth control, while health officials and experts favor creating government incentives for couples to have more children.
 
            The trend towards having small families may be difficult to reverse, especially without improvement in Iran’s struggling economy. The costs of getting married, let alone having children, are prohibitive for many youth, almost one quarter of whom are unemployed.
 
            In 2010, President Mahmoud Ahmadinejad tried to reverse the trend with new financial rewards. Every newborn was to receive a $950 award deposited into a government bank account, with another $95 added annually until the age of 18. The idea was that children could withdraw funds at age 20 for education, marriage, health and housing expenses. But the initiative was halted during its first year of implementation due to lack of funds and coordination across government institutions.
 
Khamenei’s Call to Action
            The government introduced more substantive changes in 2012, after Supreme Leader Ali Khamenei said the family planning program had been “wrong” and “one of the mistakes” of the 1990s. “Government officials were wrong on this matter, and I, too, had a part. May God and history forgive us,” he said. “If we move forward like this, we will be a country of elderly people in a not-too-distant future,” he warned.
 
            Khamenei urged the government to introduce measures to boost the population—now almost 80 million — to 150 million or more. The Ministry of Health then pulled funding from the family planning program and ended free vasectomies to encourage larger families. It eventually replaced birth control classes with ones that urged having more children.
 
            In late 2013, billboards depicting happy-looking families with four children were plastered across Tehran. Single fathers with one son were shown lagging behind larger families propelling canoes or bicycles. In 2013 and 2014, Khamenei’s office turned to social media to promoted idyllic visions of marriage and life in large families.
 
            In the spring of 2014, Khamenei began pushing even harder for an increase in Iran’s fertility rate. “A country without a young population is tantamount to a country without creativity, progress, excitement and enthusiasm,” he warned on May 5, which is International Midwives’ Day. Two weeks later, he issued a 14-point decree in letters to the heads of the legislative, judicial and executive branches as well as the Assembly of Experts. Key points included:
      · Removing barriers to marriage,
      · Encouraging marrying at an earlier age,
      · Dedicating new facilities for pregnant and breastfeeding women,
      · Providing insurance coverage for childbirth,
      · Treatment for male and female infertility
           
Government Response
            Since Khamenei’s decree, the government has reportedly added new incentives, which include lengthening maternity leave, ensuring female job security after childbirth, and subsidizing hospital care. In June, parliament debated controversial legislation aimed at criminalizing male and female sterilization. The bill, approved by 143 out of 231 members of parliament in August, must be reviewed by the Guardian Council to determine its compatibility with Islam.
 
            But the bill has produced a backlash from health officials and women’s groups. Mohammad Esmail Motlagh, a senior health official, argued that the legislation would violate citizens’ rights. He instead called on lawmakers to use voluntary incentives to encourage couples to have more children.
 
            Reformists particularly fear major changes to the family program could negatively impact women’s status, especially in the workplace, where they are already underrepresented. Some 60 percent of university students are female, but only about 12 percent of the workforce, according to the Statistical Center of Iran. Vice President for Women and Family Affairs, Shahindokht Molaverdi, noted that no other country has ever used punitive measures to increase fertility rates. She also warned that outlawing surgical procedures could push contraceptive services underground.
 
             The new policies may also be a hard sell, given changes in society over the past two decades—partly due to the smaller average family size, urbanization and spread of higher education, especially among women. In 2014, the government heralded Qassem Ali-Loui on state television as a national hero for having the country’s largest family—19 children. But nearly 70 percent of Iran’s population is urban and therefore unlikely to see the family’s pastoral lifestyle in Western Azerbaijan province as relevant or inspiring.
 
 
 
Garrett Nada is the assistant editor of The Iran Primer at USIP
 

 

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