United States Institute of Peace

The Iran Primer

Economic Trends

Garrett Nada

January and February

The most important developments in early 2015 were Iran’s reactions to low oil prices. The price of crude oil was still hovering around $60 a barrel in February, down from $115 in June 2014. In January, Iran’s government readjusted the new budget to assume an oil price of $40 a barrel, down from the $72 price included in the initial draft presented by President Hassan Rouhani to parliament in December. The previous year’s budget was based on the price of $100 per barrel. Also in February, lawmakers voted cut expected oil revenues in the draft budget by 25 percent to $18.5 billion to compensate for low prices.

But newly released statistics suggest that 2014 was still a relatively productive year for Iran. Oil and gas exports were up 39 and 41 percent, respectively, during the period from March 2014 to January 2015 compared to the same period last year. Inflation is down to less than 17 percent from 39 percent in January 2014. The auto industry, one of Iran’s most important economic sectors, saw a 60 percent rise in production. 
 
The following is a run-down of the top economic stories with links.
 
Domestic Developments
 
Growth: In a speech marking the 36th anniversary of Iran’s revolution, President Rouhani outlined the country’s economic progress. “Last year, I promised you that the economy will step out of recession. Today, I announce that the economy grew by 4 percent in the first six months of the current year,” he said on February 11. “The Industry, mine and trade sectors grew by 6.5 percent, 10.5 percent and 5.4 percent respectively in the first six months of the current year,” Rouhani added. He also noted that crude oil production increased from 2.7 to 2.9 million barrels a day.
 
Oil: Minister of Economic Affairs and Finance Ali Tayebnia said that the government is revising its draft budget to assume an oil price of $40 a barrel. The initial budget that President Rouhani presented to parliament was based on $72 a barrel, down from $100 in the 2014 budget.
 
In February, lawmakers voted to cut the amount of expected oil revenues in the draft budget by 25 percent to $18.5 billion to compensate for low oil prices. But they also earmarked an additional $5 billion to restructure the budget if prices rise again.
 
Exports fell 60 percent to 1 million barrels per day in early January, according to Oil Minister Bijan Namdar Zanganeh. But he did not specify the period. Zanganeh said that predicting the market’s behavior was impossible because “political motives and interventions” were creating fluctuations. Zanganeh declared that the fall of oil prices will not force Iran to change its positions or policies. “If the oil prices drop to $25 a barrel, there will yet again be no threat posed to Iran’s oil industry,” he later claimed.
 
Iran’s petrochemical exports totaled some $12.8 billion from March 2014 to January 2015, a 39 percent increase compared to the same period last year, according to government spokesperson Mohammad Baqer Nobakht.
 
Iran launched the world’s largest floating oil export terminal on February 8. The unit, which can store some 2.2 million barrels, is more than 1,100 feet long and nearly 200 feet wide.
 
Gas: Gas production has hit its highest point since 1970, according to the National Iranian Gas Company’s planning manager. Production capacity, which usually increases between five to 10 billion cubic meters a year, is expected to increase by 22 billion cubic meters by March 21.
 
The export of gas condensates from March 2014 to January 2015 totaled some $12.1 billion, a 41 percent increase compared to the same period last year.
 
Inflation: The Central Bank of Iran announced that the annual inflation rate was at 16.3 percent based on price changes since March 2014. The bank, however, noted sharp price increases in the health, entertainment and transportation sectors.
 
Auto industry: Production of automobiles has increased by more than 60 percent between March 2014 and January 2015 compared to the same period last year. Iranian companies reportedly produced more than 930,000 vehicles. The auto industry has historically been Iran’s largest sector unrelated to petrochemicals. 
 
Stock market: The Tehran Stock Exchange’s Index hit 65,055 points in late January, down 15 percent since October 2014. In a panic over another fall in the index, sellers attempted to sell their shares en-masse. Some traders protested by smashing glass on the trading floor and demanding the resignation of the head of Tehran’s Securities and Exchange Organization.
 
Taxes: President Rouhani called on Revolutionary Guards-controlled companies and religious foundations to give up their tax-exempt status. “We are trying to tax everyone across the board, but as soon as we touch this or that institution, they make such a stink about it,” he said in a speech.
 
Diversification: President Rouhani warned that Iran needs more than oil revenues to run the country. “We should have a variety of revenue sources, we cannot depend on a single source of income, we should get united with our neighbors and [oil] producers to solve our problems,” he said while touring Bushehr Province.
 
Banks: Lawmakers passed a bill to raise the capital of state-owned banks by 100 trillion rials, or $2.85 billion during the next 10 years. The goal is to increase lending to the private sector.
 
Corruption: The Supreme Court sentenced Mohammad Reza Rahimi, a vice president who served under former President Mahmoud Ahmadinejad, to five years and three months in prison for corruption. Rahimi was ordered to pay a 10-billion-rial (about $369,000) fine.
 
Energy: Energy Minister Hamid Chitchian warned that electricity shortfalls are hindering economic growth. The sector “has consistently been weakened over the past five years, and investment has dramatically decreased,” he noted. Energy demands are reportedly growing at about six percent a year while growth is less than a third of that. The power network needs at least $4 billion dollars in investment, according to the energy ministry.
 
The first national conference on “Renewable Energy and Sustainable Development” was held at the University of Zabol in Sistan-Balochistan Province.
 
Steel: Iran was the largest producer of steel in the Middle East in 2014 and 14th largest in the world, according to the World Steel Association. Iran produced some 16.3 million tons of steel in 2014, a 5.9 percent rise from 2013.
 
Sanctions: On February 18, Supreme Leader Ayatollah Ali Khamenei urged Iranians to “resist sanctions” and not allow Western countries to place conditions on the country's nuclear program. In a public speech, Khamenei warned that Iran can impose sanctions on the West if necessary.
 
Industry, Mines and Trade Minister Mohammad Reza Nematzadeh criticized officials for downplaying the impact of international sanctions. “Why should we say war has no effect or sanctions have no effect?” Nematzadeh said at a conference. "Our educated youths can tell if you're lying… Let's put some cotton in their ears, scotch tape on their mouth. Why do you lie? It does have an effect. The country has become backward. There's inflation, recession,” he said. The comments were unusually candid for a public forum.
 
Minister of Economic Affairs and Finance Ali Tayebnia estimated that Iran’s economy could grow more than eight percent if international sanctions are lifted. In an interview with website of the supreme leader, Tayebnia said that Iran has been relatively successful in coping with sanctions. He argued that “one of the reasons why the West came to the negotiating table and recognized Iran’s right to peaceful nuclear technology was the relatively successful management of economy and sanctions.”
 
Economic problems: At a conference on Iran’s economy, Parliamentary Speaker Ali Larijani argued that Iran’s issues predate sanctions on its nuclear program. “Sanctions might have opened the wound of our ailing economy, but our economic problems are old… Before sanctions, unemployment was high; today 44 percent of our graduates are jobless. We must try to tackle these issues. State employment is the worst solution. Responsibilities should be delegated to the private sector so that the economy is run by the public,” he said, according to Iran Front Page’s translation of a state news report.
 
International Developments
 
Non-oil Exports: Iran’s non-oil exports exceeded $46 billion between March 2014 and February 2015, the first eleven months of the Iranian calendar year. The head of Iran’s Trade Promotion Organization Valiollah Afkhami Rad said the Islamic Republic exported 22 percent more than the previous year. Some 92 percent of the trade was conducted with Asia.
 
European Union: The European Union’s second highest court annulled sanctions on an Iranian bank and 40 shipping companies. E.U. governments had failed to prove that Bank Tejarat had supported Iran’s nuclear program or was involved in skirting sanctions. The shipping companies had been linked to the sanctioned Islamic Republic of Iran Shipping Lines, but the court also found insufficient evidence linking it the company to nuclear proliferation.
 
The court has granted E.U. governments time to appeal the ruling or re-impose sanctions on different legal grounds. In the meantime, the entities will remain under sanctions.
 
The Iranian chambers of commerce of France, Germany and the United Kingdom formed an alliance to facilitate business between E.U. countries and the Islamic Republic. The business bodies are concerned that European companies will face multiple complicated national export approval processes, which could give U.S. companies an advantage if sanctions are lifted.
 
United Kingdom: The London High Court rejected an application for an injunction from Iran’s main oil tanker firm, NITC. The firm sought the injunction because the European Union is due to put it back on the sanctions blacklist. It had been removed from the list in July 2014 after a European court ruled there were no grounds for the designation. The decision was setback to Iranian efforts to lift trade restrictions.
 
Germany: German exports to Iran in 2014 were 30 percent higher compared to the previous year. The Federal Statistics Office reported that Germany, one of Iran’s biggest European trade partners, exported some 2.4 billion euros worth of goods in 2014.
 
China: China imported some 27.5 million tons of Iranian crude oil and condensate in 2014, a 28.3 increase compared to 2013, according to the country’s customs administration.
 
Industry, Mines and Trade Minister Mohammad Reza Nematzadeh announced plans for Iran and China to jointly set up an industrial town in Jask port. The four acre area will be devoted to the petrochemical, aluminum and steel industries.
 
Russia: Ali Akbar Velayati, a top advisor to the supreme leader, visited Moscow and met with President Vladimir Putin. The two agreed to coordinate efforts to upgrade Iran’s observer status within the Shanghai Cooperation Organization. Velayati also met with Russian Foreign Minister Sergei Lavrov and Energy Minister Alexander Novak.
 
Levan Jagarian, ambassador to Iran, said that construction on a second nuclear power station at Bushehr is scheduled for fall 2015.
 
Iran and Russia plan to establish a joint account for payments in rubles and rials, according to Iranian Ambassador to Russia Mehdi Sanaei. Tehran also plans to sign a memorandum of understanding in 2015 with the Eurasian Economic Union to boost exports to Russia.
 
India: India imported 2.7 million barrels of crude per day from Iran in 2014, nearly a 42 increase compared to 2013.
 
India’s Exim (Development) Bank allocated Iran a $150 million credit that it will use to buy railway facilities.
 
Iraq: Iran plans to increase bilateral trade with Iraq from $12 billion a year to $20 billion, Finance and Economic Affairs Minister Tayebnia said on February 16. “Iran is ready to cooperate and provide technical and engineering services to Iraq, particularly in the fields of construction of roads, power plants and dams.” He also noted the opportunity to bolster religious tourism, which accounted for some $222 million of Iraq’s GDP in 2013. Iraq is home to many sites holy to Iran’s Shiites.
 
More than 250 Iranian companies showcased their products at an exhibition in Baghdad in February.
 
Turkey: Iran’s trade balance with Turkey dropped from $93 million to negative $1.497 billion during the period from March 2014 to January 2015 compared to the previous year, according to the Islamic Republic of Iran Customs Administration.
 
France: Iran’s largest car maker, Iran Khodro, signed an agreement with France’s Renault to import two models of cars in early or mid-2015.
 
Italy: Iran has exported some $800 million in goods and imported some $400 million from Italy, making it the “only European partner with which Iran has recorded a positive trade balance,” according to the chairman of the Iran-Italy Joint Chamber of Commerce, Ahmad Pourfallah.
 
Pakistan: Tehran denied rumors that it has decided not to fine Islamabad for falling behind schedule in constructing a multi-billion-dollar gas pipeline. The managing director of the national gas company noted in a press conference that Pakistan “had to deliver its commitments by starting import of Iran's gas supplies in December 2014, but it seems unlikely for Pakistan to take any measure before the end of 2015.”
 
Kuwait: Iran and Kuwait signed an agreement encouraging investment. Finance and Economic Affairs Minister Tayebnia said that Iran’s National Development Fund is prepared to supporting foreign investors interested in the Islamic Republic.
 
United Arab Emirates: Transportation officials from Iran and the UAE signed a memorandum of understanding to increase the number of flights between the two countries and establish a system for cooperation on aviation safety.
 
Algeria: Iran and Algeria signed two cooperation pacts on building infrastructure that will be carried out by the Islamic Republic.
 
Air industry: Iran has signed three agreements with Boeing since the interim nuclear deal was negotiated in late 2013. Two were extensions of existing agreements and one was a new one between Iran Air and the U.S. company. So far, Boeing has repaired seven of Iran Air’s plane engines, according to Iran Air CEO Farhad Parvaresh.
 
Germania, a German budget airline, announced plans to offer direct flights to Tehran and Mashhad starting in February. The one-way airfare is set to range from 220 to 250 euros depending on the German airport of origin.
 
Ebrahim Shoushtari, deputy head of Iran’s Aviation Operations Services, announced that flights over Iran increased more than 70 percent since August 2014, mainly due to ongoing conflicts that make flying over parts of Iraq, Syria and Ukraine unsafe. He noted a 20 to 25 percent increase in the number of international flights.
 

Sina Azodi, a research assistant at the Woodrow Wilson International Center for Scholars, contributed to this round-up.

 

Tags: Economy

Geneva Nuke Talks: Latest from Iran, P5+1

On Feb. 23, 2015, Iran and the world's six major powers - Britain, China, France, Germany, Russia, and the United States - concluded another round of talks on Iran's controversial nuclear program in GenevaAtomic Energy Organization chief Ali Akbar Salehi and U.S. Energy Secretary Ernest Moniz joined the talks for the first time to provide technical expertise, but Secretary of State John Kerry noted that their presence was "no indication whatsoever that something is about to be decided." Iranian Foreign Minister Mohammad Javad Zarif said the two sides held "good discussions" but that "there is a long way to reach a final agreement." The following are quotes from officials on the status of the nuclear talks.

Iran

President Hassan Rouhani 
 
Allegations that Iran is pursuing a secret nuclear program are a "big lie." 
 
“We first turned to Europeans to get the [uranium enrichment] technology; If we wanted to conceal [our activities] we wouldn’t raise these issues with a Western country." 
  — Feb. 23, 2015, according to the press 
 
“A polling has shown an overwhelming majority of the public supporting the nuclear talks with the 5+1; this is important that a path where the government moves is supported by the public. 
  — Feb. 23, 2015, at an economic conference in Tehran 
 
Foreign Minister Mohammad Javad Zarif 
 
The inclusion of Moniz and Salehi reflected a need "for higher level people with all-embracing command over all issues." 
  — Feb. 22, 2015, according to the press 
 
Tehran will not accept a "incomplete and vague" nuclear accord, but rather a "complete agreement." 
 
“No other deal will be made before a complete agreement is clinched." 
 
“The deputies had good discussions, but no particular agreement has been made on the issues (at hand).” 
  — Feb. 23, 2015, according to the press 
 
"We had serious talks with the P5+1 representatives and especially with the Americans in the past three days ... But still there is a long way to reach a final agreement." 
  — Feb. 23, 2015, according to the press 
 
Foreign Ministry Spokesperson Marziyeh Afkham 
 
The Islamic Republic of Iran has announced that we will accept an agreement in a single phase and all its details should be clear and it should contain no ambiguities.” 
 
We believe only when all the dimensions of the agreement are clarified the time will be ripe for announcing the agreement.” 
  — Feb. 18, 2015 in a press conference 
 
Deputy Foreign Minister Seyyed Abbas Araqchi 
 
"We will continue the negotiations as long as there is a language of respect…, but we will surely leave the table if this (bullying) approach is extended to the negotiating table." 
 
"Kerry's statements about the nuclear talks were repetition of (US President Barack) Obama's last week statements and these remarks have always been repeated and we believe that they do not influence the negotiations." 
 
"Both the US and other G5+1 members have experienced that political and media pressures will never make the Islamic Republic of Iran change its methods, demands and stances in the negotiations." 
 
"Summing up the discussions, we cannot claim that progress has been made in the talks, we still have differences, but the negotiating sides are seriously and resolutely following up the negotiations to reach a solution although they have not achieved comprehensive solutions over key issues." 
  — Feb. 23, 2015, according to the press 
 
United States

Secretary of State John Kerry 
 
The presence of Iranian Atomic Energy chief Ali Akbar Salehi and U.S. Energy Secretary Ernest Moniz is no "indication whatsoever that something is about to be decided...There are still significant gaps." 
 
The president "is fully prepared to stop these talks if he feels that they're not being met with the kind of productive decision-making necessary to prove that a program is in fact peaceful." 
  — Feb. 21, 2015, according to the press
 
"The P5+1 remains united on the subject of Iran. There is absolutely no divergence whatsoever in what we believe is necessary for Iran to prove that its nuclear program is going to be peaceful into the future."
  — Feb. 21, 2015, in a meeting with British Foreign Secretary Philip Hammond
 
“President Obama has made it clear that Iran will not obtain a nuclear weapon. Since late 2013, we have been testing whether that goal can be achieved through determined multilateral diplomacy. The so-called P5+1 talks have made considerable progress but have not yet reached a satisfactory consensus on all critical questions. During our deliberations, for the first time in a decade, we’ve halted the progress of Tehran’s nuclear program and even rolled it back in key respects. We will know soon whether we will be able to reach a verifiable and comprehensive plan to ensure that Iran’s nuclear program is wholly peaceful. We will continue to consult closely with you as our efforts progress. Although I cannot predict the outcome, I do believe that an agreement of the type we seek would advance America’s interests and that of our allies in the Middle East, strengthen the global nonproliferation regime, and serve the cause of international stability and peace.”
 
“On Iran, sure it’s controversial. But we are daring to believe that diplomacy will provide a better alternative to ridding Iran of nuclear weapons than a war, or going first to the threats that lead to confrontation.”
  — Feb. 24, 2015, in a testimony to the Senate Committee on Foreign Relations
 
"In the Iran negotiations, we are not complete; I don’t know if we’ll get there.  But I know that trying is the essence of United States leadership, to find out whether or not there is a way with diplomacy to succeed in preventing a country from getting a nuclear weapon.  And that we owe it to our citizens and the world to prove our willingness to try to do it peacefully before we have to make other choices, if we did."
  — Feb. 25, 2015, in remarks to the House Appropriations Committee on Foreign Operations
 
Russia
 
Deputy Foreign Minister Sergei Ryabkov
 
"We are satisfied to see every new meeting achieve further progress."
 
"There is a growing confidence that an agreement will be reached by the assigned deadline - in other words, June 30."
  — Feb. 24, 2015, according to the press
 

Photo credit: John Kerry via State Dept Flickr (US Government work)

Media Ban on Khatami

On February 16, judiciary spokesperson Gholamhossein Mohseni-Eje’i confirmed that former President Mohammad Khatami’s name has been banned from mention in the media. Mohseni-Eje’i did not name Khatami, president from 1997 to 2005, by name, instead referring to him as “the leader of the reformist government.” The spokesperson did not say exactly when the order had gone into effect but emphasized that the judiciary has the ability to rule on issues regarding “the leaders of the sedition,” a term that refers to Khatami as well as opposition leaders Mir Hossein Mousavi, his wife Zahra Rahnavard and Mehdi Karroubi.

But Iranians have taken to social media sites Facebook and Twitter, both of which are blocked in Iran, to protest the ban. A campaign using the hashtag, “We will be Khatami’s media,” has been launched. Its Facebook group (cover photo below) had more than 39,000 likes as of February 23, and its Twitter account had more than 272 followers.

The death of Khatami’s sister, Fatemeh, and the large turnout for her funeral on February 22 posed a challenge to the ban. She had served on the city council of the family's hometown of Ardakan. Several prominent leaders issued statements or sent condolences to Khatami, so newspapers did publish his name.

Shargh, a reformist-leaning daily, published a story (left) on President Hassan Rouhani offering condolences to Khatami.

Many people have continued to post pictures and comments in support of the reformist president. The following are some examples from Twitter.
 
 
The caption below reads “Remember hope.”
 
Some people posted pictures of both Khatami and Mousavi, one of the leaders of the Green Movement protests following the disputed 2009 presidential election.
 

Report: Saudi-Iranian 'Cold War' in Yemen

Regional competition between Iran and Saudi Arabia has aggravated unrest in Yemen, according to a new publication by Peter Salisbury from the Chatham House Middle East and North Africa Programme. Saudi Arabia has accused Iran of using the Houthis, a Zaydi Shiite group based in northern Yemen, as a proxy to further Iranian interests. Although Yemen's conflict is driven mostly by local causes, the "perceived, and often exaggerated, roles of external players continue to affect the calculations of the Yemeni players and of different regional actors." The following are excerpts from the full report.

Whatever the eventual outcome of the ongoing international negotiations concerning Iran’s nuclear programme, tensions regarding Iran’s role in the region go far beyond the non-proliferation agenda of the international community. The competition between Iran and Saudi Arabia for regional influence is exacerbating a number of existing disputes in the region, where the two powers are backing different sides.
 
Among the areas where Iran’s interests appear to collide with those of Saudi Arabia is Yemen, the Arab world’s poorest country, which borders the Kingdom and occupies much of the southwestern tip of the Arabian Peninsula. Yemen’s travails during and since the Arab Spring uprisings of 2011 have often been overlooked by the Western media. Interest in the country has largely been limited to Al-Qaeda in the Arabian Peninsula (AQAP). Yet the most important development in Yemen since 2011 has been the rise and expansion of a group commonly known as the Houthis. As of early 2015, this military and political movement effectively controlled the Yemeni capital, Sana’a, having pressured the country’s transitional president, Abd Rabbu Mansour Hadi, a key US ally in the war against Al-Qaeda, into submitting his resignation.
 
This paper seeks to shed more light on the Houthis’ rise, and on how Yemen fits into wider regional competition between Iran and Saudi Arabia. It argues that primary drivers of tension and conflict are local, but the perceived (and often exaggerated) roles of external players continue to affect the calculations of the Yemeni players and of different regional actors.

Founded as a revivalist movement for the Zaydi form of Shia Islam that is largely unique to northern Yemen, the Houthis have transformed themselves over the past decade into a formidable militia. According to diplomats in Riyadh, Washington and London, the group is backed by Tehran, as part of Iran’s efforts to expand its network of proxies across the region – a line largely taken at face value by Western and regional media. The concerns of external actors go beyond regional power dynamics, with Riyadh nervous – as is Cairo – about the effect that a Houthi takeover of the west coast of Yemen would have on the Bab al Mandeb strait, which is a conduit for around 5 per cent of all world oil trade. The US administration, meanwhile, is primarily concerned with maintaining a regime in Sana’a that is both able and willing to cooperate with ongoing efforts to weaken and ultimately destroy AQAP, which Washington views as being among Al-Qaeda’s deadliest ‘franchises’. (In January 2015, notably, AQAP claimed responsibility for the violent attack on the offices of the satirical magazine Charlie Hebdo in Paris.)

Yemeni and Western officials believe that Iran’s ties with anti-establishment groups in Yemen go beyond the Houthis, repeatedly claiming that Tehran has close ties with leading members of Al Hirak al-Janoubi, or the Southern Movement, a coalition of secessionist groups that want to split Yemen down pre-unification lines. Regional security officials have similarly worried about the impact that southern secession would have on maritime security in the Indian Ocean, and what increased Iranian influence in southern Yemen would mean for a stretch of water that is crucial to Gulf trade. None the less, to characterize either group as a true ‘proxy’ of Iran that shares Tehran’s wider goals is to oversimplify the relationships involved – and overstate the degree to which such claims can be substantiated.

The bigger issue for Saudi Arabia and the United States in the short and medium term will be how to achieve a working relationship with a key power broker in a strategically important country that is unlikely to feel the need to serve their interests in the way that past regimes in Sana’a have – but which will require the financial backing of its much wealthier neighbours, above all Riyadh, to prevent its economic collapse, leveraging fears of an influx of economic migrants into the Gulf states.

Claims of Iranian involvement

Western and Yemeni officials have long accused Iran of backing the Houthis. An article in the Financial Times in February 2014 quoted a Yemeni official as claiming that Iran and its Lebanese proxies provided direct financial and logistical support, as well as military advisers, to the Houthis, a view that, according to the newspaper, was supported by US officials. In January 2013 the New York Times reported on a briefing given to one of its reporters by US officials, who cited the Yemeni authorities, that an arms shipment seized by Yemeni security forces off the country’s south coast had originated from Iran. The article stated that the officials cited believed that the shipment of ‘contraband’ was intended for insurgents within Yemen, although they declined to provide fuller details. Despite repeated requests from local and international journalists, neither Sana’a nor Washington further corroborated these claims.

A large question mark remains over the extent to which Tehran or Hezbollah have funded or armed the group, which relies on local support and taxation in order to remain sustainable. In conversation with the author of this paper, a Sana’a-based journalist and analyst, many diplomats and officials have given a more nuanced view of the group, conceding that external support has been centred more closely on internal capacity building – which is more valuable, in the view of many analysts, than simple cash payments. One Sana’a-based analyst points to the south, where Hirak has failed to achieve any kind of leadership structure or internal cohesion, and where alleged Iranian support has largely been limited to funding. The Houthis are notable in Yemen for cohesive internal management of security and administration, which, in the view of another analyst, ‘can only’ have come about through some form of external support.

This marks a change in tone from 2010, when diplomatic cables released by Wikileaks pointed to scepticism among US officials in Sana’a that the Houthis were heavily backed by Tehran and Hezbollah, or even that they were part of a regional proxy war between Iran and Saudi Arabia. ‘We are fighting on behalf of you, the Americans, and Israel,’ the then President Saleh is reported to have told one US ambassador, of the war he oversaw with the Houthis between 2004 and 2010.

US officials were apparently more concerned that Saleh was diverting US-funded troops and equipment, meant to combat Al-Qaeda in the south of the country, to the fight against the Houthis. Of a ship that Sana’a claimed to be carrying arms from Iran bound for the Houthis, one dispatch noted: ‘sensitive reporting suggests that the ship was carrying no weapons at all’. The US government provided satellite imagery of Houthi positions during the sixth and final war in Sa’dah, but only once Saudi Arabia entered the fray.

Yemeni and Western officials have also accused Ali Salem al-Beidh, the former southern president who had backed unification but who then led the 1994 attempt at secession, of maintaining close ties with Iran. ‘Iran is training militants who are aligned with a separatist movement in southern Yemen, while Iran’s Lebanese proxy, Hezbollah, is providing some funding and media training to the group,’ the Wall Street Journal reported in June 2013, pointing to al-Beidh’s Hirak faction and citing Yemeni and Western officials – but again giving few substantive details.

The reality of Hirak is of course more complex than a simplified narrative of an Iranian proxy. The movement is a multi-stranded organization which many domestic and regional actors have attempted to co-opt in order to further their own causes and position themselves during Yemen’s political transition. ‘Overtures [have been] made by [former president] Saleh through his party the General People’s Congress (GPC),’ Al Jazeera reported of attempts by various groups to co-opt Hiraki factions, adding that Hirak factions had also been approached by representatives of Yemen’s then transitional president, Abd Rabbu Mansour Hadi, and claiming that Iran, Saudi Arabia and the UAE were among the regional governments making a play for influence in the south.

Analysts who study Hirak closely argue that there is little evidence that Iran or other external actors have provided direct military training to militant Hiraki factions, or training and support to the group’s leadership, in the way that they likely have the Houthis. Rather, assistance has been limited to funding key leaders – perhaps explaining why the Houthis have been so successful and Hirak so ineffective.

Beyond these claims, officials in Sana’a claim that the Houthis’ and al-Beidh’s television stations – Al Masira and Aden Live respectively – are both run from a Hezbollah-owned building in Beirut. (Sources at Aden Live dispute this assertion, saying that the two broadcasters’ offices are in different tower blocks several minutes’ walk from one another.) Two diplomatic sources provided the author of this paper with some anecdotal evidence pointing to open lines of communication between Tehran and the Houthis during the 2014 siege of Sana’a. According to these sources, Tehran instructed Houthi leaders to abandon plans to target foreign interests in the Yemeni capital, although this claim could not be verified at the time of writing and the author agreed not to disclose details relating to the issue in full.

A number of civil society activists who took part in Yemen’s 2011 uprising, including Houthi supporters and southern separatists, say that they were flown to Beirut by Iranian representatives during and after 2011. They compare the training they were given there to the ‘capacity building’ provided to civil society organizations by Western NGOs and government-backed schemes.

Tehran has limited itself to voicing sympathy for the Houthis, stopping short of claiming them as a proxy. In September 2014 Ali Akbar Velayati, a close associate of Ayatollah Khamenei, was reported to have said that Tehran ‘supports the Houthis in their rightful struggles’. Others have been less circumspect. Alireza Zakani, an Iranian Majlis deputy who according to regional media is close to Khamenei, made claims in the Iranian press that the Houthi takeover of Sana’a was a ‘victory for the regime in Tehran’, adding that Iran now controlled four capitals: Baghdad, Beirut, Damascus and Sana’a.

It is difficult to conceive that the group, isolated for much of its existence in the mountainous northern interior, would have been able to evolve an organized and tactically assiduous fighting force without some external support. It is less difficult to believe that it was able to arm itself, however. Yemen is awash with weapons and is a major hub for the arms trade, meaning that claims that arms are being shipped to the country become something of a moot point.

Many Yemenis highlight the sharp irony of US and Saudi claims of Iranian ‘interference’ in Yemen, in the context of the support provided by both Riyadh and Washington to the autocratic Saleh for much of the last decade of his rule, and having worked in close cooperation with his regime on counterterrorism operations from 2003 onwards. Saudi Arabia also backed Saleh’s earlier efforts to install Salafists in place of Zaydi imams in mosques in northern Yemen, as well as his fight against the Houthis – for which the US also provided some intelligence support – catalysing the group’s rhetoric against foreign intervention.

Since the Houthi takeover of Sana’a, it has become increasingly clear that the Houthis’ principal sponsor was not an external actor but rather ex-president Saleh, who has encouraged his tribal and military allies to either stand aside or support the Houthi campaign, and whose loyalists make up a significant proportion of the ‘popular committees’ that have patrolled the streets of the capital since September 2014.
 
Click here for the full report
 
Tags: Reports

UN: Questions Remain on Nuclear Research

On February 19, the U.N. nuclear watchdog reported that Iran has yet to provide explanations regarding possible military dimensions of its nuclear program. Tehran was due to address two practical measures by late August, which could help determine if it carried out explosive tests and other research related to nuclear weapons production. But Iran has not fully cooperated with the International Atomic Energy Agency (IAEA) on these and other outstanding issues, so the agency “remains concerned” about possible undisclosed activities with military dimensions.

The report, however, also showed that Iran has continued to fulfill its commitments under the Joint Plan of Action, the interim nuclear deal that went into effect in January 2014. Iran has not enriched uranium above the five percent level, and it has downblended or converted its stock of 20 percent enriched uranium. Uranium would need to be enriched to more than 90 percent for use in a weapon. Tehran also has not installed any major components on the Arak heavy water reactor. The following are excerpts from the report.
 
Main Developments
 
• The Director General held talks with the Foreign Minister of Iran, HE Mohammad Javad Zarif on 7 February 2015. They agreed on the importance of continuing the dialogue between the Agency and Iran at all levels. The Director General also stressed the need to resolve, as soon as possible, all outstanding issues related to Iran’s nuclear programme.
 
• Iran has not provided any explanations that enable the Agency to clarify the two outstanding practical measures, nor has it proposed any new practical measures in the next step of the Framework for Cooperation.
 
• The Agency has continued to undertake monitoring and verification in relation to the
nuclear-related measures set out in the Joint Plan of Action (JPA), as further extended.
 
• Since the JPA took effect, Iran has not enriched UF6 above 5% U-235 at any of its declared facilities and all of its stock of UF6 enriched up to 20% U-235 has been further processed through downblending or conversion into uranium oxide.
 
• Enrichment of UF6 up to 5% U-235 has continued at a rate of production similar to that indicated in the Director General’s previous reports. The amount of such nuclear material that remains in the form of UF6 enriched up to 5% U-235 is 7952.9 kg.
 
• No additional major components have been installed at the IR-40 Reactor and there has been no manufacture and testing of fuel for the reactor.
 
• Iran has continued to provide the Agency with managed access to centrifuge assembly workshops, centrifuge rotor production workshops and storage facilities.
 
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