Tuesday, July 24, 2007

Iranian gambit

"Agriculture, internal trade and distribution are mostly in private hands. Even so, estimates of how much of the economy the government controls range between 65% and 80%.

Now there is talk of large-scale privatisation to attract investment and improve productivity. Some privatisation has even taken place, though it often entails little more than shuffling assets from one state sector to another. In theory, the pace of privatisation should pick up, thanks to a new constitutional amendment that envisages moving all but 25 state-owned companies into private ownership within eight to ten years (though the government will keep a 20% stake). Ayatollah Khamenei, the supreme leader, was a critic of nationalisation in the 1980s and is said to be enthusiastic about the change. The impediment will not be an absence of political will at the top but the hesitation of investors.

In the longer run, Iran faces a different sort of vulnerability. It is finding it hard to acquire the foreign technology and capital it needs in order to boost production of its fast-depleting oilfields and realise its vast potential as an exporter of natural gas. Without this investment, all of Iran's big plans for a prosperous energy-fired future would be put in jeopardy. But Iran still has a few years to sort this out, whereas its mastery of uranium enrichment may be only a matter of months away."

Excellent Economist article on Iranian economics. Read about how Khomeini's legacy (Economics is for donkeys) and Ahmedinejad's populist, spur-of-the moment policies are sinking the Iranian economy. Read (but not enough) about the mullah's corruption. Read how the US and world financial systems are used to squeeze countries into domestic and foreign policies pleasant (ie subservient) to the US. But read also how Iran may still achieve nuclear capabilities and then pick itself up. Not a bad plan: get a single-track populist visionary like Ahmedinejad to move Iran into the elite nuclear club, then replace him with economic reformers to bring the country back within world economic standards and develop its full economic potential. The result: a military superpower and an economic powerhouse, sovereign and united.

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