Michael Purcell: Rumblings putting Ahmadinejad's bravado in doubt

Published on 06/08/2010 17:04

IRAN'S president Mahmoud Ahmadinejad scoffs that a wave of new international sanctions is as worthless as a "used handkerchief".

He is at pains to reassure a jittery Iranian public that it will be unscathed by his government's nuclear and foreign policies.

President Barack Obama said this week that there were "rumblings" from Iran that it was feeling the pain from sanctions.

Stalled nuclear negotiations between Iran and world powers are expected to resume next month and analysts believe the nature of any new offer from the international community is more important to Tehran than the pressure of sanctions.

A European former senior envoy to Tehran told the Scotsman that a "major effect" of the sanctions is that Mr Obama can argue that, as they are biting, the US will negotiate from a position of strength.

Hawkish pundits in Washington, many of the ones who clamoured loudest for invading Iraq, have been calling for military action.

But Mr Obama put the issue of talks with Iran firmly back on the table talking to US senior journalists earlier this week.

He left open the possibility of allowing Iran to maintain its civilian nuclear programme, so long as it provides "confidence-building measures" to verify that it is not building a bomb, White House reporters said.

The key issue for Tehran, which insists its nuclear programme is for peaceful purposes, will be whether the US allows it to enrich uranium on its own territory under international safeguards.

Iran has lived for three decades with US sanctions and, in recent years, with those imposed by the UN. But the latest measures will hurt.

Iran can still export oil and gas, but the EU and the US measures target Iran's strategic energy sector by depriving it of vital investment and technical assistance. Oil accounts for about 80 per cent of exports from Iran, OPEC's second largest producer and the world's fifth largest exporter of crude oil. But it faces a decline in production. Many of its fields are ageing and sanctions have gradually scared off most major western oil companies with the best technology. Iran will rely on countries such as China and Russia to fill the gap.

Both have close trade and investment links with Iran. They have agreed to abide by the weaker UN sanctions but oppose the unilateral US and EU measures. India and Turkey have also said they will not impose the stringent US and European sanctions.

"Iran can survive, but nowhere near the point where its growth reflects its potential," said Mohammad Shakeel, an Abu Dhabi-based economist.

Before the 1979 Islamic revolution and the 1980-88 war with Iraq, Iran produced seven to eight million barrels of oil a day; the figure now is 3.82 million.

The latest US sanctions go further than those of the EU by penalising companies that export refined petroleum products to Iran.

This hits a particularly vulnerable Iranian spot. While Iran is a major oil exporter, it has limited refining capacity and needs to import 30 to 40 per cent of its domestic petrol needs.

The EU is indirectly prodding this Iranian raw nerve because, under US pressure, leading Western insurance companies will no longer cover Iranian shippers.

China and Turkey are expected to maintain supplies as will distant Venezuela, a staunch Iran ally.

Iran prides itself on a self-sufficiency born of necessity. Mr Ahmadinejad has promised his people this resilience will ensure Iran overcomes the latest sanctions challenge.

His government has pledged to upgrade its refining capacity so that it is self-sufficient by 2013. Mr Ahmadinejad also hopes to radically reduce domestic petrol consumption by slashing state subsidies for fuel under a long-heralded but controversial economic reform programme due to be implemented next month.

The reforms are economically necessary but experts predict they could be derailed because they risk igniting social unrest.

Ordinary Iranians complain that sanctions, supposedly aimed only at the regime, are pushing up the price of food and travel and hurting business.

Trita Parsi, an Iran expert at the Washington-based Woodrow Wilson International Centre for Scholars, said: "All these things trickle down to the population, rather than the regime itself."