The Latest from Iran (20 December): The Strains Within

See also Iran Special: The Battle Within --- Ahmadinejad v. Rafsanjani in 5 Scenes
The Latest from Iran (19 December): And Now A Spy Story....

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2045 GMT: Currency Watch. Thomas Erdbrink of The Washington Post summarises the dramatic developments over Iran's currency and Tehran's trade with the United Arab Emirates, and links the two events:

Iranian officials including the ambassador to the [UAE], Mohammad Reza Fayyaz, initially confirmed Tuesday that Iran had cut trade ties with its third-largest trading partner, the semiofficial Mehr News Agency reported. The Iranian Econews agency also quoted Mehdi Ghazanfari, the minister of industries and business, as saying that trade with the United Arab Emirates was halted because of its “anti-Iranian positions".

Following the statements, the rial fell to unprecedented lows against the dollar Tuesday, amounting to a 15 percent loss in value over the past three days, the Fars News Agency reported.

“There is sheer panic in the market,” one steel trader said. “The price of the dollar is increasing by the hour.”

Iran’s currency also dropped sharply in October 2010 after the United Arab Emirates implemented sanctions against Iran.

After Tuesday’s plunge, First Vice President Mohammad Reza Rahimi denied that Iranian-U.A.E. trade relations were cut. He said the emirates had simply been “warned” not to go along with sanctions proposed by the United States, Fars News Agency reported.

While the linkage is a bit too simple --- the Iranian currency has been falling for weeks, with an accelerated decline in the last few days before the trade announcement --- Erdbrink usefully describes the confusion and even chaos within Iran's establishment:

Adding to the confusion, the Iran-U.A.E. Chamber of Commerce said it had received a letter from the Central Bank of Iran banning all trade in dirhams, the U.A.E. currency, starting Tuesday.

Massoud Daneshmand, chairman of the joint chamber, pleaded for calm, Mehr reported. “The U.A.E. trades with Iran for at least $25 billion,” the agency quoted him as saying. “Any decision about this country should be thoroughly thought through.”

1915 GMT: Christian Watch. The judiciary has reportedly again asked a provincial court to postpone a verdict in the apostasy trial of Christian pastor and convert Youcef Nadarkhani.

Nadarkhani’s case has attracted international attention, with human rights groups and several foreign governments criticising Iranian authorities for violation of religious freedom and potential abuse of the death penalty.

In his latest appeal in September 2011, Nadarkhani was brought to court for three days and asked on each of them to "repent" in return for the removal of any possibility of the death penalty. He refused to do so.

Nadarkhani's lawyer Mohammad Ali Dadkhah continues to emphasise that he believes there will be no death sentence.

1750 GMT: Sanctions Watch. The US Treasury has added 10 shipping and front companies" and one individual based in Malta to its sanctions list, claiming they are affiliated with the Islamic Republic of Iran Shipping Lines (IRISL).

David Cohen,the Under Secretary for Terrorism and Financial Intelligence, issued a statement: "As IRISL and its subsidiaries continue their deceptive efforts to escape the grasp of US and international sanctions, we will continue to take action --- as we are today --- to expose the front companies, agents and managers working with IRISL and work to stop this illicit business."

1625 GMT: Trade Watch (cont.). Speaking to Fars, 1st Vice President Mohammad Rahimi has denied that trade ties have been cut with the United Arab Emirates (see 1605 GMT): "We only warned the UAE." He added defiantly, "The UAE is only the UAE thanks to Iran."

1605 GMT: Trade Watch. Mehr reports that the Government will suspend bilateral trade with the United Arabic Emirates

Minister of Trade and Commerce Mehdi Ghazanfari has been ordered to carry out the cut-off with the UAE, Iran's second-largest trade partner after China.

Trade between the two countries was $15 billion during the last eight months, with Iran importing $12 billion of goods from the UAE.

Iranian officials did not give a reason for the suspension.

1555 GMT: Ahmadinejad Watch. Khabar Online reports that the plan to question the President in Parliament, possibly leading to an impeachment effort, is back on: 79 MPs, six more than the required minimum, have signed the petition for interrogation.

1545 GMT: Elections Watch. A serious error by the Associated Press, in an item carried by The Washington Post, "Report: Iranian Reformists Will Run in March 2012 Parliamentary Elections". The article cites former President Mohammad Khatami, as quoted by Mehr.

That is a significant error: as we reported earlier (see 0905 GMT), Khatami and a leading reformist cleric specifically said that the reformists will NOT put forward candidates.

Khatami did balk, in the statement on his website, at saying that there should be a "boycott", in which people would not even participate through voting.

State and pro-regime media, such as Mehr, covered up that distinction by emphasising Khatami's non-boycott call and ignoring his statement on candidates in their headlines, which may explain the flawed coverage by AP.

1535 GMT: All-Is-Well Alert. The President's speech today on the first anniversary of his subsidy cuts programme may have been distinguished by his reference to critics waging "psychological war" (see 1230 GMT), but Fars prefers to focus on the positive in his address: "Many countries are asking Iran to help them with economic plans. A number of them have even asked us to help them with the management of their economies."

First Vice President Mohammad Reza Rahimi has echoed, "The implementation of targeted subsidies in Iran went so well that even its enemies have recognised the good performance and support of people for the authorities."

1525 GMT: Sanctions Watch. No news yet from today's meeting in Rome of 11 countries over the sanctions regime against Iran.

In the last two months, the US has led an escalation of measures, imposed on a country-by-country basis, to put economic pressure on the Islamic Republic. So far, however, steps have stopped short of a suspension of links with Iran's Central Bank and a halt to oil imports from Tehran. The latter could change at a European Union meeting in January.

1455 GMT: Currency Watch. The Iranian rial, already on a sharp slide (see 1210 GMT), has dropped another 2% this morning vs. the US dollar. It now stands at 15300:1.

1400 GMT: Budget Watch. The chief execution of the Tehran Metro says that the Ministry of Energy owes 9 billion rials (about $600,000) for the construction of the city's subway.

1230 GMT: Ahmadinejad Watch. Speaking on the first anniversary of his subsidy cuts, President Ahmadinejad has said that those who "insist on saying the situation of the country is critical" are carrying out a "psychological war".

1210 GMT: Currency Watch. The Iranian rial now appears to be in free fall vs. the US dollar. It stands at 15000:1 on the open market today, a drop of 7% in value since last Friday.

0925 GMT: Currency Watch. Khabar Online reviews the sharp decline in Iran's currency, blaming the fall in part on uncertainty over the Central Bank policy on the sale of gold coins.

The Iranian rial fell more than 3% against the US dollar this weekend, reaching a new historic low of 14450:1. Gold prices have soared, as Iranians use the coins as a hedge against the declining rial --- the process has been accelerated by a gap between the official gold priceand that on the open market, with people lining up to buy coins at banks and then re-selling them immediately.

0920 GMT: Economy Watch. On the first anniversary of the Government's subsidy cuts, Minister of Economy Seyed Shamseddin Hosseini has declared a target for inflation of 7.3% with the promise of improving the purchasing power of low-income people in the provinces.

Iran's official inflation rate, put by the Central Bank, is 19.4%, and many analysts believe the real rate is far higher.

0915 GMT: Tough-Talk Alert. Get ready for more posturing of strength --- Minister of Defense Ahmad Vahidi has promised that "Iran [will] unveil various missiles and electronic and software projects during the country's national research week that begins Tuesday".

0905 GMT: Elections Watch. Former president Mohammad Khatami said on Monday that reformists will not field candidates in March's Parliamentary elections. At the same time, he refrained from calling on people not to vote: "[This] does not mean the boycott of the elections.”

Ayatollah Mousavi Khoeiniha, the secretary general of the Association of Combatant Clerics, also said on Monday that reformists have decided not to release a list of candidates.

Some reformist MPs, such as Mostafa Kavakebian, are likely to stand as independents in the elections.

0815 GMT: The Battle Within (cont.). An intriguing challenge from MP Ali Motahari, a leading critic of President Ahmadinejad....

Motahari, evaluating events after the Presidential election, said that turmoil arose because "most principlists did not have the correct perception": "If our view on velayat-e faqih (clerical supremacy) was correct, those events would not have happened."

However, Motahari continued that far from an unconditional loyalty to the the Supreme Leader, people are allowed in Islam to criticise him. Velayat-e faqih should not "interfere with the existence of any parties", Motahari said, in a direct challenge to the suspension of reformist groups over the last two years.

The MP, who has called for Ahmadinejad's removal from office, said that if criticism was not permitted, Iranians would "get off the train of the revolution". Instead efforts should be made to ensure that they "contribute and participate more".

0735 GMT: The Battle Within. An interesting message from Ayatollah Alamolhoda, the Friday Prayer Leader of Mashhad, as he met organisers of the 9 Dey celebrations, to be held on 30 December....

Alamolhoda remembered the occasion two years ago, when the regime organised a large counter-rally to challenge the Green Movement's demonstrations that had been held three days ealier on the religious occasion of Ashura. The cleric said that the counter-rally had "destroyed the Green Sedition Movement".

So far, so on-message, but then Alamolhoda said the crowds on 30 December 2009 had also "isolated the conservatives and principlists", some of whom "had pretended to be liberal/democratic and did not fully support the Supreme Leader". The ayatollah continued that these deviant conservatives/principlists "kept insisting on investigating the Kahrizak case" of abuses and killing of post-election detainees and enquiring into the security forces' raids on Tehran University dormitories two days after the Presidential vote.

Alamolhoda's conclusion? "People realised that the Supreme Leader is alone. And that’s why they came out to support him."

Our conclusion: this is a warning to political leaders --- including the President --- that if they do not align with the Supreme Leader, they will be challenged and defeated by the regime in the name of the Iranian people.

0715 GMT: We open this morning with a special feature, as an EA source gives us a 5-scene depiction of the tensions between the camp of President Ahmadinejad and the allies of former President Hashemi Rafsanjani. When one of Rafsanjani's supporters compares the President's men to the Forqan Group, which carried out a series of assassinations in 1979 --- and tried to kill Rafsanjani --- that may be a sign that all is not politically settled within the Islamic Republic.

That is not the only ripple, however. On the economic front, the Deputy Minister of Oil Ahmad Qalebani told the Iranian Students News Agency that crude oil production fell in 2011 “due to lack of investment in oil field development".

Qalebani's statement fits the facts, as Iran's output has dropped from about 4 million barrels per day in 2010 to about 3.5 million barrels this year, but it is a sharp departure from the standard line, including that put out by Minister of Oil Rustam Qassemi, of heightened efforts to ensure oil exports and self-sufficiency.

Qalebani's admission came as talks collapsed with Polskie Gornictwo Naftowe i Gazownictwo, a leading Polish developer and distributor of natural gas, over the Lavan field in the Persian Gulf. And there were signs that Iranian media had over-stated the claim of a  $1 billion agreement with Tatneft to develop the Zagheh field in southern Iran. The company issued a statement that it had “not entered into any agreements [or] contracts” and had “not accepted any other undertakings relating to oil and gas projects in Iran".