The Latest from Iran (21 December): It's The Economy, Mahmoud

See also Iran Snap Analysis: The Currency Falls --- What Does It Mean?
The Latest from Iran (20 December): The Strains Within

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1705 GMT: Oil Watch. A bit of good news for Tehran amidst the economic pressure on the regime, including the possibility of a European Union ban on supplies of oil from Iran....

Turkey's biggest crude oil importer Tupras has renewed its annual deal to buy crude oil from Iran for 2012, at almost the same volumes as this year, according to industry sources.

China's top refiner Sinopec Corp said that buy less than half the crude it normally imports from Iran in January.

1655 GMT: Najmeh Bozorgmehr of The Financial Times offers valuable interpretation of the currency crisis:

The managed float mechanism has collapsed for much of this year. The central bank’s adoption of a multiple-rate system has also failed to bring back stability to the market and to foil the impact of international sanctions aimed at Tehran’s nuclear programme. Sanctions have caused the cost of financial transactions to increase, by forcing them to go through numerous back channels, and have hit foreign currency markets by reducing the supply of cash.

But there are also domestic dynamics at play. While the market remains anxious about the possibility of a European Union oil embargo and the US imposing sanctions on the central bank, local media have accused the government of Mahmoud Ahmadi-Nejad, president, of engineering a deliberate devaluation to boost the rial value of its oil income in the final months of the fiscal year to March.

Economists and parliamentarians have predicted this year’s budget deficit could be as high as $30bn, or 7 per cent of the country’s GDP.

The government is due to present its budget bill to parliament soon and some analysts believe the government is allowing the rial to weaken to reset the official exchange rate to the dollar in the budget, which has traditionally sat around the 10,000 mark.

But Iran’s minister of economy and finance, Shamsoddin Hosseini, on Wednesday denied any such intention. “The government has had no, [absolutely] no deliberate plan to strengthen the dollar rate,” he said, and promised to announce “a plan to manage the market” soon.

1545 GMT: Calling All Reformists. Leading conservative Morteza Nabavi, of the Islamic Society of Engineers, has made a public prediction of a coalition between reformists and the conservative Alliance of the Builders of Islamic Iran for the Parliamentary election in March.

Nabavi's statement should be seen as the latest appeal by key conservatives to reformists not to boycott the vote but to join in an effort to block the Ahmadinejad camp. Nabavi follows the public move of former Speaker of Parliament Gholam-Ali Haddad Adel, who said reformists should know that the election is important not only for their political past but for their future as well.

And given Haddad Adel's links to the Supreme Leader --- his daughter is married to the Leader's son Mojtaba Khamenei --- this can be read through the analysis of an EA correspondent: "Pro-Khamenei parties are worried that, in the current situation, the supporters of Ahmadinejad might win the majority of the Parliamentary seats. So they are trying to lower the votes of the Ahmadinejad men by involving reformists."

More on this in an analysis on Thursday....

1525 GMT: Economy Alert. Back from a break to find that the Parliament has gone into closed session this afternoon to discuss the subsidy cuts plan, the currency situation, sanctions, and other economic issues.

As a Parliamentary Commission investigated the state of the subsidy cuts programme, one MP said 20 million families have been removed from the support payments scheme to cover the highest prices from the cuts.

Both President Ahmadinejad and 1st Vice President Mohammed Reza Rahimi, on a public-relations drive this week, have said the second phase of the cuts will begin soon.

1155 GMT: Fars writes that the plan to interrogate Mahmoud Ahmadinejad has now been sent to a Parliamentary commission for review.

It was reported yesterday that the petition to question the President, which could lead to his impeachment, had been signed by 79 MPs, six more than the minimum required.

1150 GMT: What Happened with the UAE Yesterday? Our EA correspondent, monitoring the currency situation (see 0940 GMT), adds a plausible explanation for Tuesday's confusion over Iran's possible suspension of trade with the United Arab Emirates:

I think that the chain of events started with the Central Bank banning transactions denominated in the UAE's currency of dirhams. For reasons unexplained, this ended up being interpreted as a stop to all trade by both the Ministries of Commerce and Foreign Affairs, hence the absurd press remarks of Minister of Commerce [Mehdi] Ghazanfari and the Iranian ambassador to the UAE. If this is the case, it truly shows the abject breakdown in proper communication within the regime.

The correspondent adds, "Official Iranian customs figures will give you an idea of how sensitive the issue is for Iran. Trade with the UAE accounts for a whopping 32% of international transactions for the Islamic Republic. In the first eight months of the current Iranian year, imports from the UAE had a value of $13 billion dollars, while exports to UAE were $3.1 billion."

0950 GMT: The Battle Within. More on the political dispute between the camps of Mahmoud Ahmadinejad and Hashemi Rafsanjani, which we featured in an analysis yesterday....

Rah-e Sabz reports that the President's senior advisor Ali Akbar Javanfekr has used an article his Iran newspaper to allege, “What today is known as the deviant current is meaningless phrase that has been created by Hashemi Rafsanjani so that it can stand against the 'Sedition Current' phrase that was used by Supreme Leader.”

The "deviant current" is often applied by critics to Ahmadinejad's inner circle including Javanfekr, recently given a one-year prison sentence over an issue of his newspaper.

Javanfekr adds the charge, "Rafsanjani’s aim is to disperse the supporters of the Supreme Leader."

Abbas Amirifar, who was the prayer leader of the Presidential office, has made the same claim about Rafsanjani and the creation of the "deviant current".

Amirifar was imprisoned earlier this year for his involved in the making and distribution of a film about the imminent re-appearance of the Hidden Imam. There are reports that Ahmadinejad had planned to put him in place of the Minister of Intelligence, Heydar Moslehi.

0940 GMT: Currency Watch. An EA correspondent checks in with valuable additions to our morning analysis and latest news on Iran's currency:

1) Sources are reporting that the Central Bank has resorted to forcing the shutdown of most money exchange around Ferdowsi Street and Square in Tehran, traditionally the hub of the open market. Reason is probably to physically block further rises in the US dollar's value. Nevertheless, the dollar is still hovering on or above the 15,000 rial mark where traded.

2) Fararu has another, very interesting reason for this sudden spike: it says that speculators and investors from other sectors, such as construction, have recently moved over en masse to the currency sector, because of uncertainty and falling profits elsewhere. The currency market is essentially a sector of last resort for middle- and large-scale entrepreneurs now witnessing the collapse of profitability in banking bonds or large-scale construction.

3) There is more than likely an attempt by people with access to large quantities of foreign currency at the "official" Central Bank rate to take advantage of the spread between this and the open market rate. No evidence, but speculation runs from the Government wishing to offset its debts to prospective Parliamentary candidates making a fat profit with which to fund their imminent campaigns. If true, the "positive" would be that the current volatility would peak or stop at some point.

0933 GMT: Cyber-Watch. Deputy Minister of Communications Ali Hakim Javadi, Deputy Minister of Communications, has declared, "The location of the hosts of more than 90% of Iran's governmental internet sites has been transferred inside the country. This was a vital move for protecting governmental information."

0929 GMT: Sanctions Watch. Little of substance emerged from Tuesday's meeting in Rome of officials from 11 countries, discussing further measures against Tehran. Sources put out the line for the media that there was agreement "to step up pressure on Iran to force it to resume talks over its nuclear programme".

0923 GMT: All the President's Men. Fars takes a shot at the President's right-hand man Esfandiar Rahim-Mashai. Citing the complaint of the Ferdowsi Foundation, which honours Iran's famous poet, the website accuses Rahim-Mashai of "squandering millions" over the reconstruction of Ferdowsi's birthplace.

Before becoming Ahmadinejad's Chief of Staff, Rahim-Mashai was the head of Iran's Culture, Heritage, and Tourism Organisation.

0920 GMT: Currency Watch. Alef, the outlet of MP Ahmad Tavakoli, jumps in on the currency issue, accusing the Central Bank of manipulating the price of gold coins.

0915 GMT: Ahmadinejad Watch. Unsurprisingly, State news agency IRNA is featuring the President's later appearance in the provinces, his speech this morning in Varamin in northern Iran.

Ahmadinejad continued the promotion of his subsidy cuts programme, launched a year ago this week, with the declaration that a second phase would soon be launched and the warning that some would scheming against the initiative with "inflammatory rumours". He added the flourish that Iran would soon be among the world's main exporters of gasoline.

0905 GMT: Campus Watch (British Edition). Rah-e Sabz reports, from "Government sources", that scholarships for those studying in Britain will be suspended.

The regime has been trying to reduce the presence of students in the United Kingdom since the 2009 Presidential election, but the recent escalation in tensions with London has raised the prospect of a cut-off of any support.

0855 GMT: Foreign Affairs Watch (Gulf Front). While the regime may have backed away from a trade suspension with the United Arab Emirates, its battle of words with Gulf States continues. After 1st Vice President Mohammad Reza Rahimi declared, "The UAE is only the UAE because of Iran," a Tehran official has reportedly declared that Qatar is "stealing" $3 billion a month of Iranian oil.

0755 GMT: How serious is the latest turn in the Iranian economy, with the fall of the currency and Tuesday's confusion as Tehran announced and then un-announced that it was cutting trade with its second-largest partner, the United Arab Emirates?

Serious enough that leading US newspapers set aside their standard attention to Iran's nuclear programme and the chatter about "war" to feature the story. Thomas Erdbrink of The Washington Post offered an overview --- see Tuesday's LiveBlog --- and this morning The New York Times headlines, "As Further Sanctions Loom, Plunge in Currency’s Value Unsettles Iran".

Djavad Salehi-Isfahani, one of the leading analysts of the Iranian economy, offers the incisive quote: “This is the most serious financial crisis they’ve faced, with multiple things coming to a head. I have the feeling that really nobody is in charge of economic policy, nobody who can quickly think on their feet.”

(It should be noted that The Times article overstates the issue, at least with respect to the currency, with the wildly inaccurate claim, "In late October, it cost about 7,000 rials to buy one dollar...., which means the Iranian currency has plunged in value by more than 50 percent against the dollar in the past few months." The rial was around the 12500:1 mark on the open market this autumn.)

Sections of the Iranian press continue to pretend that nothing serious is happening. Press TV, for example, makes no reference to the currency issue. However, it cannot avoid the confusing --- and damaging --- episode on Tuesday over the short-lived declaration that Tehran was suspending trade with the UAE, carrying the Foreign Ministry's denial of any cut-off.