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Tuesday 02 November 2010
Acording to a secret report that was sent to the supreme leader, and reached Les Echos, the Iranian economy may "deteriorate within a year" if the severe sanctions imposed by the west are not removed.
A secret report, sent in September to the Iranian supreme leader, Ayatollah Ali Khamenei, emphasizes the "significant risks of financial collapse within a year" due to the intemational sanctions intended to force the country to abandon its nuclear program.
A generally reliable source in Tehran said that this report, which reached Les Echos and was prepared by economists from the central bank and the Economy and Oil ministers, shows that the U.N. sanctions and the sanctions added this past July by the U.S. and EU impose a huge burden on the trade, finance and oil sectors.
Oil income, which constitutes two thirds of the country's income, was harmed by the departure of the westem companies, who were forced to choose between their interests in the U.S. and those in Iran. The French Total, Dutch Shell, Norwegian Statoil, and Italian ENI companies suspended their investments (see Los Echos from 1 October 2010), and the Japanese Inpex may do the same shortly. Lack of foreign maintenance and spare parts affected oil production, the rate of which decreased from 4.2 million barrels per day in the middle of 2009 to 3.5 million barrels in the summer of 2010.
In industry, at the end of September, the Korean Kia and German Thyssen followed Daimler, Toyota, Caterpillar, and Hewlett-Packard, and suspended their activities. Munich Re, Allianz, and Lloyds now refuse to insure cargos and planes that transfer supplies to lran, while funding foreign trade is becoming more complicated, since most of the westem banks avoid all contact with Iran.
The banks in the UAE, which half of the Iranian import goes through, broke off all connections with the country two weeks ago, leading to a shortage of dollars (and a sudden increase of the dollar rate to 10.900 rial). On Saturday, the regime wamed that it will suppress the demonstrations and strikes by the merchants that will most likely breakout after the costly subsidies on consumption of food and fuel products (10 percent of the GNP) are cancelled on 23 October.
Estimation of the possible impact of the sanctions is tens of billions of dollars per year. The secret report recommends that the Ayatollah Khamenei, the number one person in President Mahmud Ahmadinejad's regime, take "drastic measures to prevent a major crisis".
Even if this crisis does not paralyze the country, the country will be marked by shortage and bankruptcies within twelve, or possibly eight months, according to some of the writers. There is need for "urgent transfer of foreign trade" towards China, Russia, and India; "increasing the reserves of food and fuel products"; and despite the technical obstacles, "converting" the central bank reserves that are deposited in dollars and Euros "into other currencies", like Yuan for example.