Iran celebrates global meltdown
Amidst the financial wreckage around the world, one government is celebrating.
Watching the global gnashing of teeth, the Islamic Republic of Iran is enjoying the ride. "We are very happy that America's economy is in jeopardy and they are paying the price for their misdeeds. God is punishing them." That is the verdict from Ayatollah Jannati, one of the most senior clerics in Iran. President Ahmadinejad has pronounced on the collapse of global capitalism, and announced that Iranians should stand ready to manage the world. If there is a Persian word for "schadenfreude", this is it. And for the moment, Iran does seem to be above the fray. Shares on the Tehran stock exchange, while down slightly in recent trading, have increased in value by 20% during the year. In fact, to walk the floor of the Tehran Bourse, you could be excused for thinking you are in a parallel universe. It looks like a normal stock exchange, with a vast computerised screen dominating the room and traders working from computer to phone to computer. ut share prices have been almost entirely unaffected by the credit crunch. Stock market insiders told me what they were more interested in was the progress of a government privatisation plan, and other domestic factors. Aahrom, a stockbroker watching the trading floor, explained that the crisis presented opportunities for Iran. He advised foreign investors to take a good look at the market here. Another stockbroker said the market here was more about politics than economics. Any foreign investors tempted to join the party should be warned that foreign investments need government approval, in a process that takes at least a month - and that is probably an optimistic assessment.
Iran, of course, is proud of going against the global trend.
According to the BP survey, taken together this country has the largest combined oil and gas reserves in the world, and it is the world's third largest oil exporter. Iran's oil minister said his country earned $70bn (£41bn) from oil exports last year - the vast majority of both its export earnings, and of government revenue. But with oil prices already down to around $60 (£35) a barrel from their peak, and still falling, that must be bad news for Iran's finances.
Day of reckoning
In theory, in the good years Iran puts surplus oil revenue into a stabilisation fund. However, Mr Ahmadinejad's government found no trouble spending the money, even as oil approached $150 (£88) a barrel.
"If the oil price for Iranian oil will be $75 to $80 a barrel, we will lose $50bn US dollars (a year) and that means we are losing between $700 and $800 per head."
Already, even in plush north Tehran, you can see the signs of economic downturn. There has been a huge property boom, with many grand old villas being replaced by luxury apartment blocks. But building work is beginning to grind to a halt. One estate agent told me that prices were down 20% from their peak. Hundreds of thousands of apartments are reported to be lying empty. "We are in a recession. No-one wants to buy. Demand is very low and there are many properties for sale," said the agent, Alireza Jahan. No-one will have too much sympathy for Iran's property elite. And most Iranians will be delighted at falling rents and property prices.For them, life has been tough for as long as they can remember, with high inflation and unemployment.
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Iranian Freedom Fighters UNITE
Saturday, October 11, 2008
at 8:54:00 am Posted by Bahramerad