Iran's faltering economy

Amir Taheri:

AS tension builds up between Iran and the international community, a potentially more significant conflict is taking shape within the ruling establishment in Tehran.

The conflict is centered on what looks like a looming economic crisis. Inflation has risen to 17 percent, its highest rate since the 1970s. A cascade of business closures has pushed unemployment, already high even by Third World standards, to its highest level in three decades.

The value of the national currency (the rial) has dropped against regional and global currencies, and is still on the slide. By official estimates, including some offered by Islamic Chief Justice Ayatollah Shahroudi, capital flight has turned into a flood.

...

... The money that would have been invested in real estate inside Iran now goes to Dubai and Turkey and, recently, Iraq.

...

Ahmadinejad's opponents also blame his populist economic policies. The president has been touring the country, distributing vast sums of oil money locally - heedless of the fact that, in the absence of productive investment opportunities, the cash fuels inflation. He has also ordered a gradual termination of government subsidies on mass consumer goods - notably gasoline (of which Iran imports 40 percent of its needs) and domestic gas.

...

As Iran's economy has faltered the economy in Iraq has prospered growing at a rate faster than Iran's economy is shrinking. Taheri says the Iranians are trying the North Korean model for their economy and it seems to be performing in about the same fashion. Iran's economic performance at the time of high oil prices does not bode well for the Islamic religious bigots. If theirs is the model for a religious economy God must not be on their side.