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Interview with Dr. Mehrdad Emadi, Senior Economic Advisor to EU


Radio Hamseda @CHIN Radio Ottawa
Producer/ Host: Shabnam Assadollahi

Link to Original: http://tinyurl.com/26l5nf9 ?

Translated to Eng. By: Azita Eraani

Oct 3, 2010

Shabnam (Host): Welcome Mr. Emadi. Regarding the sanctions enacted in the recent months; what do you see as their real effects?

Mehrdad Emadi: What we have been and still are expecting is for the sanctions to curb the governmentís fiscal activities. Those activities aimed at gaining access to military technology, nuclear technology and the enrichment of Uranium. These three were the focal point of the sanctions at the time they were originally designed. Within that framework, we see that Iranís oil and gas industry have also been subjected to the sanctions; the reason being that 88% of the revenue allocated to military and intelligence comes from the proceeds of oil and gas sales. Therefore, the plan is to curtail the governmentís capacity for militarization of the society, and Nuclearization of the country. Although the governmentís plans for using the nuclear energy for military purposes remains questionable, but even if there is a suspicions of such intent, then the sanctions can hinder that plan.

As for the possible effects of the sanctions, one thing that we can report, based on recorded data, is that Iranís foreign banking operations have become seriously limited. Also, for any individual or organization affiliated with the government, the cost of insurance for imported and exported goods has skyrocketed, by a margin of 17-35% increase and if listed as sanctioned items; no insurance company will even extend coverage. So, we see severe limitations on the banking activities, but the current price increases and inflation in the country are also being linked to the sanctions. However, it is noteworthy to say that the price increases on the unsanctioned consumer goods - though may now or in the future be actually caused by the sanctions - are mainly caused by the elimination of the subsidies that will go into effect as of first of Abaan. And this has even given rise to a nationwide expectation of higher inflation, meaning that the majority of people already anticipate a significant price hike as of first of the month. For instance, just today, the Commerce Dept. officials announced that the price of cooking oil and rice will be increased; while we know that we harvest a large amount of rice in our northern fields and that the sanctions have not limited our own domestic rice farming. Even imported rice, as with all food items, is not subject to sanctions. So, why the price increase on rice and oil? Because of the public expectations of the forthcoming price increases, these food items are withheld from the public, in order to sell them later at higher prices, for larger profits.

Host: We heard from Mr. Ahkami last week that even the price of airfare for domestic flights have gone up by some 30%. That is outrageous for domestic flights!

Mehrdad Emadi: Yes, there is a tri-level chapter of inflation underway in Iran. The first reason for this is that management of production in Iran over the last five years has weakened to a great degree. Many of our skilled professionals have been systematically laid off, removed or encouraged to leave their jobs and field of expertise. And their organizations are now under the control of the Sepaah (Rev. Guards.) Secondly, as we have been hearing over the last five years and finally reached the promised moment of the final removal of the subsidies. So, we now experience a wide-spread price shock. Thirdly, due to the imbalanced cost management over the last many years, the government is now forced to raise the prices in order to generate revenues, to recover at least parts of the exorbitant costs it has incurred in the last 2-3 years, some as high as 400 times the normal rate. Add to that the budget deficit as well, that the government is facing now. Therefore, the price hike in airfare or other products may well be induced by the government itself.

Host: You answered my question for the most part. The subject of the subsidies has been center staged within the Islamic Republic, for years now. Even Mr. Karoubi who was a presidential candidate in the elections five years ago, as one of his campaign slogans, promised to abolish the subsidies and to replace them with a monthly 50,000 toomans ($50) for the qualified applicants over the age of 18, which was widely protested. Even Mr. Ahmadinejad has repeatedly expressed a desire to eliminate the subsidies. The question here is; why would they terminate the subsidy program and blame it on the sanctions?

Mehrdad Emadi: Yes, what we hear coming out of Tehran and what the officials are announcing, seem to validate your point. The government is in fact preparing itself to blame the effects of the post-subsidy inflation and peopleís reduced buying power on the sanctions. Let us assume that there were no sanctions in effect at all. We would still be witnessing the same results, meaning that the prices of consumer goods would have gone up and people would have felt an inflationary shock in their shopping baskets; the political cost of which can be extremely high. People already under so much pressure from high prices, unemployment, loss of income from reduced wages; all and all can give rise to political dissent. My guess - and I can only offer a guess here Ė is that the government will in fact blame it all on the sanctions; which will fuel the public resentment towards the West, as people would hold the sanctions responsible for the inflation and the higher price of rice and cooking oil and airfare; rather than looking at the absence of subsidies.

In addition to that, the government can also embroider a security dimension onto this. Warning people that if they come out and protest the higher prices, the inflation, etc. that they will be posing a threat to the nationís security. Therefore, the state backed publications and news media are very busy these days constantly disparaging the sanctions. And if people spent 5 minutes contemplating the real reason behind this issue, they would arrive at the same conclusions as we just did.

From all evidences and what we hear from the inside, the government is extremely worried about eliminating the subsidies. That is why, as you suggest, in an attempt to mitigate the pain of losing the subsidies, even Mr. Karoubi had previously suggested an interest payment of sorts, in place of the subsidies. But, the plan is very poorly managed, with no clear idea as to the volume of funds or a sound computation of allocations. All decisions are made behind closed doors and only adding to public confusion.

Host: Mr. Emadi, given the circumstances, and the economic pressures and inflation; why wouldnít Iran allow the IAEA to inspect the nuclear plants?

Mehrdad Emadi: Thatís a good question. I would say, if not 100%, but at least 80% of the our problems surrounding the economic sanctions, can easily and quickly be resolved, should Iran make its plans crystal clear and consent to the inspection of its facilities by the IAEA. Because once the IAEA determines that Iranís nuclear energy is devoid of any military dimension, then Iran can immediately request a lifting of the sanctions. But, given that thus far, Iran has refused to comply and even gone so far as to denouncing the representatives of the agency; and most alarming is the recent official statement as to the enrichment level having reached much higher than 3%, and maybe up to actually 30%. And as the IAEA experts have repeatedly reminded us, once the enrichment level reaches 20%, its military potential gains a very high velocity and totally unnecessary under normal circumstances. And I know this is a taboo subject with some of our compatriots.

Host: Yes exactly. The question has been asked by many Iranians, both inside and outside the country, as to why is it that Iran should be denied the right to have nuclear energy when her closest neighbor, Pakistan, is a nuclear power?

Mehrdad Emadi: From the standpoint of the international laws, there is no reason to prevent Iran from enrichment and possession of nuclear energy at non-military grades. But with every right, also comes certain responsibilities. For instance, an oil producing country is also responsible for protecting the environment and her surrounding neighbors. And such responsibilities for nuclear powered countries are exponentially higher. Especially when a country decides to develop its nuclear energy for military use, then not only the security of regional countries but also that of nations in much farther vicinity is jeopardized. Now, given that Iran in the last two years has implemented a vast missile development project and every day confirms and emphasizes her plans for expanding the range of her ballistic missiles even further, and then announces that if any country, for example Israel ever attacks Iran; then the entire world is going to be our battleground; and that one can only make such claims when one already possesses destructive weaponry and artillery capable of such wars, such as nuclear weapons. Also Iranís refusal all along, to clarify and to disclose its nuclear ambitions quite directly gives way to the interpretation that in the event of an attack by Israel or the U.S., our retaliation will not suffice only to Israel and the U.S. and that the entire world will become the field of battle.

All this has therefore created an impression in the minds of all Western countries that Iranís nuclear development project without a doubt has serious military ambitions attached and even certain regional countries once considered allies by Iran, after the recent meetings, have changed their position. Even in the midst of all the current tension and the growing suspicions, the European Union and the U.N. still offer normalized relations, and even help with Uranium enrichment, should Iran allow the IAEA inspectors in! Yet Iran has shown no signs of a desire to cooperate.

Given all this, my brief assessment Ė applicable to both the Islamic Republic, as well as the previous regime of Pahlavi dynasty - is that a country that possesses 400 years worth of natural energy resources; simply does not need electricity produced by nuclear reactors. The same reactors that even in the United States or in Chernobyl, when confronted with an accident, warrant billions of dollars for repairs and for dealing with radioactive waves that were released into the atmosphere, as well as dealing with 1000ís of lives lost or permanently and irreparably injured. And if you are solely after the prestige of the project, then it can offer many uses, such as a satellite that can be used for meteorology or even for security purposes. The satellite can also aid in exploring terrestrial and underground natural resources that have not yet been fully discovered or identified. And thereby enrich your country. This is why the question arises as to Iranís intentions, because unlike Japan or Germany that do not have oil or gas, Iran is sitting on an ocean of natural oil and gas and still so tenaciously insists on owning nuclear energy, and in an aura of secrecy no less; then I donít think that it is unreasonable for the West or the outside world to question Iranís true intentions. So, the lack of transparency is the key factor giving rise to questions.

Host: Mr. Emadi, our last question is this. Given that the government of Iran, particularly Ahmadinejadís administration has weakened the foundation of Iranís economy to such great extent; aside from facing insurmountable problems, do you think that the next government will be able to access enough finances in a relatively short time, in order to support all its needs; knowing that so many civilians, military staff and other groups have not been paid in some time, and various deptís such as power, oil, etc. need reconstruction?

Mehrdad Emadi: Yes, I can respond confidently to this question as it more or less falls in my field of work. Once, the relations with other countries are normalized, our problems that do not only revolve around nuclear issues, will subside. Across the globe, within the European Union, in the U.S., in Japan, in Canada, everywhere, the behavior of the government of Iran towards the civil rights of its citizens and the invasive way the security forces deal with people is so widely known and discussed these days. So, once our current situation changes; and again referring back to the world grid of countries rich with natural resources, Iran is # 11 on the chart in terms of resources. And the youth of Iran that is extremely educated, extremely knowledgeable and highly fluid and flexible as a work force. They are among the fastest learners in the world. Anywhere in the world that we look, we find phenomenally successful Iranians in their own field of work. They are going to be great tools for rebuilding of the bridges that have been broken in the last so many years. From all my years of work in Eastern Europe and in Western Asia, I have learned that once there is a democratic leadership established in a country, whose attitude and demeanor both towards its own citizens and the outside world, is civilized and friendly, I imagine that Iran of such circumstance, will have absolutely no problems in attracting foreign investments as well as, in expansion of its own capability in production of oil and gas for boosted exports, and of course, significantly higher usage of raw material in the petrochemical industry, the return value of which is 20 times as much, as well as the rebuilding of our foreign trade which at the moment is suffering huge volatility, where most of our merchants are either already bankrupt or on the verge of, due to the current crisis. All of these situations can easily and rapidly get resolved and rebuilt. With the help of our natural resources and human resources and the expertise of our youth, the countryís economy can indeed experience an expedient recovery.

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