By: Marie Smith, Dimal Basha, Sahan Yilmaz and Martin Zink

IRAN

IRAN’S ECONOMIC DEVELOPMENT

A BRIEF HISTORICAL RECORD

FINDING A PLACE IN LAISSEZ-FAIRE

WORLD

• Many concessions were given to foreigners

- mainly to the British and the Russians

• After WWII, Britain became the only privileged foreign power inside Iran through its predomination over Iran’s,

- oil industry

- Banking system

- Telecommunications

1872: Baron Julius de Rueter received concessions:

• Control of customs revenues

• Monopoly of railway & tramway construction

• Rights to mine minerals & metals

• Cancelled due to opposition of the ulama

1888: Caspian fisheries to Russia

1889: Imperial Bank of Persia (British)

• Issued banknotes, controlled their circulation, imported silver to mint coins

1890: Tobacco Concession to Imperial Tobacco Company:

• Monopoly over production and export of Iranian tobacco for 50 years

• 1/4th of profits/yr the Shahs

• Cancelled due to opposition of the ulama and the bazaaris

1891: Bank of Persia (Russian)

• After WWI, Iran’s debt cancelled and bank assets Iran

MODERN NATION BUILDING

Reza Shah (1926-1941)

• Infrastructure projects

- schools, hospitals, roads, railroads, bridges

• Telecommunication nationalized

• Foreign interests regulated

- UK to dominate oil industry

- USSR to become major trading partner

- Germany to assist technology

1930s:

• Russian share of Iranian exports declined: 34% to 1%

• German share of Iranian exports inclined: 20% to 40%

• State controlled 33% 40% of its exports.

KEYNESIAN APPROACH

1941-1953: 1st 12-year instability

• Foreign military presence (1941-1945)

• Azerbaijan crisis (1946)

• Supreme Planning Board (1947)

• WB denied Iran for $250 million loan (1949)

• Premiership of Mossadegh (1950-1953)

IRAN’S DEVELOPMENT PLANS

• Heavy on public sectors: infrastructure and modern industry

• Light on private sector and agriculture

The First Seven Year Plan (1949-1956)

• Never implemented

The Second Seven Year Plan (1954-1961)

• Put in place after Mossadegh

The Third Seven Year Plan (1962-1968)

• Coincided with “White Revolution”

The Fourth Seven Year Plan (1968-1973)

• Coincided with oil boom

The Fifth Plan (1973-1977)

* Planned on the basis of the oil boom but stopped in 1977

THE SHAH’S LAND REFORM

• Intended not to empower peasantry but to weaken the landlords

• Gov’t bought excess land from landlords, sold it to peasants with 30%

discount of the given market P, and peasants to pay gov’t in 25 years

with a low fixed rate loan.

• State-sponsored farm corporations, private agribusinesses

• Mechanized, capital intensive farming

• The idea was to turn peasants into agricultural entrepreneurs. But

entrepreneurs are risk takers, peasants are risk averters.

• The end result: the land reform failed. Peasants moved to the cities.

IRAN’S CLASSES Peasants: Ranjbar

• poorest social class

• lived under iqta system for centuries:

• work on land to pay tax, pay the landlord’s military salary, and pay their own expenses

Landlords: Arbab

• owned estates, properties in towns, engaged in commerce and trade, hold government positions

• invested on vaqfs (private endowments)

Clergy: ulama

• part of landowning aristocracy, own tax-exempt lands

• invested on vaqfs (religious endowments)

Merchants: bazaari

• in the absence of industry the bazaaris dominated wholesale, retail, and franchise

State:

• largest landlord, largest industrialist

Proletariat:

• small but significant

• work in oil & natural gas, mining & metal industries, construction, car factories

Middle class: petit bourgeoisie

• public & private sector employees, professionals, entrepreneurs

Upper class: grand bourgeoisie

• industrialists, factory owners, X-M businesses, heavy industry

ISLAMIC KEYNESIAN APPROACH?

1977-1989: 2nd 12-year instability

• Islamic Revolution (1977-1979)

• Decline in Oil P & flight of K (1980)

• Iran-Iraq War (1980-1988)

• Death of Khomeini (1989)

• Iranian Constitution Article 44: “Iranian economy is to consist of three

sectors: state, cooperative, and private.”

• Two main factions: conservative mercantile elites (reformist)

populist statist elites (conservative)

POLITICAL INSTITUTIONS OF

THE ISLAMIC REPUBLIC

INFLOW OF FDI & GDP (1979-1988)

Years FDI in millions of $ GDP in billions of IR at constant P

1979 164.4 185,308

1980 80.9 157,647

1981 28.2 170,081

1982 -136.1 194,578

1983 -78.5 214,613

1984 42.7 221,751

1985 -38.2 231,047

1986 -112.4 209,454

1987 -307.6 204,882

1988 60.5 176,076

Source: UN Conference on Trade & Development (2010)

NEOLIBERAL APPROACH

1989: Rafsanjani becomes president starts his structural adjustment

program.

1990: Iraq invades Kuwait, oil P increase, Iran’s growth rate rises

1992: Iraq is defeated, oil P decrease, Iran’s growth rate declines

1995: oil P rise again, Iran’s growth recovers

1998: Asian market crisis, oil P decrease, Iran’s growth rate declines

• Sporadic strikes throughout the nation

2001: Khatami administration considers IMF Plan to cut oil subsidies

2011: Ahmadinejad government decides to implement IMF plan

INFLOW OF FDI & GDP GROWTH %

Years FDI in millions of $ GDP Growth %

1989 -19.4 3.0

1990 -362 12.1

1991 22.6 10.9

1992 8.5 5.5

1993 207.6 4.8

1994 0.3 1.6

1995 8.8 4.5

1996 20.5 5.8

1997 43.0 3.4

1998 37.6 1.6

Source: UN Conference on Trade & Development (2010)

DISTRIBUTION OF INCOME (1996)

INCOME PERCENTILES SHARE IN INCOME (%)

1 poorest 1.4

2 3.1

3 3.3

4 3.9

5 5.1

6 6.9

7 10.2

8 12.1

9 14.2

10 richest 39.8

Source: from the research conducted by the Majlis (Social Change in Iran, pg 248)

IRAN’S ELECTIONS

1989 Rafsanjani (96%) Abbas Sheibani [Freedom Mov’t] (4%)

1993 Rafsanjani (64%) Ahmad Tavakolli (24%) Abdollah Jasbi (9%)

• Split within mercantile elites between conservatives & pragmatists

1997 Khatami (69.6%) Ali Akbar Nateq-Nuri (25%)

• Split within statist elites between conservatives and reformists

• Alliance of pragmatists + reformists + leftists X statist elites

2001 Khatami (78.3%) Ahmad Tavakolli (16%)

2005 Ahmadinejad (61.7%) Rafsanjani (36%)

• Alliance of anti-conservative mercantile elites of the bazaar

2009 Ahmadinejad (64.22%) Mir Hussein Musavi (33.86%)

Social Movements in Iran A Look at

Opportunities for Mobilization

THE 1979 ISLAMIC REVOLUTION Failure of the Shah to Appease Class Formations

Shah Reza Pahlavi takes the Throne in 1941

• Allows political parties to form bazaar guilds, trade unions, prof. associations

• Allows parliament to elect cabinet members

1949: Beginning of Autocratic State

• Assassination attempt

• Declares martial law - takes control of government

• Repression of all political parties and opposition

Formation of The National Front in Opposition

• Joined secular intelligentsia and the religious bazaar class

Tudeh and National Front work together under Mossedegh

• Class antagonisms exposed after Shah and Britain gone

• Leads to 1953 CIA led coup

The Shah's "White Revolution" in 1963

War on petite bazaar class

• Displacement of peasant classes

• Severe repression of political groups by SAVAK

• Women's sufferage

Massive Uprisings in 1970s

WHY AN ISLAMIC REPUBLIC?

Religious Groups most successful in mobilizing the masses

• Bazaar population, shanty-town poor, industrial proletariat

The Shah crushes secular grass-roots opposition but leaves bazaar guilds, clergy, seminaries, mosques to function

• Tudeh and other secular parties decimated

• Public opposition to state converges in religious institutions

Soviet Russia and People's Republic of China support Shah

• Hurts mass appeal of Marxist Left

Clergy encouraged strikes for higher wages

• Appeals to industrial proletariat

Political left infatuated with Khomeini's anti-imperialism

• Ignores possible repressive aspects of regime

POST-REVOLUTION REVOLTS AND AN IMPOSED "CULTURAL REVOLUTION"

1979 Veil Protests

• Khomeini enforces hijab

• Middle class women revolt

• Clergy makes hijab mandatory months later

1979 Ayandengan Protests

• Khomeini orders secular newspapers closed

• Secular leftists revolt

• Clergy retreats but sends Hezbollah gangs

1980 "Cultural Revolution"

• Universities shut down for 3 years

• "Islamification" of University system

• Purges and violent suppression of political activism

• Little political activity among the masses until 1997

STUDENT MOVEMENTS 1997-1999 Role of Universities as Catalysts

• Class expansion in universities

o Brings together students of various backgrounds

• Provides resources for student movements

o Organizations, funds, information, location

• Activism of the Office of Consolidation of Unity

Election of President Khatami in 1997

• Opening of national political atmosphere

• Increased opportunities for activism

• Increased freedom of the press

Formation of New Political Culture

• Disillusionment with Islamic Republic

Movement Dies Down in 2000

• Reformist victory in parliamentary elections

o Increased suppression of political activism

THE GREEN REVOLUTION MAY-JULY 2009

Alleged Rigging of 2009 Election

• Ahmadinejad wins over Mousavi, Karroubi, and Rezai

Millions take to the streets in protest of election fraud

• Use twitter and other social media to organize

• Phase II in July: boycotts, "blitz" protests

Government Response

• Militia violence against protesters

• Mass arrests of protesters and reformist politicians

• Internet and news censorship

A Failure?

• Divided: Half want democracy, half want Khamenei

• Lacked religious "impetus" present in 1979 Revolution

• Failure to directly challenge clerical system

• Failure to define goals and objectives of movement

IRAN IMMUNE FROM THE ARAB SPRING?

Protests in February 2011

• Short-lived but shows opposition still exists

Iran as different from Egypt and Tunisia

• Military heavily aligned with Khamenei

• Fear that revolt will be more like Libya, Syria, Bahrain

Islamic Republic = Military Dictatorship

• Bassij infiltration of universities

• Ban on gatherings to grieve for the dead

• Secret prisons and torture camps

Not Pushed to the Brink?

• Oil Wealth: provides employment, food, basic services

• Prospect of regime change without revolution

o Khamenei vs. Ahmadinejad

o Fall of Assad Regime = Isolation

o Regional Isolation: Egypt, Turkey

Iran

Iraq

S. Arabia

Syria

Bahrain

U.A.E Qatar

IRAN V. IRAQ

• History of the two countries in an attempt to influence each-

other policies through transnational identities.

• Transnational Identities argument put forward by Gause shows

how every leader in the region feels threatened due to the large

amount of national/religious identities that overlap in various

countries.

• A similar overlap of identities occurs in Iran and Iraq

IRAN VS. IRAQ

• IRAN

• Total population: 73.9 million

(2010 est.) – World Bank

• Muslim 98%

• Shi’a - 89%, est. 63 million

• Sunni - 9% translates to

approx. 7 milion

• Other (includes Zoroastrian,

Jewish, Christian, and

Baha’i) 2%

• IRAQ

• Total population: 32 million

(2010 est.)

• Muslim 97%

• Shi’a - 60-65% - est. 20 million

• Sunni – 32-37% - est. 10

million

• Others.

RELIGIOUS DISPARITIES

Iraqi religious distribution Iran religious map

RELIGIOUS COMPOSITION OF IRAN AND IRAQ

CURRENT AFFAIRS

• Withdrawal of U.S. troops

• Iran’s ambition to influence Iraqi policies

1. Iraqi military chiefs meet with Iranian revolutionary guard on November 14, 2011

2. An offer to train Iraqi security forces?!

3. Muqtada Al-Sadr – closely tied with Iranian Revolutionary guards

4. Iran’s attempt to empower Ayatollah Mahmoud Hashemi Shahroudi, (close ally of Khomeini) and undermine Ali Al-Sistani, current Grand Ayatollah of Iraq established in holy Shi’a city of Najaf.

5. Many experts, however, believe that Al-Sistani will not be moved and it is highly unlikely that Shahroudi will be able to gain credibility in Iraq after he has been viewed as Ayatollah Khomeini's puppet by many.

IRAN V. SAUDI ARABIA

Iran Extending the Hand of Peace with a Spy up Its Sleeve

Saudi King ruling with U.S. force (puppet)

IRANIAN PLOT!!!

• U.S. Department of Justice holds Iran accountable for the plot to

kill the Saudi ambassador to the U.S.

• Gholam Shakuri, authorities claimed, was a member fo Quds

Force.

• Iran initially refused the allegations and called it an American-

Israeli “fabrication.”

• Later, Iranian authorities shifted blame towards an opposition

exile group known as Mujahedeen Khalq.

IRAN VS. SAUDI ARABIA PROXY WAR

Several ways how the two rage “battles” in foreign field

1. Saudi can back up the Sunni minority in Iran and undermine

Iranian security.

2. Iran has the same leverage where they can incite unrest among

the Shi’a oil-reach region in the Eastern Province in Saudi Arabia.

3. Iraq has also been a major tacit battleground.

a) While Iran has systematically attempted to influence Iraqi

policies through Shi’a majority, Saudis have also maintained

close ties with the Sunni leadership there.

Example: Saudi King said that they would support the Sunni minority

if the U.S. forces withdraw from Iraq in order to keep Iran at bay.

BAHRAIN!!!

• Bahrain Sunni-ruled kingdom has blamed Iran continuously about

the long-weeks Shi’a unrest.

• Saudis have openly supported the Sunni led government and

sent troops to crash the protests.

• An independent report funded by the Bahrain government did

not prove Iranian involvement in the unrest.

• The King, King Hamad Al Khalifa, ignored the findings in regards

to Iran and accused Iranian propaganda for fueling unrest in

bahrain.

IRAN’S NUCLEAR PROGRAM

IRAN’S NUCLEAR PROGRAM

• Atom’s for Peace Program under Eisenhower during 1950s

• Several deals made between the US, France, Germany and Iran

• Iran signed Non-Proliferation Treaty on July 1, 1968 as well as

Safeguards Agreement provided by the IAEA

• Relations began to sour in 1974

• Potential ambitions for nuclear weapons

• India had acquired nuclear weapons, Iran may have wanted to

compete

• Western aid was cut, so Iran asked elsewhere

• Washington blocked deals forcing Iran to disclose little

information on deals still made

• AQ Khan helped during the 1980s

• Khamenei revived projects originally planned with Germany using

Russian help

INTELLIGENCE REPORTS ON PROGRESS • Natural uranium contains 0.7 percent of the uranium-235 isotope, and

generally, light-water power reactors require enrichment levels of 3 percent to 5 percent (levels of low-enriched uranium, or LEU). Weapons-grade uranium–also known as highly-enriched uranium, or HEU–is around 90 percent (technically, HEU is any concentration over 20 percent, but weapons-grade levels are described as being in excess of 90 percent). According to the IAEA, Iran is capable of enriching to about 4.7 percent – Report from 2010

• ISIS President Albright: enough weapons-grade uranium could be achieved within a couple of months

THE NEW IAEA REPORT

• Warnings in the Weapons Annex

• Iran has failed to comply with obligations under the NPT

• IR-40 plant at Arak under IAEA Safeguards, completion in 2013

• Development of Nuclear Weapons

• Tests and experiments with undeclared nuclear material

• Alleged Studies Document, 2005

• Program Management Structure

• Physics Research Center

• AMAD Plan

• SADAT

• Nuclear Material Acquisition

• Fuel Enrichment Plant

• Pilot Fuel Enrichment Plant at Natanz

• Fordow Fuel Enrichment Plant near Qom

IAEA REPORT, CONTINUED

• Nuclear Components for an Explosive Device

• Reconversion Facilities

• Libya had similar documents

• Detonator Development, Initiation of High Explosives and

Associated Experiments

• Exploding Bridgewire Detonators

• High Explosive and Large Scale tests

• Hydrodynamic Experiments, Modeling, Missile Integration

• Simulation of implosion devices

• Development of warheads

• Environmental tests

MISSILE CAPABILITIES

• Massive military

program

• Outdated

technology

• Shahab-3

• Khalij Fars

• CBRNS

• Solid and Liquid Fuel

missiles

• Potential ICBMs by

2015

• Russian support in

ballistic development

ESTIMATED RANGE OF IRANIAN MISSILE FORCES

POTENTIAL IMPACT AND IMPLICATIONS

• Nuclear weapon would tip the regional balance

• Iran does not possess the weapon, yet

• Assumptions over the possibility of proliferation

• Aging air force and conventional military

• Increased probability of warheads or covert transportation

• US has conventional superiority

• Incapable of decisive victory

• Detection mechanisms and early warning systems

• Israel should NOT strike against Iran

• Premature program could have repercussions

LOW-YIELD ISRAELI NUCLEAR STRIKE ON IRAN’S NUCLEAR FACILITIES