Monday, February 11, 2008

US-led Sanctions and Privatization in Iran

US-led sanctions have contradictory impacts on Iran: on one hand, the sanctions give Iran's power elite an added motivation to privatize more and faster, so as not to get Iran cut off from international economy; on the other hand, the sanctions raise politico-economic costs and risks of business for both Iran's capitalists and international investors, leading to "the lack of progress in privatisation" in the words of a business consultant in Iran. These two Financial Times articles allow us to see both aspects: Anna Fifield, "Iran Banks Seek to Sidestep US Curbs," 10 February 2008; and Anna Fifield, "Tehran Makes Slow Progress in Assets Sale," 10 February 2008.

How slow is the pace of privatization? Iraj Seyf, a university lecturer in economics in the UK, estimated a while ago: "if you were to take the annual average value of assets sold off in the period between 1991-2006 to the private sector" and project it forward, "the completion of this project would take 535 years!" ("'Privatisation' in Iran!" Views from the South, 12 July 2006). There is something to be said for conservatism of Iran's power elite sometimes: their conservative privatization program -- one of the reasons for the slow pace is that "portfolio investors are likely to be put off by the requirement to lock in an investment for three years, while strategic buyers could be deterred by the 10 per cent limit on foreign stakes in each company, putting management control beyond reach," says Fifield in the latter of the aforementioned articles -- gives the working class time to fight back.

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