Special Report: Iran - Regime prepares to face down critics

29 December 2009

The year ahead is certain to be a difficult one for Iran’s President Mahmoud Ahmadinejad, not least for his economic policies. In the face of sustained opposition to his victory in last June’s disputed presidential elections, he will find it increasingly hard to gather support for the necessary reforms.

This will be even harder if the US Senate approves a bill to strengthen sanctions. The House of Representatives has already passed the bill and approval by the upper house could mean any company involved in Iran’s energy industry will be barred from the US.

Such a measure could make it impossible for Tehran to find the $200bn of investment it needs to expand its gas industry. Iran aims to produce 69.7 million tonnes a year of liquefied natural gas (LNG), but its plans have been at a standstill for three years. Only a few companies in the world have a track record in LNG infrastructure development, and most of those are US or French.

Sanctions aside, Ahmadinejad needs to introduce economic reforms to encourage growth in the private sector, whose willingness to invest in the domestic economy is critical for the country’s future. But here, too, there is opposition to the measures that are needed, such as cutting subsidies.

Domestically and internationally, the economic prospects facing Ahmadinejad are as fraught as the political ones.

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