The Rise Of Iran's Rial Can Signal A Nuclear Deal Or Intransigence

The economic failure of President Ebrahim Raisi’s government has become clear to most Iranians, including the ultraconservatives or hardliners who fully backed him one year ago as he took office. Mokhber is Raisi’s economic czar who can be easily blamed for a 54-percent inflation rate and rising poverty with its political implications.

The economic crisis did not start with Raisi. Iran’s situation quickly deteriorated when the United States withdrew from the JCPOA nuclear agreement in 2018 and imposed crippling sanction. It was a repeat of early 2010s, when the United Nations imposed sanctions on Iran for pursuing a dangerous nuclear program. However, the Raisi government is being blamed for a high degree of inefficiency, lack of planning and highly questionable appointments.

Proreform daily Arman Melli wrote in a report on its Saturday that a demand to fire Mokhber is a message the conservative camp has been lately sending to president Raisi. According to the daily, this group of Iranian conservatives are determined to prove that the Raisi administration is inefficient.

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The paper wrote that some Iranian conservatives wanted a hardliner politician as vice President last year, but Raisi chose to work with Mokhber, who was a key official in the business conglomerates operating under the aegis of Supreme Leader Ali Khamenei.

One year after his appointment as vice president, it is still not quite clear whether it was Raisi who asked Mokhber to join his cabinet or Khamenei, who knew Raisi did not have any executive experience, planted Mokhber in the government to make up for Raisi's shortcomings.

The report says that some ultraconservatives such as Javad Karimi Qoddousi: "I wish to tell the President that Mr. Mokhber lacks the capabilities required for his post. His staying in this position even for one hour will lead to losses for the government."

The ultraconservatives have also mentioned the discord between Mokhber and the other members of Raisi's economic team, particularly Vice President for Economic Affairs Mohsen Rezaei, as another reason for Mokhber's dismissal.

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Last week, a big gaffe by Mokber led to a lot of public ridicule. A lookalike of American actor Johnny Depp showed up at a religious mourning ceremony and Mokhber tweeted, praising Depp for taking part in a Shiite religious event. When social media users and politicians reminded him that the person was only a lookalike of the US actor, Mokhber's office claimed that his tweet was somehow fabricated.

All these could be more meaningful with a report in reformist Shargh newspaper that went viral on Saturday. The report by its editor Ahmad Gholami said that "the Raisi administration is a continuation of the government of populist President Mahmoud Ahmadinejad and that it will inevitably sink in the same quagmire that Ahmadinejad's administration faced."

Gholami argued that both Ahmadinejad and Raisi started their terms of office by promising they would change everything, but Ahmadinejad gradually failed as economic conditions worsened in the early 2010s with UN sanctions.

Shargh's editor predicted that the Raisi administration will eventually suffer the same fate. However, to be fair and on the safe side, Gholami observed that the Raisi is shouldering a heavier burden of all sorts of economic problems that have accumulated during his predecessors and it is highly unlikely that he could find a way out of those problems as all roads ahead inevitably lead to the same quagmire.

In an interview with Fox News on Friday, Haley pointed to the Justice Department charges against a member of the Revolutionary Guard (IRGC) for an alleged plot to kill former national security advisor John Bolton and possibly former Secretary of State Mike Pompeo. 

"The world’s leading state sponsor of terror attempted to assassinate American officials inside our country. Under no circumstances should the Biden administration allow [Ebrahim] Raisi to set foot in our country," she said, adding, "He should not be allowed to stain American soil.”

A statement from the US Justice Department alleged Shahram Poursafi, also known as Mehdi Rezayi, 45, had attempted to pay “individuals in the United States” $300,000 to carry out the killing. After the US targeted killing of Iran’s Qasem Soleimani in January 2020 in Baghdad, Iran’s top leaders have repeatedly threatened revenge against Trump administration officials, including President Donald Trump himself.

Iranian President Ebrahim Raisi is slated to travel to New York for the 77th session of the UN General Assembly in September. Raisi – who is on the US and European sanctions list -- did not attend the high-level summit in the previous year, and only delivered a video speech. 

Earlier in the month, eight US Republican senators, including Tom Cotton, March Rubio, Joni Ernst and Ted Cruz, wrote to President Joe Biden asking him to deny the visa to Raisi. 

Iran's embassy in Athens and sources familiar with the matter said on Friday, about two months after Iran's Ports and Maritime Organization (PMO) said the Lana tanker is no longer impounded. The US has sanctioned Iranian oil exports since 2018.

"The operation to transfer Iran's stolen oil to the Lana ... is underway in Greek waters, and the ship will soon depart for our country with a full shipment of oil," Iran's embassy in Greece said on its Twitter account.

"The transfer has started," a source with knowledge of the matter said, while a second source said the process started on Friday and was expected to be completed in days.

Tehran had previously warned of "punitive action" against Athens over the case, which has strained relations between the two countries after the United States hired a ship to transfer the oil from the Lana tanker, when it was anchored off Greece. The US State Department said in July it was "respectful that this case went through the Greek judicial process".

The ship, previously called Pegas and renamed Lana in March, had reported an engine problem in April. It was headed to the southern Peloponnese peninsula to offload its cargo on to another tanker but rough seas forced it to moor just off Karystos where it was seized. The removal of oil from the Iranian tanker prompted Iranian forces in May to seize two Greek tankers in the Persian Gulf.

Mohsen Khojasteh-Mehr, who also serves as the head of National Iranian Oil Company (NIOC), told Fars news agency that converting the memoranda of understanding (MoUs), sealed between NIOC and Russian Gazprom cover various fields, including petroleum and gas swaps.

Iran and Russia in July agreed to $40 billion in trade and investment projects.

A swap means that Iran would import gas from Russia and deliver a certain quantity to another country that has a gas purchase deal with Moscow if it makes sense geographically or in terms of available infrastructure. In this case, among Iran’s neighbors only Turkey has a gas deal with Russia, but it has its own pipelines, much shorter in distance than a 2,000-kilometer longer route from Iran.

Buying Russian gas to cover shortages

This makes the Iranian claim of a gas swap strange. What appears to be more likely is Iran buying Russian gas to cover its own production shortages.

Russia, in turn, which has been buying gas from Central Asian countries as a middleman and exporting it, has a shrinking market after sanctions following its invasion of Ukraine. Existing pipelines that send the cheap gas from Central Asia to Russia can now be reversed and pump it to Iran.

Last year, Russia imported 10.5 billion cubic meters (bcm) of Turkmen and 4.6 bcm of Kazakh gas through these pipelines, according to BP statistics.

There are also two pipelines, connecting Turkmenistan to Iran's northeastern regions with 20 bcm/yr capacity together. Currently Turkmenistan delivers only 1.5 bcm/yr of its gas via these routes.

Fars news agency says Iran can import 20 bcm/yr of Russian gas for both domestic consumption and delivery to Iraq and Turkey.

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It seems the first variant is feasible, because Iran had 250 mcm/d gas deficit last winter (equal to Turkey's total daily gas demand in 2021) and every year the gap between its gas production and demand is growing.

Fars says Iran has consumed 9 billion liters of diesel and 6 billion liters of mazut in electricity generation last year, due to gas shortage. Iran can consume Russian gas in power plants to be able to export more diesel and mazut, making more profit, if the Russian gas is below regional prices.

Russia helping Iran in gas production?

Fars reported that another important MoU between NIOC and Gazprom is related to pressure enhancement of South Pars gas field in the Persian Gulf, shared between Iran and Qatar.

In the absence of Western technology, Iran has been unable to keep up production at the field, steadily losing out as its domestic consumption has increased.

Fars said if the sides finalize the MoU and sign an agreement, the contract value would be $10bn.

According to the NIOC, the Iranian section of South Pars gas field would pass the half-mark point of its life by 2023 and every year its production would decline 10 bcm. Iran and a consortium headed by French Total signed a $5-bn contract in 2016 to develop the South Pars, including the installation of a 20,000-ton platform with two giant compressors to prevent production decline.

Iran needs at least 10 to 15 such giant platforms (15 times bigger than the current active platforms) in South Pars. Each new platform costs $2.5 billion.

It is not clear how Gazprom would enhance the pressure of the gas field as only large Western energy companies can build the giant platforms with huge compressors.

When Total left the South Pars contract due to US sanctions, Chinese CNPC also abandoned the project due to its inability to build larger platforms. Gazprom also has no experience or the technology for such a project in the sea.

Qatar installed huge platforms, through contracts with Western companies, especially Total, and not only prevented a decline in production, but it has started new drillings to increase gas output by 30% in the next five years.

Regarding Iran's inability to prevent production decline from South Pars - a field that accounts for 70% of Iran's total gas output- it seems the country eyes Russian imports to compensate for the decline in South Pars and prevent further gas shortages in cold seasons.

Secretary of Iran's Aviation Companies Association Maghsoud Asadi-Samani told ILNA on Friday that the last Iranian flight to Kuala Lumpur will be operated by Mahan Airlines, which was the only airliner apart from flag carrier Iran Air with the capability of direct flights to Malaysia because of the long distance. 

The Iranian company Mahan Air was sanctioned by the US in 2008 for links to the Quds (Qods) Force of Iran’s Revolutionary Guard. 

Noting that Malaysian airports do not provide fuel to Iranian planes anymore, he said that fueling companies at Malaysian airports work with US companies, and these companies have been informed that they will be subject to punitive measures if they keep fueling the Islamic Republic’s planes.

Describing it as yet another blow that hit the country's aviation industry due to the US sanction, he said domestic airlines will lose the revenues of passenger transportation on this route, and “we will lose one of the bases in Southeast Asia.” 

Before the Covid-19 pandemic hit the world, demand for this route was high, and two to three flights were made per week, but during the health crisis, flights to Malaysia were temporarily suspended, and after that, there was only one flight per week.