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The New York
Times
By NAZILA FATHI
 TEHRAN,
April 30 — As President Mahmoud Ahmadinejad moves to make good on his
campaign promise to distribute Iran's increasing oil wealth among its
citizens, warnings are coming from across the political spectrum that his
policies may be doing more to irritate political and economic tensions than
to soothe them.
Concern is also rising over how any actions taken by the United Nations
Security Council, which is beginning what is likely to be a lengthy
struggle on containing Iran's nuclear ambitions, might be felt by the
economy.
On Sunday, Iran again said it would ignore any Security Council resolution
against its atomic program. Iran could face economic sanctions, or even
military strikes, if it does not comply with the Security Council's
demands.
For the time being, at least, oil prices topping $70 a barrel are likely to
continue pumping billions into the government treasury. Iran's profits from
oil rose last year to more than $45 billion from $15 billion, surging at a
rate not seen since 1974, when the country's oil revenues tripled.
In a surprise move just before the spring holidays last month, Parliament
reluctantly approved Mr. Ahmadinejad's proposed budget, despite fierce
criticism from economists and others. Critics said that his plans for
generous spending to create jobs and increase salaries were politically
motivated and fiscally unsound. His budget relied on continued high oil
profits, they said, and would be likely to invite inflation.
Signs that some see as troubling have already emerged. After Mr. Ahmadinejad
lowered interest rates this month in a bid to decrease inflation, Iranians
pulled their money from banks, rushing to buy gold coins. And while he is
offering loans to encourage small business ventures in the hope of creating
jobs, investor confidence seems to be wobbling, which could lead to a
reluctance to invest in local industries.
Last summer, after news that Iran had resumed nuclear work prompted
international concern, investors withdrew from the market and stock prices
plunged. They have rebounded slightly since reaching their lowest levels to
date in October, while inflation and unemployment have fanned domestic
discontent.
"The government has reached the conclusion that it needs to spend
large sums of money immediately to keep its allies and the masses of people
happy," Muhammad Sadeq Jannansefat, an economic analyst, wrote in the
reformist daily newspaper Shargh last month as Parliament battled over the
budget. He suggested that Mr. Ahmadinejad, who came to power in June on a
populist mandate, was using the oil money to placate his supporters.
The government, Mr. Jannansefat wrote, "wants to distribute money and
create jobs, no matter what the consequences are or what kind of jobs it is
creating."
Ismail Jabarzadeh, an opposition member of Parliament, predicted that Mr.
Ahmadinejad's policies could lead to an inflation rate of 20 percent in a
country where inflation now stands at about 14 percent, according to
estimates by the International Monetary Fund. "But political
upheavals, such as the pressures on our nuclear program, can increase the
20 percent," he said in an interview this week.
Mr. Ahmadinejad defended his economic performance at a news conference this
week, saying that his government had started to distribute "justice shares"
of government industries among the poor in four provinces. Years of
mismanagement, however, have left most state-run industries in disarray,
and the shares of little value.
The president also said unemployment has fallen in the eight months since he
took office, but a report by the International Monetary Fund in March
stated that the figure has continued to hover at around 11 percent.
The president's policies center on injecting $40 billion into the economy
this year through the central bank. Although the government did not release
details of the budget, officials have said it calls for increased spending
on charity groups to help bolster living standards. Mr. Ahmadinejad has
also promised loans for housing and to help couples with marriage expenses.
Part of the windfall will be spent on imports, which critics say will only
weaken domestic manufacturers.
Economists warn that infusing the economy with such a sum of money will
bring on Dutch disease, a term coined when profits from natural gas discovered
in the Netherlands caused the manufacturing sector there to decline and
inflation to skyrocket in the 1960's. It is a malady that often afflicts
energy-exporting nations, and symptoms have begun to appear here.
Governments in Iran and elsewhere have long used sudden oil revenues to
make short-term economic fixes and ease public discontent. But the most
successful have also spent part of the income on long-term economic
development, building dams and other infrastructure to help fuel growth. So
far, Mr. Ahmadinejad has not specified spending on future long-term
projects, although he has said he will finish projects that are already
under way.
"Mr. Ahmadinejad does not care about the future," said Saeed
Leylaz, an opposition economist and political analyst. "We have no
control over oil revenues and cannot rely on it as a stable income. Once
people get used to the money and their spending patterns change, they
cannot return to their old lifestyle anymore."
Even now markets are
filled with imported consumer goods once considered luxuries unnecessary in
an economy striving to become self-sufficient.
More than a quarter of the population lives below the poverty line — which
opposition economists define as a family of five with an income of less
than $278 a month, although the government disputes those figures.
But wealthier consumers are turning away from locally made goods and to
imported ones. Lili Abdollahzadeh, a homemaker in Tehran, said she had
recently bought a Korean-made Samsung washing machine for $450 instead of
the least-expensive domestic one for $350 because the imported machine was
of better quality. The price of imported oranges and pears is half the
price of locally grown fruits.
Ahmad Tavakoli, an economist and conservative member of Parliament,
initially supported Mr. Ahmadinejad but is now among the president's most
vocal critics. He has compared the president's policies with those of Shah
Mohammed Reza Pahlavi during the oil boom before the 1979 revolution,
saying that such policies contributed to the fall of the former government.
"Imports will lead to the decline of the manufacturing sector,"
he said in a speech broadcast live on state radio in March. "This is
called the misfortune of oil, which is a misfortune caused by the decisions
of rulers."
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