Iran Has Slowed Down Its Centrifuge Expansion Program For ‘political’ Reasons

July 29, 2009 - PRLog -- There is still a confused picture over Iran's nuclear status. Iran is not cooperating with the wishes of the broad international community regarding clarification of their uncertain nuclear ambitions, and curbing the potential creation of any nuclear weapons. Iran is widely suspected of developing nuclear capabilities, in part for weapons manufacture. The International Atomic Energy Agency (IAEA) has stated that Iran's uranium would still require further enrichment if it were to be used to make a bomb. The IAEA has also stated that Iran has slowed down its centrifuge expansion program for ‘political' reasons. An upcoming presidential election in Iran in June 2009 could change the picture.

The major domestic political event of 2009 will be the presidential elections, which are scheduled for June 12. We expect the conservative incumbent, President Mahmoud Ahmadinejad, to seek re-election to a second term, although at the time of writing he had not yet announced his candidacy. The defining issue of the election is likely to be the state of the domestic economy. Indeed, a November 2008 BBC poll of over 4,000 Iranians found that residents thought that unemployment, poverty and high inflation were Iran's biggest issues, with only a small minority flagging up the country's hostile relations with the US or the need for political reform. In light of our expectations for economic conditions to worsen over the coming year, these views are unlikely to change significantly by the time that June's polls come round As regards US policy to Iran under the administration of newly-elected President Barack Obama, we do not foresee a dramatic shift from the policies of the Bush administration. Thus, we are not expecting a US-Iranian military conflict. Obama ‘supports tough and direct diplomacy with Iran without preconditions' (according to the White House website), and his main foreign policy goal will be to make sure that the Islamic Republic is prevented from developing nuclear weapons. While Iran contends that its nuclear programme is for civilian purposes only, if it continues to engender US suspicions by being less than totally transparent, the US is likely to continue pushing for harsher sanctions on the Islamic Republic. Indeed, the White House website also states that: ‘If Iran continues its troubling behaviour, we will step up our economic pressure and political isolation.' It is our long-held view that the nuclear stand off will be settled peacefully, and with the Iranian economy set to weaken over the coming year, Tehran may conclude that the costs of international isolation outweigh the benefits of maintaining its nuclear ambitions.

Even though our growth forecasts might seem rather bearish, we believe that risks still remain to the downside, and that in a worst-case scenario, Iran could enter into a technical recession at some stage in 2009 or 2010. As mentioned above, our current global growth forecast might still be too optimistic, and in the event that the global economy contracts in 2009, average oil prices could fail to meet our expectations, which would consequently hurt Iran's growth prospects further.

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