The Eurasia Brief: The New Chinese Capitalist Economic Model vis-a-vis Iran: So Near Yet So Far by Ambassador Donald K. Bandler and Ralph Winnie, Jr.

http://www.divshare.com/download/18575548-5fb


The recent demonstrators in Iran opposed to Mahmud Ahmadinejad's
electoral "victory" were supporters of the defeated candidate Mir-Hossein
Mousavi, pro-democracy activists, and Iranian expatriates in Western
Europe and the United States. This should provide a clear warning to
Ahmadinejad and the Iranian Mullahs, who are responsible for maintaining
his authority, that the Iranian government must address the social and
economic concerns of its well-educated populace if it wants to stay in
power.

Tehran is actively resisting efforts by its middle class, which is struggling
towards a form of Western style capitalism and liberalization that
incorporates elements of Iran's history and culture. Over time, this could
help Iran to gain greater access to the markets that Western and Eastern
technology affords.

Mousavi, who remains opposed to Ahmadinejad’s approach, sees
reconstruction of the Iranian economy as Tehran’s first priority. While
suspicious of the United States, Israel and Western democracies, Mousavi
could point to the People's Republic of China's successful economic model
and encourage the government and business sectors to embrace it as a
vehicle to achieve economic prosperity and security within a controlled,
orderly society. The PRC has enacted a stimulus package that allows
money to be directly allocated to research and infrastructure projects --
notably nuclear power plants, high speed rail lines, freeways and
secondary transportation grids.

By implementing a modified version of Chinese capitalism, the
Iranian government could capitalize on the growing
disillusionment among its citizens. After the recent bout of dissent 
and rioting in Tehran, the leadership recognized that their
government could only maintain power and control
with the active support of the middle class. Mousavi and other political 
leaders are aware that some elements of Western business offer 
opportunities for the Iranian people -- in contrast with the Iranian 
Mullahs who fail to acknowledge anything of value from the West. 
At the same time, however, the Iranian Mullahs have
been actively using Iran's oil revenues to fund terrorism, religious battles
as well as large purchases of military hardware and nuclear technologies.

Unlike Iran, the People's Republic of China has become a major economic
player in the world community because, among other things, it does not
have a regressive religious element that influences all aspects of society.
While the Chinese and Iranian governments have traditionally been
suspicious of the West, Chinese religions such as Confucianism and
Daoism encourage active planning, pragmatism and self-reliance.

China’s leadership views Iran as a country that may well wield significant
economic and military power in Southwest Asia over the next few decades.
In July 2009, Iran invited Chinese companies to participate in a $47.8 billion
project to build seven oil refineries and a 1019 mile trans-Iranian pipeline.
In August 2009, Tehran and Beijing struck a deal for $3 billion to help pave
the way for China to expand two or more oil refineries.
Iranian President Mahmoud Ahmadinejad (L) shakes hands with the
International Atomic Energy Agency (IAEA) chief, Mohamed ElBaradei in
Tehran.

Consequently, with the recent $5 billion deal brokered by Chinese National
Petroleum to develop the South Pars natural gas field in Iran, Beijing is
estimated to have committed $120 billion for Iranian gas and oil projects to
offset its own shortages in that arena.

In Iran, by contrast, theology is often the initial and predominant focus, and
is frequently measured by whether a given policy is in conflict with Islamic
religious teachings. Every new idea, concept and technology must be
filtered through that religious prism. This has resulted in a stagnating
economy with high unemployment and underemployment, which has in
turn precipitated a cauldron of unrest among Iranian students, intellectuals
and its middle class. Mousavi recognized this, and has and has
encouraged a modest form of liberalization that could bolster economic
and political stability. However, the strong opposition to his program by
Iranian Mullahs -- based in theology and fear -- has raised concerns that the
tenets of Islamic law would be compromised.

At one point, Mahmud Ahmadinejad seemed to be lending support to an
IAEA proposal to ship 2560 pounds of uranium abroad to France and
Russia by the end of the year to be refined for civilian purposes as part a
medical reactor in Tehran. Subsequently, Ahmadinejad treated this
proposal as a victory for Iran. He claimed that the West had changed its
policy from “confrontation to cooperation as a result of Iran’s resistance to
the United States and its allies.” That said, as soon as the proposal was
reviewed by Iran’s Mullahs, it was decided that Ahmadinejad would reject
the deal to ship uranium out of the country. This was confirmed by Saeed
Jalili, Iran’s chief nuclear negotiator, in a phone conversation with Javier
Solana -- Secretary General of both the Council of the European Union (EU)
and the Western European Union (WEU). Unfortunately, Iran’s leaders
rejected holding a meeting in Vienna to restart those negotiations.

The Mullahs would have viewed any attempt by the West to stop Iran’s
nuclear program as a violation of the basic tenets of Islamic law. They
believe it is an inalienable right of an Islamic state to pursue its own course
of affairs without any interference from non-Islamic countries. Moreover,
Iran’s leadership does not believe that their country would be treated as an
equal partner because the Western countries do not respect Iran’s political,
economic and security interests.

Moreover, the Mullahs believe that the tenets of Islam dictate that Iran must
neither compromise nor cooperate with the United States, Europe or Israel
-- all of whom refuse to adopt Islam as the official religion and submit to
Sharia law. Countries that adopt Judeo-Christian ideas, values and beliefs
are deemed to be hostile and subversive.

Many Iranians assume or believe that former strongman Akbar Hashemi
Rafsanjani was the first to recognize the efficacy of the Chinese economic
model. While not highly publicized, Rafsanjani’s initiation of trade
agreements and technical exchanges had a positive economic impact.
This was evidenced by the construction of Tehran’s major subway, which
was built by China International Trust and Investment Company (CITIC) -- a
major engineering and investment firm. After CITIC won the bid and built
the subway, Iran now successfully transports 700,000 passengers a day.
Tehran saw that the Chinese economic system of modified capitalism
could provide similar high tech and advanced infrastructure development
projects. This stands in marked contrast to the efforts of other socialist
governments that have attempted to do business in and with Iran.
Iran’s oil and natural resources would lead to tremendous wealth and
prosperity for the Iranian people under a Chinese system of modified
capitalism. Mousavi and Rafsanjani believe that China would provide a
security buffer against Russia, which has always coveted Iran’s valuable
natural resources. They appear to have now joined forces against Supreme
Leader Ayatollah Ali Khamenei and President Ahmadinejad in opposition to
the belief that Islamic theocracy is the final arbiter of economic and global
policies.

By allowing hard-line conservative theology to dominate the political
process, the Mullahs have retarded the development of Iran’s economy and
self-sufficiency. Moreover, it has damaged Iran’s opportunity to follow
China’s successful experiment with capitalism.

Moreover, President Ahmadinejad has deeply alienated both reformist and
conservative political leaders since his disputed re-election. He has tried to
consolidate power and marginalize his rivals. That said, neither faction is
willing to see him take credit for brokering a potential nuclear deal with the
West.

How will Ahmadinejad and his government manage their relationships with
Asia (notably China), Europe and the United States? Will increased
dissent, rallies in Iran sponsored by the growing pro-democracy
movement, and pressure from the western countries establish, encourage
and maintain more democratic practices? And how will the Chinese
government and the western countries look upon Iran -- as a growing
partner, a key player in the energy and technology arenas, or as a potential
pariah state?

Ironically, it is worth noting that if Mr. Mousavi had been allowed to
maintain his position and influence in Iran’s government, his
understanding of Chinese style capitalism -- combined with Iran's natural
resources and strategic geo-political location -- might have already begun
to make Iran a more formidable economic and strategic power.

Contributed By:
Ambassador Donald K. Bandler, Former US Ambassador to Cyprus
Ralph Winnie, Jr., VP, Director of the China Program, EC/Eurasian Business Coalition