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It’s difficult to isolate Iran with a huge economy: analyst

A senior international analyst says, “It is difficult to isolate a huge economy like Iran’s.”

“Iran has learned to live with sanctions,” Alexander Rahr, director of the Russian/Eurasia Program, tells Tehran Times in an exclusive interview.

Rahr also says, “The era of capitalism seems is coming to an end” and predicts that a new leftist movement “will emerge in the next decade and correct the capitalistic model.”

Following is the text of the interview:

Q: The U.S. economy is currently experiencing its worst crisis since the Great Depression. What are the reasons behind this recession?

A: We could talk in length about the failures of the governments of George W. Bush and Barack H. Obama in handling the crisis. The main criticism is this: the U.S. government was and is unable to regulate the country’s banking sector and control financial speculations. It also has no tradition of social politics. But the U.S. was always like that, the Americans prefer an economy of laissez-faire. Americans have a liberal-economic model; they care little for social issues as the Europeans do. The interests of the powerful economic groups, particularly in the financial sector, are so strong in the U.S. that the government can’t restrict them. Now the U.S. relies on the future strength of the dollar in the global financial system. Washington will fight for the preservation of all present “rules of the game” in the WTO and elsewhere. It needs other countries to repair their economy.

Q: S&P recently downgraded U.S. credit rating. Is this an indication that recovery of the U.S. economy is becoming harder and harder?

A: The debt problem is real in the U.S. No one understands how future governments will handle this. It seems logical that the U.S. restrict its funding, particularly for military spending. Analysts think that the U.S. will become more isolationist in the near future.

Q: Does the rise in gold prices indicate that the world economy is entering another recession?

A: Too early to say. The potentials in the world to reverse global recession are high. What is important that all countries of the globe are cooperating together in the crisis. That had not been the case in the past. Institutions like the IMF and the G20 will act as global governments in the crisis. I think rich countries are eager to show much more solidarity with poorer ones than the past. These all are positive indications that the world community will find ways to repair the existing financial model of the planet.

Q: Do you think the failure of Western governments’ economic policies was responsible for the 2008 financial meltdown?

A: It was less a failure of the individual governments but the greed of “hawks” in the financial systems. The world had amassed more and more wealth and achieved prosperity since the end of World War II and after the demise of Communism in 1991. People in the West thought that economic growth and personal wealth could be sustained forever. The crisis is also a matter of morale. Individualism of the liberal model of the West has reached certain limits. The era of capitalism seems is coming to an end. A new leftist movement – but definitely not a neo-communism – will emerge in the next decade and correct the capitalistic model.

Q: Many analysts say that the rising energy prices can push the world economy again into a new economic crisis. Please explain.

A: The energy prices will stay high because the resources are shortened. Energy products are located in fewer and fewer regions. Those countries that possess them will definitely play a more vigorous political role than in the past decades. The control over energy export routes will be key for energy security for all continents. Therefore energy will become an expensive product. But they will not provoke a major crisis in the West. The U.S. and the EU always find ways to diversify their energy imports.

Q: What are the reasons behind the recent slump in the global stock markets? And how the super-rich are still making money in this market crisis?

A: Again a question of morale and limits of the present global financial mechanisms. While in the 20th century leaders of capitalism were afraid of a communist alternative, they have no rivalry to fear now. So they become more arrogant.

Q: Do you think that dollar will lose its value further against other currencies?

A: The world is not interested today in a weak dollar, neither the EU nor China. In the long run, the dollar will definitely lose its present status as world currency.

Q: What’s your prediction of the U.S. economy in regard to Obama’s policies?

A: Obama has 1.5 years to explain to his people that America must learn to live according to different social standards. In fact, he is trying to transfer the EU’s social-economic model on the U.S. but faces enormous resistance from those who are against any change in the U.S. way of life.

Q: Do you agree with this view that the Group of 20 leading and emerging nations has not done enough to correct global imbalances?

A: Right now, the G20 is still in the making. The old Western countries would like to keep the G8 as world government. The initial crisis was over soon; in 2010 everywhere recovery was felt. Now the world is again facing signs of depression. The G20 will become again important, when leading Western countries realize that the world is more complex, multi-polar, and requires cooperation from countries like BRICS.

Q: The IMF and the World Bank failed to predict global economic recession? Isn’t it the time to restructure these two international bodies and increase the role of developing countries in decision-making?

A: The restructuring of the IMF is a must, but the U.S. and the EU are reluctant to do it fast. The developing countries have no strong common forum to make their claims for more participation in the leadership.

Q: Isn’t it better that the United States take austerity measures to resolve its debt crisis?

A: The U.S. mentality is against austerity policies. Obama thinks that the economy can only recover if more money leads to more consumption. At the moment, the U.S. has no other options on the agenda. The devaluation of the dollar helps the U.S. to get rid partly of its global debt. The EU will accept this, China will be angry but has no leverage to prevent this policy.

Q: Why the U.S. is the largest debtor in the world?

A: Because the world has accepted the dollar as the world currency and thus U.S. leadership in the global economy.

Q: What role can OPEC play in the oil market especially as Saudi Arabia is acting unilaterally and raising its oil output?

A- OPEC will stay strong in the next 20 years, until the oil peak will be reached. Saudi Arabia’s dominance in this organization is a fact, but based on the fast resources in this country.

Q: Despite huge sanctions on Iran’s oil industry the Islamic Republic is still the second largest oil exporter within OPEC? What are the reasons for this?

A: I think it is difficult to isolate such a huge economy like Iran’s from the world. As you know, not all neighbors of Iran support Western sanctions against Tehran and rather prefer to continue business as usual.

Q: Can the oil market ignore Iran’s oil supply? What will be the effects of a possible cut of Iranian oil on the global energy prices?

A: Despite what I said before that it is impossible to isolate Iran, one should also not overestimate Iran’s oil factor. The Western embargo against Iranian oil is serious. Iran lacks the money from export to modernize its oil economy. Tehran may rely on China in future, but – as we know – Chinese pay different prizes than Western companies.

Q: Iran has daringly undertaken major economic reforms which can give an enormous boost to the national economy in the long run. What’s your assessment?

A: Iran has 70 Million people – it is a big economy. It surely found a successful way to overcome the grievances of the past crisis after the Iranian revolution. But Iran would do even better if the country’s economy would be more openly cooperating with other world economies.

Q: Have sanctions affected Iran’s economy?

A: Yes, because Iran could have earned much more money through cooperation with leading Western countries and use that capital to modernize its industrial basis.

Q: Do you agree that Iran’s economy has become immune to sanctions?

A: A country like Iran cannot be totally isolated. Iran has learned to live with sanctions. It has a huge domestic market.

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