The Fate Of Arab Reforms.

"Only in stifling reform do Arab regimes display initiative". This was the headline of a commentary published on April 14 written by Bahey Eldin Hassan, director of the Cairo Institute for Human Rights Studies. Hassan wrote: "If some of the Group of Eight (G8) countries had not found...resolve at the final moments of the concluding session of the Forum for the Future in Manama, Bahrain, in November 2005, the Broader Middle East Initiative might have been buried there. There is still danger of the initiative being terminated in Moscow next July, when Russia will host the 2006 G8 summit, before the third Forum for the Future meeting in Jordan takes place later this year".

Russian President Vladimir Putin's crack-downs on Russian non-governmental organisations (NGOs) suggest that the forum, which Hassan said "once held so much promise for carving out a democratic future in the Middle East", might be doomed to being "shelved next to other stale regional bodies such as the Arab League and the Euro-Mediterranean Partnership".

The Forum for the Future is the only regional framework that provides an opportunity for NGOs in the Arab world to present their views on reform directly to representatives of their governments at the ministerial level. At the Manama conference, Arab governments pushed back, firmly opposing the creation of a foundation that would have been able to fund local NGOs directly, whether or not they were licenced by their governments.

"Arab governments", Hassan wrote, "have demonstrated consistent incompetence in all fields except for suppressing internal pressures for change, and they have demonstrated an impressive ability to maneuver and play on contradictions within the international community in light of a new and changing international environment. Due to obstruction by Arab governments, in its final session the forum was able to launch a Fund for the Future to finance economic reform, but not the Foundation for the Future that would have helped finance political reform and civil society. Thus, once again Arab governments succeeded in sending out the message they have repeated to their peoples and international community for the last two decades: yes to economic reform, no to political reform" (see the background and the implications in news16-ArabDemoApr17-06).

The seeds of this catastrophe were sown by the G8 organisers themselves, who had earlier allowed Arab states to insert individuals with close governmental ties into the preparatory meetings of the civil society NGOs. As a result, sensitive human rights issues were removed from the agenda and most preparatory meetings concluded with general, bombastic statements and soft recommendations which, when read at the Manama forum, drew smiles of satisfaction from Arab government representatives.

"The farce of civil society representation", Hassan noted, "reached its zenith when a male delegate from the public University of Bahrain headed the women's rights delegation and spoke in the name of women. One wonders whether there was a shared decision by G8 and Arab governments to blunt the claws of civil society - and thereby ensure continued participation in Forum for the Future summits by Arab governments - or whether it was merely excessive na?vety on the one side met by excessive cleverness on the other.

"The so-called major global powers have yet to realize that they are dealing with Arab regimes well schooled in despotism and much older than democratic systems. Fortunately, at the 11th hour the United States and the United Kingdom realized what was happening and refused to include within the draft final declaration the conditions proposed by Arab states, which would have withheld civil society status from NGOs not registered according to the medieval laws of their respective countries. This resulted in the Bahrain meeting ending without a final declaration".

Two weeks after the Manama meeting, Hassan said, Arab states succeeded in getting adopted at the November 2005 Euro-Mediterranean summit "the same statement they had failed to pass in Bahrain". In mid-February the Cairo Institute for Human Rights Studies and other NGOs met in Rabat to address this question in depth and formulated recommendations for the G8: first, that the Forum for the Future establish an institutional channel for communication with NGOs between its annual meetings; and second, that it abide by UN practices in dealing with NGOs, which do not require that organisations have legal status in their countries and do not allow governments to interfere in preparatory meetings.

"The backlash from Arab governments will continue", Hassan wrote, concluding: "Participants in democracy-promotion initiatives must prepare themselves to deal with this".

Why No Boom In Iran: Iran's oil income in fiscal 2005/06 which ended on March 20 hit a record of US$45 bn. But there is no feeling of prosperity in Iran, in contrast to the bonanza in the GCC. Iran's population of almost 69m is 70% below 30 years of age and lacking jobs. Real estate prices have fallen, one consequence of capital flights and stagnation in most of the economic sectors.

Iran's government, however, is acting like a super-power. It is spending heavily on such matters as nuclear development, aid to the Palestinians, Lebanon's Shi'ite war machine Hizbollah, Syria's Ba'thist regime, recruitment of Islamic volunteers in Europe, including Britain, to be trained as suicide bombers, plus international conferences in Tehran to denounce the US and Israel - all not relevant to its socio-economic needs. It is in a cold war with the US-led West reminiscent of the one the Soviet Union faced until it collapsed in late 1991.

Adding fuel to fire as June Brent hit $74/barrel on April 19, Iran's harline President Mahmoud Ahmadi-Nejad said crude oil prices remained way below where they should be. He said: "products derived from crude oil are sold at prices dozens of times higher than those charged by oil-producing countries". (Iran is the world's fourth-largest oil producer and second behind Saudi Arabia within OPEC, responsible for around 5% of global oil supply). Some Iranian MPs have said the real value of world crude prices was closer to $100/b. Fears remain that Iran's 2.5m b/d of crude exports could be disrupted in the event of confrontation with the West over its nuclear ambitions. Later in the week Ahmadi-Nejad proposed two-tier crude oil pricing with the rich powers to pay the higher price and the poorer ones to get the lower price.

The FT on April 20 noted that, with "the war of words over Iran's nuclear plan escalating and the domestic economy stalling, Iranians were scrambling to buy gold coins", sending their value up by 32% in the past two months. Earlier Etemad-e Meli, a reformist newspaper, had put a front-page story saying: "It's unbelievable. It seems no investment field is as safe". The FT quoted Heydar Pourian, editor of Iqtisad Iran (Iran Economics), a monthly magazine, as saying: "Gold coins are Iranians' political hedge fund. We keep them at home and they make us feel secure".

Commodity prices have risen worldwide over recent years partly in response to Middle East tensions centred on Iraq, but Iranians are feeling they may be at the centre of a growing storm. Hence the appeal of gold coins given as presents for weddings and new year; gold coins are a liquid and proven investment. And at 460,000 rials (about $41.50) a quarter, the gold coin is within reach for all but the poorest Iranians. By contrast, Iran's largely state-owned banking sector offers limited services, while investors face inflation put officially at 14% and independently at 25-30%. While deposits in state banks lost 1% in real terms in the year to February 2006, gold coins gained 21%.

Pourian said: "Buying gold coins reflects a lack of alternatives. Big investors may pull out of real estate and move their capital to Dubai. Smaller investors have fewer opportunities". The FT reported local businessmen as saying the rush to gold reflected both growing tension over Iran's atomic issue and destabilising economic policies of President Ahmadi-Nejad, whose government took office last August. The FT quoted one businessman as saying: "The direction reverses the years of [president Mohammad] Khatami and increases the role of the state, especially in allocating resources. It's more like communism than Islam, and makes you think some of them want a siege economy ready for war".

Tehran's buzz-phrase is "directed lending", through which banks shape lending policies to suit governmental priorities for regional development and agricultural self-sufficiency. State banks, under-capitalised, face increasing demand after Ahmadi-Nejad has made hundreds of loan promises.

Lending rates have been cut to 16%, with subsidised exceptions including farm loans at 9%. The banks, already in confusion after the new government replaced seven heads of state banks, are facing calls from ministers and fundamentalist MPs for further reductions. Lower lending rates mean lower returns for small depositors such as pensioners who, already wary of inflation, are among those fuelling rising demand for gold coins. One of the first acts of the Islamic Republic after the 1979 revolution was to issue Bahar-e Azadi (spring of liberty) gold coins.

Iranian leaders during Friday prayers on April 13 brushed off the threat of sanctions or military attack, insisting the West was powerless to halt the theocracy. The rhetoric came after Tehran dismissed appeals by IAEA chief Muhammad ElBaradei to freeze uranium enrichment and calm suspicions that it was seeking the bomb. "Today, thank God, the Iranian nation is a powerful one and we are going to have a dialogue with the world from a position of power", Ahmadi-Nejad said in a speech in the north-east of Iran, adding: "Everything we have is from God, and a few weaklings cannot stand against the Iranian people" - referring to the US and other powers.

ElBaradei's trip to Tehran on April 13 came in the wake of Iran's announcement that its scientists had successfully enriched uranium, despite a UNSC demand for the work to be halted by late April. Iran says it only wants to generate atomic energy for civilian use, but enrichment can be extended to make the fissile core of a nuclear warhead.

Ayatollah Ahmad Jannati said in a Friday prayer sermon that the US was a "decaying power" and pointed out that Iran was "not Iraq or Afghanistan". He said: "The enemy should know Iran is not comparable to any country in the world. Now we are much more powerful than before". Jannati, head of Iran's powerful Guardians Council, added: "Don't be intimidated by their threats. They don't have the stamina to do anything".

ElBaradei must give a report on Iranian compliance with the UNSC deadline. After three years of investigations, the IAEA says it is not in a position to tell if Iran's ambitions are peaceful. ElBaradei on April 13 said: "the picture is still hazy and not very clear". In Washington, US Secretary of State Condoleezza Rice called for UNSC action and highlighted part of the UN charter which allows sanctions to escalate into military action, saying: "There is no doubt that Iran continues to defy the will of the international community. When the Security Council reconvenes, there will have to be some consequence for that action".

Ms Rice suggested chapter seven of the UN Charter, which sets out specific action that can be taken when there is a threat to international peace or an act of aggression. She said: "One thing the Security Council has, and the IAEA does not have, is the ability to compel, through Chapter Seven resolutions, member-states of the UN to obey the will of the international system. And I'm certain that we'll look at measures that could be taken to ensure that Iran knows that they really have no choice but to comply". She did not specifically call for any particular measure.

US leaders recently said reports of planned US military action against Iran were "wild speculation". But Chapter Seven allows for a gradual increase of international pressure, up to military action. Several resolutions adopted by the UNSC against Iraq, before the US-led invasion of March 2003, were taken under Chapter Seven. Article 41 of the chapter allows for sanctions, including economic and transport measures or the severance of diplomatic relations, and Article 42 states that if those measures fail, the UNSC "may take such action by air, sea, or land forces as may be necessary to maintain or restore international peace and security".

Ms Rice said: "There is no doubt that Iran has continued salami-slicing tactics - a little bit here, and then a little bit more, and then a little bit more - despite the fact that the international community has said very clearly, 'Stop'".

Although the US has been prodding the UNSC to take a tough stand against Iran, including possible sanctions, it has run into opposition from veto-wielding members Russia and China.

Opening a Tehran conference on Palestine on April 13, Supreme Leader Ayatollah Ali Khamenei accused the US of "linked plots" against Iran, Iraq, Lebanon and Syria and demanded Washington stop "enflaming the Middle East and Persian Gulf". Jannati told Friday prayers the April 11 announcement that Iran had completed enrichment in its Natanz laboratory was more important in the country's history than the nationalisation of the petroleum industry in the 1950s.

The message from Tehran on April 11-20 was that keeping the pilot plant at Natanz running for "research" was non-negotiable. Iranian officials say there is little the world can do but accept a compromise allowing limited enrichment. They insist the US would not strike militarily, because Iran could retaliate against US bases all over the Middle East, and can use allied radical groups to damage US interests in Iraq, the Palestinian territories, Lebanon and elsewhere.

Ahmadi-Nejad on April 13 courted fresh controversy by saying Israel was "a dry and rotten tree to be destroyed by a storm". Ahmadi-Nejad, who last year caused an international outcry by calling for Israel to be "wiped off the map", spoke at the Third International Conference on the Rights of the Palestinian People just days after declaring Iran had joined the nuclear club.

Iran's influential former President Ali Akbar Hashemi Rafsanjani on April 17 told Kuwait's National Assembly: "We are certain the Americans will not attack Iran, because the consequences would be too dangerous", playing down reports of Washington examining the option of pre-emptive strikes on Iran's nuclear sites. Rafsanjani was in Kuwait on a three-day visit after having visited Syria for five days.

Kuwaiti parliamentarians expressed fears, shared by many of Iran's Arab neighbours, over growing tension in an area already stoked by instability in Iraq. Mohammed al-Sagr, a key MP, said Iran was "escalating [the situation] every day and this is terrifying, not only for the international community but for the [GCC] region". Although defeated by Ahmadi-Nejad in last June's presidential election, Rafsanjani has remained active at home and abroad. Recently he told the pan-Arab al-Hayat newspaper that talks between Iran and the US over Iraq, which are on hold until Iraqis form a government, could pave the way for dialogue on other issues. Rafsanjani suggested that Saudi Arabia, visited recently by Iran's chief nuclear negotiator Ali Larijani, could play a role "in lessening tension between Iran and the US".

While Rafsanjani has long favoured direct talks with the US and is critical of Ahmadi-Nejad's conduct of foreign policy, he has defended Iran's right to a nuclear programme. On April 11 Rafsanjani revealed that Tehran had completed uranium enrichment at laboratory level, pre-empting an announcement made by Ahmadi-Nejad later the same day. But international concern over Iran developing the capacity for nuclear weapons increased with an April 13 statement from Ahmadi-Nejad that Iran had tested P-2 centrifuges, a more sophisticated version of the P-1 devices now being used for enrichment. Iran admitted to UN inspectors two years ago it had obtained plans for P-2 centrifuges from the procurement network run by Pakistani scientist A. Q. Khan.

President George W. Bush, in response to a reporter's question, on April 18 declined to rule out a nuclear attack to stop Iran from building atomic weapons, saying "all options are on the table". He added: "We want to solve this issue diplomatically, and we're working hard to do so".

In his speech marking national armed forces day and at the start of an annual parade held close to the mausoleum of Imam Khomeini, Ahmadi-Nejad on April 18 said: "The enemies know that the Iranian army ranks among the most powerful armies in the world. The powerful army of the Islamic Republic of Iran is in the service of peace and security and is no threat to anyone. But in the face of enemies, it is like a meteorite. It will cut off the hand of any aggressor and leave the enemy covered in shame... The army must always be equipped and ready, and have mastered the latest technology, to respond to any aggression. We want peace, security and progress for all people, in particular the countries of the region and our neighbours".

On show at the parade was an array of conventional weapons including freshly painted Soviet-era tanks, mobile rocket launchers, short-range missiles, camouflaged trail motorcycles, pilotless aircraft and helicopters. Next to the podium seating Ahmadi-Nejad and top military brass was the simple slogan: "We can". But on the same day Rafsanjani said: "We are not seeking a confrontation but, if it is imposed on us, we are prepared for it. The consequences of such an attack will be very grave and they (the Americans) will not benefit from it".

In Moscow, US under-secretary of state for political affairs Nicholas Burns said diplomats of the five permanent UNSC members plus Germany had recognised the "need for a stiff response to Iran's flagrant violations of its international responsibilities". But he said talks on possible sanctions against Tehran had failed to produce agreement. Burns said the US expected UNSC action if Iran missed an April 28 deadline to stop uranium enrichment.

After Iran-backed Islamic Jihad's suicide bombing in Tel Aviv on April 17, which killed nine people and wounded many, Israel's UN Ambassador Dan Gillerman said: "A dark cloud is looming above our region, and it is metastasizing as a result of the statements and actions by leaders of Iran, Syria, and the newly elected [Hamas] government of the Palestinian Authority (PA). These recent statements are clear declarations of war, and I urge each and every one of you to listen carefully and take them at face value". He said Iran and Syria harboured and financed Hamas and Lebanon's Hizbollah, citing comments from Hamas leaders based in Syria, PA Prime Minister Esma'il Haniya and Iranian President Ahmadi-Nejad. But Iran's UN Ambassador Javad Zarif told the UNSC Gillerman had made "irresponsible claims". He said daily threats by Israel required "urgent and serious attention by the council" which at least should demand Israel desist from using force.

June WTI on April 21 peaked at $75.17/barrel, breaking through the post-Hurricane Katrina record of $70.85 reached on Aug. 30. June Brent rose to $74.57, another record. A breach of the Katrina high confirmed the upward trend for crude had resumed in full force. Yet taking inflation out and in terms of today's dollars WTI in November 1979 was worth %87.23/barrel (see this week's APS Review in omt17Turk-GlobalOilProspApr24-06).

Russian Foreign Ministry spokesman Mikhail Kamynin said "neither [UN] sanctions nor the use of force will lead to the solution of the problem". But Foreign Minister Sergey Lavrov called on Iran to halt uranium enrichment. A preliminary Iran-Russia accord based on a Moscow proposal for enrichment to be done on Russian soil was announced on April 22.