New iraq advs econ adv debt 1ac contention Economy



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Econ On The Brink

Econ is on the brink now. Stock market is growing because of the strong economy but it will burst and the econ will fall again, soon.

Sinaiee et al 5/9 (Maryam and Michael Theodoulou, Maryam is a foreign Correspondent for the National and Michael is a journalist based in Nicosia, “Iranian Stock Market in Fast Recovery”, May 9, 2010, The National, http://www.thenational.ae/apps/pbcs.dll/article?AID=/20100509/BUSINESS/705099898/1005/rss)


TEHRAN // When most people think of the Iranian economy, they think of UN sanctions and the potential development of nuclear power. But a stock market boom? One is well under way. The main index for the Tehran Stock Exchange (TSE) last month reached its highest level in its 42-year history and last week exchange officials issued a statement to reassure investors they are not in the middle of a market bubble. “Concerns about bubble growth are unfounded,” Ali Sahraie, the operations manager of the TSE, said in a statement released by the bourse. “The reason for the rise in the index is the flow of cash into the stock market.” Mr Sahraie said the sharp ascent was a reflection of the overall improvement of Iran’s economy, and many outside observers agree. “Even though [the market] is rallying I still think of it as underperforming,” said Ahmad Alanani, a trader with Exotix, a company based in London that specialises in frontier markets. Mr Alanani said the TSE dropped more than 40 per cent last year, lagging well behind its peers in the UAE and elsewhere in the Middle East. That performance can be attributed, in part, to the lingering effects from a crash between August of 2008 and March last year when the index lost 40 per cent of its total value before reaching bottom at 7,096. It now trades at more than 14,000. That fall was mainly due to the drastic decline in international oil and mineral prices and an ailing domestic economy. But some analysts are concerned that a similar correction could be coming if the appropriate measures are not taken. Looming on the horizon is the plan by the Iranian president Mahmoud Ahmadinejad to cut energy subsidies. Introducing the plan, which Mr Ahmadinejad refers to as “big surgery on Iran’s economy”, is expected to drastically raise the price of fuel and electricity within a few months. “The implementation of the plan, if carried out recklessly, can lead to a real drop in profitability of companies, and hence in the price of their securities, considering Iranian industries’ high energy consumption levels and their unpreparedness to adapt to a sudden increase in energy prices,” the market analyst Shervin Shahriyari wrote recently. Others feel that while cutting the subsidies may be painful in the short term for Iranian consumers and companies, it will be a positive in the long run.


Low – general

Iranian economy low now.

Shuster 4/3 (Mike, diplomatic correspondent and a roving foreign correspondent for National Public Radio “Iran’s Economic Troubles Mount as Sanctions Loom”, April 3, 2010, NPR, http://www.npr.org/templates/story/story.php?storyId=125585376)


The dramatic political turmoil in Iran since last year's disputed presidential election has been well publicized. But less well known are the country's economy troubles. Like much of the information coming from Iran, economic data are hard to trust. But it appears Iran's unemployment rate has reached about 20 percent. Actual inflation is probably running higher than that and has been above 20 percent for years. Iran's currency, the rial, is weak, its value propped up by government use of oil revenues. The country's banking system is also shaky. And now, Iran is facing a U.S.-led effort at the United Nations Security Council to impose more economic sanctions. A Struggle With Subsidies Iran's economic problems are linked to its extensive use of subsidies — billions of dollars a year — to keep basic necessities such as electricity, gasoline, bread and other food staples far below their true market value. Experts say subsidies could eventually bankrupt the Iranian government, and so this year, a great debate has emerged over subsidies, says Hossein Askari, an expert on Iran's economy at George Washington University. "Iran has realized that subsidies are very costly, not the way to develop an economy; but they have, I think, used subsidies because they have seen this as the best mechanism, depending on who is in power, in order to get political support," he says. Earlier this year, President Mahmoud Ahmadinejad proposed reducing government subsidies. But ever the populist, Ahmadinejad asked the Parliament to let him use billions of dollars of revenue from reduced subsidies to distribute to poor people at his own discretion. This has been Ahmadinejad's approach since he was first elected president in 2005, says Djavad Salehi-Isfahani, an Iran expert at Virginia Tech. "Without giving money to the poorer people, it would be impossible to implement the price increase and have peace in large cities," Salehi-Isfahani says. The president and the Parliament have not yet found common ground, so subsidy reduction is on hold for the moment, analysts say. Political Interference The troubled banking system also has been affected by Iranian politics, Askari says. "In a system like Iran's, there's a great deal of pressure on the political side for the banks to do what they're told to do, and not what they should do as good bankers," he says. "So, yes, Iran's banking system is a mess." Ahmadinejad has forced the banks to lend money at artificially low rates of interest. At the same time, says Salehi-Isfahani, state-owned enterprises, which dominate the economy, insist that banks provide them with more rials when they cannot pay their workers. "So the banks on the one hand are unable to attract depositors because they can't pay interest enough to match at least the inflation rate," he says. "And at the other end, the money they have lent out they are not able to recoup." What keeps Iran's economy afloat are the billions of dollars it makes exporting oil, but even that is in trouble. Sanctions imposed by the United States over the past 14 years have discouraged foreign oil companies from investing in Iran's oil sector and helping to modernize it. Iranian oil exports are far less today than they were in the 1970s, before the Islamic Revolution ousted the shah. Under U.S. pressure, the Russian oil company Lukoil recently pulled out of a deal with Iran — as have European and Asian oil companies. Iranian officials have made the claim for years that Chinese oil companies have supported Iran's energy industry with billions in new deals. But Askari has his doubts. "The Iranians love to publicize this, you know, a lot of bravado. But there really is no substance to it," Askari says. "There is absolutely no doubt that the Chinese do not have the technology that the Western oil companies have." Push For Sanctions But it is not clear just how effective the U.S. and U.N. sanctions imposed on Iran over the years have been. Salehi-Isfahani believes most of Iran's economic problems are self-inflicted. "I would give a much higher proportion to policy-induced problems inside Iran," he says. Nevertheless, the Obama administration is pushing hard now for additional sanctions at the Security Council. "I'm not interested in waiting months for a sanctions regime to be in place," President Obama said last week. "I'm interested in seeing that regime in place in weeks." China, a veto-wielding member of the Security Council, is proving the key player in the sanctions debate. A senior Iranian official was in Beijing just a few days ago, and Obama will have a chance to buttonhole China's president, Hu Jintao, when he comes to Washington in mid-April.



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