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Iran set for a year of living dangerously

TEHRAN, December 7 – Iran enters 2009 with economic woes to the fore and plummeting oil revenues set to restrict President Mahmoud Ahmadinejad\’s public spending in an election year marked by continued international tension.

The Islamic Republic faces fresh uncertainty as newly elected US president Barack Obama takes the helm in the White House with Tehran\’s controversial nuclear ambitions sure to feature high on his foreign policy "to do" list.

But the simmering nuclear crisis was overshadowed by domestic policy in 2008, as Ahmadinejad faced mounting criticism at home over soaring inflation and a faltering economy.

The hardline president responded by dismissing key figures including economy minister Davood Danesh Jafari and central bank chief Tahmasb Mazaheri.

Both had been highly critical, with Mazaheri favouring liberalisation of bank rates and strict controls on loans to reduce inflation, which reached nearly 30 percent in autumn from about 10 percent in 2005.

"Creating employment by injecting money into (the economy) is a mirage. We must seek the water and not a mirage," Mazaheri said in a parting shot in October at the president\’s expansionary economic policies.

In May, Ahmadinejad sacked interior minister Mostafa Pour-Mohammadi, a mid-ranking conservative cleric, who said afterwards that the president could not take criticism.

The economy remains Ahmadinejad\’s Achilles heel and the nose-dive in world oil prices, which have plunged to four-year lows from a record high of 147 dollars in July, could cost him dearly in the run-up to the June election.

Iran is OPEC\’s second largest producer, and half of the country\’s budget is dependent on its crude exports.

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Ahmadinejad swept to power in 2005 on a populist campaign of ploughing huge amounts of oil-generated cash into local infrastructure and granting low-interest business loans to create jobs.

With a presidential election looming next June, the cracks have already begun appearing among Iran\’s conservatives.

Conservatives from two competing lists tightened their grip on power in March 2008 parliamentary polls, with Ahmadinejad rival and former nuclear negotiator Ali Larijani elected speaker of the house.

In November, parliament impeached interior minister Ali Kordan after just three months in the job for lying about his credentials and presenting a fake degree from Oxford University.

The scandal greatly embarrassed Ahmadinejad, who had defended his man throughout the controversy.

Kordan\’s successor, close Ahmadinejad ally Sadeq Mahsouli, was approved by just a thin margin, highlighting the conservative split.

Ahmadinejad has yet to officially announce his bid for re-election in 2009, and Tehran\’s conservative mayor Mohammad Baqer Qalibaf has been mooted as a potential candidate.

But supreme leader Ayatollah Ali Khamenei, who has the final say on all key policy issues, has expressed support for conservatives and urged Ahmadinejad to work as if he will stay in power for four more years.

In an apparent comparison with Mohammad Khatami\’s two-term reformist presidency from 1997 to 2005, Khamenei in August praised Ahmadinejad for "blocking dangerous trends of Westoxification and secularism."

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Ahmadinejad said he would wear this endorsement as a "medal of pride."

Despite giving Ahmadinejad his seal of approval, however, Khamenei also urged him to keep a tighter control on inflation.

In the reformist camp, former parliament speaker Mehdi Karroubi has confirmed his candidacy, and there has also been speculation that Khatami may seek a third term.

A major shadow hanging over the country as it heads into 2009 will be the confrontation with the West over its controversial nuclear programme. Tehran stands accused of seeking atomic weapons, a charge it denies.

In 2008, it continued to defy UN demands and pursue uranium enrichment — the process which makes nuclear fuel but can also be used to make the fissile core of an atom bomb.

Iran increased its enrichment centrifuges to more than 5,000 from 3,000 last year, despite two new UN Security Council resolutions reaffirming existing sanctions against it and calling for an enrichment freeze.

Tehran insists its nuclear programme is aimed only at producing electricity and angrily points to Israel\’s widely believed status as the sole — if undeclared — nuclear-armed nation in the Middle East.

Alarmed by Iran\’s nuclear progress, Israel has never ruled out military action to thwart Tehran\’s nuclear drive. Ahmadinejad continues to launch verbal attacks on the Jewish state, calling it a "dirty microbe" and "savage animal."

Despite the simmering tensions with arch-foe the United States, Ahmadinejad took the unprecedented step of congratulating Obama on his election.

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After three decades of outright hostility, many Iranians believe an Obama administration may help to improve relations.

In the early stages of his election campaign, Obama said he favoured unconditional direct talks with Tehran, but has since hardened his position.

"Iran\’s development of a nuclear weapon I believe is unacceptable. We have to mount an international effort to prevent that from happening," he told his first news conference after securing the US presidency.

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