Western Nations Push Iran on Policy, Diplomats Say

WHEN "condemned" writer Salman Rushdie was invited Thursday to his first meeting inside the British Foreign Office, diplomats in Tehran immediately began considering what lay behind Britain's move.

Some Western diplomats interviewed here say the British government is setting up a diplomatic confrontation to force Iran to alter its stance on a range of international issues. These include Iran's opposition to the peace negotiations between Israel and its Arab neighbors as well as the decree by the late Ayatollah Ruhollah Khomeini that sentenced Mr. Rushdie to death for his book, "The Satanic Verses."

According to these diplomats, the timing of the offensive may be linked to the fact that several foreign observers here say the Iranian government, for economic reasons, is in its weakest position in years. Iranian officials say they do not need Western financial help or a rescheduling of the $6 billion foreign debt, but they do need to expand trade with the West. And they need guarantees from Western nations that trade agreements will be fulfilled.

The leadership here is caught between a population that is demanding an increase in its standard of living and a currency shortage that does not leave much room for maneuver.

The Iranians also say their difficulties are partly caused by Western pressure. A source close to President Hashemi Rafsanjani, who spoke on condition of anonymity, said, "The currency shortage we're in is the consequence of pressures applied by the US government, or its allies, mainly Japan.

"Japan, like several other countries, would pay for their purchases of oil several months in advance. At the request of the US government, Japan canceled this agreement in August last year and decided that it would pay for its oil at the time of delivery. That's why we had a gap in our income of currencies," the source says. "Some European countries believe in the present circumstances they can extort political concessions from us, but they're wrong."

Western nations, particularly in the European Community, have long insisted that Iran drop Rushdie's death sentence. The Iranians also pose an obstacle to the US-led Middle East peace process, since Iran opposes any talks between the Israelis, whose nation they refuse to recognize, and its Arab neighbors. Iran has also supported the militant Palestinian group Hamas, a strong opponent of the peace process.

Diplomats here say the West hopes to moderate Iran's position on the peace process in exchange for a broadening of trade relations.

At the same time, the pressures coming from the Iranian population itself are strong. Ordinary Iranians are having an increasingly difficult time making ends meet, with the cost of food and housing rising as incomes remain stagnant.

Take the example of a middle-class family in Tehran. The father, a supporter of the Islamic regime, is an engineer for a government agency. Compared to other state employees, he has a comfortable salary of 35,000 tumans per month. But his wife says: "We have two children and ... we pay a monthly rent of 25,000 tumans. And on the free market, basic commodities are expensive: a kilo [2.2 pounds] of rice sells for up to 180 tumans, a kilo of meat costs 500 tumans."

To survive, the father rushes daily to a small contracting company he has formed with other engineers, and there he makes another 35,000 tumans. Even "with two salaries," he says, "I will never be able to buy a car."

The economy's main problem is that the official value of its currency is grossly overvalued: At the official rate, one US dollar is worth seven tumans, and on the open market, one dollar sells for about 150 tumans. But when a company seeks to import goods to sell on the retail market here, it is allowed to buy hard currency from the government at the official rate - often a tremendous bargain for the importers..

Iran's central bank must make up the difference between the official rate and market value of the dollar. To reverse this inequity, the government has engaged in a step-by-step devaluation of the currency; this has triggered huge rises in retail prices. Last year the soaring cost of living prompted social disturbances in several cities.

Parliament members and Supreme Leader Ayatollah Khamenei have asked Rafsanjani to slow down the pace of reforms. On Jan. 30, parliament approved a new annual budget which doesn't yet mention the rate of the devalued tuman and provides that in any case a certain amount of basic commodities will continue to be imported at the present seven-tuman rate.

Comments a European commercial attache: "The longer they wait to introduce the new devalued rial, the more money they lose. They're already [hard put to] pay for their imports. If they maintain the idea of subsidizing basic commodities, that will be yet another financial burden. I wonder how Rafsanjani will make both ends meet during the upcoming fiscal year."

A European envoy says: "That may well be why the British have decided to turn up the heat on Rafsanjani and try to force him to political concessions. That also explains why all EC countries have decided that the "dialogue with Iran will from now on be critical."