By Prof. Gawdat G. Bahgat
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First, despite almost three decades of American economic sanctions, Iran is not isolated. Shortly after the end of the war with Iraq, Iran started improving economic and diplomatic relations with most of the world under former president Akbar Hashemi Rafsanjani. This trend gained momentum under his successor, President Muhammad Khatami. Despite the growing and dominant role of the conservatives, Tehran is likely to maintain its ties with the Arab world, Asian powers, Europe, and Russia. Second, Iran’s economy suffers from structural imbalances with high rates of inflation and unemployment and heavy subsidies to basic commodities.
An important step in this direction is the application to join the World Trade Organization. For several years the United States had blocked Iran’s application to join the WTO. In March 2005, in the midst of crucial negotiations between European countries and Iran, the Bush administration decided to lift its opposition in order to bolster European diplomatic efforts. WTO membership talks normally last for several years. For these talks to succeed, Iran will have to change its domestic laws and procedures to comply with WTO rules.
This would be devastating for an economy dependent on oil exports for most of its revenue. It is important to remember that Iran’s pursuit of nuclear energy started under the shah and has been expanded under the Islamic regime. Given the strong popular and official support for the nuclear program, three conclusions can be suggested. First, regardless of the political orientation of the regime in Tehran, Iran is likely to pursue nuclear capability. Second, Iranians are adamantly insisting that their nuclear program is only for peaceful purposes.