Friday, February 22, 2013

Mordechai Kedar: The Arabs in Israel - Part I

by Mordechai Kedar

Read the article in the original עברית
Read the article in Italiano (translated by Yehudit Weisz, edited by Angelo Pezzana)

This is the first in a series of articles on the Arab sector in Israel. We intend to bring to the reader the historical background and the position of the twenty percent of the population of Israeli society that does not share the Zionist dream, but are citizens with equal rights. We will deal with obligations of these citizens later in the series. 

These issues are politically charged, and represent contradicting narratives, one Jewish, and the other, Arab. The question we will deal with is not what the Jews think about the issues, but rather what are the prevailing opinions within the Arab sector. First, it should be noted that just as there are differences of opinion within the Jewish sector, there are variances in the Arab sector, and attitudes towards the Jewish sector, the state and its institutions not only differ, but often are even polar opposites.

We begin with a description of the Arab population in Israel. To start with, I will say that there is no such thing in Israel as one "Arab sector", rather there are several Middle Eastern populations, some of which are not Arab, and they differ one from another in religion, culture, ethnic origin and historical background; therefore they do not constitute one cohesive sector. Parenthetically, it is debatable whether there is one cohesive Jewish sector in Israel. Therefore, when we use the terms "the Arab sector" and "the Jewish sector", it will be only for the sake of simplicity.

Ethnic Division

Within the Arab sector in Israel there are a number of ethnic groups who differ from each other in language, history and culture: Arabs, Africans, Armenians, Circassians and Bosnians. These groups usually do not mingle with each other, and live in separate villages or in  separate neighborhoods where a particular family predominates. For example: the Circassians in Israel are the descendants of people who came from the Caucasus to serve as officers in the Ottoman army. They live in two villages in the Galilee, Kfar Kama and Reyhaniya, and despite their being Muslim, the young people do not usually marry Arabs.
The Africans are mainly from Sudan. Some of them live as a large group in Jisr al-Zarqa and some live in family groups within Bedouin settlements in the south. They are called "Abid" from the Arabic word for "slaves". The Bosnians live in family groups in Arab villages, for example, the Bushnak family in Kfar Manda. 

The Armenians came mainly to escape the persecution that they suffered in Turkey in the days of the First World War, which culminated in the Armenian genocide of 1915. 

Cultural Division

In general, it can be said that the Arab sector is divided culturally into three main groups: urban, rural and Bedouin. Each one of these groups has its own cultural characteristics: lifestyle,  status of a given clan, education, occupation, level of income, number of children and matters connected to women, for example polygamy (multiple wives), age of marriage, matchmaking or dating customs and dress. The residents of cities - and to a great extent also the villagers - see the Bedouins as primitive, while the Bedouins see themselves as the only genuine Arabs, and in their opinion, the villagers and city folk are phony Arabs, who have lost their Arab character.

The Arabic language expresses this matter well: the meaning of the word "Arabi" is "bedouin", and some of the Bedouin tribes are called "Arab", for example "Arab al-Heib" and "Arab al-Shibli" in the North.

The Bedouins of the Negev classify themselves according to the color of their skin into "hamar" (red) and "sud" (black), and Bedouins would never marry their daughters to a man who is darker than she is, because he does not want his grandchildren to be dark-skinned. Racist? Perhaps. Another division that exists in the Negev is between tribes that have a Bedouin origin, and tribes whose livelihood is agriculture (Fellahin), who have low status. A large tribe has a higher standing than a small tribe.

Religions and Sects

The Arab sector in Israel is divided into Muslims, Christians, Druze and 'Alawites. The Christians are subdivided into several Sects: Orthodox, Catholic and Protestant, and among the Muslims, there is a distinct sect of Sufis, which has a significant presence in Baqa al-Gharbiya. There is also an interesting Salafi movement in Israel, which we will relate to later. The Islamist movement is organized along the lines of the Muslim Brotherhood and we will dedicate significant space to it in this series.

The religion of the Druze is different from Islam, and Muslims consider the Druze to be heretics. Because of this, the Druze are supposed to keep their religion secret, even from each other, and therefore most are "juhal" (ignorant - of religious matters) and only a small number of the elder men are "aukal" (knowlegable in matters of religion"). In the modern age there have been a number of books published about the Druze religion. 

The 'Alawites in Israel live in Kfar Ghajar, in the foothills of the Hermon and some live over the border in Lebanon. They are also considered heretics in Islam, and their religion is a blend (syncretism) of Shi'ite Islam, and Eastern Christianity and ancient religions that existed in the Middle East thousands of years ago. Their principle concentration is in the mountains of al-Ansariya in northwest Syria, although some are in Lebanon and some migrated southward and settled in Ghajar. The meaning of the word Ghajar in Arabic is "Gypsy", meaning foreign nomads with a different religion. In Syria the 'Alawites have ruled since 1966. The family of Asad is part of this heretical Islamic sect , and this is the reason for the Muslim objection to 'Alawite rule in Syria since according to Islam, not only do they not have the right to rule, being a minority,  but there is significant doubt as to whether they even have the right to live, being idol worshipers.

Migration to Israel

Some parts of the Arab sector are communities that have lived in the land now called the State of Israel [Translator's note: we will henceforth refer to this area as the Land] for hundreds of years, but a significant part is the offspring of immigrants who migrated to the Land mainly in the first half of the  twentieth century, especially after 1882, when Petach Tikva was established. Many people from neighboring lands migrated to the Land at that time in order to work in the Jewish farming communities. Many migrated from Egypt even before, in order to escape from being impressed into forced labor as the Suez canal was being dug. This is how the al-Masri,  Masarwa and Fiumi families as well as many others
came to the Land, with names that testify to their Egyptian source. Other families have Jordanian names (Zarkawi and Karaki, for example), from Syria (al-Hourani, Halabi) from Lebanon (Surani, Sidawi, Trabulsi) and from Iraq (al-Iraqi).

The Arabic dialect spoken by most of the Bedouins in the Negev is a Saudi-Jordanian dialect, and because of their familial ties to tribes living in Jordan, when the Bedouins become involved in matters of blood-vengeance, they escape to family members who live in Jordan. The connection between Arab families in Israel with groups in neighboring countries should not be surprising, because until 1948 the borders of Israel were not hermetically sealed, and many Arabs of "Sham" (Greater Syria) wandered in
to the Land almost totally unimpeded, following their flocks and the expanding employment opportunities .

Traditional vs. Modern

The division between traditional and modern outlooks exists in each of the other groups, meaning that in each group indicated above there is a subdivision: those who are more connected to the tradition of the group and those who are less connected. Among the young, one sees more openness and less adherence to group tradition, and it can be assumed that the young of the next generation will generally adhere  even less to group's traditions. This is obvious among the Bedouin groups, because among the young there are more than a few who challenge the socially accepted ways of the Bedouin.

Education also plays an important role in the changing attitude toward tradition, because Arab academics are usually less linked to social tradition and the framework of the clan and live more within the framework of nuclear families (father, mother and children). They also tend to move to more open areas such as mixed cities (Acre, Ramla and Lod) and even to Jewish cities, such as Be'er Sheva, Karmiel,  and Upper Nazareth) and adopt a modern life-style. 

The shift to the city is also connected to a change in the source of livelihood - there are more in the independent professions and less in agriculture - a change that was due partly to the confiscation of the lands of absentees after the War of Independence.

Division by Gender

As in every other society in the world, there is tension between men and women among the groups that make up the Arab sector in Israel.  Tension exists regarding issues of gender such as the rights of women to learn, to work, to choose a mate, freedom of behavior, the age of marriage and number of children. The tension between men and women that exists in the Bedouin groups is different from that which exists in the villages and the cities, because of the difference in exposure to the Jewish sector, in education and methods of earning a livelihood that exist between the various segments of the Arab sector.

Basic Differences between the Jewish and Arab sectors

Beyond the religious dividing line in Israel that differentiates Jews and non-Jews, another basic division exists between the Jewish and Arab sectors in their approach - in general - to the state. For most of the groups within the Jewish sector, the State of Israel fulfills two roles: one is the political and governmental embodiment of the aspirations of the Jews to return to themselves and regain the independence and sovereignty over the Land of their fathers that was stolen from them after the destruction of the Second Temple. The symbols of the state are Jewish, such as the national anthem, which includes the words "the Jewish soul yearns", the flag which represents the prayer shawl, the Shield of David and the seven-branched menorah, the Hebrew language is the official language of the state, on the Jewish holidays, the governmental institutions are closed, and thus the state bears Jewish genes. 

The second role of the State of Israel in the eyes of most Jews is functional: to provide its citizens with security, employment, livelihood, health, education, roads, bridges and social services.

For the Arab sector, the first role does not exist; the State of Israel is not the embodiment of their diplomatic and political dreams. The national anthem is not their hymn, the symbols of the state are not their symbols, and our Independence Day is their "Nakba" (disaster). The second role as well, the functional, is only partially fulfilled by the state in matters of education, planning, roads and infrastructure. One may argue about the causes and reasons, but the facts are clear: How many Arab Members of the boards of directors of government companies are there? How may Arab judges are there in the High Court? What is the proportion of Arabs in the academic staff of universities?

But on the other hand, one cannot ignore the phenomenon of "reverse discrimination" either: laws of planning and building, that are observed almost fully within the Jewish sector, are very loosely observed within the Arab sector, especially in the Bedouin sector in the Negev. How many thousands of buildings have been built in the Negev without building permits on land that does not belong to Bedouins? How is it that there are no sidewalks in Um al-Fahm and the distance between the buildings is about the width of the cars?

Another example of reverse discrimination exists in the area of marriage: if a Jew dares to marry a woman before he has completed the process of divorce from his present wife he will find himself behind bars, like the singer Mati Kaspi. But if an Arab marries a second, third or fourth wife, the state pays a monthly children's allowance for each wife separately and without asking too many questions. 

Another case of discrimination in favor of Arabs exists in the area of housing: in the Jewish sector about ninety percent are residents of apartments and about ten percent live in private houses. In the Arab sector the picture is the reverse: more than ninety percent live in private homes, and less than a tenth live in apartments.

But the characteristic that most unites the Arab sector in Israel is the environment that they live in: All the Arabs in the world live in one of two situations: Either in dictatorships in their homeland, or in dictatorships in the diaspora. There is almost no Arab community in the world that lives in its homeland for tens of years in a truly democratic state. The Arab citizens of Israel are the only Arab group that lives on its land (especially if you ignore the lands from which they originated) in a democratic regime that honors human rights and political freedoms. This is the reason that Arabs outside of Israel envy the Arab citizens of Israel and call them "Arab al-Zibda", or "whipped cream Arabs".


Dr. Kedar is available for lectures

Dr. Mordechai Kedar
( is an Israeli scholar of Arabic and Islam, a lecturer at Bar-Ilan University and the director of the Center for the Study of the Middle East and Islam (under formation), Bar Ilan University, Israel. He specializes in Islamic ideology and movements, the political discourse of Arab countries, the Arabic mass media, and the Syrian domestic arena.

Translated from Hebrew by Sally Zahav with permission from the author.

Additional articles by Dr. Kedar

Source: The article is published in the framework of the Center for the Study of the Middle East and Islam (under formation), Bar Ilan University, Israel. Also published in Makor Rishon, a Hebrew weekly newspaper.
Copyright - Original materials copyright (c) by the author.

The Endgame for the Destruction of the United States

by Daren Jonescu

See also Part One:  Total Destruction of the U.S.: An Interview with Larry Grathwohl and Part Two: American Education: Rotting the Country from the Inside

In Part 1 of this interview with former FBI operative Larry Grathwohl, we addressed the goals and methods of the Weatherman organization and debunked recent attempts to dismiss their words and activities as "youthful folly" or "typical of those days."  In Part 2, we discussed the continuity of purpose connecting the murderous radicalism of the Weather Underground leadership with the progressive education and social justice advocacy of the "mature," "respectable" Ayers, Dohrn, Machtinger, Boudin, and others.

Here in the final installment, I ask Grathwohl about the alarming cognitive dissonance of today's Middle America in the throes of the "fundamental transformation" promised by Barack Obama, facilitated by the progressive education and legal establishments, and put into practice by federal agency appointees, colleges of education, union leaders, and bureaucrats with established leftist pedigrees.

As an example of this dissonance, consider an American colleague of mine here in Korea: a friendly, down-to-earth, educated family man in his early thirties, and a teacher by profession.  On the eve of the 2012 election, I asked him whether it bothered him that Barack Obama had been so strongly endorsed by the Communist Party.  He said he had never heard of that.  When I explained that the Party's official endorsement cited Obama's signature policy initiatives as the surest means to achieving socialism in America, and that CPUSA leaders were actively campaigning for Obama in swing states, my colleague fell silent for a moment, and then said, matter-of-factly, "It doesn't really bother me; I guess it might bother me if Obama were endorsing the Communist Party, but if they're endorsing him, it doesn't matter."

I leave you with that thought, by way of introduction to Part 3 of my conversation with Larry Grathwohl.

DJ: The Communist Party USA has officially endorsed and vocally supported President Obama, and his administration has included several people with well-known Marxist or Maoist views and affiliations.  And yet most people, including many so-called conservatives, shy away from this entire subject area, and they practically run for the hills when anyone mentions Bill Ayers, re-education camps, or communism in connection with current political events.  

Why do you think there is such discomfort among Americans, including supposed conservatives, when confronted with this issue?

LG: To answer this question in a word, I would say "political correctness."  Today we live in a world where people are afraid to discuss issues of importance due to a concern that they might say something wrong.  We have a society where people can be condemned for being on the wrong side of an issue, especially if you're in a position where you could be labeled as a racist or an individual who has no sensitivity towards those who are in some way in need.  Today, [concern about] Marxism is out of vogue, and the Chinese are our friends and are lending us money in order for our government to continue to exist.  How can you question this?  Conservatives are afraid of being labeled as mean or uncaring and want to maintain a civil image in the midst of this chaos and confusion.  Senator McCain during the 2008 presidential campaign refused to confront Barack Obama regarding his ties to Bill Ayers the unrepentant terrorist.  When others brought up the possibility of Obama's connection to the Muslim world, McCain became angry and turned away.  By doing so, he negated any possibility of forcing the two-year member of the Senate to explain his sympathetic positions towards Islamic terrorism and the domestic terrorism that his friend Bill Ayers had participated in [during] the '70s and the '80s. 

Basically, this is the problem we face today.  If you criticize the president for any of his policies, you are racist, and your argument ends.  There aren't defenses for these kinds of accusations, and it completely eliminates any possibility of discussion and compromise.  This works wonderfully for the Democrats and their policies, and it puts the Republicans and conservatives in very un-defensible positions.  The bravery or whatever you care to call it simply no longer exists [when] people who are involved in the political process are more concerned with the next election than they are with what's best and right for America.  I often wonder what would've happened during the Revolutionary War if people of this stature were to be the ones we were dependent upon to defeat the British.  I wonder if this tendency can be overcome or eliminated.

DJ: How frustrating is it for you, having seen what you have seen, to encounter this kind of reluctance from people who should be your allies?

LG: While I do have some allies, which includes those who have the courage to speak the truth and to stand up for what's right, the fact is that it is extremely frustrating that people are simply unable to recognize the truth when it is presented to them along with the evidence which exists in the WU's activities, writings, and continued attack on our institutions.  As for me, the frustration is simply a greater motivation to accomplish my mission of enlightening people as to the true goals and objectives of the WU and the means that they used in their attempt to achieve the destruction of the United States.

DJ: Many people dispute President Obama's claim that Bill Ayers was just "a guy in my neighborhood."  And Ayers himself has spoken of being ecstatic when Obama was elected in 2008.  What connection or consistency do you see between the goals and/or methods pursued or promoted by the WU and those pursued and promoted by the Obama administration?

LG: The goals and objectives of these two individuals are the same.  Bill Ayers tried first to destroy this country through violence.  Having failed, the WU determined to accomplish this through the system and in my opinion Barack Obama was recruited as a means to accomplish this goal. ...

The connections between Barack and Bill include having shared an office for at least three years in Chicago, being co-members on two boards in which Barack was the chairman, and one of which was called the Annenberg Challenge[, which] was charged with the dissemination of approximately $100 million to educational institutions in the Chicago area.  Bill Ayers has been associated with the writing of Barack's book, Dreams from My Father, through content analysis, and on three occasions Bill has admitted that he wrote this book and then later retracted his comments.  It would seem apparent to me that individuals who have been this closely associated through many years have a common knowledge [of] one another's political aims and goals.  This can only mean that they are in agreement, and while Bill has utilized the educational system to further his objective, Barack Obama has chosen politics.  Keep in mind that Barack Obama's first political fundraiser was held at Bill's and Bernardine's home while Barack was running for the Illinois state legislature.  This is his first fundraiser, and Bill and Bernardine are involved -- can there be any doubt as to the extent of the relationship that exists between these individuals?

Obama is in the process of attacking all institutions of our society and government, [including] the First Amendment by stating that it's the conservative media that keeps the Republicans from negotiating with him; the Second Amendment [through] his attempts to impose restrictions on gun ownership, procurement of ammunition, and whatever other means he can devise; and lastly, there is his attack on the freedom of religion by trying to impose birth control and abortion under the Obama health care act on churches who run such institutions as hospitals, schools, rests homes, and other services.

DJ: You have spent a good portion of your life trying to warn Americans about the specific intentions of the young leftist radicals of the late 1960s.  How do you answer people who might say that those leftists are older now, their radical days are in the past, and there is no longer anything to worry about from them?

LG: The fact is, Bill Ayers and many of his comrades from those days of strategic sabotage in the underground movement have not changed their goal or their purpose.  Bill has made this very clear in his book, Fugitive Days, in which he makes no apology for the death and destruction the WU were responsible for and even seems to revel in what he perceives as the glory of the revolution.  In his book Underground, Mark Rudd also makes no apologies for his activities and even admits prior knowledge to the bomb factory in Greenwich Village in which three members of the WU were killed.  He states that Terry Robbins had told him of the purpose of their bomb creations and that they were to be used at Fort Dix, New Jersey during an enlisted men's dance and at the officers' club.  These bombs were adulterated with fence staples and roofing nails, whose purpose can only be to inflict as much death and injury as possible.  There are many other individuals from the WU who have written books and also regret only that they did not succeed or that they didn't do enough.  Some individuals were involved in a Brinks armored car robbery during which two policemen and a Brinks guard were killed.  Kathy Boudin is no longer behind bars, but her husband, accomplice David Gilbert, is still in jail and writing books about love and the revolution and has many supporters [who are] trying to get him released to this very day.

It simply cannot be said that these people have allowed the last three or four decades to change their political beliefs or political goals.  Instead, they have been involved with the Occupy Wall Street movement and the encouragement of young people to defy authority and to create as much chaos and turmoil as possible.  Bill has actually attended Occupy meetings during which he instructed individuals on how to accomplish the most destruction of property and confrontation with authority and in a way that makes it appear as if they are the victims.  This I know for a fact, as people who are friendly to me and have attended some of these meetings have reported these facts.

Van Jones, who was appointed as the green jobs czar by President Obama, is very active [in the] political movement in the Bay Area, particularly in Oakland and Berkeley.  He has associations with Bill Ayers and has attended Occupy meetings in which they were both in attendance. 

It is simply impossible to conclude that any of these people have in any way, shape, or form been influenced to change their political beliefs or their goal and objectives by the passage of time.  They still believe that the United States is the root of all evil and must be destroyed, whatever it takes.  Innocent lives or genuine disagreement is not a qualification for being spared, and it is my belief that Bill and people who follow Bill are consumed with this hatred for this country and a desire to be in control of life and death, and this may be the underlying reason for the personality disorders they obviously suffer from.

Author's concluding note: Larry Grathwohl provides powerful witness to the hatred the Weathermen bear for the United States as founded, and their utter disregard for human life in pursuing their transformative agenda.  I do not believe that Grathwohl's perspective is infallible any more than I believe that of anyone else.  I do believe, however, that he speaks sincerely, and from a deep understanding of the minds and hearts of the Weather Underground radicals.  

Rational observers know that Ayers's relationship with Obama is much more developed than either man has publicly acknowledged.  And it is undeniable that these two progressive "reformers" have achieved a degree of mainstream success and influence in their respective fields of endeavor, education, and politics that would have been inconceivable a hundred years ago, when Ayers's educational role model, John Dewey, was beginning progressivism's long march through the souls of America's children.  A century of progressive schooling made Barack Obama's presidency possible.  In turn, with a president openly bent on transforming America according to a collectivist "social justice" agenda, public education itself, under the leadership of Ayers and his colleagues, may reveal itself ever more fully as the socialist indoctrination center Dewey could only dream and scheme of.  

As Grathwohl warns, Ayers is urging followers to see that they are "very close to accomplishing their mission of changing America forever."  The circle envisioned by early Western progressive intellectuals such as Antonio Gramsci is almost complete: government schools prepare the souls of men for subservience and dependency, and the progressive intelligentsia churn out attractive demagogues to appeal to this forcibly debased population's need for a provider.  Eventually, all that is preserved of the history of modern liberty will be the veneer of democracy masking the tyrannical structure beneath, as an emasculated humanity "freely chooses" its own slave masters.

Daren Jonescu


Copyright - Original materials copyright (c) by the authors.

Israel and the Sad History of Jewish Property Rights

by Benjamin Manaster


After reading Jan Gross’s “Golden Harvest,” the Polish historian’s ground breaking study of the Holocaust, I began to understand what for so long had perplexed me — how it is that so many people feel impelled to weigh in on the affairs of Israel and the Jews.    While murder and mayhem remains a constant in the world, no other nation attracts so much critical attention.  (The United Nations has passed far more resolutions with respect to the state of Israel than the rest of the world combined.) And in a remarkable display of moral hubris, the heirs and descendants of those who extinguished their Jewish populations in the forties have felt themselves entitled to render moral judgment on the survivors and their progeny.

Jews for millennia were spurned as Christ-killers and heretics by Church and Mosque respectively and denied standing in the communities where they lived.  While rejecting Judaism itself, the Christian Church laid claim to the Jewish Bible, which it annexed, abridged, and renamed the “Old Testament.”  And over time the Christian world came to regard as patrimony whatever else the Jews possessed. (Islam in its ascendance picked up where Christianity left off.) To this day the mainstream Protestant churches in America stand foursquare with Fatah and Hamas, averring the Palestinian cause and condemning Israel.  Jew killing has never been a moral problem for them, but the Jewish claim to the land of Israel disturbs them deeply.

Landless for two thousand years, dependant on the reticence of peoples ill-disposed toward them, Jews survived precariously, lorded over by gentile “hosts” in societies that were variously hostile.  When so inclined, their hosts would confiscate their property, issuing and enforcing decrees against them. Subject to the will and whim of others, Jews remained dependant on their sufferance and largesse.  As tenant farmers and as tradesmen, they owned only what was allotted them, allotments that could be reduced or removed, dispossessing them at will.  At times dispossession would encompass their very existence – witness the Crusades, the Inquisition, innumerable pogroms, and, ultimately, the Shoah.   A sense of entitlement seems to have passed into the DNA of formerly host societies, and continues in altered form until this day – e.g., the violent hostility of the Arab/Persian world which remains at war with Israel and the turpitude of Western nations who support or excuse it.    Even in our own time, Europeans afford themselves a privileged position with respect to Jewish interests, threatening and cajoling Israel to redistribute its property to its enemies.

Financially reliant on petro-dollars, the West in its cupidity has chosen to appease the Arabs and support them in their conflict with Israel, no matter that Arab hatred of the Christian West runs second only to their Jew hatred.  Islam’s jihadist ambitions and its utter rejection of a Jewish or Christian presence in the Middle East are inconvenient truths suppressed to win favor with the Arabs for their oil money.

But in spite of their great wealth, Arab societies are in a shambles, and, who better to blame for it than Jews?  At the heart of the Arab-Israeli conflict are generations of impoverished refugees living shiftless lives on United Nations handouts for more than sixty years.  They are portrayed as victims, no more responsible for themselves than children.  (A comparable number of Middle Eastern Jews fled persecution in their home countries and found refuge in Israel where they were absorbed and integrated into the fabric of the country.)  The wealthy Arabs states, without the least diminution in their lavish lifestyle, could have transformed the condition of their poor relations but chose instead to “drive the Jews into the sea.” Oil rich Arabia dwarfs Israel physically and economically, but it is Israel that is held responsible for Arab poverty, just as Jews for centuries were held responsible for crises in the West.  The “Zionist Entity” with its “settlements” is the moral culprit, and justice demands that, “like a cancer,” it be cut out. The benighted ways and terroristic activities of the Arabs are excused or rationalized away.  Israel’s refusal to cede its heartland is “the main obstacle to peace.”

A nomadic people, Arabs for centuries moved hither and yon throughout the Middle East.  Only with the arrival of the British and the development of a Jewish homeland did some claim an identity related to the sparsely populated area called “Palestine,” originally a Roman appellation.  The wealthy Arab states, which deflect dissent by inveighing against Israel, decry the suggestion that a place for their brethren could be found elsewhere in the vast land mass of the Middle East.

From his research, Gross learned that the nations (primarily Poland in his work but all of Europe by implication) regarded the existential situation of the Jews as theirs to determine.    Those to whom Jews were required to answer, be they German or Pole or Russian or Ukrainian or Italian or Greek or Spanish or Turk (to name some of the more significant actors in their long and tragic history), could deny them acceptance and remove whatever security they enjoyed.  Indeed, their status could be altered at will, even when they had been living in a locale for centuries.  Whatever the Jews possessed could be taken and they themselves sent packing.  Without moral or legal standing, their possessions could be absorbed as common property.  The host giveth, the host taketh.

Gross illustrates this point with examples from the war years in Poland where Jews were often blackmailed by their so called protectors – Poles who, for their own reasons, hid them.   According to his research, extortion for safe keeping was not at all exceptional.  The major motivation of “benefactors” was to gain access to the hidden property of Jewish victims.  (It was an axiom of belief that even the most impoverished of Jews had hidden away riches.)  And when Jews resisted their demands, their Polish protectors took umbrage — threatened them with violence or betrayal to the Germans.  Since the Jews were doomed and defenseless, their stubborn hold out was denying Poles their due.  Polish Jews were favoring the Germans over their fellow countrymen.  And, for many Europeans, Jewish “intransigence” is a source of consternation to this day.  They are much displeased when “shitty little Israel” will not jump at their command.

Of course, not all Europeans are hostile and certainly the majority of the American people hold Israel in high esteem — a loyal friend who shares their deepest values.  But Europeans generally, as well as Arab sympathizers in this country, demand that Judea (from which the Jews derive their name) and Samaria — lands documented in the holy books of both Judaism and Christianity, and recorded in the annals of history as theirs for three thousand years — be surrendered to their enemy. For its recalcitrance, Israel is threatened with economic reprisals and denounced in international forums.  Some Europeans regard the very existence of Israel as an injustice — an insult to their moral sensibilities.  They embrace the Arab narrative with respect to “Palestine,” a narrative that denies the historic connection of Jews to their ancient land. Wars and mass murders committed by the Arabs give them no pause.   Like Poles, Ukrainians, and Baltic people in the forties, so-called peace organizers support these self-confessed killers and organize public protests on their behalf.  Jews must surrender the land, i.e. the real property of their people.  Refusal, their critics claim, is pointless.  Surrender is inevitable.  Israel will perish if it does not give way.  (They know what’s best for Jews.  They always have.)   The land in question, including much of Jerusalem and its environs, will be redistributed to “displaced Arabs” who have been dealt a perceived injustice.  Under certain circumstances, Jews might be permitted to retain a small portion of their ill-gotten gain.  (When a gain is Jewish, it is ill-gotten by definition.)

In the star chamber of world politics, the privileges of ownership are available to some and not others — Israel in particular.  Its de-legitimization by the Left, abetted often by Jewish leftists, fits well with the Left’s disparagement of property rights in general.  Arab failure, in repeated attempts, to destroy Israel and rid the region of its Jewish presence elicits their sympathy.  Immersed in relativism and empathetic to all forms of failure, they accept Palestinian Arab claims ipso facto and dismiss those of the Israelis.   Israel’s improbable success and contributions to the world at large make it all the more troubling in their eyes.  Though the existential threat to it from Iran grows by the day, it fails to arouse their concern.   Jewish tragic history has been relegated to a footnote and deemed no longer relevant, Jewish survival a parochial anomaly with no place on their “universal” agenda.  The success of capitalist Israel, thriving in the face of worldwide opposition, adds insult to the injury suffered by the Arabs.  For the Left, pacifism, gay marriage and unlimited abortion occupy the moral high ground.  Jewish land is an oxymoron, a Zionist pipedream, internationally condemned to requisition and redistribution by the United Nations.  Alas, the “holy land” belongs neither to Jew nor Arab, but is the common property of any and all people.

Benjamin Manaster


Copyright - Original materials copyright (c) by the authors.

The Ahmadinejad—Azhar Row Escalates

by Waleed Abdul Rahman

Cairo, Asharq Al-Awsat—Statements by Ahmed Mousavi, Iranian presidential adviser and Director of the Haj and Pilgrimage Organization (HMO), on President Mahmoud Ahmadinejad’s recent visit to Cairo provoked serious controversy in Egypt earlier this week. Mousavi was talking about the contentious meeting that took place between Iranian President Ahmadinejad and Al-Azhar Grand Sheikh Ahmed Al-Tayeb against the backdrop of the 12th Organization of the Islamic Cooperation (OIC) Conference in Cairo.

Mousavi’s statements were published on Iran’s Fars News Agency’s Arabic language website on Wednesday under the headline “Unpublished details on the president’s discussions with Al-Azhar professors.” It contained a different account of the contentious meeting to the one reported in the Egyptian press between the Iranian president and Al-Azhar Grand Sheikh, and the equally difficult press conference that followed this closed-door meeting.

Fars News Agency quoted Mousavi as saying, “Following the end of the Iranian delegation’s meeting with the Al-Azhar Grand Sheikh, the Iranian president had not been scheduled to hold a press conference.”

The Iranian presidential adviser, who accompanied Ahmadinejad on the Cairo trip, revealed, “When we left the meeting we were confronted by a crowd of journalists. I was standing next to the president during the press conference in case he needed any translation . . . During the press conference I felt that everything was orchestrated and there were those who wanted to reveal what was discussed during the Al-Azhar meeting in order to embarrass the president.”

Al-Azhar issued an official statement yesterday responding to Mousavi’s allegations. The statement read, “Al-Azhar has a single viewpoint and discourse and transparency is our guide. The allegation that this press conference was a surprise is not correct, and the Iranian chief protocol office or ambassador could have acted to clarify the nature of this press conference to the journalists. This is the business of the Iranian delegation, and Al-Azhar, which is well aware of the rights of guests and Islamic manners, has nothing to do with this.”

Iranian complaints regarding the press conference seem to focus on the person of Al-Azhar spokesman Sheikh Hassan El-Shafei, who represented Grand Sheikh Al-Tayeb. However, the Al-Azhar statement stressed that “The meeting took place with absolute sincerity and transparency and the press conference took place in the same spirit and President Ahmadinejad shook Dr. Hassan El-Shafei’s hand.”

However Mousavi opined that this press conference was an attempt to raise the issue of Sunni—Shiite problems and the Syrian crisis, adding “this led us to threaten to walk out of the press conference if contentious issues were raised in public.”

The Al-Azhar statement revealed, “The Iranian president expressed a desire to visit Al-Azhar and meet with Grand Sheikh Dr. Ahmed Al-Tayeb and a group of senior scholars. Following the meeting the visiting president and his entourage, including the chief protocol officer, were told that the Grand Sheikh does not take part in press conferences and that his senior adviser, Hassan El-Shafei, would be representing him. Both the chief protocol officer and the president accepted this and they—the Iranian delegation and El-Shafei—went to the press conference together.”

Asharq Al-Awsat attempted to contact members of Al-Azhar’s Senior Scholars committee, but they refused to comment on Mousavi’s allegations.

A source within Al-Azhar, speaking to Asharq Al-Awsat on the condition of anonymity, revealed the real reason behind the Iranian delegation’s anger. The source said, “The Iranian President resented Dr. Hassan El-Shafei’s criticism of Iran’s desire to spread Shiism in Egypt.”

He added, “Ahmadinejad and El-Shafei entered a private conversation and the Al-Azhar Grand Sheikh’s adviser spoke candidly, saying: We feel sadness about what we always hear regarding insults towards the Companions of the Prophet and the mothers of the believers and this is something that we completely reject.’”

The source revealed that El-Shafei criticized Tehran’s desire to promote Shiism in Egypt, characterizing Egypt as a historical “bastion of Sunni Islam.”

The Al-Azhar source also informed Asharq Al-Awsat, “El-Shafei continued his strong words until Ahmadinejad interrupted him in Arabic, saying: We agreed on unity and fraternity.”

He said, “The real reason for the Iranian president’s anger is his objection to the statement issued by Al-Azhar which was published in local and international media outlets . . . this is the same statement that was read out by El-Shafei and which included the points of contention raised by the Grand Sheikh during his meeting with Ahmadinejad.”

The Al-Azhar source added, “This should have been a closed-door meeting with nobody knowing what was discussed. Some have described these points of contention as the ‘four no’s', namely non-interference in Gulf affairs, including respecting Bahrain as a sisterly Arab state, rejecting Shiite expansionism in Sunni states, putting an end to the bloodshed in Syria and ensuring that it becomes safe and secure, and granting the Sunnis in Iran their complete rights.”

The source also revealed that Ahmadinejad was angered by the number of satellite television channels present immediately after his meeting with the Al-Azhar Grand Sheikh, adding that the Iranian delegation was not expecting to hold such a large press conference. The Al-Azhar source claimed that Ahmadinejad thought that his meeting with Al-Tayeb would be followed by a small-scale press conference where the talk would focus on Egyptian – Iranian relations.

Following this contentious meeting and press conference at Al-Azhar, Ahmadinejad visited Cairo’s Al-Hussein mosque where he was confronted by a number of Egyptian and Syrian protesters, of of whom attempting to hit him with a shoe.

However Mousavi told Fars News, “I and other members of the delegation did not see anybody trying to throw a shoe (at Ahmadinejad), but we enjoyed a standing ovation from the Egyptians during our visit of some districts such as the Ras Al Hussein district.”

He added, “The only protester we saw was one reporter at a gathering at the Iranian embassy where Ahmadinejad was present, however this is normal.”

The Iranian presidential adviser stressed, “In any case, the Iranian delegation’s visit to Egypt was very useful and constructive.” He emphasized, “In my point of view, the message of the Islamic Republic of Iran reached the ears of the Egyptian people during our visit.”

Waleed Abdul Rahman


Copyright - Original materials copyright (c) by the authors.

Iranian Terror Plots Against Israelis Exposed in Nigeria, Cyprus

by Amir Mizroch and News Agencies

The two disrupted terror plots are the latest in a string of attacks, some foiled, others not, hatched by Iran against Israeli targets around the globe, including in India, Bulgaria, Thailand, Kenya and Azerbaijan • Hezbollah agents use Australian, Canadian, Swedish passports to travel in Europe.

The attack in Burgas, Bulgaria. Are similar attacks in the making in Cyprus?

Amir Mizroch and News Agencies


Copyright - Original materials copyright (c) by the authors.

The Case for Carson

by Bruce Walker

The buzz surrounding Dr. Ben Carson is loud and growing...but is it merited?

The Republican Party has been looking for its "Great Black Hope" since J.C. Watts almost twenty years ago.   There are solid logical reasons why black America ought to reject the slavery of leftism: violent crime, social decay, broken educational systems, and limp economic growth all hurt blacks more than they hurt other Americans.

The black conservative movement has produced some significant spokesmen: Dr. Thomas Sowell may be the greatest social historian alive; Lynn Swan is among the greatest pass receivers in football history; Condi Rice is a brilliant academician with grace notes of musical brilliance; Herman Cain is a successful businessman who could speak clearly about the economic problems of America.   

Black leftists, by contrast, tend to be like Obama: they owe everything to leftism and shrivel into insignificance without the artificial environment of the left's hothouse.  These black Americans believe that the successful cannot have achieved anything through merit, because these propped up nabobs have achieved nothing themselves.

Inordinately, these black leftists, like all leftists, tend to be drawn from academia (where real merit is brutally punished, but groupthink is richly rewarded), from the legal system (where the more surreal the rhetoric, the more serious the attention) or from the hoary hosts of political insiders (which allow even the vainest mediocrities, like Al Gore, to be feted and flattered).

Benjamin Carson is almost the utter antithesis of these sorts.  He has succeeded in a field in which only true intelligence, rigorous discipline, and the toughest work ethic matter.  Perhaps no black conservative in America has his unique combination of talents and experience.  When credibility with conservatives in America is vital to our success in future elections, Carson resembles another conservative who is rightly regarded as completely trustworthy: Senator Tom Coburn. 

These physicians have no reason to sate their egos with political cosmetics; they have held human life in their hands and healed it.  Carson, like Coburn, is a healer who holds deep religious convictions without appearing or sounding preachy or phony.  Many conservatives would have loved to see Tom Coburn run for president.  He won't -- Coburn is not really politically ambitious at all -- but Benjamin Carson offers all of the reassurance to conservatives that Coburn would offer.

Carson, like Coburn, is almost impossible to demonize.  Recall that candidate Obama in early 2008 said:
The fact is, is that I'm also friendly with Tom Coburn, one of the most conservative Republicans in the United States Senate, who during his campaign once said that it might be appropriate to apply the death penalty to those who carried out abortions.
Gallup Polls show doctors among the most respected of all professions (70% approval), with only two more respected professions: nurses and pharmacists.  For reference, lawyers come in at 19% approval and labor leaders at 18% -- the same class as business leaders (18% approval) and stockbrokers (12% approval).

Forbes actually showed doctors as more admired than nurses, with only firefighters more well-thought of by Americans.  Angus Reid, conducting the same sort of study in Britain, found almost identical results.  People trust doctors and others in the healing arts a great deal, and people view lawyers, labor and business leaders, politicians, and lobbyists as phonies seeking their own gain.

If Doctor Carson heard God's call to run for president -- and it would have to be that, I am certain, to move him -- then he will be an healer who has always been a healer, a man of faith whose life is a modern-day Horatio Alger story, running against the next boring, self-obsessed political insider in the Democrat Party to snatch the party's nomination from sibling sharks. 

Very likely it would be a black Republican running against a white Democrat.  It would be a true expert in health care detailing the failures of ObamaCare to a pompous policy wonk who doesn't live in the real world.  It would be a patriot in love with America running against the latest leftist to snicker at the rubes of "Flyover Country." 

Is Carson too old to serve two terms?  He would be four years younger than Reagan when the Gipper won in 1980.  Is there a downside to Benjamin Carson?  It is the same downside that every strong conservative in America politics owns: the left will hate him.  Carson, though, has learned to overcome bile and bigotry and rise above it all.

No, it appears, at least for now, that there is no downside at all to a candidate Carson or a President Carson.  Everything in his life, including this last duty of honor to his country and his faith, has been real.  He is, too.

Bruce Walker


Copyright - Original materials copyright (c) by the authors.

The Collapse of Iran's Rial

by Steven Plaut

The Iranian banking system is rife with corruption and embezzlement. Of loans to public entities, over 90% are non-performing. The Ayatollahs seem to understand that the real threat to their hold on power comes from Iranians on the street and in the bazaar – people who understand that the government, not sanctions, has ruined the country's economy.
"Wealth comes like a turtle and goes away like a gazelle." -- Persian Proverb

The Iranian economy has been imploding, at times even nudging news of Iran's nuclear program off of the front pages. In the first ten months of 2012, the Iranian currency, the rial, lost more than 80% of its exchange value. In a single day on October 1, 2012, it dropped by 15%, and, after a brief reprieve, resumed its trend downwards in early 2013. At least one commentator has compared Iran's economic meltdown with that in Zimbabwe.[1]

Although many, including in the media, have interpreted Iran's economic woes as proof that economic sanctions are at last "working," there are reasons to believe that the economic disaster inside Iran has little, if anything, to do with the sanctions, and -- more generally -- that sanctions cannot possibly "work" against Iran. The collapse of the Iranian currency is largely the byproduct of internal Iranian economic policy.

During the 1990s, long before the current bout of sanctions, the government found itself unable to service its debt, and there were debt "reschedulings," actually partial defaults. In 1993 a particularly severe balance of payments crisis was accompanied by rapid depreciation of the currency and large increases in money printing.[2]

Under the Shah, the rial had been pegged to the dollar at a rate of 68.73 rials to the dollar. The current account of Iran's balance of payments was generally in surplus, with Iran earning more foreign exchange, including from US aid, than it spent. By 1978, with the Ayatollahs in control, the rate was 71.46.

Over the next twenty-one years, the rial lost 99.2% of its exchange value against the dollar, reaching 9430 rials to the dollar in July 1999. This massive loss had nothing at all to do with "sanctions," although a few half-hearted sanctions were imposed by the US in 1995 in response to Iranian terrorism. Once the 1978-9 hostage crisis was resolved, there were no sanctions to speak of against Iran. Even the long war between Iran and Iraq, during which Iran ran up $30 billion in foreign debts, produced none of the losses in the exchange value of the rial. The rial actually rose slightly in value during the eight years of the war, ending at about 68.6 to the dollar. The collapse of the rial came after the war.[3]

What produced the massive depreciations was galloping Iranian inflation, produced by hyperactive printing of money by the Iranian government.[4] According to the IMF, "The role of money (in Iran) is prevalent in determining the price level in the long run."[5] The consumer price index, the usual measure of inflation, tripled between 2004 and 2011, and that is according to the distorted official statistics, which are clearly gross under-estimates.
The immediate trigger to the acceleration in the rate of depreciation of the rial appears to be the change in the governmental subsidization program. Like other Middle East countries, Iran has attempted to buy domestic tranquility by subsidizing the prices of "basic" foods.[6] Eventually the drain on the public purse becomes too severe and the government is forced to reduce subsidies and raise food prices. This invariably leads to political unrest. (The French Revolution was largely triggered by similar subsidization-then-cancellation financing schemes by Louis XVI.) The "Arab Spring" riots began in Tunisia when food subsidies were slashed; the unrest spread from there to much of the rest of the Arab world.

On December 18, 2012, the Iranian government eliminated food and energy subsidies (including to electricity consumption).[7] Petrol prices before the reform were only about 40 US cents to the gallon. The government attempted to buy the cooperation of the public by granting almost all consumers in Iran a cash grant in lieu of the higher prices for food and utilities. 50% of the loss in purchasing power was supposed to be restored to consumers by the government in what it was calling "targeted subsidies." Close to 80% of Iran's population was granted unrestricted access to compensatory payments that had been deposited in specially created bank accounts. 7000 Iranian corporations also received the "targeted subsidy." According to Prof. Meir Litvak, director of the Center for Iranian Studies at Tel Aviv University, "Until two years ago, the Iranians spent $90 billion a year on subsidies for food and fuel. Today, they spend a similar sum on monthly compensation payments to low-income families. This compensation cancels out the savings achieved by the abolition of the subsidies."[8]

Macroeconomics professors routinely conduct thought experiments with their students about what would happen if a giant helicopter were simply to dump money cash down upon all the consumers in a society, but it is doubtful any other country before Iran has tried to apply the idea literally. There is some evidence that the "experiment" has resulted in widening gaps in wealth and income across Iranian social classes. [[9] Possibly the wealthier and better-connected classes in Iran may be getting more than their fair share of the "compensatory payouts," and therefore are not as harmed by the cuts in subisides .
Iranians also seem to have long had a fetish for gold, and in times of distress run to it. In September 2012, gold prices inside Iran jumped 7% in a single month.[10] According to a report on Bloomberg,[11] the central bank of Iran tried to stabilize the price of gold by auctioning gold reserves. Ali Alfoneh, an economist at the American Enterprise Institute, wrote: "After two weeks, they abandoned the strategy because they could no longer defend the currency. The price of gold was still going up, because there's no public confidence in the CBI."

Soon after that, the regime decided to seek more effective means to stop the run on the rial. "As the exchange rate for dollars skyrocketed from 29,000 Iranian rials to nearly 35,000, police used tear gas and batons to disperse money changers and traders outside the Central Bank demonstrating against president Mahmoud Ahmadinejad's mishandling of the economy."[12]

Iranians have been pouncing upon gold from any source they can find, particularly gold imported from Turkey.[13] World gold exports in the first seven months of 2012 were five times more than the total in 2011 -- owing to rising demand from Iran, which had accounted for only 4% of sales two years earlier. According to the Guardian, "In the wake of the currency crisis, many Iranians who have lost faith in the rial are now contributing to its instability by rushing to convert their assets and properties to foreign currency and gold. The government has repeatedly attempted to bring the currency under control, but with no success. Last week it launched an exchange centre aimed at stabilising the rates, but the rial's fall has since increased."[14] The Iran government had made large gold purchases in 2011,[15] but these were being rapidly lost in 2012 in the speculative attack by Iranians themselves against their own national currency. Alcoholism, which is not supposed to exist at all in Iran, perhaps as a result of the economic troubles, seems to be on the rise.[16]

Further, to the extent that international tensions have affected Iran's markets at all, it appears that what matters []is the growing talk of armed conflict, not "sanctions." Many Iranians may believe that any armed conflict would have a far more serious impact upon their standard of living than sanctions have had until now, where trade and supplies of commodities and even utilities could be disrupted. Sanctions can be bypassed by clever merchants. Cruise missiles, however, and their effect on the functioning of the economy, cannot.

Skepticism about Sanctions

Economic sanctions are not the cause of the collapse of the Iranian rial. Economic sanctions never "work."[17] Rhodesia held out many years even with near universal sanctions against it. Sanctions can have some symbolic value and demoralize the targeted populations. But even nations seemingly subjected to the harshest sanctions -- Rhodesia, South Africa, North Korea, Cuba -- managed to function and trade in world markets quite well in spite of them. In Cuba and North Korea, their domestic poverty and misery are produced by rigid central planning more than by any sanctions.

Economic sanctions are more symbolic manifestations of anger or moral indignation than effective weapons of state. While economic sanctions have been used by various states for centuries, they have rarely, if ever, achieved much.[18] They failed to change the behavior of Serbia, they failed to force Iraq out of Kuwait and they failed to mend human rights abuses in China. Any limited effectiveness economic sanctions have is usually when they accompany actual armed warfare, not when they substitute for warfare – for example, as in the sanctions that accompanied the two world wars and the Napoleonic campaigns.
Further, the timing of Iranian regime's economic woes pre-date economic sanctions. The sudden acceleration in the demise of the rial took place after years of sanctions, only when threats of armed intervention were being voiced and "red lines" were being drawn by Israel and the United States, lines that began to concentrate the mind of the average Iranian. Sanctions simply do not cause a serious enough loss in standards of living for countries targeted by them, and there are also too many ways to evade the sanctions. Sanctions have not stopped the trade in African "blood diamonds;" and they are even less effective against moderately developed middle-income countries.

Some of the "sanctions" against Iran were clearly pointless and ineffective. For example, the US and Western allies announced in January 2012 that Iran was being cut off from international payments and bank settlements systems, which are used to clear electronic payments and checks. More recently there have been calls to evict Iran from the payments clearing system for Euros ("Targeting Tehran's Euros," Wall Street Journal, February 18, 2013.) All Iran needed to do, however, to continue to participate in the world payments system was to find a single "correspondent" or representative bank willing to clear payments for the country, to accept payments coming in and use the proceeds to pay Iranian bills. To do this, it was not even necessary to choose from among the many banks from Islamic countries. There have been reports that the giant British bank HSBC has been providing Iran with correspondence services,[19] and Russia also appears to have been providing clearing services.[20] In other cases, the sanctions almost appear to be designed to solicit chuckles, such as those imposed by the UN in 2010 directed only against eight individual Iranian officials.[21]

The most important reason for skepticism about the role of "sanctions" in the collapse of the rial, however, is the evidence that internal economic policy and regime incompetence in printing money and thereby devaluing was what produced the mess.

A superficial examination of Iran's economy would seem to point to its enormous potential, invulnerability, and capacity to withstand sanctions.[22] It is the world's fourth largest petroleum producer and was until the recent turndown the second largest oil exporter in OPEC. Iran has estimated proven oil reserves of 137 billion barrels (as of January 1, 2011). Its standard of living was until recently higher than most other Middle Eastern countries, if not quite European levels. Until the current crisis hit, its per capita GDP, a common measure of productivity and wealth, was just behind the levels for Turkey and Brazil. By most standards of health, education, and wellbeing, Iran appeared to be well on its way into the international middle classes. Life expectancy in the country was close to European levels.

The Iranian economy nevertheless still manages to defy all indicators of health, steadfastness and cohesion. The culprits are not hostile Westerners, but rather incompetent Ayatollahs who have been handed a country to run. The latest form of environmental policy in Iran consists of calling on snipers to kill the giant rats that have taken over Tehran.[23]

The Plummet of the Rial

Current popular joke in Iran: How many rials are in a dollar? Now, or… now?[24]
The demise of the rial has been one of the most dramatic financial events in recent history. The currency, named after the old Spanish Real (similar to royal) coin, traded at a distorted and artificial "official" rate of 1750 rials back in 2002. It is difficult to pin down the exchange value of the currency for various dates, and there are in fact multiple exchange rates maintained by the Iranian regime, each for a different class of transactions.[25] For example, foreign currency for imports is purchased at different exchange rates depending on how "essential" the regime regards the items imported. Recently the regime raised the price for buying foreign exchange used to pay for imported Basmati rice from India, evidently because rice was suddenly regarded as less essential.[26]

Other countries have experimented with such multiple-exchange-rate systems; these not only always fail, but create economic havoc because imports and exports end up being determined and selected by the arbitrary pseudo-pricing, not by market considerations of profit and cost effectiveness. The different rates are assigned arbitrarily to different classes of transactions; smart traders find ways to redefine their transactions to get the better rates. Iran has repeatedly announced over the years the unification of its exchange rates, only to back-peddle and re-introduce the multiple rates all over again. The results were not long in coming.

The assignment of different sorts of transactions to different exchange rates in any multiple-exchange-rate system is arbitrary; clever traders always find ways to move transactions supposedly assigned to one rate to a better, more favorable rate, then pocketing the difference as "arbitrage" profits.[27] Indeed, growing internal anger in Iran has focused on charges that insiders and cronies of the regime are making fast and easy riches by exploiting the inconsistencies in the system of multiple rates. The US has also condemned Iran for allowing such arbitrage profiteering by insiders.[28] The Iranian exchange rate has long been characterized by high volatility and "over-shooting" of equilibrium levels.[29]
The "official" exchange rate for the rial is an arbitrary and misleading non-market rate invented by the regime. Maddeningly, it is the only one cited by the CIA in its "World Factbook," and this is hardly the only economic "fact" the CIA gets completely wrong.[30] The CIA, for example has a record of accepting at face value the "estimates" of Gross Domestic Product and standards of living of many countries, including those without market economies, where prices have no meaning. Before the collapse of communism, for decades the CIA accepted many Soviet "estimates" and statistics at face value. The Iranian government also manipulates []the currency all the time by buying and selling foreign currency (and not just the currency market, but also the gold market). Along with all the confusion, by early October 2012 the rial had depreciated in the open market to about 35,500 per US dollar -- about 300% of the "official" exchange rate proclaimed by the government. By January 2013 the rial was trading even lower even than that. The Governor of the Iranian Central Bank was fired and an official "probe" of the Central Bank's malfeasance was announced.[31]

The plunge in the value of the rial was accompanied by a massive loss in Iranian state foreign reserves. According to the International Monetary Fund, at the end of 2011, Iran held 106 billion dollars in official foreign reserves, mainly deposits in Euros and other European currencies,[32] enough to cover 13 months of imports of goods and services into Iran. But these declined rapidly, so that by November 2012 Iran announced it plans to stop holding dollars and Euros as reserves.[33]

Iran has already cut the portion of its reserves held in US dollars, no doubt out of fear that America will again freeze its funds. It has reason to worry. In 1979 the US froze $12 billion in Iranian assets in response to the hostage crisis. Later, in 2009, the American government froze another two billion dollars in Iranian funds held in the US.[34] While Iran keeps its level of reserves secret, Nader Habibi, an economist at the Crown Center for Middle East Studies at Brandeis University, estimates that by September 2012, these had plummeted to 50-70 billion dollars from an estimated 100 billion dollars at the end of 2011. [35]

Galloping Inflation and Currency Depreciation

Hyperinflation and rapid depreciation always go together . Supply of foreign currency drops and demand for it increases when there is high domestic inflation. . Hyperinflation is where a currency quickly loses its purchasing power in the domestic market; rapid depreciation is where the same currency loses its purchasing power in foreign markets. The Iranian central bank is not independent; it is tightly controlled by the regime.[36] Iranian central bank official statistics concede that the amount of money in circulation more than quadrupled between 2001 and 2011.

No one really knows what the Iranian inflation rate is because the officially announced rate is fictional. The government claims it is "only" around 22% but one could probably not find a single Iranian consumer who believes that. The Wall Street Journal cites sources who put it above 50%.[37] There is evidence that inflation in food prices is considerably higher than the overall inflation rate. To make matters worse, the Iranian Central Bank has traditionally been the source for (very incomplete) financial and economic data for the country, but responsibility for data has now been passed over to an official governmental Statistics Office. Many of the pages, however, that are supposed to contain statistical data for the country are blank or missing on all web sites. From what we can ascertain, it appears that Iranian real national income went into a downward spiral in 2007.

Fereydoun Khavand, a professor of economy at the Paris Descartes University and an Iran expert, claims that the economic downturn is now serious enough that it is threatening to destabilize the regime. "There is growth stagnation plus inflation, a dangerous combination that might make Iran compromise."[38] It has not done so, at least not yet. Throughout history, stagnation and inflation have only produced belligerence, aggression and war -- and brought Hitler to power.

The rapid depreciation has been accompanied by a flight by Iranians to gold, to the dollar and to other foreign currencies. According to one financial report, "(T)he Central Bank of Iran (CBI) over the past few months has restricted cash withdrawals and allows those travelling outside the country to take with them only $2,000 a year.

The most radical step came on 26th January 2012 when the CBI's Governor, Mahmoud Bahmani, announced that it would be changing the official rate of the Rial against the Dollar at 12,260 Rials from 28th January and seek to meet all demand for foreign currency through banks. The CBI's plans to devalue the Rial at official rates are aimed at reducing the unofficial market's influence in undermining the currency.

Financial Instability and Mismanagement

The Ayatollah Khamenei recently urged Iranians to consume Iranian products and shun foreign goods in order to support domestic production.[39] Why such policies produce poverty is the subject of the first week's classes in any Freshman Econ course: international trade allows countries to produce more efficiently, and to obtain products in the world market for a fraction of what the products would cost to produce domestically.
The financial system of Iran is one in which financial transactions are supposed to be subordinated to Islamic law.[40] Therefore interest payments are formally prohibited. The entire banking system is based on loopholes and escape clauses that allow banks to charge and pay interest, but without calling these payments of interest.[41] The ersatz interest payments are generally well below inflation rates, implying that credit is ultimately directed administratively: bureaucrats determine which borrowers get credit and at which rates, based on whim and caprice, rather than markets assigning credit to the highest bidders in a market mechanism. In addition, Iranian households tend to seek alternative venues, foreign currencies and gold, in which to hold their savings, to avoid the losses due to the negative returns on bank deposits. Some bank savings have flowed out into the Iranian stock exchange. While shares there rose by 500% in the decade ending in 2011 in rial terms, this was virtually entirely a reflection of rial inflation.

Much of the credit allotted by the Iranian banks goes directly to the government; between 2000 and 2010, lending to the private sector, as a proportion of GDP, was flat. The government instructs the banks how to allot credit, which borrowers and which sectors must be regarded as "priorities," and to which clients the banks must direct most of their lending.[42] According to the IMF:

In 2010-11, the MCC recommended that banks allocate 80 percent of their increase in deposits to priority sectors—37 percent to manufacturing and mining, 25 percent to agriculture, 20 percent to construction and housing, 10 percent to trade, and 8 percent to export. The remaining 20 percent of the increase in deposits could be used freely, although there are sub-limits on credit for consumer durables or home improvement.

Banks cannot extend facilities for the purchase of property since 2009, only facilities for home improvement with a ceiling of 50 million rials (approx. $45,000). The public housing bank is not subject to these limitations.

The Iranian banking system is rife with corruption and embezzlement.[43] The corruption seems to run all the way up the ladder; a former head of the Central Bank was recently detained in Germany with a suspicious $70 million check in his possession.[44] Iranian banks have low levels of capitalization, and even that capital -- because they tend to set aside very small amounts against delinquent and non-performing loans -- is imaginary, erased by non-performing loans that are still treated as if they are performing. State-owned banks are in worse shape than private-sector banks; in 2010 alone, due to bad loans, most of their capital vanished.

Officially, over a quarter of bank loans are non-performing, but there are some indicators showing much higher rates of default. Bounced checks have also become something of a national plague.[45] Of loans to public entities -- state owned utilities, enterprises and municipalities -- . , over 90% are non-performing.[46] While initially Iranian banks were state-owned, in 1979 private banks were permitted to operate. In recent years privatized banks have expanded their operations, although they are still closely controlled and micro-managed by the regime.

Incompetence is the Cake; Sanctions just the Icing

While they are not the main cause of Iran's economic implosion, sanctions against Iran have an effect at the margin, to use the favorite expression of economists to refer to critical small incremental changes. Iranian oil exports are thought to have dropped by half in the first part of 2012, and seem to have continued to decline into early 2013.[47] Since oil prices decreased during the same period, revenue receipts for exported oil also dropped to an even greater degree.[48] Much of the drop in oil revenues was caused by sanctions, although expansion in exports by other OPEC petroleum producers and the continuing world recession also contributed to the drop in Iranian export revenues. There are plenty of countries that are ignoring the international sanctions and expanding their purchases of oil from Iran. Some of these trades, especially for petroleum, are being conducted openly; others, discreetly, under the table. Some of the loss in Iran's export earnings was due to oil reserve revenue that simply mysteriously "disappeared."[49]

The sanctions surely did not help the Iranian economy. But economic misery, because it is domestically produced, would be almost as bad even without them. "The free fall of the rial is due to a combination of President Ahmadinejad's economic mismanagement and the international sanctions regime," says Ali Alfoneh. "However, the Iranian public is first and foremost blaming the regime for economic hardships."[50] The Iranian daily Jomhouriye Eslami's cited the speaker of the Iranian parliament, Ali Larijani, as saying that 80% of the country's economic problems were due to economic mismanagement. Iran's economic troubles are thought to have forced the country to pull troops out of Syria that were defending the Assad regime.[51]

Talking heads in the Western media have been emerging in droves and patting themselves on their backs for the "success of the sanctions" in producing the collapse of the rial. The US Congress proposes capitalizing on the "success" of the sanctions by imposing more of them.[52] The Iranian government characteristically blames Western "conspiracies" for the collapse[53] -- that is, when it is not blaming domestic conspiracies. Dr Ghulam Ali Haddad Adel, former speaker of Iran's parliament, said that Iran would defeat the enemy's "conspiracy against its foreign currency and gold markets."

Iranian government actions seem to belie the claim that Iran really thinks the sanctions are what lie behind its economic sickness. Recently the government claimed 22 key Iranian "speculator ringleaders,"[54] sixteen of whom were arrested, were behind the run on the rial.[55] President Ahmadinejad threatened massive additional arrests.[56] Iranian police were assigned to stop the speculation by beating speculators and currency traders in the bazaar.[57] Complain as they might about the conspiracy of the Zionist-Crusaders to undermine their economy, the Ayatollahs seem to understand that the real threat to their hold on power comes from Iranians on the street and in the bazaar -- people who understand that the government, not sanctions, has ruined the country's economy.


Steven Plaut teaches finance and economics at the Graduate School of Management at the University of Haifa, Israel

[1] "Iran Loses the Economic Battle," By John Allen Gay , National Interest, October 4, 2012
[2] For background on that crisis, see Pesaran, M. H. (2000). "Economic Trends and Macroeconomic Policies in Post-Revolutionary Iran," in The Economy of Iran: Dilemmas of an Islamic State. I.B. Tauris, London, and Esfahani, H. S. and M. H. Pesaran (2009). "The Iranian Economy in the Twentieth Century: A Global Perspective." Iranian Studies 42, 177-211. See also
[3] The time line for the exchange rate of Iran and for changes in foreign exchange regulations may be seen here: and here

[6] "Let Them Eat Bread: How Food Subsidies Prevent (and Provoke) Revolutions in the Middle East, by Annia Ciezadlo, Foeign Affairs, March 23, 2011

See also "Food and Energy Prices, Government Subsidies and Fiscal Balances in South Mediterranean Countries," by Ronald Albers and Marga Peeters,
[7] IMF report on the reform:
[9] See The IMF says the "Gini Coefficient," a common measure for degrees of inequality, has been showing greater inequality in Iran since the cash grant experiment was introduced. See
[17] For many examples and documentation, see Robert A. Pape, "Why Economic Sanctions Still Do Not Work, International Security Vol. 23, No. 1 (Summer, 1998), pp. 66-77, See also his earlier related piece, "Why Sanctions do not Work," at
[18] See Steven Plaut, Economic Warfare: Costs or Benefits?, Washington Quarterly, Volume 4, Issue 2, 1981,, pages 190-195
[19] The Economist, July 21, 2012
[22] See this survey on the Iranian economy prepared for the US congress:
[25] and
[27] Even some Iranian economists have courageously denounced the system. See
[30] See also
[34] Wall Street Journal, Dec 12, 2009.
[35] Jerusalem Post, Oct 1, 2012
[37] May 22, 2012.
[38] Wall St Journal, ibid.
[41] See and Interest replacements in Iran include contracts in which banks enjoy participation in borrower profits, where the loan contract ties in to lease payments for equipment or property, where lottery/prize bonuses or other bonuses are granted the depositor, where interest is disguised within a repurchase agreement, or where loan principal is simply discounted at the time of lending. Installment plans with markups can also serve as a substitute for interest. There are no overdraft arrangements or credit cards in Iran.
[42] See this IMF report:
See also
[46],%202(10)10589-10597,%202012.pdf and
[47] , and
[49] and
[50] . See also .
[53] . See also .
[57] Al Akhbar, Oct 3 2012

Steven Plaut


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