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Loans to Iran Stall After Arrest of Jews

By Nora Boustany
Washington Post
Wednesday, June 23, 1999

A quiet undertaking at the World Bank over the past 15 months to rehabilitate Iran for assistance has suffered a setback. Industrious and delicate efforts to revive Iran's eligibility for soft loans in social development sectors have been stymied by the Tehran government's arrest of 13 Jewish Iranians on unproved charges of espionage, according to a number of World Bank officials and diplomats.

Two projects worth $200 million -- initially drawn up in 1993, the last time such plans were submitted to the bank's board of shareholders for approval -- were in the process of being updated for submission to the bank for approval by September, World Bank officials said. Then word came last week to halt the process. World Bank lawyers who were due to travel to Tehran within weeks were told that their plans were to be "postponed" indefinitely.

One of the projects involved loans for establishing medical clinics in the countryside, and the other was designated to help set up a sewer system in Tehran. There are currently six World Bank projects -- worth $800 million and approved prior to May 1993 -- that are being supervised and implemented in Iran and have not been affected by the spy case.

A bank official explained that the two projects in question, which have lain dormant since '93, were being updated "in case there was a request from the board" to consider them for approval. But, said one bank specialist, getting a project considered "takes more than technical reevaluation, such as clear signals from the shareholders." European and Japanese shareholders have been eager for some time for Iran-designated projects to go forward, but not the United States. Until the arrest of the 13, there were indications that even that opposition might be overcome. "We were half-ready to send them to the board. If you ask me can we do it in three months, the answer is yes. If you ask me whether it will be sent before the end of the year, the answer is no," acknowledged one official in reference to the suspended projects. "It is not going to happen."

Ironically, things had been looking up for Iran in international financial circles. In March, some members within the International Monetary Fund's board of directors raised the issue of whether to help out Iran, especially after oil prices plummeted. On one hand, Iran's conservative supreme leader, Ayatollah Ali Khamenei, wary of moderate President MohammedKhatemi's opening to the West, rejected an adjustment-and-

borrowing program recommended by IMF planners. But on the other, the Iranian government has implemented key economic reforms, such as the removal of subsidies to fuel and oil products, and is drafting a new five-year economic plan with substantive structural reforms that its future parliament will study and approve after elections next February.

While sources said the fate of the two World Bank projects was clearly linked to the spy case, bank bureaucrats were reluctant to speak openly about how the fate of 13 Iranian Jews factored into the impasse because of the sensitivity of the issue. "Is it a human rights issue? I can't say if it is the only issue. But it weighs on taking such a decision," one official conceded. Adherents to the faiths recognized under Iran's constitution -- Muslims, Christians, Zoroastrians and Jews -- face varying degrees of repression in Iran; the situation faced by unrecognized religious minorities such as Bahais is worse.

The 13 detainees raised suspicion because of their alleged contacts with family members in Israel, illegally importing prayer books from there and, in the case of three of them, visiting Israel without notifying Iranian authorities, according to well-informed Iranian sources and diplomats here from countries close to Iran.

Yet they appear to be pawns in the pre-electoral tug of war between the reform-minded Khatemi and the hawkish defenders of Iran's religious power elite. Iran's judiciary is independent, and its members are appointed by Khamenei. And while the intelligence ministry -- in charge of investigating the charges against the 13 Jews -- operates under the shadow of right-wingers opposed to reforms, there were open channels in the late '80s between Iran's intelligence services and the Israeli Mossad intelligence agency to facilitate Iran's procurement of arms in its war against Iraq.

A group of Iranian journalists close to Khatemi who visited New York and Washington last week said at a closed forum at Middle East Insight magazine that their counterparts in Iran should "insist on and be the guarantors of an open and fair trial." Three Arab embassies in Washington -- those of Syria, Jordan and Saudi Arabia -- were approached by State Department officials to ask their governments to intercede on humanitarian grounds with the warring wings of Iran's fractious polity.


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