Presidential Retreat

April 2007 | Political Risk Analysis

President Mahmoud Ahmadinejad's announcement that Tehran has decided to attend a conference on Iraq to be held in Egypt is yet another positive in terms of easing tensions and in line with our view that 2007 is likely to see a more conciliatory Iran (see December 2006, Political Risk Analysis - The Islamic Republic Votes: A Turning Point?). Indeed, since the defeat of Ahmadinejad's allies in the December polls and two UN Security Council resolutions against the country, the signs are that the president is increasingly being reined in. Instead of the usually incendiary rhetoric, the president has been showing a more diplomatic face lately; he was not only responsible for announcing the release of the seized British navy personnel, but also recently declared Iran's willingness to stay with the Nuclear Non-Proliferation Treaty, and maintain good relations with the EU. Certainly, the Ahmadinejad government is facing growing domestic scrutiny over its handling of the economy, with inflation in double digits and a widening budget deficit, leaving Tehran exposed to mounting international pressure by its conduct of foreign affairs.

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