EX-CENTRAL BANK OF IRAN EMPLOYEE CLAIMS STATISTICS FIXED IN

S E C R E T SECTION 01 OF 02 IRAN RPO DUBAI 000017

SIPDIS

SIPDIS

STATE FOR NEA/IR, LONDON FOR GAYLE, BAKU FOR HAUGEN, BERLIN FOR
PAETZOLD, TREASURY FOR HECHT

E.O. 12958: DECL: 12/10/2016
TAGS: ECON EFIN IR PGOV
SUBJECT: EX-CENTRAL BANK OF IRAN EMPLOYEE CLAIMS STATISTICS FIXED IN
IRAN


RPO DUBAI 00000017 001.2 OF 002


CLASSIFIED BY: Jillian Burns, Director, Iran Regional Presence
Office - Dubai, Department of State.
REASON: 1.4 (d)

1.(S) Summary: A self-proclaimed "disgruntled" former Central
Bank of Iran (CBI) economist discussed Iranian economic issues
with IRPOff December 7. The economist claimed the government
and statistical organizations deliberately manipulates
statistics in Iran, particularly those concerning the Ministry
of Oil. The economist disparaged President Ahmadinejad and his
senior economic advisor, calling them "silly" and "incompetent."
The contact opposed further economic sanctions on Iran, saying
they would only hurt the Iranian people. According to the
contact, the top five business executives in Tehran are:
Rafsanjani, Rafsanjani, Rafsanjani, Rafsanjani, and Rafsanjani.
He allegedly controls much of the business in Iran and is very
active in Dubai. This contact's allegations of
institutionalized statistical manipulation are single-sourced,
but the source is credible enough to warrant reporting the
allegations. End Summary.

Iranian statistics: miscalculated and manipulated
-------------- --------------

2.(S) A self-proclaimed "disgruntled" former economist at the
Central Bank of Iran (CBI) expressed frustration with Iran's
economic infrastructure in a meeting with IRPOff December 7.
(Note: this is essentially a single source report that has not
been independently verified. The claims seemed noteworthy and
the source credible enough to report. Endnote) The economist
worked at the CBI during the Khatami administration. Although
now resident in Dubai, the source asked not to be identified,
citing fear of reprisals from the IRIG if the meeting with IRPO
became known.

3.(S) The contact claimed that official economic statistics in
Iran are deliberately manipulated or miscalculated, particularly
when it comes to the Ministry of Oil. Reportedly, the CBI keeps
the "real" statistics regarding oil production and revenue in a
guarded, locked safe, and statistics are altered for public
consumption. At the time of the contact's employment at the
CBI, oil was sold for $5 a barrel; "public" statistics put the
price at $12 a barrel to avoid a public panic.

4.(S) The economist claimed that a CBI colleague would
occasionally manipulate statistical margins of error when a
sample set did not produce the desired effects. When the source
was tasked with filling out paperwork for the World Bank and the
International Monetary Fund, the section head reportedly said to
"just make the numbers work." At other statistical
organizations, numbers are sometimes miscalculated out of sheer
laziness and apathy, asserted the contact. A friend at a
quasi-governmental statistical agency claimed employees there
spent their days using their high-speed internet to play games.
When the friend asked about performing statistical analysis and
producing required reports, the employees said most sectors
experience 5-7 percent growth and that no research is required.
(Note: a well-known Iranian consulting firm caveats statistics
in its reports by noting that macro-economic statistics in Iran
vary depending on source and that official statistics from
different state institutions will often not match. Endnote)

5.(S) The economist also claimed that public bank financial
statistics do "not add up." Reportedly, set equations determine
the percent of loans that each sector should receive. Banks are
reportedly required to allocate 13 percent of available funds to
the agricultural sector, for example, but the agricultural
sector only guarantees a seven percent return. Because bonuses
are awarded based on a bank's profits, managers reportedly find
ways to loan larger percentages of money to more lucrative
industrial sectors -- which can bring up to a 30 percent return.
When the contact reportedly expressed concern regarding the
development of the agriculture sector, the supervisor responded
that Iran can always import food products. (Note: The drafter
of the Fitch Ratings' report on Iran similarly complained to
IRPOff that banks often change their declared cash reserves from
month to month without explanation, as well as report outflows
that do not appear to go anywhere. Endnote)

The incompetent President and his "silly" advisors
-------------- --------------


RPO DUBAI 00000017 002.2 OF 002


6.(S) The economist dismissed President Ahmadinejad and his
advisors as "silly and incompetent." The contact complained
that the West legitimized Ahmadinejad by reacting to his
statements, thereby boosting his power and influence. "The West
should just ignore him as Iranians do." The contact repeated
jokes about Ahmadinejad consulting the twelfth imam for guidance
on political appointees and asserted the Supreme Leader tampered
with the elections in Ahmadinejad's favor because he did not
want Rafsanjani elected. The contact claimed Ahmadinejad was an
unpopular mayor, known for illogical decisions such as rerouting
traffic in ways that made congestion worse. His economic
policies, said the economist, are counterintuitive and
restrictive to trade and advancement.

7.(S) The contact did not spare Ahmadinejad's economic
appointees either. The contact claimed that the president's
senior economic advisor, VP and Management and Planning
Organization (MPO) head Farhad Rahbar, had been the contact's
advanced micro-economics professor at Tehran University and that
in class he simply read from a dated textbook (Note: In
mid-November the Iranian press said Rahbar was dismissed from
his position, however on Dec 2 a government daily still referred
to Rahbar as VP and MPO head. His exact status is unknown at
this time. Endnote) The contact also predicted that the Tehran
Stock Exchange (TSE),while stabilized, will not return to its
pre-Ahmadinejad levels. The source blamed the current TSE head,
Ali Salehabadi, saying he was young, inexperienced, and not
trusted by investors.

Sanctions
--------------

8.(S) Turning to possible UN sanctions, the economist said,
"Iran has mastered smuggling." If sanctions limit oil exports,
Iran will smuggle out its oil as it did in the past to South
Africa. Despite US sanctions, the contact said all US products
and goods are available in Iran, and people are willing to pay a
premium as US goods are considered superior. If multilateral
sanctions are applied, the source predicted other prices would
rise, triggering higher inflation and hurting the poor and
middle class.

Business: and the man behind it all
--------------

9.(S) According to the economist, the top five business
executives in Iran are Rafsanjani, Rafsanjani, Rafsanjani,
Rafsanjani and Rafsanjani. "He is behind most everything,"
noted the contact. The contact said Rafsanjani employs "middle
men" to run his businesses, presumably to hide his affiliation.
According to the contact, Rafsanjani has very active business
interests in Dubai. His nephew reportedly resides in Dubai to
oversee his investments, and his son and daughter frequently
travel to the Emirate. The contact claimed that Rafsanjani
allegedly owns one of the Palm Island leafs and a hotel chain in
Canada. (Note: Although IRPO contacts frequently claim that
Rafsanjani owns much of Dubai, we do not have a sense of the
true extent of his investments here. Endnote)

10.(S). Comment: The economist mentioned on several occasions
that IRPOff should meet with other economists to "balance out"
the picture of Iran, acknowledging that personal difficulties at
the CBI clouded this contact's perceptions. The source
reportedly quit the CBI because of unwillingness to go along
with such unethical professional practices, plus accusations of
un-Islamic behavior and pressure to convert from Christianity.
Nonetheless, the source's comments are noteworthy enough to
document, with these caveats. The comments are consistent with
other sources who say government officials mismanage the economy
while trying to "survive" in a system driven by the whims of a
few leaders.
BURNS