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