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Syrian Mortar Fire Hits Turkey, Prompting an Artillery Response; Anti-Government Protests in Iran

Aired October 3, 2012 - 15:00:00   ET


ALI VELSHI, CNN HOST: Good evening; welcome to the program. I'm Ali Velshi, sitting in for Christiane Amanpour.

In Tehran, a day of rage aimed at Iranian President --


VELSHI: Hundreds of protesters shouting "Death to this government," took to the streets and raged over the country's crippling economic crisis. The Iranian currency, the rial, has lost 40 percent of its value in just one week and inflation is soaring as a result.

Many Iranians say they are unable to afford basic staples, like chicken and lamb. Riot police clashed with protesters and moneychangers inside Tehran's main bazaar. Merchants closed their shops and marched outside.

According to one opposition website, some protesters chanted, "Mahmoud the traitor, you've ruined the country." And policy reportedly fired tear gas in an effort to disperse the crowd.

As for Ahmadinejad, not surprisingly, he says, not my fault. Yesterday in a press conference in Tehran, he laid the blame elsewhere.


MAHMOUD AHMADINEJAD, PRESIDENT OF IRAN (through translator): Some of what is going on is psychological warfare. Some of it is the hostility of our foreign enemies that want to confront Iran. Even if our foreign exchanges stop altogether --




HALA GORANI, CNN CONTRIBUTOR: We are having some technical difficulties. We are going to join our sister network, CNN U.S.A. as they continue to cover the pre-debate, the crucial debate between the Republican candidate, Mitt Romney, and the incumbent president, Barack Obama.

Let's join our sister network, as I said, and once we get our technical issues resolved, we'll get back to AMANPOUR.



VELSHI: I'm Ali Velshi at the CNN Center, sitting in for Christiane Amanpour. We've been telling you about some of the unrest in Iran as a result of a falling rial. The Iranian currency, the rial, has fallen 40 percent in just the last week.

Now President Mahmoud Ahmadinejad is blaming Western sanctions for triggering this economic crisis. The sanctions are meant to discussing Iran's nuclear ambitions and analysts agree that they are having a devastating effect in Iran.

Now in a moment, I'll talk about all of this with an insider who watches Iran closely.

But first, a look at what's coming up a little later in the program.


VELSHI (voice-over): David versus Goliath: for 14 years, Venezuelan President Hugo Chavez has thumbed his nose at the West. Can a charismatic young challenger bring him down?

And the great debate: President Barack Obama and Mitt Romney square off tonight. But imagine a world where the loser turns out to be the winner.


VELSHI: We'll get to all that in a bit, but first we go to Afshin Molavi. He's an Iranian-American, and one of the few people who have reported for a Western news outlet from inside Iran.

He has a Ph.D. in economics; he's been studying the Iranian economy for years, and all of that study is coming to bear, Afshin, today; something very unusual is happening.

The value of the Iranian rial has plummeted. It's even hard to get an exact amount by which it's plummeted because there does not seem to be a free and efficient market right now, so many people are trying to sell it and buy hard currency.

What is your understanding of what's happening?

AFSHIN MOLAVI, AUTHOR AND ECONOMIST: That's right, Ali, as you noted in your intro, it has fallen about 40 percent in the past week. Over the past year, we've seen the value of the rial fall by about two-thirds. This is quite a significant drop.

In fact, I was talking to a merchant on the telephone just a few hours ago in Tehran. And he was telling me it's gotten to a situation where prices of goods are changing by the hour. So I'd say this is the equivalent of an economic flash flood. It has been raining on Iran's economy for the past year, year and a half.

There have been storm clouds as a result of sanctions and mismanagement. And in particular, the inability for Iran to get its oil out to the markets, Iran has seen a dramatic decline in oil exports over the past year as a result of sanctions.

And when oil accounts for 80 percent of your hard currency earnings, 60 percent of your fiscal revenues, you need to get that oil out to the market and you need to be able to get paid for that oil as well.

VELSHI: All right. Now tell me how bad this economic condition can get, where these protests can lead and what the government is likely to do about it.

MOLAVI: I think what we're going to be witnessing over the next 6-9 months is this continued slow trajectory of decline with these moments of economic flash floods that we just saw in the past couple days.

Now the government in past crises like this, they used their cash reserves; they flood the market with dollars or they add some stimulus when things are going wrong. The problem is the government is running out of dollars. They're running out of revenues. Oil revenues have been slashed by half over the past year as a result of the declining exports.

And so the tools at the government's disposal are fewer than they were last year. However, I've often argued that what we're witnessing right now is a squeezing of the Iranian economy, not a choke of the Iranian economy. And as you well know, Ali, you know, governments that are oil-rich, they can survive a long time in these kind of sanctions environments.

VELSHI: Well, so the issue of these sanctions is that it does put pressure on the economy. In this case, it's putting pressure on regular people who probably don't have foreign reserves, which are keeping them safe. At what point does this cause Iranians to turn on their government and blame their government, despite the fact that Mahmoud Ahmadinejad says this is the West to be blamed for this?

MOLAVI: We already are seeing some of that in many ways. In fact, as you noted in your intro, people are blaming Mahmoud Ahmadinejad for the economic situation. I think there's a, you know, the blame is being apportioned equally. I mean, certainly Iranians are looking at the West and looking at the United States and looking where the source of the sanctions are coming from.

But when you talk to Iranians as well, they often say that, you know, they blame their own government for the situation they're in as well. So what we're going to see going forward is continued unrest of this sort.

Now whether the unrest morphs into a larger political cohesive opposition movement, that remains to be seen. The government has shown themselves to be pretty sophisticated at repressing those kind of organized sophisticated opposition movements. So look for more unrest going forward.

VELSHI: Fair enough. But when we -- let's refer to the Green Movement, which was a strictly political movement and the government was able to withstand that. Is there something that combines with a -- possibly a more organized opposition and the fact that you're hitting a broader part of the population at home with that? Is there some chance this becomes bigger?

MOLAVI: You know, there always is some chance that it becomes bigger. When we looked at the events leading up to the 1979 revolution, we saw a inflationary spike in prices. We saw the bazaar protesting against the Shah of Iran.

And we're seeing some of those same elements today. However, the key difference is that the regime in Iran is still, you know, has many bullets. And they have the instruments of coercive force at their disposal, and they're willing to use those instruments of coercive force.

The Green Movement has not yet been able to translate their -- some of their political popularity with the economic concerns of ordinary Iranians. And when they do, the movement will be more powerful. But they have not yet been able to do that.

VELSHI: As sanctions go, these are starting to have, to some degree, a desired effect.

How does the West need to think about this to make sure that it doesn't have an undesired effect, that all of a sudden, it doesn't become what Ahmadinejad says, that it is the West that is starving you of food and causing your prices to go up? How do you manage these sanctions, or at this point, is the horses have left the barn and this has to play out as it plays out?

MOLAVI: I mean, you ask the key question, you know, the horse, to some extent, already has left the barn. The question of, you know, do sanctions work or do they not work, I suppose it means -- depends on what your definition of work is. If your definition of work is that it is -- extracts a high cost on the Iranian economy, the answer is yes. It extracts a high cost on the Iranian people.

The answer is yes if the answer of work is that it forces the Iranian regime to give up its nuclear program, the answer is no, not yet. It certainly has concentrated the attention of Iranian political elites. But no matter how smart your sanctions are, no matter how targeted your sanctions are, as you know, Ali, sanctions are a blunt instrument and the Iranian middle class is being decimated.

VELSHI: Now, you talked about Iran, the government having a lot of bullets left. Most of their foreign reserve, the incoming foreign reserve comes from the sale of oil. They get dollars for the sale of oil. How deep is that well for them? How long can this go on for, where they can make up for the lack of dollars and a weakening currency?

MOLAVI: You know, it can't go on indefinitely. But what we've -- if, you know, official numbers are to be believed -- and they're often suspect -- we look at the 2011, they were officially saying that about $100 billion in reserves.

And when you look at revenues, which were about $85 billion to $100 billion last year, looks like we're going to have about, you know, $45 billion to $50 billion in revenues from oil sales. So they're being squeezed, but not entirely choked.

But a lot of that money is being spent on patronage, on the security services. And so it can't go on indefinitely. But I certainly can foresee it going on for nine months to the next 12 months or so.

VELSHI: OK. OK. So it's not a this-week or this-month sort of a problem deadline that they face.

Afshin, thanks very much for joining us. Pleasure talking to you.

You're watching AMANPOUR on CNN. We'll be right back.




VELSHI: Hi, we're back on AMANPOUR. We've had a few technical difficulties, but we're rejoining you now. We've been talking about the unrest in Iran and the fall of the Iranian rial, which has dropped about 40 percent in the last week as those sanctions start to take effect.

I do want to bring you another piece of breaking news, however, that we have just gotten in right now.

We had heard earlier today that Syrian mortars had landed in Turkey and now we are hearing that Turkey has struck targets in Syria, in response to those strikes that killed five people in a Turkish border town. The Turkish prime minister's office has put out a statement where they have said, quote, "We have responded to the attack. Points in Syria have been hit by artillery fire."

Turkey is a member of NATO; they have said for some time that if attacked, they will consider it hostile and NATO has a pact whereby any of its member countries, if any of its member countries come under attack, it is considered an attack on all NATO countries.

So we are trying to track down exactly what conversations are going on between Turkey and the NATO secretary-general . But we will continue to keep you updated on that.

Want to have a little bit of discussion about what's going on, both in Turkey and Iran. We turn to Ambassador Nicholas Burns, a former U.S. undersecretary of state. He was the top U.S. negotiator on Iran's nuclear program during the George W. Bush administration.

Nick, good to see you. Thank you. You know a lot about Iran, obviously, but I just want to talk to you about this piece of breaking news we have right now.

This has always been a serious concern. If Turkey deems itself attacked by Syria, that all of a sudden involves all of NATO. Shed some light on this. What do you think is going on?

NICHOLAS BURNS, FORMER UNDERSECRETARY OF STATE: Well, I've just seen the same press reports that you have, so I don't have all the details. But I would say this: the Turkish government warned the Syrian government several months ago, after another Syrian attack.


BURNS: If there was a future attack, Turkey would respond. As you know, Prime Minister Erdogan of Turkey is a very strong, intelligent and very willful leader. And I'm not surprised to see that Turkey has done this, because Syria obviously was the instigator. And Turkey has an obligation to defend itself and defend its sovereignty and defend its people.

So this ought to be a warning to the Syrian government; it's got to be very careful how it handles Turkey because Turkey is infinitely stronger than Syria.

As to the NATO angle of this, you know, I was U.S. ambassador to NATO on 9/11 and for many years. And the way it works is that Turkey would have to ask the NATO alliance for assistance. And I don't know if Turkey has made that decision or if it will make that decision. And if Turkey said that we are under attack, we require the assistance of NATO, then NATO would have to consider that.

There's -- it's not automatic. The NATO alliance would actually have to vote. It would have to be unanimous the way it was on 9/11, when NATO voted to invoke Article V to defend the United States the day after the 9/11 attacks.

So I think we're very far from that right now. But the most important thing is Syria is learning just how tough -- and rightfully so -- the Turkish government is. This ought to be a warning to President Bashar al- Assad.

VELSHI: Nick, what would the thinking be? I mean, we know that the Syrian administration, the Syrian government is anything other than unsophisticated. They must have known that if a Syrian shell ends up in Turkey, that is -- that's a remarkable provocation that could drag NATO into this -- into this whole matter.

BURNS: Well, it could be in discipline in the ranks of a Syrian army, because if it's mortar shelling, it could be that there's a local commander who is firing, perhaps -- I don't know; I'm just imagining this -- on rebels within Syria and the shells were misfired. It could be as simple as that. Or, as you suggest, it could be an act of willful aggression by the Syrian government.

I find it hard to believe Syria would do that, because Turkey is so much more powerful. And Turkey, as you know, has been very supportive of the rebel alliance, and Turkey, of course, has taken in refugees as well.

So it -- if I had to guess, not knowing all the facts, I would think this is probably a mistake by the Syrian armed forces. But I certainly understand why Turkey has taken the action it has today.

VELSHI: And you bring up a good point, Nick. We have no confirmation or no acknowledgement or no claim of responsibility from the Syrian government. They didn't say "we did this," so in that part of the world, there are -- there are a lot of people controlling mortar shells.

It is unclear whether this is a rogue element or an indisciplined element or, in fact, the Syrian government. We don't know that. We do know that Turkey has retaliated by shelling particular targets using artillery.

All right. Nick, we get more information on that, I'm going to ask you about that, because you do know a lot about this. Let's go to Iran for a moment.

I just had a conversation with someone who said, you know, whether or not the sanctions are working in Iran by provoking the protests against Mahmoud Ahmadinejad that we saw in the last few days, depends on your version of what you think "working" is for sanctions.

Give me your assessment of what is going on in the streets of Tehran, and whether they are a result of the effective imposition of sanctions on that country.

BURNS: Well, Ali, as you know, this a very serious crisis for the Iranian government because the value of the rial, as you said rightly, has depreciated by 40 percent to the dollar over the last week, and 75 percent over the last year.

We already know there's tremendous unhappiness within Iran about the Iranian government's mismanagement of the economy and its repressive human rights record. We know that from the 2009 demonstrations when the Iranian government stole the elections from the Iranian people. So a very serious crisis.

I would say, Ali, it's attributed to two factors. First, the Iranian government has followed very ineffective protectionist economic policies, which have not helped the working person in Iran. And, secondly, we are seeing the most serious and toughest sanctions placed on Iran in the last decade, particularly the U.S. central bank sanctions that were imposed in late June of 2000 -- of this year.

And the E.U. oil sanctions, Iran is truly isolated. It doesn't really have a friend in the world that's willing to help it. And an economist friend of mine explained to me this morning, once the currency starts to depreciate, once there's a run on a currency, it's difficult for a government to get it back under control.

VELSHI: It's like a run on the banks. People just get convinced that this currency's going to continue to get lower and lower. They see their costs getting higher, and that's why we saw -- we saw conflicts between moneychangers and security forces today in Tehran, because people were swarming the moneychangers.

Play this out, Nick. You've seen this type of thing happen in the world. Play this out. The currency continues to devalue. People get panicked. Where do their -- where does their anger get channeled? Does that somehow help Western efforts to change Iran's course with respect to the building of nuclear weapons? Or could it backfire?

BURNS: Well, it's very hard to tell. It's an early stage. But you know, we do know that the government of Iran is not popular in its own country. We know it's been highly repressive and we know that the quality of life of the average Iranian has deteriorated over the last couple of years. Iran is effectively now cut off from the international marketplace.

It's selling about 1 million barrels per day less today than it did a year ago because of the U.N. Security Council sanctions. Even countries that have been trading with Iran in the past, some of the Gulf states, some of the east Asian industrial economies have severely cut into their trade. And there's tremendous pressure on China to finally being to adhere to the U.N. sanctions.

And so I think Iran has now completely isolated economically. It's going to have a very tough road in the future. And if you're an average Iranian looking at this, there's only one entity to blame, and that's your own government. It was the government in Tehran that made the decision to defy the United Nations, to try to make this drive towards a nuclear weapon.

And they're now seeing the consequences the rest of the world doesn't want to see that happen. And these sanctions are beginning to have an impact. There's no question about it.

VELSHI: What's the danger of them not seeing it that way? So it sounds obvious to you that they're going to sit there and say, my lamb and my chicken and everything about -- my gasoline, everything about my life is going to become more expensive.

What is the chance that they don't see their government to blame? Because we heard from Mahmoud Ahmadinejad. He had a press conference yesterday in which he very clearly said these sanctions are the -- are imposed by the West, and that's why your prices are going up.

BURNS: Well, the sanctions are imposed by the entire international community, by the way. All of the United Nations, 192 nation states versus Iran. But who's to blame for that? Not the government in France or the government in Russia or the government in the United States. It's the Iranian government. It's not an exaggeration to say this is an outlaw government.

They're trying to become a nuclear weapons power and no one in the world wants to see that happen. And that's why the sanctions are in place.

Now the sanctions could have been relieved years ago, had the Iranian government negotiated in good faith with the Europeans, the Russians, the Chinese and the Americans. But the Iranians have said no to negotiations.

So there's only one party to blame, and my strong suspicion is that most Iranians, knowing their own government, are going to blame their government, not blame the rest of the world.

VELSHI: Nicholas Burns, thank you for your insight into this and for letting us know what your thoughts are --

BURNS: Thank you.

VELSHI: -- on the situation, unveiling in Iran, and of course, we will continue to follow the breaking news out of Syria, a response by Turkey to Syrian shells landing in Turkey. They have artillery; they have launched artillery and those artillery shells have landed in Turkey. We'll keep you posted on that. Thanks for watching CNN. That's it for us.