The Latest from Iran (27 June): How to Un-Do Diplomacy --- "Jews Control the Illegal Drug Trade"

See also The Latest from Iran (26 June): The Oil Squeeze

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1st Vice President Mohammad Reza Rahimi1700 GMT: Foreign Affairs Watch (Egyptian Front). The office of Egyptian President-Elect Mohamed Morsi says it will be filing a lawsuit against Fars News Agency, linked to the Revolutionary Guard, for fabricating a high-profile interview.

The claimed interview, in which Morsi supposedly called for better Tehran-Cairo relations as part of a new "strategic balance", caused tension within the Iranian establishment. The pro-Ahmadinejad State news agency IRNA denounced Fars' articles as "fake"; Fars responded by posting an alleged audio of the interview (see separate EA feature).

1515 GMT: Supreme Leader Watch. Is this confidence or concern in Ayatollah Khamenei's remarks today to judiciary officials?

1. CONFIDENCE OR CONCERN OVER SANCTIONS?

“The main aim of the sanctions imposed by arrogant powers is the Iranian people so that the pressure will cause people to become frustrated and separate from the Islamic establishment. However, by God’s grace, they will fail in this conspiracy as they still do not know our people and officials."

2. CONFIDENCE OR CONCERN OVER PEOPLE'S SUPPORT FOR REGIME?

“These bullying powers which lyingly call themselves the international community are trying to deprive the Islamic Republic of Iran of its popular support base."

3. CONFIDENCE OR CONCERN OVER REGIME UNITY?

“Under these conditions, cooperation among all organs and the three branches [of the government] is necessary, an obligation, and incumbent."

1455 GMT: Nuclear Watch. Refusing the failure of negotiations in Moscow last week, Laura Rozen and Barbara Slavin offer new information which bolsters our analysis at the time, "US Hardens Stance in Iran Nuclear Talks":

Iran’s chief nuclear negotiator did express willingness to discuss one key step requested by the five permanent members of the UN Security Council plus Germany (P5+1): stopping enrichment of uranium to 20% U-235, the isotope that gives uranium its explosive power.

The western members of the P5+1 insisted, however, that Iran had to meet all three conditions contained in their proposal: stop 20% enrichment, ship out a stockpile of more than 100 kilograms of 20%-enriched uranium and close Fordo, a fortified enrichment facility built into a mountain near Qom.

That stance has led some P5+1 members to conclude that the United States hardened its position in Moscow compared to two earlier sessions in Baghdad and Istanbul, according to diplomatic briefings shared with Al-Monitor.

Previously, American officials had signaled they were planning to take what some called a “Chinese menu” approach to the proposed confidence-building measure aimed at halting Iran’s higher enrichment activities: in essence, the more "items on the menu” that Iran agreed to embrace, the more reciprocal benefits would be on offer. So if Iran, for example, stopped 20& enrichment, it might get fuel for a reactor that makes medical isotopes, or spare parts for Iran’s aging Boeings. At the same time, Iran had always been expected to meet all three conditions to win significant sanctions relief, such as postponement of a European ban on Iranian oil imports or on insurance of oil shipments due to go into effect July 1.

“Earlier, the US had implied that they were ready to address the three E3+3 demands … separately,” a briefing shared with Al-Monitor said, using the terminology Europeans employ for the P5+1. “However, this position had changed in Moscow,” where the US insisted “that the three demands should be treated inseparably, as a package.”

1410 GMT: Oil Watch. For the first time, a senior Iranian official has acknowledged that oil exports have fallen sharply.

The National Iranian Oil Company's Mohammad Ali Emadi said, "It was 20 to 30 percent we reduce regarding our exports. Some part of the reduction is shifting for the refinery internally."

Industry estimates claim Tehran is suffering even more amid sanctions, with exports falling to 1.3 million bpd from last year's level of 2.5 million bpd.

Emadi denied the fall was due to external pressure, "We gradually started to reduce, It is not because of the sanctions but sometime regarding overhaul maintenance of the wells."

The NIOC official said Iran wanted to export more gas to India and Pakistan to make up for the fall in crude exports.

1335 GMT: Sanctions Watch. Tehran's Ambassador to South Korea Ahmad Masoumifar hassaid that Iran "may decide to fully stop importing Korean goods" if Seoul halts imports of Iranian oil.

In an interview with The Korea Times, Masoumifar claimed there is a high demand for Iran's crude oil supplies and Tehran has no problem maintaining exports.

The South Korean Government announced on Tuesday, "Imports of Iranian oil will be suspended, as the EU [European Union] will suspend crude imports from Iran and also halt its insurance and reinsurance cover on the crude imports from July 1."

1330 GMT: Economy Watch. ILNA reports that tea farmers have not been paid for their crops, leaving 50% unemployed and 30% of the plants manufacturing tea idle.

1320 GMT: Foreign Affairs (Syrian Front). Reuters reports that three Iranian tankers are returning to Syria for the first time since April.

The first tanker, the Amin, was due to reach the port of Baniyas late on Tuesday to collect Syrian oil, while a second vessel with a delivery of diesel fuel, the Alvan, will arrive later this week.

Syria's refineries are set up to process the country's light crude oil mainly into lighter products such as naphtha and gasoline, leaving it short of diesel.

Tracking data shows the MT Tour, another UN-sanctioned Iranian tanker that picked up a cargo of sanctioned Syrian oil earlier this year and took it to Iran, is collecting another shipment. It is nearly empty and sailing towards the Red Sea.

(Cross-posted from Syria Live Coverage)

1120 GMT: Culture Watch. This might not bode well for US-Iran reconciliation --- Fars announces an "anti-American poetry and music festival".

1013 GMT: Currency Watch. Central Bank Governor Mahmoud Bahmani has warned about the fall in the Iranian currency due to "psychological and political" factors.

The Iranian Rial stands at 19190:1 vs. the US dollar this morning, more than 5% weaker than last week and 25% weaker than its level after the Central Bank and Government intervened this winter.

0738 GMT: Oil Watch. Iraq is on the verge of surpassing Iran as the world's second-largest oil producer.

A spokesman for Iraqi Deputy Prime Minister for Energy Affairs Hussain al-Shahristani said output in June was more than 3.07 million barrels a day, just short of Iran’s 3.1 million barrels. Iraq predicts production of 3.4 million barrels a day by the end of the year.

Iranian production has fallen almost 15% this year, and almost a third since 2010, amid problems with production and investment. In contrast, international oil companies are renovating Iraqi fields neglected during years of war and sanctions.

The rising Iraqi output is likely to assist the US and Europe in enforcing sanctions on Tehran's oil sales, with customers taking advantage of alternative supplies.

The conservative site Alef warns today that Iran's oil income may fall to $50 billion this year, compared to $113 billion in 2011.

0630 GMT: Economy Watch. Aftab reports that the price of mineral water has jumped 40%.

Iran's Dairy Industry Association is highlighting the rising price of milk, saying it is likely to surge 25% in the near-future.

0530 GMT: Tuesday was marked by an intense effort by Iranian officials at an advance in the nuclear talks, staving off the European Union's cut-off on Iranian oil scheduled for 1 July. Foreign Minister Ali Akbar Salehi led the campaign, visiting EU member Cyprus to request,  "We hope that the European Union looks into the matter with more rationality and wisdom because I think nobody benefits from confrontation."

Foreign Ministry spokesman Ramin Mehmanparast took up the theme, "EU sanctions against Iran will both hurt talks between Iran and the P5+1 group, and aggravate the economic and social problems in European countries." Ali Bagheri, the deputy nuclear negotiator, assured that Iran's proposals for a nuclear resolution were "comprehensive and feasible"

What could possibly derail this campaign? This can:

“The Zionists play a key role in the production and distribution of narcotics across the globe, because destroying human societies and exploiting their virtues are among the objectives of the Zionists,” [1st Vice President Mohammad Reza] Rahimi said at a conference commemorating the International Day Against Drug Abuse and Illicit Trafficking in the Iranian capital of Tehran on Thursday. 

Numerous studies have attested to the fact that the Zionists regard themselves as the master race and they view the other races as their slaves that must be used for achieving the Zionist objectives, he said. 

While the Zionists utilize the narcotics to devastate other societies, they safeguard their own society against such drugs, he pointed out. 

The Iranian vice president expressed Tehran’s preparedness to sponsor an international investigation into the role of the Zionist entities in the production and distribution of narcotics across the world. 

Rahimi did address issues such as control of drug production in Afghanistan, albeit by blaming the "West" for "inaction", but his Zionist-centred comments inevitably seized attention. Thomas Erdbrink, the Tehran correspondent of The New York Times, wrote:

Mr. Rahimi, second in line to President Mahmoud Ahmadinejad, said the Talmud teaches to “destroy everyone who opposes the Jews.”...

Mr. Rahimi...told stories of gynecologists’ killing black babies on the orders of the Zionists and claimed that the Bolshevik Revolution in 1917 was started by Jews, adding that mysteriously no Jews died in that uprising.

He also said the Talmud teaches Jews to think they are a superior race. “They think God has created the world so that all other nations can serve them,” he said. Halfway through his speech, Mr. Rahimi said there was a difference between Jews who “honestly follow the prophet Moses” and the Zionists who are “the main elements of the international drugs trade".

After the conference, a European diplomat put Rahimi's lecture into wider perspective, “This was definitely one of the worst speeches I have heard in my life. My gut reaction was: why are we supporting any cooperation with these people?”