week ago we described the sad tale of one Mahmoud Bahmani, who until recently supervised the unilateral destruction of the Iranian Rial, which on Friday just hit an all time low against the dollar down 21% in two weeks, as head of the Iranian central bank. While his currency-crushing performance would have been enough to get Mahmoud the "congressional medal of inflating away the debt" (not to mention a lifetime corner office at a TBTF bank of his choosing) at any self-respecting "developed world" banana republic, all of which have just one goal - to crush their currencies as Iran just did, in Iran it had precisely the opposite effect and let to his prompt termination. Yet this story is merely a trifle compared to the recent developments surrounding his predecessor, Tahmasb Mazaheri's, who led the Iranian central bank for just one year until September 2008, at which point Ahmadinejad fired him to make way for the recently laid off Bahmani. It is this same Mazaheri, who had been off the world's radar for over 4 years, until he trimumphantly resurfaced yesterday, when German Bild reported that he was caught last month trying to enter Germany with a check for 300 million Venezuelan Bolivars (some $70 million USD) issued by the Venezuelan Central Bank.
The German newspaper Bild am Sonntag reports that a man caught last month trying to enter Germany with a check worth about $70 million was Iran's former central bank chief.
The weekly reports that customs officials at Duesseldorf airport found the check in Tahmasb Mazaheri's luggage Jan. 21 upon his arrival from Turkey.
German customs had issued a statement Friday saying a check for 300 million Venezuelan Bolivars issued by the Bank of Venezuela was found on an unnamed 59-year-old man.
Neither customs officials nor Iran's embassy could be reached for comment late Saturday.
Mazaheri was the governor of the Central Bank of Iran until 2008.
Bild am Sonntag reported in its Sunday edition that German police and customs are investigating possible money laundering.
Superficially, this raises many questions:
- Why would a former Iranian central banker need to physically launder money into Germany, where any deposit of a check of this magnitude, and especially in this currency, would raise more than a few eyebrows?
- Why did Venezuela, best known in the international monetary arena for being the first country to repatriate its gold several years ago, well before the Bundesbank, use a former Iranian central banker to launder money, if indeed this was mere money laundering?
- Why did Venezuela have anything in common with an Iranian to begin with?
- What would the use of funds of this check deposit have been had it gone through, and how many times in the past has Venezuela deposited massive checks of this magnitude in the past?
Many questions, no answers, at least for now: the people demand to know.
For those interested in Mazaheri's background and the circumstances surrounding his termination, here is some additional information from Arash Sigarchi:
While the differences between Iran’s ex-Central Bank governor and the President were so deep that Ahmadinejad could not even wait to return to Tehran to issue his dismissal of governor Tahmaseb Mazaheri and replace him with Mahmoud Bahmani, which he did from New York, there already are reports of differences in views between the President and his newly appointed governor.
President Ahmadinejad kept Mazaheri as Central Bank governor for only one year and when he replaced him it was to “streamline his economics team”, but the official Fars news agency which had predicted Mazaheri’s dismissal weeks in advance, published reports yesterday that Hossein Samsami may be appointed as the deputy governor of the Central Bank of Iran (CBI).
Samsami is the nephew of Parviz Dawoodi, Iran’s first vice-president and while Fars news agency conditioned the finalization of Samsami’s ascend at the CBI to a “confirmation by the governor,” news reports indicate that Mazaheri is not keen on doing this. Entekhab news website on Sunday quoted an “informed source” that vice-president Dawoodi’s request to elevate Samsami to be governor Bahmani’s deputy has met a hurdle as the newly appointed CBI chief is refraining from appointing him. The news site concludes that with this level of opposition by Bahmani, his own status may be reduced to that of a deputy at the CBI.
While it seems doubtful that President Ahmadinejad would rescind his newly appointed CBI governor so quickly, Entekhab websites report indicates the regret of the cabinet in appointing Bahmani to lead the bank. Contrary to public views, Bahmani as an architect of the new policies at CBI is even more adamant on its implementation than his just dismissed boss, i.e. governor Mazaheri. His resistance and relative independence in dealing with Samsami so far has disarrayed the cabinet prompting it to think that the new governor may actually not change course at the bank and its monetary policies after all.
As tensions at the CBI and over its policies and leadership continue at a time when the official ILNA labor news agency reported that, “Some senior CBI directors had submitted their resignations because of pressures at the Central Bank.” This news agency too mentioned Dawoodi’s pressure on Bahmani over Samsami and wrote, “While Dr Bahmani has refrained from accepting the pressures in this regard, but it is heard that Samsami is already exerting his presence in all quarters of the bank. According to some reports a group of CBI directors who had joined the bank recently have resigned in protest to Samsami’s expanding control.”
The problems at the central bank have not remained confined to the presidency, the cabinet and the bank, as the Majlis too has joined in the game. First, Majlis’ Research Center which works under Tavakoli recently announced its expert opinion on CBI’s controversial policy package which led to the downfall of governor Mazaheri, and on the resolution of the economics commission of the cabinet. The center announced that, “The government should not intervene in monetary and banking policy making.” Following that, Majlis speaker Larijani actually criticized the change of guard at the CBI and said, “It is not good that individuals be replaced or removed from office so quickly,” which is a direct reference to the removal of the CBI governor.
And from PressTV as of March 2009:
A former Iranian official warns that the implementation of the government's economic reforms plan would deteriorate the financial system.
Tahmasb Mazaheri, the former governor of Iran's Central Bank, told Tabnak on Saturday that if the current proposals were hastily implemented, the inflation rate would skyrocket, possibly reaching to as high as 40 percent in the first year.
President Mahmoud Ahmadinejad's government is pushing through a plan under which the state subsidies for fuel, natural gas and electricity would be cut. The government instead would distribute cash among low-income families to compensate for the price hike caused by the plan.
Mazaheri, however, argued that since there are no proper mechanisms in place to improve the business activities in the country, the price hike would force the government and Majlis to take steps which would further increase the inflation rate.
Mazaheri said government employees who have a fixed income as well as businessmen and enterprises that have to work in a competitive market are most vulnerable to the negative impacts of the economic reforms plan.
Supporters of the plan say it is in line with global financial organizations' recommendations that Iran get rid of a heavily subsidized economy if it wants to solve its economic problems.
The former official said the plan would damage the country's economic structure and people's confidence. Such a scenario, according to Mazaheri, would shake the fundamentals of Iran's economic system and would lead to economic disintegration.
The former governor of Iran's Central Bank also dismissed the argument of the proponent of the plan that after a hike in the inflation rate following the implementation of the plan, it would be decreased to a single digit figure.
"The implementation of the plan would accelerate the trend of increase in the inflation rate," Mazaheri said.
The government's plan which sparked heated debates among its opponents and proponents is awaiting an approval by the Iranian parliament Majlis.