Reformist blasts Iran’s president over international isolation amid warnings of economic woes

The top reformist candidate in Iran’s presidential race blamed incumbent Mahmoud Ahmadinejad for the country’s isolation, while a leading global energy watchdog warned Thursday that the hard-line leader’s policies are worsening Iranian economic woes.

The salvo from reformist President Mohammad Khatami signaled that his campaign to unseat Ahmadinejad will aggressively target worries over the hard-liner’s foreign and domestic policies.

Many Iranians fear Ahmadinejad’s anti-Western rhetoric has worsened their international status at a time when the economy is struggling, including an inflation rate that recently hit 30 percent, before easing back a bit.

Iran has been hit hard by the global financial crisis and the plunge in oil prices. At the same time, the government is under U.S. and U.N. sanctions for refusing to suspend uranium enrichment until it allays suspicions its nuclear program is aimed at developing atomic weapons.

The Washington-based consultant PFC Energy said that whoever wins the June presidential election will inherit major economic problems it blamed on Ahmadinejad.

The firm sharply criticized Ahmadinejad for making direct cash distributions to the masses. The handouts have boosted his popularity among the poor, but they ramped up spending and burned through oil revenues that the government relies on for 70 percent of its budget.

“A toxic mix of populism and misguided priorities” by Ahmadinejad have deepened reliance on oil revenues, fueled inflation and caused economic inefficiencies, said Hanan Amin-Salem, PFC Energy’s director.

In the first half of 2008, record high oil prices made boosting spending easy, but then the market collapsed. Iran needs oil to bring roughly $90 a barrel to cover the government’s budget — almost three times the current price.

With no sign of prices rising, “Iran is clearly poised for a hard landing in 2009,” Amin-Salem said.