Iran's hardline lawmakers on Wednesday approved a bill enabling them to block foreign investment deals, a vote that incensed President Mohammad Khatami who said it would cost the country billions of dollars.The legislation obliges the reformist government to obtain parliamentary permits before signing deals with foreign firms.

 

It is also retrospective, applying to all foreign contracts reached since March 2004, and could affect a $3 billion deal with Turkey's Turkcell over Iran's second private GSM mobile phone operating licence.

 

"This means paralysing the government ... and raising the cost of investment in Iran," Khatami told reporters after a weekly cabinet meeting. "This will cost the country billions of dollars ... I find it completely against national interests," he added.

 

Since taking up a parliamentary majority in late May, conservative legislators have unravelled a swathe of liberalising reforms, particularly targeting foreign investment. They have also argued that the phone deal with Turkcell and another with Turkish engineering consortium TAV, to run Tehran's new airport, could harm national security.

 

MAIN TARGETS

"Our main targets are the contracts with Turkcell and TAV," said conservative lawmaker Ahmad Tavakkoli, who backed the bill.

 

After two days of fierce debate and four rounds of voting, due to questions being raised about the voting procedure, 108 out of 212 MPs present voted in favour of the legislation. Before the bill passes into law, parliamentarians will discuss possible additions. The legislation must then go to the Guardian Council, a hardline watchdog, for approval.

 

Khatami protested over the mandate to challenge deals that had already been signed. "The government is a partner in talks with the world and one cannot invalidate its promise," Khatami said.

 

The narrow vote showed that despite their majority in the parliament, the conservative camp is divided on the economy, with a pragmatic faction favouring foreign investment.

 

"It was not a big surprise when hardliners took over the parliament, but it is a surprise what they are doing to Iran's economy," Albrecht Frischenschlager, a director at the Tehran-based Atieh Bahar consulting firm told Reuters. "The heavyweights of the conservative camp may eventually appeal for intervention from senior levels," he added.

 

Turkcell was initially awarded the GSM mobile phone operating licence in February to add 16 million users to the current 3.4 million suscribers. Telecommunications Minister Ahmad Motamedi said local companies were incapable of meeting the rapidly growing demand for mobile subscriptions. TAV, which has not yet signed a contract, fell foul of hardliners after pouring $15 million into Tehran's new airport on a goodwill basis. TAV was expelled by Revolutionary Guards, who said the airport was not safe in foreign hands.