Influential Iran cleric slams Ahmadinejad on economy

Iranian President Mahmoud Ahmadinejad (bottom) looks on as he waits for his Algerian counterpart Abdelaziz Bouteflika in Tehran August 11, 2008.

TEHRAN (Reuters) - An influential Iranian cleric harshly criticized President Mahmoud Ahmadinejad for failing to pursue a policy of privatization to overhaul the lumbering economy, a newspaper reported on Wednesday.

Former president Akbar Hashemi Rafsanjani, a political rival of Ahmadinejad, said the president had failed to carry out Article 44 of Iran's post-revolution constitution, which calls for the privatization of the state-dominated economy.

The law decreed that core infrastructure must remain in the hands of the state.

"The government has become a major employer, causing a lot of economic problems for the country," said Rafsanjani, a top adviser to Iran's most powerful figure, Ayatollah Ali Khamenei.

"The government has got involved in many economic activities ... Ahmadinejad has turned the economy into a fully state-dominated economy."

Khamenei, Iran's Supreme Leader, has repeatedly ruled out a capitalist approach to privatization in Iran, saying privatization must be carried out while securing state supervision and sovereignty.

Rafsanjani heads Iran's top legislative arbitration body, the Expediency Council, which earlier this year gave the green light to the privatization of major sectors.

The ruling allows privatization of downstream oil and gas sectors, mines, banking, insurance, telecommunications, railway, roads, airlines and shipping.

Ahmadinejad, who came to power in 2005 on a pledge to share out Iran's oil wealth more fairly, has come in for criticism at home for failing to tackle inflation in the world's fourth-largest oil producer.

Rafsanjani, a pragmatic politician who has been siding with reformists seeking political and social change, said the Expediency Council had no intention of tolerating Ahmadinejad's economic policies any longer.

"When Ahmadinejad was elected, the leader asked us to tolerate his economic policies ... but after three years, the era of tolerating the government on carrying out privatization has ended," he said.

"The government still controls many key industries. Giving control of sectors to semi-governmental organizations does not mean privatization."

Khamenei has urged the government to deal with economic problems, but has still voiced support for Ahmadinejad.

The government blames rising prices on factors including international pressure over its nuclear work, its big subsidies, rapid liquidity growth and the falling value of the U.S. dollar.

The West says it suspects Iran's nuclear program is a cover for building bombs. Tehran denies the charge.

The U.N. Security Council has imposed three rounds of sanctions on Iran for refusing to suspend its sensitive nuclear activities.

(Writing by Parisa hafezi, editing by Tim Pearce)