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Iran's leaders overlook a boomerang in gloating over West's economic problems
09-Nov-2011
A POTENTIALLY HUGE DROP IN OIL PRICES WOULD COMPOUND IRAN'S ECONOMIC PROBLEMS
Many economists predict a substantial drop in world oil prices unless the USA and Europe can resolve problems quickly.
Like many Third World countries with one-dimensional economies, Iran has become overdependent on one resource for its revenue--oil in this case. What happens then if shrinking demand should cause a substantial drop in world oil prices? What makes Iran even more vulnerable are decades of economic corruption and short-sighted mismanagement.
Corruption is almost inevitable in a closed society that lacks the treansparency and natural checks provided by free press, free speech and democratic elections.
Economic mismanagement, especially by the Republican Guard--is worsened because of a decision to encourage cheap imports to keep prices down and the people contented.
A side effect of that policy has been to drive hundreds of Iranian companies and much of its agriculture out of business, making the economy more one dimensional than ever. What happens when Iran, faced with lost oil revenues, can't afford those imports? Where can Iranians find necessities?
While gloating over economic problems in Europe and the USA, Iran's leaders miss the likelly boomerang effect at home. Few are widely traveled or well read in history and economics so they fail to understand the fragile nature of worldwide global interdependence--ties which can't be avoided in the modern world. They resemble a man who gloats as he watches the other half of his lifeboat sink.
It's simple: What happens in one place can effect everyone else. This is especially true in the case of economic behemoths such as the USA, Europe, China and Japan.
Consumers and corporations faced with economic problems always cut fuel consumption. There are many ways to do so. Compounding the effect on oil prices is that--as western economies sag--China, Japan and others experience huge drops in sales. Shipping fewer goods and cutting production, they too consume less oil than predicted.
Recall the Arab oil boycott during the Carter presidency. As intended it hurt western economies but it took oil prices would take a decade to recover.
What makes Iran's situation worse is that food inflation is also threatening stability in Iran, as a recent report in the Financial Times noted.
//iranian.com/main/news/2011/11/08/food-inflation-threatens-stability-iran
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Great news
by Veiled Prophet of Khorasan on Thu Nov 10, 2011 08:17 AM PSTI want IRR to go I want a secular regime to replace it. The sooner the better for my own selfish reasons. No Iran will not vanish if IRR remains another 200 years. We had worse. But I want my home back.
Yes I am a selfish SOB and want to go home before I die. I am not immortal and do not plan on dying in the USA. Besides I want to move my kids back to Iran so they form their families there. Before they become so American that there is no room for them back home. If this IRR *** goes on much longer second generations will forget Iran. That is an opportunity we should not loose. The best thing we got is Iranians outside Iran. With their understanding of West; language and political culture skills.
On a nble note if IRR is replaced with a decent system in the next 10 years we will see a flood of top notch people back home. That is worth a billion times the oil.
More troublesome economic news from Iran
by FG on Thu Nov 10, 2011 07:40 AM PSTMehr reports that Iran has halted oil exports to Pakistan after a Pakistani refiner failed to obtain financing for a purchase because of US-led sanctions.
The National Iranian Oil Co. had signed a contract to sell 12,000 barrels of oil a day to state-owned Pakistan Oil Refining Co., but some banks in Pakistan rejected the refinery’s requests for letters of credit.
Meanwhile, Iran has closed airspace to Pakistan International Airlines, as pilgrims return from the Haj to Mecca in Saudi Arabia, because of a delayed outstanding payment of $600,000.
Aftab News reports that the Government budget deficit for 2010/11 was 26 thousand billion Toman (about $20 billion).
And linking to our LiveBlog theme today, Speaker of Parliament Ali Larijani has cancelled the 275 billion Toman (about $210 million) Government cultural budget for two Iranian provinces because of lack of financial cover for the expenditure.
Source for above info:Scott Lucas at enduringamerica.com
IRONY (From FG)
If Iranian's ruling theocrats had any smarts, they'd be rooting for the Western economies to recover, rather than the reverse--assuming they need more revenue instead of less.
INTERESTING POLITICAL ANALYSIS
The Financial Times, "Iran’s Leaders, Defiant Abroad, Struggle at Home", offers this nugget of analysis from a "former official": “Mr Ahmadinejad’s differences with the Supreme Leader and other fundamentalists are so deep that international threats can help take the huge pressure off his government only to a limited extent."
//www.ft.com/intl/cms/s/cbcc3d88-0ae6-11e1-b6...
Promising!
by PArviz on Wed Nov 09, 2011 11:26 PM PSTImagine there is an oil embargo imposed on the regime in Tehran. Oil dollars are not flowing in anymore and as a result
- They can't pay their henchmen as much as they did before
- They can not provide people with their most basic needs (food, medicine...)
- Due to lack of money many things can not be imported anymore and many things will stop functioning
- The regime uses the little amount of money it has on reinforcing its terror machinery (guards, Basijis...) and that makes hungry masses even more pissed off
- The general public will stay mostly quite in the face of tyranny if they can somehow fill their stomachs but if in addition to tyranny they have to go hungry too, then things start happening and even this regime, however brutal and savage, can not stop the people once they decide they have had enough
- One problem is the lack of a democratic alternative to this regime which will make the outcome of such an uprising/revolution unclear and worrying. Because under those circumstances no one knows who will come to power
So if the price of oil drops drastically, that in a sense would be like a mini oil embargo and you can be sure that things will start happening in Iran.
Down with the ENTIRE Islamic Republic!
Regime leaders may not care about Iranians BUT....
by FG on Wed Nov 09, 2011 02:23 PM PST....they do care about protecting themselves and their own interests. That raises 3 additional points.
1. Economic de-stabilization encourages political destabilization.
2. Many of the troops come from the suffering people. Hence, their reliability decreases as things get worse.
3.Where can they go now?
If things get worse, Syria is no longer an option for exile. Unlike Sunni dictators, they won't be welcome in Saudi Arabia. I'm not sure that Iraq is safe. Pakistan certainly isn't. Perhaps Malaysia or Indonesia will accept them although both are predominantly Sunni. Finally, there are several non-muslim countries. In any case, any of those choices may not save them from the World Court for past crimes against the Iranian people.
I Agree With Half!
by G. Rahmanian on Wed Nov 09, 2011 03:25 PM PSTI Agree With Half of what COP says. Yes, those in power are only concerned with enriching themselves. But that is not due to their ignorance. Stealing and stashing billions of dollars in foreign banks is hardly a sign of ignorance. The bastards running Iran have their teams of advisers, too.
FG jaan
by Cost-of-Progress on Wed Nov 09, 2011 11:20 AM PSTYou make good points in this blog. However, I am sure you are aware that this regime and its corrupt elements are only ineterested in self-enrichment (nukes among them) and power. These folks do not have the education or the will to understand that they have been way over their stinking heads for the past 3 decades and it is starting to show badly now.
Iran and the welfare of her people is the last thing on their minds, if at all!
BTW, I am sure you meant the Revolutionary Guards (IRGC) and not the Republican Guards; Saddam, Brave (LOL) Elite force.
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IRAN FIRST
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You are correct
by religionoutofgovernment on Wed Nov 09, 2011 10:52 AM PSTI would add that economic turmoil has been a precursor to political change and turmoil in Iran as well as other countries. This includes the role of poor economic conditions prior to the Aug 1953 coup and also for a couple of years prior to the 1979 revolution. This is something we rarely discuss, but we do consume ourselves with all kinds of conspiracy theories.
Thanks FG for a well written blog
by Anahid Hojjati on Wed Nov 09, 2011 10:23 AM PSTIranian leaders with their automatic gloating over any problem in west, might get what they wish for. Economic problems getting worse in major economic powers of the world. Although these countries will most likely weather the problems and will come out with reforms, Iran might not. That is not a bad alternative to military action by west or even oil sanctions. This will have a kind of oil sanction effect without causing as much animosity in Iran. After all if the customers donot need same amount of oil, Iran can not be upset ?