Significance of the Financial Crisis for Iran

How will the recent financial banking crisis effect Iran? what, if any, significance does it hold for the Baha’is of Iran? To answer that we first have to look at the economy of the country.

The Iranian economy is primarily based on its fossil fuels. According to the Iranian Central Bank, oil and gas exports accounted for $82 billion in the first quarter of this year. Non energy related exports accounted for only $15.6 billion which comes from mostly pistachios and woven carpets. The energy revenue is about to shrink considerably as oil prices have fallen in international markets from $147 a barrel to $65 a barrel.

iran-oil-prices-crisisA perfect storm is headed towards this teetering economy. Not only will a lower crude oil and natural gas price mean lower revenues for the IRI but a retrenching world economy will mean that Iran’s already thinly stretched trade relationship with the outside world will be strained even more, leaving the economy even more precariously dependent on diminishing petrodollars. As well, the lack of refining capacity means that Iran will have to continue to pay for refined fuel to be imported from Turkey at relatively stable prices. This will further squeeze the economy as their own raw material expenses will be relatively unchanged. Iranians have lived with extremely cheap fuel for their whole lives, paying 3-4 cents a liter. If the government tries to end the subsidies and pass on the real expense of the fuel, there will be an overnight riot engulfing the whole country.

Just this past month, the IRI was impotent to implement a 3% VAT on retail sales. It was first delayed when it met initial resistance but when the delay’s deadline wore out, shopkeepers closed their stores in droves across Iran. The government has also had to back down on its demands for more transparent accounting to get more tax revenues. And a plea for businesses to pay back outstanding and delinquent debts has gone unanswered. Iran’s tax revenues only make up a fifth of the countries budget, so as you can imagine, not very many pay their share of taxes and don’t like to be forced to all of a sudden.

The gigantic oil surplus funds that Iran had amassed has now been totally spent by Ahmadinejad in his desperate attempt to curry favor with those who elected him into power on a platform of “putting oil wealth on the dining room table”. All that this spending spree has accomplished is runaway inflation – by some estimates topping 30%. Food prices alone are running at 40%. Iran’s Central Bank recently acknowledged that almost 25% of the Iranian population live in poverty.

Ahmadinejad will seek another term in office in June 2009 which could coincide with a full blown economic tsunami. If the price of oil and gas continue to go down or simply remain in this range, the economy of Iran will suffer greatly as the government has created budgets based on much higher estimates of oil revenue. Some economists estimate that Iran needs a minimum of $75-80 a barrel to remain standing. As Iran comes under more stress due to lower oil prices, their credit rating and currency strength will also suffer, making imports more expensive. Further damaging the economy.

Ahmadinejad and the Hojjatieh extremists in power are in even more desperate need of petrodollars since that is how they have been able to prop up a diseased economy until now. They have had billions to distribute among the people to buy supporters. But today not only is inflation running wild, fraud and corruption continue to take their toll on Iran’s economy to an unprecedented degree. There is no direct investment of any significance from external sources which leaves the economy without any hope of capital injections. As well, with the recent moves against them, the baazaris who make the bulk of the Hojjatieh Society, are angry at Ahmadinejad.

In ancient Greece, less able sculptors would fill in the cracks of their marble statues with wax, making the imperfections less noticeable. Those that didn’t would advertise their wares as sin cere or “without wax”. The word today is known as sincere – as in truthful, honest, factual. If Ahmadinejad can not depend on the surplus oil revenue that Iran has been lucky to receive for the past few years, he will have less and less “wax” with which to gloss over the many ugly imperfections of Iran’s crumbling facade.

When petrodollars can not sustain this, Iran’s economy will hit a tipping point from which there is no return. Thanks to the mismanagement, cronyism, kleptocracy that has been characteristic of the Islamic regime, Iran’s economy is in tatters and does not need much more than a “flick” to hit the tipping point.

It all comes down to one number which you can watch in your daily newspaper. If the price of oil and gas goes down, Iran will change. The other variable is how fast prices come down. Even if prices don’t fall to extremely low levels, a dramatic decline, like the one we’ve seen so far can be a “shock”. This is because the harder prices fall, the less time the country has to adjust and therefore, the more fatal the shock to the system. If we imagine oil falling according to the trajectory it has set since its high at $147, then we could potentially see $30 by the beginning of next year. Such an outcome would mean that the Iranian regime would not be able to survive in its current form.

No one knows what will happen but under such a scenario the priorities of people is not ideology but simply survival under Maslow’s hierarchy of needs. And if such a scenario does unfold, it will mean a tremendous suffering for all Iranians. Which is why I continue to beg me fellow Baha’is to leave the hell-hole that is Iran. Things are bad now but they could get unbelievably worse. Under such a scenario, the IRI would completely shut out of their normal control mechanisms and the population would be in “everyone for themselves” mode.

If you’ve been reading my previous thoughts, this is nothing new:

It is my humble opinion that if any political or religious change is in the offing it will come as a result of severe economic pressure which itself can only be brought on by a much lower crude price.
My personal observation and analysis regarding this commodity leads me to conclude that it will be either much higher or pretty much at this level in the future, which is why most of my investments for the past 3 years have been related to oil/gas (don’t confuse this with financial advice).
Iran’s Future

As I’ve repeatedly said, no structural change will occur in Iran with the price of oil where it is because it gives the ruling kleptocracts too much leeway to fill in the gaps of a corrupt and decaying regime with petrodollars. After all, the cash that was given to hordes of Basijis (the fanatical militia controlled by Khamenei) to bully voters into supporting a dark horse candidate, has to come from somewhere.
Sundry

The only thing that has changed in my view is that oil is now headed down for a while. OPEC has responded as they usually do, with talk of a restriction in supply. No one believes that they will actually do as they say because they desperately need the income.

A corollary to all this economic talk is that it could have real consequences for the Baha’i community in Iran. Not only as citizens of a decaying regime but also as member of a persecuted religious community. History has shown a pattern where economic turmoil seems to coincide with religious persecution. This has already been studied and analyzed as mentioned in this previous post about Iran.

If you are a Baha’i in Iran, for this and many other reasons, it is time to say Farewell to Iran. As a Baha’i we do not believe in patriotic propaganda, nationalism nor do we exalt or glory in one country over another. We are to glory in being part of humanity. So go be a part of a healthy, open, welcoming society. There are many out there that would be more than happy to have you as a productive member.

  • http://kaweah.com/blog Dan Jensen

    Are you certain, Baquia? Perhaps they ought to wait a little longer. Iran is, after all, a nation blessed above all others:

    “Ere long will the earth be turned into a paradise. Ere long will Persia be made the shrine round which will circle the peoples of the earth.” -The prophet of Nayin, Nabil’s Narrative

    “Let nothing grieve thee, O Land of T?? (Tihr??n), for God hath chosen thee to be the source of the joy of all mankind. … Ere long will the state of affairs within thee be changed, and the reins of power fall into the hands of the people. … The day is approaching when thy agitation will have been transmuted into peace and quiet calm.” -The prophet of Nur, Kitab-i-Aqdas

  • http://kaweah.com/blog Dan Jensen

    Are you certain, Baquia? Perhaps they ought to wait a little longer. Iran is, after all, a nation blessed above all others:

    “Ere long will the earth be turned into a paradise. Ere long will Persia be made the shrine round which will circle the peoples of the earth.” -The prophet of Nayin, Nabil’s Narrative

    “Let nothing grieve thee, O Land of T?? (Tihr??n), for God hath chosen thee to be the source of the joy of all mankind. … Ere long will the state of affairs within thee be changed, and the reins of power fall into the hands of the people. … The day is approaching when thy agitation will have been transmuted into peace and quiet calm.” -The prophet of Nur, Kitab-i-Aqdas

  • http://www.bahairants.com Baquia

    Dan, I’m not very good at interpreting prophecies so I’ll stick to prognosticating on Iranian economics :) The description of Iran which you provide is entirely possible in the future but before it can happen, I think we need a clean slate. The sort of clean slate that a total economic meltdown can only bring.

    Countries have had amazing turn-arounds before. Take the example of Japan. After WWII it was a mess, “a hell hole” some may have said. Within a few decades it became an economic powerhouse with the highest literacy, per capita income, life expectancy, etc. It is possible. But you need a clean slate. Japan’s clean slate was provided via merciless shelling by the Allied Command which reduced the country to rubble. They helped build it back up of course.

    Iran’s meltdown may come without any bombs. At least I hope it will since I don’t want any more wars.

  • http://www.bahairants.com Baquia

    Dan, I’m not very good at interpreting prophecies so I’ll stick to prognosticating on Iranian economics :) The description of Iran which you provide is entirely possible in the future but before it can happen, I think we need a clean slate. The sort of clean slate that a total economic meltdown can only bring.

    Countries have had amazing turn-arounds before. Take the example of Japan. After WWII it was a mess, “a hell hole” some may have said. Within a few decades it became an economic powerhouse with the highest literacy, per capita income, life expectancy, etc. It is possible. But you need a clean slate. Japan’s clean slate was provided via merciless shelling by the Allied Command which reduced the country to rubble. They helped build it back up of course.

    Iran’s meltdown may come without any bombs. At least I hope it will since I don’t want any more wars.

  • Martin Bebow

    Baquia. I agree with you. No more wars if possible. The great good thing that could come of this economic crisis is that Iran’s regime would tumble bloodlessly.

  • Martin Bebow

    Baquia. I agree with you. No more wars if possible. The great good thing that could come of this economic crisis is that Iran’s regime would tumble bloodlessly.

  • Randy Burns

    Here’s a similar article discussing Venezuela
    Some might have an interest.

    Randy

  • Randy Burns

    Here’s a similar article discussing Venezuela
    Some might have an interest.

    Randy

  • http://www.bahairants.com Baquia

    Thanks Randy. Yes, I think no doubt any and all oil producing countries will feel a chill but most are in better shape. Even Venezuela is better positioned than Iran economically. Iran is a wobbly table with three legs, oil+gas, pistachios and carpets. Their strongest “leg” is getting kicked from under them. Unless the whole world gets addicted to sitting on persian rugs eating mountains of pistachios, I don’t think they will be ok.

  • http://www.bahairants.com Baquia

    Thanks Randy. Yes, I think no doubt any and all oil producing countries will feel a chill but most are in better shape. Even Venezuela is better positioned than Iran economically. Iran is a wobbly table with three legs, oil+gas, pistachios and carpets. Their strongest “leg” is getting kicked from under them. Unless the whole world gets addicted to sitting on persian rugs eating mountains of pistachios, I don’t think they will be ok.

  • http://www.bahairants.com Baquia
  • http://www.bahairants.com Baquia
  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Friedman: Their strongest ?leg? is getting kicked from under them. Unless the whole world gets addicted to sitting on persian rugs eating mountains of pistachios, I don’t think they will be ok.[/quote]

    People such as yourself (including myself up to 2003) continually prognosticated an imminent collapse of the Iranian regime going since the Summer of 1979. Any day now. Thirty years later – after the tumult of a Post-Revolutionary era including War with Iraq, Sanctions, Student Movement, etc – the mullahs are still in power and a meltdown qua revolution booting the mullahs out is nowhere near a remote possibility today as it was in 1981 when the leftist uprising against the mullahs occurred and Bani Sadr (the IRI’s 1st president) left Iran for permanent exile. That was the only time this regime has ever faced a dire situation anywhere near the resemblance of a meltdown collapse. We are nowhere near that today — not even by a long shot.

    For all their problems and fascistic heavy handedness, the one thing the Iranian emigre (especially in the United States) has consistently done is to underestimate the mullocracy; and it has consistently underestimated it to its own prolonged and perpetual emigre-hood. For all their obscurantism, the elite of this regime have shown that they can play – and in some cases out-play – a geopolitical chess match and hold their own with the best of them. Deliberate misinformation from Iranian intelligence fed to Iraqi opposition groups (who in turn fed them to American and European governments) is what is primarily responsible for leading George Bush down the garden path and into the Iraqi quagmire. If America had had the good sense to enlist Iran into its war with the Taliban/Al-Qaeda in Afghanistan, assuredly this war would’ve already been a footnote to history and won decisively. That this regime is now cooperating with that effort, and given how that effort seems to go from bad to worse for NATO with each passing day, don’t think for a second that the Iranians don’t have a hand in it. And on and on it goes.

    Clearly this regime has shown its durability and has consistently defied all speculations/or movement regarding its imminent collapse. As such, for better or worse, the Islamic Republic of Iran is here to stay for at least another twenty-five years, if not more, so get used to it.

    Now your opinion that Iran is on wobbly economic legs is also grossly exaggerated and it is the language and point of view of the LA based emigre pundits, who have gotten it wrong consistently since 1979 (note the Baha’i-friendly Zia Atabai of NITV whose erroneous prognostications, not to mention his predilection for making up or otherwise exagerrating “meltdowns,” is a matter of public record). Although global oil prices have only now slowly begun to decline (not by much), since late last year Iran has reaped massive financial dividends that produced liquidity and revenue circulation in sectors of the national economy that people were earlier predicting wobbliness. Explain that one. So instead of reading propaganda in the American press, let me point you to European and Asian news outlets who are giving the more balanced picture of the Iranian situation that does not remotely prognosticate wobbliness. Add to that the fact that other than a handful of EU countries, no one else seems to be cooperating with US spearheaded sanctions (the Chinese are not cooperating, neither are the Russians nor most of Eastern Europe nor South America) and your analysis is even more way off. Wishful thinking by emigre Iranians with political axes to grind and who have virtually no on-the-ground contact with Iran does not make fact.

    So given this, Iran is not on wobbly legs at all. In fact, as soon as George W Bush leaves office on January 20th – and provided a last ditch act of geo-political stupidity does not emanate from the Neo-Cons – you will begin to see for yourself that as of the beginning of the Obama administration, Iran will be in a position of strength undreamed of eight years ago – much of that thanks to the idiotically myopic policy making of the past eight years that ended up strengthening the very hand of the mullahs it was meant to weaken, which is why many of the activists of the opposition now are now telling America “thanks for nothing.”

    “halaa khar raa biyaar o baaghaali bar kon”

    Wahid

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Friedman: Their strongest ?leg? is getting kicked from under them. Unless the whole world gets addicted to sitting on persian rugs eating mountains of pistachios, I don’t think they will be ok.[/quote]

    People such as yourself (including myself up to 2003) continually prognosticated an imminent collapse of the Iranian regime going since the Summer of 1979. Any day now. Thirty years later – after the tumult of a Post-Revolutionary era including War with Iraq, Sanctions, Student Movement, etc – the mullahs are still in power and a meltdown qua revolution booting the mullahs out is nowhere near a remote possibility today as it was in 1981 when the leftist uprising against the mullahs occurred and Bani Sadr (the IRI’s 1st president) left Iran for permanent exile. That was the only time this regime has ever faced a dire situation anywhere near the resemblance of a meltdown collapse. We are nowhere near that today — not even by a long shot.

    For all their problems and fascistic heavy handedness, the one thing the Iranian emigre (especially in the United States) has consistently done is to underestimate the mullocracy; and it has consistently underestimated it to its own prolonged and perpetual emigre-hood. For all their obscurantism, the elite of this regime have shown that they can play – and in some cases out-play – a geopolitical chess match and hold their own with the best of them. Deliberate misinformation from Iranian intelligence fed to Iraqi opposition groups (who in turn fed them to American and European governments) is what is primarily responsible for leading George Bush down the garden path and into the Iraqi quagmire. If America had had the good sense to enlist Iran into its war with the Taliban/Al-Qaeda in Afghanistan, assuredly this war would’ve already been a footnote to history and won decisively. That this regime is now cooperating with that effort, and given how that effort seems to go from bad to worse for NATO with each passing day, don’t think for a second that the Iranians don’t have a hand in it. And on and on it goes.

    Clearly this regime has shown its durability and has consistently defied all speculations/or movement regarding its imminent collapse. As such, for better or worse, the Islamic Republic of Iran is here to stay for at least another twenty-five years, if not more, so get used to it.

    Now your opinion that Iran is on wobbly economic legs is also grossly exaggerated and it is the language and point of view of the LA based emigre pundits, who have gotten it wrong consistently since 1979 (note the Baha’i-friendly Zia Atabai of NITV whose erroneous prognostications, not to mention his predilection for making up or otherwise exagerrating “meltdowns,” is a matter of public record). Although global oil prices have only now slowly begun to decline (not by much), since late last year Iran has reaped massive financial dividends that produced liquidity and revenue circulation in sectors of the national economy that people were earlier predicting wobbliness. Explain that one. So instead of reading propaganda in the American press, let me point you to European and Asian news outlets who are giving the more balanced picture of the Iranian situation that does not remotely prognosticate wobbliness. Add to that the fact that other than a handful of EU countries, no one else seems to be cooperating with US spearheaded sanctions (the Chinese are not cooperating, neither are the Russians nor most of Eastern Europe nor South America) and your analysis is even more way off. Wishful thinking by emigre Iranians with political axes to grind and who have virtually no on-the-ground contact with Iran does not make fact.

    So given this, Iran is not on wobbly legs at all. In fact, as soon as George W Bush leaves office on January 20th – and provided a last ditch act of geo-political stupidity does not emanate from the Neo-Cons – you will begin to see for yourself that as of the beginning of the Obama administration, Iran will be in a position of strength undreamed of eight years ago – much of that thanks to the idiotically myopic policy making of the past eight years that ended up strengthening the very hand of the mullahs it was meant to weaken, which is why many of the activists of the opposition now are now telling America “thanks for nothing.”

    “halaa khar raa biyaar o baaghaali bar kon”

    Wahid

  • Craig Parke

    Wahid,

    I have to give credit where credit is due. This is an excellent post you have written. I, myself, tuned out Friedman about three years ago. I still read him to keep informed but I usually pay it no mind. He has been consistently wrong about everything. Everything he has to say is at some level just another perpetual “Friedman unit.” The only person who has been more consistently wrong about everything from day one is arch Neocon chickenhawk warmonger Bill Kristol. He has not gotten one single thing right. How the NYT can cut him a pay check is beyond me.

    I did like Friedman’s “The World Is Flat” though.

  • Craig Parke

    Wahid,

    I have to give credit where credit is due. This is an excellent post you have written. I, myself, tuned out Friedman about three years ago. I still read him to keep informed but I usually pay it no mind. He has been consistently wrong about everything. Everything he has to say is at some level just another perpetual “Friedman unit.” The only person who has been more consistently wrong about everything from day one is arch Neocon chickenhawk warmonger Bill Kristol. He has not gotten one single thing right. How the NYT can cut him a pay check is beyond me.

    I did like Friedman’s “The World Is Flat” though.

  • http://www.bahairants.com Baquia

    Wahid,
    as you rightfully state, many have repeatedly predicted the downfall of the IRI. However, I wasn’t one of them and as the quotes from years ago prove, I was saying the opposite. As well, in your comments you quote me but link to Friedman (?).
    In any case, I may be wrong – it wouldn’t be the first time! The dividends that you refer to, I assume you mean the “rainy day” fund that was started by Khatami – has been spent. Putting aside all that, can you tell me how Iran’s economy would survive if oil were to go down to $40 or lower? that’s a big if but assuming such a scenario were to happen as it did in the early 90′s, how do you think the Iranian economy could survive a total collapse?

  • http://www.bahairants.com Baquia

    Wahid,
    as you rightfully state, many have repeatedly predicted the downfall of the IRI. However, I wasn’t one of them and as the quotes from years ago prove, I was saying the opposite. As well, in your comments you quote me but link to Friedman (?).
    In any case, I may be wrong – it wouldn’t be the first time! The dividends that you refer to, I assume you mean the “rainy day” fund that was started by Khatami – has been spent. Putting aside all that, can you tell me how Iran’s economy would survive if oil were to go down to $40 or lower? that’s a big if but assuming such a scenario were to happen as it did in the early 90′s, how do you think the Iranian economy could survive a total collapse?

  • Wahid Azal

    [quote comment=""] Putting aside all that, can you tell me how Iran’s economy would survive if oil were to go down to $40 or lower? that’s a big if but assuming such a scenario were to happen as it did in the early 90′s, how do you think the Iranian economy could survive a total collapse?[/quote]

    Five years ago I would’ve said Iran is screwed. Not anymore. First, if something like this occurred, which it can (and which is why Iran together with Venezuela are presently forming an ad hoc bloc precisely to stop this from happening and keep OPEC from caving in to North American-European schemes), America’s primary economic ally in the region (i.e. Sa’udi Arabia) would be the first to be hit — and it would be hit badly. A drop in per barrel costs is more dangerous for the Sa’udi kingdom right now than it would be for Iran, given 1) Iran’s trading relationships with all those countries America and Europe treat with kid gloves (Russia, PRC, Venezuela, etc) and 2) the Iranian economy has developed an industry base that could potentially help keep it afloat in some manner in the short term. Also do not forget the relationship Iran now has with Russia.

    Besides wanting the bomb (which it does, make no mistakes), part of the nuclear energy program is catered precisely to this end.

    But that aside, Iran’s elite have formed both in the global private sector and the public sectors massive economic investment relationships everywhere that in an emergency situation they could conceivably rely on temporarily to keep themselves in power. Take the Emirates, for example. There is almost a parity amount of private (and some public) investment in the UAE as there is by Americans and Europeans. Most of this investment are from individuals or foundations in some way connected to the regime. If Iran gets hammered by plummeting markets (or war), so does the UAE and the other Gulf kingdoms. It is that simple. The dependency of the UAE and the rest of the Gulf on stability with Iran cannot be underestimated – and everybody knows this.

    How the mullahs have generated such mega-revenue beyond Iran is basically to have taken the traditional Shi’ite waqf system and the hussle and bussle of the bazaar and tweaked it (or out gamed the free market system of the West), playing a money game of backgammon “kharr zerangi” on international money, stock and property markets that simply baffles the mind. These people are smart. One example of this is the amount of private liquidity and assets owned by individual members of this regime in North America itself, let alone Europe and elsewhere. I am sure you are aware, for instance, that the Rafsanjani family own some very expensive property in Toronto and outlying areas of Ontario in Canada. These sorts of activities by the mullahs are occurring everywhere, and they are a lot smarter than the Shah and the Pahlavis ever where in how to both generate and hide their money. And where money is concerned, these people are not coy. They will play with just about anyone – and do. You would be surprised to learn the actual identities of certain silent partners of certain Iranian run businesses in Los Angeles itself.

    Another aspect is that Iran has also managed to create covert military manufacturing industries in the past decade and a half (small time by the standards of Europe-North America-Russia-China, but alarming nevertheless to those in the US and Israel who are clamoring for outright military confrontation) either in partnership (i.e. Chinese, Russians) or owned outright by itself throughout the Middle East – and I have heard it has investments in this industry in parts of Africa as well as South America. You saw some of this in action – test cased – during the 2006 confrontation between Israel and the Hezbollah in Lebanon. A lot more can be said, but if push came to shove – where this regime even to sacrifice hundreds of thousands – it could keep itself intact for a long time.

    But there won’t be a dramatic crash in the price of oil, whatever current indicators (which aren’t showing anything right now, really). Iran’s current economic problems is due to the mismanagement of the past three and a half years. As such Ahmadinejad will not be reelected to a second term. He will gone next summer – and not soon enough!

    That said, I am looking forward to the coming Obama administration because if they can implement a Chinese (Nixon-Mao) style rapproachment with Iran, it will in short order start bringing back to power the moderates and reformists and thereby curb the political excesses of the regime and spread the wealth around a little more amongst average joe. But don’t expect these guys to role over anytime soon. They’re going to be around for a few years more, and Iran’s economy is already showing signs of growth.

    Wahid

  • Wahid Azal

    [quote comment=""] Putting aside all that, can you tell me how Iran’s economy would survive if oil were to go down to $40 or lower? that’s a big if but assuming such a scenario were to happen as it did in the early 90′s, how do you think the Iranian economy could survive a total collapse?[/quote]

    Five years ago I would’ve said Iran is screwed. Not anymore. First, if something like this occurred, which it can (and which is why Iran together with Venezuela are presently forming an ad hoc bloc precisely to stop this from happening and keep OPEC from caving in to North American-European schemes), America’s primary economic ally in the region (i.e. Sa’udi Arabia) would be the first to be hit — and it would be hit badly. A drop in per barrel costs is more dangerous for the Sa’udi kingdom right now than it would be for Iran, given 1) Iran’s trading relationships with all those countries America and Europe treat with kid gloves (Russia, PRC, Venezuela, etc) and 2) the Iranian economy has developed an industry base that could potentially help keep it afloat in some manner in the short term. Also do not forget the relationship Iran now has with Russia.

    Besides wanting the bomb (which it does, make no mistakes), part of the nuclear energy program is catered precisely to this end.

    But that aside, Iran’s elite have formed both in the global private sector and the public sectors massive economic investment relationships everywhere that in an emergency situation they could conceivably rely on temporarily to keep themselves in power. Take the Emirates, for example. There is almost a parity amount of private (and some public) investment in the UAE as there is by Americans and Europeans. Most of this investment are from individuals or foundations in some way connected to the regime. If Iran gets hammered by plummeting markets (or war), so does the UAE and the other Gulf kingdoms. It is that simple. The dependency of the UAE and the rest of the Gulf on stability with Iran cannot be underestimated – and everybody knows this.

    How the mullahs have generated such mega-revenue beyond Iran is basically to have taken the traditional Shi’ite waqf system and the hussle and bussle of the bazaar and tweaked it (or out gamed the free market system of the West), playing a money game of backgammon “kharr zerangi” on international money, stock and property markets that simply baffles the mind. These people are smart. One example of this is the amount of private liquidity and assets owned by individual members of this regime in North America itself, let alone Europe and elsewhere. I am sure you are aware, for instance, that the Rafsanjani family own some very expensive property in Toronto and outlying areas of Ontario in Canada. These sorts of activities by the mullahs are occurring everywhere, and they are a lot smarter than the Shah and the Pahlavis ever where in how to both generate and hide their money. And where money is concerned, these people are not coy. They will play with just about anyone – and do. You would be surprised to learn the actual identities of certain silent partners of certain Iranian run businesses in Los Angeles itself.

    Another aspect is that Iran has also managed to create covert military manufacturing industries in the past decade and a half (small time by the standards of Europe-North America-Russia-China, but alarming nevertheless to those in the US and Israel who are clamoring for outright military confrontation) either in partnership (i.e. Chinese, Russians) or owned outright by itself throughout the Middle East – and I have heard it has investments in this industry in parts of Africa as well as South America. You saw some of this in action – test cased – during the 2006 confrontation between Israel and the Hezbollah in Lebanon. A lot more can be said, but if push came to shove – where this regime even to sacrifice hundreds of thousands – it could keep itself intact for a long time.

    But there won’t be a dramatic crash in the price of oil, whatever current indicators (which aren’t showing anything right now, really). Iran’s current economic problems is due to the mismanagement of the past three and a half years. As such Ahmadinejad will not be reelected to a second term. He will gone next summer – and not soon enough!

    That said, I am looking forward to the coming Obama administration because if they can implement a Chinese (Nixon-Mao) style rapproachment with Iran, it will in short order start bringing back to power the moderates and reformists and thereby curb the political excesses of the regime and spread the wealth around a little more amongst average joe. But don’t expect these guys to role over anytime soon. They’re going to be around for a few years more, and Iran’s economy is already showing signs of growth.

    Wahid

  • Wahid Azal

    [quote comment=""]

    Wahid,

    I have to give credit where credit is due. This is an excellent post you have written. I, myself, tuned out Friedman about three years ago. I still read him to keep informed but I usually pay it no mind. He has been consistently wrong about everything. Everything he has to say is at some level just another perpetual ?Friedman unit.? The only person who has been more consistently wrong about everything from day one is arch Neocon chickenhawk warmonger Bill Kristol. He has not gotten one single thing right. How the NYT can cut him a pay check is beyond me.

    I did like Friedman’s ?The World Is Flat? though.
    [/quote]

    Craig,

    If you had not listened to people like Steve Marshall over the past couple of years you would’ve read lot more from me like this, and far better.

    Now re: Friedman, I stopped reading official American political and economic pundits working for the major US newspapers over a decade and half ago – and I think you should too. Noam Chomsky opened my eyes early on in my college years that the press in America is a propaganda machine churning out endless half truths and misinformation – pure and simple. Back during the election of 2000 and its aftermath with the Florida recount (and you can go through my USENET archives of posts and check for yourself), reading the European and Asian political pundits convinced me that America and the world was in for a rough, rough ride; that the Bush (p)residency was in fact a Goldwater presidency 36 years into the future, and that these Neo-Cons would make the Reagan years look like nothing by comparison. I called Bush a Fascist in November 2000, two weeks after that farcical (s)election just as the Supreme Court decided the matter. I have been proven right on all counts. Some of the people I was then hanging out with virtually, such as Randy Burns (who voted for Bush in 2000 BTW), at the time opined that there was no substantial difference between Gore and Bush. Others, such as mild supporters of the Iranian regime in the US posting on USENET, had fallen under the spell of Dick Cheney’s 2000 election campaign spiel that a Bush administration would begin economic dialogue and lift the then remaining sanctions from Iran and unfreeze remaining Iranian assets in the US from the 1970s. I correctly showed that this was all electioneering blather and that these people were dangerous Fascists. Everyone dismissed what I said about the Bushites, including Juan Cole who has since gone on to become one the most formidable public opponents of the Bush administration’s Iraq debacle.

    The same goes for 9/11. The comparison of September 11 to Hitler’s Reichstag fire was first made by yours truly less than 24 hours after it happened, and on USENET as well as a yahoogroups list then frequented by Alex Jones. This characterization has sense become a central canon of the 911-Truth movement, and one and on it goes…

    I don’t know what it is: but there are certain things manifestly self-evident (both by an inductive-deductive process of reasoning as well as pure intuition). For some reason, the mainstream culture of “information” in North America is complete corrupted and as such has made many people either oblivious to or otherwise doubt themselves when unassailable facts and truths are put in front of them. Alexis De Tocqueville (the greatest sociologist of the American political culture and mind who has ever lived) said it best when he observed that by and large mainstream Americans tend towards a received dogma of what the truth ought to be rather than what the truth actually is. He said that this has led America (and he was writing in the 1830s) into a political culture where the ‘tyranny of the majority’ holds sway and permeates all facets of public life and activity, and that ultimately some then unknown demagogue would one day emerge and in the name of the received American dogma of truth unravel everything that America claims to be. I would say this all happened a long time ago, but in the Bush years it was made official.

    I think you Americans need to listen less to your newspaper pundits and take more seriously disenfranchised French aristocrats who came to your nation’s shores in the 19th century and saw all the fundamental flaws that is the American experiment. Let me recommend, if you haven’t already, that you read cover to cover an unexpurgated copy of Alexis De Tocqueville’s DEMOCRACY IN AMERICA. This is ‘the’ book people should have been reading more during the past eight years.

    As for Obama: he is the last ‘great’ chance America has. If this chance is somehow blown, America is finished for good. And that you can take to the bank.

    Wahid

  • Wahid Azal

    [quote comment=""]

    Wahid,

    I have to give credit where credit is due. This is an excellent post you have written. I, myself, tuned out Friedman about three years ago. I still read him to keep informed but I usually pay it no mind. He has been consistently wrong about everything. Everything he has to say is at some level just another perpetual ?Friedman unit.? The only person who has been more consistently wrong about everything from day one is arch Neocon chickenhawk warmonger Bill Kristol. He has not gotten one single thing right. How the NYT can cut him a pay check is beyond me.

    I did like Friedman’s ?The World Is Flat? though.
    [/quote]

    Craig,

    If you had not listened to people like Steve Marshall over the past couple of years you would’ve read lot more from me like this, and far better.

    Now re: Friedman, I stopped reading official American political and economic pundits working for the major US newspapers over a decade and half ago – and I think you should too. Noam Chomsky opened my eyes early on in my college years that the press in America is a propaganda machine churning out endless half truths and misinformation – pure and simple. Back during the election of 2000 and its aftermath with the Florida recount (and you can go through my USENET archives of posts and check for yourself), reading the European and Asian political pundits convinced me that America and the world was in for a rough, rough ride; that the Bush (p)residency was in fact a Goldwater presidency 36 years into the future, and that these Neo-Cons would make the Reagan years look like nothing by comparison. I called Bush a Fascist in November 2000, two weeks after that farcical (s)election just as the Supreme Court decided the matter. I have been proven right on all counts. Some of the people I was then hanging out with virtually, such as Randy Burns (who voted for Bush in 2000 BTW), at the time opined that there was no substantial difference between Gore and Bush. Others, such as mild supporters of the Iranian regime in the US posting on USENET, had fallen under the spell of Dick Cheney’s 2000 election campaign spiel that a Bush administration would begin economic dialogue and lift the then remaining sanctions from Iran and unfreeze remaining Iranian assets in the US from the 1970s. I correctly showed that this was all electioneering blather and that these people were dangerous Fascists. Everyone dismissed what I said about the Bushites, including Juan Cole who has since gone on to become one the most formidable public opponents of the Bush administration’s Iraq debacle.

    The same goes for 9/11. The comparison of September 11 to Hitler’s Reichstag fire was first made by yours truly less than 24 hours after it happened, and on USENET as well as a yahoogroups list then frequented by Alex Jones. This characterization has sense become a central canon of the 911-Truth movement, and one and on it goes…

    I don’t know what it is: but there are certain things manifestly self-evident (both by an inductive-deductive process of reasoning as well as pure intuition). For some reason, the mainstream culture of “information” in North America is complete corrupted and as such has made many people either oblivious to or otherwise doubt themselves when unassailable facts and truths are put in front of them. Alexis De Tocqueville (the greatest sociologist of the American political culture and mind who has ever lived) said it best when he observed that by and large mainstream Americans tend towards a received dogma of what the truth ought to be rather than what the truth actually is. He said that this has led America (and he was writing in the 1830s) into a political culture where the ‘tyranny of the majority’ holds sway and permeates all facets of public life and activity, and that ultimately some then unknown demagogue would one day emerge and in the name of the received American dogma of truth unravel everything that America claims to be. I would say this all happened a long time ago, but in the Bush years it was made official.

    I think you Americans need to listen less to your newspaper pundits and take more seriously disenfranchised French aristocrats who came to your nation’s shores in the 19th century and saw all the fundamental flaws that is the American experiment. Let me recommend, if you haven’t already, that you read cover to cover an unexpurgated copy of Alexis De Tocqueville’s DEMOCRACY IN AMERICA. This is ‘the’ book people should have been reading more during the past eight years.

    As for Obama: he is the last ‘great’ chance America has. If this chance is somehow blown, America is finished for good. And that you can take to the bank.

    Wahid

  • http://www.bahairants.com Baquia

    Wahid, my suspicion is that these funds outside Iran do not constitute a sovereign investment of the sort that Norway, Kuwait, et al. have but is basically kleptocracy. My suspicion is also that as things start to go down the drain the rats will jump ship, like they are starting to in China. But who knows, I may be completely wrong as you say. We’ll see, IF oil continues to go down and give Iran a negative “oil shock”.

  • http://www.bahairants.com Baquia

    Wahid, my suspicion is that these funds outside Iran do not constitute a sovereign investment of the sort that Norway, Kuwait, et al. have but is basically kleptocracy. My suspicion is also that as things start to go down the drain the rats will jump ship, like they are starting to in China. But who knows, I may be completely wrong as you say. We’ll see, IF oil continues to go down and give Iran a negative “oil shock”.

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Wahid, my suspicion is that these funds outside Iran do not constitute a sovereign investment of the sort that Norway, Kuwait, et al. have but is basically kleptocracy. My suspicion is also that as things start to go down the drain the rats will jump ship, like they are starting to in China. But who knows, I may be completely wrong as you say. We’ll see, IF oil continues to go down and give Iran a negative “oil shock”.[/quote]

    The system in Iran is a kleptocracy, absolutely. But it is lot less so than the period under the Pahlavis, a kleptocracy which the Bahais benefited under. Even if meager, it is also a kleptocracy which has managed to diffuse both wealth and (at least the illusion of) social mobility more widely and more successfully amongst various strata of society much better than the Shah and his father ever did – not to mention the other regimes in the region which are plutocratic kleptocracies of the worst despotic oligarchic sort. For all of its faults – which are innumerable – this system has managed to survive crisis after crisis and it has rooted itself firmly on a level that makes any short-term overthrow almost impossible.

    Bottom line is this, the people of Iran no longer have the stomach for the sort of massive social turmoil and overhaul which we witnessed under the last revolution. The hope is for reform, not revolution; and this regime has (for good or ill) managed to convince almost all strata of society (including many on the outside) that another revolution would most certainly break-up the territorial integrity of Iran and impoverish its people forever into permanent Bangladesh status. Given this, people will generally in such circumstances back the bastards to the end – particularly when there is outside, Western meddling at issue.

    Also, I usually do not put much stock in the reportage of such periodicals as the ‘Christian Science Monitor’. The rats of the uhj system will jump ship much, much sooner than the mullahs. That you can take to the bank.

    Wahid

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Wahid, my suspicion is that these funds outside Iran do not constitute a sovereign investment of the sort that Norway, Kuwait, et al. have but is basically kleptocracy. My suspicion is also that as things start to go down the drain the rats will jump ship, like they are starting to in China. But who knows, I may be completely wrong as you say. We’ll see, IF oil continues to go down and give Iran a negative “oil shock”.[/quote]

    The system in Iran is a kleptocracy, absolutely. But it is lot less so than the period under the Pahlavis, a kleptocracy which the Bahais benefited under. Even if meager, it is also a kleptocracy which has managed to diffuse both wealth and (at least the illusion of) social mobility more widely and more successfully amongst various strata of society much better than the Shah and his father ever did – not to mention the other regimes in the region which are plutocratic kleptocracies of the worst despotic oligarchic sort. For all of its faults – which are innumerable – this system has managed to survive crisis after crisis and it has rooted itself firmly on a level that makes any short-term overthrow almost impossible.

    Bottom line is this, the people of Iran no longer have the stomach for the sort of massive social turmoil and overhaul which we witnessed under the last revolution. The hope is for reform, not revolution; and this regime has (for good or ill) managed to convince almost all strata of society (including many on the outside) that another revolution would most certainly break-up the territorial integrity of Iran and impoverish its people forever into permanent Bangladesh status. Given this, people will generally in such circumstances back the bastards to the end – particularly when there is outside, Western meddling at issue.

    Also, I usually do not put much stock in the reportage of such periodicals as the ‘Christian Science Monitor’. The rats of the uhj system will jump ship much, much sooner than the mullahs. That you can take to the bank.

    Wahid

  • http://www.bahairants.com Baquia

    Ahmadinejad recently boasted that Iran would survive with $5 oil. No one expects anything more than empty bravado from this puppet but considering his previous predictions, that Obama would never be allowed to become president, even if everyone in the US voted for him, and that oil prices would never fall below $100, it is safe to assume that Iran will indeed undergo tremendous economic pain. Perhaps enough to cause a regime change from within.

  • http://www.bahairants.com Baquia

    Ahmadinejad recently boasted that Iran would survive with $5 oil. No one expects anything more than empty bravado from this puppet but considering his previous predictions, that Obama would never be allowed to become president, even if everyone in the US voted for him, and that oil prices would never fall below $100, it is safe to assume that Iran will indeed undergo tremendous economic pain. Perhaps enough to cause a regime change from within.

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Ahmadinejad recently boasted that Iran would survive with $5 oil. No one expects anything more than empty bravado from this puppet but considering his previous predictions, that Obama would never be allowed to become president, even if everyone in the US voted for him, and that oil prices would never fall below $100, it is safe to assume that Iran will indeed undergo tremendous economic pain. Perhaps enough to cause a regime change from within.[/quote]

    There’s a saying in Persian I am sure you’re familiar with, “bokhor aash be-hameen kheeyaal baash.”

    This regime went through worse in the ’80s. It survived that and it will survive this as well. Besides, something that most of you American expats don’t seem to understand, is that the Iranian people themselves don’t have the stomach for regime change — the desires and wishful thinking of the expat crowd notwithstanding.

    Wahid

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Ahmadinejad recently boasted that Iran would survive with $5 oil. No one expects anything more than empty bravado from this puppet but considering his previous predictions, that Obama would never be allowed to become president, even if everyone in the US voted for him, and that oil prices would never fall below $100, it is safe to assume that Iran will indeed undergo tremendous economic pain. Perhaps enough to cause a regime change from within.[/quote]

    There’s a saying in Persian I am sure you’re familiar with, “bokhor aash be-hameen kheeyaal baash.”

    This regime went through worse in the ’80s. It survived that and it will survive this as well. Besides, something that most of you American expats don’t seem to understand, is that the Iranian people themselves don’t have the stomach for regime change — the desires and wishful thinking of the expat crowd notwithstanding.

    Wahid

  • http://www.bahairants.com Baquia

    For some reason, OPEC is reluctant to cut supply. Perhaps it is because they know that members always cheat, especially when they are in dire straits and need the petro-dollars.

  • http://www.bahairants.com Baquia

    For some reason, OPEC is reluctant to cut supply. Perhaps it is because they know that members always cheat, especially when they are in dire straits and need the petro-dollars.

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]For some reason, OPEC is reluctant to cut supply. Perhaps it is because they know that members always cheat, especially when they are in dire straits and need the petro-dollars.[/quote]

    Perhaps. But in the face of wolves such as the US and its allies it is a good tactic, and one that works most efficiently.

    Wahid

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]For some reason, OPEC is reluctant to cut supply. Perhaps it is because they know that members always cheat, especially when they are in dire straits and need the petro-dollars.[/quote]

    Perhaps. But in the face of wolves such as the US and its allies it is a good tactic, and one that works most efficiently.

    Wahid

  • http://www.bahairants.com Baquia

    Well, if demand declines due to the global financial crisis, and supply is not curtailed, that would imply prices will fall hard. Not sure how that is a good tactic for oil producing countries.

  • http://www.bahairants.com Baquia

    Well, if demand declines due to the global financial crisis, and supply is not curtailed, that would imply prices will fall hard. Not sure how that is a good tactic for oil producing countries.

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Well, if demand declines due to the global financial crisis, and supply is not curtailed, that would imply prices will fall hard. Not sure how that is a good tactic for oil producing countries.[/quote]

    Your “if” depends on demand declining to radical levels unprecedented even by the standards of the 1930s. It also depends on countries like the US and Canada being able to cut foreign oil dependence by up to at least 20 percent. Since that is not going to happen, and North America is nowhere near being able to enjoy even modest standards of independence vis-a-vis foreign oil, without or without the GFC, you are still dealing with a regime that can weather the storm – as they did throughout the 1980s.

    Wahid

  • http://www.wahidazal.com Wahid Azal

    [quote comment=""]Well, if demand declines due to the global financial crisis, and supply is not curtailed, that would imply prices will fall hard. Not sure how that is a good tactic for oil producing countries.[/quote]

    Your “if” depends on demand declining to radical levels unprecedented even by the standards of the 1930s. It also depends on countries like the US and Canada being able to cut foreign oil dependence by up to at least 20 percent. Since that is not going to happen, and North America is nowhere near being able to enjoy even modest standards of independence vis-a-vis foreign oil, without or without the GFC, you are still dealing with a regime that can weather the storm – as they did throughout the 1980s.

    Wahid

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