Also, as addendum to earlier post, see Gary Sick's recent post on Iran, Israel, and the United States. Sick is a Middle East specialist at Columbia University and retired USN Captain. Sick has some interesting points that I'll highlight, looking at Iran as similar to the corporatist states of 1920s and 1930s Europe as well as Hugo Chavez's Venezuela.
First, Iran's oil fields aren't looking too great;
At the same time, because Iran’s oil fields are old and complex, they require modern technology to maintain production. That technology – and the capital investment that can only be provided by the major international oil companies – has been absent for many years. It was driven away partly by the sanctions, ironically assisted by Iran’s own short-sighted negotiating tactics that offered only the most meager profit margins to outside investors. As a result, Iran’s oil production is in decline at the same time that more and more of it is being soaked up by domestic consumption. In a period of relatively low oil prices, this means that Iran’s hard currency earnings are drying up at an alarming rate.
To make things worse, Iran's politicians are more interested in posturing and indulging patronage networks than cleaning up the mess. Ahmadinejad has an interest in economics but his understanding of economic policy is akin to that of Huey Long or Hugo Chavez--in other words populist pandering. The sanctions are also more effective than anticipated:
They have built a web of financial restrictions and limitations around the already weak Iranian economy that is certain to cause significant problems for the leadership. Iran’s critical energy sector is particularly vulnerable. It is in a pincer. Because of cheap energy prices inside the country, artificially propped up by massive subsidies, energy demand is soaring. This siphons off a lot of Iran’s oil production, which would otherwise be sold on the world market for hard currency.
Of course, this doesn't meant that Iran will give up its nuclear push. As Sick points out, the sanctions in Iraq were far harsher yet Saddam was willing to maintain the fiction of a nuclear weapons program to preserve his power, deter Iran, and posture to the West.
One final point of Sick's that most contemporary writers on Iran, from Nikkie Keddie to Ali Ansari, echo is this:
The key question about Iran today is not whether it will be attacked or collapse under sanctions. It is whether Iran is capable under its present leadership to take a sober decision about how to deal with the outside world. The Revolutionary Guards have established a dominant position in Iran’s military, its economy, and its politics. Iran increasingly comes to resemble the corporatist states of southern and eastern Europe in the 1920s and ‘30s that we call fascist. Iran is conducting an interior battle with its own demons, from the millenarians on the far right who choose to believe that Khamene`i is the personal representative of God on earth, to the pragmatic conservatives who simply want a more responsible leadership, to the reformists of the Green movement whose objective is to put the “republic” back into the Islamic Republic by giving the people a greater voice.
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