Old school student of CAUSE and EFFECT is sensing something is missing from all of the global chatter about the current post election chaos in Iran. Pundits and columnists are busily identifying all of the different power groups that are supposed to have some consequence riding on the final outcome of this flawed election. However, nowhere is anyone either in Iran or elsewhere in the world providing any analysis on the current crisis from the state of the current Iranian ECONOMY. I for one have heard little about this problem as being a major contribution to the post election unrest. Maybe you can help me out, but there is more below the fold.
On June 16, 2009 Ross Douthat wrote a column for the New York Times, titled “Recession and Revolution” which included the following excerpt:
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Even if this week’s crackdown somehow strengthens Mahmoud Ahmadinejad’s hand within the ruling clique, the regime as a whole has been severely weakened. The patina of democracy was a useful thing for the
ruling mullahs, and riot police can’t make Iran’s economic problems go away. (Iranian statistics put unemployment at 17 percent and the inflation rate at 25 percent; the real numbers may be higher. And chronic mismanagement may even send Iran’s oil revenues – the backbone of its faltering economy – into steep decline.)
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Why is this important to folks in the good old U.S. of A? Simply put the guy who Ayatollah Ali Khameini today in his speech at University, declared to be properly and overwhelmingly reelected to the Presidency, Mahmoud Ahmadinejad, is the same guy that is responsible for Iran’s current fiscal mess. Add to Iran’s internal collapsing economy the external financial pressure caused by the severe deep world wide recession, and it is little wonder that the majority of Iranians wanted anybody to be President as long as it wasn’t Ahmadinejad. Iranians are an ancient and clever people and they understand another Ahmadinejad term as President will wreck the Nation financially.
The American public must understand that the post election crisis is not a lot of silly fluff about a Georgia style “velvet revolution” (as mentioned by the Supreme Leader Khamenei several times in his speech today), nor is it about the UK, the USA, or Israel. (I lost count how many times Khamenei ranted about foreign interference by these countries in his speech.). Rather, it’s all about the economy stupid!! The political relationship between the Iranian Supreme Leader and Mahmoud Ahmadinejad is like Br’er Rabbit who got stuck on the tar baby in the old southern American folklore tale. Khamenei announced Ahmadinejad’s victory long before it was officially announced by the Iranian Election Commission, the people who were actually counting the votes. Now after a series of flip-flops Khamenei is resolutely embracing the re-election of Ahmadinejad.
The key to the internal problem as I see it is as follows.
(1) The Theocratic ruling structure in Iran does not lend itself to dramatic intervention in any critical situation in the country, except by the Grand Ayatollah, which in this case is Ayatollah Muntazeri who is the ultimate cleric in Iran, and he has chosen to remain silent above the political fray.
(2) There is little or no awareness of how to deal with severe capital problems such as liquidity and systemic risk among the Iranian clerical councils and mullahs. Further, since Iran has been pretty much isolated from modern world wide markets as a result of western embargoes and self isolation imposed by the mullahs after the overthrow of the Shah; Iran will never be disposed to even consider hiring western financial experts to come in and fix their economic problems.
(3) The ideological battle of the Occident against the Orient that is developing around the world is sputtering into life inside today’s Iran. The radical Shiite Islamic doctrine refuses to adapt to the realities of the new global economy, choosing instead to concentrate on the dream of achieving world domination by the Caliphate. The degree that the mullahs must compromise this ambition to simply survive as a nation within a depressed world community is the essence of the battle currently being waged on the streets of Tehran, Tabriz, Qom, Abadan and Chabahar.
In correspondence written by Anna Fifield and Najmeh Bozorgmehr in Tehran and published by The Financial Times on June 15, 2009, they provided the following observations and quotes concerning the financial situation in Iran following the election:
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Iran’s business community was unequivocal on Monday in its reaction to Mahmoud Ahmadi-Nejad’s re-election as president. The Tehran Stock Exchange fell sharply, while influential bazaaris threatened to shut up shop on Monday in protest.
“There was [a] heavy sell-off on the stock market after the election results were announced,” said one Iranian fund manager, who asked not to be named. “Privately owned banks, petrochemicals and investment companies are experiencing the heaviest selling queues.”
The economy was the central issue of the election campaign and remains at the heart of most Iranians’ concerns, after four years in which Mr. Ahmadi-Nejad’s distributionist policies led to sharp rises in inflation and unemployment. Economists and political rivals have sharply criticized Mr. Ahmadi-Nejad’s economic practices, and that looks set to continue.
“If government continues the same policies of the past four years, the higher oil revenues will further push up inflation and unemployment,” said Mehdi Taghavi, an economist in Tehran.
Although the poorer segments of society have benefited from his cash handouts paid for by Iran’s oil revenues, many others have complained that the increased liquidity has doubled or tripled prices. Furthermore, the tougher international sanctions sparked by Mr. Ahmadi¬-Nejad’s aggressive foreign policy have made it much harder for merchants to finance their businesses. Mr. Ahmadi-Nejad has nevertheless signaled he will continue down the same economic path.
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I find it particularly disconcerting that the American people are not being informed as to the real problems within Iran today. The American public is suffering greatly from the effects of the current financial meltdown, and they can certainly relate to a situation in any country where the Government is not doing anything to try to fix the economy. Unfortunately, none of the media outlets think Americans are intelligent enough to digest the true situation in Iran and form their own opinions as to the best method of diplomatically dealing with it.
The future danger that could come out of the Iranian crisis, if not handled properly would be further isolation from world trade. Considering Iran’s Theocratic regime has little expertise in financial engineering, facing the possibility of economic collapse they might roll the dice and bank on successfully building a nuclear bomb. In this instance they would follow the PRNK model of selling WMD’s to the rich rouge nations of the world. If this scenario does unfold, it would be easy for the Supreme Leader ( I note the similarity in titles between the “Supreme Leader” of Iran and the “Dear Leader” of North Korea) to blame the UK, USA and Israel for imposing economic strangulation on Iran which then drove Iran to these extremes as the only means of survival.