Iran's Economic Time Bomb

Even as the Supreme Guide and the Supreme Mouth of Iran, Khamenei and Ahmedinejad respectively, seek to go nuclear, it may well be the local Iranians who go nuclear first. The clerics of Tehran and the IRGC have never paid that much attention to the economy, other then to squeeze every last dime from it that they can get. The Iranian economic system is famed for its corruption. But, up to now, subsidy of many everyday products, such as gas, have kept the middle class from joining the many segments of Iranian society ready to go into open revolt. Now as the economics get ever worse, the clerics are seeking to lay all the blame on Ahmedinejad and jettison him in hopes of keeping their skins intact and their bank accounts solvent (Allah be praised):

The play has ended and the 15 British pawns have returned to their families. The verdict is that President Mahmoud Ahmadinejad neither enhanced his image as the divinely inspired warrior, who humbled the British lion, nor as the humanitarian, who freed the fifteen helpless prisoners.

The public was not fixated on the television drama that Ahmadinejad presented. Instead, Iranians are watching the prices of tomatoes and other basic necessities rising at between 20% and 40% per annum, while salaries and wages are scarcely moving.

On 21 May, the long awaited next economic blow will strike when gasoline rationing goes into effect. Iranian drivers will be limited to three litres per day at the subsidized cost of 40 cents per gallon. They will be permitted to purchase more than the three litres, but anything beyond the limit will be at a higher price. What that higher price will be has not been announced.

Rationing is the final admission by the Ahmadinejad administration that the program of promised prosperity that began a mere two years ago has failed and has brought only inflation, hardship and unemployment. The president’s preoccupation with verbal warfare with the rest of the world has done nothing to improve the lives of the Iranian public.

. . . [Ahmedinejad's recent] statements to the outside world may reduce the level of tension, but his political survival does not depend upon what foreigners think. His survival will be determined by what Iranians do; and they have spoken already. President Ahmadinejad’s days are numbered. His failed policies have alienated the lower income portion of the population that had been is strongest supporters.

He ignored in December the discontent of the public when his faction was defeated in the local elections. In spite of the severe losses, he continued his confrontations with the U.S. and the U.N.

Although he failed to heed the warning from the disenchanted voters, the conservative clergy that had elevated him from obscurity as the mayor of Tehran to the prominence of the presidency, were aware of his falling star. In January, while Ahmadinejad was visiting Hugo Chavez of Venezuela and other leaders with an anti-American view, the unelected Supreme Leader Ayatollah Ali Khamenei withdrew his support. Since then, the Supreme Leader has retreated into the safety of the shadows, while Ahmadinejad remains exposed to the public scorn.

Blame for everything that has gone wrong with the economy is being placed directly upon Ahmadinejad. Ayatollah Ali Khamenei said that “economics is for donkeys,” but he is demonstrating by his silence that he understands just how hard a hungry donkey can kick.

Ahmadinejad is learning that his former supporters have abandoned him and that is personal connections with the divine world will not protect him from the angry public. For that, he is relying upon the police and brute force. Any demonstration is being met with police batons and arrests. Opposing newspapers have been shut down; bloggers are being required to register. Once ignored morality codes are being enforced with a new vigour. Women wearing Western fashions are being warned that they can be flogged and barbers are under orders to provide only Islamic haircuts or face revocation of their business licenses.

The crack down gives signs of a pre emptive strike by a government preparing for worse conditions ahead. The real trouble is expected when the full impact of the rationing regulations is felt. During April, the first sign was an increase in the minimum charge by taxis that are often used for car-pooling. One more squeeze on already stretched home budgets could very easily be the breaking point that could send people into the streets to demand the resignation of the president. Saeed Laylaz, an Iranian economist, believes that rationing will stir social disorder and further economic stresses. His words are given credibility by the open grumbling that is being heard on the streets.

Khamenei and the “Grey Elite,” the conservative clergy that dominates much of Iranian life, seems to be preparing for Ahmadinejad’s departure. When the protesting demonstrators turn into the screaming mobs that want someone to pay for the public misfortune, the clergy will need a scapegoat; and no one fills that role better than Ahmadinejad, who has spent the two years of his administration cultivating the image of the firebrand.

Waiting in the wings to replace Ahmadinejad is Brigadier General Mohamed Baqer Qalibaf. Like Ahmadinejad, he was a member of the Iranian Revolutionary Guard (IRG).

Mohamed Baqer Qalibaf was chief of the national police and succeeded Ahmadinejad to the office of mayor of Tehran. While Ahmadinejad has been portrayed often as a mystic, Mohamed Baqer Qalibaf is described as a “pragmatic conservative,” a man concerned with civic improvements and not with international confrontations.

. . . This is not a change in the essence of the system that gives the clergy its privileges. It is a change only of style in an effort to preserve the status quo, while giving the appearance of substantive change. A brief look at Qalibaf’s credentials reveals a man dedicated to the preservation of the current system.

How quickly the change comes will depend upon the determination of the demonstrators in the streets. When the mob demands blood, the Ayatollah will serve up the head of Ahmadinejad to satisfy the blood lust.

For the outside world, it should bring a respite from the months of threats and bluster. At that point, how much of a risk premium has been built into the price of crude oil should reveal itself. Whatever it is, the oil markets are likely to experience a softening in price, which actions by the George Bush Administration is making a more likely possibility.

. . . Now, we wait. Already, the grumbling in the streets has begun. Somewhere down the road in the near future, as people run out of gas, Ahmadinejad will run out of time. The neglected people will openly express their rage, and the pretence of change will come. It should for a while lower the pressure in the region; and it will all depend upon the anger of the mob.

Read the entire article here. My own personal suggestion to Khamenei and his corrupt and bloody clerics is that they pacify the mobs by suggesting that they eat some cake.