The BBC has an interesting article about a “perfect storm”: economic collapse, high inflation,high unemployment, and an up and coming election.

No, not the US: Iran.

Some background:

A couple months ago, oil prices surged to $150 a barrel, causing food and other everyday commodity prices to climb. Here in the Philippines, the government intervened by subsidizing low income families with cheap food and staples.

What caused the price spike? Lot of analysis, blaming increased demand, a “weak dollar” and problems in production. But even the BBC noted that both the US and the IMF were checking if speculators might have manipulated the market.

But the surge in oil prices meant that oil producing countries were awash with profits.

Good Muslims give money to charities, to help the poor. The bad news is that some of these charities divert money to terrorists. So a couple months ago, Alqaeda and the usual idiots were gloating at their windfall. This gloating got worse with the fall of the stock market. From an October 16th report in the Economic times of India:

An American al-Qaida member, Adam Gadahn, said in a video released this month that “the enemies of Islam are facing a crushing defeat, which is beginning to manifest itself in the expanding crisis their economy is experiencing.”

Members of the militant Palestinian group Hamas and hard-liners in Iran also cheered the economic turmoil. Iran is thought to be the last major government supporter of terror groups. The majority Shiite country is not believed to finance al-Qaida, a Sunni group, but does support the militant Hezbollah faction in Lebanon, which engaged in war with Israel in 2006.

Iranian dingbats were especially happy:

“We are very happy that America’s economy is in jeopardy and they are paying the price for their misdeeds. God is punishing them.” That is the verdict from Ayatollah Jannati, one of the most senior clerics in Iran.

President Ahmadinejad has pronounced on the collapse of global capitalism, and announced that Iranians should stand ready to manage the world.

Now, let’s fast forward a bit.

What has happened is that the price of oil, that went up at a dizzying pace, has dropped just as quickly. Ahmadinejad’s money tree has just gone bust, and although it took a week or two for the money crunch to hit, Iran is now in trouble too….and they have an election coming on.

The usual take in the papers is: All is well, they are awash in oil revenues. The West can’t hit them with sanctions because Russia and China are backing them in the UN, and if Obama gets in, he will crawl and kiss their tushies  negotiate with the Iranian government. Voila, the Messiah will get us peace in our time.

The real story is a bit worse.

Iran has crude oil, but a gasoline shortage. The problem: Refineries.Not enough to supply them with refined petroleum that they can use.

Problem two: Sanctions do hurt. Yes, smuggling gets stuff in, but it costs more.

Problem three: Inflation is 25%.

Problem four: A recent VAT tax increase caused a lot of shopkeeper to go on strike.

Ahmadinejad is up for election in June: but by then, the fall in oil revenue combined with a world wide recession and more countries helping with sanctions, might make things difficult.

But now that the money tree isn’t bearing fruit, what comes next for Iran?

In the past few weeks and months, the price of Iranian oil has dropped between $50 and $60 a barrel.

The head of the Central Bank of Iran has warned that revenues could be cut by $54bn, effectively halving the country’s income from oil, which accounts for the vast majority of both its export earnings and government revenue.

Problem five: President Ahmadinejad has been spending money all over: buying votes, funding porkbarell projects in villages, and especially funding Hamas and Hezboallah who are busy buying up weapons and digging in to prepare for an upcoming war on Israel..

In a sane world, this would mean peace.

The bad news is that one favorite way for repressive regiemes to stay popular is to find an enemy.

One reason that Iran hasn’t hit Israel is that they are waiting. They may be theocratic Muslims, but Persians have some expertise in running empires, and they are willing to wait.

At the same time, the US is also playing the waiting game. The US hasn’t hit Iran’s nuclear program is because the country is imploding slowly, and an attack would only unite people behind the government. Bush is betting that all those Persian Pilgrims coming back from the Shiite shrines in Iraq will bring back more than religious souvenirs…they will bring back stories about a viable democracy next door.

At the same time, Bush is scary enough that Iran isn’t likely to bomb Israel (even if they could…which is another discussion) for fear of being nuked back, at least as long as Bush is president.

But with a weakened US under Obama, who claims he will “negotiate” with them, allowing them to get a diplomatic coup?

Jimmy Carter Redux…weakness in the name of peace and civil rights, and then overreaction when he realizes that bullies love pacifism…and for Israel, things maybe worse than in Carter’s time, because at least back then Carter and his advisers were not anti Israel.


Nancy Reyes is a retired physician living in the rural Philippines. She writes about Africa at Makaipablog


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