Iran regime drowning in oil

THE HARD-LINE regime of Iranian President Mahmoud Ahmadinejad has been frightening neighbors with its meddling-by-proxy in Iraq, Lebanon, and Gaza. The regime’s apparent pursuit of nuclear weapons has also prompted unusual solidarity among the United States, Europe, and Russia; together they have been ratcheting up United Nations Security Council sanctions on Iran, demanding that it suspend uranium enrichment and comply with its obligations to the International Atomic Energy Agency. But the most telling signs of trouble for the theocratic regime in Tehran are currently on display not in its external relations but in domestic turmoil. 

The reaction to gas rationing earlier this week cast light on public discontent with Ahmadinejad’s failure to keep his promises to improve economic conditions and share Iran’s oil wealth with the common people. Angry Iranians set fire to gas stations after the announcement of rationing. Amid long lines of cars waiting to fill up in Tehran, young men threw stones at police and chanted “Ahmadinejad should be killed!”

The need to ration gas in OPEC’s second largest exporter of crude oil reveals a major vulnerability of Iran’s theocratic regime.

Government policy is clearly to blame for the rationing. The problem begins with subsidies for consumers; at 34 cents per gallon (and a total cost of $5 billion last year), the subsidized price acts as a powerful stimulant of consumption. Yet Iran suffers from an acute shortage of refining capacity, forcing it to import 40 percent of the gasoline supplied to the public. And Iran’s inability to rectify the refinery deficit can be attributed to Ahmadinejad’s truculence on the nuclear issue and regional conflicts. His belligerence makes it ever more difficult to attract the foreign investment and technology Iran need s to rehabilitate its oil-industry infrastructure.

A salient conclusion for policy makers in Washington is that the current reliance on UN sanctions and Treasury warnings against international banking transactions with Tehran is having the desired effect. This is a policy that entails a much lower level of risk than threats to bomb Iran’s nuclear installations. And it is much easier to exploit Iran’s dependence on imported gasoline than to take out underground nuclear facilities.

Despite the windfall oil profits flowing into Tehran’s coffers, living conditions for most Iranians outside the corrupt clerical elites are deteriorating. A group of 57 Iranian economists released a letter earlier this month chastising Ahmadinejad for policies that are stoking inflation and curtailing growth. They also blamed him for provoking UN sanctions against Iran. Ahmadinejad has been arresting reformists and censoring the press precisely to quash this kind of dissent, but his blatant domestic failures are becoming the best antidote to the threat from Tehran.