Iran Democracy Monitor No. 79, October 3, 2008

Editor: Ilan Berman, American Foreign Policy Council

An Economic House of Cards

Conventional wisdom has it that the Islamic Republic - home to roughly 10 percent of the world's oil reserves and the globe's second largest reserves of natural gas - is a bona fide energy superpower. But new analysis from the International Monetary Fund suggests that Iran's energy situation may be far more precarious than generally thought.

According to Mohsin Khan, the IMF's director for the Middle East and Central Asia, Iran has one of the Middle East's highest "break even" prices for energy, and remains to a large extent at the mercy of world oil markets. "If prices dip below $90 a barrel," Khan tells the Dow Jones Newswires, "then they would have to tighten their public expenditure policy, and probably cut subsidies, which would be an issue for the government there - the public would not be content."

Iran appears to be increasingly hard hit on a related front as well. The government of Iranian president Mahmoud Ahmadinejad is reportedly planning to ask the country's parliament for an extra $7 billion to cover the growing price of refined petroleum on the international market. Iran remains heavily dependent on foreign refined petroleum, which accounts for close to forty percent of its total yearly domestic energy consumption. The soaring price of world oil has therefore significantly impacted the Iranian economy, despite the presence of an extensive government-imposed gasoline rationing scheme. By the end of the current Iranian fiscal year, official projections now predict, the regime in Tehran will have spent close to $10 billion on gasoline supplies from abroad. (Doha Gulf Times, September 21, 2008; Tehran Fars, October 1, 2008)

A Digital Window of Opportunity

With over a third of its population possessing access to the World Wide Web, Iran is one of the most "wired" nations in the Middle East. According to the latest assessment by the Internet World Stats website (http://www.internetworldstats.com/), more than 23 million of Iran's roughly 70 million citizens are now "online," with some level of Internet connectivity. In addition, Iran currently has approximately half-a-million Internet users with high speed access. All told, the website notes, the online community in Iran alone accounts for more than half (54 percent) of all Internet usage in the Middle East. (Tehran Fars, September 21, 2008)

Back to Iraq

Opposition and interference from the Islamic Republic are among the principal causes for the deadlock between Washington and Baghdad on a new framework security agreement. That's the assessment of Ryan Crocker, the Bush administration's envoy to Iraq. Crocker has told the Los Angeles Times that the Iranian regime is "pushing very hard" to prevent the U.S. and Iraqi governments from coming to terms on a security deal that would permit American forces to remain in the former Ba'athist state past December 31st.

Iran is also believed to be stepping up its outreach to Iraq's Shi'a militias in an effort to break the ideological influence of their one-time proxy, Moqtada al-Sadr, who in recent months has adopted a more docile, non-violent approach in his resistance to the Coalition. "I think what we may be seeing is a situation in which these groups or their successors are far more tightly linked to Tehran and perhaps less linked to Sadr," Crocker has said. (Los Angeles Times, September 26, 2008)

Copyright (c) 2008, American Foreign Policy Council

   _   _