Iranian President Mahmoud Ahmadinejad must have missed the lesson of Joseph in Egypt, as set down in the Koran. The story of the young man who interprets the pharaoh's dreams and advises him to store grain during the years of plenty appears to be lost on Ahmadinejad. During the recent years of plenty in oil prices, his Iranian administration certainly didn't put away much of the revenue it received.
Numbers from the International Monetary Fund show that Ahmadinejad has presided over a spendthrift regime, where increased expenditures have outpaced increases in revenue. The President has dipped repeatedly into the country's rainy-day oil stabilization fund in order to subsidize life for many of his poor constituents, rather than save it for the lean years.
Now Iran is paying the price. Of the Middle East's oil producers, Iran, OPEC's second-largest producer, is the hardest hit of all. With daily production of about 2.5 million barrels, Iran loses about $1-billion a year for every dollar drop in the price of oil.
As oil goes, so go Ahmadinejad's political fortunes. And while his vaunted nuclear program is not immediately threatened, those in the West who seek to prevent Iran from developing nuclear weapons should gain considerable economic leverage as a result of the financial crisis.
As recently as last month, Ahmadinejad put on a brave face, boasting that Iran was capable of enduring oil prices as low as $5 a barrel. But last week the Iranian president was forced to admit his government will have to come up with a new budget, based on more realistic price estimates.
With inflation at about 30 per cent and unemployment at 10 per cent, Ahmadinejad has run out of political options, says David Menashri, chair of modern Iranian studies at Tel Aviv University. "Thirty-per-cent inflation is a terrible hardship for someone on a fixed income," he said, noting that "800,000 people are added to Iran's work force every year; the government can find jobs for only about half of them."
Even before the current economic crisis and the collapse in the price of oil, Ahmadinejad's economic management had come under sharp criticism. His attempt to introduce a modest value-added tax failed when shops in the country's bazaars went on strike. And flooding the economy with cash through subsidies led to the current inflation.
A freeze on the price of petroleum meant that no one wanted to invest in building refineries in the country, so Iran has continued to import much of its gasoline. It also meant that Iran lost money every time someone filled up with gas, a situation that forced the president to take the highly unpopular step of rationing gas consumption.
Ahmadinejad must have gambled that the people unhappiest with the rationing -- the affluent -- weren't likely to vote for him anyway, said Roger Stern, a policy analyst with Princeton University's oil, energy and the Middle East program.
Despite his growing number of critics, Ahmadinejad could still survive and win next June's presidential election. If the Organization of Petroleum Exporting Countries dramatically cuts production -- as it is expected to agree to do Wednesday -- any resulting uptick in oil prices would also strengthen his hand.
"It's all up to Supreme Leader (Ayatollah Ali Khamenei)," Stern said. "If the Supreme Leader wants him to stay, he'll stay."
There's reason to believe, however, that the Supreme Leader may be ready to cut his losses.
As Iranian writer Amir Taheri has pointed out, there are two schools of thought in Iran's revolutionary movement.
One school, called "constructionist," follows the model of Communist China. Constructionists believe Iran, like China, cannot prosper in an atmosphere of tension with the outside world. Rather, the country "must find a place in global trade, thus giving the major powers a stake" in Iran's survival.
The second school, Taheri writes, follows a model more like North Korea. These people believe genuine Iranian society cannot exist if it is exposed to global commerce dominated by "infidels." This school argues for Iranian self-sufficiency and personal modesty. Ahmadinejad, who lives in a modest three-bedroom house in a poor section of Tehran, is of this school.
Until recently, both schools of thought were applied in various ways in the country. Today, they are at odds. The country's establishment, led by former president Hashemi Rafsanjani (reportedly the richest man in Iran), favors the constructionist approach, and recent comments by Ayatollah Khamenei suggest he does, too.
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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