Wednesday, January 11, 2006

Iran's nuclear program: A win-win situation for Tehran?

Payam, a close buddy of mine--in his reaction to my previous posts regarding Iran's nuclear crisis--tells me that he considers the current stand-off a "win-win" situation for Iran and writes: "Iran is rich and it can afford both to pay for the sanctions and the higher prices through dealers." He then goes on to say that he doesn't see that any sanctions will ever deter the government in Tehran to abandon its ambitions.

I don't agree with Payam's idea at all. Mullahs' apparent unconcern for UN sanctions and their grave consequences for Iran's economy and the Iranian people is--as The White House said this morning--"a serious miscalculation" on their part. Let's not forget that the oil factor many consider to be Iran's saving grace, could easily be turned into the country's Achilles' Heel through some severe UN sanctions. How? Christopher Dickey, Paris Bureau Chief and Middle East Regional Editor for Newsweek Magazine, explains:

So, are the mullahs untouchable? No. Paradoxical as it may seem, their greatest weakness is their oil and gas industry. Sure, Iran has the second largest oil reserves in the Middle East, after Saudi Arabia. But its facilities for pumping and processing the stuff are in such a sorry state that domestic demand for gasoline is 60 percent greater than the country's refining capacity. To keep up, the mullahs have to import more than 95,000 barrels a day. Iran has the second-largest known reserves of natural gas in the world—but it's a net importer of the stuff its people use. To make matters much worse, the mullahs long ago adopted a policy trying to buy popular support with massively subsidized prices for cooking gas, gasoline and other products. Today, those subsidies eat up a whopping 10 percent of Iran's gross domestic product, according to the latest World Energy Outlook report from the Paris-based International Energy Agency (not to be confused with the IAEA).

Even without the current crisis, Iran needs foreign technology and hundreds of billions of dollars in foreign investment if it's going to meet its domestic energy needs. Yet for that to happen, as the same report suggests, "a resolution of the nuclear issue would be required." "We have a big problem, but the Iranians also have big problems," says the European diplomat. If Ahmadinejad succeeds in provoking the United Nations to impose serious sanctions, cutting off Iran's imports of heavily subsidized natural gas and gasoline, the first people to suffer would be the Iranian president's core constituency—the poor and uneducated.
There couldn't be any neater, clearer explanation than what Chris has provided here as to the effect of the sanctions on Iran and I totally agree with him.

To read the whole article go here.