What can the West offer the Islamic Republic of Iran in return for giving up its nuclear ambitions and kenneling its puppies of war? The problem calls to mind the question regarding what to give a man who has everything: cancer, AIDS, Alzheimer's, diabetes, kidney failure, and so forth.
Iran's economy is so damaged that it is impossible to tell how bad things are. Except perhaps for the oilfields of southern Iraq, and perhaps also northern Saudi Arabia, there is nothing the West can give Iran to forestall an internal breakdown. Iranian dissidents put overall unemployment at 30% and youth unemployment at 50%. Government subsidies sustain a very large portion of the population; 42% of the non-agricultural population is employed by the Iranian state, compared with 17% in Pakistan. Within fewer than 10 years, Iran will become a net importer, at which point the government no longer will be able to provide subsidies. Iran's economic implosion is a source of imminent strategic risk.
In a May 19 statement reported by the official Islamic Republic News Agency (IRNA), President Mahmud Ahmadinejad denied a report that Iran's imports now exceed $60 billion, against an official estimate of $45 billion. A small current-account deficit would be of little concern for a nation with normal access to world capital markets, but Iran is unable to borrow. That is the background to Ahmadinejad's decree last week reducing private and state bank lending rates to 12% from 14%, that is, 5-10 percentage points below the rate of inflation. If Ahmadinejad were in the pay of a hostile intelligence service, he could not have found a more effective way to sabotage Iran's economy. Ahmadinejad took this foolhardy step against the explicit advice of Iran's economic authorities, which suggests that the economic suffering of his political base commanded his undivided attention. After increasing gasoline prices earlier in the month, he evidently found it necessary to throw his constituents a bone. |