London, June 28, 2007 – This week’s
gasoline riots in Tehran were entirely predictable. They are also the
clearest measure we have seen in recent times of the remarkable
fragility of Iran’s Islamic regime.
Predictable, because they have been debated publicly in Iran for weeks
and delayed several times, for fear of adverse public reaction.
A measure of the regime’s fragility because large numbers of Iranians
have braved repeated threats to protest gas rationing and price hikes
in one of the world’s largest petroleum exporting countries
Mahmoud Ahmadinejad came to power in August 2005 on promises that he
would put more of Iran’s oil revenue on the tables of ordinary Iranians.
During the election campaign two years ago, he toured Iranian cities
and towns, promising a new high school here, a municipal swimming pool
there, a new factory, a new gymnasium, rural development, whatever.
Until now, he has been unable to deliver on those promises, squandering
Iran’s windfall oil profits on public subsidies to such un-Iranian
groups as Hezbollah and Hamas. People know this, and they resent it.
And that is what ultimately led to this week’s gas riots, with petrol
stations set ablaze in Tehran and in cities across Iran.
So far, the economic vulnerability of the regime has not translated
into regime-threatening political vulnerability; but just wait, says
one prominent Iranian businessman encountered in London, who sees
similarities in what is happening in Iran today with the final years of
the former shah.
During the late 1970s, he reminded me, the Iranian economy, flush with
cash from high oil prices, was beset by high inflation, just as it is
now. The shah’s answer was to find a few businessmen who had raised
prices and throw them in jail, he said.
In April, the Research Center of the Iranian Majlis ( the rough
equivalent of our Congressional Research Service) announced that
inflation had risen by a stunning 22.4% for the calendar year that
ended on March 21, and projected 24% inflation for the current year.
That is an unbelievably bad performance of what is supposed to be a
populist government, especially when coupled to double-digit
unemployment and the growing scarcity of foreign investment as the
U.S.-led sanctions begin to bite.
Just as the former shah, the current regime is also seeking scapegoats:
the United States and Israel (surprise, surprise). To make their case
more convincing, they have singled out an Iranian businessman who fled
the country on February 21, who was recaptured by Iranian intelligence
agents three weeks later in a brazen extraterritorial operation in Oman.
Shahram Jazayeri was a cause celebre in Iran by the time he was dragged
out of a small tourist hotel in Khasab, an Omani port in the Strait of
Hormuz on March 14. Before fleeing Iran, he was sentenced to fourteen
years on corruption charges,
Jazayeri made it known at the time that he had documents implementing
family members of the Islamic Republic’s Supreme Leader, Ayatollah
Khamenei, in business deals described by the court as corrupt. “That
connection to the House of the Leader – the very summit of the state -
made him radioactive,” Iranian analyst Shahriar Ahy told me.
Jazayeri’s family, whom I contacted in Canada not long after he was
recaptured and tortured in Evin prison in Tehran, insisted that he had
been framed and that his extensive network of businesses was legally
sanctioned by the Iranian authorities. They insisted that he still
hoped the courts would exonerate him. Fat chance.
Ayatollah Khomeini, the figurehead who spearheaded the shah’s
overthrow, liked to say that the revolution wasn’t about the price of
watermelons. It was his way of saying that the Iranian people would
endure all kinds of economic hardship, if they identified with the
But this week’s gasoline riots show that Iranians do care about the
price of watermelons – at least, when they can see just how rich their
country ought to be (because of high oil prices), and how little of
that wealth is trickling down to them.
Consider this, the Iranian businessman in London told me.
When Iranians travel to Dubai, they are humiliated. They fly out of
Mehrebad airport in Tehran, which was constructed some 45 years ago,
and land in a modern, state-of-the-art fantasy-world in Dubai. To make
the insult even more grating, unlike their native land, Dubai has no
oil. No oil, and yet they are so rich!
The only reason Dubai is prosperous and Iran remains mired in poverty
comes down to effective leadership – and the lack of it. And Iranians
can see this every time they travel to the UAE.
Working quietly behind the scenes, the Bush administration has won
agreement from bankers in Dubai to stop clearing Iranian government
financial transactions. Because Dubai has become the economic lifeline
connecting Iran to the outside world, this has been a major blow to the
Just last week, sources in London told me, the British government
agreed to a U.S. request to put pressure on the HSBC bank to stop
clearing Iranian government financial transactions as well. Since HSBC
handles approximately 50% of Tehran’s remaining international business,
this is an additional heavy blow.
And the economic pressures are about to expand. While in London this
week, I learned of a British government proposal, now being discussed
as a draft United Nations Security Council Resolution, that would ban
Iranian government-owned ships and aircraft from international travel.
According to Lloyd’s List of London, the proposed UNSC resolution, as
currently drafted by Britain, would prohibit Iranian ships not only
from landing at foreign ports but from transiting international waters.
That is an extremely far-reaching sanction that would cut off an
estimated 40% of Iran’s daily oil exports, at least in the short run.
The British measure “would effectively strip Iran of the right of
innocent passage, enshrined in the United Nationals Law of the Sea
Convention,” Lloyd’s List wrote on June 27
The most immediate target of these latest sanctions would be the
National Iranian Tanker Company (NITC), which operates a fleet of
around thirty <http://www.nitc.co.ir/aboutus.htm> Very
Large Crude Carriers.
Iran could eventually contract with other shipping companies to lift
their oil, but they would then have to compete with other exporters in
the Persian Gulf and most likely would have to offer significant price
incentives to get their oil on board.
All of this points to one simple fact, as far as U.S. policy toward
Iran goes: financial sanctions have proven to be a far more effective
tool than political pressures or political inducements, as fashioned by
the State Department.
This regime in Tehran has never ceased a single act of bad behavior
because the West has offered it a bribe. On the contrary: the greater
the bribes, the more bad behavior we have seen.
Over the past six moths, as UN sanctions have slowly begun to bite, the
State Department continued to hold out hope that the economic “pain”
could be ended, if only the regime would suspend its uranium enrichment
Until now, the regime has said no. To show their resolve, Iran’s
leaders chose instead to impose gasoline rationing, to spread the coast
of sanctions across the population.
For the first time, the law of unintended consequences is working in
the West’s favor. The popular reaction to the gas rationing has shown
the regime’s vulnerability.
Now we need to take the next step and provide serious aid and political
support to the pro-democracy forces inside Iran as they step forward to
confront the regime.
The alternative to doing so will be war.