Iranian
president, Mahmoud Ahmadinajad, may be in charge of one of the most
fundamentalist Muslim and, in the eyes of the West, one of the most dangerous governments in the
world, but he may also be a very shrewd businessman. Iran
has the world’s second largest oil reserves, estimated to be in the vicinity of
133 billion barrels. Since the recent conflict in
Lebanon,
the price of oil has increased from $US74.50 per barrel to $US79.00 per
barrel (it’s since eased back to around $US77.00 pb). Iran exports
around 900 million barrels of oil a year – the almost immediate $US5.00 per
barrel increase in the oil price after hostilities commenced would have therefore
increased Iranian income by more than $US4 billion (on an annual basis) – pretty
handy for a country which had a GDP of only $US561 billion in 2005.

It
doesn’t seem too far
fetched to suggest that Iran’s
primary (but unstated) goal in assisting
Hezbollah
through the alleged supply with weaponry and financial aid was to
improve Iran’s
own woeful economic situation, rather than to inflict pain upon
Israel
(although no doubt that would have been a handy side-effect). Despite recent oil
price gains, Iran
still suffers extremely high unemployment (believed to be more than 11%) and
very high inflation (estimated to be more than 13%). It has been estimated that
in 2002, more than 40% of Iranians lived below the “poverty line”. For as long as Iran’s
financial situation relies on a high oil price, it remains in Iran’s best
interests to create political and military unrest, be it through supporting
terrorist organisations like Hezbollah or threatening to expand its nuclear
program.

Given
this unenviable situation, perhaps it is worth thinking of long-term solutions.
Leading New York Times commentator Thomas Friedman has regularly
suggested
a “Patriot Tax”
on petrol to reduce
America’s
dependence on oil from countries such as
Iran
and Saudi
Arabia.
Friedman has a very valid point: the sooner the West can come up with
alternatives to Middle East oil, the sooner radical leaders like Ahmadinajad
will need to start fixing their countries’ problems from within, rather than by
destabilising other nations to increase the oil price and camouflage their own
economic incompetence.

Peter Fray

A lot can happen in 3 months.

3 months is a long time in 2020. Join us to make sense of it all.

Get you first 12 weeks of Crikey for just $12. Cancel anytime.

Peter Fray
Editor-in-chief of Crikey

12 weeks for $12