Iran's Economy and the Iraqi Problem

From today's Washington Post we get this story (Iran Oil Revenue Quickly Drying Up, Analyst Says) telling us that Iran's oil revenues are dropping by some 10 to 12 percent per year. According to Roger Stern, an economic geographer at Johns Hopkins University,

Iran earns about $50 billion a year in oil exports. The decline is estimated at 10 to 12 percent annually. In less than five years, exports could be halved, and they could disappear by 2015.

Mr. Stern suggests that rather than rattle sabers and talk of a military solution to the Iran problem we just sit back and wait for nature to take its course. While Ahmadinejad, who should more properly be known as "I'manuttajob", has been occupying himself with spurious attacks on the Holocaust and sowing discord in the Middle East, including Iraq, he hasn't been paying attention to business. Voters in Iran seem to recognize there's a problem at the top given their recent smackdown on I'manuttajob at the polls, but if the United States takes an aggressive stance and tries for a military option, we will lose the potential benefit of Iranian discontent and cause them to close ranks.

The Iranians have not been reinvesting in oil production and are heavily subsidizing domestically consumed gasoline. As the Iranians' domestic situation becomes increasingly precarious they will be forced to focus more on the energy issue and less on developing weapons or sowing Islamic revolution. Recently, President Bush was asked if he would consider talking to the Iranians about the Iraq situation. He said he would only do so if they agreed to cease their uranium enrichment program.

Bush's position is wrong. Tying the Iranian uranium enrichment program to the Iraq issue is a mistake. Iraq is not related to the uranium enrichment program, but it IS related to the question of Iranian domestic tranquility. Iran's economy is already creaking under the strain of its energy subsidies, its bungling management of its oil resources, and its status as a near-pariah state with a huge and increasingly unemployed young population. Does Iran want an Iraqi refugee problem, too?

For the past two or three Sundays I have watched proponents of discussions with Iran get tongue-tied when asked what we could possibly offer Iran as an incentive to enter into such discussions. I watched Charles Krauthammer do this to Mark Shields just two Sundays ago. The answer is easy. Iran does not want an Iraqi Arab refugee problem on its border. Iran has been protected to an extent from a flow of refugees by the difficulty of the terrain and by the fact that much of it borders Iraqi Kurdistan, but as the Sunni insurgency becomes increasingly violent, and Baghdad neighborhoods increasingly unlivable, there will be a flow of people to the eastern borders of Iraq. They can't go to Sunni, Baathist Syria. They will not be welcome in predominantly Sunni Kuwait. They won't be welcome in Kurdistan, and Anbar province is dominated by Sunnis who will certainly not permit thousands of Shiite refugees to cross on their way to Syria and Jordan. This leaves Persian Iran, which has no real desire to be overrun with Arab refugees even if they share the same sect.

Our refusal to talk to the surrounding countries in the region is setting the stage for a proxy war between Syria, Saudi Arabia, and Iran because we are not offering any good reasons why they should refrain from such a war. The insurgents and militias are not operating in a vacuum. They're getting outside support from Iran and Syria. If we want to stop the internal strife in Iraq we are going to have to deal with the people writing the checks. This can only be done diplomatically.