Iran’s Election Outcome May Spark Global Crisis
With an inflation rate of approximately 25% and unemployment officially in excess of 12%, the Iranian economy has been battered by external factors such as the collapse of oil prices with the onset of the global recession. This situation was undoubtedly exacerbated by the sheer ineptitude of Ahmadinejad’s attempt at managing Iran’s economy. However, as is well known, the President of Iran wields little actual power; it is the Supreme Leader, the unelected Ali Khamenei and his clique of “experts,” who rule the country. All indications demonstrate that the Khamenei clique is far more interested in maintaining their political dominance of Iran than improving the economy. The reelection of Ahmadinejad, even if done through fraud with sufficient transparency so that nobody is fooled, is a far more comforting outcome for Khamenei than risking the appointment of a reformer as president. It is also clear that improving relations with the United States is not seen as useful to the ruling theocratic clique; maintaining tensions with the “Great Satan” is advantageous to the regime as justification for maintaining strict political control over Iranian society, and continuing with Tehran’s thinly-disguised nuclear weapons program. In that sense, strengthening the hand of the bombastic, provocative Ahmadinejad is also a desirable outcome for Khamenei.
A radicalized Iranian leadership that is willing to ignore the will of its own populace can scarcely be expected to bow to international pressure to terminate its nuclear weapons program. As the perception that Iran is getting closer to developing nuclear weapons grows stronger, the possibility of military hostilities in the region cannot be ignored, whether initiated by the U.S., Israel or preemptively by Tehran. Though the ramifications of military hostilities with Iran are unpredictable in a general context, in one specific aspect it is clear what the most dramatic implications are. Even the perception that a military clash with Iran may occur, as opposed to actual hostilities, will prove disastrous to the global economy.
Any attack on Iran, whether justified or not, will provoke fierce retaliation. Iran is in one of the most strategic areas on the globe, its coastline hugging the Persian Gulf and straits of Hormuz, the most important choke point for the export of oil to the world’s leading industrialized economies. Besides curtailing its own oil exports, the Tehran regime will almost certainly interdict and disrupt the supply of oil from the Gulf, and it unfortunately has many options to facilitate this outcome. During the Iran-Iraq war in the 1980s, the Iranians attacked oil tankers belonging to nations not involved in its conflict with Iraq, at a time when it was much weaker than currently. It therefore is a matter of certitude that if Iran’s nuclear facilities are attacked, it will do all in its power to cut off the supply of oil from the Gulf region.
The impact of any rise in tension in the Persian Gulf will send the price of a barrel of oil through the stratosphere. Factor in Iranian reaction to an attack on its nuclear installations, and we could have oil prices climb to a level that seems inconceivable at present: $400-500 a barrel, perhaps even higher. Such exorbitant prices for oil will terminate any talk of economic recovery, and ensure that the world sinks into a severe depression.
And what about Ahmadinejad? Though the Iranian intellectual establishment and even factions within the clerical ruling clique would prefer a lessening of international tensions, the chosen symbol of the real centers of power in Iran represents its most hard-line agenda. In 2005, the Iranian President stated his long-term objective in very clear terms. His comments were brief, to the point, and devoid of any references to Iran’s economic problems. He simply said, “Our revolution’s main mission is to pave the way for the reappearance of the 12th Imam, the Mahdi.” The reappearance of the Mahdi presupposes an apocalypse on earth.
It is not only the credit crunch, stimulus spending, deficits and deflation that the global economy must wrestle with. The Iranian election parody will demonstrate how even domestic political events in a foreign country can have dangerous implications for the world’s economy at a time when it is already in a state of acute vulnerability. What unfolds in Tehran in the weeks and months ahead may prove more important to the evolution of the global financial and economic crisis than the public utterances of officials in Washington.