What does $70 oil mean for Ahmadinejad?
Posted May 25, 2010 at 1:59 pm 
Filed in: Oil prices have fallen precipitously since early April, closing at around $70 a barrel on Monday. It is widely known that ups and downs in the major oil exporters’ political power abroad and control over the opposition at home correlate closely to the ups and downs of the global oil price. Most famously, perhaps, is Thomas Friedman’s “First Law of Petropolitics” thesis, supported by a back-of-the-envelope drawing of freedom going up when oil prices go down, and vice versa.
So how are today’s (relatively) low oil prices affecting Iran, perhaps the most pernicious of the oil exporters?
At a recent speech in a southern oil-rich province, Iran’s President Mahmoud Ahmadinejad reiterated his traditional anti-Western remarks but was interrupted – very non-traditionally – by young Iranians shouting that they were unemployed and deserve jobs.
Iran’s economy is in considerable trouble, with 25 percent unemployment and double-digit inflation. Iran also has to import more than 30 percent of its gasoline because it does not have sufficient refinery capacity to process the oil it requires domestically.
The West, led by the United States, appears to be moving forward with a fourth round of U.N. sanctions on Iran due to its insistence on developing a nuclear weapon.
In what may be a desperate move to avoid stricter sanctions that have the approval of traditional Iranian allies Russia and China, Iran has partnered with Turkey and Brazil on a fuel-swapping deal. Under the agreement, Iran would ship 2,640 pounds of low-enriched uranium to Turkey (which would store it) and within a year Iran would be provided with higher-enriched fuel rods that can be employed in a U.S.-built medical research reactor.
And Iran also announced today that after months of international pressure, it would release a famous filmmaker who had been arrested in March for producing a film about political turmoil in Iran without government approval.
If oil prices rise again this summer, we can expect Ahmadinejad to use the revenues at home to stifle dissent and artificially boost the economy. Abroad, he no doubt will employ the oil weapon to prevent or weaken any UN Security Council sanctions.
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