Economic Warfare

[kehenry1]

In regards to economic warfare and Iran, I noted here (scroll down and to bottom for additional links on Economic Warfare and Iran), whether Iran survives economically or not is not just linked to their oil and natural gas income, though it plays a major part, both good and bad.

For instance, Iran is now talking about building eight additional refineries for oil. Right now, they only have one. They are still rationing gasoline, though at a subsidized rate. The problem here is that, however much they are raking in on a bbl of oil, as a net importer of refined oil and gasoline, they are putting out a very large chunk of their income to buy it. It might sound good on paper, but it causes other issues.

Second, Iran is suffering from record inflation to go along with its "growth" period. Inflation is, in fact outstripping economic growth about 4 to 1. Housing prices have tripled. Food prices have quadrupled. This is in relation to both the incredible inflation of oil and the sanctions which have denied credit to even the basic importers. Some have sought an end run by working through third party nations like Dubai and Germany where they set up what appears to be other national companies. Yet, the price to import these food stuffs has increased along with the necessity to use huge, upfront cash deposits.

At the same time, Iran has been busy trying to repress their labor movements that are demanding a pay raise after over a decade of the same pay (most are making about $2/day). These people are having to work two or three jobs just to feed their families, buy gasoline and pay for heating, much less housing now that the rates are increasing so drastically. For the last two years, parts of Iran have had to institute heating rations because the nation is so dependent on exporting their energy resources to sustain their economy. Besides oil and natural gas, the third largest export from Iran is Hydro-electricity to Afghanistan and Iraq.

I posited a theory once that the unrest in Iraq and Afghanistan benefited Iran, not just politically, but economically since it keeps infrastructure from being developed in these nations to offset that export as well as the somewhat limited income from export of manufactured goods.

This need is created by their Soviet style economic system. More than 70% of all working Iranians are employed in a state run business. appx 50% are in the oil and natural gas industry which is just about the only money making industry out of Iran. Another 30% work in the service industry that is largely controlled by the IRGC, but have limited "money making" capabilities since it simply funnels internal funds from one hand to another. They do control certain textile and other manufacturing plants as well as mineral extraction.

At this time, neither their manufacturing nor mineral extraction nor even export of some food stuffs (another reason that food prices are high in Iran) is anywhere near being able to produce the amount of revenue necessary to create a diverse economy. Neither are the only 10% of private entrepreneurs in Iran capable of producing much in the way of export. While the Iranian Islamic Revolutionary dream is to create a self sustaining economy (as was once the Soviet model), it is impossible with the existing business and economic structure.

Their manufacturing and mineral extraction is in bad shape. Earlier this year, one of the showdowns that was happening in the Iranian cabinet was an argument between these two industries and the oil and natural gas industries over revenues produced as well as the amount of money being invested. They were accusing each other of being the cause of the economic problems in Iran. Even with all that energy export revenue, inflation is seriously damaging their capabilities to continue running the nation.

The mineral and manufacturing industries fought back stating that, if they had the infusion of cash that the oil and gas industry had to improve their infrastructure (including machines, transportation and even roads), they could be in a better place to produce revenue. Ahmadenijad settled that by replacing the mining and manufacturing industry ministers.

If you are truly familiar with the economic woes experienced by the USSR pre-collapse, you'd know that they suffered similar problems. Like the USSR, Iran has many price controls in place which means that these industries cannot even make money internally to help improve the situation.

Agriculture is equally damaged from lack of investment and expansion along with orders to export most of the food stuffs that created the net import of grains and other food staples like vegetables and fruit.

All of Iran's economic growth is in oil and natural gas. It is unsustainable. Unless, of course, they can get nuclear weapons and improve their regional hegemony, holding other regional suppliers "hostage" and forging alliances with countries like Venezuela, keeping oil supplies down and the price high by artificial reductions or limits. (Something that would be of some benefit to Russia as well since their economy is so heavily invested in the energy sector).

Other problems that Iran has is that the threats of potential strikes by the US have forced them to spend more on defense, though not much, it is still damaging. In fact, besides the probability of nuclear proliferation by Korea to Syria that precipitated a recent strike against Syria, the fact that Israel was able to easily circumvent Syria's Russian bought air defense system has caused Iran to have to invest in upgrades, further stressing their budget, along with other military equipment and preparation.

This juggling of funds and budgets is also apparent in their continuing inability to pay full monthly fees for the building of the Bushehr nuclear facility. Which has caused Russia to state they will continue to build the facility, but there will obviously be a slow down. In the meantime, Iran is putting a lot of money into buying and making centrifuges and other equipment for creating nuclear technology.

the long and short of it is, all of the money is staying at the top end, within major government structures, one major industry and being spent on imports of equipment and basic necessities outside the country. That is what is fueling inflation and keeping government run entities from increasing pay to workers. Money is not filtering down in the economy to allow for improved internal economic growth. Of course, corruption and Ahmadenijad's insistence on putting old IRGC cronies in position of power over these industries is creating a whole new economic class paradigm in Iran.

It's a point that we should be exploiting in our information warfare. Particularly, as the previous high separation of the economic classes was part of the original causes for the Islamic Revolution. The Islamists promised at that time to institute a more equitable "Islamic" system that had its roots in socialist economics learned in the universities of France and other European nations. the reason, of course, that the leftward, labor movements of Iran originally supported the revolution.