Tuesday, December 26, 2006

Iran: Searching for Spare Change

According to a study published by the National Academy of Sciences Iran’s oil revenues could disappear by 2015. Currently Iran produces about 3.7 million barrels a day (which is below the OPEC quota), which earns them about $50 billion a year in an economy that only has a GDP of $181.2 billion. This accounts for a staggering 80% of Iran’s total exports.

The geopolitical implications of an Iran with no oil revenue are clear. Iran’s relative decline in power will effect the situation in Lebanon, the Shi’ite/Sunni balance of power, and stability in Iraq. They will be wholly dependent on Russia for nuclear technology and support to keep their lights on and they will begin to resemble North Korea, economically and militarily.

The difference between the two countries is that Iran will be forced to confront pressure for reform from their young population (median age 24.8). While it is impossible to know if the Ayatolla will fall as the Shah before did it is obvious that Iran will no longer have the resources to consolidate the Shia crescent.

While a weakened Iran is desirable for American foreign policy it may eliminate the only major opposition to Sunni consolidation of power and the flourishing of Sunni extremist groups- especially in Iraq. Stay tuned, this could get ugly.

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