Iranian poltiical fortunes mirror price of oil

Thomas Friedman writes in the NY Times:

Watching oil prices fall from $147 a barrel to $57 is not like counting sheep. It’s the kind of thing that gives an Iranian autocrat bad dreams.

After all, it was the collapse of global oil prices in the early 1990s that brought down the Soviet Union. And Iran today is looking very Soviet to me.

As Vladimir Mau, president of Russia’s Academy of National Economy, pointed out to me, it was the long period of high oil prices followed by sharply lower oil prices that killed the Soviet Union. The spike in oil prices in the 1970s deluded the Kremlin into overextending subsidies at home and invading Afghanistan abroad — and then the collapse in prices in the ‘80s helped bring down that overextended empire.

(Incidentally, this was exactly what happened to the shah of Iran: 1) Sudden surge in oil prices. 2) Delusions of grandeur. 3) Sudden contraction of oil prices. 4) Dramatic downfall. 5) You’re toast.)

Under Ahmadinejad, Iran’s mullahs have gone on a domestic subsidy binge — using oil money to cushion the prices of food, gasoline, mortgages and to create jobs — to buy off the Iranian people. But the one thing Ahmadinejad couldn’t buy was real economic growth. Iran today has 30 percent inflation, 11 percent unemployment and huge underemployment with thousands of young college grads, engineers and architects selling pizzas and driving taxis. And now with oil prices falling, Iran — just like the Soviet Union — is going to have to pull back spending across the board. Fasten your seat belts.