Does Iran’s political crisis stem from a financial crisis?

Does Iran’s political crisis stem from a financial crisis?
http://smallwarsjournal.com/blog/2009/06/does-irans-political-crisis-st/


To what extent is Iran’s current political upheaval catalyzed, or even instigated, by sharply deteriorating economic and financial conditions inside the country? I pose the question but have no way of answering it.

Some observers believe the two earth-shaking political upheavals that occurred two decades ago – the collapse of the Soviet Union and the Tiananmen Square revolt in China – were closely tied to financial crises. Yegor Gaidar, who was Russia’s economics minister and acting prime minister in the immediate post-Soviet period, asserted in an essay he wrote for the American Enterprise Institute that Soviet financial mismanagement related to grain purchases and fluctuating global oil prices led to the Soviet Union’s (literal) bankruptcy. In China, some analysts have linked the countrywide uprising in the spring of 1989 to rapidly accelerating consumer price inflation.

What about Iran today? A table produced by the U.S. Department of Energy’s Energy Information Agency shows a rapid acceleration this decade in Iran’s inflation-adjusted per capita oil revenue, followed by a painful crash. These revenues are obviously not distributed equally. Is the emerging polarization of Iran’s clerical elite into Ahmadinejad and Moussavi camps a consequence of these elites attempting to preserve their shares of a rapidly shrinking financial pie?

As for the masses now protesting in the streets, the energy they displayed during the election campaign, the expectations they imagined, and the anger they are displaying over their dashed hopes may be a replay of what occurred in China in 1989. As with China in 1989, Iran’s accelerating consumer price inflation may be a catalyst for street protests by the middle class.

In an essay I wrote last year for The American, I argued that a cutoff in foreign investment in Iran’s oil and gas sector would be the last best hope for the international community to achieve leverage over Iran’s nuclear program. According to an academic study I cited, Iran’s oil export revenue could dry up by the middle of next decade if Iran does not receive foreign technical assistance to maintain and expand its oil production.

When I wrote that essay, I envisioned the necessity of U.S. and European diplomatic pressure to achieve a cutoff in foreign investment in Iran’s oil industry. But Iran’s internal political turmoil may do the trick – foreign investors may now deem the political risk too great.

So what are the economic and financial sources, if any, to Iran’s political turmoil? Should the U.S. government indirectly add to these pressures in the hope of defunding the current regime? Or of inducing its replacement by a more friendly one? More likely, the most the U.S. government will be able to do is watch like everyone else and adjust to whatever happens.