Iran’s crisis amid Middle East turmoil

The lifting of subsidies by Mahmoud Ahmadinejad’s government has been welcomed by the IMF as a necessary step towards exorcizing Iranians from cheap gasoline and other consumer goods.  However, the regime’s underlying economic problems remain unresolved. 

The challenges facing Iran’s economy remain the same as three decades ago: corruption, mismanagement of Iran’s natural resources, lack of foreign investment, unemployment, brain drain, squeezing out the private sector and last but not least, putting ideology before national economic interests.

The late Ayatollah Khomeini’s claim that “economics is for donkeys” has been the fundamental challenge facing Iranians since the establishment of an Islamic Republic thirty years ago. By all economic measures the people of Iran have fallen behind their neighbors and the world. Iran’s oil-rich neighbor Saudi Arabia has used the past three decades to cement itself as the world’s most important exporter of crude oil. Despite having the world’s second highest reserves of natural gas, Iran has fallen behind its small but agile neighbor Qatar in the quest to supply clean burning natural gas to regional, Asian and European markets. Non-oil exports have also suffered since Khomeini’s declaration. While rent-a-crowds encouraged by the regime have chanted “Death to America” Turkey has taken in millions of tourists and last year generated over $20 billion in revenues, a figure exceeding all of Iran’s non-oil exports. Most tragic is Iran’s brain drain which according to the International Monetary Fund is ranked No. 1 in the world. As thousands of Chinese, Israeli, Indian and Arab students take the knowledge they have gained in the US to their home countries and contribute to economic growth, Iranian students have been forced to flee their country into permanent exile. Even newly independent countries neighboring Iran, like Azerbaijan, have done better. Since its independence in 1992, Azerbaijan has attracted over $60 billion in foreign investments. 

The sum total of these opportunity costs has created a crisis amidst Iran’s plentiful resources. The historic parallels with the former Soviet Union are telling. The collapse of the Soviet Union occurred not because of but despite plentiful resources. Indeed, in spite of taking over the U.S. the system devised by Moscow imploded and collapsed within a short few months.

How to deal with the Islamic Republic of Iran is a perplexing foreign policy challenge as the Iranian economy implodes. What Washington needs is a road-map to a post-Islamic Republic Iran.

U.S. policy towards Iran should consist of five simultaneous pillars.  First, President Obama should appoint an Iran Czar to coordinate the overall goals of his approach to Iran. Second, should the regime in Tehran wish to talk with the U.S., diplomacy should always be on the table as an option. Third, impose targeted economic sanctions such as freezing the enormous assets of the regime’s leaders. Fourth, while Washington should keep a close eye on the progress of Iran’s nuclear weapons program, our public diplomacy should refocus on, the mismanagement of the economy, unemployment, inflation, corruption, lack of meritocracy, the eroding standard of living and of course  the violation of human rights in Iran. The venue for this public diplomacy should be more robust programming from the VOA Persian Language Service. Respected members of the opposition (both inside and outside the country) should be featured on a more regular basis and factual documentation of the regime’s illegal and corrupt activities during the past two decades should be presented.

Finally, serious consideration should also be given to the wishes of the Iranian people. The people of Iran hold the key to America’s long-term strategic interests in the Middle East. Poll after poll has highlighted the desire of the Iranian people to engage with Americans and the positive attitude of Iranians towards the American people. As the gulf between the Iranian people and their regime widens, Washington should focus its efforts on making this divide permanent. Indeed, the national security interests of the United States coincide with the wishes of the Iranian people. 

The day President Obama was elected the 44th U.S. President was also the 29th anniversary of the seizure of the American embassy in Tehran by radical students driven by hatred for America. Since that hostile action 32 years ago and over six different administrations the official U.S. political and diplomatic response to Iran has vacillated between engagement, appeasement and containment while the potential threat from Iran to the U.S. not only remains unchecked but has increased exponentially. 

President Obama now has an opportunity to reverse thirty-two years of failure to devise an effective and proactive policy of dealing with Iran.

Fariborz Ghadar is a Senior Adviser at the Center for Strategic & International Studies and founding director of the Center for Global Business Studies at Penn State University. Rob Sobhani, Ph.D. is President of Caspian Energy Consulting and author of two books on the Middle East.