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Throwing Ahmadinejad a Lifeline

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Hossein Askari and Trita Parsi argue in the NYT:

In an effort to squeeze Iran into submission over its nuclear policy, Congress and the White House are edging toward a gasoline embargo. This would do nothing to force Iran into submission. In fact, it would be a blessing for the hard-line government to once again be able to point to a foreign threat to justify domestic repression and consolidate its base at a time when opposition to President Mahmoud Ahmadinejad is increasing among conservatives.

An effective gasoline embargo can only be implemented through a naval blockade. This would require U.N. Security Council approval — a tortuous process with no certain outcome. An embargo without U.N. approval is an act of war according to international law, and Iran has declared that it would be met with force.

But even if the Security Council were to miraculously unite, success would still be out of reach. The economics of a gasoline embargo simply doesn’t make sense. Iran imports roughly 40 percent of its domestic gasoline consumption at world prices and then sells it along with domestically refined gasoline at a government-subsidized price of about 40 cents per gallon. As a result, domestic gasoline consumption is high. It is also smuggled and sold to neighboring countries.

Over the past 10 years, this policy has cost Iran in the range of 10 to 20 percent of its G.D.P. annually, depending on world prices and the government-mandated pump price. Yes, a whopping 10 to 20 percent of G.D.P. In need of additional revenues, the regime has wanted to eliminate this subsidy, raise the price to world levels and reduce consumption, but has been paralyzed by the specter of a domestic backlash.

Even assuming that a gasoline embargo would be effective, what would be its result? Consumption would decline by 40 percent and government revenues would go up, because no payment would be needed for gasoline imports.

If Tehran allowed the reduced supply of gasoline to be sold at a price that would equate demand to supply, the price would increase to a level that would eliminate the subsidy, meaning no subsidy for imported gasoline and no subsidy for domestically refined gasoline. The government would have more revenue to spend elsewhere. The sanctions would have done what Tehran has wanted to do for years and the government would not be held responsible!

What about the political fallout? Proponents of the embargo believe that increased economic pressure would cause Iranians to revolt against their unpopular rulers. This is a fundamental misreading of the psychology of an embargoed people.

Iranians have suffered tremendous hardships under the Islamic Republic. And while the Iranian economy is in tatters today, Iranians have seen much worse times. During the Iran-Iraq War, they faced unprecedented economic hardships. This did not ignite a popular uprising.

What caused Iranians to rise up two months ago was not economic hardship, but dashed hopes in anger over the fraudulent election.

If the back of the Iranian economy is broken, the first casualty will be hope. Economic misery will kill people’s faith in a better future. The result will be political apathy. And rather than blaming Mr. Ahmadinejad, Iranians are likely to blame the United States.

Moreover, Iran’s ruling hard-liners are in disarray. The politics of fear is their bread and butter; they have long benefited from invoking foreign plots and Washington’s discredited regime-change policy. But now — with President Obama’s new outreach to Iran — the hard-liners have lost their 9/11. President Obama has deprived them of their perennial boogeyman.

This has helped the opposition find the maneuverability to challenge Iran’s vote-robbers. The hard-liners have no credible threat to rally around. Their disgraceful show trials on Iranian TV reveal their desperation. This has not only allowed fissures between various factions in Iran to grow, but also increased tensions among the conservatives themselves.

Mr. Ahmadinejad is desperately in need of a threat to help consolidate his conservative base and lend credibility to accusations of conspiracy against his moderate opposition. Imposing a gasoline embargo could be his last, best hope. Congress and the White House should think long and hard before throwing a lifeline to Iran’s vote-robbers.

Hossein Askari is professor of international business and international affairs at the George Washington University. Trita Parsi is president of the National Iranian American Council and author of “Treacherous Alliance — The Secret Dealings of Israel, Iran and the United States.”

Irancove @ September 11, 2009

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