One of the most important questions when assessing Iran’s economy and perhaps even the Islamic Republic’s stability is at what price of oil did the Iranian leadership calculate Iran’s budget. The oil market is historically volatile, but prognosticating the average price of oil over the fiscal year is important: Iran’s economy is not only dependent upon petroleum products but it is also beset by a bloated bureaucracy and inefficient management. If Iranian bureaucrats guess wrong about oil prices, then they risk not making payroll. As the price of oil declines, the Iranian government—and even the Islamic Revolutionary Guard Corps—also have less money to engage in special projects or to spend overseas.
Most analysts believe Iran calculated its budget based on oil being $90/barrel. Brent crude is now trading at $85/barrel, down from $115/barrel in June. Not only does that represent a 26-percent decline in the price of oil in just four months but, if the price remains at $85/barrel, it represents a potential 5.5 percent shortfall in the Iranian budget. If the price falls further and fast, the damage to the Iranian economy and its ability to invest money in international adventures in Iraq, Afghanistan, Syria, Lebanon, and the Gaza Strip will fall even further.
How sad it is, then, that the Obama administration seems to be greasing its diplomatic process on sanctions relief to the tune of more than $7 billion—122 percent of the official annual budget of the Islamic Revolutionary Guard Corps—while European and American firms now chomp at the bit to spend money inside Iran.
There is no coherent regional strategy in the White House or State Department: Heck, it’s been hard enough for the Obama administration to understand that it cannot treat Syria and Iraq as problems detached from each other. While the Obama administration increases its desperation to deal with Iran, it is prepared to ignore Iranian interference in Iraq, Syria, Lebanon, the Gaza Strip, and Afghanistan. Any cash crunch will negatively impact Iran’s influence and involvement in these countries and territories, especially given the cost of Iran’s subsidies of groups like Hezbollah and Iraq’s various Shi‘ite militias. There should be no argument that the activities of the Qods Force and various Iranian-backed militias are antithetical to regional security and American national interests. Over the past year, the Obama administration has been willing to compartmentalize and ignore this fact in order to advance its nuclear diplomacy.
Perhaps it’s time to recognize that continuing to compartmentalize not only risks letting Tehran off the hook for its actions, but now risks snatching defeat from the jaws of possible victory. Rather than provide Iran cash (or enable investment which does the same thing) to help the regime in time of need, the United States should be doing everything in its power to reduce the price of oil further. This would give Iranian officials a choice: Either cease interfering in and destabilizing countries like Syria and Lebanon, or risk collapsing Iran’s own economy. And if the United States managed to play its cards right, it might just cripple the regime enough to set itself and Iran down the path of solving myriad other regional problems.