Dark clouds on Iran's horizon

By Kamal Wadhwa

A zillion-dollar question confronts the Iran of today: What would happen to Iran or what lies in Iran's future when its oil reserves are finally sold, consumed and exhausted? Indeed the fate and future of the young generation of Iranians who are in exile and want to return to Iran (even if their parents won't) and the millions of other youth who live within Iran hangs in the balance if no proper answer is forthcoming to this question.

Will it take 20 or 30 years to deplete Iran's black gold? Present indications are that the confrontation between Iran and America could bring that date precipitously closer if Iran does not come to an agreement with the West to roll back and cap its nuclear program. In the event that the  present patchwork agreement negotiated between Mr. Rouhani and Mr. Laurent Fabius in November does not survive, then hostilities could ensue that would push up Iran's expenditures on acquiring armaments and advanced weaponry from Russia and other countries. This would mean another diminution in Iran's dollar reserves and would raise the necessity of selling more oil by that beleaguered nation.

Moreover, Iran has an import-based economy with  virtually no other export products of any substance apart from oil. The few industries that were set up earlier under the previous regime to produce a range of goods for domestic consumption have probably closed down and almost all of Iran's needs are supplied from abroad against payment in petrodollars.

And now the present government has to cope with the cost of supplying food coupons to nearly 20 million Iranian families to enable them to survive and meet their needs in the present inflationary and recessionary scenario confronting the country. This again means the State must sell more oil to meet the cost of this subsidy for the poorest of poor Iranian families.

The earlier administration headed by Mr. Rafsanjani seemed to be aware of the problem of Iran's dwindling oil reserves when it announced  that it would, upon popular demand, be prepared to distribute all of Iran's dollar reserves accumulated from oil revenues (present and projected) at the rate of U3S$11,500 per family and thereby end all further speculation on this score.

The scenario confronting Iran becomes even more ghoulish because Iran does not have the capability to drill for offshore oil (reserves have been discovered under the seabed) and it must contract with foreign companies to do the drilling. This is no longer possible because Washington maintains a strict vigil on all oil exploration initiatives by Iran and applies sanctions to any foreign  company which disobeys its diktat. Thus we have seen the Reliance Group of India withdraw from its offshore drilling operations in Iran because of threatened sanctions against that oil major.

Conceivably, Iran could use the remainder of its oil income to buy gold and build up reserves of this precious metal. These reserves could then be used to buy assets overseas such as shops, industries and businesses that are profit earning. This option is not available to the present regime because Iran falls outside the WTO covenant and is a suspect nation with no friends apart from a handful of Muslim states notably Pakistan which, too, is increasingly coming under the American scanner because of the poisonous terrorism that springs from there.

The mood in Washington does not seem to be upbeat in view of the contradictory signals emanating from Iran. Just days after the patchwork nuclear deal was signed between Tehran and Washington, the former announced that it would soon scale up its nuclear enrichment program.

The present government of Iran has not chalked out any detailed or comprehensive long-term policy as to what Iran would do once its oil reserves run out. It has not invested sufficient oil income in building up badly needed infrastructure within the country apart from defense. It really has been doling out funds on an ad hoc basis without any clear rationale for such allocation.

Sensing that Iran has no more of a future, those who had amassed vast sums of money during the monarchical regime have been quietly siphoning off their wealth to foreign banks through illegal channels. These billions of dollars worth of capital could have probably been used to set up alternative industries and businesses in Iran after the oil income is finally depleted and exhausted. These are also the people who have the potential and capability to revive Iran's non-oil exports such as carpets, dry fruit and minerals & metals.

Then, too, Iran does have a vast unexplored hinterland that could generate new exports provided funds were forthcoming from the government or the private sector - a possibility that is becoming remoter with each passing day. Sooner or later, those who have transferred their monies abroad are expected to follow their funds and leave Iran more or less permanently. If that happens, Iran would become a dirt-poor Third World nation unable to even feed and clothe its people. What use then Iran would have for its Islamist ideology or the potent influence it exercises on many other countries with Ayatollah Khomeini's brand of Islam?

With the closure of schools and colleges that were once imparting secular and scientific education, what chance would then Iran have to stand up and be counted as an equal member in the comity of nations? It may be that the surviving mullahs sincerely have taken to heart Khomeini's dictum that Iran should be prepared to perish in the service of Islam. If so, then doomsday for Iran is not far away.

However, it should not be forgotten that Iranian civilization is older than Islam and few Iranians would relish ruining themselves for the sake of a religion that has caused them so much distress and heartburn in latter part of the 20th and the early part of the 21st century.

Kamal Wadhwa

NOTE: Kamal Wadhwa has spent fifteen years in Iran and did a short stint as reporter for Kayhan International in Teheran.    


Author`s name Dmitry Sudakov