Defusing Iran’s oil weapon

Oil prices have fallen from above $78 per barrel in mid-July to less than $60 in early October. The drop – due in no small measure to an easing of tensions over Iran’s nuclear programme – is costing the Iranian government money, compounding the regime’s domestic problems.

Inflation in Iran is rising, perhaps to as high as 20 per cent. On October 1, Khamenei called on Ahmadinejad to address the growing problem. There are price freezes on certain subsidised goods and services, and rising inflation makes these subsidies even more expensive for the government. Indeed, the government indicates that it may begin rationing gasoline. Unemployment stands at about 12 per cent, and is probably twice as high among young people.
The US can undermine the Iranian regime by avoiding statements and actions that help drive energy prices higher and bolster Iran’s economy. Administration officials should lower the political temperature. They should again offer Iran direct talks. Bush should invite Ahmadinejad to Washington. Better yet, invite him to Crawford. Make him breakfast.

Washington can also press the Saudis, who control virtually all of the world’s spare capacity, to keep their output high to contain prices. Saudi Arabia’s ruling Sunnis are more threatened than is the US by Iran’s support for a shift in the regional balance of power toward Shia Muslims.

The Nation