Investment in Iran drying up; analyst: Economic problems may tame Teheran.
By HERB KEINONunited nations 88(photo credit: )
Nonmilitary steps that began with the UN Security Council's decision to impose sanctions on Iran could eventually lead Teheran to drop its nuclear program, a senior diplomatic official said on Monday, sounding a rarely-heard optimistic note in Jerusalem on efforts to stop the Islamic state's nuclear program.
But all this, the official said, depended on whether Teheran wanted to remain within the community of nations. If, however, it opts to snub the world and to go the way of North Korea, the implication in the official's comments is that military steps may be the only way to stop Iran from gaining a nuclear capability.
Blog - The Persian Abyss: The myth of sanctions
The diplomatic official said he did not know which path Iran would choose.
According to the official, Israel - which for months has been pushing the world in the direction of sanctions - must remain "vigilant" at the diplomatic level to prevent the international community from saying that with this round of sanctions, "We have done everything we can do."
The official said the Iranian issue would remain atop Israel's agenda, and that Israeli diplomats would work to ensure that the sanctions imposed were applied. He said Israel would likely push the countries involved to make sure that if the Iranians did not stop enriching uranium within 60 days, as the UN Security Council Resolution stipulated, a harsher set of sanctions would be imposed.
The official said that while the sanctions alone would not stop Iran, they did give "moral and legal" support for unilateral "financial and commercial" steps that the US and financial institutions around the world have begun taking.
"Saturday's decision rejuvenates the Security Council-bypass efforts," the official said, referring to these unilateral measures. For instance, the official said, a major Iranian bank has been cut off from the banking systems in the US, Japan, and several European countries, and that Iran had been denied lines of credit.
As an indication that these measures were being felt in Teheran, the diplomat the Iranian ambassador in London recently complained that his country was being boycotted by Britain, and Iran's oil minister recently complained that investments in Iranian oil fields were drying up.
"Financial institutions and foreign companies look at all the developments surrounding Iran and wonder whether it is worth the risk," the official said, adding that the Security Council Resolution strengthened the perception that Iran was a "bad risk." And this, the official said, would add to the country's economic woes.
An indication of the depth of these woes was provided on Monday with the release in Washington of a US National Academy of Sciences analysis that indicated Iran was suffering a staggering decline in revenue from its oil exports, and that if the trend continued, the income could virtually disappear by 2015.
Iran's economic problems could cripple its oil industry, rendering the country unstable and vulnerable, Roger Stern, an economic geographer at Johns Hopkins University, said in the report and in an interview with AP.
Iran earns about $50 billion a year from oil exports, which are declining at an estimated 10 percent to 12% annually. Exports could be halved in less than five years and disappear by 2015, Stern predicted.
The country could be destabilized by declining oil exports, hostility to foreign investment needed to develop new oil resources and poor state planning, Stern said.
He said oil production was declining and both gas and oil were being sold domestically at highly subsidized rates. At the same time, Iran is failing to reinvest in its oil production.
Iran produces about 3.7 million barrels a day, about 300,000 barrels below the quota set by OPEC.
The shortfall represented a loss of about $5.5b. a year, Stern said. In 2004, oil profits represented 65 percent of the government's revenues.
"If we look at that shortfall, and failure to rectify leaks in their refineries, that adds up to a loss of about $10b. to $11b. a year," he said. "That is a picture of an industry in collapse."
If the United States could "hold its breath" for a few years it might find Iran a much more conciliatory country, he said. And that, Stern said, was good reason to ignore any instinct to take on Teheran militarily.
"What they are doing to themselves is much worse than anything we could do," he said.
"The one thing that would unite the country right now is to bomb them," Stern said. "Here is one problem that might solve itself."
AP contributed to this report.
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