The Six Percent Doctrine

Michael Hirsh says folks hoping economic sanctions may pressure Iran to abandon its nuclear program are dreaming:

Iran's oil-fueled prosperity tends to undercut another still-prevalent idea in Washington and European capitals: that with yet one more set of U.N. sanctions Iran will give up its nuclear program. Even many reformers who despise Ahmadinejad and his clumsy defiance of international opinion say that's not going to happen. America's confrontational approach to Iran, says S.M.H. Adeli, Iran's former ambassador to London, "has already gone on for three decades, and it hasn't worked. Why should it work now?" U.N. sanctions are shrugged off by most Iranians as a cost of doing business, adding about 6 percent to prices in general.

To me, six percent sounds like a lot; I feel like a politician proposing some policy initiative likely to generate an across the board six percent price increase would be doomed. Maybe that's just me. Hirsh's description of the actual conditions of Iranian life are interesting.

Comments

Pyongyang and Washington have helped to completely cut off North Korea's access to the world market, raising the cost of doing business by a gajillion bajillion percent. Now all we have to do is up the ante to septoquadxeniallion percent and we'll be all set.

Posted by Reality Man | June 25, 2007 4:04 PM

"I feel like a politician proposing some policy initiative likely to generate an across the board six percent price increase would be doomed."
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Hmmmmm, we have Bush proposing a few hundred billion dollars get set afire every 60 days or so and his proposals aren't doomed. I wonder how that trillion we've spent in AfghanIraqistan has affected economic quality of life stateside?

Posted by steve duncan | June 25, 2007 4:09 PM

Overall, the economic conditions are improving.

Posted by Nima | June 25, 2007 4:13 PM

More important, this isn't a new 6% that's being threatened in the event of some specific action that the avg. Iranian can address at the polls. This has been ongoing for decades, and I'm sure most Iranians assume that no Iranian action short of utter capitulation to the West would reduce that 6%, except marginally.

This is actually the problem with the US "rogue states" approach - we lose leverage because we institute sanctions too readily, and lift them too rarely. The "rogue states" become more like petulant teens - "Fine. If you're going to ground me anyway, I may as well do this." And, frankly, it's utterly rational on their part.

Posted by JRoth | June 25, 2007 4:32 PM

The marriage of convenience between the neocons and the American oil interests is a perpetual motion machine. War in the Middle East leads to higher oil prices leading to more wealth for Iran and other nations in the region leading to more belligerence on the part of leaders like Ahmedinezad leading to calls for further wars by the neocons, and the cycle repeats forever. In the mean time both the parties laugh all the way to the fulfilment of their respective objectives.

Sadly, the Dem leaders keep on weakly threatening very strict Congressional action the next time around.

Posted by gregor | June 25, 2007 4:45 PM

Nuclear weapons development must seem to the Iranian leadership
a rational response to an "existential threat" (to use a phrase popular in
a different context with the neo-conservatives).

Indeed if the Iranians are labeled as part of the "axis of evil" and constantly
threatened with regime change, what are they supposed to do?

Let's do a thought experiment. Suppose the Iranians did terminate their
nuclear program, and later (say) Hezbollah carried out some action killing
large numbers of Israelis. Does anyone think that Iran would be immune
from Israeli/US retaliation?

Thus a 6% hit to their economy seems a triviality against the real threats
they face.

Posted by Nick Patterson | June 25, 2007 4:59 PM

Well, given that European countries have chosen, without any outside pressure, to have VATs of up to 25%, I think it's clear that people are perfectly willing to accept significant price increases, as long as they accomplish something that the public deems in the national interest. In France's case, that might be universal healthcare, in Iran's case, that might be not becoming a client state of The Great Satan. If a US Politician was to present a plausible claim that a 6% price increase would prevent our country from falling under foreign domination, I suspect I'd support them.

Posted by OhioBoy | June 25, 2007 5:32 PM

Economic sanctions could potentially still work, but so far the UN has only imposed them on nuclear cooperation and arms dealing. 1747 also calls on member states to hold off on loans, grants, and other financial assistance, but American sanctions already choked off most of Iran's opportunities for trade beyond oil sales years ago. And the oil industry's not doing all the badly. If the US/EU can persuade China, Russia, and the rest of the Security Council to squeeze the life out of the Iranian economy then maybe, just maybe, sanctions could force Iran to back down. But unless Iran makes some kind of bold decisive move, which it isn't likely to do anytime soon, there's little either the US or EU could do to bring Russia and China to their side. There's also the chance that tougher sanctions could just spur Iran further.

Six percent is a lot. If the Iranian political elite was pushing for a new plan of action that would levy a new 6% tax on the economy then maybe we'd see more backlash. But Iran's also lived under sanctions for some time now, so there's less of a visible policy initiative for the public to rally against.

Six percent also can seem smaller in the face of massive social benefits to defying the big bad West and securing the prestige of a nuclear program tooth and nail.

The bottom line is that this isn't a clear cut case of an economically rational Iran choosing between the benefits of a nuclear program and the costs to its GDP.

Posted by Brian Radzinsky | June 25, 2007 5:48 PM

Really, you couldn't titled this the "6% solution"? It was begging for it.

Posted by JG | June 25, 2007 6:14 PM

Iran is going to get nukes, as is any other country that wants them. If it were in the U.S.'s power to to stop that from happening, it might make sense to stop that from happening. But I just don't understand how it is within the U.S.'s power to stop that from happening, short of launching a war that will kill 500k and have us occupying not two but three Islamic nations. And that's if things go well.

I guess I don't think it's unfathomable for Iran to have nukes, nor do I think it's necessarily a bad thing all around. To the extent that Iranian nukes would force neocons to think twice about launching preemptive wars, it's a good thing.

Posted by Joe Strummer | June 25, 2007 6:39 PM

Re Joe Strummer

I have a flash for Mr. Strummer. Iran is not going to be allowed to develop nuclear weapons. If the whackjobs currently running that country don't submit to international inspection, their nuclear facilities will be annihilated. As for collateral damage, tough noogies.

Posted by SLC | June 25, 2007 7:01 PM

Just like what happened to the North Koreans, SLC?

Posted by Other Bill | June 25, 2007 7:13 PM

The problem with Iran isn't possession or not of nuclear weapons per se. It's that Iran acts independently of U.S. control.

The fact that we haven't seen a war on Iran yet (I would have expected it before Iran took delivery of the TOR anti-aircraft system from the Russians, but whatever) means that U.S. policy-makers are divided on the question of whether or not such an attack will advance the U.S. interest of regional control. I doubt very much that they are being held back by any sort of moral compunctions, any more than SLC is. The politicians are certainly champing at the bit, at least in public.

The attack on Iraq has demonstrated that America has great power to destroy, but it has so far not been able to compel obedience, in spite of the open and near-complete abandonment of principle. Israel's assault on Lebanon had the same result. It may be emotionally gratifying to U.S. nazis to do it, but there's no point to destroying Iran if the end result of it is nothing more than briefly staving off the collapse of U.S. influence in the region.

Personally, I think the U.S. was far better off doing nothing and being thought omnipotent than it is now, to have acted and revealed itself to be both bully and coward. Well, that's water under the bridge and can't be undone.

Perhaps now we are at last seeing momentum in the U.S. to take policy out of the hands of violent idiots and into the hands of people who at least try to look forward and see consequences before acting. When all else fails, people will still use reason, and that gives me cause to hope.

Posted by RLaing | June 25, 2007 7:16 PM

I have a flash for Mr. Strummer. Iran is not going to be allowed to develop nuclear weapons. If the whackjobs currently running that country don't submit to international inspection, their nuclear facilities will be annihilated. As for collateral damage, tough noogies.

Speaking of whackjobs, were you whacking off as you wrote this?

Posted by Steve | June 25, 2007 7:25 PM

"A politician proposing some policy initiative"

Um, what does this have to do with Iran? The Ayatollah isn't a politician.

Posted by Al | June 25, 2007 7:38 PM

Iran is already planning to start rationing gasoline so I think it's already having a little bit more of an effect than simply a small price increase.

http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=156260&version=1&template_id=48&parent_id=28

Posted by Dave | June 25, 2007 8:38 PM

If the US really wanted to hurt Iran they'd cut off the countries supply of gasoline. Iran has to import massive amounts each year because they lack the capacity to refine it.

I hope the comment about the Ayatollah not being a politician was in jest.

Posted by Sean-Paul Kelley | June 25, 2007 8:41 PM

I know several fairly wealthy dual-citizens who return to Iran on a regular basis and they echo the sentiments of this article almost to a word. Iran's economy is not in trouble for the country's elites - in fact it is awash with high end merchandise sold in fancy boutiques throughout the major cities. You can ski and go to nightclubs. High end real estate is more expensive than ever. For the wealthy, Iran is booming.

Women, for the most part, are not harrassed on the streets, despite the huffing and puffing of the NY Times Sunday paper or the WaPo. If you want to have wedding in Tehran where there is alcohol, mixing between the sexes, and plenty of skimpy outfits, you simply bribe the authorities. It's all very ho hum for actual living, breathing Persians.

This is not to say that political oppression is not wide spread. The mullahs have simply learned from America's favorite supplier of cheap crap:

Religious conservatives today openly invoke the "China model," whereby the mandarins in Beijing managed to quash political dissent after the Tiananmen Square democracy movement by redirecting the desire for more freedom into a booming economy.

Ironic, huh? Bush wants to export democracy, but the mullahs have excelled by subduing the masses with that other American export: greed. Mixed with a touch of another American favorite: political apathy. The mullahs have learned to let the middle class spend their money on fancy crap and the middle class has learned to keep its head mildly bowed while enjoying the finer things in life.

Posted by owenz | June 25, 2007 9:06 PM

Re Steve

Mr. Steve breaths in but he doesn't breath out.

Posted by SLC | June 25, 2007 9:15 PM

I feel like a politician proposing some policy initiative likely to generate an across the board six percent price increase would be doomed.

6-percent is a lot. But not quiet enough for people to riot in the streets or take a trip to prison when most of the finer things in life are still available.

Posted by owenz | June 25, 2007 9:17 PM

And of course, those Cuban sanctions are going to work miracles any decade now... We sure showed Fidel and the commies!

Seriously, what do you think we'll do to mark the 50th anniversary, just a year and a half from now?

Posted by Santa Monica Jeremy | June 25, 2007 9:53 PM

Oil fueled prosperity is a pretty loaded terms. Iran's economy is a mess. It's vastly wasteful of energy which is highly subsidized or to be more accurate, sold at below market rates. Iran's oil output is peaking. You can take it to the bank that in a few years it will fall. Their 'prosperity' is oil related but underneath that there is desperation in the rural areas and stagnation at best in the cities. It might be prosperous compared to Yemen.

Interestingly they do have their own Bush in Ahmadinejad . One might say Bush got Ahmadinejad elected. Way to go Dubya.

Posted by rapier | June 25, 2007 10:41 PM

Owenz: just about everything you write is correct, except the comment about night clubs: there aren't any. When I was in Iran in late October-early November last year we spent a lot of time with twenty-somethings and early thirty-somethings and asked several times if there were any nightclubs. They all sighed and said they wished. But there were a lot of great parties. Skimpy outfits indeed. North Tehran is a very interesting place, nothing, not even remotely like I expected. You won't see a chador in North Tehran, but you will see them in South Tehran, in the more conservative, poorer neighborhoods. Just as all countries have contradictions, so does Iran.

Posted by Sean-Paul Kelley | June 25, 2007 11:12 PM

an across the board six percent price increase would be doomed

I don't know, since GW has been president the price of gas has gone up about 100% and I don't see the mobs in the streets with pitchforks yet.

People get used to the higher prices.

Posted by Jinchi | June 26, 2007 12:00 AM

True. As long as he didn't say "I am going to raise all prices by 6%!" the politician would get away with it. I mean, if your grocery bill goes up from $40 to $42.40, would you really notice?

Posted by ajay | June 26, 2007 5:22 AM

Bear in mind we're not talking the US here. Iran has an annual inflation rate of around 16%, so 6% isn't all that much in the big picture.

Posted by Ginger Yellow | June 26, 2007 5:40 AM

"If the US/EU can persuade China, Russia, and the rest of the Security Council to squeeze the life out of the Iranian economy then maybe, just maybe, sanctions could force Iran to back down."

Leninist logic like this is the reason that Castro may very well one day celebrate his 90th birthday while still in power.

Posted by Reality Man | June 26, 2007 7:07 AM

Leninist logic like this is the reason that Castro may very well one day celebrate his 90th birthday while still in power.

Jeez, not content with calling for an attack on Iran, these mooks want to attack Cuba as well.

Has Iraq taught you nothing about the limits of military power?

Posted by rea | June 26, 2007 7:57 AM

"Jeez, not content with calling for an attack on Iran, these mooks want to attack Cuba as well.

Has Iraq taught you nothing about the limits of military power?"

Umm, who are you responding to? Just poking around here you can see I'm pretty anti-Iraq War and always was. I was pointing out that the logic behind sanctions - that making things economically and socially worse for the people will make things better for them by making them more politicized and force political change - is Leninist and has a history of failure. The biggest example of this is our sanctions against Cuba.

Posted by Reality Man | June 26, 2007 8:28 AM

the thing with non-proliferation in general sanctions in particular is: you gotta be consistent, just and even handed

A.Q. Khan never really had to face justice, Israel has zero accountability for their nuclear weapons program and recently Ethiopa was allowed by the US to purchase arms from North Korea despite UN sanctions

I don't like the prospect of Iranian nukes either, but it's never going to work this way.

Posted by novakant | June 26, 2007 9:54 AM

Notice I didn't say we *should* squeeze the life out of the Iranian economy. Mine was a comment about the relative effectiveness of UN sanctions on a country that has adjusted over the years to its status as an economic pariah of the United States.

Ahmadinejad has considerable political investment in a complete fuel cycle so whatever it is that makes him (and the military, high level clerics, the Revolutionary Guard, the AEOI) back down will have to be comprehensive and multilaterally implemented.

Posted by Brian Radzinsky | June 26, 2007 10:19 AM

Brian, why are you assuming that the Iranian nuclear program is the work of one man? And not the most powerful man in the Iranian government at that?

A dispassionate strategic analysis of the Iranian situation would, IMHO would lead to the acquisition of nuclear weapons. The USA is too threatening, and the previously-assumed constraints are no longer there.

Posted by Barry | June 26, 2007 1:40 PM

Barry, where did I say the program was the work of one man? I specifically mentioned the president, the clerics, the military, the Revolutionary Guard, and the AEOI. To the extent that the nuclear program is a train with many engineers, it isn't going to be stopped by specifying what it is one man should or shouldn't do, and I don't think my comment recommended anything of the sort.

While we're at it, "dispassionate strategic analysis?" Did you read any indication of inflamed passions in anything I wrote? Or did you mean to say that I should treat Iran as a unitary, rational, maximizing actor who thinks solely on the basis of threat calculations? Because, to me, that seems like a far more limited analytical perspective.

Posted by Brian Radzinsky | June 26, 2007 4:27 PM

Well looks like I was right about Iran preparing for gas rationing. It started suddenly overnight and has caused violence alread.
http://news.bbc.co.uk/2/hi/middle_east/6243644.stm

Posted by Dave | June 27, 2007 1:19 PM