December 19, 2012: Although the latest round of sanctions have cut Iranian oil exports by over half (and oil income by two-thirds because of higher expenses and deep discounts needed to attract buyers for illegal Iranian oil), Iran announced that it would not stop enriching uranium for its (officially non-existent)  nuclear weapons program. Iran has cash reserves but it cannot afford to let the general population suffer too much. That suffering is already evident but it could take a year or more before it became really painful. The government is basically a religious dictatorship that seized control in the 1980s and has just barely coped with declining popularity. Eventually the loss of oil income could screw things up enough to trigger a popular rebellion. That could get very nasty, as the government has an army of religious fanatics (the Iranian Revolutionary Guard Corps or IRGC). This is more than just the "royal guard" of the Iranian dictatorship. Originally founded to do the clerics dirty work, and keep an eye on the Iranian armed forces, and population in general, the IRGC has grown to become a state-within-a-state. The IRGC not only has 150,000 armed members but also controls billions of dollars’ worth of businesses inside Iran and runs numerous terrorist operations outside the country. The IRGC, or at least large parts of it, can be depended on to follow orders and slaughter rebellious civilians. The ruling clerics are determined to avoid losing power like the East European communist dictatorships did in 1989. The clerics have made sure most Iranians know this and what the price of rebellion would be.

Meanwhile, a growing number of reform-minded Iranians are fleeing the country. The crackdown that began after huge protests against rigged elections in 2009, continues. About 45,000 Iranians have officially sought political asylum in West since 2009, and many more just fled and kept quiet. This outflow of reform-minded Iranians pleases the government but it’s not enough. There are still a lot of Iranians angry at the corrupt and cruel religious dictatorship they have endured for over two decades.

One of the biggest economic obstacles created by the latest sanctions is the inability of Iran to use U.S. dollars. While Iran has threatened to switch to euros or Chinese yuan, this has not been practical. But Iran has found an alternative currency of sorts: gold. Since the new sanctions kicked in earlier this year, there has been a major shift in global gold sales and shipments. Billions of dollars’ worth of gold is flowing into Iran, especially from Turkey (to pay for natural gas imports). While some nations have received temporary exemptions from the sanctions to buy Iranian oil (until they could line up other suppliers), there have not been any exemptions to dealing with Iran in dollars. It’s more expensive for Iran to take payment in gold (higher fees and transportation costs) but it is working. Alas, the huge Iranian purchases will drive up the price, which will then fall when Iran again gains access to the international banking system.  That access was sharply curtained over the last year, as investigators identified major banks that had been, for years, illegally handling transactions for Iran. Several billions dollars in fines, and the addition of monitors within the accused banks, put a big chill on any further illegal banking activity for Iran.

The government continues in its effort to cut the country off from the Internet, by building an internal Internet just for those in Iran who cannot be trusted with the World Wide Web. That means most Iranians are finding it more and more difficult to reach the international Internet. Recently Iran introduced a heavily censored local version of YouTube. China is helping Iran to censor Iranian use of the Internet.

It’s not just political reformers who are angry. There’s growing discontent among Azeris. A quarter of Iranians are Turks (Azeris) but they are Shia and prominent in the religious leadership (that actually rules Iran). While these Azeri clerics have been enthusiastic supporters (and leaders in) the government, most Azeris are angry at the growing economic decline in the country. At the moment Azeris are particularly upset at a lack of government aid after major earthquakes in the northeast (where most Azeris live) last August. There have been a growing number of anti-government demonstrations, and casualties because of this, along with some dead and wounded. Only about half of Iranians are ethnic (Indo-European) Iranians. The rest are various minorities who often feel like subject peoples of an Iranian empire. For many ethnic Iranians, the empire still exists and it’s a good thing to remind the non-Iranians from time to time.

Relations with Turkey continue to get worse. The NATO decision to send Patriot anti-aircraft batteries Turkey requested has made Iranian leaders very angry. They won’t actually do anything, although military leaders have announced that the presence of the Patriots could cause World War 3. This does not make Turks feel any better about their neighbor. Historically, the two regional superpowers have been evenly matched over the past thousand years, with the Turks having a military edge but not a decisive one. Neither empire was able to conquer the other, but the Turks did drive Iran out of Baghdad, a 500 year old defeat that still rankles in Iran. The fact that many Iranians still believe central and southern Iraq should be part of Iran makes many Iraqis nervous.

Iran gets mixed reviews among Palestinians. More radical Palestinians praise Iran for supplying Hamas with the rockets used in Gaza to fire into Israel. Arab states that provide economic aid to Hamas refuse to supply weapons but Iran does. Iran also tries to convert the largely Sunni Palestinians to Shia Islam and encourages Hamas to impose strict life-style rules on Gazans. Unfortunately for Iran, Sunni Islamic conservatism includes regarding Shia as heretics. To maintain relations with Hamas, Iran has had to back off on trying to convert Palestinians to the Shia form of Islam that dominates Iran. At the same time, Hamas quietly discourages Sunni Islamic radicals from coming down too hard on Gaza Shia. Hamas also remains quiet on what is happening to Palestinians in Syria. There, a half million Palestinians are split over support for the Iran backed Assad dictatorship. For decades the Assads had provided sanctuary for Palestinian refugees and terrorists. But many of these Palestinians backed the rebels and this caused a civil war within the Palestinian community. Iran has said little about this, even when Syria sent aircraft to bomb Palestinian refugee camps. All this merely illustrates that Shia Iran supports Sunni Palestinians only if they will be allies in the Iranian campaign to destroy Israel.

Iran has been hit by another computer virus that destroys data and entire hard drives. A similar attack in April did a lot of damage. Although aimed at government computers, a lot of home PCs were hit as well. These two attacks are thought to be from small groups of Israeli hackers, acting alone to strike back at Iran (which is constantly calling for the destruction of Israel and the killing of all Jews).

December 16, 2012: The government officially called for a cease fire and peace talks in Syria. Unofficially the government now believes the Assads and their Shia government in largely Sunni Syria is doomed. Iran is now seeking ways to limit the damage (to its reputation in the Arab world, especially regarding its Shia militia client Hezbollah in Lebanon). President Mahmoud Ahmadinejad cancelled a visit to Turkey (at the invitation of the Turkish government) because yesterday a senior Iranian general threatened Turkey with war because Turkey had requested and received NATO Patriot anti-aircraft batteries to make sure Syrian warplanes don’t attack Turkish targets. Iranians consider a better armed Turkey as a threat and a provocation.

December 13, 2012: The U.S. imposed sanctions on seven Iranian companies and five individuals believed involved in Iran’s nuclear weapons program. This puts the companies and individuals under additional restrictions and scrutiny.

December 8, 2012: After a battle with drug smugglers in the southeast, police seized 11 tons of Afghan opium being brought in via Pakistan. Drug addiction is a growing social and economic problem in Iran and nearly all the drugs come from Afghanistan.

Two Iranian navy ships (a corvette and a supply ship) visited Sudan, the second such visit in five weeks. The growing frequency of these visits is believed to assist Iranian smuggling efforts.

December 7, 2012:  The government complained to Azerbaijan about the Azeris using their newly purchased Israeli Hermes 450 UAV to patrol along the Iranian border. The Azeris told the Iranians to back off because the UAVs were not straying into Iran.