February 8, 2015: While the economic disaster caused by sanctions and plunging oil prices preoccupy many government officials (and most Iranians), there is still lots of good news. The loss of oil income has not halted the growing strength of Shia throughout the region (where, except for Iraq, they are a minority). In addition Iranian foreign policy continues to improve relations with the neighbors (except for non-Shia Arabs). Non-Iranian Shia take satisfaction in how Iran is standing up to sanctions.

With the Americans leaving Afghanistan Iran has been making itself more useful and friendly there. Thus Iran continues to allow about half a million Afghan refugees to stay in Iran and this is openly done as a friendly gesture to Afghanistan. Other such gestures include more and more trade with and investment in Afghanistan. Then, of course, there is the deal (involving India and China) to build that new port near the Pakistani border and a road north to the Afghan border to give Afghanistan another route to the sea. Iran may not like Afghanistan’s chummy relationship with the United States, but does want to maintain millennia old economic and cultural relations with their eastern neighbor. In the past eastern Afghanistan was often part of the Iranian (or “Persian”) empire but that is no longer an issue with the Iranians or Afghans.

The Turks, an ancient enemy of Iran, are on such good terms that the two countries have agreed to use each other’s currency for mutual trade. This is basically an improved barter system that makes it easier to get around some of the sanctions. 

Then there is Syria. The Assad government’s worst problems are not in Syria. Pro-Iran businessmen in Syria and their counterparts in Iran agree (usually off the record) that the plunging oil price threatens the generous and critical Iranian financial support for the beleaguered Assad dictatorship. Russian support is also threatened by the lower oil prices. Even with continued Iranian military support Assad really, really depends on the financial support to maintain the loyalty of the few (less than a quarter) Syrians that support him to one degree or another. Because of that, and the damage ISIL has done to the rebel alliance (which has been fighting a civil war with itself since early 2014) the war has been going a little better for the Assads lately.  Thanks to Iranian trainers, the pro-government militias are better trained and more effective as are the soldiers. All of these men are more often paid regularly and most see a better future than do many of the rebel fighters. The army is about half its pre-war strength of 300,000 but the remaining troops are loyal and most now have combat experience. The army is trying to expand back to its pre-war strength, which may not be possible. All this progress is due to cash from Iran, because the Syrian economy is wrecked. But that Iranian cash has been reduced recently a nd that is largely due to the plunging price of oil. This has forced Iran to cut its cash support for the Syrian s . Thus while the Assad forces can provide some security, they are increasingly unable to provide much prosperity and even necessities are not arriving as frequently. Most of what remains of the Syrian economy is in Assad controlled areas where there is an unemployment rate of over 50 percent and the size of government handouts is a matter of life or death. Iran does not want its Syrian ally to be destroyed but subsidizing the Assad controlled population costs more than Iran can afford right now. Unless the price of oil moves sharply north and the economic sanctions on Iran (because of the ir nuclear program) are reduced the hard times will be getting harder in Syria for Assad supporters. Despite that living in Assad controlled territory is still a pretty good deal compared to what life is like in ISIL or al Nusra controlled areas. Yet life anywhere in Syria is pretty miserable and more and more Syrians would just like peace. More people are leaving the country and many experienced soldiers and rebels are giving up and leaving as well.  Iran is training and sometimes leading Shia militias. In Syria ISIL is getting beaten by Kurds, Syrian soldiers and more Iranian trained Shia militias. 

Israel believes Iran is now helping Hezbollah to build tunnels under the Lebanese border. The evidence is piling up and an effort is underway to find and breach one and examine it. Since the 50 Day War with Hamas ended last August in Gaza Israel has been examining the massive amounts of evidence it collected in the 32 Hamas tunnels into Israel that were discovered and destroyed. Comparing notes with the CIA and other Western intel agencies it was determined that these tunnels were of a new design probably supplied by Iran. Apparently nearly $100 million of the aid Iran supplied to Hamas to help the Palestinians instead went into building these elaborate tunnels. Israel determined that each of these tunnels required 350 truckloads of construction material and were built to specifications similar those described by agent reports of such tunnels inside Iran.

Then there is Yemen, where Shia rebels have unexpectedly come close to seizing control of the national government. Saudi Arabia and the other members of the GCC (Gulf Cooperation Council, the Arab oil states in the Persian Gulf) are reluctant to intervene militarily. The GCC agrees that Yemen cannot be allowed to disintegrate or become dominated by the Shia minority. For one thing that would provide Iran with another ally (via the Shia tribes of the north). At the moment the GCC is trying to determine exactly what is going on with the Yemeni government and army. Both are unclear about how they still will resist growing Shia power. The government can do nothing without permission from the Shia rebels who now control the capital. Yemen needs a new coalition to run the country because the one that existed until September has ceased to function, at least when it comes to the Shia rebels occupying the capital and the growing number of cities and provinces the Shia have taken control of.

Iran officially has nothing to do with all this, but Arabs know that the “victory” in Yemen is being celebrated in the streets of Iran (at least in conversation). This is humiliating for the GCC members and Sunnis in general. Iran has not directly intervened (but is suspected of supplying the Yemen Shia with cash and advice). The best Sunni hope for military intervention is the Saudis, but that’s not the Saudi style. The Saudis don’t want to see their armed forces tied down in Yemen, not when Iran remains a major, and growing, threat. Then there is the ISIL threat in Syria and Iraq (and, to a lesser extent, inside Saudi Arabia itself). There is no easy way out of this mess for anyone. The customary way these things are settled in Arabia is by making deals. The Shia have interfered with that by coming down on the rampant corruption. Many Arabs, especially Sunni, see corruption as the lubricant that makes governments, and the maintenance of law and order in heavily armed and short-tempered Arabia possible. Shia see the corruption being used against them and also the major reason why the economy is crippled and the government is so ineffective. The Shia are on the right side of history when it comes to corruption. The West would not be so advanced (economically, militarily and so on) were it not for their success in dealing with corruption. Yet the Yemeni Shia also feel an affinity for Iran, considered the “leader” of the Shia world. Iran is also mired in corruption as well as disagreements over the value of letting clerical rule continue. The Iranian clerics don’t actually run Iran, but they have the final say and their own private army of fanatics (the Revolutionary Guard) to enforce their will. Most Yemeni Shia don’t want that, but they are willing to accept aid from Iran and work to make Sunni majority Yemen a “friend“ of Iran (much like the Shia minority has done in Lebanon and Syria). The Saudis and GCC are very hostile to this sort of thing but reluctant to go to war over it.

The Secret Sanctions War

The Iranian economic problems have led India to make itself very useful to Iran. Barter deals enabled India to import 42 percent more Iranian oil (276,800 barrels a day) in 2014. India, Russia and Iran have created an unofficial currency union and barter network to facilitate trade that gets around the sanctions. India wants peace with Iran because Iran is often on bad terms with Pakistan.

While India officially helps Iran break the sanctions, neighbor like the UAE (United Arab Emirates) looks the other way as major firms in the UAE help Iran sell its oil by “laundering” it into non-Iranian oil then selling it at a discount and taking a large commission in the process. Such outlaw methods have long been tolerated in the UAE, as long as it helps the economy and there are no dead bodies in the UAE over it. Despite this help from the UAE Iran continues to interfere in UAE affairs. In late 2014 an Iranian espionage effort was uncovered there. A police sergeant in Dubai was arrested because he had obtained information for Iranian diplomats and was rewarded with large discounts at an Iranian hospital in Dubai. The Iranians wanted the names of Dubai policemen who were Shia as well as other information. An Iranian diplomat provided the cheap medical care (for the policeman’s wife) first and later another diplomat asked for the information. This was all done in such a way that the policeman could feel he was not spying but simply returning a favor to Iranian diplomats who had helped him out with a family medical crises. What bothered UAE officials the most was that the Iranian diplomats were known to be friendly and generous and that this may be but one locally recruited spy among many. The fact that the Iranians were seeking the identities of Shia policemen was disturbing as the Iranians have been known to aid or instigate Shia Arabs to do things that benefit Iran, often at the expense of the local Arab government. Iran smoothed things over, no doubt with some cash and the promise of favors. The Arab UAE know that doing business with Iran requires a thick skin and a willingness to smile on command.

All this sanctions busting activity is aimed at reducing the damage the sanctions have done to the Iranian economy. In addition to the obvious shortages of imported goods since the sanctions began in 2012, there is the unemployment (ten percent officially, twice that in reality), inflation (14 percent officially, more than twice that in reality) and constantly falling standard of living. Except for the elite families, especially those of senior clerics. These families have suffered losses to their large fortunes but there is still enough cash for them to live it up behind their walled compounds. Their late-model foreign cars are still seen frequently often visiting the many shops that cater to the rich, offering foreign goods, now at higher prices, but still affordable to the ruling families. This does not go unnoticed although you can be arrested if you speak about it via any media (especially the Internet). The news that can be circulated is about how the economy will resume growing in 2015 (or at least stop shrinking so much) and unemployment and inflation will also decline. That may also happen, but not as dramatically as the government would like. Most of the economic improvements are the result of Iranians adapting to less (by about half) oil income. In any event most of the lost oil income was stolen or wasted by the religious dictatorship misruling the country.

Some of the government efforts to address the loss of oil income are popular. For example the military now allows Iranians to legally buy their way out of mandatory military service. Although this measure is unpopular with families that cannot afford the fee, those families that can (including many of the middle class that provides the managers and professionals that keep the economy running) are quite happy about it. Most Iranians see their military mainly as a make-work program and those conscripted see the two years of mandatory service as two lost years. Now the majority who want nothing to do with military have a legal option to avoid it.

What Iran did not expect was the world price for oil to crash (to half what it was in 2013). Iran blames this on the Arab producers (especially Kuwait and Saudi Arabia) who could instantly boost the price by sharply cutting their production. The Saudis don’t want that as they know the lower oil prices hurt Iran, as well as American foes Russia and Venezuela. Iran believes the Saudis are using their control over oil prices to hurt Iran and keep the Americans grateful to the Saudis. In this case the Iranian view of the world seems quite accurate and the Iranians are not happy about that at all. Nor are the oil service companies Iran has been approaching with proposals for working in Iran again after the sanctions are lifted. Iran is offering very attractive terms but foreign firms don’t trust the religious dictatorship and the current low oil price makes expanding Iranian production an even more risky undertaking. Officially the Iranians blame all this on a Western (and Israeli) conspiracy. Unofficially they can comprehend the numbers and their past performance with foreign companies and know that Iran is screwed at this point in time. Nevertheless many Iranian economists and business owners see this period of reduced oil income providing an incentive to make the Iranian economy less dependent on oil. Before oil income began arriving nearly a century ago Iran had the strongest economy in the region and that had been the case for thousands of years. Many Iranians see all that oil income as a corrupting influence and not much help at all.

As successful as the sanctions (against both Iran and Russia) have been and how much the plunging oil price has made it worse for both countries, the rulers of Iran and Russia are unlikely to give in. Both will continue threatening their neighbors while also causing murderous mayhem wherever they can. In both cases state controlled media continues to succeed at shifting most of the blame to foreign enemies and conspiracies. To help that along the government limits the imports of medicine and medical equipment (both exempt from sanctions) and blames the shortages on the sanctions. Many Iranians are aware of what is really going on and that is leading to more anti-government demonstrations. 

February 2, 2015: For the fourth time Iran launched a space satellite. This was a photo reconnaissance one.

January 31, 2015: The government protested the Islamic terrorist attack on a Pakistani Shia Mosque the day before that left 69 dead. Such attacks on Pakistani Shia are a regular occurrence that Iran keeps demanding Pakistan do more to prevent.

The government revealed that in December a Turkmenistan warship had sunk an Iranian fishing boat in the Caspian Sea, killing one of the crew. The rest of the crew were taken prisoner and are still being held for illegal fishing. Going public with this is seen as an effort to get Turkmenistan to discuss the issue. Such attacks like this are rare although both countries have been active in seeking out ships smuggling drugs between the two nations. The landlocked Caspian Sea is bordered by Azerbaijan, Russia, Kazakhstan, Turkmenistan, and Iran.

January 28, 2015: Hezbollah and Iran both threatened major retaliation for the Israeli air attack on the 18^th that killed an Iranian general and some senior Hezbollah men. Israel is watchful, but reminds everyone that a major escalation is not in the interest of Iran or Hezbollah. Israel also said that it was not going after the Iranian general but the six Hezbollah leaders he had the misfortune to be with.

January 24, 2015: Iran and Russia signed a military cooperation agreement that will increase Russian aid (training and equipment including sale of S-300 anti-aircraft missile systems covered by sanctions) as well as military cooperation between the two nations.

January 21, 2015: A vice-resident in the previous government of president Mahmoud Ahmadinejad was convicted of corruption and sentenced to five years in prison. This was seen as more about punishing Ahmadinejad for occasionally defying the religious leaders and accusing them of corruption.

January 20, 2015: The UN announced that its IAEA (International Atomic Energy Agency) has found that Iran is observing the terms of the interim agreement and not expanding its nuclear research and fuel production. Iran continues to deny it is working on nuclear weapons and refuses to allow IAEA inspectors near any facilities the IAEA believes are working on nukes.

January 16, 2015: The U.S. State Department warned Americans to be careful if they visit Iran and to consider not going at all. There is fear that the Iranians will kidnap more American citizens legally visiting Iran. These captives can be used to try (rarely successfully) to get concessions out of the United States.