Despite a show of unity within the Iranian leadership over the handling of the British sailors and marines, Bush administration officials still hope that economic and diplomatic pressure can persuade the country's more pragmatic conservatives to sideline firebrand President Mahmoud Ahmadinejad and compromise away the country's nuclear ambitions. They shouldn't get their hopes up. It is domestic anxiety over the economy and the rising public anger it provokes that encourages the Iranian government to continually reassert its determination to go nuclear.
Ahmadinejad's election in 2005 didn't create Iran's economic problems or the broad domestic consensus in favor of nuclear development. Both have been growing for many years, but the president's belligerent stance on Iran's right to enrich uranium has helped divert some public attention from the economic woes. Ahmadinejad also absorbs the bulk of public criticism of economic mismanagement, sparing Supreme Leader Ayatollah Ali Khamenei and others within the clerical elite their share of blame.
That's why, whatever their reservations about his rhetorical excesses and his inability to reduce inflation and unemployment, the mullahs still consider Ahmadinejad too useful to silence.
The economic problems are real and getting worse. Ahmadinejad won the presidency 22 months ago on promises to create jobs, lift millions from poverty, and curb inflation. Unemployment and the gap between rich and poor remain steady, and inflation continues to rise.
One of the world's leading oil exporters, Iran has problems fulfilling domestic demand for energy. Its oil output consists of very heavy crude, and the country is able to refine only enough product to meet about 60 percent of domestic demand for gasoline, a demand that is rising at about 10 percent per year. Gasoline is heavily subsidized in Iran, and the price consumers pay has remained steady for the past three years. To reduce demand, the country's parliament recently voted to ration gasoline and to raise the price beginning in May. New pain at the pump will make many Iranians very unhappy with their government.
It gets worse. Iran's dilapidated oil infrastructure and declining production from mature fields threaten its ability to continue to produce at current levels. Oil minister Kazem Vaziri-Hamaneh warned last autumn that without a significant increase in infrastructure investment, production levels could fall by as much as 13 percent per year. Sanctions indirectly make matters worse. Foreign oil companies may still be willing to enter into buy-back agreements that allow them temporary access to some mature fields, but financial sanctions deprive Iran of the cash it needs to upgrade its energy infrastructure and to develop newer infrastructure.
A December 2006 report from the U.S. National Academy of Sciences forecasts that, without significant investment in energy infrastructure, oil-export levels are likely to drop by more than 50 percent by 2011 and could reach zero by 2015. The Iranian government needs its energy income. Oil accounts for about 80 percent of state export revenues. But this offers Iran's leaders another justification for the nuclear program. If the country's domestic energy needs can no longer be met by the resources it now pumps from the ground, all the more reason, they argue, to develop nuclear energy.
Iran's ruling conservatives know they need a winning political issue to rally domestic support for an otherwise unpopular government. That's where the nuclear program—and public defiance of international pressure to renounce it—comes in. The clerics know that Iran's economic decline will not be easy to reverse. They also know that Ahmadinejad attracts most of the blame. And they know that their president has become the public face of defiance to Western pressure and chief defender of the nuclear program, a powerful symbol of Iran's sovereignty and growing international clout.
Official criticism of the president, in the form of complaints in state-run newspapers, may well continue. But Iran's ruling elite prefers public discussion of the nuclear program, the United States, and Israel—Ahmadinejad's favorite subjects—to frank explanations of the need for gasoline rationing. There may be differences over style and tactics, but the interests of Ahmadinejad's loyalists and the ruling clerics are probably more closely aligned than many realize.
The misperception of distance between Iran's president and its supreme leader make the growing U.S.-Iranian confrontation over the nuclear program all the more dangerous. Some analysts argue that U.S. or Israeli airstrikes on Iran's nuclear facilities can achieve only limited success. They note that the logistical challenges of inflicting substantial damage on Iran's nuclear sites are far more formidable than those Israel faced before it bombed the Iraqi nuclear facility at Osirak a quarter-century ago. Iran's sites are scattered across the country, and many are buried deep underground in heavily fortified bunkers.
But hopes that domestic economic turmoil will undermine Iran's government and create distance between Ahmadinejad and Grand Ayatollah Ali Khamenei may convince the Bush administration that even airstrikes that merely delay Iran's nuclear progress for two or three years could undermine the Iranian government and buy more time for the West to slow Iran's nuclear momentum. If so, prospects for a diplomatic resolution of the conflict would shrink even further.
A foreign attack on the country's nuclear sites could make a defiant Iranian public more willing to endure hardship. They could also make Mahmoud Ahmadinejad much more popular. That is surely not what the United States and Israel have in mind.