Michael Rubin writes at Forbes about Iran’s increasing economic insolvency:
Non-oil sector production is stagnant. Factories may remain open but many do not pay workers. On Oct. 2, for example, tire factory workers staged a protest in front of the Ministry of Labor seeking six months’ unpaid wages. In recent weeks, wild cat strikes have occurred in Tehran, Isfahan, Qazvin and Sanandaj. Purchasing power has plummeted.
Even with world oil prices falling and worldwide credit tightening, inflation still plagues Tehran:
On Oct. 11, just a day after Ahmadinejad declared prices in decline, the Central Bank reported inflation above 30%. Such figures are still likely low.
The Mullahs and Ahmadinejad even resort to Nixon-esque solutions to combat the inflation, but call in the Basij, who are otherwise better known for running into Iraqi minefields unarmed during the Iran-Iraq War:
On June 11, the daily Resalat reported that the paramilitary Basij, a subdivision of the Islamic Revolutionary Guard Corps, would enforce low prices. Over subsequent days, the Iranian press featured photos of Basij beating merchants whose prices were too high.
In addition, falling oil prices and shifts in capital have resulted in additional problems (emphasis mine):
Housing costs have skyrocketed; Tehran real estate prices rival New York’s. The average Iranian family now pays 60% of its income for rent, while the Ministry of Housing estimates 1.5 million Iranians are homeless.
To fight economic malaise, Ahmadinejad has raided Iran’s foreign reserves. In the past two months alone, Iranian papers have reported more than $15 billion in withdrawals from the reserves to import refined gas and several additional billion dollars to subsidize industrial schemes. Ahmadinejad’s reinstatement of subsidies has meant Iran once again must import 40% of its refined petroleum needs.
He will need to continue spending. Last winter, Iran ran out of gas. Food prices more than doubled and the Revolutionary Guards had to deploy on the streets of towns and cities to keep order. On Oct. 1, the Parliament’s Energy Commission predicted another “severe gas shortage” again within months.
As oil prices plummet, Iranian pessimism grows. In 2006, Tehran planned its budget assuming an oil price of $60/barrel. High oil prices masked Ahmadinejad’s incompetence. While Iran’s budgetary process has grown more opaque, it appears that Ahmadinejad constructed his budget with the assumption of oil price stability. Now that oil has plummeted, the Islamic Republic is in trouble.