More Problems For Ahmadinejad, and Iran

Ahmadinejad has lost popularity in Iran because of his social and political policies.
Ahamdinejad has lost popularity in Iran because of personal scandal.
Poor Ahamdinejad--now there might not be enough oil.

Business Week has an article, Surprise: Oil Woes In Iran, that agrees that Iran is very successful.

Yet Iran has a surprising weakness: Its oil and gas industry, the lifeblood of its economy, is showing serious signs of distress. As domestic energy consumption skyrockets, Iran is struggling to produce enough oil and gas for export. Unless Tehran overhauls its policies, its primary source of revenue and the basis of its geopolitical muscle could start to wane. Within a decade, says Saad Rahim, an analyst at Washington consultancy PFC Energy, "Iran's net crude exports could fall to zero."

That's not to say Iran doesn't have abundant resources. The country's 137 billion barrels of oil reserves are second only to Saudi Arabia's, and its supply of gas trails only Russia's, according to the BP Statistical Review of World Energy. Getting it all out of the ground, though, is another matter. Iran has been producing just 3.9 million barrels of oil a day this year, 5% below its OPEC quota, because of delays in new projects and a shortage of technical skills. By contrast, in 1974, five years before the Islamic Revolution, Iran pumped 6.1 million barrels daily.

Yet although this is a problem for Iran in general, and for the Iranian government as a whole, it is also a particular problem for Mr. Ahmadinejad in particular who has been particularly aggressive in using the potential oil wealth to make big promises to the Iranian people:

An oil squeeze could spell trouble for President Mahmoud Ahmadinejad. The populist leader has won backing at home through generous handouts. Ahmadinejad has ratcheted up public spending this year by 21%, to $213 billion, on everything from aid to rural areas to housing loans for newlyweds. He has also promised some $16 billion in outlays from a special $30 billion fund set up to tide Iranians through future hard times. Without a healthy oil sector, Iran's social spending could bust the national budget--and reignite inflation.

This has the potential to further sink Ahmadinejad's approval rating with the Iranian people.

The heart weeps.

Technorati Tag: Ahmadinejad and Iran.