The Economic War on Iran

According to this LA Times story, the U.S. is gaining ground on economically isolating Iran. We have sanctions in place, but unlike Cuba, the U.S. is by far more active in undermining Ahmadinejad's government...

As Washington wages a very public battle against Iran's quest for nuclear power, it is quietly gaining ground on another energy front: the oil fields that are the Islamic Republic's lifeblood.

Iran's oil industry has raked in record amounts of cash during three years of high oil prices. But a new U.S. campaign to dry up financing for oil and natural gas development poses a threat to the republic's ability to continue exporting oil over the next two decades, many analysts say.
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The efforts by the United States and its allies over the last few months to persuade international banks and oil companies to pull out of Iran threaten dozens of projects, including development of Iran's two massive new oil fields that could expand output by 800,000 barrels a day over the next four years.

"Many European banks which had accepted financing some oil industries projects have recently canceled them," Nejad-Hosseinian said.

In addition, banks are no longer granting letters of credit for delivery of some supplies, ministry officials say. And as nations such as Japan begin to back out of Iran oil development under U.S. pressure, the government in Tehran is being forced to dig into its own reserve funds to get crucial new projects off the ground.

You wouldn't know it by today's media coverage, but Iran is not that well off:

First is the condition of Iran's aging oil fields, which have never fully recovered from damage inflicted during the Iran-Iraq war of the 1980s.

To maintain sufficient pressure to keep them pumping, Iran has to divert large amounts of natural gas that might otherwise be sold.

"You need billions of dollars invested in order to stand still — to avoid a decline," said Manouchehr Takin, a former Iranian petroleum geologist who is a senior analyst for the Center for Global Energy Studies in London.

Likewise, increased output from refinery construction is being outpaced by the swelling number of young Iranians with a fondness for gas-guzzling cars. Heavily subsidized gasoline is just 35 cents a gallon, a price that invites smuggling, and talk about raising the price has, until recently, gone nowhere.

In fact, in another story, Iran cut its exports of natural gas to Turkey to meet such needs. Perhaps with more economic hard lines against the nuclear hopeful, it will crumble from within:

A report by academic Roger Stern at U.S. John Hopkins University last week predicted Iran's exports could dwindle to almost nothing by 2015 if it did not change its energy policies.

"The short story is that every aspect of the oil infrastructure has been starved - drilling, refineries, distribution, even the gas stations in Iran," Stern told Reuters in a telephone interview on Thursday.(Zaman).

That means Iran’s gas production is suffering from underinvestment. Also the inefficient use of its natural resources amplifies the problem. Being odds with the Western world, China seems the only foreign investment to rescue Iran from underinvestment.

Perhaps the Ayahtollah and Ahmadinejad suffer from Kim Jong il-ism, thinking nuclear status would demand better trade relations and foreign investment. Possibly, because at the current rate, Iran doesn't feel the need to warm up to the West.