IRAN FACES THE LAW OF DIMINISHING RETURNS

Dick Cheney famously said: “The good Lord didn’t see fit to put oil and gas only where there are democratic regimes friendly to the United States.” His words certainly ring true in the case of Iran, an arch enemy of America and a regime teetering on the brink of collapse after 46 years of corruption, mismanagement and brazen warmongering by the mullahs who seized power in the 1979 revolution. With 92% of Iranian oil being sold to China, often at significant discounts, Iran’s Supreme Leader Ayatollah Ali Khamenei has bemoaned his country’s oil production levels and called for the diversification of its export markets. Speaking to members of the mullahs’ cabinet, the elderly and fanatical Supreme Leader said: “Oil production in the country – with the importance it has in the economy, which is obvious – is low. Our oil production methods are old methods; the tools are old … We are behind many of the oil-rich regions of the world.”

Iran’s oil industry has been under crippling Western sanctions since the United States withdrew from Barack Obama’s ‘deeply flawed’ 2015 nuclear deal in 2018, during Donald Trump’s first presidency. Since returning to office, Trump has pursued a “maximum pressure” strategy against Iran to cripple its economy. Inflation in Iran is running at around 38.7% due largely to rising food prices. Combined with the collapse of the Iranian currency, the rial, which has lost more than half its value since Masoud Pezeshkian took office as president in August 2024, poverty in Iran has reached unprecedented levels. It is estimated that up three quarters of Iranians now struggle to survive on incomes below the international poverty line.

Under the reviled Shah at the time of the Iranian revolution in 1979, the currency was valued at 74 rials to the US $. Today it is 940,000 rials to the US $. Pensioners, teachers, nurses, doctors, office workers, labourers and truck drivers are routinely seen joining mass demonstrations, protesting about unpaid pensions, overdue wages, the broken economy, corruption and oppression. Now the theocratic regime fears another revolution may overthrow their crumbling dictatorship.

Much of the blame can be levelled at the Islamic Revolutionary Guard Corps (IRGC), who control around 70% of all business and industry in Iran, pay no tax and are answerable only to the Supreme Leader. Venal corruption among the higher-ranking officers in the IRGC is rampant, with many owning luxury villas in Turkey, Dubai and other countries in Asia, while sending their children to universities in the UK and EU. The IRGC has been blacklisted as a terrorist organization in America, Canada and most recently Australia, and there are increasing demands for the UK and EU to follow suit.

Relations with Europe have also deteriorated over Iran’s nuclear program. Iran halted its cooperation with the UN’s International Atomic Energy Agency (IAEA) nuclear watchdog following the 12-day war with Israel in June, during which the United States and Israel struck key Iranian nuclear facilities. Last month, Britain, France and Germany triggered the so-called “snapback” mechanism under the 2015 nuclear deal to reimpose UN sanctions that were lifted when the deal was signed. The snapback mechanism will be triggered by the UN Security Council on September 30^th unless the regime agrees to the IAEA Director General Rafael Grossi’s demands, which includes inspecting the 400 kg of uranium enriched to 60% purity, which is almost weapons’ grade.

In panic, Khamenei sent his foreign minister Abbas Araghchi to Cairo, in a desperate bid to negotiate with Rafael Grossi, in the hope that the snapback could be delayed. But Western powers have lost their patience with the mullahs’ delaying tactics and there seems little likelihood of any further attempts to appease the regime. If sanctions specifically target China’s ability to purchase Iranian oil, it could severely impact Iran’s revenue and economic stability.

Iran has developed various strategies to circumvent sanctions, such as using alternative payment methods, finding new buyers, and expanding its domestic production capabilities. However, these measures may not be sufficient if China’s involvement is significantly curtailed. Continued sanctions and economic difficulties could lead to domestic unrest and political challenges for the Iranian government. The social and economic repercussions of prolonged sanctions could weaken the regime’s ability to maintain control.

Already, the US Treasury Department has sanctioned a network of shipping companies they have accused of smuggling Iranian oil disguised as Iraqi oil. They also said sanctions were being imposed on companies and vessels operated by Mohammad Hossein Shamkhani, the son of a top political advisor to Iran’s Supreme Leader. The Treasury Department said Hossein Shamkhani operates a fleet of more than 50 tankers and container ships that transport Iranian and Russian oil and petroleum products, generating tens of billions of dollars in profit. Treasury Secretary Scott Bessent said: “The Shamkhani family’s shipping empire highlights how the Iranian regime elites leverage their positions to accrue massive wealth and fund the regime’s dangerous behavior.”

On September 6^th, hundreds of thousands of ex-pat Iranians took part in a massive rally in Brussels, to demonstrate their support for the repressed Iranian population and their dauntless resistance movement. The rally was addressed by Mike Pence, the former US Vice President, who debunked the myth of ‘no alternative’, which he said has been the regime’s most successful piece of propaganda sold to the West for years, claiming there can be no substitute for the current theocratic regime other than the return of the hated Shah. He said: “One of the biggest lies the ruling regime sold to the wider world is that there is no alternative… But you all know there is an alternative, well-organized, fully prepared, perfectly qualified.” He was referring to the National Council of Resistance of Iran, the main democratic opposition to the mullahs and their courageous Mujahedin-e Khalq (MEK) Resistance Units who are poised to lead a new nationwide uprising to overthrow the brutal clerical regime. The message from the mass Brussels rally was that there is no place for military intervention in Iran, nor can the West continue their failed policies of appeasement. Instead, the West must embrace the “Third Option” of regime change by the people of Iran themselves.