Iran: The High Cost Of Blood Money


May 26, 2014: After many delays caused by the potential for public unrest the government began to eliminate fuel subsidies on the 2 nd by increasing the price of petroleum products as much as 75 percent. Many Iranians expect inflation to return because of this. Iran spends a third of its $300 billion GDP on subsidies for gasoline, natural gas, electricity and food. Paying for these subsidies restricts what the government can do, but getting rid of these subsidies angers most of the population. Eliminating the subsidies would give the government more flexibility in rewarding its supporters. Without the subsidies electricity will cost 25 percent more and water 20 percent more. The rules for who is eligible for welfare payments have also been changed and a lot of people will not get as much (or any at all) cash each month from the government. It was feared that all this could cause widespread violence but the cuts were necessary to balance the budget in the wake of continued sanctions. As it is Iranians have become increasingly and openly hostile to their government over the last year as the increased sanctions hurt the economy and hit most Iranians directly. To the relief of the government there were no major uprisings in reaction to the increased prices, but opinion surveys show falling morale and more Iranians believing that if it comes down to prosperity or nukes, they prefer higher living standards to being a nuclear power. The government is up against the fact that Iran has been “at war” since the clerics took over in the 1980s (during the chaos and fear generated by the war with Iraq) and more and more Iranians are getting fed up with decades of “Death to America” and “Death to Israel.” As a result the ruling clerics have to worry about is people getting angry enough to fight for their freedom. For the last few decades the truly unhappy voted with their feet and fled the country. The government allows this, despite the loss of many highly educated, talented and frustrated citizens. Worse, those who stay behind are having fewer children and becoming more apathetic. For the religious dictatorship, the trends are not favorable. But since the country is run by clerics, the future is considered secure because God wills it. That may be comforting to the religious leaders at the top and the 20 percent of the population that agrees with them, but middle management and most Iranians are less optimistic and getting worried. 

The government is cracking down more frequently and quickly on any sort of demonstration. Even crowds complaining about environmental or economic problems are quickly swarmed by police and Basj (Revolutionary Guard thugs often called out to provide semi-official muscle on the street.)

The government announced several new military technologies created by Iranian research organizations. Except for a new portable 122mm howitzer design, all the new items were electronic devices that Iranian has a hard time obtaining because of the arms embargo. Most of this stuff isn't very high-tech but these announcements are considered important for domestic morale. Few Iranians bother to note that nearly all these new, locally made, items rarely enter service or, if they do, arrive in small numbers. The government is insistent and clever in its pro-military propaganda. Another example of that is the periodic stories about the fact that Iran operates the world’s only KC-747 aerial tanker (based on the Boeing 747). The U.S. Air Force paid for development of the KC-747 in the 1970s but ultimately decided to go with the DC-10 three engine transport as a large tanker (the KC-10). These KC-10s are due to be retired soon, but Iran bought two KC-747s in the late 1970s just before the revolution and one is still operational, providing aerial refueling for Iran’s 1970s warplanes (F-14s and F-4s). Iran boasts to its people that the KC-747 is the largest aerial tanker in service without mentioning that the design was rejected by the Americans and everyone else and that the huge tanker is considered obsolete by any standard.

Iran is coping with the crippling economic sanctions by doing more of its trade with its immediate neighbors (Afghanistan, Pakistan, Turkey and Iraq.) Over 30 percent of Afghan imports are from Iran and like the trade with other neighbors tends to be barter, in order to get around the sanctions (which restrict Iranian use of the international banking system). Despite this resourcefulness inflation is still over 20 percent and unemployment among young men is over 30 percent. This is a key factor in the low birthrate and the growing migration to other countries. And once people leave they tell their family and friends back home how much better life is overseas. Iran has become very shabby after three decades of sanctions. The latest evidence of that is admission that over a hundred airliners (aircraft with over 150 seats) are grounded and half of them are considered irreparable (because of age, hard use and poor maintenance) even if parts were available. Phone calls and emails from Iranians overseas have made most Iranians aware that things are very different across the Gulf in the Arab states and especially in the West, where many Iranian migrants prefer to go.


Another major annoyance to most Iranians is the huge expense of propping up the pro-Iran dictator there. Syria is where the Iranian government spends over a billion dollars a month to keep the Assad dictatorship in power. A key factor in the Assads ability to reverse rebel gains over the last year has been the appearance of thousands of Lebanese Hezbollah militiamen and Iraqi Shia volunteers. Despite offering lots of Iranian cash, fewer of these Shia men are willing to die for the Assads. So Iran has turned to Afghanistan where it is offering Shia Afghans in Iranian refugee camps residency permits and $500 a month to fight in Syria. Iran would also pay thousands of dollars in “compensation” to the family of the young man if he was killed in Syria. More money is paid to Syria veterans recovering from wounds and pensions for those crippled by their wounds. This is an attractive offer because many Afghan Shia prefer life in Iran. Only 15 percent of Afghans are Shia and these Shia are a particular target for Sunni Islamic terrorists (like the Taliban). Moreover, despite all its economic problems the standard of living (and degree of law and order) is higher in Iran. This offer, especially the residency permit (because Iran is trying to force the last few hundred thousand Afghan refugees from the 1980s back into Afghanistan) is attractive and is expected to attract Shia living in Afghanistan. There is a lot of illegal movement back and forth across the Iran-Afghan border so it is no problem for the Shia men to get into Iran and sign up.

For the Syrian government, which is also subsidized by Iran, these Shia mercenaries have been crucial because Hezbollah’s paramilitary force is one of the most effective in the region and the non-Hezbollah Shia volunteers are at least enthusiastic. The problem is that most of these men fight for six months or less before returning home. Getting them to sign up for another tour of duty is difficult. This is particularly troublesome when it comes to the Hezbollah men because the Syrian rebels are backed by most Lebanese. Over the decades Hezbollah has developed effective tactics to fight Israeli troops and hostile militias and Islamic terrorist groups in Lebanon. Israel can still beat Hezbollah fighters, but with greater effort than against other Arab irregulars. In Syria this Hezbollah experience, training and professionalism has been a nasty shock to the rebels. Hezbollah fighters can operate as effectively (and often more so) than trained Syrian soldiers, but also fall back on many terrorist and commando techniques they have learned from the Iranians and decades of combat inside Lebanon and on the Israeli border. Inside Syria the Hezbollah fighters are feared by the rebels and respected by the Syrian soldiers.

May 23, 2014: UN inspectors from the IAEA (International Atomic Energy Agency) believe that the Iranian stockpile of highly (to 20 percent) enriched uranium has been reduced for the first time since 2010. IAEA believes Iran had 197 kg (431 pounds) of 20 percent enriched uranium last November but by February that was reduced (by diluting with even lower percentage enriched uranium) to 161 kg (354 pounds). To build a nuclear bomb you need 250 kg of 20 percent uranium. For weapons you need to increase the content of Uranium 235 in uranium ore to at least 54 percent. This is far above the 3.5-10 percent typically used in nuclear power plants. In its natural state Uranium ore is only about .7 percent U-235. Anything over 20 percent enriched can be used for a nuclear bomb although for best results you want it over 50 percent. The most effective and reliable nuclear weapons use 80 percent enriched uranium. The problem with Iran is not just how much highly enriched uranium it has but how much capacity it has to quickly enrich uranium to weapons grade levels of enrichment. In this respect Iran has, by its own admission, greatly increased its enrichment capability in the last year. Thus even if it reduces its 20 percent enriched stocks to zero these stocks could be rebuilt in a few months. Iran also, for the first time, admitted that it had items normally only used in nuclear weapons. These were high speed detonators. Iran insisted that these were being used to develop civilian applications. The IAEA inspectors were not convinced. Those issues aside the UN agrees that Iran is complying with the January 20 agreement regarding their nuclear program. This agreement lasts six months and during that time Iran will receive over $5 billion in frozen assets if they comply. If no long-term agreement is reached at the end of six months then the sanctions will get worse. Iran is trying to negotiate its way out of the sanctions mess and, by their own calculation, are making progress.

May 14, 2014: Saudi Arabia is trying to lessen the tension with Iran and has asked the Iranian foreign minister to visit Saudi Arabia for “talks.” The Saudis have been the major backer of the Syrian rebels and are well aware that the Iranian mercenaries have been very effective and the Saudi backed Islamic terrorist rebels are now spending a lot of time fighting each other. It may be time to make a deal with Iran regarding Syria.

May 12, 2014: For the third time this year an Israeli citizen has been arrested in Israel at the request of the United States and charged with illegally exporting military materials to Iran.

May 11, 2014: : In the Persian Gulf there are rumors that one of Iran’s Ghadir mini-subs sank while practicing tactics for attacking an American Nimitz class carrier. It was believed that a recently built two-thirds replica of an American Nimitz class aircraft carrier would be towed out so the Ghadir could get some experience in how to approach such a large ship and launch torpedoes at it. The rumored loss of a Ghadir was accompanied by talk of some new stealth technology on the Ghadir. That is probably just rumor as the small size of the Ghadir already confers a substantial amount of stealthiness. This purported stealth technology is supposed to explain why Iranian salvage ships are not out looking for the sunken Ghadir as that activity would tell foreigners where, approximately, the sub went down. If foreigners raised the sunk Ghadir they could discover the stealth features, or that these features did not exist at all.

May 9, 2014: Iranian and Pakistani warships held joint training drills off the coast. Pakistan has also been developing closer ties with Saudi Arabia, which is currently locked in an ideological battle with Iran over Iranian claims to be better qualified to manage Islam’s most sacred sites located inside Saudi Arabia.

May 7, 2014: On the Afghan border Afghan troops fired on an Iranian border patrol and accused the Iranians of regularly patrolling on the Afghan side of the border. There were no casualties. There are still disagreements over exactly where the border is.

May 6, 2014: In the northwest (Qazvin) there were explosions and fires in an oil storage depot. Sabotage was suspected but nothing was ever proven and it was all apparently just an accident. It is believed that this site supplies to a nearby nuclear facility.

May 5, 2014: An Iranian warship and an Iranian Navy supply ship  docked at Port Sudan in Sudan in order to refuel and take on supplies. The two ships are serving on the anti-piracy patrol off Somalia. Sudan has long been an ally of Iran.

May 4, 2014: A Revolutionary Guard (the separate army that defends the religious dictatorship and keeps an eye on the regular armed forces) commander admitted on TV that Iran had troops in Syria and was actively training foreign mercenaries to fight for the Assads. This was unusual as the official Iranian line is that Iran is not directly involved. The commander’s statement was removed from government web sites after a few hours. Another Guard officials repeated that the main goal of Iranian naval forces was to prepare for attacks on American warships operating off the Iranian coast. The Iranian admiral said that the main goal of Iranian naval forces was the destruction of the American fleet.

The U.S. recently announced a $5 million reward for information leading to the arrest of Chinese businessman Li Fangwei. What makes this man so valuable to American prosecutors is the fact that Li controls a network of companies that form the single largest organization Iran uses to illegally import weapons (especially missile) components and export oil and other contraband. Since 2006 Li Fangwei has conducted 165 known smuggling operations for Iran, worth $8.5 million. The items obtained were crucial for the functioning of Iran’s ballistic missile program. It took years of discovering and investigating smuggling efforts, connecting them to various Chinese companies and then realizing that many of these operations were organized by Li Fangwei. China refuses to arrest Li Fangwei because according to Chinese law Li Fangwei has committed no crime and Iran is considered a major trading partner and supplier of desperately needed oil. Li Fangwei has been careful not to travel anywhere the United States might be able to arrest him. In fact, Li Fangwei spends most of his time in eastern China, looking after the many businesses he owns. The smuggling is a very small part of his business activity, most of which appears to be legitimate.

May 2, 2014: Turkish police released the results of a long investigation into illegal gold exports to Iran. This involved billions of dollars of gold being used to buy Iranian petroleum products at a discount. Criminal gangs in Turkey used bribes and their smuggling networks to get the gold into Iran to pay for the Iranian oil. Many Turkish officials are denouncing the report because of accusations that a large number of Turkish officials accepted bribes to look the other way while all that gold was bought up and shipped to Iran.





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