IDEA - The economy of Iran and Oil
“Iran’s government dependents on oil revenues for more than 80% of its annual budget.”
writes Kaveh L Afrasiabi in Asia Times.
The question, as always, is, What does this mean? To answer this question I have developed IDEA.
IDEA stands for Integral Dynamics’ Estimated Assessment.
For each relevant statement in the news I apply this two-step approach. The first step is to assess the impact of the statement on the causal loop model. And change the model if applicable. For instance, by adding new Open-Ended Issues and defining relations between those OEIs. The second step is to estimate for each factor the impact on the status of that factor.
In this article, I have explored the first step more extensive, making a kind of storyboard,. This will make it hopefully easier for readers to understand what this step entails.
Update the causal loop model (if applicable)
1. I added the Open-Ended Issues (OEI) ‘ Iran has a healthy economy’ and ‘Iran oil revenues’ as a factor in the causal loop diagram; and of course the relationship, An improvement of Iran’s oil revenues will improve the health of Iran’s economy.
2. Basic economy teaches us that the revenues for Iran depends on their oil supply (the oil that they sell) and the oil price they get.
3. Connect the above to the OEI, ‘Iran has a stable regime’, as follows
3.1. It is good for the economy if Iran has a stable regime.
3.2. A stable regime is easier to maintain if the economy is healthy.
3.3 A stable regime is also conducive for the production and delivery of oil
4. There are two OEIs, Iran has to be cautious about.
4.1 First, there is a kind of limit regarding the oil price. If the price becomes ‘too high’, it will have an averse affect on the Global Economy and that will have a negative impact on the economy of Iraq. More detailed, if the Global Economy declines there will be less demand for oil, oil prices will go down, and there will be less revenues for Iran.
4.2 Secondly, if the government of Iran will collapse, this will directly and indirectly impact their economy.
Collpasing of Iran’s government could be caused by the following events:
4.2.1. A new round of sanctions imposed by the United Nations Security counsel;
4.2.2. A military action of the United States on Iraq;
4.2.3. An attack of Iran on Israel;
4.2.4. An attack of Israel on Iran;
4.2.5. The collapse of Iraq’s government resulting in an all-out regional war.
And of course, these events will also have a direct impact on Iran’s economy, the oil sypply by Iran, and Iran’s oil revenues.
Update the OEI state table (if applicable)
There are two main issues related to 4.21 – 4.2.5, being
Iran is seen as a state sponsor of terrorism, supplying insurgents and terrorists in Afghanistan, Iraq and Palestine with money and weapons.
Iran is seen as developing nuclear weapons.
On both issues Iran is cooperative. It is in dialogue with the United States regarding its role in the Afghanistan war and the Iraq war. And it is in dialogue with the IAEA, allowing inspection visits to its nuclear sites.
This gives the following estimations for the factors used in this article.
Develop a Policy Claim
The third step (in this two-step approach) would be to develop a Policy Claim.
First, decide for whom the Policy Claim will be developed. Let’s say, we will develop a Policy Claim for Iran.
Second, decide what the ambtion / intent is.
If for instance, the ambition of Iran is to have a stable government with a healthy economy, this ambition should be reflected in her foreign policy.
(a) Make sure that the global oil price remains fairly stable, the OPEC is the mechanism to pursue this.
(b) Make sure that the region becomes more stabelized. A war in your front yard and in your back yard doesn’t help. So, do what ever is possible to stabelize the situation.
(c) Make sure that all involved believe and trust your claim that your nuclear programme is only civilian / peaceful.
I will not work this out to a full swing Policy Claim but point the reader to two examples of Policy Claims:
PKK should do ‘whatever it takes’ to provoke Turkey to invade Northern Iraq