[Cowperson]

Originally Posted by Hakan

Iran's interests are being ignored in this thread which makes for an interesting analysis.

Why did Iran significantly increase the conflict with their abduction of British sailors? Are they baiting someone into a fight? If not, what are their motives?

The key to understanding this situation rests with Iran's motives not the American's.

Iran's leaders need a crisis to divert attention of their citizens from their collapsing economy . . . . . astonishingly effective diplomatic and economic sanctions, combined with the incompetence of the Iranian President, are crippling the country . . . . . and that highlights the vulnerability and weakness of a country with essentially only one product to sell.

A crisis adds a risk premium to the price of oil as well, and that helps Iran. The risk premium had largely disappeared in the last six months.

Iran has little refining capacity though and spends billions importing gasoline.

A good article in the Globe & Mail recently:

This is a good summary of Mr. Ahmadinejad's economic policies. In the election, he won popular support with his pledge to “put the oil money on the tables of the people,” to redistribute wealth. This resonated with a working class that had become increasingly poor as oil prices rose, and sociologists say this, rather than his talk of a “new Islamic revolution,” was the main reason for his success. (Political polls are banned, so sociological field work is Iran's only source of public-opinion research.) In other words, Iranians voted with their pocketbooks.

Mr. Ahmadinejad has responded in an especially blunt fashion: He has increased government spending dramatically, by 27 per cent in last year's budget. He spent $1.5-billion on grants to young married couples, and forced banks to make low-interest loans (effectively grants, since repayment is not required) to low-income families and small businesses; he ordered workers' salaries increased by 40 per cent; he regulated the price of housing and set state-determined prices for numerous goods.

But the main effect of his economic policies, which have maintained the heavily state-owned economy that produces hardly any revenues beyond oil incomes, has been galloping inflation and rampant unemployment.

And in the final insult, Iran, the world's fourth-largest oil exporter, has run into severe gasoline shortages. It has had to import billions of dollars' worth of gasoline, because it has neither enough refineries to serve its people nor the investment to exploit its full reserves. More than 6 per cent of the oil it drills is lost to leakage, and there is no apparent interest in fixing the leaks because the state monopoly has little incentive to do anything.

The society, one former Finance Ministry official tells me, is “dying of petroleum poisoning.”

This is no secret to anyone living in Tehran, the most car-clogged city in the world. The government has fixed the gas-pump price at 8 cents a litre, far below the cost to produce it (Mr. Ahmadinejad introduced a bill this month to raise the price — in five years, when he will be out of office). Tehran, with 7 million people, has three million cars on the road, and 1,500 new vehicles registered every day.

In Narmak, his old neighbours, who should be his most loyal supporters, are turning against Mr. Ahmadinejad.

“This past year and a half has been very difficult for us,” says Hamid, 20, who with his father runs Istanbul Greengrocers, where the President used to shop. “Prices for all the fruit and vegetables have doubled. It's the inflation that's done it. And people can't afford to buy more than the absolute minimum of produce, because 100 per cent of their salary is taken up with rent, which has doubled.

“People around here still like Ahmadinejad personally; he's one of us. But we can't live this way. He should have a different job.”

http://www.theglobeandmail.com/servl...eRequested=all

Cowperson