Sunday, December 14, 2008

Iran's creative reaction to its economic crisis

The Globe and Mail reports:
Of the Middle East's oil producers, Iran, OPEC's second-largest producer, is the hardest hit of all. With daily production of about 2.5 million barrels, Iran loses about $1-billion a year for every dollar drop in the price of oil.

As oil goes, so go Mr. Ahmadinejad's political fortunes. And while his vaunted nuclear program is not immediately threatened, those in the West who seek to prevent Iran from developing nuclear weapons should gain considerable economic leverage as a result of the financial crisis.

As recently as last month, Mr. Ahmadinejad put on a brave face, boasting that Iran was capable of enduring oil prices as low as $5 a barrel. But last week the Iranian President was forced to admit his government will have to come up with a new budget, based on more realistic price estimates.

With inflation at about 30 per cent and unemployment at 10 per cent, Mr. Ahmadinejad has run out of political options, says David Menashri, chair of modern Iranian studies at Tel Aviv University. "Thirty-per-cent inflation is a terrible hardship for someone on a fixed income," he said, noting that "800,000 people are added to Iran's work force every year; the government can find jobs for only about half of them."
So Iran came up with a creative way to slow down its losses - close all markets for a brand new "holiday":
All markets in Iran will be closed on Monday as a protest to the crimes of the Zionist regime in the Gaza Strip.

Releasing a statement on Saturday, the Basij department of the merchants’ union announced the merchants will close their shops on Monday throughout the country to show their resentment to Israel over its brutal measures in Gaza.
It isn't clear how closing markets will help Gazans, or Iranians, but it does save a day of expenses in an economy that is heavily subsidized by the government.