Reverse Oil Shock Affecting Three Oil-Rich Countries
The New York Times reported Monday on the financial crisis that three oil-rich nations–Iran, Venezuela and Russia–may begin experiencing due to the potential of a global recession. All three nations rely on oil revenues for much of their government spending. The Iranian government uses such revenues to advance its nuclear program despite western opposition and to “promote itself as the leader of the Islamic world.” The money has also allowed for Iranian influence in Iraq as well as in Lebanon (through Hezbollah) and permitted aid to the Palestinians (through Hamas) in their conflict with Israel. This use of government funds to support their Arab neighbors demonstrates the complicated nature of identity in the Middle East, Iranians not being Arab themselves but feeling somewhat united with these nations based on their similar Islamic heritage. Domestically, oil money has also allowed for “Iran’s ideological hard-liners to preserve their monopoly on power, to buy political allegiances and to offset the fiscal damage of [Ahmadinejad's] economic policies.” While these three countries have all based government spending on the price of oil, the rapid decrease in the value of oil in the last few months has severely altered the situation. If oil prices continue to drop dramatically these nations could be facing deficits, or at the very least be forced to cut or slow down certain programs, which would cause a great shift in the way the Iranian government operates at home and internationally.
Kayla Cahoon
