It is becoming clear that Iran will not escape the growing global economic crisis unscathed. The LA Times reported on Friday that the Iranian government is seriously considering a $300 million bail-out to help companies that are suffering from the recent drops in oil and commodity prices. The Times reports:

According to a report Tuesday in the daily Kargozaaran, the chief of the Tehran Stock Exchange is pressing the government to put up cash to stop the collapse of the stock market, which has dropped to a five-year low since oil prices began plummeting this fall.

Iran is also struggling with rampant inflation. According to a report by Iran’s Central Bank inflation has risen 25% in the last twelve months and the cost of food and drinks rose 35% in September alone. This rise in the cost of living, combined with wide-spread unemployment, is particularly tough on Iran’s young people. A government report recently found that “a young college graduate had to work and save 40 years in order to be able to afford to buy a first home.”

Economic anxiety among Iranian citizens could play a major role in the upcoming Presidential election. Current President Mahmood Ahmadinejahd has been criticized for his handling of the economy, particularly since up until recently he claimed that Iran would not be affected by the global economic downturn. According to Mohammad Atrianfar, a senior adviser to former President Akbar Hashemi Rafsanjani, Ahmadinejahd has consistently lied about Iran’s problems with exports, inflation, and employment. Anger over economic mismanagement could definitely hurt Ahmadinejahd at the polls.

Meanwhile, American and European officials are hoping that Iran’s economic troubles will force the regime to take the threat of economic sanctions more seriously. The threat of sanctions, however, is severely undermined by Russia’s opposition to sanctions and its position as a permanent member of the U.N. Security Council. Without Russia’s support, it is almost certain that the Security Council will not be able to approve new sanctions against Iran. An op-ed in yesterday’s New York Times by Oded Eran, Giora Eiland, and Emily Landau offers an interesting solution: a three-way deal between the United States, Russia, and Iran. They propose that the United States should offer to drop its plans for a missile defense system in Eastern Europe and increased scrutiny for Eastern European NATO candidates, in exchange for Russia support of stricter sanctions and its promise to stop providing Iran with conventional weapons. This deal would give the United States increased leverage that it need to negotiate with Iran and convince the regime to suspend its nuclear enrichment program. Iran would therefore be able to save itself from painful sanctions and rejoin the international community in exchange for putting its nuclear dreams on hold.

This is an interesting proposal but it fails to take in to account how wildly popular Iran’s nuclear program is among Iranians, who believe that they have a right to nuclear energy. If Ahmadinejahd, or indeed any politician, were to agree to such a deal, this could severely hurt their chances in the June election. Rather than asking Iran to completely stop its nuclear program , international pressure would be more effective if it held Iran accountable to the standards of the International Atomic Energy Agency which has demanded more transparency to determine Iran’s nuclear motives.

As Iranian officials are wondering how to stabilize their faltering economy and American and European officials are wondering if the time is right for renewed economic pressure, one thing is clear: the ramifications of the economic downturn are being felt around the globe and Iran is no exception.

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