Watching the news, you may not get the sense of what is happening in Iran. Most news outlets are consumed with U.S. domestic interests and pay little attention to the tens of thousands in the streets each night protesting against the Islamic government. It is extraordinary to see those who are willing to risk their lives for the freedoms and opportunities we take for granted each day. It is more extraordinary given the degree of indifference and outright disregard we have shown for the people of Iran over the last 8 years.
Many of our followers let out a collective sigh – “not our fight” or “not our problem” – but as you know, what happens around the world has a profound impact on our money, and on our lives, here at home. Many left of center analysts suggest this is “not about us,” but that it is about the Iranians. That’s of course factually incorrect – price of oil, balance of power, terrorism, allies in the region … one thing is a constant: It’s always about us.
Let’s consider (I) How we got here, (II) What’s happening now, and, (III) How it affects you.
I. How did Iran get to this point of a general uprising?
- The Short History of Iran 101. Iran is the inheritor of the Persian Empire and after a Muslim conquest in the 7th Century AD largely became a Shia-dominant population. The modern state came into being in the early 1920’s under a Monarch known as the “Reza Shah,” which became known in the colloquial as the “Shah.” The Shah ruled but with marginal civic and human rights. A prime minister served to manage the government, and one appointed in 1951 caught the eye of the Americans.
- The Cold War brings the Americans to Iran. Iran had largely avoided the colonial impact of the British and the French throughout the Middle East. They faced a continual subversion from communists after World War II, because of the Soviet forces which entered Iran during the war. The residual communist political parties and influence helped elect Mohammed Mossadegh, a socialist prime minister. He nationalized the oil industry and threatened existing corporate oil interests of the British. The United States, without any oil interest in Iran, was worried about Soviet influence on the new Prime Minister. The combination of those fears led to the first CIA-backed overthrow of a government in the post-War era, as US clandestine forces removed the communist-influenced Mossadegh from office. Under the direction and influence of the CIA, the Shah rolled back reforms and democratic freedoms to help ensure no further communist influence in Iran.
- Repression brings the Ayatollah’s. From 1953 to 1979, Iranians enjoyed an upper-middle-class, Western lifestyle, thanks in large part to their relationship with the United States. But political rights were limited, and the secret police jailed dissenters and Islamic radicals. The lack of political rights led many Islamists into exile, one that would become well-known to the United States: Ayatollah Khomeini. The Ayatollah led a revolution against the Shah in 1979; he took 52 U.S. embassy personnel hostage for 444 days; and, he became an enemy of the US and an exporter of terror throughout the globe. Iran became, almost overnight, a radical anti-American, Islamic terror state.
- No surprise that the people of Iran now want freedom! Decades of war … socialist economics … a continued police state – this one an Islamic police state … funding acts of terror around the world … funding terror groups such as Hamas and Hezbollah … teaching “Death to Israel” and “Death to America” … engaging in a tanker war with the U.S. in the late 1980’s … attacking U.S. troops during the War in Iraq … hundreds of thousands of lives lost in the Iran-Iraq War (1980-88) … is it any wonder that the Iranian people would do anything for something different with their lives???
II. What’s Happening Now?
- Sadly, America has not helped. The United States over the last 8 years, starting in 2009, turned its back on those seeking free and fair elections (2009 Green Movement) … withdrew our secret services such as the CIA, NSA, and other intelligence gathering operations …….we ceased funding pro-freedom groups in Iran … did not provide an overt force, or voice, for freedom … disregarded the war crimes committed against our troops in Iraq……the Clinton server that was hacked led to spies who worked for us being identified and executed, rolling up dozens of human sources and essentially drying up all assets on the ground who worked on our behalf … did not exert a penalty for seizing our sailors in the Gulf in 2016 … turned over billions in frozen assets in exchange for the Obama-led Nuclear agreement, which was immediately spent on the war in Syria and to fund terror groups such as Hezbollah … the list is too long to discuss in detail. Bottom line – America has not sided with those seeking freedom in Iran and has instead actively worked against it over the last 8 years. It is hoped that has changed in the last 12 months.
- Organically, and after the departure of the Obama Administration from office, protest elements have begun popping up in Iran. In one respect, it truly is not about the US. Decades of soaring inflation have been tamed, but the economic fruits of foreign trade have not materialized. There are no political rights, no employment or market-driven opportunities, and the people have had enough. You could even say that the Iranian people realize there is no one coming to the rescue, so they have decided to take matters into their own hands. It did not start where Western-educated elites live, such as the cosmopolitan capital Tehran. It began in one of the holy cities, Mashhad, and it appears to be economically driven – food prices are too high. But since then, the protests have spread nationwide.
- The U.S. appears to have re-engaged the Iranian opposition. It appears the U.S. is beginning to return to the fray. The Trump Administration has been offering support through NGO’s as well as intelligence services re-opening lines of communication. It is not America’s fight, but supporting freedom over a sworn enemy IS in our interest.
III. How and Why it affects You:
- U.S. troops and American interests could be targeted. U.S. troop deployments in Iraq, Syria and throughout the region could be targeted if the regime feels it is about to be toppled. That is an unlikely outcome, but we have seen the unlikely become likely all too often in the Middle East. US Naval patrols have been targeted before, and certainly could again, if the regime believes it is at risk. Bottom line – an unstable regime could strike out at our people if it begins to crumble from within in Iran.
- Friends could be in harm’s way. America’s word, and our reputation, matter. Without the trust, or fear, of America, then our markets and economic well-being in an interconnected world will always be in the crosshairs. Having said that, U.S. allies such as Saudi Arabia, and US friends such as Israel, are equally at risk of being targeted by an unstable Iranian regime. The more things fall apart, the greater risk to the stable regimes of the Middle East. Also – does Iranian nuclear assets get sold to North Korea or smuggled out to terror groups? Does Iran ask for Russian assistance? The variables are exponential and few of them are very good.
- Oil – transportation – dollar – markets. Even if your position is to “… get the heck out of Dodge,” that doesn’t solve the economic dilemma: Oil, transportation and the dollar ALL are impacted by unrest in the Middle East, specifically Iran, and therefore ALL can impact US markets and your portfolio. We could have not one soldier anywhere on the planet other than Fort Benning, and an Iranian Revolution could widely impact oil, dollar-denominated assets, and wildly swing the values in your retirement plan.
In the end, this will most likely go the way it always has in the past – the protests will be suppressed. A massive police state combined with government handouts will eventually stem the public resistance. The American withdrawal over the last 8 years, combined with our giveaway of the billions in frozen assets, combined with our removal of most sanctions on their economy, and the government has enough resources to kill this nascent movement in its infancy. It is ironic, but we have made it most difficult for the people to rise up against their autocratic Islamist government.
Another data-point of massive volatility in a world no longer under American authority. Be careful what you wish for. In the end, while it is a dangerous and difficult fight for freedom in Iran, your portfolio will remain exposed to the volatility regardless of the outcome. That means it may be time to consider putting some of your gains into products that will protect you from market loss.
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