Normally, Michael Ledeen wouldn’t qualify as an optimist, especially on Iran.  That’s what makes his column today on the mullahcracy’s fortunes interesting reading, as Ledeen sees the regime teetering after its proxies have lost ground.  But is Ledeen a little too hopeful?

First of all, the dramatic drop in oil prices is devastating to the mullahs, who had planned to be able to fund terrorist proxies throughout the Middle East, Europe and the Americas.  Suddenly their bottom line is tinged with red, and this carries over onto their domestic balance sheets, which were already demonstrably shaky (they were forced to cancel proposed new taxes when the merchant class staged nation-wide protests).  No wonder they seize on any international event to call for petroleum export reductions.  Just today they called for a [2] drastic reduction of oil shipments to all countries that supported the Israeli military incursion into Gaza.

No doubt, the Iranians believe the fall in oil prices is the result of satanic will, rather than the shock to demand produced by the runup to $140/barrel.  Not for them the subtleties of the free market;  given the way they view the world, they must be convinced that the same strategy that beggared the Soviet Union–Saudi cooperation with America to hold down prices–is now deployed against them.  This belief was no doubt reinforced when the recent official cut in petroleum production did not lead to markedly higher prices.

Second, their terror strategy has not been working as well as they wished and expected.  Most American and European analysts have not appreciated the effect of the defeat of al Qaeda, Hezbollah and the Revolutionary Guards in Iraq, but you can be sure that the high and mighty in Arab capitals have taken full notice.  The Iranians not only lost a considerable number of skilled and experienced terror leaders–Imad Mughnieh, the long-time operational chieftain of Hezbollah is the most important, and Abu Musab al Zarqawi was close behind, having created al Qaeda in Iraq alongside a network throughout Europe–but also several of their own Revolutionary Guards officers.  Some of these were captured, others have defected, and most all have provided details of the Iranian network. This sort of thing is bad for operations, bad for recruiting, and weakens the Iranians’ efforts to bully their neighbors into appeasement or more active cooperation.

Third, despite all their efforts to crush any sign of internal rebellion, many Iranians continue to publicly oppose the mullahs.  A few weeks ago, students at universities all over the country demonstrated in significant numbers, and as one Iranian now living in Europe put it to me, “they were surprised that the regime was unable to stop the protests, even though everyone knew they were planned.”   This is the background for the new wave of repression, accompanied by an intensification of jamming on the Internet, and an ongoing reshuffle of the instruments of repression;  Khamanei and Ahmadinejad have no confidence in the efficacy or blind loyalty of the army or of large segments of the Revolutionary Guards.  Most public actions are carried out by the Basij, who are judged more reliable, and repression is less in the hands of the traditional ministries than in new groups freshly minted in the Supreme Leader’s office.

In short, we are dealing with a regime that is very concerned about its future, and is not very comfortable with its friends, allies, and proxies.

The steep drop in oil prices is probably the worst problem facing the mullahs.  Their economy had already gone sour long before then, even with oil at its $147/barrel peak.  With the current trading price at this writing at $47 and demand dropping dramatically, they have no capital to fund their terrorist activities.  They also have precious little with which to maintain their oppressive rule over the Iranians, at a time when dissent and dissatisfaction appear to be increasing significantly.

Will that continue in the long run?  I’d say that Tehran may look to Washington for a little Hope and Change on this score.  Barack Obama opposed, more or less, the idea of increasing American domestic oil production in order to achieve more independence from foreign energy resources.  Eventually, Obama wants the US to get away from an oil-based energy platform altogether, and that would be very bad for OPEC and Iran, but that’s at least a generation away in the most cheerful of estimates.  If Obama won’t expand American production, the current low prices will not last, and Iran can once again count on high profit margins to correct most of the ills Ledeen outlines in his column.

However, that’s precisely why the other Arab nations will work to keep prices reasonably low.  They may talk Israel, but their eyes are fixed on Iran as the real threat in the region.  They do not want a Persian Shi’ite hegemony in the Gulf nor an expensive nuclear-arms race, and Iran’s late aggressiveness with its Hamas and Hezbollah proxies has them worried.  They will do their best to quietly starve Iran of its funds and hope the Iranian people do the rest.

The best strategy for the US is to pursue low international oil prices over the next few years by aggressively expanding domestic oil production.  Starving the Iranians of the funds for terrorism doesn’t require bombs or invasions, and it will be much more effective at weakening the mullahcracy enough to foment an organic overthrow by the Iranian people — as well as securing our own economic standing and keeping American capital in America, creating jobs and cutting back sharply on our trade deficit.