The Recession and the World Economy...

I came across this thought provoking piece on the Wall Street Journal that I really recommend reading. The focus is on how the world economy is in trouble beyond just what is happening here in the US and what we can expect that is not good news but that there is also are some scenarios that are not necessarily bad that could be a result:

Still, most clouds have silver linings, and this one is no exception. Recession has caused a major decline in the world price of oil, to roughly $70 a barrel from over $140. This is bad news for Iran, Venezuela and Russia -- the so-called axis of diesel.

The most encouraging consequence of this change involves Iran. Iran has been closing in on the ability to enrich uranium on a large scale. The last thing the new administration wants is to choose between living with a nuclear Iran and attacking Iran so it does not reach that point. Either path promises to be extraordinarily costly.

Up to now, diplomacy has produced little. The question is whether this could change. The reason it might is economic pressure. Financial sanctions, relatively easy for the mullahs to shrug off when oil was $140 per barrel, are having real effect now that oil is only half that price. Adding to the pressure is an Iranian budget that is based on oil fetching some $90-$95 per barrel. Inflation, unemployment and deficits are rising as dollar reserves are falling.

All of this could well make the Iranians more open to diplomacy that would limit or better yet end their independent uranium enrichment effort in exchange for economic relief. It might even lead the Iranians to examine some of their expensive support for Hamas, Hezbollah and Shiite militias in Iraq.