At the moment, a substantial amount of public outcry, including riots and mass demonstrations, are being reported throughout Iran as supporters of presidential candidate Mir Hossein Mousavi have taken to the streets, protesting the outcome of that country’s recent presidential election. The official announcement from the Iranian government that President Mahmoud Ahmadinejad won the election in a landslide immediately threw up a number of red flags indicating possible voter fraud.

From a distance, the situation looks pretty unsavory, with riot police beating down protesters, foreign journalists getting hassled by interior security agents, and even reports that the BBC Persia satellite link is being jammed from somewhere within Iran itself. All of this points to a regime that clearly has a stake in keeping a lid on things, which one must assume could include a questionable electoral outcome. Why else employ such heavy security?

While the Western world in particular raises questions over this situation, the business implications of the election pose a less headline-worthy but potentially more serious impact. Iran is currently OPEC’s second-largest petroleum producer and, as such, remains heavily dependent on world oil prices.

Fluctuation in price per barrel has taken a heavy toll on Iran, which supports its internal economy through heavy public spending.

According to the Coface Handbook of Country Risk 2009, Iran experiences inflation in excess of 25%, thanks in part to poor governance and the long-term impact of international sanctions against the country. It is that very inflation, among other things, that has driven so much discontent within the country. And it seems likely that if the current election results stand as is, or if Iran’s recently announced probe into them proves to be nothing more than a charade, additional sanctions could follow.

What will happen when one of the world’s leading oil producers is put under even greater international economic pressure? What will happen when its own economy worsens? What will happen when an entire generation of citizens no longer fear the state’s ability to keep the peace? It all adds up to a most unusual display of instability in a country that holds the keys to a great deal of economic power. As we saw during the last two years of oil fluctuation, weird things can happen when the price of oil goes off the rails.

And what’s happening in Iran is looking more and more like a train wreck.