The Iranian Oil Weapon

I'd like to take a more careful look at exactly what kind of oil weapon President Ahmadinejad is packing. In particular, let's go over the seventies oil shocks and use them to fashion a rough guesstimate of the likely impact of a cutoff in Iranian oil supplies now.

To give you the punchline up front, I'm going to argue that, with large (50%) uncertainties, a complete loss of Iranian production for an extended period might be expected to roughly double oil prices and cause massive economic impacts, while a halving of oil production due to sanctions, or retaliation to sanctions, might be expected to produce a 30-40% increase in price and significant economic impacts. If Iran is left alone, prices are quite likely to drift up somewhat anyway, but not by this much.

To help you get an overall feel for the history, the graph at right shows world oil production broken out into non-OPEC, OPEC excluding Iraq and Iran, and Iraq and Iran together (the last two having been big factors in many of the oil supply problems in recent decades). The graph runs from 1965 through 2004. The source of the data is the BP Statistical Review of World Energy. You can click the picture to get a more readable version in a separate window.

You can see in the data three oil shocks (or four, depending how you count):
  • The Arab Oil Embargo, which started on October 17th 1973, and ran through March 17th 1974.
  • The effects of the Iranian revolution of 1979, and the Iraq-Iran war which began in September 1980. Sometimes these are viewed as separate oil shocks, but the effects are hard to disentangle.
  • The Gulf War which began with the Iraqi invasion of Kuwait in August 1990.
Of these, if we measure by impacts on production and consumption, the events of 79-80 had by far the greatest effect, while the 1990-1991 Gulf War had the least. You can see the oil embargo causing a sudden cessation in growth in oil production (which had been very rapid), and then even a little notch down in 1975. The 79-80 events cause a major multi-year drop in oil consumption and production (although as we'll see, this was due to a smaller relative price change than the Arab embargo caused). The 1990-91 events show up as just the tiniest production reduction. (Later notches in the production curve are caused by demand side events - the 1998 Asian flu, and the 2000-2001 tech stock crash.)

Let's now focus in for a moment on the oil production of Iraq and Iran specifically:

Annual oil production from Iraq and Iran 1965-2004. Source: BP Statistical Review of World Energy. Click to enlarge.

You can see that during 1974, while Iraq reduced production in line with their Arab brethren, Iran, under the Shah, kept right on growing production. In 1979, with the revolution, Iranian production starts to drop, but is partially offset by increased Iraqi production. However, in 1980 both have dropped to about half the 1978 level, and by 1981 we are down to a little over two million barrels/day between the two parties to the conflict - versus around 8 million barrels/day in the years 1973-1978. Production has never reached that peak level again. Iranian production slowly recovered through the eighties and early nineties to reach a level of about four million barrels/day in recent years. Iraqi production also increased during the eighties, but then fell to very little following the Gulf War. With the advent of the Oil for Food program in 1996, Iraqi production began to increase, until the most recent war began in 2003.

It's worth taking a closer look at that as a case study on the effects of an invasion/insurgency on oil production:

Monthly oil production by Iraq since January 2002. The US/British invasion began on March 20th, 2003. Source: Energy Information Agency. November and December 2005 are estimates from news reports. Click to enlarge.

As you can see, production takes a dive with the March invasion and reached a nadir of almost nothing in April. From there, it slowly comes back over the course of the next six-ninth months, and then is choppy since. It has never reached the January 2003 level again, and was particularly bad at the end of 2005. This is despite the fact that Iraq has enormous undeveloped reserves, which the country has never brought into production due to onoing political instability. Clearly the recent invasion has not improved that situation, but rather made it worse, at least on the evidence to date.

We now turn to looking at the effects of the oil shocks on price. The next figure shows average annual price of light sweet crude over time in 2004 $US (note that prices on any given day can differ quite a bit up or down from the average price over the year).

Average price for light sweet crude during each year 1965-2004. Expressed in 2004 US dollars. Source: BP Statistical Review of World Energy. Click to enlarge.

As you can see, the shocks had a dramatic effect. The 73-74 shock caused prices to roughly quadruple from $10 to $40, where it then stayed. In 1979, prices doubled again. What we now need to do is get a more quantitative sense of how much production changed in order to produce those price changes. That should help us to estimate how bad an Iranian oil shock would be now.

Economists like to look at the relationship of price to the quantity demanded through the lens of a concept called the elasticity. The idea is that if the price changes by X%, and then we find people using Y% less, then the elasticity is -Y/X. The minus sign captures the inverse relationship - when price goes up - a positive change in price - we use less, a negative change in quantity. For very essential commodities such as oil, the elasticity is very small (it takes a lot of X to get a small amount of Y, so the ratio Y/X is small). Inessential or easily substitutable goods can have a much larger elasticity.

In general, the idea that there is a fixed number, the elasticity, that controls the response of price and quantity should only be viewed as a very rough approximation. One thing that makes it better however, is to take account of the fact that oil usage tends to respond to changes in the size of the economy much more strongly than changes in the price (in econo-speak, the income elasticity is much larger than the price elasticity). So it makes more sense to look at how much the quantity used changed in response to price, relative to how much it would have changed otherwise. To do this, the next graph is helpful. It shows the percentage change from one year to the next in how much oil is used worldwide (ie the percentage changes in the production graph up top).

Year-on-year percentage change in global oil production. Source: BP Statistical Review of World Energy. Click to enlarge.

As you can see, in the late sixties and early seventies, oil production grew at roughly 8% a year (give or take a percentage point). So when the shock hit (it shows up in the 1974 point, which has a 0% growth over 1973) it causes about an 8% reduction relative to that expected. So, a 300% change in price is associated with an 8% change in production. -8/300 = -0.027 - let's call it -0.03. That's pretty inelastic, all right. However, these shocks seem to cause long-lasting changes in the growth of supply and demand. In the late seventies, production growth was only running at 4% give or take. So when in 1980, it takes a dive to -4%, that is also an 8% change. However, this was associated with only a 100% change in price: -8/100 = -0.08. You can see this elasticity concept is a bit fuzzy as different shocks give different answers.

After that, there again seems to be a fairly permanent change in the nature of oil demand. It runs negative for several years (as major efforts were made to make the economy more oil efficient). And when it does start growing again in the late 1980s, it now only runs around 2% a year growth. So when the 1990 invasion of Kuwait comes, it only causes a 2% change in production (from 2% growth to zero). So that's elasticity of -2/15 or -0.13.

So which is it -0.03, -0.08, or -0.13? Part of the pattern seems to be that the more severe the shock, the more inelastic demand appears to be in response. People are somewhat able to make modest changes in their oil usage, but find it very difficult to make sudden radical changes. It may also be that the absolute price matters as well as the relative change - when prices are lower, it takes a larger relative change to get a response. (As an aside, the straight line in the growth rate graph is a fit to the data, and the fact that it has just crossed the x-axis - zero percent growth - is one of the pieces of evidence for a near-term peaking in oil production).

Now in recent years, oil production growth has been volatile with economic swings, but the trend over the last decade is running at around 3% annually. However, in 2005, we seem to have started to run into significant difficulty expanding production much further (which has pushed prices up). Forecasts vary from people who think 2006 is unlikely to grow any over 2005 (near-term peak) to more optimistic forecasts of 2% growth or so. Let's take an intermediate case, and assume that the rest of production grows by 1% (about 0.8mbpd), and then consider Iranian possibilities in the background of that.

A harsh scenario is that Iranian production ceases altogether for an extended period of time, as war rages, let's say. That's a loss of about 5% of world oil production (at the 2004 rate of 4mbpd or so). Thus world production would be dropping by 4% (allowing for 1% growth in the other 95% of production), when the recent trend has been for around 3% relative growth. Thus the combination of complete loss of Iranian oil production on top of an already stressed supply situation would represent about a 7% supply change compared to the recent trend. That's comparable to the 8% shocks in 1973-74 and 1979-80. That might be expected to roughly double oil prices from their current level There's a large uncertainty associated with the uncertain elasticity, but my guess is that the 1979-1980 oil shock represents the best model for the situation in that it came on already heightened prices.

A milder scenario might involve a deliberate reduction in oil exports by Iran as retaliation for sanctions. A halving of their production would represent about a 5% oil shock relative to trend. That might give somewhere in the region of a 30-40% increase in oil prices. No doubt enough to make significant economic trouble for the world.

All of these estimates should be viewed as 50% uncertain, given the variation in response to past oil shocks, and our lack of knowledge of how today's economy might respond differently than the rather different world economy of the seventies and early eighties.

Finally, if the US were to attack Iran, there is some possibility of a supershock. Since Iran has considerable influence over Shiite factions in Iraq, and also can attack tankers from Saudia Arabia and Kuwait in the Gulf, there is an outside possibility of a very large - more like 10-15% -- oil shock as exports from all around the Gulf were affected. That would be an economic disaster.

Indeed an argument can be made that the long-term effects that the oil shocks appear to have in reducing growth in oil production and consumption also translate into an effect in reducing economic growth generally. This next diptych shows the same oil production growth 1965-2004 graph we showed before (at left). But it also shows world GDP growth for the second half of the last century on the right. It's surprisingly hard to obtain a long annual sequence for world GDP, but Brad deLong cites the numbers every five years from 1950-2000. From that I constructed average growth rates over each five year span, which is plotted at the end of the span.

Left panel. Year-on-year percentage change in global oil production 1965-2004. Source: BP Statistical Review of World Energy. Click to enlarge. Right panel - world annual GDP growth 1950-2000 averaged over five year intervals. Source: Brad deLong. Click to enlarge.

As you can see, in the happy years of the 1950s-1960s, economic growth was very high - running around 5-6%. For the period containing the first oil shock, it drops to only around 4.5%, and then drops again to a little over 3.5% following the second oil shock. Since then, it has recovered but only to about 4% annually, where it has been since.

Now whether the correlation in the way these growth rates evolve is indicative of causation is not certain. However, the possibility should certainly be considered when we start to consider doing things that might affect Iranian oil supply.

One question,
should we not focus on Iranian oil exports, vs total Iranian  production, in an estimate of the effect on the world economy?
Iran is using a significant portion of its production for domestic use (something on the order of 35-40%).
Yes, we should. Look at my story here.
A cynic would say - The ideal oil export partner for the West is a nation with high production, and either a small population, or a population living in abject poverty with no industrialization, as long as the oil wells keep running.

The same cynic might regard a deindustrialization of Iran by way of Western aerial bombardment and subsequent seizure of the oil-rich regions (which are concentrated in Khuzestan bordering on Iraq) as a valid policy goal in its own right, as it would keep those Iranians from burning their own oil.

But even the cynic would have to admit that this hasn't gone very well in Iraq.
Which throws us back onto the rather dim hope, that
a) our Western leaders heed the advice about stopping the digging when you´re already in a hole, and
b) Allah does a quick trick to replace Mr. Ahmadinejad with a less doom-driven personality.

It´s one of history´s nice ironies that the first non-clerical  president of Iran would also seem to be the first outright messianic apocalyptic among them - which severely perturbs calculations of mutually assured destruction that would have wokred quite well with the Rafsanjani kleptocracy.

It's not Ahmadinejad who sets Iran's nuclear policy. It's the Supreme National Security Council. I don't think we can blame what Iran is doing on Ahmadinejad. He may be the most visible, but it's the whole leadership, the whole country, that is setting this course.

Ultimately, it's probably our own president who set this in invading Iraq.

Iran knows they're safe. We're tied down in Iraq, and we know Iran could throw the entire region into turmoil, just by sending some Shi'a militia units to "defend" their brethren in Iraq. Indeed, Iran has threatened to do just that, if we attack them. They know it would ignite a civil war.

But: Before Ahmadinejad the probability of a negotiation/diplomatic solution seemed much more likely. In the June 2005 elections, most people seemed to expect either a victory of the Rafsanjani make-money&business-as-usual types or the reformers. In that situation, Iran would not have appeared so much as a potential mad dog. However with the statements of Ahmadinejad regarding Israel, and some of his statements/suggestions regarding the preparation for the physical appearance of the Mahdi (~Shiite rapture) there is a significant mad dog factor. From the position of Israel - if someone says he wants to kill the Jews, BELIEVE him; the last time people didn´t listen to such threats, we know what happened. It is now becoming increasingly more difficult to argue against Israel´s interest in 'doing something' about Iran. Likewise, the situation is playing into the hands of the US administration which is seeking for an opening to attack Iran anyway.
In this situation the role of Ahmadinejad cannot be underestmated. Just imagine where we would be now, if instead of saying that israel should vanish/be relocated, he had said something like the political confrontation with Israel is a result of historic injustices which need to be resolved so that the rights of Palestinians are respected. In this case, everybody would be happy with diplomacy and there would be great pressure on Israeli and US hawks to do nothing until there is proof of a real nuclear threat. Instead due to Ahmadinejad as a catalyst we are in a situation reapidly accelerating into uncontrollable conflict.
And if Ahmadinejad is indeed not in conflict at all with other groups, but instead only expresses what a homogenous power structure wants, why all the problems within the regime (e.g. the oil minister, scuffles with ayatollahs, etc). The Iranian regime doesn´t look like a homogenous power structure to me (but can be forged into one by an external threat and a martyric mission, like it was in ´80-88 - the gory glory days which Ahmadinejad wants to revive) and I have the impression that there were some conservatives who wanted to get rid of the reformist movement by bringing in someone to "clean up" the Islamic Republic from such degenerate influences. The classic mistake, like Hindenburg appointing Hitler in 1933. Ahmadinejad got is out of control, and is now endangering the very existence of their republic and nation.
It may seem odd to us, but Ahmadinejad is not an extremist by Iranian standards.  He's a moderate, who believes in modern science and technology as well as the old religion.  He doesn't like Israel - but that is hardly unusual for the region.  Israel-bashing is politicians' bread and butter in the Middle East.

No matter who was elected, we would have reached this point.  One, Iran really does want nuclear energy.  They have struggled to meet their OPEC quota for awhile now, and are painfully aware that their oil will not last forever.  They want to prepare for the future (not to mention sell as much oil and gas as possible to the west).  Two, we are trapped by the tar-baby of Iraq, and everyone, including Iran, knows it.  This has emboldened Iran immensely.  Indeed, I expect it will embolden banana republics all over the world.  They know we can't start anything.  Or if we do start anything, we can't finish it.  We have too much on our plate already.

Umm, well, maybe he isn´t an extremist by Iranian standards. However in delicate internation diplomacy it´s INTERNATIONAL standards, however vague they may be, that count. And international standards say that it just isn´t nice to say that a certain other nation should be wiped out/removed/be otherwise morphed into nonexistence. Whether a certain number of Iranians (like the 19.5% or so that voted for Ahmadinejad in the first pass of the elections) really are dedicated to such beliefs is irrelevant. Ahmadinejad has higely deteriorated Iran´s position; most European nations apart from Britain couldn´t care less about Iran´s nuclear power program when Khatami was in power and also would not have cared if Mustafa Moin or Ayatollah Karubi had won the elections. With these statements from Ahmadinejad the Continental EU nations see themselves forced to side with Israel/US totally regardless of any real estimation of whether Iran would ever launch a nuclear device at Israel or whether there even is any realistic threat of a nuclear weapons development (which seems likely but is not proven). This situation is solely brought about by Ahmadinejad.
Also when it comes to whether Ahmadinejad is an extremist or not by Iranian standards I remember that many Iranians were quite shocked both by his taking first place in the first round and then winning the run off. Most it seemed expected that Rafsanjani would win as the 'lesser evil' and 'devil we know' choice. And that it cannot be ruled out that the ballots were somewhat stuffed by coordinated Bassij operations etc.
Might be wrong here, but didn't The Pipsqueek say something to the effect that the Talaban must be destroyed?  That's different, you say?  Why?  Just because Pipsqueek's opinion coincided with the majority of people in the world, that is not automatic justification... that's rightousness.  Isn't it possible that Iran views Israel with the same degree of paranoia most others viewed the Talaban?  Let's remember who has been responsible for Iran's turmoils in the last century?  Who has directly attacked Iran before?  Its a pretty long list, but Israel, Iraq and the US can be considered pretty high up on that that one.  I'm not trying to justify that Israel should be blown off the map, but it seems pretty much the same to me when I hear today, "Iran should be blown back into the stone age".  (Or just a corner of Iran)

To participate in successful negotiations, I think you have to be able to place some small amount of trust that your adversary will follow through with the resulting agreements and be able to place yourself in your adversary's chair to fully understand what his/her idea is of reaching a successful conclusion.  If they think you are out to destroy them, any attempt at negotiation is more likely to be only an information gathering exercise.  This is why I believe there have been no fruitful results with negotiations canceled in frustration by all parties.

So what is their perspective?  Example:  If Bermuda was responsible for blowing up Twin Towers and the Talaban were stockpiling stolen dirty bombs there now, wouldn't you be highly suspicious of Bermuda's intentions today and saying that, "We are keeping all options open?  If Mexico was responsible for 8 years of war and killing I don't know how many millions of Americans with chemical weapons, If.... I think you would be saying "Yes Mr. President.  We will blow them off the face of the earth as soon as you say the word."  Just because Mr President mentions "Israel", everybody's outraged.  Well, that's only because the rest of the world is still on such a (well deserved) guilt trip about their previous treatment of Jews that they are (naturally) very sensitive about it to this day, as well they should.

Well, It seems to me that Iran has "stumbled" onto the ultimate Non-Nuclear Counterbalance.  No easy trick.  Maybe they should be given some credit for that.  

We didn't learn much as to what Iran needs to be able to arrive at a successful conclusion to those negotiations, but let's postulate for a second as to what the major issues of interest to Iran might be.  Do you suppose that it might be something like this,  

#1 "It must be guaranteed that in order for us (Iran) not to continue to develop nukes, Israel must be stripped of nuclear weapons and subjected to full UN verification inspections, just as we accept now."  
#2 "The US must vacate Iraq and remove its Naval Base in Qatar.  You can keep operating from Diego Garcia.

What's wrong with those?  Do they present real problems for America, or is removing the Naval Base going over the top?  Why?  Is that too high a price to pay for a future without nukes in a highly dangerous area?  Or, do you lose too much face if you have to vacate Iraq or remove a Naval Base to guarantee stability in the most important oil production area of the world?  Is it a problem for the EU?  What's your opinion of my hypothetical Irani conditions?  What do you think the real conditions would be?   Would they be acceptable to you, if you were the President of the United States?  Why? Why not?  I'd like to know your opinion and your proposed solution, if it doesn't involve blowing them back to the Stone Age.  Your solution is very highly likely to be more viable than anything Condi can come up with.  Help her out here.  I don't think the Pipsqueek has thought it through.

Isn't it possible that Iran views Israel with the same degree of paranoia most others viewed the Talaban?  Let's remember who has been responsible for Iran's turmoils in the last century?  Who has directly attacked Iran before?  Its a pretty long list, but Israel, Iraq and the US can be considered pretty high up on that that one.

When did Israel attack Iran?

Indeed! Israel has been on the receiving end.
Hope this helps you understand and can appreciate that Iran's present state of paranoia is not without cause.  They have good reasons to behave the way they do, given the historic lessons taught them.  Will the US ever let a Japanese, FSU or Chinese carrier armed for war within 1000 miles of Pearl Harbor ever again?

In 1981, Israel attacked a Baghdad nuclear reactor. Israel combat jets bombed a French-built nuclear plant near Iraq's capital, saying they believed it was designed to make nuclear weapons to destroy Israel. It was the world's first air strike against a nuclear plant.

Sure, Israel attacked Iraq. But when did Israel attack Iran?
It was a long time ago and I admit I got my n and q mixed up, but I still think it was a valid point although not 101% accurate.  

So.. Given Israel's behaviorial history and considering the latest threats against Israel coming out of Iran, can you think of a any reason why Israel would attack Iraq, but they would not attack Iran?

Continuing... don't forget it was the US that made the first nuclear attack on any country, which many today believe was totally unjustified under the true circumstances that existed at the time (Germany had already capitulated and Japan's had no remaining mil-ind capacity to speak of) and the motive was simple revenge for Pearl Harbor.  Wheather that was the actual motive or not is immaterial.  Image and and the resulting emotional response does not foster a detailed investigation into the justification for previous actions.  The lasting association is simply who did what to whom.

Perhaps you should change your name to "Gets it wrong"
Maybe so, but try sticking with the concept.
It's worth noting that, according to Red Star Rogue, elements of the Soviet Union's KGB did send a Kilo-class sub near Pearl Harbor, and it did launch a ten-megaton nuclear missile at Pearl Harbor.

Evidence: In addition to the sunk sub, a massive secret recovery operation, and tales of oil slicks and radiation, satellite photos showed burning missile fuel--the missile blew up in the tube on the surface.

Speculation: The KGB wanted to frame China; the warhead used Chinese fissionable material, and China had a Kilo-class sub, and the Soviet sub sank within the Chinese sub's missile range of Pearl Harbor--significantly closer than the Soviet equipment would have needed to get.

Relevance: If this is right, then it illustrates another failure mode in the nuclear standoff; shows that we came closer to nuclear devastation than we thought; shows that nukes just aren't as safe to have around as we might have hoped; shows that things can go to hell quickly and randomly.

Sleep tight.


see reply to next post
Pipsqueak frightened off a lot of America's allies when he said and did stuff like that.

You raise some valid points but there are also some things I have to disagree with. You complain of a double standard, comparing the outrage caused by a call  for "destroying the Taliban" (none) and Ahmadinejad´s call to remove/relocate Israel (a lot).

Well, the Taliban were basically a movement , whose members joined voluntarily, that took over a state. The call was never to wipe out the people of Afghanistan, or to wipe out all people in Afghanistan who shared the Taliban´s dominant ethnicity (Pashtun) or their religion. The call was to destroy the Taliban government and the Taliban movement.

Ahmadinejad´s comments were however not directed against a movement, they were directed against an entire people.  and the existence of their nation. You could now argue that Israel is simply a piece of land that has been hijacked by a radical political movement (Zionism), like Afghanistan was hijacked by the Taliban. There remain however still much more important differences, like the fact that Israel has long since become a people, and that their nation, at least in certain borders, is fully recognized by the international community.

Just because Pipsqueek's opinion coincided with the majority of people in the world, that is not automatic justification... that's rightousness

How do you gain moral or legal justification for political action by governments? Does the justification derive from God, then you will have religious wars of all factions. As long as the justification comes from within the world itself, it does in fact come from the majority, not of people, but their representations. It´s called the United Nations and International Law, and while it may be very imperfect and often insufficient there is nothing better around. And in sight of international law and the UN, the Taliban were not recognized as the government of Afghanistan, and they were taken into responsibility for their actions. On the other hand Israel is recognized as a nation with a right to exist (the matter of Israel breaking many aspects of international law is another matter but does not negate their right as a nation to exist).
Possibly more importantly we saw how much the afghans really wanted to be governed by the Taliban, didn´t we; I don´t think the Israelis have a desire to jump into the sea that is comparable in strength to the desire Afghans had to shave their beards after Nov.12,2001.

Let's remember who has been responsible for Iran's turmoils in the last century?  Who has directly attacked Iran before?  Its a pretty long list, but Israel, Iraq and the US can be considered pretty high up on that that one.

Israel and Iran have to my memory never met on the battlefield. (In fact Iran clandestinely procured arms from Israel in the 1980s!) Iraq, the US, Britain, and the USSR all are responsible for aggressions, terrorism, or intervention against Iran. However, Iran is also responsible for plenty of its own turmoil! But Israel?

What is it with the fixation on Israel? Think of Egypt and Jordan, they have fought multiple wars with Israel, are they still calling for Israel´s annihilation; no, they have signed for peace. For Iran, Isreal is really a foreign country, where perhaps certain foreigners are oppressing certain other foreigners. The situation in Israel infringes on Iran no more than apartheid in South Africa did. The questions of Jews in Palestine yada yada El Kuds bla bla is irrelevant. If Iran feels threatened by Israeli nukes, that is another matter. But Ahmadinejad has not called for an end to Israel´s nukes, he has called for an end to Israelis.

Your point regarding the prerequisites for true negotiation is well taken. The approach of the US is that they will act against Iran if they do not give up their nuclear energy program, however if Iran does agree to give up the program, it appears guaranteed that the US will claim that the program is continued in secret anyway, and attack just the same (see Iraq), and even absent the nuclear issue the US have dedicated themselves to destabilize and regime-change Iran and take over their country. And any program that would allow verification to the standards that the US is willing to accept would mean posting US personnel all over the country, aka giving up to occupation without a fight, as the US will never accept a verification by the UN (again, see Iraq).

So indeed there is nothing to negotiate as long as this position is held, and that is why I assume the Iranians have come to the conclusion that a US/Israeli attack is inevitable anyhow; Ahmadinejad´s goal seems to be to rekindle the flames of early revolutinary hysteria and circle the wagons. He doesn´t mind feeding the flames.
The problem is, that even if we assume the EU and US come to the conclusion that there is no real threat, we cannot realistically expect Israel to ignore the situation. The Jews have learned two lessons the hard way, 1) do not be patient, obedient and rely on others to help you in your hour of need; 2) if someone says he wants to kill you, believe him.

Your hypothetical conditions would in my eyes be totally acceptable, if we add to them, 1) a guarantee that Iran will respect the rights of Iraqis to come to their own decision about their future (if they WANT an Islamic republic, so be it), 2) a reasonable solution to the 'terrorist support' issue (easy, actually), 3) guarantuees to freedom of shipping in the Strait of Hormuz so Iran doesn´t abuse its position by threatening with closing shipping for every little thing it wants. But of course this is all parallel-universe stuff.

If I were president of the United States, ha ha - well if I suddenly got remote-control of Bush´s brain I would still have the problem that the situation has developed to a point were it is very close to getting out of control - and this is one thing that Ahmadinejad does have a lot of responsibility for. If he had continued playing a different hand he would still have full support of Russia and goodwill of Europe, due to his statements he has lost this. However if a different strategy could have been  followed, well I would start by thinking about the following things.

  • The NPT is basically bogus. It was ridiculously flawed for the purpose it was originally (allegedly) intended to serve, and it has been turned into a totally different instrument. I am not surprised that many nations ignore it.

  • A minimum step is for Christ´s sake to totally 100% ensure that all nuclear-armed nations are held to the responsibility that they may not attack a non-nuclear nation with nukes first, in any conflict. Otherwise all bets are off and anyone feeling threatened MUST race for nukes. If that means some bunkers remain theoretically unbustable, live with it. Total control is impossible

  • The goal of nonproliferation of nuclear weapons has morphed into a denial of all nuclear technology to nations the US doesn´t like. this has served to greatly increase the motivation to get nuclear weapons technology in fact. Maybe we need a new policy of proliferation management, that works primarily to defuse the motivations to get nuclear weapons

  • In this context it is important to see that getting nuclear weapons is not a point of no return. There are enough instances of nations giving up nuclear weapons that already existed (South Africa, Ukraine) or giving up nuclear programs that were more advanced than Iran´s (Argentina, Brazil). The case of South Africa is interesting because its motivation for nuclear armament rested entirely on the ideological position of the regime. With the ideology of the regime abandoned, the nukes were also abandoned

  • A policy of nuclear balance recognizes that a situation where some are expected to be defenseless is not stable. It is very well possible that even a fully democratic Iran would still be interested in nuclear weapons.

  • Mutually assured destruction is a principle that many people understand. Even most religious fanatics understand it - as long as they believe they are doing God´s work on Earth and it pleases God for them to do more of it. The one kind of fanatic that ignores M.A.D. is the apocalyptic, who believes that Earth has run its course and the Second Coming/Rapture/Return of the Mahdi is imminent. The problem with Ahmadinejad is precisely that he has uttered statements regardin the Mahdi, and himself being surrounded by a godly aura, etc that suggests he may be this kind of fanatic. Most other leaders of Iran are not apocalyptics, as the notion of the Islamic Republic and Velayet-e-faqih have always been to enact godly governance on earth. However if you have someone with nukes, who believes that the time for governance on earth is over, there is a problem

  • The unhealthy fixation on Israel needs to be resolved in order to have a real peace process. The Arab nations, Iran, and other Islamic nations who occasionally butt in are mostly abusing the Palestinian conflict to deflect the attention of their people from other issues - for decades. This does not mean to say that there is not a real problem with the acts of Israel. However the Arab nations, Iran et al are not really focusing on the issues and especially the Arabs have in reality done very little for Palestine. Also, isn´t it funny how the Russians have slaughtered far more Msulims in Chechnya but this is no obstacle to good relations between Teheran and Moscow? The Iranians are culturally, ethnically, historically and religiously not any closer to Palestine than the are to Chechnya.

  • the US has developed a political pathology (which is inherited from one administration to the next) that requires total dominance and control of all areas that affect its interests. Such as the Persian Gulf. The strategic goal of "keeping Iran from developing into a regional heavyweight in the Persian gulf" is idiotic because Iran is the natural heavyweight in the place that is called the fucking PERSIAN Gulf. The attempt to control  this region, so that no regional power can exert control over too much oil (they might raise the prices!) has cost the US far more in terms of trillions of dollars, and eternal enemies, than it might have cost the US to let reginal powers develop and compromise with them (they still need the oil money). Iran would be a good candidate as they are so interested in industrialization! Instead, the US are fixated onto not letting anything slip out of their iron fist and are instead losing much more. How many kids are there now in Iraq, who witnessed the barbaric massacre of their families by Americans? It is almost a certain fate that some of these will grow up with a determination to carry the destruction of all they knew worth living back into the heart of America and make all of these foreigners feel the same way. America has not been helping itself this way. Its obsession with "total" and "full spectrum" dominance is responsible for the almost instinctive ad-hoc Anti-US coalitions that have been springing up. The US political class needs to learn to be content with always wanting the largest piece of the cake, not always wanting all of it.

I'm not trying to justify either one, or one over the other.  I'm outraged at both.  I don't think governments have any rights, never mind justification to use them, so its not important to me where they supposedly get them from.  People have rights and governments, theoretically, are supposed to serve people.  As you are a person (or a pretty good bot), ask yourself what is right or wrong, justified or unjustified and think back to remember who instilled those concepts inside you, then you'll know their origin.  Was it the Preacher, was it your Mom, was it your grandfather, was it God?  Doesn't matter today, as now its your responsibility to live within whatever limitations they impose upon you.  If you chose to transfer certain functions within your personally defined rights to your government, then do so.  But don't give them a blank cheque.  Hold them accountable to your moral standard and your sense of justice.

I presume you've also been through first grade, or bot school, so you will also know what is basically right and wrong and acceptable or unacceptable.  I don't need a code of anybody's laws to tell me what is right and wrong.  When you write down the "laws" all you're really doing is defining the loopholes for some wise guy to get away with murder.  And, as we've seen many times, if a certain power doesn't like the existing law, he/she/it/they will change the law to suit them, or failing that, simply disregard them entirely if they think they do not need to be held accountable to the law.  You seem to imply that the Taliban were not an officially recognized, person, place, thing, organisation or government, therefore you can overthrow them or vaporize them as you chose.  Extending that analogy, are you saying that, if I don't have a valid passport or driver's license at this moment, or for some other reason, I am not an officially recognized human being, you're free to kill me?  Man! That's like Jihad, something else I don't understand;  a "law" that says (from what I do understand about that) it's alright to kill me if I'm not a Muslim, as long as it was properly sanctioned by meeting some kind of religious conditions.  See, there's all kinds of "laws".  You say that's making some irrelevant comparison between apples and oranges and you have nothing like that written down in your government's "codes".  What about the draft back in Viet Nam days?  Closest thing I can think of to Jihad.  I would have had to go there and kill people, just because the US law said the conditions were present and I had no other viable choice.  What did any Vietnamese ever do to anybody within 5000 miles of the United States borders?  What does clear and present danger mean?  See... loopholes all over the place.  

I think my "fixation" on Israel has something to do with their strategic location and them being the most powerfull recognised adversary of Iran and just about everyone else in the area at one time or another who also happen to have a widely recognised nuclear capability.  Something to which perhaps Iran would like to provide some conterbalance.  Given the US history with building nukes to counterbalance the SU for most of the last 60 years, do you claim that would be an unnatural desire?  I don't think I tried to justify Iran's call to oblitherate Israel.  I think I was examplifying their natural desire to have parity with their neighbours.

How can you say that the Israel problem is irrelevant when every mideast country I know of and the US government among others has agreed that the resolution of the Israel-Palestine issue is paramount to a "Long and Lasting Peace in the Area"?  Although later down, you seem to me to be agreeing that it is not irrelevant.  Confussed me.

I don't see anywhere else where we have any unresolved issues and found the rest quite good reading, except I don't think the Pipsqueek's brain even functions on remote control (we'll have to ask Cheney how he does it.  I think its cue cards), but seriously .. dead on.  The US needs to stop showing so much (bloated) face in order to avoid losing it and getting their political ass kicked in the process.  

I have only to add a couple of items,

1.)  That the nuclear kitty is out of the bag and we all need to learn to deal with it sooner or later.  If we don't resolve this issue with Iran, it will resurface sooner or later, probably sooner.  Direct confrontation is definately not the way to go about this.  Do you suppose the US can bluff them into a rerun of the old "Star Wars" Antimissile System Development Program and bankrupt them out of existance?  Looking at the current account balances of each country, that doesn't look like a promising solution, but then again, cheap credit may be available to finance a system like that.  Hopefully it will be "Open License Technology".  Oh I suppose you just giving them to everyone now would work too... little difference... in the long run we'll (effectively) get to the same point on the curve, if we're not their now.

2.)  Even if Star Wars goes to production, the threat of terrorism could go on unabated.  I for one don't like the errosion of civil liberties, and I think the costs of looking under everyone's beds is getting way too far out of hand for the methods used today of combatting that threat.  Even in GB, where there must be the highest number of CATV installations per capita than anywhere else on the planet, they still got to the tubes.  Sure, those guys were identified by their pictures, but the CATVs didn't stop anything from happening.  Is it possible that simple probability of one getting through and the cost of maximizing survailence and interception before the fact actually prohibits an effective implemantation of antiterror measures?  Is this the ulitmate counterbalance to everything?

Re: "a cynic would say--the ideal oil export partner..."

Well, anyone who has read my stuff here knows I'm not the least bit cynical--though I do think that Algeria is a land of opportunity.
If Iran were totally offline that would remove 4million bpd of production and 2.55mbpd out of the world export pool. We've started this discussion before but I dont think there is that much switching ability in the system at all. Probably 2.5mbpd could be met with equivalent demand destruction via higher prices. But if you would add the 2.2m bpd of Nigeria for example,  I think you would get physical shortages, and then things spiral to the point of not being able to predict.

We can only look at history (as you have meticulously done Stuart) to give us a clue of the impact. But in 1979, we had a huge natural gas inventory to fall back on (plus nuclear, hydro etc). Now our 'fuel-switching' is biomass and coal, both viable but with limits, as well as capital and time constraints.

In my opinion, Irans production totally offline in todays world is not only a price spike but a disaster.

Re: "Production has never reached that peak level again. Iranian production slowly recovered through the eighties and early nineties to reach a level of about four million barrels/day in recent years. Iraqi production..."

This is interesting because after the Venezuelan political unrest in 2002/2003, their production has never reached former levels.
Sorry, I should have provided the EIA country link.
In my opinion, a disruption in Iranian exports would be a net long term benefit to the world economy, in the sense that the sooner we start adjusting to higher oil prices--and less oil---the better off we are going to be.  A better way to do it would be with a much higher gasoline tax, but that does not appear to be a realistic possibility.

However, the geopolitical effects of an attack on Iran would be severe.  I've thought for a long time that Iran is to World War III as Poland was to World War II.  

Guess who is playing the role of the Germans this time?

This morning, a Fox News talking head introduced a segment on Iran with the following lead, "When will the time for talk be over and when will it be time for action?"

I agree that the sooner we get oil to triple digits and beyond the more realistic strategies for 'sustainability' can be made (in quotations because probably nothing is long term sustainable for 6.7 billion people with declining fossil fuel sources). But an overnight removal of that amount of oil would alter the short term drops in dopamine we experience from gradual oil price increases into full blown doses of testoserone in the Fox viewers. Any Mike Tyson-like reaction by US might trump the 'net long term benefit' you envision. We agree that prices need to go higher in order to give us the pain to change.
Part of the pattern seems to be that the more severe the shock, the most inelastic demand appears to be in response.

Now, I would have never thought that way. It's a brilliant point you've made Stuart.

This explains very well why the rise of prices since mid 2004 haven't made more havoc than we'd probably expect. Smaller increases allow people to acomodate more easely.

Well, as for Iran it really is a difficult case. I can't see any other way to the West than diplomocy. A diferent course of action will be worse to us than them.

And of course, I believe Iran to be a respectfull country like any other. They've signed the Non-Proliferation treaty, why should we distrust them?

SS, A alternate heading for your post could have been "The Iranian Oil AND GAS Weapon". Let's not forget that Iran and tiny neighboring Qatar together have 30+% of the worlds natural gas reserves.
By the way, based on the P/Q versus Q method, Iran only has about 60 Gb of oil left, and they have  a pretty steep P/Q intercept--almost identical to the North Sea.

The four top net exporters are:  Saudi Arabia; Russia; Norway and Iran.  Three of the four are at or beyond the 50% of Qt mark (I haven't seen a P/Q versus Q plot for Russia).  

This is one of the reasons that Iran wants to develop Nuclear Energy. For internal energy consumption, it sees Nuclear as the more viable medium term source of energy.

Iranians will be unable to afford oil as peak oil hits. All their oil will be exported, and they will rely upon Nuclear for internal energy use. Iranian economy is not highly automobile dependent. Thus Rail and electric power can suffice for a large proportion of their energy use.

I don't think anyone seriously beleives that Iran is pursuing nuclear technology only, or primarily, for domestic power generation. It is preposterous to think that a country that is one of the primary owners of natural gas would bank on nuclear for their future, especially at the risk of int'l sanctions.

How much power is Iran currently producing using nuclear? How many facilities are planned? Given the duration of Iran's interest, their capital resources, and the availablity of nuclear technology, why aren't they generating now?

At least the argument that Iran eeds weapons to protect themselves makes some sense. Claiming that pursuit of nuclear power generation is ther motive appears to be willful blindness.

Iran's nuclear program goes back to the 1970s under the Shah's regime, when it was recognised that if the country were to industrialize it would need plenty of energy -- and using up the oil and gas to do so would only leave dates, carpets and pomegranites to export.  

As for the natural gas potential, I believe that some of it is being used support some fields in decline as well as power their expanding economy.  With an expanding economy, and planned exports to India, China and Pakistan, I wonder if immense gas reserves may already be spoken for.

Iran has only so much hydro power in the Zagros mountains, and supplying its economy will either consume its own oil and gas or they must go nuclear (or wind, or solar if possible, but doubt).  Iran is not a small country, with a small population.

The case for nuclear was set with the US lead invasion of Iraq -- no nukes -- get wiped out.  North Korea's Kim Il Jong must feel very smug right now.

Muhandis said: "The case for nuclear was set with the US lead invasion of Iraq -- no nukes -- get wiped out.  North Korea's Kim Il Jong must feel very smug right now."

I acknowledged that this is a reasonable argument. I said it was unrealistic to pretend that there is no weapons component to Iran's nuclear program, or that it is a secondary consideration.

I don't buy the ideas that Iran has sold all of their gas and are now cash rich and energy poor. I do not see any scenario in which it makes sense for China to generate electricity from gas, but doesn't make sense for Iran. Gas plants have a low capital cost and given local resources is a very viable solution to the countries energy needs.

If someone can present a case for why it would make sense to think that Iran is selling gas for others to use to generate electricity, but can't do so themselves, I'll listen.

Comparative advantage in developing nuclear power must come in part through access to inexpensive capital. Gas versus nuclear is certainly a real debate in some countries, but face facts: Iran's nuclear ambitions involve bombs, not power plants.

Well, if you don´t believe Iran might have any interest in a new energy source, do the following:
-Get yourself the numbers for the development of Iranian oil/gas production and their trends
-Get yourself the numbers for Iranian economic growth, energy consumption, population growth rates
-Project them into the future and llok for the intersection...

-Now consider that Iran needs jobs for its huge population of young people or must descend into poverty. Those jobs need to come from industrialization, which needs lots hard currency, as they cannot bootstrap their entire industrialization. that hard currency right now is coming from energy exports. So it does not seem unwise for Iran to invest heavily once into developing a major nuclear infrastructure and profit for many decades (nuclear plant running time, 50 years or so) by selling off a much higher part of the fossil fuels instead of buring them. Iran is still creating even electricity in  significant amounts from oil.
You cannot make a comparison of China and Iran. China´s economy is living off exports of manufactured goods to other Asian nations and the West. It is not living off the sale of raw materials - instead it depends on their import. Iran is in the position of wanting to develop an economy that might make money by export of manufactured goods but is right now still living mostly living off resource exports. The goal for Iran is to extend the life of their valuable resource until their economy is transformed. People all over the world will continue to buy oil/gas from them, but if they burn all their oil/gas for electricity, will Japan or EU buy electricity off them? Hardly. So it is wise for Iran to create its electricity and internal energy consumption from something other than exportable fossil fuel, and sell as much of those as possible.

I wasn't aware of Japan and the EU buying electricity from either Iran or China. Could you fill me in on what you meant?
What I mean is this:
Iran extracts oil/gas fro its. It uses this for two things
a) domestic - transport + electricity
b) export to EU, China, Japan etc.

If it replaces its domestic electricity generation with nuclear energy, it saves oil+gas which it can now export. That is what Japan, China and EU are buying from Iran: Oil, gas. Iran gains export revenues from this.

If it increasingly uses up its oil/gas for domestic electricity generation because "it doesn´t need nuclear" - nobody imports electricity from Iran. So, no export revenue.

Nowhere did I suggest that anyone imports electricity from Iran. My argument is that the statement "Iran doesn´t have any motivation for civilian nuclear energy use because they have oil and gas" is wrong; they have a very strong motivation for it.

...will Japan or EU buy electricity off them? Hardly.

You said it, so I'm assuming you suggested it.

Uh maybe this is a language problem?

If I say it is "hardly likely" that Japan or EU will buy electricity from them then what I mean it the likelihood is LOW. (because there is no way to do it anyway)

So, to restate clearly: No-one is buying electricity from them, and no one will, and I never suggested this is happening, or could happen. What I did suggest is that it is extremely unlikey this would ever happen.

I've debated actually responding to this but here goes. If there is a language problem, it is yours. If there is,as you say,"no way to do it," then that would make the likelihood ZERO, not low. That is the reason why I simply questioned your original statement. Again, I am not saying this stuff, you are.  It's OK to admit you made a mistake. Acting like I'm the idiot isn't going to work. You can't build the entire case against yourself and then blame me because I pointed out the discrepancy. Otherwise, I totally understand what you are saying on a broader level and actually agree. I'd say "just drop it", but obviously I can't do that myself, so whatever.
Well there is really something I do not understand here. I honestly do not know what is going on here.
A person called Jack said the following

"I do not see any scenario in which it makes sense for China to generate electricity from gas, but doesn't make sense for Iran. "


"but face facts: Iran's nuclear ambitions involve bombs, not power plants. "

I argued against these statements of Jack saying, that converting its fossil fuels to electricity is not the best path for Iran. And that therefore a primary energy motivation is an acceptable notion.

Here I said "but if they burn all their oil/gas for electricity, will Japan or EU buy electricity off them? Hardly."

IF states that this is not happening now.
WILL states that this would have to be somehting in the future.
'HARDLY' denotes that this Not-happening What-if scenario for the future is unlikely. Since it is  IN AN ALTERNATIVE REALITY FUTURE I cannot claim full knowledge but my guess is that even in this alternative future such an event could not happen. Although my personal conviction is that it is 100% impossible.

And then you, Mr. Oil CEO jump in and berate me for allegedly claiming that this Not-happening Alternative-Reality What-if scenarion were the truth! What is your problem? I would suggest, just drop it.

And if it is my language problem, I have no problem with that. Since after all, I did suggest that it was my language problem.

But then, I recognize here the pattern, you argue about that which is not there, but ignore that which is there?

Alright, let's just drop this. I'm sorry I brought it up.
Oil CEO, I understood immediately what plasticgolem meant. You both use English well, and you're both smart, and I don't know why you read it differently from how he wrote it. But as far as I can tell, he used fairly standard language tools. Paraphrased: "If Iran were to generate electricity from their gas, they would be left without an exportable commodity."

I'm not saying you were wrong to be confused, but I am saying that he was not wrong to write his argument the way he did, and I think you have no call to badger him to admit he was wrong.



To be accurate, yuor quote would have to read

"If Iran were to use ALL OF THEIR GAS to generate electricity, they would be left without an exportable commodity."

I don't think domestic demand would put that much of a crimp on overall supply or significantly reduce exports. Iran has one of the world's largest gas reserves and not a huge amount of power demand.

Further, the income gains from would be less than the cost involved in generating electricity from other fuel sources.

I am staying far clear of the earlier skirmish, but don't think it is at all clear that it makes sense for Iran to treat gas as strictly for export. I have explained my thinking in more detail in other posts.

You are right. And I apologized for bringing it up. I've dropped it.
Actually, the Iranian nuclear programme dates back to 1959. The blueprint to which they are working is a rehash of a plan developed in the mid-1970's with Westinghouse which envisioned the development of 20 reactors for domestic power consumption. It also needs to be stressed that Iran is self-sufficient in uranium ore.

Iran could develop its gas sector more fully - but that wuld probably require an end to US sanctions and access to World Bank funds to develop the pipeline infrastructure.

Nuclear power is far more capital intensive than generating power from natural gas.
Yes, but they can't sell nuclear power to rich industrialized nations.  

Have you see the little quote that rotates in the upper right corner?  "My father rode a camel. I drive a car. My son flies a jet-plane. His son will ride a camel."  The oil-producing countries of the Middle East are very aware of depletion.  Iran has made a conscious decision to husband their petroleum, so that future generations will have something to sell.  They are thinking about the future in a way we never do.


The son will ride the camel again because the oil producing nations frittered their wealth on nonproductive assets. I agree that nuclear power would be a better way to spend resources than on weapons programs, ski trips and shopping binges. However, it is still worse than developing an infrastructure for development closer to what Asian countries have for example. Education, for example, will get more people off of camels than nuclear power.
At these prices of NG it is ridiculous to build NG powered plants, and consequently nobody is doing that. Check out here.
If you don't have coal and you have quite a lot of uranium the nuclear option is the only one and left (if you leave wind in the environmetal dream world where it belongs).

I can not escape the feeling that your opinion is predetermined maybe by some "Axes of evil" talk. Like it or not countries that have not a ouchy-gouchy goverments like ours have long understood that nuclear is the only alternative to fossil fuels in the medium to the long term to come.

Like it or not countries that have not a ouchy-gouchy goverments like ours have long understood that nuclear is the only alternative to fossil fuels in the medium to the long term to come.

Agreed.  Iran's oil ministry has openly talked about peak oil for awhile now.  They know they are looking at becoming an oil-importing country in a few years if the trendlines continue.  

C'mon LevinK. If I don't agree with you I must be a neocon? If you had read my posts, you would know that I have not supported Bush or even said the US is right.

I'm just trying to bring the conversation around to facts. I have said several times, that I disagree with your assertions and that I would like to see evidence so that we can discuss, learn and maybe even meet in the middle.

It seems bizzare to me to claim that it is uneconomical for Iran to use gas to generate power, but it makes sense to convert it into LNG, ship it around the world and gain export revenues from others that use it. Your link seems to prove my point. It is too expensive to build power plans where it needs to be shipped in as LNG.

However, Iran is sitting on a lot of gas. My impression is that it is not going to run out in the medium term (defined by the operating lifetime, or cost recovery cycle of a gas fired plant). You appear to disagree on this point. If you have data that shows I am wrong - and maybe you do - I will admit it. I think that would be win-win. I'm here to learn, not score debating points.

Natural gas plants are also fairly low technology and and have lower capital costs than nuclear - an additional asset  for countries that have limited access to capital. Finally, many other countries do plan to develop nuclear power, however there are much easier ways to do it than the approach the Iranians have taken. The costs of capital for a capital constrained economy added to the burdens of sanctions make nuclear a losing proposition for Iran compared to using their own gas.

So you can keep on throwing out stuff like "countries that have not a ouchy-gouchy goverments like ours have long understood that nuclear is the only alternative to fossil fuels in the medium to the long term to come." But face facts - this is a discussion board. I'm allowed to discuss it.

The original point that gas-fired power is cheaper and better for Iran seems so obvious to me that I have also doubted your partiality and motives. However, I chose to try to focus on facts. I suggest you do too.

This seems to be pretty simple. I'm not sure why there is so much debate.

Surely, IF the peak oil thesis is approximately accurate, then the one thing you don't want to do is consume hydrocarbon reserves now. You know they'll (very likely) be worth a great deal more in the relatively near future. You want to do what you can to not burn them now and have more available to use or sell in the future.

The balance to this is you need to power your economy now.

I would not be surprised if Iran's motives for nuclear power include a weapons component, but to argue that Iran could not reasonably seek nuclear power without having a weapons motive seems to me absurd.

If you think the value of hydrocarbons is going to skyrocket in the relatively near future, it makes only simple common sense to seek to preserve them for when they are highly valued, and to ensure you will not be locked in to using them for trivial purposes (read substitutable) when they are so highly valued.

Thank you, this is exactly my point. Just to add that according to USGS Iran has 864.7 Tcf of identified NG reserves but just 0.9 Tcf of production. They must have made the simple math that in future it will be better to export the to-be developed NG production instead of burning it at home (70mln. people and growing represents quite a pressure). Additionaly if the future production will be for export it would be very easily for them to attrack foreign investments.

I know some Iranians and IMO they are not a stupid nation at all; they don't want to share the future of Saudi Arabia which is already doomed to face severe problems due to its overexhaustion of resources.

Look at it this way: For the sake of the argument, there are two places gas can be used to create electricity and two places nuclear can: Inside Iran and outside Iran.

Inside Iran gas is cheap and supply is assured. Outside Iran, it is more expensive (based on how and how far it is shipped), and bears supply risk. Look at Constellation Energy. It is obvious that electricity produced using gas outside of Iran is going to cost more than inside of Iran. I don't see how this can be disputed.

Outside of Iran nuclear is going to be somewhat cheaper. Developed countries have more open capital markets and lower risk premiums on investment. Developing countries have limited access to capital in any case.  Sanctions make it worse. Shipping uranium is easier than shipping gas.  

At a system level, the lowest cost means of producing electricity in the two places is gas in Iran and nuclear outside. Any deviation from this introduces new costs that are either waste or transportation costs.

If using gas for electricity doesn't make sense in Iran, it can't possibly make sense anywhere else.

That is a good point but Iran does not border a developed country that it can import electricity reliably from. Maybe Turkey can be counted as one, but they are soon going to face the same problems as Iran (I know that my home country exports to Turkey, we do have nuclear).

Anyway if I were Iranian I'd want this to happen, because there is a clear distinction between countries which are in the nuclear club and those who are not. The world is slowly waking up for the nuclear power and those that are first will be the winners. I can not agree with the double standards here - Iran is sentenced to be an "evil country" and that's why they are refusing it to have what it wants. All others apparently are the good guys because they can get what they want freely. I don't think Iran is like Korea no matter what they say; the anti-Israely talk was mainly to challenge US in their current game. Nobody is going to go to war with anybody (not to mention about nuclear weapons), especially in the presence of US nearby. It seems that only we are that stupid to do that nowadays.

I lived in Turkey for 2 years and loved it, but I'll tell you they've got nothing to spare and you can hardly walk around in Ankara in the winter without choaking on the low grade coal smoke from what most people are burning in their kitchen stoves.  And only relatively minute quanties of other HCs.  Their counting on making money just from transport revenues from the BTC pipeline and were importing a lot of what they needed (previously illegally) from Iraqi tanker trucks running the border and what the locals could carry across the in jerry cans.
I think that there is plenty of stupid going around.  

I recognize that Iran is an independent country with a great history and culture. It is not a backwater and can't be preached to. I don't think it is an evil country, or even that its leaders are evil. I understand that it is hypocritical for the US (and others) to say Iran can't have nuclear weapons, but it can. I do think that Iran has a right, equal to that of every other country to pursue peaceful nuclear energy.

However, in addition to the obliterate Israel comments, Iran has been accused of being primary supporter of terrorism in the region and as far Argentina. The current government is totalitarian and their democracy is in part a facade. The range of people permitted to run for election is very small and select.

The US did not encourage, or turn a blind eye towards the development of nuclear weapons in India or Pakistan. In fact the US did sanction both countries (if  recall), but what can you do after the fact - especially unilaterally.

The US, much of Europe and even the IAEA seem to be talking from the same sheet. Mohamed ElBaradei even said:

"If [the Iranians] decide to go the confrontation route, everybody will be hurt, there is no question about it. But at the end of the day, in my view, they will hurt more because there is a more united international community."

I do understand your desire for a fair and equal treatment for Iranians, but think you need to have some sympathy for those of us who legitimately feel the world is a better place without nuclear bombs in Iran.

The US couldn't possibly invade Iran without the pretext of nuclear weapons. So while you can say possession of the bomb would protect Iran from invasion, it is also the only reason I can think of they would be a realistic target for attack at all. The foolish quest for nuclear weapons is condemning millions of Iranians to poverty and dooming the hopes of its people to be treated with the respect they deserve.

PS: I wasn't suggesting that Iran import electricity. I think that they could generate plenty themselves using gas in the short to medium term and nuclear further out (if they wanted). No one would have any problem with Iran developing nuclear power as long as they proved it was for peaceful purposes. Brazil and South Africa did this too.

Well I guess that was the polite way of saying that Iran is considered evil/unstable (because of suspected terrorism support) and therefore the special treatment.

I guess we have a fundamental difference of views here (always comes to values, huh?:). You'd feel much safer if the world did not have countries like Iran or had them put under some kind of control (like for example tied hands, legs and mouth). I'd feel much safer if we were not provoking countries like Iran who have no other option but counter our rude power with subtle measures. This would potentially result in us seeing the bomb coming... Let's face it - Iran is a weak and poor country, dependant for almost everything on its trade with the Western World. It wouldn't do anything stupid, they know it and just gamble for a better place on the table. Just like all the rest. TI was talking about a lot of possible mutually beneficial deals with US and I think that was the correct path to take. With bluntly demanding that they shut down their program (yeah potentially dual-use, but isn't this part what they hope for us to think?) completely we closed ourselves the doors to that (ever heard US making a compromise?). Well I don't believe in US going delibertely into the "Iranian trap", I am expecting a further move from them and that's what I fear from.

The most idiotic theory I read today is that Iran is planning (nuclear?) attack on USA so that USA retaliates attacking Iran and inflaming a world-wide hate throughout the muslims. Question: what Iran wins from that? Scenic pictures of nuclear mushrooms over Teheran?

Just to add to the mix, if Qatar is spending billions to build a natural-gas to diesel plant, then potentially others might find it economical to do the same.  Natural gas is not just for electricity.  
Absolutely Correct!

A simple need for hard currencies is what drives a lot of government special export programs.

soft evidence

Business News Americas reports that OPEC member Venezuela, in response to rising oil prices and the growing concern over peak oil, has committed to converting the nation to wind power in order to free up more oil for export. Venezuela's state oil company, Petroleos de Venezuela S.A. (PDVSA), plans to boost exports by 100,000 barrels per month through increased domestic use of wind-generated power. The oil will fetch about ten times the price internationally as it would at home, and wind-generated power will be gentler on the country's environment. The first generator facility is tentatively scheduled to be operational in 2007, generating 100 megawatts of electricity, and another facility is in early planning stages.

I agree that this is a good and important point. I also agree that this could be a good reason for Iran wanting to develop nuclear power over the medium term.

I would note a few counterpoints:

  1. I suspect that the commercialization of gas to diesel is at a small-scale pilot level. Do you have a link the the Qatar example or details of volume?
  2. This is a newish development and does speak to Iran's earlier motives.
  3. No one is stopping Iran from a transparent pursuit of nuclear power. If this case goes in front of the IAEA, it is going to be very obvious that there is more to Iran's nuclear ambitions than electricity.
Check the new open thread on Thursday Jan 19th(tomorrow.
Why this focus on burning gas for electricity? Perhaps Iran plans to install a gas-to-fertilizer plant in a few years, and wants to make sure they will still have the gas supply to make it pay off. Fertilizer is pretty efficient to ship. And when gas gets tight, so will fertilizer.

But there's another problem with the argument about making electricity in Iran being just as good as making it elsewhere. That argument ignores the aspects of time and peak-oil preparedness. Let's look at some of the choices Iran has:

  1. Buy gas-to-electricity plants today, have enough electricity for a while, not export much gas.

  2. Buy nuke plants today, have enough electricity for a while, export gas later.

  3. Buy nuke plants today, have enough electricity, build gas-using infrastructure later.

By your argument, option 2 is pointless, because using the gas outside Iran will be less efficient than using gas inside Iran. Better to build the nuke plant where the gas would have been shipped to.

The trouble with this argument, and the advantage Iran has, is that most areas of the world are not going to seriously prepare for peak oil. You think America is going to build that nuke plant? Not likely. Not before gas goes to $5 or $6 a gallon. Then we'll start looking for a site, trying to get permits, etc. America will be hurting for energy for a decade. Look how much gas-fired electricity we have.

Meanwhile, Iran will have the nuke plant already built and running, and plenty of gas to sell to America at a premium, because they looked farther ahead than we did. In this scenario, that gas will be worth far more in America than in Iran, because America was short-sighted. This is certainly true if it's used to make electricity in both places--and it may even be worth more for heating in America than for electricity in Iran, because we have lots of money and no plan B.


Chris - I'll give you credit for not giving up. But you have got to look at numbers before you try to claim that Iran could possibly use up their reserves for domestic power production or fertilizer.
Gas can be used as feedstock for many other fuels, chemicals and plastics.
What about my other point--that Iran may be making a longer-term investment to take advantage of America's short-sightedness?

BTW, if Iran has more than enough natural gas to produce the world's supply of fertilizer, then why are we worried about fertilizer being scarce when Peak Oil or Peak Energy hits?


I acknowledged that this is a reasonable argument. I said it was unrealistic to pretend that there is no weapons component to Iran's nuclear program, or that it is a secondary consideration.

I don't buy the ideas that Iran has sold all of their gas and are now cash rich and energy poor. I do not see any scenario in which it makes sense for China to generate electricity from gas, but doesn't make sense for Iran. Gas plants have a low capital cost and given local resources is a very viable solution to the countries energy needs.

If someone can present a case for why it would make sense to think that Iran is selling gas for others to use to generate electricity, but can't do so themselves, I'll listen.

Comparative advantage in developing nuclear power must come in part through access to inexpensive capital. Gas versus nuclear is certainly a real debate in some countries, but face facts: Iran's nuclear ambitions involve bombs, not power plants.

You appear fixated on the weapons aspect alone. Iran's oil is close to or past peak, according to Ali Morteza Samsam Bakhtiari, senior expert at the Iranian National Oil Company. Further, as we've seen in the US, gas depletes much faster than oil. And further still, the value of the oil and gas as trade to other nations is high right now. This all leads to the same view as in the US - that a long term energy strategy, not one predominated by asinen MBA 90 day bottom line assessments, leans towards nuclear solutions, not petroleum/gas.

So yeah, anyone with eyes to see will agree that Iran almost certainly has nuclear weapons ambitions. The US has ensured that having the nuke is a trump card by how we handled Iraq versus how we handled North Korea. But at the same time, nuclear power remains the better long term choice for many nations, including Iran. Iran doesn't have an existing infrastructure for petroleum consumption like the west does. So why not sell the oil at high markup to the west and build their own infrastructure around nuclear which can last far longer?

There is an excellent case for nuclear power generating capacity for Iran, especially if you look beyond the end of the next quarterly earnings report. Consequently, I fully believe Iran when they say they want nuclear power generating capacity. However, I don't believe them when they say they are not interested in the bomb. The two positions are not mutually exclusive, no matter how much you seem to think they are.

Since it is clearly related, read HO's story today and especially about the unpalatable choice regarding oil export sanctions against Iran to punish them over their nuclear program.
The focus in the posts so far has been on what Iran might do if attacked by the US, and the consensus seems to be that we should expect either a partial or total halt in Iran's oil exports.

I agree, but I also think that we have a lot more to worry about that just Iran. If a massive and highly destructive attack is made against Iran, and particularly if Israel is directly or indirectly involved, than would it be unreasonable to expect that many of the other oil exporting countries in the Middle East might also impose an oil embargo on the West out of sympathy for their Islamic brothers?

And if that happens, then what?

Then Chavez pals up with China, and Russia strengthens its borders, and I become a farmer.
Yes, what about Venenzuela; the possibility that Chavez cuts of shipments of oil the US?
I beleive that there was something in the press about a year ago when Iran and Venezuela agreed to embargo oil shipments to any aggressor states if attacked.  I don't know if this was hot-air from Chavez or something of substance.
The Iranians could also block the strait of Hormuz which would accomplish the same thing.
"Islamic Brothers?"

You mean the Sunni House of Saud?  Remember that Iran's IRBMs can reach Riyadh and Cairo.  The US is not the most likely nuclear target but the local Islamic brothers.  The Sauds were supportive of our removal of Saddam; today they face a similar threat from Iran.

The big problem is not so much Israel as Iran as a regional nuclear power with an unstable theocratic ruling group.  They intend to intimidate their "Islamic Brothers"' not lead them.

Comparing the US to Nazi Germany is a complete misreading of history.  Even Mussolini thought Hitler and gang were nuts.  Listen to the public utterances of Ahmadinejad and tell me he is not trouble with a capital T!

The choices are coming down to capitulation to a nut, regime change, or military action. The second is preferred but the first is the unthinkable option.

"Islamic Brother"  To add some comments, on this theme, we are then talking disfunctional family as I doubt the centuries divide between shite and sunni could ever be reconciled.

The threat to the Saudi's is that Iran represents a popular revolution that overthrough the monarchy.  The threat to the West is that Iran represents a popular revolution that overthrough a monarchy, installed a shite theocracy, and might inspire wahhidists and other extreme sunnis to do the same in their countries.

It was the threat of overthrough that resulted in Kuwaitis and Saudis bankrolling Iraq in the first gulf war (Iraq vs Iran)! The West was only too eager to supply the weapons in the 1980s to their ally, Saddam Hussien (paid by petrodollar loans from the Kuwaitis and Saudis to Iraq).

Iranians are Persian, not Arab, and Shia, not Sunni. The Arab countries are not anxious to see a nuclear armed Persia. Persian tensions with their neighbors precede biblical Israel.
Actually, Iran is an ethnically diverse country.  Persians are the largest ethnic group with Azeris (Turks), Kurds, Arabs, Baluchis, Armenians and others filling in the gaps.
A related pre-history of the Great Gulf War of 2007 is at:

or also at:

Iranians see themselves threatened by the U.S., Britain, Israel and Russia. Britain and the Soviets invaded Iran in 1941, a forgotten aggression as criminal as Hitler's invasion of Poland. The U.S. and Britain overthrew Iran's democratic government in 1952, imposing their puppet, Shah Pahlavi. In 1980, the U.S. and Britain engineered Saddam Hussein's invasion of Iran that inflicted nearly 1 million Iranian casualties. Ahmadinejad led volunteers in that war.

btw ... fwiw Iran was reported to have received 3 stolen nukes in the 1991 period (CIA report via Time Magazine back int eh mid 90's) and another 6 to 9 in the 1995-98 period so they may already be a "nuclear power".

Keep in mind that Buehler reported on the phone that these guys have nukes.

Gavrilo Princip.  Anyone recognize the name?  How about Ralph Nader?

Gavrilo Princip fired the shot that killed Archduke Ferdinand, triggering World War I, and indirectly World War II.  I suppose that the war might have happened anyway, but perhaps not.  How might the history of the 20th Century have been different without this assassination?

My thesis is that Gavrilo Princip was to World War I as Ralph Nader is to World War III, in the sense that Nader politically assassinated Al Gore.  How might the history of the 21st Century have been different if Gore had been president?

BTW, I suggest that you read Al Gore' speech today, on the Drudge Report.  The introduction is as follows:

"(Republican) Congressman Barr and I have disagreed many times over the years, but we have joined together today with thousands of our fellow citizens-Democrats and Republicans alike-to express our shared concern that America's Constitution is in grave danger.

 In spite of our differences over ideology and politics, we are in strong agreement that the American values we hold most dear have been placed at serious risk by the unprecedented claims of the Administration to a truly breathtaking expansion of executive power.

As we begin this new year, the Executive Branch of our government has been caught eavesdropping on huge numbers of American citizens and has brazenly declared that it has the unilateral right to continue without regard to the established law enacted by Congress to prevent such abuses.

 It is imperative that respect for the rule of law be restored.

 So, many of us have come here to Constitution Hall to sound an alarm and call upon our fellow citizens to put aside partisan differences and join with us in demanding that our Constitution be defended and preserved."

Here's the whole text. As for Nader, the election was stolen in Florida, and the theft legalized by the Supreme Court's paty-line vote.

'We the People' Must Save Our Constitution  
by Al Gore
Constitution Hall, Washington, D.C.
Monday, January 16 2006 12:30 PM

Congressman Barr and I have disagreed many times over the years, but we have joined together today with thousands of our fellow citizens-Democrats and Republicans alike-to express our shared concern that America's Constitution is in grave danger.

In spite of our differences over ideology and politics, we are in strong agreement that the American values we hold most dear have been placed at serious risk by the unprecedented claims of the Administration to a truly breathtaking expansion of executive power.

As we begin this new year, the Executive Branch of our government has been caught eavesdropping on huge numbers of American citizens and has brazenly declared that it has the unilateral right to continue without regard to the established law enacted by Congress to prevent such abuses.

It is imperative that respect for the rule of law be restored.

So, many of us have come here to Constitution Hall to sound an alarm and call upon our fellow citizens to put aside partisan differences and join with us in demanding that our Constitution be defended and preserved.

It is appropriate that we make this appeal on the day our nation has set aside to honor the life and legacy of Dr. Martin Luther King, Jr., who challenged America to breathe new life into our oldest values by extending its promise to all our people.

On this particular Martin Luther King Day, it is especially important to recall that for the last several years of his life, Dr. King was illegally wiretapped-one of hundreds of thousands of Americans whose private communications were intercepted by the U.S. government during this period.

The FBI privately called King the "most dangerous and effective negro leader in the country" and vowed to "take him off his pedestal." The government even attempted to destroy his marriage and blackmail him into committing suicide.

This campaign continued until Dr. King's murder. The discovery that the FBI conducted a long-running and extensive campaign of secret electronic surveillance designed to infiltrate the inner workings of the Southern Christian Leadership Conference, and to learn the most intimate details of Dr. King's life, helped to convince Congress to enact restrictions on wiretapping.

The result was the Foreign Intelligence and Surveillance Act (FISA), which was enacted expressly to ensure that foreign intelligence surveillance would be presented to an impartial judge to verify that there is a sufficient cause for the surveillance. I voted for that law during my first term in Congress and for almost thirty years the system has proven a workable and valued means of according a level of protection for private citizens, while permitting foreign surveillance to continue.

Yet, just one month ago, Americans awoke to the shocking news that in spite of this long settled law, the Executive Branch has been secretly spying on large numbers of Americans for the last four years and eavesdropping on "large volumes of telephone calls, e-mail messages, and other Internet traffic inside the United States." The New York Times reported that the President decided to launch this massive eavesdropping program "without search warrants or any new laws that would permit such domestic intelligence collection."

During the period when this eavesdropping was still secret, the President went out of his way to reassure the American people on more than one occasion that, of course, judicial permission is required for any government spying on American citizens and that, of course, these constitutional safeguards were still in place.

But surprisingly, the President's soothing statements turned out to be false. Moreover, as soon as this massive domestic spying program was uncovered by the press, the President not only confirmed that the story was true, but also declared that he has no intention of bringing these wholesale invasions of privacy to an end.

At present, we still have much to learn about the NSA's domestic surveillance. What we do know about this pervasive wiretapping virtually compels the conclusion that the President of the United States has been breaking the law repeatedly and persistently.

A president who breaks the law is a threat to the very structure of our government. Our Founding Fathers were adamant that they had established a government of laws and not men. Indeed, they recognized that the structure of government they had enshrined in our Constitution - our system of checks and balances - was designed with a central purpose of ensuring that it would govern through the rule of law. As John Adams said: "The executive shall never exercise the legislative and judicial powers, or either of them, to the end that it may be a government of laws and not of men."

An executive who arrogates to himself the power to ignore the legitimate legislative directives of the Congress or to act free of the check of the judiciary becomes the central threat that the Founders sought to nullify in the Constitution - an all-powerful executive too reminiscent of the King from whom they had broken free. In the words of James Madison, "the accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny."

Thomas Paine, whose pamphlet, "On Common Sense" ignited the American Revolution, succinctly described America's alternative. Here, he said, we intended to make certain that "the law is king."

Vigilant adherence to the rule of law strengthens our democracy and strengthens America. It ensures that those who govern us operate within our constitutional structure, which means that our democratic institutions play their indispensable role in shaping policy and determining the direction of our nation. It means that the people of this nation ultimately determine its course and not executive officials operating in secret without constraint.

The rule of law makes us stronger by ensuring that decisions will be tested, studied, reviewed and examined through the processes of government that are designed to improve policy. And the knowledge that they will be reviewed prevents over-reaching and checks the accretion of power.

A commitment to openness, truthfulness and accountability also helps our country avoid many serious mistakes. Recently, for example, we learned from recently classified declassified documents that the Gulf of Tonkin Resolution, which authorized the tragic Vietnam war, was actually based on false information. We now know that the decision by Congress to authorize the Iraq War, 38 years later, was also based on false information. America would have been better off knowing the truth and avoiding both of these colossal mistakes in our history. Following the rule of law makes us safer, not more vulnerable.

The President and I agree on one thing. The threat from terrorism is all too real. There is simply no question that we continue to face new challenges in the wake of the attack on September 11th and that we must be ever-vigilant in protecting our citizens from harm.

Where we disagree is that we have to break the law or sacrifice our system of government to protect Americans from terrorism. In fact, doing so makes us weaker and more vulnerable.

Once violated, the rule of law is in danger. Unless stopped, lawlessness grows. The greater the power of the executive grows, the more difficult it becomes for the other branches to perform their constitutional roles. As the executive acts outside its constitutionally prescribed role and is able to control access to information that would expose its actions, it becomes increasingly difficult for the other branches to police it. Once that ability is lost, democracy itself is threatened and we become a government of men and not laws.

The President's men have minced words about America's laws. The Attorney General openly conceded that the "kind of surveillance" we now know they have been conducting requires a court order unless authorized by statute. The Foreign Intelligence Surveillance Act self-evidently does not authorize what the NSA has been doing, and no one inside or outside the Administration claims that it does. Incredibly, the Administration claims instead that the surveillance was implicitly authorized when Congress voted to use force against those who attacked us on September 11th.

This argument just does not hold any water. Without getting into the legal intricacies, it faces a number of embarrassing facts. First, another admission by the Attorney General: he concedes that the Administration knew that the NSA project was prohibited by existing law and that they consulted with some members of Congress about changing the statute. Gonzalez says that they were told this probably would not be possible. So how can they now argue that the Authorization for the Use of Military Force somehow implicitly authorized it all along? Second, when the Authorization was being debated, the Administration did in fact seek to have language inserted in it that would have authorized them to use military force domestically - and the Congress did not agree. Senator Ted Stevens and Representative Jim McGovern, among others, made statements during the Authorization debate clearly restating that that Authorization did not operate domestically.

When President Bush failed to convince Congress to give him all the power he wanted when they passed the AUMF, he secretly assumed that power anyway, as if congressional authorization was a useless bother. But as Justice Frankfurter once wrote: "To find authority so explicitly withheld is not merely to disregard in a particular instance the clear will of Congress. It is to disrespect the whole legislative process and the constitutional division of authority between President and Congress."

This is precisely the "disrespect" for the law that the Supreme Court struck down in the steel seizure case.

It is this same disrespect for America's Constitution which has now brought our republic to the brink of a dangerous breach in the fabric of the Constitution. And the disrespect embodied in these apparent mass violations of the law is part of a larger pattern of seeming indifference to the Constitution that is deeply troubling to millions of Americans in both political parties.

For example, the President has also declared that he has a heretofore unrecognized inherent power to seize and imprison any American citizen that he alone determines to be a threat to our nation, and that, notwithstanding his American citizenship, the person imprisoned has no right to talk with a lawyer-even to argue that the President or his appointees have made a mistake and imprisoned the wrong person.

The President claims that he can imprison American citizens indefinitely for the rest of their lives without an arrest warrant, without notifying them about what charges have been filed against them, and without informing their families that they have been imprisoned.

At the same time, the Executive Branch has claimed a previously unrecognized authority to mistreat prisoners in its custody in ways that plainly constitute torture in a pattern that has now been documented in U.S. facilities located in several countries around the world.

Over 100 of these captives have reportedly died while being tortured by Executive Branch interrogators and many more have been broken and humiliated. In the notorious Abu Ghraib prison, investigators who documented the pattern of torture estimated that more than 90 percent of the victims were innocent of any charges.

This shameful exercise of power overturns a set of principles that our nation has observed since General Washington first enunciated them during our Revolutionary War and has been observed by every president since then - until now. These practices violate the Geneva Conventions and the International Convention Against Torture, not to mention our own laws against torture.

The President has also claimed that he has the authority to kidnap individuals in foreign countries and deliver them for imprisonment and interrogation on our behalf by autocratic regimes in nations that are infamous for the cruelty of their techniques for torture.

Some of our traditional allies have been shocked by these new practices on the part of our nation. The British Ambassador to Uzbekistan - one of those nations with the worst reputations for torture in its prisons - registered a complaint to his home office about the senselessness and cruelty of the new U.S. practice: "This material is useless - we are selling our souls for dross. It is in fact positively harmful."

Can it be true that any president really has such powers under our Constitution? If the answer is "yes" then under the theory by which these acts are committed, are there any acts that can on their face be prohibited? If the President has the inherent authority to eavesdrop, imprison citizens on his own declaration, kidnap and torture, then what can't he do?

The Dean of Yale Law School, Harold Koh, said after analyzing the Executive Branch's claims of these previously unrecognized powers: "If the President has commander-in-chief power to commit torture, he has the power to commit genocide, to sanction slavery, to promote apartheid, to license summary execution."

The fact that our normal safeguards have thus far failed to contain this unprecedented expansion of executive power is deeply troubling. This failure is due in part to the fact that the Executive Branch has followed a determined strategy of obfuscating, delaying, withholding information, appearing to yield but then refusing to do so and dissembling in order to frustrate the efforts of the legislative and judicial branches to restore our constitutional balance.

For example, after appearing to support legislation sponsored by John McCain to stop the continuation of torture, the President declared in the act of signing the bill that he reserved the right not to comply with it.

Similarly, the Executive Branch claimed that it could unilaterally imprison American citizens without giving them access to review by any tribunal. The Supreme Court disagreed, but the President engaged in legal maneuvers designed to prevent the Court from providing meaningful content to the rights of its citizens.

A conservative jurist on the Fourth Circuit Court of Appeals wrote that the Executive Branch's handling of one such case seemed to involve the sudden abandonment of principle "at substantial cost to the government's credibility before the courts."

As a result of its unprecedented claim of new unilateral power, the Executive Branch has now put our constitutional design at grave risk. The stakes for America's representative democracy are far higher than has been generally recognized.

These claims must be rejected and a healthy balance of power restored to our Republic. Otherwise, the fundamental nature of our democracy may well undergo a radical transformation.

For more than two centuries, America's freedoms have been preserved in part by our founders' wise decision to separate the aggregate power of our government into three co-equal branches, each of which serves to check and balance the power of the other two.

On more than a few occasions, the dynamic interaction among all three branches has resulted in collisions and temporary impasses that create what are invariably labeled "constitutional crises." These crises have often been dangerous and uncertain times for our Republic. But in each such case so far, we have found a resolution of the crisis by renewing our common agreement to live under the rule of law.

The principle alternative to democracy throughout history has been the consolidation of virtually all state power in the hands of a single strongman or small group who together exercise that power without the informed consent of the governed.

It was in revolt against just such a regime, after all, that America was founded. When Lincoln declared at the time of our greatest crisis that the ultimate question being decided in the Civil War was "whether that nation, or any nation so conceived, and so dedicated, can long endure," he was not only saving our union but also was recognizing the fact that democracies are rare in history. And when they fail, as did Athens and the Roman Republic upon whose designs our founders drew heavily, what emerges in their place is another strongman regime.

There have of course been other periods of American history when the Executive Branch claimed new powers that were later seen as excessive and mistaken. Our second president, John Adams, passed the infamous Alien and Sedition Acts and sought to silence and imprison critics and political opponents.

When his successor, Thomas Jefferson, eliminated the abuses he said: "[The essential principles of our Government] form the bright constellation which has gone before us and guided our steps through an age of revolution and reformation... [S]hould we wander from them in moments of error or of alarm, let us hasten to retrace our steps and to regain the road which alone leads to peace, liberty and safety."

Our greatest President, Abraham Lincoln, suspended habeas corpus during the Civil War. Some of the worst abuses prior to those of the current administration were committed by President Wilson during and after WWI with the notorious Red Scare and Palmer Raids. The internment of Japanese Americans during WWII marked a low point for the respect of individual rights at the hands of the executive. And, during the Vietnam War, the notorious COINTELPRO program was part and parcel of the abuses experienced by Dr. King and thousands of others.

But in each of these cases, when the conflict and turmoil subsided, the country recovered its equilibrium and absorbed the lessons learned in a recurring cycle of excess and regret.

There are reasons for concern this time around that conditions may be changing and that the cycle may not repeat itself. For one thing, we have for decades been witnessing the slow and steady accumulation of presidential power. In a global environment of nuclear weapons and cold war tensions, Congress and the American people accepted ever enlarging spheres of presidential initiative to conduct intelligence and counter intelligence activities and to allocate our military forces on the global stage. When military force has been used as an instrument of foreign policy or in response to humanitarian demands, it has almost always been as the result of presidential initiative and leadership. As Justice Frankfurter wrote in the Steel Seizure Case, "The accretion of dangerous power does not come in a day. It does come, however slowly, from the generative force of unchecked disregard of the restrictions that fence in even the most disinterested assertion of authority."

A second reason to believe we may be experiencing something new is that we are told by the Administration that the war footing upon which he has tried to place the country is going to "last for the rest of our lives." So we are told that the conditions of national threat that have been used by other Presidents to justify arrogations of power will persist in near perpetuity.

Third, we need to be aware of the advances in eavesdropping and surveillance technologies with their capacity to sweep up and analyze enormous quantities of information and to mine it for intelligence. This adds significant vulnerability to the privacy and freedom of enormous numbers of innocent people at the same time as the potential power of those technologies. These techologies have the potential for shifting the balance of power between the apparatus of the state and the freedom of the individual in ways both subtle and profound.

Don't misunderstand me: the threat of additional terror strikes is all too real and their concerted efforts to acquire weapons of mass destruction does create a real imperative to exercise the powers of the Executive Branch with swiftness and agility. Moreover, there is in fact an inherent power that is conferred by the Constitution to the President to take unilateral action to protect the nation from a sudden and immediate threat, but it is simply not possible to precisely define in legalistic terms exactly when that power is appropriate and when it is not.

But the existence of that inherent power cannot be used to justify a gross and excessive power grab lasting for years that produces a serious imbalance in the relationship between the executive and the other two branches of government.

There is a final reason to worry that we may be experiencing something more than just another cycle of overreach and regret. This Administration has come to power in the thrall of a legal theory that aims to convince us that this excessive concentration of presidential authority is exactly what our Constitution intended.

This legal theory, which its proponents call the theory of the unitary executive but which is more accurately described as the unilateral executive, threatens to expand the president's powers until the contours of the constitution that the Framers actually gave us become obliterated beyond all recognition. Under this theory, the President's authority when acting as Commander-in-Chief or when making foreign policy cannot be reviewed by the judiciary or checked by Congress. President Bush has pushed the implications of this idea to its maximum by continually stressing his role as Commander-in-Chief, invoking it has frequently as he can, conflating it with his other roles, domestic and foreign. When added to the idea that we have entered a perpetual state of war, the implications of this theory stretch quite literally as far into the future as we can imagine.

This effort to rework America's carefully balanced constitutional design into a lopsided structure dominated by an all powerful Executive Branch with a subservient Congress and judiciary is-ironically-accompanied by an effort by the same administration to rework America's foreign policy from one that is based primarily on U.S. moral authority into one that is based on a misguided and self-defeating effort to establish dominance in the world.

The common denominator seems to be based on an instinct to intimidate and control.

This same pattern has characterized the effort to silence dissenting views within the Executive Branch, to censor information that may be inconsistent with its stated ideological goals, and to demand conformity from all Executive Branch employees.

For example, CIA analysts who strongly disagreed with the White House assertion that Osama bin Laden was linked to Saddam Hussein found themselves under pressure at work and became fearful of losing promotions and salary increases.

Ironically, that is exactly what happened to FBI officials in the 1960s who disagreed with J. Edgar Hoover's view that Dr. King was closely connected to Communists. The head of the FBI's domestic intelligence division said that his effort to tell the truth about King's innocence of the charge resulted in he and his colleagues becoming isolated and pressured. "It was evident that we had to change our ways or we would all be out on the street.... The men and I discussed how to get out of trouble. To be in trouble with Mr. Hoover was a serious matter. These men were trying to buy homes, mortgages on homes, children in school. They lived in fear of getting transferred, losing money on their homes, as they usually did. ... so they wanted another memorandum written to get us out of the trouble that we were in."

The Constitution's framers understood this dilemma as well, as Alexander Hamilton put it, "a power over a man's support is a power over his will." (Federalist No. 73)

Soon, there was no more difference of opinion within the FBI. The false accusation became the unanimous view. In exactly the same way, George Tenet's CIA eventually joined in endorsing a manifestly false view that there was a linkage between al Qaeda and the government of Iraq.

In the words of George Orwell: "We are all capable of believing things which we know to be untrue, and then, when we are finally proved wrong, impudently twisting the facts so as to show that we were right. Intellectually, it is possible to carry on this process for an indefinite time: the only check on it is that sooner or later a false belief bumps up against solid reality, usually on a battlefield."

Whenever power is unchecked and unaccountable it almost inevitably leads to mistakes and abuses. In the absence of rigorous accountability, incompetence flourishes. Dishonesty is encouraged and rewarded.

Last week, for example, Vice President Cheney attempted to defend the Administration's eavesdropping on American citizens by saying that if it had conducted this program prior to 9/11, they would have found out the names of some of the hijackers.

Tragically, he apparently still doesn't know that the Administration did in fact have the names of at least 2 of the hijackers well before 9/11 and had available to them information that could have easily led to the identification of most of the other hijackers. And yet, because of incompetence in the handling of this information, it was never used to protect the American people.

It is often the case that an Executive Branch beguiled by the pursuit of unchecked power responds to its own mistakes by reflexively proposing that it be given still more power. Often, the request itself it used to mask accountability for mistakes in the use of power it already has.

Moreover, if the pattern of practice begun by this Administration is not challenged, it may well become a permanent part of the American system. Many conservatives have pointed out that granting unchecked power to this President means that the next President will have unchecked power as well. And the next President may be someone whose values and belief you do not trust. And this is why Republicans as well as Democrats should be concerned with what this President has done. If this President's attempt to dramatically expand executive power goes unquestioned, our constitutional design of checks and balances will be lost. And the next President or some future President will be able, in the name of national security, to restrict our liberties in a way the framers never would have thought possible.

The same instinct to expand its power and to establish dominance characterizes the relationship between this Administration and the courts and the Congress.

In a properly functioning system, the Judicial Branch would serve as the constitutional umpire to ensure that the branches of government observed their proper spheres of authority, observed civil liberties and adhered to the rule of law. Unfortunately, the unilateral executive has tried hard to thwart the ability of the judiciary to call balls and strikes by keeping controversies out of its hands - notably those challenging its ability to detain individuals without legal process -- by appointing judges who will be deferential to its exercise of power and by its support of assaults on the independence of the third branch.

The President's decision to ignore FISA was a direct assault on the power of the judges who sit on that court. Congress established the FISA court precisely to be a check on executive power to wiretap. Yet, to ensure that the court could not function as a check on executive power, the President simply did not take matters to it and did not let the court know that it was being bypassed.

The President's judicial appointments are clearly designed to ensure that the courts will not serve as an effective check on executive power. As we have all learned, Judge Alito is a longtime supporter of a powerful executive - a supporter of the so-called unitary executive, which is more properly called the unilateral executive. Whether you support his confirmation or not - and I do not - we must all agree that he will not vote as an effective check on the expansion of executive power. Likewise, Chief Justice Roberts has made plain his deference to the expansion of executive power through his support of judicial deference to executive agency rulemaking.

And the Administration has supported the assault on judicial independence that has been conducted largely in Congress. That assault includes a threat by the Republican majority in the Senate to permanently change the rules to eliminate the right of the minority to engage in extended debate of the President's judicial nominees. The assault has extended to legislative efforts to curtail the jurisdiction of courts in matters ranging from habeas corpus to the pledge of allegiance. In short, the Administration has demonstrated its contempt for the judicial role and sought to evade judicial review of its actions at every turn.

But the most serious damage has been done to the legislative branch. The sharp decline of congressional power and autonomy in recent years has been almost as shocking as the efforts by the Executive Branch to attain a massive expansion of its power.

I was elected to Congress in 1976 and served eight years in the house, 8 years in the Senate and presided over the Senate for 8 years as Vice President. As a young man, I saw the Congress first hand as the son of a Senator. My father was elected to Congress in 1938, 10 years before I was born, and left the Senate in 1971.

The Congress we have today is unrecognizable compared to the one in which my father served. There are many distinguished Senators and Congressmen serving today. I am honored that some of them are here in this hall. But the legislative branch of government under its current leadership now operates as if it is entirely subservient to the Executive Branch.

Moreover, too many Members of the House and Senate now feel compelled to spend a majority of their time not in thoughtful debate of the issues, but raising money to purchase 30 second TV commercials.

There have now been two or three generations of congressmen who don't really know what an oversight hearing is. In the 70's and 80's, the oversight hearings in which my colleagues and I participated held the feet of the Executive Branch to the fire - no matter which party was in power. Yet oversight is almost unknown in the Congress today.

The role of authorization committees has declined into insignificance. The 13 annual appropriation bills are hardly ever actually passed anymore. Everything is lumped into a single giant measure that is not even available for Members of Congress to read before they vote on it.

Members of the minority party are now routinely excluded from conference committees, and amendments are routinely not allowed during floor consideration of legislation.

In the United States Senate, which used to pride itself on being the "greatest deliberative body in the world," meaningful debate is now a rarity. Even on the eve of the fateful vote to authorize the invasion of Iraq, Senator Robert Byrd famously asked: "Why is this chamber empty?"

In the House of Representatives, the number who face a genuinely competitive election contest every two years is typically less than a dozen out of 435.

And too many incumbents have come to believe that the key to continued access to the money for re-election is to stay on the good side of those who have the money to give; and, in the case of the majority party, the whole process is largely controlled by the incumbent president and his political organization.

So the willingness of Congress to challenge the Administration is further limited when the same party controls both Congress and the Executive Branch.

The Executive Branch, time and again, has co-opted Congress' role, and often Congress has been a willing accomplice in the surrender of its own power.

Look for example at the Congressional role in "overseeing" this massive four year eavesdropping campaign that on its face seemed so clearly to violate the Bill of Rights. The President says he informed Congress, but what he really means is that he talked with the chairman and ranking member of the House and Senate intelligence committees and the top leaders of the House and Senate. This small group, in turn, claimed that they were not given the full facts, though at least one of the intelligence committee leaders handwrote a letter of concern to VP Cheney and placed a copy in his own safe.

Though I sympathize with the awkward position in which these men and women were placed, I cannot disagree with the Liberty Coalition when it says that Democrats as well as Republicans in the Congress must share the blame for not taking action to protest and seek to prevent what they consider a grossly unconstitutional program.

Moreover, in the Congress as a whole-both House and Senate-the enhanced role of money in the re-election process, coupled with the sharply diminished role for reasoned deliberation and debate, has produced an atmosphere conducive to pervasive institutionalized corruption.

The Abramoff scandal is but the tip of a giant iceberg that threatens the integrity of the entire legislative branch of government.

It is the pitiful state of our legislative branch which primarily explains the failure of our vaunted checks and balances to prevent the dangerous overreach by our Executive Branch which now threatens a radical transformation of the American system.

I call upon Democratic and Republican members of Congress today to uphold your oath of office and defend the Constitution. Stop going along to get along. Start acting like the independent and co-equal branch of government you're supposed to be.

But there is yet another Constitutional player whose pulse must be taken and whose role must be examined in order to understand the dangerous imbalance that has emerged with the efforts by the Executive Branch to dominate our constitutional system.

We the people are-collectively-still the key to the survival of America's democracy. We-as Lincoln put it, "[e]ven we here"-must examine our own role as citizens in allowing and not preventing the shocking decay and degradation of our democracy.

Thomas Jefferson said: "An informed citizenry is the only true repository of the public will."

The revolutionary departure on which the idea of America was based was the audacious belief that people can govern themselves and responsibly exercise the ultimate authority in self-government. This insight proceeded inevitably from the bedrock principle articulated by the Enlightenment philosopher John Locke: "All just power is derived from the consent of the governed."

The intricate and carefully balanced constitutional system that is now in such danger was created with the full and widespread participation of the population as a whole. The Federalist Papers were, back in the day, widely-read newspaper essays, and they represented only one of twenty-four series of essays that crowded the vibrant marketplace of ideas in which farmers and shopkeepers recapitulated the debates that played out so fruitfully in Philadelphia.

Indeed, when the Convention had done its best, it was the people - in their various States - that refused to confirm the result until, at their insistence, the Bill of Rights was made integral to the document sent forward for ratification.

And it is "We the people" who must now find once again the ability we once had to play an integral role in saving our Constitution.

And here there is cause for both concern and great hope. The age of printed pamphlets and political essays has long since been replaced by television - a distracting and absorbing medium which sees determined to entertain and sell more than it informs and educates.

Lincoln's memorable call during the Civil War is applicable in a new way to our dilemma today: "We must disenthrall ourselves, and then we shall save our country."

Forty years have passed since the majority of Americans adopted television as their principal source of information. Its dominance has become so extensive that virtually all significant political communication now takes place within the confines of flickering 30-second television advertisements.

And the political economy supported by these short but expensive television ads is as different from the vibrant politics of America's first century as those politics were different from the feudalism which thrived on the ignorance of the masses of people in the Dark Ages.

The constricted role of ideas in the American political system today has encouraged efforts by the Executive Branch to control the flow of information as a means of controlling the outcome of important decisions that still lie in the hands of the people.

The Administration vigorously asserts its power to maintain the secrecy of its operations. After all, the other branches can't check an abuse of power if they don't know it is happening.

For example, when the Administration was attempting to persuade Congress to enact the Medicare prescription drug benefit, many in the House and Senate raised concerns about the cost and design of the program. But, rather than engaging in open debate on the basis of factual data, the Administration withheld facts and prevented the Congress from hearing testimony that it sought from the principal administration expert who had compiled information showing in advance of the vote that indeed the true cost estimates were far higher than the numbers given to Congress by the President.

Deprived of that information, and believing the false numbers given to it instead, the Congress approved the program. Tragically, the entire initiative is now collapsing- all over the country- with the Administration making an appeal just this weekend to major insurance companies to volunteer to bail it out.

To take another example, scientific warnings about the catastrophic consequences of unchecked global warming were censored by a political appointee in the White House who had no scientific training. And today one of the leading scientific experts on global warming in NASA has been ordered not to talk to members of the press and to keep a careful log of everyone he meets with so that the Executive Branch can monitor and control his discussions of global warming.

One of the other ways the Administration has tried to control the flow of information is by consistently resorting to the language and politics of fear in order to short-circuit the debate and drive its agenda forward without regard to the evidence or the public interest. As President Eisenhower said, "Any who act as if freedom's defenses are to be found in suppression and suspicion and fear confess a doctrine that is alien to America."

Fear drives out reason. Fear suppresses the politics of discourse and opens the door to the politics of destruction. Justice Brandeis once wrote: "Men feared witches and burnt women."

The founders of our country faced dire threats. If they failed in their endeavors, they would have been hung as traitors. The very existence of our country was at risk.

Yet, in the teeth of those dangers, they insisted on establishing the Bill of Rights.

Is our Congress today in more danger than were their predecessors when the British army was marching on the Capitol? Is the world more dangerous than when we faced an ideological enemy with tens of thousands of missiles poised to be launched against us and annihilate our country at a moment's notice? Is America in more danger now than when we faced worldwide fascism on the march-when our fathers fought and won two World Wars simultaneously?

It is simply an insult to those who came before us and sacrificed so much on our behalf to imply that we have more to be fearful of than they. Yet they faithfully protected our freedoms and now it is up to us to do the same.

We have a duty as Americans to defend our citizens' right not only to life but also to liberty and the pursuit of happiness. It is therefore vital in our current circumstances that immediate steps be taken to safeguard our Constitution against the present danger posed by the intrusive overreaching on the part of the Executive Branch and the President's apparent belief that he need not live under the rule of law.

I endorse the words of Bob Barr, when he said, "The President has dared the American people to do something about it. For the sake of the Constitution, I hope they will."

A special counsel should immediately be appointed by the Attorney General to remedy the obvious conflict of interest that prevents him from investigating what many believe are serious violations of law by the President. We have had a fresh demonstration of how an independent investigation by a special counsel with integrity can rebuild confidence in our system of justice. Patrick Fitzgerald has, by all accounts, shown neither fear nor favor in pursuing allegations that the Executive Branch has violated other laws.

Republican as well as Democratic members of Congress should support the bipartisan call of the Liberty Coalition for the appointment of a special counsel to pursue the criminal issues raised by warrantless wiretapping of Americans by the President.

Second, new whistleblower protections should immediately be established for members of the Executive Branch who report evidence of wrongdoing -- especially where it involves the abuse of Executive Branch authority in the sensitive areas of national security.

Third, both Houses of Congress should hold comprehensive-and not just superficial-hearings into these serious allegations of criminal behavior on the part of the President. And, they should follow the evidence wherever it leads.

Fourth, the extensive new powers requested by the Executive Branch in its proposal to extend and enlarge the Patriot Act should, under no circumstances be granted, unless and until there are adequate and enforceable safeguards to protect the Constitution and the rights of the American people against the kinds of abuses that have so recently been revealed.

Fifth, any telecommunications company that has provided the government with access to private information concerning the communications of Americans without a proper warrant should immediately cease and desist their complicity in this apparently illegal invasion of the privacy of American citizens.

Freedom of communication is an essential prerequisite for the restoration of the health of our democracy.

It is particularly important that the freedom of the Internet be protected against either the encroachment of government or the efforts at control by large media conglomerates. The future of our democracy depends on it.

I mentioned that along with cause for concern, there is reason for hope. As I stand here today, I am filled with optimism that America is on the eve of a golden age in which the vitality of our democracy will be re-established and will flourish more vibrantly than ever. Indeed I can feel it in this hall.

As Dr. King once said, "Perhaps a new spirit is rising among us. If it is, let us trace its movements and pray that our own inner being may be sensitive to its guidance, for we are deeply in need of a new way beyond the darkness that seems so close around us."

<political rant>
WWI is an outdated example.  Let's try WWII.  Just as it took millions of good Germans to vote Hitler into power, it took millions of good Democrats to vote Bush into power - and to continue that support to this day.  It wasn't Ralph Nader who "politically assassinated" Al Gore, it was those millions of Democrats.  Al Gore even had a hand in his own "political assassination" as evidenced by his pathetic failure to take even his home state of Tennessee in the 2000 elections.
</political rant>
The Strategic Game Effect seems to be very high on you. Remember that you are talking about real countries, not a bunch of color pixels on the screen!
Fair comment probably. In this particular piece, I was trying to avoid taking any position on what should or should not be done, and just stick to what are the likely consequences of disruptions in oil supply.
But if Stuart was to extend the Strategic Game theory to this situation, using a Dungeons and Dragons framework,
the characters might look like this:

United States=>  Lawful/evil Warrior  Hit Points 2,000
Strength 17, Constitution (er..oil) 4, Dexterity 15, Intelligence 17, Wisdom 3, Charisma 16

Iran=> Chaotic/good Cleric  Hit Points  800
Strength 9, Constitution (oil and gas) 18, Dexterity 9, Intelligence 12, Wisdom 15, Charisma 5

Seriously though, in looking at geopolitical strengths and weaknesses, there does seem to be a subtle (and not-so-subtle in some cases) shift between the energy consuming nations and energy producing nations. The US is importing oil to create jets/missiles/bombs to enforce importing more oil to make more jets/missiles/bombs.
Essentially ERoMI (Energy Return on Military Invested)

Incidentally, Russia and China appear to be going along with US and Europe regarding Iran.

The Keyword is appear.  China particullary has lots more to gain from Iran.  Part of this exercise is maintaining control and influence.  It appear that Iran feels that they might have enough room to manoeuvre without the blessings of China or Russia using the world's tight oil market as leverage.  
What surprises me here in this discussion are two things.

  1. We keep talking about the impact on the USA but it will be less than the impact on Asia and to a degree Europe as the Iranian oil goes there for the most part.

  2. If Iran disrupts shipping passing through the Persian Gulf (and they would) it will make it worse on the Asian importers of that portion of the Middle East.

Plus the higher price will be harder to be paid by say India certainly, or China (though she has tremendous $$ reserves), not even mentioning poorer nations like Pakistan or the Philippines.
Short of a total breakdown in the global oil market, prices will go up everywhere and the problem will be distributed to everyone. Oil is a global market. As we've seen in the LNG market, tankers will turn around in mid voyage if somebody bids more for the cargo.
Stuart, have you got a link on that LNG tanker that turned around and went to the highest bidder (Spain?). This happened last summer, I think. I looked around and couldn't find a reference.
Here's a rather obscure reference (big PDF warning). I've quoted below testimony by Mark Hayes, a research fellow at Stanford, before last June's workshop convened by several agencies of the State of California to advise Gov. Schwarzenegger on LNG importation options.  

Here is an example to show how the cargos from the Atlantic LNG in Trinidad cargos shipped from that facility have tracked the price differential between the US and Spain. And this is an explicit contractual mechanism that is agreed on by the three parties involved. People are trying to follow this model, they broke the mold of that fixed point to point trade and other people are basically following their example. So the green line is the US price minus the Spanish price. And when that goes negative, cargos tend to go to Spain. And really most of the action is on the Henry Hub, the Spanish prices still tend to be linked, like other European prices, to oil. (pp. 11-12)

Evidently, having been written into the contracts these diversions are a routine business practice.  

If European and Asian countries lose a major supplier they will have to get the deficit from the open market. This will surely lead to a bidding war in which USA of course will win but the resulting price could be really scary... Let's not forget that while we use the oil to drive SUVs other countries need it to grow food for example, which I don't see them cancelling out that easy.
The US is still the most inefficient user of oil in the developed world, Japan is half as dependent on oil per unit of GDP and most of western Europe is close to Japan in GDP / oil efficiency. Also, the US is more sensitive to price increases than the rest of the developed world due to its lower taxation of oil and oil products. For example, while US gasoline prices rose over 50% in response to the 2005 GOM hurricanes the UK price rose 10% (yes, there are special factors for the US in this example but the pattern is valid).

Western Europe and Japan have well developed public transport infrastructures, hence more scope for switching away from car use in response to high gasoline prices.

Despite the US not importing any Iranian oil I think it would suffer most from a 50% or greater oil price jump. It would probably result in slightly lower food production in poorer countries especially, but that would take some time to feed through.

Just checked commodity prices, spot gold is up further, now at 563.50 (Friday US close was 556.50, Friday US open was 546.50) that's a big jump in a couple of days. Feb Nymex oil is up a mere $0.82 at $64.74, it'll be through $65 on Tuesday. The gold increase is a jittery sign, $600 can't be far off unless the Iran situation rachets down a bit.
Yeah I considered these days some diversification, but I intend to miss that particular hike. I expect that the worries over Iran will pass away pretty quickly and it will go back below 550. BTW I always wandered why gold is so much preffered over silver; unlike gold silver has much more inherent value that will keep up no matter of what happens. Currently gold/silver ratio is above 60, which if I'm not mistaken is quite above the historical average.
I have heard that $12 silver is likely by the end of the year and in the next few years $25 is probable.  Gold is supposed to break $600 by the end of the year and is on the way to $2000 in a few years from now.  Of course the progression is nonlinear.  If you were considering buying gold, you could do it through GLD, where you can hold paper for 2 ounces for each ounce paid for.  When you want to actually take possesion of the gold, you would sell the paper and buy gold for the cash price on the spot market from a local vender.  It is probably not a good idea to hold more than a couple of hundred ounces, since storage, insurance, and other safety issues become a problem.
An interesting article is found on:

It talks about the IOB and if collapse of the dollar happens over the next couple of years, then gold and silver will indeed rise in comparison to a falling dollar.  I think that the US would rather not attack Iran, but rather than allow the IOB to open, I think they will attack.  Either way will be ugly for the US, but attacking Iran will be ugly for the whole world, which may be preferable.

When pinch comes to shove, how long do you think you can continue to bid more and more of those more and more worthless US Dollars for more and more of the world's energy?  The US is the world's biggest debtor nation.  $1800/yr avg American family... on interest alone.   I'll tell you how long you can continue to do this... as long as you can continue to convince your creditors to keep on buying dollars and lending them back to you.  In other words,

1.) Until China and Japan let you, or
2.) Until you can't pay your credit card and mortgage any longer and slow down or stop your purchases of foreign goods and oil.    

#1 is a strategic issue which might be enough to start seriously swaying US Administration policy toward lessening those unilateral actions (which is probably not a bad thing) and
#2 is purely an economic issue which will result in skyrocketing US interest rates. (see #2 above)

As soon as China and Europe start replacing the US as Japan's #1 trading partners and visa versa... or a strategic issue of importance to Japan or China arrises the crap will be arriving at the face of the fan blades.  Welcome to the third world where most all actions and reactions are controlled by the (your) creditor nations.

I think that the long-term strategy towards the external and internal debts (which have for long become practically unpayable) is to inflate them to a managable amount. For this PO and the skyrocketing prices of anything of real value will just help. But I think they will try to do it gradually via higher IR, without risking a bank run which would turn US to a real third world country pretty quickly.
Ecological economics uses systems ecology to model quite complex biological/ecosystem interfaces: evapotranspiration, nutrient uptake, feedback loops etc. Each component in a model has some scientific basis for extrapolation based on how it interacts with other variables.

However, even with new fMRI and PET scans, we can barely begin to model the behavior of the human brain, let alone the thousands of decision makers involved in a geo-political situation like this one in Iran and others to come. It is virtually impossible to model what might happen. We can just hope for the best and educate and discuss.

The last time the world was at war (1940s), each country was a much more local place, with global imports and exports not nearly at the scale of today, nor the $ price of the marginal barrel of oil so paramount to making the system work. In my opinion, there is some finite price of oil where economic 'models' of demand destruction just get trumped by the human instinct for resource acquisition (read: war)

IMO we're at an extremely dangerous point in a chaotic geo-political situation "far from equilibrium" where nearly any shock can cause a bifurcation towards a radical new state.  The only thing we know for sure is that we will (assuming survival of course :) be living in a declining-energy environment.  Along with education and discussion we need to take practical steps now to prepare for powerdown.
I the US invades Iran, won't the Iranians make a determined attmept to use Silkworm missiles to close down shipping on the Gulf. No one will be willing to sail an oil tanker through the Strait of Hormuz is there is a fair cahnce that you'll become a burning wreck by the other end.

The short answer is yes. But it is not that simple. First, they do not have a lot of Silkworms, and as we have shown in the last two wars we shoot off hundreds of Tomahawks. They have, according to THE MILITARY BALANCE, a few dozen missiles that we need to worry about. But it would be an asymetrical defense on their part. They have 200+ small craft, including hovercraft and missile patrol boats - and guys willing to blow themselves up in. They have at least one midget submarine that can release frogmen. They have some larger assets that will get sunk quickly.

But the point is that the Straits will be disrupted for 2-4 weeks. There will be a spike. It could last longer

Do they have some asymetrical plan for attacking Saudi oil fields?

The other wildcard is if they hit one or two of our big aircraft carriers, it will most likely not sink anything but it will take a lot out of our attack.

I still think we will see three days of bombing from either us/USA or Israel. Not a full on invasion.

If nukes are available to them, Qatar and the US Naval base will be vaporised. After that, a simple mining of the Hormuz will completely stop all tanker traffic. Even NOT after that. No missiles required. You also know how many mines they have I suppose? OK... Then Saudi oil fields and the Port of Ras Tanura will be conventionally smoked (or biocontaminated along with Riyadh's water supply). Then Riyadh itself. They're all pretty much within catapult distance. Then...just sit back in your cold dark corner with your 1 candlepower lamp and watch your 4 week scenario run until your lamp flickers for the last time in 2025. Looks like the world community bully finally has been forced to go sit quietly in the chair facing the wall. I thought they have five German-built superquiet diesel subs, or am I wrong about that? You better hope I'm wrong. I don't think even one running around in the Indian Ocean would be a good thing. It would surely create a very efficient diversion of the already overworked forces in the area.
Gets It,

It is not that simple. First the Gulf States have been buying Patriot anti-missile stuff and have a pretty up-to-date fighter plane force available to it. The Sunni dominated Gulf States have been scared of Iran for almost three decades. Plus the USA keeps military stuff there on a pretty complete basis. We have our Aegis cruisers armed with Standard III missiles that have been very reliable so far at shooting down missiles - part of our Star Wars program. That certainly does not guarantee they will shoot them down.

Iran has at least one home-built (North Korean design) mini-sub and two building. They have three older and noisy Kilo Class Russian built subs. Israel has three German quiet subs with missile capability (short range - probably with nukes) and two more on order.

Iran has lots of sea mines.

Just the threat of and sinking or damaging one oil tanker will cause insurance rates to climb and will disrupt the oil trade.

This world policeman would crush Iran militarily but boy will it create a lot of other problems. Will get us to alternative energy stuff more quickly though!

First 1/2 Disagree.  Second half; dead on.

Patriot's are not proven as effective.  True that one or two hits have been claimed in combat situations, but it's still a  largely unproven anti-weapon.  I think more friendly fire damage has been attributed to Patriot system launches than actual hits on enemy targets.  Two incoming missiles probably square-root the Patriot success probability.

Some Arabic mideast air forces have relatively up-to-date equipment, but the electronic packages are often obsolute.  Mideast pilots are good fliers, but not good at independently interpreting situations and taking appropriate actions during active combat missions.  <Direct from a conversation with a RSAF sqdrn commander>

Agis anti-missile defence systems are (to my knowledge) not proven in actual combat situations (and we all know how test results can get "fudged").  Kilos can present a considerable threat to oil tankers and divert considerable military resources to nutralizing them.  Mini, not sure, but my dad told me they were pretty quiet back in WWII.  He was a sonarman at Layte Gulf.  Given improvements in both sonar and noise control, I'd be willing to bet that they could still be a RPITA (royal pain in the arse).

But as we both agree, the tankers arn't going to head in or out. 25 million $ cargo value will not make it a profitable run.  Ship and cargo, what? maybe 100 million value?  What does a breakeven analysis say:  ¿How much would oil have to be selling for to give them a $1 or $2/BBL profit, after paying the insurance premiums? (assuming some idiot insurance company is greedy enough to write a policy that doesn't exclude sea mines.)  I haven't got a clue as to what they'd charge for a policy.  Probably none available, so now figure the shipping company would have to make the total risk (value ship+cargo) on one or two runs), ... Yup... thats about 200$/BBL. Ouch!

Gets It,

$200/BBL is the price Osama Bin Laden says is what the rate should be. He stated that on one side or the other of 9/11.

It is not if it will hit that price, just when.

I just got this off another site. Boy I am glad we have Mexico and Canada on our borders!

Purchase of North Korean Missiles Extends Iran's Force Projection Capability

A little-noticed story from late 2005 could prove quite significant as conflict with Iran draws closer. On December 16, the German newspaper Bild reported on the German secret services' claim that Iran had bought 18 disassembled BM-25 missiles from North Korea.

The BM-25 missile is based on the Soviet SS-N-6 (R-27) submarine-launched ballistic missile. Although Bild said that the missiles Iran purchased have a range of 2,500 kilometers, Jane's Defense Weekly reported that North Korea, with the help of Russian specialists, has developed two new versions of the R-27 with extended ranges. Analysts believe that the land-based version has a range of 2,500 to 4,000 kilometers. Consistent with this report, Bild reported that Iranian president Mahmoud Ahmadinejad wanted to have the missiles' range "extended to 3,500 kilometers." The German secret service report warned that "with a longer range, and the probability that (Tehran) would try to equip the missiles with nuclear warheads, there is the risk that Iran could strike at Israel and parts of central Europe."

Reader Timothy Thompson, who is always able to provide keen insight into weapons systems, comments on the missile purchase:

[The BM-25 missiles that Iran purchased] can easily be launched from [a] freighter modified with launch tubes and blast channels. They give Iran a projection of force capability far beyond the 2000-3000 km range of the missiles. It is possible -- though not confirmed -- that Iran may not use the BM-25's but only bought them to get the R-27 rocket motors for a missile of their own design.

The countries most concerned about these developments are Israel and Turkey. Israel's concern is obvious: Anytime a country whose president has vowed to wipe you off the map improves its ability to strike, that is a worrisome development. Turkey's concern stems from three major factors. First, it shares a large border with Iran. Second, Iranian missiles can reach vital Turkish military and industrial targets. Third, the NATO treaty obligates Turkey to treat any attack on another NATO country as an attack on its own territory. In the event this were to occur, we may see the use of Turkish ground forces.

Iran's ability to strike at longer range makes military options against that country increasingly perilous.

A comment: Don't fall for the propaganda.  Iranians are not crazy zelots, or stupid, contrary to how the West reports the statements of their leaders.

Iran would never attack Israel because the Israelis have a significant nuclear arsenal, and would have no hesitations to use it.


While a part of me agrees with you, we do have a current President of Iran who is expecting the return of the hidden Iman and we know what he has said about Israel.

A previous Iranian President, a "moderate", has said on more than one occasion that the loss of 10,000,000 Muslims to destroy Israel would not be too tough a price to pay. And you norI have had our people go through a holocaust not too many years back. I think it is difficult to say what the Israeli's will do

I am actually wondering if the Israeli's will wait to be hit first before they use Nuclear Weapons. France's Chirac just came out this past week saying that nuclear weapon use to retaliate because of a terrorist attack in France is fine by him. I am not sure what he would nuke . . . It is on the table.

Probably the best thing that has happened the last few years is when Pakistan and India backed off from their confrontation. The fear of nuclear weapons was enough to get them to pull back.

So, if the Straits of Hormuz is blocked because of a sunk tanker, how much oil would be out?

Kuwait, Saudi Arabia, Iraq, & Iran...

Not a lot of room:

Larger image:

I just posted this in response to a comment to an earlier post, but it has relevance here also. Iranian oil export data, by destination, from OPEC:

It might sugget who would be on which side in the United Nations debate.

Re: A UN Debate

These export numbers are important since the category Asia & Pacific obviously gets the bulk of the imports. Eventually, Iran (being in Asia, after all) will be firmly aligned with its important customers--which are in Asia & the Pacific. China is the big player here. Especially with the US insistence that Iran belongs up there with North Korea in the axis of evil and that these Persians are not a bona fides member of the community of nations.

But it puts Europe in a pretty tight squeeze, doesn't it? Are they getting nervous yet? This would be the time.
Wait a minute!  If I'm reading this table correctly, it says that the US does not import any oil from Iran.  Is this correct?

If oil is truly bought in a global market to the highest bidder, how can the US avoid buying oil from Iran?

They're under US sanctions already. Obviously, it doesn't make that much difference since a lot of other folk trade with them.
US gets its imported energy from Canada, Mexico, Venezuela and a bit from Nigeria, with relatively minute amounts from Saudi Arabia, Colombia and Ecuador.  Might not be exact, but its pretty much in that order.  Addtional small amounts may soon be starting to come from Azerbiajan via the BTC pipeline through Turkey.  Although the BTC pipeline is not fully flowing yet, it will have an eventual capacity of 1MM BOPD and probably be divided between Europe and the US.  

Warning!  The pipeline may not reach rated capacity if the Chinese continue to purchase in the greater Caspian region, as BP was counting on adding new reserves over the next 10 years or so that China has been actively seeking to purchase lately, and has actually signed some 20 year contracts, attempted to purchase Unocal, a partner in the BTC pipeline, and when refused SEC permission to do so, immediately purchased Hurricane Oil of Canada with their reserves and operations in Kazakhstan.  Look for PetroChina to continue searching for accquisitions to the south.  Without the additional supplies for the BTC pipeline, the cost/BBL transported will be relatively high since it was one of the most expensive routes out of the Caspian area of all possible contenders.

A map of the major Iranian Oilfields:

A site with a large amount of info on Iran:

Perhaps the US administration is viewing the effects of an attack on Iran like a does of chemotherapy.

The resulting oil shock may give the healthy countries a hard time, but the 'cancer' of Iran will be eliminated.

Heck, they might even think that knocking the poorer (less 'healthy') China and Russia down a few pegs is an added bonus!

However, I am more heartened by the Russian idea that they could process the Uranium for the Iranians, thus eliminating the contentious part of the Iranian nuclear program.

Sorry, that should have been "dose of chemotherapy".
Re:  two stories last year.

First, the U.S. was reportedly pressuring Japan to switch oil suppliers from Iran to Libya.  I wonder why?

Second, there was a front page story in the WSJ about war gaming efforts focused on planning for a limited takeover of a small portion of Iran.   Can anyone guess which portion?  

I have postulated that Bush was aware of Peak Oil from day one.  One of my logical outcomes of Peak Oil is that the federal debt will never be repaid--therefore why not max out the federal credit card?   What if Bush is in effect borrowing money from foreign creditors to pay for our takeover of key oil fields in the Middle East?

Also, it's only a question of when--and not if--that economic growth, at least highly energy intensive economic growth--and much of world trade--comes to a halt.   What if the grand plan is to suck in all the capital we can, seize the oil fields and then in effect renege on the debt?  

I coudnt agree more. Under the same general concept, shouldnt we all go put down 5% on farmland and borrow 95% at low interest rates?....
Why not max out the federal credit card on building essential post peak oil infrastructure like electrified railways?

It seems awfully stupid to risk everything on a war you might loose.

We can be pretty sure Bush knew since at least 2001, when Matt Simmons participated in Dick Cheney's secret energy taskforce meetings.
This might be what you were looking for on the war games effort.

Will Iran Be Next?

Soldiers, spies, and diplomats conduct a classic Pentagon war game--with sobering results

by James Fallows

Middle East

How Iran will fight back
By Kaveh L Afrasiabi

TEHRAN - The United States and Israel may be contemplating military operations against Iran, as per recent media reports, yet Iran is not wasting any time in preparing its own counter-operations in the event an attack materializes.

Well it might be more a matter of belief but I refuse to agree that anybody could be that stupid. Bankrupting your country in order to capture some oil fields 10000 miles away and trying to hold on them while all the rest of the world is turning into your enemy looks more like a Kafka ethude not like a real strategy.

What will happen to my mind? Nothing that fearful. Bush and Co know that they can not touch Iran but will keep on with the cold war of words in order to keep control over that country. USA is losing influence with every day passing and now is the time to step back and gather some more friends for the next stage - the battle for Central Asia's resources. Actually this is what this fuss is all about.

How would runaway oil prices and perhaps depression knock down oil and gas exporting Russia a few pegs?
Heck, they might even think that knocking the poorer (less 'healthy') China and Russia down a few pegs is an added bonus!
Russia exports oil and China exports money to buy US treasury bonds. To be blunt about it, we are going to get hurt more than they are.
wkwillis said: "we are going to get hurt more than they are".

In the case of China, I think you are wrong. China is dependent on growth to justify the rule of the current government, clean up the financial sector, and employ millions of dislocated people. The Chinese government is in, and views themselves as being in, the middle stages of transforming their economy into one of the largest and mostr successful in the world. However, it is still precarious.

Iran has a powerful oil weapon, but it is a blunt one. It hits who it wants to hit, not who Iran want to hit with it. If Iranian oil is held off the market, prices will soar. Poor and energy dependent countries will suffer the worst. I would guess much of Africa, South Korea, Thailand, the Philippines and others would be the first victims. Russia, as an oil exporter, could potentially benefit. The US has domestic oil and the strategic reserve. The US would be hurt badly, but would be fine in relative terms - and could hold out longer.

I would like to see (and participate in) a fact-based discussion of who would be hurt worse, but it is not the most important question. Far more important is how badly would China be hurt. The answer is very badly. Do not expect China to back Iran in destroying the world economy.

China, Japan, Europe, etc, are loaning us money. If oil prices go up, they will stop loaning us money because they will need it to buy oil.
Of course, the Saudis may start loaning us money with all the massive profits they will be making at 200$ per barrel.
Or the Saudis might choose to buy nukes from someone who desperately needs oil. Pakistan, perhaps. China and India have nukes. Japan does not have nukes but is officially in possession of quite literally tons of refined plutonium from it's fuel reprocessing plant.
Don't worry about the first part of it.  At present conditions "Oil'll" never get to a $200/BBL with anyone alive that would still be willing to buy $$$ and loan them back to you, unless interest rates were so high that it would make buying oil on credit prohibitingly expensive to even think about doing it, but somebody will have enough gold to complete the remaining conditions of your scenario.
I would like to ask Stuart if he thinks this very scary situation with Iran changes his outlook for 2006.  Specifically do you think the chances of civilization collapse/economic collapse/rapture are now more than just "negligable"?
No. :-)
You didn't ask me but

Yes, a bit :-)
Especially the rapture part.
Hmm - up 1 point on Iran news, I see.
Does anyone know if the Department of Homeland Security bases its color coded risk warnings on this Rapture Index? They seem of approximately equal value.
A thought on the attribution of production variability, Stuart.
It runs negative for several years (as major efforts were made to make the economy more oil efficient)

You've made the assumption that production variation is a function of price, where price changes were due to external shocks or pressures.

While this is likely true of the oil embargo, I'd argue that the production changes of the early eighties and early nineties is a function of US-led global recession. That is porduction change is demand-driven, rather than the other way around. The first years of Reagan were marked by deep recession pulling out of the seventies. Oil production growth resumes in tandem with demand later in the dacade when the US economy starts humming again, only to be kicked in the shins by Bush I.

You touch on this a bit in this paragraph but...

Now in recent years, oil production growth has been volatile with economic swings, but the trend over the last decade is running at around 3% annually. However, in 2005, we seem to have started to run into significant difficulty expanding production much further (which has pushed prices up). a lot of ways, oil price is a decent coincident indicator of economic strength. Maybe 2005's price changes are simply a function of continued US, China, India growth, and even Old Europe and japan eeking their way out of decade-long slumps. Try overlaying your global oil production change chart with a chart of US economic growth. I think you'll see tight correlation

Well I would argue the recession was mainly caused by the oil shocks :-) However GDP recovered a lot faster than oil consumption. I have analyzed this at length - the big reduction in oil-intensitivity of the US economy got started in the 1970s. Here's US GDP growth:

and here's US oil usage:

I'll try and remember to make a longer term oil-intensivity plot later tonight - gotta go for dinner now.

Indeed an argument can be made that the long-term effects that the oil shocks appear to have in reducing growth in oil production and consumption also translate into an effect in reducing economic growth generally.....
Now whether the correlation in the way these growth rates evolve is indicative of causation is not certain.

Could there be enough of a correlation to estimate how steep of a decline after peak oil the economy could withstand before going into a depression?

The main point of "The Oil Factor", by S. Leeb, is that when the yoy oil price increase hits 80% or more, the economy gets sick, and recovery does not come until yoy increase declines to 20%.
Excellent read from the Energy Bulletin.

"The Proposed Iranian Oil Bourse" by Krassimir Petrov

Here are two good discussions on the topic of the Iranian oil bourse:
(scroll down)

My opinion is that the claim that theory that the Iranian Oil Bourse and fear of Euro pricing of dollars is a driver for war and a major threat to the US role in the world gets solidly debunked whenever it is brought up. The Daily Kos thread does it best and it is hardly a right wing site. No serious economist will even discuss this topic.

I see you get it too.

If there was logic to the arguments expressed in this thread, it would not fail to address or adequately explain the North Korea phenomenon...  Why THEY are not the focus of the world's attention at this moment.

Everybody!  READ the Dailykos.  You will understand why this is happening NOW and concerns Iran, whom with no nuclear weapons confirmed is taking the US Administration's total attention, rather than North Korea with already having 5 confirmed nuclear weapons and has no less a radical leader than Iran, is quietly allowed to continue making #6, 7, 8...  
     1.) NK, China, Japan have no oil.
     2.) NK does not freely trade in USD.
     3.) NK is not a clear and present danger to Israel
     4.) NK is not a threat to US oil security

Iran and North Korea are neither problems nor threats.

The US clearly sees the mistakes it made in its successful invasion of Iraq. If we go into Iran, it won't be to occupy and rebuild a country. It will act at the behest of the UN with the full backing of the other major powers in the world. Same with North Korea. Which means the rest of the world will be slated to clean up the mess.

Mines and Diesel Submarines will be about as effective against the US Navy and Air Force as filling ditches with burning oil was against US Marines.

Any threat these countries pose is to their neighbors. Current US posture is just that. Diplomacy, International relations, whatever. That's our role in the world.

As far as Iranian oil and gas - the only way it can be used as a weapon is if all 4 million barrels are taken off the market. 2 million won't cut it, there is enough play in the system to handle that with nothing more than a large price jump. But withholding 4 million barrels is a double-edged sword. It will kill Iran, while only shocking the rest of the world.

I C(EO) you're part of the problem.  You don't have anything to lose if oil goes to 100+, in fact probably everything to gain.  This is the beginning of the same diplomatic arm twisting that happened before.  How can you be so sure that the US learned its lessons today if they didn't learn anything from -Cuba, Viet Nam, Somilia, "The Shah", the last 10 years of Saddam embargos and Afganistan?  I suppose  you think Afganistan goes to the "Win-Win" column.  They're back dealing drugs more than they ever have before.  

Face it.  American forign policy IQ is somewhere below 40.   The US will not even admit to the extent of the disaster and true cost of the war that they have on their hands now?  

4MM?  Iran can easily stop up to 15 MBOPD from going anywhere (at least long enough to cause a major problem).  Just turning off 1 million at the "right" frequency could spook the Street enough to cause a lot of grief for the rest of us.

You still fail to even mention why Korea is not the center of attention instead of Iran, never mind explain it.  Keep up the paint it green talk though, but try selling it to your stockholders.  Maybe they'll buy it.

  1. What problem am I a part of?

  2. A lot of things can happen, but probably won't.

  3. I mentioned very specifically why North Korea is not a focus - but I'll repeat - They are not a problem or a threat for the US, only for their neighbors. Their neighbors also don't seem that concerned, else they would be focusing on them.

  4. American foreign policy is what it is. It makes mistakes and there are successes.

  5. Your ranting is just standard, boiler-plate anti-American, old-school Noam Chomsky mumbo-jumbo.

  6. It is you, my friend, who ignores the truth and fails to mention even the most basic of American successes. World War I, World War II, resistance to the former Soviet Union, Gulf War I, protection of Taiwan and South Korea, protection of shipping lanes with the US navy, #1 supplier of foreign aid, #1 supplier of disaster relief, etc. It is easy to denigrate the US and its involvement in the world, yet much harder when you look at the big-picture historically to show that the world would be better off without that same involvement.
Then where is the US getting its bad image from?  I'm not making it up.  Get out of your office and into the foreign oilfields.  Find out what opinion the world has of GW, Cheny, Condi, Rummy.  I guess your not a "major", heh?  Only got ops in Colorado... Wyoming?  I was with Conoco in Venezuela.  Oxy in Colombia, over with BP in far-far eastern Turkey, Saudi for 10 years, Europe 5 years.  Hey bud, NEWS! Protecting the sea lanes hardly outdoes the negatives you get for Iraq.  Or is that a successful "Win-Win" in your book too?  What lessons learned in WWII are being applied today?  Invade on lies, Abu Ghraib, delivering prisoners for torture (Oh, right, nobody did that) holding people for 5 years without any rights simply because they are being held outside some line in the sand, taking democracy to where nobody understands what it is, stopping drugs in Colombia with defolient spray, attempting to destabilise Venezuela, signing the land mine treaty?  Over the weekend, 18 people were vaporised in Pakistan by US missiles.  Too bad, maybe they knew so and so... heh?  Let's don't forget about Koyoto.  Personally, I think the USA needs to pay more attention to the Mississippi levees, rather than diverting 250MM from repairing them to the War on Terror in Iraq, but as long as Halliburton is getting away with the booty... it must be a good thing going on.  

A perfect case in point when I say you are part of the problem is when you say, "Protecting Tiawan", in China that translates to, "Giving aid to a renegade province".  To me it sounds like it must only be a "good thing" if you (American, no?) say it.  If you saw things from a non-unilateral perspective, you wouldn't have put that on your list of the good stuff you're out there doing every day.  Now do you understand when I say its you that is part of the problem?

Why should it make a difference as to where a prisoner is held to any American that truely believes in HIS/HER US Constitution?  Doing such only says, "If you live in the USofA, you have rights.  If you don't ... SOL bud."  Good image?  Right!  To the rest of the world, that is exactly how it seems like the US treats us.

Like I said, take it to the stockholders, the rest of us have had enough of your "Look! We're saving the world"... rant.

Now tell me again how Korea is no threat to US interests.  Am I under the mistaken impression that there are some  50,000 US troops there?  If Korea is no threat, please explain what in the HELL ARE THEY DOING THERE.  The US interests or non-interests are whatever the US Admin says their interests are from any given minute to another, wheather it violates the US Constitution, soverign territory, the Bible, the "Rule of Law", the Geneva Convention, the theory of relativity or anything else is always at best a far secondary concern.

More people died in Chinese coal mines over the weekend then by US missiles in Pakistan.

Those US troops in South Korea could as easily be explained as keeping the North from being a threat rather than being there because North Korea is a threat. The reality is that they are probably a symbolic deterrent leftover from the Cold War. I wouldn't expect you to pay to much attention to any subtleties. Rumsfeld has recently, to my knowledge, moved the American component rearwards - indicative of the reality of the situation. Maybe you should be a tad more clear about why you are so revved-up about Korea? Isn't it really an issue for the Chinese/Japanese?

The fact is, no matter what the US does on a particular issue, half the world will have a problem with it. You're the proof. If we focused on Korea, you'd just be screaming that we were.

I've spent time in Saudi myself. Your travels don't impress me, nor do they make your argument any more effective. Try not to assume anybody's background here, it'll ruin your game.


"More people died in Chinese coal mines over the weekend then by US missiles in Pakistan."

That is such a sterotypical American justification that I am actually shocked you used it!  

OK, so Rummy moved everybody around last year.  Pawns get moved here and there all the time.  Maybe it was a guesture to try to tone down the tension there?  Maybe somebody did learn something.

Now, wanna' try responding to the other points.

I think you haven't been to Saudi in quite awhile and that I'm doing rather well with "my game" thank you.

I am new to this board, an so far I really enjoy it. There appears to be a good selection of well educated, well informed people having rational discussions trying to understand various topics.

That is why it is so disappointing to see you (Gets It) being so hostile. I actually agree with many of your points and you are clearly well informed on many things. However your hostile attitude and arrogance will keep me and many others from listening to you. It's my opinion you will get a lot further if you try a little patience and change your attitude. You seem to like to complain about the US, but it would seem you are using the same tactics that you are complaining about. Just my two cents.

Have a nice day.   :)

Sorry.  I don't think I'm arrogant.  At least don't mean to be.  I prefer "emotional, but still rational and very highly opionated".  Perhaps you are simply seeing an equally but oppositely opinionated American to the one above and having trouble reversing the perspective.  No offence taken in any case.  Maybe you just need to know more about why I'm this way, but we don't have time for that and its not part of the thread anyway, but quickly I'm American by birth, but haven't lived there for 15 years, and most of the rest of them in the world make it pretty GD hard for me just trying to go about my everyday business.  Fortunately I blend in rather well.. for a little while.

I try to remain open-minded and even invite more debate from anyone willing.  As you may have noted, I did concede one point, (OK kinda') but have not been granted the favor of a continued discussion with CEO on any of the remaining topics.  

Was there a particular problem you had with any of my comments?  (Is it my clarvoiance?)  Be happy to talk about them with you, if you like.

My observation is that you are making points that a decent fraction of regular commenters at the Oil Drum would agree with, but making them with an angry hostile tone as though you think everyone here will disagree with you and it's your mission to persuade us (of course you'll always find a few...).  In particular, you seem to frequently assume that because many people here are Americans, we'd support American foreign policy or economic behavior (which I'd say is untrue of Oil Drum commenters with only a tiny handful of exceptions).  I think you'll find far more dollar-bears than dollar-bulls here.  You come across as much more interested in scoring debating points than developing insight into the issues.

(We do have a much-valued contingent of commenters from all around the world, as well as a lot of Americans).

Just my perception, FWIW.

What can I say?  I agree with you for the most part.  You seem to agree with me for the most part as well.  As I say, I don't mean to make anyone angry, but if they happen to get angry, simply by reading something that doesn't even exist on paper, what can I do about it?  I enjoy the heat, I like being the devil's advocate, I like to get people thinking in any manner required to do so.  I don't avoid controversy.  I know more than a lot of people and I know less than a lot of people.  I agree with people, I disagree with people.  I have no financial interest in what I say and I don't expect to convert anybody. I exadurate at times to make a point.  Sometimes I dodge a bullet, but I also tell the truth as I see it from MY perspective.  And, when somebody tells me, so what its only 18 people that died in Pakistan and more were killed in the China coal mines and everyone thinks, how crass and insensitive that guy is, you don't think that makes me angry and mad.  I'll tell you what makes me mad. Its that too many people think I'm, just like Mr. CEO, because too many people in the rest of the world think his attitude is so stereotypical of Americans that they guess he's American (he didn't deny it) and then just because I'm American, they think I'm just like him and I aint like that and I know a lot of us arn't like that, and I know that you're probably not like that, but the damage is ALREADY DONE and that guy aint helping stop it.  I have to go running around all day doing US foreign policy-image Damage Control and trying to pick up that guy's dodo instead of being immediately able to find some common form of communication and mutual understanding with the people I'm trying to work with.  So, take it or leave it, no offense intended, I don't accept USD as payment for nothing, so I don't really care what anyone wants to do with them either, or are you trying to tell me that this is ONLY for regular visitors.  Maybe I am a regular now.  Admission price is cheap, the entertainment is good and I obviously don't have enough real work to do.  Sorry, I am definately on a rant now. <Terminate Program>
I for one, enjoy your comments.  But, maybe your "Gets It" tells people that you "get it" and it tells others that they "don't" get it.


Thanks for that. You're right. GetIT's objective was (is) to try to immediately stimulate some kind of a response from you. I don't have a lot of time to get your attention, right? Bot gottcha', no? OK, well, maybe someone doesn't like what I say, maybe they feel the exact same way I do. Not important. What is important is that someone reading what I write doesn't just read it and run to the next thread without being caused to think, preferably something new and different and hopefully interesting to them. If I'm lucky, maybe they will start questioning their own values or re-evaluate their opinion in light of what I said. When I have to question my own beliefs, that's what makes things interesting. I'm not in it for the debating points and I don't think anyone's gonna' vote for me in the next election, cause'you can't, and I'm not asking for donations. So let's just make it as stimulating as possible otherwise we would both (me and the reader) be making a complete waste of our time and go back to watching TV. What I know, I usually don't have to be told again and I find it quite boring when somebody tries to do that. What I see from my perspective, I already know. Seeing something from another's perspective is why I talk to other people, why I go to museums and look at the art that other people make and why I read things I didn't write myself. So, once someone reacts, they go to active mode and I have the opportunity to begin learning from them if I want to, and they can from me if they want to. And if nobody learns anything from anybody, at least we had a talk, slugged it out, developed some new perspective on things or just had a rant or passed a few exciting moments in an otherwise rather impersonal and highly boring form of media. Communication is what the internet is supposedly all about, so I'm told, so let's try to make it as interesting as possible. I can read all the charts and graphs the same way you do, but that doesn't tell me how you feel about what they are saying, and they don't tell you how I feel about either. I can make all the charts and graphs I ever want to see myself, but I can't invent your opinion and I can't sit in your chair and see what you see and feel what you feel unless I get some response from you. Are charts and graphs for presenting some quantity of information or are they for helping somebody to arrive at a conclusion and do something to make things better? Just don't expect I'm going to like what you say all the time, and hopefully I won't. But that doesn't matter either, perhaps I will find some way to use what you are saying to my or another's advantage someday and I'll thank you for what you said many years from now. You're free to do the same with what I say... or not. I know I'm not sitting on the highest rung of the ladder, but hey, I've been around, yet I still know that it sometimes takes me awhile to "Get IT" myself and I usually need the help of others to do so. In the meantime, I'll do my best not to take things to a personel level, but hey... can't promise anything. Sometimes my dentist hits a nerve even though she didn't mean to. If you really don't like what I'm saying, write the Pipsqueek and tell him to fix it or vote for Gore next time. <Did that do it for you? If not, rearrange names as required.> <cyclic redundency check, exiting>
I've been lurking on this site for about six months now and hardly ever post, but Gets IT make me want to. I've learned a heck of a lot from people here, reading posts by people with very well informed posts. I see this site as an excellent resource, with a wide variety of opinions. I don't want to post very often, as I would I just add noise to an excellent system, and Gets IT, you've just upped that noise level incredibly. Your opinions are ok, I even agree with most of them, but can you please tone it down? Everyone here is way beyond the shock, if you've got a point make it. I certainly can't find one in that last post.

I will give you a  reply to OilCEO's comment on the strike on  Pakistan, though I learn lots from his posts as well. The attack on an "ally" was terrorism, yet the American media responses were appologetic. The lack of shock and outrage that the government will kill people at will outside their country is appalling, but the way you put out your point did nothing for your argument. Just try to keep the noise down for all of us trying to learn something from here, please.

I find your comments rather amusing, actually. The only reason that you take me to task is that I am one of the very few here who bothered to respond to your rants over the last two days. To actually argue with you. If you look back, the only other responses were to tell you to cool it. But you ignored them.

You have a big problem with my statement about dead Pakistanis and Chinese. Look back at what I said. It was a statement, I made absolutely no judgement, I offered no comparison other than numbers, I offered no opinion. You decided to call me crass and insensitive. To Who? The Pakistanis or the Chinese?

I'll tell you now why I wrote what I originally wrote, then I'll defend what I wrote in light of your baseless insult.

You were upset by a US missile strike in Pakistan over the weekend. You blamed the US for its intrusive foreign policy. You held the US in a vaccuum, not considering the policies of other nations. Over the weekend I heard a report on the BBC comparing the fact that 12 Americans died in a coal mine in West Virginia last week(a once every few years occurance) to the fact that 12 miners die in Chinese coal mines EVERY DAY.

What I was thinking was that you didn't particularly care what China does, domestically or not. Your beef is with the US - the same US that pays a huge amount of attention to worker safety, citizen safety, human rights, miner safety, foreigner's safety(unlike China, which you don't have a problem with) - But all you want to talk about is Abu Ghraib and all the other unsavory moments in American history. I'm just trying to be fair and balanced.
Don't try to paint me as someone who doesn't care. You misquoted me as saying "who cares." I said nothing of the sort. The evidence is clear in the record above. That would make you a liar.

So who was I crass and insensitive to? Was it the Pakistanis, the Chinese coal miners, or - here's a new one - the American coal miners? Again, I made the statement to simply put things in perspective, something you seem incapable of doing for yourself. Anything other than that is something you read into it.

As far as the Pakistanis, I know little about the incident. My understanding is that a well-known Al-Queda member was targeted and they got what the media calls a bunch of his associates instead, but those could have been innocent bystanders. Personally, I don't know how effective many such methods in the war on terror are and I deplore the loss of innocent life as any real American does, unlike you who merely uses death counts to suit some anti-American agenda. Don't pretend that missile strike wasn't carried out without the express authorization of Musharraf. Don't ignore the fact that the Pakistani regime has more to fear from IslamoFascists than we do. Fact is - you had no idea about the Chinese deaths and won't be losing any sleep over them. For you - out of sight, out of mind.

Sorry I gave you the impression it was a baseless insult.  I thought it had a basis.

The US image as it appears to the world concerns me, not the Chinese image.  And I do resent the fact that many American jobs have left for China because without equal OSHA and environmental protection regulations, it ain't a level playing field.  Trade barriers should be reinstated, to level the field and give the world a even chance of environmental survival, the little Chinese coal miners a chance at a long and decent life and the American workers a level foothold in a truely competitive market that considers "true lifetime and environmental costs".  Chinese cities are putting out the coal smoke from which you will shortly reap the benefits in the form of acid rain, as Europe has reaped the benefits of your acid rain for years.  Advice:  Reconsider your obligations both to Koyoto and your own American workers.  

From a country that has the potential to do so much good, it gets mucked up far too often.  This is very depressing to me.  I have (had) higher hopes for the US. I admit that I do not deal with disillusionment well.

I'm also trying to show you why the US has a problem with Terrorism.  Something I thought that many innocent Americans are still wondering about and don't fully understand to this day... as I believe you obviously don't recognise as well.  It's not simply because there are radical fundamentalists running around.  There are people with issues out there.  If you want to address the issues and try to solve the problem, take heed.  An ounce of prevention.. you know.  Or would you rather continue to walk around wondering when the next plane to hit the Pentagon will come along.  Or do you like putting your bags into three X-ray machines in the same terminal?  I simply tried to make evident that those kind of statements do nothing to prevent the rest of the world from arriving at the same conclusion that I did... justifying innocent deaths by minimization of the horror in relation to something else.  So MSNBC.  

I also DO NOT believe that, as you suggest, if Musharraf preauthorises a US attack on Pakistani soil (which he does not himself control or otherwise) that it makes the resulting deaths any more politically or morally acceptable than those attributed to Hitler and his henchmen.  I think it makes Musharraf an equal accomplice to an indispicable immoral act and ... a traitor to his (supposedly) own people.  But then he is not what I would really call a properly elected and completely ligitimate representative president of (certainly not all of) Pakistan anyway.  So, do you want to be the accomplice or do you prefer that it be him?  Matters very little.  My point is that the resulting world opinion and image that is fostered by such actions and your crass statement are highly negative. Why make a statement comparing Pakistan missile strike deaths to Chinese coal mine deaths, if you did't mean for me (us)to make the only possible inference?  Don't you think I can read both stories independently?  What was your point in saying stating those to highly independent events together, if you didn't mean for us (me) to draw some illogical conclusion?  Were you just restating recent events for out benefit in practicing reading?  It certainly gave me the impression that you were justifying one, by use of the other.  Did you think that through?

I commend OSHA's efforts and the American worker's safety record and agree it is one to be proud of, although I'm not sure how much of the results are simply due to automation and the reduction of the workforce caused by sending a lot of manufacturing capacity to Mexico and China where no such worker safety or equally protective environmental regulations exist.

Fair enough. Valid points. I still want to know when Israel attacked Iran, though.
1981 <search in page "1981"> for evidence link.
Maybe we're not reading the same thing, but the Daily Kos article that you cite DOES raise serious concerns over the Iranian oil bourse and ties it in with ominous implications of the Fed concealing the size of M3 come March.

Surely, the Iranian bourse is not THE reason we are beating the war drums over Iran (the Bush Administration's de facto strategy of trying to control oil resources militarily and pressure from Israel being reasons No. 1 and No. 2 in my book) but it is probably an aggrevating factor.

 How can the US financial establishment be happy about the prospects of large amounts of oil no longer being traded in dollars?

Is it reasonable to say that nations go to war almost always in response to economic motives -- opportunities or threats to their wealth?
I think it is reasonable that if the opportunities present themselves (multiple), then enough interests are brought together to create the critical mass for armed conflict.
The oil bourse is a real threat to the US petro-dollar hegemony -- but one that would unravel slowly at first.  The US dollar has certainly dropped in relative value against most major currencies in the last few years.  A petro-euro would certainly hurt US purchasing power.
Control of Iran's western oil fields might be another. I am sure that there are other opportunities.
Isn't a war usually rooted in multiple motives?
While economic motives, either directly or indirectly, have historically been a major cause of wars there are other causes as well.

To that list we might add: revenge, spite, vanity, national pride, lust for glory, distraction from domestic problems, domestic political power, and plain old stupidity and pig-headness.  I'm sure I could add lots more if I though about it enough.

The threat to the petro-peso is real.  I do business in Saudi Arabia and have been there 4 times this past year.  Each time I was there I heard many openly express their continued disbelief as to why Saudi Aramco continues to sell oil for worthless green paper.  We that get it know that they are forced to keep building their stockpiles of the green stuff in order to try to maintain its relative scarcity and hence protect the value of their current green assets, rather than dump them on an open market.  Its the same reason that Japan has 3 trillion of the green things and China 1 trillion and rising.  What else can you do with them?  Buy Yahoo at a PE of 300:1?

In the ten years that I lived in Saudi Arabia, from 1991 to  2001, I never heard one anti-US Dollar sentiment.  Now, people are finally waking up.  Before they had USD accounts at Merrill Lynch and Prudential and the Isle of Man.  Now they have Euro and Islamic Gold Dinar accounts in Dubai.

Many things are changing all over the mid east region.  Watch out for the blowback.  It will happen when they can't fit any more Boeings into the hangers or stuff any more green paper into their socks and finally cry uncle, or when you don't want to pay the high interest rates that it will eventually take to keep your US Dollar scam going.  

Almost every time the dollar goes up a little, the Chinese take a bit of what they have and buy oil.  That floods the market with dollars and the Euro and gold go up.  You can quite easily see the effects on any overlay plot of the two during the last year.  These actions have recently pushed th e Euro up to what are temporarily unsustainable levels, which forced a break with the general price track the Euro has been making with gold for the last five years and the Euro has fallen back some, however gold has continued to rise.  

So now, just keep an eye on USD interest rates.  Its already  going up.  Dollar interest last year reached levels 2% or so higher than Euro rates, which temporarily forced a decline in the Euro, but the Euro has recently resumed its rise.  So... look for that cycle to continue and another push up in the USD interest rate must come soon as it attempts to stay within 1 Euro:1.35 USD, because allowing the Euro to go over 1.35 doesn't seem to be sustainable.  

Chris Sanders touches on this theme in a recent article on the US-UK currency alliance.

If you think the Arabs have lots of US dollars to recycle, try playing the role of China now that it has been told by the US that it can't always spend them -- think back to the UNOCAL take over bids.

Right you are!

See where I mention the BTC pipeline above.  

Actually with Unocal the true reason had nothing to do with the official excuse handed out by the SEC, which was that the domestic petroleum market is far too strategically sensitive to have a foreign entity involved.  Unocal is a partner with BP in the BTC Pipeline from Azerbiajan through Turkey for Caspian  Sea Oil.  If PetroChina bought Unocal, BP would lose what they had already considered as their "pipeline" oil.  BP was and still is counting on locking up as much Caspian oil as they can to go into that pipeline eventually and I am absolutely certain that Lord Brown and Tony Blair were the ones knocking on the wall when the SEC nixed that particular deal.

P.S. Shell is Dutch and BP is British and if I recall correctly, Cities was Venezuelan owned at one time or another.

The article in the Energy Bulletin by Krassimir Petrov "The Proposed Iranian Oil Bourse" makes for interesting reading.
That's so typical. Economists do not discuss "externalities". They do not exist.


BTW it is still unclear for me why US opposed that much the introduction of the euro currency. Or why not a single oil exporting country is pricing in anything else than USD. Why for example the London IPE is not pricing in pounds? Is there a special reason for Britain to prefer a foreign currency against its own?

But for the part that USA will not go to warfare this particular time I do agree. We are not suiciders, we'll think of something else... What about sanctions?

There are many things that doesn't fit in the picture in the Iran crisis. War seems to be likely, but the options for a successful operation for the US are very few. So may be the things are not what they look like. After all, Iran is a de facto ally of the US in Iraq. May be there is a deal in the making. What are the real questions between the US and Iran? The Iranian nuclear program is not counted here, it is a bargaining chip, not a problem.

  1. The unilateral US sanctions against Iran. They are hurting almost only the US, so the US must get rid of them as soon as possible to be able to participate in the Iranian oil and gas industry. A Libyan model would work here. Libya didn't really have WMDs, but it could announce cancelling all WMD programs and so the US could lift the sanctions. Compromise on the Iranian nuclear program could be a fine face saver for the US.

  2. The Southern Iraq. Iranian-controlled political forces are now in charge almost everywhere there. The US needs a deal here. And there are indeed some signs already. The Shias have not yet declared an autonomous state in South, despite of the possibility in the new constitution. There are rumours of negotiations between the US and the Resistance. The last election results are being "corrected". The deal could be a united Iraq where no one of the three main political groups, the Kurds, the Sunnis and the Iranian-backed Shias, have a majority. The Iranian backed forces could have wide influence and the US would keep mostly inside in those big bases the Americans have been busy building. The idea would be that the US and Iran would back each other against the Iraqi nationalists, but the nationalists could have Iraq unified and some influence in the mostly Sunni provinces. A very fragile deal, but it could bring some peace.

  3. The pipelines, and also the strategic position of Iran. Europe would be mostly interested in connecting Iran via (EU-)Turkey and Balkans to the EU gas network. This would be the only real alternative to Russian gas. A good deal in Iraq, and Iran would be happy to achieve this. It could earn some transit fees from Central Asian gas, too. The US could improve its strategic position if it could get peace in Iraq as a result of an US - Iran - Iraqi Resistance deal. The US troops would break free from the quagmire and be a power factor in their bases. This could be interpreted as a victory - and everything would be just fine.

Ahmadinejad is no fool. He should not be underestimated. He can make a deal - if the Americans are not too dumb.  
I'm afraid the points you made seem to me too positive to fit to the current US policy. If USA wanted a deal then it would have tried to make a deal using both the hammer and the carrot... But I don't see a carrot in this case; we are not offering anything like an exchange between the things you stated, basicly we are not even negotiating, we are just demanding.

US position reminds me too dangerously on the pre-Iraqi war one, when the government kept pushing the ridiculous WMD argument no matter what the other side or the UN inspectors said. But my working hypothesis this time is that the goal is not to justify a new warfare but to try to isolate and destabilize the country just like they did with Serbia. The ultimate goal is a pro US government, Ahmadinejad is seen as a too strong and independant leader; a Hugo Chavez type one.

It might be argued that the whole thing was started by Iran, but IMO Iran was pretty much provoked to do it, just like Saddam was provoked to expel the UN inspectors for their apparent espionage. Iran was sick for a long time from the restrictrions it was subject to and (a coincindence?) just before the opening of the oil bourse saw a convenient moment to push for its goal to get US out of its way to the European market... But this contradicts the US goal to control the region and hence the US reaction. There will be no deal (at least with this government) because independant Iran, supplying countries from China to Great Britain is not acceptable for Washington.

Touche Kevin!
You have a point, Kevin, of course. Bit it is not entirely true that the US has nothing to offer. It is Iraq. Iran needs its positions there to be stabilized. Southern Iraq is the prize.

The US doesn't have much choice. Either a deal or a desperate war in all of Iraq and Iran (or the worst case - using the US nuclear option). Toppling the Iranian government is most unlikely. The present Iranian posture is understandable. They will show that they are not afraid and will not back without getting something. And they are creating a situation where the nuclear power program seems to a bigger issue and hence could be used as a better bargain chip.

Remember that the Iranians did let the Americans to Iraq and helped them to consolidate their positions there. And the Americans have helped the Iranians gain a strong control of Southern Iraq. All this despite the fact that Iran, too, was designated as a member of the "axis of evil". The Iranians did not make a common cause with Iraq but with the US, and the US with the Iranians. They already have a deal.

But the Iranians must have had a plan of  how to deal with Americans later. If Iran wants war, they already had a chance. If they want a better deal, they have the chance now. From the Iranian viewpoint the US, Russia, China, and the EU could be seen as balancing forces. Everybody, but the Iraqis, love the Iraq war. It neutralizes the US nicely.

It is, of course, possible, that Iran has only created better positions for the war against the US. In this case they will start the action, probably in Southern Iraq. If this were so, we are right now seeing a clever provocation scheme going on. Some Israeli or US boming raid would be the signal of attack in Iraq. I suppose that they in Teheran know pretty well what they are doing. Does the US?

YA!  It worked so well against Cuba and lasted what? 10 years against Saddam.  Seems like I remember sanctions were already tried on Iran.  I couldn't bring any Iranian carpets into the US one time, so I had to send them back out to a friend in Colombia and then go get them and smuggle them in the second time.  I think we already been down that road.  Wanna' hurt the little guys and keep them near death and without medicines and baby food?  Go for it!  Now Madrid has just been told it can't sell some old F-14s or somthing to Venezuela, so look for Chavez to start developing more "resistance".  What alternative "carrot" was offered?  Nothing I've heard of.  One *up after another.
I believe that the Spanish arms sales to Venezuela are still going ahead.  US components will be substituted with either Israeli or Chinese components I believe.
You may be correct, but I don't think Zappatero has the same warm feeling as you do.  On Friday he was still voicing disappointment with the US prohibition, but agreeing that the US was within the current technology transfer agreements, so unless he's found some way around it as you suggest, still feels like a cold ending to me.
Ya, as much as Brits like Pounds, I'd say there is some "special" reason involved in them pricing oil in USD.  As the US is (one of?) their largest trading partner(s), not to mention that BP-Amoco is British, I wonder what it can be?  Do you suppose they realise what USD pricing would do and don't see any advantage to destabilising the dollar?
I don't think Iran intent is to destabilize the US dollar -- rather, it is a move to more independance and a more mutual trading relationship with their main partners like the EU.

US dollar pricing for international trade occurred because of Bretton Woods and its previous convertability to gold. Its a legacy system because nothing better has replaced it yet for international trade.

Yes I agree its a leftover, but today only benefits a limited number of highly powerfull banking profiteers that have significant interests in retaining that lucrative system, not to mention the interests of the US Treasury. Just changing fees for the billions of USD worth of other currencies required needed to get the USD to pay for oil costs many of the world's poorest countries a significant amount of money that otherwise could be used to pay for food and medicines rather than those bankers Jags. I get donation requests every day saying I can feed a child for less than 1.00 USD/day, so don't tell me its not significant. OK, maybe the poor countries would still have to change pesos, rupees, limpias or whatever for Euros or something, but maintaining such a rigid hold on an antiquated system priced only in USD does not seem to offer a humanistic approach that wins friends and favors in most of the world. What's wrong with a basically open system approach? Works for Linux. If you want to know what's wrong with that approach, search page for "280%".
See the link at my comment above.

Krassimir Petrov has received his Ph. D. in economics from the Ohio State University and currently teaches Macroeconomics, International Finance, and Econometrics at the American University in Bulgaria.

You forgot the best part. Tne sentence you cut off the bio says he is looking for a job in "Dubai or the U. A. E."

This is the fourth time this Iran Oil Bourse story has been linked to in two days and the second on this thread. I nominate it for most popular conspiracy theory of the whole year.

Here is what I said the third time it was posted:

This topic comes up twice a week and this is the third reference to the same article.

Rather than go over it again and again, I keep posting these two links, which I think largely debunk the idea that this is a significant problem for the US or the dollar. Oddly the Daily Kos says it best.
(scroll down)

In response Muhandis, says it is not debunked and posts these links:

(as a note, is a Qatari based company, is a British company.),3604,1239644,00.html conomy

My main points are that the role of the US dollar as a global currency is underpinned not by it shortterm use in transactions, but because dollar denominated assets are held for the long term by oil producers and other exporters. They do this because of return and exchange rate considerations.

The Iran Bourse doesn't change anything. It only translates the dollar price into Euros, then asks for that. This may cause some countries to stop converting other currencies into dollars for a few hours, but so what? I am pretty sure that the EU can pay Iran for oil in Euros anyways, the dollar price is only a price, not a currency requirement. It is fundamentally impossible to have two unrelated pricing schemes. If Iran created a Euro price that was anything other than a translation of the dollar price purchasers would just choose whichever one was cheaper.

I contend that no serious economists even consider this issue. Muhandis said that I have a US bias and claimed some Candanians do. I would welcome a link. Maybe the Daily Kos is American, but it is hardly the party line. I think you have to wander pretty far into conspiracy land to get people to say ths is a top tier issue.

at $70 a barrel, Iranian oil exports are only worth $65 Billion a year. May seem like alot but compared to US/world economy, whatever money is going to come out of it in the form of Euros or stopped "manipulations" isn't going to effect much. Iran isn't exactly a hotbed of economic financial activity and they don't have alot of friends. So you are probably right, it won't change much. But, like you say, we'll have ample more opportunities to see this story.
If the Bourse were limited only to Iran's economy, I would agree, so what in the bigger scheme of things.

But, from what I have read in the Iranian and Asian press, the Bourse appears intended to eventually become a regional exchange.  So, the plans are that it would be able to conduct transactions for central asia and the middle east -- a much, much bigger pool of potential transactions.

Central Asia won't add much to this equation, either.
The Middle East means basically Kuwait,UAE, and Saudi, all Sunni Arabs as opposed to Shiite Persians. And All de facto allies of the US. I'm not saying it's not possible, it's just one of those things that I'll believe when I see.

Iran's authoritarian autocracy is hardly the place for an international capitalist financial institute to take root.

Hmmmm... there are two problems there.

1- Iraq - the sunni will not control the Iraq's oil, the shia and the kurds will control the oil. As the Iraq's shia have strong ties to Iran I guess that they will sell their oil at the Iran's Burse sooner or later, USA like it or not.

2- a problem with markets is that there are sellers and buyers. I guess that the big buyers at the Iran's Burse will be China and India. Maybe Japan or Europe too enter as buyers after some time if there are few oil being produced (Peak Oil). Russia and Venezuela can too enter as sellers if they see that they will have better profits there. I gues that that will make the Burse a global market and not a regional market. But the worse thing is that China will not need so much dollars as money reserve if they enter at the Burse as buyers. The dollar need China...

João Carlos

Sorry my bad english, my native language is portuguese

You make too many assumptions about what will happen, who will control what, what decisions will be made, and what kind of profits will be made. Some of your assumptions also rely completely on your other assumptions. I don't see how you can possibly know how these things will work out this way, but certainly these things are possiblities.
That the Iraq's shia will control the Iraq's oil is not an assumption, it is a fact. Too is fact that they have strong ties to Iran. And they don't like USA. No flowers and candy coming from the shia to the US "liberators". They don't forget Bush I. So, sooner or later they will sell their oil (and that oil is their poeprty, not US poperty) at the Iran's Burse. So, two main oil producers seelling oil there.

That China and India will buy at the Iran's Burse too is fact. They need the oil, China mostly need it because China is growing 10%/year. They will enter the Iran's Burse because they need oil, they have no options.

The only guy making wrong assumptions is you CEO.

Don't be ridiculous. You are entitled to your own opinions, not your own facts. If the Shia are doing such a great job "controlling" the oil, why is Iraqi production down to 1.3 mbpd? Why? Because a largely Sunni insurgency is obviously effecting the situation.

If Iraq ever gets to the point where Western companies can safely come in and enhance the production to more than 2.5 mbpd by exploring and renovating a decrepid system, it will be a day when the Sunnis are satisfied that they will get a fair shake, IMHO. Do you not agree that this is just as likely a scenario as what you propose?

Quite right.

I don't think there is any question that, in a seller's market, Iranian oil will be sold where and when the Iranians want to sell it.  

If their exchange works and they manage to sell some combination of oil contracts totaling 4E6 BOBP @ average ~$50/spot price => 200 million $/day loss to FX transactions which, from my very general (and probably highly INaccurate) estimates on the FX exchanges, that could lead to constant downward pressure of say a  0.75 to 1.5 cents/month for the USD.  These days any downward pressure more than zero cents/month would not give anyone I know, with USD denominated investments in their portfolio, a really pleasant feeling.

I'd say that Iran and Russia will sell to China and Iran will sell to India all the oil they want to buy thru Iran's trading arrangements.  Let's add Sudan to that as CP is building a pipeline and marine terminal there now.  Pakistan might be willing to try it just cause they live next door.  Maybe in a few years probably Nigeria would get in there.  They're not too keen on transparancy conditions.  China Petroleum has a block or two of offshore leases there now. We'll have to wait to see if they come up wet or dry.  Say automatic yes for Uzbekistan and Kazakstan (PetroKazakstan is a Chinese company) and Tajikistan.  Venezuela wouldn't mind and CP has somekinda' long-term sales deals going on there.  I'd say just about any country that doesn't like the transparancy, human rights provisions and "other" forms of meddling typical of the conditions of the western corporate laws, development loans, export finance agreements, aid and interest conditions, typically on offer, wouldn't mind getting involved.  I don't think they will have to worry too much about enforcement of the deals.  I'm sure if one deal went sour the buyer's "E-bay" rating would suffer severely and they probably wouldn't find a oil seller neither here nor there or nowhere ever again.
I can't say that Iranian Oil Bourse angst is solidly debunked. Maybe when one says serious economists, one means American economists. As for Canadian economists, yep, some see a serious threat.

One could possibly view this as part of a broader struggle between the EU and the US-UK for banking and financial dominance.  Maybe this is only a subtheme?  Settling international petroleum and other trade goods in US dollars is left over from the gold standard days of Bretton Woods, and now only benefits the banks and the US.  Much of the rest of the world is being bled on conversion charges as well as stuck accumulating American IOUs in the case of China, SA, and even Iran.  Yes, they can sell their US dollars, but they loose on the sale, and the banks gain.

As for the percentage, I don't know.  But these are large FX transaction amounts with serious implications I suspect.

Past articles on the bourse have been covered in the press.(as a note, is a Qatari based company, is a British company.),3604,1239644,00.html conomy

I think the latest trade deficit was 58 billion/month.  Of that I believe it is around an avg of 14.3 billion/month to pay for imported oil.  Might be some +/- there.  From the Japanese Bank interventions last year, made while trying to keep the Yen from completely running away from the USD, from what I read at the time it seemed that around 5 billion or more USD was soaked up during daily transactions in order to hold the dollar to within a 2¢ range of its opening price.  It is hard to tell exactly how much was soaked off and by whom, as central bank actions are conducted by many third party agents in extreme secrecy.  So, by my uneducated deduction, you perhaps could be talking about the USD losing as much as a more or less 5.72¢/month,

1.) the above amount of petrobucks were left entirely on the table,
2.) the US oil consumption remained constant during the period we're looking at, and
3.) oil continued to be priced in USD,

in about 17 months of continuous linear decline, the USDollar would therefore (thoretically) be worth nothing to anyone outside of the Homeland!  Actually, if it all came out on the table today, it would be worth far less than nothing, but I'm not going to tell anybody that.  

Now consider the same scenario, but using a monetary unit with a constant value (NOT pricing oil in Dollars), the cost of the oil in USD would rise each month corresponding to the depreciation of the USD by the 5.72¢/month, even though the actual amount of oil to be imported during the next month is here assumed to remain the same.  Extrapolation of that scenario yields a 0 USD value in only 6 months.  

Theoretically, pricing oil in ounces of Gold, or some other thoretical monetary unit of constant value in relation to oil would kill off the USD in only 30% of the time that it would take if oil was to remain priced in USD.  Keeping oil priced in USD extends this theoretical lifetime by 280%!  

Fortunately, there are still some things that you can buy with enough of these little green paper airplane makers, so practically speaking this is not true and on the FX markets, things do not move linearly for more than 15 minutes at a time, unless its the weekend, so there is some hope the above scenario will not play out in its entirety, but the pressure is still there.  And of course there are people who believe in Santa Claus, but I think that now even they (ie. all those holding USD) can see the advantages of maintaining the oil price structure with a USD base.  So use the above to your advantage however you prefer and remember, "The one-eyed man is king in the Land of the Blind."  Until then, dump your holdings with the highest interest rate costs.

PS Most of the Venezuelan crude is heavy heavy heavy stuff and requires very specialised processing.
(Some comments from Urban Survival follow.  This website is a little off the wall, but author has some good sources and has an intereting way of looking at events).

War Ahead or Just Training?

Not to be an alarmist about such things, but we have one Reader who spends a lot of his time watching public information about the US military.  Today, he notes the following:

WOW ... almost everything that can carry a Marine is now at sea.  Enough stuff is now out to fully outfit an ADDITIONAL FIVE (5) Marine Expeditionary Strike Forces.

All 8 LSD's are out

6 of the 8 LPD's are out (1 was scheduled for retirement this spring and another 1 in Aug so I don't even know those two (2) are capable of going to sea)

4 of our 7 LHD's (new model mini carrier) and 3 of our 5 LHA (old model mini carrier) are out (enough for one for each real and each potential ESG).

The Marines are MOVING.

Follow The Money Tuesday

Iran: The Money Issue

So, you want to understand international diplomacy, do you?  Well, start by looking at the money issues.  Both China and Russia are now pushing for a peaceful resolution of the "crisis" because both have made major investments in the country.  Of course, on the other side of the equation, the US is more anxious than ever to move on this latest fortress of evil.  Why?  Because, as one observer notes, they dare to speak the Great Heresy: They wish to sell Oil for Euros not Dollars.  Collision of economic proportions, no doubt about it.

Iran knows something is coming - and perhaps it will start with an "event" late this month or within the first week of February.  What are they doing to prepare for self defense?  For one thing, they're letting CNN back into the country...

Nigeria: The Money Issue

So, with the US trying to contain Iran from getting nukes, and keeping them from opening up an oil bourse, the other remaining oil in the world becomes progressively more important.  That's why Venezuela is in the news, reporting back taxes owed for oil,  and that's why we watch the situation in Nigeria, where locals are fighting for control of their natural resources so closely.

Afghanistan: The Money Issue

26 people dead in Afghanistan yesterday.  That's a country which has some importance in terms of energy (think pipelines) and drugs (think heroin).  Because of the attacks, the president of Afghanistan is urging the West to keep up the fight against "terror.

regarding the Marine movement rumour - can anyone corroborate that information?

My google-fu is great for linux and mac related information, poor for 'most everything else :-)

One indicator that something is about to happen would be if the US Navy withdraws its ships currently in the Persian Gulf to an area several hundred miles out into the Gulf of Oman or beyond.  

This might seem like the opposite of what might be expected, but it is the opinion of someone whose military opinion I deeply respect that the US Navy would be quite vulnerable to anti-ship cruise missiles in the short ranges and confined space of the Persian Gulf. The latest variant of the Russian-made 'Sunburn' missile is really bad news, with mach 2.2 speed, a 600-lb warhead, and capable of final-approach evasive action.  Just one of these hitting the flight deck of a carrier would so materially degrade its ability to launch and retrieve planes as to effectively take it out of action.

The Aegis anti-missile system would down a lot of incoming missiles, but it could be overwhelmed by a lot of junk missiles just prior a launch of the highly effective Sunburns. I don't think we really know what missiles Iran has bought from Russian or China or how many they have. That is why the US Navy would more likely play it safe and try to conduct an attack from outside the Persian Gulf.

Another point is that while Iran only has a few diesel subs, these are not to be taken lightly either.  The modern diesel attack sub, such as the Russian Kilo class, is not your father's U-boat. It is extremely quiet (more so than a nuclear sub, whose only advantage is cruising range and endurance, two features that don't matter much in short-range local operations), difficult to detect, and can launch highly effective modern homing torpedos.  The US Navy takes the threat from modern diesel subs very seriously and therefore tries to keep its carrier battle groups as far away from any subs as possible.

For these reasons, the bulk of a US air attack on Iran will come from land-based aircraft rather than from a carrier battle group.

As you point out the Kilo is mostly undetectable by sonar.  Its only disadvantage in operating in the Hormuz and the entire Arabian Gulf is the shallow depth of water and highly restricted manuverability so it would prefer as would any submarine, to be somewhere they could evade if necessary, something that no ship has when operating in that area.  If the US Qatar Naval base starts making for open ocean, buckle down.  In Riyadh, we always knew when something was going down when the all white KC's showed up, the AWACS disappeared and you could hear the C5As landing at night.  Very distinctive resonating sound from the turbines, you know?  When the Marines pass by Gibraltar, I'll let you know although I often suspect they do so on Moonless nights with no visible running lights.  What's the current Moon phase?  Where's my radar?
WOW!  I left for the UK right when this post came out, and I figured it would get a lot of comments - and it certainly has!  Personally, I think from their point of view Iran's desire for a nuclear power program is logical, and IF they are pursuing nuclear weapons, then that is too.  Both for different reasons of course.  But I do not believe that the nuclear issues have anything to do with the focus on Iran now - it's all about control of the Mideast oil/NG resources, and Iran is a rival power there, as well as possessing considerable energy resources of their own.  I don't think the misadministration has any other play going with regard to the new great game.  I think the IOB is just an additional issue - I'm not sure how it ranks in importance, but I'd bet it contributes.

I am surprised that Iran is egging us on right now, but perhaps they've concluded that some form of military action is inevitable.  Even so, I don't know what they're playing at.

All this discussion about the nuclear issue is so much hot air and distraction - it's not what it's about - maybe for the Israelis, but not for the US.  

Absolutely agree. To see the problem from Iran's perspective, simply remember back to 27 Oct 1962. How did it feel having your most hated rival freely operating with nuclear missiles 90 miles from US shorelines? Live the paranoia again as you duck and cover under your desk facing away from the glass windows and try to remember how you thought you'd be able to get home to Mom if you were left hiding under your desk or in the basement under the classroom. Ride your bike? With all the talk about the use of tactical nuclear weapons as being one of the possible scenarios bantered about on CNN by some idiot who should know better by now, what do you think they believe in Tehran? Does anyone believe Iran trusts Americans? News! Iran is NOT the one operating freely in Mexico. Iran has more oil than Iraq. Iran is next door to Iraq. Iran knows that GW does not like Iran. Iran remembers that US supported Saddam in Iraq's war with Iran. Iran knows that GW likes... OIL and the more the better. Got the dots connected now?
Twilight - it was indeed a timely and interesting post, though the TRoEI (Thread return on energy invested) declined at the end as 19 of the last 38 posts were by one person.
"Iran is egging us on"?  I am really not sure who is egging who on.  Although the English speaking press, US, UK, Canada, is painting Iran as the one turning-up the noise, I am not so sure that non-English speaking world sees it the same way.  

Iranian leaders have always excelled at wild statements, threats, etc...  I wonder how much of the recent Iranian bravado and statements is the 'same old' ongoing loop of sayings and statements?  (It is a pity I do not understand Persian to read things in their original context). Only now these wild statements are used to illustrate how 'dangerous' Iran's regime is to the West.

As for the main media, there is just a few majors which heavily influence coverage.  For example, CanWest Global controls almost every local newspaper in Western Canada, as well as several major TV and radio stations.  Not to mention, operations in Israel, UK, NZ, etc... Big geographic coverage, one corporate feed.

News is entertainment, and fear sells.  Maybe the US and UK need another boogy-man?

You are correct - I have no idea if Iran is really putting out retoric that is seriously different from the past, nor do I know how it sounds in its original context before translation.  I try to ignore the MSM, but the propoganda creeps in anyway.  It's so had to judge.
From Drudge:

World can't afford to lose Iran's oil: US EIA chief

WASHINGTON (Reuters) - A disruption in Iran's crude oil exports because of a dispute over that country's nuclear program would affect an already tight global oil market and lead to higher petroleum prices, the head of the U.S. Energy Information Administration warned on Tuesday.

"The market is so tightly balanced, clearly, we can't afford to lose a large supply of crude to the market," EIA chief Guy Caruso told Reuters in an interview.

Even though the United States does not directly import Iranian crude, Caruso said a cutoff of Iran's oil would affect the U.S. market because other countries that buy Iranian crude would compete with America to find new supplies.

"It's a fungible world oil market, and any disruption in supply affects everyone, because the price would go up for everyone," he said.

Caruso declined to say whether a disruption of Iran's oil exports would have an impact significant enough to spike oil prices to $100 a barrel.

"I wouldn't want to speculate on that. Hopefully (the nuclear dispute) would be resolved without any disruption of supply," he said.

""The market is so tightly balanced, clearly, we can't afford to lose a large supply of crude to the market," EIA chief Guy Caruso told Reuters in an interview.""

However the same person if asked if Peak Oil was a reality would probably deny it.

I can't help but wonder whether this is all a feint to drum up support for Bush again.
Since the Iraq war, the United States has taken a noticeably back-seat approach to Iran. I know this since there has been scant coverage of Iran in the American press for the last 3 years. As soon as the Administration decided to focus on Iraq as the first of the "Axis of Evil," and as that endeavor proved more costly and problematic than initially expected - it became more reticent and shied away from dealing with Iran.

Listening to the BBC on a regular basis, however, you would have heard over the same period what seemed like almost daily stories about Iran and its nuclear program. All these reports had one thing in common - they talked about how the European powers and the IAEI headed by El Baradei, I believe, were doing all the work.

If you are honest and look back over the last few weeks at the reporting on this (hyped-up)"crisis" you will see that nothing has really changed. The Europeans and the UN continue to take the lead and I think Washington is happy about that. Aside from occasional statements from Secretary Rice or some other notable, this story, from the American vantage point, is driven largely by the media's lack of a better story. Bird Flu is not as exciting as was iniatially thought(at least not yet).

This site has a legitimate reason to discuss Iran given that country's importance in the oil world. However, it saddens me that so much of the discussion involves conspiracy theory talk highly critical of the Bush administration and its supposed "cabal of neocons."

Clearly there is not much to suggest an imminent invasion of Iran. Anybody who knows the first thing about military matters should be well aware that months of conspicuous mobilization and work-up precede any significant US operations. This has not been happening.

We are not talking about cruise missile strikes here. Any surgical strikes on Iran have to be taken with the expectation that there will be retaliation, which means escalation, and therefore the need for a full-on air/land/sea component that would require the aforementioned buildup.

Also lacking is any serious talk in Washington of such an approach. This always procedes large-scale military operations. The only ones yapping are Pat Robertson and his opposites on the left.

I hope you are right in that this is just the result of the press making news, for the sake of sales, and lack of anything 'better' to report.
I think the press is being fed stories in a political ploy to distract people from Iraq, Libby, DeLay, Abramoff, Ney, Frist, illegal wiretapping, torture, etc.
I have some fears if we see a war between USA and Iran. The Roman Empire had the most powerfull army but they lost 3 legions inside the "Dark Forest" to the german's barbarians. When you read the Roman Empire's military history you can see that Roman Legions normally win against large numbers of barbarians. The barbarians ever had more warriors, but the Roman Legions had superior weapons and better equipment and better training and better tatics, so they ever won. Except inside that forest where the legions had few space to maneuver and the germans were preparated.

While it is common read here that the Iran's youth "like the USA", I think they will not give "flowers and candy" to the US troops if the USA invade or attack Iran. Get real, the iranians elected that nut, they not elected a moderate. I think it is more reasonable to think the iranians will mostly enlist to the "suicide" battalions to fight the invaders, any invaders. And it is good too remember that Iran have less racial/religious divisions than Iraq. Persians are predominant there, Arabs are only 3% and Kurds are less than 20%. And almost everyone is shiite...

USA can have the most powerfull army but we know that powerfull armies too have a bad day. I don't like the possible consequences we can have if US troops fight the Iran army and the iranian "suicide" battalions. Iraq army had a lot of disgusting surprises when fighting the iranian suicide battalions, they had to return to Iraq and defend Basra from the iranian counter-attack.

We ever need remember that Iran is not wasting time when preparating to fight USA. They had a lot of time to buy weapons and to train troops and the persians aren't stupid, they learn with the mistakes. They certainly know how US troops work and they are thinking a lot how to fight US troops tatics and superior equipment. They too observed with a lot of attention how the afgans fought (and won) the russians. And they are observing how the sunni rebels are fighting US troops on Iraq now.

I don't like the fact they are preparating against an US anfibian invasion for some time now. They are buying missiles with the intent to fight the the US navy. We really not know if they can sunk a sip, I think that can be a question of luck (the anti-missile system not work as intended and the iranians use their missiles effectivelly). An important factor will be if they mantain an operational Air Force if the US don't destroy iranians fighters instantilly and if the iranian fighters have pilots that want to make suicide attacks. If the iranians have a chance to counter-attack they can be lucky and get the big prize, sunk a carrier. I am just not sure how much luck they will need for get the big prize, but I fear that they not need be extremelly lucky if they have a lot of suicide pilots.

The Iran's topography too not help. It is easy to US troops advance to Bagda from Kwait because the terrain is plain. The US troops only had problems when fighting inside the cities and villages, any opposition the saw at the plain desert was oblitered by the tanks and artillery and Air Force. But Iran's terrain is not good for tanks and for Air Force strikes, so US troops will lose some strategic advantage. And a serious problem is that the natives know the terrain and how to use it to make effective counter-attacks and ambushes. And they certainly have a lot of AK-47 and RPGs to use and if they had military training they will know how to use them (remember, RPGs too are effective against copters).

And the fact they have strong links to the iraq's shia will make the things worse. I think they certainly have infiltrated troops training the Badr and the Sadr militiamen to fight US troops if US attack Iran. South Iraq will be a bad place to stay if the war starts and the supply lanes to the troops at the sunni triangle will be problably gone. I think this can be a lot bad.

And too there is the oil problem. If the war is fast the problem will be minor, but if the iranians are really smart they can make the war be long (the USA don't have a fast victory and need some months to win) and that will have nasty effects to the world's economy. Maybe disastrous effects...

Boy, if there is a war there I think it will be a lot messy bad thing.

João Carlos

Sorry my bad english, my native language is portuguese.

how come no-one is talking about the Iranian Bourse, due to come online March 20, 06?
an international petroleum market that sells its oil, gas, nat. gas futures in Euros - not US dollars.  Thus undermining petro-dollar currency.  This is the one thing the US of A will go to whatever end to stop, try to stop, desparately halt, delay, undermine, sabotage, covertly/overtly, stop, end...
Hence the nuke is the only thing that guarantees the survival of the Bourse.  Iranian victory appears to be imminent.
You should scroll up a little bit. There's been plenty of discussion about the Iranian bourse.
I would have said how come everyone IS talking about the Iran Oil Bourse. As I noted on an earlier post the topic comes up twice a week and this is the fifth reference in two days. I see it as near obsession.

Yes, do scroll up this post. I would have thought it made sense to see what people were talking about before commenting on what they weren't talking about. Also see the Iran post of a few days ago, where it also came up two or three times.

This has been covered in great detail here and in the Daily Kos. I don't think we've reached agreement, but all sides have aired their views. Follow the links in the earlier comments.

Excerpt from

Intra-Islamic Diplomacy

If the Iranians are seen as getting too close to a weapon, either the United States or Israel will take them out, and there is an outside chance that the facilities could not be taken out with a high degree of assurance unless nukes are used. In the past, our view was that the Iranians would move carefully in using the nukes to gain leverage against the United States. That is no longer clear. Their focus now seems to be not on their traditional diplomacy, but on a more radical, intra-Islamic diplomacy. That means that they might welcome a (survivable) attack by Israel or the United States. It would burnish Iran's credentials as the true martyr and fighter of Islam.

Meanwhile, the Iranians appear to be reaching out to the Sunnis on a number of levels. Muqtada al-Sadr, the leader of a radical Shiite group in Iraq with ties to Iran, visited Saudi Arabia recently. There are contacts between radical Shia and Sunnis in Lebanon as well. The Iranians appear to be engaged in an attempt to create the kind of coalition in the Muslim world that al Qaeda failed to create. From Tehran's point of view, if they get a deliverable nuclear device, that's great -- but if they are attacked by Israel or the United States, that's not a bad outcome either.

In short, the diplomacy that Iran practiced from the beginning of the Iraq-Iran war until after the U.S. invasion of Iraq appears to be ended. Iran is making a play for ownership of revolutionary Islamism on behalf of itself and the Shia. Thus, Tehran will continue to make provocative moves, while hoping to avoid counterstrikes. On the other hand, if there are counterstrikes, the Iranians will probably be able to live with that as well.

US force ...Neutralized.  Next phase... Behavior modification training.
An interesting couple of articles. I will let readers come to their own conclusions

From The Daily Star, Lebanon


Iraq needs $20 billion over the next five years to solve a chronic electricity crisis after U.S. reconstruction funds failed to flick the right switches, the Iraqi electricity minister said. "When you lose electricity the country is destroyed, nothing works, all industry is down and terrorist activity is increased," Mohsen Shlash said Tuesday
"The American donation is almost finished and it was not that effective. They did a few power plants, yes, but that definitely is not worth $4.7 billion," said the minister, adding that some of the work carried out was worth just one-tenth of the money being spent.



Iran's Charge d'Affaires in Iraq Hassan Kazemi met here Monday with Iraqi electricity Minister Abd al-Muhsin Shalash.

They discussed implementing the signed agreement including the expediting building nine electricity transfer plants.

Shalash expressed his country's readiness for reconstruction of its electricity sector with Iran's assistance.

He also called for implementing electricity projects from credit allocated by Iran for Iraq's reconstruction drive.

After the meeting, Kazemi told IRNA that given Iraq's electricity needs and Iran's experiences in the field, the electricity sector is the highlight of the two neighbors' cooperation.

President Ford had a bill sitting on the desks in Congress 30 years ago starting off a national coal conversion program with 20 plants. He was reacting sensibly to the initial Arab misbehavior with their oil exhibited by their Six Day War revenge embargo of '67 and the '73 embargo. If we had taken the path he started, by now we would be producing most of our fuel from our own coal, gradually converting the rest of our oil use to nonfossil sources, be relatively unconcerned with peak oil since it would be occuring far later with much lower oil use, and we could bomb rat countries like Iran to oblivion if need be without all this needless oil mess. But the bill didn't pass. We had to spend that money on bridges to nowhere and, above all, protect the habitat of the yellow speckled owl. Thank God for the tree huggers. Now we're sending our kids to get maimed and killed in the misbehaving oil bearing lands abroad in ever increasing numbers - but the yellow speckled owl is OK.
Gosh, wonder what would happen if more than 40% voted in local elections?