By Chris Martenson
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| Randolph Bourne |
Why revisit this topic again? Simply because if actions against Iran trigger a shutdown of the Strait of Hormuz, through which 40% of the world’s daily seaborne oil passes, oil prices will spike, the world’s teetering economy will slump and the arrival of the next financial emergency will be hastened. Even if the strait remains open but Iran is blocked from being an oil exporter for a period of time, it bears mentioning that Iran is the third-largest exporter of oil in the world after Saudi Arabia and Russia.
Once again, I am deeply confused as to the timing of the perception of an Iranian threat, right now at this critical moment of economic weakness. The very last thing the world economies need is a vastly increased price for oil, which is precisely what a war with Iran would deliver.
Let me back up. The U.S. has already committed acts of war against Iran, though no formal declaration of war has yet been made. At least if Iran had violated U.S. airspace with stealth drones — and then signed into law the equivalent of the recent U.S. bill that will freeze any and all financial institutions that deal with Iran out of U.S. financial markets — we could be quite confident that these would be perceived as acts of war against the U.S. by Iran.
And rightly so. From Reuters:
“U.S. Imposes Sanctions on Banks Dealing With Iran“Dec. 31, 2011
“(Reuters) – President Barack Obama signed into law on Saturday a defense funding bill that imposes sanctions on financial institutions dealing with Iran’s central bank, while allowing for exemptions to avoid upsetting energy markets.
“The sanctions target both private and government-controlled banks — including central banks – and would take hold after a two-six-month warning period, depending on the transactions, a senior Obama administration official said.
Sanctioned institutions would be frozen out of U.S. financial markets.”
The impact of this law was quite pronounced and immediate, with the Iranian rial falling sharply against the dollar in the first few days after the bill was signed into law.
As reported in Reuters:
“Iran’s Rial Falls to Record Low on U.S. Sanctions“Jan. 3, 2012
“(Reuters) - The Iranian rial fell to a record low against the dollar on Tuesday following U.S. President Barack Obama signing a bill on imposing fresh sanctions against the country’s central bank.
“The new U.S. sanctions, if fully implemented, could hamper the world’s major oil producer’s ability to sell oil on international markets.
“The exchange rate hovered at 17,200 rials to the dollar, marking a record low. The currency was trading at about 10,500 rials to the U.S. dollar last month. Some exchange offices in Tehran, when contacted by Reuters, said there was no trading taking place until further notice.
“‘The rate is changing every second…we are not taking in any rials to change to dollar or any other foreign currency,’ said Hamid Bakhshi in central Tehran.”
That represents a more than 63% decline in just a month. Assuming that Iran trades its oil in dollars, this will not necessarily cripple its economy, but the specter of hyperinflation looms large whenever a currency falls by that much. With hyperinflation come economic, social and political instability, and these are, of course, precisely the aims of the U.S. in imposing the sanctions. And of course, everything that Iran imports will become hideously expensive — quite rapidly.
The U.S. is deliberately poking and prodding Iran right now. Given the glacial pace of nuclear development, we must ask ourselves, why now?
The Story
As with most things today, there is a story created for public consumption that justifies waging war against Iran. The main narrative goes something like this: Iran is trying to develop nuclear weapons, and this is intolerable, so it must be stopped.
In November 2011, the International Atomic Energy Agency (IAEA) issued a report, long denied under the prior director’s tenure (Mohamed ElBaradei), finally declaring that Iran was unequivocally trying to build a nuclear weapon. From The New York Times:
“U.N. Agency Says Iran Data Points to A-Bomb Work
“Nov. 8, 2011
“United Nations weapons inspectors have amassed a trove of new evidence that they say makes a ‘credible’ case that “Iran has carried out activities relevant to the development of a nuclear device,” and that the project may still be under way.
“The long-awaited report, released by the International Atomic Energy Agency on Tuesday, represents the strongest judgment the agency has issued in its decade-long struggle to pierce the secrecy surrounding the Iranian program. The findings, drawn from evidence of far greater scope and depth than the agency has previously made public, have already rekindled a debate among the Western allies and Israel about whether increased diplomatic pressure, sanctions, sabotage or military action could stop Iran’s program.”
I’ve not yet read the report, but I am concerned about the gap between the headlines I’ve seen that say Iran is building a nuclear bomb and carrying out “activities relevant to the development of a nuclear device.” For example, much has been recently made of the fact that Iran has enriched some uranium to the 20% grade, but there is a huge leap between that and the 90%-plus grade needed for a nuclear device. Iran had told the world it needed the 20% grade for a medical reactor, and then created a fuel rod for that reactor. To say that enriching to the 20% grade is the same thing as trying to build a bomb is not accurate, and possibly deceptive.
As a signatory to the Non-Proliferation of Nuclear Weapons (NPT) treaty, Iran has every legal right to enrich uranium for peaceful purposes, such as making nuclear fuel rods for a research reactor, and Iran is claiming that all their current work is toward this end.
Maybe it is; maybe not. But even if a nuclear bomb is being pursued, there’s nothing in the NPT that provides for military action to pre-emptively prevent any nation-state from carrying out such development work. In fact, if a preemptive strike is carried out, it will be done without the benefit of any international laws or treaties that could justify the action.
Also left out of the narrative is any explanation of why it was OK for Pakistan to develop nuclear weapons or why North Korea is permitted to hold them.
The simple answer is because they don’t have any oil. A quick view of the U.S. military presence surrounding Iran, coupled with the Iraqi experience of being attacked for supposed weapons of mass destruction that did not exist (nor were used by Iraq to threaten the U.S.), reveals why Iran may be so motivated to develop a nuclear weapon:
If Iraq had a nuclear weapon in 2002, it is quite doubtful the U.S. would have invaded — a lesson that has not gone unnoticed.
While I am not a supporter of the current repressive theocratic regime in Iran, I strongly believe that it is up to the people of any nation to decide for themselves what sort of system they will choose to live under. The Arab Spring, as messy as it was, is vastly preferable to the blunt instrument of an externally driven war.
The most curious thing about this story is the apparent lack of awareness among U.S. officials about how the oil markets work. I know they know better, but the context-free repetitions in articles such as this next one from Bloomberg almost literally drive me crazy:
Geithner to Seek China’s Support on Iran
Jan 9, 2012
U.S. Treasury Secretary Timothy F. Geithner will urge Asia’s two biggest economies to cut Iranian oil imports and seek to narrow differences with China on trade and currency disputes on a visit to Beijing and Tokyo this week.
The idea that the world could just stop buying Iranian oil, as though it were the same thing as boycotting McDonald’s and buying Burger King, is just ridiculous. The world oil markets are far too tight for that.
How is it that China is supposed to cut its Iranian oil imports exactly? Oil is a fungible product. If China cuts its oil imports from Iran, it will simply have to buy the missing amount of oil from someplace else. The 2.6 million barrels a day that Iran exports cannot simply be instantly replaced at this time from other spare capacity elsewhere in the world. It doesn’t exist at the moment. Where will it come from?
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