Wednesday, March 01, 2006

War Made Easy: Step-by-Step Guide to Attack Iran

I had written about it a number of times earlier, e.g.,
Collapse-of-Dollar-Economy,
New-"Axis-of-Evil"...
Invade!-But-At-Least-Change-the-Script",
etc.


But there is reason to come back to it once again, since this is March, and three important - and interconnected - events are going to unfold this month.

1. On March 6th, IAEA will again meet to decide "what to do with Iran?". Since, it is obvious that they will refer Iran issue to UN Security Council, there is a need to understand the farce around the "concern of the international community" about the nuclear Iran.

2. On March 20th, Iran is planning to open its oil bourse, which will compete the two existing oil bourses - New York's NYMEX and London's International Petroleum Exchange.

3. From 23rd March, the Federal Reserve will stop publishing its M3 monetary aggregates - which gives the figures about dollars circulating in global market.
http://www.federalreserve.gov/releases/h6/discm3.htm

Perhaps to understand this linkage, one must look at a significant (but under-reported) event that occured on the floor of US House of Representatives, a few days back. For the first time, someone from the mainstream political domain (i.e., from the "Free West", "International Community", "Civilized World", etc.) clearly articulated what was otherwise often discussed in the alternative media - namely, there is a tacit connection between the growing US debt (not just deficit), threat to the the dollar supremacy, and the increasingly invasive US foreign policy... And that the Dollar Hegemony is nearing an end (or at least, under a killing threat)

It was the first time, an American politician, openly brought the issue of the threat to the "Dollar Hegemony" from the "Iranian Oil Bourse" (though, once again, this speech given by the Texan senator, Hon. Ron Paul was conveniently ignored by the MSM).

You can read the whole text at The End of Dollar Hegemony. Here are some key excerpts about why US will find justifications to attack Iran (directly, or maybe through Israel):

"...In November 2000 Saddam Hussein demanded Euros for his oil. His arrogance was a threat to the dollar; his lack of any military might was never a threat. At the first cabinet meeting with the new administration in 2001, as reported by Treasury Secretary Paul O'Neill, the major topic was how we would get rid of Saddam Hussein - though there was no evidence whatsoever he posed a threat to us.... It now is common knowledge that the immediate reaction of the administration after 9/11 revolved around how they could connect Saddam Hussein to the attacks, to justify an invasion and overthrow of his government. Even with no evidence of any connection to 9/11, or evidence of weapons of mass destruction, public and congressional support was generated through distortions and flat out misrepresentation of the facts to justify overthrowing Saddam Hussein.

There was no public talk of removing Saddam Hussein because of his attack on the integrity of the dollar as a reserve currency by selling oil in Euros... Within a very short period after the military victory, all Iraqi oil sales were carried out in dollars. The Euro was abandoned.

In 2001, Venezuela's ambassador to Russia spoke of Venezuela switching to the Euro for all their oil sales. Within a year there was a coup attempt against Chavez, reportedly with assistance from our CIA....It's become clear the U.S. administration was sympathetic to those who plotted the overthrow of Chavez... The fact that Chavez was democratically elected had little influence on which side we supported.

Now, a new attempt is being made against the petrodollar system. Iran, another member of the "axis of evil", has announced her plans to initiate an oil bourse in March of this year. Guess what, the oil sales will be priced Euros, not dollars.
"


But if this is true, then what about the "Nuclear Ambitions" of Iran?

This "threat to the global peace" that is being highlighted as much by the politicians and MSM these days, as were the hidden WMDs that led upto US invasion of Iraq. In fact, the parallels between the build-up propaganda to Iraq invasion, and the current drumbeat about the "Iranian Nuclear Ambitions" are remarkable.

But coming back to Iran's nuclear capabilities, some facts:

1. According to the the US National Intelligence Estimates report (which was ordered by the US National Intelligence Council), Iran is at least a decade away from developing nuclear weapon. It is also interesting to note that unlike in case of Iraq - since it turned out to be rotten last time - this time the Bush administration has not been attributing the "Iran threat" to its "intelligence" (yes... pun is also intended:)
See:
Iran Is Judged 10 Years From Nuclear Bomb

2. According to an IAEA Update document, dated January 31, 2006: "Iran has continued to facilitate access under its Safeguards Agreement as requested by the Agency, and to act as if the Additional Protocol is in force, including by providing in a timely manner the requisite declarations and access to locations."

This update from the IAEA Dy. Director General was shared to all just a week before 30/37 IAEA member nations "ratified" the US government propaganda - about Iran's "non-compliance of its obligations", "clandestine nuclear weapons program", etc. - as a fact.

In fact, even the earlier reports from IAEA Director General also communicate the same message: "to date, there is no evidence that the previously undeclared nuclear material and activities referred to above were related to a nuclear weapons program" (Nov 2003, Implementation of NPT Safeguard Agreement in Islamic Republic of Iran)
and
"all the declared nuclear material in Iran has been accounted for, and therefore such material is not diverted to prohibited activities" (Nov 2004, Implementation of NPT Safeguard Agreement in Islamic Republic of Iran)
See:
Developments in the Implementation of the NPT Safeguards Agreement in the Islamic Republic of Iran and Agency Verification of Iran’s Suspension of Enrichment-related and Reprocessing Activities (Update Brief by Dy Director General, IAEA)

3. From whatever one can understand about the technology for producing nuclear weapons (not my area of competence at all), one needs thousands of high-grade uranium centrefuges, that can spin at a speed of 800-1200 revolutions/second witout breaking down, to enrich weapon-grade uranium; Iran has just about 160 or so, and those too crude ones. Iran also does not produce uranium hexafluoride gas of high quality which is required to run its crude centrifuges.
See:
Iran 'years from nuclear bomb'
Nuclear Poker Over Iran


But Why Would An Oil-Rich Nation (in fact, one with second largest reserves) Invest In Developing Nuclear Energy - Unless It Wants To Make Nuclear Weapons?

Plausible as this argument looks, like most such reasons that are made to ultimately justify a war, it hides more than it says.... Facts, after all, should never stand in the way of empire-building.

An article written by Prof Mohammad Sahimi (Prof & Chairman of Chemical and Petroleum Engineering, University of Southern California, Los Angeles) in 2003 lists out some useful facts to understand Iran's energy sector and needs (and which rarely find their way in MSM, politician's speeches, or public discourse):

Iran's Nuclear Program. Part II: Are Nuclear Reactors Necessary?

  • Most of Iran's 60 oil fields are old, and need to repairs, upgrading and repressurizing to remain viable. Even though it is large producer of oil and gas (about 4mn barrekls/day), it has not been able to reach its pre-revolution production level of around 5.5-6mn barrels/day. This would require an investment of around $40 billion over next 12-15 years (Getting such investments a bleak possibility for Iran, since US had imposed economic sanctions after the '79 revolution).

  • On the other hand, like most other developing nations, Iran's energy needs are increasing. Its population has more than doubled since 1980 (from 32mn to 70mn), and during the same time, its total energy consumption increased more than 3 times from 1.6 quadrillion Btu (quads) in 1980 to more than 5.5 quads at present.

  • Iran has a present installed electrical capacity of around 20,000 megawatt. However, it's annual growth in demand is 5-8% - which means that by 2010, it will need another 7,000-megawatt of electricity.

  • Since a large part of this electricity requirement comes from Iran's consumption of its own oil and gas production, Iran's own consumption of oil has been growing at a rate of 8%/year since the early 1990s. If this trend continues, Iran will, paradoxically, become a net oil importer by 2010. That, to say the least, will be a catastrophe for a country that relies on oil for 80% of her foreign currency and 45% of her total annual budget... If that happens, where will Iran get money to build its infrastructure, feed its people, manage the other parts of economy, etc.

  • There is also this basic issue of Energy-Economics-101. To paraphrase Iran's former ruler, Shah Mohammad Reza (a good friend of US then, who was ousted), a barrel of oil is too "precious" to be used for generating electricity (in fact, that is why US had supplied Iran the uranium enrichment technology back in 1974).

  • To put is simply: if one can make electricity from other sources, then the oil & gas can be used for more value-added products - that range from plastics to cosmetics... Iran, presently, produces around $2.7bn/year worth of petrochimical products, and if it reduces its reliance on oil & gas for its electricity requirements, this can be a huge source of revenue for the country.

  • To put this in context, a fact often not mentioned, Iran's known uranium reserves can produce as much electricity as 45bn barrels of oil - that is more than 50% of Iran's known oil reserves of 96bn barrels of oil. "In other words, if we can extract all of Iran's known oil reserves (a remote possibility!) and use about half of them just for producing electricity, we will generate as much electricity as what Iran's presently-known uranium deposits can produce! It would therefore be absolutely foolish not to do this!"

  • And lastly, there are environmental costs of using oil to produce electricity (even if one uses gas/CNG). The carbon emmissions - a major culprit in air pollution - in Iran have increased from 33mn metric tons in 1980 to 85mn metric tons... There are 17,000 deaths/annum from air pollution in Tehran alone (apart from an increase in asthma, heart and skin ailments)... Fortunately, unlike the brave new privatised/corporatised world of US economy, the healthcare costs are still considered to be a responsibility of the state in Iran - and so, it is natural for the state to consider its overall costs...

    It is in this context that in 2003, one of the IAEA reports noted:
    "According to all the surveys performed in power sector of Iran, nuclear option is the most competitive to fossil alternatives if the existing low domestic fuel prices are gradually increased to its opportunity costs at the level of international prices IAEA Report on Energy & Economics in Iran."


    If So, Why Would We Have Another War - This Time, Waged on Iran - In The Coming Months/Weeks?

    Iran, obvioulsy, is not a military threat to any nation. But it sure is an economic threat to US.
    then, US govt. has no other alternative but to invade/attack it, if it has to save its economy.

    Reasons:

  • The global supremacy of US$ - and therefore, of US economy - is not because of the "economic fundamentals". US$ is, after all, a "fiat currency" backed by "nothing"!!!

  • The value of US$ is because it remains in high demand globally. The global demand is fuelled by the fact that world-wide oil is bought and sold in US$. The two oil exchanges - NYMEX & IPE - deal in US$, and are effectiely owned by US. And therefore, all countries buy US$ for their foreign currency reserves.

  • To buy the US$, countries produce and sell "something". In contrast, US only has to print some greenbacks to achieve similar ends (of course, it maintains control of the supply of US$ in the currency market; too many US$ floating around will decrease its value).

  • On 20th of March, when Iranian Oil Bourse opens, it will trade denominate oil in Euro, and not in US$.

  • If this happens, the magic of US$ will get eroded, since many countries will start offloading US$ for Euro. The more number of countries sell the US$, the lesser will be its value.... It will be kind of "bear-run" on the currency market - which, some would have noticed, is essentially a speculative global casino... only 2% of FX transactions relate to any "real" economic trade of goods or services, we are actually living in a global casino, where 98% transactions are speculative

  • Ceasing the publication of M3 Monetary Aggregates from March 23rd is Federal Reserves' way to slow or stop the bear-run. If people are not aware how many US$ are being sold in the market, they will have no way to decide its "market value".

  • Ensuring that Iran is referred to UN Security Council will be the other US initiative, which will lead it one step closer to attack Iran with a semblence of legitimacy (though, unlike in case of Iraq, this time there is less chance of an invasion, but greater chances of an air attack on Iranian facilities - either by US or by Israel - as an "act of self-defense"!!)

  • 8 comments:

    AKS said...

    I am speechless. What analysis. Even if you go wrong - that was a great piece.

    Abrar said...

    amamzing article!! I did read about the Oil bourse that is about to be setup in Tehran and how its going to be threatning the US DOLLAR, but you have presented this whole situation in terms of Iran's nucleur controvery very beautifully.

    I have added you to my blogroll!!

    Supratim said...

    Prof,

    Don't you think you should give the background of the guy you are quoting? And, whether you would accept all his other views? Because his view of ending the "dollar hegemony" is tied to a lot of other stuff and you can not only pick the stuff that is convenient to you. Here is his bio on the same site:

    Congressman Ron Paul of Texas enjoys a national reputation as the premier advocate for liberty in politics today. Dr. Paul is the leading spokesman in Washington for limited constitutional government, low taxes, free markets, and a return to sound monetary policies based on commodity-backed currency. He is known among both his colleagues in Congress and his constituents for his consistent voting record in the House of Representatives: Dr. Paul never votes for legislation unless the proposed measure is expressly authorized by the Constitution. In the words of former Treasury Secretary William Simon, Dr. Paul is the "one exception to the Gang of 535" on Capitol Hill.

    How many of those things would you agree to?

    Madhukar said...

    Thanks, Supratim!... for sharing Ron Paul's background.

    From the first line of your comment about his "background", I thought I had quoted some criminal!!!;0)

    Supratim said...

    No, not a criminal. But, given his support for "free markets", I thought that would be equivalent for you! : )

    Madhukar said...

    Supratim
    I only wish that people just don't go by words, and actually read, - and think about - what others have written when they used a particular term. Ron Paul's usage of "free market" is not how it is being sold (and understood) nowadays by people. The so called "free" market - in its current avatar - is actually far from "free"... a fact, that unfortunately, most educated (literate?) Indians do not appreciate or think about.

    Anand Surana said...

    Hats of to you sir...
    Amazng analysis. A beautiful piece and it makes so much sense...since the first time i visited your blog i have become your fan..

    Supratim said...

    Prof,

    I am happy to learn why the "free market" is not free. Maybe you should blog about it. But, before you go off and point to agri subsidies in Europe or something else in the US, you should keep in mind that this is an evolving theme. A theme, which is perhaps 30 years old or lesser, and hence hardly likely to be perfect. If you are going to point out that our free markets today are not perfect, that I would accept. But, this imperfection does not mar the concept. The effort has to be in removing the imperfections or distortions (as the mercantilists call it), rather than to say that we must do away with the free movement of goods and services. Bajaj scooters in the 80's is a great example of what happens when you don't have a "free market". BTW, you should show up the comments on the main body of the article - would help to get a better dialogue/discussion going.