The US-Iran economic war, as Europeans paddle in troubled waters....
By Pepe Escobar
NEW YORK - Here's a crash course on how to further wreck the global economy.
A key amendment to the National Defense Authorization Act signed by United States President Barack Obama on the last day of 2011 - when no one was paying attention - imposes sanctions on any countries or companies that buy Iranian oil and pay for it through Iran's central bank. Starting this summer, anybody who does it is prevented from doing business with the US.
This amendment - for all practical purposes a declaration of economic war - was brought to you by the American Israel Public Affairs Committee (AIPAC), on direct orders of the Israeli government under Prime Minister Benjamin "Bibi" Netanyahu.
Torrents of spin have tried to rationalize it as the Obama administration's plan B as opposed to letting the Israeli dogs of war conduct an unilateral attack on Iran over its supposed nuclear weapons program.
Yet the original Israeli strategy was in fact even more hysterical - as in effectively preventing any country or company from paying for imported Iranian oil, with the possible exceptions of China and India. On top of it, American Israel-firsters were trying to convince anyone this would not result in relentless oil price hikes.
Once again displaying a matchless capacity to shoot themselves in their Ferragamo-clad feet, governments in the European Union (EU) are debating whether or not to buy oil from Iran anymore. The existential doubt is should we start now or wait for a few months. Inevitably, like death and taxes, the result has been - what else - oil prices soaring. Brent crude is now hovering around $114, and the only way is up.
Get me to the crude on time
Iran is the second-largest Organization for Petroleum Exporting Countries (OPEC) producer, exporting up to 2.5 million barrels of oil a day. Around 450,000 of these barrels go to the European Union - the second-largest market for Iran after China.
The requisite faceless bureaucrat, EU Energy Commissioner Gunther Ottinger, has been spinning that the EU can count on Saudi Arabia to make up the shortfall from Iran.
Any self-respecting oil analyst knows Saudi Arabia does not have all the necessary extra spare capacity. Moreover, and crucially, Saudi Arabia needs to make a lot of money out of expensive oil. After all, the counter-revolutionary House of Saud badly needs these funds to bribe its subjects into dismissing any possibility of an indigenous Arab Spring.
Add to it Tehran's threat to block the Strait of Hormuz, thus preventing one-sixth of the world's oil and 70% of OPEC's exports from reaching the market; no wonder oil traders are falling over themselves to lock up as much crude as they can.
Forget about oil at an accessible $50 or even $75 a barrel. The price of oil may be destined to soon reach $120 a barrel and even $150 a barrel by summer, just as in crisis-hit 2008. OPEC, by the way, is pumping more oil than at any time since late 2008.
So what started as an Israeli-concocted roadside improvised explosive device has now developed into a multiple economic suicide bombing targeting whole sections of the global economy.
No wonder the chairman of the Iranian parliament's national security and foreign policy commission, Ala'eddin Broujerdi, has warned that the West may be committing a "strategic blunder" with these oil sanctions.
Translation: as it goes, the name of the game for 2012 is deep global recession.
Obama rolls the dice
First Washington leaked that sanctions on Iran's central bank were "not on the table". After all, the Obama administration itself knew this would translate into an oil price hike and a certified one-way ticket for more global recession. The Iranian regime, on top of it, would be making more money out if its oil exports.
Still, the Bibi-AIPAC combo had no trouble forcing the amendment through those Israel-firster Meccas, the US Senate and Congress - even with US Secretary of the Treasury Tim Geithner expressly against it.
The amendment just passed may not represent the "crippling sanctions" vociferously demanded by the Israeli government. Tehran will feel the squeeze - but not to an intolerable level. Yet only those irresponsible people at the US Congress - despised by the overwhelming majority of Americans, according to any number of polls - could possibly believe they can take Iran's 2.5 million barrels of oil a day in exports off the global market with no drastic consequences for the global economy.
Asia increasingly will need more oil - and will continue to buy oil from Iran. And oil prices will keep flirting with the stratosphere.
So why did Obama sign it? For the Obama administration, everything now is about electoral calculus. Those terminal wackos in the Republican presidential circus - with the honorable exception of Ron Paul - are peddling war on Iran the moment they're elected, and substantial swathes of the American electorate are clueless enough to buy it.
No one, though, is doing some basic math to conclude the American and European economies certainly don't need oil flirting with the $120 level if some minimal recovery is in the cards.
Show me your balls Apart from that self-defeating, terminally in crisis euro/North Atlantic Treaty Organization bunch, everyone and his neighbor will be bypassing this Israeli-American declaration of economic war:
- Russia already said it will circumvent it.
- India is already paying for Iranian oil via Halkbank in Turkey.
- Iran is actively negotiating to sell more oil to China. Iran is China's second-largest supplier, only behind Saudi Arabia. China pays in euros, and soon may be paying in yuan. By March they both will have sealed an agreement about new pricing.
- Venezuela controls a bi-national bank with Iran since 2009; that's how Iran gets paid for business in Latin America.
- Even traditional US allies want out. Turkey - which imports around 30% of its oil from Iran.
- Will seek a waiver exempting Turkish oil importer Tupras from US sanctions.
- And South Korea will also seek a waiver, to buy around 200,000 barrels a day - 10% of its oil - from Iran in 2012.
China, India, South Korea, they all have complex two-way trade ties with Iran (China-Iran trade, for instance, is $30 billion a year, and growing). None of this will be extinguished because the Washington/Tel Aviv axis says so. So one should expect a rash of new private banks set up all across the developing world for the purpose of buying Iranian oil.
Washington wouldn't have the balls to try to impose sanctions on Chinese banks because they will be dealing with Iran.
On the other hand, one's got to praise Tehran's balls. After a relentless campaign of covert assassinations; abductions of Iranian scientists; cross-border attacks in Sistan-Balochistan province; Israeli sabotage of its infrastructure, with viruses and otherwise; invasion of territory via US spy drones; non-stop Israeli and Republican threats of an imminent "shock and awe"; and the US sale of $60 billion of weapons to Saudi Arabia, still Tehran won't balk.
Tehran has just tested - successfully - its own cruise missiles, and in the Strait of Hormuz of all places. Then when Tehran reacts to the non-stop Western aggressive barrage, it is blamed with "acts of provocation".
Last Friday, the New York Times editorial board was totally in love with the Pentagon's threats against Iran, as well as calling for "maximum economic pressure".
The bottom line is that average Iranians will suffer - as average, crisis-hit, indebted Europeans will also suffer. The US economy will suffer. And whenever it feels the West is getting way too hysterical, Tehran will keep reserving the right to send oil prices skyrocketing.
The regime in Tehran will keep selling oil, will keep enriching uranium and, most of all, won't fall. Like a Hellfire missile hitting a Pashtun wedding party, these Western sanctions will miserably fail. But not without collecting a lot of collateral damage - in the West itself....
By Kaveh L Afrasiabi
This week, as the European Union inches closer to imposing a total oil embargo on Iran, thus escalating tensions to dangerous new levels, it is important to scrutinize the causes of what is rapidly turning into a major international crisis with unforeseen consequences, and to ponder the potential option of alternative Western policies that would prevent yet another crisis of choice, rather than necessity.
Representatives from 27 countries of the EU began talks on Thursday for an agreement on banning the purchase of Iranian oil. EU foreign ministers had agreed late last year to work toward such a ban with the aim of blocking funding for Iran's nuclear program that some suspect is designed to develop nuclear weapons - a charge Tehran strongly denies.
An EU official was quoted on Thursday as saying that "significant issues remain and no agreement is expected before the end of January". In 2010, crude oil from Iran accounted for about 5.8% of total European imports.
The official Iranian news agency IRNA quoted a member of parliament as saying that pressure from "bullying nations" made the country "more resilient", while Economic Minister called the EU's move "an economic war".
The EU move follows US President Barack Obama last week signing off on a law that slaps sanctions on Iran’s central bank, also aimed at curtailing the country's oil sales.
To many Iranians as well as outside observers, any European ban on Iranian oil would be as unjustified as a similar ban that was imposed on the country after the nationalization of its oil industry in 1951. Then, the British government, which had long-term neo-colonial agreements with Iran giving it possession of 85% of oil proceeds without financial scrutiny, managed to rally the US and other European governments, culminating in a joint US-British covert action that overthrew the democratically elected government of Mohammad Mosadegh. It was replaced with a compliant puppet regime for the next quarter of century, until that was overthrown by a populist revolt led by the nationalistic clergy in 1979.
Since then, neither the US nor Europe has formally apologized to the nation, seeking instead to restore their hegemony over the geostrategically important country one way or another, eg, initially by supporting Iraqi leader Saddam Hussein's illegal invasion of Iran in September 1980 then turning a blind eye to his use of chemical weapons.
With the Western missions against several Middle Eastern nations in the past decade alone, the last being Libya, where under a lame United Nations authorization the North Atlantic Treaty Organization gave itself the license to wage an almost full-out war and humanitarian disaster in the name of saving the country, the stage is now set for regime change in both Syria and Iran, two "rogue" regimes that defy Western (and Israeli) scripts for regional order.
Geopolitically, any substantial weakening of Iran would be a definite minus for both Russia and China, two favorite targets of US power, and it is therefore up to those two nations to resist the latest Western efforts seeking (a) to weaken Russia's eastern flank and thus to sow discord in Central Asia, and (b) to undermine China's energy security.
A prudent counter move by Russia and China would be to upgrade Iran's status in the Shanghai Cooperation Organization (SCO) from observer to full member, and to enhance the organization's cooperative security measures to protect their members from Western machinations. The SCO is an inter-governmental mutual-security organization founded in 2001 by China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.
However, whereas Moscow has detected evidence of a major Western disinformation campaign on Iran's nuclear program, Beijing has been comparatively more reticent, perhaps miscalculating the short- and long-term implications of oil sanctions affecting its energy security. A narrow focus on Iran energy sanctions that neglects to contextualize it within the broader parameters of global, ie, great power rivalry, is self-defeating to both Russia and China.
Former head of the International Atomic Energy Agency (IAEA), Hans Blix, recently confirmed there is no evidence that Iran is manufacturing nuclear weapons.
Iran's enrichment activities are fully monitored by the IAEA's surveillance cameras, there have been regular inspection of Iran's facilities, some on short notice, and to date the United Nations' atomic watchdog has not detected any diversion of nuclear material.
Nor has Iran breached its international obligations by seeking to possess a nuclear fuel cycle under the articles of the nuclear Non-Proliferation Treaty, as confirmed by six former Western ambassadors to Tehran in their opinion column last year.
Western sanctions on Iran would be justifiable only when there was a smoking gun and/or solid evidence of nuclear proliferation on Iran's part, not the present case, with Iran continuing to implement the terms of its safeguard agreement with the IAEA.
Clearly, the Iran nuclear crisis is good news for the Western military-industrial complex, which profits from the huge sales of Western military hardware to Saudi Arabia and other oil sheikhdoms in the Persian Gulf, the latest being the sale of US$30 billion worth of used US fighter jets to Saudi Arabia, much as this translates into an intensified arms race in the oil-rich region.
"If the European Union foolishly follows the American lead against Iran, it will inflict a major wound on its own unity since several European countries including Turkey, Greece, Italy and Spain are heavily dependent on Iran's oil," says a Tehran University political science professor on the condition of anonymity.
He adds that he expected the oil sanctions to be "watered down" due to the wave of exemptions. "If the West wants to play hard ball with Iran, then they should expect collateral damage to their other 'safe' oil supplies, because Iran can close the Strait of Hormuz - even dozens of boats full of Iranian students could do this, as they shut down the British Embassy." (He was referring to the storming of the British Embassy in Tehran last November, to which Britain responded by expelling Iranian diplomats and ordering the Iranian Embassy in London to close.)
An Iranian flotilla blocking oil tankers at Hormuz might instigate a harsh American military reaction, not unlike Israel's deadly assault on the Free Gaza flotilla in international waters last year, but with more dire consequences.
Iran's options to scuttle the free flow of oil to the Western world are not limited to sinking ships at the strait or flexing naval muscles.
Akin to acts of civil disobedience reminiscent of anti-whaling activists, masses of Iranian protesters on boats could play a role in temporary shutting down the waterway so vital to the Western economy.
Before following the US and appeasing Israel (which is nuclear armed), Europeans would be advised to take a healthy pause and think about the dire implications of their planned economic war on Iran....