12/01/2006

Middle East Counter Point

GeeGuy posted a suggestion on how Iran might be brought into line by Saudi Arabia.

If I understand the premise, SA starves out Iran by cutting the price of oil. The Saudi's can afford it, Iran cannot. But, that is a long term process. SA would incur the wrath of Iran and other middle eastern oil producers in the meantime. Turmoil would result, with outright war likely. As Wolfpack points out, we could lay waste to Iran, in response to an attack against SA. If we pull out after three days of destruction, as he suggested, what do we have left? Another mess like Iraq, but without any policing? We would have to allow the Saudi's to take over Iran to restore order. Assuming SA can handle that, which I doubt. Oil fields across the region would almost certainly be burning. But, the potential for war and the burning of the oil fields would not be the only problem, or necessarily the worst.

The side effects would be felt far beyond the Middle East. First of all, consider that it would weaken, if not destroy, the economies of Venezuela (OPEC member, in unstable South America), Indonesia (OPEC member, unstable part of Pacific), Libya/Algeria (OPEC members in unstable northern Africa) and Nigeria (OPEC member in unstable central Africa). (See OPEC map here). Those are just SA's OPEC brethren.

Oil funds Mexico to our south and Canada to our north. We cannot afford to have those economies go under. What kind of immigration problem would we have if Mexico's economy totally collapsed? Russia is already in somewhat dire economic straits. If its oil suddenly becomes devalued, its economy would likely collapse, with hardliners (already on the rise) coming back into full power, sitting on a vast nuclear arsenal. Desperate, starving people do crazy things. We do not want crazy things done with WMDs.

I do not mean to rain on anyone's parade, I just do not think that starving out Iran, by devaluing oil, is the answer. The cure would be far worse than the disease. Not to say sanctions would not work, but the shock to the world economy by oil devaluation would just be too severe to bring one country into line.

6 comments:

GeeGuy said...

I will post more on this if I feel like it later. In the meantime, I am struggling with your premise.

Assume that we were to discover a new technology to replace petroleum in the next 3-5 years. Are you suggesting we would not want to pursue it in order to prop up the economies of these other countries?

It's not like most of the countries you have listed are our friends.

You're suggesting that if the price of oil, and OPEC, collapse, that is a bad thing?

And, it's important to note, I don't think a) any of this will happen, or b) anyone who might read this (including myself) really has the knowledge or expertise to predict just what might happen.

WolfPack said...

Sounds like we should just go ahead and take out Iran along with it's oil production capabilities so that all of the economically unstable countries mentioned will love us and be thankful for the unarguable economic upturn that would take place for all.

free thought said...

It is not like I want Iran to have the economic power it does, I am stating what I believe.

I am suggesting that the controlled output of oil has an enormous effect on the world economy. Shifts in prices can be handled. The original suggestion was that the price be cut in half. That would be a radical shift, just like the supply side shifts of oil expenses that created havoc in the 70's when the price increased. There would be benefits. The US would welcome the price drop. It would boost our economy, and that of other major consumers like Japan and China. But, it would hurt many other economies.

If there were magically some source of alternate fuel, that devalued oil, it would shake up economies as well. Some would improve, some would plummet. There would still be the risk of nations like Russia and Mexico causing us trouble.

The difference would be that here would not be an impetus for war by Iran vs Saudi Arabia. The original premise was that SA would destroy Iran by cutting oil prices. That would cause war. Incidental loss of customers would do the same, without causing the war.

Given our lack of success in creating any stability with the last couple wars, I do not see taking out Iran as a good option. A nice idea to ponder over drinks, but not a real world solution.

WolfPack said...

Free Thought,

I wasn't being serious. I was being sarcastic about your premise that Iran would start a war that would with out a doubt end in the destruction of their current power structure. I think the Iranian leadership is crazy but not suicidal. It wasn’t that long ago that oil was half of what it is now and everybody survived so I doubt the world wide collapse you describe would ensue. Especially in larger diverse economies like Russia which would have many sectors benefit from a drop in energy prices. Also, if Mexico’s economy tanks and we get an in rush of illegals we can just raise the minimum wage to a livable amount and mandate health insurance so that they will all be able to live comfortably. All high energy prices has done is fund the crazies of the world (look at your list).

free thought said...

Wolfpack makes a good point about the oil money funding crazies. No one would care about the middle east without oil, and they would have no outreach ability without that money.

I do not doubt that a long, slow push toward lower prices might work. I was commenting about the risk of a sudden change. And by price change, I do not mean the fluctuations, but more the over time base line. If we cut the 30 year average by 1/2, and kept it there, that would create the same type of havoc that the oil embargo did in the 1970's (even though our economy might get a boost).

Of course, we have no control over this stuff. And high energy prices might make us better off in the long run by forcing us to alternate energy and less polution.

One point of disagreement. I think that the Iranians could be so misguided as to follow suicide tactics. They used human wave attacks, leading to millions of deaths, to repel Iraq in the Iran-Iraq war. Those were religious zealots, sent in mass formation, without weapons, to overwhelm the Iraqi army. Pretty crazy to me.

Walter Greenspan said...

This was already tried once before: at the end of the Iraq-Iran War, the CIA got the Saudis to bost their crude production to pressure the price of oil (they did pressure the price to under $10.00/barrel) to prevent Iraq from having the funds to rearm itself (it had used up much of its military asets in the fighting with Iran). Sadam Hussein did not take kindly to this interference to his national sovereignty and the result was that Iraq invaded Kuwait on its way to attempt to invade Saudi Arabia