Wednesday, January 4, 2012

An American Enterprise Institute Analysis that Greatly Misinforms on the Situation in Iran

AEI Resident Scholar Michael Rubin writes under the headline, The West should hand Iran's leadership a chalice of poison:
It would be a mistake to relieve the economic and military pressure on Tehran.

Tensions in the Strait of Hormuz are at a more than 20-year high after Iranian authorities threatened to close the 34-mile-wide channel through which more than one-third of the world's oil tanker traffic passes. The threats come against the backdrop of renewed international discussion of sanctions in the wake of an International Atomic Energy Agency report cataloguing Iranian efforts to develop nuclear weapon technology...Make no mistake: Iran cannot close the Strait of Hormuz for more than a day...Nor can Iran itself afford a closure of the strait. Not only does it need to export oil itself through the waterway, but, because of decades of financial mismanagement, it also depends on the strait for the import of refined petroleum products.
Aside from the fact that keeping "economic and military pressure on Tehran" is US intrusiveness into the affairs of others, Rubin does not seem to be up to date on the current US financial capabilities that could result in pushing Iran to block the Strait of Hormuz.

As I reported last week:
The U.S. Congress just passed a bill that President Obama appears ready to sign that, if fully implemented, could substantially reduce Iran’s oil revenue.

In other words, the U.S. is backing Iran into a corner. The bill could impose penalties on foreign firms that do business with Iran's central bank. Since those that import Iranian oil use the Iranian central bank for the transactions, it would likely cut off that method of Iran selling oil.

Iran is reacting as you would expect most cornered governments would act. Iran’s first vice president Mohammad Reza Rahimid said that Iran could shut down the critical shipping lanes through the Strait of Hormuz in the Gulf, if foreign sanctions are imposed on its oil exports.

The Strait of Hormuz is very important. About 33% of seaborne oil shipments (17% of world oil) go through the Strait of Hormuz. A blocked Strait would force tankers to take longer, more expensive routes that would most assuredly drive oil prices higher.

The thinking has always been that Iran wouldn't shut down the Strait of Hormuz because they use it for their own export of oil. Indeed, in an EPJ Daily Alert in November 2010, I reported:
This afternoon I attended a meeting where the speaker was Capitan Jeffrey Kline. Kline is the Program Director, Maritime Defense and Security Research Programs, Naval Postgraduate School. He is an Adjunct Professor at the Naval War College where he teaches, "Joint Analysis for the Warfare Commander"...Kline...pointed out that it might not be in Iran's interest to close the strait since Iran ships its oil through the Strait.
But, if the United States makes it impossible for Iran to sell its oil, then a key factor that would stop Iran from blocking the strait would be removed.
Would the US push Iran into such a corner? Here's what's going down

The President signed the bill into law on New Year's eve that gives him the right, for all practical purposes, to lock down Iran's ability to sell oil.

Thus, Rubin's argument that the Straight will not be shut down by Iran, because they use the Strait to export their oil, is hanging by a thread. All that is now needed is the word from the President to increase sanctions and cut off Iran's use off regular global banking operations. It will push Iran deeper into a corner. But, would the US really push Iran into such a corner? It's starting.

NYT is now reporting, today:
The countries of the European Union have taken their boldest step so far in the increasingly tense standoff with Iran over its nuclear program, agreeing in principle to impose an embargo on Iranian oil, French and European diplomats said on Wednesday....

A final decision by the European Union will not come before the end of January and would be implemented in stages to avoid major disruptions in global oil supplies. But the move by some of Iran’s most important oil customers appears to underscore the resolve of Western allies to impose toughest round of sanctions...

And the Treasury has just announced (my bold):
The U.S. Department of the Treasury today announced that Secretary Tim Geithner will travel to Beijing, China and Tokyo, Japan January 10-12, 2012, for meetings with senior government officials in both countries to discuss the state of the global economy, policies to strengthen global growth and other economic issues of mutual importance. Secretary Geithner will also discuss our continued coordination with international partners in the region to increase pressure on the Government of Iran, including financial measures targeting the Central Bank of Iran.
Far from Iran not being a threat to block the Strait, the US is pushing Iran into such a corner that the blocking of the strait becomes an option, since it appears they will have enormous difficulty selling oil, thanks to increasing U.S. pressure on other countries to stop dealing with Iran, which is then likelyt follow with sanctions put on by the U.S. with anyone that deals with the Iranian central bank .

As for Rubin's statement that Iran can't block the strait. There is an opposing view from the U.S. Navy's Captain Kline. Here's how I reported it in the EPJ Daily Alert:
I thought I would ask Kline, who might have a pretty damn good idea, if the Strait could be closed by Iran. His answer was it could. When I asked him how long it would take, he said 3 or 4 days for Iran to position ships and lay mines. He did say that the blockade could eventually be broken, but it would depend upon international co-operation and that it would take "some time". He said that Iran has missiles onshore aimed at the strait that would have to be taken out,and that Iran had other sophisticated equipment in the area including drones that could listen in on ship communications. He said ship mine sweeping can also get "very tricky".
Bottom line, the US is clearly pushing Iran into a corner. Rubin's analysis, (AEI reports are read on the Hill and by MSM), is lacking in pointing out that the bill, President Obama signed on New Year's eve, makes it more likely that Iran will attempt to block the Strait of Hormuz, especially since it appears the U.S. is muscling China and Europe to stop purchasing oil from Iran.

Further, a Naval commander, who teaches "Joint Analysis for the Warfare Commander" at the War College,   states that Iran could mine the Strait and that it would be "tricky" and take "some time" to unblock the Strait. The complete opposite view that Rubin presents.

Thus, Rubin's analysis, which fails to take into account the true developing situation, is simply setting  false security as to what may result from on going US pressures on Iran.


  1. This like Japan in WWII all over again- using a pressure-cooker strategy of hostile banking policies and trade sanctions to goad them into initiating conflict.

    It's also worth remembering that Israel goaded Egypt into initiating a naval blockade that provided the casus belli for their pre-emptive attacks in 1967.

    The only lesson of history is that we don't learn from it.

  2. 'The Central Bank of Iran' that's it, eh? Does it have anything to do with Iran's desire to move away from accepting dollars for their oil? I seem to recall that Iraq was about to do just that under Saddam...and so was Libya under Qaddafi. Look what happened to them.

    Iran will capitulate IF China and Russia decide to fold on their backing. The Russians MIGHT play tough and might bark loud...but they cannot really DO anything. Not in the conventional sense. And here's the question - is it WORTH to go nuclear over something like this?

    Putin is under some political pressure at home and I don't think that he can muster the political will and/or backing to do anything outside Russia's borders.

    China is also having some severe internal domestic pressure. Their economy is taking a turn for the worse.

    Right now...its who can bluff the longest. What drunk can remain standing the longest and he who remains standing last...wins.

    There is a lot we're not allowed to know through the pre-approved 'news' channels. MUCH more. But what is certain is that there is a global war brewing. Wars are catalysts for geopolitical and economic change...

  3. That's some scary truth you just delivered. "How many times must the cannonballs fly..."

  4. I hope some Chinese/Russian/etc. types put Tim in his place instead.

  5. Evening Robert....

    Switzerland's central bank chief accused of insider trading | Business | The Guardian

  6. Strong dollar policy...

  7. @Anon 7:57

    Starting a war with the 'Evil Empire' would solidify Putin's weakening hold on the country. Same with China. A foreign bogey-man is the best way to unify the populace. Remember 9/11?

    Russia/China/Shanghai Co-op, plus the Muslim world, fighting the USA on their turf, is a VERY bad situation for the US.

    What happens in the USA when we have a draft to fight to protect our bases in Korea or surrounding Russia? While our currency collapses, oil skyrockets, and China shifts their manufacturing from USA exports to weapons. How long will we put up with it?

    Russia and China have been bullied by the USA for decades, and haven't been at war. China has a huge surplus of men, and Russia has a huge surplus of commodities. Their leaders will be able to make a compelling argument that they're facing an existential threat from the USA, because it will be fought on their turf.

  8. Interesting to see regional groups forming; Russia/Asia/eurozone...these groups may go along with US policy as they continue to watch the US bring itself down...the trade off may just be rising oil prices/inflation/stagflation like in the 70's, only this time leading to the big time devaluation of the dollar...

  9. Same Anon poster that posted at January 4, 2012 8:22 PM

    Folks - Russia and China have severe internal issues. They too have muslims that are trying to pry themselves loose from the Russians and the Chinese.

    Yes, China has a huge surplus of men - so what? They really do not have the power projection capabilities that the US has. Russia...just doesn't have the manpower and their power projection is regional at best.

    Its going to be economic at first. Expect the Chinese and Russians to use all types of economic tools/weapons at their disposal. You can bet that some of their soldiers will be thrown into the mix to act as advisors and to a lesser degree a more credible deterrent - as in "yeah, we can put up a fight and make it tough".

    But it will degrade quickly. Nukes CAN be set to fly a lot faster than people may think. Most wars start off how the last one ended... Note I said WAR not some 'police action' or local brown people stomping. REAL WAR...which is what is planned.