Monday, January 07, 2008

Iranian Naval Harassment: About Oil Prices, Not Suicide   [Steve Schippert]

A lot of understandable unease - and significant misreading of events - today regarding the Iranian speedboat harassment and threats to U.S. Navy warships entering the Gulf through the Strait of Hormuz. Most of the initial public take has centered around the threat transmitted in English, "I am coming at you, and you will explode in a few minutes." Quite understandable.

But from there, most public reactions have failed to identify proper context for the Iranian actions this weekend.

First, in a quote attributed to an unnamed official in the latest New York Times article on the incident, is the possibility of an Iranian probe, testing reactions and observable procedures for future reference. “Whether they’re just testing us to learn about our procedures, or actually trying to initiate an incident, we don’t know,” the Times quoted him as saying.

Second, and more importantly from a strategic view rather than tactical, is the Iranian leveraging of crisis and instability in the manipulation of sky-high crude oil prices, the only boost that exists in the Iranian economy.

Oil is flirting with $100 per barrel. Its average price in December dropped to just over $88 per barrel from over $92 average for the month of November. Incidents like this weekend's serve to remind the global oil market of how fragile the supply route is, thus maintaining premium price for Iran's only significant export and only significant source of revenue.

There almost certainly was never any true suicide ramming threat on the open Strait. But perceptions can be quite profitable.

More initial analysis here, and deeper analysis of the real nature of the Iranian Oil Weapon here, for those interested.

One additional thought:

While a revolutionary Shi'a Iranian regime poses the greatest threat to regional Arab oil exporters, such as Saudi Arabia and Kuwait, its overtly threatening actions to US Naval vessels and statements threatening to block the Strait of Hormuz if attacked drives up alarm and oil prices for them as well. And this they enjoy with lucrative pleasure. For now.

For it's a dangerous game of speculation they play of navigating the 'gulf' between international market perceptions of risk and a much lower level of threat actually perceived by the region's predominantly Sunni Arab OPEC members.

And unless something drastically changes, this mutually beneficial market run will have finally fully funded the successful nuclear armament of the Iranian protagonists. And with that the 'gulf' between risk perception and threat reality will have narrowed substantially, and the game will be over. At that point, who played whom?

And it is so often said that it is American greed that is responsible for so much ill... Greed is universal. And the game being played is more dangerous than most apply thought to. Or so it seems from here today.

01/07 04:15 PMShare