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New US strategy on Iran emerges from Davos

Anatole Kaletsky, Times Online (UK)
The real value of Davos is in making connections – not just in the sense of networking and schmoozing with important people, but also in relating seemingly disparate events and ideas.

…Start with the premise that America is indeed being tough on Iran in order to strengthen internal opposition to the extremist confrontational policies of President Ahmadinejad. The purpose is not necessarily to trigger the removal of Ahmadinejad, but rather to shatter Iran’s present grandiose delusions of regional hegemony and bring Iran into negotiations from a position of relative weakness, rather than its present perceived strength.

Three strands of policy are now being directed to achieving this internal shift in Iranian politics.

…This brings us to the final and most interesting strand in the anti-Iranian policy nexus: the price of oil. Iran’s economy depends entirely on oil sales, which account for 90 per cent of exports and a roughly equal share of the Government’s budget. Since last July, a barrel of oil has fallen from $78 to just over $50, reducing the Government’s revenues by one third. If the oil price fell into the $35 to $40 range, Iran would shift into deficit, and with access to foreign borrowing cut off by UN sanctions, the Government’s capacity to continue financing foreign proxies would quickly run out. Iran has reacted to this threat by calling on Opec to stabilise prices but, in practice, only one country has the clout to do this: Saudi Arabia. Earlier this month, in a highly significant statement, Ali al-Naimi, the Saudi Oil Minister, publicly opposed Iranian calls for production cuts to halt the decline in prices. Mr Naimi’s pronouncement was cast as a technical matter unconnected with politics, but it seemed to confirm private warnings by King Abdullah that his country would try everything to thwart Iran’s hegemony in Iraq and throughout the region, whether by military intervention or more subtle economic means.

This policy was spelt out with surprising precision in an article by Nawaf Obaid, a senior Saudi security adviser, in The Washington Post: “King Abdullah may decide to strangle Iranian funding of the Iraqi militias through oil policy. If Saudi Arabia boosted production and cut the price of oil in half, the kingdom could still finance its current spending. But it would be devastating to Iran, which is facing economic difficulties even with today’s high prices. The result would be to limit Tehran’s ability to continue funnelling hundreds of millions each year to Shiite militias in Iraq and elsewhere.”

This article attracted huge attention in the Middle East and Washington, but was hardly noticed in the financial markets and the business community. But that was when the bulls still thought that they commanded the oil market and most analysts believed that the only direction for oil prices was up. Maybe they should think again.
(25 Jan 2007)
Submitter WT writes: “Does Saudi Arabia really have the production capacity to take the price of oil down to the $35 to $40 range? Perhaps, perhaps not. But I think a major recession probably does have that power.”

Related from the Guardian: Israel tries to cut off Tehran from world markets

An elephant can run very fast
India’s boundless ambitions

Martine Bulard, Le Monde diplomatique viz Znet
AMIT Raina, who is a student at the prestigious Jawaharlal Nehru University (JNU) in New Delhi, said: “An elephant can run very fast.” He inclined his head slightly as he spoke, as many Indians do. His fellow students agreed with him and all were convinced that India would sooner or later resume its place in the world. They were more divided over whether the Indian elephant could overtake the Chinese dragon, yet all dreamed of power.

Indian civilisation once rivalled China and was pre-eminent in Asia; in 1700 it led the world financially (1). Yet by 1820 its share of global income had fallen from 22.6% to 15.7%, half that of China (which then followed it into decline). By 1980 India, with 3.4% of global income, and China, with 5%, had been marginalised. China has now shown that a country can bounce back and India wants to catch up as fast as it can.

…The government of Prime Minister Manmohan Singh has copied China’s example: among other measures it has set up special, near tax-free economic zones, waived social protection and lowered customs duties. These measures have yielded results. There has been investment in IT services and in cars; in November 2006 Renault announced the construction of an assembly plant. The major supermarkets — Wal-Mart, Tesco, Carrefour — are planning to move in: who cares if the arrival of their vast stores kills local businesses and overwhelms landscapes that have so far been spared the monotonous urbanisation of the West?

“Modernisation” is under way. The US leads the investors, followed by the island tax haven of Mauritius, Britain, Japan and South Korea.

…India must also come to an understanding with China. Either the two giants build a regional understanding that will influence Asian and international politics, or they fight it out, which seems the more likely possibility. Nothing is settled; there are really three parties in the ring, including the US, or four including Japan.

…China’s prime minister, Wen Jiabao, visited New Delhi in April 2005. Showing an impressive sense of history, he pointed out that for 99.9% of the past 2,200 years the countries had lived in harmony (7). The discordant 0.1% was the war of 1962 (8), an unexpected defeat that heralded the end of the Nehru era and still rankles in India.

…Another potential area for detente is energy, with its rapidly increasing demands. The two countries are in competition for energy resources with China well ahead, especially in Africa. At the end of 2005 the China National Petroleum Corporation and India’s Oil and Natural Gas Corporation (ONGC) reached an agreement to invest in the exploitation of Syrian oil reserves. Also in 2006 the Chinese and Indian oil ministers discussed creating a buyers’ cartel to influence prices, a fresh idea that was thwarted when the Indian minister, Mani Shankar Aiyar, was sacked.

The joint declaration that accompanied Hu Jintao’s visit emphasised the need to “encourage collaboration between their enterprises, including through joint exploration and development of hydrocarbon resources in third countries” (10). The full significance of the declaration emerged in the context of US protests to the Indian government about its investment in Syria. The declaration also announced that “the two sides agree to promote cooperation in the field of nuclear energy, consistent with their respective international commitments”.

The quest for oil and gas supplies also encourages cooperation with Russia. In 2004 the oil minister, Aiyar, announced: “In the half-century of Indian independence, Russia has guaranteed our territorial integrity, and in the second half-century it may be able to guarantee our energy security. I am talking about the strategic alliance with Russia in energy security, which is becoming for India at least as important as national security” (16).
(25 Jan 2007)
Long article about India’s new place in the world – energy is a key theme. -BA

Oil, Not Terrorists, the Reason for US Attack on Somalia

Wanjohi Kabukuru, Daily Nation via Information Clearing House
While the terrorism theory holds some water, the reality of the factors contributing to the mess in Somalia is pegged on natural resources. Oil and gas are Somalia’s Achilles heel. It is an open secret that four US oil giants are sitting pretty on money-spinning concessions expecting to reap huge windfalls from massive resources of both oil and gas in Somalia.

The story of Somalia and oil goes back to the colonial period. British and Italian geologists first identified oil deposits during that period of imperialism. The first oil wells historically referred to as the Daga Shabell series were dug in the 1960s. Tiny gas discoveries adjacent to Socotra were also noted.
(22 Jan 2007)

Somalia – A trip down memory hole lane

Media Lens
Following recent American airstrikes in Somalia, the words ‘Black Hawk Down’ have been mentioned dozens of times across the UK national press, and more than 100 times in the US press, over the last month.

The words refer, of course, to the Hollywood film based on the October 3, 1993 raid by US forces on Mogadishu, the Somali capital. Press coverage has focused on two aspects of that raid: the claim that it was part of a humanitarian mission motivated to relieve famine, and the fact that 18 US rangers lost their lives.

With near-perfect consistency across both the US and UK press, other facts and claims have simply been ignored.
(23 Jan 2007)