Since, historically, desperate countries do desperate deeds, the US and the world had best be prepared. It all has to do with the price of oil and the cost of ambition.
In a way the situation which is developing today is reminiscent of that which provoked the attack upon the US and the UK by Imperial Japan in December 1941. Then the reason was oil. The US was the single greatest source of oil for the factories and war machine of the Japanese Empire. When the Roosevelt campaign of escalating economic sanctions, which was intended (at least by Secretary of State Cordell Hull) to force the Japanese to end their aggression in China, reached its final stage, the Japanese were left without a supply of oil, particularly refined aviation gasoline.
This left the Japanese with two alternatives. The first was a humiliating capitulation to US policy demands. The second was the seizure of the oil fields and refineries of what was then the Dutch East Indies.
Taking the second option would assure war with both the US and the UK if for no other reason than the shipping routes from Indonesia to the Japanese home islands ran between the British outpost at Singapore and the US bases in the Philippines. Since both countries were dedicated to protecting the integrity of the Dutch East Indies, only removal of the threat to oil convoys would make the effort of taking the oil resources worth the effort.
The Japanese naval high command and its exceptionally able and honest strategist, Admiral Yamamoto bet that the UK and the US would be so preoccupied with the Germans that a single short series of shocks to both countries would allow the Japanese to achieve their strategic goal. Yamamoto was never sure that it would, fearing that the necessary surprise attacks upon the centers of US naval power at Pearl Harbor and in the Philippines would "awaken a sleeping giant who would pursue us without remorse."
Still, it was the least-worst of the options. The Japanese attacks were successful and for six months, just as Yamamoto predicted, the Empire rode high on the waves. The American eagle had its perch broken and its beak shoved in the dreck of defeat. It did, again as Yamamoto had predicted, take wing again and come after the Japanese with a complete dedication to the destruction of the Empire.
Desperate countries do desperate deeds.
Iran is now a desperate country. It is desperate because without oil prices above a minimum of ninety bucks a barrel, it cannot meet the needs of its population. Also, the mullahocracy cannot continue to invest vast resources in its effort to achieve both nuclear capacity and the status of regional hegemon.
When OPEC cut production 1.5 million barrels per day, that cut was no where near enough to boost the price of oil to the minimum required by Iran's budgetary requirements. The force behind the almost token cut was Saudi Arabia and it's fellows on the Arabian Peninsula. These oil states with the cushions of massive sovereign wealth funds need no more than fifty dollars a barrel to do handsomely.
(It might be noted that Iran's oil infrastructure is in such bad shape that it was not pumping all that it was allowed to before the cut and will not be able to move as many barrels per day as it is allowed under the new production regime.)
Iran (and Venezuela, but the Geek will ignore the New Workers' Paradise for now) was left in the cold of relative pauperdom. Due to the imprudence of President Ahmedinejad, the "rainy day" fund established during the glory days of triple digit prices under the control of the Iranian central bank no longer exists. As a result the Iranians do not have even a very short term reserve.
The central bank continues to crank out money, but the money is worthless. Inflation is currently running at the thirty percent level.
Eighty percent of Iran's foreign exchange comes from oil revenues, so the treasury is as empty as an Obama foreign policy statement. The last attempt by the mullahocracy's front man to up the government's internal take, a three percent value added tax, was withdrawn after the shopkeepers of the bazaar shut up shop and took to the streets. A new thrust in the VAT direction is not likely to go over any better.
It is definitely panic time in the mullah's corral. And, desperate countries do desperate deeds.
The desperation felt in the Iranian government is evident in the latest round of shrill rhetoric coming from both President Ahmedinejad and his rival for power, Speaker of the Majlis Larijani, regarding the near-collapse of the "world bully," the US. Ahmedinejad told his audience that the "American empire in the world was reaching the end of the road."
Yeah, right.
The empireless US is having a tough time. The tough time will continue and probably worsen in the months to come as the global recession deepens. But the US is not near the end of its road.
The situation for Iran is different. The economic distress currently being felt by the Iranian people can only get much, much worse. The combination of sheer ambition and fiscal mismanagement along with the cumulative impact of the sanction campaign assures that reality.
Desperate countries do desperate deeds.
Iran has a number of options available to it in an attempt to seek a higher price for its oil. The Iranian funded Mahdi Army in Iraq could be brought back on stream. Muqtada Al-Sadr could crank up his troops quickly and effectively should Tehran give the word. (This possibility should give the Sunnis in Iraq some pause for thought as the SOFA is under consideration. Do they really, really want the Shiites to start shooting again?)
The Iranian Revolutionary Guard Corps (naval section) could seize or fire on an oil tanker transiting the Straits of Hormuz under some transparent cover or another. Violation of sovereignty. Water pollution. Killing fish without a license. You get the drift.
The consequent impact upon insurance rates if nothing else would slow or end the transport of oil from Basra. (Another cause for thought on the part of (any) responsible Iraqi politicians considering the SOFA.)
Another option open to Iran is cranking up its creature Hezbollah. This could easily have the effect of producing another round of exsanguination as Israel seeks to squash once again the rocket firing lads in Lebanon or their Hezbollah aided, supported and trained colleagues in the Gaza. The inherent attractiveness of this option is enhanced by the upcoming Israeli elections, the relatively high degree of war-weariness in the Israeli population and the vulnerability of the population to casualties inflicted at acceptable risk (at least to Tehran.)
Even discounting the recent low-credibility reports holding that the recent seismic events in southwest Iran were caused not by nature but by Iranian nuclear weapons tests, the capacity of the Iranians to cause trouble on a large scale is impressive. It is certainly sufficient to cause the desired escalation in the price of oil.
Gosh, looks like there may be a challenge, a test, waiting for the next president as he steps into the Oval. The Iranians--at least Speaker Larijani--hope the man behind the big desk is named Obama. After all, as the Speaker observed, Obama is "more mature" than McCain.
Interesting question for all of us. Who is right? Sarkozy with his observation that Obama's views on Iran are "utterly immature" or the Speaker of the Majlis?
Showing posts with label Oil Prices. Show all posts
Showing posts with label Oil Prices. Show all posts
Thursday, October 30, 2008
Sunday, July 6, 2008
Yemen And The Overlooked Chokepoint
Yemen is another one of those pesky artificial states. Created by accident as part of the ongoing British "fits of absentmindedness" during the late Nineteenth and Twentieth Centuries, Yemen is a country which has always been wanting to fall apart. It takes only the slightest excuse to do so.
It is in the process of collapse one more time.
So why should we care?
Good question.
Basically there are a couple of reasons. One is quite good--at least for the moment. The other is also adequate, but will take a longer time to properly appreciate.
The good short-term reason is the Bab al Mandab. The "Bab" is the narrow stretch of water at the southern mouth of the Red Sea. Currently four percent of the world's daily production of oil flows through the narrow opening between the coasts of Yemen and Djibouti. Not much, but enough so that any threat to the flow will cause yet another spike in oil futures.
A bit of context wouldn't hurt before looking at today's state of play. The northern portion of today's Yemen, formerly called North Yemen became more or less independent in 1918 following the defeat of the Ottoman Empire and its dismantlement by the British and French. Great Britain kept a "benevolent" eye on the Shiite majority stretch of semi-barren mountains and desert.
The southern portion of Yemen, formerly the Peoples Democratic Republic of Yemen (aka South Yemen) and before that the British Protectorate of Aden, was cut loose by the UK in 1967. Three years later at the ambiguous conclusion of a form of civil war between it and North Yemen in which Egypt played an open role, Aden changed names to the Peoples Republic.
As the name make clear the PDRY was Communist. Well, sort of hemi-demi-semi Communist.
North and South unified in 1990. Four years later a secessionist movement started in the south. It was officially "subdued" in 2000.
Subdued? Perhaps. Ended? No.
The southern portion of Yemen is relatively richer, better educated (if that term is relevant where only roughly half the population is literate) and possessed of modest oil reserves. It is also Sunni. Sunni of the Wahibist/Salifist persuasion. (No wonder that Osama bin Ladin's ancestry is from the south of Yemen as are the roots of many others in the al-Qaeda organisation.)
The north is Shiite. Strongly so. Let's step back forty-six years. In 1962, North Yemen, under the avuncular eye of Whitehall, became a "republic" after overthrowing the Immamate. This theocratic rule had limped along well enough as long as no one cared who or what was running the show. Regional considerations finally prompted someone to care and, since the sun had not yet set completely on the "lands east of Suez," bidda-bing, bidda-bang, the Immamate was gone and the good republicans in.
The Immamate was gone. But, not forgotten. In recent years it seems that the Shia majority in the north has been pining after the good old days of pure Shia sharia. Helped along by Iranian agents, the pining has taken a more definite shape.
The shape of guns. The shape of suicide bombers. The most recent example of Shia unrest in the north came just the other day as a suicide bomber reported to be fourteen years old blew himself and four others to protoplasm splashes in Sa'ada. There's lots of coverage, this is good and short. (http://www.themedialine.org/news/news_detail.asp?NewsID=22007)
The northern threat is posed to a government which is already overstretched by the presence of the southern separatist movement and (drum roll, please) the never absent al-Qaeda. As if the government did not face enough problems, it is not widely considered to be legitimate due to its policy proximity to both the US and Saudi Arabia.
It has been al-Qaeda in the past which has made most Americans even dimly aware of Yemen's existence. It was in Aden that the USS Cole allowed one small boat too many to come too close.
Since that time the US government and Yemen have had a tenuous relationship. Yemen is an important geographical point in the Great Global War on Terrorism. Not because it was the ancestral home of bin Ladin, or even the place at which the bombing of the Cole announced clearly that the US was in the crosshairs.
Yemen became important because of an event taking place two years after the Cole was holed. A Yemen based al-Qaeda cell attacked the French flagged oil tanker, Limburg. The resultant small and short lived spike in oil prices brought home to those who care just how important the Bab al Mandab is.
Since then al-Qaeda and its affiliates have been quiet. In part this is because the government of president Salih has made important concessions to the jihadists. Prisoners have been allowed to escape, detainees transferred from US custody have been "reeducated" and released. From the US perspective this has made Yemen as less than reliable "ally" in the Great Global War on Terrorism. A good summary of the state of play in this area can be found at the following: http://www.metimes.com/Security/2008/07/02/is_yemen_an_ally_in_the_war_on_terror/5613/
Salih has not been so successful in the north even though he was born in that region and was president of North Yemen before federation. There are currently a minimum of three thousand fighters in the mountains and caves of the north. They are all members of one particular sect of Shia, the Zaidi.
The Geek does not agree with those who argue the northern insurgency is a proxy war between Iran and Saudi Arabia. While Iran has undoubtedly provided some moral and training support, it is unlikely that it has gone beyond this level.
Adding to the potentially quite destabilizing mixture in Yemen is the presence of an estimated twenty thousand Somali refugees who have arrived in the country this year alone. (See the Doctors Without Borders Estimate at: http://www.alsahwanet.net/view_nnews.asp?sub_no=403_2008_07_05_64460)
Salih has been successful so far in playing region against region, tribe against tribe, sect against sect and the US against bin Ladin. How much longer he can keep his balance and keep Yemen from going the way of Somalia is difficult to judge.
Easy to judge is the impact of a failing Yemen on both the adjacent Bab al Mandab and the global oil markets. Bad at best. Catastrophic if combined with other shocks to the market.
Easy to judge is the impact of a Yemen failure on the Arab Peninsula. The Somaliazation of Yemen would have large, negative effects upon all the Arab oil states. Quite possibly it would be the start of a very unpleasant avalanche.
Incipient crises are always easiest to nip off at their first sign. (Think about what would have been the effect if the French Army had resisted the German reoccupation of the Rhineland.) We have missed that particular opportunity.
Among the many, many foreign policy challenges facing the next administration is how to (note, not "when to," or "if to") intervene effectively in Yemen before it hits the tank along with Somalia.
It is in the process of collapse one more time.
So why should we care?
Good question.
Basically there are a couple of reasons. One is quite good--at least for the moment. The other is also adequate, but will take a longer time to properly appreciate.
The good short-term reason is the Bab al Mandab. The "Bab" is the narrow stretch of water at the southern mouth of the Red Sea. Currently four percent of the world's daily production of oil flows through the narrow opening between the coasts of Yemen and Djibouti. Not much, but enough so that any threat to the flow will cause yet another spike in oil futures.
A bit of context wouldn't hurt before looking at today's state of play. The northern portion of today's Yemen, formerly called North Yemen became more or less independent in 1918 following the defeat of the Ottoman Empire and its dismantlement by the British and French. Great Britain kept a "benevolent" eye on the Shiite majority stretch of semi-barren mountains and desert.
The southern portion of Yemen, formerly the Peoples Democratic Republic of Yemen (aka South Yemen) and before that the British Protectorate of Aden, was cut loose by the UK in 1967. Three years later at the ambiguous conclusion of a form of civil war between it and North Yemen in which Egypt played an open role, Aden changed names to the Peoples Republic.
As the name make clear the PDRY was Communist. Well, sort of hemi-demi-semi Communist.
North and South unified in 1990. Four years later a secessionist movement started in the south. It was officially "subdued" in 2000.
Subdued? Perhaps. Ended? No.
The southern portion of Yemen is relatively richer, better educated (if that term is relevant where only roughly half the population is literate) and possessed of modest oil reserves. It is also Sunni. Sunni of the Wahibist/Salifist persuasion. (No wonder that Osama bin Ladin's ancestry is from the south of Yemen as are the roots of many others in the al-Qaeda organisation.)
The north is Shiite. Strongly so. Let's step back forty-six years. In 1962, North Yemen, under the avuncular eye of Whitehall, became a "republic" after overthrowing the Immamate. This theocratic rule had limped along well enough as long as no one cared who or what was running the show. Regional considerations finally prompted someone to care and, since the sun had not yet set completely on the "lands east of Suez," bidda-bing, bidda-bang, the Immamate was gone and the good republicans in.
The Immamate was gone. But, not forgotten. In recent years it seems that the Shia majority in the north has been pining after the good old days of pure Shia sharia. Helped along by Iranian agents, the pining has taken a more definite shape.
The shape of guns. The shape of suicide bombers. The most recent example of Shia unrest in the north came just the other day as a suicide bomber reported to be fourteen years old blew himself and four others to protoplasm splashes in Sa'ada. There's lots of coverage, this is good and short. (http://www.themedialine.org/news/news_detail.asp?NewsID=22007)
The northern threat is posed to a government which is already overstretched by the presence of the southern separatist movement and (drum roll, please) the never absent al-Qaeda. As if the government did not face enough problems, it is not widely considered to be legitimate due to its policy proximity to both the US and Saudi Arabia.
It has been al-Qaeda in the past which has made most Americans even dimly aware of Yemen's existence. It was in Aden that the USS Cole allowed one small boat too many to come too close.
Since that time the US government and Yemen have had a tenuous relationship. Yemen is an important geographical point in the Great Global War on Terrorism. Not because it was the ancestral home of bin Ladin, or even the place at which the bombing of the Cole announced clearly that the US was in the crosshairs.
Yemen became important because of an event taking place two years after the Cole was holed. A Yemen based al-Qaeda cell attacked the French flagged oil tanker, Limburg. The resultant small and short lived spike in oil prices brought home to those who care just how important the Bab al Mandab is.
Since then al-Qaeda and its affiliates have been quiet. In part this is because the government of president Salih has made important concessions to the jihadists. Prisoners have been allowed to escape, detainees transferred from US custody have been "reeducated" and released. From the US perspective this has made Yemen as less than reliable "ally" in the Great Global War on Terrorism. A good summary of the state of play in this area can be found at the following: http://www.metimes.com/Security/2008/07/02/is_yemen_an_ally_in_the_war_on_terror/5613/
Salih has not been so successful in the north even though he was born in that region and was president of North Yemen before federation. There are currently a minimum of three thousand fighters in the mountains and caves of the north. They are all members of one particular sect of Shia, the Zaidi.
The Geek does not agree with those who argue the northern insurgency is a proxy war between Iran and Saudi Arabia. While Iran has undoubtedly provided some moral and training support, it is unlikely that it has gone beyond this level.
Adding to the potentially quite destabilizing mixture in Yemen is the presence of an estimated twenty thousand Somali refugees who have arrived in the country this year alone. (See the Doctors Without Borders Estimate at: http://www.alsahwanet.net/view_nnews.asp?sub_no=403_2008_07_05_64460)
Salih has been successful so far in playing region against region, tribe against tribe, sect against sect and the US against bin Ladin. How much longer he can keep his balance and keep Yemen from going the way of Somalia is difficult to judge.
Easy to judge is the impact of a failing Yemen on both the adjacent Bab al Mandab and the global oil markets. Bad at best. Catastrophic if combined with other shocks to the market.
Easy to judge is the impact of a Yemen failure on the Arab Peninsula. The Somaliazation of Yemen would have large, negative effects upon all the Arab oil states. Quite possibly it would be the start of a very unpleasant avalanche.
Incipient crises are always easiest to nip off at their first sign. (Think about what would have been the effect if the French Army had resisted the German reoccupation of the Rhineland.) We have missed that particular opportunity.
Among the many, many foreign policy challenges facing the next administration is how to (note, not "when to," or "if to") intervene effectively in Yemen before it hits the tank along with Somalia.
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