Category Archives: Global Economics

Israel: The Case Against Attacking Iran

bumper stickerMy Comments: George Friedman has an international reputation for his knowledge about how the world works and his ability to articulate credible analyses of what is going on. This is a fascinating article that’s very relevant to the current questions about Iran and how the world needs to respond to the existential threat they pose.

The Democrats and Republicans, mindful that most of us can only understand 5th grade words, attempt to create an “either or” decision in black and white. These words from George Friedman show how incredibly complex the issue is.  I have no clue how this is all going to play out, but I’m inclined to let professionals decide, mindful that they face the same ultimate risks you and I face. 75 years ago we were at war with Japan, but now co-exist as friends and allies. Freiedmans comments here are kinda long, so if you don’t give a damn about any of this, then simply ignore this post.

August 25, 2015 By George Friedman

On Aug. 21, Israeli Channel 2 Television aired a recording of Ehud Barak, Israel’s former defense minister and former prime minister, saying that on three separate occasions, Israel had planned to attack Iran’s nuclear facilities but canceled the attacks. According to Barak, in 2010 Israel’s chief of staff at the time, Gabi Ashkenazi, refused to approve an attack plan. Israeli Cabinet members Moshe Yaalon and Yuval Steinitz backed out of another plan, and in 2012 an attack was canceled because it coincided with planned U.S.-Israeli military exercises and a visit from then-U.S. Defense Secretary Leon Panetta.
The fact that the interview was released at all is odd. Barak claimed to have believed that the tape would not be aired, and he supposedly tried unsuccessfully to stop the broadcast. It would seem that Barak didn’t have enough clout to pressure the censor to block it, which I suppose is possible.
Yaalon, like Ashkenazi, was once chief of staff of Israel Defense Forces but was also vice premier and Barak’s successor as defense minister. Steinitz had been finance minister and was vocal in his concerns about Iran. What Barak is saying, therefore, is that a chief of staff and a vice premier and former chief of staff blocked the planned attacks. As to the coinciding of a U.S.-Israeli exercise with a planned attack, that is quite puzzling, because such exercises are planned well in advance. Perhaps there was some weakness in Iranian defenses that opened and closed periodically, and that drove the timing of the attack. Or perhaps Barak was just confusing the issue.

A number of points are worth noting: Ehud Barak is not a man to speak casually about highly classified matters, certainly not while being recorded. Moreover, the idea that Barak was unable to persuade the military censor to block the airing of the recording is highly improbable. For some reason, Barak wanted to say this, and he wanted it broadcast.

Part of the reason might have been to explain why Israel, so concerned about Iran, didn’t take action against Iran’s nuclear facilities. Given the current debate in the U.S. Congress, that is a question that is undoubtedly being asked. The explanation Barak is giving seems to be that senior military and defense officials blocked the plans and that the Israelis didn’t want to upset the Americans by attacking during a joint exercise. The problem with this explanation is that it is well known that Israeli military and intelligence officials had argued against an Israeli strike and that the United States would have been upset whether or not joint exercises were occurring.

It would seem, intentionally or unintentionally, that Barak is calling Israeli attention to two facts. The first is that militarily taking out Iranian facilities would be difficult, and the second is that attempting to do so would affect relations with Israel’s indispensible ally, the United States. Military leaders’ opposition to the strikes had been rumored and hinted at in public statements by retired military and intelligence heads; Barak is confirming that those objections were the decisive reason Israel did not attack. The military was not sure it could succeed.

The Potential for Disastrous Failure

A military operation, like anything else in life, must be judged in two ways. First, what are the consequences of failure? Second, how likely is failure? Take, for example, the failure of the U.S. hostage rescue operation in 1980. Apart from the obvious costs, the failure gave the Iranian government reason to reduce its respect for U.S. power and thus potentially emboldened Iran to take more risks. Even more important, it enhanced the reputation of the Iranian government in the eyes of its people, both demonstrating that the United States threatened Iranian sovereignty and increasing the credibility of the government’s ability to defend Iran. Finally, it eroded confidence in U.S. political and military leaders among the U.S. public. In reducing the threat and the perception of threat, the failure of the operation gave the Iranian regime more room to maneuver.

For the Israelis, the price of failure in an attack on Iranian nuclear sites would have been substantial. One of Israel’s major strategic political assets is the public’s belief in its military competence. Forged during the 1967 war, the IDF’s public image has survived a number of stalemates and setbacks. A failure in Iran would damage that image even if, in reality, the military’s strength remained intact. Far more important, it would, as the failed U.S. operation did in 1980, enhance Iran’s position. Given the nature of the targets, any attack would likely require a special operations component along with airstrikes, and any casualties, downed pilots or commandos taken prisoner would create an impression of Israeli weakness contrasting with Iranian strength. That perception would be an immeasurable advantage for Iran in its efforts to accrue power in the region. Thus for Israel, the cost of failure would be extreme.

This must be measured against the possibility of success. In war, as in everything, the most obvious successes can evolve into failure. There were several potential points for failure in an attack on Iran. How confident were the Israelis that their intelligence on locations, fortifications and defenses were accurate? How confident were they that they could destroy the right targets? More important, perhaps, how certain could they be that the strikes had destroyed the targets? Finally, and most important, did they know what Iran’s recuperative capabilities were? How quickly could the Iranians restore their program? Frequently, an operationally successful assault does not deal with the strategic problem. The goal of an attack was to make Iran incapable of building a nuclear weapon; would destroying all known targets achieve that strategic goal?

One of the things to bear in mind is that the Iranians were as obsessed with Israeli and U.S. intelligence efforts as the Israelis and Americans were obsessed with the Iranian programs. Iran’s facilities were built to be protected from attack. The Iranians were also sophisticated in deception; knowing that they were being watched, they made efforts to confuse and mislead their observers. The Israelis could never be certain that they were not deceived by every supposedly reliable source, every satellite image and every intercepted phone call. Even if only one or two sources of information were actually misleading, which sources were they?

A failed Israeli assault on Iran would cause a major readjustment among other regional players in the way they perceive Israel and Iran. And for Israel, the perception of its military effectiveness is a strategic asset. There was a high risk of damaging that strategic asset in a failed operation, coupled with a strong chance that Israeli actions could unintentionally bolster Iran’s power in the region. The likelihood of success was thrown into question by Israel’s dependence on intelligence. In war, intelligence failure is a given. The issue is how great the failure will be — and there is no way to know until after the strike. Furthermore, operational success may not yield strategic success. Therefore, the ratio of potential risk versus reward argued against an attack.

Considering Iran’s Capabilities

There is another side to this equation: What exactly were the Iranians capable of? As I have argued before, enriched uranium is a necessary but insufficient component for a nuclear weapon. It is enough to create a device that can be detonated underground in controlled conditions. But the development of a weapon, as opposed to a device, requires extensive technology in miniaturization and ruggedization to ensure the weapon reaches its target. Those who fixated on progress in uranium enrichment failed to consider the other technologies necessary to create nuclear weaponry. Some, including myself, argued that the constant delays in completing a weapon were rooted both in the lack of critical technologies and in Iranian concerns about the consequence of failure.

Then there is the question of timing. A nuclear weapon would be most vulnerable at the moment it was completed and mounted on its delivery system. At that point, it would no longer be underground, and the Israelis would have an opportunity to strike when Iranians were in the process of marrying the weapon to the delivery device. Israel, and to an even greater extent the United States, has reconnaissance capabilities. The Iranians know that the final phase of weapon development is when they most risk detection and attack. The Israelis may have felt that, as risky as a future operation may seem, it was far less likely to fail than a premature attack.

Barak’s Motivations

Whether intentionally or not (and I suspect intentionally) Barak was calling attention, not to prior plans for an attack on Iran, but to the decision to abandon those plans. He pointed out that an Israeli chief of staff blocked one plan, a former chief of staff blocked a second plan and concern for U.S. sensibilities blocked a third. To put it in different terms, the Israelis considered and abandoned attacks on Iran on several occasions, when senior commanders or Cabinet members with significant military experience refused to approve the plan. Unmentioned was that neither the prime minister nor the Cabinet overruled them. Their judgment — and the judgment of many others — was that an attack shouldn’t be executed, at least not at that time.

Barak’s statement can be read as an argument for sanctions. If the generals have insufficient confidence in an attack, or if an attack can be permanently canceled because of an exercise with the Americans, then the only option is to increase sanctions. But Barak also knows that pain will not always bring capitulation. Sanctions might be politically satisfying to countries unable to achieve their ends through military action or covert means. As Barak undoubtedly knows, imposing further restrictions on Iran’s economy makes everyone feel something useful is being done. But sanctions, like military action, can produce unwelcome results. Measures far more painful than economic sanctions still failed to force capitulation in the United Kingdom or Germany, and did so in Japan only after atomic weapons were used. The bombing of North Vietnam did not cause capitulation. Sanctions on South Africa did work, but that was a deeply split nation with a majority in favor of the economic measures. Sanctions have not prompted Russia to change its policy. Imposing pain frequently unites a country and empowers the government. Moreover, unless sanctions rapidly lead to a collapse, they would not give Iran any motivation not to complete a nuclear weapon.

I don’t think Barak was making the case for sanctions. What he was saying is that every time the Israelis thought of military action against Iran, they decided not to do it. And he wasn’t really saying that the generals, ministers or the Americans blocked it. In actuality, he was saying that ultimately, Prime Minister Benjamin Netanyahu blocked it, because in the end, Netanyahu was in a position to force the issue if he wanted to. Barak was saying that Israel did not have a military option. He was not attacking Netanyahu for this decision; he was simply making it known.

It’s unlikely that Barak believes sanctions will compel Iran to abandon its nuclear program, any more the current agreement does. My guess is that for him, both are irrelevant. Either the Iranians do not have the ability or desire to build a bomb, or there will come a point when they can no longer hide the program — and that is the point when they will be most vulnerable to attack. It is at that moment, when the Iranians are seen arming a delivery system, that an Israeli or U.S. submarine will fire a missile and end the issue.

If Barak didn’t want a strike on Iran, if Netanyahu didn’t want a strike and if Barak has no confidence in agreements or sanctions, then Barak must have something in mind for dealing with an Iranian nuclear weapon — if it ever does appear. Barak is an old soldier who knows how to refrain from firing until he is most certain of success, even if the delay makes everyone else nervous. He is not a believer in diplomatic solutions, gestures to indirectly inflict pain or operations destined for failure. At any rate, he has revealed that Israel did not have an effective military option to hamper Iran’s nuclear program. And I find it impossible to believe he would rely on sanctions or diplomacy. Rather, he would wait to strike until Iran had committed to arming a delivery system, leaving itself wide open to attack — a nerve-racking solution, but one with the best chance of success.

Stopping the Iran Nuclear Deal

Nixon+ChinaMy Comments: Readers of my daily posts know I agree with the proposed agreement. I disagree with the notion that the inevitable outcome of failing to approve the deal is war with Iran. But that’s not to say there won’t be some serious negative consequences. Switzerland, for example, has already lifted most of it’s sanctions against Iran.

Stephen Collins Aug. 11, 2015

The fate of the nuclear deal with Iran appears to be in some jeopardy. Key democrats in Congress – most notably New York Senator Chuck Schumer – have recently announced that they would vote to reject the agreement. So passage of the agreement is far from a done deal, with more than two dozen Senate Democrats remaining in the uncertain column.

Opponents regard the deal with disdain, characterizing the accord to curtail Iran’s nuclear program as counterproductive, naïve and reminiscent of England’s appeasement of Nazi Germany.

Critics of the Joint Comprehensive Plan of Action (JCPOA) are right to be skeptical of Iran’s commitment to multilateral accords. The International Atomic Energy Agency reported on several occasions – including in 2005, 2008 and 2011 – that Iran had violated important articles of the Nuclear Nonproliferation Treaty. But even given Iran’s lackluster record, I’d argue that a move by Congress to block the accord would result in a less favorable security outcome for the US and its allies.

The benefits of the deal for Iran are substantial. They include extensive sanctions relief that would allow Iran to resume oil export sales and gain access to frozen assets, estimated at US$55 billion. That would give the regime an enormous incentive to abide by the terms of the accord. In return for sanctions relief, Tehran has agreed to relinquish 98% of its supply of enriched uranium, limit its centrifuge operations and restrict enrichment to 3.67%. These actions would significantly lengthen Iran’s “breakout period,” or the time needed to create a nuclear weapon.

Additionally, the JCPOA also includes a carefully crafted verification protocol that permits intrusive and technically savvy inspections of known and suspected nuclear facilities.

Critics want to coerce Iran into complete capitulation so that it would cease all nuclear activities in perpetuity and allow “anywhere, anytime inspections.” Barring that, they advocate starving the regime so that it would be unable to afford nuclear, militant or terrorist activities.

But this sort of result was unfeasible. Short of Iran actually testing a nuclear device, the P5+1 – the US, Germany, China, UK, Russia and France – were never willing to support a marked increase in economic pressure.

What if the deal fails? A blocked deal would lead to several alarming consequences.

A no-deal Iran would have 33,000 pounds of enriched uranium instead of just 660 pounds. It would be able to produce enough fuel for a nuclear weapon in a few weeks instead of a full year.

If Tehran does aspire to build a nuclear weapon, as critics maintain, the dissolution of the deal would, in fact, facilitate their goal. The regime has publicly stated that it would speed up enrichment if the deal was blocked. Iran would also possess additional paths to a bomb without the deal’s prohibition on Iran reprocessing its plutonium.

What is more, the collapse of the plan would scuttle the enhanced transparency that the international community would have gained about Iran’s nuclear program as a result of inspections.

In the wake of a blocked deal, the solidarity underpinning the present multilateral, UN-backed sanctions program would dissipate. That would leave the US standing alone or with few allies. The historical record shows that without multilateral sanctions, the US lacks leverage to make Iran capitulate.

Additionally, China and Russia are likely to benefit by exploiting American obstinacy as an excuse to strike trade deals with Iran. That would bolster China’s economic and Russian’s strategic positions.

But the most dangerous diplomatic setback would be the effect a botched deal could have on America’s transatlantic alliances. America’s allies strongly back the deal. Blocking the JCPOA would quite likely result in a deep rift between the United States and its NATO allies, crippling support for future collaboration.

And then there is the question of how the sinking of the pact would complicate nonproliferation objectives far beyond the Middle East. America’s perceived unwillingness to negotiate on nuclear diplomacy would further marginalize any pro-diplomacy voices inside North Korea, arguably the more significant nuclear threat. Blocking the accord would ossify Pyongyang’s distrust of the US and give greater momentum to North Korea’s nuclear buildup.

Critics of the deal emphasize the danger presented by the windfall of unfrozen money Tehran will acquire. They predict that money will flow to Iran’s military and its investment in militant foreign activities, including sponsorship of terrorist organizations.

They’re not wrong – funding will probably flow in this direction. Still, the danger presented by this for the US and its regional allies is far less than the threat posed by the robust nuclear program that will likely emerge in the deal’s absence.

Moreover, the amount of funds freed up by the end of sanctions that will be devoted to military ends is probably much less than critics suggest.

Iran has pressing economic matters it must deal with immediately. The regime will have to invest between $100 billion and $200 billion in its oil and gas industries simply to reestablish past production levels. To satisfy the rising expectations of the public regarding the economic bounty it expects to materialize after the deal, the government will also have to invest in the domestic economy.

If the bulk of the unfrozen money does indeed flow to the military, the US and its allies might even benefit from a better financed Iranian military, which could use the new funds to step up its military operations against the Islamic State.

Still, simply signing a deal with Iran does not automatically make this episode of diplomacy a success. The devil is indeed in the details – implementation and verification.

The international community must prove its resolve to Iran. Iran must be shown that it will be held accountable and that automatic “snapback” provisions of the deal will be reimposed in response to a significant and unresolved violation.

The deal indeed fails to achieve all that the US could have hoped for. Still, the accord offers a credible path to a peaceful resolution of the crisis, and therefore it would be far too risky to turn it down.

Read the original @ http://www.businessinsider.com/there-are-alarming-consequences-to-stopping-the-iran-nuclear-deal-2015-8#ixzz3icvmd6U8

Saudi Arabia May Go Broke Soon

My Comments:  If Saudi Arabia ceases to function and Iran has a nuclear weapon, what are the implications for the rest of the world?

I accept that I’ll be just a memory by 2045. However, the United States may then be the only country on the planet with the ability to both unilaterally feed itself and produce 100% of the energy it needs. Food and fuel are as critical today as they were millennia ago.

Yes, there are environmental reasons to oppose fracking anywhere in the world but you have to admit the technology has the potential to dramatically change existing global economic and political dynamics.

How all this plays out politically with concurrent changes to existing global security arrangements is yet to be seen. It helps explain Russia’s recent moves to be more aggressive and paranoid about their future. As for Saudi Arabia, without oil to pump, they become a ghost town. We need to think about all this as we argue for or against the pending Iran nuclear deal.

By Ambrose Evans-Pritchard 05 Aug 2015

If the oil futures market is correct, Saudi Arabia will start running into trouble within two years. It will be in existential crisis by the end of the decade.

The contract price of US crude oil for delivery in December 2020 is currently $62.05, implying a drastic change in the economic landscape for the Middle East and the petro-rentier states.

The Saudis took a huge gamble last November when they stopped supporting prices and opted instead to flood the market and drive out rivals, boosting their own output to 10.6m barrels a day (b/d) into the teeth of the downturn.

Bank of America says OPEC is now “effectively dissolved”. The cartel might as well shut down its offices in Vienna to save money.

If the aim was to choke the US shale industry, the Saudis have misjudged badly, just as they misjudged the growing shale threat at every stage for eight years. “It is becoming apparent that non-OPEC producers are not as responsive to low oil prices as had been thought, at least in the short-run,” said the Saudi central bank in its latest stability report.

“The main impact has been to cut back on developmental drilling of new oil wells, rather than slowing the flow of oil from existing wells. This requires more patience,” it said.

One Saudi expert was blunter. “The policy hasn’t worked and it will never work,” he said.

By causing the oil price to crash, the Saudis and their Gulf allies have certainly killed off prospects for a raft of high-cost ventures in the Russian Arctic, the Gulf of Mexico, the deep waters of the mid-Atlantic, and the Canadian tar sands.

Consultants Wood Mackenzie say the major oil and gas companies have shelved 46 large projects, deferring $200bn of investments.

The problem for the Saudis is that US shale frackers are not high-cost. They are mostly mid-cost, and as I reported from the CERAWeek energy forum in Houston, experts at IHS think shale companies may be able to shave those costs by 45pc this year – and not only by switching tactically to high-yielding wells.

Advanced pad drilling techniques allow frackers to launch five or ten wells in different directions from the same site. Smart drill-bits with computer chips can seek out cracks in the rock. New dissolvable plugs promise to save $300,000 a well. “We’ve driven down drilling costs by 50pc, and we can see another 30pc ahead,” said John Hess, head of the Hess Corporation.

It was the same story from Scott Sheffield, head of Pioneer Natural Resources. “We have just drilled an 18,000 ft well in 16 days in the Permian Basin. Last year it took 30 days,” he said.

The North American rig-count has dropped to 664 from 1,608 in October but output still rose to a 43-year high of 9.6m b/d June. It has only just begun to roll over. “The freight train of North American tight oil has kept on coming,” said Rex Tillerson, head of Exxon Mobil.

He said the resilience of the sister industry of shale gas should be a cautionary warning to those reading too much into the rig-count. Gas prices have collapsed from $8 to $2.78 since 2009, and the number of gas rigs has dropped 1,200 to 209. Yet output has risen by 30pc over that period.

Until now, shale drillers have been cushioned by hedging contracts. The stress test will come over coming months as these expire. But even if scores of over-leveraged wild-catters go bankrupt as funding dries up, it will not do OPEC any good.

The wells will still be there. The technology and infrastructure will still be there. Stronger companies will mop up on the cheap, taking over the operations. Once oil climbs back to $60 or even $55 – since the threshold keeps falling – they will crank up production almost instantly.

OPEC now faces a permanent headwind. Each rise in price will be capped by a surge in US output. The only constraint is the scale of US reserves that can be extracted at mid-cost, and these may be bigger than originally supposed, not to mention the parallel possibilities in Argentina and Australia, or the possibility for “clean fracking” in China as plasma pulse technology cuts water needs.

Mr Sheffield said the Permian Basin in Texas could alone produce 5-6m b/d in the long-term, more than Saudi Arabia’s giant Ghawar field, the biggest in the world.

Saudi Arabia is effectively beached. It relies on oil for 90pc of its budget revenues. There is no other industry to speak of, a full fifty years after the oil bonanza began.

Citizens pay no tax on income, interest, or stock dividends. Subsidized petrol costs twelve cents a litre at the pump. Electricity is given away for 1.3 cents a kilowatt-hour. Spending on patronage exploded after the Arab Spring as the kingdom sought to smother dissent.

The International Monetary Fund estimates that the budget deficit will reach 20pc of GDP this year, or roughly $140bn. The ‘fiscal break-even price’ is $106.

Far from retrenching, King Salman is spraying money around, giving away $32bn in a coronation bonus for all workers and pensioners.

He has launched a costly war against the Houthis in Yemen and is engaged in a massive military build-up – entirely reliant on imported weapons – that will propel Saudi Arabia to fifth place in the world defence ranking.

The Saudi royal family is leading the Sunni cause against a resurgent Iran, battling for dominance in a bitter struggle between Sunni and Shia across the Middle East. “Right now, the Saudis have only one thing on their mind and that is the Iranians. They have a very serious problem. Iranian proxies are running Yemen, Syria, Iraq, and Lebanon,” said Jim Woolsey, the former head of the US Central Intelligence Agency.

Money began to leak out of Saudi Arabia after the Arab Spring, with net capital outflows reaching 8pc of GDP annually even before the oil price crash. The country has since been burning through its foreign reserves at a vertiginous pace.

The reserves peaked at $737bn in August of 2014. They dropped to $672 in May. At current prices they are falling by at least $12bn a month.

Khalid Alsweilem, a former official at the Saudi central bank and now at Harvard University, said the fiscal deficit must be covered almost dollar for dollar by drawing down reserves.

The Saudi buffer is not particularly large given the country’s fixed exchange system. Kuwait, Qatar, and Abu Dhabi all have three times greater reserves per capita. “We are much more vulnerable. That is why we are the fourth rated sovereign in the Gulf at AA-. We cannot afford to lose our cushion over the next two years,” he said.

Standard & Poor’s lowered its outlook to “negative” in February. “We view Saudi Arabia’s economy as undiversified and vulnerable to a steep and sustained decline in oil prices,” it said.

Mr Alsweilem wrote in a Harvard report that Saudi Arabia would have an extra trillion of assets by now if it had adopted the Norwegian model of a sovereign wealth fund to recyle the money instead of treating it as a piggy bank for the finance ministry. The report has caused storm in Riyadh.

“We were lucky before because the oil price recovered in time. But we can’t count on that again,” he said.

OPEC have left matters too late, though perhaps there is little they could have done to combat the advances of American technology.

In hindsight, it was a strategic error to hold prices so high, for so long, allowing shale frackers – and the solar industry – to come of age. The genie cannot be put back in the bottle.

The Saudis are now trapped. Even if they could do a deal with Russia and orchestrate a cut in output to boost prices – far from clear – they might merely gain a few more years of high income at the cost of bringing forward more shale production later on.

Yet on the current course their reserves may be down to $200bn by the end of 2018. The markets will react long before this, seeing the writing on the wall. Capital flight will accelerate.

The government can slash investment spending for a while – as it did in the mid-1980s – but in the end it must face draconian austerity. It cannot afford to prop up Egypt and maintain an exorbitant political patronage machine across the Sunni world.

Social spending is the glue that holds together a medieval Wahhabi regime at a time of fermenting unrest among the Shia minority of the Eastern Province, pin-prick terrorist attacks from ISIS, and blowback from the invasion of Yemen.

Diplomatic spending is what underpins the Saudi sphere of influence in a Middle East suffering its own version of Europe’s Thirty Year War, and still reeling from the after-shocks of a crushed democratic revolt.

We may yet find that the US oil industry has greater staying power than the rickety political edifice behind OPEC.

Obama’s Long, Hot Iranian Summer

My Comments: To deal or not to deal, that is the question. Most people are focused on the political implications of the agreement, and whether it’s a good deal for us or not. I’m very concerned about the economic implications as well. My blog post tomorrow talks about the high probability that Saudi Arabia will completely exhaust its currency reserves by the end of this decade. This has the potential to completely rearrange the balance of power in  the Middle East, and if Iran is free to resume building a nuclear weapon, we’re all in trouble.

The net effect of these two seemingly unrelated circumstances could lead to a conflict of biblical proportions in the Middle East. We are now involved with Turkey in attempting to reverse the gains made by ISIS. Couple that with the financial relationship we have with Saudi Arabia, to name just one country, the chances of a dramatic shift in the balance of power if we cannot contain the nuclear ambitions of Iran increases dramatically.

Granted, the agreement cannot ultimately guarantee that Iran does not get a nuclear weapon. But it does realistically allow some time for counter measures to get put in place. If the outcome is the removal of the Saudi government in its present form, all bets are off. Never mind the lives to be lost in a conflict between the US and Iran, imagine the cost to us and the rest of the free world if the oil now flowing to Europe, Russia, China, India, etc. from Saudi Arabia stops. Talk about a global economic crisis. And all because few people in Congress are willing to look beyond their hatred of Obama. Dumb, and you and I will pay for it, again.

Edward Luce, August 2, 2015

A US rejection of the deal would give Tehran a green light to revive their nuclear agenda

Six years ago, Barack Obama’s big domestic reform almost went up in flames during an August of town hall protests. He was accused of trying to set up death panels for the elderly. This time his big foreign policy deal is under fire — though the allegation has not changed.

The Iran nuclear deal will apparently create a death panel just for Israel. The difference in 2015 is that Mr Obama is already lobbying Congress. His legacy, and the future of the Middle East, hinges on whether the deal survives next month’s vote on Capitol Hill.

The noisiest protest will take place on Thursday when the top 10 Republican candidates appear on Fox News for their first presidential debate. Among them will be Mike Huckabee, the former Arkansas governor, who believes the deal “will take the Israelis and march them to the door of the oven”. Ted Cruz, the Texas senator, says: “Hundreds of billions [sic] of dollars will flow to Iran that they will use to fund radical Islamic terrorism to murder Americans.” Donald Trump says Mr Obama has been taken “to the cleaners”. Only Jeb Bush has risked nuance. He has been pilloried for saying Republicans should be more “mature and thoughtful” about it. Yet he, too, says the deal should be binned.

Will it survive the onslaught? That depends on Mr Obama’s own party. To a person, Republican lawmakers oppose the deal, some apocalyptically. Even former isolationists, such as Rand Paul, who will also appear on the Fox podium, are now hawkish on the Islamic Republic. Much like Obamacare, the Iran deal will rely solely on Democratic votes on Capitol Hill. Many are wavering. To salvage the deal, Mr Obama must use his veto to override an all but certain majority vote against it. He will need a third of either chamber to do so. That means either 34 of the 46 Senate Democrats or 145 of the 188 House Democrats.

It will boil down to whether he, or Benjamin Netanyahu, the Israeli prime minister, holds more sway with undecided Democrats. Chief among them is Chuck Schumer, the New York senator, and probable next leader of the Senate Democrats. Mr Netanyahu has said Israel’s survival as a nation is at stake. In fact, it is his own job security as the country’s leader that is in the balance. He has built his career on hyping the existential threat from Iran. His coalition controls just 61 of 120 Knesset seats. He broke all rules in March by speaking to the US Congress against a president’s set piece initiative. Never before has a foreign ally done anything this egregious. Having breached the limits once, he has nothing to lose. The American Israel Public Affairs Committee and its allies plan to spend up to $40m lobbying against the deal. Much of it will be targeted at Mr Schumer. Mr Netanyahu will be working the phones as furiously as Mr Obama.

It is easy to forget that America’s legislature is supposed to be evaluating what is in America’s national interests. But Mr Obama’s real task is to convince fellow Democrats it will be good for Israel’s security. On paper, this ought to be straightforward. Though undeclared, Israel has an estimated 80 nuclear warheads. It also has “triad” capabilities – it can launch missiles from sea, air and land. Opponents of the deal say it will unleash a Middle East arms race. But as Bruce Riedel, a former senior official at the Central Intelligence Agency, put it: “A nuclear arms race has been underway in the Middle East for 65 years. Israel won it.” For the next 15 years at least, Mr Obama’s Iran deal cements Israel’s status as the Middle East’s sole nuclear weapons state.

Mr Netanyahu’s allies say the deal will unfreeze $150bn for Iran to spend on terrorism. This is absurd on multiple levels. First, the US Treasury says just $55bn in assets will be repatriated. Much will remain frozen under sanctions unrelated to Iran’s nuclear programme.

Second, Iran already spends what it wants on its regional proxies: unlike nuclear weapons, terrorism is a cheap business. With at least $3bn in annual US military aid — and more promised by Mr Obama — Israel has more than enough ability to keep defeating Hizbollah and Hamas on the battlefield.

Third, Iran suffers from an estimated $500bn in infrastructure backlog, of which up to $200bn is needed to reboot its oil industry. Iran’s government was elected on the promise of restoring economic growth. It will lose office if it wastes too much of the proceeds on foreign adventurism.

Would a rejection by Congress lead to a better deal? This is critics’ most frequent line. It is a fantasy. Rather than bringing Iran back to the table, America’s unilateral rejection of a deal it negotiated will push its own partners away. The horse has already bolted. Countries such as China, Russia and India have made it clear that they will resume trading ties with Iran regardless of what Congress does. Even the European three — the UK, France and Germany — are likely to press on. Moreover, a US rejection would give Iran’s hardliners a green light to revive their nuclear agenda. Instead of waiting a decade or more, Tehran could develop a warhead within months, according to the International Atomic Energy Agency.

Facts, as they say, are stubborn things. But perception matters more. The chances are that Mr Obama can scrape together enough support to uphold this deal. But it will be close. Either he or Mr Netanyahu will end this summer victorious.

A Century of Defense Spending In The United States

USA EconomyMy Comments:  With deal with Iran now in play, the focus is increasingly on the choice between war and peace. We either come to terms with some kind of negotiated settlement, or we accept the idea of sending young men and women off to die once again.

I read recently that of the 239 years since 1776, the US has been involved in an armed conflict during 222 of those years. Yes, some of those have been to protect our friends, but too many happened with no direct physical threat to the homeland. So with all the money spend on defense, are we actually safer for it?

The chance that Iran, in and of itself, can mount an attack on the territorial integrity of the US is very remote. Israel is another question, but they have atomic weapons of their own and there are those in charge who are prepared to use them. In my judgement, that alone greatly diminishes any threat from Iran. But it does explain to some extent why Iran would like to have their own weapons.

by Genevieve LeFranc,  July 22, 2015

 

“Of all the enemies to public liberty war is, perhaps, the most to be dreaded because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes… known instruments for bringing the many under the domination of the few… No nation could preserve its freedom in the midst of continual warfare.”
—James Madison, Political Observations, 1795

The U.S. military accounts for a staggering 40% of global military spending, but this isn’t anything new, folks. The United States has been experiencing a century of extreme defense spending, and if we don’t slow down soon, this military spending could prove to be our country’s downfall.

The World Bank defines military expenditure as:

…All current and capital expenditures on the armed forces, including peacekeeping forces; defense ministries and other government agencies engaged in defense projects; paramilitary forces, if these are judged to be trained and equipped for military operations; and military space activities.

Such expenditures include military and civil personnel, including retirement pensions of military personnel and social services for personnel; operation and maintenance; procurement; military research and development; and military aid.

So it’s pretty clear military expenses cover quite a wide range of stuff. But just how much has our country spent on defense over the last 100 years?

Before WWII, and in times of peace, the U.S. government really didn’t spend that much on defense — only about 1% of GDP.

After the war, America found itself smack-dab in the middle of a global fight against Communism, and defense spending was more than 41% of GDP.

Since then, defense spending has never returned to anything less than 3.6% of GDP.

There have been four major spikes in U.S. defense spending since the 1970s. USgovernmentspending.com reports:

It spiked at nearly 12 percent of GDP in the Civil War of the 1860s (not including spending by the rebels). It spiked at 22 percent in World War I. It spiked at 41 percent in World War II, and again at nearly 15 percent of GDP during the Korean War.

Defense spending exceeded 10 percent of GDP for one year in the 19th century and 19 years in the 20th century. The last year in which defense spending hit 10 percent of GDP was 1968 at the height of the Vietnam War.

The peak of defense spending during the Iraq conflict was 5.66 percent GDP in 2010.

CONTINUE-READING

US-Iran Treaty Can Send Oil to $40

oil productionMy Comments: I’ve already said that I much prefer a negotiated deal between adversaries than continued threats to bomb the crap out of them. In todays economic and political environment, that option poses too many risks that I’m unprepared to accept.

Here’s some economic thoughts about what might happen, now the deal is in place. Yes, Congress has 90 days to approve, and no, the oil industry will be unhappy, but it’s time to think what is best for ALL OF US, and not just the few.

by Barry Ritholtz – July 14th, 2015

While the world is distracted by the unending Greek saga (will it or won’t it leave the euro?) and the epic Chinese stock-market meltdown (and manipulation), something really important is going on. Three words sum it up: Iran and oil.

Negotiators have reached a deal with Iran to constrain its nuclear arms program. Despite the pessimism and outright fear-mongering, an agreement has been reached.

Don’t let China’s stock market and Greece’s debt melodrama distract you from paying attention to this issue — now that this deal is all but consummated, the repercussions are potentially enormous.

The agreement to end 13 years of sanctions against Iran over its nuclear aspirations is likely to be the defining foreign policy achievement of the Obama administration. Iran had opportunistically pursued its nuclear ambitions after 9/11, accelerating the program once its biggest regional enemy, Saddam Hussein, was removed by the U.S. military invasion.

Normalizing relations between one of the largest military powers in the Middle East and the major nations of the West is a huge, game-changing event. Iran’s ruling party wants access to global markets, technology and capital; Iranian youth would like access to Western consumer goods, culture and most of all, the Internet. How much any of these become part of the end result of a deal has yet to be determined.
What is perhaps most fascinating about this deal is the role and ambitions of China and Russia.

China’s motives are more obvious: It would like to blunt the projection of U.S. military power around the world, disengagement of the U.S. from Middle East politics and — most of all — a reduction of geopolitical tensions that tend to raise oil prices.
Russia’s interests are more complex, since it benefits from higher oil prices. Putting Iran’s huge oil production back on the market could exacerbate today’s global crude glut. Speculation that this will happen has already helped push down the price of oil, which has fallen by about a third in the past 12 months. Further signs of a Chinese economic slowdown also are weighing on crude prices.

Given the current situation, including sanctions against Russia for its role in destabilizing eastern Ukraine, one has to wonder what advantage there is for Vladimir Putin & Co. if Iranian oil begins to flow freely to the global market.

The Houston Chronicle quoted Neil Atkinson, an oil analyst at Lloyd’s List Intelligence in London, who observed, “It’s finally dawning on the market that the overwhelming weight of supply growth isn’t just going away… Iran is a huge factor. I can see $50 in sight for West Texas Intermediate [when a deal is reached].” Iran has 40 million barrels of crude stored on at least 23 ships that could be released into the market relatively quickly, the Chronicle added.

So what’s driving the Russians to be so cooperative? Perhaps the lessons of the 1980s are still fresh in Putin’s mind. What brought down the Soviet Union wasn’t the result of military failures or armed conflicts through surrogates. Rather, it was the economic might of the U.S. Supporting a huge military requires a large, efficient and productive economy and the Soviets simply couldn’t compete with the U.S. As much as former U.S. President Ronald Reagan is praised for the collapse of the USSR, Adam Smith deserves more credit.

The Russians may have figured out that fighting the American economy has been a losing game for them.

A peaceful, non-nuclear Iran might help to limit the U.S. presence in the Middle East, according to Gary Samore of Harvard’s Belfer Center. “The Russians don’t like to see the U.S. going around the world, bombing countries,” he noted.

Given the painful sanctions on Russia — and the related precarious economic state it is in because of much-reduced oil prices — greater cooperation between Russia and the U.S. could be mutually beneficial. Both want to see a defeat of the Islamic State. So does Iran. All benefit from a more stable Middle East, albeit for very different reasons.

Putin is smartly playing a long game. Lower oil prices will be painful in the short run for Russia. But an aggressive U.S., with an expansionist military around the world may be even worse. Hence, the surprising willingness of Russia to sign on to an agreement to lift sanctions against Iran.

The key takeaways of the deal with Iran is that it has the potential to lower energy prices, reduce tensions in an area fraught with conflict and create an opening for Russia to find a way to end the sanctions now hobbling its economy. A Russian economy that is better integrated into the world economy will have far better growth prospects.

It will be interesting to watch the contortions and hysterics among members of Congress opposed to the Iran deal. But as of now the critics of the accord lack a veto-proof majority. However much they might complain, it is likely to just be political noise.

Watch the price of oil. Consider what increases in supply and reduction of Middle East tensions do to its price. Then imagine what that could mean for the global economic recovery.

Wrong On Iran

My Comments: I’m unsure about the title of this article; is the author talking to us, to the Israelis or both. Personally, I’m all for the deal that was signed on Monday. I’m persuaded the choices are either an agreement based on mutual distrust, made by skilled negotiators, or war. And I’m sick and tired of us playing that game. Since 1945, we’ve only won once, and that was against the mighty nation of Grenada.

For the GOP, it’s the same mantra since 2008; if Obama is for it, we’re going to do whatever we can to oppose it and stymie his efforts, never mind what’s in the country’s best interest. If we spend another few trillion dollars and get thousands killed and maimed, so what. We enjoy making money.

Nothing of significance can be reduced to simple black and white terms, even though the media would have you believe it is. This article talks about subleties, background and motives of those involved. If we can be friends with Japan and Germany after what happened in the 1940’s, there’s no reason we can’t develop a foundation with Iran.

by David Swanson on July 14, 2015

For the United States to sit and talk and come to an agreement with a nation it has been antagonizing and demonizing since the dictator it installed in 1953 was overthrown in 1979 is historic and, I hope, precedent setting. Let’s seal this deal!
Four months ago the Washington Post published an op-ed headlined ‘War With Iran Is Probably Our Best Option.’ It wasn’t. Defenders of war present war as a last resort, but when other options are tried the result is never war. We should carry this lesson over to several other parts of the world.

The time has come to remove the “missile defense” weaponry from Europe that was put there under the false pretense of protecting Europe from Iran. With that justification gone, U.S. aggression toward Russia will become damagingly apparent if this step is not taken. And the time has come for the nations that actually have nuclear weapons to join and/or comply with the nonproliferation treaty, which Iran was never actually in violation of.

In addition to the prevention of a massive bombing campaign in Syria that was prevented in 2013, a major recent success in war-lie-preparedness is the holding off, thus far, of a U.S. war on Iran — about which we’ve been told lies for decades now. The longer this debate goes on, the more it should become clear that there is no urgent emergency that might help justify mass killing. But the longer it goes on, the more some people may accept the idea that whether or not to gratuitously bomb a foreign nation is a perfectly legitimate policy question.

And the argument may also advance in the direction of favoring war for another reason: both sides of the debate promote most of the war lies. Yes, some peace groups are talking perfect sense on this issue as on most, but the debate between Democratic and Republican party loyalists and those in power is as follows. One side argues, quite illegally and barbarically, that because Iran is trying to build a nuclear weapon, Iran should be bombed. The other side argues, counterproductively if in a seemingly civilized manner, that because Iran is trying to build a nuclear weapon, a diplomatic agreement should be reached to put a stop to it. The trouble with both arguments is that they reinforce the false idea that Iran is trying to build a nuclear weapon. As Gareth Porter makes clear in his book Manufactured Crisis, there is no evidence for that.

Both arguments also reinforce the idea that there is something about Iranians that makes them unqualified to have the sort of weapon that it’s alright to voluntarily spread to other nations. Of course, I don’t actually think it’s alright for anyone to have nuclear weapons or nuclear energy, but my point is the bias implicit in these arguments. It feeds the idea that Iranians are not civilized enough to speak with, even as one-half of the debate pushes for just that: speaking with the Iranians.

On the plus side, much of the push for a war on Iran was devoted for years to demonizing Iran’s president until Iran, for its own reasons, elected a different president, which threw a real monkey wrench into the gears of that old standby. Perhaps nations will learn the lesson that changing rulers can help fend off an attack as well as building weapons can. Also on the plus side, the ludicrous idea that Iran is a threat to the United States is very similar to the idea that Iraq was such a threat in 2002-2003. But on the negative side, memory of the Iraq war lies is already fading. Keeping past war lies well-remembered can be our best protection against new wars. Also on the negative side, even if people oppose a war on Iran, several billionaire funders of election campaigns favor one.

Will Congressman Robert Hurt who claims to represent me, and who got Syria right in 2013, commit to taking no funding from those warmongers? Here’s what Hurt had to say on Tuesday:

“The Threat of a Nuclear Iran Persists
“Dear Friend,

“The long-running nuclear negotiations with Iran and the United States, China, France, Germany, Russia, and the United Kingdom finally reached a head early this morning. Even with the deal reached, I am skeptical that Iran will keep their word, act in good faith, and abide by the terms of the deal.”

The deal is an INSPECTION arrangement, not based in any way on anybody trusting anyone.

“I remain committed to the goal of eliminating Iran’s nuclear capabilities because the prospect of Iran attaining the ability to produce a nuclear weapon is a grave threat to the world, and it is a very real possibility that this deal may only fuel Iran’s ability to expand its nuclear ambitions and facilitate its efforts to spread terror in the Middle East.”

What nuclear ambitions? What terror? This from a Congressman who voted for pulling out U.S. forces on June 17th but has taken no further action and has funded the U.S. operation that is currently killing people in the Middle East?

“Iranian leaders clearly remain focused on expanding their nuclear capabilities. They only want to do the bare minimum necessary to lift damaging international economic sanctions that have crippled their economy.”

What mindreading feat is this based on? Where’s evidence? Haven’t we learned to demand it yet?

“Iran is the world’s largest state sponsor of terror.” Not according to any world source, but rather the U.S. government which defines terrorism to suit its ends. The world disagrees.

“The regime makes no secret of its longstanding commitment to see the demise of the United States and Israel, our greatest ally in the Middle East.”

Then why don’t you point to a single scrap of evidence?

“On Saturday, Ayatollah Ali Khamenei spoke about the need to continue to fight against the “arrogant” U.S. regardless of the outcome of these talks. Allowing Iran to achieve the nuclear capabilities it seeks would pose an existential threat to Israel and the world.”

There’s nothing there about the demise of the United States or Israel or the slightest evidence of Iran pursuing or threatening to use any weapon. Expecting people to believe otherwise seems a bit — if you’ll excuse me — arrogant.

“Given Iran’s nuclear ambitions and history, I remain unconvinced that Iran will act in good faith and adhere to any of the terms of a deal. Iran has been unwilling to make necessary compromises to meaningfully limit their nuclear program, and there is little reason to believe this will change. Reaching a deal just for the sake of doing so is not worth putting the safety and security of our allies and our country at risk; no deal is better than a dangerous deal.”

Again, what ambitions? What history? Why the steady avoidance of documenting any claims? Iran is complying with restrictions not imposed on any other nation. How is that a refusal to compromise?

“If this deal is in fact a bad one, the American people have a role to play in this process. In May, the President signed into law the Iran Nuclear Agreement Review Act, which would require congressional review of any final nuclear agreement with Iran before the President can waive or suspend sanctions previously imposed by Congress. Now that an agreement has been reached, Congress has 60 days to review the agreement and pass a joint resolution to approve or disapprove of the deal. Should Congress disapprove the deal, the President would likely veto that measure, but Congress can override the veto with a two-thirds vote.”

The American people, in case you hadn’t noticed, favor the deal, including a majority of Democrats and a plurality of Republicans.

“It is my hope that Congress will carefully consider the consequences of a deal with Iran and maintain its focus on the ultimate goal of eliminating the threat of a nuclear Iran. I remain committed to working with my colleagues on both sides of the aisle to enhance the necessary sanctions against the Iranian regime. We must do everything within our power to prevent Iran from gaining nuclear capabilities.”

Is that a proposal for war?

Anyone can tell their rep and senators to support the deal here.

David Swanson is the author of War Is A Lie.