Iran to stop pricing oil in U.S. dollar

[FRED]

Re: U.S. implicates Iran in January attack

*** MAJOR TYPO ***
Main page says June 3, 2007 for U.S. Today is July 3rd

Wups. Fixed it. Thanks.

[Guest]

Rhetoric and Reality: The View from Iran

Rhetoric and Reality: The View from Iran

By George Friedman

The Iraq war has turned into a duel between the United States and Iran. For the United States, the goal has been the creation of a generally pro-American coalition government in Baghdad -- representing Iraq's three major ethnic communities. For Iran, the goal has been the creation of either a pro-Iranian government in Baghdad or, alternatively, the division of Iraq into three regions, with Iran dominating the Shiite south.

The United States has encountered serious problems in creating the coalition government. The Iranians have been primarily responsible for that. With the death of Abu Musab al-Zarqawi in June, when it appeared that the Sunnis would enter the political process fully, the Iranians used their influence with various Iraqi Shiite factions to disrupt that process by launching attacks on Sunnis and generally destabilizing the situation. Certainly, Sunnis contributed to this, but for much of the past year, it has been the Shia, supported by Iran, that have been the primary destabilizing force.

So long as the Iranians continue to follow this policy, the U.S. strategy cannot succeed. The difficulty of the American plan is that it requires the political participation of three main ethnic groups that are themselves politically fragmented. Virtually any substantial group can block the success of the strategy by undermining the political process. The Iranians, however, appear to be in a more powerful position than the Americans. So long as they continue to support Shiite groups within Iraq, they will be able to block the U.S. plan. Over time, the theory goes, the Americans will recognize the hopelessness of the undertaking and withdraw, leaving Iran to pick up the pieces. In the meantime, the Iranians will increasingly be able to dominate the Shiite community and consolidate their hold over southern Iraq. The game appears to go to Iran.

Americans are extremely sensitive to the difficulties the United States faces in Iraq. Every nation-state has a defining characteristic, and that of the United States is manic-depression, cycling between insanely optimistic plans and total despair. This national characteristic tends to blind Americans to the situation on the other side of the hill. Certainly, the Bush administration vastly underestimated the difficulties of occupying Iraq -- that was the manic phase. But at this point, it could be argued that the administration again is not looking over the other side of the hill at the difficulties the Iranians might be having. And it is useful to consider the world from the Iranian point of view.

The Foundation of Foreign Policy

It is important to distinguish between the rhetoric and the reality of Iranian foreign policy. As a general principle, this should be done with all countries. As in business, rhetoric is used to shape perceptions and attempt to control the behavior of others. It does not necessarily reveal one's true intentions or, more important, one's capabilities. In the classic case of U.S. foreign policy, Franklin Roosevelt publicly insisted that the United States did not intend to get into World War II while U.S. and British officials were planning to do just that. On the other side of the equation, the United States, during the 1950s, kept asserting that its goal was to liberate Eastern Europe from the Soviet Union, when in fact it had no plans, capabilities or expectations of doing so. This does not mean the claims were made frivolously -- both Roosevelt and John Foster Dulles had good reasons for posturing as they did -- but it does mean that rhetoric is not a reliable indicator of actions. Thus, the purple prose of the Iranian leadership cannot be taken at face value.

To get past the rhetoric, let's begin by considering Iran's objective geopolitical position.

Historically, Iran has faced three enemies. Its oldest enemy was to the west: the Arab/Sunni threat, against which it has struggled for millennia. Russia, to the north, emerged as a threat in the late 19th century, occupying northern Iran during and after World War II. The third enemy has worn different faces but has been a recurring threat since the time of Alexander the Great: a distant power that has intruded into Persian affairs. This distant foreign power -- which has at times been embodied by both the British and the Americans -- has posed the greatest threat to Iran. And when the element of a distant power is combined with one of the other two traditional enemies, the result is a great global or regional power whose orbit or influence Iran cannot escape. To put that into real terms, Iran can manage, for example, the chaos called Afghanistan, but it cannot manage a global power that is active in Iraq and Afghanistan simultaneously.

For the moment, Russia is contained. There is a buffer zone of states between Iran and Russia that, at present, prevents Russian probes. But what Iran fears is a united Iraq under the influence or control of a global power like the United States. In 1980, the long western border of Iran was attacked by Iraq, with only marginal support from other states, and the effect on Iran was devastating. Iran harbors a rational fear of attack from that direction, which -- if coupled with American power -- could threaten Iranian survival.

Therefore, Iran sees the American plan to create a pro-U.S. government in Baghdad as a direct threat to its national interests. Now, the Iranians supported the U.S. invasion of Iraq in 2003; they wanted to see their archenemy, former President Saddam Hussein, deposed. But they did not want to see him replaced by a pro-American regime. Rather, the Iranians wanted one of two outcomes: the creation of a pro-Iranian government dominated by Iraqi Shia (under Iran's control), or the fragmentation of Iraq. A fragmented Iraq would have two virtues. It would prove no danger to Iran, and Iran likely would control or heavily influence southern Iraq, thus projecting its power from there throughout the Persian Gulf.

Viewed this way, Iran's behavior in Iraq is understandable. A stable Iraq under U.S. influence represents a direct threat to Iran, while a fragmented or pro-Iranian Iraq does not. Therefore, the Iranians will do whatever they can to undermine U.S. attempts to create a government in Baghdad. Tehran can use its influence to block a government, but it cannot -- on its own -- create a pro-Iranian one. Therefore, Iran's strategy is to play spoiler and wait for the United States to tire of the unending conflict. Once the Americans leave, the Iranians can pick up the chips on the table. Whether it takes 10 years or 30, the Iranians assume that, in the end, they will win. None of the Arab countries in the region has the power to withstand Iran, and the Turks are unlikely to get into the game.

The Unknown Variables

Logic would seem to favor the Iranians. But in the past, the Iranians have tried to be clever with great powers and, rather than trapping them, have wound up being trapped themselves. Sometimes they have simply missed other dimensions of the situation. For example, when the revolutionaries overthrew the Shah and created the Islamic Republic, the Iranians focused on the threat from the Americans, and another threat from the Soviets and their covert allies in Iran. But they took their eyes off Iraq -- and that miscalculation not only cost them huge casualties and a decade of economic decay, but broke the self-confidence of the Iranian regime.

The Iranians also have miscalculated on the United States. When the Islamic Revolution occurred, the governing assumption -- not only in Iran but also in many parts of the world, including the United States -- was that the United States was a declining power. It had, after all, been defeated in Vietnam and was experiencing declining U.S. military power and severe economic problems. But the Iranians massively miscalculated with regard to the U.S. position: In the end, the United States surged and it was the Soviets who collapsed.

The Iranians do not have a sterling record in managing great powers, and especially in predicting the behavior of the United States. In large and small ways, they have miscalculated on what the United States would do and how it would do it. Therefore, like the Americans, the Iranians are deeply divided. There are those who regard the United States as a bumbling fool, all set to fail in Iraq. There are others who remember equally confident forecasts about other American disasters, and who see the United States as ruthless, cunning and utterly dangerous.

These sentiments, then, divide into two policy factions. On the one side, there are those who see Bush's surge strategy as an empty bluff. They point out that there is no surge, only a gradual buildup of troops, and that the number of troops being added is insignificant. They point to political divisions in Washington and argue that the time is ripe for Iran to go for it all. They want to force a civil war in Iraq, to at least dominate the southern region and take advantage of American weakness to project power in the Persian Gulf.

The other side wonders whether the Americans are as weak as they appear, and also argues that exploiting a success in Iraq would be more dangerous and difficult than it appears. The United States has substantial forces in Iraq, and the response to Shiite uprisings along the western shore of the Persian Gulf would be difficult to predict. The response to any probe into Saudi Arabia certainly would be violent.

We are not referring here to ideological factions, nor to radicals and moderates. Rather, these are two competing visions of the United States. One side wants to exploit American weakness; the other side argues that experience shows that American weakness can reverse itself unexpectedly and trap Iran in a difficult and painful position. It is not a debate about ends or internal dissatisfaction with the regime. Rather, it is a contest between audacity and caution.

The Historical View

Over time -- and this is not apparent from Iranian rhetoric -- caution has tended to prevail. Except during the 1980s, when they supported an aggressive Hezbollah, the Iranians have been quite measured in their international actions. Following the war with Iraq, they avoided overt moves -- and they even were circumspect after the fall of the Soviet Union, when opportunities presented themselves to Iran's north. After 9/11, the Iranians were careful not to provoke the United States: They offered landing rights for damaged U.S. aircraft and helped recruit Shiite tribes for the American effort against the Taliban. The rhetoric alternated between intense and vitriolic; the actions were more cautious. Even with the Iranian nuclear project, the rhetoric has been far more intense than the level of development seems to warrant.

Rhetoric influences perceptions, and perceptions can drive responses. Therefore, the rhetoric should not be discounted as a driving factor in the geopolitical system. But the real debate in Iran is over what to do about Iraq. No one in Iran wants a pro-U.S. government in Baghdad, and blocking the emergence of such a government has a general consensus. But how far to go in trying to divide Iraq, creating a pro-Iranian government in Baghdad and projecting power in the region is a matter of intense debate. In fact, cautious behavior combined with extreme rhetoric still appears to be the default position in Tehran, with more adventurous arguments struggling to gain acceptance.

The United States, for its part, is divided between the desire to try one more turn at the table to win it all and the fear that it is becoming hopelessly trapped. Iran is divided between a belief that the time to strike is now and a fear that counting the United States out is always premature. This is an engine that can, in due course, drive negotiations. Iran might be "evil" and the United States might be "Satan," but at the end of the day, international affairs involving major powers are governed not by rhetoric but by national interest. The common ground between the United States and Iran is that neither is certain it can achieve its real strategic interests. The Americans doubt they can create a pro-U.S. government in Baghdad, and Iran is not certain the United States is as weak as it appears to be.

Fear and uncertainty are the foundations of international agreement, while hope and confidence fuel war. In the end, a fractured Iraq -- an entity incapable of harming Iran, but still providing an effective buffer between Iran and the Arabian Peninsula -- is emerging as the most viable available option.

___________________


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[metalman]

Re: Rhetoric and Reality: The View from Iran

is the period of uncertaintly coming to an end? not yet...

http://www.jpost.com/servlet/Satelli...cle%2FShowFull

"If the US or Israel bombs Iran's nuclear facilities, can Iran strike back at Israel with weapons of mass destruction? This is obviously a vital question to answer before deciding whether to use the "military option." Unfortunately, there is no one conclusive answer."

[Sapiens]

Australia 'has Iraq oil interest'

Australia 'has Iraq oil interest'

http://newsvote.bbc.co.uk/mpapps/pag...ic/6272168.stm

Australia 'has Iraq oil interest'
Australian Defence Minister Brendan Nelson has admitted that securing oil supplies is a key factor behind the presence of Australian troops in Iraq.
He said maintaining "resource security" in the Middle East was a priority.

But PM John Howard has played down the comments, saying it was "stretching it a bit" to conclude that Australia's Iraq involvement was motivated by oil.

The remarks are causing heated debate as the US-led Iraq coalition has avoided linking the war and oil.

Oil concerns

Australia was involved in the invasion of Iraq in 2003, and has about 1,500 military personnel still deployed in the region.

There are no immediate plans to bring them home.

In comments to the Australian Broadcasting Corporation, Mr Nelson admitted that the supply of oil had influenced Australia's strategic planning in the region.

"Obviously the Middle East itself, not only Iraq but the entire region, is an important supplier of energy, oil in particular, to the rest of the world," he said.

"Australians and all of us need to think what would happen if there were a premature withdrawal from Iraq.

"It's in our interests, our security interests, to make sure that we leave the Middle East, and leave Iraq in particular, in a position of sustainable security."


Australians and all of us need to think what would happen if there were a premature withdrawal from Iraq
Brendan Nelson


This is thought to be the first time the Australian government has admitted any link between troop deployment in Iraq and securing energy resources.
But Prime Minister John Howard was quick to play down the significance of his defence minister's comments.

"We didn't go there because of oil and we don't remain there because of oil," he told a local radio station.

"A lot of oil comes from the Middle East - we all know that - but the reason we remain there is that we want to give the people of Iraq a possibility of embracing democracy," he added.

Opposition criticism

Opposition politicians, though, have chastised Mr Howard's government over the comments.

"This government simply makes it up as it goes along on Iraq," Labor leader Kevin Rudd told reporters.

Anti-war protesters say the government's admission proves that the US-led invasion was more of a grab for oil rather than a genuine attempt to uncover weapons of mass destruction.

But ministers in Canberra have brushed aside the criticism, saying they remain committed to helping the US stabilise Iraq and combat terrorism.

They have also stressed that there will be no "premature withdrawal" of Australian forces from the region.

Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/h...ic/6272168.stm

Published: 2007/07/05 09:50:08 GMT

© BBC MMVII

[Sapiens]

Iran Asks Japan to Pay Yen for All Oil, Starting Immediately

Iran Asks Japan to Pay Yen for All Oil, Starting Immediately


http://www.bloomberg.com/apps/news?p...d=aLaColVYu5LA

Iran Asks Japan to Pay Yen for All Oil, Starting Immediately

By Megumi Yamanaka

July 13 (Bloomberg) -- Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, to counter the risk that U.S. dollar transfers may be frozen by increased sanctions.

Iran wants yen-based transactions ``for any/all of your forthcoming Iranian crude oil liftings,'' according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments ``effective immediately,'' according to the letter, dated July 10 and obtained by Bloomberg News.

It looks to me that Iran is playing with fire...

[metalman]

Re: Iran Asks Japan to Pay Yen for All Oil, Starting Immediately

Iran Asks Japan to Pay Yen for All Oil, Starting Immediately


http://www.bloomberg.com/apps/news?p...d=aLaColVYu5LA


It looks to me that Iran is playing with fire...

been baiting the usa for quite some time. looking for an excuse to try out these...

"The Russian weapons are of particular concern because the SS-N-22 Moskit and SS-NX-26 Yakhont are designed to defeat the defenses of a carrier battle group. Traveling at more than two times the speed of sound, any vessel targeted by this warhead would optimally have 25 to 30 seconds between detection and impact, giving American warships no time to react defensively. The danger these missiles present becomes clear when the dimensions of the Persian Gulf are considered; at its widest, it is 338 km and narrows to a scant 48 km at the Strait of Hormuz, the only exit from the Persian Gulf. These missiles have a range of 120 km and 300 km respectively, making the Persian Gulf a shooting gallery. At best, the Iranians may manage to sink a few destroyers and frigates. At worst, they could destroy an aircraft carrier, killing thousands of Americans. Those who would dismiss this scenario should recall what the Argentineans managed to do in the Falklands War with only six Exocets."

http://badgerherald.com/oped/2006/04...ion_would_.php

my ex-wife's bro was a submariner. he told me submariners think the prospects of their navy pals on ships are not so good in modern warfare... "in the age of supersonic torpedoes and tactical nukes, we call ships TARGETS"

[Tet]

Re: Iran Asks Japan to Pay Yen for All Oil, Starting Immediately

Iran Asks Japan to Pay Yen for All Oil, Starting Immediately


http://www.bloomberg.com/apps/news?p...d=aLaColVYu5LA


It looks to me that Iran is playing with fire...

The actual Japanese purchase of the oil was still conducted from either Wall Street or London and was made using the d0llar when these Japanese refiners bought TURDS on either of the two exchanges. When the actual delivery takes place the TURDS are now converted into Yen which will now need to be done through a Japanese Bank, not a US or British Bank where the assets might be frozen. I don't view this as odd, the sell is not being made directly with the Japanese refiners, if it was the US/UK would be declaring war on Japan not Iran.

[metalman]

Re: Iran Asks Japan to Pay Yen for All Oil, Starting Immediately

meanwhile...

"IRAN: Iran has dropped a previously imposed restriction on U.N. experts visiting its nuclear facilities and now will allow International Atomic Energy Agency (IAEA) officials to inspect its sites, the IAEA said. Tehran also has offered to answer questions regarding past suspicious experiments and agreed to allow IAEA inspectors to visit the heavy water research reactor in Arak by the end of July."

at the same time announcing the switch to yen for oil. iran trying to show the world what usa's hostility is about?

[Guest]

Re: Iran to stop pricing oil in U.S. dollar

Sorry, couldn't figure out where to post this cartoon. A wonderful political snapshot from Jim Sinclair's website ... May you live in interesting times ...

[renewable]

Re: Iran to stop pricing oil in U.S. dollar

Finster, I agree with jk that it is about marginal demand of dollars for currency reserves in central banks around the world. If Iran establishes its own oil bourse as they are trying to do, it would not just cut out our middlemen, but it would trigger yet more dumping of dollar reserves around the world. That's got to push the currency value down even more.

I would agree with this, too. If the petrodollar lost it's ability to purchase oil, dollar reserves would be sold, decreasing the value of the dollar. The US would then not be able to afford to import anywhere near as much oil as it does.

[Tet]

Re: Iran to stop pricing oil in U.S. dollar

I would agree with this, too. If the petrodollar lost it's ability to purchase oil, dollar reserves would be sold, decreasing the value of the dollar. The US would then not be able to afford to import anywhere near as much oil as it does.

I would disagree; cheaper oil by definition is a stronger d0llar. If London and Wall Street have to compete with other Bourses to sell crude that will create a lower price for crude. I don't agree that Iran's bourse is much of a threat, Iran hasn't been using the d0llar for a long time already, they did this when the US threatened to seize Iran's foreign assests. Iran doesn't export that much crude and without nuclear power Iran will be forced to supply much of their crude domestically. Russia's Bourse is the one to watch and China's Bourse is also one to keep an eye on. The only way to complete for oil sales for London and Wall Street if nuclear intimidation, military occupation, and economic threats no longer works is to lower the price of crude. fficeffice" />Once again we're back to lower crude equals stronger d0llar. For the moment it does look like nuclear intimidation and military occupation still works.

[Guest]

Re: Iran to stop pricing oil in U.S. dollar

Tet -

You wrote:

<< The only way to complete (compete?) for oil sales for London and Wall Street if nuclear intimidation, military occupation, and economic threats no longer works is to lower the price of crude >>

You must be in some kind of dream world to imagine a claque of financiers in either "London" or "Wall Street" are in a position to lower the price of crude in any but the most fleeting, illusory interventions. They'd go bankrupt in a matter of weeks by trying to significantly manipulate current global oil market trends via the futures markets.

This is the 'finance and inflation rule all commodity markets & prices' school of thought. How many of you academic ivory tower guys are there around here anyway? Seems like a lot!

It's absolutely nothing personal Tet. It's the inability to grasp the basic drivers behind 21st century resource markets which leaves me gasping for air. There are many, many resource analysts out there to whom you have to propose a rational argument, for your views to find a solid ground upon which to stand.

I am astonished. So many people here seem to find no flaw in the logic which preaches that commodity prices can be definitively 'driven down' by the curtailment or abatement of monetary inflation, or by the whims of 'Wall Street' or 'London' financiers.

You guys are living in some kind of dream world - where the 21st century never arrived! Mexico's PEMEX just announced their oil exports will CEASE, in 5-7 years! Their Cantarell is the SECOND LARGEST OIL FIELD IN THE WORLD!

How are your powerful financiers in New York and London going to exert the slightest influence on what that will do to prices?

[c1ue]

Re: Iran to stop pricing oil in U.S. dollar

Lukester,

I cannot remember where I saw it, but I did read just recently that there are 5x more derivatives based on oil futures vs. actual oil production.

This means that the present market price is significantly due to the derivatives action, and in turn means that financial entities could conceivably affect the price of oil (short term) through manipulation of these derivatives.

You are absolutely right that peak oil means higher oil prices if it is true (and technology/falling economies don't decrease demand), but as I've noted before - the inflation adjusted price of oil now vs. the 70's and 80's is at the same levels. We do all remember what the economy suffered through in that era?

Don't forget that while the present economy is more fuel efficient in some respects (i.e. CAFE fuel standards), on the other hand I do wonder how much more or less oil is now used per capita as so much that is consumed in America is shipped over the Paciic ocean.

[Guest]

Re: Iran to stop pricing oil in U.S. dollar

C1ue -

You are a great guy, and I really enjoy your posts. Please accept my posts directed to you as being in all decency, sincerity and full respect. But you along with so many others here are possibly getting seriously side-tracked by market technicalities?

There is a large, fire-engine-loud claxon blaring right now out of Mexico. Their head of PEMEX announced it to Wall Street, and few people in this community even interrupt their snooze to analyze the implications for the US? Excuse me - our second largest global supplier, and we have no comment?

That's just ONE. How can anyone look at the speculations in the futures markets and miss that fact that even when you knock $20 off the price of oil for speculation, America's # 2 global supplier has officially warned they will cease to export in 4 OR 5 YEARS?

Who is stepping up to fill that gap? Yemeni natural gas - shipped over here in double hulled tankers?

The bias is huge and blinding. We are looking at the futures markets as the story worth discussing, while I-Tulip don't discuss AT ALL the implications of the # 2 supplier AND the # 2 largest oil field in the world CEASING to export in 5 years.

C1ue - if the world were your family, and you were the head of household, would you be doing some hard due diligence right about now to make sure your family did not wind up on the skids?

Where is the sense of clear and present alarm, or sense of responsibility to evade harsh consequences here?

[Tet]

Re: Iran to stop pricing oil in U.S. dollar

Tet -

You wrote:

<< The only way to complete (compete?) for oil sales for London and Wall Street if nuclear intimidation, military occupation, and economic threats no longer works is to lower the price of crude >>

You must be in some kind of dream world to imagine a claque of financiers in either "London" or "Wall Street" are in a position to lower the price of crude in any but the most fleeting, illusory interventions. They'd go bankrupt in a matter of weeks by trying to significantly manipulate current global oil market trends via the futures markets.

This is the 'finance and inflation rule all commodity markets & prices' school of thought. How many of you academic ivory tower guys are there around here anyway? Seems like a lot!

It's absolutely nothing personal Tet. It's the inability to grasp the basic drivers behind 21st century resource markets which leaves me gasping for air. There are many, many resource analysts out there to whom you have to propose a rational argument, for your views to find a solid ground upon which to stand.

I am astonished. So many people here seem to find no flaw in the logic which preaches that commodity prices can be definitively 'driven down' by the curtailment or abatement of monetary inflation, or by the whims of 'Wall Street' or 'London' financiers.

You guys are living in some kind of dream world - where the 21st century never arrived! Mexico's PEMEX just announced their oil exports will CEASE, in 5-7 years! Their Cantarell is the SECOND LARGEST OIL FIELD IN THE WORLD!

How are your powerful financiers in New York and London going to exert the slightest influence on what that will do to prices?

You crack me up, all this Peak Oil hype and you have absolutely no clue how oil is sold on the world exchanges. Do you know what a TURD is and how it relates to the purchase of crude? Where can you purchase a TURD and what currency is required for the purchase? Nuclear bombs and 150K troops occupying foreign lands is how the price of crude gets decided. What we used to do for sugar and pineapples we now do the same for a barrel of crude. Nothing changes, the game remains the same for a hundred years or more, no big mystery. Net result, a stronger d0llar buys more oil.