Economic war on the U.S.? Iran, Venezuela join forces

The Vens economy would tank inside 60 days if they stopped shipping.

Of course it would, but Venezuela will NOT stop shipping or stop selling. It will just be going to a different place, NOT north to us. The Chinese are happy to give Hugo the same deal he gets now (market price.) The Chinese have begun their own version of a strategic oil reserve and would probably use his oil to build their reserves.

You must not be reading all the articles out of Iran. The Iranians want to end being paid in dollars for oil and will only take euros. Hugo doesn't accept dollars for his oil, even if it costs him money. That's been going on for sometime now. Hugo prefers the yuan or anything but the dollar in payment for his oil, so as long as the price stays high, he's not concerned about taking less money for it than he has to. He's even selling it to like-minded commies in our big cities for cut rate prices since he's rolling in money and can afford to give plenty away to promote the cause of bringing down the US from within and without.

Our investors may be leaving China "in droves" as you say, but I've not read where that is happening yet. A lot of US investors who have been suckered in have very little to show for their investment other than they expended a lot of money and gave away a lot of know-how for a small and perhaps soon to be diminishing return, but as long as Americans keep buying all the Chinese imports, the Chinese have plenty of dollars to spend on their military which is all that matters to them. It will save them from nationalizing the factories US companies have built in China if the companies walk away from crummy investments. Hugo, on the other hand is "nationalizing," or just plain taking anything owned by foreigners with no apology or explanation.

"Sure it will be painful (here) but what doesn't kill us, makes us stronger. I know I could use more exercise, riding a bike to work or carpooling wouldn't hurt most of us. And if we really really had to, I suspect we in this great country can come up with alternatives if we get desperate enough."

You know the saying, if we can put a man on the moon... The sad part is that we have to feel the pain first, I guess human nature works that way.

"We're probably going to see if your theory holds water since the Chinese are dealing with Hugo to put Venezuelan oil under contract to them, and Hugo is now threatening to cut the oil he ships to us by 1/2 in the near future."

And as the price per barrel goes up to $80 per barrel and permanent $3.00+ per gallon gas, so will our expediency in being off arab oil once and for oil. Necessity is the mother of all invention.

"All the more reason for the U.S. to begin a "Manhattan" project to achieve energy independence as soon as possible."

AMEN. I am going for some VC funding for my marketing company. Investors are already on the prowl searching for play. I hope when this happens we do not peel back just as we are getting close like we did in the late 70's.

You are absolutely right on target. The higher the price of oil, the more interest there will be in finding alternatives. Our "addiction" will only be solved when the cost is high enough and remains there.

by Charles whalen
But my biggest worry in the meantime, and specifically this year, is that I think there's a better than even chance that the US and/or Israel is/are going to launch an aerial bombing campaign with air strikes and cruise missiles on Iran's nuclear facilities sometime this year. If (or rather *when*) that happens, we're going to see oil at over $300 and gasoline over $10 at the pump. Iran already has its retaliatory plans in the works. They are going to launch massive (conventional) missile strikes on Saudi Arabia's Ras Tanura oil terminal (less than 200 miles across the gulf from Iran), which is the largest oil terminal in the world through which the vast majority of Saudi oil is shipped and which Iranian missiles can destroy with great accuracy. This will take most of Saudi Arabia's oil exports offline for months if not years. The Saudis can divert some of their output to the Yanbu oil terminal on the Red Sea via their cross peninsula pipeline (that is if Iranian missiles don't destroy that pipeline as well), but that pipeline's capacity, as well as that of the Yanbu terminal, can probably handle less than a quarter of the current output from Ras Tanura.

Furthermore, the Iranians are planning to completely block and shut down all shipping traffic through the Straits of Hormuz, the narrow chokepoint of passage into and out of the Persian Gulf, only about 40 miles wide at its narrowest point. They will do this by firing anti-ship missiles at oil tankers passing through the narrow straits. Sinking several large oil tankers in the narrow straits will render the waterway impassable. Plus the Iranians are also going to massively mine the straits. All of this will shut down all shipping traffic into and out of the Persian Gulf for months and possibly years.

Of course the US military is well aware of Iran's plans and is planning its own countermeasures, but such countermeasures will not be very effective because our best anti-missile/missile-defense systems have proven inadequate against these types of attacks, especially if the missile attacks coming from Iran are massive; a few will be knocked down, but most of the Iranian missiles will get through US missile defense shields and hit their targets.

Everything I see and read tells me that this clash and conflict is probably now inevitable, especially due to the belligerent, bellicose, intransigent, uncompromising nature of the antagonists on each side whose positions and rhetoric are becoming increasingly hardened and dug in. The world is becoming increasingly polarized in this brewing conflict, with the Europeans now becoming more unified and pushed into the American camp by the whole Prophet Muhammed cartoon affair with all of its targeted violence directed against Denmark, Norway, France, Britain, and Germany. On Iran's side, you have Russia, China, Syria, and Venezuela (which is the United States' third largest oil supplier, after Canada and Mexico, and whose president, Hugo Chavez, has said that he would cut off all oil exports to the US in the event of any US attack on Iran). The other Arabs and the Turks seem to be caught somewhere in the middle at the moment. The battle lines are hardening. I can see the train wreck coming. The repercussions will be devastating. As I said, we'll have oil over $300 and gasoline over $10. We will see a worldwide depression on a scale not seen since the Great Depression of the 1930s. The US dollar will collapse against the euro and go into free fall. China will use the opportunity to seize Taiwan. The Chinese will also engage in economic sabotage against the US through the enormous financial leverage they have over us with their massive US Treasury debt holdings, which they will dump en masse on world financial markets. Yes, that's a bit like shooting oneself in the foot, but at that point it won't matter any more because things will have moved way beyond such considerations.

If this escalates as I see it likely happening, I think the US will probably end up using tactical nuclear weapons against Iran's underground nuclear facilities (which are the only type of weapon that can successfully take out Iran's hardened nuclear facilities deep underground), and in fact Bush has already formally authorized in writing a battle plan that includes the use of tactical nuclear weapons against Iran's hardened, deep underground nuclear facilities. Given that Iran has deliberately built these nuclear facilities in (and under) heavily populated areas, such a nuclear attack by the US, even just a *tactical* nuclear attack, will likely end up killing hundreds of thousands, if not a million or more, Iranians (in a heavily populated country of over 70 million people). There still remains considerable moral ambivalence in the world about Hiroshima and Nagasaki more than 60 years later. There will be no such ambivalence about US tactical nuclear attacks on Bushehr, Natanz, Isfahan, and other locations in Iran. I hesitate to say that this will elevate Bush into Hitler and Stalin territory, but he will certainly be heading in that direction, at least in the eyes of much of the world.

The top corporate leadership in this country is well aware of the perils of this current standoff and nuclear brinkmanship with Iran and can see this entire scenario unfolding and escalating out of control exactly as I have described above, which would be in no one's interest as the entire world would suffer from a longtime -- and possibly permanent and terminal (given the imminence of peak oil, which this would accelerate by a few years) -- worldwide depression of unprecedented magnitude with tens of millions of people losing their jobs, corporations going bankrupt, entire economies failing, etc. So top corporate leaders are privately urging the White House to tone down the rhetoric and go slow on all of this so as not to overturn the global economic apple cart. Even some of the ayatollahs in Qom are becoming concerned that Ahmedinajad is going too far and pushing too hard in his radicalism, beyond the requisite (and politically correct) anti-Semitic and anti-American rhetoric, and are becoming alarmed at his doomsday personal cult of martyrdom that he apparently seeks to project onto the entire Iranian nation, which he seems to have no qualms about sacrificing to the greater glory of his mystical apocalyptic visions.

I wish it were simply as easy as just saying that "hopefully cooler and saner heads will prevail in Washington and Tehran & Qom", for were it only dependent on such, then I think there might be a decent chance that all of this could be defused and Armageddon avoided, that both sides could slowly back away from the edge of the precipice, from which we are presently staring into the abyss. But of course it is not just dependent on Washington and Tehran & Qom because other parties are involved and have just as large stakes in all of this, namely the Israelis, who perceive this as an existential life-and-death crisis for them (and I wouldn't disagree with that perception given the repeated statements of Ahmedinajad over the last several months about wiping Israel off the map, and this from a country that is proudly boasting of its ambition and its right to develop nuclear weapons). My big fear is that the Israelis -- with their own exigencies, imperatives, and agendas (being very different from ours), including even the relatively moderate Ehud Olmert and his Kadima party, who are likely to win the upcoming March election -- will see that cooler and saner heads are indeed prevailing in Washington and starting to defuse the crisis, upon which they (the Israelis) will feel compelled to force the issue to a head and force it upon us whether we want it or not by precipitating a full-blown military crisis by launching preemptive air strikes of their own on at least some of Iran's nuclear facilities, whereupon with the resulting mayhem and devastation that will ensue (including Iranian, Syrian, and Lebanese-Hezbollah missile strikes on Tel Aviv and Haifa), it will be left to the US military to finish the job with massive aerial bombing and missile strikes on Iran's nuclear and military facilities. So I'm afraid that Israel is going to preemptively force our hand in this matter and force us into a war with Iran whether we want it or not.

The Israeli Mossad already has a base in the mountains of Iraqi Kurdistan (with the knowledge and tacit consent of the Kurdish leadership), east of Suleimaniyah, near the Iranian border, from which Israeli agents are eavesdropping on Iranian military communications as well as conducting clandestine cross-border surveillance and sabotage planning missions into Iran. But the big question is how Israeli war planes are going to get from Israel all the way over to Iran to launch their payloads when the time comes that the Israeli leadership decides to pull the trigger and launch their preemptive strike on Iran. It is doubtful that Turkey would allow Israel to use its airspace for such a purpose, which means that Israeli planes, in addition to flying over Jordan (which could probably be finessed), would have to transit Iraqi airspace, which of course is controlled by the American military. If George Bush wants to avoid the scenario I've just outlined above where Israel forces us into a war with Iran, then he will have to make it abundantly clear to Ehud Olmert, in no uncertain terms and be very adamant and steadfast about it, that the US will under no circumstances tolerate any Israeli incursion into Iraqi airspace and that any such incursion will be met with stiff resistance and deadly force from the US military. But given Bush's extremely close relationship with (the now apparently terminally comatose) Ariel Sharon, which has presumably carried over to his designated successor, Ehud Olmert, and given the neo-conservatives' dominance, sway, and stranglehold over the Bush administration at its highest levels, when this matter is eventually forced to a head and push comes to shove, I have a hard time seeing Bush being so resolute and standing up to and resisting all of the pressure that will come from those closest to him who have access to the president and have his ear.

So I guess you could say that my outlook for 2006 is not the most sanguine and that I have some serious geopolitical concerns. Add to that the additional negative prognostication that I am now re-revising my own personal forecast for peak oil by moving it forward from the 2010-2015 timeframe to 2008-2010, which is what I had earlier predicted up until the second half of last year, when I had read some slightly more optimistic (and what I thought at the time were more balanced) analyses of some younger, still-practicing petroleum geologists, such as Sadad al-Husseini and Jack Zagar, who have access to proprietary Middle East oilfield production and reserve data of current or more recent vintage, unlike some of the older, more pessimistic and alarmist petroleum geologists who retired 10-20 years ago and have not had access to such proprietary data for that amount of time and thus were basing their conclusions on very old, out-of-date data. But in just the last two months, I have read a number of new analyses, including in the Wall Street Journal and other respected publications, which would appear to support the more pessimistic predictions of those older experts like retired petroleum geologist Colin Campbell and energy investment banker extraordinaire and George W. Bush presidential advisor Matthew Simmons which put peak oil somewhere between now and 2010. In particular, it has just recently come out and been revealed that the world's three largest oilfields have now peaked and are in decline. The world's third largest oilfield, Burgan in Kuwait, which at 1.7 million barrels a day accounts for 68% of Kuwait's total output and has been in production for over 50 years, has now peaked and is in irreversible decline. The same is true of the world's second largest oilfield, Cantarell in Mexico, which at 2 million barrels a day accounts for 60% of Mexico's total output and is expected to decline at a rate of over 50% this year and then another decline of over 50% again next year. The oilfields of Alaska and the North Sea have been declining at over 10% a year for several years now. Then of course there is the world's largest oilfield, Gharwar in Saudi Arabia, which at 4.5 million barrels a day accounts for 40% of Saudi Arabia's total output and has been in production for over 60 years. Gharwar is believed by most serious analysts to now be in decline; it has an enormous water cut with the Saudis pumping in 7 million barrels a day of seawater in an uphill struggle and sagging effort to try to maintain the pressure of the oil in the field, for only 4.5 million barrels a day of oil that they're getting out.

If the US and/or Israel do not attack Iran this year or next year, and if there are no other major (internally-generated or externally-perpetrated) geopolitical upheavals or cataclysms in other major oil provinces like Venezuela and Nigeria (in addition to the one presently playing out in Iraq, where oil production is down to 1.1 million barrels a day from a pre-war level of 2.8 million barrels a day), then I would expect global oil peak to occur in the 2008-2010 timeframe at no more than 92 million barrels per day. But if the US and/or Israel launch a preemptive strike on Iran's nuclear facilities this year, then the 84 million barrels a day of oil produced in 2005 will turn out to have been the global peak, which shall never again be seen and from which we will start an abrupt and inexorable decline.

Charles Whalen

eUROS?..Most of the :euro" govenments are supporting U.S. in this mess...no not Euros...

china ...yuck

or Gold

Use less oil. Burn more coal.

Even high haired women in SUVs will get out of the way of the coal-mobile!

Venezuela selling to China will netback less to the Vens. Longer distance means higher freight. The US south and east coast is Hugo's tier one sale.

Such a punk? He's only helping American companies and politicians subvert our economy.. what's wrong with that. I mean if it isn't treasonous for our own people to do it.. how could it possibly be bad for an enemy to do so...

Unless we stop this now, third world punks will line up to buy nukes from Iran (who'll sell or give them to Chavez), and we won't have to worry about how cold it gets next winter.

"Of course the US military is well aware of Iran's plans and is planning its own countermeasures, but such countermeasures will not be very effective because our best anti-missile/missile-defense systems have proven inadequate against these types of attacks, especially if the missile attacks coming from Iran are massive; a few will be knocked down, but most of the Iranian missiles will get through US missile defense shields and hit their targets."

Charles,
I won't argue your political views, but you are wrong about our capacity to target, track, and destroy Iranian missiles.

I doubt that Hugo would be paying the freight to get the oil to China. The contract even at market prices is dealing outside the market, so I'm sure there would be compensation for delivery to the other side of the world included unless Hugo is happy to cut slack to Chinese commies like he does to Castro, selling at a discount because they all have the same objective - destroy US.

I have no idea what you're saying. If you mean we have the backing of anybody in old Europe other than the Brits (? - maybe) to keep oil priced in dollars, you need to do some reading in regard to who our "allies" are. When it comes to who will back us if they think they can bring us down and improve their own finances, the Iraq war and our European "allies" response is there for all to examine. If we're giving something away and footing the bills for them, we have more "allies" than we know what to do with.

Please explain if there is no surplus oil to be bought on the market, how the Chinese receiving the Venezuelan oil that we use will free up oil from someplace else. The OPEC cartel is talking about cutting production. You don't think this is part of someone's plan? The only good thing I see is that attempting to destroy our economy will bring down all their economies along with ours and without our recovery to drag them all out of the mire, nobody is going to be any better off than we are, and most will be a lot worse, plus we'll be back to $ 10 per barrel oil since the producers will have to sell it for whatever it will bring - kind of like bursting the bubble they have helped to create. JMO

.Another,..part of a the plan..., fuel distribution depots are gearing up bigtime for "alternative fuels" AKA corn liquor our taxes help pay for.

We'll be paying $10 gal soon enough, only we won't realize how exactly.

No doubt. Hugo is not driven by the netback mentality.

"LOL!....I fear Venezuelan and Iranian superiority in technology and economic power. We had better do what the say or they will..."Bury us..."

Sounds ridiculous but read the "Mullah threat not sinking in" on http://www.antimullah.com" and perhaps have another think at the damage that can be done almost by accident.

Not by their might or technology but the teeter-totter position of world economical factors, specially currencies, that if the first domino tips over, none of the central banks and none of the financial structures have the funds or ability to prevent the ensuing crash. Simply not enough money in the whole world to bolster the Dollar at that point.

"You are absolutely right on target. The higher the price of oil, the more interest there will be in finding alternatives. Our "addiction" will only be solved when the cost is high enough and remains there."

And as long as the world buys oil from despotic religous nutcakes, we'll never win the world on terror.