August 17, 2005
Use the oil weapon against Iranian nukesBy Ed Lasky
As Iran continues its program to develop nuclear weapons in the face of unrelenting appeasement by many Western nations and a feckless International Atomic Energy Agency, various proposals have been presented by 'experts.' Most of these ideas have a fatal flaw: they accept the inevitability of an Iranian nuclear arsenal.
Since Iran is the number one state sponsor of terrorism in the world, has provided the means by which its proxies have killed hundreds of Americans in Lebanon and now in Iraq, and has proudly stated its intention to slap America in the face and to destroy Israel, this stance towards Iran is one of the most disgraceful capitulations since the end of World War Two. However, resignation regarding the Iranian WMD program is not the only option (and it is a doomsday option). Iran has one extreme vulnerability that can be exploited by the West and paradoxically it involves a weapon they have wielded in the past: oil.
Due to a combination of circumstances, the West now has within its power the ability to use an oil weapon against Iran in order to stop its development of nuclear weapons.
How has this situation come to pass?
Madrassas must not have economics as a prerequisite for graduating, for the mullahs have violated one of the basic tenets of economics. Artificially depressing the price of any product will lead to artificially increased demand for the same product. In the case of Iran, cheap gasoline has been bountifully supplied to Iranians for many years. This is quite common in the region and is a way to appease people who might otherwise express discontent over their lot in life, who come of age in a religious theocracy with very few prospects for finding a job or developing a career. It also ensures that the locals won't get upset when oil prices soar.
In the case of Iran, a gallon of gas costs 40 cents and this has led to astronomical demand by Iranians, who now depend on a steady supply of such cheap gas. The demand for gas within Iran is over 17 million gallons a day. Yet, gross mismanagement of their energy industry has left them with a refinery capacity of only 10 million gallons a day. Iran actually imports 7 million gallons of gasoline a day (over 40%) from foreign refineries!
The Iranians have been unable to build the refineries capable of processing the crude they pump out of the ground. Gross mismanagement, foreign investors reluctant to increase their exposure to a xenophobic government, and restrictions on energy investment by oil companies due to American laws (the Iran—Libyan Sanctions Act imposes penalties on companies investing in the energy industry in those nations*) have led to a severe refinery shortage. Refineries cost hundreds of millions of dollars and take years to build. Due to the profit risks involved (profit margins can fluctuate wildly) few have been built over the years. A matter of fact, the entire world suffers from a refinery shortage.
This refinery shortage might be a potent weapon that can be brought to bear on the Iranians to encourage their cooperation regarding their obligations under the Nuclear Non—Proliferation Treaty.
A coalition of nations can act to restrict imports of refined products into Iran. The plan would require the cooperation of various companies and governments. However, if Europe is serious about persuading Iran to drop its nuclear weapons program a veiled threat to explore the possibility of restricting the exports of refined products to Iran might be salutary.
Gas prices would soar in Iran as severe shortages rapidly develop. Rapid increases in the price of fuel have been a trigger that has led to street protests and the overthrow of governments around the world (especially when the people are angry over other issues).
Iran could threaten to cut off shipping in the Strait of Hormuz and increase terror throughout the region (including Iraq). However, violence in the Strait of Hormuz would be considered an act of war justifying military action against the regime. The Europeans would be severely affected by such a closing. A giant coalition against it is a prospect Iran must worry about.
Iran's most likely response would of course be a threat to halt crude exports with the hope of causing a worldwide crisis. However, other nations in the region might be able to boost their level of exports to cover part of any shortages that develop. Saudi Arabia and other Gulf nations that are led by Sunnis certainly would be eager to prevent the Iranian Shiites from acquiring nuclear weapons. If Iran were successful in developing a nuclear arsenal they would be in a position to exercise hegemony on the region — a right they have historically considered theirs as part of their Persian inheritance (The Persian Gulf is called the Arab Gulf by Arab nations).
A nuclear Iran would embolden restless Shiites in Sunni—ruled Gulf nations, which would be an ominous prospect for their Sunni emirs. Even Iraq, whose oil production has increased from 1.44 million of barrels a day in June to 1.6 million in July and whose oil exports in early August stood at 1.6 million of barrels a day, might soon be in a position to help meet any oil shortages. While Iraq might be under Shiite control, they are Arab (not Persian) Shiites and bear scars from the Iran—Iraq war. They are nationalistic and many follow a 'quietest' school of Shiism that looks in abhorrence at the theocracy that Iran has become. The Iraqis might also be amenable to American and Western requests to increase oil exports to compensate for any shortages caused by Iran.
The American Strategic Petroleum Reserve has a billion barrels of oil that could help ease us through any crisis. That is precisely why it was created. As a strategic weapon.
While some Westerners would protest a threat to halt exports of refined products to Iran, such a 'weapon' does not inflame people as much as the use of military weapons would. America has had an embargo against Cuba for 40 years and has had trade restrictions against a variety of nations (the old Soviet Union, Iran, Libya) for many years. The world countenanced embargoes against Saddam Hussein's Iraq for almost a dozen years. Many might see an element of divine justice in such an embargo since Iran has engaged in the practice in the past. An embargo of refined oil products is just too abstract to bring protesters in to the street.
Iranians surely are aware of their vulnerability regarding refineries. Naturally, they would look for opportunities to reduce this risk to their supply. Russia and China might be able to step up their supply of refined products but they too have a severe refinery shortage and restive populations. Would they starve Peter to pay Persian cousin Paul? They might be reluctant to inflame their own populations, let alone angering their trading partners by not cooperating in the embargo.
However, there is one outlaw leader of a nation who seems to enjoy thumbing his nose at the West, and who might be eager to due the mullahs' bidding: Hugo Chavez, dictator of Venezuela.
There is one axiom of international politics that seems to hold true across the centuries: just as misery loves company, miserable regimes love other miserable regimes. Hitler had his Mussolini and the mullahs of Iran have Hugo Chavez. They have developed amiable relations over the years and certainly have important characteristics in common. They are both active supporters of terror, providing funds and sanctuary for terrorists. They have fomented unrest in neighboring nations with the goal of overthrowing other regimes. They both have cooperated in sending oil prices soaring.
Most importantly, they both loathe America.
Chavez has visited Iran and has bolstered ties between Venezuela and Iran. Chavez has a jihadist mentality: hoping to export his revolution throughout South American and thus fulfill the dream of Simon Bolivar. Chavez has proven his bona fides to the mullahs by spreading anti—Semitism within his nation. Thor Halvorssen has written an excellent article in the Weekly Standard which depicts a Venezuela increasingly under the control of anti—Semitic thugs and which has been marked by, among other developments, attacks against a Jewish day care school which terrified young children and the exodus of half of Venezuela's Jewish population in the last six years.
How might Chavez come to the aid of Iran if other nations threaten to halt gasoline and heating fuel exports to Iran? Venezuela is a huge oil exporter to America and it could threaten to join Iran in threatening to halt oil exports to America if pressure is applied against Iran regarding its nuclear program.
Another interesting development with long—term implications: Chavez has announced a plan to massively increase the number of oil refineries Venezuela's government owns or controls. The state oil company, under the control of Chavez and his cronies since the professionals were fired, has plans to spend over 4 billion dollars to build or upgrade refineries in various nations in South America. This will help Chavez in his efforts to exert influence in South America and will also capture profits lost to other nations' refineries. However, one other nation would benefit from more refineries under Chavez's control: Iran. Since Iran faces hurdles building its own refineries (due to the Libya—Iran Sanctions Act) what better way to increase its options regarding refinery suppliers than having a 'cut—out' (intelligence parlance for a stand—in) build refineries under its 'flag'? These Venezuelan refineries would free Iran from dependency on other nations for its refined products.
While some might view an embargo of refined products as a fanciful weapon to be used against the Iranian mullahs, desperate times call for creative measures. An Iran with nuclear weapons is an Iran that could exercise hegemony over the entire region. An Iran with nuclear weapons could supply terrorists with the ultimate weapon of terror. A nuclear Iran would set off a nuclear arms race in a region beset by unstable regimes. * Embargoes have been used throughout history to influence nations' behaviors. Hopefully, the game theorists in Washington might also consider these times appropriate for the imposition of one.