A Very Different Take On The "Iran Barters Gold For Food" Story

Tyler Durden's picture

Much has been made of today's Reuters story how "Iran turns to barter for food as sanctions cripple imports" in which we learn that "Iran is turning to barter - offering gold bullion in overseas vaults or tankerloads of oil - in return for food", and whose purpose no doubt is to demonstrate just how crippled the Iranian economy is as a result of the ongoing US embargo. Incidentally this story is 100% the opposite of the Debka-spun groundless disinformation from a few weeks ago that India was preparing to pay for Iran's oil in gold (they got the asset right, but the flow of funds direction hopelessly wrong). While there is certainly truth to the fact that the US is actively seeking to destabilize the local government, we wonder why? After all as the opportunity cost for the existing regime to do something drastic gets ever lower as the popular resentment rises, leaving the local administration with few options but to engage either the US or Israel. Unless of course, this is the ultimate goal. Yet going back to the Reuters story, it would be quite dramatic, if only it was not the case that Iran has been laying the groundwork for a barter economy for many months now, something which various other analysts perceive as the basis for the destruction of the petrodollar system. Perhaps regular readers will recall that back in July, we wrote an article titled "China And Iran To Bypass Dollar, Plan Oil Barter System." Specifically, we wrote that "according to the FT, China has decided to commence a barter system in which Iranian oil is exchanged directly for Chinese exports. The net result: not only a slap for the US Dollar, but implicitly for all fiat intermediaries, as Iran and China are about to prove that when it comes to exchanging hard resources for critical Chinese goods and services, the world's so called reserve currency is completely irrelevant." Seen in this light the fact that Iran is actually proceeding with a barter system, something that had been in the works for quite a while, actually puts the Reuters story in a totally different light: instead of one predicting the imminent demise of the Iranian economy, the conclusion is inverted, and underscores the culmination of what may have been an extended barter preparation period, has finally gone from beta to (pardon the pun) gold, and Iran is now successfully engaging in global trade without the use of the historical reserve currency.

Here is how Reuters presents its findings:

Difficulty paying for urgent import needs has contributed to sharp rises in the prices of basic foodstuffs, causing hardship for Iranians with just weeks to go before an election seen as a referendum on President Mahmoud Ahmadinejad's economic policies.

 

New sanctions imposed by the United States and European Union to punish Iran for its nuclear program do not bar firms from selling Iran food but they make it difficult to carry out the international financial transactions needed to pay for it.

 

Reuters surveys of commodities traders around the globe show that since the start of the year, Iran has had trouble securing imports of basic staples like rice, cooking oil, animal feed and tea. Grain ships have been held at its ports, refusing to unload until payment can be received for cargo.

 

With Iran's rial currency tumbling, the prices of rice, bread and meat in Iranian bazaars have doubled or more in dollar terms in recent months.

 

Iranian grain importers have in the past side-stepped sanctions by booking business through the United Arab Emirates, traders said, but this option was cut off by the UAE government in response to sanctions.

 

Iran has been trading oil in currencies like Japanese yen, South Korean won and Indian rupees, but such deals make it difficult to repatriate profits.

 

Deals revealed Thursday appear to be among the first in which Iran has had to result to offering cashless barter to avoid sanctions, a sign of new urgency as it seeks to buy food and get around the financial restrictions.

The article's punchline:

Another trader said: "As the shipments of grain are so large, barter or gold payments are the quickest option."

 

Details of how the barter deals work are still unclear as the payments problem is so new, and traders did not disclose the exact size of such deals.

Perhaps a different spin on the news is that gold is "suddenly" just as equially accepted as a pseudo-reserve currency virtually everywhere in the world, as the dollar: a blasphemous concept to many legacy economists for sure. But the truth is that gold and barter appear to be working. Especially when one considers what the FT had to say on this topic back in July 2011:

Tehran and Beijing are in talks about using a barter system to exchange Iranian oil for Chinese goods and services, as US financial sanctions have blocked China from paying at least $20bn for oil imports.

 

The US sanctions against Iran, which make it extremely difficult to conduct dollar-denominated business, mean that China could owe the oil-rich nation as much as $30bn, according to people familiar with the problem.

 

They said the unpaid oil bills had built up over the past two years and the governments, which are in early-stage talks, were looking at how to “offset” the debt.

 

Some Iranian officials are growing increasingly angry about the inability of the country’s largest oil customers to pay cash, a problem that has contributed to a shortage of hard currency and has hindered the central bank from defending the Iranian rial, which has been sharply devalued over the past month.

 

China and India together buy about one-third of Iran’s oil, the country’s economic lifeblood. China’s oil imports from Iran have risen 49 per cent this year, according to Reuters.

And what prevents China, whose secretive gold stockpiling is the stuff of legends to migrate from a barter system to one of gold, whereby the two countries exchange goods not in the form of barter but using the yellow metal currency equivalent. Furthermore, how would the world react if the entire Asian continent was found to be transacting in gold, coupled with the discovery that China's gold holdings have soared, very much the same way it disclosed its shocking gold expansion back in April 2009 when overnight its gold holdings went from 600 tonnes to 1054 tonnes:

Shanghai/Beijing: China disclosed on Friday that it had secretly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying.

 

Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure.

 

The confirmation of its surreptitious stockpiling is likely to fuel market talk about Beijing’s ability to buy secretly and its ambitions for spending its nearly $2 trillion (around Rs100 trillion) pile of savings. And not just in gold: copper and other metals markets are booming thanks to China’s barely visible hand.

 

Speculation has gathered speed over the last year, since the tumbling dollar has threatened to weaken China’s buying power—and give it yet more reason to diversify into gold, oil and metals.

Not only that, but consider our post from September 2011: "Wikileaks Discloses The Reason(s) Behind China's Shadow Gold Buying Spree"

Wondering why gold at $1850 is cheap, or why gold at double that price will also be cheap, or frankly at any price? Because, as the following leaked cable explains, gold is, to China at least, nothing but the opportunity cost of destroying the dollar's reserve status. Putting that into dollar terms is, therefore, impractical at best, and illogical at worst. We have a suspicion that the following cable from the US embassy in China is about to go not viral but very much global, and prompt all those mutual fund managers who are on the golden sidelines to dip a toe in the 24 karat pool. The only thing that matters from China's perspective is that "suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar's role as the international reserve currency. China's increased gold reserves will thus act as a model and lead other countries towards reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the RMB." Now, what would happen if mutual and pension funds finally comprehend they are massively underinvested in the one asset which China is without a trace of doubt massively accumulating behind the scenes is nothing short of a worldwide scramble, not so much for paper, but every last ounce of physical gold...

In other words, we humbly submit that instead of taking the Reuters article at face value, and one may certainly do that, what may instead be happening as Iran migrates to a non-dollar based international trade system is the testing of the waters of a non-USD regime, more impotantly, one quietly encourage by  China, who is a very complicit participant in the transition to a world in which the US Dollar suddenly finds itself irrelvant. Whether replaced by gold, or a currency backed by a basket of hard assets (the CNY?) we don't know. However, we know one thing: China needs Iran's crude, which at last check was among the world's top 5 oil producers, and had the world's third largest proven oil reserves after Saudi Arabia and Canada, and despite media reports that it is actively looking for crude import alternatives, we would allege that this is nothing but purposeful disinformation. After all why would China comply with US demands for an enhanced Iranian embargo? The whole point of China's foreign policy to date has been to counteract US pushes and provocations abroad without fail. Why should it make an exception now. Frankly, we don't buy it, especially when one considers last summer's FT piece.

 

Finally, we leave readers with this interesting take from Casey Research's Marin Katusa, who looks at recent development in a rather comparable light.

Will Iran Kill the Petrodollar? (source)

The official line from the United States and the European Union is that Tehran must be punished for continuing its efforts to develop a nuclear weapon. The punishment: sanctions on Iran's oil exports, which are meant to isolate Iran and depress the value of its currency to such a point that the country crumbles.

But that line doesn't make sense, and the sanctions will not achieve their goals. Iran is far from isolated and its friends – like India – will stand by the oil-producing nation until the US either backs down or acknowledges the real matter at hand. That matter is the American dollar and its role as the global reserve currency.

The short version of the story is that a 1970s deal cemented the US dollar as the only currency to buy and sell crude oil, and from that monopoly on the all-important oil trade the US dollar slowly but surely became the reserve currency for global trades in most commodities and goods. Massive demand for US dollars ensued, pushing the dollar's value up, up, and away. In addition, countries stored their excess US dollars savings in US Treasuries, giving the US government a vast pool of credit from which to draw.

We know where that situation led – to a US government suffocating in debt while its citizens face stubbornly high unemployment (due in part to the high value of the dollar); a failed real estate market; record personal-debt burdens; a bloated banking system; and a teetering economy. That is not the picture of a world superpower worthy of the privileges gained from having its currency back global trade. Other countries are starting to see that and are slowly but surely moving away from US dollars in their transactions, starting with oil.

If the US dollar loses its position as the global reserve currency, the consequences for America are dire. A major portion of the dollar's valuation stems from its lock on the oil industry – if that monopoly fades, so too will the value of the dollar. Such a major transition in global fiat currency relationships will bode well for some currencies and not so well for others, and the outcomes will be challenging to predict. But there is one outcome that we foresee with certainty: Gold will rise. Uncertainty around paper money always bodes well for gold, and these are uncertain days indeed.

The Petrodollar System

To explain this situation properly, we have to start in 1973. That's when President Nixon asked King Faisal of Saudi Arabia to accept only US dollars as payment for oil and to invest any excess profits in US Treasury bonds, notes, and bills. In exchange, Nixon pledged to protect Saudi Arabian oil fields from the Soviet Union and other interested nations, such as Iran and Iraq. It was the start of something great for the US, even if the outcome was as artificial as the US real-estate bubble and yet constitutes the foundation for the valuation of the US dollar.

By 1975, all of the members of OPEC agreed to sell their oil only in US dollars. Every oil-importing nation in the world started saving its surplus in US dollars so as to be able to buy oil; with such high demand for dollars the currency strengthened. On top of that, many oil-exporting nations like Saudi Arabia spent their US dollar surpluses on Treasury securities, providing a new, deep pool of lenders to support US government spending.

The "petrodollar" system was a brilliant political and economic move. It forced the world's oil money to flow through the US Federal Reserve, creating ever-growing international demand for both US dollars and US debt, while essentially letting the US pretty much own the world's oil for free, since oil's value is denominated in a currency that America controls and prints. The petrodollar system spread beyond oil: the majority of international trade is done in US dollars. That means that from Russia to China, Brazil to South Korea, every country aims to maximize the US-dollar surplus garnered from its export trade to buy oil.

The US has reaped many rewards. As oil usage increased in the 1980s, demand for the US dollar rose with it, lifting the US economy to new heights. But even without economic success at home the US dollar would have soared, because the petrodollar system created consistent international demand for US dollars, which in turn gained in value. A strong US dollar allowed Americans to buy imported goods at a massive discount – the petrodollar system essentially creating a subsidy for US consumers at the expense of the rest of the world. Here, finally, the US hit on a downside: The availability of cheap imports hit the US manufacturing industry hard, and the disappearance of manufacturing jobs remains one of the biggest challenges in resurrecting the US economy today.

There is another downside, a potential threat now lurking in the shadows. The value of the US dollar is determined in large part by the fact that oil is sold in US dollars. If that trade shifts to a different currency, countries around the world won't need all their US money. The resulting sell-off of US dollars would weaken the currency dramatically.

So here's an interesting thought experiment. Everybody says the US goes to war to protect its oil supplies, but doesn't it really go to war to ensure the continuation of the petrodollar system?

The Iraq war provides a good example. Until November 2000, no OPEC country had dared to violate the US dollar-pricing rule, and while the US dollar remained the strongest currency in the world there was also little reason to challenge the system. But in late 2000, France and a few other EU members convinced Saddam Hussein to defy the petrodollar process and sell Iraq's oil for food in euros, not dollars. In the time between then and the March 2003 American invasion of Iraq, several other nations hinted at their interest in non-US dollar oil trading, including Russia, Iran, Indonesia, and even Venezuela. In April 2002, Iranian OPEC representative Javad Yarjani was invited to Spain by the EU to deliver a detailed analysis of how OPEC might at some point sell its oil to the EU for euros, not dollars.

This movement, founded in Iraq, was starting to threaten the dominance of the US dollar as the global reserve currency and petro currency. In March 2003, the US invaded Iraq, ending the oil-for-food program and its euro payment program.

There are many other historic examples of the US stepping in to halt a movement away from the petrodollar system, often in covert ways. In February 2011, Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), called for a new world currency to challenge the dominance of the US dollar. Three months later a maid at the Sofitel New York Hotel alleged that Strauss-Kahn sexually assaulted her. Strauss-Kahn was forced out of his role at the IMF within weeks; he has since been cleared of any wrongdoing.

War and insidious interventions of this sort may be costly, but the costs of not protecting the petrodollar system would be far higher. If euros, yen, renminbi, rubles, or for that matter straight gold, were generally accepted for oil, the US dollar would quickly become irrelevant, rendering the currency almost worthless. As the rest of the world realizes that there are other options besides the US dollar for global transactions, the US is facing a very significant – and very messy – transition in the global oil machine.

The Iranian Dilemma

Iran may be isolated from the United States and Western Europe, but Tehran still has some pretty staunch allies. Iran and Venezuela are advancing $4 billion worth of joint projects, including a bank. India has pledged to continue buying Iranian oil because Tehran has been a great business partner for New Delhi, which struggles to make its payments. Greece opposed the EU sanctions because Iran was one of very few suppliers that had been letting the bankrupt Greeks buy oil on credit. South Korea and Japan are pleading for exemptions from the coming embargoes because they rely on Iranian oil. Economic ties between Russia and Iran are getting stronger every year.

Then there's China. Iran's energy resources are a matter of national security for China, as Iran already supplies no less than 15% of China's oil and natural gas. That makes Iran more important to China than Saudi Arabia is to the United States. Don't expect China to heed the US and EU sanctions much – China will find a way around the sanctions in order to protect two-way trade between the nations, which currently stands at $30 billion and is expected to hit $50 billion in 2015. In fact, China will probably gain from the US and EU sanctions on Iran, as it will be able to buy oil and gas from Iran at depressed prices.

So Iran will continue to have friends, and those friends will continue to buy its oil. More importantly, you can bet they won't be paying for that oil with US dollars. Rumors are swirling that India and Iran are at the negotiating table right now, hammering out a deal to trade oil for gold, supported by a few rupees and some yen. Iran is already dumping the dollar in its trade with Russia in favor of rials and rubles. India is already using the yuan with China; China and Russia have been trading in rubles and yuan for more than a year; Japan and China are moving towards transactions in yen and yuan.

And all those energy trades between Iran and China? That will be settled in gold, yuan, and rial. With the Europeans out of the mix, in short order none of Iran's 2.4 million barrels of oil a day will be traded in petrodollars.

With all this knowledge in hand, it starts to seem pretty reasonable that the real reason tensions are mounting in the Persian Gulf is because the United States is desperate to torpedo this movement away from petrodollars. The shift is being spearheaded by Iran and backed by India, China, and Russia. That is undoubtedly enough to make Washington anxious enough to seek out an excuse to topple the regime in Iran.

Speaking of that search for an excuse, this is interesting. A team of International Atomic Energy Agency (IAEA) inspectors just visited Iran. The IAEA is supervising all things nuclear in Iran, and it was an IAEA report in November warning that the country was progressing in its ability to make weapons that sparked this latest round of international condemnation against the supposedly near-nuclear state. But after their latest visit, the IAEA's inspectors reported no signs of bomb making. Oh, and if keeping the world safe from rogue states with nuclear capabilities were the sole motive, why have North Korea and Pakistan been given a pass?

There is another consideration to keep in mind, one that is very important when it comes to making some investment decisions based on this situation: Russia, India, and China – three members of the rising economic powerhouse group known as the BRICs (which also includes Brazil) – are allied with Iran and are major gold producers. If petrodollars go out of vogue and trading in other currencies gets too complicated, they will tap their gold storehouses to keep the crude flowing. Gold always has and always will be the fallback currency and, as mentioned before, when currency relationships start to change and valuations become hard to predict, trading in gold is a tried and true failsafe.

2012 might end up being most famous as the year in which the world defected from the US dollar as the global currency of choice. Imagine the rest of the world doing the math and, little by little, beginning to do business in their own currencies and investing ever less of their surpluses in US Treasuries. It constitutes nothing less than a slow but sure decimation of the dollar.

That may not be a bad thing for the United States. The country's gargantuan debts can never be repaid as long as the dollar maintains anything close to its current valuation. Given the state of the country, all that's really left supporting the value in the dollar is its global reserve currency status. If that goes and the dollar slides, maybe the US will be able to repay its debts and start fresh. That new start would come without the privileges and ingrained subsidies to which Americans are so accustomed, but it's amazing that the petrodollar system has lasted this long. It was only a matter of time before something would break it down.

Finally, the big question: How can one profit from this evolving situation? Playing with currencies is always very risky and, with the global game set to shift to significantly, it would require a lot of analysis and a fair bit of luck. The much more reliable way to play the game is through gold. Gold is the only currency backed by a physical commodity; and it is always where investors hide from a currency storm. The basic conclusion is that a slow demise of the petrodollar system is bullish for gold and very bearish for the US dollar.

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johny2's picture

I have lost any hope for the USa after watching Romney, Gingrich an Santorum get more votes than R. Paul. The deception failed, so the fear is going to be used more and more to keep the present ponzi scheme going. We can look at the details, but the big picture is that Iran will be bombed, as it is in interest both of Israels and Irans own dictatorship. There, had to say that somewhere.

saints51's picture

I don't know if it would be wise for the USA to bomb Iran. It seems Iran has more backup than we do. They have China and looks like India soon. China and Russia are together with their deals also. Iran has some major allies for their resources. USA trys to play games they are going to create a shitstorm. Thats a pissing match the USA will lose everytime. Those countries have toys too and a much bigger army when combined than all of our allies together. Add in their tech and its tilted in their favor. But with our current leadership who has a 1 inch dick yet thinks they are big dick champion , it would not surprise me if the USA started some shit.

pazmaker's picture

Saint, it would be very unwise...unfortunately we appear to be heading in that direction.  The proxy fight is going on in Syria right now..Iran next.

saints51's picture

Paz I agree. What worries me the most is not USA starting a war but Israel. Somehow and someway they are going to instigate. They are playing the nuclear card for the public right now. If this war would start it won't be like anything we have ever learned or seen unfortunately.

Xkwisetly Paneful's picture

Yea cause those evil zionistas are sooooo provacative.

Great material.

Funniest shit on the internet today.

Well done.

Was Abdul51 already taken?

Aslam Alekem brothers.

saints51's picture

Glad i made you laugh. The jewish people are great people and its not them that is being targeted from what i stated. its their current leadership just like the USA and any ther country is why the good folks get a bad rap. Thats who I am talking about. God bless you!!

CompassionateFascist's picture

That's right, moron, suck up to the ZOGster. Actually, those Jews that aren't Red are Zionist, and vice-versa: two tentacles of the same squid. There's probably a good reason why Jews have been booted out of every host nation they've parasited and bloodsucked for the past 3,000 years.

saints51's picture

I work side by side with some jewish people. They are good people and great friends of mine. if I am a moron for that then so be it. I think you need to reevaluate your stance on who is the enemy and direct that anger towards them not the everyday people. I am not the enemy and can promise you that. I am in the boat with you. Directing anger to the wrong people solves nothing and keeps you asleep.

CompassionateFascist's picture

Yes, and "some of my best friends" are Jews. Unfortunately, the JP is about Group Conflict, not this or that undoubtedly excellent individual. Still, if you see any reptilian shape-changers ("illuminati")  wandering about, we'll stand side by side and slaughter them. In fact I am going to write my two fine US Senators about this very issue. Barbara Boxer and Diane Feinstein.....uh oh.....

saints51's picture

"Still, if you see any reptilian shape-changers ("illuminati") wandering about, we'll stand side by side and slaughter them"

 

haha you got me to laugh. Thought about a movie i like called hot fuzz and the zombie one withthose 2 guys.

Its all good bro. You are entitled to any feelings you have and I respect it. We dont have to agree.

 

 

 

slewie the pi-rat's picture

 

well, when you're coming up with...:

  • I don't know if it would be wise for the USA to bomb Iran. It seems Iran has more backup than we do.
  • I am not the enemy and can promise you that. I am in the boat with you. Directing anger to the wrong people solves nothing and keeps you asleep.
  • The jewish people are great people and its not them that is being targeted from what i stated. its their current leadership just like the USA and any ther country is why the good folks get a bad rap. Thats who I am talking about. God bless you!!

...it's probably a good strategy to go w/: 

  • Its all good bro. You are entitled to any feelings you have and I respect it. We dont have to agree.
Xkwisetly Paneful's picture

AND DOWN WITH AMERICA RESPONDED THE CROWD!

they must have misinterpreted the caveman drivel  too.

Shouldn't you be off stoning some gays somewhere by now anyway?

Funny though, the newbie actually bought into the idiotic radical islamic muzzie as a victim. The modern day anchor to the human race is somehow the victim.

Hilarious  stuff, those evil zionistas out numbered how many hundred to one are  the threat and the provacateur not the cavemen. Even absent those evil zionistas it isn't like the radical islamic muzzie gasses other muzzies or anything.

Isn't there a nice peaceful soccer match you should be taking in about now?

 

slewie the pi-rat's picture

actually, you "made him laugh!" and so did the other guy, too!

so, you're both very effective!

happy 1-year zH birthday, too, mrPanefullyBo_ring!!

i hope you have many happy returns of twisting what people have clearly written on these boards about "gays"  and "muzzies" and then pretending that slewie should be off doing something else

apparently, whoever pays you is happy w/ your level of skill, tho...

why don't ypu just take care of you, and i'll go ahead and lead my life, at least for the resta today, ok? you can still get a ton of attention!

say!  do you miss the spammerZ?  is there a strike?  can we contribute?  somehow?  doya think they all gassed each other over religious or racial differences, like all the trollz here, today, just trying to PROVE that zH is a hate site and...???   well, thanks for sayin "hi"! 

buh-bye, now!

Xkwisetly Paneful's picture

The post was  not directed towards you.

Sorry for the confusion.

 

slewie the pi-rat's picture

thank you for the unexpected clarity  L0L!!!

let me guess!  you asked the cunt holding the leash, whose BiCh uB, for some xtra "rewards";  after all, it's been a year!  and now you're bleeding from even more orfices?

hey, that's just super-x_quiz!  i'm just over-joyed for you and glad to see how you feel about the spammerZ being on strike, here, too!

you are good!

but what i really would hope, for you or any fellow-Z, is that you value your own clarity, and be responsible for what you mix it with and why

less confusing, right?

now, if that might make you less effective, i hope you realize i don't want to criticiZe how well you're doing on that one without any help from anyone...

MobBarley's picture

I love that' I am not the enemy and can promise you that'

that shit was hilarious.

Like 'the persuit of happiness' . HEH.

Yall motherfuckers are some of the funniest ass lying bitch ho motherfuckers I ever had the

disgrace of sharing a planet with.

slewie the pi-rat's picture

awww, shucks, m0_B! 

he wuz hopin y'all would be a bit more trustin, i'll betcha!

now that we don't have so much spam, it is quite the treat to see all the varieties of creeping, weeping, and hanging trollery with which we are blessed in the flowering of shitheadedness afore which we stand in mortal awe, sharing the dis-grace, but (hopefully, at least) just being in it and not totally of it

trollery abhors a vacuum, also, tho whether that accounts for some of this shitheadedness may be a matter of opinion, information-wiZe

there!  so much for that, huh?  bitch ho motherfuckers are out today! 

SilverRhino's picture

Those countries have toys too and a much bigger army when combined than all of our allies together.

Uhm are you serious?   20 million hunters in the USA alone and you think that doesn't count?  

saints51's picture

I am not talking about an invasion of the USA. I am talking about a war in the middle east. So yeah I am serious. If in the USA then of course it would count.

unrulian's picture

20 million hunters in the USA alone and you think that doesn't count?

 

...you mean like dick cheney?

X86BSD's picture

Actually China and Russia are a non threat. As much as I would LOVE to see someone! anyone! be a check to American Imperial threats and power around the globe the truth is both Russia and China have no naval fleet to speak of. I actually looked at the numbers each of them have 1 aircraft carrier in their entire fleet. Its not much of a check on America. We could take out both of their combined navies. And that pains me to say. I think the best strategy for them would be to move both aircraft carriers into the straights of Hormuz and make their own naval blockade. Stating any American vessel that attempts to cross into the straights will be sunk. And call the US out. In the statement make it clear you will not allow American aggression to starve or murder the Iranian people. I don't know that is what I would do.

saints51's picture

 USA has the elite Navy so not sure how we stack up in that aspect. I will take your word for it. Not sure how many subs they have that can cause chaos for us so this may help them if they have a decent fleet. Also didn't China build the aircraft killer missle. I remember reading something about it and can't recall if it was completed or in experimenting stages. If that works for them then it could change the game keeping the Navy fleet at check.

 We must still consider the tactic of just prolonging the war that will not just cause casualties of American soldiers creating a negative impact from the public but the drain of a fragile American economy already in vast amounts of debt. It would be interesting to see how the chess game would play out but the unfortunate events is the game will cause a lot of pain and death whuch none of us really want to be apart of or witness.

YC2's picture

More that military compairsons I worry they will have an incentive to create economic MAD vie their leverage in the Ts mkt and see if they come out on top on the other side of it.

Citxmech's picture

Not so sure the rest of NATO wants to see $200/bbl oil bad enough to sign-off on this crap.

BanksterSlayer's picture

The Shanghai Treaty Organization (aka, the SCO) pretty much guarantees that Russia and China will come to the aid of Iran ... that treaty was signed only a few weeks before 9-11 happened. This article at GlobalResearch.ca was posted in 2007 about it:

http://www.globalresearch.ca/index.php?context=va&aid=6688 

Citxmech's picture

Ask the American Indians how much faith to put into treaties.

There's more going on behind the scenes right now than any of us are privy to.

Wakanda's picture

Now is the time for hope that comes from deep inside - hope that is inspired by our ancestors and generations yet to be born.

The Human Spirit will prevail no matter how dark it seems at the moment.

Summon your courage and be prepared for the miraculous.

johny2's picture

Thank you, I still have hope that there is some other life or something. Other than that, I have understood that even a few rotten apples will make the rest fare badly. 

Eisenhorn's picture

If this IS the case then we can count on war soon.

No way in HELL the west allows a country like Iran to bring the whole petro-ponzi crashing down.  At least not without a fight.

 

"What?!  Brown people are about to crash the system?!?!  F THAT!  Time to end those pesky Garnetians!"

pazmaker's picture

And this one will be a little more than USa vs Iraq or Afghanistan, not that I think IRAN has a great military force but they have firends like China and Russia that I don't think will stand idly by and let USA and Israel do it's thing.

Eisenhorn's picture

I have little doubt that a western military incursion into Iran will lead us to the precipice of global war.  China and Russia have both ante'd up for this hand and the cards are on the table.

Does it actually lead to a global conflict?  I lean more toward a new cold war - you know - proxy wars ad infinitum.

Outright conflict between the West and China/Russia?  Not yet, at least not with China.  Poland may jump the gun on killing Russians and drag us all into that one, but the Chinese won't move until THEY are ready.

Boxed Merlot's picture

Outright conflict between the West and China/Russia? Not yet, at least not with China...the Chinese won't move until THEY are ready...

    Wang Lijun, "the former top cop of a major Chinese city has dropped from sight amid unconfirmed reports he is seeking U.S. asylum following a quarrel with one of China's most powerful local politicians".

 

 

 

If I understand this correctly, this guy's superior may be the next in line for the position of high commander. What's the deal here?

xela2200's picture

Russia is the gun dealer of the world, and China can use financial weapons.

11b40's picture

Iraq & Afghanistan are low risk targets....Iran, not so much.  Neither of the first 2 had the power to cause International economic problems, nor did they have the implied support of China, Russia, India, Pakistan, and numerous other smaller players.

Just look at the map.  Iran's coastline covers the entire Western side of the Persian Gulf.  Close the entranceway to the gulf & you cut off oil supplies from Bahrain, Kuwait, Qatar, the UAE, & the Western ports of Saudi Arbia.  Cause enough problems in the gulf itself, and tankers won't sail.  10,000 "smart" mines (the cheap, floating equivelent of IED's) would cause untold problems.

We really do need to sober up and shut up before we let our mouth overload our ass.  Hubris is a very dangerous dish we seem to enjoy gorging ourselves on.  There are a lot of ways to get bitch-slapped in this game we are playing.

WolfePaq's picture

@ 11b40  - 2,500 years later and the HUBRIS is on the other foot... Xerxes, Persian King though he was invincible too...

xela2200's picture

One problem --> Petro-Dollar.

trav7777's picture

persians are not that brown

Mr Lennon Hendrix's picture

That one loud mouth Iatola is more white than I am! 

Eisenhorn's picture

Everyone who is not of European descent is brown.  Them's the rulez.

Randall Cabot's picture

Those white-looking Iranians are European. They are probably the descendents of the Aryans, from which the word "Iran" is derived, who migrated southward way, way back into the area that is now called Iran. Not sure how they managed to stay white-looking after all these thousands of years and how they still run the place but them's the factz.

WmMcK's picture

The Chinese are brown?  Native Americans too?  Oh, sorry have to re-read the rulez.

xela2200's picture

Hippies are brown too. Whatever! I don't like them so there to the showers with them literally.

AnAnonymous's picture

Everyone who is not of European descent is brown. Them's the rulez.
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Correction: everyone who is not of Indo-European descent is brown.

Europeans like the Black Irish are brown in US citizens mind.

akak's picture

Correction: everyone who is not of Indo-European descent is brown.

/////////////////////////////////////////////////////////////

No, they are not. 

It is only Chinese citizens who are brown.

This is due to them constantly stepping into each other's shit on the sides of the road.

Roadsides in China, even the sidewalks, are full of Chinese citizenism citizen's excrement, where they drop it like animals, whenever they feel like it.

Hygience, manners and basic courtesy are foreign to the Chinese citizenism citizen's mind, which is much more concerned about conquering, exploiting and blobbing up.

Living like animals in antheaps is their inherent and eternal nature.

Brown Chinese citizens are a plague upon the earth.

Equally shitty Chinese citizenism is a plague upon civilization.

Humanity will not survive unless this plague is quarantined and eventually eradicated from the face of the Indo-European earth.

Randall Cabot's picture

Some of them are even whiter then Mr Lennon Hendrix.

bigdumbnugly's picture

to a rectal thermometer - or bawney frank - we're all brown.

bigdumbnugly's picture

aww shucks.  thanks bawn.

but taint nuttin

Randall Cabot's picture

How come none of these Ayatollahs are brown? They look like white dudes to me.