Iran

Today for the first time, Iran's IRNA news agency reported that the country had fired two missiles with a range of 1,900 km, coupled with TV coverage, into the mouth of the Indian Ocean. As PressTV reports, "Commander of the Aerospace Division of Iran's Islamic Revolution Guards Corps (IRGC) Brigadier General Ali Hajizadeh said that the long-range missiles were fired in the Iranian calendar month of Bahman (January 21 to February 20). He said that the missiles, fired from central Iran towards the Indian Ocean, successfully hit its designated targets, IRNA reported Saturday. Hajizadeh said that Iran's missiles have a range of up to 2,000 kilometers, adding that “Iran has the ability to produce longer-ranged ones (missiles) but presently there is no need to produce them." The purpose of the test firing was all too clear: "Our desired targets and the country's threatening us are located well within the reach [of our missiles]," he said. In other words: any US-based invasion of Iran will most certainly see prompt retaliation against US national-interests in the region. This is especially concerning since the US currently has two aircraft carriers, amusingly the Bush and the Reagan, both sitting side by side at the straits of Hormuz, with LHD 4 boxer backing up the rear in a zone that is now quite explosive. Had these test firings been perceived by a provocation, and lately it appears that the US is actively seeking one, it may have been quite a mess.

While the market appears to be happy with promises for incremental crude output by Saudi Arabia which has now broken off from the broader OPEC cartel and is doing its own pro-US thing, JPMorgan, which at last check still had a Brent target of $130/bbl, once again introduces an unpleasant dose of reality in the crude story by noting that any increase in crude output by the rogue OPEC state may be offset by production drops in Iraq and Iran. Will Saudi now promise to offset even that drop and hike output to 11 mbd or some other more unbelievable number? Stay tuned for more lies from the "peak oiled" kingdom.

Contrary to ongoing wideranging skepticism, Saudi Arabia continues to posture that not only does it have substantial excess capacity, but that it will bring it online any... minute...now. After all, Saudi owes the US a big favor (i.e., lower gas prices) in exchange for America's (or rather its Fifth Fleet) continued presence in Bahrain, which even those living in a cave know has been under a full media blackout to keep the ongoing religious tensions under wraps and keep the Saudi-Bahrain border safe (not to mention the Ghawar oil field). So even as Saudi had promised to hike its output as Libyian production went offline only for it to be discovered that the country had in fact lowered production, so now too the song and dance has hit fever pitch. Reuters reports that "Saudi Arabia is planning to lift oil output sharply in June, whatever policy OPEC adopts this week, in an effort to rein in high fuel prices. Riyadh expects to lift production by more than 500,000 barrels a day in June to its highest for three years, a senior Gulf industry official familiar with Saudi oil policy told Reuters." We can't wait to hear how Saudi's unilateral plan to boost Obama's reelection chances is met by other OPEC members such as Iran, Venezuela, Iraq and Libya. "Worried about the impact on economic growth of
inflated energy costs, Saudi will act alone if necessary to keep a lid
on prices now at $114 a barrel for benchmark Brent crude." Wait, isn't OPEC a "cartel", or a place where unilateral decisions are not allowed, for precisely this reason? Of course, at the end of the day, with recent Wikileaks disclosure that Saudi Arabia admitted it has overstated its reserves by some 300 billion barrels, or 40% of total, this latest ploy to push gasoline prices lower into the summer season will have a half life that is shorter than the SNB's FX intervention attempts.

It appears that even a Stuxnet-crippled Iran can strike back. As the WSJ reports, "Germany summoned the Iranian ambassador in Berlin Tuesday after Iran temporarily blocked a plane carrying German Chancellor Angela Merkel from entering its airspace" in what has the making of a major diplomatic scandal. Merkel, along with a large German delegation was en route to India for an official visit, and had expected to get an uncontested green light to fly in Tehran-controlled skies, when the permission was granted... for over two hours. NDTV has more: "In an incident that could have serious diplomatic consequences, Iran temporarily refused to allow German Chancellor Angela Merkel's plane to enter its airspace on Tuesday. The plane reportedly had to circle over Turkey for two hours before being given permission to enter. The government aircraft was denied overflight rights in the early hours of Tuesday. The exact reason for the denial of overflight rights is unclear. But before the plane left Berlin on Monday evening, it was reportedly given permission by Iranian authorities. Germany along with the US and its other allies in NATO has long been at loggerheads with Iran essentially over its nuclear arms policy and alleged support to terror." Who could have possibly conceived that a country ostracized by the global community can possibly strike back. All we can say is that Air Force One better fly the friendly skies when it travels over the Middle East going forward or else it may be forced to discover just how efficient its flare and chaff Electronic Counter Measures truly are...

A week ago Die Welt reported that, in what may soon be a repeat of the Cuban missile crisis, US arch-enemy Iran, following a secret agreement signed on October 19, 2010 of strategic cooperation, Venezuela has allowed Iran to commence construction of a missile base on Venezuelan soil. The base, which will be located on the northernmost peninsula de Paraguana, 120 kilometers from the Colombian border, has recently been visited by a group of leading engineers from the Iranian Revolutionary Guard-owned construction company Khatam al-Anbia, is unofficially designed "to help develop an infrastructure to protect against air attack. Also planned is the construction of a command and control station, residential areas, watchtowers, and bunkers, in which warheads, missile fuel and other items can be stored. In cooperation with its Venezuelan partners, Iran also intends to build missile silos at a depth of about 61 ft." The project appears to be funded by Iran: "Information gathered by Die Welt also suggests that on their visit to
Venezuela, members of the Iranian delegation carried cash in their
luggage for the project’s initial funding. Western security circles
suspect that this involved tens of millions of dollars siphoned off from
Iran’s burgeoning oil profits." But most importantly is the discovery that while presumably defensive, Venezuela has told Iran, that it will be granted use of the base when completed: "According to the secret agreement between the two countries, Venezuela
pledged to Iran that it will be able to strike its enemies from the
joint missile base. Iran is attempting to boost its strategic threat to
the U.S., similar to the Soviet strategy in Cuba during the 1960s." And while skeptics may say that the base located about 2,400 miles from DC has no chance in striking the US capitol, the reality is that the Iranian long-range ballistic missiles Shahab 5 and 6, are rumored to be a three-stage system, which has a range of anywhere between 3,000 and 10,000 miles. So with missile base supplies most likely to come by sea (Venezuela is a few hundred miles away from Cuba), is a recreation of the 1961 Cuban missile crisis the next big political diversion?

Those seeking the spark that will set off the next middle east conflagration can finally rest easy. Reuters reports that Shi'ite-ruled Iran sent a flotilla to Bahrain on Monday to show solidarity with mainly Shi'ite Muslim protesters, escalating tensions with the island kingdom that is home to the U.S. Navy's Fifth Fleet. As a reminder, Barhain is the nation that imposed a total and complete media blackout, going so far as to expel a Reuters correspondent, while most likely continuing its atrocities against protesting Shi'ites, which has raised the specter of a possible war erupting on the tiny island home, so critical to the US navy, and situated only 60 miles away from the world's largest Gwahar oil field. If Iran is serious about this latest escalation between Shi'ites and Sunnis, and it certainly appears to be, all hell may break loose as this could be the straw that not only breaks the proverbial camel's back but launches a full out Gulf States war (and woe to those short CL in a worst case scenario that sees the involvement of Israel, Kuwait and Saudi Arabia, not to mention all of the the middle eastern countries).

This one is just too good to pass by: the latest critic of US monetary, and budget policy, is none other than... Iran. From PressTV: "Iran's President Mahmoud Ahmadinejad strongly criticizes US economic policies, saying that the paper currency created by the American government is taking a heavy toll on the global economy." In an address to the fourth UN Conference on the Least Developed Countries in Istanbul, Turkey, on Monday, Ahmadinejad said that the cash injected into the global economy in the form valueless US dollars amount to over USD 32 trillion, IRNA reported. “This is while the US budget deficit for the 2011 fiscal year is expected to reach a figure above USD 1.6 trillion,” he added. Who would have thought The Onion reality of our centrally planned times would get to a point where Iran speaks more truth than our own politicians...

And so the battle of propaganda begins: on one hand we have the US government demanding the population take a leap of faith that Osama was killed then promptly converted into lead-containing fish food, now Iran has stepped up to the plate claiming it has 'evidence' that bin Laden was in fact dead long ago. From RIA: "Iranian Intelligence Minister Heidar Moslehi said Tehran has evidence
that al-Qaeda leader Osama bin Laden had died of disease long before the
United States' alleged raid on the terrorist, FARS Iranian news agency
said. "We have accurate information that bin Laden died of illness some time ago," Moslehi said."  And since Osama's body was promptly dumped at sea, and Obama decided to not release any pictures of the corpse, the conspiracy brigade will surely have a field day with this one. We can only hope Iran's evidence takes a shorter time to produce than WikiLeaks' Bank of America "killer" expose.

Minutes ago, the Pentagon released a 5 page powerpoint presentation showing exclusive details of the Abbottabad compound where bin Laden was supposedly killed (and where the PCR test to confirm he was in fact "he", took about 1/20th the time it usually takes in leading US Universities). And even as the Pentagon collects kudos from the population for spending hundreds of millions and taking ten years to eliminate a person who is now largely irrelevant tactically (if not symbolically), Fars News out of Iran proposes an alternative explanation of everything that happened on Sunday night: "The West was fully satisfied with bin Laden's performance during the past years and today… it was obliged to kill him to prevent possible leakage of the priceless intelligence that he had," member of the parliament's National Security and Foreign Policy Commission Javad Jahangirzadeh told FNA on Monday. Surely not something that the US public would want to hear...

Iranian PressTV reports that Israeli jet fighters have reportedly conducted drills at a military base in Iraq in order to strike targets inside Iran. While the Pentagon has so far denied this development which could easily send oil to $200, we are more curious what Israel has to say, or do in response to such allegations.

While the majority of the world was in a sleepy mood courtesy of closed core capital markets, events in Syria were anything but. From Reuters: "Syrian security forces killed almost 90 protesters on Friday, rights activists said, the bloodiest day in a month of escalating pro-democracy demonstrations against the rule of President Bashar al-Assad." Yet while many are quick to dismiss "yet another MENA revolution", Emad Mostaque, MENA strategist at UK's Religare Capital Markets begs to differ. "The market implications of a breakdown in Syria would be profound, but likely not be felt immediately as it doesn’t tick the boxes for proximity (such as Bahrain) or oil production (such as Libya). Iran’s influence would be curtailed, as would support for Hezbollah and Hamas." But the mittelspiel does not end there, and will likely have even greater consequences on Israel: "A third intifada between Israel and Palestine is already likely following a series of rather unpleasant attacks from both sides and a Syrian breakdown would heighten the chances of an Israeli attack on Lebanon, particularly given the success thus far of their new Iron Dome anti-ballistic system (even stops mortars)... A conflict like this would raise the chances of a follow up attack on Iranian nuclear facilities, particularly if Hezbollah’s retaliatory rocket capabilities were neutered." So it appears that the old bogeyman from the summer of 2010, Iran's nuclear power - the source of so much Stuxnet (of unknown origin( consternation, is about to come back front and center all over again. And when one factors in the ubiquitous presence of CIA operatives (flipflops on the ground) in the region (always disclosed well after the fact) one wonders just how staged this latest "revolution" truly is.

Following two revolutions, one civil war, a massive earthquake, a tsunami and a nuclear catastrophe, the world now appears to be a oblivious to geopolitical news of any nature. And yet geopolitics continue to matter. The latest example comes from Bahrain where The National reports that "there is no state of emergency in Bahrain, the nation's foreign minister said yesterday, but rather a "national safety situation" due to interference from Iran." Well, with Saudi troops and the US 5th fleet solidly still landed in the kingdom, it appears that this is nothing but another preemption of a Wag the Dog type scenario. "Khalid bin Ahmed al Khalifa told reporters on the sidelines of an anti-piracy conference in Dubai that the Gulf Peninsula Shield Force was needed to counter Iran's effect on his country." And just in case it was unclear how much of a "threat" Iran is, he added: "We have never seen a sustained campaign from Iran on Bahrain and the Gulf like we've seen in the last two months." Naturally, Iran was delighted to be blamed for what is a crackdown by the Bahrain government against its own people: "Meanwhile, Iran's foreign ministry has said the allegations of interference in Bahrain, where Shiites form the majority, targeted "Muslim unity", according to the state television website." In the meantime Brent continues trading at a price, and will continue trading at a price, that continues to take out several percentage points from US and European GDP. But this is so obvious it will take Hatzius at least a few more weeks before he downgrades his full year outlook.

While it will not come as a major surprise to most, according to senior BOE individuals and Wikileaks, Iran, as well as Qatar and Jordan have been actively purchasing gold well over the amount reported to and by the IMF, in an accelerated attempt to diversify their holdings away from the US dollar. "Iran has bought large amounts of gold in the international market, according to a senior Bank of England official, in a sign of how growing political pressure has driven Tehran to reduce its exposure to the US dollar. Andrew Bailey, head of banking at the Bank of England, told an American official that the central bank had observed “significant moves by Iran to purchase gold”, according to a US diplomatic cable obtained by WikiLeaks and seen by the Financial Times." The reason for Tehran's scramble into gold: "an attempt by Iran to protect its reserves from risk of seizure”. The misrepresentation of Iran's holdings could be so vast that Iran could possibly be one of the largest holders of goldin the world. "Market observers believe Tehran has been one of the biggest buyers of bullion over the past decade after China, Russia and India, and is among the 20 largest holders of gold reserves... with an alleged 300 tons, big enough to challenge the UK at 310 tons, and more than Spain! " As a reminder according to the WGC, Iran is not even disclosed as an official holder of gold. Also, Iran is not the only one: "Cables obtained by WikiLeaks cite Jordan’s prime minister as saying the central bank was “instructed to increase its holdings” of gold, and a Qatar Investment Authority official as saying the QIA was interested in buying gold and silver." Which means that there is far more marginal demand by countries supposedly friendly to the dollar, as many more than previously expected are actively dumping linen and buying bullion. What all this means for the future price of gold, especially with geopolitical tension in the region,  and QE3 imminent, is rather self-evident.

According to the BBC, the Gulf Cooperation Council has just gotten involved with the UAE pledging 24 aircraft and Qatar - 4 to 6. It is still unclear if Saudi Arabia will now lead a two front war following its invasion of Bahrain last week. Additionally, Al Jazeera reports that the Libyan authorities had detained one of its reporting teams several days ago when working in west Libya. The channel said, in a report on its website, that the team included two correspondents, one Tunisian and another Mauritanian, and two cameramen, one Norwegian and one British. But most troubling is that per Gaddafi's earlier address to the people he would start arming the civilian population to defend Libya. From Reuters: "Libyan leader Muammar Gaddafi said on Saturday he will arm civilians to defend Libya from what he called "colonial, crusader" aggression by Western forces that have launched air strikes against him. "It is now necessary to open the stores and arm all the masses with all types of weapons to defend the independence, unity and honour of Libya," Gaddafi said in a speech broadcast on state television hours after the strikes began. "We call on the peoples and citizens of the Arab and Islamic nations, Latin America, Asia and Africa to stand by the heroic Libyan people to confront this aggression, which will only increase the Libyan people's strength, firmness and unity," he said." Whether that means that UN forces will treat every civilian as a possible enemy combatants will be seen upon the land incursion which should commence within a few days. Unclear if Xe will be involved this time.

The situation in Bahrain is going from bad to dire. Earlier, thousands of protesters marched to the Saudi embassy in the Bahraini capital, angry at the intervention of Gulf Arab forces. 1000 Saudi troops had rolled into the country at the request of Bahrain's Sunni rulers. As Reuters reports, and as Zero Hedge discussed extensively before, the troop movement could signify Saudi concern that any concessions in Bahrain might inspire the Kingdom's own Shi'ite minority. Earlier on Tuesday, the Bahrain King declared martial law as his government struggled to stop the protests. The three month state of emergency hands power over to Bahrain's security forces, which is dominated by the Sunni Muslim elite. Injured were taken to hospital as violence continued in the small Gulf island. "We came out of the tunnel and they started shooting at us and I got injured here, in the back." An opposition politician said one man was killed and several wounded in clashes with police in the Shi'ite area of Sitra. But the biggest news, that which caused crude to just jump by a dollar, is that the Iran President has called the actions by the Bahrain government "unjustifiable and irreparable." And if or rather when Iran gets involved on the basis of a religious escalation, watch out for global stagflation.