Iran

Yet another step in the escalation between Iran and the US came earlier today, this time in the form of some trade war shots, after the leading economic daily Doniye e-Ektesad quoted First Vice President Mohammad Reza Rahimi as saying that "We are going to remove dollar and euro from our foreign currency basket and replace them with (Iranian) rial and all other currencies of the countries which accept to cooperate with us. These currencies are filthy and we will no longer sell our oil in dollar and euro." AFP further clarifies: "He did not say when that would go into effect, or how Iran was going to implement that decision as the second largest exporter in the Organisation of Petroleum Exporting Countries (OPEC), in an energy market dominated by the dollar." This is certainly not the first time Iran has threatened to move away from the dollar: the problem, of course, is execution. "Rahimi also said that Iran would limit its purchases from the European Union, which amounted to 11.4 billion euros or 27 percent of the Iranian imports in 2009, according to official EU statistics. He said this would mainly affect Iran's food imports such as wheat and soybeans from Europe."

The lingering impact of August 3, 2010, clash on the Israeli-Lebanese border lies in the greater context of, and wider strategic dynamics in, the Middle East. These aspects were highlighted by HizbAllah Secretary-General Hassan Nasrallah in his speech later that day.
Overall, the issue dominating the overall situation in the Middle East is the reaction by the local powers to the emerging new grand strategic reality: namely, the demise of the United States as the dominant regional power. This is a dramatic reversal of a concentrated US policy of more than half a century.

Associated Press reports: "A handmade grenade exploded Wednesday near President Mahmoud Ahmadinejad's convoy in western Iran, but the leader was not harmed, a conservative website reported." We are trying to determine just how this news will be spun to push the red futures (probably the first day in two weeks futures have been negative, and one of several times in the past two months this has happened) back into the green.

The Steering Group of the Veteran Intelligence Professionals for Sanity (VIPS) which consists of Phil Giraldi, former CIA (20 years), Larry Johnson, former CIA; DoS, (24 years), W. Patrick Lang, Col., USA, Special Forces (ret.); Director of HUMINT Collection, Defense Intelligence Agency (30 years), Ray McGovern, US Army Intelligence Officer, CIA (30 years), Coleen Rowley, FBI (24 years), and Ann Wright, Col., US Army Reserve (ret.), (29 years); Foreign Service Officer, Department of State (16 years), have penned a memo to the president in an attempt to alert him "to the likelihood that Israel will attack Iran as early as this month. This would likely lead to a wider war." Read on for the full memo by the activist group.

I have written in the past about the prospect of a nuclear Iran and its destabilizing effect in the world’s most important energy region. But what if Israel strikes before Tehran’s nuclear ambitions are realized? Although given that Iran currently could have as many as 8,000 centrifuges enriching uranium by December (IAEA estimate), an Israeli strike now, as opposed to say 2003 when the secret program was first revealed, may not effectively shut down the decentralized program. Still, it could cause a frustrating delay in Iran’s timetable and, depending on the line the mullahs take immediately succeeding the attack, weaken the regime’s hold on a populace that is more educated, more worldly, more pro-Western and less easily cowed than others in the region as the green protests last year revealed. The (literally) billion dollar question of course for commodities traders is what will be the effect on the price of global energy in the immediate and longer dated aftermath of such a military strike? As with the current diplomatic stand-off today, much of that will depend on Tehran’s reaction. Here are three possible scenarios should we wake up to news of Israeli fighter-bombers winging away from Natanz, leaving a burning nuclear facility and a thousand questions in their jet wash behind them.

The spy novels just keep on coming. The latest is out of the FT which speculates that due to numerous delays and technical setbacks in Iran's nuclear program, it could have been the target of sabotage. "A series of recent reverses, notably affecting Iran’s ability to enrich uranium, is prompting debate over whether the programme is being undermined by sabotage, sanctions, or the incompetence of the regime’s scientists." Of course, while the latter is most likely the correct answer, the fact that the FT is floating this story now is cause for concern. The reason: Iran will likely not take too kindly to even mere speculation that its control structure is weak enough to allows spies to interfere with its identity-defining and critical nuclear program.

The explosions occurred at a mosque in Zahedan according to IRNA. No details on injured or casualties yet.

One wonders how many Ph.D. were consulted in the preparation of this report. Yet aside from the glaringly obvious, there are some other interesting observations. "An Israeli attack on Iran would be the start of a protracted conflict that would be unlikely to prevent the eventual acquisition of nuclear weapons by Iran and might even encourage it. Long-range strike aircraft acquired from the United States, combined with an improved fleet of tanker aircraft, the deployment of long-range drones and the probable availability of support facilities in northeast Iraq and Azerbaijan, all increase Israel's potential for action against Iran." According to the report, it might take three to seven years for Iran to develop a small arsenal of nuclear weapons if it decided to do so. Also, the report wisely states that an Israeli strike would be focused not only on destroying nuclear and missile targets but would also hit factories and research centers and even university laboratories to damage Iranian expertise. Shockingly, this would cause many civilian casualties. Oxford believes Iran's retaliation would include withdrawing from the nuclear Non-Proliferation Treaty and the production of nuclear weapons to deter further attacks. Other recourse would include missile attacks on Israel, closing the Strait of Hormuz to push up oil prices and paramilitary or missile attacks on Western oil facilities in the Gulf. Fun bedside reading.

I have a frequent nightmare: In the year 2011, with the full support and complicity of their shadow ally, Russia, the Islamofascist regime in Tehran announces that that they have developed a deliverable nuclear weapon(s).

A whole bunch of American ships are headed to Iran, including one aircraft carrier. Some claim this deployment is “normal”, while others think it might be the first move in a U.S. offensive against Iran, either actual or diplomatic. From the Iranians’ point of view, there’s only one way to look at this deployment: As another provocation. American leadership—educated at the best schools and colleges, multi-cultural up the wazoo—don’t have a clue why Iranians feel besieged. They have no idea why Iran acts the way it does. They don’t even realize that they don’t understand Iran’s motivations. There has been a complete lack of imagination, in America’s dealings with Iran—and that failure of imagination is why things are so fucked up in the Middle East. (Is there any other way to characterize the whole mess? False politesse does not capture the sheer fucked-up-edness of the situation.)

Iran: The failure of imagination has been Iran.

So perhaps a thought experiment is in order—for once, let’s try looking at the world from the Iranians’ point of view

Paul Mylchreest periodic report on all that is important is, as usual, a must read. In this issue:

• Buying Oils and Rare Earths
• Gold and the Euro - rumblings of economic discontent
• Feedback from the secretive Bilderberg & Trilateral Commission
  meetings
• Why we shouldn’t be surprised that Obama has failed to live up to all
  the hope
• Arch Crawford’s warning of a rare planetary alignment
• Decoding Stanley Kubrick’s Eyes Wide Shut

At least back in 2009 the most promising targets for damaging the Iranian nuclear program, specifically the weapons related development, were Plutonium production facilities (characterized primarily by the Plutonium Production Heavy Water Nuclear Reactor in Arak) and facilities critical to the "Nuclear Fuel Cycle" (most obviously the Uranium Enrichment Facility in Natanz and the Uranium Conversion Facility in Esfahan).  The Center for Strategic and International Studies' Abdullah Toucan released a detailed report comparing the mission requirements of strikes on these (and other) facilities with Israel's capabilities and concluded the mission was within Israel's grasp operationally.1  Normally we would call this report a "must read," but instead we've read it so you don't have to, as well as added some of our own research and secondary sources.  The report also examined the ballistic missile strike option and delved into some of the political and instability costs that an attack would extract (which we ignore for the purposes of this discussion).  Those sections are well worth reading, even if the political reality on the ground has changed since early 2009.

• 1. Abdullah Toukan, "Study on a Possible Israeli Strike on Iran's Nuclear Development Facilities," Center for Strategic and International Studies (March 16, 2009).

What's really going on with Iran?

As we first reported last week, in an article that was met with much original skepticism, the Pentagon has now confirmed that a fleet of 12 warships has passed the Suez Canal, and is now likely awaiting orders to support the escalation in the Persian Gulf. The attached image from Stratfor shows the latest positioning of US aircraft carrier groups as of June 23: the USS Harry Truman (CVN-75) is now right next to USS Eisenhower (CVN 69), both of which are waiting patiently just off Iran. As for the catalyst the two carriers may be anticipating, we provide the following update from the Gulf Daily News where we read that Israel may be on the verge of an attack of Iran, with an incursion originating from military bases in Azerbaijan and Georgia.

Remember those 3 nuclear-armed subs we wrote about, that Israel had positioned off the coast of Iran, a development which promptly got lost in news about the whole flotilla incident? Well, they may be getting some more press time soon. Jerusalem Post reports that in the latest escalation step, Iran has offered to provide military protection in the form of warship escorts for Gaza activist ships. Needless to say, this introduces another huge variable into the game theoretical stability equation: not a single party has "cooperated" yet, even as more and more parties decide to defect. We are increasingly concerned that this will not have a favorable outcome, as all it takes is one stray button or trigger getting pushed for events to get beyond the point of no return.