Iran

Blink and you will miss the latest revolution. Algeria riots yesterday, Bahrain earlier today, and Iran now. Per AP: "Clashes between Iranian police and tens of thousands of protesters wrecked central Tehran on Monday as security forces beat and fired tear gas at opposition supporters hoping to evoke Egypt's recent popular uprising. The opposition called for a demonstration Monday in solidarity with Egypt's popular revolt that a few days earlier forced the president there to resign after nearly 30 years in office. The rally is the first major show of strength for Iran's cowed opposition in more than a year. Police used tear gas against the protesters in central Tehran's Enghelab, or Revolution, square and in Imam Hossein square, as well as in other nearby main streets. Demonstrators responded by setting garbage cans on fire to protect themselves from the stinging white clouds." And a quick refresher in Geopolitics 101: Iran has lots of oil...and, supposedly, nukes (assuming Norton anti-virus has a Stuxnet patch).

To all freedom loving Arab brothers and sisters...

It appears that gold isn't really a currency... until it is. The Economic Times reports that India is attempting to ensure steady crude oil supplies from Iran. In doing so it is doing everything it can to pay Iran in a way that avoid loopholes associated with recent US sanctions. And the stunner: "India could settle crude oil import transaction using gold in the short term, while efforts to resolve the deadlock continue." But does Iran realize they can't possibly eat all that gold? Or that The Fed has no way of diluting to oblivion? Or that, unlike the dollar, it is currently not involved in a global race to bottom in which every central bank will have no choice but to print ever more of its linen-infused currencies? Something tells us that the answer to all three is yes.

With republicans back in control, it was only a matter of time before the military-industrial complex reminded the world of its existence. It took about 72 hours: republican senator Lindsay Graham, who apparently has not received the memo that all modern wars are now waged in binary, and are won by those who can push the FX bid/ask the furthest and the fastest away from equilibrium, spoke at the Halifax International Security Forum, giving a very distinct taste of what US foreign policy is about to look like: "Iran is a major threat to any conceivable world order" and that he sees an almost inevitable confrontation with Iran. As AP reports, the South Carolina Republican saw the United States going to war with
the Islamic republic "not to just neutralize their nuclear program, but
to sink their navy, destroy their air force and deliver a decisive blow
to the Revolutionary Guard, in other words neuter that regime." And the Democrats, still in shock over their recent pummelling, will likely not have the resolve to respond palliatively to such warmongering, which they likely deem as supported by the broad population: "US Democratic Senator Mark Udall, who joined Graham during a panel
discussion at the forum in Halifax, Nova Scotia, urged continued
sanctions against Iran. But he also noted that "every option is on the
table," a thinly veiled reference to possible military action." And just when the world was getting along so well, and all the international bickering appeared to be taking place over various Forex terminals...

Great idea ... Not!

As of today, one of the world's top oil exporters disclosed that it has exchanged about $15 billion of its FX reserves into gold. Earlier, Iran announced that the country has converted about 15% of its foreign exchange reserves into gold, and "will not need to import the metal for the next ten years." There is your mystery buyer to all that gold the IMF was selling in Q3... And since Ahmadinejad said that Iran's total FX reserves exceed $100 billion, the amount of gold in stock held by Iran is more than $15 billion. Which is equivalent more than 345 tonnes at a closing price of about $1350. Which also means that the WGC's official gold holdings are in dire need of an update, as Iran does not appear anywhere on the IMF's listing of official gold holders, and with over 345 tonnes, it would make Iran a top 15 holder of the yellow metal.

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Sources in the Gulf region report that Iran is preparing for a possible attack by Israel and/or the United States on one or more of its nuclear production units by stockpiling arms and munitions with its proxy militias in Kuwait and Bahrain. This comes as Bahrain arrests 23 opposition leaders accused of terrorism offenses and hints that Iran is behind an alleged plot to overthrow the government. Bahrain's attempted coup reports should be taken seriously, as Iran knows that its best chance of fighting the US and/or Israel is by proxy. Hitting Bahrain hard would greatly upset the overall security situation in the Middle East and Gulf region.

After last week's Stuxnet disclosures, it was only a matter of time before the viral sabotage was flushed into the open, with Iran confirming that it had been in fact attacked. As expected, Al-Jazeera has just confirmed that not only has Bushehr been infected, but so have numerous other industrial sites all over Iran. Yet despite the pervasive attack, "no damage or disruption of nuclear facilities has yet been reported, however." What is surprising is that Iran has made such a major media splash on the topic: one would assume that demonstrating such broad cyberdefensive weakness would not be in the country's favor...

One of the most interesting stories in the last few days, has little to do with finance and economics (at least right now), but arguably very much to do with geopolitics. A fascinating report which cites computer security experts claims that the recent uber-cryptic malware worm Stuxnet is nothing less than a weapon designed to infiltrate industrial systems, and based on attack patterns, the ultimate object of Stuxnet may be none other than Iran's Busher nuclear reactor, which could be targetted for destruction without absolutely any military intervention. Has modern warfare just become obsolete courtesy of a computer virus?

There are permabulls, and then there is Jim O'Neill. The Man U fan explains why, after it has been consistently discredited, people do not believe in decoupling: "because they are not prepared to get it." And just because people are really stupid and just don't get it, O'Neill pitches Indonesia, Turkey, Nigeria and Bangladesh, and, oh yes, Iran, as the "Next 11" once again. Because, gasp, 9 of them are up year to date. We wonder if Jim recalls what happened to the Russian market in 2008. Somehow we think his selective memory may have shut that one out. Also, it turns out Jim O'Neill does not appreciate fan mail bourne out of "weird blog site" commentary: "I received quite a few incoming hostile emails in response, and references to some weird blog sites who apparently opine on my views." Oops.

As has been widely anticipated, Iran is currently in the last stages of preparation before pushing the On button for its brand, spanking new (and 20 years in the making) nuclear power plant. As Reuters reports: "Television showed live pictures of Iran's nuclear chief Ali Akbar Salehi and his Russian counterpart watching a fuel rod assembly being prepared for insertion into the reactor near the Gulf city of Bushehr." Yet despite Russia's guarantee that it would collect spent rods that could be used to make weapons-grade plutonium, Israel is not taking this development lightly at all, and as Jerusalem Post reported earlier, warned that "It is totally unacceptable that a country that blatantly violates decisions of the United Nations Security Council and the International Atomic Energy Agency, and ignores its commitment to the Non-Proliferation Treaty charter, will enjoy the fruits of using nuclear energy," according to Foreign Ministry spokesman Yossi Levy said. Which in turn has prompted Ahmadinejad to warn that a strike on Iran would be answered with "harsh and painful" response. All in all, just another Saturday in the middle east.

Nothing like a little geopolitical ruckus to spoil the fun...the fun. Xinhua reports that hours ago, and just a day before the Bushehr nuclear reactor is supposed to go online, Iranian Defense Minister Ahmad Vahidi said that Iran had test fired a surface-to-surface missile, Qiam, footage of which was shown on state television. Surely this fits well as a time slot segue from the recent clip showing mass graves prepared for Iran's "aggressors."

The latest development in the neverending saga of Iran, comes via the Middle East Media Research Institute (MEMRI) which states that according to the Gulf states, the military option may be the best option to deal with the Iranian nuclear program, as the contra-Iran axis is now complete. The article also reflected "the Gulf states' growing tension and concern regarding Iran's nuclear program, and mentioned their proximity to the Bushehr reactor." What is scary is that the straw man of military intervention is pretty much presented as a fait accompli, and alternatives to military intervention are not even considered as an option. The timing could not be worse: as we highlighted earlier, John Bolton believes that there is ticking clock (through the 21st) after which the option of "striking" Iran with manageable casualties becomes negligible. And lastly, and certainly not making matters any easier, was the earlier revaluation by AFP, that Iran is preparing to unveil an array of weapons next week. An impartial reader would be forgiven if left with the impression that at this point a military operation is all but granted. Yet, keeping an eye out on spot oil, indicates that the realistic chance of an incursion is still negligible, at least as judged by oil prices. We believe that is still one of the best advance warnings indicators of a geopolitical shift. Unfortunately, if the oil market is in any way comparable to stocks in its predictive ability, it just may be that oil is, for once, a reactionary indicator instead of forward looking, in which case it will be useless as a predictive force.

In an interview with Fox Business News, former US envoy to the UN, John Bolton, told the channel that if Israel wants to prevent Iran from acquiring a working nuclear plant, then a military strike must be launched against the Bushehr nuclear power facility within the next eight days. Specifically, Bolton was envisioning the projected August 21 launch date of the nuclear power plant, which Zero Hedge noted previously. According to Bolton, once the Bushehr facility is operational it will be too late for a military air strike against Iran because such an attack would affect too many Iranian civilians due to the spread radiation.