Bank of America believes the increasing geopolitical tensions in Iraq risk regional contagion, with the potential for negative spillover to global markets. If Iraq were to see further turmoil, in addition to the civil war in neighbouring Syria, we believe it could destabilize the region further, disrupt oil production and exports, and provide fertile ground for terrorist activity to extend its reach. They review the background of Iraqi turmoil, and discuss the political, economic and market implications in 10 questions; noting that the root of the problem is the central government’s non-inclusive and sectarian policies.
The slaughterhouse that Iraq has become in the past week is the stuff that nightmares are made of. And this is just the beginning. Here's why...
You name the Obama administration scandal/screw-up and Hillary Clinton is distancing herself from it as she prepares to run in 2016 on a clean slate of 'well, I would have done it better/different'. As Reuters reports, recent interviews on Fox and CNN show her claiming she tried but failed to persuade Obama to arm the rebels fighting Syrian President Bashar al-Assad; that NSA spying was "absolutely uncalled for"; and that "changes need to be made at the IRS" seemingly disagreeing with Obama's claims that it was a "phony scandal." With friends (party colleagues) like this, who needs enemies.
In Escalating War Of Words, Saudi Arabia Fires Back At Iraq, Warns Of Civil War, Opposes Foreign InterventionSubmitted by Tyler Durden on 06/18/2014 08:44 -0400
Moments ago Saudi Arabia fired back at Iraq's "harsh words" and warned that Iraq faced the threat of full-scale civil war with grave consequences for the wider region and, in a message to arch rival Iran, warned against outside powers intervening in the conflict. "This grave situation that is storming Iraq carries with it the signs of civil war whose implications for the region we cannot fathom," Foreign Minister Prince Saud al-Faisal told a gathering of Arab and Muslim leaders in Jeddah. He urged nations racked by violence to meet the "legitimate demands of the people and to achieve national reconciliation (without) foreign interference or outside agendas". It was unclear if "foreign interference" includes the US as well, or just limited to Iran.
Shortly after the US revealed that, in addition to aircraft carriers and amphibious assault ships it was also sending a few hundred "special forces" on the ground in Iraq, contrary to what Obama had stated previously, Washington made quite clear it wants Prime Minister Nuri al-Maliki to embrace Sunni politicians as a condition of U.S. support to fight a lightning advance by forces from the Islamic State of Iraq and the Levant. Then something unexpected happened: Iraq's Shi'ite rulers defied Western calls on Tuesday to reach out to Sunnis to defuse the uprising in the north of the country, declaring a boycott of Iraq's main Sunni political bloc and accusing Sunni power Saudi Arabia of promoting "genocide."
The world is a very complicated place, and the Middle East is a particularly difficult region to try to get your head around. Between decades of colonialism, gigantic oil reserves, governments that are essentially feudal kingdoms, and the never-ending and always shifting Western government propaganda that often changes the targets of demonization on a whim, it’s no wonder people are so confused. The following provides a perspective based on what we have seen so far, and more importantly, ask readers to ask their own set of questions. What is happening is very bad, and it is the direct result of the idiotic children calling the foreign policy shots in Washington D.C. Ever since 9/11, everything about the status quo’s decision making has been irrational and dangerous.
Quite frankly where do you start? We are sure there will be congratulations for the capture of the Benghazi ringleader (an interestingly timed distraction) but what the President will be asked (if we have a press corps) are: why Iraq wasn't his fault, how 275 boots on the ground are not really boots on the ground, will the US partner with Iran to 'fix' Iraq, and what about new reports of Syria using chlorine gas? Not to mention lost IRS emails, the VA debacle, government-sponsored civilian deaths in GM cars, and of course, how Seattle raising minimum wages will increase jobs?
In 2006, I invited the late General Bill Odom to address my Thursday Congressional luncheon group. Gen. Odom, a former NSA director, called the Iraq war “the greatest strategic disaster in American history," and told the surprised audience that he could not understand why Congress had not impeached the president for pushing this disaster on the United States. History continues to prove the General’s assessment absolutely correct.
Events in Iraq are changing by the hour, now that US combat boots are "on the ground", expect them to change even faster. For those looking to catch up on the most recent overnight news out of this latest civil war torn country, here is the full update.
With newsflow out of Iraq having slowed down as has the ISIS offensive, which appears to have been halted north of Baghdad, the market now shifts its attention to the Fed's two-day meeting which begins today and continues through tomorrow afternoon, when it will be leaked by media outlets to ultra-wealthy speculators and robots, breaching the embargo (in exchange for a hefty payoff) some 10 minutes before 2 pm.
The situation in Iraq is serious, and is probably going to get worse before it gets better. The potential for this recent action to morph into a regional conflict is very high. That means that oil could go a lot higher, and if it does, we can expect the odds of a global economic recession and an attendant financial crisis to go up considerably from here. Before we dive into what's actually happening over there right now, we need to begin with a longer and deeper historical context of the region, which is essential to understanding pretty much everything in the Middle East. The western press likes to report on things as if they suddenly occur for no discernible reason, context-free and unconnected to our actions and activities over there. But the story of the Middle East is a story of intense external meddling -- especially by the US, recently.
Despite Secretary of State John Kerry predicting today that Sunni militants in Iraq do not have the ability to overrun Baghdad, the Obama administration is willing to talk with Iran over deteriorating security conditions in Iraq and is not ruling out potential U.S.-Iranian military cooperation in stemming the advance of Sunni extremists. Speaking with Yahoo's Katie Kouric, Kerry confidently explained, "I don’t believe that they will in the near term certainly, and I don’t believe they necessarily can at all," overrun Baghdad or other major cities. Having "absolutely, unquestionably" denied that the turmoil in Iraq could have been prevented if US left a residual force, he somewhat shockingly submitted that the US is "open to any constructive process here [with Iran] that can minimize the violence, hold Iraq together, the integrity of the country and eliminate the presence of outside terrorist forces."
"In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” - The Fourth Turning - Strauss & Howe – 1997
For the moment, it is hard to see how anything can be salvaged in Iraq. You can be sure that Obama will be blamed both for pulling out in 2011 and then not going back to war, to protect our two trillion dollar previous investment. We have to imagine that distrust for civilian control of the US military by a corps of rising officers will reach never-before-seen depths. It may not be expressed right away, but the knock-on effects of political breakdown in the Middle East could go long and far in upsetting US politics. The defeat of Eric Cantor is just the beginning of what could be the unraveling of the federal system.
The situation in Ukraine and Iraq have gone from bad to worse. There is the potential for a wider Middle East conflict as the region remains a ‘powder keg.’ Iraq may be the match that sees the region explode into chaos and war - with attendant effects on global oil prices and the global economy.