Should We Bomb Iran

"Iran's WMD is the impact a war would have on the world economy once Iran is attacked."
- Barry Ritholz, "The Big Picture"

There must be something in the drinking water in this country that makes people stupid. Seriously. The only reason we seem to like war so much MUST be because of something in the drinking water. In actuality, I think Americans like war because it's always "over there". They don't see the real horror. Other than 9/11 and the Oklahoma City bombings, America has been extremely lucky about war. As a result, it seems more like "entertainment" to most Americans than what it is.

That being said, we now have the Republican candidates criticizing Barack Obama for not being tough enough on Iran and their nuclear program. They would "take action". They are beating the war drums. George Bush didn't do a thing about the Iran program -- he was too busy losing the Iraq war. He didn't do a thing about North Korea either, and they actually exploded a lame bomb. So why are they beating their war drums? Political expediency, of course. They are trying to create a new reality show for the morons, I mean their constituents, who like this sort of thing.

On the other hand, there is a real situation with Iran that has to be monitored. The first question is, Is Iran really building a nuclear weapon? The answer is almost certainly yes. We know this because of the method of enrichment they are implementing. It's not used to enrich uranium for peaceful purposes. It's used to enrich weapons grade materials. Therefore, the conclusion MUST be that they are building a nuclear weapon.

The next important question is, Why are they building a nuclear weapon? If you ask the Republicans it's because they are madmen and terrorists, Islamic extremists and so on. But the answer is much, much simpler. They are building a nuclear weapon to keep from being attacked by the West. Note that no nation that acquires a nuclear weapon has ever been invaded or attacked. The Iranians are not madmen. They saw what happened to Iraq, and they know they were next. If the Republicans win in November, they know they ARE next. Even the Israelis acknowledge that there is a point after which they can no longer safely attack Iran. This point ultimately is when Iran tests its first device...because then they probably have multiple devices and those could be deployed in any number of ways. Notice also that many countries around  Iran have nukes -- Pakistan, their unstable next door neighbor: Israel, their other unstable next door neighbor. What reason can the world give for NOT allowing them to have a nuclear weapon? They are certainly in far better shape than Pakistan.

So we've established they are building a bomb and seem to have rational reasons to do it. We've taken the position that we have to do something about it -- but what? Is war the answer? What does "war" mean in this context?

First of all, one thing no one is talking about is how much a war with Iran would cost. The Iraq war cost us about $1 trillion directly. How much would a war with Iran cost? What would be the objectives? What does victory look like? What's the exit strategy.

I imagine the objective would be to end or at least delay the Iranian nuclear program; it would be accomplished by bombing several Iranian nuclear sites; it would require action to keep the Straits of Hormuz open; it require a close-ended campaign and would have a definite end scale, regardless of accomplishment. That being said, the BEST CASE scenario, based on rapidity of the US advance in the Iraq war, is that the attack would cost a minimum of $50 Billion dollars. That does not include the economic impact of the war, the run up in the price of gas and oil and so on.

Many other commentators have already stated that the 100 or so planes the Israelis could bring to bear would not be enough to do the requisite damage to the Iranian nuclear sites. Therefore, heavy US bombers, such as the B2 and the B52 would be needed. If air superiority could be achieved, the Israelis could modify C130 type cargo planes to drop bigger munitions but the risks are huge. So assuming the US involves its bomber fleet, it would mean flying from Guam, England and Germany at a minimum and possibly Italy, Spain and Turkey. Rumors state the Israelis are entering into agreements with Cyprus and Azerbajan to use their airfields and airspace.

It's important to discuss the Straits of Hormuz here. The straits are about 30 miles across, but ships can only pass through about a mile of it, so its rather narrow. Something like 30 percent of the world's oil passes through the Straits, but not US oil. Therefore, China, India, Japan, South Korea and so on have an extremely vested interest in keeping the Straits open. There will be enormous pressure on the US to insure the Straits are  not closed once the shooting starts. This would mean the entire fighting strength of more than once carrier group to knock out Iranian naval ships, as well as command and control centers on the shore. There is absolutely no doubt that US Marines will have to be employed to capture, destroy and abandon many ground installations. There would have to be a concerted effort to neutralize Iran submarines before they damage US ships or even sink themselves in the Strait. Oil laden ships might also become targets of the Iranians. Radar and fire control sites, as well as missile launchers, and Iranian Air Force assets would have to be neutralized. The United States would be hard pressed to suppress and destroy this large number of targets in such a short time. No doubt cruise missiles and other remote assets would be involved. It would take multiple days and thousands of sorties. It would be reasonable to assume US casualties to planes, ships and men. It's likely there would also be collateral damage to tankers in the Gulf and it's highly likely that traffic in the Straits would be halted for some amount of time, whether its days or weeks depends on the determination and capabilities of the Iranians.

My assumption is that the absolute best case would indicate an attack of duration of a week. What would be the ramifications? As soon as the attack became known gold would skyrocket; US bonds would collapse; oil would skyrocket and gasoline would spike. In addition, the US debt would increase as well. Over the next week we would see diplomatic protests against the US from China and Russia, and possibly India. We would hope they would not create mischief. No doubt Iranian exports would stop for awhile, roughly 2.5 million barrels per day. An additional 20 millions barrels would be halted from moving through the Straits for a period of time. This would not only cause huge price spikes but real hardship in many parts of the world...shortages, layoffs, industrial failure, unemployment, recession, debt. The longer oil failed to move the worse the impacts would be. This is the true WMD of Iran.

No doubt within hours or days of a US attack, the Mahdi Army in Iraq would revolt. It's possible the US might have to send troops back to Iraq to keep the government from falling. Much of Iraq is pro-Iranian now and it's possible Iraq would fall into all out civil war. It's likely Iran would be able to fire many of this medium range missiles, possibly hitting targets in Saudi Arabia, possibly Kurdistan, Turkey, Kuwait and the UAE. If the missiles hit oil fields or oil production facilities, the resultant loss of oil would be an even bigger hardship to the world.

It is possible that Iran could disperse its three former-Soviet submarines into the world where they could target tanker lanes, sinking tankers until they were located and destroyed. The impact of this would be more to cause the insurance rates for tankers to skyrocket, something that is passed on to the cost of each barrel of oil.

Within a couple of weeks, much of Iran's offensive capability would be destroyed. Pakistan would be in turmoil with massive Al Qaeda and Taliban sentiment. It is extremely possible that Pakistan would be engulfed in civil war or revolution, with the Al Qaeda faction winning. Under these conditions, the US would be forced to invade the nuclear dumps in Pakistan and seize their nuclear weapons. It would not do any good to bomb them because we would never be sure to have eliminated these weapons. It would be necessary to attack, invade and hold until we could account for the weapons. The fury of the Pakistan citizenry and army should not be under-estimated. They could strike back at US assets or even India. Afghanistan would likely devolve into anti-American violence.

It seems likely that Hamas would launch an all out attack on Israel. There would be 100s of rockets launched at Israel, causing massive retaliation against Hamas and Lebanon and possibly even Syria. The question would remain as to what Egypt would then do. There is already an unhappy truce between Egypt and Israel and there would most certainly be a price to be paid. What that price is, no one knows.

After a month or so, the US would have assessed the success of the raids. At this point the US would either have to renew the attacks to insure target sites have been neutralized or they would have to offer an olive branch to the Iranian government. The way Iran has its military sites would mean significant civilian casualties. This may drive the citizenry to support the government and launch a far-reaching hatred against the US, in ways that would not become clear for months or even years as retribution is taken. "Death by a thousand cuts" is not something to be dismissed lightly. Iran would have suffered many billions in damage. What would be the de-escalation process be then? Would we just wipe our hands and walk away? There is no doubt that multiple carrier groups would have to be deployed in the Straits for months after the attack.

Back at home in the US, gasoline would possibly be in the seven to eight dollars a gallon range. This would be a huge hardship to Americans. The price would take up to 125 dollars a week from American family pockets. The economy would slow down considerably. Layoffs would grow. Car sales would collapse. Import prices would grow rapidly. It would mean a serious recession. The site "Political Calculations" uses a formula that determines the impact of gasoline prices on unemployment. According to their formula, a price of $7.50 for gasoline would result in a direct unemployment rate of about 17 percent, with a total unemployment of 30 percent or more. The country would be in free fall. The resulting collapse in tax revenues combined with the cost of the war could easily add 500 billion to the deficit within the first year after the war. We could see 1.5 or 2 trillion dollars in total deficit spending within a year when you add the new deficit spending to the existing deficit spending. It would be a spiral of failure leading to a collapse of functional governance. The government would have to dissolve at least 1/2 its cabinets, with resulting layoffs and chaos within the states. The dollar would no longer be the reserve currency because it would be worthless. Eventually, no one would be lending money to the US and interest rates would look like those in Greece. On top of all this, the US would have to be on constant guard from Iranian attacks, Al Qaeda attacks and other extremism in all its forms.

The US would have to pull back from so many obligations and the hardships within the country would be those that have not been experienced since the Depression, if ever. This would open the door to rampant Chinese expansionism. In addition, its possible Europe would be in free fall, opening the door to Russian expansionism and mischief, and the US would be in no position to thwart them. It's possible the US would declare bankruptcy, but this seems radical in the first year. It's possible it would happen in Year 5, however.

Perhaps this sounds extreme, but it's not that far fetched to believe that any, if not all of these things could happen. It is extremely likely that an attack would result in a US recession or depression and the US cannot take too much more debt right now -- not without some major restructuring of how the US government does business.

In the end, the Iranians will have exploded not their nukes but their economic WMD and when they do the winners will be the Chinese and the Russians and the loser will the Europeans and the Americans. War with Iran would be suicide. Let's not do it. 

Facts About Oil

"Everyone is entitled to his own opinion. No-one is entitled to his own facts."

Of course blogs are about opinion. I am spouting mine here. But you have to base your opinion on SOMETHING. You have to have something to  believe in. Do people believe what they believe because someone they trust or admire or like said it? Do they believe it because it was written in a magazine or a journal or they saw it on the news? Why do people believe what they believe and what can make them change their minds?

I think that people believe the things that fit their world view and no amount of fact will change their minds. Ever. They will find a way to alter the facts instead. You can easily see this by the number of people who believe George W. Bush was anything but an unmitigated disaster for the US. Some still believe he was "the best President ever" despite overwhelming evidence to the contrary. And I mean overwhelming.

This brings me to my post for the day. I want to post facts about Oil. Facts are used in understanding the world and in decision making. For example, here is a study that shows pumping more oil does not lead to lower gas prices -- there's no correlation.

http://minnesota.publicradio.org/display/web/2012/03/22/ap-gas-prices-analysis/

And yet all the red meat morons that listen to "Drill, Baby, Drill" would never believe it. It doesn't matter if it's right. To them it's just left-wing opinion. 2 + 2 does NOT necessarily equal 4, just as George Orwell said in "1984". It can equal whatever someone says it mean, if he is saying what his followers want to hear.  We are awash in oil. The US has so much oil that North American Oil, classified as "WTI" has separated in price from European oil, called "Brent Crude". WTI is about 10 - 15 dollars LESS per barrel than Brent. The issue is not oil. The issue is "refining capacity". The US has not built a new gasoline refinery since 1972. They are expensive, dirty, big and very dangerous with lots and lots of regulatory issues but that doesn't stop companies from building nuke plants. (There's three new permits for nukes for the first time since the 70s also) We don't build them because there is no incentive to build them. By using what we have, the oil companies can simply jack up prices and make record profits. And when they want to make even more money, oil companies can just shut down one or two for "maintenance". If you want a real laugh, go to the "Exxon-Mobil Perspectives" site sometime where they spew unbelievable propaganda that would make Joseph Goebbels proud. But I digress....

Facts about Oil

"If you have a milkshake and I have a milkshake and I have a straw and my straw reaches across the room and starts to drink your milkshake. I drink your milkshake! I drink it up!"
- Plainview (Daniel Day Lewis), "There Will Be Blood"

Gallons of oil in a barrel: 42
Number of gallons of gasoline rendered from a barrel of oil: 20 - 21
Amount of oil used each day worldwide: 94 million barrels
Amount of oil used each day in the US: 24 million
Amount of oil imported into the US each day: 10 million barrels
Amount of gasoline used each day in the US: 400 million gallons
Number of gas stations in the US: 104,000
Number of cars in the US: 254 million
Number of trucks in the US: 15.5 million
Average fuel use on average: 1.6 gallons per car per day
Amount of aviation fuel used in the US each day: 70 million gallons
Number of oil wells in the entire world:  950,000
Number of oil wells in the US: 530,000 (56%)
How gasoline is priced:
Crude oil: 76%
Taxes: 12%
Refining: 6%
Distribution/Marketing: 6%
Taxes raised from fuel: $110 million per day

Top oil producers, exporters, consumers, importers in millions of barrels per day:

Producer                                 Exporter                   Consumer                                   Importer

1. Saudi Arabia 10.72             1. S. Arabia 8.65      1. United States 20.59              1. United States 12.22  

2. Russia 9.67                          2. Russia 6.57          2. China 7.27                           2. Japan 5.10  

3. United States 8.37               3. Norway 2.54        3. Japan 5.22                           3. China 3.44  

4. Iran 4.12                             4. Iran 2.52               4. Russia 3.10                          4. Germany 2.48  

5. Mexico 3.71                        5. UAE 2.52             5. Germany 2.63                      5. South Korea 2.15

6. China 3.84                           6. Venezuela 2.20    6. India 2.53                            6. France 1.89  

7. Canada 3.23                         7. Kuwait 2.15         7. Canada 2.22                         7. India 1.69  

8. United Arab Emirates 2.94   8. Nigeria 2.15         8. Brazil 2.12                           8. Italy 1.56  

9. Venezuela 2.81                    9. Algeria 1.85         9. South Korea 2.12                    9. Spain 1.56

10. Norway 2.79                      10. Mexico 1.68       10. Saudi Arabia 2.07                10. Taiwan 0.94

11. Kuwait 2.67                       11. Libya 1.52         11. Mexico 2.03    

12. Nigeria 2.44                       12. Iraq 1.43           12. France  1.97    

13. Brazil 2.16                         13. Angola 1.36       13. United Kingdom  1.82    

14. Iraq 2.01                           14. Kazakhstan 1.11  14. Italy  1.71

Source: http://www.infoplease.com/ipa/A0922041.html

I apologize about the column justification, I can't seem to figure out how to make the cells work in this blogger and I'm far too lazy to struggle with it. 

Top exporters to the US

CANADA
SAUDI ARABIA
MEXICO
VENEZUELA
NIGERIA
COLOMBIA
IRAQ
ECUADOR
ANGOLA
RUSSIA
BRAZIL
KUWAIT
ALGERIA
CHAD
OMAN

Gasoline and the Destruction of Money

In the 1930s George Maynary Keynes talked about the power of government to create or destroy money as a way of flattening business cycles and easing the pain of depression. In his theory he said that in times of recession/depression the government could create money by cutting taxes and spending like crazy. This would put people to work and so on. In fact, this is exactly what the US government did during the second world war and that ended the depression with a vengeance. He also said that in times of prosperity, the government should destroy money, raise taxes and lower spending. This would slow the economy but would make for a more regular cycle. This worked until Johnson came around and decided to just blow the whole thing up and we've been screwed up ever since. During the bad times we overspend and during the good times we overspend. Now we'll never balance the budget. Keynes saw the government as the prime mover of the economy because it controlled the money. He never envisaged a Congress that would work AGAINST the President to actually HURT the economy as the Republicans do now. Plus, government policy is slow to enact and takes time to have an impact.

Not so with gasoline!

From the stats above we see that the average gas use is about 2 gallons a day. We also see that the average family has 2 cars in America. That means that the average family is using about 28 gallons of gasoline per week. Every penny gasoline goes up means a quarter less per week to spend. And gas has gone up more than 2 dollars over the past year and a half or so. That's 56 dollars per week! That represents the destruction of 56 dollars of spending for every family in America! Fifty six dollars is a night out at a restaurant; or a movie and popcorn for a couple; it's a pair of jeans; it's a new hammer, saw and set of screwdrivers; it's any number of real things people can't buy. It's the destruction of purchasing power and money in just the way Keynes described.

What happens when money is destroyed? The economy slows down. It MUST slow down -- people aren't buying things  because they don't have the money do buy them.

Gasoline prices are going up. The economy will slow down. No amount of drilling will change that.

	Country	Reserves (bbl)
1	Venezuela (more information) (2010) [1]	296,500,000,000
2	Saudi Arabia (more information) (2011)[2]	264,600,000,000
3	Canada [3] (more information) (2008)	175,200,000,000
4	Iran (more information) [1]	150,600,000,000
5	Iraq (more information) (2010)	143,500,000,000
6	Mexico (more information)[4]	139,020,000,000
7	Kuwait (more information) (2010)	104,000,000,000
8	United Arab Emirates (more information) (2008)	97,800,000,000
9	Russia (more information) (2009)	74,200,000,000
10	Libya (more information) (2010)	47,000,000,000
11	Nigeria (more information) (2011)	37,200,000,000
12	Kazakhstan (2009)	30,000,000,000
13	Qatar (2009)	25,410,000,000
14	China	20,350,000,000
15	United States (more information)	19,120,000,000
16	Brazil (ANP 2/10/11 revised est.)	14,240,000,000
17	Azerbaijan	14,000,000,000[5]
18	Angola	13,500,000,000
19	Algeria	12,200,000,000
20	India	9,000,000,000 [6]
21	Sudan	6,800,000,000
22	Norway	6,680,000,000
23	Ecuador	6,542,000,000
24	Oman	5,500,000,000
—	European Union	5,453,000,000
25	Ghana (more information) (2010)	5,000,000,000
26	Vietnam	4,700,000,000
27	Egypt	4,300,000,000
28	Indonesia	4,050,000,000
29	Gabon	3,700,000,000
30	Australia	3,100,000,000
31	United Kingdom	3,000,000,000
32	Yemen	3,000,000,000
33	Malaysia	2,900,000,000
34	Syria	2,500,000,000
35	Argentina	2,386,000,000
36	Colombia	1,900,000,000
37	Congo, Republic of the	1,600,000,000
38	Chad	1,500,000,000
39	Brunei	1,100,000,000
40	Equatorial Guinea	1,100,000,000
41	Denmark	1,060,000,000
42	Trinidad and Tobago	728,300,000
43	Romania	600,000,000
44	Turkmenistan	600,000,000
45	Uzbekistan	594,000,000
46	Timor-Leste	553,800,000
47	Peru	470,800,000
48	Bolivia	465,000,000
49	Pakistan	436,200,000
50	Thailand	430,000,000
51	Tunisia	425,000,000
52	Italy	423,700,000
53	Ukraine	395,000,000
54	Germany	276,000,000
55	Turkey	262,200,000
56	Cote d'Ivoire	250,000,000
57	Cameroon	200,000,000
58	Albania	199,100,000
59	Belarus	198,000,000
60	Congo, Democratic Republic of the	180,000,000
61	Cuba (more information)	178,900,000
62	Papua New Guinea	170,000,000
63	Philippines	168,000,000
64	Chile	150,000,000
65	Spain	150,000,000
66	Bahrain	124,600,000
67	France	101,200,000
68	Mauritania	100,000,000
69	Netherlands	100,000,000
70	Morocco	100,000,000
71	Poland	96,380,000
72	Austria	89,000,000
73	Guatemala	83,070,000
74	Suriname	79,600,000
75	Serbia	77,500,000
76	Croatia	73,350,000
77	New Zealand	60,000,000
78	Myanmar	50,000,000
79	Japan	44,120,000
80	Kyrgyzstan	40,000,000
81	Georgia	35,000,000
82	Bangladesh	28,000,000
83	Hungary	26,570,000
84	Bulgaria	15,000,000
85	South Africa	15,000,000
86	Czech Republic	15,000,000
87	Lithuania	12,000,000
88	Tajikistan	12,000,000
89	Greece	10,000,000
90	Slovakia	9,000,000
91	Benin	8,000,000
92	Belize	6,700,000
93	Taiwan	2,800,000
94	Israel	1,940,000
95	Barbados	1,790,000
96	Jordan	1,000,000
97	Ethiopia	430,000
-	Total	1,392,461,050,000