Newsmakers and even the oil markets have learned to get used to
tensions between the West and Iran. Last week,
an Iranian physics professor linked to the country’s nuclear
program was assassinated. Iran blamed Israel and
the United States for the remote control bombing of the man’s
car. Iran, for once, was probably right.
Foreign spies in Iran are likely trying to help make it clear to
the Iranian government that Israel and the United States will not
tolerate Iran’s nuclear program. The
bombing forces many scientists in Iran think twice about their
profession.
Next door, in neighboring Iraq, the country is accepting 100
billion in foreign investment that will update Iraq’s aging
oil production capabilities, possibly allowing them to produce much
more oil and become a more important player for the oil
market. Some peak oil analysts now even see a
risk in the idea that oil production has hit its peak due to the
new investments. Others contend that cheap oil
production has still hit its peak but more expensive production
will continue to help meet demand.
Either way, Iran is left with aging oil producing technology and
a desperate radical religious government which has demonstrated a
disregard for its citizens in recent anti government flare
ups. Their government does not hesitate to turn
the country’s attention on their battle with Israel and the
United States to garner nationalist sympathy and turn their
citizens’ attention away from internal struggles.
But the recent killing of the professor suggests that the empty
threats are becoming decreasingly empty and increasingly
real. In slow motion, we may be witnessing the
path to war, where an unreasonable government is left with no other
choice but to create international conflict. The
unpopular Iranian government has proven that it can survive its own
country’s protestors and will intentionally try to refocus
the country’s rage on its nation’s
enemies. The U.S. and Israel, in turn, are
adamant about stopping the Iranian government’s nuclear
program and the recent assassination proves how far they are
willing to go. Iran has made clear that their
greatest weapon is the disruption of the oil
trade. That’s a trade-off that Israeli
Prime Minister Benjamin Netanyahu has repeatedly accepted as fine
with him.
What may happen? Rising tensions followed by
a good excuse for the West to attack is what happens next, if the
history of Iraq were to repeat itself in Iran.
The mullahs will then have no choice but to disrupt traffic in the
Straight of Hormuz, which will temporarily devastate the oil
trade. After the U.S. takes back control of the
passageway, Iranians will put their resources into attacking oil
pipelines and oil wells, as Iraq did to Kuwait in a similar act of
desperation.
If history were to repeat itself, oil prices are in for another
decade of dramatic price increases.