Iran From 10,000 Feet

Simultaneously clutching his Nobel Peace Prize in one hand and George W. Bush’s preemptive strike doctrine in the other, Obama has straddled this no-man’s land about as well as any president possibly could.

This column appears in the February 2nd, 2012 edition of the Long Island Press.

Trunk to tail the elephants circle the ring while the four remaining clowns in the circus vamp, weep and honk their noses to the delight of the audience. The train travels from Iowa to New Hampshire, and then makes its way down the coast to Florida where the most recent performance went off without a hitch. With dozens more appearances planned for the upcoming weeks, the greatest show on Earth promises to keep the masses entertained for months to come.

Outside the alternate reality that is the American election season, however, a gathering storm is rapidly approaching, threatening to rip the stakes from the ground and bring the tent down upon all of us.

The deadliest game of chicken in history is being played in dark alleys with no headlights. Two cars careen toward each other, Iran in one and Israel in the other, while the world huddles close to see which one of them blinks first. But we are all more than spectators in this deadly contest, we are participants. The ever-expanding concentric circles of conflict that began with the Mossad and Hezbollah, extended to neighboring nations such as the United Arab Emirates and Syria, now encapsulate the United States, Europe, Russia and China.

In short, the stage is set for World War III. Damn, those Mayans were good!

Because the economy is still in the center ring, however, it’s the primary show the audience focuses on. We can see shadowy figures moving about in the periphery. We know they’re there, but our attention is diverted for the moment. Humanity be damned, it’s still the economy, stupid. It’s why every pronouncement of war, every threat to prevent a nuclear Iran, includes references to the disruption of the global oil supply.

But exactly how do you quantify the potential ramifications of a complete breakdown in both production and supply of oil in the Middle East, and more specifically Iran? The second oil shock of the 1970s, beginning with an Iranian oil-workers’ strike in 1978 and continuing through the Iran-Iraq War in 1980, is a useful portent of financial catastrophe. This two-year flare-up resulted in skyrocketing oil prices that reached $38 per barrel in 1980. Adjusted for today’s dollars, that’s around $90 per barrel.

Think about that for a moment. If the equivalent figure of $90 today thrust the global markets into utter chaos and drove the world deeper into recession in 1980, what effect would a new shock today have on the global economy, considering oil is consistently trading around $100 per barrel today? Obama doesn’t need to ask Jimmy Carter how that would work out.

This is why Europe and America have been rallying support to increase economic sanctions on Iran while Israel continues its effective covert assault on the power structure in Tehran. Treasury Secretary Timothy Geithner recently visited China to ask for their participation in a global embargo on trading with Iran. The problem there, of course, is that China receives approximately 10 percent of its oil from Iran—a figure projected to grow steadily over the next couple of decades as China attempts to break the coal habit. Geithner’s reception was as chilly as it was when he asked the Chinese to adjust their undervalued currency in an effort to stabilize the balance of trade between our nations. Add to the mix that China has no moral or political allegiance to Israel, and it’s easy to understand why Geithner would have had better luck talking to the Great Wall of China than its ruling class.

The political calculus in Washington is as complicated as ever. Obama has been able to walk the tightrope between America’s hawks and isolationists by surging our forces in Afghanistan while withdrawing them from Iraq, and allegedly killing Osama bin Laden while entertaining the possibility of dialogue with Tehran. Simultaneously clutching his Nobel Peace Prize in one hand and George W. Bush’s preemptive strike doctrine in the other, Obama has straddled this no-man’s land about as well as any president possibly could. But time is running out as the election draws ever nearer, which is why the war rhetoric is beginning to intensify. This diplomatic squeeze is lost only on mouth-breathing Americans whose eyes are glued to the spectacle in the center ring, as they await the outcome of each GOP primary as if it matters. The rest of the planet has adjusted to the darkness as it watches these war preparations very, very closely.

Here’s the current score. Europe has taken a decidedly aggressive stance by leading the way with harsh economic sanctions on Iran forcing the United States to follow suit perhaps more than it might have otherwise. China and Russia have little to gain by punishing Iran as they trade openly. Israel is not above taking matters into its own hands and striking Iran’s nuclear facilities but it requires more assurance from the United States that we will back its play. The less-than-cozy relationship between Obama and Israeli Prime Minister Benjamin Netanyahu thwarts Israel’s next move, because acting unilaterally without U.S. support is as suicidal as doing nothing may someday prove to be.

 Saudi Arabia, which shares access to the strategically important Strait of Hormuz, also has little patience for Iran’s shenanigans; but it, like Iran’s allies in the area, has its own political and economic issues, and can hardly afford a conflict with any of the region’s stakeholders.

We are witnessing one of the greatest standstills of all time. The deciding vote, however, will likely come from none of the nations mentioned here because a new, more powerful force has emerged in the global landscape with the ability to tip the scales: the people.

From Occupy to the Arab Spring, the past year has shown that the most influential voice in world politics is that of the people. In this new interconnected world, the Iranian government’s clandestine policies and shadowy behavior are anachronistic. That’s not to say Israel and the United States don’t understand this potential, as both admit to stoking tensions within Iran to mobilize its youth in the hopes that they will lead to yet another revolution. If a fruit vendor in Tunisia can set off a series of events that changed the Arab world forever, the same can even happen in a nation as mysterious and closed-off as Iran. Dictators can be ousted and regimes can be toppled without deploying the U.S. military.

It’s why an untimely show of force against Iran would undermine the Iranian people’s naturally occurring dissatisfaction, shown by their willingness to protest the regime’s fraudulent elections and its hard-line stances that have wrought such economic hardship. This phenomenon has been occurring even before the most recent round of rigorous sanctions. In practice, imposing more stringent sanctions or military action may have the opposite of the desired effect by coalescing support for the Iranian government from within. Given the Iranians’ already poor economic circumstances, they may in fact see little distinction between enduring harsh sanctions and a blistering show of force.

Critics of the Obama administration have likened his stance on Iran as akin to that of British Prime Minister Neville Chamberlain’s appeasement of Hitler with the Munich Pact in 1938. They claim that the United States is being hoodwinked by Iran’s leadership who will immediately use nuclear weapons against Israel once they possess the capability to do so. Most who have written about the subject, however, believe this is folly, but that it’s better to have an Iran without nukes than one with them. In the meantime, the theory of Mutually Assured Destruction might take a backseat to the mutually assured production of oil. In my mind, the specter of nuclear warfare is a singular endgame issue, not an ongoing strategic battle that dismisses the Chamberlain/Hitler analogy in favor of Kennedy/Kruschev. When both men drew their lines in the sand and realized the lines were in exactly the same spot, everyone knew where they stood during the Cuban Missile Crisis in 1962.

Because the current leaders of Iran have publicly stated that they are committed to annihilating the state of Israel, they have legitimized the world’s fear of a nuclear Iran. But I would submit that the world doesn’t have an Iran problem, it has an Ahmadinejad problem. Were the U.S. to declare unequivocally that we will use force if Iran’s president denies UN inspectors in Iran or we discover that they have developed the capacity to use nuclear technology beyond domestic energy production, we would hardly be blamed for being the aggressor. But perhaps we should re-examine the role of sanctions and look at things differently because a free and prosperous people have a much greater ability to dictate policy in Iran than we outsiders ever will.

A desperate population with nothing to lose alters the equation of Mutually Assured Destruction and interrupts the natural evolution of the Arab Spring. It’s time to reverse the antiquated notion that a forcibly impoverished nation is ultimately obsequious to those nations that suppress it. President Obama should call upon the Congress and the world to lift all economic sanctions on Iran because sanctions starve the people, not the government. Moreover, the people have proven they know how to seize the opportunity for self determination.

Then we can all go back to watching the circus.

 

Main Photo: Associated Press

Fracking: The Ultimate Scam Revealed

By touting natural gas as the clean-burning fossil fuel that is cheaper to use and helps reduce our dependence on foreign oil, the industry has nailed the PR trifecta: cheaper, cleaner and patriotic.

gas mask hydrofrackingOne of the great joys of writing, as in science, is the accidental discovery. To wit: penicillin. And while this entry hardly ranks near Alexander Fleming’s pharmaceutical breakthrough, it does relieve a particular itch that has been nagging my brain. For months I have been vexed by the discrepancy in pricing between crude oil and natural gas. (Wait, I know how tedious commodities can be but I promise you this column is worth sticking with.) Unable to settle on any fundamental market-based explanation, I placed the issue on the mental backburner. It was only when I decided to update a series of articles on the role of speculation in the commodities markets that I happened upon the most plausible solution to this puzzle.

First, a little context. Over the past couple of years New York State has been flirting with the idea of hydraulic fracturing, or “fracking.” The discovery of enormous pockets of natural gas in the Marcellus Shale formation that runs from West Virginia, Pennsylvania and New York to as far as Ohio, has led to a modern-day gold rush in the region, with Pennsylvania several years ahead of New York. While the gas has always been there, it wasn’t until the turn of the millennium when controversial chemical enhancements invented by Halliburton were added to a difficult horizontal drilling technique that accessing this gas became feasible.

Almost immediately, however, environmental concerns began to mount. Stories of contaminated groundwater, intense air pollution and, most recently, a ruptured fault line and mini-earthquake in Youngstown, Ohio, on Dec. 31, have begun leaking into public consciousness. Gasland, a documentary by Josh Fox, increasingly agitated environmental organizations, and high-profile activists such as actor Mark Ruffalo have helped fracking reach the tipping point in the media. Once seen as a panacea for rural land owners in depressed parts of the country, fracking has become a pariah in the environmental community, setting the stage for yet another battle between the oil and gas industry and environmentalists. Caught in the middle of the entire fiasco at the moment is Gov. Andrew Cuomo, who is cautiously moving toward legalizing fracking in New York, though his public reticence highlights how tenuous this decision truly is.

Early on, I came down firmly against fracking in New York, and the Long Island Press was in the vanguard of reporting on it downstate. So I’m on record quite clearly as to why I believe fracking to be a disaster for New York, or anywhere else for that matter. No need to rehash this position. Still, one piece of the broader issue was missing—until now.

Here’s the issue: Fracking is expensive. The prolonged low market price of natural gas is the most logical deterrent to increasing drilling because it barely pays to pull the gas out of the ground. Moreover, the U.S. Energy Information Administration projects that natural gas demand in the United States should rise only 11 percent over the next 25 years compared to a projected rise of more than 300 percent in China over the same period.

Here’s where the market rationale gets murky. Analysts point to increased demand for fossil fuel in developing economies as the primary reason behind the steady rise in oil prices. Goldman Sachs’ most recent forecast of Brent Crude Oil, commonly known as “sweet light crude,” is $120 a barrel for 2012, with most market analysts following suit. A weak dollar, the ongoing crisis and uncertainty in the Eurozone, a burgeoning conflict between the U.S. and Iran, and continued growth in China, India and Brazil are the oft-given reasons behind these prognostications.

Historically, natural gas and oil prices have generally moved in tandem, and with natural gas gaining momentum as the fossil fuel of choice, it only makes sense that they would continue their mirrored trajectory. Instead, the opposite has occurred. Crude oil remains stubbornly high and creeping ever higher while natural gas remains depressed.

A closer look reveals that the world has record stockpiles of both fuels, and has developed incredible potential for new sources such as the Marcellus Shale play or the tar sands in Canada. Then there are the yet-to-be-developed fields in Iraq that, according to the New York Times, are “expected to ramp up oil production faster than any other country in the next 25 years, with a capacity…more than traditional leaders like Saudi Arabia.” Or, if you prefer, the real reason we went to war in Iraq.

Excess supply, new discoveries, and sluggish demand—and yet only natural gas is acting appropriately in the markets. This behavior is undeniable proof that the invisible hand of speculation is at work, which naturally begs the question as to why traders would suppress the price of gas but not oil.

For this answer we must turn back the clock once again and revisit several acts in Congress over the past two decades that made it possible for banks to merge with investment banks and trade commodities without limits and without transparency. Much of this trading is done on the Intercontinental Exchange, a trading platform that was founded and owned by Morgan Stanley, Goldman Sachs and BP. When you understand that markets today are dominated by investment banks and oil companies, who are at times one in the same (Morgan Stanley’s direct holdings in oil companies, fossil fuel infrastructure and transportation companies make it one of the largest oil companies in America), it is possible to fully comprehend the psychology behind natural gas pricing. Oil companies and investment banks have the ability to move the market by forecasting prices and investing in their own products through opaque exchanges that they own, so no matter where prices are they are making money.

Now you’re ready for the secret behind the fracking con job.

As previously mentioned, domestic natural gas is difficult to procure. The process is devastating to human health and the environment, and the effects are irreversible. To gain momentum and influence public opinion, the oil and gas companies have launched an ingenious propaganda assault on America. By touting natural gas as the clean-burning fossil fuel that is cheaper to use and helps reduce our dependence on foreign oil, the industry has nailed the PR trifecta: cheaper, cleaner and patriotic. And with an earnest pitchman like T. Boone Pickens, who wouldn’t believe it?

The problem is none of the above is true. First, natural gas might burn cleaner than oil but the process to extract it is so harmful it doesn’t matter. And second, because the same companies who are in control of the product are in control of the pricing, once they sew up the drilling rights they can simply jack up the price. This leaves the final argument that is wrapped in the American flag and served with a side of apple pie: reducing dependence on foreign oil for the sake of the union.

For the truth, let’s check in with the rest of the world to see what they say. (This was the happy accident that prompted this column.)

According to India’s leading daily business newspaper, the Business Standard, “the increasing shale gas production in the U.S. has led to a surplus, likely to increase in the coming years. The U.S. is, therefore, eyeing export to countries like China, Japan, Korea and India… In the past, the U.S. has been an importer of gas.” The article goes on to quote A. K. Balyan, chief executive officer of Petronet LNG, India’s largest liquefied natural gas importer, who states, “With an increase in U.S. gas production, the gas receiving terminals need to be converted to exporting terminals.”

Ta-dah!

The average life of a fracking site is seven years. At best. The environmental and human health catastrophe is forever. All of the current talk of job creation and reducing dependence on oil is a sham. Our natural gas stockpiles are higher than ever and the demand for natural gas, by our own country’s admission, will remain basically flat until 2035. The oil and gas companies are planning to export gas from the Marcellus Shale region to the same developing economies we’re supposed to be competing against. How’s that for homeland security?

The real insult? American oil and gas companies are willing to risk the health and welfare of our own citizens by fracking on our land in order to export fuel they claim is more beneficial to the environment. Normally, our companies are busy screwing up other countries in pursuit of their natural resources for our own consumption. As if this isn’t bad enough, they are finally committing the cardinal sin of shitting where they eat.

Let’s do the right thing for once: Ban fracking now. There’s no other way.

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Main Photo Image: Photograph from AP. April 22, 1970, the first Earth Day.
Long Island Press cover image. Original art by Jon Sasala
T. Boone Pickens
. AP Photo.

This article was published in the January 5th, 2012 edition of the Long Island Press.