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Offline steve from virginia

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Arab Summer...
« on: June 14, 2014, 02:05:17 AM »

Off the keyboard of Steve from Virginia

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Published on Economic Undertow on June 13, 2014


Discuss this article at the Geopolitics Table inside the Diner

As our precious world of resource waste falls apart, it only takes a very small shock to precipitate an avalanche:

In a heartbeat, America’s multi-trillion dollar Iraq project is swept into the dumpster; ‘Mission accomplished’ says Abu Mohammed al Adnani, (NY Times):

Iraqi Kurds Take Oil City as Militants Push ForwardTim Arango, Suadad Al Salhy and Alan Cowell

ERBIL, Iraq — Iraq’s fracturing deepened on Thursday as Kurdish forces poured into the strategic northern oil city of Kirkuk after government troops fled, while emboldened Sunni militants who seized two other important northern cities this week moved closer to Baghdad and issued threats about advancing into the heavily Shiite south and destroying the shrines there, the holiest in Shiism.

The rapidly unfolding developments came as Prime Minister Nuri Kamal al-Maliki’s entreaties for emergency powers stalled because of inaction by Parliament, which seemed paralyzed over the worst crisis to confront the country since it was convulsed by sectarian mayhem at the height of the American-led invasion nearly a decade ago. The inability or unwillingness of Mr. Maliki’s armed forces to hold their ground only compounded the crisis.

The speed and completeness of the US puppet-regime collapse is an embarrassment to the Washington establishment which erected ‘democracy theater’ in Iraq at stupendous expense. Here is the geopolitical equivalent to the Lehman Brothers blowup. The Pentagon which trained and equipped the various Iraqi security forces has also failed. Where is the accountability?

Silly rabbit, there is never any accountability! There is no penalty for stupidity in America and has never been in our modern world; since 1455 all errors of judgement are cured with economic growth.

Regardless of what occurs in Iraq from here on in, whether it ultimately is a Maliki victory or that by militants, US influence in Iraq is finished.

The ISIS militants are led by an Iraqi Abu-Bakr-al-Baghdadi. The fighting force appears to include some number of Baathist ex-Saddam military; it will no doubt take aim at Baghdad and seek to remove the current Iraqi government. The prize is not some dusty towns in northwest Iraq or an imaginary caliphate but instead the large oil fields in the area of Basra in the far south of the country that contain the balance of Iraq’s crude oil reserves.

The ISIS militants have very little choice but to press forward; at the same time, the range of outcomes is remarkably narrow due to geography. The area taken over so far by ISIS and its allies offers little in the way of either plunder or longer-term economic gain. Outside of Kirkuk and Kurdish region, there are small amounts of oil, agricultural yields are very modest; against the backdrop of a severe, long running drought. Control by either side is limited to towns and areas adjacent to the highways which connect them. Iraq is a country for Irwin Rommel’s lightning strikes; not an agricultural heartland for Vietcong to withdraw into. Off the roads and outside the towns is open country; pastures, fallow fields and desert: cutting a few roads and the towns are vulnerable along with those who live in them.

Soon enough the ISIS will learn as the Americans should have; there are no little victories in war. There is total victory or nothing.

If jihadi radicals are in control of the onrush they will use their momentum to root out the Shiites to a man and chase those they don’t kill into Iran. If the Baathists are in charge, they will leave Baghdad’s governing armature intact and reprise a nominally Islamist but still dictatorial ‘Saddam 2.0? regime. By doing so they would re-establish administrative dominion over the majority of the country, to own Basra’s oil riches without having to conquer them. This is a likely outcome; the Sunnis would avoid destructive combat and ethnic cleansing that would accompany a jihadi purge. Shiites would be largely left alone; under no circumstances will the the Baathists or ISIS group have anything to do with the disciplined and well-armed Kurds.

A large, general war across the Middle East is unlikely because none of the nations can afford to fight one. Marginal oil production would be cut and the resulting finance crisis would cripple both drillers and customers.

To stop short of taking Baghdad leaves the income-generating oil fields in the hands of the Shiites, which will allow them means to regroup. Presumably they will gain more American weapons — the entire American adventure from 2003 onward has been a platform for the production and sale of expensive US military hardware. The ISIS team must capture its prize before the lumbering Pentagon purchasing manager behemoth wakes up and the American aircraft — and pilots — arrive to tilt the balance.

The ISIS core only has traction as long as its expansionist program continues to succeed; Like AMZN, ISIS is a momentum stock that no one will sell as long as it rises. Reliance on ‘capital growth’ requires the ISIS management team to press forward aggressively against the rump Shiite state in southern Iraq. To do otherwise leaves it vulnerable to being wiped out in detail by Shiites, Iranians, Baathists and Sunni tribesmen. ISIS only has a few thousand fighters, the hard core are from overseas, they have little in common with the people they intend to gain dominion over. As Friederich von Mellinin remarked during World War Two; they, “are in the position of a man who has seized a wolf by the ears and dare not let him go.”

The current ISIS offensive in Iraq began with their stinging defeat in northern Syria at the hands of Free Syrian Army; a motley collection of Assad-army deserters and civilians taking up arms. ISIS has a dim future in Syria regardless of outcome; if Assad prevails he will extirminate the group, if he cedes control, any replacement government will root out the Islamic State from their home territory in the country’s eastern oil fields. The group is too small to be formidable, they are too violent to be considered capable administrators. For them to grow they must become more political, more moderate, more inclusive … to become indistinguishable from other groups or parties. ISIS success in Iraq is more a matter of failure in Baghdad, a Sunni reaction to Shiite incompetence.

The current offensive is a part of a larger piece; a long-running campaign of car-bombings and shootings directed against the Shiites and Kurds since 2011 in Baghdad and elsewhere, culminating a few months ago with the ISIS takeover of Fallujah and Ramadi.

The US trains its enemies far better than it trains its allies by subjecting foes to combat operations with the latest death-dealing technologies. Survivors of extended combat with US military become very good soldiers, indeed. Our allies are trained to flatter superiors or outmaneuver them in the cocktail lounge so as to gain money and popularity; how to operate vehicles so that the salesmen and Beltway Bandits who populate ‘Pentagon Inc.’ can sell more missiles, rockets, office furniture, file systems, computers along with the vehicles needed to haul all that stuff around in.

Since the rise of OPEC, the Middle East has been the arena for a proxy slugfest between absolutist petroleum titans Iran and Saudi Arabia. Both countries are governed by witless, unaccountable oil tycoons. Saudi, Qatari and Emirati sheiks subsidize Wahhabi militants across northern Africa, the length and breadth of southern Asia to the Philippines. The Iranian mullahs support the Assad government in Syria, Hezbollah radicals in Lebanon in addition to the politically bankrupt Maliki government.

Because of high oil prices both regimes have their way without restraint; until recently war- and threats of war reliably pushed the price of petroleum higher: saber rattling made adventures in Syria, Afghanistan, Yemen and elsewhere into self- reinforcing ‘sustainable’ enterprises. Ironically, by the time one or the other side ‘wins’ the oil reserves of both countries will be depleted; the only way to continue the war is if both sides sell as much oil as possible as fast as possible.

Iraqi government collapse is a serious setback for Iranian ambitions. If ISIS wins, Iraq will become hell-on-Earth for Shiites in southern Iraq who will be butchered in the streets or forced into Iranian refugee camps. If the Baathist’s win, the long supply loop from Moscow to Tehran to Damascus will be cut … with the loss of income falling heavily onto Tehran. War is not just good business for Americans. Strategically, the weight of necessity lies with ISIS which must win in Iraq on its own terms so as to maintain any chance of success in Syria. If Baghdadi loses or he is pushed aside by the Baathists he and his cohorts are dead men, reviled by both Sunnis and Shiites as murderous ‘losers’, ultimately dangers to themselves and others nearby as targets for American drones.

If the ISIS group succeeds it will continue to sell Iraqi oil because it has to, it needs money like all other ‘governments’ … If it falls short Iraq risks becoming another Libya where (NATO-supported) Islamist militants have on-and-off control of oil ports. When one particular group has a dispute with another the ports are closed and little oil is shipped: over time the country becomes poorer; oil extraction cannot be done cheaply, it is a costly, technology-dependent heavy industry. Eventually it becomes too costly for militants to produce any oil at all. Afterward, what happens at the ports is irrelevant, there is no oil to ship. In Libya, there is effectively zero government, it is a failed state in all but name:

Want Cheaper Oil? Pray for Stability in LibyaMatthew Philips

Now that Libya’s government has wrested control of its ports back from armed rebels, the country is finally starting to export crude oil again. Libya’s oil has essentially been trapped since militias seized its three largest ports last summer in an attempt to grab a share of the country’s oil revenue.

On Tuesday, a ship bound for France began loading as much as 850,000 barrels of crude at Libya’s easternmost port of Hariga. This is the second shipment of oil to be loaded at Hariga in the last two weeks. On April 16, a ship called the Aegean Dignity began loading crude for export for the first time since rebels took over the port last July. In an interview with Bloomberg News at the time, the ship’s manager said that the crew “didn’t see any people with guns or soldiers” at the port trying to interfere. Which is usually good news.

Sow the wind, reap the whirlwind. Maybe next week people with guns or soldiers will close Libya’s oil terminals. That might push fuel prices up another penny or so … then again, maybe not. Customers are broke, accelerating a conflict in an oil producing country or cutting off supplies does not make customers wealthier.

Next Syria? Arab Spring turns into Arab Summer …

Energy Commodity Futures

CommodityUnitsPriceChange% ChangeContract
Crude Oil (WTI)USD/bbl.106.88+2.48+2.38%Jul 14
Crude Oil (Brent)USD/bbl.113.19+3.24+2.95%Jul 14
RBOB GasolineUSd/gal.307.89+7.81+2.60%Jul 14
NYMEX Natural GasUSD/MMBtu4.75+0.24+5.32%Jul 14
NYMEX Heating OilUSd/gal.299.03+8.60+2.96%Jul 14

Precious and Industrial Metals

CommodityUnitsPriceChange% ChangeContract
COMEX GoldUSD/t oz.1,273.10+11.90+0.94%Aug 14
Gold SpotUSD/t oz.1,273.18+12.11+0.96%N/A
COMEX SilverUSD/t oz.19.52+0.34+1.79%Jul 14
COMEX CopperUSd/lb.301.30-2.75-0.90%Jul 14
Platinum SpotUSD/t oz.1,444.06-38.32-2.59%N/A

A common element in Libya, Iraq and Ukraine is the absence of effective governments in these countries … not that there is an effective government anywhere. Effect begins when nations accept reality and repudiate the current, fashionable notion of endless economic growth. After that comes accountability and a step away from unpunished stupidity.

Energy conservation would eliminate funding for militants everywhere including mullahs, sheiks, tsars and other comic book psychopaths. The plan so far has been to sacrifice everything that comes to hand to the God of business expansion and automobile waste. The end comes with conservation by other means ™, the world goes broke and everything falls apart.


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