Iran Disaster, Chaos and Opportunity
"I don't believe that the big men, the politicians and the capitalists alone are guilty of the war. Oh, no, the little man is just as keen, otherwise the people of the world would have risen in revolt long ago! There is an urge and rage in people to destroy, to kill, to murder, and until all mankind, without exception, undergoes a great change, wars will be waged, everything that has been built up, cultivated and grown, will be destroyed and disfigured, after which mankind will have to begin all over again." - Anne Frank 1929-1945, German Jewish Refugee, Diarist
"We have announced that if our regime is referred to the Security Council, we have several options and one of those is to close off the Straits of Hormuz so that not one drop of oil can be exported".
"Europeans should especially comprehend that if they do not act wisely and try to act manipulatively with us, the Islamic Republic in turn can and will certainly stop oil leaving its shores [to Europe]."
"Switzerland's behaviour is quite unexpected...coming from a country that even claimed neutrality during World War II. We had assumed that Swiss politicians would have made decisions more wisely. When it came to the Islamic Republic; severance of economic relation with the Islamic regime is dictated policy from the U.S. to Switzerland and we recommend that the Swiss do not tarnish their relations with us over our nuclear dossier."
Those are just some of the threats that Iran has made and we could list a whole bunch more but that should be sufficient for everyone to get an idea of what's at stake right now. Okay lets assume Israel and the United States strike Iran as both countries strongly oppose a nuclear Iran. In our opinion such a strike will at best only delay the inevitable ( A Nuclear Iran) and at worst result in a huge surge in terrorist activity, total chaos in Iraq (as Iran has a very strong influence now that the Shiites are in charge) and it could even bring about a regime change in Pakistan. If a regime change should occur in Pakistan with radicals in charge they might be willing to sell Iran or other nations a nuclear bomb.
The main reason a strike against Iran is almost futile is because they have spread their nuclear program very widely and it would be impossible to destroy them all. Iran has deliberately placed many of its sites underground in heavily populated areas. The US and Israel would never risk killing hundreds of thousands of people just to get at these sites. Furthermore Iran has openly threatened to move its program to other countries that have hostile relations with the US.
If Iran is attacked they will definitely retaliate and they have several options on the table. They are definitely not as weak as Iraq and they have strong support from the Chinese and Russian governments. It's reported that China is looking to invest close to 100 billion dollars into Iran and we are sure these guys are not going to let their investment go up in smoke.
The first thing Iran could do is simply cut of their own oil supply. At this point in time they can afford to do this because they are loaded with money to the gills due to the high price of oil. That would take 4.2 million barrels plus of the market immediately.
The total length of the straits of Hormuz is approximately 280Km and the width at the narrowest point is only about 50km. The strait of Hormuz happens to be one of the most important areas in the world as it's the only sea route through which oil from Saudi Arabia, Bahrian, Qatar, Iran, Iraq, Kuwait, and United Arab Emirates can be reach the outside world.
Iran could close the straits of Hormuz completely. At its narrowest point its only 50 km wide. All they would have to do is deploy the copy cat version of the Chinese Silk worm missiles and blow up several super tankers to cause total chaos. These missiles travel nearly at the speed of sound and travel so low that they are practically skimming of the waves; this makes them virtually invisible to radar. Then to make sure that no one comes in they could flood the place with mines. Take a look at the map above if the straits were closed all those oil producing nations would have no way to get their oil to the markets. Over 21 million barrels a day of production would be cut of instantaneously; this is more then what the US consumes.
Now many are going to say that the US is not going to allow the straits to remain closed they can send in the Huge Aegis war ships. That's where the dreadful Iranian SSN-22 missiles come in. These missiles were basically designed by the Russians to deal with Super Aegis's defence system. They travel at twice the speed of sound and can be launched from up to 120km away from the target (remember at the narrowest point the Strait of Hormuz is only 50km wide; its believed that this point is heavily fortified with Silkworm missiles and the SSN-22 Sunburn missiles). There is no defence against the SSN-22 it will virtually rip an Aegis war ship in half and the Iranians have hundred of these missiles. The US navy would be stuck and unable to open up the Strait of Hormuz. In the Falklands war Argentina had less then 9 anti ship sea skimming missiles (they were produced by France and were similar in nature though not as fast as the Russian Sunburns) and they were able to sink 2 British war ships. Imagine the damage Iran could do with the hundreds of the worlds fastest anti ship missiles.
Lastly Iran's new Shaab missiles can now easily reach all US targets in the Middle East and the new missiles they recently acquired from North Korea puts Europe in reach now. Iran will definitely launch as many of these missiles as possible and since they are built at home they have a huge supply of them. Iran also possesses chemical weapons and it's possible that it could use these. The link below provides a look at some of Iran's arsenal.
One must not forget that Russia has refused to heed the United States call to stop supplying Iran with arms and they are scheduled to receive a rather large shipment soon. One can only wonder what this shipment might contain.
Other factors to consider are the following
- An aerial attack is not as fully effective as full scale ground assault. However at this point in time we do not have the troops to do this. If we should ever take this route then expect the draft to make a comeback because that's the only way we will be able to have enough soldiers to deal with the situation.
- Iran will immediately increase funding to all Terrorist groups who will start to attack US interests all over the world. In addition the current situation in Iraq will look like Childs plays.
Attacking Iran is like opening Pandora's Box; the result is going to be bad the question is just how bad. Russia is looking to re establish its influence as a super power and China also wants to be considered as one of the big kids on the block. They are sitting there very smartly watching the US bury itself in Iraq and they are definitely making plans to take advantage of the United States weakness now that we are bogged down in Iraq. These two nations are in a win win situation right now. If the US attacks Iran they will be completely tied down to make sure they are tied down till they bleed to death all these two chaps have to do is keep supplying the Iranian with sophisticated weapons. Then they sit on the sidelines and watch the chaos and in the mean time they are now free to exert full control over the regions next to them. In China's case it will be Taiwan and in Russians case they will start playing hard ball with all the former Soviet Union countries that try to from alliances with the West.
Iran is heavily armed and they could on a moments notice shut down the Strait of Hormuz for an indefinite period of time. The shock to the world would be huge; oil would almost certainly spike to over 100 dollars a barrel and up to 150 dollars in a few days. Every time there has been any from of threat in the Middle East oil prices almost always doubled; this happened several times in the 1970's and also during the first Gulf war. The difference this time is that there are more nations competing for the same limited resource. In the 1970's China and India were not even on the map and Indonesia was still self sufficient. China now is the world's second largest consumer of oil and Indonesia is no longer self sufficient. Forget about the other effects of attacking Iran, just the closure of the straits of Hormuz is enough to cause hell.
Potential opportunities if the above scenario should unfold
Natural gas prices will go through the roof as more business will try to use this instead of oil. To make matters worse supplies are already constrained.
Coal prices will take off as many utility companies are forced to bring on old power plants due to the high prices of oil and Natural gas prices could take off on a moments notice if demand suddenly spikes.
Precious metals will keep sky rocketing and since both Silver and Gold have corrected nicely those that do not have positions could start buying some bullion now.
Uranium prices will take off as more nations race to adopt Nuclear energy. Ukraine has recently stated that they are looking to build 14 nuclear power plants to make sure that they are not as dependent on Russia for their energy needs.
The housing sector with the rest of the economy will get smashed; the astute investor who has patience will find some incredible gems in the real estate sector.
Now we would prefer that this scenario does not come true because all the opportunities we listed above are going to become reality sooner or later. We would just prefer that they become reality without a huge massive global disruption in oil supplies and thousands of unnecessary deaths.
"What vast additions to the conveniences and comforts of living might mankind have acquired, if the money spent in wars had been employed in works of public utility; what an extension of agriculture even to the tops of our mountains; what rivers rendered navigable, or joined by canals; what bridges, aqueducts, new roads, and other public works, edifices, and improvements might not have been obtained by spending those millions in doing good, which in the last war have been spent in doing mischief." - Benjamin Franklin 1706-1790, American Scientist, Publisher, Diplomat