December 29, 2006

Iranian Oil

It seems from the Washington Post quoting Roger Stern, an economic geographer from Johns Hopkins, is running out of accessible oil- to the extent that if the current patterns of underinvestment continue, there will be no Iranian oil exports by 2015. Its an interesting thesis- Stern puts this down directly to government action. He is quoted by the Post as saying that

What they are doing to themselves is much worse than anything we could do.

Its an interesting quotation and attests to what I beleive is the fundamental weakness of the fundamentalist regime in Iran. Many of us fear Iranian nuclear weapons precisely because the regime seems illogical. But on the other hand the very illogicality of the regime, the reliance on theology over either economics or empirically based analysis, is a weakness and will in the long run lead to the collapse of that particular form of state in Iran. That brings its dangers with it of course- but the image that we have in our heads of a strong Iran standing up to the US and bullying the rest of the Middle East maybe only temporarily relevant. Rather in my view we should see Iran as a weak bully, attempting to bluster its way into the modern world with rhetoric and nuclear weapons, unstable and prone to lash out- this is no superpower to threaten us, rather an unstable state run by people whose training is in religious eschatology not exchange rate movements.

The policy implications of this can be discussed another time- but I do think its important that when we do, we look on Iran as it is not as it might seem to be.

Hat-tip to Bereft for providing the link to the Washington Post Article.


CityUnslicker said...

I agree with you here. I think there is alot of depth to Iranian politics that is missed in the West. There is the possibility of regmie change from within Iran due to their crazy policies.

A good argument for not going to war with them in the near future.

Gracchi said...

I agree we are missing the depth in our analysis all over the middle East. I wouldn't just say Iran but I was talking to a politically literate friend of mine who didn't knwo the distinction between Shia and Sunni Muslims- this guy is very intelligent and interested not to an obsessive level but to a listen to the Today program level- and it says something about our understanding of the Middle East that someone like him didn't know that.

dreadnought said...

We should look on Iran as what it is: an oppressive, extremist, revolutionary, pseudo-theocratic state which seeks to be a regional superpower and which runs international terrorist networks to threaten and destabilise its neighbours and extend the reach of the regime. Iran, as you say, may be “a weak bully” but the regime can keep their region and the rest of the world in a state of flux; confident in their brinkmanship and knowing that they hold all the cards. The Iranian theocratic experiment is inherently unstable, but, as in all authoritarian states, it is this instability which makes Iran so dangerous. It is the thing of nightmares but it really is imperative that they don’t get ‘the bomb’.

Gracchi said...

Dreadnought you are right- a nuclear armed paranoid failure of a state is dangerous- see I said this could play either way, but I think understanding what Iran actually is does help the arguments at least stand on their own terms.

A. said...

It's important to note that OPEC imposed limits on the amount of oil Iraq and Iran could export following the Iraq/Iran war in the 80s. The idea was that if their oil revenue was limited, they would not have the funds to keep fighting. However, once the war ended, OPEC kept the limits in place. Many Iranians view the pursuit of nuclear energy as a way of sticking it to the U.S. and OPEC.

Why invest billions in infrastructure only to have OPEC tell you no? Why not invest in nuclear technology, a form of energy not controlled by OPEC and the Saudis? If you were a policymaker in Iran, which path would you choose? Far from delusional, the article actually provides a plausible economic/geopolitical reason for Iran's actions. They are only 300k barrels below their limit! Hardly worth a vast reinvestment. I would tell the US either pressure the Saudis to eliminate Iran's oil limits [never going to happen] or subsidize oil facilities upgrade in exchange for giving nuclear ambitions [sadly, also never going to happen].

*Sigh* such honest compromise used to be possible among American policymakers. --Bill B

Gracchi said...

Bill I can see your point given the limits but you would still think that investment for the longterm would be a good idea. I take your point though, having said that it does seem like the action of someone who has basic shrewdness but lacks the longterm economic planning neccessary to govern successfully. It would still make sense for them to acquire nuclear power though because eventually the oil will run out- but they should if planning well for the future invest their oil profits into their infrastructure or even set up a fund like Norway has rather than spending it on illusory influence in Lebanon and the Middle East.

dreadnought said...

I’m afraid I don’t get this notion of OPEC and the Saudis saying how much oil can be produced and exported by Iran. Production levels and agreements are non-binding and are broken everyday by all OPEC members. OPEC is a cartel who attempts to set production quotas for all members to maximise profits without wrecking the industrialised economies and thus driving down the requirement for their oil. It is always a two way street. Any Iranian under investment in their oil industry is more to do with their own incompetence and politics than yet another US inspired plot. Given America’s insatiable desire I am sure the Americans would love Iran to flood the world market with cheap oil.

Iran still has massive crude oil supplies which will probably last longer than it would be prudent for the world to keep burning the stuff. The only reason why Iran is developing a nuclear program is because they want regional hegemony, to threaten the West and as King Hussein of Jordan has said extend the Shia crescent. Nuclear weapons are their means of achieving these aims.

Serendip said...

Fascinating exchages here. Great job Gracchi. The latest news from Iran is that Iran has been late in its shipment of gas to turkey for a few months and even in Iran people are freezing to death especailly in the Kurdistan area. I haven't translated the article yet because I'm deathly ill with the flu.

Gracchi said...

First things first, get well soon.

Fascinating. I'll be looking at that and linking to it when you publish it. I do think this really puts the whole Middle Eastern region in the context of these developments off screen.