Iran 'ready to attack US bases'

Discussion in 'West Asia & Africa' started by pmaitra, Jul 5, 2012.

  1. pmaitra

    pmaitra Moderator Moderator

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    Iran 'ready to attack US bases'

    Iran declared on Wednesday that it can destroy nearby US military bases and strike Israel within minutes of an attack on the Islamic Republic, reflecting tensions over Iran's suspect nuclear programme.

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    The elite Revolutionary Guards' military drill included the firing of ballistic missiles Photo: AP

    Source: Iran 'ready to attack US bases' - Telegraph
     
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  3. sob

    sob Moderator Moderator

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    My 2 cents-- the falling oil prices are hurting Iran. They just talked the oil prices to go up.
     
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  4. pmaitra

    pmaitra Moderator Moderator

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    Interesting perspective.

    If oil prices spike now, Obama will be in trouble.
     
  5. sob

    sob Moderator Moderator

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    PM, Iranian economy is in dire states. They do not have the money to even keep up the maintenance of their existing oil fields. Their only legitimate export is oil, if the prices crash then they are in big trouble. So it is in their interest to keep the prices high.

    If you analyse for the last 18 months most of the price hikes in crude are not due to increase in consumption but due to supply side shocks- and most of them look to be manipulated.
     
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  6. asianobserve

    asianobserve Elite Member Elite Member

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    (OT) I know of another megalomaniac who is praying that oil prices return back to the stratosphere...

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    Vladir Putin Needs Higher Oil Prices to Save Russia | Business | TIME.com

    Falling oil prices make just about everyone happy. For strapped consumers in struggling developed nations, lower oil prices mean a smaller payout at the pump, freeing up room in strained wallets to spend on other things and boosting economic growth. In the developing world, lower oil prices mean reduced inflationary pressures, which will give central bankers more room to stimulate sagging growth. With the global economy still climbing out of the 2008 financial crisis, policymakers around the world can welcome lower oil prices as a rare piece of helpful news.

    But Vladimir Putin is not one of them. The economy that the Russian President has built not only runs on oil, but runs on oil priced extremely high. Falling oil prices means rising problems for Russia – both for the strength of its economic performance, and possibly, the strength of Putin himself.

    Despite the fact that Russia has been labeled one of the world’s most promising emerging markets, often mentioned in the same breath as China and India, the Russian economy is actually quite different from the others. While India gains growth benefits from an expanding population, Russia, like much of Europe, is aging; while economists fret over China’s excessive dependence on investment, Russia badly needs more of it. Most of all, Russia is little more than an oil state in disguise. The country is the largest producer of oil in the world (yes, bigger even than Saudi Arabia), and Russia’s dependence on crude has been increasing. About a decade ago, oil and gas accounted for less than half of Russia’s exports; in recent years, that share has risen to two-thirds. Most of all, oil provides more than half of the federal government’s revenues.

    What’s more, the economic model Putin has designed in Russia relies heavily not just on oil, but high oil prices. Oil lubricates the Russian economy by making possible the increases in government largesse that have fueled Russian consumption. Budget spending reached 23.6% of GDP in the first quarter of 2012, up from 15.2% four years earlier. What that means is Putin requires a higher oil price to meet his spending requirements today than he did just a few years ago.

    Research firm Capital Economics figures that the government budget balanced at an oil price of $55 a barrel in 2008, but that now it balances at close to $120. Oil prices today have fallen far below that, with Brent near $100 and U.S. crude less than $90. The farther oil prices fall, the more pressure is placed on Putin’s budget, and the harder it is for him to keep spreading oil wealth to the greater population through the government. With a large swath of the populace angered by his re-election to the nation’s presidency in March, and protests erupting on the streets of Moscow, Putin can ill-afford a significant blow to the economy, or his ability to use government resources to firm up his popularity.

    That’s why Putin hasn’t been scaling back even as oil prices fall. His government is earmarking $40 billion to support the economy, if necessary, over the next two years. He does have financial wiggle room, even with oil prices falling. Moscow has wisely stashed away petrodollars into a rainy day fund it can tap to fill its budget needs. But Putin doesn’t have the flexibility he used to have. The fund has shrunk, from almost 8% of GDP in 2008 to a touch more than 3% today. The package, says Capital Economics, simply highlights the weaknesses of Russia’s economy:

    This cuts to the heart of a problem we have highlighted before – namely that Russia is now much more dependent on high and rising oil prices than in the past… The fact that the share of ‘permanent’ spending (e.g. on salaries and pensions) has increased…creates additional problems should oil prices drop back (and is also a concern from the perspective of medium-term growth)…The present growth model looks unsustainable unless oil prices remain at or above $120pb.

    The only way out of the trap is to decrease Russia’s dependence on oil. That will require a much higher rate of investment, and especially private sector investment, to develop new industries and create better jobs. Improving the poor investment climate, however, will take a long list of reforms, which include fixing inefficient state enterprises, allowing greater competition, stopping the state from crowding out the private sector, and fighting widespread corruption. Putin himself has repeatedly advocated for just such reforms, as he did in a speech at the St Petersburg International Economic Forum in June:

    “We are well aware of serious long-term and medium-term challenges for our economy. The economy is still not properly diversified. Much of the added value is created in commodities sectors. There is a high proportion of non-competitive old plants and the level of Russia’s dependence on oil prices remains high. We must reduce the dangerously high [budget] deficit if oil revenues are not taken into account. This…is the Achilles’ heel of our economy…We understand very well that we must offer investors exclusive conditions to compete for these investments, so that the investors ultimately choose Russia. This is why we feel creating an investment climate that is not just favorable, but truly better and more competitive, is a key issue in state policy…Today I want to reaffirm our principled position: the state will gradually withdraw from a variety of industries and assets…Unfortunately corruption is without exaggeration the biggest threat to our development. The risks are even worse than the fluctuation of oil prices.”

    Yet Putin and his political allies have said all this stuff before, and little has changed. Achieving Putin’s stated goals will require drastic changes in the Putin state, changes he has so far shown little willingness to make.

    He may have to, though. In a June 21 report, Capital Economics forecast growth would slow sharply, to 3.8% in 2012 and as low as 2.5% in 2013, from the 4.3% achieved in 2011. Without reform, the fate of Putin’s economy — and his legacy — will rest on the unpredictable swings in commodities markets.



    Now this is what I call shared interest.
     
    Last edited: Jul 5, 2012
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  7. thakur_ritesh

    thakur_ritesh Administrator Administrator

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    Sumeet,

    I am not so sure, this has been a tried and tested method and has been repeated over and over again. The impact would be insignificant, if anything, though I would like someone to follow the crude price fluctuation. But both the US and the KSA are flooding the market with crude and the news is being well covered to make sure there is no panic reaction from all such rhetoric. Iran, with it's buyers deserting it, is as such not in much of a bargaining position so the global crude price has very limited impact.

    As you say, their economy is in dire straits, I would see this more as a part of keeping their domestic constituency in the grip of nationalism, than worry about the economic catastrophe headed their way with a compounded impact to what they have seen so far.

    As rightly pointed out by AO, the real worry is for Putin, a messed up economy is an instant invitation for street protests, and so I suspect the game will be played in Syria militarily, and not through Iranian rhetoric.
     
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  8. sesha_maruthi27

    sesha_maruthi27 Senior Member Senior Member

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    When will the war start?
     
  9. sob

    sob Moderator Moderator

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    The sanctions are tightening the screws on Iran and the biggest problem they are facing is of storing crude oil, as their exports are dipping.

    http://www.nytimes.com/2012/07/05/w...-iran-to-disguise-tankers.html?pagewanted=all

     
  10. Singh

    Singh Phat Cat Administrator

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    Sanctions are having a twin effect, it is forcing the regime into a corner, and paradoxically is increasing further support for USA amongst urban Iranians (Tehran residents, persians etcc). Iranians are already one of the more pro-USA people in the ME.
     
  11. sob

    sob Moderator Moderator

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    Ritesh, Putin has other resources too, notably diamonds, but yes lower prices will hit Russia too, as Putin has leveraged the high prices for strengthening the Russian Defence forces.

    However from the above article you can see that for Iran, oil which is their only real source of income, exports are drying up and the impact is huge.

    However good news for us, every Dollar drop in Crude prices, gives us some breathing space.

    On the other side , Ritesh global economies have been contracting for the last 18 months, especially in the US ,Europe and Japan where the oil consumption is very high. This news itself should have shaved off a good amount from the Crude prices last year itself, not in the last couple of months.

    On the other hand OPEC has not reduced production levels, even in the face of opposition of countries like Algeria, Venezuela and Iran. As pointed out by you KSA has been pumping more oil and this will keep a downward pressure on crude prices.

    Based on this I had offered my hypothesis for which I could be wrong also.
     
  12. asianobserve

    asianobserve Elite Member Elite Member

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    Last time the Saudis and Co. and America coordinated their actions on oil it brought down an empire, USSR. Will it bring down a much more shaky target (Iran) this time? And regarding Russia, this might become a bittersweet rehash of history...
     
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