PIMCO on Iran strike & Oil $ spike

[Adeptus]

CONSIDERING A POTENTIAL IRAN STRIKE & OIL PRICE SCENARIOS... (vote above, after reading below)

Article Source: http://business.financialpost.com/20...-attacks-iran/

Partial Article Quote...

[PIMCO considers] 4 scenarios for oil if Israel attacks Iran
First scenario: This is the most optimistic. In this scenario, oil initially spikes to US$130-$140 per barrel and then settles around US$120-US$125. This would occur if the International Energy Agency steps in and fills any shortfalls in the oil supply. Mr. Sharenow adds, however, that markets need to price in an attack before one occurs for this scenario to play out.

Second scenario: This one is slightly more grim. In it, Iranian exports are cut off for one month following an Israeli attack. This would result in prices reaching previous all-time highs of US$145 a barrel or even higher. In this scenario, the IEA and Saudi Arabia step in to fill help fill the gap, but uncertainty over capacity still drives oil prices higher. PIMCO eventually sees oil prices settling to US$130-135 a barrel after a few months.

Third scenario: This envisions a serious shock to the Iranian oil supply. Exports are lost for half a year, causing global oil prices to spike to US$150 for six months, with notable spikes above that level. Once the Iranian supply comes back online, PIMCO expects oil to settle back to US$110 or lower, depending on global demand.

Fourth scenario: This is the “Doomsday” scenario. Oil prices soar as Iran responds to the attack militarily. Oil production is not only effected in Iran, but also throughout the region as the ability to move oil through the Straits of Hormuz is affected. PIMCO doesn’t forecast where oil prices will be in this scenario. “Forecasting prices in the prior scenarios is dangerous enough,” Mr. Sharenow said. “So, we won’t even begin to forecast a cap or target price in this final Doomsday scenario. Needless to say, even the modest Scenario 1 is enough to collapse global economic growth.”

EJ's Scenario was originally articulated here (subscribers only): http://www.itulip.com/forums/showthr...heap-Oil-Cycle

In summary (this is from my recollection), it roughly concluded that oil prices will crash UP and then crash DOWN, then back UP and DOWN, and so on, over the next few years as a result of Cheap Peak Oil factors alone. Each new crash UP will reach all time new highs, and each crash down will be severe (50%+) but likely stay above the previous low, meaning the long term trend is still oil prices continuously rising. Crashes up or down may not occur in a matter of days, but rather over months. That said, EJ's article did not go into unforseen MENA civil revolution catalyst scenarios or Iran military strikes which could accelerate the crash UP spikes and also the (price) height they reach. EJ also made the logical arguement that oil price spikes UP that are sustained for any significant amount of time may trigger further global recessions due to embedded inflation upon consumer goods & consumers cutting back aggregate purchasing, and as a result pushing GDP into negative territory long enough to be considered a recession.

[Adeptus]

Re: PIMCO on Iran strike & Oil $ spike

I voted "other" because my personal (very) amateaur take is that we'll see EJ's scenario played out in an accelerated fashion due to continued Middle East Instability + Canadian Oil pipe into US now on hold. By this I mean, faster crash up and faster crash downs - but not as severe on the down-side in terms of depth. This is because I'm guessing "they" will print before we barely see the beginning of a deflationary dip.

The wild cards in all this, IMO are Europe (who still has not comitted to print due to Germany refusing to do so), and China, which depending on which numbers and timeframes you believe, may experience some degree of production meltdown in 2012 resulting in a global comodity demand crash (including oil).

Welcome to the global casino everyone, place your bets carefuly!

PS. Please note, I've been wrong before (a few hundred times ;-)

[Slimprofits]

Re: PIMCO on Iran strike & Oil $ spike

Is scenario #1 to conservative?

Oil spiked to $113 earlier this year when Libya went offline and they were exporting almost a million barrels less per day than Iran at the time.

[Adeptus]

Re: PIMCO on Iran strike & Oil $ spike

Even though the sampling size is tiny at the moment, it seems 6 out of 11 people don't believe Israel or USA will strike Iran. Really? Israel has a history of returning strikes if attacked, and USA has a history of pre-empting wars against entire countries before they are attacked.There's going to be a lot of surprised people if Iran is attacked. Of course we've been watching the plethora of warnings to Iran mount up for the past how many years? Just curious if people could list as to why they think USA/Israel wouldnt attack Iran? Fear Russia & China would intervene? Dont believe they will strike without UN approval like was done with Libya? Something else?

[Techdread]

Re: PIMCO on Iran strike & Oil $ spike

1. Iran is no Libya, They would shut off a big portion of Oil supply going through the Straits of Hormuz. Crashing the already weak global economy.
2. Iran has not got a dictator which the west could say is killing it's own people, they have elections(no matter how rigged they are!)
3. Iran has been preparing for a military strike against its nuclear installations for a long while nothing short of invading the country will stop it getting the bomb.
4. The US has not got the stomach for another pre-emptive war.

[don]

Re: PIMCO on Iran strike & Oil $ spike

in related news . . .

Iran delivers major blow to the CIA
By Mahan Abedin

Iran's claim last week to have arrested 12 spies working for the United States Central Intelligence Agency (CIA) is potentially a major blow to American intelligence-gathering efforts in Iran and to American intelligence generally. The arrests come on the heels of the arrest of 30 alleged CIA spies in late May and are indicative of steadily improving counter-intelligence capabilities.

The recent success is reinforced by the unraveling of a CIA spy ring in Lebanon operating within the Hezbollah organization. These reports have been grudgingly confirmed by current and former US intelligence officials, which is suggestive of a major American intelligence defeat, if not a full-blown disaster.

Recent Hezbollah counter-intelligence successes against Israel and the US (in June, Hezbollah arrested two CIA spies operating inside the organization) are at least in part due to increased counter-intelligence assistance from Iran.

Asia Times Online sources in Tehran claim that Iran's Ministry of Intelligence and Security (MOIS) has been more willing in recent years to transfer sensitive counter-espionage know-how and techniques to both Hezbollah and the official Lebanese intelligence services.

Regarding the arrest of 12 alleged CIA spies by Iran, aside from the clear indication of escalating American intelligence operations, there are two outstanding observations. First, the CIA is operating a lower threshold of quality control in terms of agent recruitment and management. Second, there are signs that the MOIS is moving steadily in the direction of making Iran a forbidding space for hostile foreign intelligence services.

Information from a wide range of Iranian media - and corroborated by ATol sources in Tehran - is suggestive of a scatter-gun approach by the CIA inasmuch as the agency is targeting virtually any Iranian citizen it believes could potentially provide useful information on the CIA's target set.

While there were media reports that some government "managers" were amongst the suspected CIA spies arrested in May, this time around Iran's intelligence minister, Heydar Moslehi, told local journalists on Sunday that there were no government officials amongst the 12 suspected spies.

Speaking on the fringes of the government's weekly cabinet meeting, Moslehi gave strong indications that most, if not all, of the latest arrested suspected spies were either junior Iranian scientists or students who frequently travelled overseas as part of their studies or official scientific work.

Information gleaned from a wide range of Iranian media over the past six months - and confirmed by ATol sources in Tehran - appears to indicate that besides the high-value targets such as the nuclear program and the country's defense establishment, the CIA's target set includes Iran's banking and financial sector; logistics and transportation networks (particularly air transportation); town planning; the oil and gas sector; and the software industry, particularly private companies that design and operate specialist software for the Iranian government.

More specifically, the CIA appears to be focussed on how Iran is defeating international and unilateral US and European sanctions; how and to what extent Iran is using the international financial system to advance its critical projects as well as its ordinary day-to-day business; the vulnerabilities of Iran's transportation and logistics network; the level of preparedness by Iranian emergency and humanitarian relief organizations; and more generally the resilience of critical Iranian infrastructure in the face of a major disaster or a prolonged period of national stress, such as a military conflict.

To achieve its objectives, the CIA's National Clandestine Service (NCS) has set up a dedicated team of operatives and analysts who operate primarily from countries bordering Iran, but also further afield, particularly in countries with sizeable numbers of Iranian students, such as Malaysia.

This dedicated network is exceptionally well-trained, for example all the operatives and analysts possess a masterful command of the Persian language and display high levels of inter-cultural competence.

Early indications appear to suggest that the CIA started to develop this dedicated network in 2003 and that most of the elements were in place by the middle of 2008. This makes the MOIS' recent counter-intelligence success an even more remarkable achievement, in so far as Iranian counter-intelligence may have doomed the CIA's vast investment almost from the outset.

In the course of its investigations and specialized counter-espionage work, the MOIS claims to have identified 42 officers of the CIA's NCS operating in several countries and collected detailed information on the scope and nature of their activities.

The dedicated NCS team appears to be embedded within numerous official and unofficial American organizations, including US embassies, multinational corporations, medium-sized commercial organizations, recruitment consultancies, immigration and wider legal services, academic and quasi-academic institutions and reputable (ie longstanding) as well as newly set up thinktanks.

If accounts on online Iranian media are to be believed the focus on Iranian scientists and students may have been this dedicated team's downfall. It has been suggested that the 30-person network(s) unraveled earlier this year (and announced in late May) was initially brought to the attention of the MOIS by a patriotic Iranian student who had been approached by a quasi-academic institution (offering grants and scholarships as a means of entrapment) in Malaysia.

The MOIS subsequently investigated the Malaysia-based institution and was able to establish a clear CIA link, which in turn widened the scope of the investigation and eventually netted 30 suspected spies.

It has been reported that 75% of the suspected spies detained this year had higher education qualifications. At one level, this is suggestive of an innovative CIA approach to entrap and recruit gifted Iranian scientists and students with a view to collecting information on the target set in a short to medium time frame.

However, the relative dearth of government officials - or in fact anyone with access to classified or sensitive information - indicates a degree of CIA desperation and an acceptance by the agency that it has to make do with lower quality recruits and manage them to a shorter life span, in view of the agents' lack of ready access to classified materials and the expectation that the MOIS would catch up with them sooner rather than later.

It is also an indication that the most sensitive Iranian organizations (or at least the higher reaches of these organizations) including the Islamic Revolutionary Guards Corps and the wider defense establishment, are now either free of American spies or at least more secure than before in the face of determined American espionage efforts.

Furthermore, it can be argued that as the CIA widens and intensifies its agent recruitment efforts it runs the long-term risk of making it more and more difficult to operate inside Iran, in view of the MOIS' proven prowess at penetrating American intelligence networks and learning the key secrets at the heart of these conspiracies at a relatively early stage.

In summary, there appears to be a disparity between escalating CIA espionage and the MOIS' growing counter-espionage resilience, with the latter steadily gaining the upper hand.

But despite clear improvements in counter-espionage capabilities and protective security measures, Iran is still some way away from making it prohibitively costly for Western agencies to operate inside the country. Indeed, all the major West European, North American and Israeli intelligence services are either active inside Iran or work closely with some elements of the Iranian diaspora.

Nevertheless, there are clear signs that in the pure intelligence war (as opposed to sabotage) Iran is beginning to turn the tide.

Mahan Abedin is an analyst of Middle East politics.

http://www.atimes.com/atimes/Middle_East/ML01Ak01.html

Tehran invokes revolutionary fervor
By M K Bhadrakumar

On Monday, Iran's powerful Guardian Council endorsed the Majlis' resolution adopted the previous day to downgrade the country's ties with Britain. The speed with which the process gathered momentum conveys the message that it carries the stamp of a decision at the highest levels of the Iranian leadership.

The protesters raised three main slogans: "Down with Britain", "Down with America", and "Down with Israel". They carried photographs of Iranian scientist Majid Shahriari and the Islamic Revolutionary Guards Corps commander Major-General Qassem Soleimani. Tuesday was also the first anniversary of Shahriari's murder, which was believed to have been carried out by Israel's Mossad with the support of Britain's Secret Intelligence Service, MI6.

Asymmetrical response

But the tipping point must be London's steps toward removing the Mojahedin-e Khalq (MKO) from the list of terrorist organizations. The MKO has been responsible for some of the most devastating terrorist attacks in the history of the Islamic Republic of Iran. Tehran holds the MKO responsible for more than 17,000 killings over the years. The most "celebrated" were of course those of Ayatollah Muhammad Behesti (who was next only to Imam Ruhollah Khomeini in the pantheon of the revolutionary leadership) in June 1980 and of the popularly elected Iranian president Muhammad Rajayi in August of the same year. The second terrorist strike came close to eliminating the entire revolutionary leadership under Khomeini.

It must be one of the quirks of modern history that Western intelligence has depended on the MKO, which practices an ideological mix of Marxism, nationalism and Islam, as the principal instrument to subvert the Islamic regime in Iran. Iranian security personnel and Lebanon's Hezbollah busted in a major counterintelligence operation in Beirut the entire network of the US Central Intelligence Agency in Lebanon and Iran.

The CIA was apparently using Lebanon as the "gateway" to penetrate Iran, given the relative freedom of movement between the two countries. Through May and June, Iranian security officials arrested more than three dozens Iranians who were working for the CIA. Their interrogation revealed that recent covert operations against Iran were the joint ventures of the CIA, Mossad and the MKO.

Thus the British move to rehabilitate the MKO (whose leadership is based in Brussels and is allowed to travel freely to the European capitals) has infuriated Tehran to no end. It seems to be the real reason behind the present crisis. Tehran is resorting to "asymmetrical" response by striking at the symbol of British power because it lacks the capacity to pay back to London in the same coin.

A deep chill is setting in with Iran's ties with Britain. The relationship has been a hugely troubled one historically, the high-water mark in recent history being the coup leading to the overthrow of the government of Mohammed Mossadeq in Iran in 1952, which is commonly attributed to the CIA but was actually the handiwork of MI6. And Iran remembers it. Iran knows better than most countries that Britain continues to be the "brain" behind America's policies - be it toward Iraq, Afghanistan, Syria or Myanmar.

Britain will almost certainly take its grouse over the Iranian snub to the European councils and will seek a "regional" consensus in the Western world to make diplomatic moves against Iran in unison. The predictable pattern will be that given the heightened feelings in London, such countries as Germany that have extensive involvement in Iran will fall in line. All the same, it becomes an occasion to take the temperature on European unity when chips are down over the Iran situation in the coming months.

This, in a manner of speaking, will also be the trial run for the Middle East. The lines are being drawn as the night of the long knives begins. Everyone understands it. And for the autocratic regimes in the Persian Gulf, there will be no corner to go and hide in. The hurried visit by King Abdullah of Jordan to Israel shows the panic over the gathering storm. Saudi Arabia's robust efforts to divide the region on Sunni-Shia sectarian lines haven't succeeded. The Arab street will find it difficult to accept the Western push against Iran. That is the thought worrying Abdullah most. What if this mass indignation erupts in Jordan?

The United States and Israel will no doubt work overtime in the European capitals to get the West to downgrade ties with Iran and if they succeed, they will beat the drums that Iran faces "international" isolation. But it may have no value other than propaganda. Clearly, Tehran has factored in the downstream diplomatic fracas that will follow by insulting Britain, and is nonetheless going ahead with its decision to downgrade ties.

So, what is on the Iranian mind? Some serious conclusions can be drawn. First, Tehran estimates that a US-British-Israeli axis is in any case gearing up for a confrontation. The strategic ambiguity - "all options are on the table" - no longer exists really, after the hardline policy speech by US National Security Adviser Tom Donilon at the Brookings Institution in Washington last week.

Evidently, Donilon spoke up for President Barack Obama, fully mindful of the criticality of an already supercharged Middle East situation:

We have enhanced our significant and enduring US force presence in the region. In addition, we have worked to develop a network of air and missile defenses, shared early warning, improved maritime security, closer counterterrorism cooperation, expanded the programs to build partner capacity, and increased efforts to harden and protect our partners' critical infrastructure.

The steps demonstrate unmistakably to Tehran that any attempt to dominate the region will be futile. And they show the United States is prepared for any contingency ... President Obama has said as recently as last week, we are not taking any options off the table in pursuit of our basic objectives.

Second, Tehran estimates that this confrontation may take place within Obama's first term as president - because it may well ensure the success of his bid for a second term. The manner in which the Obama administration jacked up the tensions with Iran almost in parallel with the commencement of his re-election bid hasn't escaped Tehran's attention. Third, emanating out of the above, Tehran has little choice left but to take to the high ground, as it is no longer a matter of Iran being flexible on the nuclear issue or not, of Iran being conciliatory toward Israel or not, or of Iran being "moderate" on the Palestine problem and the Arab-Israeli conflict or not.

It is pure power play and realpolitik. A similar situation arose in 1980 when Tehran couldn't care less anymore what the US and Britain thought of its revolution, and Tehran feels today once again that it is far better off without the British hanging about. The Iranian historical consciousness still regards Imperial Britain as a poisonous serpent that every now and then crept up from India to devour the succulent Persian fruit.

Collective memory

The animus against Britain comes out clearly in the statement issued by the student protesters who stormed the embassy: The embassy of the old fox should have been occupied much earlier. Every free-minded Iranian whose heart is beating for this land and has observed the crimes of the old colonialism against Iran and the Iranians should know that occupation of the embassy of the old fox serves the interests of Iran and our country's national interests.

The recent statements by Iranian military commanders have warned that Iran has known (and unknown) capabilities to retaliate if attacked. By warning explicitly, it hopes to inject some rational thinking into the US-British-Israeli discourses that are bordering on delusional estimations regarding Iran's policies and choices. But Tehran senses the futility of trying to influence the undergirding of the Obama administration's disposition anymore in the near term.

In the Iranian estimation, Obama is simply not interested in hearing Iran's narrative. His obsessive concern is his 2012 re-election bid, and his campaign interests lie in diverting the locus of the political discourse away from his failings in mending the US economy. A regime change in Syria and a move toward cracking down on the Hezbollah are just the kind of decisive leadership that he needs to project to get over the image that he "leads from the rear".

With an amazing degree of belligerence, Donilon continued in his speech at Brookings: The end of the [Bashar al-] Assad regime [in Syria] would constitute Iran's greatest setback in the region, a strategic blow that would further shift the balance of power in the region against Iran. Tehran would have lost its closest ally in the region. To be sure, the "revolutionary" mood in Tehran is developing against the regional backdrop. Tehran links Donilon's belligerence with the stationing of the nuclear aircraft carrier USS George H W Bush off Syria. The US 6th Fleet is also patrolling the eastern Mediterranean off Syria. The US and Turkey have asked their nationals to leave Syria.

Again, US Vice-President Joseph Biden has arrived on a surprise visit to Iraq, en route to Turkey on a mission to display US backing for Ankara's interventionist role in Syria. Turkish Foreign Minister Ahmed Davutoglu hinted for the first time on Tuesday that his country was ready for an intervention in Syria.

According to Britain's Daily Telegraph newspaper, a secret meeting was held in Istanbul last Friday between Turkish officials and representatives of the Libyan "opposition" to work out the logistics to bring Libyan fighters who were trained and equipped by the West to fight in Syria.

There are reports in the Russian media that the first contingent of 600 Libyan fighters may have already been transferred to Syria. The dilemma facing Turkey and its Western allies is that the Syrian armed forces have overwhelmingly remained loyal to the regime. Thus the fig leaf of Syrian "resistance" is unavailable, which in turn would expose the gamut of the outside intervention. The Libyan fighters are expected to make up for this operational deficiency.

In short, the writing is there on the wall that a Western intervention in Syria led by Turkey is shaping up. France has openly called for creating a European Union-backed humanitarian corridor that would allow Western intelligence and military advisers to move through Turkey into Syria and mastermind the regime change. Turkey was specially invited to the EU foreign ministers' meeting in Brussels on Tuesday.

All in all, Tehran is left in no doubt that the time has come to switch the Iranian nation into a revolutionary mode. The intrusion into the British Embassy invokes archetypal symbols of defiance and resistance, which are embedded in the Iran's revolutionary consciousness - especially when the collective memory about Britain is summoned. It is Iran's ultimate line of defense - as was the hostage crisis with the US in the months following the revolution when Iran came under siege.

Clearly, Obama, who has a panache for taking political gambles - and has so far won in a meteoric political career - is on a slippery path. Syria is a hard nut to crack; Hezbollah is waiting in the wings; so is Hamas. The odds are 50-50 that things may not happen the way Donilon tried to persuade us to anticipate, even if they may not be an exact replay of the outcome that horrified Jimmy Carter. On Tuesday afternoon, the US-Iran standoff moved to a flashpoint.

Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey.

http://www.atimes.com/atimes/Middle_East/ML01Ak02.html

Russia deploying warships in Syria

Russia is deploying warships at its base in Syria. The battle group includes aircraft carrying missile cruiser Admiral Kuznetsov. The deployment is being projected as pre-planned and having no relation to the current tensions in Syria, but it follows the US move to station the George H.W. Bush Carrier Strike Group with support vessels off Syria. Speculation is mounting about a western ‘humanitarian intervention’ in Syria.

US and Turkey have asked their nationals to leave Syria. Arab League is linking up with European Union on Syria. France is taking the leadership once again. Interestingly, Turkey has been invited specially to the EU foreign ministers’ meeting in Brussels. The moves look strikingly similar to the Libyan intervention. The Russian MFA spokesman said on Friday, “The human rights situation in a particular country may certainly be the subject of international concern, but human rights issues under no conditions should be used as a pretext for interfering in the internal affairs of states, in this case Syria. The Syrian people must decide their own fate, without ‘tips from outside. We absolutely do not accept a scenario of military intervention in Syria.“ There have been unconfirmed reports that Russian military advisors may be helping Syria to set up advanced S-300 missiles, which will make it extremely risky for the West to impose a ‘no-fly zone’ as it did in Libya.

The big question is whether there could be a US-Russia showdown over Syria. For US, regime change in Syria opens the road to taking on Hamas and Hezbollah next, which would isolate Iran. The stakes are very high. For Russia, loss of the Tartus naval base will be a serious blow that will cripple its capability to operate in the Mediterranean region, apart from Syria being an old ally. A US-Russia showdown over Russia can have implications for a host of other issues - Afghan endgame, Iran nuclear problem, US-Pakistan tensions, etc.

Significantly, Kremlin is deputing Russia’s ambassador to NATO, Dmitry Rogozin to Beijing and Tehran for consultations over the US/NATO missile defence system. Russia has been focusing on the ABM as a bilateral problem so far with US. Now, commonality of interests is being explored with China and Iran. The implications are profound for the regional security in Central and South Asia as well as the Far East.

To be sure, India’s ‘Act East’ policies - US-India-Japan ‘trilateral dialogue’ in particular - are in Russia’s sights too, as much as China’s. The ‘time-tested’ Russian-Indian cooperation seems to be heading for testy times even as India harmonises with the US’s Asia-Pacific strategy. PM Manmohan Singh’s forthcoming Moscow summit will throw light on the fault lines.

http://blogs.rediff.com/mkbhadrakuma...hips-in-syria/

[Prazak]

Re: PIMCO on Iran strike & Oil $ spike

Thanks for posting those Don.

[cjppjc]

Re: PIMCO on Iran strike & Oil $ spike

Nothing would surprise me. So I didn't vote. I did notice Fred voted for the EJ scenerio.

Lord help us, but doesn't it seem with hindsight all this has been so predictable.