Policy Of Blockade

A. Jacksonian (A.J.) has an excellent post up tying Iran's natural gas problems with Turkmenistan with its oil problem and its internal economic woes. Let us start with this bit that A.J quotes from Reuters

Ebadollah Ghanbari, who heads the public relations unit of the national gas company, said Turkmenistan on Saturday slashed exports to Iran by half to 10 million cubic metres, before stopping deliveries completely a day later.

"In an official letter they said it was due to technical problems," he told state broadcaster IRIB. "Since yesterday evening Turkmenistan has completely cut its gas exports to Iran."

Despite its massive gas reserves, Iran has been a net importer of gas since 2002.

A.J. goes on to say:

Well, if you haven't read my previous stuff on Iran's Oil Problem and its Oil Outlook, now is the time to, because Iran just hit the wall.

Excellent advice since those articles provide excellent background.

Iran subsidizes natural gas so as to keep things running and folks happy. They don't use natural gas to rejuvenate their oil fields, which is one of the cheapest ways to do it. Instead, with non-market prices they get steep use and an increase in that use. If an energy source is cheaper than others, it gets over-utilized, just ask the folks in Iraq who don't pay monthly bills for electricity but get the 'all you can eat with a flat tax' deal from the Government. If there were meters, Iraq's power problem would diminish greatly, but that would also stall out the economic recovery so it will wait. Iran, however, is selling the natural gas at a rate cheaper than re-utilizing it for their oil fields. In theory they should have more than enough to export.

Which brings up the prime question: Why is Iran importing any natural gas?

And why is 5% of their natural gas supplies coming from imports via Turkmenistan?

This was supposed to be a money making export, as they had just finished a pipeline deal with India for natural gas. So *what* are they going to put in that pipeline? Right now the answer is NOTHING.

The folks in Turkmenistan suddenly had a great awakening: they were keeping the Iranian natural gas market afloat and NO ONE ELSE WOULD SELL TO THEM.

If you were in that position, what would *you* do?

Can you say: raise the prices?

A.J. then looks at what the Iranians can do in this situation with respect to natural gas prices.

Iran can't raise the price without causing a major recession or depression and starting to shut down some sectors of the economy. Plus, if they raise the prices for natural gas, they will be raising the cost of operating gas fired electrical facilities. A 'double-whammy' on the economy.

Iran might start 'rationing' it, but how they would do that is beyond me. Maybe start closing shut-off valves to certain neighborhoods for half-a-day at a time? That will start to cause some *serious* complaints, not just from college students or government employees, but from everyday folks.

Iran has only one solution that it tends to use for everything, and that is to shift terror operations. So Turkmenistan can expect to get its own little Hezbollah and meet-ups with the Qods forces. Which will be a blessing for Iraq and a 'holding pattern' in Lebanon. Unless, of course, Turkmenistan is *serious* in which case the next year in Iran is make or break.

And if Iran has to *pay up* a lot of terrorist cash will suddenly *dry up*.

Thank you to Turkmenistan!

I'd like to look a little further into the situation and see what the US has done to help put Iran in its current position.

A. J.,

You and I have been on the same page on this for quite some time.

I covered the Cash Flow Jihad aspect. You have been covering oil.

America is squeezing Iran by preventing them from earning income from other than oil and cutting off their cash flow from western banks. Iran's own bad policies (as you point out) are squeezing their oil income.

In other times this would be called the policy of blockade.

I posited that they had a window of opportunity for their jihad program. They lost the war in Lebanon (intended to weaken Israel - it did not). They needed an unstable Iraq (so they could take Iraqi oil fields once America left Iraq. This was an effort to stave off collapse by the usual methods. Theft.). That didn't work out either.

They are now between a rock and a very hard place. Afghanistan is their last hope. However, even if they win it they gain a liability, not an asset.

If they don't get nukes within a year (instability in Pakistan ring a bell?) they are fooked. They are screwed any way. A huge nuclear arsenal didn't save the USSR from economic collapse.

Let me add that the Iranian regime sells gasoline in Iran for under 50¢ a gallon. About 1/4 the world price.Iran raised gasoline prices by 25% last summer. It was around 34¢ a gallon previously.

In addition economic genius Ahmanutjob withdrew all the Iranian cash reserves from the world banking system to stave off disaster. It created an inflationary spike and produced nothing as the money was not invested but went to support jihad and stave off internal economic collapse.

Paying off the Shiites for the disaster in Lebanon must have cost a lot. However, without that payment Iran loses prestige and its proxy Hizbollah.

Historical precedent - Germany summer of 1918.

Another point. Perhaps the CIA leak - taking military pressure off Iran - was policy and not a rogue element in the US Government acting without authorization.

In fact it may have been in Iran's interest because by making a deal re: cutting the funding of the insurgency in Iraq in exchange for a reduction of American military pressure they reduce their cash flow strain.

My guess is that it will buy time for Iran, but not enough. So it was a good deal for us. If we reckoned that the slide had gone so far as to be irreversible.

Cross Posted at Classical Values