TSG IntelBrief: Iran: Oil, Sanctions, and Risks
May 11, 2011
Following the death of Usama bin Laden, and while chaos continues to engulf the Middle East and North Africa, and the world’s oil traders make untold millions by betting on the oil supply, there is an equally destabilizing conflict being played out, which is sending out increasingly dangerous political and economic shockwaves.
This conflict does not use bullets, bombs or airframes, but rather words and rules, procedures and processes. But the effect is no less profound.
The conflict is the result of the quietly increasing stranglehold of sanctions on Iran, imposed by the European Union, the UN and the U.S. and the tensions it creates as a result of the impacts that are spiraling outwards from this process.
Iran used to be a cheap country in which to live, but no longer. Thanks to sanctions (or no thanks to sanctions if you are an Iranian) the cost of everyday goods and services—from electricity, petrol, gas and water to flour and cooking oil—have rapidly escalated.
This is because the Tehran government has been forced to remove subsidies to plug the domestic economic gap caused by the impact of sanctions on its ability to trade.
The impact of the sanctions–imposed in response to the alleged Iranian nuclear weapons’ program—is playing out in a way that is having a growing impact on the physical and economic security of the Gulf states, the military posture in Israel, and the energy security of the West. The effects radiate as far as Latin America.
A concern is that the law of unintended consequences is waiting in the wings to come into operation and make an already confused and dangerous situation even more confused and dangerous. This will have repercussions on both politics and business around the globe.
In October 1939, Winston Churchill said of Russia: “I cannot forecast to you the action of Russia. It is a riddle, wrapped in a mystery, inside an enigma; but perhaps there is a key. That key is Russian national interest.”
That is now as true of Iran as it was—and still is—of Russia.
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