Iran Suffering from Own Version of Peak Oil

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What’s going on in Iran? When the old guard starts shooting the young people, that’s not a favorable sign for the long term.

Last time Iran had a revolution, in 1979, it ushered in turmoil in the oil (and gold) markets for several years. Of course, the invasion by Iraq in 1980, and subsequent war, had something to do with it as well.

After 30 years, the Iranian theocracy – and well-connected family and friends – has pretty much taken over that nation’s economy. Most everything that’s worth owning – oil facilities, banks, industrial facilities, etc. – has some ‘revolutionary’ connection. And these folks are not going to walk away from it without a fight.

There are clearly a series of major disconnects within Iranian society. Young versus old, middle-class versus theocrat, reformer versus revolutionary. And then there’s the oil problem. Mr. Depletion and Ms. Rust.

Iran is suffering from its own version of Peak Oil. Iranian net exports of oil are falling. Iran’s oil infrastructure is aging. According to the U.S. National Academy of Sciences, the trend is that Iran will be exporting ZERO oil by 2014, which is a mere five years from now. That means almost no serious money will be coming in for the Iranian leadership and government.

So if you think that they’re rioting in the streets of Iran now, just wait awhile. Iran is headed for national insolvency and penury. It’ll get even more exciting. Then again, the Iranians may have nuclear weapons. Pretty depressing, huh? Better buy that gold while you can.

Byron King
for The Daily Reckoning Australia

Byron King
Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. Byron is also co-editor of Outstanding Investments.
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Comments

  1. If all this is true, then there can be only one solution that can save them and that is to develop nuclear power to fulfill their domestic requirements. The oil not used can then be exported to earn money for internal use. Perhaps to the Iranians then, giving up nuclear power would be the same as committing the nation to near-term poverty and chaos which is why they are not willing to buckle to foreign demands. Even if they did buckle, the chaos will still ensue and the hostility would not lessen from those foreign nations.

    K Warner
    July 6, 2009
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  2. Just cracks me up how nobody can talk about anything in Iran without someone having to have yet another crack at the “Evil White Culture” in some way or another. Religious fanatics kidnap US diplomats and hold them hostage while taking over the country….somehow it’s whitey’s fault….they then repress all other religions, culture, etc etc……introduce sharia law including stoning to death for things like adultery and all cultures are equal and it’s still whitey that is the big bad guy in the world. They hang juveniles for alledged sex acts supposedly committed years before….fine….can’t touch the whitey for pure evil though……they allow marriage and sex with girls as young as 8 years old……remember all cultures are equal….no critisism of Islam now. But there is one exeption to the all cultures are equal rule……you can hang it on white culture as much as you like. So according to the post above……even if Iran wasn’t repeatedly threatening to wipe Isreal off the map….and waffling on about the evil jews and the big satan at every opportunity…..even at UN meetings….despite their apparent zero tolerance of racism……they quite happily host mad muslims crapping on about Jews and Satanic Americans all the time. And even if all that were to stop……and they abandoned their nuclear goals……”the chaos will still ensure and the hostility would not lessen from those foreign nations” Those nations being……..white…….of course. Get real…….Iran is run by the biggest madmen since Hitler ran Germany. We will all live to regret that we ever allowed that regime to come this far.

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  3. An interesting link as a background to this:

    http://www.payvand.com/news/07/jan/1142.html

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  4. “Then again, the Iranians may have nuclear weapons. Pretty depressing, huh? Better buy that gold while you can.”

    Come on Mr King……….yes scare everyone to buy gold.
    Mr King…. Iran would be hard pressed to build/design a assault rifle little lo than to have the ability to build or buy any type of nuclear weapon.
    And then work out what the hell they could do with it?………nothing!

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  5. Pretty depressing for the Iranians I’d say – The Israelis would love to get that dirt on them! And good ole Joe Biden is in there stirring the pot … Ah, politics, politics, politics! But then Yes, it is a bit silly and alarmist – Even Mossad reckons Iran aren’t going to have a nuke until 2014 earliest: http://www.reuters.com/article/topNews/idUSTRE56507F20090706?feedType=RSS&feedName=topNews
    Plenty more time for hand wringing, Pontius Pilate posturing, sabre rattling, enlisting allies and seeing where it all leads before Uncle Sam can really hope to justify playing the weapons of mass destruction card again surely?

    I suppose a few kilograms of shiny yellow stuff in the bum bag could be made to sound handy if one was planning on fleeing a war torn Middle East? But these days a thoughtfully prearranged overseas bank account would probably be less bother. Some US T bonds even??? Please, please, please says Joe!

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  6. Isaac, Ned

    I don’t underestimate Iran’s military capability. My understanding is that they have a few small tactical nuclear warheads and the missiles to deliver them. The nukes were purchased though Mafia sources during the early 90’s, and as Ned says, Iran is yet to manufacture its own. Iran’s defence industries manufacture advanced jet trainers (they are a bit like the UK’s Hawk), assault helicopters, tanks and small arms. Their key facilities are defended with advanced radar and SA9 ?? missile systems. Iran’s airforce is no match for what the US has but some of their stuff is modern. On the ground they have access to the Kornet anti tank missile which is designed specifically to counter the armour of an Abrams.

    The good news is that the hardliners in the regime are likely to be turfed out soon.

    Coffee Addict
    July 7, 2009
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  7. C.A..I seem to recall we heard pretty much the same story about Iraq a few years back. Having modern weapons is one thing, being able to deploy and use them effectively is another thing. I doubt Iran could move a hamster from one cage to another without a dozen sensors going off in the Pentagon ;)

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  8. Hi Greg. Trust me on this one. On the surface the Iran and Iraq stories are presented in a similar vein but there are differences underneath. Iran has a much greater conventional defence capacity and unlike Iraq there have been no long term economic trade sanctions against Iran

    What is bringing the hardliners down are: fuel shortages, inflation, unemployment, declining infrastructure and the departure from office of Bush. With Bush gone the hardliners have no credible bogey man to rally against. If the hardliners are tossed out the other points of dispute may just fade away.

    Coffee Addict
    July 7, 2009
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  9. Got to admit that I mightn’t be heartbroken to hear the current Iranian regime had unravelled of its own accord? But that certainly doesn’t make me feel inclined to nudge it.

    But then I’m biased – Back when I was a boy, regime change wasn’t widely accepted as a good reason for trundling off to war. And I do know that the West can work quite happily with cultures that have plenty of primitive ways – Providing they cough up their natural resources and/or other tradable goodies without causing us too much grief.

    Maybe if we’d just be up front and say we want your oil and we want it cheap and we want it reliably and we want it now, something could be figured out? Maybe not??? If not, then it’s just time to get our oil elsewhere and pay the price for mine. It wasn’t $147 a barrel oil that crashed the world economy – It was the West shooting itself in the foot with debt – Mainly for other doodads I gather.

    A side note, but Oz is a pretty heavy user of oil on a per capita basis. I was surprised when I realised just how hooked we are on the stuff. Shouldn’t have been I suppose – Lots of distance between places and big mining trucks burning up diesel. Might be smart to rethink some of our national strategies in relation to it though.

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  10. Same problem, even worse, for Mexico. They will be at zero oil export in 2012. With the economic crisis bottoming out the, they have no chance for recovery. Dark times to come.

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  11. Iran will need either nuclear or solar energy to replace oil. Not a lot of other options in al landlocked country like that.

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  12. Richo that is why they are probably trying to get some reactors online. In fact across the Middle East quite a few nuclear power plants are slotted for construction because oil rich countries would rather export oil than burn it to generate electricity.

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  13. I have never read as many poor posts on DR as I have here. Iran is pluralistic … it has direct minority representation and its jews generally stick up for their government and have always had a safe haven there.

    As for economics they have domestic issues with populism and inflation. They have rigorous domestic debate on these issues. and yes CA they have had enduring US economic / financial sanctions which is worth 32% of Iranian GDP at last count. Now if any liberal western country had 32% knocked off its chit how would it be going right now?

    http://en.wikipedia.org/wiki/Sanctions_against_Iran

    And those supporters of the Shah of Iran as an upholder of western values – you have to be kidding! Maybe some reading back from the middle Asian power politic history that the Brits wrote mainly for themselves and the Russians took decades to even notice. Maybe something on the Khyber pass as the logistical route for central Asian resource exploitation that the west is trying to wrest away from a more natural feed to Russian or chinese industrial capacity. Maybe something on Churchill and how he was the first to use chemical weapons in warfare against the Pashtun and how they kicked his behind.

    If you don’t think the liberal facist west has at least the equal of reserve powers to an Iranian theocracy you are kidding yourself. If you think either blue or red in the US can come to power with a popular mandate on US foreign policy you are sadly mistaken. If you think Australia can navigate a foreign policy without realpolitik forced support of positions that oppose the natural inclination of our community then you are living in loopy land. So if you think the Mullahs will get the exercise of reserve power more wrong than the liberal fascist elite of the west then you are welcome to that opinion if it is by a matter of degrees but it is not one that I would send my kids to war in a sovereign country looking abiding by its own interests under the Westphalian principals that the liberal fascists are trying to trash.

    So we see these slapstick efforts every time the US/UK roll out a propagandist effort to support a campaign of limited warfare (the Vietnam middle class revolt prevents full scale warfare until such time as they could successfully create a large enough bogeyman that is painted as being the blame for economic decline or “terrorist incidents”.

    If you think this is idea of western liberal facism and terrorism is a joke I would encourage those to stick to reading factual historical accounts like the below to see how truth really is as more alarming than fiction.

    http://en.wikipedia.org/wiki/Operation_Northwoods

    There are no laughs when looking at the liberal-fascist camp or having to endure Beeb propagandising on Iran which discredits us all and threatens our kids futures. Likewise with Biden turning up the ratchet threatening Israeli aggression, with the Urgurs insurrections in China, and the old chestnuts like the contrived Grenada invasion and the Bay of Tonkin incident that gave LBJ his impramateur to get stuck into Vietnam, the Dali Lhama movement, the Sudanese provincial conflicts, the Bosnian war, the Kosovo/KLA backed war, with the disclosed US financial support for groups proved to have committed acts of terriorism within Iranian borders, with liars that continually quote Ahmedinjad as having threatened to have laid waste to Israel. And yes when Saddam accused G (HW) Bush of being a double crosser he was spot on.

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  14. Iran is not land locked. The Iranians(Persians) are not afraid to fight. They fought Iraq when Saddam was in charge. As the Persian empire, it waged war to acquire new territory. Iran has many mountains and is much bigger than Iraq. The Americans would be sorry if they tried taking over Iran. It would not be a push over as Iraq has been.

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  15. Ta Ross – You don’t happen to have any thoughts on why the US has a “thing” about North Korea do you?

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  16. Ross I am guessing you mean Gulf of Tonkin?

    You sort of lost me with liberal fascism bit..are you simply saying that U.S democrats don’t mind bombing stuff either?

    As for chemical weapons..they were used way before Churchill’s day.

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  17. Australians do have a very long track record of being global sheep despite what our preferred self perception might be – “All the way with LBJ” predated by “Australia will be there” come to mind?

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  18. Ross: You are correct on the economic sanctions issue and I was wrong. I had heard that it is easy for Iran to get around some sanctions but I accept that the underlying impact of the sanctions is significant. I guess the lack of investment in a petrochemical industry may be partly due to sanctions and partly due to the perceived vulnerability (to agression) of any such investment.

    I stand firm on my view that any agression against Iran, in current circumstances, is unlikly and (unlike Iraq) Iran has a very strong capacity to defend itself.

    Do you have any views on the likely path forward for Iran?

    Coffee Addict
    July 8, 2009
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  19. Greg, Liberal Facism is something that I think was coined before WWII when those people associated with Fabianism started to see the light. I think it was HG Wells. The Fabians are fundamentally anti-democratic and charge that the average Joe on the street doesn’t deserve emancipation because he is not educated enough in world matters. I however trust the average Australian Joe’s b/s meter far more than a crude bastardised elite and even the average US Joe’s meter once they get past a USA Today level of knowledge.

    Anyway the Rockefeller / CFR lobby’s use of Liberal Facism and the US government programmes like Human Rights Watch are high water marks. Basically you use a liberal domestic cause like say womens rights or freedoms as the excuse to regime change or otherwise shoot up a country that has resources or provides access to resources. One problem for the US is that they have run out of their enemy’s enemies that are willing to deal with them because G (HW) Bush’s double crossing efforts destroyed US credibility from South America to Africa to the Middle East and Asia. If you do business with the US and do their bidding you get it in the neck in the end. In some ways Saudi and Egypt may be the last exceptions standing but in others they have chosen not to get sucked in either.

    Here is Australia we like to kid ourselves that we have these Liberal Facists under control. Those like Sheridan and Hartcher and Sheehan who suck up to govt as being there to execute taking the safe public line by us as a nation while propagandising for US Liberal Facist offensives have long ago been hijacked by the Liberal Facists and owe nothing to anyone but themselves and their little elite world govt agenda chums.

    CA, I don’t have any set view on likely outcomes for Iran. Events will likely unfold. I don’t think the Khyber pass supply line will ever be viable let alone to host a pipeline. I think the Russians will give the US just enough logistical access for them to make idiots of themselves like they did in Khyrgistan and anyway air lift is useless. Land supplies via Russian territory itself won’t have any arms included. The terrain and the depth of the educated scientific elite is the big difference between Iraq and Iran as I see it. They will have reverse engineered everything from US Tomcats to their missiles extracted from the field in Iraq. The US high tailed their aircraft carrier out of the Gulf recently when they got a demonstration of Iranian defensive capability. So I agree on that score.

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  20. Ned, I don’t have much to add on North Korea. They do act rationally and have been double crossed too many times making them even more dangerous. Hopefully they will keep screening episodes of MASH in the US. Most of the interest should centre on the high risk U turn taken by the South Koreans that reignited most of what we now see. I’m not convinced of the popular mandate in this respect. North Korea is an insular state and maybe there is this great belief about in the potential of a Berlin Wall crumbling effect. I think however you always need to look at truths as they are seen by the local population. There was this deep power of sadness and ozzies getting a bum rap in Germany that led me to predict that wall’s collapse ahead of the west germans themselves thinking it a possibility.
    Greg, I forgot re Churchill, remember he was an old codger by WWII and this goes back pre WWI when he was in the field.

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  21. Ross…yes I knew you were referring to his field days in the Army in the late 1890’s. What I was hinting at was chemical weapons has been used long before then.

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  22. Ross, keep posting. You’re right on the money.

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  23. Iranians with nukes, so buy gold? Why? Because peace might break out? Nobody is going to attack a country that _really_ has nukes because that would be suicide. If it ever happens, North Korea will be first.

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  24. To be honest I cannot recall what the West are annoyed at the Iranians for in the first place. Is it because they never filled out their application form correctly to have a nuclear reactor? If that is the case I do not recall India or Pakistan filling out an application form to have nuclear weapons either.

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  25. About as far back as I can personally remember is that the Americans were backing Saddan Hussein to overthrow the nasty Soviet backed(?) Iranians who’d turfed out America’s good mate the Shah of Persia or some such??? – Some of this stuff gets pretty convoluted as the major powers’ national interests (re oil?) are seen to be better served by backing different horses over time I suspect.

    And the Yanks seem to have gotten some sort of joy from making the Russian Bear squirm – Even in very recent times – Missiles in Poland and let’s support the Georgians? But then the Russkies seem to have had their own less than tactful moments – Including the Cuban Missile Crisis!

    Heck, the Americans and the Taliban were even best of buddies once upon a time – Again, aligned against some nasty Commie regime – Even though the same wicked Stalinists had given Afghanistan many years of peace and relative prosperity – As I recall?

    Seriously, some of this stuff doesn’t bear looking at – It’s very hard on the head! America has almost as endearing a track record re managing its foreign policy as its economy! As for Russia? Well, we know what happened to its economy. And foreign policy. Smile!

    Had a dig on Churchill and poison gas. The closest I could get was the following where he’s mentioned as reckoning the use of tear gas in Iraq just after WWI was fair game: http://en.wikipedia.org/wiki/Alleged_British_use_of_gas_in_Mesopotamia_in_1920

    Although there seems to be a very similar reference in a Marxist writeup which manages to put a rather different twist on it:
    http://www.internationalist.org/chemwarhoax0503a.html

    My recollections on early gas use (in WWI) follow: The French were the first to give it a burl when they used tear gas. No one seems to have cried too much over that(?) if you’ll pardon the pun. The Germans used Chlorine a bit later – That caused the Allies to do a rather serious cough and a spit (of a half lung or two?) They reckoned it was a violation of a 1896 Hague Convention on the rules of war or somesuch? But the Hun pleaded a technicality – He hadn’t actually fired it at them; Just cracked some cannisters open – And the wind did the damage.

    But, yeh, it’s interesting that even prior to 1900 (as best I can recall) some rules had been written on what was and what wasn’t fair game re gas. So it very well may have been available before that – Certainly the potential was recognised. I looked at it a while back – I fully suspect anything I’ve mentioned here came off Wikipedia. Although some of it might be found under Trench Warfare rather than Gas.

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