War On Iran: Energy War Moves From Disruption To Destruction
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The war on Iran continues to be the most important issue currently moving the world.
Israel and the U.S. are continuing their assassination campaign of Iranian officials. It was confirmed today that Ali Larijani, the head of Iran’s Supreme National Security Council, was killed by an Israeli airstrike on the house of his daughter. The strike caused several dozens of additional casualties. Larijani was a highly capable pragmatist, not a hardliner. His death is a loss for everyone who seeks peace in the Middle East.
Two of the leaders of the Iran’s voluntary Basji militia were also killed in Israeli airstrikes as was Iran’s Minister for Intelligence, Esmaeil Khatib.
None of these deaths will lower Iran’s will or capability to resist. It knows that it has is able to throttle the global economy via its control of the Strait of Hormuz and thus has the upper hand in any long term conflict. A some point the U.S. will have to agree (archived) with Iran’s end-of war conditions:
Iran’s strategic objective now is to impose such high costs on the United States and the Gulf states that Trump will opt for a cease-fire that includes a restriction on future Israeli actions. In essence, Iran wants to force him to choose between Israel’s security interests and the stability of global markets. The bottom line is that the war Trump started has no good ending.
Yet Israel today does not feel bound by any restrictions. It has just launched an attack, with U.S. backing, on Iran’s major South Pars gas field and other Iranian energy installations:
Israel has just bombed Iran’s largest natural gas processing facility in Bushehr Province. Israel stated that it conducted this attack in full coordination with the United States.
The attack is consistent with Israel’s strategy of aiming to destroy not only Iran’s military and military industries, but also its industrial base and its economy. Israel’s objective is not regime change but state collapse.
In this particular case there is I believe an additional motivation behind the Israeli attack. Iran has repeatedly indicated that if its energy infrastructure is attacked, this crosses a bright red line and that it will retaliate with attacks on energy infrastructure throughout the Persian Gulf.
If Iran does indeed respond in this manner, the prospects of direct participation in this war by Gulf Cooperation Council (GCC) states increases significantly. This is exactly what Israel would like to see, and would also explain why the US, which previously counseled against such attacks, now supports them and participates in their execution.
This attack is not only a demonstration of US-Israeli capabilities, but also of US-Israeli strategic failure and arguably of growing desperation as well.
Iran’s gas production is mostly used domestically. Its electricity production largely depends on its gas infrastructure. The strike is also a hit against Turkey which receives 15% of its gas consumption from Iran. Iraq will be hit hard too as its electricity production also depends on Iranian gas. A spokesman of the Foreign Ministry of Qatar condemned the attack.
The most rational response for Iran will be to hit Israel’s energy infrastructure. Strikes on Haifa and Israeli gas facilities will come too but Iran’s immediate response, as promised, were evacuation orders for five energy installation in its neighboring Persian Gulf countries:
SAMREF Refinery – Saudi Arabia
According to Bloomberg the facilities are being evacuated. Energy prices in the commodity future market have risen in consequence of the strikes even though they are, due to manipulations, still much lower than real world prices (archived):
The growing disruption to supplies has driven a number of regional price benchmarks to all-time highs, even as global marker Brent has fallen back to just above $100 a barrel after jumping to nearly $120 in the early stages of the Iran war.
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The price of a barrel of oil in Oman — which exports from ports outside the Strait of Hormuz — soared to nearly $154 on Tuesday, driven by intense competition for the small volumes still leaving the Middle East.
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“Right now it feels like the paper and the physical market has dislocated,” said Ole Hansen, head of commodity strategy at Saxo Bank. “[This is] the biggest disruption since the 1970s and Brent can barely hold above $100.”
The $100bbl is for light sweet crude while the market needs heavier variants as well as processed products:
Current spot prices for gasoline, diesel, and jet fuel on the West Coast appear unhinged at $147/bbl; $162-$170/bbl; and $186/bbl until one considers that refiners in China, India, Japan and South Korea face physical crude costs that top $150-$155/bbl.
The strike on energy facilities in Iran has opened another level on the economic front of the war.
Blocking ship from passing Hormuz is disruptive. Striking energy facilities is destructive.
It will take a long time to repair the damage.
posted by Satish Sharma at
07:55
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