Topic: Iran's nuclear program
Biweekly column by Sam Barden
On April 15, Iran will meet with the 5+1 group of Nations, comprising the U.S., Russia, China, Britain, France and Germany, in Istanbul to discuss Iran’s nuclear ambitions. Economic sanctions are the current weapon of choice against Iran for the U.S. and European Union, who believe Iran is building a nuclear weapon. The U.S. and EU are exerting an enormous amount of pressure on nations not to trade with Iran.
The sanctions have recently been extended to the SWIFT communications system as Iran is squeezed out of the banking system. However, many nations are far from happy about the U.S. and EU pressure. It is not beyond the realm of possibility that the sanctions game is being turned on its head and it is the U.S. and EU that are being sanctioned.
Imagine that the BRICS nations (Brazil, Russia, India, China, and South Africa) decide as a trading group to collectively ignore the U.S. and EU sanctions and continue to trade with Iran and buy its oil. In fact, this is increasing likely. At a BRICS conference two weeks ago, creation of a new BRICS bank was at the top of the agenda.
The key goal of the bank would be to facilitate trade between the BRICS nations, without involving the EU and U.S. dollar. What would the U.S. and EU do? What could they do? The reality is that the U.S. and EU need the BRICS nations more than the BRICS nations need the EU and U.S. That is the reality.
None of the BRICS nations wants to cease trading with Iran, regardless of the economic threats from the U.S. and EU. The economic paradigm has already changed to render the U.S. and EU sanctions voidable. In fact, they are more likely to end up excluding the U.S. and EU rather than those countries they are trying to convince to adopt the sanctions. Imagine that.
Imagine that Egypt, Libya, Syria, Iraq and even Afghanistan end up with popularly elected governments. The trend in each of these countries is not one of closeness to either the U.S. or EU. In fact, it is quite the opposite. Many Iraqis and Afghanis view the U.S. and EU (Britain) as occupiers. The result of the U.S. and EU led liberation of Libya is likely to be a complete breakup of that country. Egypt meanwhile is well on its way to electing a popular government. In Syria, the people want change. They want an end to one-family rule, but they do not want the U.S. or the EU to influence this process, much less have troops on the ground in Syria.
In each of these countries, the trend is clear. They want the U.S. and EU to have less influence, not more. Imagine that these countries rejected trade with the U.S. and EU in favor of trade with the BRICS and Iran. This is a reality that is in fact likely to emerge on the current trajectory of relations between the U.S. and EU on the one hand and these countries on the other.
Imagine that the Arab spring comes to Saudi Arabia. Imagine that the Saudi people follow in the footsteps of their neighbors, like Egypt or Syria, and demand regime change. A change in the Saudi leadership, which is what an Arab spring there would mean, would be catastrophic for the U.S. in particular, but the EU as well. At best it would mean a temporary disruption in oil supplies and at worst a complete re-negotiation of all Saudi oil contracts. This of course would be an economic and political disaster for the U.S. and EU, not to mention for the house of Saud. Although this scenario remains in the realm of imagination for now, it could all too easily become a reality.
Imagine that the U.S. and EU attempt to isolate Iran using sanctions backfires and ends up isolating the U.S. and EU instead. Forced to choose, the weight of consensus among the rest of the world might be too strong a force for the U.S. and EU sanctions to withstand.
The Iran and 5+1 nation talks scheduled for Istanbul in a few days’ time are not merely about Iran’s nuclear ambitions. They are about consensus economics versus conflict economics. Imagine that some breakthrough agreements are reached. The U.S. and EU need a positive result as much as Iran does from the talks in Istanbul, not because of any nuclear threat, but because of an economic one. The era of consensus economics is here. Sanctions represent conflict economics - and for the U.S. and EU - could prove far too damaging to enforce. The emerging reality is proving to be very different from what it was imagined that the sanctions would achieve.
The views expressed in this article are the author's and do not necessarily represent those of RIA Novosti.
Current markets are anything but global or integrated. What if we had a paradigm shift in the way we think and transact when doing business with each other? Balanced global trade can only occur if we have transparent, accessible and efficient markets. We are on the cusp of achieving this, although most people cannot see it. Sam’s Exchange aims to give its readers a clearer view and a platform for discussion. Markets, trade and economics are in fact nothing more than the result of our thoughts and actions expressed in numbers, not the reverse.
Sam Barden is founding Partner of SBI Markets DMCC, a Dubai-registered commodities trading and advisory company. Barden has worked in the global financial markets for more than 17 years in Europe, Russia and the Middle East. He has advised and executed strategic transactions for both the government and private sector, in particular in energy and commodity markets, advising various energy producing nations on their strategic market developments and interaction. He holds a degree in economics and finance from Victoria University, Melbourne, Australia.
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- email@example.comWell written article Sam!20:26, 10/04/2012Imagine that the U.S. and EU attempt to isolate Iran using sanctions backfires and ends up isolating the U.S. and EU instead.
One just knows that this is a very strong possibility as world power shifts away from the United States and the European Union.
One only has to look at the energy stats for the United States and Europe to see what is going to be happening by 2015.
Deep concern as US domestic oil supplies begin to dry up. 1.74 years remaining.
United States Oil Production 2011
Oil Production: 9,056,000 bbl/Day 
Oil Consumption: 18,690,000 bbl/Day 
Proven Reserves: 19,120,000,000 bbl/Day 
Days available for production 2,111 at 100% retrieval. (unrealistic)
Years of production left 6. Exhaustion date is 2018. (unrealistic)
Days available for production 2,111 * .30 = 633 at 30% retrieval. (realistic)
Years of production left 1.74. Exhaustion date is 2014. (realistic)
Data source: http://www.globalfirepower.com/country-military-strength-detail.asp?country_id=United-States-of-America
Unless a country's oil reserves are inflated by 70% it is simply unrealistic to pump out 100% of a country's oil reserves. Realistically 25% of a country's oil reserves can be pumped out of the ground.
For the case of this comment I have been optimistic at 30% retrieval.
Conclusion of these numbers: economic collapse of the United States is inevitable beginning in the year 2015 unless a new energy source can be found.
By the year 2015 the United States needs to find an additional 9,056,000 bbl/Day to 10,000,000 bbl/Day of oil to import in order to stay economically viable.
The oil situation in the United States is now absolutely CRITICAL!
Thank you Sam for a GREAT article.
- metchihow to define democracy!?00:49, 11/04/2012Immagin that the US and the EU mind their own business and do not interfere with other country's affairs...immagin that they keep their vitality to themselves only, leaving other nation's vitality to thier own vitality...
can you tell how the world will look like then...economically and politacally...
this is democracy ...Munia
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Russia has become very adept in playing the diplomatic game, in which victory depends on choosing the right associate or partner. But there are a growing number of claimants to this role in the new horizontal and interdependent world. Aside Syria and Iran, being still important, the new venues for the application of practical diplomacy may well be Ukraine, the East China Sea and Afghanistan.