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Iran Attack, Rumours of a Hard-Rain and the Price of Oil: My Trip to Tehran

Politics / Iran Mar 31, 2010 - 06:25 AM GMT

By: Andrew_Butter


Best Financial Markets Analysis ArticleOil-Blogger Alan Von Alterdof ( is convinced that pretty soon Iran is going to “get what’s coming to it”, he tells us:

Hundreds of powerful US "bunker-buster" bombs are being shipped from California to Diego Garcia in the Indian Ocean

Abu Dhabi web news: "Iranian president said he expects war to break out somewhere between spring and summer of this year"

Iran incursion takes Iraq oilfield. Could be a tripwire. Raising Q1 crude outlook to $150 barrel without Israeli attack, $300 if war.

Interesting how the “bunker-buster” story got out, it was made public by the US Military….like a sort of “message”? Or perhaps it’s a decoy given that in 2004 Israel took delivery of 5,000 of those, and well if a bunch of bunker-busters (with genuine British Passports “accidentally” tucked inside), mysteriously fell out of the sky one dark night, how could anyone know whose fault that was?

The danger of a war or an escalation of the simmering belligerence into sticks-and-stones (outside of the danger for people who might get caught in the crossfire), is that from about 2001 Iran has been stocking up with Russian-made 3M-82 Moskit anti-ship cruise missiles (NATO designation: SS-N-22 Sunburn), a weapon for which the US Navy currently has no defence (and nor do oil tankers).

The range is 100 miles, so draw the shortest line from Dubai to Iran, and from Abu Dhabi’s new oil terminal in the Indian Ocean, near Fujairah, to Iran, and any ship in those waters are a potential target from mobile launchers located anywhere along a 500 mile coastline; that’s about a 300 mile danger zone that tankers coming from Saudi, Qatar, Kuwait or Iraq would have to travel through; and you can’t take out those Sunburns from the air, the only way is to put in (a pretty sizable) force on the ground, they found that  out with Saddam Hussein’s SCUDS; of course the Sunburn is a bit more accurate than those were, like 500mm going at Mach 2.1.

Would they?

Well they did before, although back then they had mainly rubber boats (it was the Iraqi’s that had the Exocets like the ones they blasted USS Stark with (friendly fire)).

 The “tanker-war” then, tripled the price of oil; and one gets the feeling that if Iran was attacked by Israel on the grounds that they are in violation of the Nuclear Non-Proliferation Treaty (which Israel didn’t sign, and nor did Pakistan or India), they might get a bit itsy; like they might say that Israel doesn’t have a mandate from the UN to enforce the NNPT.

Would USA attack?

I’m beginning to suspect that America is starting to think about getting around to doing a cost benefit analysis on the idea of launching unprovoked attacks on people they suspect might possibly have had some contact with terrorists, or that might be thinking about perhaps some time in the future doing harm against America.

For example the 9/11 Commission pointed out that neither Saddam Hussein nor the Taliban had anything to do with 9/11 and gave no indication those guys had any intention of organising or even funding any sort of attack on America.

Interestingly it was the Northern Alliance (America’s allies) that invited bin Laden to Afghanistan after he got kicked out of Sudan following the Nairobi bombing, he only ended up on the Taliban “side” after they took over the town he was in.

And when the Americans accused him of “involvement” in 9/11 the Taliban offered to get hold of him and put him on trial (in Afghanistan) – in retrospect it’s possibly a shame George Bush turned that offer down flat given as (a) they still didn’t find him (b) one of the things about anti-terrorist operations, is to know where the enemy is (a GPS reference point is real helpful), and if George didn’t like the way the trail had been conducted, well he would at least known where the guy was.

Regardless, George wasn’t one to look to save a few nickels on a good war; some analysts say that whole thing will have cost $3 trillion by the time its “Mission Accomplished”…and the reward?

Well there wasn’t another 9/11, but there isn’t any good evidence that if USA had not borrowed that money to go to war, there might have been another similar attack. Some analysts say that by going to war he actually increased the chances of America being attacked, but who knows? What’s done is done, although $3 trillion is a lot of money to spend, particularly in a credit crunch.

Do the Iranians want to be attacked?   

Recently the Iranians moved some of the equipment that they use to enrich uranium, out of the bunkers, into the open, that’s a bit like painting a big bulls-eye, waving a flag, and saying, “COME-AND-GET-ME”.

Meanwhile, in response to President Obama’s initially friendly overtures towards Iran just after he was elected, President Ahmadinejad went on an “anti-charm” offensive.

He refuses to speak English (even though he appears to understand it perfectly), and he delivers his tirades in riddles. But he’s not stupid, he has a PhD in Transportation Engineering; and he certainly knows how to wave a red-flag at the pro-Israeli lobby in USA. So he waved the flag, and got exactly the knee-jerk response that he was looking for.

By-the-way no he didn’t “deny the Holocaust” or say Israel should not exist - what he said was “further study is required” and in any case what did Palestinians have to do with it (that doesn’t sound completely unreasonable to me), he also said that unless the Israelis kick out all the Arabs with Israeli passports, in fifty years the Arabs will be a majority, that’s just arithmetic. But he knew exactly how that would all be translated.

But it’s hard to imagine how he could have done a better job pissing off the Pro-Israel lobby. I noticed an article in The American Thinker covering what they called the “anti-Israeli” rhetoric of the Obama administration, urging him to do what McCain promised (“Bomb-Bomb-Bomb…Bomb-Bomb-Iran”).

To get an idea of the tone, the article referred to “The first third-world President of USA”, which I presume is the new politically correct way to say “Nigger”?

It also made a big fuss about how the lobbyists had made generous contributions to Obama’s campaign, and seemed to imply that they wanted their money back. As if buying a politician was ever that easy, even in America.

But why would Iran want to get bombed?

It’s obvious they’re up to something, doing your own nuclear technology from scratch makes no sense…if you want to buy a nuclear power station these days you can pick one up on the Internet for as little as  $2.0 billion a GW (if you go with the Chinese model).

One reason that Iran might like to get attacked, particularly by Israel, is that could be used as a reason to withdraw from the NNPT which has a let-out clause that can be interpreted to allow withdrawal from the treaty, if the country is attacked.

From Wikipedia:

Article X allows a state to leave the treaty if "extraordinary events, related to the subject matter of this Treaty, have jeopardized the supreme interests of its country", giving three months' (ninety days') notice. The state is required to give reasons for leaving the NPT in this notice.

NATO states argue that when there is a state of "general war" the treaty no longer applies, effectively allowing the states involved to leave the treaty with no notice.

So the logic there would be to antagonise the Israelis to attack (to prevent Iran having nuclear weapons), so that Iran could develop, nuclear weapons…perfect logic!!

Checking out the Axis of Evil First Hand:

A couple of weeks ago I got asked to go to Tehran to have a look at an investment one of my clients was thinking about. I thought “why not?” I hadn’t been to Iran for fifteen years; I figured, “that would be fun”, and I was interested to get some sort of a feel about what might happen next.

I had plenty of questions, like “is this some sort of a “blood-on-the streets” play?” He told me “not at all, Iran is booming”.

So I said “well what about the Israelis and the Americans threatening to bomb it back into the Stone Ages?”

“Oh, that…they’ve been threatening to do that for ages, don’t worry about it”.

“What about the riots?”

“Ah, just a bit of over-exuberance, you know the Iranians are very emotional people”.

“Okay, if you say so…”

Tehran has changed a bit since I was last there, but the atmosphere’s the same, the people I met, some of whom had participated in the protests, were relaxed, not afraid to talk about anything, practically everyone apart from the taxi-drivers speaks very good English, and it’s a much more open place than for example Saudi Arabia…women can drive, and they can talk to you like “normal”.

In Saudi the women often cover their whole face, in Iran well they have a headscarf…but there are plenty of ways to let it drift back. In Saudi some women wear socks just in case they might expose an inch of naked flesh and “send the wrong message”, in Iran well…it’s all about that little gold chain on the ankle; although a bit like in Saudi there are things you can’t do, and if you have any sense, you don’t.

One guy I met was an Armenian. Apparently there are two major minorities in Tehran, the Armenians (who are Christian) and the Jews, although there aren’t many, about 100,000 of each.

There is a rumour I heard that Armenians and Jews were allowed to drink alcohol in Iran, I wanted to check that out.

Sadly that’s not true; he was telling me that every time there is a wedding there is this sort of cat-and-mouse thing on the alcohol, but he seemed OK with living in Iran. He said there is some discrimination, like for jobs, but otherwise they get pretty much left alone. I got the feeling that life is a lot easier for a Christian or a Jew in Iran than a Palestinian in Israel even if they got Israeli passports (I have some friends who have that strange status).

Anyway, Emirates fly three planes into Tehran a day and they are all full (both ways), mainly with Iranians, plus a smattering of Chinese and Indians, I was the only “Anglo” on the flight.

The airport has changed, now they got a nice new glass and architect-designed thing although it’s an hours drive out of town; the guy who stamped my passport didn’t actually smile but he was certainly more civil that the immigration people at Kennedy Airport. And unlike the last time I came, I wasn’t hauled into a back room to get bullied for a couple of hours before the mandatory (at that time) Mr. Fix-It arrived (back then I think I was the only “white-face” in Tehran).

The roads were new, streets were spotlessly clean, and there were no more 30-year old relics on the road like last time, everyone drives Peugeots now, blink for a second and you feel like you are in France. Apparently a lot of the components for Peugeot are manufactured in Iran, I even got to drive in a car that I was told is 100% manufactured there, which wasn’t bad although I don’t think un-intended acceleration will ever be problem with that model.

And no policemen – absolutely none, I spotted three in my whole trip.

I’m not quite sure what that means although one would have thought that in a city of fourteen million that was about to implode due to pent-up social unrest, there would be more policemen on the streets. Imagine what would happen in Bagdad, or New York, if they only had three policemen on duty?

I was told that initially the police didn’t do much about the protesters, but once they got an idea in their head it was serious; they got pretty brutal (some people are sitting on death-row now for being involved). But no one I met seemed particularly upset, even the guys who had been part of it; apparently there are twelve policemen on trail for “going too far”, it wasn’t exactly Tiananmen Square.

The way it works is the protests all happen when they have some sort of festival, either religious, or commemorating something; and everyone goes out on the streets and basically hangs out; and they have guys now and then standing on a soapbox and saying “Death to America”, and everyone says “Death to America”, a bit like…”Long Live Rock & Roll”, it’s a family outing. And well the protesters just joined in since you aren’t allowed to have organized rallies, everyone knows when there will be a protest.

Anyway, since I was supposed to be the “Great-White-Clown-from-a-long-way-away” pontificating about valuation, I attempted to understand how the economy and real-estate in Tehran works. 

Property and land prices are crazy (high) and apparently a major way that the municipality makes money is to charge people for changing the zoning (like from residential to office or hotel or increasing the FAR). Often the re-zoning costs two or three times what the land costs…and of course…since the country is basically completely owned by the government, which as far as I could figure is hopelessly corrupt…there are “ways”.

And everyone pays cash – there is no debt; it’s weird, I thought the whole point of real estate was about debt; but land and property appears to be how Iranians protect themselves against inflation, and when they aren’t buying in Iran they buy in Dubai (or used to), particularly when Dubai was offering residence visas; although they stopped that (which may be one reason why the Dubai property market crashed).

I asked “so what about the poor people-how do they afford any of this”, I got told, “Oh they all live in villages, property is not so expensive there”. There appears to be a pretty big divide between the “haves” in Iran and the “have-nots”, interestingly, the protestors were the “haves”.

Understanding the economy is complicated by the fact that the National Accounts appear to be published three years in arrears. When I asked about where I was supposed to get some statistics from, I got told to look everything up on the CIA Factbook. I thought that was a bit ironic, apparently Iranians have more faith in the accuracy of CIA statistics than those of their own government, I just wonder where the CIA gets them from?

The real size of the economy is even harder to figure out since almost all means of production are owned either by the government, or by some “quasi” government entity, like the “Widows and Orphan’s Fund”, plus they have subsidies on all the basics which were introduced after the Revolution.

For example petrol sells at 80 Cents a gallon (in spite of the fact half of it is imported), with the result that there is a huge trade smuggling it into Pakistan, Iraq, and Turkey. The big debate that has been going on and on for years is the removal of subsidies, they were talking about that when I was last there, fifteen years ago.

The problem there is that there is a fear that all the “have-nots” will riot, they are trying to do it gradually and they are starting with petrol and flour; but there is a serious nervousness about how that will pan out, and that’s one thing Ahmadinejad has to face – since nominally, he’s in the driving seat.

But if there was a war – well he could blame it all on the Americans and the Israelis (or even better – both).

Quite a few of the people in the office where I was, had “participated” in the riots; apparently what used to happen was mass-e-mails got sent out explaining where to go, although half the time apparently, nothing was happening at the designated place.

 What I was told was that the protests weren’t really about the result of the election, which even the protestors I spoke to said that Ahmadinejad had won fair-and-square (70% of the vote is hard to fiddle – OK if the margin is similar to the margin there was between Bush & Gore, well, but that’s what he got five years ago). It was more about the whole system in Iran, which is seriously screwed up.

I was told was that Ahmadinejad has practically no power anyway; he’s all mouth and no trousers, the real power is with the clerics, and basically, that’s what everyone was protesting about. 

 I asked …”so why is he so determined to piss-off the Americans and the Israelis?”

“Oh that’s just politics – he does it for his supporters, who are mainly un-educated villagers who go with that sort of thing”.

“A bit like George Bush and his obsession with terrorism?”


The point as far as I can figure it out is that the power, wherever it rests in Iran, stays in power by fostering a sort of State-Paranoia.

Ahmadinejad has huge popular support with the have-nots, and it was them who provided all of the cannon-fodder that were dispatched to charge in human waves across the marsh-lands in Iraq, against machine-guns, and gas (the rich kids could pay a bribe to avoid doing that).

Most of those still have memories of lost ones. That war was fought a bit like the First World War, with huge casualties, and regardless of whether it’s true or not, they blame the war on America and Europe backing Saddam Hussein. Those memories take time to heal, and the anger is easy to ignite.

One interesting thing I was told, which I sort of remembered, but at the time I wasn’t very interested, was that the reason Iran refused to end the Iran-Iraq war after they kicked the Iraqis out of Iran; was because they were insisting that Saddam Hussein be kicked out.

And the reason they did finally agree to end the war (which Iraq started – trying to steal their oil), was because America started signalling it might come in on the side of Saddam Hussein when he started losing. And then they started blowing up Iranian oil installations, shooting down Iranian civilian airliners (by “accident”), and letting Saddam’s oil get exported in Kuwait tankers re-flagged as “American”; when that started well the clerics just decided to call it a day. That’s what it says on Wikipedia too – I checked it out.

I couldn’t help thinking that’s a bit ironic, seeing as America will have apparently spent all that money doing not much except getting rid of Saddam Hussein. Perhaps it would have been a lot cheaper if they had let the Iranians do that in 1987?

I suppose there is a “Good Explanation” for that; geo-politics is not my forte.

The other factor though is the Clerics. Those are the people the protesters were really protesting against, although saying anything against those guys when you are in Iran is about as smart as saying something against the King of Thailand – you can get put to death for that…and it looks like, if their appeals don’t go the way they like, a handful of Iranians might.

The “clerics” make a huge amount of money out of the weird structure of the Iran economy – absolutely huge. This whole thing is not about oil, or jihad, or “freedom”, it’s plain & simple about an elite holding on to power, so that they can milk their country for what it’s got.

So this is how it works, as far as I can understand:

1: When Ahmadinejad is mouthing-off against the Israelis, what’s he’s really doing is mouthing off against the clerics; and if USA or Israel react, Ahmadinejad’s power in Iran goes up, he is apparently a simple guy and very anti corruption (i.e. the clerics),  trying to do his best for ordinary Iranians.

2: When the protestors are mouthing off (and rioting) against Ahmadinejad, what they are really doing is also having a go at the clerics.

So USA is in a bit of a pickle, traditionally they have always gone with the despots that are robbing their country blind, rather than going with the “popular” leaders; on account of the fact they could be “communists”, (in the old days) and “terrorists” these days.

The way the CIA used to explain that was, “We know they are sons of bitches, but they are OUR sons of bitches”.

But they are unlikely to side with the clerics against Ahmadinejad, however hard he tries to get them to do that.

The options:

1: Israel can bomb Iran, then what will probably happen is that Iran will set up sort of oil blockade, and the price of oil will go to $300 as Alan Von Alterdof says, and Iran will have carte-blanche to develop nuclear weapons….in my opinion, based on my huge experience (four days in Tehran), that’s highly unlikely.

2: USA will persuade the UN to increase the already quite severe sanctions on Iran, if it can persuade the IAEA to say Iran is violating the NNPT, which currently they are a bit ambivalent about saying.

That will help Ahmadinejad to remove the subsidies. Otherwise it won’t really make any difference, Iran is basically self sufficient (apart from for petrol), and it has long borders with plenty of people willing to break sanctions (particularly China).

And Iran will deny access to IAEA inspectors unless sanctions are lifted (and deny making nuclear bombs), and the US will refuse to lift the sanctions unless the IAEA inspectors can go in, and the whole thing could drag on and on for years.

Plan B Anyone??

There is another option, which is to recognise that Iran exists and that it is a reasonably well governed reasonably democratic country (particularly compared to some of its neighbours).

And that it has a right to be concerned about getting attacked (it did get attacked in the past by America’s big ally (at the time)), and that if Pakistan, India, and Israel have nuclear weapons well so what if Iran has them?

If USA really wants a non-nuclear Middle East well, get the other guys to get rid of their weapons, and provide guarantees on borders. And please don’t talk about the idea that Iran is going to launch a nuclear attack on USA, that’s as ridiculous as Rumsfeld’s bunkers in Tora Bora and all those WMD in Iraq.

With regard to supporting the Palestinians, perhaps Iran does support terror as well as providing humanitarian aid, perhaps it doesn’t, but so what? A lot of the support for Palestinians is private money anyway, just like a lot of the support for the Mujahidin fighting the Russians,  and sanctions against Iran will be just as likely to increase that not decrease it.

I suspect that the cheapest option with the highest potential return on investment (by far); will be to drop all the silly sanctions that easily cost US firms $5 to $10 billion a year in export orders. That would be the cheap solution; it would also mean that America isn’t going to have to borrow another pile of money from China to go to war again.

Whether the “First Third-World” President of the United States is going to have the good sense to do that; is of course hard to predict.

But one thing’s for sure, if he can find a way to put up with Ahmadinejad mouthing-off (tough call), it would probably work out a lot better for ordinary working-class Americans…and Iranians.

By Andrew Butter

Twenty years doing market analysis and valuations for investors in the Middle East, USA, and Europe; currently writing a book about BubbleOmics. Andrew Butter is managing partner of ABMC, an investment advisory firm, based in Dubai ( ), that he setup in 1999, and is has been involved advising on large scale real estate investments, mainly in Dubai.

© 2010 Copyright Andrew Butter- All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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