Posted By thestatedtruth.com on February 1, 2010

On the opening MarketCast this morning I emphasized oil strength; not just because of Exxon-Mobile, but because of the growing Persian Gulf tensions. On Sunday we’d become aware of several stories (most have heard it I suspect by now) which have at least a slight correlation to Iran’s constant jockeying to ‘buy time’ for their nuclear and other ambitious programs. This complements their aggressive stance against not just their neighbors, and their own people; but their refusal to return Uranium to Russia. In a sense Western powers likely realized that Obama ‘carrot diplomacy’ hasn’t gained a bit of ground with the 7^th Century mentality of the ruling despotic regime that most of their own people would like to retire to the dustbin of history.

Likely this is a reason Teheran (typical old school thinking) looks for an international aspect to their problems; so as to galvanize dwindling support among their own flock. Actually they may not be successful in that quest, but they are trying. On February 11 the opposition has scheduled a protest rally, and has released a statement saying in no uncertain terms that what their government is doing is “un-Islamic” and also totally “unconstitutional” based on Iran’s current constitution. The response from the radical leadership has been: ‘just wait until February 11, and we’ll show the West a shock so severe they are unprepared’. Nobody knows what that means, but clearly they aren’t at all amenable to civilized negotiations or proper behavior. Plus they hanged one of the protestors today (a 20 year old innocent kid) and a 37 year old protestor, with 16 others potentially facing similar fates. It’s they the leadership that needs stringing up.

Well, according to sources several things are in the works by Teheran to throw-off a growing acquiescence to sanctions or other restrains of the revolutionary extremists. One is a threat against not just Israel, but Qatar, Bahrain, the UAE and the Saudis as well. Oil installations are being reinforced, and 2 Aegis Class advanced USN cruisers have augmented our Fleet in the Gulf (these have Standard 3 missiles which are the newest and more effective against some, but not all, missile types). The US is using a ‘public relations’ approach to let Teheran know that we are preparing for them; as it seems the US is also saying we’re not only dissuading Israel from action, but going at it in a defensive posture. No military leader would fail to have an offensive capability if risks are truly rising; so we presume that strike forces (both seaborne or land-based) are being prepared just in case. Given our Forces fighting on both sides of Iran; how do we have any choice but to be prepared with multiple contingencies at the ready?

Clearly we are preparing; that’s why something like 90 US and NATO warships are in the region now. At the same time, another story has leaked suggesting that Iran has a plan to have Hezbollah invade northern Israel from Lebanon and overrun one city (Nahariya) with shock troops, so that the Israel Air Force couldn’t respond given the population. I would think that is bravado on the part of the terrorists in Lebanon, and would invite their total devastation by whatever it takes; except that if coordinated in a conventional or nuclear attack on Israel, there would be a certain amount of real risk.

More realistically, Iran should realize by the U.S. putting a defensive umbrella over the area (this has been ongoing for several months, only the news has it freshly by the way), any attack by Iran on any sovereign nation in the region would be an act of war, and bring about annihilation of Iran’s military capability, trying to avoid most of the major population centers, which are generally opposed to their own regime. And if Iran were to fire a missile (even though the U.S. assumes they’re not that far along as of yet) and it was intercepted; that too would bring about a strategic response, since it would be clear what their intent was, and they wouldn’t have any second-strike depth.

So where does that leave them? With the 3^rd alternative, which is also a story making the rounds everywhere but the U.S. This story holds that Iran will ‘content’ that grants of property to Great Britain by the Shah (Embassy grounds and a separate Consulate property) were not fairly given; and use that as a pretext to try another hostage-style seizure of the British Embassy. That would shift the focus away from nuclear program worries, and start one of those never-ending sagas. No idea if there’s any merit to the story; but if so, good thing that it leaked out now. Royal Marines can be prepared and Embassy staff can be evacuated to London if deemed appropriate as a precaution. It is also conceivable that Britain could suspend relations with the Islamic whackos and in a sense encourage normal people to pursue overthrowing the despotic regime. As the regime knows their support is eroding daily; we really feel compassion for regular people who (those not already arrested illegally) risk their lives to restore normalcy.

For this reason (actually even last week as Oil slipped a bit) we forewarned that any oil slippage would be temporary and nobody should get negative just as the pattern broke a bit, which was probably due more to the Shanghai market at the time than to anything else. And today’s rally we think has more to do with Iran than yet-another of the Islamic rebel strikes on oil facilities in Nigeria. Here in the U.S. demand remains a bit constrained; and that’s why large and independent refiners are not responding on the upside (yet anyway; though increasingly cheap with relatively low risk) while large international oils certainly are. In a conflict with Iran, the terrorist regime would likely be attempting to mine or block the Straits of Hormuz, while the US Navy opposed it.

One of the keys to realize that tensions ‘really’ are mounting, is the disclosure that as this unfolds, the U.S. is helping Saudi Arabia develop a force to protect all petroleum installations. A couple months back we talked (before it became public) about Yemen not only being infiltrated by al Qaeda, but by Iranian-backed rebels and offshore boat forces, which gradually were confronted by the U.S. Navy (still not disclosed). Noting that a couple Saudi border guards were killed when Shiite infiltrators tried to move in the direction of a major oil facility, we thought that was the target; not Yemen itself of course. It would seem Washington reached the same conclusion. But before saying there is nothing of interest in Yemen; there is. It could be the terrorists first blue-water port, and that simply cannot be permitted. Very handy that so many warships (even from Russia and China) are in the area, ostensibly to fighting Somalia’s pirate boats. This could put a new spin on the term ‘mission creep’, and reveal the true colors of a few countries whose commitment to fight Islamic terrorism is a bit tough to pinpoint.

At the moment, we go on heightened ‘military alert’ for exogenous events that may in due course have impacts on markets, and more. While Feb 11 (if that date actually is meaningful) is a ways off, there is no telling what the Islamic Republic might attempt preemptively, if they see that their jig is essentially up. However, we’re sure (actually believe we know) that the United States would not ramp the rhetoric unless mostly all short-term preparations had been completed, rather than announce their initiation as superficially is in the news. As noted before, preparation has been ongoing awhile. It is the reversion to ‘official’ harder-line politics with Iran that, rightfully, is occurring.

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