Oil Plunge Heightens Tensions in Iran

[Dover]

Source: WSJ

TEHRAN -- Falling oil prices and soaring inflation are squeezing Iran's economy, sparking anxiety among top officials and citizens on how the country will cope.

Iran's budget deficit next year will widen to as much as $50 billion, economists forecast. In a turnabout earlier this month, President Mahmoud Ahmadinejad acknowledged the plunging oil prices are hurting the economy and said the government would have to abandon "a major part" of its public projects. It was a rare admission for the president, who until then had said Iran's economy was immune to the global downturn.

The economy is becoming a sore point for the populist Mr. Ahmadinejad, who came to power promising to bring the country's oil money to the people, and faces new elections in June. "What has the government done with $200 billion in oil revenues?" was the headline on one daily newspaper in Iran this week.

The downturn is a heated topic these days. In taxis and shops, at work and family gatherings, Iranians say they are being squeezed by soaring prices and economic instability. Newspapers devote many pages every day to dissecting various problems people face, such as unemployment and inability to buy property. Recently, a government study showed that a young college graduate had to work and save 40 years in order to be able to afford to buy a first home.

Oil's recent plunge has been a huge blow for Iran, where crude accounts for 80% of the country's annual revenues. Oil dropped below $34 a barrel on Friday, down more than $110 from its peak in July despite a pledge by the Organization of Petroleum Exporting Countries this week to cut production dramatically. In response, Tehran's stock market dove to a five-year low this week, down nearly 18% from October.

Cont'd



Read more: http://online.wsj.com/article/SB122973669825423389.html

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Artificial lows?
Might this be why oil/gas is so low right now...putting the screws to Iran and perhaps Russia?

[Zynx]

1. I doubt it. The commodities market was just another bubble.

Its fall was predictable and many did predict it. It is overshooting on the downside now, but that was also predictable.

[Dover]

3. Well, it seems odd that prices didn't increase even when OPEC cut output recently.

Whether it's a manipulation of the market thru a concerted effort among Western nations to control Iran, or the effect of a bubble, it seems to be heightening the tension for regime change in Iran (if this story is credible).

From the article:

Some observers say that could change. "Our state of economy is desperate now, and it will get worse. If the U.S. offers Iran an attractive economic package that would lift the sanctions and allow Iran to tap into the American market as well guarantee the regime's security, I think Iran would be interested," says Saeed Leylaz, editor of the business daily Sarmayeh.

[pa28]

4. Just for your entertainment . . .

Here's a thread from the week oil peaked in the 140's. Fun read that contains lot's of hard evidence that oil could only go up from there.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=3550802&mesg_id=3550802

"The usual bull market successfully weathers a number of tests until it is considered invulnerable, whereupon it is ripe for a bust."

George Soros

[Zynx]

11. Everytime something is going up a lot, people always look for reasons it can go up more.

What's funny is that the people all hot and bothered about commodities were so negative on everything else. That didn't make sense. Commodities go up coincidentally with the economy. They can't go off into their own little world.

[Lucky Luciano]

5. I don't know that it is overshooting to the downside

Incidentally, the real price is about $42 per barrel for the Feb contract...The $33.87 price is for the January delivery contract that expired yesterday. The huge huge contango (Feb being more expensive than Jan) was caused by the oversupply being so much that someone who wants to make the roughly $8 spread between Jan and Feb would need to be lucky enough to be able to store the Jan delivered oil so that they could deliver it in Feb after selling Feb for $42...there is just no place to store the stuff due to oversupply...So there were huge sellers of the Jan contract who could not let it expire which would force them to take delivery of oil they could not store...in fact supertankers are being used for storage since there is nowehere else to put it!

I also think that we are apporaching the natural price of oil...you know...the price before the US invaded Iraq was about $25-30. I will attach a China/India premium to the oil and say that it should be worth maybe $40 in normal times...now there is global recession keeping demand down, while the bubble caused production to be ramped up in a major way causing a supply surge...so perhaps we go back to $25-30.

[mikehiggins]

2. Holy Moley! Maybe they really DO want nukes for power

go figure!

Could our intel estimates be that wrong???

Could it be that fear of longterm dependence on oil exports could be behind their desire to build nuclear plants (like France, England, et al) rather than looking to become a nuclear power?

How weird would that be?

[robcon]

6. Ridiculous, IMO, mikehiggins

Iran did not predict the current price situation, and has no shortage whatsoever of oil for electricity.

[pampango]

7. One would think that nuclear power made more sense when oil-based power

had to use $140 a barrel oil. Now that oil is so cheap (and they have plenty of their own oil they can use), nuclear power makes less sense, since it is so expensive. A big investment in nuclear power would make more sense if you expected $100-$150 a barrel oil to last forever, which perhaps they did.

[ohio2007]

10. Code Pink wants to build wind turbines in Iran under a joint venture but

Well....is it possible to use that technology to
huff
and puff and blow the straw men down ?

CODEPINK leaders announce plans for investment in Iranian wind energy company; Hope to defy sanctions and build peaceful relations

http://www.codepink4peace.org/article.php?id=4564

Here is what other enterprising women in america are doing for Iran;




http://www.abcactionnews.com/news/state/story/Woman-convicted-over-night-vision-goggles/rf2Z4rpu_UCNxArqPvN2Hw.cspx

I know,
they are unrelated useful tools


http://codepinkdc.blogspot.com/2008/11/medeas-blog-day-1-iran-citizen.html

[ohio2007]

9. Russia has plenty of reactors and are also on the brink if they can't scare oil up soon

World Bank: Russia may need help if oil falls more
http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=3649830&mesg_id=3653039


and yet,
the evil forces of the west persist in their plans to destroy Russia despite "change"
:sarcasm:

Don't destabilize Russia, Putin warns foes

MOSCOW (Reuters) - Prime Minister Vladimir Putin warned Russia's foes on Friday against trying to destabilize a country facing broadening economic crisis, Russian news agencies reported.

Putin did not specify who might pose a threat to Russia's stability. But in the past, he has often blamed Western security services of trying to destabilize the country using opposition groups and non-governmental organizations as their instruments.

"Any attempts to weaken or destabilize Russia, harm the interests of the country will be toughly suppressed," they quoted ex-KGB spy Putin as telling an annual meeting of top spies and security officers ahead of their professional holiday.


snip

http://www.reuters.com/article/worldNews/idUSTRE4BI62M20081219?feedType=RSS&feedName=worldNews&rpc=22&sp=true

Trouble for the ex Soviet bread basket in six months ?


of course
always
be ready for stories from Iran concerning the purge of "internal spies" if the EU doesn't increase their orders of Iranian crude.
At least on the plus side is the cost of EU gasoline being sent back to Iran will fall ....
but
will the mullahs pass the savings on to the taxi cab drivers of Tehran ?

Wednesday, December 3rd 2008, 6:28 AM

TEHRAN, Iran - Iranian President Mahmoud Ahmadinejad is acknowledging publicly for the first time that tumbling oil prices are gouging the country's fragile economy.

The official IRNA news agency is quoting the increasingly unpopular president as saying Iran will be forced to trim spending and generous subsidies and raise taxes. It's a sensitive admission for the Iranian president, who is seeking re-election in June.

Oil prices have plunged from $147 a barrel in July to under $50, adding to the pain of Iran's rising inflation and unemployment.

Wednesday's report quoted Ahmadinejad as saying the government budget would have to be readjusted to base it on an oil price of around $30 a barrel.

snip
http://www.nydailynews.com/money/2008/12/03/2008-12-03_oil_prices_hurting_irans_economy_mahmoud.html

Iran traditionally sells its oil for less then what the accepted OPEC price setting is.
They laughed and danced chanting 'death to america' as we paid at the pump.
Should we cry about the conditions we now pay and blame ourselves ?

phuc em,
let them make good on their threats to shut down the Straits of Hormuz now.
China will be all over them like white on rice.

[Igel]

15. A map that gets so many cities' Ukrainian names right ...

and yet says the capital is "Kiev", and not "Kyiv".

Granted, some Slavists balk at "Kyiv". Still, consistency isn't all bad.

[Sex Pistol]

8. The concern here is that they shake things up in the Middle East in an effort

destabilize the region.

That would do doubt cause the price of oil to increase.

[pjt7]

12. This should just give Obama a wider door to start normalized

relations w/ Iran..

[ohio2007]

14. 'Iran arrests BBC reporters for spying' ( I don't think so )

The Islamic Republic has reportedly arrested several BBC reporters for spying in the wake of the latest espionage activities against Iran.

snip

Security officials later identified the BBC reporters were planning to expand their network of intelligence activities in Iran with the help of the British embassy, Abedi said.

The arrests come at a time when espionage activities against the Islamic Republic have reached a new height. Iranian security officials made high profile arrest of a number of Israeli operatives in the country in recent months.


snip
http://www.presstv.ir/detail.aspx?id=79094§ionid=351020101

[Jack_DeLeon]

13. Nice...

I hope it drops lower and we use less and less of it in the future. Fuck the middle east and russia.