The Iranian Rial has just suffered one of the most cataclysmic crashes in the recent history of the foreign exchange markets. It was off 25% last week, and has plummeted a mind-numbing 72% since the beginning of 2011. One dollar bought 35,500 Rials. Watch out Zimbabwe!
When communications between intelligence agencies suddenly spike, as has recently been the case, I sit up and take note. Hey, do you think I talk to all of those generals because I like their snappy uniforms?
The word is that the despotic, authoritarian regime in Syria is on the verge of collapse, and is unlikely to survive more than a few more months. The body count is mounting, and the only question now is whether Bashar al-Assad will flee to an undisclosed African country or get dragged out of a storm drain to take a bullet in his head a la Gaddafy. It couldn’t happen to a nicer guy.
The geopolitical implications for the US are enormous. With Syria gone, Iran will be the last rogue state hostile to the US in the Middle East, and it is teetering. The next and final domino of the Arab spring falls squarely at the gates of Tehran.
Remember that the first real revolution in the region was the street uprising there in 2009. That revolt was successfully suppressed with an iron fist by fanatical and pitiless Revolutionary Guards. The true death toll will never be known, but is thought to be in the thousands. The anti-government sentiments that provided the spark never went away and they continue to percolate just under the surface.
At the end of the day, the majority of the Persian population wants to join the tide of globalization. They want to buy iPods and blue jeans, communicate freely through their Facebook pages and Twitter accounts, and have the jobs to pay for it all. Since 1979, when the Shah was deposed, a succession of extremist, ultraconservative governments ruled by a religious minority, have failed to cater to these desires.
When Syria collapses, the Iranian “street” will figure out that if they spill enough of their own blood that regime change is possible and the revolution there will reignite. The Obama administration is now pulling out all the stops to accelerate the process. Secretary of State Hillary Clinton has stiffened her rhetoric and worked tirelessly behind the scenes to bring about the collapse of the Iranian economy.
The oil embargo she organized is steadily tightening the noose, with heating oil and gasoline becoming hard to obtain. Yes, Russia and China are doing what they can to slow the process, but conducting international trade through the back door is expensive, and prices are rocketing. The unemployment rate is 25%.
Iranian banks have been kicked out of the Swift international settlements system, which would be a death blow to their trade. That is what the Standard Chartered money laundering scandal is all about. Sure, you can sell oil one truckload at a time for cash. Try doing that with 3 million barrels a day of oil which should fetch $270 million. That’s a lot of Benjamins. Forget the fives and tens.
Let’s see how docile these people remain when the air conditioning quits running because of power shortages. With their currency now worthless, it has become impossible to import anything. This is causing severe shortages of everything under the sun, especially foodstuffs, which in some cases have more than doubled in price in months.
What does the government in Tehran say about all of this? Blame it on the speculators. Sound familiar?
Iran is a rotten piece of fruit ready to fall of its own accord and go splat. Hillary is doing everything she can to shake the tree. No military action of any kind is required on America’s part. Think of it as victory on the cheap.
The geopolitical payoff of such an event for the US would be almost incalculable. A successful Iranian revolution will almost certainly produce a secular, pro-Western regime whose first priority will be to rejoin the international community and use its oil wealth to rebuild an economy now in tatters.
Oil will lose its risk premium, now believed by the oil industry to be $30 a barrel. A looming supply could cause prices to drop to as low as $30 a barrel. This would amount to a gigantic $1.66 trillion tax cut for not just the US, but the entire global economy as well (87 million barrels a day X 365 days a year X $100 dollars a barrel X 50%). This is why I have been hammering every rally in Texas tea from the short side.
Almost all funding of terrorist organizations will immediately dry up. I might point out here that this has always been the oil industry’s worst nightmare. Commercial office space in Houston may not do so well either, as imports account for 80% of the oil majors’ profits.