Sunday, December 07, 2008
Mr. Sore Loser
But the real spark that has incensed the Liberals – and most specifically their leader, Stephane Dion – was Mr. Flaherty’s announcement of cuts to a public fund for political parties. This cut was not entirely unforeseen following the Democratic Party’s own tally in the United States that Barack Obama’s election cost some USD 730 millions, and considering that in the wake of the general economic slowdown that has affected and is afflicting all Western governments to various degrees, the general idea is to reduce what is aptly termed "spending waste" – especially political spending waste.
Frugality, however, is not a term in Mr. Dion’s vocabulary if the end result affects his political agenda and own personal goals and ambition. The main reason for the anger of the liberal leader was the elimination of federal political subsidies, as this would have disproportionately worsened the financial situations of the opposition parties compared to the Conservatives; the Conservative Party received 37 percent of their funds from Crown funding in 2007, the NDP 57 percent, the Liberals 63 percent, the Green Party 65 percent and the Bloc Québécois 86 percent. Recent polling by Ipsos-Reid found that 61 percent of Canadians wants political subsidies eliminated.
As it turns out, Governor General Michaelle Jean has agreed to “prorogue” the current session of Parliament until January 26, 2009 at the request of Prime Minister Stephen Harper. To “prorogue” parliament means to discontinue a session of parliament without dissolving it. Various prorogation scenarios were possible: one was a long-term prorogation, lasting up to a year, while another was a short prorogation period lasting a few weeks to a few months. Each would delay any parliamentary activity regarding bills, hence a motion of non-confidence could not be registered and the Conservative government would continue.
The economic implications of all this political drama are huge, especially as they relate to big ticket items such as real estate.
For one thing the very idea of national unity has been damaged, with Westerners who were never favorably disposed to the Liberals accusing them of trying to dislodge their Conservative government, and with Quebecers feeling that they have no business in governing Canada. And this does not reverberate well internationally at a time when large capitals are already looking upon North America as a dismal place to invest.
This theme was re-affirmed by Gordon Campbell himself, the liberal Premier of British Columbia, who has spoken out against the coalition stating that if their gamble fails, Canada's economic worries will become significantly worse as a result. And Campbell’s own worries in British Columbia would head south considerably, in light of the fact that the Premier will have to call the provincial elections within the first half of 2009 and seeing as to how the left-leaning New Democratic Party (NDP) is already leading the Liberals five points in provincial polls. An NDP win would be a disaster for real estate, recession or not.
And then an un-elected “coalition government” headed by Stephane Dion as interim Prime Minister would certainly be put under question by both Canadians and foreigners alike, considering Mr. Dion’s track record as leader of his own political party. Stephane Dion’s leadership quality have been already challenged and put to a test, having just led his own political party to one of the worst electoral defeats ever. And this too would not bode well with investors, especially foreign.
Besides, to see a Stephane Dion sitting in as an un-elected Prime Minister smacks too much of politics Venezuelan style. Anytime Canada’s political stability is diminished both domestically and abroad we all stand to lose in the international arena politically and ethically as a nation, as well as in the economic arena. Canada is too dependent upon its reputation as one of the best places on Earth to conduct business to afford ‘coup d’etat a la Dion’, and in light of this Mr. Dion has done a great disservice to the country.
Real estate specifically, as among other business, stands to suffer from the reverberations of all this political drama. The capital appreciation we all have enjoyed this past few years is the direct, proximate result of the international image of Canada as a politically stable society and a serious and resourceful economic partner. This in turn has attracted foreign investments and capital that have contributed to the unprecedented development of various sectors of the economy with real estate in the forefront.
We can hardly afford now to have politicians the likes of Mr. Dion satisfying their own political ego and ambitions by putting their own interest and personal agenda over and above the national interest.
Luigi Frascati
Real Estate Chronicle
Labels: POLITICAL ECONOMICS
Thursday, July 12, 2007
Russian Roulette
Ten years ago Russia was in a state of disarray reminiscent of the Seventeenth Century. Putin's predecessor, Boris Yeltsin, had secured re-election in 1996 only by turning the privatization of the Russian energy sector into a sleazy scam, trading oil and gas fields for campaign contributions. Meanwhile, ordinary Russians had to endure rampant inflation and unemployment. As former Soviet republics and Warsaw Pact allies queued up to join NATO, the superpower seemed really to have become – as the Cold War joke had it – Upper Volta with missiles.
Then, at the end of 1999 Vladimir Putin took over, and since then he has ruthlessly reasserted the Kremlin's control over the energy sector – in fact over the entire country. When it comes to energy, Putin's Russia seems prone to loutish behaviour, despite constant claims that Russia is a reliable partner. Russian officials have made no secret of wanting to keep big oil projects in the family, and thus have pushed out of the country pretty much all major oil players, from Royal Dutch Shell to Mitsubishi. And the Kremlin has often intimidated neighbours with threats to cut off their oil or gas supplies. Last winter, for example, Russia appeared to blackmail the Ukraine's new pro-western government by cutting off the country's gas amid a dispute over prices. Early this year, when Lithuania had the temerity to sell an oil refinery to a Polish firm instead of a Russian one, the pipeline that supplies the refinery with Russian oil suddenly succumbed to a mysterious technical fault.
Through these bullying methods Russia's economy has bounced back, with growth averaging almost 7 percent and inflation coming down into single digits, and has enabled the country to once again re-establish its former political clout throughout the world. So much so, in fact, that at the recent international conference on Security Policy in Munich the Russian President declared that a "unipolar world", meaning a world dominated by the United States, would "plunge into an abyss of permanent conflicts".
Maybe so, but what would happen to a world dominated by Putin's Russian Federation?
His Russia is an energy empire, sitting on more than a quarter of the world's proven reserves of natural gas, 17 percent of its coal and 7 percent of its oil. America, for geographical and political reasons is not one of Russia's main customers, but three-fifths of Europe's natural-gas imports and one-fifth of its oil come from Russia. Energy is a weapon with which Vladimir Putin seems to be intent at restoring the lost greatness of the Soviet Empire. No longer needs Russia to go beg the West for money cap in hand, as it did in Boris Yeltsin's days. Now it can stand tall once more, not the least among the neighbouring former Soviet countries that many in Moscow have never reconciled themselves to losing.
Mr. Putin's use of energy as a weapon is only one instance of a newly-found Russian assertiveness that nowadays seems to border on gangsterism, as clearly pointed out by the assassination of former Russian Agent Alexander Litvinenko in London in December, 2006. Polonium has its merits.
Russia's geopolitical power has become a function of its energy exports. As history teaches us, the energy crisis of the 1970's helped the Soviet economy very much even has it hurt the West, by bathing the ailing Soviet system in petrodollars. But as oil prices slid below an average price of USD 20 per bbl. from 1986 through 1996, Russian power and prestige slid too. It is no coincidence that the price of oil touched USD 11 per bbl. in Yeltsin's miserable last year.
As the renaissance of Russia is now well under way, one can't avoid wondering the political implications of today's very expensive oil, for which we all pay out of our own pockets. Quite simply Russia is, after all, the only major power that has an interest in high oil prices, both economic and political. Which then conversely means that Russia is the only major power with no interest whatsoever in the stability of the Middle East. And it shows.
Russia poses America's biggest problem when it comes to stopping Iran from acquiring nuclear weapons capability. Russia is the one supplying Iran with more than 3000 centrifuges for the enrichment of uranium. Russia is fomenting anti-Americanism throughout the region as well as sowing the seeds of discord among Arabs. Russia's condemnation of President Ahmadinejad's repeated calls for Israel to be wiped off the map was lukewarm, at best. Russia is building the Iranian nuclear reactor at Busher, and the Russians have recently been awarded the contract to build an additional six such plants.
So, would this be the world with the Russian Federation at the helm? A world where destabilization of the Middle East would guarantee high energy prices on which Russian power has come to depend?
Some things never seem to change.
Luigi Frascati
Real Estate Chronicle
Labels: POLITICAL ECONOMICS
Sunday, April 29, 2007
Quoting Islam
A collection of memorable quotes by a collection of memorable Islamic personalities.
Mahmoud Ahmadinejad
"The Jews are a cancer which is liable to spread again at any moment. There is no solution to the conflict between Islam and the Jews except the disappearance of Israel. Put a knife in your shirt, get close to an Israeli and then stab him. And, furthermore, let the entire world hear me – our hostility to the Great Satan is absolute. I encourage all Muslims to take suicide bombings worldwide. Don’t be shy about it ".
"Jews are responsible for the world’s moral decay and are the roots of the world’s evil".
"Our thanks go to the late Adolf Hitler who wrought in advance the vengeance of the Palestinians upon the most despicable villains on the face of the Earth. However, we rebuke Hitler for the fact that such vengeance was incomplete and insufficient".
"Iran is ready to begin the next Holocaust and implement the Final Solution".
"Israel will exist and will continue to exist until Islam will obliterate it, just as it obliterated others before it. And then it will be America’s turn".
"The battle with the West will surely come, the decisive Muslim victory is coming without a doubt and the Prophet - peace be with him – spoke about it in more than one Hadith. And the day of resurrection will not come without the victory of the believers over the descendants of the monkeys and pigs [the Jews] and the complete annihilation of the infidels".
"Oh Allah, destroy America as it is controlled by the Zionist Jews. Oh Allah, avenge in the name of your Prophet the colonialist settlers who are the descendants of monkeys and pigs".
"Those who have come at night, like bats, will hear us saying: death to Israel, death to America".
Sheikh Abdullah Ramadan Shallah
"In compliance with God's orders we declare that it is the duty of each and every Muslim to kill the infidels, civilians and military, wherever they may be and to wash the Holy Land with the blood of the beasty Jew. For there never was among them a supporter of peace. They are all liars, all criminals. They slaughtered our children, turned our wives into widows and their children into orphans. Therefore it is necessary to kill them all in accordance with the word of Allah the Almighty and Omnipotent, peace rest upon him. Make war on the infidel Christian, kill the filthy Jew in any place where you can find them. Have no mercy on them. Murder them everywhere".
Those who cannot remember the past are condemned to repeat it.
Support US and Canadian troops abroad.
Luigi Frascati
Labels: POLITICAL ECONOMICS
Friday, March 02, 2007
No Sex? The Grand Ayatollah says "Beat Her Up!"
Well, not quite - but there is Grand Ayatollah Naser Makarem-Shirazi willing to dispense his advices on the Iranian population and anyone else willing to listen through his website with URL at http://www.makaremshirazi.org, particularly on such delicate matters as conjugal relationships.
The Al-Qu'ran, professes the Grand Ayatollah, permits to inflict corporal punishment on a woman if she refuses to perform her marital duties in the bedroom. "There is no doubt that Islam has bestowed valuable services on women in society, and that they [the women] owe a debt of gratitude [to Islam] to that end". In fact, continues the Grand Ayatollah, even those Western writers who do not have a positive regard for Islam such as Crane Brinton, John Christopher and Robert Lee Wolff in their book History of the Western Civilization And Its Fundamentals In The East frankly admit that the Islamic movement has helped to improve the status of women.
But as much as the teachings of Islam contain all this great emphasis on the nature of kindness to women and, in fact, stress that one should not be unpleasant towards them "women are also obliged to treat their husbands with kindness". Specifically as it relates to the matter of corporal punishment where women refuse to perform their marital duties in the bedroom, the Al-Qu'ran clearly commands that the husband must first try to resolve the problem through counselling and guidance, followed by the non-sharing of the matrimonial bed. If, however, after a while all this is not effective then "he can beat her a little", says the Grand Ayatollah.
Of course, continues the shi'a clergyman, this issue is a totally exceptional situation and in fact should be regarded as "performing necessary surgery on a patient". When the wife refuses to live up to her matrimonial duties and the only way to persuade her is to inflict corporal punishment, but the husband refuses to do so, then the Islamic regime is authorized to inflict such corporal punishment on her on behalf of the husband, and with or without his explicit consent, "for her own good".
In fact Grand Ayatollah Naser Makarem-Shirazi, moreover, goes one step further and delves his expert opinion and renders his erudite understanding of psychological tenets as well by declaring: "It is important to emphasize that according to various psychologists some women are masochists and enjoy being harmed, and sometimes that is intensified in the form of a mental health crisis, in which case corporal punishment can be an effective 'spiritual relief'. To this end, of course, it is important that the punishment should not be such that it leaves scars or permanent injuries", but it is acceptable if the body turns 'mildly' black and blue.
So therefore, if you are experiencing matrimonial woes or, better still, if you are trying to conquer the heart and mind of the lady of your dreams and would like to submit a ‘Dear Abby'-style question to Grand Ayatollah Naser Makarem-Shirazi, feel free to send an e-mail to makarem@www.makaremshirazi. Results are guaranteed.
In light of his profound knowledge and professional expertise in the matters of human nature and relations between the sexes, perhaps one day the Grand Ayatollah will consider setting up an 800-number.
Grand Ayatollah Naser Makarem-Shirazi is one of the most important and influential clergymen in Iran today. He has been appointed to his post by the regime for, among other things, "having completed his religious and seminary studies in four years time, when it usually takes twelve to fifteen years", says the biography of the website.
Hummh ... He must have skipped a few chapters ...
Luigi Frascati
Labels: POLITICAL ECONOMICS
Monday, January 01, 2007
Capitalism Under Attack: Petrodollars, Petroeuros and the Iranian Oil Bourse
Who would have ever imagined it?
Forget about the Prophet Mohammed, Islam, the Koran, President Ahmadinejad and his nuclear program, Islamofascism and all the umpah-pah. The Mullahs do not like American Dollars anymore. As reported by Reuters UK (http://rtv.rtrlondon.co.uk/2006-12-18/3e56a070.html) Iran announced that it has ordered its Central Bank to start using Euros for foreign transactions, and to transform the nation's Dollar-denominated assets held abroad into the single European currency. "The government has ordered the Central Bank to replace the Dollar with the Euro to limit the problems of the executive organs in commercial transactions," government spokesman Gholam Hossein Elham told reporters.
Coming from OPEC's fourth oil producer, this is a move that will undoubtedly have both deep economic reverberations and grave political consequences worldwide. It would certainly appear that rather than ‘wiping out Israel' from the face of the planet, Iran is setting the tempo to wipe out American capitalism and influence everywhere. To understand the implications of such a move in financial affairs, one has to first revert to the importance of money in our economic systems and the effects that the ravages of inflation have over it.
Money is one of man's most amazing inventions. Imagine the difficulty of our daily lives without those metal coins and coloured pieces of paper. To make any kind of transaction - from shopping for groceries to purchasing a real estate asset - you would have to find someone who had what you want and who wanted what you have, and then the two of you could barter. In a world with thousands of products, one would spend most of the time looking for trading partners and devoting very little time to actually earn an income. The alternative to avoid having to find trading partners would be for each and everyone of us to do a little bit of everything by ourselves.
But with money on the scene everything becomes more straightforward, simple and less time-consuming, and all of us can increase our productivity by and through specialization - that is doing what we do best, and then trade with our partners. As a direct and proximate consequence of our increased productivity, each of us can therefore become richer. It is easy to lose sight of the very basic economic point that we all owe a large part of our high living standards to the existence of money, its possession and the spending power that stems out of it.
But there is a catch: money works best when its value is stable over time. And this is nowhere more true than in international trade.
Economically speaking, the power of the American Dollar and its influence in economic and financial affairs worldwide was born during the United Nations Monetary and Financial Conference held at Bretton Wood, New Hampshire in July 1944. The Conference was attended by the delegates of all 45 allied nations directly and indirectly involved in the fight against the powers of the Axis - Nazi Germany, Imperial Japan and Fascist Italy, and their socio-economic doctrines. As a result of the Bretton Woods Conference, a system of exchange rate among different currencies was set up anchored on the American Dollar, which was made convertible to gold - the common denominator and measure of wealth worldwide. Thus, the American Dollar became de facto the reserve currency of the world, accepted and traded everywhere. This system remained in place until the early 1970's and it allowed countries to accumulate reserves in American Dollars, as opposed to gold.
When in 1970-1971 an economically resurgent Western Europe began demanding payment for their US Dollars, as it became clear that the American Government did not have enough gold reserves to buy back all those Dollars, the US Treasury under the Nixon Administration rather than defaulting on its payment ‘de-anchored' the Greenback - that is it severed the link between the Dollar and gold. To avoid an international collapse of the American currency in world markets, however, the US treasury had to substitute gold with another valuable commodity so as to entice foreign countries to keep their foreign reserves in Dollars and to continue accepting the American currency.
Thus in 1972-73 an iron-clad arrangement was made with Saudi Arabia to support the power of the House of Saud in exchange for accepting only U.S. Dollars for its oil. The rest of OPEC was to follow suit and also accept only American Dollars. Because the world had to buy oil from the Arab oil-producing countries, it now had the reason to hold Dollars as payment for oil. Because the world needed ever increasing quantities of oil at ever increasing oil prices, the world's demand for Dollars could only increase. Even though Dollars could no longer be exchanged for gold, they were now exchangeable for oil. The Petrodollar was born.
In 2000, the first man who actually began demanding Euros for his oil was none other than Saddam Hussein of Iraq - and we all know what has happened to him. To be more specific, in fact, Saddam Hussein Abd al-Majid al-Tikriti (1937-2006), former President of Iraq, made two strategic mistakes, the second one of which would ultimately cost him his neck - literally.
Firstly, on August 2, 1990 he invaded Kuwait, a country very friendly with both the United Kingdom and the United States, and holding approximately ten percent of the world's oil reserves. Saddam, furthermore, became a real threat to Saudi Arabia as well. By invading Kuwait and threatening Saudi Arabia, Saddam breached the Carter Doctrine postulated by President Jimmy Carter in 1980, which states that "[...] an attempt by any outside force to gain control of the Persian Gulf region will be regarded as an assault on the vital interests of the United States of America, and such an assault will be repelled by any means necessary, including military force." The Carter Doctrine was later on upheld by President George H.W. Bush in 1989 with National Security Directive 26, which declares that "Access to Persian Gulf oil and the security of key friendly states in the area are vital to U.S. national security [...]." The Gulf War ensued in January 1991.
The second mistake of Saddam was to start demanding payment for his oil in Euros. At first, his demand was met with ridicule, later with neglect, but as it became clearer that he meant business the need arose to make an example of anyone who demanded payment in currencies other than U.S. Dollars. The punishment came with the worsening of the geo-political situation after the 9/11 attacks on the Twin Towers and an increased perception and worry about Saddam's weapons of mass destruction - which he had used extensively against the Kurds and his own citizens. President Bush's Shock-and-Awe intervention in Iraq followed, which ultimately brought about the demise of the Iraqi dictator.
Contemporary warfare has traditionally involved underlying conflicts regarding economics and resources. Today these intertwined conflicts also involve international currencies, and thus increased complexity. Current geopolitical tensions between the United States and Iran extend beyond the publicly stated concerns regarding Iran's nuclear intentions, and likely include a proposed Iranian "petroeuro" system for oil trade - the Iranian Oil Bourse ('Bourse' is the French word for Stock Exchange). The proposed Iranian Oil Bourse signifies that without some sort of US intervention, the Euro is going to establish a firm foothold in the international oil trade.
This is so, because the Europeans would no longer have to buy and hold Dollars in order to secure their payment for oil, but would instead pay with their own currency. The adoption of the Euro for oil transactions would provide the European currency with a reserve status that would benefit the European at the expenses of the Americans. Given U.S. foreign debt levels and trade deficit, Tehran's objective constitutes an obvious encroachment on the Dollar supremacy in the crucial international oil markets, and America can hardly afford that to happen. It is really a case of lethal economic terrorism and financial warfare, a matter of life and death.
And speaking of economic terrorism and financial warfare, it is very interesting and worth mentioning the link between oil and Euros on one side and Iran's nuclear programme on the other side that Gholam Hossein Elham has made during the foresaid announcement. He has stated: "They (the Westerners) should put an end to their hostilities towards our nation and should also be aware that we are capable of achieving nuclear technology through very transparent and legal methods - something that they must respect. They must not waste their time with venting hostility against this nation, otherwise they will be harmed, more so than us."
If Iran follows up with the intention to charge Euros for its oil, the upcoming Iranian Bourse will introduce Petroeuros currency hedging in direct competition with traditional Petrodollars. More than that, in political terms, it will pit America, Israel and Sunni Islam against Iran, Syria and Shiite Islam and will fundamentally create new dynamics and competition into the biggest markets in the world - those of global oil and gas trade. One of the Federal Reserve's nightmares may well begin to unfold if it appears that international buyers will have a choice of buying a barrel of oil for USD 60 on the NYMEX and IPE - or purchase a barrel of oil for €45 - €50 through the Iranian Bourse. In essence, America would no longer be able to expand effortlessly its debt-financing with the issuance of US Treasury bills, and the international demand and liquidity of the American Dollar would fall. This is a very good reason to go to war.
Welcome to 2007.
Real Estate Chronicle
Labels: POLITICAL ECONOMICS
Wednesday, December 13, 2006
How Did Our Oil Get Under Their Sands?
Recounting sixty years of Western economic policies that have led to the rise of Islamic Fundamentalism in Iran.
________________________________________
At a time when yet another conflict has just finished emblazing the Middle East which involved the Jewish State of Israel on one side and Hezbollah, the paramilitary militia founded, trained and financed by the Islamic Republic of Iran on the other side, and also at a time where a civil war in Lebanon seems to be in the making once again directly involving Hezbollah and Syria and Iran indirectly, it is worth to take a look at the initiatives, economic and military, launched and underwritten by the West in Iran throughout the years. The importance of looking back at history is to be found in the fact that, far from being a tug of war between the Israelis and Hezbollah, this relatively localized conflict threatens to expand well beyond the borders of Lebanon, and to involve players much bigger than the ones who are presently fighting. Particularly when one can find calls already on the part of some decidedly extremist Bloggers and columnists, that the time has come to drop a couple of bunker-buster bombs on Iran's uranium-purifying facilities. It is also all the more important to know the plight of the people and be aware of the circumstances that have given rise to the ascent of Islamic Fundamentalism in Iran, a country which is placing itself - now more than ever - in a collision course with the West.
It is difficult for Westerners to fully grasp the sheer force of nationalistic feelings in Iran, and how much these feelings centre on oil. With virtually no other natural resources and a history of being under foreign domination, the people of Iran have come to see oil as their economic lifeline, upon which the foundations of any vision of national identity and pride must necessarily be built. And, ironically, these very nationalistic feelings have inevitably brought them in the past to clash with the powerful economic concerns of the West, who saw the region's oil as their own legitimately-claimed property.
By the early 1950's international oil companies had managed to effectively gain control over Iranian oil, and a desire to take that control back became a potent force throughout the country. It was a drama that was played out most vividly - and tragically - in 1951, when the charismatic Mohammed Mossadegh became a towering nationalist figure. With his inspiring visions and powerful oratorical skills, Mossadegh attracted a huge number of followers. Because of this a parallelism has been drawn by many historians between Mohammed Mossadegh and Martin Luther King, Jr. in terms of political and social effectiveness on the masses. Mossadegh was a democrat with a deep commitment to the rule of law. He was also at the head of a movement that pioneered democracy in Iran with great success.
One of the most volatile issues in Iranian politics was the enormously favourable deal that had been granted to a British oil concern, the Anglo-Iranian Oil Company. This name was, in fact, a misnomer since there was nothing remotely Iranian about it. It was entirely British owned, and it had been given a sixty-year concession for all of Iran's oil. As a result, massive revenues from Iranian oil flowed into the British treasury, while Iran merely received a small token share of the revenues and had no voice whatsoever in the company's management - not even the right to audit the company's books.
It was within this context that the then Shah of Iran - Mohammed Reza Pahlavi - backed politically and financially by the British, in 1949 tempered with the national elections in order to secure a legislative body favourable to Britain and to the status quo. Mossadegh instead favoured the revocation of all oil rights and called upon all those who wanted fair elections - which numbered in the tens of thousand - to hold a vigil in front of the Royal Palace in Tehran. After a vigil of three days and three nights, and so as to avoid the start of what was promising to be a civil war, the Shah agreed and granted new elections.
Mossadegh was elected triumphantly, and immediately began the political push for more democracy and for more national control over oil. By the end of 1951, with enormous popular support, Mossadegh recommended that the Anglo-Iranian Oil Company be entirely nationalized. This move passed fully in the Iranian legislative body and in the Senate, even though both were controlled by the Shah's appointed deputies. The British were flabbergasted as the Iranians, under the leadership of Mossadegh, proceeded swiftly with the nationalization of the Anglo-Iranian Oil Company and all of its assets.
Britain viewed the takeover by Iran as nothing short of a coup d'etat. In fact, even more than that, as a slap in the face and an affront to Britain's honour. Declared Sir Anthony Eden, the British Foreign Secretary:" Our authority throughout the Middle East has been violently shaken by the insolent defiance of decency, legality and reason of a group of wild men in Iran". A sentiment, this, echoed by Dan Acheson - the then US Secretary of State.
The international oil companies quickly swung into action, collectively coming to the defence of one of their own. An attack on Anglo-Iranian Oil was seen as the precursor to an attack on the international oil establishment and on the sanctity of oil companies to the region's oil reserves - especially by the Americans. The major international oil companies, therefore, spearheaded by Exxon cooperated in imposing a worldwide boycott on nationalized Iranian oil. The British and US governments backed the embargo, and Washington pressured the American oil industry to respect the boycott and to refuse to enter into any contract for the exploration and development of Iranian oil resources. The boycott succeeded in cutting off Iranian oil from world markets, devastating that country's economy. So effective was the embargo, that Iranian oil exports dropped from USD 400 million in 1950 to less than USD 2 million in 1952!
Even so, the boycott failed to bring Mossadegh's government down to its knees. In fact, if for nothing else, it served to increase Mossadegh's popularity among the Iranians as well as throughout the Middle East, in that he quickly became a symbol of defiance of British power and Western capitalism. In the face of such popularity Prime Minister Winston Churchill, a strong supporter of British imperial power, became convinced that Mossadegh had to be stopped at all costs, and requested Washington's help to this effect. He found the perfect timing in the transition from the Democratic Administration of Harry Truman to that of Republican Dwight Eisenhower, who was inclined to see Iran as a potential battleground between the United States and the Soviet Union. Eisenhower gave the green light to the CIA, which then dispatched Kermit Roosevelt - the grandson of President Theodore Roosevelt - to Tehran. Roosevelt spent a week meeting secretly with the Shah to win his support for the coup d'etat. Reza Phalavi was initially against a coup for fears that it would fail, but in light of the many concessions made by Roosevelt - including US military support for his regime - the Shah finally agreed.
The coup succeeded. The enormously popular Mossadegh was arrested, tried by a military tribunal, found guilty of treason and incarcerated in a military prison for three years. Upon his release, the Shah ordered Mossadegh to be placed under house arrest until his death, which occurred in 1967.
The US-led coup d'etat became a defining moment in the history of Iran, if not of the entire Middle East. To some extent it served as a lesson and a reminder to those who longed for greater national control over their countries' oil industries. But at the same time, by exposing what many thought of as the imperialistic aims of Western powers, the coup in Iran became a rallying point for anti-Western nationalism in the region for years to come. At the forefront of this anti-Western sentiment were two men - an Egyptian and an Iranian - whose names were to become very well known in the West: Gamal Abdel Nasser (1918 - 1970) and Ruhollah Musavi Khomeini (1900 - 1989).
Nasser's appeal lay in his willingness to defy Western powers, most notably the US, and in his fierce advocacy of Arab sovereignty and unity. In 1956 Nasser claimed Egyptian control of the Suez Canal, the vital conduit for moving oil from Iran to Europe and proceeded to its nationalization, thus precipitating the Suez Canal Crisis. In early October, the United Nations Security Council met on the matter of the Suez Canal and adopted a resolution recognizing Egypt's right to control the canal as long as it continued to allow passage of foreign ships. On October 29, 1956, however, Israeli forces moved into the Sinai Peninsula and on October 31, 1956 a joint force from Britain and France entered the Canal Zone. On November 5, 1956, the Soviet Union issued an ultimatum demanding the withdrawal of all foreign forces from Egypt, and in this the Soviets found an unlikely ally in Washington. Britain, France, and Israel reluctantly complied and gradually removed their forces, thus ending the Suez Canal Crisis.
Less visible but even more effective in shaping the Middle East was the life of Ruhollah Khomeini. After graduating from the Islamic seminary of the holy city of Qom, the future Ayatollah taught the Shariah, the Islamic Law, for many years and wrote numerous books on philosophy and mysticism. In 1963, he publicly denounced the government of Shah Mohammad Reza Pahlavi and was thereby imprisoned for 8 months. Khomeini, already a recognized figure in Iranian politics, had originally been sentenced to death, but the Shah felt that his execution would anger the common people of Iran. Upon his release from prison, the Shah ordered him to leave the country.
Khomeini initially went to Turkey but was later allowed to move to Iraq, where he stayed until he was forced to leave in 1978 by the then Vice-President Saddam Hussein. Khomeini moved to France, where he became one of the most influential opponents to the rule of the Shah, and where he further became to be perceived as the spiritual leader of all those fighting Reza Pahlavi. During his exile, Khomeini wrote a book entitled Guardianship of the Islamic Jurists, where he laid out his three fundamental beliefs: 1) that all laws in an Islamic society should be based on the laws of God (Shariah); 2) that all laws and activities of the state should be monitored by clerical authorities on Islamic Law (the Mullahs, or guardians); and 3) that Islamic countries should become republics and not monarchies. Khomeini believed that the leader of an Islamic Republic should be a faqih (an Islamic jurist, who is also a member of the clergy), who should be selected by a group of clerics. The Supreme Leader, as the post is officially called, would have absolute secular and religious authority, and could only be removed from power by that very same group of clerics.
The book, furthermore, provides an insight on the eventual political background of the Islamic Republic of Iran. In short, after the success of the revolution, Khomeini replaced the monarchist government of the Shah with a theocratic system dominated by the clergy, with the approval of 98 percent of the voters sixteen years of age and older, who were called in a referendum to determine the question of accepting an Islamic Republic as the new form of government and constitution.
The history of Iran is tied to and intertwines with Western economic policies in the Middle East, especially those of the United States. Nearly three decades have passed since the leaders of Iran and those of the US have communicated openly, and with the war in Lebanon going on the prospects of talks between the two countries seem more remote than ever. This is so because opening talks with Iran at this time would confer legitimacy on Iranian leaders who, aside from their suspected desire to obtain nuclear weapons, deny Israel's right to exist and support Hezbollah, a terrorist organization.
Additionally, many experts believe that no matter what incentives the US or the world offer, Iran is determined to become a nuclear power. This fact alone raises the specter that the US - or even Israel if aided by the US - might take military action to destroy Iran's nuclear facilities. As much as this scenario causes shudders among European and Arab states allied with America, it is indeed not that incredible or farfetched, and the odds of a military intervention in Iran increase exponentially with every passing day that the conflict in Lebanon continues, and with each and every inflammatory statement and the rhetoric of confrontation that President Mahmoud Ahmadinejad seems to be so fond of dispensing.
The Hezbollah flags that we are increasingly beginning to see in demonstrations organized by Muslim communities in London, Paris and Rome, furthermore, are yet another reminder - especially to European nations - that the confrontation in the Middle East may not be limited to the arid plains of Lebanon.
Luigi Frascati
Real Estate ChronicleLabels: POLITICAL ECONOMICS
