From the inner most recesses in Tehran’s secretive world of
spymasters, a call was given to launch strikes against Israeli
diplomats around the world. A tit for tat kind of reaction, hitherto
not known to come out of Iran. The shadowy Iranian Quds Force is being
seen as the new action force targeting Israelis. Iran of course has
been shrugging off all that the Israelis have thrown at them by saying
that it is nothing more than posturing and filibustering on their
part. Adding that what the Israelis are saying lacks credibility and
smacks of slander. Even as we wonder what the truth is, a Israeli
newspaper reported the Israeli Vice Prime Minister Moshe Yaalon naming
Brigadier-General Qasem Soleimani, commander of the Quds Force, a
covert arm of Iran's Revolutionary Guards Corps, as the mastermind of
this neo attack strategy.
Yaalon went on to say that Soleimani is subordinate to the Iranian
leaders and is responsible for the special force and for subversive
activity against everybody by coordinating operations with Lebanon's
Hezbollah guerrillas who are now viewed as a proxy for Tehran. Lending
credence to this new theory, the United States blamed the same Quds
Force in 2011 for an alleged plot to assassinate the Saudi ambassador
to Washington
Even as this state of play had the world on an edge after the
coordinated attacks in Tbilisi and New Delhi, the failed Bangkok
bombing also at 3.15 IST sent shivers up everyone’s spine. The result
was seismic reverberations in the global crude futures market. So,
oil is on the boil again. Any armed conflict in the middle east is a
surefire recipe for a further spike in global oil prices. Crude
futures markets are already on fire. And India is caught between a
rock and a hard place. It needs weapons and defence armaments from
Israel and curiously 11 per cent of all our crude requirements come
from Iran. Delicious irony, no?
Throw in the bit about India’s natural unstinted support for west
Asian nations and you have a heady mix. Mavens in the foreign and
finance ministries are scratching their heads wondering which side
they should tilt. With the war having arrived on our shores and blood
being spilled, India is viewing the entire scenario with great
consternation. At the core of it all is the politics of oil, rather
than the economics of oil. Iran pumps out 3.5 million barrels of oil
daily.
Of this 3.5 million barrels, as much as 600,000 barrels goes to six
top EU nations while the majority is sucked up by energy deficit
nations like China and India. What has complicated already elevated
crude prices is not just the emergence of Iran as a big boy on the
nuclear stage, but equally the concerns coming out of Sudan where a
newly divided South Sudan is accusing its northern counterpart of
seizing 2.4 million barrels of oil. With two flashpoints on the global
crude map, the balance of power has been disturbed. What is perhaps
most pertinent is that Israel normally trigger happy to take action –
both deterrent and offensive – is not pressing the hot button yet.
Though it has been ratcheting up the rhetoric. Defending its people
and land is a way of life for insular Israel, but perhaps a nuke armed
Iran is a suitable enough reason not to go ballistic. Or perhaps the
US is mollifying Israel and telling it not to cross the Rubicon.
Crossing the Rubicon at this juncture can have cataclysmic
consequences for the world economy. A bellicose Iran will not take
things lying down. What has happened in Afghanistan, before that
Kuwait and now in Iraq could well see retaliation and reprisals from
Iran.
The world teeters. For India it is as I said extremely bad news,
because not only do we get it in the neck politically since both Iran
and Israel are our friends, but we suffer acutely economically. Just
when the inflation genie has been wrestled back into the bottle and
mothballed, comes the crude spike which may end up as a super spike.
Cassandras have been screaming from the rooftops that crude is headed
northwards to new gravity defying levels. Its economic impact is
scary. India will obviously import inflation given that 80 per cent or
thereabouts of its crude requirements are out sourced. Empirical
evidence suggests that a $10 increase in crude prices can shave off as
much as 20 to 40 basis points from an importing nation’s Gross
Domestic Product. Goldman Sachs Asia Economic Analyst reckons for
India it will be closer to 0.2 percentage point.
Every dollar increase in crude prices translates in to a 50 paise
increase in petro product prices here in India if the Government
allows a pass through. The Indian crude basket on February 15 was a
sky rocketing $118.35, a mix of sweet and sour crude. Now comes the
tricky part, as of April-December, the under recoveries for oil
marketing companies is Rs 97,313 crore. Wait, there is more pain. For
the full year ending March 31, 2012, the projected figure is Rs
140,000 crore, eating at the very innards of public sector oil
companies. The picture gets grimmer when one factors in a loss of Rs
12.31 per litre of diesel, Rs 378 per LPG cylinder, Rs 28.77 per litre
of kerosene and Rs 1.50 per litre of petrol. This makes for a Rs 465
crore loss borne by oil marketing companies daily due to subsidies.
All wreaking havoc on the already soft underbelly of a rapidly
decelerating Indian economy.
Oil prices are rising in any case on furious demand from Asia led by
an ever hungry China, the world’s second biggest crude consumer. So,
while geo politics is being blamed for $120 levels for crude, Asia’s
huge appetite is acting as a catalyst. China’s crude imports increased
7.4 percent from a year ago to 23.41 million metric tons in January, a
record high, according to preliminary data from Beijing-based General
Administration of Customs on February 10. Don’t forget, that the US
economy is beginning to chug along nicely too.
Forewarned they say is forewarned. When the head of the National
Iranian Oil Company, Ahmad Qalehbani said that oil was headed for $150
in the last week of January, the world should have paid attention. Any
conflagration in the middle east will leave behind an economic
wasteland. Pray and hope.
-MAIL TODAY,FEBRUARY 19,2012
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