Sunday, February 25, 2007

War with Iran: Who wins, who loses

Which way will the balls bounce?

Ezra Klein: The Edwards Interview
Iran: His [John Edwards'] position here is more thoughtful and nuanced than his comments at the Herzliya conference revealed. "what happens," he asked, "if America were to militarily strike Iran? Well you take this unstable, radical leader, and you make him a hero—that’s the first thing that’ll happen. The Iranian people will rally around him. The second thing that will happen is they will retaliate. And they have certainly some potential for retaliating here in the United States through some of these terrorist organizations they’re close to, but we’ve got over a hundred thousand people right next door. And most people believe that they have an infrastructure for retaliation inside Iraq. So, that’s the second thing that’ll happen. And the third thing is there are a lot of analysts who believe that an air strike or a missile strike is not enough to be successful. To be successful we’d actually have to have troops on the ground, and where in the world would they come from?"

Something I've been thinking about the last few weeks is who wins and loses if war (or a facsimile thereof) breaks out between the U.S. and Iran. Being as the grunts are tied down in Iraq I imagine a plan similar to Arthur Herman's, heavy on special forces, air and sea power.

Iran: Undoubtedly their air force and navy would suffer terribly. If oil facilities and refineries were damaged they would have a hard time bringing in outside supplies and experts for rebuilding (especially if sanctions were ongoing). Iran already faces declining production aggravated by a lack of investment in the oil sector On the other hand the threshold of victory is a lot lower for Iran than it is for the United States. As we saw in Lebanon, Iran just has to refuse to quit until international pressure forces the U.S. to knock it off. The U.S. will be starting in a P.R. hole (especially after being seen as crying wolf on Iraq's WMDs) and CNN will be rebroadcasting every shot of dead Iranian kids that comes over Al Jazerra. Criticism from allies, rivals, and assorted tinpot dictators will flow in a mighty wave. Even if Iran is whipped militarily they could still "win" the war.

Iraq: Iranian instigated violence against the U.S. and/or the Sunnis would no doubt make things worse. More neighborhoods flattened, more bodies in the streets. If the pessimists are right (and Iraq has been nothing but kind to pessimists) and the U.S. forces come under heavy attack and have to pull back to a few bases or even quit the country, full bore ethnic cleansing and civil war will probably be the order of the day. The Kurds are friendly with the Iranians so the Northern part of the country might not be that good of a spot to pull back to (depends how scared of Turkish intervention the Kurds are). We may have to choose between Iran and Iraq.

Saudi Arabia and Kuwait: It depends if Iranian missiles reach them and if the straits of Hormuz are blocked for any period of time. If they can keep pumping they will be rewarded with even greater oil wealth as oil prices shoot up. Having the Iranians cut down to size will probably make them feel more secure in the long term. Civil unrest among Shia populations in the oil rich part of Saudi Arabia might cause some sleepless nights in the house of Saud in the short term though.

Russia: Falling oil prices were a big part of what brought down the Soviet Union. So the boost in oil prices will improve job security for the in crowd at the Kremlin. The Soviets won't be happy to see their wishes ignored which feeds into the sense that they are not taken seriously since the end of the Cold War. The Russians see the influence they used to have and had accepted as their birthright gone and that doesn't go over well. Russia may well land contracts to redevelop the Iranian infrastructure and even a greater amount of influence over Iranian production. Russia wouldn't mind altogether having the Iranians knocked down a bit though given their traditional desire to be surrounded by vassal buffer states (and the potential for an insufficiently cowed and dependent Iran to make trouble in the Muslim territories). And hey, if some of those new misslies they sold Iran knock down a few American planes that'd be a heckuva ad for Russian arms exports.

China: The story of China's foreign policy the last few years has been the scramble to secure resources. China has been offering no questions asked deals with rogue states that possess oil and minerals and has been pushing hard for pipeline deals to lessen their dependence on sea lanes for oil. As a fairly energy inefficient producer of exports this could hurt them both with an increase in costs and a drop in demand. China has to maintain growth to keep the populace reasonably happy. No doubt they will sell lots of new toys to the Iranians to replace the ones broken by the Americans but that seems a small consolation.

Mexico: They are heavily dependent on oil wealth for government spending and face declining production. So this could delay a day of reckoning for the Mexican government.

Much of the third world loses. They have been priced out of the oil market already and increases in price which would be painful for the west could be catastrophic to countries on the edge.

The United States: The best likely outcome is Iran being forced to accept international inspectors and back off its nuclear program after a short engagement with relatively light costs to the U.S. Even with this scenario, Oil will spike in price and probably set off another round of inflation which of course will require the good doctor Bernanke to administer another round of tough love to the economy a few months later . Higher prices (especially higher energy prices) will cut disposable income. Couple that with Interest hikes and ARMs resetting and you have a lot of marginal homeowners who just became ex-homeowners. So housing takes another hit. Domestic automakers are hit with the economy slowing down in general and energy prices incompatible with their product mix, perhaps even incompatible with life. Hope the Republicans don't need Indiana, Ohio, or Michigan to win the Presidency in 08.

In the Worst case Iran emerges bloodied but unbowed. Probably the nuclear program is delayed a year or three due to damage to the facilities themselves and to the Iranian economy but the country is determined as a point of national pride to follow the path to the bitter end. The U.S. suffers massive casualties in Iraq and in retaliation attacks elsewhere (probably leading to more punitive strikes on Iran and more long term reductions in Iranian oil production). The Straits are closed for a period of time and some oil facilities in nearby countries are damaged by missiles or terrorists. Mix in a hurricane or two that forces a shutdown, even a brief one, of the Gulf of Mexico and oil is at triple digit levels. The big 2.5 are in chapter 11, if not chapter 7. The country is in a deep recession and the bears are murmuring about a depression. Republicans endure many a "thumpin" and minority status for the next decade. Worst of all, many, many American troops aren't coming home....ever.

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