Oct

24

There's lots of chatter about the decline in oil resulting from perceived risks of war in the Middle East. That's strange, since the risks haven't been higher in a while. Consider: Turkey did a pretty good job of betraying the Mossad by revealing 10 agents in Iran. How many of those agents were involved in monitoring Iran's nuclear weapons program I do not know, but I doubt that their absence provides the Israelis with any sense that Iran is far away from being able to build a nuclear weapon.

As a result of the above event, the US responded by canceling drone shipment to Turkey. Since Turkey was trying to reposition itself as a ME power and away from the EU (which it assessed as a losing proposition a few years back), it's not clear what the impact of this action may be, though it certainly doesn't increase US influence.

The US cut off aid to the Egyptian military, losing leverage. The Israelis are concerned because they saw that aid as the guarantee on the peace treaty with Egypt. Israel is also concerned about the return of the Muslim Brotherhood to the Egyptian government, with its connections with Hamas and complicity in support of the Gazan tunnels into Egypt. Of equal concern is the re-emergence of Russia in Egyptian affairs, with Putin moving to sell arms and provide financial relief to Cairo.

Saudi Arabia just turned down election to the Security Council as a protest against inaction in Syria and against IranThe Iranian PR offensive continues with absolutely no suggestion of any real behavior change by the regime.

Bibi is again talking about Israel's right to defend itself and that Israel will not tolerate anything short of the shutdown of the Iranian nuclear weapons program, including Iran's ability to enrich uranium (which Iran has declared to be off the table). I've seen no suggestion that concern among the Israeli electorate about Iran's intentions has lessened.

Syria has attempted on three different occasions in the past month to move chemical weapons to Hezbollah in Lebanon, even as the Lebanese re-evaluate their tolerance of the group in Lebanon.

Syria continues to decay, the Iranians continue to prop up the Syrian economy (or what's left of it), and refugees continue to enter Turkey and Jordan. Russian influence in Syria has increased in the wake of the negotiated quasi-destruction of some portion of Syria's chemical weapons store (the part that's visible and easily monitored). Iraq deteriorates as political support for the government continues to drop.

US credibility in the area is greatly diminished as a result of multiple international and domestic missteps. None of these occurrences should be a surprise. But in light of them, why is the "war premium" going down? If anything, instability in the Middle East, especially in the Gulf, has increased.

Ed Stewart writes:

You said: "None of these occurrences should be a surprise. But in light of them, why is the "war premium" going down? If anything, instability in the Middle East, especially in the Gulf, has increased."

It might be the difference between kinetic vs. potential energy. A specific crisis (kinetic) creates focal point for risk premiums. Some of the regional potential energy has been talked about for so long (business as usual) it is less relevant until movement occurs which signifies it is activated and being released.

As to if the "chatter" is correct or not, I have not, I have no clue.


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