Guest Post by Larry C. Johnson
Washington and Israel are talking again about “finishing the job” in Iran. Before they do, someone should take a hard look at the bill for the jobs already done. My friend Karl Miller, who has called this region correctly more often than most of the people paid to do it, sent me his latest assessment on Monday. His conclusion is blunt: on the current course, another round of escalation is coming, and the countries paying for it will be the ones that never got a vote.
Start with the people who are supposed to be America’s partners. The IMF’s October outlook reads like a casualty report. Kuwait’s economy is forecast to shrink 16.7 percent this year. Qatar’s will shrink 15.6 percent, and Bahrain’s 11.3 percent. The UAE, long sold as the region’s safe haven, is now expected to contract 3.9 percent, a seven-point swing from the IMF’s April forecast. Saudi Arabia is forecast to shrink 3.3 percent. The only Gulf economy still growing is Oman, and that is because its ports sit outside the Strait of Hormuz.
These are not paper losses. Qatar lost two LNG trains at Ras Laffan in March, about 17 percent of its export capacity. QatarEnergy says the repairs will take three to five years and will cost it roughly $20 billion a year in revenue. Saudi Arabia’s escape route around Hormuz, the East-West Pipeline to Yanbu, is crippled. My sources tell me four of its 11 pumping stations are severely damaged and out of service. Riyadh now projects a deficit of 4.9 percent of GDP, is borrowing to cover it, and has frozen non-essential spending.
Miller explains why this is worse than the headline oil price suggests. A damaged plant produces nothing to sell, but the payroll, the debt payments and the repair bills keep coming. A plant that is still standing but cannot get parts in or cargo out is in almost the same position. A $108 barrel of oil is worth nothing if you cannot ship it. And the cash the Gulf states used to invest at home and abroad is vanishing fast. If a government takes in 100 and must spend 70, it has 30 left over. Cut income to 80 and that cushion drops to 10. A 20 percent hit to revenue wipes out two-thirds of the money for everything else.
The Gulf states bought American protection to safeguard exactly this wealth. Instead, as Miller puts it, they have ended up paying for the costs of American strategy. That is a bargain they will not keep making forever.
Now consider what another round of American and Israeli strikes would do to a world that is already short of energy. Oil flows through Hormuz are running around 11.6 to 11.9 million barrels a day, against a pre-war level of about 17 million. Middle Eastern fuel exports are below half of what they were before the war. The International Energy Agency says diesel will stay tight well into 2027, and that the diesel stocks already burned will not be rebuilt before the second half of that year. Brent is around $108, up more than 75 percent from a year ago.
Every escalation so far has followed the same pattern. Iran answers by tightening its grip on Hormuz. Its allies in Yemen widen their target list. Gulf facilities that were patched together get hit again before they earn back the cost of repairing them. That is the cruelest part of Miller’s analysis: repeated attacks make repairs pointless, because nobody will spend billions restoring a plant that may be destroyed again next month. A new campaign will not reopen the Strait. It will close it further, take more Gulf capacity offline, and push diesel back toward September’s record of more than $200 a barrel, just as Europe heads into winter. France and Italy are already rioting over the cost of living. Imagine them in February.
Miller’s harshest judgment is reserved for Israel, and it deserves a full hearing. He believes Israel will never recover from what it has done in Gaza, which a UN commission of inquiry concluded last year was genocide. In his words, the state is “done economically. It is done politically. It is done morally.” That is strong language, but the argument behind it is not hysteria. It is about how a state wears itself out.
His reasoning runs like this. Israel’s leadership has bet everything on military domination: hit every opponent hard enough that no one dares resist. Force can win battles, but it cannot make anyone accept the result. Every campaign therefore creates the need for the next one. Opponents rebuild, resentment grows, and the circle of countries willing to stand with Israel gets smaller. So the government doubles down with more force, because the alternative, accepting real limits on occupation and on its treatment of the Palestinians, threatens the political project it is defending. War becomes a way to postpone the reckoning, not avoid it.
The cost is already showing. The IMF says Israel’s economy is about 9 percent smaller than it would have been without the war. The budget deficit is heading to 6.2 percent of GDP, and public debt is on track to reach about 74 percent of GDP by 2031. Reservists are pulled from their jobs again and again. Israelis are already fighting over who carries the burden, with ultra-Orthodox men still far less likely to work or serve than everyone else. Foreign investors and partners grow more cautious with each campaign. Miller’s warning is that Israel’s project could become unsustainable long before its military power runs out. A country can keep its tanks and jets and still lose the economy, the alliances and the legitimacy it needs to survive. That is the dark and uncertain future he sees, and I find it hard to argue with.
Which brings me to the President’s latest reassurance. On October 13, Donald Trump said he does not believe Russia or China is helping Iran. On Sunday he went further on social media, insisting that “Russia is doing very little to help the Islamic Republic of Iran, compared with what it could be doing,” if it is doing anything at all, and that he wants it to stay that way “unless some stupid people get in the way.”
Less than a day later, Russian Foreign Minister Sergei Lavrov stood next to Iran’s Foreign Minister Abbas Araghchi in Tehran and said the opposite. “I am confident that Iran’s cause, like Russia’s, is a just cause,” Lavrov declared. He said Russia “has no intention of abandoning the implementation of agreements with Iran in the economic and investment spheres,” and recommitted Moscow to the 20-year strategic partnership that formally took effect on October 2. He announced that Russian specialists will return to the Bushehr nuclear plant. He called for Hormuz to return to pre-war conditions, and tied that to protecting Iran from renewed attacks. Before landing in Tehran, he called Trump’s approach “wrong.”
To be fair to the President, Russia has not gone to war for Iran, and the partnership treaty does not require it to. There is no mutual-defense clause. But that is a lawyer’s distinction. Russia’s foreign minister does not fly into a capital under threat of attack to call its cause just by accident. Add the reported Russian satellite data reaching Iran’s allies and the steady improvement in the accuracy of Iranian and Houthi missiles, and the picture is of a partner that is careful, deniable and very much engaged. Moscow does not need to fire a shot. It only needs to keep Iran standing while America bleeds its Gulf allies and Europe’s economy.
If Washington and Israel launch another round, they will be betting that this time force produces a settlement. Three years of evidence says it will not. What it will produce is deeper Gulf recessions, a longer energy shortage, more anger in Europe’s streets, and a bigger bill for an Israel that is already running out of room. Miller’s forecast is that the next round is coming anyway. I hope he is wrong this time. I doubt it.
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[ H/T The Burning Platform ]
Washington and Israel are talking again about “finishing the job” in Iran. Before they do, someone should take a hard look at the bill for the jobs already done. My friend Karl Miller, who has called this region correctly more often than most of the people paid to do it, sent me his latest assessment on Monday. His conclusion is blunt: on the current course, another round of escalation is coming, and the countries paying for it will be the ones that never got a vote.
The Gulf is being bled dry
Start with the people who are supposed to be America’s partners. The IMF’s October outlook reads like a casualty report. Kuwait’s economy is forecast to shrink 16.7 percent this year. Qatar’s will shrink 15.6 percent, and Bahrain’s 11.3 percent. The UAE, long sold as the region’s safe haven, is now expected to contract 3.9 percent, a seven-point swing from the IMF’s April forecast. Saudi Arabia is forecast to shrink 3.3 percent. The only Gulf economy still growing is Oman, and that is because its ports sit outside the Strait of Hormuz.
These are not paper losses. Qatar lost two LNG trains at Ras Laffan in March, about 17 percent of its export capacity. QatarEnergy says the repairs will take three to five years and will cost it roughly $20 billion a year in revenue. Saudi Arabia’s escape route around Hormuz, the East-West Pipeline to Yanbu, is crippled. My sources tell me four of its 11 pumping stations are severely damaged and out of service. Riyadh now projects a deficit of 4.9 percent of GDP, is borrowing to cover it, and has frozen non-essential spending.
Miller explains why this is worse than the headline oil price suggests. A damaged plant produces nothing to sell, but the payroll, the debt payments and the repair bills keep coming. A plant that is still standing but cannot get parts in or cargo out is in almost the same position. A $108 barrel of oil is worth nothing if you cannot ship it. And the cash the Gulf states used to invest at home and abroad is vanishing fast. If a government takes in 100 and must spend 70, it has 30 left over. Cut income to 80 and that cushion drops to 10. A 20 percent hit to revenue wipes out two-thirds of the money for everything else.
The Gulf states bought American protection to safeguard exactly this wealth. Instead, as Miller puts it, they have ended up paying for the costs of American strategy. That is a bargain they will not keep making forever.
A new round means a deeper shortage
Now consider what another round of American and Israeli strikes would do to a world that is already short of energy. Oil flows through Hormuz are running around 11.6 to 11.9 million barrels a day, against a pre-war level of about 17 million. Middle Eastern fuel exports are below half of what they were before the war. The International Energy Agency says diesel will stay tight well into 2027, and that the diesel stocks already burned will not be rebuilt before the second half of that year. Brent is around $108, up more than 75 percent from a year ago.
Every escalation so far has followed the same pattern. Iran answers by tightening its grip on Hormuz. Its allies in Yemen widen their target list. Gulf facilities that were patched together get hit again before they earn back the cost of repairing them. That is the cruelest part of Miller’s analysis: repeated attacks make repairs pointless, because nobody will spend billions restoring a plant that may be destroyed again next month. A new campaign will not reopen the Strait. It will close it further, take more Gulf capacity offline, and push diesel back toward September’s record of more than $200 a barrel, just as Europe heads into winter. France and Italy are already rioting over the cost of living. Imagine them in February.
Israel’s dark future
Miller’s harshest judgment is reserved for Israel, and it deserves a full hearing. He believes Israel will never recover from what it has done in Gaza, which a UN commission of inquiry concluded last year was genocide. In his words, the state is “done economically. It is done politically. It is done morally.” That is strong language, but the argument behind it is not hysteria. It is about how a state wears itself out.
His reasoning runs like this. Israel’s leadership has bet everything on military domination: hit every opponent hard enough that no one dares resist. Force can win battles, but it cannot make anyone accept the result. Every campaign therefore creates the need for the next one. Opponents rebuild, resentment grows, and the circle of countries willing to stand with Israel gets smaller. So the government doubles down with more force, because the alternative, accepting real limits on occupation and on its treatment of the Palestinians, threatens the political project it is defending. War becomes a way to postpone the reckoning, not avoid it.
The cost is already showing. The IMF says Israel’s economy is about 9 percent smaller than it would have been without the war. The budget deficit is heading to 6.2 percent of GDP, and public debt is on track to reach about 74 percent of GDP by 2031. Reservists are pulled from their jobs again and again. Israelis are already fighting over who carries the burden, with ultra-Orthodox men still far less likely to work or serve than everyone else. Foreign investors and partners grow more cautious with each campaign. Miller’s warning is that Israel’s project could become unsustainable long before its military power runs out. A country can keep its tanks and jets and still lose the economy, the alliances and the legitimacy it needs to survive. That is the dark and uncertain future he sees, and I find it hard to argue with.
Trump says Russia is doing nothing. Lavrov says otherwise.
Which brings me to the President’s latest reassurance. On October 13, Donald Trump said he does not believe Russia or China is helping Iran. On Sunday he went further on social media, insisting that “Russia is doing very little to help the Islamic Republic of Iran, compared with what it could be doing,” if it is doing anything at all, and that he wants it to stay that way “unless some stupid people get in the way.”
Less than a day later, Russian Foreign Minister Sergei Lavrov stood next to Iran’s Foreign Minister Abbas Araghchi in Tehran and said the opposite. “I am confident that Iran’s cause, like Russia’s, is a just cause,” Lavrov declared. He said Russia “has no intention of abandoning the implementation of agreements with Iran in the economic and investment spheres,” and recommitted Moscow to the 20-year strategic partnership that formally took effect on October 2. He announced that Russian specialists will return to the Bushehr nuclear plant. He called for Hormuz to return to pre-war conditions, and tied that to protecting Iran from renewed attacks. Before landing in Tehran, he called Trump’s approach “wrong.”
To be fair to the President, Russia has not gone to war for Iran, and the partnership treaty does not require it to. There is no mutual-defense clause. But that is a lawyer’s distinction. Russia’s foreign minister does not fly into a capital under threat of attack to call its cause just by accident. Add the reported Russian satellite data reaching Iran’s allies and the steady improvement in the accuracy of Iranian and Houthi missiles, and the picture is of a partner that is careful, deniable and very much engaged. Moscow does not need to fire a shot. It only needs to keep Iran standing while America bleeds its Gulf allies and Europe’s economy.
The bill comes due
If Washington and Israel launch another round, they will be betting that this time force produces a settlement. Three years of evidence says it will not. What it will produce is deeper Gulf recessions, a longer energy shortage, more anger in Europe’s streets, and a bigger bill for an Israel that is already running out of room. Miller’s forecast is that the next round is coming anyway. I hope he is wrong this time. I doubt it.
Tweet
Continue reading...
[ H/T The Burning Platform ]
