February 22, 2007

BARKS AND BITES



El Cabrero is a pretty much lifelong student of the martial arts, which have quite a bit to teach those who are willing to learn about strategy and the dynamics of conflict.

Here's a basic rule: never do anything if you can help it that makes your potential opponent more powerful and dangerous than he (usually it is a he) already was. That's another lesson lost on the Bush administration.

Here's a case in point:

The Feb. 19 & 26 issue of The New Yorker has an interesting article by James Surowiecki about how the belligerence of the Bush administration towards Iran actually strengthens the hardliners in the regime. The title is Troubled Waters over Oil.

Basically, the political fortune of Iranian President Ahmadinejad follow the price of oil. When it goes up, the regime has more money to spend. When it goes down, reformers and internal critics are usually in a stronger position. So when signs point to a crisis and conflict, the "risk premium" and thus the price of oil increases.

When buying and selling oil, traders don’t just look at today’s supply and demand. They also try to forecast the future. And if buyers think there’s a chance that supply is going to be lower down the line—because, say, Iranian oil fields will be shut down—they will be willing to pay a higher price today in order to guarantee that they will have the oil they need. That’s why, in the run-up to the Iraq war, oil prices jumped more than fifty per cent. In the current confrontation between the U.S. and Iran, these same concerns create a perverse set of incentives: whenever the U.S. says things that make a military conflict with Iran seem more likely, the price of oil rises, strengthening Iran’s regime rather than weakening it. The more we talk about curbing Iranian power, the more difficult it gets.


The inflated risk premium provides the revenue that the government depends on. This means that "Ahmadinejad, whatever his religious or nationalist inspiration, has an economic incentive to say confrontational things that spook the oil market."

But by himself, he can only do so much, since traders know that Iran does not really want to shut off the supply of oil. What really raises the risk premium are the American public responses to these provocations.

He concludes

Talking tough may look like a good way of demonstrating U.S. resolve, but when tough talk makes our opponent richer and stronger we may accomplish more by saying less.


ROUGE'S GALLERY: Meanwhile back to El Cabrero's beloved state of West Virginia. Here is an op ed on state budget issues by GR amigo Ted "Beavis" Boettner. He's gunning for the position of uber-wonk and is going to be pretty insufferable now.

And this one by AFL-CIO secretary treasurer Larry Matheney asks some big questions.

And finally, a few years back, WV became the "mouse that roared" when it passed legislation aimed at reducing the price of prescription drugs. Since then, we've been more like the mouse that...I don't know...didn't. This one by Dan Kurland suggests we're facing a moment of truth.

GOAT ROPE ADVISORY LEVEL: ELEVATED

4 comments:

Elipsos said...

How do Oregon and WV differ in their drug plans?

and...I'd ask La Cabra about that first paragraph on battles and men. :)

El Cabrero said...

The trouble with fighting La Cabra is that she uses techniques that are so bizarre that I don't recognize them as such and am therefore defenseless against them.

I'll have to check on Oregon. The intent behind the WV law was to use state muscle (or the pretense thereof) to bargain with drug companies the way some govt. agencies do (alas, not Medicare at this point). To put it mildly, that hasn't happened.

The fight now is to try to get the companies to disclose lobbying and other costs.

Sometimes Saintly Nick said...

The article in the New Yorker was excellent. It continues to amaze me that the Bush administration's saber rattling causes them (and us) so many problems. Was it Von Clausewitz who said that "War is an extension of diplomacy?" I think that out present administration has it backwards.

El Cabrero said...

They do have quite a knack for acting in counter-productive ways, don't they?