January 4, 2007EconomyForeign AffairsSecurity

Children, this is called analysis

The Iran problem is a oil market power problem. The solution is a price attack”

This is an archived blog post from The Acorn.

Iran’s oil exports are declining due to energy subsidies, hostility to foreign investment, and inefficiencies of its state-planned economy underlie Iran’s problem”. That is the reason why Iran is seeking nuclear energy. It is also seeking nuclear weapons to become a regional superpower. The best way to tackle the Iranian regime is not through war or economic sanctions, but, as Roger Stern argues, through enforcing fuel-economy regulations on the automobiles in oil importing countries, including the United States and India. The solution is a price attack” that breaks the OPEC cartel.

Stern’s analysis and arguments, which follow his earlier analysis of oil market power and the threat to US national security, are brilliant.

There’s something in it for Indian policymakers too: another good reason to dump that pipeline project—Iran does not have enough gas to pump across.

Remarkably, India is proceeding with an agreement for an Iran–Pakistan–India gas pipeline, apparently oblivious to what is common knowledge from the Majlis to the trade press; Irani gas is overcommitted, which will continue to be the case even when new South Pars gas comes on stream (6, 33). It therefore seems open to question whether Iran will continue gas exports should oil exports decline precipitously for lack of reinjection. [PNAS]

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