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Iraq to produce more oil than Iran by the end of the year as sanctions bite

Posted on 28 May 2012 with 1 comment from readers

From July 2nd all Iranian oil sales to the European Union and Australia will stop, and many other nations such as South Korea have joined the embargo. Meantime. Iraq has quietly ramped up oil production to three million barrels per day and will overtake Iran sometime this autumn.

Rarely has a nation exposed to sanctions been confronted by such unity as Iran. Even sales of oil to China come at a huge discount, the sting in the dragon’s tail. Iran’s only regional ally Syria is mired in a de facto civil war.

Business squeeze

It may still be safer on the streets of Tehran than Baghdad but there is no doubt which city is the better place to be doing business. And actually Baghdad has recently hosted two major diplomatic meetings without incident, includiing ironically the inconclusive Iranian nuclear talks.

These talks resume in Moscow next month. Iran is the all the poorer while they drag on. The ineffiicient old fashioned dhows from Dubai mainly carry essential foodstuffs these days, not consumer goods. Trade is down by more than half.

The Iranian rial has crashed this year losing more than half its value. Capital has left the country with rich Iranians buying homes in Dubai. Gold is the new currency of choice with oil sold to China for gold. Oil production is at its lowest for a decade.

At the same time Iraq is earning around $9 billion a month from oil sales and rising. Internal security is still an issue but economics and social stability do generally improve at the same time.

Gulf power shift

The balance of power is shifting in the Gulf of Arabia as many commentators now refer to the Persian Gulf. For with Iran’s klout in the oil market humbled by its long-standing rival and neighbor Iraq, the Islamic Republic has little economic muscle to exert in its own defense.

What happens next is anybody’s guess. Israel remains poised to strike Iranian nuclear installations but not while talks continue. If Tehran was hoping that events might drift in its favour then they will have been sadly disappointed.

The idea that a resurgent Iran would step into the power vacuum of the Arab Spring seems very far from the reality of a country more on the margins of regional economic and political life than ever.

Posted on 28 May 2012 Categories: Banking & Finance, GCC Economics, GCC Real Estate, GCC Stock Markets, Global Economics, Gold & Silver, Oil & Gas

1 Comment posted by readers:

Comment by Bill on Clearwood Dr. - 28 May 2012

In a few years, a lot of people will be quite surprised when they discover how much oil Iraq actually has. I heard a rumor that they are selling it at a discount.
I was sure wrong about the security situation in Iraq after the US troops left. I guess the three major groups are too busy counting the oil money, and are tired of fighting and terrorism. That is good. If they can avoid fighting among themselves, they can ALL get very rich, and live quite comfortably for a long time.
It looks like Bankia in Spain will use Spanish government debt to borrow from the ECB. That, and possible US QE could push up gold, and might even cause a stock market pop. Of course, a bad jobs report from the USA on Friday could cause a sell – off, until the QE (by another name) is announced by the Fed.
I read an interesting comment by someone on the MarketWatch website a couple of days ago. He claimed that he had worked for a company in Dallas,
Texas, and that they had discovered large silver ingots that had three holes of base metals that had been inserted into them. I can’t say he wasn’t making the whole story up, but he did give the company’s name. I didn’t check if it was even a real company, since I would never trust bars of anything. Coins are harder to counterfeit. Making those precision dies and stamping bogus coins that look right is very tough. And coins have a definite size and weight that can be easily measured.
The Spanish 10 year yield is now at 6.46% The spread with German debt is nearly 5%. And they use the same money!
Don’t forget platinum and palladium coins. The Chinese will need a lot more pollution control on all those millions of new cars they will build as their middle class expands. Without catalytic converters, they will poison themselves. The air will become toxic and dangerous. Platinum and palladium are the only things that work to burn up those nasty unburned hydrocarbons in the exhaust, unless you want them in your lungs.
I think the Greek conservatives will win the election, and Greece will stay in the euro. They are terrified of having worthless money, and possibly being abandoned to the Turks, once they are out of the euro. They will vote to stay in the euro.
Hugo Dixon of Reuters Breaking Views says a US of Europe won’t work.
Madrid has just told the ECB of a plan to recapitalize the banks with government debt, with the ECB NOT objecting. Spain will tap the European Financial Stability Fund. A little rule fudging? It looks like Germany will get drained of wealth for a long time to come. They have little choice but to fund the good life for the South, as long as they are in the euro. They are trapped. It will cost them a lot.
Bank of America is predicting that high oil prices are here to stay. (I wonder if they figured that out all by themselves? Absolute genius!) If the ECB starts more money printing, they predict that Brent will hit $140. They predict that US GDP will only grow 1% in the second half of 2012. I say more like 2% but the politicians can screw anything up with the debt ceiling fight threats.
A little QE happy talk, and rumors of the radicals not taking over in Greece and leaving the euro, is all that is needed to push the European stock markets higher. DOW futures too.
And once again some clown is on CNBC trying to compare Greece to Argentina. Do these fools know ANYTHING about the resources in Argentina? Evidently not.
I’m just grateful for Freon because once again the heat is way above normal for late May. At least the lack of rain means I don’t have to cut the grass. And with this radio scanner, hurricanes will stay away. I would never have thought that the Gulfport Mississippi Fire Department FM signal could reach all the way to Slidell. I need to get a small antenna to stick on the top of my lamp and run a wire to the scanner. That will look nice. There are a lot of FM signals that are too weak to intercept reliably with the little antenna on the scanner. Hey, I’m helping the economy by buying all the useless stuff I can. I have learned one thing useful. Do NOT speed in Pearl River County Mississippi.

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