A Forecast, written on 9/30/05

Last night, I heard a journalist for the NY Times, who is a reporter in Baghdad, talk with Terry Gross (on NPR) and he basically confirmed what we Middle East Studies experts were thinking in 2003, which is that this insurgency is creeping toward civil war; Sunnis are entering Shiite neighborhoods and assassinating the few Sunni's who live there and Sunnis are entering Shiite neighborhoods and killing the few Sunni's, who live there. In fact there is a new industry that has emerged in which the assassins are paying "allahs" to guide them to the house of the victims. So, what we have going on now is ethnic cleansing and it is only serving to fuel the fire of the insurgency, which will soon become a civil war.

Like the Balkans, the involved ethnicities won't know that they are in a civil war until things reach a critical mass by which time it will be too late to stop it; the hornets nest will have already been struck. Once full blown civil war emerges, we predict that this will spillover into a regional war. This would be interesting and test Turkey's alliance to the US and Israel, let alone their newfound commitment to human rights as part of their bid to enter the EU. Turkey's truce with the Kurds in Southeastern Anatolia, which borders Iraq, is over and has been for some time. The Kurds in Iraq and Iran will ally with the Kurds in Turkey and Iran to fight the Turkish government. Turkey will deploy more troops into Northern Iraq and possibly Iran to deal with them. The Kurds are already aligned with the Shiites, who will have the support of Iran. Turkey and Israel already engage in military cooperation and no one knows whether it is a strategic cooperation agreement. If it is, then an attack on one is an attack on the other and the other must come to the attacked party's assistance.

The US would align with Israel and oppose Iran. Turkey is predominantly Sun'ni, the Sun'nis of Iraq are would align with them against the Kurds. So, you have Turkey and the Sunnis of Iraq against Iran; the Kurds, the Shiites, the US and Israel against Iran. If Turkey starts fighting the Kurds in Iraq, the US might have a difficult decision to make and it might test the strength of NATO, which could be torn apart at the seems since two critical members (Turkey is the second most powerful (militarily) player in NATO) might wind up fighting each other. The US/Israel will bomb Iran's nuclear facility, OPEC will use its "oil weapon" against the West, which will starve the west of Oil and since we would be engaged in a full-scale regional war, we would then tap into the strategic petroleum reserve for military purposes. This regional conflice could then escalate to a global war, if China allies with Iran for access to its energy resources. N. Korea will bandwagon with China and Iran. India would ally with the US, Turkey, and Israel's trilateral alliance, out of fear of China.

In any case, all the players in this puzzle lose. I really do think that this might have been engineered by the evangelical idiot we have in office as he thinks it will bring about Armageddon in which he would not die but be lifted into the heavens with all of his other faithful brethren, while the others are left to deal with the aftermath. Meanwhile, back in reality, we have a delusional leader who actually believes this fantasy and has begun the process of moving a delicate and strategically important region toward more instability. This, to me, seems ironic, given that one of our stated goals was to bring more stability to the region through bringing democracy to the region. I am of the belief that you can't impose democracy on a culture, but rather you can introduce it to them and let them evolve toward it on their own. This is a communautarian belief and the administration seems to be taking a cosmopolitan approach by arguing that all humans deserve to have democracy, imposed or not.

At any rate, all the experts know that it takes 15 years to quell an insurgency. We either knew that the ethnic tensions were so strong that this would happen and deliberately orchestrated things this way, or we were ignorant of their culture and went in with our imperialist arrogance in which case we deserve the comeuppance that we are being served.

I will step down from my soap box, now.

Free Trade and the Food vs. Fuel debate

The fundamentals of the global oil market don’t look very sweet for customers. We are in short supply, due to political events and refinery capacity, let alone upward pressure on demand, as we enter the summer season. Needless to state, we are vulnerable to the factors that impact the oil market.

One way that energy-independent Brazil has decided to deal with this threat is by switching to alternative fuels. They already use sugarcane-ethanol and it was recently reported that they may soon add coffee beans to their fuel mix. This is an interesting development. I would be interested to know what the yield is (in terms of ethanol) from coffee beans and how Brazil is positioned in the world coffee market.

The background of Brazil’s sugarcane-ethanol fuel economy is interesting. Due to the subsidies to the US producers and European producers, as well as tariff duties levied by both political entities on Brazilian Sugarcane, Brazil has found that they can't compete with Sugarcane producers from those zones; though they are the most efficient at producing Sugarcane ($.04 per cane vs. $0.25 in the EU and the US). So, they have become the world leader in terms of using ethanol to power their vehicles. The last statistic I read was that 85% of their vehicles are powered off of the sugarcane-ethanol. This is one way that they have been able to leverage their strategic resources to become energy independent.

One of the reasons that we have such a problem in the US, with gasoline, is that we don't have enough refinery capacity; a new refinery has not been built in around 30 years, mainly due to capital and regulatory constraints. We are talking about using corn to develop ethanol, but sugarcane yields 8 times as much ethanol than corn. So, one can surmise that our ethanol won't be as cheap as Brazil's. However, it could be a step in the right direction, as we would conceivably be able to reduce our Ag Subsidies to corn; thus making us more competitive in at least one area of Ag. In addition, we would take a step toward energy independence.

Then we run into other gray areas. A supplier would have to make the decision of whether to supply the food market, or the energy market, and given the thirst for fuel, I could see there being a shortage of corn being supplied in grocery stores; thus driving the price up. This is known as the food vs. fuel debate.

So, the next time you hear a politician talking about free trade, keep this in mind. They are only interested in “free trade” that benefits their constituents and “free trade” isn’t always free.