IRAN X IRAN = IRAN SCREWED = PEACE = PROSPERITY

Pipelines to the left and pipelines to the right of Iran mean that the Straight of Hormuz is losing its choke hold on the world.

If you have played the game of Risk, you know that Iran is one of those key land bridges between continents. Place a large number of pieces on Iran and it is difficult for an opponent to invade significant territories to the East or West of Iran. In terms of oil supply, there is no more strategic location than the Straight of Hormuz. The Middle East holds about 60% of the world's proven oil reserves; most of the oil from the Middle East flows past the 2 mile wide Straight. Should war break out, Iran could potentially stop the flow of oil from Saudi Arabia, Iraq, Kuwait and other countries.


In 1949, a Trans-Arabian pipeline was built to connect Saudi Arabia to Europe via the Mediterranean Sea and a terminal at Tripoli, Lebanon. After years of civil war in Lebanon, this pipeline is no longer used. One of the reasons Syria wants to control Lebanon and to get the Golan Heights back from Israel is to regain control of the pipeline route. The pipeline route is the reason the Saudis and the Iranians have financed opposing sides in Lebanon.

The animosity between Iran and Saudi Arabia has inflamed by the conflict in Lebanon but it is a natural conflict as Iran is the military threat in the region. Iran holds the strategic location and its leaders have expressed the desire to rule a much larger territory. The fear of Iran's neighbors has been heightened by Iran's pursuit of nuclear weapons.

Under the circumstances, Iran's neighbors are in pursuit of other delivery routes. The constant conflict in Lebanon cut off the Trans-Arabian pipeline to the Mediterranean and politics prevent its extension to the Mediterranean through Israel, but there are several other potential routes.

NEW PIPELINES FROM HERE TO THERE AND EVERYWHERE

There are many oil and gas pipelines under construction and several more in the planning stages. Some have been in the planning stages for years. An agreement signed on April 24, between Turkmenistan, Afghanistan, Pakistan and India (TAPI) will deliver abundant gas supplies from Turkmenistan to India and perhaps to China. While this route has been under consideration for 20 years and while it will not be completed until 2014, it represents a major set-back for Iran. The financing has already been arranged and this success could easily be followed by an oil pipeline from Kazakhstan, again, bypassing the Straight of Hormuz.

Iran is second only to Russia in proven gas reserves. Iran has promoted a competing, Iran-Pakistan-India-China pipeline, but UN sanctions have delayed progress. India and China hope both pipelines will be built. Iran is becoming a bit like King Midas. Iran sits on huge amounts of oil and gas but has no way to sell it. Last month, Iran's oil production declined by 200,000 barrels per day. My guess is that number is misleading because much more production was deposited into ships that are now full to the brim.

The cost of pipelines is enormous but the long term profits can be even more enormous. In North America, the current competition is for a pipeline to bring natural gas from Prudhoe Bay Alaska to Alberta Canada and on to US markets in the Midwest. The projected cost is 26.5 Billion Dollars! The battle with tree huggers is not totally over but it certainly makes economic and environmental sense to pipe gas rather than sending a steady stream of super tankers up and down the Pacific coast. The total cost of the TAPI pipeline will be about $7.5 Billion but there are also costs to protect it from terrorist attack. Afghanistan will earn an 8% transit fee $31 billion dollars worth of gas per year; $2.48 billion is not a bad commission if you can get it.

The Risk player, who desires to control Asia but who does not control Iran, must place equal sized armies in Turkmenistan, Afghanistan and Pakistan. The proposed TAPI pipeline bypasses Iran to the East but there are Western efforts in the works as well.

Saudi Arabia is on a pipeline building binge. An East West pipeline has cut across the country to the Red Sea. It is not being used to full capacity because the shipping route is longer. For now it is primarily a safety valve. However, plans include an extension through Egypt to the Mediterranean. Another pipeline will connect Basra, Iraq to the Saudi network. Another will connect Yemen. Another Dubai. And, there are others. The point is that once the network is completed, oil will not have to move past the Straight of Hormuz on its way out of the Middle East.

SYRIA

Peace and prosperity is a promoted by win-win trade deals. Syria is finally ready to join a winning team. In the same city where Israel bombed Syria's nuclear facility, China has agreed to build a large oil refinery. One report says the oil refinery is 100,000 barrels per day but another says it is the largest refinery ever. In any event, it is well located; the Saudis have agreed to build a pipeline to it. It has also been noted (by John Loftus, International Analyst Network) that the location is very close to the old Hess pipeline from Iraq. Iraq produces a lot of oil just across the border from Syria. According to the preliminary deal reached between Syria and Israel, Syria will control the total route to Tripoli. There is yet another network of pipelines connecting several countries, including Iraq to the Mediterranean through Turkey.

BYPASSING RUSSIA

Russia made deals to build a gas pipeline to Europe, underneath the Baltic Sea. European nations, which have expressed concern about being too dependent on Russia, support competing routes from several former Soviet Union states.

IRAN X IRAN = IRAN SCREWED = PEACE = PROSPERITY

A game of Risk can go on forever. One way a game can end is for one player to be such a threat that the others gang up on him. Long ago, the leaders of Iran decided to win through intimidation. Their strategic location and oil wealth allowed them to get away with this strategy, until the other players, almost unanimously, decided to gang up on them. Now, Iran needs to sue for peace. There is room for all players to enjoy peace and prosperity.

A PLAN COMES TOGETHER, EVERYBODY WINS

Despite the constant criticism, the Bush Administration has played an excellent game of Diplomacy. The game of Diplomacy is much like the game of Risk. The US has looked for and negotiated win-win deals. Deals have been made to help countries like India and China secure energy supplies and deals have been made to give countries like Russia, Saudi Arabia and Turkmenistan an outlet for their supplies. The deaths of over 4,000 US soldiers in Iraq has been a steep price. As George Will noted, this war is an extension of WWI and WWII, in which there were 117,000 and 440,000 American deaths respectively.

In the game of Risk, there comes a point when you know it is over. The weak player still has a few armies but the odds of beating the other players has approached zero. Iran is whipped unless they cooperate. The PR from Iran showed they are ready to make their suspension of enrichment of uranium a victory by securing the location of an international enrichment center. In any event, it is going to be necessary for Iran to agree to stop arming and financing terrorist.

ABUNDANT RESERVES

Iraq is in the process of signing technical agreements with the major oil companies. Exxon and BP were the first two to sign. A recent review of Iraqi oil fields, in light of new production techniques, resulted in recoverable reserves being increased to 350 billion barrels. Iran could easily double its reserves by allowing the best of the best to develop it's oil and gas. It can also build a pipeline all the way to China. While these abundant reserves will not last forever, nuclear power is ready for prime time. Iran can sign on to the 123 nuclear accord and participate in low cost electricity.

It will take years to build the nuclear power but we have the time. The price of oil is falling again so far today because the price is holding down demand and increasing supplies. Good news is here for all!