A war between America and Iran could escalate beyond the borders of Iran and Saudi Arabia and have an enormous impact on the oil market. We are at a tipping point where things cannot go on as they are, writes Clem Sunter.
In an article I posted on this website in May this year, I said the following: "With America on the one hand walking out of the nuclear agreement with Iran and applying really tough sanctions to bring the country to its knees, and Iran on the other hand saying it might go back to enriching uranium, a war appears very much on the cards. If that happens, Israel will join America on the side of Saudi Arabia and Russia could take the side of Iran. The consequences will be devastating for the Middle East."
The latest attack on Saudi Arabia in which half of its oil production has been temporarily taken out of action by either drones or missiles is a game-changer. It brings to mind 9/11, when a terrorist attack on an American city was not even considered a remote possibility beforehand by US intelligence agencies because they completely underestimated the resources of the enemy.
Chantell Ilbury and I warned President George W Bush in a letter published in The Mind of a Fox in June 2001 that a major attack on a Western city was his number one strategic risk because of advances in military technology and tactics. If he should have read the book, he did not heed the warning.
Such is the case today of not recognising the red flag for what it is. The international media is taken aback by the sophistication of the attack on the Saudi oil refineries, and is surprised at how vulnerable the latter are even though they are probably protected by the latest anti-missile defence system available. The presumption continues to be that the enemy only has primitive arms at its disposal and can therefore be ignored as a critical threat.
Until now! US President Donald Trump has said he is "locked and loaded" without specifying if, when and where he is going to mount a military response. Iran has firmly denied having anything to do with the strike which has been claimed by a Houthi group in Yemen. Meanwhile, the US is trying to establish who is responsible before doing anything.
As I said in the same May article, with Trump as commander-in-chief of US forces, anything is now possible. However, even he will be unlikely to consider the option of using nuclear weapons given that such an action could trigger a nuclear response from Russia which would be devastating for the world as a whole. The MAD principle of "mutually assured destruction" is still very much in play.
So the plausible scenarios are conventional military action on a much bigger scale by the US in the Middle East or renewed treaty talks between America and Iran. The biggest argument against the first scenario is that Trump comes up for re-election as president next year and he knows that a war would not favour his chances of success. He has pledged to reduce rather than increase American military presence in the region. A treaty with Iran would be less disruptive to his campaign.
However, he may be forced to take action to show he is not a weak leader. In that event, the law of unintended consequences kicks in: a war between America and Iran could escalate beyond the borders of Iran and Saudi Arabia very quickly and have an enormous impact on the oil market.
So this is a tipping point where things cannot go on as they are. One must carefully watch the flags associated with the Bloodbath scenario outlined in the May article and assess its probability on a daily basis. More to the point, you should examine whether such a scenario can affect your personal life in any way and whether, like a fox, you should take action to ameliorate the impact before you feel it.
To be specific, I gave a 30% chance to the Bloodbath scenario until this weekend, but I have raised the odds now to 40%. That is still less than fifty/fifty but highly significant given the potential devastation.