Monday, March 29, 2010

War Gaming an Israeli Strike on Iran from an Energy Perspective

The Brookings Institute recently conducted a war game centered on a preemptive Israeli attack on Iran's nuclear production facilities. Sounds like a good idea to simulate this thing, but it also seems a little too neat the way they did it (i.e., optimistic) for me. Here's how it starts according to David Sanger in the NY Times:
Without telling the U.S. in advance, Israel strikes at six of Iran's most critical nuclear facilities, using a refueling base hastily set up in the Saudi Arabian desert without Saudi knowledge. ... Convinced that the Saudis had colluded with the Israelis, and emboldened by the measured initial American position, Iran fires missiles at the Saudi oil export processing center at Abqaiq, and tries to incite Shiite Muslims in eastern Saudi Arabia to attack the Saudi regime.
Nothing is said of the impact on worldwide oil availability or prices, but given the way the real markets responds to much less substantial events in Nigeria and elsewhere, we could assume prices would sky rocket.  Then there's an indication of a more sustained attack on Saudi's oil infrastructure and the confidence of global marketplace:
Knowing that its ultimate weapon is its ability to send oil prices sky high, Iran decides to attack Dhahran, Saudi Arabia, an oil industry center, with conventional missiles and begins mining the Strait of Hormuz. A Panamanian-registered, American owned tanker and an American minesweeper are severely damaged. The price of oil spikes, though temporarily.
OK, so there's an impact, but relax, it's only temporary. Why so short lived? Well, maybe because the game itself was short-lived:
The game ends eight days after the initial Israeli strike. But it is clear the United States was leaning toward destroying all Iranian air, ground and sea targets in and around the Strait of Hormuz, and that Iran's forces were about to suffer a significant defeat.
So there's no real impact to the highly oil dependent US or world economies, and we're about to kick Iran's butt with finality with air strikes alone? Don't get me wrong: I'm all in favor of giving Khamenei, Ahmadinejad and their like a major dose of whoop ass. But I think we'd better get our games on straight before embarking on the real thing.

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