State of Denial in Coming War Catastrophe

The world economy is in the tank, and the Federal Reserve’s decision to extend its zero interest rate policy to, at least, the end of 2014 proves it. What will happen if the fragile world economy also has to deal with a war with Iran?

That should have been the big headline coming out of the World Economic Forum in Davos, Switzerland, but what was reported was concern over slow or no growth in the world.

All the signs are that the West is careening towards war with Iran, and there is not a peep about it from world leaders. Are they in a state of denial in a coming war catastrophe? I say yes.

One of the first shots fired by the EU was in the form of increased sanctions to boycott Iranian oil in about five months.

The second shot looks like it will be fired by the Iranians who won’t wait for sanctions to kick in and will move to cut off oil exports of around 600,000 barrels a day to the Eurozone. (Click here for more on this story.)

The Iranians have not yet cut off the oil.

MSNBC reported yesterday, “The Islamic Republic declared itself optimistic about a visit by U.N. nuclear experts that began on Sunday but also warned the inspectors to be “professional” or see Tehran reducing cooperation with the world body on atomic matters. The International Atomic Energy Agency (IAEA) inspection delegation will seek to advance efforts to resolve a row about nuclear work which Iran says is for making electricity but the West suspects is aimed at seeking a nuclear weapon.” (Click here to read the latest CNBC story.)

The immediate cut off of oil to the EU would be a disaster, and the Iranians do not have to close the Strait of Hormuz to do it. This would cause major pain to a European economy teetering on the brink of collapse. How well do you think the Eurozone would perform with a spike in energy prices? Talk about no growth, how about a giant contraction and an implosion of some of the biggest banks on both sides of the Atlantic. This is not all out war, mind you, just an immediate cut of Iranian oil to Europe.

Some say this is all just a high stakes game of poker with both sides saber rattling and jockeying for position. Stratfor.com, global intelligence experts, said in a report last week, “It is in this context that the possibility of negotiations has arisen. The Iranians have claimed that the letter the U.S. administration sent to Iranian supreme leader Ayatollah Ali Khamenei that defined Iran’s threats to Strait of Hormuz as a red line contained a second paragraph offering direct talks with Iran. After hesitation, the United States denied the offer of talks, but it did not deny it had sent a message to the Iranian leadership.” (Click here to read the complete report.)

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