Friday, August 1, 2008

The Fear of an Economic Fiasco

“Even before Iran’s enemies get their hands on the trigger, we will cut their hands off already.”
–Mahmoud Ahmadinejad

It has been almost two years since we heard a blistering conflict between Washington and Tehran regarding Iran’s nuclear program, yet despite all the audible war drums the war itself has not started. United States, with Israel as comrade in arms, repeatedly vowed to take serious actions against Iran if the country still refuses to suspend its uranium enrichment. Actually, at present their preparations are all set. The weapons are loaded, the missiles are ready to be launched, and the assault has already been staged; why do they hesitate? It’s because the economic repercussions of the war that await United States if they enter the battlefield, which undoubtedly leave Pentagon on the tight spot.

For United States, the mission to invade Iran alongside Israel is not as easy as smash-and-grab job since they have several consequences to be put into deliberation. United States has spent more than US$ 170 billion in their two previous invasions to Afghanistan and Iraq and if they involve in another war again, they will find their economy in a real mess. With United States’ economy is heading toward deep recession, allocating budget in warfare rather than fixing its economy is completely thoughtless. The country itself is currently struggling with slow GDP growth and high inflation rate; and running a budget deficit policy to wage war in this kind of situation will be the last option you want to choose.

The war against Iran will not be as easy as messing with Afghanistan and Iraq. Iran is ranked 22nd on military spending in the world, spending not less than US$ 7.2 billion a year on its warfare necessities, while both Afghanistan and Iraq don’t even make the top 60 list. What’s more about its military spending, Iran is currently strengthening its defense by developing long-range ballistic missiles. Iran’s newest missile, the Shihab-3, puts Israel in an unsafe situation as the missile is said to be able to reach 810 miles in distance, which is the exact distance Iran needs to devastate Israel’s military bases. By the help of Shihab-3, Iran will have the ability to give US and Israel an instant reply if it is attacked.

In addition, the situation could become nasty for United States if Tehran calls Moscow for backup, and Russia agrees to join the war. The close relationship between Iran and Russia is known worldwide, which is shown by frequent political visits by the leaders of both countries, as well as several military equipment and economic deals such as the recent oil drilling deal that includes the biggest oil company in Russia; Gazprom. Thus, an invasion to Iran can put United States back in business with Russia, which will be the first time since their last conflict in the cold war era.

Iran, with brawny military power, valiant guidance of Mahmoud Ahmadinejad, and its strong alliance with Russia; will be one hell of a menace to cope with. With all these facts, the war may cost more than two previous wars in that United States getting themselves involved. Bear in mind that United States is having a hard time on its economy these days, and if Pentagon persists to make this Gulf War II a reality, what do you think its economy will be?

Next, the war against Iran is a howler for United States because it will certainly create nuisances in oil supply and distribution, which will lead to a higher oil price in the world market. About 40 percent of global oil shipments leave the Persian Gulf through the Strait of Hormuz, which is located on Iran’s south coast. Iran then uses this situation as a hostage; it has threatened to impose tight controls on shipping there if it is attacked. For that reason, it is highly possible that the attack on Iran will make trouble on the distribution of oil in the world market, especially exported oil from Mideast countries.

More to the point, Iran is an active member of the OPEC (Organization of Petroleum Exporter Country) and one of the biggest oil suppliers in the world. In fact, the country is OPEC’s second-biggest oil supplier and the fourth biggest in the world, producing at the level of 4 million barrels of crude oil per day. United States, as we know, is the biggest oil importer country in the world and the country that suffers the most from exorbitant price of oil these days. With its huge dependence on oil, and with the oil’s price tag has reached the level of US$ 145 per barrel as well, the effect to the United states’ economy will be unimaginable if the oil price increases yet again.

Hence, United States is caught up in a dilemma; to give precedence to its invasion to Iran means dealing with the risks of financial meltdown. The war against Iran is opposed by most of the Americans, particularly economists, since making a bet on taking all of the war’s economic consequences is considered as an unwise decision. United States’ economy is currently teetering on the edge of recession and heading to the possibility of depression, while the war promises an additional burden to the economy. By entering this war, there is a possibility that this economic situation will become far nastier than the great depression of 1929. Notorious with his failures in two preceding wars in Iraq and Afghanistan, now Americans and all the people in the world are waiting whether George W. Bush’s decision to invade Iran this time turns to be a remarkable triumph, or an economic fiasco.

This article was published in FEUI's Voice of Economics newsletter on Thursday, August 21 2008

1 comment:

Arif Nindito said...

I found that this particular issue is very interesting. Economy and Politic are like the 2-in-1 road system, two major issues that occur at once.

Talking about the U.S Foreign Policy (especially the military policy), we are not leaving the basis of Republican's way of thinking. The republicans behind Mr. Bloody-Hell Bush are still believed that their country still have to had the thing, that they called as "PRIDE". These conservative way of thinking brought the idea of military supremacy, space exploration, and other -in my opinion- cliche things. They believed, in order to earn the "Pride", they have to show some supremacy on this tiny world.

According to me, the decision made by the U.S to call two totally failed invasion to Afghanistan and Iraq, already shown the total failure that the Republicans made. They called the military invasion in the name of the people of United States, in fact, majority of the people did not stand in the back of the decision. In case of the idea to invade Iran because of its nuclear enrichment, i am sure that U.S will face the same ;or even worse failure than they faced in the previous wars. Since Iran also got powerful military forces, frankly speaking, if there is a war, then it will be a very dramatic war.

One thing that i want to highlight here is, we all do have to had the thing that we called as "Pride", in appropriate way of thinking and acting. I rather earn more "Respect" from my fellow friends, than just pursuing the empty dream that we all pretend it as Pride. And as a fellow Moslem, i would express my deep respect to the Iranian People, with Mr. Ahmadeneijad as a president. I really support the Iran's efforts in pursuing the equality to acquire the same level of knowledge and technology to develop their country.

And lasty, I hope the new government of the U.S will show more respect not only to any other country on this planet, but also respect to humanity.