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Iran’s Oil Woes

A hot topic of late is the terrible condition of Iran’s oil infrastructure and the risk of plummeting exports:

Persian Empire
c. 500 BC

Iran’s oil exports are plummeting at 10pc a year on lack of investment and could be exhausted within a decade, depriving the world economy of its second-biggest source of crude supplies.

A report by the US National Academy of Sciences said rickety infrastructure dating back to the era of the Shah had crippled output, while local fuel use was rising at 6pc a year.

“Their domestic demand is growing at the highest rate of any country in the world,” said Prof Roger Stern, an Iran expert at Johns Hopkins University, Baltimore.

“They need to invest $2.5bn (

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Comments

  • buckethead says:

    Well, Murdoc, now we know not to grab a tiger in the corner by the tail, and not to embargo scrap iron for Iran. Funny, I have heard people claim that WWII is our fault because we were cutting off Japan from necessary resources. Look what we made them do! By analogy, our attempts to keep Iran from developing nuclear technology would also make any future Iranian/Persian imperial aggrandizement our fault. Which would suit some folks right down to the ground. Somehow, though, I don’t think that the Iranians will be able to get through Turkey. The Greeks won’t have to fight another Marathon, or Salamis, anytime soon. Though you deserve credit for being the first person I am aware of to use a map like that to comment on the current situation. From what I understand, that sort of thing is significant there – they aren’t Arabs and identify strongly with their past.

  • Murdoc says:

    Not that I agree with claims that we ‘forced’ Japan’s hand in the 1940s, just that I think we need to be aware of the ramifications of what we do. Not necessarily so that we don’t do them, but so that we’re at least prepared for the reaction. I don’t disagree with our policies in the Pacific in the 1930s and 40s. I DO disagree with the level of military preparedness in the 1940s, though, considering what our policies were. Particularly in the Philippines. FWIW, two of my granfather’s brothers were in the Philippines in 1941. Both were captured and participated in the Bataan Death March. One survived. One didn’t. We should have given our guys a fighting chance.

  • buckethead says:

    I don’t agree with those claims either – in fact, I vigorously argued with their proponents both times they were brought up in my presence. You are right, though about preparedness. At least Bush seems finally to have gotten religion on increasing the size of the army and Marine Corps. A little religion, anyway. As much as I have agreed with the aims of this administration in Iraq and elsewhere, there has been a little too much magical thinking in terms of contingency planning. The military has done, I think, a wonderful job of adapting to the situation as it evolved, but a lot of the thinking, pre-war, amounted to a version of the South Park underpants gnomes: 1. Invade Iraq 2. ??? 3. Profit! And by profit, I don’t mean oil. But still. The analogy to the Western Pacific in the thirties is still there, though.

  • GK says:

    er…. to think about the Persian empire of 500 BC is ignorant. That was 1100 years before Islam! Anyone who knows things will agree tht Islam is at the root of Iran’s actions. By the ‘empire’ argument, Turkey had a much larger empire just 150 years ago, not 2500 years ago like Iran. And Turkey’s empire was Islamic. Does that make them dangerous too?

  • Twok says:

    Why is the US not acting quickly to get Turkmenistan on our side, now that their dictator has died? Just look at where it is on the map!

  • Murdoc says:

    GK: I’m certainly not saying that a reconstruction of the old Persian Empire is something that the mullahs would be working toward or even interested in. What I’m saying is that if they wanted to recruit folks for a massive ‘public works administration’-type project, they certainly have some history and heritage (ancient and unattached as it is) to draw on. As Bush critics will happily point out, you wouldn’t invade nations for oil by telling your people you’re out to get more oil. You tell them that they’re ‘restoring lost glory’ or some such. Folks at home are getting a bit restless? Send em off to campaign somewhere. Maybe they’ll even win. It’s been done before.

  • Murdoc says:

    Oh, and Islam has its own former empire to restore, while they’re at it. I’d sure love to see an Iranian revolt of some sort. We keep getting hints that it’s about to break loose, but it always seems to fizzle before it catches. This makes me worry that perhaps the population isn’t as close to the tipping point as we’ve hoped, and that maybe a few good rallying cries in the face of Western aggression and sanctions would galvanize the Iranian people to do something. Something drastic.

  • ElamBend says:

    Forget empire, nitpickers, All Iran has to do is rattle the cage for Shi’ite self-determination (i.e. Sudetenland) and make a political or military grab for southern Iraq and the East coast of the Arabian peninsula, both of which have plenty of (Arab) Shi’ites and, you guessed it, oil. Just getting their hands on the oil tankers loading platform south of Basra would probably buy them around 10 years.

  • Jeff P. says:

    Dear Murdoc, A couple of points. Iran would not have oil for ‘tanks and stuff.’ Tanks cannot run on crude. Tanks require diesel or gasoline. I read somewhere that Iran has little or no refining capability and has to import both. Even if they did have refining capability, Iran’s ‘tanks and stuff’ require spare parts to keep running. Their army wouldn’t have mechanized diddly after about two weeks. Their air force is already junk because of this. Iran’s oil is the one way they can pay for tanks and stuff, and without it, the Pasdaran are basically a bunch of angry Islamists with automatic rifles, with no ability to project force anywhere. With this difference: they are not among friends; most Farsi hate the Mullahs’ guts. I really wouldn’t want to be their government right now. Looks like they made some bad choices. Perhaps their president and Council are doing a Kim Jong Il act to keep their regime from crashing. They indeed could be desperate, and could end up flinging a nuke if we let them — but there won’t be any followup. They are not going anywhere. 1939 Japan had a serious industrial economy. These jokers don’t. There is no Islamic regime, not one, that can successfully prosecute a conventional war by themselves. It costs too much and takes industrial infrastructure that they don’t have and are unlikely to ever acquire. They can rattle their sabers only if some saber manufacturer gives them a saber to rattle. Too bad there are some who have and will.

  • DANEgerus says:

    In related news… Saudi Arabians to run out of sand.

  • Kevin says:

    I think the ‘Iran is running out of oil’ crowd overlook the role that China (or India) might play in investing in Iranian oil. It is not that Iran lacks reserves but that it has not reinvested in its oil industry. China and others might be more than willing to provide the money to rejuvenate old fields and explore for new sources – especially off Iran’s Gulf coast and in the Caspian.

  • Clark says:

    Who cares about oil output a decade from now when the 12th Imam and nuclear weapons are just around the corner…..

  • luagha says:

    Iran is said to have refining capacity for some 40-60% of its own use. It imports the rest. That means in case of a war, everyone else gets rationed and the tanks get all the diesel.

  • TallDave says:

    But they’ll still have oil for, say, tanks and stuff. True, though their refining capacity is limited (they actually import refined fuel, iirc) and vulnerable. One possibility that’s been thrown around is a very limited war aimed only at seizing the port and refining facilities, making it impossible for them to fuel their military or export oil. Now it looks like they’re doing half the work themselves.

  • TallDave says:

    I think the ‘Iran is running out of oil’ crowd overlook the role that China (or India) might play in investing in Iranian oil.’ What, enlist the help of infidel Buddhists and Hindus? Surely you are mad, sir. Anyway, people should keep in mind Iran has a lot of the same sectarian/ethnic issues Iraq has. The Azeris are restless, the Arabs are angry, the Jews are terrified.. they should realize arming insurgents is a game the U.S. can play too, and far better.

  • Murdoc says:

    This is one of the best comment sections on this site in quite some time. A lot of good thoughts from a wide range of folks. Very cool. Here are a couple of responses: RE: Iranian attempt to seize the Basra section of Iraq — I doubt this will be seriously considered, at least as long as US and UK heavy forces are in the region. A first step would be to try and tie down said forces by inflaming, arming, and aiding some sort of insurgency in Iraq. Oh, wait…that sounds terribly familiar… Actually, the options are severely limited for a quick fuel grab by the Mullahs. All the rich(est) pickings are down the western Persian Gulf, which would require a push through the Basra region anyway. Just thank Pete that they don’t have the resources for a cross-Gulf invasion of the UAE. It’s a *totally unforeseen* benefit of conquering Iraq that *no one* ever thought of. Whew. Are we lucky, or what? RE: ‘Tanks cannot run on crude’ — As pointed out by others, there would be sufficient fuel for a short military campaign. For all we know they’ve been stockpiling hidden stores of diesel for the past five years. Would we care? We’ve been worried about hidden nuclear facilities, not hidden fuel dumps. RE: Lack of spare parts for the Iranian army — Absolutely a very serious problem for them and they know it. There have been reports of late of Iranian attempts to get proscribed parts, including F-14 Tomcat components. If we’re catching them trying, they’re getting some past the watchdogs. RE: China or India helping Iran — While I’m skeptical of direct intervention, either with fuel infrastructure aid or military support in the event of a war, I certainly can see China doing what it can under the table to aid Iran for a cut of fuel reserves in the future, particularly if it will come at the expense (one way or the other) of America. Perhaps by helping with the spare parts problem. China could also make a feint at Taiwan, for instance, at a strategic time to tie up a US carrier group or two. My point is not that Iran is about to try and reestablish the Persian Empire, but that their desperation may drive them to do desperate things. Sanctions will exacerbate their desperation, and if we’re going to continue to push for them and enforce them (as I think we should) we also need to be prepared in case they lash out because they’re out of rational options.

  • Twok says:

    What about the Turkmenistan opportunity? The US has a chance to make it an ally, or let Iran make it a puppet state.

  • Murdoc says:

    Twok: You are right. I didn’t include it in my big response comment because I intended to treat it separately. But I haven’t had a chance. I’m very uninformed about the Turkmenistan situation, but on the surface it certainly looks like we should be working it overtime. Huge benefits possible for relatively cheap if we can find a good guy to play ball and we play ball ourselves.

  • bristlecone says:

    I wonder why we’re not arming insurgents within Iran, as TallDave suggests? I know we’re NOT, as the New York Times would surely break the case if we were: It’s the chance to score a trifecta: Sell newspapers, weaken the United States, and embarrass the Bush administration. Not necesarily in that order of preference.

  • deadman says:

    If the Iranian oil is destined to go off the international market in the next decade, it makes it an inviting target for stopping their nuke program. The West will have to face the loss of this oil source sooner or later. If we can’t benefit why should the mullahs? Israel does not have the long range power to significantly slow Iran’s nuke program, but it does have the capability of crippling the oil refineries and transport infrastructure. The economic damage would be far more severe to Iran than to the rest of the world. The two-fold effect is the loss of direct income (70% of their budget) and the social unrest from the elimination of heavily subsidized fuel.

  • So they have tanks. So what? What are they going to do with them? Iraq and Afghanistan are both occupied by the United States, which could pretty much pick off anything crossing the Iranian border with impunity, once diplomatic cover is provided by an actual invasion. Pakistan and Turkey are both more-or-less allies and in the face of an actual invasion would probably be happy to accept US help. (Would be nothing short of suicidal not to.) And what’s left on Iran’s border are mostly countries I’ve never heard of, which are probably therefore not worth invading, and which still for that matter would probably be happy to accept offers of US military assistance against Iranian aggression. Iraq is only going ‘poorly’ because we’re so powerful we’re actually trying to win a war without indiscriminate killing, which is what winning a war has looked like up until, well, the first Gulf War, really. If the US fought the Gulf War like it fought any other war there’d be no question whatsoever that the United States won. There’s no way in hell any conventional military assets are going to help Iran. The moment they try to use them is the moment they lose all diplomatic cover, and mere moments after that attempted use there will be no more Iranian government.

  • Twok says:

    Pakistan and Turkey are both more-or-less allies and in the face of an actual invasion would probably be happy to accept US help. (Would be nothing short of suicidal not to.)’ er… Pakistan and Turkey are both stronger than Iran, for reasons including the fact that they both have larger populations than Iran. Plus, Turkey is part of NATO and Pakistan has nukes.

  • About Iran needing nuclear power, wouldn’t it be easier and more technically viable for them to get assistance to build more oil refineries? That would be a very easy transaction to negotiate, and it would give them what they really need. For that reason, I think nuclear power is a smokescreen. If they really needed energy, they would ask for refineries. D

  • Nicholas says:

    Hell, if they really wanted nuclear power, they could just let the IAEA inspectors in. What would it cost them, really? It certainly would eliminate sanctions and hostility from other countries. It would be win/win, surely. Unless they think keeping us off balance is more important than their economy.

  • Jerry in Detroit says:

    Iran may have adequate oil to fuel their military but I’ve read on several occaisions that they lack refinery capapcity. All the oil in the world is useless without refineries. Even if Iran does has sufficient refinery capacity, refineries tend to be rather easy targets.

  • RKV says:

    Several comments have been made with regard to Iranian refining capacity which are in error. The precise numbers as reported by the US DOE are such that Iran has refinery capacity about equal to it’s domestic consumption (which due to subsidies which hold down the price, is the highest per capita in the world). http://www.eia.doe.gov/emeu/cabs/Iran/Oil.html Iran DOES import gasoline at this time, but is expected to meet all domestic needs in this product by 2010. Why does Iran import gasoline if it has an overall refinery capacity? This has to do with the specifics of petroleum refining production – which product mix issues (shortage of facilities to make the product gasoline) are being addressed by the mullahs.

    Indeed, such facilities are high value targets which can be readily assaulted by missiles, etc. It would be rational to expect that stockpiles are kept for military use which would allow the Iranian military to operate over a period of months (if such stores survived attacks).

  • RKV says:

    keeping us off balance is more important than their economy’

    Actually for Iran and it’s ally Russia, keeping the price of oil high is what is important. Both countries depend heavily (and Iran more so than Russia) on petroleum to finance their government. That Iranian and Russian geopolitical interests (find a foreign enemy to keep the people agitated and in line) align with their financial interests should be no surprise.

  • RKV says:

    Pardon the 3rd post – I was insufficiently clear in my first post. Let me say it outright – I am calling BS on this article. DOE doesn’t agree with the author.

  • Jim Webster says:

    War with Iran will not be like Iraq. Iran has thier own technology. during the ten year war with Iraq they realized their military needed updating, realized american weaponry lacked the parts and so built up to manufacture its own war machine. The straights of Hormuz is shallow and can be blocked. That would make our Navy a sitting duck for thier Cruise missiles. A demo was shown during the war with Lebanon and Isreal or have we forgotten. I agree with the tiger backed in a corner idea. Many say yes we can win but is the world ready to do with out oil. Wouldnt Iran strike at Saudi oil knowing it goes to the U.S. and what about European oil. I speculate Russia would love that leaning as the only supplier. It is bad for the world if this war escalates.

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