Between a rock and a hard place while living in interesting times
There is nothing going on in the world at this time that has the potential to affect investors negatively that can compare to the current situation in the Middle East, where developments are taking place at warp speed. The world in general and the region in particular are certainly subject to the famous Chinese curse, “May you live in interesting times.”
Imagine for a moment that you are a fly on the wall observing a meeting between Iranian Supreme Leader Ali Khamenei and Iranian President Hassan Rouhani. The last few weeks have brought the following developments:
The United States rocketed what it claimed were Syrian chemical-warfare facilities.
An Iranian drone strayed into Israeli territory and was shot down.
The United States withdrew from the Joint Comprehensive Plan of Action (JCPOA or “the Deal”) and reinstated pre-Deal sanctions.
Israel unveiled what it said were 5 tons of secret Iranian nuclear records stolen from supposedly secret and secure facilities by the Mossad.
Iran sent a handful of rockets into Israel. All either were intercepted or fell in Syrian territory.
In retaliation, Israel massively attacked Iranian bases and facilities in Syria, doing substantial damage. No Israeli planes were shot down.
The United States declared that in case of war between Iran and Israel, the US would back up Israel politically and militarily.
Israeli Prime Minister Benjamin Netanyahu flew to Moscow and President Vladimir Putin declared himself neutral as to the Israeli attack on the Iranian installations and promised not to send S-300 anti-aircraft missile systems to Syria.
This is the rock; or rather, the many rocks. Here is the hard place:
The rial is collapsing and is approaching worthlessness.
Inflation is approaching hyper status.
Drought continues unabated in large swaths of the country.
Unemployment continues to increase, especially among the young.
Demonstrations have taken place in dozens of Iranian cities, and although the demonstrators are manifesting their dissatisfaction with the economic and social situations of the country, some are also chanting “Death to the Dictator.” The “dictator” is Khamenei.
Unrest and open rebellion plague Baluchestan, Arabistan (Khuzestan) and Kurdistan, or about a quarter of the population of the country.
“All right, Rouhani, that’s where we are now. What do we do?”
The president fidgets nervously in his chair and takes a sip of tea, before answering. “Supreme Leader, these are our options in the face of the factors you have been enumerating:
“We can attack Israel in retaliation for its attacks on our facilities in Syria. Of course, the Israelis will retaliate and we must not forget that they have submarines in the Persian Gulf equipped with missiles with nuclear warheads.
“We can unleash Hezbollah and the various Iraqi and Syrian militias we control. The Israelis will retaliate and they have shown that they know exactly where everyone and everything is so their attacks are likely to be devastating.
“If Hezbollah fires hundreds of rockets and missiles into Israel in a short period of time, Israel’s defenses may well be overwhelmed and severe damage inflicted on the Israeli population, but Israel will then obliterate southern Lebanon and all militia concentrations on its border. No international action will be taken because the US will stand behind the Zionists and Russia will do nothing. Europe is irrelevant.
“The Saudis and the Emiratis might very well take advantage of the situation to send agents and infiltrators into Arabistan to sabotage the oil installations and encourage the separatists. They might also invade Qatar and overthrow the regime there.
“Or, we might do nothing effective in retaliation for the Israeli attack, in which case we will be shamed before our own people, who in any case are suffering economic hardship and will be facing even greater hardship if the reimposed sanctions are effective. We will also be shamed before the Sunni dogs and the rest of the world.
“These are our options, Supreme Leader, as I see it now.”
There is a long pause as Ayatollah Khamenei sips his tea. He then turns to Rouhani and says: “Put in a call to the young Shah in Washington. Tell him we want him to come and view the mummy of his dynastic ancestor. In the meantime put out for public and international consumption that we are weighing our options. All alternatives are on the table, as the degenerate Westerners say.”