Thursday, December 28, 2006

Silly Iranians

(And Venezuelans, etc. Saddam was particularly bad in this regard).

DECEMBER 11, 2006
By Stanley Reed, with Babak Pirouz in Tehran

Surprise: Oil Woes In Iran; Flagging output from its vast reserves could diminish Tehran's influence
[Or, How Iran Could Gain 'The Bomb' and Still Lose World Power]
[Or, How to Kill the Golden Goose]

[Except for subtitles, all emphasis is added]
[I]ran has a surprising weakness: Its oil and gas industry, the lifeblood of its economy, is showing serious signs of distress. As domestic energy consumption skyrockets, Iran is struggling to produce enough oil and gas for export. [...] Within a decade, says Saad Rahim, an analyst at Washington consultancy PFC Energy, "Iran's net crude exports could fall to zero."

[Iran's] 137 billion barrels of oil reserves are second only to Saudi Arabia's, [Actually, fourth, behind those of the United States, Canada, and Arabia, but close enough - M.H.], and its supply of gas trails only Russia's, according to the BP Statistical Review of World Energy. Getting it all out of the ground, though, is another matter. Iran has been producing just 3.9 million barrels of oil a day this year, 5% below its OPEC quota, because of delays in new projects and a shortage of technical skills. By contrast, in 1974, five years before the Islamic Giant Leap Backwards Revolution, Iran pumped 6.1 million barrels daily.

The situation could get even tougher for the National Iranian Oil Co. (NIOC), which is responsible for all of Iran's output. Without substantial upgrades in facilities, production at Iran's core fields, several of which date from the 1920s, could go into a precipitous decline. In September, Oil Minister Kazem Vaziri-Hamaneh suggested that with no new investment, output from Iran's fields would fall by about 13% a year, roughly twice the rate that outside oil experts had expected. "NIOC is likely to find that even maintaining the status quo is a mounting challenge," says PFC Energy's Rahim.

Iran's looming crisis is the result of years of neglect and underinvestment. [Stemming from socialist claptrap and a lack of democratic accountability in the government - M.H.] As in other oil-producing countries such as Venezuela and Mexico, the government treats the oil industry as a cash cow, milking its revenues for social programs. [President Mahmoud Ahmadinejad has ratcheted up public spending this year by 21%, to $213 billion, on everything from aid to rural areas, to housing loans for newlyweds.] [But Iran] allocates only $3 billion a year for investment, less than a third of what's needed to get production growing again.

Compounding the pressure are policies that encourage profligate energy use. Gasoline prices are set at 35¢ a gallon, which has helped fuel 10%-plus annual growth in consumption, PFC Energy figures. The national thirst for gasoline far outstrips domestic refining capacity, so Iran will import about $5 billion in gasoline this year, or about 40% of its needs. The government is planning a $16 billion refinery building program to boost capacity by 60%. [...]

Iran badly needs fresh foreign investment to shore up the oil industry. [...] But new investment has largely dried up in recent years because of lingering worries about the risk of war with the U.S. and disenchantment with Iran's tightfisted terms. Outsiders are offered contracts only to drill wells--rather than operate fields--and get just a small share of profits from output. [In addition, American firms are prohibited by the U.S. government from investing
in Iran]. [...]

Endless haggling and delays have set back some of Iran's biggest oil initiatives. One top priority had been the Azagedan field in southern Iran, which is expected eventually to produce 260,000 barrels a day. But in October, Tehran scrapped a $2 billion contract, agreed to in 2004, with Japan's Inpex to develop the project. And [Royal Dutch/Shell's] $800 million Soroush/Nowrooz project in the Persian Gulf has been plagued by cost overruns and technical glitches. In January, meanwhile, [Norway's] Statoil wrote down the entire $329 million book value of its South Pars project because of "productivity and quality problems" with a local contractor.

It's not just oil that Iran is failing to exploit. The glacial pace of negotiations is also making it fall behind neighboring Qatar in exploiting the huge offshore gas field that the two countries share. While Qatar has signed up the likes of ExxonMobil and Shell to develop the site, Iran's talks with Total and Shell have progressed far more slowly. Iran is now a net importer of gas, a situation not expected to reverse before 2010. [...]

Can Iran fix its energy conundrum? Some experts are betting Tehran will get its act together sooner rather than later. Iran was able to boost production from 1.2 million barrels a day during the 1980-88 war with Iraq to nearly 4 million barrels with almost no foreign help, notes Bijan Khajepour, chairman of Tehran's Atieh Bahar Consulting, which advises oil companies. He thinks Iran should be able to sustain current production for the next decade. Even so, if Tehran doesn't face up to the woes of its oil industry, Iran may find itself in the unusual position of sharing the West's angst over growing dependence on imported oil.

Idiot Iranian gov't priorities: Actually spending billions in a quest to gain near-useless nuclear weapons, igniting a regional arms race thereby, and inviting UN sanctions, while also making themselves the potential targets of an Israeli pre-emptive military strike, and only planning to spend a few billion to upgrade their refining capacity, which would assuredly save them at least a billion per year, as well as potentially giving them the ability to export premium, value-added products such as gasoline and jet fuel, instead of workaday crude oil...

Actually, it's even worse, since the billions that they're spending in an attempt to get nukes actively and directly imperils their ability to export even the workaday crude. "Iran's net crude exports could fall to zero." How sweet that would be...


Blogger Harry Eagar said...

There you go thinking that consumption motivates people.

December 28, 2006 10:07 AM  
Blogger Duck said...

Chavez is taking Venezuela in the same direction. When natural resources are valued more highly than human resources, poverty is the result. The only way to motivate human resources is to deny them an unearned share in the production of a nation's natural resources. The worst thing to happen to people in the last 200 years is populism.

December 28, 2006 10:20 AM  
Blogger Susan's Husband said...

"poverty is the result"

Not for the rulers.

December 28, 2006 11:52 AM  
Anonymous Anonymous said...

In the specific cases of Iran and Venezuela, it isn't so clear to me that populism was worse for the common folk than whatever preceded it.

One thing that stuck with me over the generations was line from a Time story back in the '50s or early '60s that half the children in Venezuela were illegitimate because the parents could not afford wedding licenses.

You must be careful not to fall into the Orrin error of thinking that just because what we got today is bad, what we had yesterday must have been better.

December 28, 2006 3:07 PM  
Blogger Hey Skipper said...

It takes a special kind of stupidity -- achievable only by running people through two filters selecting for incompetence: political orthodoxy and religious dogma -- to be perched on top of all that oil and still have to import gasoline.

Hard to see how an onslaught of secularism would hurt the Iranians in the least.

December 29, 2006 5:03 AM  
Blogger Duck said...

Harry, you caught me using a superlative for dramatic effect. Yes, there have been worse things than populism. I should have reworded that statement to highlight the irony in the fact that one of the worst thing you can do for "the people" is to give them what they want.

The whole notion of "the people", which has become a holy word for politicians, is the bane of democratic politics. It encourages voters to think of themselves in the collective instead of as individuals with individual interests, and facilitates the multiplication of grievances. It leads to a victim mentality and a sense of helplessness, dependency and expectation.

There is a good article on this from the previous month that I will post a link to when I find it.

December 29, 2006 7:30 AM  
Blogger Duck said...

Here is the article:

December 29, 2006 8:09 AM  
Anonymous Anonymous said...

I don't suppose any of you are old enough to remember that President Carter, during the time our embassy staff were prisoners in Iran, relaxed his embargo to allow 50K tons of diesel to be sold to Iran for winter heating fuel, as they did not have the ability to refine diesel themselves.

That incapacity, of course, was attributable not to the populists but to the monarchists.

The problem is not so much that they are populists but that they are not modernists.

Buying support is the coin of the realm in politics.

December 29, 2006 10:42 AM  
Blogger Duck said...

I'm old enough, I just don't remember it.

December 29, 2006 11:59 AM  
Blogger Harry Eagar said...

It was described as a 'good will gesture.'

For some reason, the diplomats never describe, eg, imprisoning diplomats, as a 'bad will gesture.'

I am not as big a critic of Jimmy Carter as it was popular to be then, or now; but that gesture did reveal that he didn't understand enmity.

That was the event that got me studying Islam -- not the religion, the political animal.

My Islamophobia goes back a long way, both personally (which is irrelevant) but historically (which is the only relevant thing).

One of the things the shah tolerated (or even encouraged) in what I suppose we could desribe as his antipopulism was live sex shows on the streets of Tehran.

This was, in my view, the Iranian equivalent of the tsar's selling the bones of his slain soldiers to be ground up for fertilizer.

Henry Kissinger is the stupidest man in the world.

December 29, 2006 2:45 PM  
Blogger Harry Eagar said...

Combing the memory banks, it was 50K bbls, not tons. About 2,500 T.

December 29, 2006 8:34 PM  
Blogger Susan's Husband said...

Mr. Eager;

The problem with populism is that it is generally better in the short term than what went before. It's over a generation or two that you see that it's an artificial high, brought on by using up savings.

In the case of Iran, its GDP (IIRC) is now half of what it was in the last days of the Shah. Given that the mullahs are politically more oppressive, it's hard to believe that things are not worse now than then.

For Venezuela, my impression from my friend the Intrepid Girl Reporter (who covered South America for a major American paper and spent a lot of time there) is that in fact things are getting worse now than it was before Chavez.

December 30, 2006 3:27 PM  
Blogger Harry Eagar said...

Worse for whom?

In the shah's days, there actually was a region (I forget which) in which the people had gone back to the pre-Stone Age. That is, they were so backward that, although their ancestors used to make utensils (like metates) out of stone, they no longer knew how.

Iran now has a national health service that is rated among the best in the Muslim world. I don't know how 'national' national is, but it's got to be better than what was going on under the shah.

Populism without freedom is a locked gate to the future, but anything, capitalism included, without political and educational freedom is the same.

Nobody likes to say a good word for Khadaffi, but one thing he did was to take the common steps to eradicate malaria, draining marshes and so on. Neither Idris nor the Italians had bothered. Things like that help explain why he still has his head.

Saddam would have been well advised to do something similar, instead of his Assyrian practices toward the Shia and Kurds.

If the putatively oppressed are not rising up, it is always a good idea to check and see if they think they are more oppressed than they used to be or less.

The answer will almost always surprise the Reaganite political illiterates.

This next will be a repeat for some of the oldtimers, but I have not used it since you came along.

Lamont Lindstrom, in a survey of Micronesians, discovered that the generation that had had children during the Japanese colonial period (1914-44 or -45) had a generally favorable view of the Japanese, even despite the suffering brought on by the war.

The reason was, the Japanese had taught their children to read. Neither the Germans nor the Spaniards had bothered.

I think most Americans, and all the flag-waving Republicans, vastly overrate the difference between Red and White oppression, to the point, with outliers like Orrin Judd, that they deny White oppression or White terror at all.

December 30, 2006 7:40 PM  
Blogger Oroborous said...

Good points.

I dunno how Iran's health services stack up against Cuba's, but Cuba has national universal "care" too - only it doesn't provide any drugs, not even aspirin. Further, one can't even BUY drugs using Cuban pesos, although they are available. The only way for Cubans to get access to drugs in Cuba is to buy them using FOREIGN CURRENCIES.

That is a sick mockery of "national health care", and an extremely telling sign of how well Cuba has fared under Castro.

December 31, 2006 12:00 AM  
Blogger Oroborous said...

BTW, how does a society forget how to make STONE tools ?!?

It seems as though it should be pretty easy to figure out how to make tools out of stones, if the concept of toolmaking is still present. And if it isn't, that's beyond pre-Stone-Age, that's sub-human.

December 31, 2006 12:04 AM  
Blogger Susan's Husband said...


My dad at one point took up flint knapping as a hobby. It's harder than you think to make useful stone tools, starting with picking the right type of stone.

Mr. Eager;

It seems to me that you're being disingenuous in exactly the same way you accuse me of doing. If saying things are worse under the Mullahs than the Shah is "ignoring White oppression", isn't saying things were worse under the Shah "ignoring Red oppression"? If not, what's the difference?

You cite a certain region of Iran that suffered under the Shah as evidence that things were worse then, but provide no evidence that things improved for those people under the mullahs. Same for health care — being the best in the Islamic world is a low bar. And as Oroborous points out, having national health care isn't indicative of much at all. And why does it "have to be better than that under the Shah", given (for instance) the purging of women doctors and sex segregated health care?

P.S. "If the putatively oppressed are not rising up, it is always a good idea to check and see if they think they are more oppressed than they used to be or less" — like in North Korea? Certainly a good idea to check but it's merely indicative, not determinative.

P.P.S. Do you really think that ad hominems like "Reaganite political illiterates" and "flag waving Republicans" add to the strength of your arguments?

December 31, 2006 7:02 AM  
Blogger Harry Eagar said...

As to your last, yes.

Reaganite political illiteracy got us into a big mess. It is important to point the finger of blame where it belongs.

I am not calling you a Reaganite political illiterate, though.

December 31, 2006 12:30 PM  

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