Israel to Nuke Iran

1. Iran’s nuclear facilities are deep underground, and constructed in long corridors that would require extensive bombing to destroy.
2. Israel’s air force is small, and perhaps not capable of flying the necessary number of bombing missions to take out Iran’s facilities with conventional weapons.
3. Iran is not on Israel’s border, and Israel has the same “battlefield access” problem that the USA had when it initiated hostilities with the Taliban in Afghanistan.
4. Tactical nukes may be Israel’s only viable option for a successful mission.

Israel also has to worry about Syria. Recall that during Israel’s invasion of Lebanon during the Summer of 2006, the Israeli’s did not send in their heavy divisions. Those forces had to be held in reserve to counter a possible incursion by the Syrians. The Israelis were forced to suffer a defeat in Lebanon because of the threat from Syria.

The same is true today. If the Israeli air force flies off to Iran, the Syrian air force may see an opportunity to strike Israel. So, this potential war could begin with the Israelis first destroying the Syrian air force in a surprise attack while they are still on the ground, and a simultaneous launch of submarine-based missiles at Iran’s air defenses and nuclear facilities. If the missiles fail, then with the Syrians out of the way, the Israeli air force could fly to Iran and drop a couple of small tactical nukes to finish the job.

Israel’s very public “practice bombing mission” was probably a feint. By practicing the mission with the Greeks, a member of NATO, there was no chance of the secret being kept. So, they make the Iranians watch for an air raid while the real air raid takes place in Syria, and the strike on Iran comes from the opposite direction via Israel’s submarine force.

Why did the USA leak the story to the New York Times on Friday? Perhaps the purpose was to assist the Israelis with the feint. Or perhaps it was a “good cop, bad cop” strategy to pressure the Iranians. (Let’s hope that’s the case.) Or maybe it was the USA’s way of absolving itself: “We tried to deter those crazy Israelis” and perhaps minimize OPEC retaliation.

My guess is that the USA is assisting the Israels with the feint. Even though a $5 gasoline price might be sufficient in itself to lose the election for the Republicans, president Bush has not released any oil from the Strategic Petroleum Reserve (SPR). Why? Perhaps he knows that oil will be needed to deal with a potential Arab oil embargo after the strike on Iran, or perhaps it will be needed to keep the US military’s tanks and jets running in Iraq and Afghanistan as Iran launches its cruise missiles at tankers in the Persian Gulf.

Oil did not break out of its upper trading-range on Friday after news of Israel’s practice bombing-mission was published. The strike on Iran is probably already baked into oil prices, but perhaps a nuclear strike is not.

As the USA drives its collective SUV off of a cliff to collect the insurance money and buy a Toyota Prius, you would think this rather dramatic “demand destruction” would put at least a small dent in the price of oil, but it has not. It is likely that those “in the know” have been accumulating long oil positions in front of the strike on Iran.

On the other hand, maybe we really are running out of oil. On Friday night, Kudlow had on Marcel R. Coutu, CEO of Canadian Oil Sands Trust who said (about 38 minutes into the show) that oil was going higher:

“Longer term, we just see the price moving up further because the problem is that all of the producers around the world who are doing their darndest to add to supply are just not keeping up to declines so, we’re in what hopefully won’t turn into a crisis situation here because it’s pinching in pretty sharply here over the next five-to-ten years.”

Of course, CEO’s almost always paint a rosy picture to boost their stock prices. But Coutu used the word “crisis”, which gave me a good jolt – the man is genuinely alarmed. It’s hard to see how oil loses here until after it causes a global recession.

Barron’s thinks that oil will fall and that was this week’s cover story. If this prediction works out the same way as their “Buy GM” cover story did three weeks ago, then oil will soar. Since Barron’s published the GM story, GM’s stock has dropped from $17.44 to $13.79 – a rather spectacularly bad call – and GM is now “circling the drain” as Jim Cramer put it last week. I for one, will not be shorting oil based on this Barron’s story.

Note: I have no oil or commodities positions, but I am short the market via SDS, QID, TWM, SKF, SPY puts, and QQQQ puts. And yes, I read Debka every day.

This entry was posted on Sunday, June 22nd, 2008 at 11:41 am and is filed under Investing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.