And the word of the day today is… fungible…. قابل مبادله
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Word of the dayAugust 12th, 2014 |
 27 comments to Word of the day |
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How’s Iran going to pay it’s goons and buy food?
The goons will live off all that fattening yellowcake which they have stored away. Or they might sell their oil to China, which seems to need all the oil it can get…
It is a shame that we can’t buy ‘ethical’ petrol, Diesel and LPG that does not come from crude from say, Qatar, Iran (sorted), Saudi Arabia, Venezuela or any other craphole of a State, but fungibility simply means that the demand from others not so inclined would prop up sales from those places.
Hence the word of the day… they are going to pay their goons and buy food just fine because oil is… fungible.
The whole “sanctions” business is a theater of the absurd. There are no sanctions, it’s just a show.
The sanctions show is what the Wests puts on to mask it’s total and absolute impotence.
That goes for Iran and Putin as well…
This will probably assist them:
http://www.infowars.com/vladimir-putin-signs-historic-20bn-oil-deal-with-iran-to-bypass-western-sanctions/
Literally a liquid asset.
That is the whole point. The only way to hurt Iran is to destroy their oil fields (ie push up the global price of oil by taking Iran out of the market completely), which obviously ain’t going to happen. Fungible means it does not matter in the slightest who Iran sells their oil to, it is a global market.
Sanctions against Russia are also largely symbolic… but not quite so utterly pointless as refusing to buy oil from Iran in a fungible market. Many other products are not so fungible. In effect what is being done is ‘we’ are agreeing to damage our economies with sanctions on the assumption it will hurt ‘them’ more than ‘us’. Which is probably true, but it is also fairly trivial as economies on both sides of the line will adjust to the new realities.
“‘we’ are agreeing to damage our economies”
We are agreeing to pretend that we imposed sanctions… It’s all theater.
Actually you just need to use Google to see people wailing about being damaged by the sanctions against Russia. But it does not actually mean much so I am not sure who you think you are arguing with Jacob 😉
The whole point of this post was pointing out sanctions really do not mean much, and when it comes to Iran’s oil, they mean nothing whatsoever.
What has had a huge effect on Iran’s oilfields is the sanctions which ban or restrict the financing and insurance of projects and the use/sale of oilfield equipment technology. Total had to withdraw from the South Pars gas project due to these US-imposed sanctions, and so they brought the Chinese in. And then a few years later they kicked the Chinese out for failing to make any progress, although whether this was down to Iranian fuckwittery or Chinese incompetence is not clear.
And now they’re turning to the Russians to import oilfield technology. Good luck with that. Ditto for “consumer goods”, a single one of which the Iranians want or need I cannot think.
Well does this means that the Russians have cornered the Iranian vodka market? 😉
Very tangential if not OT, but amusing in a grim sort of way, over in Venezuela, they have a smuggling problem. The government subsidises lots of goods, including petrol, and they have found that people are smuggling 40% or so of the subsidised stuff from Venezuela out to Colombia, to flog it at a profit. Naturally the answer is to close the border at night and bring in 17,000 troops. Imposing sanctions on yourself as a response to shortages is quite a nice twist down the long road of economic insanity in Venezuela.
So the “Operation Choke Point” on the international banking platform doesn’t magically “fix” things?
I imagine Iran can figure out a few “other” things to “export”.
Tim Newman makes an interesting point (as usual)… the only ways sanctions *can* hurt Iran is by reducing their overall output of oil (ie denying them the expertise to get the stuff out of the ground as effectively), there by reducing their income. Oil being fungible means refusing to buy it is irrelevant as it is a global market, but limiting their production actually does hurt them (it also slightly increasing the price of oil to everyone of course, but clearly that pain is spread over the entire market and given that the product is not perfectly elastic, Iran does indeed come out a net loser).
“people wailing about being damaged by the sanctions against Russia”
Wailing is always profitable, they are probably demanding Government compensation…Theater begets theater…
As to oil extracting equipment – it gets shipped via third parties.
Suggest you go back and read the comment by Tim (In The Oil Business) Newman then Jacob.
Why not hurt the Saudis, the Iranians, AND the Russians by stabilizing the dollar vs gold so that oil prices go into the crapper anyway?
Sure, it’ll suck for Houston and Bozeman, but the rest of us will have much better lives while these villains all implode.
Why not hurt the Saudis, the Iranians, AND the Russians by stabilizing the dollar vs gold so that oil prices go into the crapper anyway?
How about full investment in shale gas and nuclear?
FWIW, oil is not completely fungible except in a theoretical market. What sanctions can do is impose significant transaction costs on Iranian oil that will be impactful. For example, the US Navy could close the straits or Hormuz, or create an intrusive inspection of every tanker passing through to “check for terrorist weapons” and “racially profile” those coming from Iran.
It can also charge various duties on Iranian imports, meaning that the oil would have to stop over somewhere else first — which isn’t free, or they could impose various regulations to hinder the financing or involvement of American companies in Iran, or make spare parts that are currently made in the US harder to come by (possibly requiring a middle man who always wants a cut, or possibly financing an alternative manufacturer, which will be worse, because if it wasnt’ they’d already be using them.) All are soluable problems for the Iranians, but the solutions have transaction costs.
Of course the same is true of Europe, but I suspect they have considerably less leverage than the US both because they have a larger Navy and a far stronger influence on oil production.
These transaction costs would impact everyone because the Iranian component of the total oil market cost would increase. However it would impact Iran asymmetrically, so we’d all be poorer, just that the Iranians would be more poorer than the rest of us.
Not that I am advocating such sanctions. It am just saying as a form of soft war (everyone gets hurt but your enemies get hurt more) it can be impactful.
Fraser. A blockade is an act of war, so closing the straits = war with Iran
This is already the case. See Tim Newman’s comment 😉 But that does not have anything to do with fungibility as such, but rather production.
Let them produce as much as they want… at $50/barrel.
@Perry,
Indeed, oil is still (basically) fungible, but that doesn’t mean economic sanctions aren’t impactful, which I think is the underlying theme of your comment. Sanctions can cause considerable asymmetric costs on the sanctionee.
Do I think that sanctions will be effective? Probably not. The only ways to prevent Iran from getting nuclear weapons are dropping large amounts of explosives, firing small pieces of lead into certain specifically targeted individuals, inciting an internal revolution, or something really innovative like Stuxnet.
I think many of these actions would be legitimate given the serious threat to life and liberty Iran offers when nuclear capable.
Here’s another word for you, off topic. ‘Race’. The Swedes are going to e-race the word ‘race’ from their dictionaries, so as to make the world a kinder, gentler place. The word ‘ethnicity’ will be used where any reference to genetic heritage is required. Has anyone told them about Newspeak, or was ‘1984’ banned in Sweden?
An article in the NY times about sanctions on Iran
It says Iran is allowed to export only 1 million barrels a day, mainly to Asian countries (China, India and Turkey), down from 2-2.5 mbd they exported before, and revenues are down to 62 billion $, down from 100-115 b$ in past years.
Iran is also not allowed to bring the money paid for the oil back to Iran, they can only spend it in the countries of origin (China, India, Turkey) for imports of goods from there, or keep it there on deposit.
These are significant sanctions, if implemented as claimed. I doubt they are implemented.
Also…oil is not completely fungible, as there are different grades. Hugo Chavez found this out when he decided not to sell his “heavy” crude to the US and then found that nobody other than the US had their refineries set up to handle it and hence weren’t interested. You might be able to squeeze a producer to some degree, but you can’t boycott a purchaser as the Arabs discovered when they tried to stop Israel getting their hands on crude.
Sanction Busting, Prohibition proved politicians along with the Meeja are effwits when they manipulate markets or just about anything i.e. the Middle East.
You are missing the real value of sanctions to the world*. Consider, as an example, the sanctions put in place on Saddam Hussein after Operation Desert Storm, particularly the Oil for Food program exception. OfF was spectacularly effective at relieving the pain, suffering, and poverty of the transnational corruptocrat class, especially at the UN, while providing opportunities for moral preening. And so sanctions will always be popular (at least, among the politicians).
*And by world, I mean the corrupt politicians on the international stage.