Tuesday, September 14, 2010

Geopolitical Risks Rising?

Could it be that (despite all the news about renewed Middle East peace efforts) geopolitical risks are on the rise behind the scenes?

Weak Signals
Investors need to be aware of such risks. Over the last couple of weeks, we have registered a couple of weak signals about an increased likelyhood of Iran strike by Israeli forces (or at least, increased sabre-rattering):
  • "Iran Strike" Contracts on Intrade, one of the leading "prediction markets" where people can "bet" on real-world events, registers a rise in the likelyhood of an Israeli air strike on Iran by December 2011 from 15% to 25% (but note that the nearest contract has fallen basically to zero). Some studies on prediction markets have shown that such markets can convey quite interesting information on the likelyhood of events over time, and that such markets as an expression of "swarm intelligence" perform often better than groups of so-called experts. See the related Intrade "Iran Strike" contracts here. 
  • At the beginning of August, the Israeli Defense Force seems to have ordered extraordinarily high volumes of  fuel that is mainly used for combat aircraft.
  • The Iranian regime has chosen the path of increased confrontation with Israel by a) openly and aggressively celebrating its new Russian reactor, and b) declaring its first drone combat-ready at the same time.
  • Israel immediately protested against the new Iranian-Russian reactor and deemed it totally inacceptable. 
Of course, members of the UN security council are most likely working hard to avoid an escalation of this conflict, and any rational thinking would argue against a war that would stir up additional instability in the Middle East, especially at a time where US and NATO forces already face increasing difficulties in Iraq and Afghanistan.

Nevertheless, many wars have been started rather irrationally, especially when looked at in retrospect, and recent behaviour of both parties is concerning.  Although the "Israel-Iran" Alarm bell has been rung already a couple of times over the past couple of years -  nothing happened....

...which doesn't mean that we should be complacent:

For example,  on Sept. 12th, former Israeli Mossad Chief Danny Yatom has urged the West to form an alliance to deliver airstrikes on Iran:

"BBC MidEast: Former Israeli Mossad chief says West should strike Iran
2010-09-13 07:43:47.774 GMT

Text of report in English by privately-owned Israeli daily The Jerusalem Post website.
 [Report by Ya'aqov Katz: "'West Needs To Mobilize Into Coalition To Strike Iran'"]

Western countries need to mobilize together into a coalition that will strike at Iran's nuclear facilities, former head of the Mossad Danny  Yatom said on Sunday [12 September].

Speaking at the International Institute of Counter-Terrorism (ICT) Conference at the Interdisciplinary Centre (IDC) Herzliya, Yatom, a former Labour Party MK, said that only military force will succeed in stopping Iran. "Since the sanctions are not enough I am hopeful that the world will come to its senses and reach the conclusion that in order to stop the Iranian nuclear arms race we will have to attack some of their nuclear facilities," Yatom said in rare comments for a former top Israeli security official regarding the use of military
force against Iran.

While refraining from discussing specific Israeli capabilities, Yatom said that if the world failed to meet the challenge, Israel would "retain the right to self defence." "Figure out for yourselves what that means," he then told the audience.
Yatom said that Israel could not live with a nuclear Iran. "I don't want to be in a situation that I will be sitting in Israel and my fate will be in the hands of others, especially when we are talking about a lunatic regime," he said. "I don't want to be the subject of an Iranian experiment."

Yaton made comments a year ago in an interview with Russia Today, in which he doubted that a peaceful resolution was possible with Iran. He declared at the time that it was “prohibited” for the world to allow Iran to continue its civilian uranium enrichment but said there was still time for diplomacy. 

Now, Yatom seems to have jumped on the bandwagon for a military strike.

...and US Republicans trying to push for it:
See this piece on Huffington Post from July:  47 Republican Congressmen launched "House Resolution 1553"  which provides support for military strikes against Iran, stating that Congress shall support Israel's use of "all means necessary" against Iran "including the use of military force".

1 comment:

  1. Update: Senator Graham calls for military action against Iran.


    A quote from Mr. Graham:
    "If you use military force against Iran, you've opened up Pandora's box," Graham told the American Enterprise Institute in Washington. "If you allow Iran to get a nuclear weapon, you've emptied Pandora's box. I'd rather open up Pandora's box than empty it."