Wednesday, October 15, 2008

Economic Warfare

Iran is worried.

ThreatsWatch reports:

Iran’s break-even price is $90 a barrel, and that is a big issue in Iran right now. … If prices dip below $90 a barrel, and we have seen it touch $89 earlier this week, then they would have to tighten their public expenditure policy, and probably cut subsidies, which would be an issue for the government there – the public would not be content.

I believe oil prices dropped under the $75 per barrel level today. During the First Gulf War (a.k.a. the Iran-Iraq War), part of the war strategy against Iran was producing oil to reduce the price of oil. Iraq could borrow money to finance the war but Iran needed to sell oil to finance their war. The price drop (which interestingly enough was greatly helped by the new Alaskan North Slope oil fields coming on line) devastated Iran's war effort.

We shall see if we can keep the price low enough for long enough to undermine the Tehran mullahs.