Iran, not the euro, is biggest threat to global economy
Britain’s media is in danger of becoming overly focused on the eurozone crisis. There are a number of valid reasons for this: EU countries acount for half the UK’s trade in manufactured goods, it’s relatively cheap to cover compared with other parts of the world, most people can find it on the map and watching other Europeans (particularly the French and Italians) struggling to escape from the mire is very entertaining.
Nevertheless, it is probably not the most serious threat to our economy. That dubious honour must, in my opinion, go to Iran. Until last weekend, there had been very little coverage – and even less analysis – of what is going on in that part of the Middle East.
While we all know that Iran has a very serious nuclear programme which no-one belives is for purely peaceful purposes, many are unaware that there is actually a low-level war already going on between Iran and Israel. On the one hand, Iran has been supplying Hizbollah in Lebanon and Hamas in Gaza with increasingly sophisticated rockets and, on the other, Israeli intelligence is widely believed to be behind the assassination of four Iranian nuclear scientists (the latest one today), explosions at a number of military sites and the development of the Stuxnet computer virus, which has slowed down Iranian nuclear progress.
Currently US forces are in Israel “on exercise” and US warships are in the eastern Mediterranean. Iran has been test-firing missiles and is talking about closing the Straits of Hormuz if she is attacked. Given that about a third of the world’s oil supplies are shipped through the Straits of Hormuz, it is easy to see how their closure could disrupt the global economy. In fact there has already been a sharp hike in the oil price on the back of these fears.
The reality is that Iran is almost certain to become a nuclear power sometime this year. Even if Israel launches a pre-emptive strike against a reactor, it is unlikely to be able to destroy the country’s whole nuclear infrastructure. So at the very least, we can expect more disruptive behaviour from Tehran and, quite possibly, the situation could spiral into military conflict. That will do infinitely more damage to the global economy than Greece’s likely exit from the euro.
Not a very happy note with which to open my blog for 2012. But forewarned is…
