Posts tagged: Inflation

The air campaign then poured over 88,000 tons of bombs in approximately 100,000 sorties. And this to capture a country a bit smaller than New Jersey.

As we finish the third week of this war we can assess who is winning and who is not. We have spent this past week discussing what it means to be victorious in this war (The Economy and The Military) and to state unequivocally that victory is the moral choice no matter the price of oil. That being said, the price of oil is rising and hit $120 a barrel before dropping. Economists see $138 barrel as the price that could send the US into a recession. So far, the US economy is holding firm. The S&P 500 closed on the Friday before the war at 6740 and yesterday’s close was 6624 – a drop of about 1.7% – not the panic that the front pages would have us think. The Eurostoxx 50 is actually up slightly from 5719 to 5736.

The Federal Reserve did not cut rates, signifying that they don’t need to prop up the economy and risk inflation as they do when they fear a collapse.

The economies of the West seem strong in spite of (or because of?) the war which should end with the cessation of the 47 year of Islamic Republic price premium. The Russian and Chinese economies meanwhile will be under stress for quite some time. While China will have to wonder about its oil supply, Russia understands that $100 a barrel oil will encourage increased US production (and now Russian and Chinese free Venezuelan?) that will hurt them when oil prices go back to normal levels. As we will now discuss, Chinese and Russian arms deals might start to go south, too.

Technologically, this war is a further test of American and Israeli technology and abilities, and they have passed with flying colors. The American and Israeli missile and drone defense systems are outperforming what they did less than a year ago in the “12 Day War” and the U.S Navy is untouchable. The Gulf States are also fairing better than expected although due to the short distance and the lack of experience, they are getting hit more than Israel is. To top it off, the Russians have forced Ukraine to become global leaders in the defense against drones and there are now 2,000 Ukrainian anti-drone personnel in the Gulf States.

But is the air-forces that are performing so well, that one would think that the Iranians did not invest in the most advanced Russian and Chinese air-defense systems over the past few years. The S-300 or S-400 advanced Russian systems or the Chinese HQ-9B long range surface to air missile and the JY-26 (alleged) anti-stealth radar, are performing so poorly, the Chinese themselves must be hoping it is a personnel issue and not a technological one.

Speaking of personnel, this war has shown that pilot skill still matters. It is the bravery, daring and success of American and Israeli aviators that matters as much as the technology. Just look at the Gulf countries who fear sending their combined force of around 400 F-15’s and French Rafale fighters into the air.

The Russian air force (and army) has already shown it is lacking the skill to compete with even poorly trained Ukrainian pilots, let alone with American or Israeli aviators. The Chinese too, must be wondering if their air force, made up of untested, pilots from one-child families will brave the fire coming from Taiwan as well as the American and Japanese navies in order to complete their missions.

Technology is great – especially if it works as advertised, but if the “operators” are inferior, even great technology will not be up to par. No one yet has been able to match American and Israeli personnel, in the air or on the ground.

Which brings us to that annoying wild-card, the Straits of Hormuz. While the Iranians have not succeeded in closing the straits they are scaring off shipping to an extent that it is a concern not only for the present but for the future. By using this tool, by playing this card, if you will, Iran has forced the United States to make the security of the Straits a war aim. The success of the U.S operation in the Straits will turn it from an international waterway under the veto power of Iran to a U.S controlled and protected gateway from the Persian Gulf. In times of war with China the U.S Navy will be able to turn it into a Chinese energy chokepoint. If the U.S was not there prior to the Iranian gamble, they will be there now.

As for pure military, Iran is losing as no one has lost before. The combined forces have destroyed nearly all their production capabilities for military hardware, have destroyed air defenses, command and control centers, leadership on multiple levels and most of their navy. We don’t need much more to declare Iran the military loser.

Diplomatically, things are not as they appear. While no western European countries support the fighting or even the aims of the war, the Gulf States, India and others are quietly forming an unofficial coalition against regional terror. As Europe tries to figure out how to pacify its growing radical Moslem population, other counties, including Moslem ones, are finally realizing that terror against Israel and Jews slowly but surely works its way back to them. For fanatics, no one is religiously or ideologically pure enough, even if you are descended from Mohammed.

Western Europe is a clear diplomatic loser in this war as President Trump is the last person who will forgive their teachery and allow them to share in the spoils of this war. Their role in the Middle East and in global politics generally is done. Their ability to use their victory in WWI to determine and influence events around the world is finished even though they have now backtracked and agreed to help on the Straits of Hormuz issue.

Regarding China, they have now abandoned one of their main allies and the country they have depended on to provide them not only oil but a strong military presence in the Middle East. The war was clearly coming and just as the United States sent carrier groups to protect its and its allies’ interests, so too, could have China. They could have sent naval vessels to help defend Iran – or at least deter the United States but did not, either because they don’t have the ability to do it or they don’t have the will. In either case, China is a diplomatic loser in this war.

Russia is also losing the diplomatic game as Ukraine becomes closer to the Gulf states and Israel and America are neutering their best technology. Regarding Israel’s recent sinking of Iranian naval ships in the Caspian Sea, reports are coming out that they were laden with Russian military aid. Russia, like China, has not raised a finger to help their main Mideast ally, making it hard for them to claim the loyalty of other purported allies.

And Israel? Israel seems always to be a diplomatic loser, war or peace. However, this war has strengthened the bonds between the American and Israeli military in ways that no one could have foreseen just months ago. The cooperation and trust between the two militaries is beyond anything America has had since its partnership with the UK in WWII. Western Europe’s continued irrelevance on the global scene has lightened the pain the Israeli public feels for western Europe’s betrayal.

India on the other hand has tightened its ties with Israel as Prime Minister Modi’s pre-war trip to the country showed. As for the Gulf Countries, the UAE seems to be interested in strengthening its Israeli ties while Qatar does not. While Qatar is angry at Iran for their attacks it is not clear that this will lead them to abandon their goals of Islamicizing the West and ridding the world of Israel. Saudi Arabia is hard to call. We don’t expect any diplomatic breakthroughs especially if the Islamic Republic actually falls.

Israel we can say is neither a winner nor a loser, yet, in the diplomatic arena – which, considering the beating Israel gets on the world stage, might be called a win but most certainly is not a loss.

The United States can hardly be considered a diplomatic loser in this war as they are the only major power to be able to come to the aid of allies when U.S interests are also involved. The tough talk out of western Europe is a very small thorn in the side of the United States.

To summarize, Iran is the big loser of course as their support comes from a neutered Russia, an apathetic China and a global progressive left that has no power to influence, let alone determine events. Iran’s main allies have been proven ineffectual at best, uninterested at worst and their “brand” has been diminished no matter what else happens in the war.

The only part of the war that the United States and Israel can be said to be losing is the news and propaganda (but I repeat myself) war.

For the things that count though, one thing is certain – the United States and Israel are not the losers.