Thursday, January 18, 2007

Economic Warfare: The Axis of Evil From Iran to Latin America

When President Bush talked about the "Axis of Evil" (Iraq, Iran and North Korea), he missed Venezuela and Hugo's Mini-me in Bolivia. Not only is Chavez continuing to erode freedom in his own country with Mini-me in hot pursuit, he continues to meet and, put it bluntly, connive with the Iranians.

At home, to their supporters, they pretend to be the leaders of the new social justice revolution, standing against greedy capitalist nations that exploit their people while thugs in all countries, both elected and brown shirt followers, beat down the population. Hugo Chavez rules by decree. He threw out the constitution and desolved parliament. And they let him. Voted to do it.

For those who compare Bush to Hitler or tend to see his actions as tending towards autocratic rule eroding American civil liberties please come back to reality. While every citizen of a democratic nation that prides itself on freedom should be wary of growing government power and reduction of individual liberties, there is simply no comparison to the acts of people like Chavez or Ahmadinejad.

Meanwhile, the Venezuelan is using his recent election victory to consolidate his grip on the economy. A week ago, he announced he would nationalize the country's electricity and telephone companies; he already controls the oil business. His goal here is to redistribute income but especially to shrink the private economy in order to reduce the space in which any political opposition can operate.

[snip] He's moving to withdraw the license of a prominent independent television network, and he has asked Congress to grant him temporary executive power to rule by decree. "The world should know: Our revolution is not turning back," he said. "This is the path our boat is on: socialism. Country, socialism, or death."

Besides Hugo becoming the next bloody dictator in our southern hemisphere, he and the Mad Dog from Iran aren't just hoping to rule their own little piece of thug-o-cratic dreamworld. Both Venezuela and Iran are members of OPEC and would like nothing better than to complete a real power alliance to either gain control of OPEC or challenge the power of Saudi Arabia and the other Gulf Arab producers. Both Venezuela and Iran need high oil prices to finance their regimes and insure their continued power. Both Venezuela and Iranian economy (50% of total revenues and 70% of export revenues) are based on oil and natural gas (largely oil).

This piece of news must be very disturbing to them: Oil Prices Continue to Slide. Both Venezuela and Iran are trying to pressure Saudi Arabia and the other Gulf producers to commit to and comply with a reduction in output, increasing the gulf between supply and demand, increasing the price of oil and thus saving their economies from going into the dumps (closely followed by their regimes).

The Caracas Stock Exchange Index fell 16% last week, but that didn't phase Señor Chávez.

It didn't phase him because it is in direct relations to his attempts to Nationalize the electricity and telecommunications industries. The government's continued spending spree coupled with the rise in oil prices has spawned what can only be a short lived growth in GDP. Once oil revenue decreases, the amount available for government expenditures, thus social welfare programs that support Chavez's popularity in Venezuela will be slowly eroded.

Aug 18, 2006 - ``These numbers should be analyzed more over the long-term and not solely in the short-term. Venezuela is spending all its oil earnings and it isn't saving or investing at all. We have huge GDP growth today, but it isn't going to be sustainable,'' said Alberto Ramos, senior Latin America economist at Goldman Sachs Group Inc. in New York.


Ramos said government spending is climbing at a pace of about 50 percent annually, a move which makes the country vulnerable to a possible drop in oil prices. Ramos today raised his forecast for Venezuela's GDP growth this year to 8 percent, from an earlier forecast of as much as 7 percent.

Too late. That's what we're seeing now.

For Iran, if forecasted decreases continue and then stabilize in 2007, it will most likely result in a loss of $13 billion in revenue to the state. With 11% unemployment, 44% of Iranians employed by the service sector which is dominated by state owned and operated companies and another 30% are employed in the gas, oil and mining industries, also largely owned by the Iranian government. Almost 70% of the population receiving some sort of state stipend.

Add to that Ahmadinejad is strangely being criticized by MPs and conservative papers back in Iran while he's galivanting around with the South Americans.

Ahmadinejad has been under criticism for abrupt decisions during his provincial tours where he promises lofty sums from the budget regardless of pre-planned macroeconomic outlines.

One hundred and fifty deputies have already issued a public statement warning the government over next year's budget, setting out "eight conditions for a favourable budget law".

"The government's efforts must be focused on decreasing spending and cutting its dependence on oil revenues," the Sarmayeh newspaper quoted the statement as saying.[snip]

Open letters from academics and experts have over the past year accused the government's economic policies of being expansionist and "lacking a scientific and expert basis" which risked fuelling "persistent inflation".

In fact, despite record oil prices (or maybe because of it), inflation is growing at record speeds with some estimates putting it at 16%. In any other country, 16% inflation, 11% (or greater) unemployment spells a recession if not depression.

It should be a very real National Security concern when dedicated foes of the United States, including Iran, Venezuela, Ecuador and Nicaraugua, seek to form an alliance. Whether that alliance is as a voting block in OPEC (Iran and Venezuela)that can effect oil prices and, thus, the American economy or the possibility that Iran, widely supposed to be using the development of “civil” nuclear power as a front for developing nuclear weapons, would share such technology with a country within our hemisphere and capable of directly threatening US soil, it is all the same: a danger to the security, economy and very life of citizens of the United States.

Venezuela has purchased MiG fighters and licensed a Kalishnakov factory in order to build up its military power. Chavez has made repeated accusations that the US is attempting to over throw his government or contemplating direct attacks against Venezuela. The US may be attempting to support opposition to Chavez, but it’s unlikely that overt attacks were ever considered. This is typical rhetoric meant to stir fear in the populace against American supported NGOs or opposition groups which Chavez can claim to have ties with the US and threaten Venezuelan autonomy. It may also provide the onus under which he may threaten or actually attack US allies in the region. The final threat may be to stir up opposition in neighboring sympathetic countries to free trade pacts with the US in attempt to weaken US economic security.

Fortunately, all of the countries in question seem bent on using destructive Soviet or Cuban style economics. Which makes them very vulnerable to the very thing that destroyed the Soviet Union and makes Cuba a boil in the Carribean: economic warfare.

Greedy capitalists are very good at that.

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