Trump, Iran, Gold and Financial Crash

A couple of FB post in one place predicting if there is a war with Iran

a) Gold will sky rocket USD 1,700/oz and above is a high probability (USD 1,400 on June 20)
b) Will Trigger a Financial Crash bigger than the 2008 because

• Possibility of  Oil pushing USD 100- USD 150
  That will trigger trillions in derivatives and the dominoes fall

Gold Price as of June 25 2019 (usd/oz price is on right axis)

c) Saudi Arabia will fall apart, like Libya. Recall what happened to Kuwait.  Luckily Bush senior saved absorption of Kuwait into Iraq.


Probability  of war is high. On the negative side Trump would prefer war after 2020 Election.  However, he is out weighed by War Hawks, Bolton, Pompeo, Kushner, Israel and Saudi Arabia.

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Gold Prediction (June 20)
A little late, but low downside risk and high upside to buying gold.
Upside of Gold at USD1,700/oz and above is reasonable upside in my opinion.

I* have been saying since 2009 there will be another Financial crash and to buy gold. 10 years later it has not happened. The Central banks and the US Fed have managed to keep on kicking the can down the road.
It is a good possibility the Central Banks have reached the end of the road. The potential of war with Iran and US-China trade conflict maybe the big nail on the coffin for an financial crash.

Iran has said if sanctions wont allow Iran to export oil, no one will get oil from the mid-east. i.e. they will shut down the Straits of Hormuz. I dont think Iran is bluffing.
For war to be avoided, Trump will have to provide concessions to Iran. Concessions like permitting Iran to export oil to China and India . Maybe it can be done in a face saving way for the US, without appearing to look weak.

* Not really, I. More like Satyajit Das and Raghuram Rajan (both who predicted the 2008 crash early as 2005). For me that why I read ZeroHedge.
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An analysis on Iran and US sanctions (21st June)
Trump may well want some diplomatic exchange with Iran. But Iran will not talk to him as long as the sanctions against it are kept in place. It will continue its maximum pressure campaign by creating new incidents that will again increase the price of oil. The easiest way out for Trump is to abolish sanctions against Iran. He at least should issue waivers for China and others to allow them to again buy Iranian oil.

Unless he does so Iran will hit again and again against those who press for war against it. Yesterday it was a U.S. drone and a Saudi desalination plant that were the targets. The next incident could be in some oil facility in the United Arab Emirates or a symbolic strike against Israel.

The ball is still in Trump's court. He has to act further to avoid a larger war.

https://www.moonofalabama.org/2019/06/white-house-pushes-trump-pulled-back-story-he-likely-never-approved-to-strike-iran.html?

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Sanctions need to End for probability of War to become Less (June 24)

Trump: “I have some hawks. John Bolton is absolutely a hawk. If it was up to him he'd take on the whole world at one time.“
Trump: I was against going into Iraq... I was against going into the Middle East. Chuck we've spent 7 trillion dollars in the Middle East right now

So will Trump avoid a war with weapons with Iran. Unhappily Trump does not realize crippling starvation sanctions are war by another means. Unlike Venezuela, Iran has a Trump card, shut down the Straits of Hormuz.
Just the direct statement from Iran saying it will bomb/attack any tankers passing thru the Straits will shut it down. It gets shut down because Insurance companies will refuse to insure vessels going thru the straits.

Repeat, Trump needs to end sanctions against Iran. At the least allow the sale of oil to some countries like China. Otherwise war with Iran is still in play

https://www.zerohedge.com/news/2019-06-23/trump-unleashes-uber-hawk-bolton-he-would-take-whole-world-one-time

Pipelineistan: Iran, Pakistan, Syria, Qatar (Afghanistan ?)

Ever wondered if there was more than met the eye with all the events in the Middle East.  Here is an article

Reason for the longest war in American history

that makes you think. Next you wonder if the Hambantota Harbor is a reason for some of the foreign power efforts to destabilize Sri Lanka.

Construction is nearing completion on a natural gas pipeline linking Iran and Pakistan, a project that portends a huge geopolitical shift. As regional powers strengthen ties in this key energy market, they're looking to China, and away from the West.

This – among other developments – is what it’s all about, the conclusion of the final stretch of the $7.5 billion, 1,100-mile natural gas Iran-Pakistan (IP) pipeline, starting from Iran’s giant South Pars field in the Persian Gulf, and expected to be online by the end of 2014.

IP, as a key umbilical (steel) cord, makes a mockery of the artificial – US-encouraged – Sunni-Shia divide. Tehran needs the windfall, and the enhanced influence in South Asia. Ahmadinejad even cracked that “with natural gas, you cannot make atomic bombs.”

Islamabad decided not only to hand over operational control of the Arabian Sea port of Gwadar, in ultra-sensitive southwest Balochistan, to China; crucially, Islamabad and Beijing also signed a deal to build a $4 billion, 400,000 barrels-a-day oil refinery, the largest in Pakistan.
Gwadar, a deepwater port, was built by China, but until recently, the port's administration was Singaporean.

The long-term Chinese master plan is a beauty. The next step after the oil refinery would be to lay out an oil pipeline from Gwadar to Xinjiang, parallel to the Karakoram highway, thus configuring Gwadar as a key Pipelineistan node distributing Persian Gulf oil and gas to Western China – and finally escaping Beijing’s Hormuz dilemma.

Gwadar, strategically located at the confluence of Southwest and South Asia, with Central Asia not that far, is bound to finally emerge as an oil and gas hub and petrochemical center – with Pakistan as a crucial energy corridor linking Iran with China. All that, of course, assuming that the CIA does not set Balochistan on fire.

The Syrian Pipelineistan angle

This graphic Iranian success in South Asia contrasts with its predicament in Southwest Asia.
The South Pars gas fields –  the largest in the world – are shared by Iran and Qatar. Tehran and Doha have developed an extremely tricky relationship, mixing cooperation and hardcore competition.
The key (unstated) reason for Qatar to be so obsessed by regime change in Syria is to kill the $10 billion Iran-Iraq-Syria pipeline, which was agreed upon in July 2011. The same applies to Turkey, because this pipeline would bypass Ankara, which always bills itself as the key energy crossroads between East and West.

More at
http://rt.com/op-edge/iran-pakistan-syria-pipeline-843/

Via
http://www.zerohedge.com/news/2013-12-12/us-backed-syrian-rebel-commander-chased-out-country-al-qaeda

Myanmar-China Pipeline: Opportunity for Hambantota Harbor ?

The 2,800 km Sino-Myanmar pipeline is about to be operational. The gas lines are scheduled to be opened in July 2013. The parallel oil line is scheduled to open at the end of the year (2013).

The gas is to be pumped from offshore wells near Kyauk Phyu.  The oil arriving from the Mid-East will be pumped into the pipeline from the deep water port at MaDay Island.  China now will be able to get Mid-East oil without having to go through the Straits of Malacca.  That means not having to go past Singapore.

Now for the million dollar question.  Will the tankers traveling from Mid-East to Myanmar have to refuel. If they need to refuel then the only place that can occur is at Hambantota.  Did the Rajapakses foresee this opportunity.?

Addendum:
I think Singapore is worried about peace and development in Sri Lanka and the loss of shipping and other business to Singapore. Former Prime Minister (1954-1990) Lee Kuan Yew whose family runs Singapore as their fiefdom has called Sri Lankan policies racist.  That is quite a statement from   LYK who has publicly said that  Chinese are smarter than Indians/Malays and who runs a country that the Human Rights Watch says is a "Text Book" case of a Repressive State.

Background Info/Links on Sino-Myanmar pipeline
NY Times Article
Opposition to Pipeline

India Diesel prices to be hiked 40-50 paise (approx LKR 1,00) every month

Will Sri Lanka follow as well

NEW DELHI: Diesel prices will be hiked by 40-50 paise per litre every month till losses on the nation's most used fuel are completely wiped out, oil minister M Veerappa Moily said today.

"Until further orders, oil marketing companies can increase it (diesel price) by 40-50 paise (per litre) every month," he told reporters here.

The government had on January 17 decided to move towards deregulating or freeing diesel prices from state control and gave powers to state-owned oil firms to raise prices in small measures every month till all of their losses are wiped out.

More at: http://timesofindia.indiatimes.com/business/india-business/Diesel-prices-to-be-hiked-40-50-paise-every-month-Veerappa-Moily-says/articleshow/18287874.cms

Private Power Generation in Sri Lanka

There was a Jack Point post on CEB (Ceylon Electricity Board) losses and payments to private Power. I was skeptical that the percentage of private power was that significant. N pointed out a link to on the CEB losses were correct.  I was now curious, how much of private thermal power generation was there in Sri Lank.

I dont have an issue with the private hydro power, but private Thermal can be issue specially if foreign owned (if foreign owned then SL e would be twice f#%&*d, once while paying for imported oil, second when profits get repatriated.)

First off tried to get a list of Thermal Power Stations and then find out ownership.  . There were two sources, the Power Stations Wiki  and policy analysis report, but the two reports were slightly different.   Then came across the CEB 2008 report, which had a wealth of information. Kudos to the CEB for a really great report, unhappily no reports online after 2008. Based on the information (pg 14 &21), provided, below is the list of Private and CEB Thermal Power generation plants. There are 10 Private and 6 CEB Thermal Power Plants.   Total capacity all Thermal power plants were 1270 MW, with Private and CEB sharing 57% and 43% respectively.  Total generated power in 2008 was 5770 GWh with Private and CEB sharing 64% and 36% respectively. (Table below is sortable, click on header to sort).

The whole private thermal power ownership is a maze.  Here is some of what I managed to tease out before I gave up.

ACE Power: DEG (German Investment and Development Organisation ) 26% and Aitken Spence Power
AES Power: AES Corporation (also has Indian Arm) and Hayleys  (see here)
Agrico Pvt: .  Maybe part of US based Aggreko (see here and here)
West Coast Power:  As Tharindu de Silva says Yugadanavi is the name of the power plant, owned by  Lakdhanavi  but the foreign loan lending counties wanted the government guarantee for the loan. (Other link here )

There is also  Report on Electricity Tariff Rates in South Asia  and to me the two take home points were that

• a) GDP 2005/per unit in Sri Lanka (9.5) was better than India (5.1). I dont know what percentage of electricity in India is consumed by Industry compared to household. I suspect in  India Industry usage is probably greater than in Sri Lanka (1%). 
• Tariff rates were the highest in South Asia. 

Ability to Comprehend Energy use in The modern World

Came across an interesting article (hat tip adornosghost at CalculatedRisk) on the modern worlds use of energy and our inability to grasp the sheer scale of energy being used. examples from comments

Magnitude of energy derived from oil; A gallon of gasoline will move a medium size car 20 miles. Go out and find a level stretch of road and push your car 20 miles. When you get done, we will talk about renewable energy.
A loaded eighteen wheeler can go a mile on something between a pint and a quart of diesel. Give the driver a hand truck, and it'll take him something like five hundred hours.

In addition he argues that prior to finding fossil fuels, we lived paycheck to paycheck of our energy quota. Finding fossil fuels, was like winning the Lotto, and there is a good possibility we are nearing the end of energy Lotto.

Energy funds, energy flows by John Michael Greer

Underlying all the grand and sweeping fantasies of endless economic growth powered somehow by lukewarm sunlight and inconstant wind, I’ve come to think, lies the simple fact that the human mind never quite got around to evolving the capacity to think in terms of the huge amounts of energy our species currently, and briefly, has at its disposal. It’s one thing to point out that a planeload of tourists flying from Los Angeles to Cairo to see the Great Pyramid, back when political conditions in Egypt allowed for that, used more energy in that one flight than it took to build the Great Pyramid in the first place. It’s quite another to understand exactly what that means – to get some sense of the effort it took for gangs of laborers to haul all those blocks of stone from the quarries to the Nile, load them on boats, then haul them up from the Nile’s edge east of Giza and get them into place in the slowly rising mass of the Pyramid, and then to equate all that effort with the fantastic outpouring of force that flows through the turbines of a modern jet engine and keeps an airliner poised in the thin air 40,000 feet above the ground for the long flight from LA to Cairo.

Apply this to energy and you’ve basically got the history of the modern world. Until our species broke into the Earth’s store of fossil fuels and started going through it like a lottery winner on a spree, we lived from paycheck to paycheck on the incoming flows from the sun, and we got fairly clever at it. Growing food crops, raising livestock, building windmills and waterwheels, designing houses to soak up heat from the sun in winter and shed it in the summer, and a good many other ingenious tricks gave us the annual paycheck of energy we used to support ourselves and cover the costs of such luxury goods as art, literature, philosophy, science, and the occasional Great Pyramid.

With the transformation of coal from ugly black rock to energy resource over the course of the eighteenth century, that changed radically. Simply put, our species won the lottery, and it wasn’t a paltry little million-dollar prize, either – it was the great-grandmother of all jackpots, unimaginably vast enough that for most of three hundred years, the major constraint on how fast we used fossil fuels was the struggle to figure out enough clever ways to use it all. What nobody noticed at the time, or for a long time thereafter, was that we’d switched from a flow to a fund, and the faster our fossil fuel use accelerated, the faster the bank balance depleted