Friday, February 24, 2006

Deterring WMD terrorism

The “war” that the United States is attempting to wage against Islamic Fundamentalist terrorist is inextricably interwoven with the economics of oil in particular, and the world economy in general. What follows are some thoughts that came to mind while contemplating the controversy over the purchase by a Dubai organization of the British operator of our major East Coast port facilities. Though such a transfer of ownership at first seems counterintuitive to our security interests, a little thought and analysis indicate otherwise. It also suggests what may be a realistic means of engaging the cooperation, or rather, twisting the arm of all who may be in a position to help us thwart a WMD attack upon the U.S.

Americans expect that their dollars will buy all the gallons of gasoline that their over-sized SUVs will guzzle and do so at a price that ranges from between one-third to one-half of what Europeans customarily pay for their motor fuels. What we seem to lack is a clear notion of why anyone should be willing to sell to us all that sticky, black stuff we need to craft the lighter, aromatic fluids we use to power our cars, trucks, tractors, planes and trains. Well, for every dollar we give them for their crude oil, they – be they Emirates, Kingdoms, Islamic Republics or any one of the other assorted arrangements of dubious or unsavory political stripe – actually expect to use that dollar as they see fit. To buy with it what they wish, when they wish, given an agreeable price and terms.

If you were to have dollars that could not buy what other dollars could, they wouldn’t be worth as much as those “other” dollars, would they? And the price of what you’d be willing to exchange for such “restricted” dollars would probably rise, wouldn’t it? But any given dollar is supposed to be interchangeable, that is fungible, with any other dollar. It’s value should not depend upon who is holding it. If it does, then the dollar’s value is lessened. Especially for those holding “restricted” dollars. So, if we tell the Emirate of Dubai, or any other OPEC member for that matter, that their dollars are not the same currency as that held by others, we can expect the price of oil to rise, substantially perhaps.

The price of crude oil has already risen substantially over the past three-plus years. At the end of November, 2002, the dollar and euro were at parity and the price of a barrel of crude was $23.32. By mid-February of last year the price of crude was $39.59 per barrel, but the euro price was only 30.77. That’s a 28.7 percent premium for dollar oil over the price in euros. Today the dollar is worth 0.8390 euros, crude oil is at about $60 per barrel, and so the euro price would be about $50 per barrel. We are thus still paying a 20 percent premium for crude over the price our European cousins do. They of course pay much higher price for refined fuels but that is mostly a function of taxes and not obscene windfall profits by big oil companies.

Restricting investment by those foreigners holding petrol-dollars could go a long way towards further increasing the price of crude oil through additional reduction in the value of the dollar. If we can’t trust those who accept our money for their goods, then we’d better stop asking them accept our dollars.

We also must ask ourselves why we would expect those investing their oil dollars in the United States to diminish or destroy the value of those investments? We should be quite confident that the Dubai company purchasing the operating control of the ports has absolutely no intention of facilitating nor any desire of being responsible for a WMD terrorist attack that results from its ownership of port operations. Their $6.8 billion investment could become worthless. Middle Eastern Arabs may confound and enrage us, but they still have their own financial self-interest at heart.

The same is probably true of all of those around the world with whom we do business, but with whom we experience elevated levels of political, religious or cultural friction. This is at least true of those who control the monies and are running the economic show in those countries. This is why we should little fear that any recognized political entity has any desire to instigate or perpetrate a WMD, especially nuclear, terrorist attack upon the U.S. Such an event would probably totally screw up the world economy and result in horrific financial losses to those who have invested their dollars in the U.S. The Saudis and other Muslim countries may not be, nor may ever be our friends, but they do covet the business we and others send their way, as well as the value of their investments in our fair land and other points West of their oil-rich desert kingdom. The same preference for wealth preservation can be said true of any number of other countries – Muslim or otherwise.

If economic considerations provide reasonable insurance against state- or corporate-sponsored WMD attacks, how do we deter the rogue factions that seem to care not a twit for the world economy and the impact its devastation would have upon even Muslim lands? What should be America’s response if we ever experience a nuclear terror attack upon one or more of our major cities? As President how would you respond? If you’re still around, that is. Whom do we nuke? No one? Everyone? How would we determine who was responsible for furnishing the weapon? Building it? Delivering it? Detonating it?

The Mutually Assured Destruction (MAD) school of deterrence doesn’t work if one doesn’t know against whom to retaliate. So how might we construct a deterrence not involving the retaliatory use of nuclear weapons? How do we get the Arab world, and any others upon whom we might cast a suspecting eye as perpetrators or co-conspirators, to actively work to prevent such an attack?

Show them the money. The money they would forfeit should such an attack occur. The assets we’d confiscate. The wealth within our grasp that we’d strip from them. And promise to do so to the fullest extent that we have the capacity to impose our will. What else, other than the threat to obliterate the entire Muslim world – a threat not credible – would have any deterrent effect?

If you know, please tell the President. So he can tell “them.” Meanwhile, be assured that the Emirate of Dubai will do a fine job of running the ports. Just learn to enjoy hommus and lamb. We here in the Detroit area, having the largest concentration of Arabs outside of the Middle East, have become quite fond of Middle Eastern cuisine. There’s a bright side to everything!

Bon appétit!


Anonymous Anonymous said...

I hate oil. It is greasy and it fouls my motor when it gets past the piston rings. Awful stuff. Anywho, I live in an Eastern City that has seen its port affected by the Dubai deal. It's nasty. I don't want those guys telling me when I can put gas in my Bronco! They're militants! Bill O'Reilly is right: those militants are bad news! I'm just glad I don't have a burka on my head. Or is it fatwah? I can't keep those straight.

7:34 PM  
Anonymous Dave said...

You ask what would we do if we were Prez Bush? I'm just a simple guy with simple solutions. Redneck type solutions. Here goes. First I'd ask the Conservative Base' forgiveness for insinuating that they may be anti Arab. They aren't. But they've waited patiently for almost 5 years for the Islamic Kingdoms to make a greater contribution to the war on terror. After all they are Kings. "Its good to be King" right? They don't have constituents to please. They have billions. It would be a simple matter for them to set aside a billion or 2, hire a state of the art, covert merc army, go into western Pakistan and bring us Bin Laden & Al Zawahiri. That would be the 2nd thing I'd do if I were Prez. I'd sit down with the UAE and tell them "you get the terminals when you deliver Bin Laden and Al Zawahiri - end of discussion". And I'd implement a new policy towards all Islamic countries. Produce 1st on the war on terror then you get to share in our markets, economy and commerce. They'd scream bloody murder at first but if we stood fast they'd comply. And they'd silently round up the trouble makers (as only a King could) and cash them in. But we must insist that they pay first. We need to come to a realization. Thats the only way to deal with folks from that part of the world. They're laughing at us! They have been manipulating us like so much silly putty. My plan will be tough to implement but it is doable. And it'd work. The red staters out here aren't anti Arab nor or they anti-Islamic. But they want to see our Nation begin to make the Islamic kingdoms and countries suffer a little for their inaction. No apologies from me for that belief. To the Congress and the President I say start using the brains God gave you. That goes for the pundits, too. The above article is about the closest I've seen as far as realistic solutions.

8:54 PM  
Anonymous Anonymous said...

I am all about boycotting. If you want to show the Arabiacs something, you have to hit them where it hurts. I for one stopped using algebra. Let's see them deal with that!

3:56 PM  

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