The ongoing situation with Iran is hugely gold and oil bullish right now, and will be for the coming months. The recent statement by Iran that they will free the British naval hostages is just one detail. It solves nothing fundamental.

First of all, before I discuss why, I want to comment on several emails I got about my views that Iran is going to be attacked. The comments went along the line: ‘the US is too tied down in Iraq, won't even think of another war..' etc.

I disagree. So let's get into the reasons why there is likely an attack on Iran….

Iran in the Way of US Success in Iraq

First, the US is bogged down in Iraq. True. But Iran is a major reason why. Iran and Syria have fostered sectarian strife between the Sunni and Shiite in much of the Mid East – Lebanon, Iraq, Palestine, and even inside moderate Arab nations there. In fact, Egypt commented recently that Iran is fostering major Muslim on Muslim strife, trying to extend a Shiite influence, and Egypt, the Saudis, and the other moderate Arabs, are concerned at Iran's building interference, and domination. Syria is closely aligned in this whole picture, and is trying to gain back its ruling domination in Lebanon, among other things. The tension is so severe that the opposite sectarian camps are even burning each other alive. The severity of this strife to Mid East stability cannot be underestimated.

This is not to mention that Israel is constantly being pressed with the Palestinian issue, and the risk of attacks from insurgents from Lebanon – and even from inside Syria where they are staged. Israel has stated they will never allow a hostile neighbor to have an atomic bomb.

Iran, Russia, and China

The Russians and Chinese are using Iran as a counterweight to the US influence in the region. Iran clearly is emboldened by this support. Both China and Russia recently have made comments that Iran needs to back off their nuclear aspirations, and Russia even pulled out hundreds of their technicians building a new atomic generation station ostensibly because Iran is not paying for that.

But, I suspect that a lot of this posturing is merely for public consumption. Iran appears continually emboldened. I doubt very much that they would be so bold, unless Russia and China were still very much behind them. Both Russia and China have huge new energy contracts with Iran.

The fact is, Russia pulled out all those technicians probably because they suspect a US attack is imminent, not just because of money.

Weather

There is a weather reason to move ahead with this attack soon. In the Summer, that area gets so hot that it is almost impossible to fight – particularly if you are an aggressor. If the US really does intend to do something with Iran, it is probably soon, just for weather reasons. This is particularly true if US/Allied soldiers have to go to MOP chemical suits.

Those are stifling full body covers – with those clumsy impractical US gas masks.

The stakes are very high. Russia and China have both stated they will defend their interests in Iran, should the US attack. I surmise that if the US does launch attacks, it will be so swift there would be little Russia and China could do but complain. I read that the US has the ability to attack 10,000 targets in Iran in 24hours.

US Building Relentlessly

The US has now moved three carrier battle groups to the area. It takes two to have 24 hour flight operations. Each carrier is good for 12 hours until mandatory servicing is needed.

The US has relieved or moved many senior US commanders in Iraq and the Mid East who were not very enthusiastic with the prospect of a US attack on Iran.

The US has quietly built huge military bases all around Iran for the last few years.

Moderate Arabs to Look the Other Way

The moderate Arabs have stated publicly that they are concerned about a nuclear armed Iran, particularly given Iran's recent propensity to push their agenda. Iran is radical Shiite, and is fostering domestic insurgencies and Muslim strife in Saudi, Afghanistan, Lebanon, Palestine, Iraq, and – the EU! The EU is scared to death of Iranian fostered violence in places such as we saw in France during the Summers.

If Iran is actually attacked, I surmise the moderate Arabs will be publicly angry, and privately, quite gleeful.

US Pressured on Iraq

US cannot get any control in Iraq with Iran in the way. The only solution is to seriously defang Iran. If the US were to abandon Iraq now, Iran will be totally ascendant in the region. Iraq will turn into an Iranian puppet. Sectarian strife will likely spread across the entire Mid East. The Saudis and others are just totally incensed that the US has made such a mess of the whole Iraq situation, but frankly, Iran has interfered so badly that the US is not able to get ahead of that mess. The Saudis and others are now faced with the prospect of a nuclear Iran, an Iranian puppet state in Iraq, a politically paralyzed US, and ever increasing Iranian domination. And back of them are likely ruthless Chinese and Russians with comparatively unlimited resources to get what they will want in that region.

The Arab moderates will be reduced in this scenario to mere local puppet states, with the ever growing threat of new domestic strife if they oppose Iran, and even invasion, and so on. Remember the original Iran/Iraq wars, the Iraq invasion of Kuwait, and all the rest.

Of course the moderate Arabs are not pleased with US interference there either, but possibly, the alternative is much worse for them.

So, I have written subscribers that, with all these reasons, to expect there will not be an attack on Iran is to be blind. The only question now is – when?

By Christopher Laird
PrudentSquirrel.com

© 2007 Christopher Laird. All rights reserved.
Chris Laird has been an Oracle systems engineer, database administrator, and math teacher. He has a BS in mathematics from UCLA and is a certified Oracle database administrator. He has been an avid follower of financial news since childhood. His father is Jere Laird, former business editor of KNX news AM 1070, Los Angeles (ret). He has grown up immersed in financial news. His Grandmother was Alice Widener, publisher of USA magazine in the 60's to 80's, a newsletter that covered many of the topics you find today at the preeminent gold sites. Chris is the publisher of the Prudent Squirrel newsletter, an economic and gold commentary.

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