Huge opportunity in Iran

Tom Friedman writes about the huge problems facing Iran now that oil prices have collapsed.

I’ve always been dubious about Barack Obama’s offer to negotiate with Iran — not because I didn’t believe that it was the right strategy, but because I didn’t believe we had enough leverage to succeed. And negotiating in the Middle East without leverage is like playing baseball without a bat.

Well, if Obama does win the presidency, my gut tells me that he’s going to get a chance to negotiate with the Iranians — with a bat in his hand.

Have you seen the reports that Iran’s president, Mahmoud Ahmadinejad, is suffering from exhaustion? It’s probably because he is not sleeping at night. I know why. Watching oil prices fall from $147 a barrel to $57 is not like counting sheep. It’s the kind of thing that gives an Iranian autocrat bad dreams.

After all, it was the collapse of global oil prices in the early 1990s that brought down the Soviet Union. And Iran today is looking very Soviet to me.

As Vladimir Mau, president of Russia’s Academy of National Economy, pointed out to me, it was the long period of high oil prices followed by sharply lower oil prices that killed the Soviet Union. The spike in oil prices in the 1970s deluded the Kremlin into overextending subsidies at home and invading Afghanistan abroad — and then the collapse in prices in the ‘80s helped bring down that overextended empire.

This is an example of the tremendous leverage we get by destroying domestic demand for oil by switching to alternative fuels.

  

Barack Obama supports stronger dollar, Wall Street Journal cheers

This interesting news comes courtesy of the Wall Street Journal editorial page:

The underreported economic news of the week is that Barack Obama favors a stronger dollar. Even better, he thinks a stronger greenback would help to reduce oil prices.

That at least is what the Democratic Presidential candidate told a town hall forum in Parma, Ohio, on Tuesday. “If we had a strengthening of the dollar, that would help” reduce fuel costs, he said, according to a Reuters dispatch ignored by most of the media.

Barack Obama won’t get many cheers from the Wall Street Journal, but he’s completely right about the dollar. Frankly, I’m surprised he hasn’t stressed the dollar issue more. It’s hard to think of a more powerful symbol of American decline under George W. Bush than the destructive and embarassing devaluation of the dollar.

The value of the dollar and the turmoil in the Middle East are two important factors in the rise in oil prices. Yes, increased demand is also part of the problem, but everything costs more if the dollar declines in value, the the sabre rattling with respect to Iran and the fiasco in Iraq have also driven up prices.

Now we have some Republicans crowing that oil is down to $120 per barrel now that they are talking about drilling. That’s beyond ridiculous. The bubble in oil occured under the “watch” of a Republican president who promised to control oil prices.

Obama needs to pound this theme of the value of the dollar. It’s the easiest way to explain why we need a change.

  

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