I'm glad to see you downplaying the Iranian nuke danger, but this is the kind of vapid Econ-101-ism that really cannot be allowed to pass in polite discourse.

The fact that you can put a dollar cost on them does not eman all risks are fungible. Your argument here is exactly equivalent to the one Max Sawicky rightly mocks. The economic disruption from a spike in oil prices that an importer risks by failing to invest in alternative energy is not at all equivalent to the foregone windfall that the exporter risks.

Think about it this way: by investing in alternative energy, an importer decreases their exposure to oil price fluctuations, while an exporter increases it.

   Yes this is an important point which needs to be made more often. To restate the argument what matters is the opportunity cost of oil not the extraction cost. If oil costs 5 dollars per barrel to extract and sells for 60 dollars on the world market, it is the latter cost that matters in deciding what to do with the oil. If your nuclear plant can make an oil-barrel worth of energy for 40 dollars it makes to build the nuclear plant and sell the oil on the world market. As a corrolary the recent increase in the price of oil has defintely made nuclear energy more attractive for a country like Iran.

  All this is not to say that Iran might not also be seeking nuclear weapons. Some of their past activities are definitely suspicious. However the mere presence of huge oil reserves isn't evidence for a weapons program.

"Think about it this way: by investing in alternative energy, an importer decreases their exposure to oil price fluctuations, while an exporter  increases it."

  So what? There is upside to risk as well as a downside. The Iranians may well calculate that given long-run supply and demand oil prices are more likely to rise than not. Or they may calculate that the cost of avoiding this risk is too high in terms of oil exports foregone.
 

I find it very suspicious that Tehran is building a nuclear energy program given the oil reserves they have access to.  Matt's argument about reducing their dependence on their own oil so they can export more and see more of a profit, isn't completely believable.  I think their goal is a nuclear weapons program.  The key words there are "I think".  Should we, or can we, make a case to the UN for sanctions against Tehran based on a "maybe"?  We made assumptions when we made our case, to the UN, for invading Iraq based on incorrect intel about Saddam's WoMD program.  Are we now going to turn around and again try to dictate UN policy on Iran based on more assumptions?

Sanctions against Tehran presently are not justified.  To push for sanctions without proof will be counterproductive in our efforts to curb Islamic extremism.  Like with our invasion of Iraq it will be viewed by Arabs as another example of the US trying to unjustly exert our influence in their region.  I think the best course is no sanctions and continued scrutiny by the IAEA.  And if proof is found of an Iranian nuclear weapons program, then sanctions would be very warranted.

There are a lot of reasons to tread cautiously with respect to the Iranian push for nuclear weapons.  However, doubts as to whether Iranian claims that they are merely seeking to develop a peaceful nuclear energy program are genuine should not be one of them.

Given all of Iran's development issues, the lack of alternative sources of energy is not exactly high on the list at this point.  After all, a spike in the price of oil would mean that Iran would have to sell less oil to generate the same level of revenues, so it does not seem to follow that there would be a need to reduce domestic consumption to free up additional reserves to sell.  

Of course Iran wants the bomb.  One of the unitended consequences of the invasion of Iraq, paired with the kid gloves North Korea has been treated with is that it has provided an incentive for hostile rogue regimes to acquire nuclear weapons as a deterrant and bargaining chip. 

(What to do about it in the case of Iran is extraordinarily hard.  The mullahs have many cards to play - from further destabilizing Iraq to using their proxies in Lebanon and Gaza to disrupt the Israeli-Palestinian detente.  It will take a fully united West to provide the necessary carrots and sticks to even begin to alter Iranian policy.)   

I think the problem here is that it has gotten to the point that if the Bush Administration announced that the earth revolves around the sun, liberals would start re-evaluating the virtues of the Ptolemaic system. 

"Of course Iran wants the bomb.  One of the unitended consequences of the invasion of Iraq, paired with the kid gloves North Korea has been treated with is that it has provided an incentive for hostile rogue regimes to acquire nuclear weapons as a deterrant and bargaining chip."

Argh.  Iran and North Korea were both seeking nuclear weapons before Bush was elected.  Unless they time-travelled, they weren't responding to Bush in seeking nuclear weapons. 

Libertine, I see your point and it's a good one, but, there are lots of examples out there of resource rich countries where the local populations are actually left short of the major resource. Some of this is due to disorganization, local poverty and the like but it's also do to exporting. This stuff is extracted for a profit, not for local use.

Also, it's not really extracted by the government, nor is it really government property. There's always a private multinational involved, as a partner of the government, and with a claim to some of the oil profits. In Nigeria, multinationals split profits 50/50 with the government. So, the margins ain't as good as they look, and you have to sell more to make up for that.

Mr Mason,
this is the kind of vapid Econ-101-ism that really cannot be allowed to pass in polite discourse.
You said: "Think about it this way: by investing in alternative energy, an importer decreases their exposure to oil price fluctuations, while an exporter increases it. "

Do you really think Iran can generate enough electricty in their reactors to offset the global price of oil?  Or that one plant can further the technology of nuclear power in any way?   Its like drinking a spoonful out of a bucket.  Their investing in nuclear power doesnt increase or decrease their exposure to oil price fluctations.  At the consumption scale they are at compared to what they are exporting, its not a valid argument.

You missed my point -- investing in nuclear power makes Iran more subject to oil price risk.

Think of it this way: being an oil exporter is making a bet that oil prices will rsie. If they do, you;re happy, if they don't, you're sad. Now for the reasons Matt described in his post, investing in nuclear power is also a bet that oil prices will rise. So while nuclear power reduces the risk of oil price fluctuations for an importer, it has exactly the opposite effect on an exporter. So Matt is wrong to say that "the situations are identical." 

"Actually, we very much need to support Iranian economic development for our long term interest. You better believe the last thing we want is ME regimes collapsing after we’ve been interfering in the region for centuries. If that happens all the ME will be one big AQ training camp."

Not to mention more oil availability over the longer term for the US...

JW-

That is mistaken for a few reasons.

First of all, oil power is most valauable for cars and mobile use. 

Nuclear electrical energy is way cheaper than burning oil for grid electricity, as long as one presumes automotive oil consumption will keep prices high, which is a totally safe bet, especailly looking at china and india. A country like Iran can also store waste cheaper than most places, so economically it's an even better deal.

Regardless, Iran's oil is not unlimited, therefore Iran needs to transition to alternative energy sources for long term viability. that is doubly true considering that Iran needs energy independance more than most nations for fear of the dominant global powers.

I think it would be a good thing for Iran to have the bomb. Yes, it might go off. That would be bad. But demonstrating the utter failure of current US policy in the region, which is what Iran getting the bomb would do, would count as a world-historical boon from Iran to the planet.

So you think the US should not only not seek sanctions in the UN about their nuclear program but instead you think the US should be supporting Tehran's efforts in developing nuclear energy?

Actually, all of the world, including the US is ostensibly interested in helping Iran develop peaceful nuclear energy. Right?

Whether that can be separated from nuclear weapons production is another matter, one which is technical, and is a whole other discussion which I didn’t address in that post. So your jumping the gun quite a lot, and should respond to what I actually posted. If there is some factual error there, please highlight it for me.

Look, I know you’re interested in piling on and have an axe to grind with me right now, but we’re discussing FP here, it’s important. Let’s try to actually stick to what I said before making counter arguments and downrating my post please. Thanks.

2 points while we're on the subject:

1) I rated your post a 3 becasue it contained an important logical flaw, quote:  Matt's argument about reducing their dependence on their own oil so they can export more and see more of a profit, isn't completely believable. I quoted and responded to that specific point as to why it is entirely believable, regardless of what additional nuclear weapon agenda they may likly have. So please do me the same courtesy and stick to the facts.

2) The rulers of Iran are very wealthy...he main reason for them developing that program is for eventually having a weapons program. Again, that is your assumption and certainly weapons goals are likely, as I already pointed out. However, we know for a fact that regardless of weapon desires, alternative energy is part of the infrastructure they need to build, for when the oil runs out, otherwise they won't be so wealthy. I think I made that point already, and Matt alluded to it.

I'll leave this debate with you until you cool down a bit, stick to what was actually said, and try to understand the point being made about Iran's legitimate need for nuclear power, regardless of other issues.

Matt, two things come to my mind:

1)  "Control" of oil has as much to do with how oil is traded as the oil itself.  Right now, a large percentage of transaction are done in dollars, which is very good for the US economy.  Iran, Iraq and North Korea all announced that they were going to trade in Euros shortly before the "Axis of Evil" speech.  Venezuela did also, but I think Bush couldn't figure out how to tie that one into the Axis metaphor. But apparently it didn't fool Pat Robertson, who has just called for Hugo Chavez' assassination. 

2) SCO.  The Shanghai Cooperative Organization looks to me to have the potential to rewrite geopolitical power in Central and East Asia.  The strongest rhetoric I've seen against the SCO is coming from the Heritage Foundation.  Not a surprise, after reading the PNAC stuff.  SCO is actually making public statements that it is organizing to resist the Great Hegemon.  Kamirov's recent eviction notice - which is often "explained" as his being pissed-off that the US criticized his human rights violations, is actually a programatic SCO policy implementation, and other Central Asian states will follow.  So it looks like Rumsfeld is going to move military assets to Azerbaijan, which so far hasn't made any move to join the SCO.  That could change - a very politically unstable country, and with Mother Russia a dues paying SCO member, it probably will change.  And now, Iran, Mongolia, Pakistan and Indian apparently want to join, or at least they have successfully applied for observer status.

Just nine days ago Russia and China held war games at Kamchatka, under the pretext of antiterrorism.  One wonders if Islamists now have nuclear dhows - navel exercises against terrorists is a bit much to chew on. But this is unprececented, Russia and China have never had war games together in the past.

It's totally logical for the Iranians and others to build nuclear power plants so they can free up more oil to sell and thus make more money. For this reason, I trust the Iranians on this issue more than I do the Bush administration. This is sad.

The line between nuclear power and bombs is not as firm as people believe it is. The two technologies travel hand-in-hand and can share fuels.

I'd prefer that Iran develop solar, wind and geothermal power.

<i>Argh.  Iran and North Korea were both seeking nuclear weapons before Bush was elected.  Unless they time-travelled, they weren't responding to Bush in seeking nuclear weapons.</i>

You have absolutely no clue what Iran was doing when and neither do any of the idiots spouting off now.

It's not even verifiable to the outside world if the Pyongyang metro runs and somehow you know when they were working on a weapons program.

Right.

Bet you believed all that bullshit from 2003 also.