Friday, August 20, 2004

Cauldron Boil, Cauldron Bubble

The festering sore that is Iraq continues create waves - and serious ones that should not be ignored.

The focus right now is the battle over Najaf. Although the American-backed forces will no doubt prevail ultimately - by sheer force of numbers and raw firepower most likely, I don't think that Najaf will be the end of the troubles for "New Iraq".

First, although he is hinting that he will leave the Imam Ali mosque, al Sadr is also claiming that he will continue to fight the Americans.

Second, I don't think that al Sadr represents the only group vying for ultimate power in "New Iraq". The US forces have their hands full:

Oil Facilities Attacked
Abu Ghraib Scandal Not Finished Yet
Northern Iraq is Stable?

It isn't a pretty picture - but then, I didn't exactly think that post-Invasion Iraq was going to be stable. There are too many factors in that part of the world that conspire to ensure that a country like Iraq is going to be on the edge of social disaster at the best of times. Many of the countries over there are little more than loose coalitions of tribal societies. The persistence of tribalism alone makes much of the Arab world incomprehensibly fractured to the Western eye. We see "Iraq" as a nation. The near civil war in Iraq is starting to divide along old cultural and tribal lines - the Kurds, the Shia and whomever else may be feeling offended.

The American government has a huge task ahead of it. The instability in Iraq is contributing heavily to skyrocketing oil prices. If the situation in Iraq is not stabilized - fast - those prices could have a serious inflationary impact on most of the world's economy. When I bought a new car a couple of years ago, I suspected that gasoline was going to hover around $0.75/l. At $50/bbl, I'm beginning to think that was a low estimate and $1.00/l or more is not unreasonable.

I've already seen a number of things go up in price, simply based on the cost of transportation. I fully expect that trend to continue. The US "Consumer Price Index" isn't showing any substantial inflation - yet - but that index also omits gasoline, heating fuel and other key expenses that people have. The reality is that prices are going up, and that's going to freak a lot of people out.

If Bush's advisors are smart, they'll guide him in two key directions over the coming months. First, stabilize the situation in Iraq. Having that area on the edge of a civil war that would no doubt ultimately involve Iran and Saudi Arabia is a recipe for disaster at home and abroad. Second, focus on encouraging infrastructure upgrades and investment in the US. North American energy infrastructure desperately needs an overhaul from its pipelines to its electricity generation. That investment would not only create some short term gains in the economy - something that has been sadly lacking since GWB came to power - it would lay the foundation for future growth in the world's economies, not just North America.

Whether Bush's advisors have the requisite wisdom to see beyond their current pounding of the war drums, I do not know. I can only surmise that the silence over Iran the past week or so is a hint that they are beginning to clue in to just how far they have to go before its neighbor will be stable enough to allow the US military to divest itself somewhat. The current number of 250,000 troops on the ground in Iraq is probably inadequate to the job ahead of them.

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