- - Sunday, May 4, 2014

ANALYSIS/OPINION:

What happened “unexpectedly” on the Crimean peninsula afflicting Ukraine months ago will spread. There are portions of other troubled nations that are certainly ripe for the picking.

Bad as the evolving situation now seems, the tumult in Ukraine never will approach what could happen to global stability and the global economy should Iran suddenly succeed in prizing the Eastern Province away from Saudi Arabia.


SEE ALSO: Sen. Lindsey Graham: Obama “delusional” about what’s happening in Ukraine


We in North America are somewhat insulated, but let us hope energy-starved Western Europe, Japan, and South Korea are fully prepared.

Outsiders think of Saudi Arabia’s kingdom as an impregnable and unified nation where most subjects remain complacent and loyal to Riyadh, but the reality on — and under — the ground may be quite different.

Virtually all of Saudi Arabia’s energy resources reside in one province, a province in which 4.1 million out of 27 million persons live. And a significant percentage and possibly even a majority of the province’s residents are Shia Muslims, long reviled by powerful elements within Saudi Arabia’s Sunni majority.

A Crimea-like strike in the province could happen at lightning speed, instigated by Iran and possibly supported by Russia. It’s a move that might spread beyond the Eastern Province to Bahrain, to Kuwait, to the United Arab Emirates and even to Qatar. Counting Iraq as already being under the influence of Iran, we and our allies might awake one morning to discover that an overwhelming majority of the world’s ready energy resources has fallen under control of hostile nations.

According to the U.S. Energy Information Administration, the Middle East, together with Russia and Venezuela, control 63 percent of the world’s proven petroleum reserves and 64 percent of the world’s proven natural gas reserves.

Like the Middle East Respiratory Syndrome virus, strategically important elements within countries can jump from host to host, infecting the global economic system with uncontrollable consequences.

Watching Vladimir Putin toy with Barack Obama in Ukraine, the leadership in Iran may view the period from now through January 2017 as a window of opportunity to foment widespread insurrection in territories formerly under U.S. influence and protection. When Tehran “nobly” moves to protect the interests of their Shia co-religionists in the Eastern Province whose rights and properties they will argue have been trammeled for decades, no nation currently stands ready and willing to stem the tide.

Power shift

The Obama administration’s wrongheaded clandestine and overt support for Iran nears the point where the balance of global power could switch decisively against American interests, toppling Gulf monarchies and dethroning the U.S. dollar’s hegemony in the blink of an eye.

Americans so far suffer little direct harm as Ukraine unravels. But having to pay for energy resources priced differently because Iran’s expanding group of allies and Russia suddenly pin the traded value of petroleum and natural gas to precious metals could yield a potentially ruinous set of conditions.

Prices for essential commodities already are rising inside America. Should Tehran successfully press for an advantage against its neighbors, inflation likely will accelerate. Because America has pushed benchmark interest rates down to the basement, the Federal Reserve System and U.S. Treasury have little latitude left to continue an easy-money policy begun in January 2009.

Falling nominal interest rates from 1981 to present lifted the traded value of most assets, in some cases to levels that now seem stratospheric.

Mr. Putin and the mullahs of Iran understand that what goes up certainly can come falling down. Is America truly better off with President Obama retreating from in front?

Charles Ortel serves as managing director of Newport Value Partners (newportvalue.com), which provides economic research to executives and to investment firms.