It is a rare day indeed when current events take me back to the 1980s and big new wave hair, but here we go.

 

Last Friday, I wrote a blog making fun of Alberta separation. And it was fun and whimsical. Lighthearted in a sincerely mocking way. I was in a really good mood that day so I wasn’t overly mean. You could say I let everyone off easy then packed up and headed home early, secure in the knowledge that the world around, although admittedly weird, was in a relatively good place, even if Canada was on the losing end in hockey.

 

And I thought it was a well received blog that people were responding to until that stinker south of the border stole ALL of my oxygen and started a war with Iran. And not just any old war. A regime changing, nuclear weapon program annihilating, missile obliterating, leader assassinating post modern crusade. Actually, don’t call it a war. It’s not a war. It’s a special military operation. A term borrowed from someone – I forget who.

 

Dude. Seriously. What. In. The. Actual. Fart.

 

Sure, there were warning signs.  Military build up. Practice run in Venezuela. Misdirection and lies. Nuclear negotiations carried out by muppets pretending to be Dumb and Dumber. Ad nauseum Epstein file revelations. All the elements were there for a classic Trump misdirection.

 

But this? THIS??????

 

To be honest it took me by surprise

 

So now, instead of writing a poem or whatever it was I was planning to do, I have to analyze everything and pontificate on “what it all means”.

 

Which is a lot. And might take some time to unpack.

 

Since as you all know, I am a globally respected Middle East scholar and analyst, consulted regularly by governments and businesses about politics and business in one of the most complicated regions on earth.

 

Not buying it? How about my grandfather emigrated from Lebanon in the early 1900s and settled in the Northwest Territories as a trapper and in the 1970s our family visited the village he came from (before the “troubles”) and I am super-opinionated and moderately informed.

 

Mock me if you will, but those bona fides would get me an expert panelist seat on CNN.

 

At any rate, here are my random hot takes.

 

First off – look out Cuba. What do I mean by that? Simple logic.

 

In his first year, Donald Trump has taken out the president of Venezuela and claims “control” of the country’s oil. In addition, he has been very clear in his rock-solid support for Israel and their security and territorial ambitions, including this recent military escalation (don’t call it a war!) in Iran.

 

Also, Donald Trump spends most of his time at his place in Florida. And Florida happens to be a hotbed of Venezuelan expats, chased out of their country by Chavez and Maduro, just itching to go back if only s0omeone would do the hard work for them. Also, Florida also happens to be where many militant pro-Israeli American jews live, giving them easy access into the inner sanctum at Mar-a-Lago.

 

See where I’m going with this? What else is Florida known for? I mean aside from iguanas falling out of trees and crazy “Florida-man” memes? That’s right. Tony Montana and the Cuban diaspora. A massive Cuban population that would like nothing more than the opportunity to take back the motherland and dispose of the last remnants of the Castro regime and make bank.

 

So in a way, with all these actions, Trump isn’t really rewriting the world order so much as he’s doing a solid for some of his regular dinner guests. It’s called being a good host.

 

Like I said, watch out Cuba.

 

Okay, back to the business at hand, the elephant in the room.

 

The military campaign (don’t call it a war!) against everyone’s favourite theocratic dictatorship – Iran.

 

This is a big deal. Gulf Scuffle (don’t call it a war!) Three. Our own version of the third in a series which we all know is always so, so much worse than the first two.

 

Look, I’m not here to get into any justifications for the campaign or comment on its legality or otherwise. Whether it was justified under international law or whether Trump had the legal rights under his presidential authority to act on “imminent 47-year-old threats” to authorize the military action (don’t call it a war!). Maybe he did, maybe he didn’t. Clearly, he didn’t care. As it regards that attitude domestically, the electorate will make their judgement. As for international law? That’s for someone else to judge. I am very much grounded in realpolitik and of the view that the only people who care about international law are the bureaucrats who write it because “international law” gets flouted and stomped on every day by rogue countries around the world including everyone’s favourites: Russia, China, North Korea and, you guessed it, Iran.

 

And to be honest, it’s been a rough few months for the leadership of the psychotic Iranian regime. First, they had to kill thousands of their citizens for daring to protest for freedom (dummies) and then they had to suffer the utter humiliation of finding out that the Israelis and Americans knew where every important regime member was, their personal habits, favourite chocolate bar and brand of boxer shorts. And that realization coming just before some super high-tech laser guided munitions vaporized them in their “super-secret” meeting room. Oops.

 

I am not going to shed even an iota of a tear for the brutal, nihilist, evil and barbaric Iranian regime. That a society and people that ancient and sophisticated has been repressed under that totalitarian yoke for so long was a tragedy.

 

It’s time has been coming to an end for a while. It remains to be seen whether this is a sufficient catalyst.

 

Of course the downside to this is that while the US and Israel have air superiority and most of the Iranian navy on the run, there’s apparently the ongoing issue of the Straits of Hormuz, that 28-mile wide pinch point through which something like 20% of the world’s energy supply transits and that no self-respecting tanker wants to sail through just in case, you know, they get sunk by the Iranians who claim the Strait is “closed”.

 

I’m told this is bad. Especially for oil markets. Go figure. Prices may rise. They already have. Dramatically. $200 by the end of March if this continues until then.

 

I’m sure this was all taken under advisement when planning the military foray (don’t call it a war!). Surely releases from the SPR are being considered, since that is what it is for. They can’t possibly be relying on increased production from Venezuela to counter the loss of 15 million barrels a day. Or increased gas exports from the United States to counter the complete shutdown of Qatar’s LNG infrastructure.

 

There is a crisis as it regards energy transportation and supply. And the longer it goes on, the worse it is going to get. And let me emphasize this – there is no plan.

 

I get that the US is looking to guarantee safe passage with its navy, but that can’t go on forever. And all that does is give Iran and its drones more targets. And this idea that the US will provide backstop insurance to vessels transiting is preposterous. A US government insured vessel may as well travel with a target painted on its side. There is nothing the Iranian regime would like more than to cost the US Treasury billions of dollars in insurance claims.

 

Bottom line, the Strait must be safely reopened, which means that the operation (don’t call it a war!) must end. Sooner rather than later.

 

Here are some more hot takes on the energy front.

 

First, it is way too soon to make any kind of proclamations, which is why I have been mostly tongue in cheek. But…

 

In the short run, this is great for Canadian energy producers and the province of Alberta. Yay! That’s right, military incursions (don’t call it a war!) in the Gulf are typically good for business if your business is oil and you aren’t in the Middle East. And our business is indeed oil and our production, unlike that in much of the Gulf, is unaffected by the “turm-oil”.

 

So, prices have risen and the differential has narrowed. All of a sudden, a whole lot of countries want what we got and will pay for it. And every $1 increase in the price of oil is worth $2 million a day to the province. If this keeps up long enough, we could get a new hospital! Or pay for a referendum. The sky is the limit!

 

Of course, this is all temporary until it’s not. There won’t be any appreciable increase in capex spending in Canada or North America and increased production unless the supply issues become intractable, and in that scenario, we will likely be screwed into recession by price increases, which will crater demand and, thus solve the supply issue. Good lord. What were these guys thinking?

 

For this and other reasons I think long term, this is either neutral or slightly bearish for Canadian producers. Why do I say this?

 

Well, consider the range of outcomes in Iran. The leadership is gone. They will be replaced by someone semi-palatable to the United States or the destruction will continue. So the Americans will “prevail” in one form or another. This new leadership will trade nuclear development for the lifting of sanctions on oil. They have to. And unsanctioned Iranian oil will flood the market (officially as opposed to surreptitiously) and more importantly, investment dollars will rush into Iran.

 

This will be to the long-term detriment of Canadian producers unless we can get in front of it.

 

If I were a Canadian producer and, dare I say it, a Canadian government, I’m hoping for a fragile cease-fire and extended civil unrest and maybe civil war (yes, this you can call a war!) to keep the region on edge and volatile for the foreseeable future.

 

The irony for the United States and a successful regime change is that by first freeing Venezuelan oil from Chavistan incompetence and now potentially removing the shackles from one of the most prolific producers and reserve holders in the world in Iran, Donald Trump may have finally put the nail in the coffin of the Permian. If a flood of oil takes prices down to where he wants, who’s drilling a well in Texas? Well done all around.

 

MOU

 

The best time to get an export pipeline approved is during an energy crisis. If I were Danielle Smith I would be working on this pipeline proposal 24/7 and getting everyone in my government to drop everything, even referendum question development, and work on this proposal and get it on Mark Carney’s desk before he gets back from his next foreign trip. You want this done before the oil market figures itself out and/or the Americans cut a deal with some friendly strong man in Tehran.

 

A second new export pipeline from Alberta should be everyone’s top priority so that when the chaos dividend goes away, we just have regular old jacked up production and tolls.

 

Speaking of which…

 

Wouldn’t it be great for North American energy security if Keystone XL were complete and in service now?

 

Look. I have always been a huge fan and proponent of the Keystone XL, otherwise known as the Kenney’s Folly Pipeline. An extra half to a full million barrels of export capacity into the United States would have been and still is a game-changer for the Alberta and Canadian economies. And in times like these, where supply is being squeezed by outside events, that continental level of security and buffer from price increases would save economies and governments from themselves.

 

This pipeline should be fast-tracked now. Whether it’s the original route that will never get through Nebraska or the new proposal being floated by Southbow and Bridger pipeline, can we please just plow through the politics and get it done. Mark – call Donnie and get it done.

 

I don’t have a crystal ball so I don’t have a better perspective on how long this is going to last. I think the shock and awe phase is almost over and now both parties are going to have to dig in. Oil supply will figure itself out and new egress out of the Persian Gulf will get planned so this never happens again. Or maybe not.

 

I am not bullish on regime change for the Iranian people. It is complicated. And it’s not the same as taking out Maduro and opening door number two. The regime in Iran hates America.

 

To achieve regime change in Iran is a massively complex exercise and air power has NEVER led to regime change no matter how much bombing happened. The US had clear air superiority in Vietnam and never achieved any objective with respect to regime change. The longer it goes on, the harder it gets. As a side note, I am surprised at how easy it was for the US and Israel to establish complete control over Iranian airspace given the decades of military support and lead time to prepare that Iran has had. Oh wait, I forgot. That was Russian support.

 

Speaking of which – the big winner in all this is probably Russia. Ironic isn’t it? The pariah is the only nation that has both the oil and gas resources and infrastructure in place to replace some of the stranded oil and gas and come to the rescue of Europe.

 

But back to Iran. Now that Donald Trump is calling for “unconditional surrender”, boots on the ground is the only way to do regime change which will take months if not years and cost 1000s of lives. There doesn’t appear to be an obvious organized opposition in Iran and the state is a bureaucratic metastasized cancerous web that may prove impossible to remove. They have a massive army and apparently huge supplies of arms and could conceivably carry on for years.

 

Iran is also a massive country (bigger than Texas and California combined) with a population approaching 100 million people.

 

The best option may actually be a “least-bad” strongman who allows limited freedoms and restores a semblance of uneasy stability to the region. And lets the Americans ratchet down the pressure and move on to Cuba. Neutral for everyone.

 

The worst case is a country torn apart by civil war, rival warlords and competing factions like Obama created in Libya. I don’t know that anyone wants that. Except as referenced above, maybe Canada and drillers in the Permian.

 

One thing for sure. It won’t be 2 weeks. Or 4 or 5. Or 8. Or September. Or 2026 when this is settled.

 

That’s the problem when you drop Epic Fury on the world but don’t have clearly defined objectives and, to be honest, don’t appear to really understand the region or even the industry that is concentrated there and is the lifeblood of the global economy.

 

You’ve just set about a whole bunch of moving pieces that are all quibbling at each other and are impossible to control.

 

Kinda like a flock of seagulls.