Coming Up This Week
The ECB meets on June 4th, and has a tall task on its hands: investors will be watching closely to see what decisions the ECB takes on the proposed (but not yet detailed) €750 billion EU bond buying program.
June 4th is also the 21st anniversary of when the Chinese military began to brutally suppress protests in Tiananmen Square.
LME Commodity Spot Prices
Minerals & Mining
Iron ore prices broke $100/ton because of supply constraints in Brazil and expectations that China will implement a major stimulus package to boost growth (especially in infrastructure, which needs lots of steel).
Protests continue to escalate in cities across the U.S. In Washington DC, the White House went on a brief lockdown after protests erupted outside. A spokeswoman for China’s Foreign Ministry stoked the tensions by tweeting “I can’t breathe”—the words that both George Floyd and Eric Garner said before they died in police custody.
SpaceX’s launch went smoothly yesterday. You can watch a rerun of it here: https://www.youtube.com/watch?v=W36QKRS_t5k.
The EU urged Pres. Trump to reconsider cutting WHO funding.
Two people—a journalist and a driver—were killed in yesterday’s IED attack on a TV channel vehicle in Kabul. Islamic State claimed responsibility.
The Afghan government says 3,000 Taliban prisoners have been released so far—out of 5,000 due to be released under the U.S.-Taliban deal signed in February.
A new-ish conservative group, the National Citizen Front, is agitating for Pres. AMLO’s resignation. The NCF organized protests in around 60 Mexican cities against AMLO’s “communist dictatorship” yesterday.
Iranian gas from the four tankers that have already docked began to reach Venezuelan fuel stations.
Now that stations are restocked, Pres. Maduro announced a rise in gas prices, though the new prices will still be heavily subsidized within each driver’s monthly fuel quota: it will now cost around $1 to fill a whole tank under the subsidized quota price (after reaching their quota, drivers will have to pay internationally-indexed prices for the rest of the month).
A Forbes op-ed pasted below thinks that “America Is In Trouble If Iran And Venezuela Share Smuggling Expertise.”
Pres. Trump announced that the next G7 summit will be postponed until the fall—perhaps around the time of the UN General Assembly in New York in September. Trump also said he wants to expand the group to include Russia, Australia, South Korea and India. [Russia was previously part of the club, but was suspended in 2014 after it annexed Crimea.]
America Is In Trouble If Iran And Venezuela Share Smuggling Expertise (Forbes)
IRGC Navy speed boats might be useful to South American criminal networks ASSOCIATED PRESS
A fourth Iranian tanker filled with much-needed fuel arrived in Venezuela this week. While Washington grumbled over Venezuela’s new Iranian lifeline, the shipments went forward without interference. But these initial shipments risk opening opportunities for the two hard-pressed countries to engage in far more worrisome collaborations that could endanger the United States and destabilize the entire region.
Iranian smuggling prowess and Iran’s small-craft and fast-attack technology are particularly tempting commodities for Venezuela. Iran is a state-based center of smuggling expertise. And for Venezuela, any new smuggling techniques or smuggling-ready technology able to be fielded with only simple, home-spun manufacturing techniques are welcome.
But the hard-pressed Venezuelan government is not the only potential customer for Iranian smuggling and manufacturing expertise. Smugglers are also always eager to exploit the latest in cheap, easily-leveraged smuggling technologies. Any smuggling methods or smuggling-ready technology provided to the Venezuelan government will most certainly flow into the region’s illicit drug-smuggling networks, offering a potential opening for IRGC or Iran’s other irregular forces to build a destabilizing influence in the region’s large criminal networks.
Iran Is Eager For A Foothold In The West
As Iranian tankers trundled into Venezuelan waters, Iran’s Islamic Revolutionary Guard Corps (IRGC) emphasized the association by marking the delivery of over 100 domestically-produced high speed craft, submersibles and other smuggling-ready platforms.
As a major smuggling entity, the IRGC already has considerable expertise in simple regional smuggling efforts in the Persian Gulf as well as in the complex international smuggling initiatives surrounding weapons manufacture and transport. Venezuela, eager to maintain internal security and desperate to bring in revenue, makes a perfect partner for Iranian expertise.
While Venezuela needs revenue and supplies, Iran, of course, still smarting from America’s January 2020 assassination of IRGC commander General Qasem Soleimani, will pay an enormous premium for any means to move personnel and equipment into the United Sates. If a collaborative lash-up between these two rogue states can help Iran even modestly discomfit the United States, smuggling innovations or materials and methods for new smuggling platforms are a trivial price for the IRGC to pay.
But What Does Iran Have To Offer?
Iran’s vessel designs are not new, but what Iran does offer are a range of techniques and innovations familiar to any smuggling-oriented community—the secrets to sneaking more cargo through with less risk. And it often is not based on new technology; smuggling provides a great incentive to employ existing technologies in radical new ways. With that in mind, the marriage of Iranian smuggling techniques and smuggling-ready platforms with South American criminal networks could be a game changer.
Iran’s small boat technology that was put on display this month was not very exciting. Iran’s Ashura class motorboats are merely utility speedboats, offering little more than just another iteration of the classic open-construction panga fishing boats that are already a staple of drug smugglers. However, Iran’s open-construction motorboats are built to handle heavy munitions and weapons, so they may offer a modicum of added capability, reduced visibility or production feasibility, offering advantages over the classic open “pangas” currently used in America’s traditional drug smuggling routes.
Other boats on display were derivations of North Korean, Chinese and Italian designs, capable of carrying a range of cargoes. Others were reverse-engineered variants of Swedish Boghammar fast attack craft or the speedy and stable British-designed Bradstone Challenger, a Bladerunner speedboat, that, back in 2005, set the world record for circumnavigating the British Isles with an average speed of 55 knots. These boats could offer a wider array of drug runners an opportunity to expand their transit envelope, making it harder the U.S. Coast Guard and other stakeholders to detect and then interdict drug shipments.
Iran even revealed a prototype crew-less undersea platform. If Boeing’s far larger and far more sophisticated Echo Voyager uncrewed submarine is used as a template, Iran’s initial efforts could, one day, grow into a platform capable of delivering eight tons of cargo into U.S. waters (Iran’s effort would, however, need to increase their undersea craft’s volume by about three times). But to get a sense of the stakes, in 2018, the U.S. Coast Guard put a value of 260 million dollars on an 8.5 ton cocaine seizure.
Most of Iran’s designs are easily within reach of well-funded smugglers. But the secrets of cheap indigenous and low-visibility manufacturing of relatively high-end, stable hullforms may not have inculcated quite as deeply into the South American smuggling-support infrastructure. Iranian manufacturing and advanced smuggling methods may make higher-end and more capable smuggling platforms available not just to South American governments, but to South American drug smugglers and, potentially, Iran’s irregular forces.
And Iran’s irregular forces may be far less interested in smuggling drugs—and far more interested in smuggling in other things.
What Can America Do?
If America is unable to take active measures to degrade the nascent trading relationship between Iran and Venezuela, the U.S. Coast Guard and the U.S. Southern Command should immediately leverage all possible knowledge it has acquired on Iranian smuggling platforms and practices in the Persian Gulf and apply that knowledge to monitoring developments in South American smuggling. With two decades of experience in Iranian smuggling practices garnered via the Patrol Forces Southwest Asia Command, the U.S. Coast Guard has, via the sustained operation of six Island class patrol boats in the region, developed a substantial amount of in-house expertise in Iranian practices, procedures and capabilities.
That expertise needs to be put to use. If the U.S. Coast Guard or other anti-drug partner identifies changes in South American smuggling capabilities that align with the transfer of Iranian or IRGC-sourced practices, designs or manufacturing techniques, more U.S. Coast Guard, Department of Defense and State Department resources should immediately flow into the region, and those resources should include better means to detect, identify and stop any potential efforts to move terrorist materials and personnel towards the United States.