Spare a thought for the poor Iranians

There is economic cataclysm going on in Iran. What guns and rhetoric have failed to do might be achieved by grubby old economics - the downfall of the nut cases who have been ruling Iran for sometime.

The Iranian rial has plunged into free fall. It declined by 25% in one week in October against the US dollar. Since the beginning of 2011 it has fallen by 70+%. It was some 10,000 rial to the US $ in 2011. Its now around 30,000 rials to the US $. The rial is now virtually worthless. Inflation by official estimates is some 25%, in reality more like 70%. There is economic chaos.

Why is this important ? You only have to look towards  the street protests that have sprung up in Iran to see how this is affecting everybody in Iran - the rich, the poor, and yes, even the mullahs. But, wait a minute. Iran is oil rich, right ? It should be rolling around in wealth. And yet, the country  is in deep crisis and the population is suffering.  Why ?

If ever there was an example of how a rotten government can destroy its people, it is Iran.  By all rights Iran should be a rich country. It is an ancient and rich culture and full of extremely bright people. And above all, it is swimming in oil. But unfortunately it has a government that must surely compete with North Korea and Zimbabwe for the title of the worst government in the world. It exports terrorism, it dips its fingers into every trouble spot in the region - it finances the Hezbollah in Lebanon, it backs the Syrian regime, it supports the Hamas in Gaza........ It is trying its best to build a nuclear bomb.

Consequently it has pissed off the world. Crippling economic sanctions have been the result. Nobody bar Russia and China, and to some extent India, is trading with it. It has been kicked out of SWIFT - the international banking settlement system. Therefore everybody, including Russia and China have to deal with it via the back door.  If anybody trades with Iran he has to virtually receive suitcases of cash in return. That's not easy to do on scale. So even exporting oil has become difficult.

End result is that the rial is plunging like a stone. So everything becomes incredibly more expensive. Food prices are doubling. Luxuries, which might even be necessities in other parts of the world, are becoming unthinkable. The common Iranian, like most others in the world, cares two hoots about religious purity and dogma. He wants to fill his stomach. And then wants to buy a mobile phone. After that he wants to post on Facebook. Simple.  If you deny that from him for too long and make him slide backwards, his patience will break and he will burn the beards of those who are stopping him. 

So for Israel and the hawks in America, here is a pleasant thought. You don't have to nuke Iran to stop them from acquiring nuclear weapons. The rial is doing the job for you brilliantly. With a bit of journalistic license I say, the bill is mightier than the bomb !

Grow, baby, grow - all the guar you can

I don't know what to make of this story. An economics soap opera ? How the most unexpected things can happen  ? How sometimes prosperity can hit you from the strangest of directions ? Read on - judge for yourself.

The story starts in a very boring manner. Everybody knows Americans guzzle gas. With the Sheikhs turning the screws, Americans are feeling the pinch. Ouch - the price of oil is hurting. Drill baby drill, is fine, but oil is, alas, not to be found. Need new forms of cheap energy so that Americans can continue to guzzle away. Suddenly they discovered a new "source" - Shale gas.  Apparently natural gas is  found in rocks called shales. And apparently shale gas is rather plentiful in the US. Wonder of wonders, use of shale gas even releases lower greenhouse gases than evil Oil.. Voila, the new gold rush is on. 

All very good. What's new. This sort of thing happens all the time. The real interesting bit is that, in order to extract this gas, you have to do "hydraulic fracturing" or "fracking". Without getting too technical, an essential ingredient in this process is an obscure agricultural product called guar gum. You simply can't extract the gas without guar gum ! Guar gum is derived from the , rather ordinary, guar bean.

Cut to Basni, on the outskirts of Jodhpur in Rajasthan state in India. This is a drought prone area, near the desert. The sight of fat , sweaty Americans is not new in this area as they come to tour the Thar desert and see the palaces and forts of Rajasthan. But suddenly the villagers started to see far more Americans than usual. This lot was different. They did not want to see forts or palaces. They wanted to buy all the guar you had !

You see, Rajasthan is the guar producing capital of the world. The farmers here are mostly poor - this is after all desert area. They have been cultivating guar for centuries to feed their cattle. For some strange reason guar doesn't grow well anywhere else in the world. 90% of guar is grown in India - the balance 10% in neighbouring Pakistan. Some 70-80% of guar in India is grown in Rajasthan.

It was, as if, money was raining from the sky. Guar used to sell at Rs 10 a kilo. At Rs 40, the farmer made a nice profit.  In December last year it touched Rs 70. And in March, this year,  it touched an impossible Rs 300 !!

Farmers who were in debt , or dirt poor, are suddenly seeing untold riches.  They've built a house. They've bought colour TVs. Two wheelers are plentiful - even the odd car is seen. Thousands of farmers have suddenly been lifted out of poverty into, what for them, is a quality of life they could not have even dreamt about. Guar gum is suddenly, back gold. The largest Indian agricultural export last year by far, more than basmati, more than cotton, was guar gum !

Of course, it has all the makings of a stampede. Everybody, man, woman and dog, is trying to grow guar.  Factories have sprouted adding crazy capacity to extract gum from the guar beans. Traders, middlemen and the usual scoundrels have descended to trade on the guar market - there was so much of the Wild Wild West going on that the government has banned the futures market in guar.  There has also been much stockpiling by the energy firms that the next season demand for guar might plummet. Lots of punters will burn their hands.

But for the next few years at least, the trend is inexorable. Shale Gas will be an important source of energy in the future. The largest reserves are in China, another energy guzzling economy. Nobody has yet found a way to extract this gas without guar gum. Nobody has also found a way to grow this economically outside of Rajasthan. So there is much prosperity waiting in store for the agriculturists of Rajasthan. Its a great story - those hardy souls deserve every bit of it. However you could be forgiven for some rather puzzled faces as to how come money is raining from the sky when even water doesn't. And the even more puzzled stare of their cow which is wondering, whatever happened to the guar bean it used to chew contentedly, not so long ago.