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Oil money fuels combatants

Scott Tong Jul 14, 2006

KAI RYSSDAL: There’s a phrase people in the know like to toss around. In part to prove they’re in the know. And in part because they don’t really know what else to say. Scare premium is what I’m talking about. And best guesses are we’ve got about all the scare premium we can take in the oil markets right about now. Crude hit a record $78.40 a barrel in electronic trading overnight. Closed this afternoon in New York at a slighly less amazing $77.03. That sent major stock indices around the world lower.

But those rising prices amount to disposable income for oil sellers in the Middle East. Marketplace’s Scott Tong looked into whether some of that money is paying for the violence in Lebanon and the Gaza Strip.

SCOTT TONG: Lebanon-based Hezbollah makes no secret of its main financier: Iran.Martin Indyk is a former US ambassador to Israel:

MARTIN INDYK: It’s generally accepted that Hezbollah receives approximately $100 million a year from the government in Tehran, which constitutes the bulk of the funding for Hezbollah’s operations.

Iran also supplies Hezbollah’s long-range missiles, the kind that hit the Israeli city of Haifa yesterday. Now, Tehran’s already in the UN hot seat over its nuclear program. So why ask for more trouble?

Patrick Clawson of the Washington Institute for Near East Policy says Iranian leaders aren’t scared. They feel their oil-rich economy is sanction-proof.

PATRICK CLAWSON: Iran’s got more than $45 billion in foreign-exchange reserves in the bank. Iran thinks that its oil is vital to the world economy, and the West can’t cut it off. And so Iran is remarkably self confident.

It’s also expanding its influence in the region. Pro-Iran groups play key roles in Iraq’s new government.And Tehran not only has financial leverage over Hezbollah, which is Shia, But also the Sunni Hamas, which is fighting Israel on its southern flank. Again, Martin Indyk:

INDYK: As the financing of Hamas was cut off, partly by the results of the US treasury, Hamas became more and more dependent on Iran.

Take these regional partnerships, add in 78 bucks for a barrel of oil, and Indyk says OPEC’s number-two producer feels the wind is in its sails.

In Washington, I’m Scott Tong for Marketplace.

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