wsj editorial: toppling iran's unsteady regime, page-4

Seals, hi
Sorry for the delay in responding.

On point number 1 when regime change will occur and on having all the same reasons 2 years ago for regime change:

The 9 years of negotiating latitude the Iranian regime has had are now almost finished. The regime has been very clever in portraying the argument to the unsophisticated that it is about the West denying them the right to nuclear power, as evidenced by the placard this lady is carrying (even I agree with her it is their right).

The argument surely is about whether they should be allowed to acquire the know-how to make a nuclear bomb while at the same time Iran wanting to preserve a regime based on difference with the West, thus making building trust nearly impossible: we don't have a problem with Japan knowing how to make a nuclear bomb because we trust them? Some people will of course say it is all about oil - I don't understand that argument, but I'll come back to that.

I accept that in investment jargon political risk is unpredictable (otherwise it wouldn't be a risk) and that you can get long trends resulting from random events (long sequences of heads from tossing a coin, a sequence of interest rate reductions over a business cycle and Arab Spring uprisings resulting in Govts. being toppled and that such trends may make the unsophisticated investor think he can predict the next interest rate change direction or coin toss with confidence (and he may even think he is a smart ar*e for getting it right). Such investors probably don't understand randomness: coins have no memory and there are too many inputs into interest rate decision making? With regime change and the Arab uprisings though one thing is different they may not be independent unconnected events: people can see the changes (benefits?) that protests have brought. This may be the reason there is a new campaign to seize satellite dishes in Iran(as reported in the article I posted from the Atlantic 2 days ago). Also they don't want the VOA /DeutscheWelle/ BBC Persian Service informing people of the reasons for high unemployment and high inflation? But the major reason why regime change will have to happen soon: something Dr Ottolenghi fails to develop in his WSJ editorial is the nuclear timetable. There is no rational option other than for the West to help bring down the regime: how, I don't know. Extreme force worked with Germany and Japan. It failed to bring about a better end result in Iraq, and the result was achieved at great cost. If I was Jordinson I would not want to bet against Professor Avner Cohen (Maryland University) and various books on the Israel and the nuclear bomb: he says the status quo can't last in Iran beyond the end of this year. The nuclear timetable does not give the politicians any choice and Khamenei can't back down (the nuclear folly has already cost Iran too much to back down now and Khamenei is fully supportive of the nuclear programme: his fatwa is against having the bomb not against having the knowledge to produce it?).

"There will be a vacuum of power of some sort. Will we see an Egypt style revolution in which the real power ie the military remains unchanged and thus possibly no effective change for us? "

The changes will have to be utterly titanic for them to have an economy AND have the nuclear programme they want: they would have to become like Japan before the West trusts them. There would have to be a US embassy in Teheran for a start and Iran would have to become a popular tourist destination again (like it was pre 1979). It is interesting the grandson of Ayatollah Khomeini is against compulsory hejab! Even Ahmadinejad is against all the Government micro meddling in Iranians' lives on dress code, dating, etc.

"There is certainly no current circumstance to justify avoiding dilution in Mehdiabad by not acting on other currently achievable interests. In fact it would most probably be illegal under Australian company law for UCL management to fail to maximise interests in current real prospects ie Sandpiper in favour of hope in a possibly never realisable stolen 'asset' in Iran."

They could demerge Mehdiabad like Drummond did with TNT. Despite what I've said about predicting political risk outcome, it just seems obvious that it is worth waiting 12 months to see how the nuclear issue plays out: too many countries have an interest in curtailing Iran's power, and they are all beginning to sing from the same hymn sheet like never before. I am in favour of maximising shareholder value: I can't afford not to be. The decision to get rid of Mehdiabad at this point is as bad as Rudd's decision to impose a resource tax: it would have benefited the Chinese when it was repealed by a subsequent Govt. (an unintended consequence perhaps enabling the Chinese to invest after mining share prices were depressed by the Rudd decision only for value to be transferred to the same people when the tax was repealed). Jordinson's decision on Mehdiabad looks to me like delivering massive value to Omanis in the future (and to unappreciative MAK holders who take up the offer).


" understand the struggle for you nobull with Mehdiabad being your sole reason for investing in this Aussie company. However the rational assessment surely must be that shareholders capital interests are better served by advancing and protecting Sandpiper and potentially increasing share there than doing otherwise to try and avoid giving part of Mehdiabad to MAK shareholders."

I like Sandpiper too and all I want is for a sensible value from Mehdiabad to be realised e.g. $18m costs + a discovery fee will do. (The premium obtained from selling shares to Marwid is poor compensation, IMO). I would be even happier if Sandpiper was in Australia. Nothing against Australia: only against directors who make uninformed decisions that lose me money. I am not particularly wedded to the idea of developing Mehdiabad: the cash flows from Sandpiper are good enough for me, and as somebody who once had to learn the Krebbs cycle by heart for a "Part I" Biochemistry exam, I've got nothing against phosphorus. I still possess the textbook (a first edition of Lehninger from the 1970s).

Oh, I forgot: is the West's strategy to expropriate oil from Libya, Iraq, Iran, etc. Given the ways to extract value: 1. sell below market cost 2) award yourself operating contracts/exploration contracts that extract the economic rent 3) deny some purchasers (China?) the right to buy so that the price is not an arm's length one 4) open the taps to flood the market. I am not aware of any of these strategies currently being used by any invading army.

Finally if the Iranian regime is toppled tomorrow, will I be congratulating myself? No. Too many inputs, but it is hard be nice to Mr Jordinson, when it all looks like Bashar al Assad is finished and that Iran is next because of the nuclear issue. I think I have made an informed decision to wish not to be diluted out of Mehdiabad: the same cannot be said for Mr Jordinson's decision to get rid of it now: there is no evidence in any UCL document he has mastered the brief on Iran?