Baltimore, MD - North Korea has just agreed to take steps toward dismantling its controversial nuclear program. Yet this news comes amid escalating concerns over Iran's nuclear intention. Perhaps North Korea's energy crisis foreshadows Iran's own nuclear future.

Help Kicking the Nuclear Habit

Nearly four years ago, North Korea officially admitted it possessed nuclear weapons. Global concern has been focused on the tiny Korean peninsula ever since. The defiant country conducted an underground explosive test four months ago. The blast measured less than one kiloton.

This week marked a step in right direction. North Korea agreed to freeze the core reactor in their nuclear program. The agreement was negotiated by the U.S., North Korea, Japan, Russia, China and South Korea.

In return for stopping the main reactor, the U.S. will open North Korean bank accounts within a month. Also, the United States agreed to begin the process of removing North Korea from its list of state sponsors of terrorism.

These measures are trivial, however, compared to the energy aid North Korea will receive.

In return for shutting down the main nuclear reactor within 60 days, North Korea will get 50,000 tons of fuel. They will gain another 950,000 tons of fuel after taking more steps toward nuclear disarmament.

But the decision by North Korea to suspend and potentially dismantle their nuclear program isn't that surprising. The eventual collapse of the program was evident. And all the signs stemmed from the country's dire energy situation.

The end of the cold war in the 1990's decimated the North Korean economy. GNP was reduced by half. In fact, every sector of their economy declined due to energy shortages.

After the collapse of Soviet Union, North Korea lost its subsidized oil imports. This is significant because North Korea has no proven oil or gas reserves. The country must import its entire oil demand of 25,000 bbl/day.

Also, they were unable to maintain and modernize energy infrastructures. Losing support from the USSR meant that technology and spare parts became unavailable. Some of their energy facilities were over fifty years old. North Korea would have collapsed in a few years because of their growing energy crisis.

This recent step forward in halting their uranium enrichment may not hold. It certainly wouldn't be the first time they violated a nuclear agreement. When they admitted they had nuclear weapons in 2002, it meant they had been violating an agreed framework signed in Geneva on October 21, 1994.

But with North Korea currently placating the global community, eyes are now turning to the Middle East.

Stepping out of the spotlight may present North Korea with the opportunity to return to is former nuclear ambitions.

North Korea's economic collapse is what forced them to cooperate. Iran will experience comparable conditions over the next few years. I outlined the grim future of Iran's energy situation in last Friday's Energy and Capital. Briefly, their energy consumption is growing at an alarming rate. As the effects of peak oil become more evident over the next few years, countries like Iran that are dependant on oil revenue will collapse.

Nuclear Staring Contest

Next week is the deadline for Iran to stop its uranium enrichment program. And failure to comply could lead to further sanctions.

But their answer was already made clear when President Ahmadinejad pledged to Iranian citizens that he will not stop pursuing the country's nuclear program.

The global community is primarily concerned about intentions. Iran has been accused of pursing nuclear energy with the intent to build up an arsenal - a claim that it has persistently denied. Prior negotiations have always failed to yield any results. Previous six-party talks in 2006 led only to Iran's refusal to halt its enrichment program.

How long will belligerence on both sides continue before open conflict? Bush is already greasing the wheels by connecting Iran to the troubles in Iraq. He has suggested that Iran is supplying militants with weapons.

So where do we end up?

We all know that oil prices are directly affected by the instability of the Middle East. If direct military action is taken on Iran over its nuclear program, prices would jump far beyond post-Hurricane Katrina levels. And they would take years to come back down - assuming they decrease at all.

It's no secret that Iran covets higher oil prices. Not surprisingly, they have persistently called for OPEC to cut production. But the question about their nuclear program is: Who will blink first?

Until next time,

Keith Kohl