Last week's session of the UN General Assembly did more than tie up traffic well into New York City's northern suburbs. In his first speech before the world body, Iran's new President, Mr. Ahmadinejad signaled a more distressing kind of gridlock in the negotiations to resolve the potential international crisis over Iran's nuclear ambitions. His repeated assertion of Iran's right to develop a full civilian nuclear fuel cycle has implications for energy markets, as well as geopolitics. Iran seems to believe it holds the winning hand in this high-stakes game. That could prove as big a miscalculation as Saddam's complex WMD bluff, or might well be an accurate assessment of the situation.
As I've described elsewhere in some detail, arguments by Iran's leaders concerning the desirability of nuclear power as a backstop to the eventual end of its oil reserves simply doesn't stand up to scrutiny. Even if Iran's oil reserves were shrinking--which they are not--it also possesses the world's second largest reserves of natural gas, rendering any Iranian civilian nuclear facilities both uneconomical and unnecessary.
The most interesting element here is the subtle way in which Iran is deploying its greatest leverage, the "oil card." Rather than threatening an embargo, which still remains a last resort, Iran seems to be lining up support from China and India--large and growing customers of and investors in Iran's energy sector--and Russia--a key supplier of nuclear technology--to outmaneuver US and European efforts to hold Iran accountable for discrepancies under the Nuclear Nonproliferation Treaty. Iran must be calculating that, with oil prices over $60/barrel and supply even more precarious after Katrina, diplomacy is the only avenue against which it must defend, and one in which it has important allies.
So Iran plays for time, presumably hoping to produce a nuclear fait accompli; the EU plays for time, seeking to avoid a confrontation; and the US plays for time, trying to regain room for maneuver, up to and including military action in the event that US forces can be extracted from daily combat in Iraq. This kind of geopolitical instability has produced some very unpleasant surprises in the past, and any kind of big surprise in Iran would throw the oil markets into a tizzy.
The most hopeful note in this affair comes from an unlikely quarter. Even as President Ahmadinejad was exclaiming his hard line at the UN, North Korea was in the process of agreeing to decommission its nuclear weapons program, much as Libya did a couple of years ago. Who would have guessed that Tripoli and Pyongyang might show Teheran the way forward?