Tuesday, August 22, 2006

The Rope to Hang Us

Iran has just turned in a response that will apparently indicate a willingness to continue talking, but rejects the main provision of a UN Security Council directive to halt its Uranium enrichment program. This is hardly surprising, given their recent rhetoric and actions. In the year and a half since I analyzed Iran's motives for seeking nuclear capabilities, the stars have aligned in their favor. While the joint US/EU opposition to Iran's nuclear efforts has remained remarkably cohesive, successfully pushing through the Security Council Resolution last month, events have conspired against us. Last April I suggested that buying time, rather than an immediate confrontation, looked like our best option. Unfortunately, the horse has not cooperated by learning to sing.

Of the three main factors affecting Iran's ability to maintain its present course, all have evolved to strengthen the hand of President Ahmadinejad and the mullahs. Despite a gradual easing of market fundamentals, the price of oil has increased steadily over the last 18 months, trending from the mid-$50s to the mid-$70s. Part of this rise reflects the Iran risk premium, but there has been no shortage of other risks and disruptions, from Alaska to Nigeria and Venezuela. The ability of the market to absorb an interruption in Iranian crude oil deliveries through the use of spare capacity elsewhere--rather than by drawing commercial and strategic inventories--is minimal. Iran still holds the trump card on oil.

Nor has the security situation in Iraq improved, either in reducing the number of American troops within striking range of an Iranian reprisal, or in repositioning those troops to threaten Iran directly. The expansion of nihilistic violence in Iraq has benefited Iran in multiple ways, not least in pinning down the Coalition forces and reducing the appetites of their home countries for sustaining this effort, let alone taking on a larger project elsewhere in the region.

Finally, the Middle East as a whole looks even less stable than it did a year ago. Footage of the conflict in Lebanon reminded me of the order given by General Maximus in "Gladiator": "At my signal, unleash hell." Whether Iran ordered up this particular hell or not, any US military option against Iran's nuclear sites has to look less palatable now, both in its execution and regional consequences. And with various commentators remarking on the deflation of their reputation for invincibility, the odds against Israel undertaking an Osirak-type mission have increased, at least under the current government.

Yesterday the Wall Street Journal, which has been one of the most consistent and assertive voices against nuclear appeasement of Iran, published their assessment of the options. The title says it all, "In Iran Nuclear Standoff, Scant Leverage for West." (Subscription required.) Iranians have a reputation as tough negotiators, if not always brilliant strategists--at least not since 480 BC. It is hard to imagine them yielding here, until the price becomes much higher. As a Security Council member and key supplier of nuclear technology to Iran, the view of Russia on potential sanctions against Iran is critical. The circumscribed list of actions they seem willing to endorse doesn't inspire confidence that it will curb Iran's ambitions.

Where does that leave us? With an Iran motivated to call our bluff, and a Western coalition that needs to demonstrate more resolve that it has so far--France's current waffling on its earlier commitment to spearhead the UN force in Lebanon is particularly unhelpful in this regard. Given the economic interests of its members, the Security Council seems likely to choose near-term oil price stability over long-term international security. Unfortunately, that could set up an even larger crisis in the future, that would shatter both poles of that trade-off.

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