IRAN - Soon the Main Event

We have followed Iran’s nuclear ambitions for four years. During this period Iran has masterfully played its delay tactics - disseminating contradictory statements, signaling a willingness to compromise, then in the end adhering to its positions, thus gaining time, allowing the centrifuges at Natanz to continue producing the material needed for a weapon. Observers tell us there remain perhaps 18 months before Iran reaches the "technological threshold" for a first device.

We explained early this month how the Nov/07 NIE release motivated Israel to institutionalize something that earlier had been only an outlier - a military strike on Iranian nuclear facilities. Odds for this event are at present perhaps 40% and will change, +/- with near-term results of western "diplomacy" with Iran.

At this writing sanctions in place are providing little pain. Thus, Javier Solana, the EU’s foreign policy chief arrived in Iran last week. The EU is not the EU of two years ago. They are, bless their little hearts, a tad tougher, closer to the US agenda even though they face the threat of a wedge driven by Iran between them and Japan and the US due to the EU’s much heavier dependency of Persian Gulf oil exports. And the result of this meeting? Next to nothing. "We are not looking for any more meetings. Give us a call in two weeks time and say yes or no," a European official quoted Solana as telling Iranian nuclear negotiator Saeed Jalili. That a boy!

The US has in reserve two effective weapons, one of which, short of an Israeli strike, will be brought into service over the intermediate term. The first and obvious, our own strike. The less obvious but certainly the more effective of the two because of the longer range implications - a blockade of Iranian gasoline imports (these clowns float in oil but can refine only 50% of their gasoline). We first highlighted this solution in a June/07. Such a step, although perhaps a tad messier than the alternative, would not only end Iranian nuclear plans but in fact put the mullahs out of business entirely, ultimately ushering in a bona fide democracy. From Sunday’s edition of the Haaretz Daily we understand that most members of Congress have signed a petition supporting such a blockade. The Bush administration is preparing for just such an event. Last week’s conciliatory gestures in sending a senior official to the talks seemed on the face a major change in policy. No. This is simply a way for Bush to move things along, to signal that he does not reject diplomacy and then in the end (assuming it won’t work, which he does) he can argue that nothing, no matter how conciliatory, could assuage Iran.

Robert Craven

OIL

UN Impotence and the Price at the Pump

Given the release of the National Intelligence Estimate (Nov/07) we advised that the course of least resistance for petroleum prices over the intermediate term was higher; how much higher we had no idea, but certainly substantially higher. Crude was then in the neighborhood of $84, last $145.

The NIE, which claimed that Iran halted nuclear activities in 2003 through at least mid-2007, was a hatchet job cooked up by ex State Dept employees to do harm to the Administration. And it was false. But false or not, this gave instant motivation to Israel to institutionalize something that earlier had been only an outlier - a military strike on Iranian nuclear facilities.

China and Russia pursue their selfish interests, leaving the world’s welfare up to the US. The NIE was a gift, allowing both as members of the Security Council to bow out of tougher UN sanctions, free to further pursue their business interests with Iran. Only under such a flaccid organizational structure would such a thing be possible, but either way, Israel understood the consequences.

Until the day that the US abandons the UN for perhaps a stronger NATO, or, simply goes it alone with tougher sanctions, Israel understands that it too must go it alone, knowing the effective sanctions that we have advised for example are not in the cards, at least for now.

It is the perceived tensions surrounding this potential conflict which are primarily driving oil prices. Tag this event the November release of the NIE.

Robert Craven