Risk of Confrontation

Iran is hell-bent on accelerating and implementing their nuclear program (with a ray of discussed later), one that seems to have weapons capability at its core, notwithstanding their claims of only peaceful intentions. “But a controversial report challenges the Iranians’ claim. On Nov. 8, 2011, United Nations weapons inspectors released a trove of new evidence that they say makes a ‘credible’ case that ‘Iran has carried out activities relevant to the development of a nuclear device’ and that the project may still be under way.” New York Times, December 5^th. And if there is a hint as such a program revealed by the International Atomic Energy Agency (U.N. sponsored), after the Iranian government has made the agency’s ability to find such weapons almost impossible, it is highly probable that the program is not too far from realizing its goal.

So what to do with a country that has disavowed the very existence of the Holocaust and threatened to push Israel into the sea, one that sees confrontation with the West, particularly the United States, as key to its regional credibility, particularly as this unpopular Shiite nation in a sea of Sunnis neighbors seeks support from its traditional local enemies. Send in a smart bomb flight of Israeli aircraft to target pinpointed nuclear development facilities? Do we really know where they all are? The United States will always be charged with complicity in such an attack, but is it worth the risk? Would Iran’s retaliation effectively push the price of oil to unacceptable heights?

Accelerate the sanctions that Iran – whose economy is at best faltering – claims have no impact on a country that tells the world it is awash in cash? Continue to squeeze Iran’s import of essential materials and commodities, including precious gasoline… odd for an oil-producing nation, but since it lacks refining capacity, Iran imports about 40% of that basic fuel? As the latest spate of U.S.-sponsored sanctions focus on cutting off Iran and its central bank from the global financial community, Iran is saber-rattling again, threatening to shut down the Strait of Hormuz (the red arrow on the above map) through which about two fifths of the world’s oil supply passes, should such efforts and additional import restrictions be further implemented. “‘If they impose sanctions on Iran’s oil exports, then even one drop of oil cannot flow from the Strait of Hormuz,’ according to Iran’s official news agency. Iran just began a 10-day naval exercise in the area.” New York Times, December 27^th.

The European solution favors ramping up banning and restricting oil imports from Iran, but in an election year, taking an action that might result in staggering increases in the price at the pump doesn’t seem to be an option for candidate Obama: “The American effort [at constricting Iran’s access to global banking] is more subtle than simply cutting off Iran’s ability to export oil, a step that would immediately send the price of gasoline, heating fuel, and other petroleum products skyward. That would ‘mean that Iran would, in fact, have more money to fuel its nuclear ambitions, not less,’ Wendy R. Sherman, the newly installed under secretary of state for political affairs, warned the Senate Foreign Relations Committee earlier this month.” NY Times. Since oil is a global commodity, any efforts that raise prices for any one country effectively raise the price for everybody everywhere.

Do the banking sanctions have any effect? In November, Iran’s “President Mahmoud Ahmadinejad acknowledged that the current penalties were impeding Iran’s financial institutions, saying, ‘our banks cannot make international transactions anymore.’” Huffington Post, December 31^st. Hmmmm…

We have asked the Saudis and the new Libyan governments if they would step up oil production to counter the Iranian threats, but even with their expected cooperation, the volatile oil markets are still likely to push prices upward. Even talk of such potential confrontation is enough to move the oil-price-needle significantly higher: “But the energy sanctions carry the risk of confrontation, as well as economic disruption, given the unpredictability of the Iranian response. Some administration officials believe that a plot to assassinate the Saudi ambassador to the United States — which Washington alleges received funding from the Quds Force, part of the Iranian Revolutionary Guards Corps — was in response to American and other international sanctions.

“Merely uttering the threat appeared to be part of an Iranian effort to demonstrate its ability to cause a spike in oil prices, thus slowing the United States economy, and to warn American trading partners that joining the new sanctions, which the Senate passed by a rare 100-0 vote, would come at a high cost.” NY Times. But what exactly does the world look like if Iran does have nuclear weapons capabilities? Exactly what would Iran do with nuclear warheads knowing it would probably be obliterated should it elect to use them? Will Israel find that it has no choice other than to attack? Will Iran’s hostile anti-Shiite regional neighbors feel pressure to secure such weapons for themselves against the Iranian threat? Do Americans really have the stomach for the impact that the retaliation for such sanctions/confrontations would have on their daily lives? Would it really kill our struggling “recovery”?

Want a tiny ray of hope? On the December 31^st, Iran “proposed a new round of talks on its nuclear program with six world powers that have been trying for years to persuade Tehran to freeze aspects of its atomic work that could provide a possible pathway to weapons production… The country's top nuclear negotiator, Saeed Jalili, said he has formally called on the United States, Russia, China, Britain, France and Germany to return to negotiations.” Huffington Post. Happy New Year! I hope.

I’m Peter Dekom, and in a maze of complex political and economic interrelationships, each choice in dealing with nuclear Iran has a particularly difficult and unwanted side-effect.