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Thursday, September 30, 2004

IRAN'S NUCLEAR ACE: FIFTY DOLLAR OIL

No state or situation seems more tenuous and opaque than that involving Iran and its relations with Iraq, the United States, the IAEA, and its long time nemesis Israel. For months now Iran has played the nuclear issue off against the Iraq issue, attempting to force the U.S. into cooperation and concessions. Israel, of course, has had to throw its weight into the balancing act as well.

Since the war in Iraq began, Iran has spared no means trying to get its own interests and influence implanted in the governing structure of the country. While Iran at times has seemed on the verge of significant success -Shiite Ayatollah Ali Sistani was at one point just hours away from securing a Shiite led government before it slipped away- it currently is on the short end of the Iraqi stick with Ayad Allawi slowly normalizing his interim presidency in Iraq. Allawi, although Shiite, is a former member of Saddam's Baath Party, and has backers in the Sunni Muslim countries of Jordan and Saudi Arabia.

In order to balance its current deficits in the Iraq situation, Iran has been playing its nuclear card with some tenacity of late. On September 21, just days after the U.N. demanded that prove that its nuclear intentions are peaceful, Iran announced that it had taken another significant step down the road of nuclear development.

So what will happen if Iran persists in this progress? The U.S. can hardly afford another invasion, especially one the magnitude of Iran. Even if Iraqi security were not in its present state of disarray, an invasion of Iran would be a much larger, riskier, and diplomatically difficult undertaking. While Iraq's available military age manpower was approximately 7 million, Iran's is over 20 million. More significantly, while Iranians in general would like to see a liberalization of their country of the religious state, Iraqi's had been utterly oppressed and brutalized by their dictator. The battle would surely be magnitudes fiercer than the resistance shown in Iraq.

An economic embargo, similar to that imposed upon Iraq, would be a popular alternative with many if Iran persists with development of its nuclear capabilities. But alas, there are serious problems with that as well, at least for the foreseeable future. Namely, oil.

With the price of oil currently at $50 a barrel -and fairly sticky at around $43 even before the latest turmoil in Nigeria- one can only imagine the market panic if its 4 million barrels of crude were to disappear from the market. With growth in Europe already slowing, faced in addition with a strengthening dollar, the economic hit would be tremendous.

So what was the answer in the Iraqi situation? Well, it was that humanitarian seeming Oil for Food Program, which now is the focus of the worst scandal in the history of the U.N. Could the international community possibly try it again with a straight face?

Surely not. First of all, there are obvious credibility problems with a top U.N. and top French officials under investigation for accepting bribes for turning a blind eye to Saddam's siphoning off of the oil cash. The U.N. will not be institutionally prepared to oversee another such program for a long time, if ever. In addition, the effectiveness of the program, U.N. scandals not even withstanding, is highly dubious.

And herein lies the problem that the U.S. and the West faces in handling Iran's nuclear situation. Without sanctions as a credible threat, there little left other than the Israeli solution of militarily picking off the suspected nuclear sites. And if the U.S. doesn't do it Israel will, risking a far broader conflict in the already volatile Middle East.

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