A meeting is set for tomorrow in Baghdad that could
determine the future of the US-led sanctions regime and whether or not there
will be another war in the Mid-East this summer, this time over Iran's nuclear program.
The rhetoric out of the region seems to have cooled off a
bit in recent weeks – unless, of course, you're Benjamin Netanyahu, who
continues to beat the wardrums. The most
likely reason, as explained here, is that all of the parties involved realize
that they can't afford a war or a disruption in global oil supplies: not Iran,
not the United States and certainly not Europe.
But Iran and Europe can't risk seeing the sanctions regime continue
either, the United States, which doesn't import Iranian oil, is largely immune
from the impact of the sanctions we've slapped on Iran and are expecting the
rest of the world to abide by.
Of course the European economies most vulnerable to the lack
of Iranian oil are the European economies in the worst trouble; including
Greece and Italy. Both are suppose to
halt imports from Iran on July 1 as per the European side of the sanctions
regime, but Italy is owed billions of dollars worth of Iranian oil as payment
for infrastructure projects completed by Italian companies, while Greece also
has favorable deals with Iran to buy oil, if they need to replace this oil, it
will likely be at a higher cost from other sources. And if Greece drops out/is kicked out of the
Euro as some are speculating they will be, they will have to negotiate new oil
deals in the midst of a full-blown economic crisis.
From the Iranian side, the sanctions are having an effect on
their economy, with food and fuel prices soaring, though the bite is reported
to be not as bad as Western authorities expected (there was some foolish hope
in the West that the pain caused by the sanctions would inspire the Iranians to
rise up and overthrow their government. Good luck with that...). The Iranian government has stepped in and is
offering subsidies to perhaps 60% of the population to help defray costs. Of course this isn't a sustainable policy for
the long run, but so far it seems to be working. Meanwhile two of Iran's biggest oil
customers, China and India, are balking at joining in the US-led sanctions
regime. Oil exports from Iran to China
actually increased in April, reversing a decline in March. Technically, both China and India could face
punitive action from the US for not joining in on the sanctions party, but
let's see if the US has the nerve to slap sanctions on them.
Of course it's also hard to see how the US and Iran back away
from the crisis they have created. Iran
may offer some level of inspection of their nuclear sites, but it is unlikely
to satisfy the US, which has demanded a full stop to their nuclear program;
from the American side, agreeing to anything less than the full compliance we
demanded of Iran will be pounced on by President Obama's Republican opponent in
November election as a sign of “weakness” (never mind that it may be the most
practical/rational thing to do), so that's unlikely to happen. And then there's Israel, where Benjamin
Netanyahu has made a career of stoking fears of an Iranian nuke; it is hard to
imagine just what Bibi would accept short of a military raid against Iran,
which the US Republicans will expect the Obama regime to fully support...
Navigating out of this quagmire created by political
posturing and stubbornness will require some deft political maneuvering and
probably more finesse than we can expect from the Baghdad meeting.
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