Tuesday, May 22, 2012

Iran, US, Others Try One More Time To Avoid War

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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