Geopolitical update

At the very moment U.S. Secretary of State Hilary Clinton is visiting Moscow to defuse tensions between the U.S./Israel and Russia/Iran, Russia announced yesterday that it is changing its nuclear doctrine.

Specifically they have changed the doctrine to include the pre-emptive use of nuclear weapons. This changes a doctrine that has been in place since the 1950s. Furthermore, the Rules of Engagement, such as when to use nuclear weapons, are very closely guarded state secrets. So a change of this magnitude is not made public unless it is for political reasons. The reason is obvious. It is a rebuttal by Russia to counteract U.S./Israeli pressure to stop supporting the development of the Iranian nuclear program.

We have been tracking the flow of events surrounding this for the past week. Unfortunately, the rhetoric shows no signs of this geopolitical “game of chicken” abating. Positively, the game remains one of rhetoric at this point. However, the U.S. has the weaker position for several reasons:

1. The U.S. cannot absolutely control Israeli response to the Iranian nuclear program.

2. The U.S. needs Russian help to contain Iran in order to get Iranian help to stabilize Iraq and allow the U.S. to draw down troops in Iraq. That will allow the U.S. greater flexibility to deal with Afghanistan.

3. The Russians invaded Georgia last year. This was a clear demonstration to the world that Russian foreign policy was for real and that its bark was backed by bite. The U.S. has yet to show that it is willing to fight for its foreign policy agenda – this makes the U.S. negotiating position appear weak.

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As usual the media are not paying attention to the escalating crisis. Because all sides are quiet and not bombarding the press with overt and directly worded press releases, the press has moved on to other stories. This, despite the fact that the crisis was a major news story for all of 2009. [Despicable!] I will continue to pay attention to statements coming from the various parties, especially the Israelis who have the power to initiate war with Iran unilaterally.

Jason

PS – I have locked in the profits I made this year in the stock market by selling my portfolio. In its place I have purchased shares of an energy company that pays a dividend exceeding money market interest rates. Whether or not anyone chooses to follow suit, I am comfortable having locked in 5-7 years worth of gains and have now hedged myself to benefit from any foreign policy snafu in Iran. Once it blows over I will reposition myself.