The Iran crisis shifts from hot war to cold war

I have not written for awhile about the Iranian nuclear situation.  Mostly this is because nothing has been happening that is worth reporting.  However, the chain of events that have occurred are a strong indication to me that the situation has downgraded from a potential hot war to an evolving cold war.  Here is an update on some of those events as corralled by the major players.

The United States
The U.S. is currently distracted and to such a degree that there is no Executive Branch bandwidth available to do much about Iran.  There are the midterm elections coming in November of this year.  Because of the poor showing in recent elections Barack Obama is going to have to switch his attention to domestic issues if he hopes to maintain Democratic control of Congress, and hence the agenda.  Expect lots of noise and bluster about the unemployment rate, GDP growth, etc.  In other words, Barack Obama is preoccupied domestically.

On the international front the U.S. has just upped the engagement of the Taliban in Afghanistan.  The escalation of a war where the stated time table for success is 18 months is a major undertaking.  But  aditionally, by September of this year the U.S. is going to be drawing down troops in Iraq.  So expect lots of chaos between the Sunnis and the Shiites as they try and create enough noise to try and keep the U.S. pinned down there.  In other words, Barack Obama is preoccupied internationally.

So what of Iran?  Frankly Iran would love to have the attention of the U.S., but frankly the massive distance between Iran and the U.S. and the lack of a missile that can deliver a nuclear warhead (if such a thing even existed in Iran) to the U.S. mainland, means that the U.S. can afford to ignore Iran in terms of a hot war.

Russia
Russia has gotten a lot of the wishes on its wish list fulfilled recently.  The U.S. is preoccupied in Iraq and Afghanistan to such a degree that it could not enforce the gains it made over the last decade in infiltrating the countries immediately on the periphery of Russia.  A number of the states that form Russia’s near abroad had tilted toward the West, but due to a lack of European, NATO and U.S. support, they are falling back in line within the Russian sphere of influence.  Witness the most recent presidential election in the Ukraine where both of the top two candidates were supremely pro-Russian.  Actually, the top 7 of 8 candidates were all pro-Russian.

Additionally, Russia has successfully played the Iranian nuclear card to embroil the U.S. in a massive distraction.  The U.S. under Barack Obama has allowed itself to be distracted.  Anytime the U.S. has upped pressure on Iran, Russia retorts that it is increasing aid to Iran to develop weapons.  Russia doesn’t really want a nuclear weapon in the hands of the Iranians, or its terrorist allies.  After all, Russia has a lot to fear from its Muslim minorities, like those in Chechnya.  The last thing Russia wants is a nuclear Muslim state.  Nonetheless, they have played the nuclear card expertly.

Iran
For awhile it looked as if Iran might implode.  There was a serious challenge to the power of the Republic in the form of massive student protests.  However, each subsequent protest became more and more tame.  It appears that the Iranian state has survived the internal challenges to its power.  That removes an important lever for the West on Iran to bargain with regard to its nuclear program.

Internationally Iran has a lot of levers that, when pulled, give it breathing room to develop its nuclear capabilities.  Specifically it is a major funder of Hezbollah in Lebanon and of Hamas in Palestinian occupied territories.  Additonally, Iran has near absolute control of the Shiite population in Iraq.  Anytime Iran needs to be respected there is a bombing of a Sunni target in Iraq.  This brings the Sunnis and Americans running back to the table almost everytime.  The last thing Barack Obama wants is to not remove troops from Iraq – as this was a major campaign promise.

So Iran is continuing the development of its nuclear program, much to the ire of the U.S., and especially Israel.  Expect continued “leaks” of Iranian nuclear material enrichment being further along than was believed, as well as “leaks” about them being further along in the development of missile and warhead technology.  This is a sure sign that they don’t really have those capabilities.  Nuclear weapons are strategic weapons kept in reserve in times of immediate crisis.  Iran would not broadcast its possession of these weapons if they were real as it would invite the ire of every major power on earth.  However, these “leaks” do get the Western publics activated and interested in Iranian engagement.

Israel
Israel remains the wildcard.  However, they do not have the singular capability of bombing the nuclear facilities of Iran which are very well protected.  Not only that, Israel can only begin a hot war, they do not have the capability to start a war and simultaneously contain an Iranian response.  The Iranian response would be to mine the world’s major oil trafficking lanes as well as to activate terrorism in Lebanon, the Palestinian territories, Iraq and even in places like Yemen.

It’s my feeling that the Israeli’s value their alliances with Europe and the U.S. more than they are afraid of a nuclear Iran.  At least for now.

So where does this leave us?  In the midst of a cold war.  Evidence of this fact is unfolding.  The U.S. is negotiating with the Syrians for a trade.  The trade is that Syria is to be granted de facto control of Lebanon in exchange for a reduction in the threat of Hezbollah.  The U.S. has committed to end Operation Iraqi Freedom (i.e. the War) by 2011.  That removes one of Iran’s levers on the U.S.  It also frees up U.S. forces so that it can put bite behind its bark militarily should Russia, or other states, irritate it.  Russia has enjoyed free reign in its near abroad since 2001 because of the U.S. preoccupation with (first) Al Qaeda, and (second) with Iraq.  Russia sees that the end is near and, in fact, has been sending out signals that it is finally willing to protect the interests of foreign investors in Russia.  That is, Russia has finally woken up to the fact that for it to survive as a nation it needs Western investment capital.

Economically, when there have been rumblings about a nuclear Iran there have been spikes in oil prices, but they have been tepid and temporary responses.  Also, the U.S. economy is in better shape than it was in the fall.  While still a little wobbly/hungover from the consumption of the real estate bubble, the U.S. is starting to get its economic legs under it.  The vision is a little less blurry and sharpening.  So…

In conclusion, its my opinion that definitively the Iran crisis has shifted from the potential for a hot war to a very definite cold war.  What this means is that I am no longer concerned about an outside shock to the system coming from a combined Israeli/U.S. attack on Iran’s nuclear facilities.  My feeling is that the Iranian issue has not gone away, but that all parties have agreed to push the day of reckoning into the future.

At this point the only major shock to the system that I can see is the potential for a domino-effect collapse of European nations that are deeply indebted: Portugal, Italy, Greece and Spain (the PIGS).  However, the collapse of these nation’s economies would likely lead to a capital flight to the U.S. – a good thing for U.S. equity investors.

Jason