Middle East Foreign Policy is Hell

Whether it is using military force or diplomatic efforts, applying leverage in foreign policy always has substantial consequences. It is a myth that the consequences of diplomacy are more or less dangerous than military action, because in fact, either can and often are equally as dangerous, not to mention equally complex.

For example, war in Iraq has claimed a large number of lives. I have no intention to choose among the multiple sources, but regardless the loss of lives of Iraqi civilians, foreign fighters, US soldiers, and private citizens or contractors from all countries is not a small number. War Policies can be Hell.

But not fighting war can also be dangerous. This week a number of private intelligence firms, and open sources like strategypage and the DailyNK are reporting that deaths by starvation in North Korea are approaching the critical levels not seen since the 1990s. When you think about how many millions have starved to death over the decades, or simply been killed outright in internal violence in North Korea, it becomes difficult to intellectually argue that the cease fire hasn't been a dangerous policy that has resulted in an incredible loss of life. Peace Policies can be Hell.

Iran is the next big Foreign Policy issue facing the United States, and the more I look at it, the more it appears it is guaranteed to end ugly.

Despite the rhetoric otherwise, the US is now clearly engaged in a non-military policy for Iran. Whether or not this is the best, or even the wisest strategy, is certainly debatable, but nonetheless on many fronts the strategy of a non-military policy to handle Iran is afoot.

The first part of the strategy is a large informal Middle East alliance against Iran. Bill Arkin went back to back to back before coming up with the phrase "Middle East 2.0" to describe the strategy. I did several posts of my own to coin the phrase "The Diplomatic Surge." Both phrases describe the same strategy, Middle East arms are intended to upgrade regional security cooperation and integrate the region behind a coordinated military umbrella designed to protect the region from Iranian influence, expansion, and military capabilities.

The second part of the strategy is to leverage the United States soft power, namely economics, to slow bleed Iran similar to how the United States has done with North Korea. Stratfor's weekly Global Market Brief: U.S. Pressure on Foreign Firms and Iran's New Financial Direction (I believe it is free if you register), describes the latest move.

The U.S. House of Representatives on July 31 passed legislation amending the Iran Sanctions Act (ISA) of 1996, expanding the scope of businesses subject to sanctions for investing in Iran's energy infrastructure. Further threatening Iran's commercial standing, the two largest banks in Europe that are still conducting financial operations in Iran -- Deutsche Bank and Commerzbank -- recently announced plans to halt transactions with private clients in Iran.

What the Stratfor article doesn't say though, is that Banking isn't the only industry the amendment to the ISA will effect. The Financial Times explains:

European governments are warning Congress that US legislation aimed at Iran could hit European energy groups, undermine transatlantic unity on Tehran’s nuclear programme and provoke a dispute at the World Trade Organisation.

Diplomats from France, Germany and the UK, among other countries, have stepped up a lobbying campaign on Capitol Hill against moves that would mandate sanctions on energy companies that invested more than $20m (€14.6m, £9.9m) in Iran.

Among such companies - already marked out by a US campaign to disinvest in energy companies that trade with Iran - are Royal Dutch Shell, Total of France and Repsol of Spain.

Royal Dutch Shell and Repsol, which are both looking for oil in US territorial waters in the Gulf of Mexico, are involved in a project worth up to $10bn to produce Iran’s first liquefied natural gas. The companies are due to take a final decision about their investment in 2008.

Most Americans reading this probably think this is some sort of Bush Foreign Policy push, but you would be mistaken. Bush is an open market kind of guy, and an oil guy, he would likely waive sanctions on the EU big oil.

President George W Bush has the power to waive sanctions on third parties doing business with Iran, but a bill introduced by Tom Lantos, chairman of the House foreign affairs committee, would remove his ability to do so. The bill has 322 co-sponsors, enough to overcome a presidential veto.

Diplomats stress that a parallel bill being considered by the Senate would leave Mr Bush’s waiver intact while seeking to introduce other measures against Iran.

But European officials say they are unsure what would emerge from efforts to hammer out a deal between the House of Representatives and the Senate and are worried that it could make some sanctions mandatory.

“Which do we fear more?” asked Jon Kyl, Republican senator from Arizona, last week. “A trade dispute with Europe or China or what Tehran will do with the revenues of a fully reconstituted energy sector?”

I'm not sure I have the answer Jon, but I'm glad the question is being asked. There is a lot of rhetoric thrown around in the media regarding who has the brass balls in the US government to make tough foreign policy decisions. In the past Bush has claimed to champion that role, although he has made a number of questionable moves that certainly brings into question his selective utilization of the brass.

Democrats on the other hand have a horrible reputation for breaking out the brass balls on issues of Foreign Policy, except maybe for the recent "Obama Option," but clearly the House Democrats are packing in this case (so far). Will they fold to pressure? I think they will, because virtually everyone in the region is interested in Iranian oil, so how much leverage can the US really apply before they back down?

The economic pressure on Iran is severe nonetheless, but how long and how broad it can be sustained is still in doubt. The UN sanctions help, but the US economic sanctions the Treasury Dept. applies is the real hammer that makes it very hard for Iran to sustain its energy infrastructure, and in general it has devastating effects on the Iranian economy as a whole. It takes time, but if applied consistently the policy has a better than average chance of success. There is a major hurdle though, and it is called the EU.

Someone needs to say it, so I will.

We are going to see intense lobbying on Capital Hill regarding the amendment to the Iran Sanctions Act (ISA). That lobby is going to be Big Oil, but not US big oil, rather European Big Oil.

The EU Big Oil lobby, or more accurately, the European greed for oil is now the primary hurdle standing against a tough, but non-military bipartisan US approach to the Iranian nuclear issue. How many Republicans and Democrats will cave to EU Big Oil? I don't think Congress has brass balls, rather a paper cup, so expect Congress to punt the issue and send the problem back to the President.

Which might explain why the US House, while taking a tough non-military Foreign Policy approach towards Iran, has also been weighing the potential world economic cost of a military approach to Iran as well.