Corporate Debt Review

US Iranian Move Has Untenable Objective

Suspicious Minds

I must admit Las Vegas is a unique place. Where else can you hold meetings during the day, take your wife to a Celine Dion concert in the evening, and find a number of options for a meal at 3 AM?

You can also gamble, of course. But that is never on my agenda, especially these days. The real-world stakes are grave enough already.

The meetings involve folks from three continents. It always seems easier to attract people on short notice if the venue is Vegas. But this time around, whatever emerges need not stay in Vegas.

Because this is all about preventing a rapid increase in global tensions.

Now there’s déjà vu and then there’s déjà vu all over again.

In meetings over the past 36 hours, I find myself between a current crisis and what unfolded more than a decade ago. The only difference is the objective. Then, the goal was to impede a nuclear development program. Now, the objective is regime change.

Hunka-Hunka Burnin’ Iran Deal

The focus remains Iran. Then, I still had something to do with advising on economic sanctions as a policy tool. Today, the US is once again applying severe restrictions on Iranian access to global hard currency and banking on the one hand, while seeking to prevent oil exports on the other.

The move will serve to stifle any hope of an economic recovery in Iran while making the lives of average Iranians worse. But it will fail in the naive attempt to replace the government in Teheran.

Unfortunately, that emerges as the only route left for a badly mishandled American approach. The first use of sanctions against Teheran actually accomplished a focused (and multilateral) goal of arresting nuclear weapons development.

The Joint Comprehensive Plan of Action (JCPOA) involved the five permanent members of the UN Security Council (the US, UK, France, Russia, and China), Germany, the EU and Iran. JCPOA introduced very invasive and, despite the pompous rhetoric from Washington, internationally recognized oversight. It was working in terms of achieving precisely what it was intended to accomplish.

At least until the Trump Administration decided to introduce new demands that were not part of the original negotiations and then startle the world, anger allies, and introduce a significant jump in the global volatility index.

There is no fallback, no plan B, for where the US goes next. Iran will not change its rulers; there will be no popular uprising to lead the Iranian people by the hand to some brighter horizon.

To plagiarize Gertrude Stein, the policy has no there there. If there is no regime change from the inside; is the US then on a perilous path to use military action to achieve it? Back to the threats now posed by Washington. Economic sanctions are very unsuccessful in replacing governments. Look at the basket case called Venezuela. There, a nation is in the deep grip of a debilitating economic and financial meltdown. PDVSA, the national oil company overseeing what on paper remain the largest crude reserves in the world, has witnessed production levels plummet to levels not seen in twenty years.

And the regime of Nicolas Maduro just won another term (albeit it in an election that featured massive boycotts and fraud).

When effective, economic sanctions are a tool in a broader basket of carefully coordinated efforts having a stated, realizable, and tangible policy target. Collapsing a government and moving a nation into national paralysis is never one of them.

The US has had experience in such failure. An oil embargo against Japan did not lead to a regime change, but rather to the outbreak of World War II. Neither did economic sanctions topple Saddam Hussein. Military action was needed in both cases.

Iran elected an even more reactionary president in response to the first wave of American sanctions. However, the point at the time – in a process that lasted some 12 years – was to negotiate an end to an Iranian nuclear program that could (some said had) transform into weapons. That was accomplished in concert with a range of diplomatic tools in a classic “carrot and stick” approach.

The most disheartening result from the embarrassing turn of events inside The Beltway is the belief by some that military action might be needed. This is a dangerous indication that Trump’s folks have no understanding (or appreciation) of history.

Fear & Loathing in Teheran

To the point, Iranian terrain offers a far more difficult place to fight a war than was Iraq. It also involves a population that has withstood much higher levels of sacrifice to repel invaders. Consider the Iran-Iraq War of the 1980s.

Even today, just about half of all Iranian families experienced a household death either in that war or in the 1979 Revolution that preceded it. In addition, the lengths Iranians would go to defend the homeland were incredible.

Let me provide a personal testimony to this.

Toward the end of the Iran-Iraq War both sides were positioning for the inevitable cease fire. That involved grabbing whatever land could be had to improve the bargaining position. I was still a serving US intel officer at the time.

An issue emerged that nobody could figure out. Satellite imagery was clearly showing Iranian military forming for a last push across the Shatt al-Arab into Iraq. But something else was showing up in the images – a thin brown line at the apex of the Iranian front.

We brought in the “crateologists,” so named specialists that could take one look at an object in image and, if it as bigger than a crate, could tell you what was in it. They had no idea. So the only alternative was to rely upon human intelligence to eyeball the situation.

You need to understand that in such a battlefield situation resorting to humint virtually guaranteed that the decision would literally kill the messenger.

The intel received was totally unexpected.

The thin line in front of the troops were an estimated 50,000 Iranian students, each holding above their heads their personal burial sacks. Each student was there to die, allowing the soldier behind him or her to enter Iraq.

I recall a two-star turning and muttering to nobody in particular “We better never have to fight those bastards.” A word of caution to John Bolton and his crew. Be careful about resorting to the military card as your only last option.

Instead, we have been meeting in Vegas. The subject has been how to prevent Iran from rearming, isolating the US from those normally on our side, and calming the troubled waters forming in the global oil markets. I will fill you in once I am back.

About the Author

KentMoors

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk management, emerging market economic development, and market risk assessment.

He serves as an advisor to the highest levels of 27 countries, including the U.S., Russian, Kazakh, Chinese, Iraqi, and Kurdish governments, to the governors of several U.S. states, and to the premiers of two Canadian provinces. He’s served as a consultant to private companies, financial institutions and law firms in 29 countries, and has appeared more than 2,300 times as a featured radio-and-television commentator. He appears regularly on ABC, BBC, Bloomberg TV, CBS, CNBC, CNN, NBC, Russian RTV, and the Fox Business Network.

A prolific writer and lecturer, his six books, more than 2,700 professional and market publications, and over 650 private/public sector presentations and workshops have appeared in 47 countries.