Oil's Not Well

“When Israelis bombed Iraq’s nuclear reactor in 1981, the attack came completely out of the blue,” says Sick. “When they destroyed a facility in Syria earlier this year, they didn’t talk about it even after the fact. This time, every two-bit politician is shooting his mouth about the need to handle Iran. It just doesn’t seem to be their usual way of going about such things.”

Favors NegotiationsSick certainly doesn’t think that Iran’s leaders should have the technology to produce nuclear weapons. But he doesn’t believe that a military strike is the way of discouraging it. A regime change is needed.

Ironically, he says that Iranians are probably better disposed toward the United States than any other nation in the Middle East except Israel. Iranians are tired of their 30-year-old Islamic revolution and are ready for a change.

But attacking Iran, he says, is the sure way of altering this perception. He is convinced that Iranians will rally around their discredited religious leaders and that support for Mahmoud Ahmadinejad, Iran’s belligerent president, will instantly increase.

Moreover, a U.S. attack would give an excuse to the government to paint dissenters and reformers as traitors and America’s puppets. The opportunity for a regime change will likely be delayed indefinitely.

What is the choice then?

Sick believes that there is no alternative to negotiations. Not paying off the Iranian leadership, but nevertheless giving incentives to Tehran to abandon large-scale nuclear enrichment. Perhaps allowing them to go ahead with a scaled-down program that could not produce weapons-grade materials — which in any case they are allowed to do under the terms of the Nuclear Nonproliferation Treaty to which Iran is a signatory.

It is not the best alternative, he admits, but there is probably no other. “We should have started engaging with them 15 years ago,” he says. “It was a bipartisan mistake to think that we could force them to do what we tell them. Now, the price of their cooperation has gone up, but it will have to be paid.”

In Sick’s view, the next U.S. President will be forced to negotiate with the Iranians, even if during the campaign there will be much tough talk and posturing.

Risk Premium to RemainIn addition, says Sick, talking and offering the Iranian leadership incentives to become more integrated into the global economic and political system would create more favorable conditions for a regime change.

It is a nice idea, but his views seem to contradict each other. He admits that some of Iran’s top religious leaders are intransigent. Religious leaders could have dismissed Ahmadinejad and offered some concessions to Washington in order to diffuse the tensions. However, they clearly feel that the situation enhances their power.

Indeed, since the ayatollahs voluntarily disengaged with the rest of the world in the first place, why should they want to become bound by new ties to the international community — especially if it could hasten a regime change?

But then again, the Middle East is the kind of place where a large number of people have prescriptions for how to solve its numerous problems. Yet, nothing seems to work. Peace is a rare commodity and policy successes can be counted on the fingers of one hand. The region is likely to keep Sick busy with the Gulf/2000 Project and to remain at the center of U.S. foreign policy well beyond the presidential campaign.

Unfortunately, it probably means that oil will continue to carry a risk premium for a long time to come.

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Alexei Bayer runs KAFAN FX Information Services, an economic consulting firm in New York; reach him at [email protected]. His monthly “Global Economy” column in Research has received an excellence award from the New York State Society of Certified Public Accountants for the past five years, 2004-2008.