Stratfor: Odds of War with Iran Spiking

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
October 13, 2009

IN THIS ISSUE:

1.  West Discovers Secret Nuclear Facility in Iran

2.  Iran Much Closer to Nukes than Previously Thought

3.  Russian Scientists Said to be Helping Iran Build Nukes

Introduction

Several very disturbing geopolitical revelations over the last two weeks regarding Iran and its possible nuclear weapons ambitions and capabilities have dramatically changed how the US and the international community are thinking in terms of the nuclear threat we face from Iran.

First, there was the announcement by President Obama, Britain’s Prime Minister Gordon Brown and French President Nicholas Sarkozy on September 25 at the G20 summit in Pittsburgh that joint intelligence had proven that Iran has a secret uranium enrichment facility inside a mountain near Qom, a city south of Tehran.  The Iranians quickly admitted to the existence of this massive compound but claimed, as usual, that it is solely for domestic energy purposes.

Second, shortly thereafter, The New York Times published an article reporting that staff at the International Atomic Energy Agency (IAEA), the U.N. nuclear oversight group, had produced an unreleased report saying that Iran was much more advanced in its nuclear program than the IAEA had thought previously. According to the report, Iran now has all the data needed to design a nuclear weapon.

Third, was a revelation in the first days of October by the Times of London which reported that Israeli Prime Minister Benjamin Netanyahu traveled to Moscow on September 7 to charge that Russian scientists and engineers are working directly with Iran on its nuclear weapons program.  This intelligence suggests that Iran may be much further along in developing nuclear weapons than the international community previously believed.  

Obviously, these very latest developments are hugely important and very alarming, especially if it is proven that the Russians are actively assisting Iran in developing nuclear weapons, possibly years ahead of previous intelligence reports.  (And don’t be surprised that you have not heard about all of this in the mainstream media.)

Whenever it comes to such matters of grave geopolitical importance, I always turn to our good friends at Stratfor.com to get the real story.  As long-time readers know, Stratfor is an internationally respected source on geopolitical intelligence.  I have quoted Stratfor and its founder Dr. George Friedman many times in the past.

In the pages that follow, I will again quote liberally from Stratfor’s latest analysis on the disturbing situation with Iran, the possible Russian involvement in Iran’s nuclear program, etc., etc.  Suffice it to say that Stratfor now believes the odds of the US going to war with Iran have recently increased exponentially.  This is very scary stuff!

I will start with Stratfor’s new Forecast for the 4Q, which is most insightful in light of the latest news on Iran.  I will follow that with their latest analysis of the very real possibility that Russia is assisting Iran in the development of nuclear weapons, and the likelihood that Iran may be much further ahead than the world has been led to believe.  

No conclusion section is needed as the Stratfor articles below are most comprehensive and self-concluding.  Let’s get right to them, read carefully.

* Note that the bracketed comments within the Stratfor text are mine.

**  You have my permission to reprint and/or forward this E-Letter
    as you may wish, with proper credit to Stratfor and my company.

STRATFOR QUOTE:

Setting the Stage

Events are taking the fourth quarter of 2009 into new territory. The rising confrontation with Iran has taken center stage as a conflict with global participants and global consequences. As the final quarter of the year dawns, representatives from the world’s major countries are meeting in Geneva with their Iranian counterparts. The official goal is to see if sufficient international safeguards can be placed on the Iranian nuclear program. Failure could well lead first to sanctions against Iran, and should those fail, possibly a U.S.-Iranian military confrontation.

At its core, the brewing crisis is this: Israel is too small a territory to tolerate a nuclear-armed Iran, and too militarily weak to guarantee that it can deal with the problem on its own. However, an Israeli strike would certainly generate Iranian retaliation against shipping in the Persian Gulf, which in turn would force the United States to act against Iran directly. So the question in STRATFOR’s collective mind is whether or not any concessions Iran grants on its nuclear programs will be sufficient to satisfy Israel’s security concerns. The Obama administration is obviously a player, and the onus is on the Americans to act, but the decisions that truly matter will be made in Israel, not the United States.

As goes this crisis, so goes the world.

Russia is attempting to lock down the United States in the Middle East so that Moscow can extend and deepen its efforts to re-create its Soviet-era sphere of influence, particularly in the former Soviet Union. Thus Russia is funneling various forms of assistance, primarily technical cooperation on weapons, energy and nuclear industries, to Iran. It is also making apparent its intent to do an end run around any sanctions the West might impose on Iran. An Iran strong enough and independent enough to keep the United States preoccupied is just what Russia wants.

After the worst recession in a generation, the global economy is on the mend. The ending recession was primarily financial in nature, meaning that it evolved primarily into a crisis of confidence. Confidence requires time to rebuild, and as such the recovery is both shallow and extremely uneven, with some regions as likely to descend back into recession as return to real growth. It is a recovery very vulnerable to disruption. A military confrontation in the Persian Gulf would send shock waves through the system, at a minimum interrupting the flow of Iran’s 2.4 million barrels of daily oil exports. That alone would be more than enough to break the recovery’s back.

Global Trend: The Iranian Nuclear Crisis

A new topic has rocketed to the top of STRATFOR’s international concerns: the possibility of a war between the United States and Iran. There has been much discussion of this topic for years now, and STRATFOR has tended to dismiss it; there is a great chasm between remedial uranium enrichment programs and having a deliverable nuclear weapon. But events in the third quarter added credibility to the scenario. Primarily this is because of Israel. As a small state, Israel is not comfortable pinning its survival on Iran’s choices. As Iran’s nuclear program matures, Israel is feeling forced to eliminate the threat before it can manifest.

Israel does not have high confidence in the United States’ ability to unilaterally remove the threat, but Israel does have the ability to rope the United States into an attack against Iran. Even an ineffectual Israeli strike against Iran would force Iran to respond. Since Iran lacks the ability to respond with a direct attack on Israel, it would likely need to settle for activating Hezbollah in Lebanon, various Shiite factions in Iraq and militant assets in Afghanistan, and attacking energy shipping in the Persian Gulf. This last action in particular would force an American response — perhaps even a pre-emptive one. And if the United States found itself engaging the Iranian military over maritime [Persian Gulf] issues, it would be illogical for the United States to not extend the conflict to Iran’s nuclear assets.

The United States would prefer to avoid a war — in fact it would prefer a more cooperative arrangement with Iran in order to ease its exit from Iraq — but Washington understands the inevitability of conflict should Israel feel direly threatened. The opening weeks of the fourth quarter will be dominated by 11th-hour negotiations primarily between but not limited to Washington and Tehran to see if war can be avoided. Washington and its allies will seek formal, transparent oversight for the entire Iranian nuclear program, and failing that, sanctions on the Iranian sector that is most vulnerable to foreign pressure: gasoline imports.

Tehran, thinking (correctly) that the West in general — and U.S. President Barack Obama in particular — does not want a war and that its own retaliatory options are formidable deterrents, will equivocate. Russia, also thinking (correctly) that the West does not want a war and thinking little of Obama, has the option of bolstering Iran in the hopes of keeping U.S. forces tied down in the Middle East. Primarily STRATFOR expects this to take the form of circumventing Western gasoline sanctions — Russia and its allies have plenty of spare refining capacity and sufficient rail connections to backfill Iran’s gasoline supply [if the US were to cut it off]. The Russians also retain the critical leverage of following through with a sale of S-300 strategic air defense systems to Iran — though such an action, if discovered in time, also runs the risk of precipitating an Israeli attack.

There is little but diplomacy preventing this conflict from happening. Between the Iraq and Afghan conflicts, the United States has the naval and air assets in the region that would be required for extensive and sustained air strikes against Iran. But both Iran and Russia feel they have the upper hand and both doubt Obama’s nerve. Any of the sides could back down — Obama or Iran could flinch, Russia and the United States could strike a deal on sanctions, Israel could decide that Iran is not so far along in its nuclear program — to avert a war. But any of these options would clearly harm the national interests of one of the other players. War is not yet inevitable, but it is looking increasingly likely. [Emphasis added]

Global Trend: The Russian Resurgence

Moscow has been attempting for some time to consolidate its near abroad [Stratfor’s term for expanding its sphere of influence] in preparation for the time when the United States is no longer distracted by events in the Middle East. The challenge has been simple: Either convince the Americans that they cannot achieve their ends in the Middle East without Russian assistance (and that the Russians must be amply compensated for their trouble), or ensure that the Americans remain locked down in the Middle East so that Russia can simply impose its will on the former Soviet territory without the threat of U.S. intervention.

The third quarter was when Russia got things done, using a mixture of diplomatic, military, intelligence and economic tools. Russia has managed to soften Azerbaijan, Turkey and Germany’s pro-U.S. positions and, if it has not formally added them to the list of countries where Russian power is preeminent, it has at least made them neutral in the competition between Russia and the United States. Russia has persuaded nearly all factions in the Ukrainian political spectrum to favor a Russian-leaning (as opposed to Western-leaning) future and will cement that achievement in the country’s January 2010 elections.

Georgia is now isolated, even from the United States. Poland might even be in play now; the American attempt to trade portions of its ballistic missile defense plans for concessions in Iran succeeded only in scaring Poland into believing that the U.S.-Polish alliance was not as strong as it had hoped, forcing Warsaw to re-evaluate its traditional hostility toward Russia and to consider closer integration into the European Union.

So Russia enters the fourth quarter feeling quite confident, if not downright smug. It sees the American [Obama] administration as overconfident, inept and simultaneously unwilling to make any geopolitical trades or commit to a military operation that could force Iran to capitulate. With such a geopolitical position, Russia has a threefold plan.

First, the Russians intend to do anything to ensure that the Americans remain locked in a conflict with Iran — that is, anything that will not cause more problems for Russia in the long run. Dangling nuclear and advanced military technology in front of Tehran without actually delivering it remains a cornerstone of this policy. But more concretely, the Russians are working to undermine any U.S.-led sanctions on Iran before they can get off the ground, and are highly likely to circumvent them directly should the sanctions materialize.

Russia and its near-proxy states of Azerbaijan and Turkmenistan each possess the ability to completely replace all sea-borne gasoline shipments to Iran, and to do so in a way that not even a full naval blockade of the Persian Gulf could stop. The only place where the Russians are likely to take a stance that is not obstructionist will be in Afghanistan, as the Russians do not wish to see the chaos there spread (that the Americans are the bulwark there is simply the icing on the cake). Of course, Moscow is willing to abandon all its plans for Iran in a heartbeat should Washington pay the right price to Russia.

Second, the Russians are putting the finishing touches on wrapping up their near abroad [expanding its sphere of influence]. Ukraine will remain chaotic (as always) but Russia is working to break up and perhaps even excise any remaining pro-Western power centers there. Pressure on Georgia is once again intensifying from “merely” economic and political to military, with naval forces now actively patrolling the coast of Abkhazia, one of Georgia’s Russian-backed breakaway provinces. Russian troops will also be inserted into strategic locations in the former Soviet Central Asian states to limit American access, to lock down the allegiance of those states and also to prevent the region’s would-be hegemon — Uzbekistan — from trying anything…

Two Leaks and the Deepening Iran Crisis

Two major leaks occurred this weekend [the weekend of October 2-4] over the Iran matter.

In the first, The New York Times published an article reporting that staff at the International Atomic Energy Agency (IAEA), the U.N. nuclear oversight group, had produced an unreleased report saying that Iran was much more advanced in its nuclear program than the IAEA had thought previously. According to the report, Iran now has all the data needed to design a nuclear weapon. [Emphasis added.] The New York Times article added that U.S. intelligence was re-examining the National Intelligence Estimate (NIE) of 2007, which had stated that Iran was not actively pursuing a nuclear weapon.

The second leak occurred in the British daily The Times, which reported that the purpose of Israeli Prime Minister Benjamin Netanyahu’s highly publicized secret visit to Moscow on Sept. 7 was to provide the Russians with a list of Russian scientists and engineers working on Iran’s nuclear weapons program.

The second revelation was directly tied to the first. There were many, including STRATFOR, who felt that Iran did not have the non-nuclear disciplines needed for rapid progress toward a nuclear device. Putting the two pieces together, the presence of Russian personnel in Iran would mean that the Iranians had obtained the needed expertise from the Russians. It would also mean that the Russians were not merely a factor in whether there would be effective sanctions but also in whether and when the Iranians would obtain a nuclear weapon.

We would guess that the leak to The New York Times came from U.S. government sources, because that seems to be a prime vector of leaks from the Obama administration and because the article contained information on the NIE review. Given that National Security Adviser James Jones tended to dismiss the report on Sunday television, we would guess the report leaked from elsewhere in the administration.

The Times [of London] leak could have come from multiple sources, but we have noted a tendency of the Israelis to leak through the British daily on national security issues. (The article contained substantial details on the visit [Netanyahu visit to Moscow on September 7] and appeared written from the Israeli point of view.) Neither leak can be taken at face value, of course. But it is clear that these were deliberate leaks — people rarely risk felony charges leaking such highly classified material — and even if they were not coordinated, they delivered the same message, true or not.

The Iranian Time Frame and the Russian Role

The message was twofold. First, previous assumptions on time frames on Iran are no longer valid, and worst-case assumptions must now be assumed. The Iranians are in fact moving rapidly toward a weapon; have been extremely effective at deceiving U.S. intelligence (read, they deceived the Bush administration, but the Obama administration has figured it out); and therefore, we are moving toward a decisive moment with Iran.

Second, this situation is the direct responsibility of Russian nuclear expertise. Whether this expertise came from former employees of the Russian nuclear establishment now looking for work, Russian officials assigned to Iran or unemployed scientists sent to Iran by the Russians is immaterial. The Israelis — and the Obama administration — must hold the Russians responsible for the current state of Iran’s weapons program, and by extension, Moscow bears responsibility for any actions that Israel or the United States might take to solve the problem.

We would suspect that the leaks were coordinated. From the Israeli point of view, having said publicly that they are prepared to follow the American lead and allow this phase of diplomacy to play out, there clearly had to be more going on than just last week’s Geneva talks. From the American point of view, while the Russians have indicated that participating in sanctions on gasoline imports by Iran is not out of the question, Russian President Dmitri Medvedev did not clearly state that Russia would cooperate, nor has anything been heard from Russian Prime Minister Vladimir Putin on the subject. The Russian leadership appears to be playing “good cop, bad cop” on the matter, and the credibility of anything they say on Iran has little weight in Washington.

It would seem to us that the United States and Israel decided to up the ante fairly dramatically in the wake of the Oct. 1 meeting with Iran in Geneva. As IAEA head Mohamed ElBaradei visits Iran, massive new urgency has now been added to the issue. But we must remember that Iran knows whether it has had help from Russian scientists; that is something that can’t be bluffed.

Given that this specific charge has been made — and as of Monday not challenged by Iran or Russia — indicates to us more is going on than an attempt to bluff the Iranians into concessions. Unless the two leaks together are completely bogus, and we doubt that, the United States and Israel are leaking information already well known to the Iranians. They are telling Tehran that its deception campaign has been penetrated, and by extension are telling it that it faces military action — particularly if massive sanctions are impractical because of more Russian obstruction.

If Netanyahu went to Moscow to deliver this intelligence to the Russians, the only surprise would have been the degree to which the Israelis had penetrated the program, not that the Russians were there. The Russian intelligence services are superbly competent, and keep track of stray nuclear scientists carefully. They would not be surprised by the charge, only by Israel’s knowledge of it.

This, of course leaves open an enormous question. Certainly, the Russians appear to have worked with the Iranians on some security issues and have played with the idea of providing the Iranians more substantial military equipment. But deliberately aiding Iran in building a nuclear device seems beyond Russia’s interests in two ways. First, while Russia wants to goad the United States, it does not itself really want a nuclear Iran. Second, in goading the United States, the Russians know not to go too far; helping Iran build a nuclear weapon would clearly cross a redline, triggering reactions.

A number of possible explanations present themselves. The leak to The Times might be wrong. But The Times is not a careless newspaper: It accepts leaks only from certified sources. The Russian scientists might be private citizens accepting Iranian employment. But while this is possible, Moscow is very careful about what Russian nuclear engineers do with their time. Or the Russians might be providing enough help to goad the United States but not enough to ever complete the job. Whatever the explanation, the leaks paint the Russians as more reckless than they have appeared, assuming the leaks are true.

And whatever their veracity, the leaks — the content of which clearly was discussed in detail among the P-5+1 [US, UK, France, Germany, Russia, China] prior to and during the Geneva meetings, regardless of how long they have been known by Western intelligence — were made for two reasons. The first was to tell the Iranians that the nuclear situation is now about to get out of hand, and that attempting to manage the negotiations through endless delays will fail because the United Nations is aware of just how far Tehran has come with its weapons program.

The second was to tell Moscow that the issue is no longer whether the Russians will cooperate on sanctions, but the consequence to Russia’s relations with the United States and at least the United Kingdom, France and, most important, possibly Germany. If these leaks are true, they are game changers. [Emphasis added.]

We have focused on the Iranian situation not because it is significant in itself, but because it touches on a great number of other crucial international issues. It is now entangled in the Iraqi, Afghan, Israeli, Palestinian, Syrian and Lebanese issues, all of them high-stakes matters. It is entangled in Russian relations with Europe and the United States. It is entangled in U.S.-European relationships and with relationships within Europe. It touches on the U.S.-Chinese relationship. It even touches on U.S. relations with Venezuela and some other Latin American countries. It is becoming the Gordian knot of international relations.

STRATFOR first focused on the Russian connection with Iran in the wake of the Iranian elections and resulting unrest, when a crowd of Rafsanjani supporters began chanting “Death to Russia,” not one of the top-10 chants in Iran. That caused us to focus on the cooperation between Russia and Iranian President Mahmoud Ahmadinejad and Supreme Leader Ayatollah Ali Khamenei on security matters.

We were aware of some degree of technical cooperation on military hardware, and of course on Russian involvement in Iran’s civilian nuclear program. We were also of the view that the Iranians were unlikely to progress quickly with their nuclear program. We were not aware that Russian scientists were directly involved in Iran’s military nuclear project, which is not surprising, given that such involvement would be Iran’s single-most important state secret — and Russia’s, too.

A Question of Timing

But there is a mystery here as well. To have any impact, the Russian involvement must have been under way for years. The United States has tried to track rogue nuclear scientists and engineers — anyone who could contribute to nuclear proliferation — since the 1990s. The Israelis must have had their own program on this, too. Both countries, as well as European intelligence services, were focused on Iran’s program and the whereabouts of Russian scientists. It is hard to believe that they only just now found out. If we were to guess, we would say Russian involvement has been under way since just after the Orange Revolution in Ukraine [late 2004-early 2005], when the Russians decided that the United States was a direct threat to its national security.

Therefore, the decision suddenly to confront the Russians, and suddenly to leak U.N. reports — much more valuable than U.S. reports, which are easier for the Europeans to ignore — cannot simply be because the United States and Israel just obtained this information. The IAEA, hostile to the United States since the invasion of Iraq and very much under the influence of the Europeans, must have decided to shift its evaluation of Iran. But far more significant is the willingness of the Israelis first to confront the Russians and then leak about Russian involvement, something that obviously compromises Israeli sources and methods. And that means the Israelis no longer consider the preservation of their intelligence operation in Iran (or wherever it was carried out) as of the essence.

Two conclusions can be drawn. First, the Israelis no longer need to add to their knowledge of Russian involvement; they know what they need to know. And second, the Israelis do not expect Iranian development to continue much longer; otherwise, maintaining the intelligence capability would take precedence over anything else.

It follows from this that the use of this intelligence in diplomatic confrontations with Russians and in a British newspaper serves a greater purpose than the integrity of the source system. And that means that the Israelis expect a resolution in the very near future — the only reason they would have blown their penetration of the Russian-Iranian system.

Possible Outcomes

There are two possible outcomes here. The first is that having revealed the extent of the Iranian program and having revealed the Russian role in a credible British newspaper, the Israelis and the Americans (whose own leak in The New York Times underlined the growing urgency of action) are hoping that the Iranians realize that they are facing war and that the Russians realize that they are facing a massive crisis in their relations with the West. If that happens, then the Russians might pull their scientists and engineers, join in the sanctions and force the Iranians to abandon their program.

The second possibility is that the Russians will continue to play the spoiler on sanctions and will insist that they are not giving support to the Iranians. This leaves the military option, which would mean broad-based action, primarily by the United States, against Iran’s nuclear facilities. Any military operation would involve keeping the Strait of Hormuz clear, meaning naval action, and we now know that there are more nuclear facilities [in Iran] than previously discussed. So while the war for the most part would be confined to the air and sea, it would be extensive nonetheless.

Sanctions or war remain the two options, and which one is chosen depends on Moscow’s actions. The leaks this weekend have made clear that the United States and Israel have positioned themselves such that not much time remains. We [STRATFOR] have now moved from a view of Iran as a long-term threat to Iran as a much more immediate threat thanks to the Russians.  [Emphasis added]

The least that can be said about this is that the Obama administration and Israel are trying to reshape the negotiations with the Iranians and Russians. The most that can be said is that the Americans and Israelis are preparing the public for war. Polls now indicate that more than 60 percent of the U.S. public now favors military action against Iran. From a political point of view, it has become easier for U.S. President Barack Obama to act than to not act. This, too, is being transmitted to the Iranians and Russians.

It is not clear to us that the Russians or Iranians are getting the message yet. They have convinced themselves that Obama is unlikely to act because he is weak at home and already has too many issues to juggle. This is a case where a reputation for being conciliatory actually increases the chances for war. But the leaks this weekend have strikingly limited the options and timelines of the United States and Israel. They also have put the spotlight on Obama at a time when he already is struggling with health care and Afghanistan. History is rarely considerate of presidential plans, and in this case, the leaks have started to force Obama’s hand.

END QUOTE

This is quite a LOT to think about, but think about it we must.  It will not go away anytime soon, so I will revisit this issue in upcoming E-Letters. Sorry to add something else to our worry list.

As always, my personal thanks extend to Dr. George Friedman and Stratfor for allowing us to reprint their always insightful analyses from time to time.  Be sure to visit their website at www.stratfor.com and consider subscribing.

Very best regards,

Gary D. Halbert


Read Gary’s blog and join the conversation at garydhalbert.com.


Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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