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The Kiplinger Washington Editors
August 29, 2008
 

Russia's Incursion Into
Georgia: What's at Risk?

With limited military, political and economic options available to the U.S. and Europe, the greatest pressure on Russia may come from businesses and investors fleeing increased risks there. This week's Kiplinger Letter looks at what's at stake for both Russia and the U.S. Also, note our Special Issue this week on the 2009 outlook for business costs.
 
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U.S. Tamps Down Iran War Fears -- For Now

A high-ranking U.S. presence at this weekend’s talks with Iran cools chances of military action, but doesn’t eliminate them.
 
 

Mounting tensions with Iran are being defused somewhat with a White House decision to send Under Secretary of State William J. Burns to attend this weekend's summit between European Union foreign policy representative Javier Solana and Iranian nuclear negotiator Saeed Jalili. The trip demonstrates a new flexibility in President George W. Bush's dealings with Tehran. It suggests that he’s willing to stick with diplomacy rather than risk a preemptive strike on Iran's nuclear facilities, which could easily backfire.

At the Geneva summit, Jalili will present his government's response to the most recent package of incentives from the five permanent UN Security Council members -- U.S., United Kingdom, France, Russia and China -- plus Germany to end its uranium enrichment program. Burns will not negotiate with Jalili, attending chiefly to reiterate the U.S. demand that Iran halt enrichment immediately. Nevertheless, Burns' attendance is significant. As the number-three figure in the State Department, Burns will become the highest-ranking U.S. diplomat to meet openly with an Iranian official since the 1979 Islamic Revolution.

It will also mark the second time in as many weeks that the White House has sent Burns to make the point that the U.S. would prefer a diplomatic solution to the impasse with Iran. On July 9, Under Secretary Burns testified on Iran before the House Foreign Affairs Committee. He laid out the concerns of the Bush administration on Iran's behavior, both in its nuclear activities and its support of terrorism. But he stressed that the U.S. preference was to resolve the standoff peacefully through multilateral diplomacy. Burns also cited evidence that U.S. and international sanctions against Iran's financial system are making it difficult for Iran to conduct any business abroad, let alone to import dual-use technology in support of its nuclear program.

But even if a U.S. strike on Iran now appears unlikely, an Israeli one can't be ruled out. At a minimum, a nuclear arsenal would embolden Iran, giving it more confidence to launch conventional attacks against U.S. bases and allies, Israel included. It would also greatly raise the risk of nuclear terrorism. Iran's Revolutionary Guard, which arms and trains foreign Islamist organizations, also runs the country's ballistic missile program.

Such developments would amount to a strategic nightmare for the U.S. For Israel, it would be a mortal threat. Iranian President Mahmoud Ahmedinejad has repeatedly sworn to wipe Israel off the map. It would only take a handful of nuclear weapons to do so. "[Israel] can't just pack up and leave. It lives in the neighborhood," says Kamran Bokhari, director of Middle East analysis for private intelligence firm Stratfor.

Israel has a history of striking preemptively when it judges such a threat to be imminent -- the most famous examples being its destruction of Egypt's air force at the start of the Six-Day War and the bombing of Iraq's Osirak nuclear reactor. The Israeli Air Force's June maneuvers over the Mediterranean were intended as a message to Tehran -- planes flew roughly the same distance as between Israel and Iran.

The downsides of a preemptive strike are huge. Oil prices would spike the moment the bombs fell, and that would only be the start. Iran's leaders have stated repeatedly that they would retaliate to an attack by either the U.S. or Israel. They would try to close the Strait of Hormuz, shutting off not only their own oil exports but their Persian Gulf neighbors as well. That would force Washington's hand. The U.S. Fifth Fleet would have to intervene to keep the strait open, leading to a full-scale naval war.

Iran would also target U.S. forces in Iraq. They would crank up support for any armed groups, whether Shiite or Sunni, willing to attack Americans and also try to throttle U.S. logistics. "I don't think people realize how tenuous the supply line is between Kuwait and Baghdad," says retired Army Lieutenant General Daniel W. Christman, now senior vice president for international affairs at the U.S. Chamber of Commerce. "Look on a map and you can see how close that is to the Iranian border. Tens of thousands of vehicles travel that [border] every day." Meanwhile, Iran would target Israeli cities with conventional missiles, much as Iraq did during the Persian Gulf War. Iran's clients, Hezbollah and Hamas, would almost certainly join in with their own rocket attacks on Israel.

The U.S. is more than aware of these risks and is taking pains to keep Israel on a leash. Admiral Michael Mullen, U.S. Chairman of the Joint Chiefs, met with his Israeli counterpart, Lieutenant General Gabi Ashkenazi, shortly after Israel staged its Mediterranean exercises. At a Pentagon press briefing on his return, Mullen acknowledged Israel's security concerns and called Iran "a destabilizing factor in the region." But he went on to say he believed in a solution through diplomatic and economic pressure -- a message he undoubtedly conveyed to the Israelis.

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