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Democracy is two wolves and a lamb deciding what to have for dinner.  Liberty is a well-armed lamb.”
— Benjamin Franklin (1706–1790)

Will Bibi Have Barack Over a Barrel (of Oil)?

While Israeli leaders historically have enjoyed significant influence with
their U.S. counterparts, Prime Minister Benjamin “Bibi” Netanyahu
will likely arrive at the White House next week with a little extra boost in
his efforts to get President Barack Obama to toughen his already hard line against
Iran.

Not only is that because the vaunted Israel lobby – whose premier organization,
the American Israel Public Affairs Committee (AIPAC), will be holding its star-studded
annual convention here beginning Sunday – has been working overtime to
hype the “existential” threat posed by Tehran’s nuclear program to
the Jewish state’s survival.

Nor is it related only to the fact that three of the four Republican presidential
candidates are repeatedly accusing Obama of being “soft” on Iran and
insufficiently committed to Israel’s security, thus seeking to drive a wedge
between the president and Jewish voters and donors.

The extra boost on this visit is provided by growing concerns over the convergence
of steadily rising oil prices – and jitters in the oil market over mounting
tensions between Israel and Iran – with the November elections here.

“The biggest hurdle to President Obama’s reelection is almost surely going
to be the inevitable rise in gas prices over the summer,” wrote Daniel
Dicker
, an oil trader who writes a column for financial website, The Street,
this week.

“And no matter how hard he – or anybody else – argues that higher
pump prices are largely beyond his control, you and I know that the American
public won’t much care for explanations.”

Although Israel itself is neither a major producer nor consumer of oil, Netanyahu
– whether by design or not – now finds himself in a position to influence
the price that US motorists pay at the pump and thus affect Obama’s political
fortunes this fall, as noted Thursday by Gal Luft, the Israeli-born director
of the Washington- based Institute for Global Security, in an essay published
this week by ForeignPolicy.com.

“There is no gainsaying the corrosive political impact that high gasoline
prices have on an incumbent president’s chances of getting reelected,”
he wrote. “With prices projected to hit a national average of 4.25 dollars
a gallon (3.8 liters) by (the end of May), and with a new poll finding that
seven in 10 Americans find the gas price issue ‘deeply important,’ the president
should be concerned.”

After all, back in the summer of 2008, oil and petrol prices reached all-time
highs, helping to propel Obama to victory over Republican Senator John McCain
in the presidential election that fall.

“Today, it’s the (Republicans’) turn to smell blood,” according to
Luft. “Obama knows this. The problem is that Netanyahu, one of the savviest
foreign leaders when it comes to American politics, know this too.”

Indeed, oil experts cited by the New York Times estimate that recent
Israeli-Iranian threats and counter-threats, combined with U.S. pressure on
third countries to reduce Iranian oil imports, have increased world oil prices
by as much as 20 percent.

The same experts estimate that an actual Israeli attack on Iran’s nuclear facilities
would by itself provoke a further spike in oil prices on the order of 15 to
25 percent, adding at least 50 cents to petrol costs at the pump, which are
now averaging close to four dollars a gallon.

“If the price of oil goes up to five dollars a gallon or more, it would
not be good for Obama’s reelection,” according to Charles Ebinger, an energy
expert at the Brookings Institution.

But such an increase could be prolonged or multiplied if Tehran retaliated
by following through on threats to close the Strait of Hormuz – even if
only for a few days – or by striking, either directly or through proxies,
critical oil- and gas-production or refining facilities in Saudi Arabia, the
United Arab Emirates (UAE), Qatar, or Iraq, where Iranian-backed militias are
well-placed to cause havoc in the southern oil fields.

“The most dangerous scenario would be if the Iranians were to retaliate
against some of the Gulf states either because one or more let (the Israelis)
overfly their territory or another reason,” Ebinger told IPS.

“If they were attacked – especially the major refineries in Saudi
Arabia or the main LNG (liquefied natural gas) facilities in Qatar – oil
and gas prices would go through the roof,” he said.

An Israeli attack “could be a stunning success, or it could just as easily
unleash a chain of events that would bring the world to the brink of the Greater
Depression,” agreed Luft.

He argued that success would be better assured if the U.S. carried out the
attack because, unlike Israel, it has the military resources to destroy Tehran’s
conventional retaliatory capabilities, as well as its nuclear facilities.

But even without an attack, the persistence of Israeli-Iranian tensions through
the summer ensures that petrol prices will remain 10-20 percent higher than
they otherwise would be. Moreover, those prices will likely increase as demand
grows with the ongoing – albeit slow – economic recovery and as supplies,
whether due to sanctions against Iran or declines in exports from other sources,
such as Sudan or Nigeria, tighten.

Netanyahu is expected to demand that Obama toughen his rhetoric against Tehran,
deploy more firepower in the region to increase the credibility of a U.S. military
strike, and offer concrete assurances that Washington will indeed take military
action if Iran’s nuclear program crosses certain “red lines.”

If Obama acquiesces, Luft noted, the current 10-20 percent Iran-related premium
on oil prices could go higher yet. But rejection of those demands could also
send prices higher because Israel may be considered more likely to take unilateral
action with or without U.S. approval.

There are ways for Obama to overcome his predicament, according to Luft, who
is closely associated with a number of prominent neoconservative hawks.

Netanyahu may be willing to hold off on striking Iran until after the November
elections in exchange for such prizes as the release of convicted Israeli spy
Jonathan Pollard, a major new U.S. weapons deal, and an increase in missile
defense spending for Israel in the administration’s 2013 budget, according to
Luft. Such an agreement would presumably be accompanied by a U.S. commitment
to strike Iran if its nuclear program crossed certain red lines.

But Luft’s preferred option is something else altogether. Obama, he wrote,
could “take ownership of, and lead, the military option against Iran, and
reinvent himself as a war president in the hope that American motorists will
view their pain at the pump forgivingly as part of their patriotic duty.

“Such an option would also defuse Republican criticism about Obama being
weak on Iran and transform national priorities in the months leading up to the
elections.”

Luft’s essay, however, leaves out a number of other possible factors that could
both reduce the Iran-related premium and enhance Obama’s chances of being reelected.

It ignores, for example, Iran’s own potential influence – for good or
ill – on the oil market, according to Michael Klare, an energy specialist
at Hampshire College.

“Netanyahu can have a lot to say about the price of gasoline, only so
long as the Iranians play along,” he said. “But if tomorrow the Iranians
say, ‘We’re going to negotiate seriously to resolve this,’ then he won’t have
any cards to play any more,” as tension – and the Iran-related premium
– ratchets down.

Indeed, any progress in negotiations between Iran and the P5+1 – the U.S.,
France, Britain, Russia and China – which most analysts believe will resume
after a year’s hiatus at the end of this month or in April – could have
that effect.

Read more by Jim Lobe



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