Commentary Magazine


Topic: oil-and-gas

EU Undercuts U.S. Sanctions on Iran

Remember that the administration and its enablers told us that, sure, the UN sanctions weren’t that biting, but the EU would really lower the boom on Tehran. Well, not so much:

The European Union issued regulations this week that went well beyond a UN Security Council resolution passed in June, outlining tough restrictions on the sale of equipment and technology to the Iranian oil and gas industry, as well as on investment in those sectors. But the regulations — unlike legislation passed by the U.S. Congress — allow for the import and export of oil and gas to the Islamic Republic.

This, of course, is the most critical and probably the only effective aspect of economic sanctions. An EU official explained: “We don’t want any negative effect on the Iranian population or to deprive them of energy, so we do not follow U.S. measures that go beyond United Nations sanctions.” Well, then how are sanctions to be effective? Hmm. I guess they won’t be.

Remember that the administration and its enablers told us that, sure, the UN sanctions weren’t that biting, but the EU would really lower the boom on Tehran. Well, not so much:

The European Union issued regulations this week that went well beyond a UN Security Council resolution passed in June, outlining tough restrictions on the sale of equipment and technology to the Iranian oil and gas industry, as well as on investment in those sectors. But the regulations — unlike legislation passed by the U.S. Congress — allow for the import and export of oil and gas to the Islamic Republic.

This, of course, is the most critical and probably the only effective aspect of economic sanctions. An EU official explained: “We don’t want any negative effect on the Iranian population or to deprive them of energy, so we do not follow U.S. measures that go beyond United Nations sanctions.” Well, then how are sanctions to be effective? Hmm. I guess they won’t be.

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Block This Sale

The bad ideas just keep coming. A few bloggers and news outlets picked up this week on the report that a Russian company wants to acquire a 51 percent stake in a U.S. uranium-mining operation. Four congressmen have written to Timothy Geithner asking him to block the sale, pointing out that if it goes through, a Russian corporation will control 20 percent of America’s uranium resources.

The sale should be blocked. The congressmen fear – with reason – that Russia could deliver uranium from the Wyoming mine to Iran, but that’s not the only consideration. Russia acquiring a 51 percent interest in a natural-resources operation creates unnecessary vulnerabilities for the nations involved. Multiple rounds of natural-gas extortion in Europe have made that clear. Russia behaves badly in its natural-resources dealings, using them alternately to build leverage with the wealthy and to strong-arm the struggling.

Russia and China are competing vigorously to acquire control of natural resources in Asia, Africa, and Latin America. Besides its gas and oil investments in the Caribbean, Brazil, Venezuela, Argentina, and Colombia, Russia has signed uranium-development agreements with Brazil, Venezuela and Ecuador. The Russians are also prospecting for oil and gas off Cuba’s West coast in the Gulf of Mexico, an enterprise unaffected by President Obama’s moratorium on U.S. drilling. (See here for an extended treatment of Russia’s oil and gas acquisitions.) Between them, Russia and China are gradually narrowing the resource options of the U.S., the EU, and Japan; if geopolitical shifts drive us to seek new suppliers, we will find, wherever we look, that the Asian giants are already there. We certainly don’t need to collude in their strategy by handing our own resources over to their companies.

In turning markedly against Japan last week over the Kuril Islands issue – which carries major implications for undersea resources – the Putin-Medvedev regime sent a very clear signal about where it is headed. If we invite Russia to control the commercial destiny of a significant amount of our natural resources, we will be buying political problems for the future. Our current ability to stand up to extortion is no excuse for courting it unnecessarily. The Russia factor makes this sale an issue of national security; it is inherently political and should be decided for political reasons. The sale should be blocked.

The bad ideas just keep coming. A few bloggers and news outlets picked up this week on the report that a Russian company wants to acquire a 51 percent stake in a U.S. uranium-mining operation. Four congressmen have written to Timothy Geithner asking him to block the sale, pointing out that if it goes through, a Russian corporation will control 20 percent of America’s uranium resources.

The sale should be blocked. The congressmen fear – with reason – that Russia could deliver uranium from the Wyoming mine to Iran, but that’s not the only consideration. Russia acquiring a 51 percent interest in a natural-resources operation creates unnecessary vulnerabilities for the nations involved. Multiple rounds of natural-gas extortion in Europe have made that clear. Russia behaves badly in its natural-resources dealings, using them alternately to build leverage with the wealthy and to strong-arm the struggling.

Russia and China are competing vigorously to acquire control of natural resources in Asia, Africa, and Latin America. Besides its gas and oil investments in the Caribbean, Brazil, Venezuela, Argentina, and Colombia, Russia has signed uranium-development agreements with Brazil, Venezuela and Ecuador. The Russians are also prospecting for oil and gas off Cuba’s West coast in the Gulf of Mexico, an enterprise unaffected by President Obama’s moratorium on U.S. drilling. (See here for an extended treatment of Russia’s oil and gas acquisitions.) Between them, Russia and China are gradually narrowing the resource options of the U.S., the EU, and Japan; if geopolitical shifts drive us to seek new suppliers, we will find, wherever we look, that the Asian giants are already there. We certainly don’t need to collude in their strategy by handing our own resources over to their companies.

In turning markedly against Japan last week over the Kuril Islands issue – which carries major implications for undersea resources – the Putin-Medvedev regime sent a very clear signal about where it is headed. If we invite Russia to control the commercial destiny of a significant amount of our natural resources, we will be buying political problems for the future. Our current ability to stand up to extortion is no excuse for courting it unnecessarily. The Russia factor makes this sale an issue of national security; it is inherently political and should be decided for political reasons. The sale should be blocked.

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Missing the Big Picture in Sudan

John Bolton has a good opinion piece about the upcoming (January 2011) referendum on independence for Southern Sudan. He points out that a break-up and its aftermath are likely to have repercussions for the internal ethnic disputes in many nations across Africa. The Obama administration, he says, is miscalculating badly in its carrot-and-stick approach to the Bashir government in Khartoum; its policy of “appeasing Khartoum” is only making the situation worse.

There are other considerations as well. Khartoum and the southern insurgency aren’t conducting their messy business in a vacuum. They’ve got plenty of outside help. China has been known for some years as the principal backer of the Bashir regime, but the southern insurgency is gaining patrons of its own from among the globe’s usual suspects in king-making and insurgency-arming. Russian and German international firms are taking out a big stake in Southern Sudan — and the Russians may be arming the South.

As Bolton notes, the majority of Sudan’s proven oil and gas reserves are concentrated in the territory that would go to the South in a break-up. Less visible to most Americans is the fact that the South is landlocked, and, under current conditions, largely inaccessible to modern transport facilities. The region’s aging and inadequate infrastructure has been an insuperable obstacle to independent economic development. This shortfall has made UN-contracted air links — in which Russian peacekeepers and aviation companies have figured prominently — a lifeline for Southern Sudan. It has also meant that any independence achieved by the South would be vulnerable and contingent.

This past weekend, however, African new outlets were full of a story that has been building since 2007. A consortium made up of German giant ThyssenKrupp, Russia’s MosMetrostroy, and the Texas-based firm Ayr Logistics Group will begin work in October on a long-planned modern rail line from Southern Sudan to Uganda — and ultimately, it is hoped, to the Kenyan ports of Mombasa and Lamu. This is somewhat more than just good news for Southern Sudan’s economic prospects. By promising to confer independent economic viability on the South, the rail project increases the stakes for everyone involved. From Khartoum’s perspective, the meaning of political independence for Southern Sudan will expand dramatically, and to Khartoum’s disadvantage, this would happen when the railroad becomes operational.

China has put a great deal into the national government in Khartoum and will view with disfavor the prospect of an economically connected South seceding with most of the oil and gas. Russia is positioned well to bolster the South’s bid for independence, however, with its commercial stake in the region’s development and its military force deployed with the UN peacekeepers. In a sign that Moscow recognizes the freighted significance of a North-South breakup, the Russians have recently sold the South 10 military transport helicopters, which can easily be fitted with weapons.

China also has a peacekeeping force in Darfur, however, and has been implicated this year in direct military support to the Bashir regime. The conditions are aligning for Sudan’s internal arrangements to become a proxy showdown for China and Russia, the world’s most brutal competitors for natural resources. Only one nation has the stature and power to discourage the Sudan question from hardening into such a proxy clash, to the detriment of the Sudanese people and the surrounding region. But as John Bolton observes, the U.S. administration is narrowly focused on incentivizing the Bashir regime with an all-carrot approach — a strategy that could hardly be surpassed for sheer uselessness.

John Bolton has a good opinion piece about the upcoming (January 2011) referendum on independence for Southern Sudan. He points out that a break-up and its aftermath are likely to have repercussions for the internal ethnic disputes in many nations across Africa. The Obama administration, he says, is miscalculating badly in its carrot-and-stick approach to the Bashir government in Khartoum; its policy of “appeasing Khartoum” is only making the situation worse.

There are other considerations as well. Khartoum and the southern insurgency aren’t conducting their messy business in a vacuum. They’ve got plenty of outside help. China has been known for some years as the principal backer of the Bashir regime, but the southern insurgency is gaining patrons of its own from among the globe’s usual suspects in king-making and insurgency-arming. Russian and German international firms are taking out a big stake in Southern Sudan — and the Russians may be arming the South.

As Bolton notes, the majority of Sudan’s proven oil and gas reserves are concentrated in the territory that would go to the South in a break-up. Less visible to most Americans is the fact that the South is landlocked, and, under current conditions, largely inaccessible to modern transport facilities. The region’s aging and inadequate infrastructure has been an insuperable obstacle to independent economic development. This shortfall has made UN-contracted air links — in which Russian peacekeepers and aviation companies have figured prominently — a lifeline for Southern Sudan. It has also meant that any independence achieved by the South would be vulnerable and contingent.

This past weekend, however, African new outlets were full of a story that has been building since 2007. A consortium made up of German giant ThyssenKrupp, Russia’s MosMetrostroy, and the Texas-based firm Ayr Logistics Group will begin work in October on a long-planned modern rail line from Southern Sudan to Uganda — and ultimately, it is hoped, to the Kenyan ports of Mombasa and Lamu. This is somewhat more than just good news for Southern Sudan’s economic prospects. By promising to confer independent economic viability on the South, the rail project increases the stakes for everyone involved. From Khartoum’s perspective, the meaning of political independence for Southern Sudan will expand dramatically, and to Khartoum’s disadvantage, this would happen when the railroad becomes operational.

China has put a great deal into the national government in Khartoum and will view with disfavor the prospect of an economically connected South seceding with most of the oil and gas. Russia is positioned well to bolster the South’s bid for independence, however, with its commercial stake in the region’s development and its military force deployed with the UN peacekeepers. In a sign that Moscow recognizes the freighted significance of a North-South breakup, the Russians have recently sold the South 10 military transport helicopters, which can easily be fitted with weapons.

China also has a peacekeeping force in Darfur, however, and has been implicated this year in direct military support to the Bashir regime. The conditions are aligning for Sudan’s internal arrangements to become a proxy showdown for China and Russia, the world’s most brutal competitors for natural resources. Only one nation has the stature and power to discourage the Sudan question from hardening into such a proxy clash, to the detriment of the Sudanese people and the surrounding region. But as John Bolton observes, the U.S. administration is narrowly focused on incentivizing the Bashir regime with an all-carrot approach — a strategy that could hardly be surpassed for sheer uselessness.

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Oil Spill Looking More and More Like Katrina

Marc Ambinder, perhaps the most eager Obama-spinner in the blogosphere (unlike others on the left who take principled stances against Obama’s insufficiently extreme positions, Ambinder invariably has an excuse at the ready), says this about the BP oil spill:

If you watched the first block of the evening news programs, especially CBS Evening News and ABC’s World News, you can plainly see that the White House’s effort to pre-emptively choke off the assignment of blame for the continuing existentially-threatening oil spill has failed. The perceived problem: they’re not doing enough. They deferred too much to BP. The real problem: nothing like this has ever happened before. There is no script. Sadly, BP does seem to be the only entity remotely capable of doing anything. [emphasis in original]

Hmm. Was it an excuse for the Bush administration that a hurricane (Katrina) of that magnitude had never hit New Orleans? Was there a script then? Weren’t the local and state authorities the ones charged with the immediate response?

Moreover, Ambinder is simply wrong. From the very same ABC News report:

As thick oil flows into the sensitive marshes of the Louisiana coast, Gov. Bobby Jindal called on the White House and BP today to either stop the oil spill or get out of his way. Jindal is still waiting for the federal government to provide millions of feet in boom and to approve an emergency permit for a state plan to dredge and build new barrier islands to keep the oil from reaching the marshes and wetlands. Jindal is so desperate for the islands, he’s said he’ll build them even if it sends him to jail.

In fact, even the liberals’ favorite cable network, MSNBC, is starting to ask some tough questions. Ed Shultz (h/t Glenn Reynolds) queries whether there isn’t something the administration can do — send clean-up squads or at least work on keeping the oil offshore. Unlike Ambinder’s spin-a-thon, Shultz blasts:

It’s on your watch. We need to come up with some kind of huge plan on what we’re going to do, because we’ve spent thirty days waiting for BP, waiting for Transocean, who’ve done a great job of just washing their hands of all of this. Let me just say this, Washington: It’s time to get it on. It’s time to get real serious about this.

It’s apparent that the feds lack the expertise to cap the spill and that BP is trying an array of methods to cut off the flow. But that doesn’t mean Obama and his minions can’t assist rather than hinder local authorities in dealing with the aftermath. Moreover, the administration hasn’t been fulfilling its regulatory function:

The federal agency responsible for regulating U.S. offshore oil drilling repeatedly ignored warnings from government scientists about environmental risks in its push to approve energy exploration activities quickly, according to numerous documents and interviews. … Interviews and documents show numerous examples in which senior officials discounted scientific data and advice — even from scientists elsewhere in the federal government — that would have impeded oil and gas companies drilling offshore.

Yes, the problem existed under the Bush administration. “But the pattern of dismissing biologists’ input has continued under the Obama administration.”

In sum, Obama has grandstanded and excoriated BP but done nothing to help the situation. Setting up a commission to find fault doesn’t really count. That, after all, is Obama’s usual tact — blame others and give speeches. This time, not withstanding the helpful spin of a few devoted fans like Ambinder, it doesn’t seem to be working.

Marc Ambinder, perhaps the most eager Obama-spinner in the blogosphere (unlike others on the left who take principled stances against Obama’s insufficiently extreme positions, Ambinder invariably has an excuse at the ready), says this about the BP oil spill:

If you watched the first block of the evening news programs, especially CBS Evening News and ABC’s World News, you can plainly see that the White House’s effort to pre-emptively choke off the assignment of blame for the continuing existentially-threatening oil spill has failed. The perceived problem: they’re not doing enough. They deferred too much to BP. The real problem: nothing like this has ever happened before. There is no script. Sadly, BP does seem to be the only entity remotely capable of doing anything. [emphasis in original]

Hmm. Was it an excuse for the Bush administration that a hurricane (Katrina) of that magnitude had never hit New Orleans? Was there a script then? Weren’t the local and state authorities the ones charged with the immediate response?

Moreover, Ambinder is simply wrong. From the very same ABC News report:

As thick oil flows into the sensitive marshes of the Louisiana coast, Gov. Bobby Jindal called on the White House and BP today to either stop the oil spill or get out of his way. Jindal is still waiting for the federal government to provide millions of feet in boom and to approve an emergency permit for a state plan to dredge and build new barrier islands to keep the oil from reaching the marshes and wetlands. Jindal is so desperate for the islands, he’s said he’ll build them even if it sends him to jail.

In fact, even the liberals’ favorite cable network, MSNBC, is starting to ask some tough questions. Ed Shultz (h/t Glenn Reynolds) queries whether there isn’t something the administration can do — send clean-up squads or at least work on keeping the oil offshore. Unlike Ambinder’s spin-a-thon, Shultz blasts:

It’s on your watch. We need to come up with some kind of huge plan on what we’re going to do, because we’ve spent thirty days waiting for BP, waiting for Transocean, who’ve done a great job of just washing their hands of all of this. Let me just say this, Washington: It’s time to get it on. It’s time to get real serious about this.

It’s apparent that the feds lack the expertise to cap the spill and that BP is trying an array of methods to cut off the flow. But that doesn’t mean Obama and his minions can’t assist rather than hinder local authorities in dealing with the aftermath. Moreover, the administration hasn’t been fulfilling its regulatory function:

The federal agency responsible for regulating U.S. offshore oil drilling repeatedly ignored warnings from government scientists about environmental risks in its push to approve energy exploration activities quickly, according to numerous documents and interviews. … Interviews and documents show numerous examples in which senior officials discounted scientific data and advice — even from scientists elsewhere in the federal government — that would have impeded oil and gas companies drilling offshore.

Yes, the problem existed under the Bush administration. “But the pattern of dismissing biologists’ input has continued under the Obama administration.”

In sum, Obama has grandstanded and excoriated BP but done nothing to help the situation. Setting up a commission to find fault doesn’t really count. That, after all, is Obama’s usual tact — blame others and give speeches. This time, not withstanding the helpful spin of a few devoted fans like Ambinder, it doesn’t seem to be working.

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Another Summit

The “jobs summit” today typifies the root of the Obama team’s misguided thinking on jobs. In place of policies that would aid in private-sector job creation, the administration has provided an oversold and ineffective stimulus plan, lots of dog-and-pony shows, much heated rhetoric about Wall Street excesses, and a grab bag of policies that makes things worse. For starters, the looming debt, as Robert Samuelson explains, has created “the perception that the administration will tolerate, despite rhetoric to the contrary, permanently large deficits [that] could ultimately rattle investors and lead to large, self-defeating increases in interest rates. There are risks in overaggressive government job-creation programs that can be sustained only by borrowing or taxes.” But that’s not all, as Samuelson observes:

Obama can’t be fairly blamed for most job losses, which stemmed from a crisis predating his election. But he has made a bad situation somewhat worse. His unwillingness to advance trade agreements (notably, with Colombia and South Korea) has hurt exports. The hostility to oil and gas drilling penalizes one source of domestic investment spending. More important, the decision to press controversial proposals (health care, climate change) was bound to increase uncertainty and undermine confidence. Some firms are postponing spending projects “until there is more clarity,” [Moody’s Economy.com Mark] Zandi notes. Others are put off by anti-business rhetoric.

The jobs summit ignores all that and offers up yet another campaign-type event in lieu of productive governance. This is at the heart of not only the jobs problem but also much of what ails the administration. Rather than a useless summit, the administration would do well to consider a package of tax cuts designed to bolster hiring and an agreement to hold off on job-killing legislation. (Gary Andres highlights a useful model for economic revival: the state of Texas.) But in fact, the administration is going in the opposition direction. That — and another dopey jobs summit — are surefire signs that the administration is a long way from getting its act together.

The “jobs summit” today typifies the root of the Obama team’s misguided thinking on jobs. In place of policies that would aid in private-sector job creation, the administration has provided an oversold and ineffective stimulus plan, lots of dog-and-pony shows, much heated rhetoric about Wall Street excesses, and a grab bag of policies that makes things worse. For starters, the looming debt, as Robert Samuelson explains, has created “the perception that the administration will tolerate, despite rhetoric to the contrary, permanently large deficits [that] could ultimately rattle investors and lead to large, self-defeating increases in interest rates. There are risks in overaggressive government job-creation programs that can be sustained only by borrowing or taxes.” But that’s not all, as Samuelson observes:

Obama can’t be fairly blamed for most job losses, which stemmed from a crisis predating his election. But he has made a bad situation somewhat worse. His unwillingness to advance trade agreements (notably, with Colombia and South Korea) has hurt exports. The hostility to oil and gas drilling penalizes one source of domestic investment spending. More important, the decision to press controversial proposals (health care, climate change) was bound to increase uncertainty and undermine confidence. Some firms are postponing spending projects “until there is more clarity,” [Moody’s Economy.com Mark] Zandi notes. Others are put off by anti-business rhetoric.

The jobs summit ignores all that and offers up yet another campaign-type event in lieu of productive governance. This is at the heart of not only the jobs problem but also much of what ails the administration. Rather than a useless summit, the administration would do well to consider a package of tax cuts designed to bolster hiring and an agreement to hold off on job-killing legislation. (Gary Andres highlights a useful model for economic revival: the state of Texas.) But in fact, the administration is going in the opposition direction. That — and another dopey jobs summit — are surefire signs that the administration is a long way from getting its act together.

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Scoffed Power

Noah Pollak has at least found some comic relief in Obama’s “Israel ploy” with China. The old “my buddy here is crazy, don’t know if I can hold him back” routine is as well-worn a device in the soft-power toolkit as it is in Hollywood scriptwriting. We should not, however, buy the credulous, one-dimensional implication of the Washington Post story that a veiled threat to unleash Israel got the Chinese on board for censuring Iran. In Beijing they have plenty of their own intelligence on the Middle East, and they also know a ploy when they see one.

We find a much better explanation for China’s cooperation in this November 19 piece from Reuters on the prognosis for sanctions. It didn’t get much play in the mainstream media, possibly because of the title, “West lowers sights for new Iran sanctions at UN.” It clarifies quite baldly how the cost of bringing East and West together in the P5+1 is being lowered: by accommodating Russia and China and dropping the idea of targeting Iran’s oil and gas sector.

Out in the real world, China is obviously not taking a harder line with Iran. The day before joining the censure motion, the Chinese inked a $6.5 billion gasoline refinery contract with Tehran, the fourth major oil-and-gas contract between the two countries in 2009. China continues to supply gasoline to Iran, as it has been doing openly since September. Beijing’s actual trade posture with Iran has not shifted by even an inch.

Trade may be involved in this drama in another form, however: deal-making with U.S. tariffs. President Obama, under pressure from the unions, has been threatening China with punitive tariffs on key imports, including auto tires and manufactured steel pipes. China strenuously opposes the tariffs, of course, and relief from them is a high priority. In what was very possibly a quid pro quo, the approved tariff schedule for steel pipes — announced simultaneously this past week with China’s agreement to censure Iran — reflected a top rate of only half what the Department of Commerce had proposed in September.

Soft power is all about the horse-trading, of course. But it’s hard to find the “smart” power in this deal. If it was a horse trade, we paid too much. Whether the bait we used was the “Israel threat” or U.S. tariffs, the deal was ultimately set up by lowering to zero the cost of China’s participation. The censure motion is a meaningless gesture that carries no guaranteed consequences, a concession so costless to China that we should have paid nothing for it.

Undeterred, Iran is doubling down on its recalcitrance by announcing plans for new uranium-enrichment sites. We might almost suppose that the Iranian regime was scoffing at all this fascinatingly clever soft power — or at least smirking a little.

Noah Pollak has at least found some comic relief in Obama’s “Israel ploy” with China. The old “my buddy here is crazy, don’t know if I can hold him back” routine is as well-worn a device in the soft-power toolkit as it is in Hollywood scriptwriting. We should not, however, buy the credulous, one-dimensional implication of the Washington Post story that a veiled threat to unleash Israel got the Chinese on board for censuring Iran. In Beijing they have plenty of their own intelligence on the Middle East, and they also know a ploy when they see one.

We find a much better explanation for China’s cooperation in this November 19 piece from Reuters on the prognosis for sanctions. It didn’t get much play in the mainstream media, possibly because of the title, “West lowers sights for new Iran sanctions at UN.” It clarifies quite baldly how the cost of bringing East and West together in the P5+1 is being lowered: by accommodating Russia and China and dropping the idea of targeting Iran’s oil and gas sector.

Out in the real world, China is obviously not taking a harder line with Iran. The day before joining the censure motion, the Chinese inked a $6.5 billion gasoline refinery contract with Tehran, the fourth major oil-and-gas contract between the two countries in 2009. China continues to supply gasoline to Iran, as it has been doing openly since September. Beijing’s actual trade posture with Iran has not shifted by even an inch.

Trade may be involved in this drama in another form, however: deal-making with U.S. tariffs. President Obama, under pressure from the unions, has been threatening China with punitive tariffs on key imports, including auto tires and manufactured steel pipes. China strenuously opposes the tariffs, of course, and relief from them is a high priority. In what was very possibly a quid pro quo, the approved tariff schedule for steel pipes — announced simultaneously this past week with China’s agreement to censure Iran — reflected a top rate of only half what the Department of Commerce had proposed in September.

Soft power is all about the horse-trading, of course. But it’s hard to find the “smart” power in this deal. If it was a horse trade, we paid too much. Whether the bait we used was the “Israel threat” or U.S. tariffs, the deal was ultimately set up by lowering to zero the cost of China’s participation. The censure motion is a meaningless gesture that carries no guaranteed consequences, a concession so costless to China that we should have paid nothing for it.

Undeterred, Iran is doubling down on its recalcitrance by announcing plans for new uranium-enrichment sites. We might almost suppose that the Iranian regime was scoffing at all this fascinatingly clever soft power — or at least smirking a little.

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Will Sanctions Stop Iran?

Not likely. So far, it looks like an enfeebled Bush administration will pass into irrelevance, the Security Council will impose additional ineffectual measures, and Tehran’s mullahs will enrich enough uranium for an atomic device that can kill hundreds of thousands.

Of course, history does not always travel in straight lines. Are there any off-ramps in sight? President Mahmoud Ahmadinejad has kept Iran’s nuclear weapons efforts on track by essentially buying support from the populace with his massive program of subsidies for food, fuel, transport, and other items. The government can make these payments thanks to bulging oil and gas revenues—some $70 billion last year—resulting from surging prices. This month, light sweet crude futures hit a record $111.80 a barrel.

No price goes up forever, and oil is about $10 off its high partially due to fears of a mild recession in the United States. If the downturn in America is more severe or goes global, the Iranian government will not be able to maintain its subsidization program. Even today, the economy is fragile. The world’s fourth-largest extractor of crude had to resort to gas rationing last year, and this year inflation is slipping beyond control of Tehran’s technocrats. “Sometimes we have to change the price stickers three times a day because of inflation,” says Ali Daryani, a grocer in the Iranian capital.

Iran, in a buoyant economic environment, can withstand anything the Security Council or the West will throw at it in the way of sanctions. In a global collapse—last Sunday the invariably optimistic Alan Greenspan stated that the current crisis will probably be “the most wrenching since the end of the second world war”—the Iranian nuclear program is a goner.

For the record, I am not arguing that Washington should purposely try to destroy the global economy to get at Iran. But we should remember that the Reagan administration succeeded in depressing commodity prices to undermine the Soviet Union. It’s time, therefore, we started looking at the price of oil and gas as a national security issue of the first order.

Not likely. So far, it looks like an enfeebled Bush administration will pass into irrelevance, the Security Council will impose additional ineffectual measures, and Tehran’s mullahs will enrich enough uranium for an atomic device that can kill hundreds of thousands.

Of course, history does not always travel in straight lines. Are there any off-ramps in sight? President Mahmoud Ahmadinejad has kept Iran’s nuclear weapons efforts on track by essentially buying support from the populace with his massive program of subsidies for food, fuel, transport, and other items. The government can make these payments thanks to bulging oil and gas revenues—some $70 billion last year—resulting from surging prices. This month, light sweet crude futures hit a record $111.80 a barrel.

No price goes up forever, and oil is about $10 off its high partially due to fears of a mild recession in the United States. If the downturn in America is more severe or goes global, the Iranian government will not be able to maintain its subsidization program. Even today, the economy is fragile. The world’s fourth-largest extractor of crude had to resort to gas rationing last year, and this year inflation is slipping beyond control of Tehran’s technocrats. “Sometimes we have to change the price stickers three times a day because of inflation,” says Ali Daryani, a grocer in the Iranian capital.

Iran, in a buoyant economic environment, can withstand anything the Security Council or the West will throw at it in the way of sanctions. In a global collapse—last Sunday the invariably optimistic Alan Greenspan stated that the current crisis will probably be “the most wrenching since the end of the second world war”—the Iranian nuclear program is a goner.

For the record, I am not arguing that Washington should purposely try to destroy the global economy to get at Iran. But we should remember that the Reagan administration succeeded in depressing commodity prices to undermine the Soviet Union. It’s time, therefore, we started looking at the price of oil and gas as a national security issue of the first order.

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