Note: Today is the eighth in a series of posts that detail Eurasia Group's Top Risks for 2013
The dangers emanating from the ongoing shadow war with Iran are greater than many observers believe. This struggle has consisted of several components, including a cycle of mutual killings and cyber attacks. While there is no hard proof, it is a reasonable assumption that Israel and Iran (or at least some officials in Iran) are responsible. The final theater is the ongoing proxy war in Syria.
In early 2013, the West will also become engaged in an effort to negotiate a solution to the standoff over Iran's nuclear program. Western countries, led by the U.S., would very much like a peaceful resolution, while Iran sorely needs relief from stiff economic sanctions. Talks will be intensive but on balance the talks will probably fail by late spring. The Iranian elite have an almost existential commitment to the nuclear program, while Supreme Leader Ali Khamenei possesses a deep seated enmity for the U.S.
As a result, the West and Iran will probably return to escalating sanctions and shadow war, with two drivers boosting the ferocity of that struggle. First, the Iranian regime will feel compelled to show resolve and retaliate in the face of new sanctions. Second, the regime faces a period of profound economic weakness, though it will not collapse. But weak governments are prone to lashing out, both to rally domestic support and to portray an image of strength.
These new drivers will likely intensify the shadow war and could lead to new fronts. The chance of miscalculation and overreaction on both sides would rise, especially in the face of provocations such as a successful assassination plot in the U.S. similar to the alleged attempt against the Saudi ambassador in October 2011 or an episode such as the 2008 swarming of U.S. Navy frigates by Revolutionary Guard boats.
Iran's nuclear program is the second area of concern in 2013. Israeli rhetoric will remain at a high pitch, but is intended to increase diplomatic leverage and economic sanctions. Still, the probability of an Israeli attack in 2013 is low because Iran's nuclear program is unlikely to pose an imminent threat this year. Also, Israel can inflict only limited damage on Iran's nuclear facilities and there will be a lack of consensus among its political leaders about the wisdom of a strike. Polling also shows the Israeli public firmly opposes unilateral action. Finally, the U.S. would likely attack only if Iran tries to acquire a nuclear weapon and that is unlikely.
There are, however, a number of worrying scenarios. Developments at the Fordo enrichment facility make up one. Iran will have enough medium-enriched uranium to make a bomb by early summer, but weekly IAEA inspections leave enough time for detection and action. The central question is whether the Israeli government will trust the U.S. or strike on its own. Israel is unlikely to attack, but this dilemma slightly boosts the chance of Israeli strikes during 2013 (to roughly 20 percent).
A scenario involving a detectable Iranian breakout would probably elicit a U.S. attack. Yet Tehran has been very cautious and slow. Iran probably wants to become a latent nuclear power; that is, the world knows it could develop a bomb quickly. But Iran's threat perception will become more dire this year, making an irrational dash to a bomb, and a U.S. attack, slightly more likely.
Next week, we'll profile Risk #9: India
IIPA via Getty Images
Today, The Call presents our top risks for 2013. Click HERE for Eurasia Group's complete report.
1. Emerging markets -- The era of emerging market abundance is
finished. As the United States and Europe slowly regain their economic footing, the
political risk focus will return to the emerging market world, where
differences among the largest players will become more obvious. Slower growth
and rising expectations from larger and more demanding middle classes will
create public pressure on governments, meaning that emerging markets -- including
the increasingly suspect BRICs -- should no longer be treated as an asset class
for outsized growth. Consideration instead should shift toward which
developing country governments have enough political capital to remain on track
to a more advanced stage of development.
2. China vs. information -- China's new leadership faces many challenges in 2013, most importantly the state's growing inability to control the flow of ideas and information across borders and within the country. Until now Beijing has been largely effective in isolating online discourse to focus on discrete issues without culminating in real challenges to the government's decision-making or policy. But every corruption scandal and example of official malfeasance makes the next event more difficult to navigate, and the risk is that a broad-based social movement for change will gain momentum in China in 2013, distracting the government from its domestic and foreign policy priorities and potentially weakening investor confidence in the stability of the mainland market.
3. Arab Summer -- We are far beyond the Arab Spring, and an Arab Winter, where dictators rebound and consolidate power, has not materialized. Instead we are approaching an Arab Summer, whereby the region will witness radicalized movements -- both sectarian and Islamist -- playing a much more important role. As outside powers look to avoid direct involvement in the region's risks, local powers -- Iran, Turkey, Saudi Arabia and others -- will compete for influence and play out their rivalries. At the center of this lies Syria, whose civil war now has implications that extend far beyond the humanitarian. Syria has become a proxy conflict for Shiite and Sunni powers, as well as a magnet for jihadists, increasing the geopolitical risk overall and sparking further insecurity throughout the region, most notably in Iraq, Jordan, and Turkey.
4. United States -- Every silver lining has a dark cloud. While the fiscal cliff was averted, the process by which the deal was reached casts a large shadow over hopes that the election might create a more conducive environment for cooperation, and dysfunctional American politics will weigh on both the U.S. economic recovery and President Obama's legislative agenda. This is not about a politically induced new recession, let alone a major financial crisis. But political uncertainty over corporate taxes and a series of noisy brinkmanship episodes will generate a modest but real drag on growth.
5. JIBs (Japan, Israel, Britain) -- These are the three current global trends that matter most: China is rising, the Middle East is exploding, and Europe is muddling through. Set against a G-zero backdrop, the structural losers of these trends are the JIBs (Japan, Israel and Britain): countries influenced most directly and problematically by changes now underway in the geopolitical order. All three countries are now in a similar position for three reasons: their special relationships with the United States are no longer quite as important; they sit just outside the major geopolitical changes underway, without the means to play a constructive role; and key domestic constraints in all three countries (political, social, historic, and otherwise) make it particularly difficult for them to respond effectively to the challenges posed by a shifting global order.
6. Europe -- There will be no grand implosion, but the muddle-through approach to crisis management carries risks of its own. The eurozone is headed for neither breakup nor resolution, and in 2013 the risks shift from a threat of financial crisis to a loss of momentum in creating the institutional and policy frameworks for a redesigned union. The weak economic outlook and the politics of crisis-fighting will also remain sources of uncertainty. Simultaneously, euro-skepticism is on the rise and resistance to reforms is increasing in the face of protracted austerity and few prospects for an economic turnaround.
7. Asian geopolitics -- In 2013, geopolitical risk will continue growing in East Asia in a new and potentially more dangerous way. Facing increased nationalism in China and Japan, the United States will look to play a larger role, giving oxygen to the hedging strategies of many regional states seeking closer American ties. Territorial disputes over the East China and South China Seas will also create new friction, and at risk overall is East Asia's decades-long distinction as a zone where positive-sum commerce and economics trumps zero-sum geopolitical tension.
8. Iran -- The significant risk in Iran this year is not the one everyone's thinking about. A strike on the country's nuclear program is unlikely, but biting sanctions, other forms of international pressure, and leadership tensions make Iran less predictable and heighten the stakes of an ongoing shadow conflict with Israel and the United States -- one with the potential to rattle markets and put upward pressure on oil prices.
9. India -- India in 2013 will be one of the prime examples of the intrusion of political factors into what had until recently been seen as a long-term economic success story. The country's dysfunctional politics and looming elections feed the risk of an economic shock, and in 2013 the ability of the government to implement robust economic policies will decline even further, perpetuating India's "stalling or falling" outlook.
10. South Africa -- In aggregate growth terms, Africa as a whole looks to be on a trajectory to continue its recent position of positive performance. But in South Africa -- one of the continent's largest and most sophisticated economies -- the outlook is far less rosy. Populism, spearheaded by the ruling ANC party, is on the rise, and it is hard to see any real movement on labor, education, and budgetary reforms. Coming retrenchments in mining will almost certainly spur another bout of labor unrest, which has the potential to spread into other sectors as well. Taken together, all these factors increase the risk of further credit downgrades.
In addition to these, Eurasia Group's red herrings for 2013 include:
The geopolitics of energy -- 2013 isn't the year to get overly concerned about geopolitical risk spiking energy prices. For one thing, most of the Middle East risk in the coming year isn't about energy -- it's about everything else -- and the energy revolution happening in the Western Hemisphere will be a boon for consumers across the globe.
Global protectionism -- The G-20 can afford to agree on protectionism because there's less of a threat here than meets the eye. The trend in fact is toward hints of competitive trade liberalization, especially within the European Union, which is generating a strong internal consensus on the need for a new major transatlantic economic cooperation package.
Radicalism in the developed world -- Many fear the growing gap between rich and poor will instigate class warfare and cause significant instability across the developed world. We think not. For much the same reason that emerging markets are the top risk this year, it's the underlying stability of advanced industrialized democracies that will come through in 2013.
European separatism -- There is no doubt that there are very real separatist pressures building in Catalonia and in Scotland, and national unity remains fragile in Belgium. However -- as much as we all would love to watch Barca field its own team in the World Cup -- there is almost no chance that any of these issues will grow into an actual crisis leading to separation in 2013.
? - North Korea -- Sometimes, you just can't know what's happening, and with North Korea in 2013 that's really the case. In the face of a sudden leadership transition in the world's most totalitarian state -- now run by an untested 28-year-old -- it's almost impossible to assess whether North Korea is becoming more stable. All signs point to the country remaining a perilous bet, but what causes trouble and when? It's hard not to lose sleep over it, but at the same time working harder to assess what exactly is going bump in the night doesn't feel very purposeful. Sorry.
Over the next three weeks, we'll be posting more ideas and information on each of these risks.
SAJJAD HUSSAIN/AFP/Getty Images
By Ian Bremmer
A few days ago, I took a quick, informal survey around Eurasia Group on power and global politics. The question: Who are the world's most powerful people? We're defining power as "a measure of an individual's ability to (singlehandedly) bring about change that significantly affects the lives and fortunes of large numbers of people."
Here's what we came up with:
1. Nobody -- In a G-Zero world, everyone is waiting for someone else to shoulder responsibility for the world's toughest and most dangerous challenges. The leaders you'll see named further down this list are preoccupied with local and regional problems and don't have the interest and leverage needed to take on a growing list of transnational problems.
2. Vladimir Putin -- In Russia's personalized system, this is still the person who counts. He isn't as popular as he used to be, and his country has no Soviet-scale clout or influence, but no one on the planet has consolidated more domestic and regional power than Putin.
3. Ben Bernanke -- The world's largest economy is still struggling to find its footing. To help, no one has more levers to pull and buttons to push. The world needs the U.S. economy back on its feet, and Bernanke has more direct influence than anyone else on when and how that happens.
4. Angela Merkel -- For the moment, her commitments are the glue that binds Europe. Merkel's ability to bankroll Europe's emergency funds, win concessions from the governments of cash-strapped peripherals, and maintain solid popularity at home continues to be a remarkable political and policy achievement.
5. Barack Obama -- Even at a time when Washington is focused almost entirely on Washington, the elected leader of the world's most powerful and influential country carries a lot of water. The Obama administration will watch the eurozone from the sidelines and keep commitments in the Middle East to a minimum, but America will continue to broaden and deepen security and commercial relationships in East Asia, and Obama's decisions on how far and how fast to move will be crucial.
6. Mario Draghi -- Europe's backstop. Europe's Central Bank has kept the continent's blood flowing at a crucial moment in its history, and his work is far from done.
7. Xi Jinping -- China's forward progress is the world's most important variable, and Xi Jinping is now the man behind the wheel. Over the next decade, economic and political reforms will be needed to keep China on track, and Xi will make some difficult (and profoundly important) decisions.
8 (tie). Ayatollah Khamenei -- The supreme spiritual and political authority in a country at the heart of a volatile region. Halfway through 2013, Ahmadinejad will give way to a new president, but it is still Khamenei who will decide how the international fight over Iran's nuclear program plays out -- and what the future holds for the Islamic Republic.
8 (tie). Christine Lagarde -- The world's fire marshal. Here is that rare leader whose contribution will be crucial in multiple regions at once. But nowhere will the IMF's work be more important than in keeping Europe on track.
10. King Abdullah Bin Abd al-Aziz -- King of a kingdom with a unique power to move markets. The Saudi monarch is not in the best of health, but the choices he makes in determining who lead the world's hydrocarbon powerhouse into the next generation will help shape the entire global economy for many years to come.
What do you think?
Ian Bremmer is president of Eurasia Group.
ALEXEI NIKOLSKY/AFP/Getty Images
Eurasia Group's weekly selection of essential reading for the political risk junkie-presented in no particular order. As always, feel free to give us your feedback or selections @EurasiaGroup or @IanBremmer.
1. "Al Qaeda 3.0:
Terrorism's Emergent New Power Bases"
Bruce Riedel, The Daily Beast
In a world where international governance is breaking down, leaders are focused more on domestic than on foreign policy challenges. This trend extends to al Qaeda, an organization transitioning from global to local goals.
2. "India's African ‘Safari'"
Sudha Ramachandran, The Diplomat
We hear a lot about the US and China's conflicting investment approaches in Africa, but there's precious little written on Africa's fourth largest trading partner: India. With trade increasing by a factor of 17 over the last decade, India-Africa relations are becoming much more interesting.
3. "How Crash Cover-Up
Altered China's Succession"
Jonathan Ansfield, New York Times
How will Beijing's leadership manage the challenges that come with an era of more open information? What will the rest of us learn about the Chinese leadership's taste in cars, clothes and once-hidden power politics?
4. "Merkel's mastery of
Michael Fry, The Scotsman
Is Angela Merkel the most talented politician in the world? Her domestic political tactics shed light on her policies with regard to the Eurozone and beyond.
5. "A free-trade agreement
David Ignatius, The Washington Post
Though still on the drawing board, the Trans-Pacific Partnership has far-reaching security and economic implications for North America and the Asia Pacific region. Progress on an Atlantic equivalent seems beyond the horizon. But is an ‘economic NATO' already in the planning stages?
6. "The mother of all
worst-case assumptions about Iran"
Stephen M. Walt, Foreign Policy
Would a nuclear Iran carry "shattering geopolitical significance?" This piece overstates its case at times, but it's a question that demands consideration.
The Weekly Bonus:
"Floating Housing (And
Golf Courses) For Post-Climate-Change Island Paradises"
Co.EXIST blog, Fast Company
In a G-Zero world, don't expect political leaders to tackle climate change. An ineffectual climate summit meeting in Doha this week makes that all the more obvious. If climate change continues unabated, the Maldives will end up underwater. The government knows it, hosting a cabinet meeting on the ocean floor in full scuba gear in 2009, and inquiring about land purchases abroad. But even the most daunting risks come with opportunities, however whimsical they may seem.
By Cliff Kupchan
In Iran last week, sanctions pressure pushed frustration into violence. Iran's currency has lost half its free market value over the past month, and a clumsy policy response made matters worse.
The rial's dramatic depreciation is stoking a level of inflation that has become the most serious threat now facing the regime. The official inflation rate stands at 23.5 percent, but anecdotal evidence suggests the rate is much higher and climbing. The government's lack of a coherent anti-crisis strategy, economic mismanagement, corruption, and heavy transaction costs imposed by sanctions suggest the worst is yet to come. Sporadic protests are likely to become a fact of life in Tehran.
As a result, the bickering within Iran's political elite is becoming more vitriolic. President Mahmoud Ahmadinejad blames foreigners and their sanctions for the current crisis; parliamentary speaker Ali Larijani instead points the finger at the incompetence of Ahmadinejad's government. Ahmadinejad can't seek re-election next June, but his exit won'tprevent these fights from heating up in advance of the vote.
Yet, there is no evidence that Iran is
close to the boiling point. Following the controversial presidential election
of 2009 and the street demonstrations that followed, the regime proved it can
and will use deadly force to intimidate Iran's fractious opposition. Nothing
has happened to suggest that new protests would produce a different result.
So what should Western governments, anxious to slow Iran's momentum toward a nuclear program, be hoping for? Iran's economic turmoil is unlikely to topple the regime, at least not anytime soon, but it just might bring about a more conciliatory Iranian approach to nuclear talks after the U.S. presidential election -- and especially after Iran's presidential election next year.
Over the past half decade, Tehran has demonstrated an almost existential commitment to the nuclear program, but the sanctions-induced pain is squeezing Iran's economy ever tighter, and that could make Iran more flexible. In turn, it's now very important for Western negotiating partners to offer a diplomatic proposal that allows Iran's government to save face before its people.
The Iranian government will never negotiate away its domestic legitimacy, but there might be room for a crucial compromise on the nuclear issue. Without such a breakthrough and relief from tightening sanctions, the Iranian regime has a bleak future -- and the country's leaders know it.
Cliff Kupchan is director of Eurasia Group’s Eurasia practice.
ALI AL-SAADI/AFP/Getty Images)
By Ayham Kamel
Iranian leaders believe more and more that Western and Arab involvement in the uprising against Syrian President Bashar al Assad is designed to weaken the Islamic Republic. Tehran feels threatened by the so-called Sunni Triangle's (Turkey, Qatar, and Saudi Arabia) support for Syrian rebels, which Iran views as a complement to sanctions that aim to limit its regional influence and prestige. The United States's alliance with these countries makes it more difficult to resolve any disagreements over Syria. In this context, Iran finds supporting Assad -- at least in the near term -- as the best worst option. This policy isn't new, but the parameters of what Tehran is willing to provide have expanded.
The audacious bombing of the National Security Council in Damascus on 18 July probably represented a watershed moment in Iranian thinking about the uprising in Syria. The "nuclear" option, dispatching units of the Iranian Revolutionary Guard Corps to assist Assad's weakened forces, is very unlikely -- it would likely trigger a so-called Chapter 7 UN resolution authorizing Western military intervention or provide enough impetus to inspire a coalition of the willing. But Tehran, now more than ever, is willing to do more to help Syria's embattled president.
First, the Iranian regime is likely to divert perhaps tens of millions of euros to help Assad counteract the flight of foreign reserves. It views support of Assad as important enough to justify the diversion of scarce reserves despite the increasing domestic economic pain caused by international sanctions. Second, Iran is likely to boost its provisions of arms and intelligence to the Assad regime. It has so far been reluctant to provide a large amount of support out of fear that doing so would play into the Syrian opposition's efforts to divide the regime's base on sectarian grounds. As the threat to the Assad regime has grown, that calculus has changed. Finally, Hezbollah forces have a great deal of fighting experience that would be valuable to Assad. However, the regime will likely dispatch them in a covert manner to avoid destabilizing the Lebanese government.
Iran, for now, may have an unrealistic view of Assad's chances of staying in power, and of its own ability to influence the outcome. It is likely that Iran will eventually reduce or eliminate its assistance to Assad as the latter's position grows increasingly untenable. Biting sanctions, declining oil revenues, rampant inflation, and dwindling foreign reserves will force Iran to focus internally. In the long run, the Islamic Republic will not be able to afford supporting a sinking Syrian regime either financially or diplomatically.
Ayham Kamel is an analyst in Eurasia Group's Middle East practice.
By Michal Meidan
A growing economic juggernaut and rising political power, China has many reasons to look to the Middle East: to import oil, extend its diplomatic influence, diversify its trade ties, and undermine U.S. hegemony. In that context, it seems hardly surprising that Beijing (alongside Moscow) vetoed a recent U.N. Security Council resolution on Syria and set aside its commercial dispute with Iran to conclude an oil import deal -- undermining U.S. and European sanctions on Tehran.
But Beijing's Middle East strategy is hardly the coherent, well-thought-out doctrine that some believe. Instead, it's the product of a number of (sometimes competing) domestic interests that must be coordinated each time a crisis unfolds. Worryingly for Beijing, as China's commercial ties to the Middle East increase, it will inexorably become more involved in the region's politics. In the process, the risk of antagonizing an important commodity supplier, getting on the wrong side of Washington, or fueling unwanted domestic debates will become more costly and more complicated.
Some argue, simplistically, that when China blocks pressure on Iran to protect its commercial relations with that country, it pays no price for it. The reality is not nearly that simple.
First, Beijing's decisions on Iran and Syria have clearly irked Washington. Secretary of State Hillary Clinton dubbed the Syria veto "despicable." Moreover, ongoing oil trading between China and Iran has already led Washington to slap sanctions on a Chinese trader. In a year of presidential elections in the U.S. and political turnover in China, when both sides are trying to keep tensions at bay, Middle East politics will burden an already complicated relationship with an unwelcome irritant.
But Beijing has more than the United States to worry about. Take China's ties with Saudi Arabia, which provides China with almost one fifth of its oil. Beijing's reluctance to support Western-led sanctions on Iran isn't going down well in Riyadh either. Nor has China's decision to veto the U.N. Security Council's Syria resolution, a choice that Beijing claims was intended to prevent the situation on the ground from escalating further.
Finally, several diplomatic principles -- non-interference in a third country's sovereignty, support for non-proliferation, China's rise as a responsible stakeholder -- are increasingly being called into question by other governments. The decision to veto the U.N. Security Council resolution on Syria may have been motivated by diplomatic principles of non-interference in a country's sovereignty and by Beijing's desire to prevent the situation from getting worse, but it has plainly damaged popular perceptions of China elsewhere in the region, and Premier Wen Jiabao's criticism of the Iranian nuclear program rings hollow to Western ears.
When thinking about its foreign policy goals, does Beijing really want to provide the security framework for the Middle East? These are difficult debates that Chinese leaders must have, but they will certainly want to postpone them until after Beijing's leadership transition is complete next year.
In short, the more deeply Beijing becomes involved in the Middle East, the more complicated its foreign relations and internal policy-making processes become -- and the more China has to lose. The choice between alienating an oil supplier, challenging an important trade partner and a global political power or opening up its diplomatic principles for debate is one that Beijing would like to avoid. But as its global reach extends, so will the trade-offs it has to make.
By Cliff Kupchan
News that Tehran is reportedly planning to deploy faster centrifuges at a hardened site and intends to triple production of highly enriched uranium increases somewhat the risk of Israeli strikes, if Iran can follow through. If these steps are successfully implemented, Iran would have the ability to make a nuclear weapon more quickly. However, Tehran frequently overstates its capabilities, and the degree of looming threat is uncertain. Observers will need to watch future International Atomic Energy Agency (IAEA) statements carefully.
If Iran places both advanced generation machines and a large stockpile of 19.75 percent uranium at the hardened Fordo site near Qom, the threat of dash to a bomb would significantly increase. Even using very conservative assumptions, Iran could make a bomb in 12-18 months, depending on how many advanced machines are deployed, their efficiency, and other factors. The possibility that Fordo may not be vulnerable to air strikes increases the chance an Iranian breakout could succeed.
There are doubts, however. First, Iran's ability to make and operate advanced machines that work well, individually and in cascades, is uncertain. Second, Iran may not have enough component material to make large numbers of advanced machines.
Several explanations are possible for why Iran is, rhetorically at least, again emphasizing its nuclear program. Supreme Leader Ali Khamenei may now feel the need to boost the regime's domestic legitimacy and international influence, for two reasons. The Iranian regime is concerned about the effect of Syrian President Bashar Assad's possible fall on its regional clout, and may seek to augment that clout through progress on the nuclear program. In addition, Khamenei faces the prospect of a low turnout from a disaffected population at parliamentary and presidential elections in 2012 and 2013, and could be seeking to preempt a loss of legitimacy through nuclear advances. Finally, Iran may have made at least enough progress on advanced centrifuges to deploy two cascades and reap the political benefits of doing so.
The central question is how quickly Iran is able to move forward. Several signposts in quarterly IAEA reports will be telling. The reports will reveal how quickly Iran deploys the two test cascades and then how quickly, in what quantity, and with what efficiency Tehran deploys these machines at Fordo. Finally, these documents will provide information about how much 19.75% material is being accumulated.
The chance of Israeli strikes remains now very low for now, as Israel has been pleased with the effect of covert action and sanctions. But Israeli officials have revealed increasing concern over these issues. Progress by Iran on the above agenda will increase the chance of strikes; movement of advanced centrifuges into Fordo would be especially provocative. Unless Israel believes it could successfully attack the hardened site, it will face a very tough decision point. This more dangerous scenario would very likely rattle markets.
Cliff Kupchan is a director with Eurasia Group's Middle East practice
IIPA via Getty Images
By Cliff Kupchan
Has Mahmoud Ahmadinejad finally pushed too hard? For over a week, the perennially prickly Iranian president refused to go to work, openly defying Supreme Leader Ayatollah Ali Khamenei, with whom he'd been at a standoff. Ahmadinejad has since returned to the office and professed loyalty to the leader, but not before drawing criticism from the conservative establishment and even his own radical conservative base. Associates of Ahmadinejad and his chief of staff have been accused of sorcery and arrested, and, according to insiders, many traditional conservatives dismiss Ahmadinejad's faction as a "gang." The president is no stranger to controversy, but this latest furor will likely cost his radical conservatives in the next elections.
The dispute began on April 17, when Ahmadinejad dismissed Intelligence Minister Heydar Moslehi after the minister sacked a deputy close to the president's influential chief of staff, Rahim Esfandiar Mashaei The power struggle grew more circular a few days later, when Khameni issued a public letter overruling Ahmadinejad and declaring that Moslehi would keep his job.
The rift was more about religion and politics than personnel. Mashaei has a nationalist, somewhat secular vision of Iranian politics, as well as an Iranian view of Islam that reduces the role of the clergy and so offends Iran's political establishment. Insiders say that Ahmadinejad shares this view. Plus, parliamentary elections are due in 2012 and the presidential election in 2013, and both Ahmadinejad's faction (the radical conservatives) and their opponents (the traditional conservatives) are jockeying for position. Both camps were likely seeking control over the intelligence ministry, and the sensitive information it possesses, for the election season.
But Ahmadinejad's gambit turned out to be a significant and consequential overreach. Already, allies are distancing themselves from him. Ayatollah Mohammad Mesbah Yazdi, one of Ahmadinejad's spiritual mentors, implicitly chastised the president for not following the leader's orders and directly attacked the "seditionist" line espoused by Mashaei. Lay preachers, most of who tend to support Ahmadinejad, railed against both Mashaei and the president.
Impeachment is a long shot (Khamenei has backed Ahmadinejad for too long to turn against him wholeheartedly now), but the vitriol of the affair will scar the president's relationship with the leader and debilitate his government. As a result, policy execution will likely become increasingly contentious and ineffective, meaning that even if they wanted to, Iranian elites probably couldn't agree to or implement any deal with the West for the next few years. And Ahmadinejad's cronies will likely pay the price in the 2012 parliamentary elections. The chance that an Ahmadinejad surrogate will win the 2013 presidential election is even more remote: Khamenei will likely tolerate the president until his term is up, but then ease him and his associates from power in favor of more pliant figures. Though the new leaders also would hold anti-Western views, bureaucratic infighting in the coming years will cause Iran's institutions to degenerate, likely making the country a less dangerous foe for the US.
Cliff Kupchan is director of Eurasia Group's Eurasia practice.
ATTA KENARE/AFP/Getty Images
By David Gordon and Cliff Kupchan
"You don't want a messianic apocalyptic cult controlling atomic bombs," Israeli Prime Minister Benjamin Netanyahu told a journalist in 2009, in reference to Iran's nuclear program. He wasn't the first or last Israeli official to use such inflammatory rhetoric. References to Iran as an existential threat or to the country's nuclear program as raising the specter of another Holocaust have been typical among Israeli officials. But on a recent research trip to Israel, we heard surprisingly little anxiety. No official spoke about a threshold beyond which Iran's program would be unstoppable -- a deadline that in the past was always one year off. And elites across the political spectrum for now favor sanctions and covert action, rather than military force, to deter Iran. As a result, the chance of Israeli strikes in the next eighteen months is very low.
So what accounts for the sea-change in the Israeli approach? Success, essentially. Iranian officials have claimed that successive rounds of international sanctions have benefitted the country by forcing it to adopt necessary economic reforms. But top Israeli officials stressed to us that sanctions are crippling Iran's economy and sparking debate about nuclear policy among the ruling elite. Likewise, the triumph of the Stuxnet computer worm -- credited with destroying 1,000 Iranian centrifuges and widely believed (though not confirmed) to be an American-Israeli creation -- and possibly other covert measures have encouraged Israeli policymakers. While officials wouldn't talk in detail, they said that Iran's nuclear program has been slowed.
Buying time is an important reason to stick with sanctions and covert action. For one, as the repercussions of ever harsher sanctions sink in, Tehran may be forced to make concessions at the negotiating table. Second, in the wake of Stuxnet, Israel is probably more optimistic about its ability to impair Iran's nuclear program over the long term. Third, an extended time horizon opens the door for domestically induced regime change in Iran -- a remote but real possibility that bears monitoring as disaffected crowds again take to the streets of Tehran.
There's probably also a public relations angle to Israel's transformed rhetoric. As some sources noted, breathless statements about existential threats and points of no return likely strengthened Iran's hand, both diplomatically and publicly. Moreover, Israeli public opinion has turned its gaze elsewhere, to what it considers the more imminent threats of Gaza, Lebanon, and Egypt.
It would be wrong to read the shift in the Israeli approach as a rejection of military action, though. While no sitting politician said so, there is a widespread belief among the country's elite that the government still considers force a viable option: Netanyahu would not stomach a nuclear Iran. But unless sanctions and covert action lose their credibility in the eyes of this (or a similarly inclined) Israeli government, strikes in the next year and a half will remain unlikely.
David Gordon is head of research at Eurasia Group. Cliff Kupchan is director of the firm's Eurasia practice.
By Willis Sparks
The New York Times reported on Saturday that Feda Hussein Maliki, Iran's ambassador to Afghanistan, recently passed a large bag full of cash to Umar Daudzai, chief of staff to Afghan President Hamid Karzai. According to the Times, unnamed Afghan and Western officials say the payment was part of a "secret, steady stream of Iranian cash intended to… promote Iran's interests in [Afghanistan's] presidential palace" and "to buy the allegiance of Afghan elected officials, tribal leaders and insurgent commanders."
Iran has dismissed the report as "devilish gossip," and even some members of Karzai's staff initially denied the report. But Karzai himself now admits that it's true -- though he claims the payments are no secret. "The cash payments are done by various friendly countries to help the president's office and to help dispense assistance in various ways to the employees around here, to people outside, and this is transparent and this is something that I have discussed," Karzai said. The United States' sometimes pay in cash too, he added.
On the question of transparency, Karzai has a point. After all, the money was reportedly packaged in plastic bags.
Maybe the anonymous sources who leaked this story are working to drive a wedge between Karzai and his chief of staff, who some Western officials say is Tehran's man in Kabul. Maybe someone is trying to punish Daudzai for complaining about the use of private security companies in Afghanistan to protect aid organizations, a practice Karzai now blames for the deaths of significant numbers of Afghan civilians.
Maybe the story is designed simply to shine another light on Iran's backroom bid to build patronage networks inside Afghanistan -- and thus to make it a little more difficult for Tehran to extend its influence. Maybe the leak was designed to build a case for U.S. troops to remain in Afghanistan longer than some within the Obama administration would like. Perhaps all these factors played a role.
But the larger story here is that U.S. troops will one day leave Afghanistan -- and that the neighbors, including Iran, want as large a say as possible in what happens next. Reaction to this story sounds a bit like the surprise and outrage expressed by members of Congress when someone inside the United States is caught spying for Russia. As if no one could have known that Moscow still spies on Washington, or that Washington still spies on Moscow. It would be a lot more shocking if Iran weren't trying to buy influence in Afghanistan.
Given the Taliban's history and its views of Shia Islam, it's fair to say that Washington and Tehran share a common enemy in Afghanistan. The Sunni-dominated Taliban has massacred Shia, targeted Iranian officials, and fueled the transport of opium from Afghanistan into Iran. Neither government wants a return to full Taliban control.
But as in Iraq, Iran also has a clear interest in seeing both the withdrawal of U.S. troops from a neighboring country and expansion of Iranian influence there.
President Obama has pledged to begin the withdrawal of U.S. troops next July, though the pace of drawdown will depend on security conditions in Afghanistan -- and political conditions at home. But however long U.S. troops remain in Afghanistan, just as in Iraq, they can't stay forever.
The other moral of the story is that, despite hundred of billions in outside help, Afghanistan is still a country where cash is king.
Willis Sparks in an analyst in Eurasia Group's Global Macro practice.
By Hani Sabra
When James Fallon and I wrote about Lebanon last month, domestic tension was rising over the possibility that the international tribunal set up to prosecute the assassins of former prime minister Rafiq Hariri looked set to indict members of Hezbollah, Lebanon's most powerful military force. The tribunal hasn't issued indictments yet, but things have gotten a lot more complicated. As in the past, trouble in the region could fuel trouble inside Lebanon, but regional collaboration could help head off a political crisis inside the country.
For years, and especially after Hariri's assassination in February 2005, Saudi Arabia antagonized Syria, a key ally of the Saudis' primary regional rival Iran. Riyadh, along with Hariri's son Saad, now Lebanon's prime minister, blamed Damascus for Hariri's killing. Syria maintained its ties with Lebanon's opposition camp in general and Hezbollah in particular.
Relations between the Saudis and Syrians warmed in 2009 as the Saudis saw an opportunity to drive a wedge between Syria and Iran, and Syria looked to expand its roster of contacts to ease its own isolation. Lebanon enjoyed a period of stability. To create some more breathing space at home, Saad Hariri worked to improve relations with Syria and (more or less) backed off claims that Damascus was responsible for his father's death. Domestic tensions lingered, but fears of an explosion of violence eased.
Now the Saudi-Syrian understanding appears to be fraying, raising the specter of turmoil again in Lebanon-especially with the tribunal's indictments expected soon. Riyadh may have overestimated Syria's willingness to try to block a bid by Iraqi Prime Minister Nouri al Maliki -- whom the Saudis view as too pro-Iran -- to keep his job following a close election. The Syrians appear disappointed that the Saudis haven't helped them torpedo the tribunal.
That could help explain why a Syrian court has indicted nearly three dozen people, including several Lebanese close to Hariri, on charges of providing false testimony in the assassination investigation -- a move that has provoked a rising tide of anxiety inside Lebanon.
Unless Riyadh and Damascus find a good reason to double down on better relations, Lebanon's domestic situation will deteriorate further. And if the Hariri tribunal issues indictments of Hezbollah members, Lebanon's opposition will probably withdraw its ministers from the government. The opposition has just 10 of 30 ministers, but it can easily persuade newfound friend and erstwhile Hariri ally Walid Jumblatt to withdraw one of his ministers, triggering a collapse of the government that could plunge Lebanon back into the state of sporadic violence and government paralysis that it suffered in 2007-2008.
In the less likely but more dangerous scenario, Hezbollah could respond to indictments as it acted in May 2008, when the group briefly seized control in Beirut. The group certainly has the firepower to take over the city to prove who has the real power in Lebanon.
The Saudis and Syrians could act to reduce the likelihood of these worst-case scenarios, but the point has been made yet again: Lebanon's stability largely depends on the calculations of other governments.
Hani Sabra is an analyst in Eurasia Group’s Middle East practice.
MAHMOUD ZAYAT/AFP/Getty Images
By Cliff Kupchan and Jonathan Tepperman
Last week was a busy one in New York, and Iranian President Mahmoud Ahmadinejad, in town for the U.N. General Assembly meeting, kept the media spotlight focused firmly on Turtle Bay with his usual antics: absurd claims about 9/11, some casual Holocaust denial, a little pro forma denunciation of Zionism, and some reflexive chest beating directed at Washington.
But the president's performance distracted attention from where the really interesting action was taking place: in Tehran, where a possibly game-changing battle within the conservative elite has intensified in recent weeks. The tensions between clerics and pragmatic conservatives on the one hand and Ahmadinejad and his allies on the other has been brewing for some months, but recently reached a fever pitch.
At issue are several disputes. The first is an ongoing power struggle between the president and the parliament, or Majlis, which is dominated by his pragmatic conservative foes. This battle has finally crystallized around a surprisingly banal question: funding for the Tehran metro, which the Majlis has appropriated $2 billion to upgrade and the president refuses to spend.
Part of Ahmadinejad's reasoning is that the metro system is run by the son of one of his many enemies: In this case, Akbar Hashemi Rafsanjani, the former president who supported the Green Movement in last year's contested election. But there is a deeper reason for Ahmadinejad's fight with parliament, and it explains some of his other recent moves as well -- the diminutive leader is trying nothing less than to reinterpret Iran's constitution by fiat, to push it from a system in which the Supreme Leader coordinates between the three branches of government to one in which the president calls more shots.
Ahmadinejad's creeping power play can be seen in another of his recent campaigns: to wrest control over Iran's foreign policy. The president has long distrusted Foreign Minister Manouchehr Mottaki and sought to replace him. The problem is that Mottaki got his job from the Supreme Leader, Ayatollah Ali Khamenei. So Ahmadinejad, like a deft infighter, has simply started working around Khamenei on this issue, appointing his own foreign policy experts -- in effect, establishing an alternate foreign ministry under exclusive presidential control. The new men include Ahmadinejad's chief of staff, Esfandiar Rahim Mashaei, who now holds a brief as Middle East adviser, and five others. Khamenei has reportedly warned the president against setting up such parallel power structures, but so far at least, Ahmadinejad is ignoring him.
All of this might seem like good news for the United States, and in the long term, it probably is. Having successfully marginalized Mir Hossein Moussavi, Mehdi Karroubi, and the democratic Green Movement they led in last year's elections, the country's conservative elite is now turning on itself -- and if these battles keep escalating, they could eventually tear the regime apart.
The squabbling has also weakened the standing of Khamenei, the Supreme Leader, who, by failing to intervene, is confirming his reputation for weakness and indecisiveness.
In the short term, however, the chaos will complicate relations between Washington and Tehran. For all his anti-Western rhetoric, Ahmadinejad has actually been one of the Iranian politicians to call most loudly for talks with the United States on Iran's nuclear program. But pragmatic conservatives will now do all they can to torpedo any outreach to the Great Satan, lest the president claim credit for a breakthrough. That means the chances of negotiation over Iran's advancing weapons program -- never high at the best of times -- have just gotten a little bit worse.
Cliff Kupchan is Director of the Russia and CIS team at Eurasia Group and an Iran analyst. Jonathan Tepperman is Eurasia Group's Managing Editor and a Correspondent for TheAtlantic.com.
EMMANUEL DUNAND/AFP/Getty Images
There's an interesting fight simmering inside Iran. Not over support for the nuclear program, which remains just about the only thing Iranians of all ages and ideological persuasions agree on. Nor is it another round in the conflict between the regime and the reformers that kicked into high gear following last year's disputed presidential election, though that one is far from over.
This fight is within the conservative elite -- with interesting implications for the future of President Ahmadinejad, Supreme Leader Ayatollah Ali Khamenei, and the balance of power within the establishment. It's a battle for the future of the regime.
The latest sign of strife between hardliners and more moderate conservative factions comes from a dispute over control of the $2 billion set aside for development of Tehran's metro.
The Majlis, Iran's parliament, green lighted funding for the project. Ahmadinejad, anxious over how unfriendly factions within the government might use the money, objected. Iran's Guardian Council, the six jurists and six theologians who make up the country's most influential body, ruled in favor of the Iranian president. But the Expediency Council, the advisory body with the final word on disputes over legislation between the Majlis and Guardian Council, turned the decision back to the Majlis.
Ahmadinejad then announced he would simply ignore the Expediency Council's ruling. Khamenei refused to take sides directly, but referred the issue back to Ahmadinejad's allies on the Guardian Council.
This fight has been building for quite awhile. The president and parliament have been butting heads for years. In the spring, Ahmadinejad reportedly complained that the Majlis had passed dozens of bills that were "unconstitutional," "un-Islamic," or both. Following the metro dispute, the president has simply refused to recognize the parliament's right to make law, a view that Ali Larijani, the majlis speaker, has diplomatically dismissed as an "odd interpretation" of the country's separation of powers.
What does all this mean? Khamenei damaged his standing as a leader above politics last year by taking sides in the election controversy, and he's looking increasingly irrelevant on fights like this latest one.
Meanwhile, Ahmadinejad looks to be trying to ensure his own centrality in the regime's future by building his own distinct, domestic political brand -- one that fuses patriotism with intense religious fervor, blurring the lines that (in theory) separate spiritual and political authority.
It's a power grab, and one we better keep an eye on.
Ian Bremmer is
president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and
ATTA KENARE/AFP/Getty Images
For the sixth time in less than four years, the U.N. Security Council has voted to impose new sanctions on Iran in connection with its nuclear program. Nothing new there. U.S. officials wanted stronger measures, but the Chinese in particular pushed back hard. Nothing new there either. The sanctions, which are still significantly tougher than earlier models and include tightened restrictions on arms sales, new headaches for Iranian shipping, and an assault on the finances of the Revolutionary Guard and about 40 Iranian companies, will not persuade Iran's government to renounce its nuclear ambitions. Nor is there anything new there.
The real news is that Turkey and Brazil voted no. That's a diplomatic coup for Tehran, which in five previous UNSC votes had won virtually no support. Qatar voted no on the first round of sanctions in July 2006. Indonesia abstained on the fourth round in March 2008. Support from regional heavyweights like Turkey and Brazil (and an abstention from Lebanon) give Iran something tangible to build on as its embattled government works to ease its isolation and to persuade other governments to resist U.S. and European calls for further sanctions outside the U.N. process.
President Ahmadinejad's recent dance card-a Russia/Turkey summit on security just before the sanctions vote and a trip to Beijing just after-illustrates the value of that strategy.
But there's a larger point here about the current state of international politics. It's getting harder for Washington to exercise international leadership. With 10 percent unemployment, an ambitious legislative agenda, an oil spill, and mid-term elections to worry about, President Obama has limited time and energy to invest in grand strategy on foreign policy. Managing geopolitical risk has also become much more complicated in a world that has shifted from a G7 model of international leadership to a G20 model that brings countries like Brazil and Turkey to the international bargaining table. And there is no emerging power willing and able to fill the gap left by new limits on American power and resources, because European powers, China, Russia and others who might lead on key transnational issues are likewise occupied with complex challenges at home.
In other words, no one is really steering this ship, and we can't expect it to sail smoothly through troubled waters.
Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations?
Mario Tama/Getty Images
By Greg Priddy
It might seem premature to address how the world oil market and other regional powers will accommodate rising Iraq oil production capacity -- considering that the outcome of Iraq's recent election remains unresolved, and the process of putting together a governing coalition has barely begun. But some of the broad dilemmas that more Iraqi oil will create are structural in nature, and not terribly dependent on the new government's makeup. One thing's for sure: Both Saudi Arabia and Iran will face major challenges to their interests if this scenario plays out.
The Saudi-Iraq axis is simpler than the Iran-Iraq one. If Iraq's production capacity rises to even half of the clearly unrealistic 12 million bpd by 2020, which was a goal cited by Oil Minister Hussein al Shahristani, it will likely serve to maintain some of the current overhang of spare capacity for longer than would have otherwise been the case. This would prevent a retightening of the world oil market that may have put upward pressure on prices. Saudi policy will have to confront how to deal with this situation -- both in terms of whether to delay investment in their own capacity, and how to accommodate what has the potential to be a much stronger second-place producer within OPEC. At some point, Saudi Arabia may approach the new Iraqi government for a discussion about how to renegotiate the system of OPEC quotas in order to accommodate Iraq's increasing oil production with both countries' interests in mind. But depending on how the bilateral relationship evolves, achieving this sort of cooperation may be problematic. Iraq has already added written provisions into its service contracts with foreign oil companies dealing with government-mandated output cuts. This demonstrates that the Iraqi side is beginning to grapple with the idea that it may at some point be adding capacity to an oversupplied market and need to exercise restraint.
The implications of increasing Iraqi oil are even more complicated when it comes to Iran. US secondary sanctions under the Iran Sanctions Act (ISA) have been reasonably successful at hindering development of additional Iranian oil and gas production capacity. While they haven't stopped activity altogether, they've kept it at a level where the volume of oil available for export is likely to continue its gradual slide over the next decade as production declines and domestic demand continues to grow. In this scenario, an eventual retightening of the world oil market with attendant higher prices would clearly be in Iran's national interest, helping it to maintain revenues even while volumes fall a bit during the next several years. The increase in Iraqi capacity, however, could prevent this from happening -- taking a toll on Iran's government finances, and potentially creating tension between the two Gulf neighbors. Given the substantial amount of Iranian influence within Iraq, and the still-latent disputes about the border and control over the Shatt al Arab waterway, this market-driven tension could potentially spill over into the geopolitical realm.
All of this, of course, is dependent on whether Iraq's internal stability permits large-scale oil development to move at a rapid pace, which remains a big "if" at this point. Still, it's not just a matter for the oil market. This situation has the potential to substantially redraw the map of state finances and national power in the Gulf.
Greg Priddy is an analyst in the Global Energy and Natural Resources practice at Eurasia Group.
ESSAM AL-SUDANI/AFP/Getty Images
To the long list of Israel's vulnerabilities, add the risk that the country won't be able to attract as much foreign investment in coming years and that the most talented Israelis will leave the country.
ago, Western companies looked at the rest of the Middle
East as an oil play. Israel's world-class education
standards, its durable political institutions, its capable bureaucrats, and its
strong rule of law earned the confidence of those looking to set up shop in
Today, other countries in the region offer attractive opportunities for retail, tourism, health care, light-medium manufacture, and a host of other investments, and Israel's small size and political isolation are becoming real weaknesses. Persian Gulf and other Middle Eastern governments are letting would-be investors know that companies with a large-scale presence in Israel aren't going to fare as well inside their borders. Over time, this subtle (in some cases, not-so-subtle) pressure could have an impact.
Israel has outlasted many such threats in the
past. The country's comparative excellence in advanced technology -- an area
requiring limited long-term capital exposure and where the Israelis have little
competition in the region -- will offer lasting advantages. Second, Iran's nuclear program provides a seriously
destabilizing element to the politics of the region, but it doesn't pose much
direct threat to Israel's
economic development. Israel's
military capabilities, including its own nuclear weapons program, make direct
conflict with Iran
Other threats are more serious. One day soon, Hezbollah will have access to missiles with the range and accuracy to effectively target Tel Aviv from anywhere inside Lebanon. That will be a game-changer for Israel's security, its economy, and its politics. More than half of Israel's population and the heart of its economy are centered in and around Tel Aviv. As the city becomes more vulnerable to the threat of precision-guided missile attacks, those Israelis most directly involved in the country's economic and financial life will be the most vulnerable to attack -- and some may well leave the country.
Tel Aviv's vulnerabilities to ballistic missile attack will strike at the heart of Israel's technology and pharmaceutical industries. Consider the recent history of Armenia. Once the best educated of Soviet republics, a steadily deteriorating security environment, better opportunities elsewhere, and a strong Armenian diaspora presence in Russia, France, the United States and other countries made it easy and attractive for the best educated Armenians to leave. And leave they did -- about a third of the population emigrated within 15 years of the Soviet collapse. The exodus hollowed Armenia out, and the country has yet to recover its economic dynamism. With an almost certain-to-deteriorate security environment, Israel's greatest long-term risk may be a serious brain drain, just as its Arab neighbors are opening for business in so many non-energy-related sectors.
That's a lot more dangerous for Israel's future than a surprise attack from Tehran.
Ian Bremmer is president of Eurasia Group and author of The End of the Free Market: Who Wins the War Between States and Corporations? (Portfolio, May 2010)
JACK GUEZ/AFP/Getty Images
Did everyone notice the Saudis suggesting that further sanctions against the Iranians are well and good, but that they'd rather see a quicker resolution? (The FT did, with the Saudis saying that they meant the Middle East peace process. Umm, that's not credible. And not what they've been saying privately.)
I'd discount hints at support for the more direct approach as 90 percent bluster, since the Saudis know the Obama administration is completely committed to the present course. But the absence of routine communications between Saudi Arabia and Israel gives you the remaining 10 percent -- many in the kingdom could think of worse outcomes than having the Israelis "resolve" their looming Iranian nuclear issue through surgical strikes.
At one level, given the attendant risks in the region, it's an eye-opening assertion. At another, in the absence of Bush administration hawks willing to keep the "or else" drumbeat going, it's a little less surprising.
Having said that, when I was in Saudi Arabia a few weeks ago -- the geopolitical issue most frequently brought up was neither brewing tensions with Iran (No. 2 issue) nor the potential for a failed state and cross-border terrorism coming out of Yemen (No. 3 issue) ... but the enormous investment opportunities afforded in a stabilizing oil-rich Iraq. Not at all where the Saudis were a year ago. Interesting.
YASSER AL-ZAYYAT/AFP/Getty Images
By Ian Bremmer and David Gordon
By far the biggest purely geopolitical risk in 2010 comes from Iran. Its
government now faces growing pressure on three fronts. At home, the regime has
had a tough time since last June's presidential election; hardliners had
initially consolidated, but are now under intensifying pressure as domestic
protests continue. Regionally, Tehran has lost
considerable influence, with elections in Lebanon
turning against Hizbullah, rising Iraqi nationalism making it harder for Tehran to exert influence upon their principal historic
competitors, and Iran's
financial outpost in Dubai put at risk by the
growing influence of Abu Dhabi.
Globally, Iran faces a considerably tougher sanctions regime over its nuclear program, a push spearheaded by the United States, Europe, and Japan, with even Russia and China unhappy over Tehran's aggressive rhetoric. A Western push for negotiations will continue, but divisive local politics and insufficient leadership coordination make it very unlikely that Iran's leadership could reach a negotiated settlement even if it wanted one. And it doesn't. Even under considerable domestic pressure, the hardliners in charge of the regime will continue to try to buy time to achieve their nuclear ambitions.
That's why the government is likely to overreact to sanctions when they hit. 2010 carries the highest risk to date of Iranian provocation in the region, in the form of harassment of shipping in and around the Strait of Hormuz, support for radical organizations in neighboring countries, and instigation of trouble for Iraq and other neighbors in demonstrations of muscle. The Iranian regime looks increasingly like a cornered, wounded animal. In 2010, it's likely to act like one.
Israeli military strikes have actually become less likely -- certainly for the first half of the year as sanctions are put in place. Faced with strong opposition from the Obama administration (even as it uses the threat of strikes to gain support for sanctions and to pressure Tehran), mounting intelligence challenges on the location of key Iranian targets, and recognition of the military limitations of Israeli strikes, some Israeli government officials now privately are beginning to discuss how to cope with an eventual nuclear Iran as much as the nature of its "existential threat." Still, the perceived Israeli national security issue is enormous. Looking toward the final months of the year, the Israelis remain an important question mark.
Over time, if the regime in Tehran remains in power, the Iran danger will become more diffuse and start to look more like North Korea. It's clearly a significant long-term negative for global stability. Though for Iran itself, by 2011, we'll probably see a bunch of countries start thinking about how they'd like to start investing there, even as the Western powers seek to prolong sanctions.
Next up: Fiscal issues in Europe
Ian Bremmer is president of Eurasia Group, and David Gordon's is the firm's head of research.
AMIR SADEGHI/AFP/Getty Images
By Ian Bremmer
When Yemen makes international headlines, it's usually because outsiders look at the unrest there as yet another proxy conflict between regional heavyweights Saudi Arabia and Iran. It's one more version of the Sunni vs. Shia Middle East story. The Saudis are supporting Yemen's government in a fight with Shia Houthi rebels financed and trained by Iran. The Saudi, Yemeni, and Iranian governments each have their motives for feeding this simplification.
The Houthis are a Shia rebel group in northern Yemen, centered in the city of Saada. They've warned for years that they've been politically and economically marginalized by Yemen's government, and Houthi rebels launched a rebellion in 2004. There have been six rounds of fighting since. In August of this year, the Yemeni government, with Saudi support, launched another battle against the Houthis, and the conflict has spilled across the border into Saudi Arabia, where Houthis have fought pitched firefights with Saudi forces. In response, the Saudis have launched bombing raids on Houthi positions inside northern Yemen. Tens of thousands of people have fled the expanding conflict zone.
The spike in violence is now getting the regional attention it deserves-but for the wrong reasons. Yemen's weak government already has its hands full with a growing threat from al Qaeda in the Arabian Peninsula (AQAP) and increasing secessionist pressures in the south, adding to the risk that Yemen will become a failed state. The refugee problem is creating a risk of social unrest inside Saudi Arabia. These are serious issues. Less serious is the fear, fanned by both Saudi and Iranian officials, that Iran wants to use the Houthis to create an Arabian version of Hizbullah, a direct Shia threat to Saudi territory. The Saudis are playing up this threat to justify cross-border attacks into Yemen. Yemen's government is using the threat to justify its willingness to accept Saudi attacks on Yemeni soil and to gain Western military support and financial help. Iran feeds the story to pose as increasingly influential within the region.
The Houthis, though, have no reason to play along. They follow the Zaidi form of Islam. They're technically Shia, but theologically and historically distinct from Iran's Twelver Shia majority, which has cultural connections in Lebanon and (to a lesser extent) in Iraq -- but not in Yemen. The Houthi rebels need guns and cash and can't be picky about where they get them. If Iran is willing to sell, they're willing to buy. That doesn't mean they will use them to advance Iranian interests in Saudi Arabia's backyard.
In Yemen, at least, all militancy is local. Few outside al Qaeda relish the idea of the world's largest oil-producer sharing a border with a failed state. That's a risk worth worrying about, but it's not a good reason to over-simplify a complex political, economic, ethnic, religious, and social problem into some sort of regional proxy war between Sunni and Shia.
KHALED FAZAA/AFP/Getty Images
By Greg Priddy
Saudi Arabia faces a complex set of challenges in its role as leading member of OPEC amid ongoing economic and financial market volatility. After achieving an unprecedented level of compliance with OPEC production cuts from other members earlier this year, the kingdom now confronts a problem: compliance is beginning to fray, even as a weakening of the U.S. dollar and a surge in global equities markets push the oil market surging ahead.
If the breakout above $75 per barrel for West Texas Intermediate (WTI) crude oil is sustained and the momentum continues, it's entirely possible that Saudi Arabia will intervene to try to tamp down prices. If that happens, it wouldn't be as part of any understanding with the United States -- a relationship now under serious strain -- but from pure self-interest. With the global economic recovery still fragile, a rapid momentum-driven escalation in oil prices could weigh on consumer confidence and economic growth. That could produce a drop in oil prices. Saudi Oil Minister Ali al Naimi has spoken in recent months of a "goldilocks" range for crude oil at around $75 per barrel, and hinted at action to blunt any sustained push past $80 per barrel.
The Saudis also need to manage price increases to maintain pressure on Iran. Iran's nuclear progress has Gulf Arab governments on edge -- and the Saudis, in particular, would like to avoid taking any action that provides Iran's government with extra revenue. The Saudi government can balance its budget with WTI crude oil in the vicinity of the high $50s. That means they are now replenishing reserves at a rapid pace after running a deficit for the first half of this year. Despite spending cuts, Iran is still under financial pressure, and the Saudis would like to keep it that way.
Managing output levels and prices will be difficult, given that global inventories of crude oil and petroleum products remain well above their normal ranges. Any move by the Saudis to tamp down a surge in prices would likely involve a modest amount of increased exports -- say 500,000 bpd -- and could be pulled back once it has its intended effect of breaking the market's momentum. To bring inventories down, however, the leading Gulf Arab members of OPEC (Saudi Arabia, Abu Dhabi, Qatar, and Kuwait) will need to keep their own output well below pre-September 2008 levels through at least the end of 2010. Right now, compliance outside the Gulf Arab members has receded, particularly in Iran and Angola. Nigeria remains at its target, but that's a result of the continuing violence in the Niger Delta, not a policy decision to keep its promises.
Greg Priddy is a Global Energy & Natural Resources analyst at Eurasia Group.
JOE KLAMAR/AFP/Getty Images
By Willis Sparks and Geoff Porter
As the world focuses on the diplomatic tug of war over Iran's nuclear program, Israel lives with the worrying hum of all those centrifuges spinning just a thousand miles to the east. Yet, Benjamin Netanyahu's government knows that if Israel launches airstrikes, there's a limit to how much damage can be done and how long Iran's progress can be delayed. It therefore has to persuade the Obama administration -- and anyone else who might help slow Iran's march -- to see the risks from Iran as Israel sees them.
It helped that Iran recently revealed the existence of an undeclared nuclear site near the city of Qom. At the very least, that revelation of Iranian dishonesty might have made it a little more difficult for Beijing and Moscow to justify continued resistance to sanctions. Yet, Israel remained quiet. Suddenly it appeared Netanyahu, Defense Minister Ehud Barak, and National Security Advisor Uzi Arad might have a wind at their backs. Though they'd like the wind to blow a bit more steadily and to get them to their destination quicker, they can't risk the rhetoric that might label them as blowhards.
But now there's talk of a diplomatic breakthrough. Following talks in Geneva with negotiators from the United States, China, Russia, Britain, France, and Germany, Iran has signed on to a tentative "interim agreement" to accept a U.S.-Russian proposal (that has been on the table for more than a year) to ship much of its low enriched uranium outside the country for reprocessing. Ensuring that this uranium is processed outside the country would help verify that it's used for civilian, not military, purposes. And then over the weekend, Iran ostensibly agreed to allow IAEA inspectors into the Qom facility on Oct. 25.
This leaves the Israeli government in a bind. First, because the details have yet to be worked out and Iran could renounce a completed agreement at any time, Israel can't take much comfort from it. Second, the fact that others treat it as a potential diplomatic breakthrough makes it even less likely than before that Israel could justify military strikes or that the US can persuade Russia and (especially) China to support sanctions tough enough to make any difference in Iran's strategic planning.
Israel has no faith that the potential for diplomatic détente between Iran and the US and EU is anything more than an Iranian stalling tactic, buying Tehran more time to speed toward the nuclear finish line. Likewise, Israel doesn't believe that sanctions -- no matter how tough they are -- will back Iran down. For Israel, diplomacy and sanctions are merely different forms of delay, but Netanyahu has little choice but to wait them out.
He'll be waiting for some time. First, diplomacy has to run its course. Following the tentative agreement in Geneva and the announcement that Iran will allow inspection of its Qom facility, the diplomatic track seems to be gaining momentum. Once that momentum slows and stalemate resumes, sanctions will be debated and some of them will be implemented. That won't happen before spring 2010 at the earliest.
In the meantime, Israel has little choice but to sit on its hands. Netanyahu knows that strikes on Iran's nuclear sites during delicate negotiations would inflict much more damage to Israel's international reputation -- and its relations with Washington, in particular -- than to Iran's nuclear program. Nothing brings this home more clearly than the U.N. Human Rights Council's report investigating Israel's military campaign in the Gaza Strip in 2008-09, which came very close to launching a legal process within the UN that could have produced a referral to the U.N. Security Council -- and possibly a war crimes tribunal. That's not going to happen, but it underscored already shifting international attitudes toward Israel.
Former Defense Minister Shaul Mofaz has said 2010 would be the year of sanctions. His government was hoping for a year of action. Instead, Israel will wait.
Willis Sparks is Global Macro Analyst and Geoff Porter is Middle East & Africa Director at Eurasia Group.
Alex Wong/Getty Images
By Eurasia Group analyst David Bender
Iranian President Mahmoud Ahmadinejad made it through his August 5 inauguration with the regime secure, but he faces a bumpy road ahead. The Iranian government won round one against the opposition through its willingness to use force in the streets, torture in the jails, and heavy propaganda in the media. Based on its apparent calculation that excessive repression will not provoke a revolution, but compromise might, the regime won't let up anytime soon on its crackdown. While this hard-line policy may keep the regime firmly in control for the short term, it leaves it few long-term options. The regime now has neither the legitimacy nor the political capital to effectively rule or institute needed economic reforms.
Iran is less politically stable than it has been at any time since the Islamic Revolution. The regime shows deep internal fractures, even between Ahmadinejad and Supreme Leader Ali Khamenei. The two are hanging together for now, but if Ahmadinejad becomes too great a liability, Khamenei may have to dump him. Ahmadinejad faces serious challenges, including an increasingly reactionary support base dominated by the hard-line Islamic Revolutionary Guards Corps, a wide field of opponents, and wary clerics in Qom. Meanwhile, the parliament is gearing up to challenge the president on a number of technocratic matters. In other words, the impetuous president is under pressure from multiple angles, something that history suggests will push him to become more brash, outspoken, and antagonistic.
Beyond his inflammatory rhetoric, Ahmadinejad needs to bring the concrete economic reforms he promised to the country. He must tame inflation, which has been higher than 20 percent for most of the last four years; reduce budget-draining energy subsidies that have made cheap gasoline a virtual entitlement for the urban middle class; and raise tax revenue to reduce Iran's dependence on oil revenue, which currently accounts for more than 80 percent of the country's total revenue. At the same time, with oil prices half of what they were 13 months ago, but official unemployment still at more than 12 percent, Ahmadinejad's government will need to continue creating jobs to maintain social stability. It remains unclear how the government can actually solve any of these major problems, however, given that the regime has little political capital and Ahmadinejad seems to have a personal aversion to technocratic expertise.
An opening to the West now looks even less likely than before the June presidential election. The Iranian regime's decision to blame the post-election social unrest on sinister foreign elements means that few in power in Tehran will be amenable to compromise with the United States on the nuclear issue -- or anything else. In Washington, there will be more support for expanding sanctions than pushing talks. A nuclear or diplomatic breakthrough between the United States and Iran is extremely unlikely at this point, raising the threat of U.S. or Israeli military action in 2010.
For now, having consolidated control of the government and the security services, the Iranian regime looks secure. The political equation, however, has fundamentally changed as the Islamic republic has essentially become a military junta that imposes its will though force. This arrangement leaves very little margin of error for the regime and makes the country even less able to withstand future political or economic shocks. During the next 18 months, the Iranian regime will struggle to maintain regime unity, effectively counter the opposition, and deal with disillusioned cleric elites while trying to make difficult economic decisions and manage an increasingly complex geostrategic position. Ahmadinejad may find that fixing his election was the easiest part of his next four years in office, if he makes it that long.
By Ian Bremmer
The George W. Bush administration learned the limits of a policy approach to America's antagonists (like Iran and North Korea) that relies almost exclusively on political pressure and economic coercion. Even as Washington issued warning after warning, Iran made enormous progress toward a nuclear capability, and North Korea amassed a small nuclear arsenal.
But the Obama administration is now learning the limits of constructive engagement. Iran is ignoring U.S. calls for an end to a crackdown on Iranian demonstrators, and North Korea is threatening the United States with a "fire shower of nuclear retaliation." What do we learn from this? That, as time passes, U.S. policymakers have less and less ability to influence events within isolated countries and the choices made by their leaders.
In fact, events inside Iran over the past two weeks represent something close to a worst-case scenario for Washington. Since Obama became president, his tactical approach to Iran has been governed by a simple principle: Don't do or say anything that will help Iranian President Mahmoud Ahmadinejad use Washington to rally support. That was a wise choice, but one that came to nothing because, as Joseph Stalin once observed, "It's not he who votes that counts but he who counts the votes."
Obama responded to the stolen election and the protests that followed with characteristic caution, using vivid language of condemnation only after the level of violence in Tehran demanded it. But it will be harder now to make the deal he wants over Iran's nuclear program, because whatever he offers Iran will open him to charges of "appeasement," and because Iran's weakened government will likely respond to U.S. warnings with renewed belligerence.
On North Korea, whatever the president's approach, uncertainty within that country is generating a level of anti-American vitriol that's unusual even by North Korean standards. Kim Jong-Il has apparently tapped his 26 year-old son, Kim Jung Un, to succeed him. Whether this latest of the Kims will actually rule or the North Korean military will wield new power within a kind of dictatorship by committee, we can only guess. But it's clear that, for the moment, U.S. officials can plan for various contingencies and respond to events, but can't do much to influence what comes next.
The Obama approach to these problems is to try to keep as many options open as possible. That might help to protect him against the charges of hubris that rained down on Bush-era neocons, but it also allows others who don't play by the same rulebook to outmaneuver him. Political decision-makers inside Iran and North Korea are now defining the terms of their engagement with the United States.
By Eurasia Group analyst Cliff Kupchan
The Iranian regime controls the guns and has the support of at least 30 percent of the population. That's probably enough to reestablish dominance in the streets and to avoid compromise in the bitter conflict stemming from the country's presidential election. That said, Supreme Leader Ayatollah Ali Khamenei has tied himself as never before to Iran's controversial president -- and therefore could become increasingly vulnerable over the next year.
The crackdown now playing across front pages all over the world looks to be led by the police and the Basij, the militia blamed for much of the current violence. But press reports suggest it may also include elements of the Revolutionary Guard, demonstrating clearly that the government now means to quell the protests as fully and quickly as possible. Eyewitnesses placed the crowds of pro-opposition protesters last week at more than 100,000, but over the past two days, the numbers in the streets of Tehran have become noticeably smaller.
Iran's government will likely regain control of the streets of Iranian cities. Violent repression will intimidate protestors, and the arrests of reformist leaders and continuing limitations on the internet and mobile phones makes organization of protests difficult. Importantly, the regime has far better control of police, military and security forces than did the governments of Georgia, Ukraine, and Lebanon -- the focal points for "color revolutions" of recent years.
There is a short-term and a serious longer-term threat to Iranian stability. The shorter-term threat is of a fracture within Iran's governing elite. One of Mousavi's most high-profile supporters is Ali Akbar Hashemi Rafsanjani, the former president and current head of the Assembly of Experts, who currently appears to be working to build support among the clerical establishment in Qom. His precise intentions are unclear, but Rafsanjani's actions represent a larger fracture occurring within the Iranian regime between the militaristic Revolutionary Guard (which supports Khamenei and Ahmadinejad) and the clerics (who support the regime but were never enthusiastic about Khamenei's elevation to supreme leader or Ahmadinejad's presidency).
Another key powerbroker, Parliamentary Speaker Ali Larijani, said publicly on Sunday that "a majority of people are of the opinion that the actual election results are different than what was officially announced," and warned the supervisory Guardian Council, which has final authority to rule on election appeals, against siding with one candidate. He's also called for support for the government and attended the supreme leader's Friday sermon last week. But if Larijani and other pragmatic conservative political figures jump ship, the government's non-military base will narrow further.
There's a greater long-term threat: The Leader's legitimacy, and by extension that of the system, is in question for the first time. In the past, the supreme leader managed to remain above politics, entering the fray only to mediate or impose a compromise. But the firm public and personal support he has expressed for Ahmadinejad, including at Friday prayer last week, makes Khamenei a partisan, now firmly linked to Ahmadinejad. This means that the Supreme Leader will also be connected in an unprecedented way to the president's actions, including his failed economic policy and extremist foreign-policy rhetoric -- factors that have divided many Iranian conservatives and motivated many of the protesters. Also, by endorsing an almost certainly rigged election, the Leader has further reduced his legitimacy. The vote matters to Iranians; the veneer of democracy in the system is a matter of national pride, and the Leader's repudiation of it will hurt him.
Finally, the opposition has been very effective in using Islamic symbolism against the Islamic Republic, focusing most of its protest on honoring the dead, wearing green, shouting ‘God is Great' from rooftops, and using other tactics reminiscent of the 1979 revolution. Especially in that context, every death will undermine the Leader's moral standing and further weaken the regime's legitimacy over the longer term.
Iran's hardliners will likely win the current battle in the streets, but Khamenei and Ahmadinejad now have a longer-term legitimacy problem. Further, if the regime continues on its current course, Iran will increasingly become a garden-variety military dictatorship, which would make the regime's ability to absorb internal shocks -- whether from economic crisis or social instability -- far narrower. The outcome of Iran's broader and deeper conflict is farther from certain. Iranian stability is in play as never before.
ALI SAFARI/AFP/Getty Images
The Call, from Ian Bremmer, uses cutting-edge political science to predict the political future -- and how it will shape the global economy.