It’s a bit like the devil disliking the stench of sulfur, but Iran’s leaders now complain that the United States has thrown the Middle East into chaos in order to reshape the region. That is a man-bites-camel story. With the exception of the late Yasser Arafat, no one has wielded the weapon of instability with greater skill than Iran. Israel’s disproportionate response to the July 12 Hezbollah provocation changed the rules of the game in the region. Whether the players have the presence of mind to exploit the new rules remains an open question.

Persia’s new imperialists have grasped the shift in circumstances far more quickly than their obtuse counterparts in Washington. The benefits of chaos most likely redound to the US and Israel, even though squeamishness prevents Washington from thinking this way. The Iranians, who are utterly ruthless, profligate in the expenditure of human blood, and adept at the use of chaos as a strategic weapon, know just what is afoot.

“Israel is pushing the region into utter chaos,” warned the July 15 editorial in the Foreign Ministry daily Tehran Times, warning that America’s backing for Israel “will harm the whole world, from exacerbation of the global security situation to undermining the world economy.” The newspaper added that “the attack on Lebanon has already sent oil prices skyrocketing to an unprecedented high of [US]$78 per barrel.” Tehran’s instinct remains to respond to the threat of chaos by raising the ante by reference to the oil weapon.

On July 25, “Iranian President Mahmud Ahmadinejad said … that survival of the Zionist regime depends on creation of crises and unrest in the Middle East region,” Iran’s official Islamic Republic News Agency reported. On the same day, “Foreign Ministry spokesman Hamid-Reza Asefi said that the United States has thrown the region into chaos to reach its ultimate goal of the new Middle East,” again according to IRNA.

Iran now badly wants a ceasefire so that Hezbollah can claim a draw as a victory. A few Israeli analysts, although evidently not the government of Prime Minister Ehud Olmert, understand the game. “In a way, we’re playing an old Palestine Liberation Organization game, to precipitate regional instability and then try to bring in international intervention,” Israeli defense analyst Michael Oren told the New York Times on July 24. Oren, author of the standard history of the 1967 Arab-Israeli war, advocates an Israeli attack on Syrian armored divisions stationed on the Lebanese border.

Asefi and Oren understand the sea-change in the Middle East better than the US or Israeli government. Despite the vehemence of Israel’s initial response to the July 12 incidents, Jerusalem remains squeamish about casualties both among Israeli soldiers and Lebanese civilians. If the enemy employs civilian sites as artillery platforms, and civilians decline to leave after due warning, they are subject to attack. The three-score deaths at Qana are sad, but so were the 180,000 deaths during Lebanon’s civil war of 1976-80 and the million deaths during the Iran-Iraq War, including perhaps 100,000 12-to-14-year-old children sent by the Khomeinists into the Iraqi minefields. The political-religious current to which Hezbollah adheres holds the region’s record for civilian deaths, despite British Prime Minister Tony Blair’s crocodile tears.

Israel’s strongest move on the chessboard would be a massive armored incursion into Lebanon to crush Hezbollah combined with limited strikes against Syria. These would be costly in terms of human life, but that is the bill due the devil for fleeing Lebanon six years ago. The Israeli population longs for normalcy, and is loath to sacrifice its young men, a fact with which Hezbollah taunts them. It is far from clear whether Israel will convert a subtle but fundamental change in the regional balance into a strategic breakthrough.

Washington’s best move would be an ultimatum to Tehran with a deadline for dismantling its nuclear-weapons program, followed by aerial attacks in the event of non-compliance. Rather than engage the regime of President Bashar al-Assad in Syria, Washington should take the opportunity to destabilize it. Rather than attempt to hold together its Frankenstein monster in Iraq, it should partition the country. Sunnis and Shi’ites already are fleeing mixed neighborhoods and agglomerating into sectarian strongholds, and a broader population exchange is the best formula to suppress bloodshed.

In other words, in pursuit of its own best interests, Washington should do precisely what the Iranian regime fears that it may do. Tehran’s paranoia, of course, runs far ahead of Washington’s limited imagination. US Secretary of State Condoleezza Rice is skating in tighter and tighter little circles attempting to limit the war. The US demand for a 48-hour halt in Israeli bombing runs in Lebanon to which Israel acquiesced expresses the delusional hope that Sunni Arab states can be enlisted to oppose Iran and Hezbollah.

Israel, in summary, remains in denial about the failure of its withdrawal policy since 2000, and Washington remains in denial about the absurdity of its plan to stabilize the Middle East through democracy. That gives Iran considerable wiggle room to press ahead from an inherently weakened position.

Given Jerusalem’s reluctance to pursue an advantageous position with abandon, it is not clear how the near-term situation will proceed. A multinational peacekeeping force would have to confront a highly effective guerrilla force with a predilection for suicide attacks against foreign soldiers. Unless France is willing to deploy its Foreign Legion, it is hard to identify prospective participants. Most likely the situation will drag on well into August, when Iran must deliver an answer to the United States on its nuclear program.

What cards does Tehran have left to play? It can (1) further destabilize Iraq, (2) deploy terrorists against Israeli and US targets outside the theater, or (3) make good on its threat to wield the “oil weapon.”

If Washington really had a conspiratorial bent, it would provoke Tehran into wielding the oil weapon, with the objective of shutting off both Iranian oil exports and its imports of refined product. The world can sustain a loss of Iran’s 5% of world oil supply much better than Iran can sustain the loss of 100% of its oil revenues. Gasoline prices in the United States probably would double, ie, to the prevailing level in highly taxed Europe, or the equivalent of $6 a gallon (about $1.60 a liter). The Western economy would suffer, but Iran’s economy would implode. The Ahmadinejad regime would collapse in short order.

If Iran could bottle up the Strait of Hormuz, through which two-fifths of world oil exports pass, the position of the world economy might become desperate, but it is likely that the US 7th Fleet could prevent this.

In this scenario, Washington would exploit a one-time shock to oil prices to roll over political obstacles to stringent energy-security measures (rapid exploitation of domestic energy sources, building nuclear power plants, gasoline conservation). US consumption would suffer, but a shift from consumption to investment ultimately would benefit the US economy.

I very much doubt that President George W Bush has either the brains or the stomach to press America’s advantage. To a surprising extent, US leaders still swim in the goldfish bowl of the Cold War era. It has not quite dawned on them that the United States, in the parlance of options traders, is “long volatility.” As I wrote on January 26, 2002 (Geopolitics in the light of option theory):

The elder Bush and advisers such as James Baker and Bent Scowcroft, schooled in the Cold War, flinched at the thought of instability … Their strategic reflex came from the simple fact that the Soviet Union stood to gain from any instability outside its immediate sphere of influence. The more chaos, the more options open to the Kremlin. Now there is no Soviet Union. Russia remains occupied with domestic problems. China shows little inclination to fish in stormy waters far from its shores. No power stands to gain from instability other than the United States itself. American clients and enemies alike can twist and turn in the wind; America can watch and wait … Coups, revolutions, wars do not faze Washington. It can sit back like the council of gods in Homer’s Iliad, betting on the outcome and choosing whom to support and whom to undermine. From the standpoint of American interest, the more volatility, the more choices and the more influence.

This will not be the first time in history that a power with a potentially winning position frittered away its advantage by inaction. Germany in the First Morocco Crisis of 1905 comes to mind, when the opportunity arose to crush France at a moment when Russia was paralyzed by revolution and Britain had no interest in intervening. The most probable outcome is that Iran will feel emboldened by the resilience of Hezbollah and defy the West on the nuclear issue, and that the United States will attack Iranian nuclear installations this year.

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