What does the ongoing BP oil spill imbroglio in the Gulf have to do with the war in Afghanistan? Probably not much, from the vantage point in the United States. But here in London this week, the two issues are being linked in some ways that should be worrisome for the Obama administration. 

Two particular stories have featured in headlines in the major U.K. newspapers this week: BP's plummeting share price from President Obama's rhetorical attacks, and the London visit by Secretary Gates and General Petraeus urging a continued strong U.K. troop commitment to the NATO mission in Afghanistan (followed by Prime Minister David Cameron's surprise visit to Afghanistan today).  Separate though they may be, the two stories are combining to produce one narrative in the minds of many British citizens: the Obama administration is attacking a pillar of our economy while urging us to sacrifice even more blood and treasure in Afghanistan. 

BP of course bears the most blame for the catastrophic spill, as well as responsibility for stopping it and remedying the damage. And in the first few weeks after the rig exploded, there was little sympathy for BP even here in the United Kingdom. Most U.K. media coverage initially focused on the horrific environmental damage being wrought as well as the Obama Administration's apparent insouciance as the oil continued to gush.

But now that attacking BP (or "British Petroleum" as Obama calls it, even though that has not been the company's name since 1998) has emerged as a core tactic in the Obama Administration's scramble to arrest their own falling political fortunes, they risk doing real damage to relations with a key ally and the largest non-U.S. troop contributor to Afghanistan.

As recently as two months ago, BP was Britain's largest company by market cap, and is a core holding of most British pension funds. In other words, it is not just BP executives or investors in the City who take a hit when BP's share price plummets, but also every average Brit who has any type of stake in a retirement fund.  Which is most of the country -- many of whom have also grown weary and skeptical of their nation's military role in Afghanistan. 

Last week had already demonstrated one unintended consequences of the administration's intensifying campaign against BP: the vocal attacks that drive the share price down also erode billions of dollars in market value and diminishes the resources BP will have available to pay for the damage, clean-up, and compensation. The White House needs to be mindful of not going too far and triggering a second unintended consequence of further eroding British support for their force posture in Afghanistan. Fortunately at the U.K. end, Prime Minister Cameron, at least up to this point, is trying deftly to strike a balance and not further escalate tensions with the United States either over BP or over Afghanistan.

Pursuing a unified grand strategy is always a hard task, but this situation shows even more acutely the challenges of linking domestic and foreign policy such as the Obama administration's National Security Strategy attempts to do. Last week it was American strategic interests in Asia that got short shrift, as Obama cancelled (again) his Australia/Indonesia trip to focus on the BP spill. This week it is the U.S.-U.K. relationship that is suffering, as a beleaguered White House tries to shore up its domestic political standing at the expense of relations with a key ally.

By John Hannah

Are the Saudis prepared to constrain oil prices to weaken Iran? It's an intriguing possibility that, if implemented, could have major implications for U.S.-led efforts to curb the Islamic Republic's nuclear program.

In no small part because of a weakening dollar, oil prices have risen for most of the past year from a low of close to $30 per barrel to around $82 per barrel last week. But since then, prices have been slowly sliding back, dipping below $77 yesterday. Most media attributed Thursday's decline to a report that U.S. oil inventories had increased higher than expected, and that U.S. consumers continued to reduce energy use in a still sluggish economy. No doubt true. But other factors have been at play as well.

Specifically, the near-record stockpiles of oil that currently exist not only in the United States, but across the developed world, have been made possible by the fact that OPEC has been increasing output at the fastest pace in two years. Earlier this week, Bloomberg reported that the cartel has boosted production more than a million barrels a day since March -- despite the worst global recession since World War II. OPEC's largest producer, the Saudis, have helped lead the way, increasing exports four out of the past six months. Saudi output has increased almost 300,000 barrels per day since earlier this year. Overall OPEC production reached its highest level in 10 months in October.

The Saudis have said that $75 per barrel is an appropriate target price. This week, a Saudi government advisor told the press that, at over $80 per barrel, prices had reached "the high end of our range" and any further rise could prompt the Kingdom to further tap its unused capacity -- which currently stands at approximately 4 million barrels a day.

The Saudis have publicly explained their effort to moderate prices as a function of their desire to protect a fragile global economy. But it's hard not to notice that the Saudi strategy also has the side benefit of pinching Iran. Specifically, while the Saudis in 2009 require an average oil price of about $51 a barrel to cover their budget, Iran needs an average price in excess of $90. If the price holds steady at the Saudi-designated range of $70-$80 for the rest of this year, the Saudi treasury could come in with a slight surplus. The Iranians, by contrast, have reportedly been forced to consider phasing out food and energy subsidies in an attempt to battle their looming fiscal problems.

Of course, reducing subsidies on essential commodities is almost always political dynamite -- especially in a place like Iran, where the economy is already in a shambles, and where millions of Iranians have taken to the streets since the fraudulent June 12 elections to make known their hatred of the current regime. The fact is that the Islamic Republic is desperate for increased cash flow that could be used to buy off as many of its disaffected citizens as possible and cover up its gross economic mismanagement. Saudi determination to limit any price spike -- for whatever reason -- is clearly an impediment.

With daily exports in the range of 2.5 million barrels per day, Iran stands to lose about $900 million annually from every one dollar drop in the price of oil. With excess capacity of 4 million barrels per day, the Saudis are clearly in position to go much farther than they have to date in squeezing Iran if they so choose. An aggressive Saudi effort to depress oil prices well below the current $75 target could prove extremely harmful to Iran's already reeling economy and tumultuous political situation. Almost certainly, such an effort could inflict as much pain on the Iranian regime as many of the sanctions currently being discussed by the United States and its international partners -- and, given Russian and Chinese reluctance to get tough with Iran, would almost certainly be quicker and easier to implement.

Would the Saudis really be prepared to play hardball with Iran in this way? In the past, the answer has usually been no. Taking big risks to offend more powerful neighbors has generally not been the Saudi way. A transparent effort to inflict major damage on the Iranian economy would certainly incur the Islamic Republic's wrath. The Saudis no doubt recall that a similar charge about depressing oil prices led Saddam Hussein to invade Kuwait in 1990. Even if an Iranian military attack is not likely in the cards, the Saudis have good reason to fear the kind of mischief Iran could cause within the Kingdom -- especially among the large, potentially restive Shiite population that is concentrated in its oil-rich Eastern Province.

That said, there's no doubt that Saudi King Abdullah views Iran -- and the near-term prospect of its acquiring nuclear weapons -- as nothing short of an existential threat to the House of Saud and its preeminent position in the Islamic world. There's at least some chance that he may be prepared to consider doing things now that in the past would have been unthinkable in order to prevent his worst nightmare from coming to pass -- especially if he's provided sufficient support, encouragement and guarantees from the United States and our major European allies.

In this regard, the current crisis in Yemen, in which Saudi forces have been drawn into combat on their southern border against Iranian-backed Shiite rebels, has only upped the ante. As with almost everything Iran does, Abdullah no doubt perceives the Islamic Republic's involvement in Yemen as the latest maneuver in a grand strategy whose ultimate target is the Kingdom itself and control of the Islamic holy sites of Mecca and Medina.

The big question is how far the Saudis are willing to go in drawing on their oil power to really do something about it -- something, that is, that actually stands a chance of either 1) compelling the Iranian regime to fundamentally re-calculate its nuclear ambitions, or 2) speeding the regime's unraveling at the hands of its already seething population. Of course, encouraging the Saudis to use oil as a political weapon is not without its downside risks; after all, the United States was on the receiving end of just such a Saudi gambit during the oil embargo that followed the 1973 Arab-Israeli war. But given the enormity of the stakes now at play vis a vis Iran -- both for the Kingdom and for the United States -- it's clearly an option that at least deserves serious consideration. One hopes that it's already the subject of intense consultations between Washington and Riyadh, preferably at the highest levels. Should the United States conclude that the potential benefits outweigh the risks, it will need to muster every instrument at its disposal to steel the Saudi king to take unprecedented measures to face down Iran's unprecedented challenge.               

Scott Nelson/KAUST via Getty Images