Security

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

By Peter Feaver

Our sister blog, The Cable, reads the tea leaves and has concluded that President Obama has made his decision on Afghan Strategy Review 2.0 and is preparing for a roll-out sometime around the 19th or 20th of November. Senior officials are clearing their schedules, giving heads-up to allies, and generally girding their loins for a major public relations push. But a push for what?

McClatchey reports that, as expected, the president will split the difference between his warring advisors. He will embrace the counterinsurgency approach recommended by General McChrystal and other military advisors. He will reject the narrower approach favored by Vice President Biden and other political advisors. But he will not authorize the upper-bound of military resources McChrystal requested. If the McClatchey report is accurate, the final choice comes close to resembling the option dubbed "McChrystal light," but probably not light enough to avoid a political battle with the anti-war faction at home.

As slow and painful as the review process has been, the hard part is just beginning and the Obama team seems fully aware of this. According to the McClatchey report:

Administration officials also want time to launch a public relations offensive to convince an increasingly skeptical public and a wary Democratic Congress -- which must agree to fund the administration's plan -- that the war, now in its ninth year and inflicting rising casualties, is one of "necessity," as Obama said earlier this year.

"This is not going to be an easy sell, especially with the fight over health care and the (Democratic) party's losses" of the governors' mansions in New Jersey and Virginia last week, said one official.

Persuading the public to support his new strategy will be hard, and the clumsy review process has made it harder.  But it is not impossible.  President Bush faced far more daunting political odds in January 2007 when he opted for the Iraq surge. Some of the lessons the Bush team learned could be of value to the Obama team as they plan their roll-out:

• The media will focus on the numbers, but the President should focus on explaining the strategy and demonstrating his commitment to seeing it through because the numbers are likely to change. President Bush opted for the upper-most bound of the recommended surge of troops -- 5 Brigade Combat Teams (BCT) -- and yet when General Petraeus took over, he actually requested additional troops beyond those. Because Bush never publicly discussed the 5 BCT surge as the "uppermost bound," he could finesse these additional requests without triggering whole new "surge debates" each time. Obama should be careful not to paint this as the "last and final time we will send additional troops." That may be his fervent hope, but he should not handcuff himself to a hope.
• The president will need a convincing answer for why he is authorizing a smaller surge than McChrystal requested. It is the president's call to make, but the experience of the Iraq war is a painful one in this regard. Secretary Rumsfeld still faces scathing criticism for trimming the troop requests of the original invasion -- for appearing to have authorized a bit less than needed rather than a bit more than was required. Obama must persuade the public not to view him as a latter-day Rumsfeld.
• The president and his political appointees, the Secretary of Defense and the Secretary of State, should carry the lion's share of the political water in persuading Congress and the American public. But they cannot do it alone, because polls indicate that the public trusts the military far more than the president to "make the major decisions on overall military strategy and the number of troops needed" -- by a whopping 62-25 percent spread. That means that Obama will need General McChrystal to validate publicly Obama's decision, just as General Petraeus validated publicly Bush's surge decision. The Obama team must be ready to call the critics to account if the anti-war faction attempts to smear McChrystal the way they tried to smear Petraeus. As much as possible, the generals should be left to focus on the military fight and kept out of the political fight.
• The president should spend the political capital to preserve bipartisan support for the new strategy. Unfortunately, support for the Iraq surge came down to the slimmest of Republican-only margins (plus Senator Lieberman). Here Obama has a decided advantage and he should exploit it. Republicans are far more committed to a robust approach in Afghanistan than were Democrats in Iraq and Obama could bring them on board. To do so, he should drop the partisan trashing of the previous administration and finally deliver on his campaign promise to seek a genuine partnership with Republicans. On this issue, he will need robust support from the center and the right and he should take the requisite steps to secure it.
• The president will have to accept the unfairness of the media, which will scrutinize his proposal with excruciating rigor while giving a breezy pass to the alternative strategies promoted by his critics. The media never rigorously evaluated the proposals of the Iraq surge critics and so the political debate over the surge was never on a level playing field.  President Obama and his team should expect the same kind of treatment, and indeed may be facing the same chorus of critics. The opponents of the old Iraq surge are girding their loins to fight a new Afghan surge. The Obama team must do more than simply whine about it. Instead, they must take upon themselves responsibility for explaining the myriad problems with off-shore counter-terrorism, McChrystal Super Light, or any of the other alternatives that arm-chair generals promote. By and large, the watchdog media will likely give the critics a free pass.

Of course, the most important lesson is the most obvious one: pick the right strategy. President Bush was able to prevail politically over the surge opponents because, at the end of the day, the surge produced dramatic results on the ground. Had the surge not reversed the trajectory in Iraq, then no amount of domestic political resolve could have saved it.

If President Obama's choice is a similarly wise one, and if he devotes the concentrated effort to explaining his choice to a skeptical Congress and American public, Obama can reverse his Afghan slide. If not, our wartime Commander-in-Chief will face even more daunting decisions down the road.

NICOLAS ASFOURI/AFP/Getty Images

By Tom Mahnken

Surprises?

I'm surprised that the Obama administration hasn't tackled the reform of U.S. national security institutions. Before assuming office, many of the administration's top officials -- to include Jim Jones and Dennis Blair -- argued persuasively for the need to update the organization of the national security community to meet the challenges of today and tomorrow. Since assuming office, the administration has been largely silent on the issue. There's still time to act, but the momentum for change appears to be slipping away.

Praiseworthy?

Easy. The decision to keep Secretary of Defense Robert Gates and a handful of his advisors onboard was a wise one.

Predictions?

I predict that a year from now we're likely to be involved in a crisis that the administration either hadn't foreseen or for which it hadn't adequately prepared. I can't tell what that crisis will, be of course; merely that the unexpected is to be expected.

Chip Somodevilla/Getty Images

By Aaron Friedberg

Philip Zelikow's interesting posts on the incoming administration's plans for economic recovery point to another set of issues that is worth thinking about. What is at stake in the current crisis is not only the wealth of nations but their power. When the smoke clears, some countries are likely to find themselves weaker than they might otherwise have been, while others may actually come out stronger.

It's easy to see a number of ways in which the U.S. position could be weakened by recent events. A prolonged recession may fuel protectionism, strengthen isolationist sentiment, and in general cause us to pull back from the world. This impulse may be strengthened by the fact that huge fiscal deficits and demands for big new domestic programs will put significant downward pressure on defense budgets and foreign aid. While the crisis has boosted demand for the dollar in the short run, in the long run its appeal as the world's reserve currency is likely to dwindle. Finally, in the "soft power" department, our national reputation for economic competence has obviously been tarnished, and some have suggested that the U.S. model of free-wheeling capitalism has also suffered long-term damage.

Because power is always relative, however, it's important to look at the other side of the equation. China might appear in certain respects to be the country that stands to gain most from our troubles, but, at least in the near-term, it may face even greater challenges. Plummeting demand for Chinese exports is slowing growth, forcing factory closures and boosting unemployment. Violent protests over lost jobs and unpaid wages, already common, are likely to become even more so. The next few years will test the ability of the Beijing regime to ride out an extended economic downturn without major political instability.

One beneficial, albeit temporary, consequence of the global economic slowdown has been a fall in the demand for, and price of, oil. This could lessen Russia's ability to flex its muscles and intimidate its neighbors. Ditto for Venezuela.

Most interesting, and perhaps most promising, is the case of Iran. Falling oil prices have hurt its already ailing economy, damaged the political prospects of its present government and may just possibly render it more vulnerable to a coordinated campaign of international pressure to force it to abandon its nuclear program. Ironically, and unexpectedly, the world economic crisis could wind up presenting the United States and its European allies (along with Russia, Japan and China, if they can be brought into line) with their last best chance to stop Iran from getting the bomb. The Obama administration would be well advised to seize this opportunity.