Damage Is Done: The Bush administration’s bad Iran move
June 1, 2006, 8:36 am |
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by Michael Rubin
National Review Online*
June 1, 2006
http://www.meforum.org/article/939
* Cross-posted with permission
It did not take long for Iranian President Mahmud Ahmadinejad to slap down Secretary of State Condoleezza Rice’s offer of direct talks. “Rice’s comments can be considered a propaganda move,” Ahmadinejad told the Islamic Republic News Agency.
Rice’s announcement that U.S. officials were prepared to both offer the Iranian regime new incentives and sit down with it was a strategic fumble. Not only did Rice provide Ahmadinejad with an opportunity to humiliate the “arrogant power” to his domestic audience, but she also undercut what little international credibility the U.S. retains.
On its surface, the U.S. initiative was traditional diplomacy. Rice offered both carrots and sticks: “We are agreed with our European partners on the essential elements of a package containing both the benefits if Iran makes the right choice, and the costs if it does not.” But the devil is in the details. The stick—if Iran remains noncompliant—is a vague European and Russian commitment to consider sanctions at the United Nations. What specific sanctions? Not decided. What time frame? Undetermined.
Should Washington trust European and Russian sincerity when it comes to a fundamental threat to U.S. national security? In Bush’s calculation, the worst outcome would be for the Islamic Republic of Iran to possess nuclear bombs. For many Europeans, though, the idea that the U.S. might act forcefully to deny Iran nuclear weapons is a greater threat. And so they encourage an administration more eager to please the international audience than lead it to once again entangle itself in multilateral obfuscation.
It is tempting to believe engagement can succeed, but precedent suggests otherwise. In early 1992, Berlin inaugurated a policy of critical engagement with Iran, believing that dialogue and concession could draw the Islamic Republic into the norms of international behavior. Soon after, on September 17, 1992, Iranian government assassins murdered four Iranian dissidents in Germany. On April 10, 1997, a German court found that a committee composed of Iranian Supreme Leader Ali Khamenei, Iranian President Ali Akbar Hashemi Rafsanjani, and intelligence minister Ali Fallahian had ordered the hit. Rather than moderate, European concessions convinced Iranian leaders that they could get away with murder. They did.
After delivering to their Iranian counterparts a strongly worded tongue-lashing, European officials tried again. Between 2000 and 2005, European Union trade with Iran almost tripled. Oil prices surged. But rather than invest its windfall in civil society and basic infrastructure, the Iranian government—at the time in the hands of so-called reformists—poured its hard currency into a clandestine nuclear program. On September 24, 2005, the International Atomic Energy Agency found Iran in non-compliance with the nuclear non-proliferation treaty’s safeguards agreement.
European negotiators tried once more. On November 15, 2004, the Iranian government agreed to suspend uranium enrichment—the same demand Rice made yesterday. Iran got what it wanted: A decision not to refer the matter to the United Nations. The next day, the Daily Telegraph reported, that Foreign Secretary Jack Straw said “he was confident that Tehran was taking its commitment seriously.” European backslapping was short-lived. Iran decided to backslide on its commitment and again began to enrich uranium. It was typical Tehran behavior. Iranian diplomacy consists of one step forward, two steps back. Western officials meet backsliding—however large—with a click of the tongue; they mark forward progress, however slight, with concessions. That the net vector is backwards matters not when diplomats just seek to win the next promise or transitory deal.
European governments are not the only ones who have experienced Iranian insincerity. Washington has too. Prior to the Iraq campaign, the Iranian government pledged to not interfere. They broke their promise within days of the fall of Saddam Hussein. Today, Iranian intelligence has free reign over southern Iraq and, increasingly, Iraqi Kurdistan. None of this should come as a surprise to Washington. Iranian government officials consider U.S. red lines to be drawn with pencil on sand.
Foggy Bottom’s fundamental misunderstanding of Iran is dangerous. There was little surprise to Rice’s about-face. Undersecretary of State for Policy Nicholas Burns has long urged direct negotiation; he can be persuasive. There is a mantra in Foggy Bottom—inculcated in diplomats from their very first day in the A-100 class—that any problem can be solved with discussion and negotiation. In some cases this is true. But it also reflects a projection on the part of U.S. diplomats who feel that all problems are political and solutions lie only in discovery of some magic formula of incentives and compromises. But multiculturalism is not just about celebrating diversity. It is also about recognizing that those from other nations and cultures can have different ideologies, values, and thought processes. “Diplomacy is much more than just talking to your friends. You’ve got to talk to people who aren’t our friends, and even people you dislike,” former Deputy Secretary of State Richard Armitage told the New York Times. Perhaps. But does Khamenei view diplomacy the same way? Where did Iranians learn the art of negotiation? In some swank Virginia institute or in the bazaar? How did a lifelong seminary education shape Khamenei’s perception of the West?
If Rice’s offer was just a misstep—to be forgotten like Madeleine Albright’s—then no harm done. But Rice set a precedent. Her offer may have sought to solve one problem, but it signaled other nations that the path to concession and recognition lies through proliferation, not compliance. Washington’s handicap has always been the triumph of short-term fixes over long-term strategy. Why should any country voluntarily forfeit a nuclear program as South Africa and Brazil once did, or nuclear weapons as did the Ukraine and Kazakhstan?
The damage caused by Rice’s offer to the people of Iran may be irreversible. She can speak of how “President Bush wants a new and positive relationship between the American people and the people of Iran.” But if so, why recognize and legitimize the unelected regime which is oppressing them? In 1953 and 1979, the U.S. government supported an unpopular leader against the will of the Iranian public. Why, in 2006, should we make the same mistake a third time?
During his second inauguration, Bush declared, “All who live in tyranny and hopelessness can know: The United States will not ignore your oppression, or excuse your oppressors. When you stand for your liberty, we will stand with you.” Nothing could be further from the truth. The wholesale abandonment of those seeking liberty goes beyond Iran. When Rice announced the reestablishment of diplomatic relations with Libya, she did not mention democracy. Likewise, Rice has broken her promises to the Egyptian people. On May 25, Egyptian police beat and sodomized a 24-year-old protester Muhammad Sharkawi. His crime? Holding a sign reading, “I want my rights back.” The Egyptian government has denied him medical attention, and those monitoring his case in Cairo say his breathing is labored due to cracked ribs, and he is urinating blood due to other internal injuries. Both the State Department and the U.S. embassy in Cairo remain silent.
On September 20, 2001, President Bush declared, “Either you are with us, or you are with the terrorists.” With Bush’s decision to abandon freedom-seekers across the region, and reward a terror-sponsoring Iranian regime in noncompliance with its international commitments, the White House has signaled to the world, stand with us if you want, but we only respond when you’re against us.
Michael Rubin, editor of the Middle East Quarterly, is a resident scholar at the American Enterprise Institute. He is co-author, with Patrick Clawson, of Eternal Iran: Continuity and Chaos.
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June 2nd, 2006 at 1:35 am
Soros and Me Part VI
Bankruptcy Bills Break into Global Bloodletting as Ballooning Bankruptcies Bleed Bush’s Bungling Economy and Boom Boom, Boom, it’s a Real Estate Bust all over… But, but, but…
By Alex S. Gabor
A 10% annual return on an investment of $400 billion should return $40 billion a year, but not in our current war economy. Americans will never see a single penny return on billions spent so far on the war on terror.
It is a growing liability not only in financial and economic terms but in social terms for generations to come.
This reality is hitting home so much so that the current administration is changing its marketing and sales strategy to the global investment community by renaming it “The Long War” and shuffling top level positions within in an effort to save face, which it lost on the day it was announced “Mission Accomplished”.
Some foreign central bankers have come up short shrift of any sense of economic sanity.
This does not bode well for the US long bond or the U.S. Dollar.
In studying investors and particularly billionaires’ buying habits of risky and blue chip investments, it is noted that they tend to stay away from mismanaged companies, almost as if relying on a sixth sense to avoid failure, most of the time.
They also know when it is time to shift away from mismanaged national economies and try to get out before the stampedes from burning theatres wake up the sleepy hollows of humans hankering for a helping of wealth while the captains of industry are fast asleep at the wheel.2005 saw the most noteworthy year for bankruptcy in the history of that legal economic bloodletting process.
America and the world saw some of the largest public company filings ever. The all-time infamous list of chapter 11 “super-mega” cases added three new super novas in 2005.
Delta Airlines (tenth on the all-time list) was the first to file in September. Saddled with over $28 billion in debt, Delta became yet another victim of the lingering malaise that has beleaguered U.S. and foreign air carriers alike since the 2001 terrorist attacks.
Blaming nearly $22 billion in debt, crushing pension obligations and skyrocketing fuel costs, Northwest Airlines also filed for chapter 11 in September.
That is $50 billion in debt relief from just two firms who cannot compete in a restructuring industry bloated with antiquated planes, much like the auto industry which faces stiff future competition for fuel economy from alternative fuel powered transportation systems.
Contrary to this sickly industry which was impacted by 911 more than any other economic or fundamental event, and in which some who shorted their stock prior to the event profited enormously but are yet to be brought to justice, George Soros has stayed the course through his Soros Fund Management by retaining a 14% stake in Jet Blue and Hainan Airlines, two growing airlines who are capturing greater market share away from the beleaguered dinosaurs with badly managed debt and the pension liabilities of older airline businesses.
The Scandal-ridden futures trader Refco, Inc. sought chapter 11 protection in October, listing over $33 billion in assets and $16.8 billion in debt, which entitled the company to slot number five on the all-time big bankos list. The public story for the cause was a missing $500 million which had been paid back the day after the bankruptcy filing.
The real story was covered up in order to prevent widespread panic in the financial system, namely the parking of open naked short positions which would never need to be covered in thousands of accounts held by Refco for dozens of outside financial institutions and broker dealers playing in the derivatives market.
By such instruments is meant convertible debentures, futures, options, puts and calls whose underlying assets had become worthless in the financial markets.
In 2006 and beyond, there appeared to be many efforts being made by the administration through the regulatory process to stem the bloodletting so as to avoid the patient hemorrhaging from uncovered naked short positions amounting to over a trillion dollars and $200 billion in losses to small business investors over the past decade.
This has been all dross to placate angered small business men who see the rape and pillaging of their earning power as more than a gross injustice.
Uncoverable positions in the derivatives market are now estimated to exceed $15 trillion and rising as the national debt approaches an unconscionable $10 trillion.
These gaping black holes in the economy are slowly coming to light through the efforts of scattered groups of investors and lawyers who see the heart of the problem but yet are being denied their perceptions through various forms of legal covering up, rather than forcing the market participants from paying up, which of course would bankrupt some of the largest broker dealers in America who all participated in the scandalous practice of naked shorting.
The new Fed Chairman and incoming Treasury Secretary have inherited an octopus whose tentacles have outgrown its ability to survive without some massive tactical surgery on the part of the patient. But the patient has no scalpel.
The entire class action lawsuit industry is being rattled by the indictments of prominent top law partners and their shilling lackeys who got kickbacks for acting as lead plaintiffs in dozens of lawsuits against major US corporations over the past 25 years.
There is no place in America where the long arm of justice has not uncovered corruption.
Power generator Calpine Corporation filed the eighth-largest U.S. bankruptcy on December 20, 2005 listing more than $22.5 billion in liabilities after prices for natural gas, used to fuel its plants, soared to record highs.
Soros, still the 55th richest man in the world, in the previous quarter had dumped a large portion of his energy holdings not necessarily presciently but because of market fundamentals which indicated that continued rising oil and gas prices would force the fed to keep raising interest rates to fight inflation.
He of late has been shifting out of consumer, health care, oil, energy and war stocks, and is betting more and more on technology.
The raising of rates is not over as the Fed is battling to keep the dollar the global oil gold standard against Iran’s plan to establish the Iranian Oil Bourse which will shift trillions of petrodollars into petroeuros as contracts on that exchange will be settled only in Euros, a soaring currency against the US Dollar as central bankers and global flight capital seeks safer havens.
Several multi-billion dollar bankruptcy filings in 2005 did not make the all-time list. American Business Financial Services, Inc., the holding company for American Business Credit, which originates, sells and services home equity and small business loans, filed for chapter 11 in January of 2005, listing just over $1 billion in assets.
The mortgage industry is down 50% from two years ago and even larger bankruptcies loom on the horizon.
This was symptomatic of the growing ever larger ballooning of the regionalized real estate markets, where previously both Fannie Mae and Freddie Mac went through some serious scrutiny by Congress and federal regulators.
Both of these government sponsored institutions were spanked by mega lotto sized fines, but they didn’t cry very long before they were back to business as usual.
In fact, 90% of all loans underwritten using the stated income and no asset verification loans which are then repackaged and sold off to foreign investors contain lies, false financial information and outright corrupt data which is yet to be uncovered by the regulators who keep looking the other way, despite many settlements in the past five years for predatory lending practices.
Both FNM and FRE managed to come through relatively unscathed, and rumbling forward they are equally open to severe losses in their portfolios due to rising short term interest rates and foreign investors losing confidence in the squeaky American war machine as civil wars gradually break out all over the Middle East, miring hundreds of thousands of troops into a morass of mindless murdering of the minions of the Muslim world.
Facilities-based competitive local-exchange telecommunications carrier McLeodUSA filed for bankruptcy for the second time in three years at the end of October, 2005 listing $1.025 billion in assets.
Last February saw filings by Winn-Dixie Stores, Inc. with $2.6 billion in assets, a regional grocery chain with 920 stores in eight Southeastern states and the Bahamas, which like Safeway and Albertsons still faces growing competition from Costco and Wal-Mart stores.
Rumblings of General Motors possibly filing bankruptcy worked their way through the market but by the end of April of 2006, those had died down and the PR men at GM took over, but Soros stayed mostly out of that blue chip according to its SEC filings.
Now there are rumblings of potentially merging both Ford and GM so there is only one main US auto maker left, to prevent either one from collapse and creating even larger economies of scale, while jobs keep getting sent to places where the cost of doing business is cheaper for labor, the currencies are rising against the dollar, the sales are gaining far faster than in the US, thus setting the stage for more layoffs, more bankruptcies, and ever more foreclosures as rates are risen above the rational expectation of economists who seem to never get it right.
Tower Automotive, Inc., the world’s largest supplier of vehicle frames, sought chapter 11 protections to restructure $1.3 billion in debt that same month.
Collins & Aikman Corporation, a supplier of car interiors, filed for bankruptcy in May listing approximately $3.2 billion in assets and nearly $2 billion in debt, and citing a cash shortage after U.S. carmaker customers cut production and material costs rose.
America’s biggest auto parts maker Delphi Corporation rounded out the billion-dollar club in 2005. It filed for bankruptcy in October, listing $17 billion in assets and $22 billion in debt, including an $11 billion under funded pension liability.
ASARCO LLC, a subsidiary of Grupo México, the world’s sixth-largest copper producer, sought chapter 11 protections in August, citing a combination of environmental liabilities, lawsuits from former workers with asbestos-related health problems, high labor and production costs and continuing industrial action. The company listed $1.1 billion in assets and $1.9 billion in debt.
The results of this curtailment of copper production have seen global copper prices soar to record levels while seigniorage on Lincoln Head pennies by the US Mint seems to be waning in the process.
The U.S. Penny is the most minted coin in the world. The value of a penny is actually higher than its face amount due to its copper content, which hasn’t really happened since the last time the copper content of pennies was shorted by replacing it with nickel, whose value, which among other commodities, including sugar, zinc, platinum, gold, and various other metals used in industrial production has soared as the Fed and US Treasury have fed almost 3 trillion fresh dollars into an already inflated global economy.
Overall, 80 public companies filed for chapter 11 protection in 2005, with an aggregate pre-petition asset value of nearly $134 billion. By contrast, 2004 saw 92 public company chapter 11 cases, with an aggregate pre-petition asset value of only $47.7 billion.
While 2005 was the year for bankruptcy reform, 2006 is the year when America realizes it is under siege.
After more than five years of partisan infighting, President George W. Bush gave his imprimatur last April 20 to the Bankruptcy Abuse and Consumer Protection Act of 2005.
The most sweeping changes to U.S. bankruptcy law since 1994 became effective on October 17, 2005, precipitating a blizzard of last-minute consumer bankruptcy filings to avoid the more stringent eligibility requirements created by the new law.
Since then the number of individual bankruptcies has soared while notices of foreclosure and default have risen by 50% in some states due to adjustable rate mortgage payment shocks to consumers who were suckered into ultra low, some as low as 1%, refinancing schemes, which added to the real estate bubble, a balloon which popped late in November 2005, whose after shocks are just now being rumbled about by the likes of Warren Buffet at the most recent annual stockholders meetings of Berkshire Hathaway, and Soros who in January predicted that the real impact of the blow out of real estate balloon bursting would not be recognized by the vast majority of Americans until some time in 2007.
It is going to get far worse as $2.7 trillion in adjustable rate mortgages are reset to higher rates, some jumping as high as 3%, over the next 12 months. And fixed rates are not going to be lower any time soon. The entire industry is caught in a trap. It can’t walk out because it is so in love with itself. So it will get blown out!
But the siege is not from terrorists for they have all been beaten back across the ocean, even rumors of thousands of sleeper cells in the US have all but faded from the front pages of eyeball catching bloggers pages and TV sets.
It’s not coming from the seething masses of impoverished people who remain the majority of this planet who earn less than $500 a month, denizens of the failed war on poverty of the early 60’s and 70’s, who can hardly survive any pending global economic meltdown.
Nor is it coming from the millions of drug addicts who have become the de facto casualties of the failed war on drugs, or the five million and counting prisoners of that failed campaign many who are serving life sentences for non-violent crimes in America’s prison system.
Like the war on poverty, the war on drugs, the war on terror is a failure and has only served to stir up the rebellious nature of humans who do not like liars, tyrants and thieves being in charge of their destinies.
No, the real siege is coming from smart investors whose capital flight is highlighted by NASDAQ’s recent purchase of 25% of the London Stock Exchange, using borrowed funds from Bank of America, and the New York Stock Exchange Group buyout of Euronext for $10 billion, setting the stage for a huge hedge position against the impending collapse of the US dollar.
The amount of capital fleeing America in expectation ahead of the collapse, regardless of any secret plunge protection teams at the treasury or Fed, is increasing in quantum leaps because everyone knows, you don’t throw good money after bad, and America’s money has become so corrupt, tainted and dirty, covered in the blood of civilization, that sane men know that the only way to stop a madman is to cut off his money supply.
And where are these growing trillions in flight capital coming from?
From the hedge fund industry that is shorting the banks, the real estate trusts, the mortgage industry, the home builders, the title insurers, and any public company which has depended so much on the real estate industry over the past decade of falling interest rates, that their very own myopia is causing the downturn.
Welcome back stagflation, welcome back George Soros, the stage is set for someone to become the world’s first trillionaire.
Developing nations hold more than $1.5 trillion in surplus foreign exchange reserves, almost $3 trillion in corporate bonds, and over $3.5 trillion in U.S. government debt obligations, all of it denominated in dollars.
It is those very same nations who don’t like bullies, bellowing and bloating about their own blunderingly bad foreign policies.
They’d rather sell than listen to more of it.
In 1993, Soros leveraged his Quantum Fund to short the British Pound and made $1 billion in one day.
Today, the stage is set for the next generation of Soros’s to short the dollar and make a trillion in one day. The computer technology is in place. All that is left is for someone to click on the send button.
Copyright © 2006 by Alex S. Gabor Syndicate. All World Rights Reserved. Reprinted with permission.
June 2nd, 2006 at 12:44 pm
After WWI, the American mood turned inwards and for about 2 decades thereafter, America was quite content to not have much to do with the rest of the world, to enjoy its own successes at home and limit sharing their good life by restricting immigration.
Those were the years of American isolationism.
Brought into WWII and figuring largely in the victory, America suddenly found itself on the world stage with the admiration of a great many nations that wanted to rub shoulders with it.
To be sure, not all nations were so enamoured with such a powerful single nation and the Soviet Union at the close of the war managed to carve out its own sphere of influence. So began the cold war.
In spite of tensions between East and West, America basked in the glory of being top dog for the West and enjoyed admiration and respect of many Western nations.
My how have things changed.
America now abhors the thought of being isolated on the world stage. It craves the leadership role it once had amongst its traditional Western and European allies and desperately feels the need for their friendship, adulation and respect of old.
Other Western nations, typified by the EU are looking out for their own interests. Those interests are bound up more in oil than being tight with America. Two factors motivating the EU nations in their pursuit of self interest is greed in respect of oil and fear of angering the oil producing nations, either directly or indirectly.
Specifically as regards Iran and its nuclear agenda, the EU has like the cowardly inept and eunuchian U.N. have only been able to muster some sputtering discontent with Iran’s lies and threats, but they stop short of imposing real sanctions with real teeth to stop Iran. Many would say it comes back to greed and fear surrounding the world’s oil based economy.
It is however easy for the EU to now try to lay off blame for failing to deal with Iran, by saying they have no choice but to throw their hands up in the air, since Russia which has armed Iran and enabled its nuclear program and China that is dependent on Iran’s oil say now quite openly they will prevent any hostile and invasive sanctions by the U.N. against Iran.
America has come to the point that it cannot live without and cannot effect its foreign policies without its traditional friends and allies which it either pays for now or align its policies closer to the Western eunuch nations.
So what is options are left for America, but to offer to negotiate with Iran and take comfort in the pretence that negotiations offer some sense something is being done and there is yet hope
This at least in part explains Condoleeza Rice’s carrot and stick offer to Iran to negotiate. There is in her message a lot of carrot and very little stick, if she is really carrying any stick in her hands at all.
It looks more and more that the U.S. would only be prepared to go it alone against Iran with a few Western nations it still might be able to count on, if Iran becomes bold enough to actually start carrying out its threats against America.
On the other hand, America like the EU are maybe hoping that their favorite scapegoat, Israel may pull another rabbit out of the hat by a pre-emptive strike against Iran’s nuclear facilities as it did in 1981 when it bombed Iraq’s nuclear facility at Osirik.
Whatever fuzzy thinking pervades the minds of America and the EU as regards Iran and paralyzes them from acting, Iran’s thinking is crystal clear.
What Iran is thinking does not only not bode well for Israel, America or the EU, it bodes deadly.