By Pepe Escobar
So the grand Barack Obama administration foreign policy strategy of trying to square the circle between an Iranian nuclear deal and getting the eurozone economy back on the road slouches towards … what exactly? (See War and cheeseburgers Asia Times Online, May 22)
Not even Zeus knows. At least what was on the table this week in both Baghdad and Brussels has kept the ball rolling further on down the road in Moscow and Paris/Berlin.
The story in Baghdad
The much-anticipated meeting of the five permanent members of the UN Security Council – the US, China, Russia, Britain and France plus Germany (P5+1) with Iran in Baghdad at least
produced a result; a third round of negotiations in Moscow next month.
It couldn’t be any other way. A divided P5+1 (the US and the Europeans on one side, BRICS members China and Russia on the other) wanted Iran to totally halt their uranium enrichment to 19.75% – to which it has a right, as it subscribes to the nuclear Non-Proliferation Treaty (NPT). In exchange, the P5+1 offered a “sanctions-lite” package, allowing the sale of US aircraft spare parts and a vague “assistance” in developing Iran’s energy sector.
Tehran was unmoved; to succeed, this P5+1 package had to be “significantly revised and reformed”, according to the IRNA news agency. Tehran’s ultimate objective in these negotiations is to soften the Security Council sanctions. For the leadership, a schism is very clear between the UN as a whole and the wall of mistrust involving any US government. Both Russia and China support Iran’s position.
Tehran even accepts, in principle, the idea of a foreign supply of 19.75% enriched uranium for the production of medical isotopes at its medical reactor. And it might even agree with the International Atomic Energy Agency (IAEA) inspecting the military base in Parchin (although that is not part of the IAEA mandate).
But the key point is still that the P5+1 has turned the NPT into dust. The mantra since 2006 has been the same; Tehran must stop all sorts of uranium enrichment. This is being enforced by a nasty financial blockade whose ultimate aim is essentially to paralyze the Iranian economy – by preventing it from selling oil using the international banking system.
Unfair doesn’t even begin to describe it.
Then steps in the European Union (EU) – with its extra sanctions cum oil blockade, to be in effect in theory by July 1, in fact going beyond the Security Council sanctions, and virtually illegal to boot. This is compounded by a US law in effect on June 28 forbidding any foreign bank to be involved in payment for Iranian oil.
Yet the Obama administration needs a deal – be it in Moscow, or beyond. That will be essential for Obama to milk as a foreign policy triumph – in fact much more substantial than the milking of the Osama bin Laden raid (see Osama re-elects Obama Asia Times Online, May 25). If there is no deal, the Obama administration will have to exert much pressure for the EU to scrap, at least until the end of 2012, the ban on insurance of tankers carrying Iranian oil (EU companies control most of the global maritime insurance industry).
Who’s suffering with the sanctions? Not the suspected “regime change” target – the Tehran leadership. The military dictatorship of the mullahtariat stays comfortably in place with oil above $54 a barrel (Brent crude is at around $106, and West Texas Intermediate at $90). Moreover, Tehran is selling energy in every currency from yuan to Indian rupees, and is engaged in wholesale barter with its customers – especially Asian.
The bottom line though is clear; the EU will have to scrap its absurd Iranian oil blockade to avoid badly hurting itself and also, by extension, the US economy.
The story in Brussels
It was up to German weekly Der Spiegel  to gleefully register the birth of Merkollande.
New French President Francois Hollande drew a monster crowd during his first press conference after a EU summit – starting way beyond 1 o’clock in the morning and speaking for over an hour; for her part German Chancellor Angela Merkel faced a half empty room for five minutes.
The stage is set for a Gotterdammerung-style clash. Hollande will go no holds barred to prove to Merkel that issuing euro bonds is the only way out of the eurozone disaster.
Hollande insists that would be a mighty help to hyper-troubled Spain, for instance, in terms of saving on huge interest payments and using the money on productive investment. Hollande is supported by Spain, Italy, Ireland and Austria.
Merkel’s argument is the troika (European Central Bank, European Commission, International Monetary Fund) argument; euro bonds violate EU law. She is supported by Sweden, Finland and the Netherlands. Yet even Hollande admits EU treaties would have to be modified to accommodate euro bonds – and that would be a mess, as Britain and the Czech Republic already rejected an amendment to the treaties late last year.
The whole situation is immensely complex. Hollande let it be known that some EU members would accept euro bonds only in a distant future; some may accept them for a very specific purpose; and some reject it outright.
European bankers, for their part, take refuge in a fuzzy “debt sustainability” concept; somebody’s got to pay, and it’s basically the bulk of the salaried population. No wonder Nobel laureate Joseph Stiglitz is fuming with the “pontifications” of “those who, at the helm of central banks, finance ministries and private banks, steered the global financial system to the brink of ruin – and created the mess”.
No one seems to be betting on multi-year subsidies of core European countries to the periphery, most of them part of the Club Med. At the same time, everyone knows there’s never been an “exit” sign on the euzone. Now, though, the unthinkable is already thinkable.
Anyway, what is being described as a Orwellian “growth package” will only be decided on at the next formal EU summit in late June – after two crucial events on June 17; the French parliamentary elections, and the possible victory of the left-wing Syriza party in Greece, whose key platform point is to renegotiate the country’s bailout imposed by Berlin/Brussels.
Incidentally, EU political leaders have absolutely no clue what to do with Greece. While they reassure the god of the market saying Greece will never leave the euro, they threaten Greece saying, “If you don’t vote the right way, you will be out of the euro.” No wonder the Obama administration is perplexed. Compared to this, killing Osama was a piece of cake.
1. See here.
Pepe Escobar is the author of Globalistan: How the Globalized World is Dissolving into Liquid War (Nimble Books, 2007) and Red Zone Blues: a snapshot of Baghdad during the surge. His most recent book, just out, is Obama does Globalistan (Nimble Books, 2009).