A Worst-Case Scenario for Obama (and Us)

by Gary North
by Gary North

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I have given a lot of thought to this question: "What is the worst-case scenario that has a relatively high probability of taking place over the next six months that I want to prepare against?"

The worst thing that could happen to the American economy at any time would be the detonation of a nuclear bomb in the financial district of New York City. On a par with that would be the release of airborne anthrax in the same part of town. The terror caused by such an attack would cripple the banking system within hours. This would spread to the entire world. The economic breakdown would be rapid, and it would be extensive. I cannot think of any area of the economy that it would not affect adversely.

We have no idea what the odds are, for or against, for such an act of terrorism. Given the fact that it has not happened yet, the odds seem to be against it. So, looking at those events that have a reasonable probability of taking place over the next six months, we should not list this sort of terrorist mega-attack as being high on the list of priorities that we should be preparing for.

Then what is the worst scenario that is more likely? I keep coming back to the same event: war with Iran.

This can happen in either of two ways. First, the President unilaterally issues an order to one or more aircraft carrier task forces to bomb suspected Iranian nuclear production facilities. Second, the Prime Minister of the State of Israel issues a similar order to the Israeli Air Force. I think the second is more probable than the first.

These days, there is greater talk about this second possibility than there has been over the last year. There are signs that the Israelis are preparing to launch such an attack. While this is not being discussed on the evening network news shows, it is being discussed in the fringes of the mainstream media.

I was convinced as recently as last November that there would be war with Iran. Then, with the simultaneous release by 16 American intelligence agencies of a report concluding that the Iranians ceased working on a program to create a nuclear weapon back in 2003, I decided that the powers that be had boxed in President Bush on this issue. You can read the report here.

In other words, the American Establishment had decided that it would not be a good idea for the United States to attack Iran. But the American Establishment has only indirect influence over the decisions of the government of the State of Israel. The fact that America's intelligence agencies have concluded, for public consumption, that Iran is not pursuing the development of a nuclear weapon may have only limited significance on the decisions of senior officials in the Israeli government. In fact, it may pressure the leaders to launch an air strike on Iran. They may sense a wavering in the Establishment's support for Israel.

The immediate domestic issue is this: Who will be elected President of the United States in November? The question is this: Do senior decision-makers in the government of the State of Israel believe that Obama will be significantly less willing to accept the possibility of an Israeli air strike on Iran than President Bush would be?

This issue will not be raised publicly by either party during the election campaign. No Republican senior strategist dares say that Obama is soft on Israel's defense. Obama on June 4 stated clearly that, with respect to the protection of the State of Israel, there is nothing that he would be unwilling to do as President.

I have been proud to be a part of a strong bipartisan consensus that has stood by Israel in the face of all threats. That is a commitment – that is a commitment that both John McCain and I share because support for Israel in this country goes beyond Party. . . .

I will do everything in my power to prevent Iran from obtaining a nuclear weapon – everything in my power to prevent Iran from obtaining a nuclear weapon – everything.

No senior Democrat is going to go public with any suggestion that Obama is secretly willing to see Israel attack Iran. Obama would deny this immediately. So, this is a hot potato that neither the Democrats nor the Republicans are going to pick up.

The fact that this topic is not likely to be discussed in the major media by representatives of either party does not mean that the issue is not a major issue. I regard it as the most important issue that the country is facing between now and the inauguration of a new President.

The Israelis can be confident that President Bush is not going to impose negative sanctions on the nation if the government unilaterally launches an attack on Iran. The only question is this: Will he quietly pressure Olmert not to launch the attack prior to the election in November?

For political reasons, President Bush may not want to face this issue prior to the election. In between the election and the inauguration of the new President, President Bush is probably much less likely to interfere with an attack by the Israeli Air Force. The #1 question is this: Is he likely to give a green light to such an attack? This issue is important, because Israeli planes must fly over one or more foreign nations. The most likely candidate is Turkey.

NON-NUCLEAR FALLOUT

Think through the military implications an air strike by the Israeli Air Force on suspected nuclear production facilities inside Iran.

Iran is a large nation geographically. It is not like Iraq. Second, its nuclear facilities are underground. The Israelis will not be able to take out all of them. Some of them have deliberately been located beyond air strike range of Israeli aircraft. The Israelis know this. So, the attack would be more of a warning than a crippling strategic attack. There is no way for the Israeli Air Force to cripple Iran directly, short of the use of nuclear weapons. I think it is highly unlikely that the Israelis would use nuclear weapons.

So, the infrastructure of Iran will still exist. But there will be an overnight transformation of public opinion in Iran. An attack would create enormous and unbreakable unanimity among Iranian voters, a unanimity which does not exist at the present time. An attack would create legitimacy for the existing government to do whatever it deems effective in crippling the United States regionally.

Iran may not be able to do much directly against the State of Israel, but it can do a great deal to hamper the two regional wars that the United States is presently conducting.

Officials of the Iranian government have already said that Iran will regard such an attack by Israel as an attack by the United States. This means that the new President will face Iranian counter-attacks on American forces in the region. The question is: What kinds of counterattacks are likely, and what will be their effects?

The obvious thing that Iran could do is to increase the flow of weaponry to Shia resistance groups inside Iraq. The other thing that it can do is to supply resistance groups in Afghanistan with weapons. This would make difficult every aspect of both wars from the perspective of the American military command. This is why there is no widespread support within the American military for an attack on Iran. The the head of the U.S. Central Command, Admiral Fallon, resigned in March over exactly this issue. He was known to oppose any air strike against Iran.

If the Israelis do attack Iran, this will guarantee long-term acceptance retroactively by the United States government of Israeli strategic policy. Prior to such an attack, no U.S. government official would dare to admit this publicly. After the attack, almost every government official will do so.

This is always the effect of a war. Opponents of the war are able to present their case prior to the day hostilities break out. On the day hostilities break out, virtually all domestic opposition to a war ceases. This is why peace movements find it almost impossible to stop a war once the war begins.

If the war drags on, and if the headlines are bad enough, and if the media decide to take a stand against the war, an antiwar movement can have some effect in bringing the war to an end. But it cannot do this without growing opposition to the war within the general electorate, which had been overwhelmingly in favor of the war on the day it broke out.

There is widespread opposition to the war in Iraq today. Nevertheless, this has not translated into effective antiwar activity. Congress still votes for all of the expenditures that President Bush calls for to fund the wars.

WHY ATTACK THIS YEAR?

My opinion is that the main justification for an Israeli attack on Iran prior to January 20 would not be to cripple the supposed nuclear weapons facilities in Iran. I don't believe such facilities exist, and I don't believe that the Israelis believe such facilities exist.

The main reason for the attack would be to box in the next President of the United States, so that he is incapable politically of opposing the extension of hostilities into Iran by the United States.

United States troops will be put at risk by an Iranian counter-offensive. This offensive will be in the form of low-cost weapons supplied by Iran that can create damage to conventional troops when placed in the hands of dedicated Shia militia groups – something that at present is being restrained by Iraq's Shia leaders, presumably at the request of the Iranian leaders. But the day Iran is attacked, Iranian officials will not only reverse their existing decision to restrain the Shia militias in Iraq, they will actively encourage the escalation of guerrilla attacks on American troops.

I have no doubt that the Israelis understand military cause and effect. There is very little that Iran can do directly to gain revenge against the Israelis. They can encourage Hezbollah in Lebanon. But Hezbollah is a nationalist movement in Lebanon, and it will not do much to threaten the Israelis, other than perhaps shelling a few cities close to the Lebanese border. It may not even do this. Hezbollah can create a great deal of trouble for the Israelis in terms of propaganda in Lebanon, but it cannot inflict major damage on Israel's military forces unless Israel invades Lebanon. Israel knows this. The last invasion was a debacle for Israel's forces.

So, an air attack by Israel on Iran will be a case of "let's you and him fight." An attack would be guaranteed to create Iranian-funded counter strikes against the regional forces of the United States. Under such conditions, the President of the United States would have to commit American resources against Iran.

I have not seen any analyst present the case for an Israeli air strike in terms of the strategy that I have presented here. Analysts talk about Israel's concern over the possibility that Iran will develop a nuclear weapon. I have no doubt that the Israelis are very concerned about this possibility. What I doubt is that senior Israelis believe that the Iranians are anywhere near producing a nuclear weapon. What they want to ensure is that Iran is not in a position to produce such a weapon in the near future.

It is therefore possible that senior decision-makers in Israel have concluded that the best way to keep Iran from developing a nuclear weapon is to tie up Iran's resources in a surrogate guerrilla war against the United States' troops in the region. In other words, the strategy has more to do with bankrupting the Iranian economy than it does with taking out alleged facilities that allegedly are producing a nuclear weapon.

This strategy is widely believed to have been the basis of Ronald Reagan's escalation of military spending for eight years. It is widely believed that the Soviet Union went bankrupt in an attempt to match this buildup of American military power. In other words, strategists believe that Reagan adopted a self-conscious strategy to bankrupt the Soviet Union. They do not believe that Star Wars (SDI) was ever going to be deployed. They don't believe that Reagan believed it would ever be deployed. They believe that Reagan believed that the threat of deploying it would force the Soviets into spending programs to counteract Star Wars, and these spending programs would bankrupt the Soviet government. I don't know if Reagan was this self-conscious, but I do believe that this was the effect of the buildup of American military power during the 1980s.

If you were an Israeli military strategist, and you wanted to inflict the greatest damage possible on Iran, you would do whatever is necessary to involve Iran in a regional war that would not involve direct attacks on the State of Israel. The longer this regional war lasts, the more likely that Iran will be bankrupted. The Iranian economy is already a disaster zone. It has very high unemployment. It is a welfare State. Its demographics are truly disastrous. The birth rate in Iran has collapsed. It is likely that Iran will not be able to export oil within 20 years – maybe as soon as ten years. If the Iranian economy shifts output to military production, it is likely that Iran will go bankrupt within a few years. This would do more than anything else to make certain that Iran will not be able to develop nuclear weapons and a strike force capable of threatening the State of Israel.

This is a very high-risk strategy. The risk is not that Iran will launch successful counter-strikes against the State of Israel. The risk is that Iran will launch successful counter-strikes against United States troops by surrogates in Iraq and Afghanistan. These attacks could be successful in creating a public relations disaster for the United States military. Voters in the United States might finally turn against the wars and demand that the President withdraw troops from the region.

This happened in Vietnam. To think that it cannot happen again in the Middle East is naïve. In other words, the greatest threat to the State of Israel of an attack on Iran this year is not what Iran can do directly to the State of Israel; it is what Iran could do indirectly over the next two or three years to American military troops in the region. If the United States ever decides to get out of the region, and stay out, then the long-term threat against the State of Israel increases dramatically.

So, I am not saying that this attack is inevitable. I am saying that the risk is much higher than the network evening news shows indicate. It is also much higher than what stock market investors believe is the case today.

CONCLUSION

I suggest that you think through your plans on the assumption that there will be an attack by the Israeli Air Force on Iran before January 20, 2009. That's what I am doing; so, I suggest that's what you should do.

You would be wise to factor such an attack into your economic strategy. You should look at your employment possibilities, your retirement portfolio, and the solvency of your employer. How well would your company do in an economy in which gasoline is at least $10 a gallon? What about $20? How would you do personally under these circumstances?

I suggest that you sit down with a pencil and a piece of paper and write down the changes in your life that would be imposed by gasoline at $10 a gallon. Think through the implications of a permanent war by Shia insurgents in Iraq.

Add to this the re-arming of insurgent groups in Afghanistan.

Add to this the loss of confidence in the American stock market by investors who come to the realization that the war in Iraq and the war in Afghanistan are escalating because of low-cost weapons supplied by Iran to insurgent groups, and they see that the federal deficit is likely to go up by 50% over the next three or four years.

Then think about a shift to the euro by Middle Eastern oil exporters.

It's an ugly scenario.

July 9, 2008

Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.

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