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June is the month to watch out for! Wachovia outlines the possibility of a regional war in the Middle East! US, Israel, Lebanon, Syria, Iraq, Iran, et

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05/08/2008 12:15 AM
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June is the month to watch out for! Wachovia outlines the possibility of a regional war in the Middle East! US, Israel, Lebanon, Syria, Iraq, Iran, et

By Bill O’Grady
Chief Investment Strategist
May 5, 2008

In last week’s report, we discussed the situation between Syria and Israel. Although a number of events have occurred that increased tensions between the two countries, there also was news that the two sides were engaged in negotiations over a peace deal. In the previous week, we examined the ramifications of a potential agreement between these two states. In this week’s report, we will broaden the focus to the Middle East, the potential impact from these talks and the possibility of a regional peace agreement. In addition, we will also discuss the possibility of a regional conflict.

The Israeli/Syrian peace deal

As mentioned last week, the basic outlines of the potential peace accord between Israel and Syria are rather simple. Israel would vacate the Golan Heights, giving the land back to Syria. The area would be demilitarized, and Israel would retain water rights to the Jordan River and Lake Kinneret. In return, Israel would allow Syria to control Lebanon with the understanding that the Assad government would be in command of Hezbollah and Hamas.

In other words, the two groups would be effectively emasculated by the Syrian government. If Hezbollah is controlled, then there is little point for Israel to attack Hezbollah in Lebanon, which was discussed in last week’s report. And so, Syria benefits insofar as it doesn’t have to worry about being the target of the Israeli military if the war were to widen. To a great extent, if Israel were to attack Hezbollah in Lebanon, Syria would become an Israeli target because of their support of this group.

There are three interested outside parties to an agreement: Hezbollah, Iran and the United States. All three have reasons to oppose the deal. Hezbollah clearly doesn’t want to see its power reduced or lose the support of Iran. Iran has little interest in losing an ally (Syria was the only Arab nation with good relations with Iran) or seeing Hezbollah weakened. And finally, the United States generally opposes Syrian influence in Lebanon. On its face, it would appear that the odds of a peace accord between Syria and Israel are rather low. However, in the context of a wider regional peace agreement, the outside parties may allow the treaty.

The argument for peace

The Israeli/Syrian talks are occurring in a regional context. The major issue in the Middle East is the continued U.S. involvement in Iraq and Iran’s influence on that outcome. The United States and Iran have had ongoing negotiations on Iraq, with some indications of an agreement. Both nations have established that neither can unilaterally establish their will on Iraq. The U.S. troop surge made it clear to Iran that the allied presence in Iraq would likely persist regardless of how much support Iran offered to Iraqi insurgents. Even more disquieting for Iran was the U.S. military’s decision to incorporate Sunni groups into stabilizing the Sunni regions in Iraq. The last outcome Iran wants in Iraq is a Sunni threat; after all, they had to face an invasion and a bloody eight-year war from Saddam Hussein’s Iraq in the 1980s.

On the other hand, the United States has also realized that Iran can exert influence on Shiite 2 of 4
groups in Iraq, including Muqtada al-Sadr, the leader of the militia Mahdi Army. Iran has shipped arms to insurgent groups in Iraq and apparently controls the flow of weapons to suit their political goals.

In effect, the United States wants an Iraq that is able to defend itself and not be dominated by Iran. Iran wants an Iraq that won’t threaten them again; thus, they either want a weak state that will be unable to project power or a friendly Shiite-dominated government. In addition, Iran wants to be the dominant power in the Middle East; as long as the large U.S. military presence exists in Iraq, that outcome isn’t likely. And finally, they want to avoid having their infrastructure attacked by U.S. and Israeli warplanes. Neither nation can, at least in terms of the Iraqi situation, force these outcomes. Thus, negotiating an exit agreement makes sense.

During the past few months, military casualties have declined, in part due to a slowdown in the flow of Iranian weapons to Iraq. And the recent flare-up near Basra was brought under control, in part, by Iranian influence over al-Sadr. Last year’s National Intelligence Estimate that indicated Iran had ended its nuclear weapons program (see the Dec. 10, 2007, Weekly Geopolitical Report, "Iran and the NIE") effectively removed the primary reason for an air campaign against Iran. These actions could be construed as good faith efforts to bring about an agreement on Iraq.

We note that media reports indicate that Thomas Pickering, the former U.S. Ambassador to the United Nations, has been in backchannel negotiations with Iranian officials for several months, ostensibly to negotiate an agreement on Iran’s nuclear program. Thus, there is the potential for a broader peace agreement with the United States, Iran, Syria and Israel. And it may happen sooner rather than later. One of the lessons Iran learned in 1979 was that one tends to get a better deal by negotiating with a weakened, outgoing president than an incoming one. Iran held the American hostages until President Carter left office, and the incoming Reagan administration did no special favors in return. Thus, there are reasons why an agreement between the United States and Iran with regards to Iraq and Iran’s nuclear program is possible. If this deal works, the parties may be willing to allow the Israeli/Syrian agreement to go forward.

The way of war

As discussed above, there are ongoing negotiations between Syria and Israel, as well as separate talks between Iran and the United States. However, coincident with these discussions are preparations for war. In particular:

• As discussed in last week’s report, Israel recently conducted its most extensive military exercise in its history. This exercise was designed to prepare the Israeli military and civil defense for an attack from non-conventional weapons.

• Reports indicate that Hezbollah has restructured its organization, ostensibly to streamline its operations in preparation for a conflict with Israel. Along with this news, media reports indicate an increase in Iranian intelligence officers and military trainers working with Hezbollah in Lebanon. And new anti-tank weapons and Iranian-built Zelzal missiles have been put in place. These missiles have a longer range than the ones used in the last Israeli/Hezbollah conflict, and some variants can carry chemical or biological warheads. Hezbollah has also built redundant command and control centers in Lebanon.

• At the same time that the United States is negotiating with Iran, there continues to be belligerent commentary from U.S. officials. Recently, Adm. Michael Mullen, Chairman of the Joint Chiefs of Staff, indicated the Pentagon was preparing "potential military courses of action" against Iran. He also warned Iran that the United States had ample capacity to conduct an air campaign against Iranian targets. Earlier in April, in Congressional testimony, Gen. Petraeus and Iraqi Ambassador Crocker sharply criticized Iran for supporting insurgents in Iraq. We note that Gen. Petraeus has recently been named head of Central Command (CENTCOM) replacing the more cautious Adm. Fallon (see the March 31, 2008, Weekly Geopolitical Report, "Adm. Fallon’s Exit," for details).

• There are reports of carrier movements into the Indian Ocean, including the USS Abraham Lincoln and the USS Harry Truman. The former recently arrived in the area. Two carrier groups allow for 24-hour air operations and could portent military action. It should be noted, however, that there have been several occasions in the past few years where multiple carriers are in the area, only to see one group eventually leave. However, we also note the USS Cole has been in the Mediterranean, off the coast of Lebanon, likely as a warning to Syria.

Iran has been persistently threatening U.S. shipping in the Persian Gulf by swarming small speedboats around U.S. vessels (see the Jan. 14, 2008, Weekly Geopolitical Report, "Near Miss in the Strait of Hormuz"). It would appear that Iran is trying to show the U.S. Navy that it has tactics and resources to threaten our ships and is willing to do so at the risk of setting off an international incident.

And finally, the Bush administration has begun to inject oil into the Strategic Petroleum Reserve. Although this administration has persistently built this reserve during the past eight years, the recent decision to inject oil, with prices at historic levels, seems a bit odd and could indicate concerns about future supply interruptions.

The conflicting trends

As the above discussion indicates, there are trends in place that support the possibility of a regional peace agreement and, at the same time, clear preparations for a conflict. There are two reasons for these divergent trends:

• First, within each government there are "hawks and doves." In the Bush administration, Vice President Cheney is usually in the hawkish camp, continually reminding the world that the military option against Iran is still a viable option. Meanwhile, Secretary of State Rice appears to be trying to encourage negotiations with the Iranians, supported by the international community. There are similar divisions in Iran, Israel and Syria.

• Second, the hawkish stance could be a negotiating ploy. By deploying aircraft carriers to a region, or holding extensive military exercises, or swarming small vessels against U.S. Navy ships, or supplying insurgents in Iraq, the negotiating parties want to show each other they have leverage. Thus, the saber rattling may be nothing more than a way to gain the upper hand in eventual negotiations.

What should we expect?

At this point, there is not enough evidence to declare peace in our time or that war is imminent. However, there are some guideposts to watch for. The most important situation is the Israeli/Syrian talks. A treaty is only possible if Iran and the United States acquiesce. And it seems unlikely that the latter two nations would allow the accord to progress unless each believes that a deal between Iran and the United States is at least likely on Iraq and probably on the Iranian nuclear program.

So, if the Israeli/Syrian talks flounder, the next item to watch is military preparations for another Hezbollah/Israeli war. The last one, in the summer of 2006, remained contained within Lebanon. However, Israel may decide that the best way to undermine Hezbollah would be to destroy its supply lines, which generally run through Syria. An attack on Syria could trigger an Iranian response, which could embroil the region on a war.

We should have a pretty good idea of the outcome by early June.

Read more here: [link to www.militaryphotos.net]

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*Vishuz (OP)

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05/08/2008 01:07 AM
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Re: June is the month to watch out for! Wachovia outlines the possibility of a regional war in the Middle East! US, Israel, Lebanon, Syria, Iraq, Iran, et
The blackening of roses will send you to the edges of the land/
The emerald tablets of Thoth the Atlantean/
The hands of the mighty Lion of Judah/
Will throw you through the triangular portals of Bermuda/
Exploring the Hologramic aspects of consciousness/
User ID: 429484
05/08/2008 01:14 AM
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Re: June is the month to watch out for! Wachovia outlines the possibility of a regional war in the Middle East! US, Israel, Lebanon, Syria, Iraq, Iran, et



Now we can all get on with things.