|Thunder from down under
||THE updated version of the Bush Administration's 2002 national security strategy, released in Washington last week, identifies Iran as the country that may pose the biggest danger to the United States.
According to Reuters, the strategy document, which reaffirms pre-emptive military action as a central tenet of US security policy, raises fears the Bush Administration will resort to force to prevent Iran acquiring nuclear weapons.
If force is used, it will come in the form of air strikes, as US land forces are already overstretched in the occupation of neighbouring Iraq.
One question still to be confronted is the impact such a strike would have on the US economy and how that would affect the global economy, particularly Australia, which is, after the US, the largest-deficit country in the advanced industrial world.
At the very least, a broadening of the war in the Middle East would be certain to push up interest rates in the US and Australia, because the central banks there would have to protect the currencies' value by increasing yields. How far and fast would depend on judgements about the likely outcome of the military intervention.
An air strike against Iranian nuclear facilities is unlikely to be surgical. There are about 50 sites associated with nuclear development in Iran and they are mainly sited in towns where civilian populations would be at risk. An attack would be certain to inflame the Islamic world against the US, almost certainly lead to a full-scale civil war in Iraq with the support of the predominantly Shiite Iranian people, and the US fleet in the shallow and narrow Persian Gulf would have to withdraw or be vulnerable to Iranian missile attack.
Worse, any air strike against Iran is unlikely to get the support of the United Nations Security Council, given that China and Russia would likely veto any resolution put up by the US.
Why would the Bush Administration risk widening Gulf War II to include Iran when it still has the chance to limit its losses to Iraq? The most popular explanation is that the US wants to pre-empt the Iranian decision to set up a Tehran oil bourse to facilitate the selling and buying of oil in euros instead of US dollars.
The idea is that this would cause a chain reaction in which more and more oil producers and their customers would trade in euros and eventually force the US to pay for its oil in euros too. This would mean the US would have to do what every other country in the world has to do, namely earn foreign exchange through exports in order to pay for its oil imports.