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Could GOP Sanctions on Europe Tank the Economy and Elect Romney?
Submitted by Robert Naiman on 8 December 2011 - 8:20pm
Remember, "It's the Economy, Stupid?" So how come Democrats in Congress - over the objections of the Obama Administration - are helping Republicans press sanctions on Europeans who buy oil from Iran - sanctions that would increase unemployment in the U.S. during the 2012 campaign?
The National Defense Authorization Act now contains a Senate amendment by Republican Senator Mark Kirk - supported by many Democrats in Congress - that would sanction European banks and companies that do business with Iran's Central Bank, in order to stop Europeans from buying Iranian oil. This is a big deal, because Iran is the world's fifth-largest oil exporter, and blocking Iranian oil exports to Europe would raise the price of oil, in Europe and in the United States.
Kirk's amendment would hurt the U.S. economy, at a time when economic contraction in Europe could push the U.S. back into recession.
Is fear of the economic blowback of the sanctions on Europe that Kirk wants to impose justified? Many Europeans seem to think so.
On Tuesday, Reuters reported:
The European Union is becoming skeptical about slapping sanctions on imports of Iranian oil, diplomats and traders say, as awareness grows that the embargo could damage its own economy without doing much to undercut to Iran's oil revenues.
"Maybe the aim of sanctions is to help Italy, Spain and Greece to collapse and make the EU a smaller club," one trader joked.
The remark reflects the growing unease that EU sanctions would hit hardest some of the continent's weakest economies, because Iranian oil provides the highest share of their needs, not to mention the rest of the bloc.
"The likely increase in oil prices that would result from a ban would be felt by all (European) oil refiners, not just those that are big customers for Iranian oil," ratings agency Fitch said last week.
An oil industry source in Greece, which mostly relies on Iranian oil, said: "Greece can't be put with its back to the wall."
The threat to Iran's oil exports and fears about a possible military strike on its nuclear facilities have helped keep oil prices above $100 a barrel...
Raising the price of oil will hurt the U.S. economy directly. In addition, hurting the European economy will also hurt the U.S. economy by causing U.S. exports to Europe to fall. Furthermore, adding to Europe's economic problems now would undermine attempts to contain the European financial crisis, as the trader's joke about sanctions helping Italy, Spain and Greece to collapse suggests. And if efforts to contain Europe's financial crisis fail, we're going to feel that pain in the U.S., just as Europe felt the 2008 U.S. financial crisis.
What's the Republican response to all this? When a U.S. Treasury Department spokesman said, "it is critically important that the steps we take do not destabilize the U.S. and global economy," a senior GOP Senate aide responded by saying, "Treasury should go back and model the cost to the U.S. economy and the world economy of an Israeli strike on Iran."
So, according to this Republican argument, we only have two choices: sanctions on Europe that will hurt the U.S. economy, or an Israeli military strike on Iran that will hurt the U.S. economy even more.
But that's a false choice, because 1) a lot of people in Israel, including the former head of the Mossad, think the idea of an Israeli attack on Iran is insane, and 2) the U.S. can keep Israel from attacking Iran if it wants, just as the U.S. did during the Bush Administration.
Of course, many Republicans claim that Iran's nuclear program constitutes a national emergency in the United States, so we should be willing to accept higher unemployment in the United States in order to block Iran's oil exports to Europe.
But the "emergency" claim is extremely dubious, for the following reasons:
1) As Pulitzer Prize-winning journalist Seymour Hersh recently noted in the New Yorker, there is still no definitive evidence that Iran has a nuclear weapons program.
2) As former AIPAC staffer MJ Rosenberg recently noted, leading neoconservatives at the American Enterprise Institute - a key cheerleader for war with Iran, as it was a key cheerleader for war with Iraq - are now publicly conceding that the issue for neoconservatives isn't really whether Iran has a nuclear weapon - it's trying to maintain a balance of power in the region in favor of Israeli military ambitions. It's certainly understandable that some Israeli generals would want to maintain their freedom, as they see it, to invade Lebanon anytime they want, but does supporting this ambition constitute a national emergency for people in the United States?
3) As Defense Secretary Leon Panetta recently affirmed, at best a Western military strike on Iran would set back its nuclear program by two years. Since a military strike can't stop Iran's nuclear program - and since such a strike would be extremely costly to the U.S. - it's an extremely stupid thing to do, if the goal is to stop Iran's nuclear program.
The only way that military force can stop Iran's nuclear program is if it is used to overthrow the Iranian government and install a Western client government. But few dare call for this openly, since thanks to the Iraq and Afghanistan experience, the public is now quite aware of what this program would cost in blood and treasure, and is also aware that despite that cost, the program of installing a client government could fail anyway.
So there is no emergency requiring sanctions that hurt the U.S. economy. There's just another manufactured crisis, designed to force Americans to submit again to the neoconservative agenda.
But the question remains: why would Democrats support this? Do they want to lose the election?
Robert Naiman is Policy Director at Just Foreign Policy.