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The fourth quarter of 2006 will be driven by a country we named as a wild card earlier this year: Iran. More precisely, the dynamics that previously were set in motion by Iran will be playing out through the end of 2006.
What happened during the third quarter was fairly simple in retrospect. The Iranians read Washington as weak and its threats of sanctions or military action as hollow. They also saw the United States as being vulnerable in Iraq. Iran therefore refused accommodation over the orientation of an Iraqi government and triggered a crisis within the Shiite community and, more important, between the Shia and the Sunnis. At the same time, Iran encouraged actions that drew Israel into a war it was not prepared for militarily or psychologically. Hezbollah, trained and armed by Iran, held its own. Given the history of Arab military performance against Israel, not collapsing constituted a major victory. Coupled with events in Iraq, Iran was suddenly driving the regional system -- and given the importance of that system, driving the global system as well.
There are a number of competing processes under way now. First, Iran and the Shia have become the drivers in the Middle East. Second, this has generated an inevitable reaction against Iran among Sunni Arabs in general, and by Saudi Arabia in particular. Third, as Iran becomes more powerful and more threatening in the Arabian Peninsula, the Saudis are looking for a counterweight to it. The only counterweight is the United States. Fourth, neither the United States nor the Saudis want circumstances to develop into a situation in which the United States is militarily defending the Saudis.
Therefore, the main battleground must be Iraq. The Saudis want the United States to defend Sunni interests against the Shia and to prevent Iranian domination of the region. The United States wants to do that, but it cannot simply remain bogged down in a futile attempt to pacify Iraq. This leaves the United States with two options. One is a redeployment in which the United States withdraws from security responsibilities for Iraq but keeps U.S. forces there, blocking the Iranians. The second option is to forge a political settlement in Baghdad. But there will be no political settlement without Iran.
The Iranians have now launched a very public initiative to redefine their posture. Iran sees itself as having achieved a real but potentially transient advantage. Its options now are to try to build a permanent advantage, or negotiate from a position of strength. Since the next move would involve the withdrawal of U.S. forces from Iraq and Iran's emergence as a superpower in the Gulf region -- and since the Iranians must have serious doubts as to whether this will happen -- this would seem to be an outstanding moment in which to negotiate the status of Iraq and, alongside Syria, the status of Lebanon.
There is an intervening event: the U.S. congressional elections. Iran, having helped bring Jimmy Carter down in 1980, is well aware of U.S. politics and how to manipulate them. The problem is that the outcome of this election is unclear. If the Republicans were handed a massive defeat in November --for example, losing both houses of Congress -- and if the Democrats trapped President George W. Bush by ending funding for U.S. troops in Iraq, that would be the ideal time for Iran to negotiate. But it is simply not certain how the election will come out. If the Republicans hold both houses, which is possible, Iran will face an even more intractable Bush -- one potentially capable of breaking out of the bind. Therefore, the logic of the situation is that Iran will want to negotiate in October, when Bush and the Republicans need a political triumph. Alternatively, the Iranians could, through proxies, attempt some major action in Iraq that would shatter voter confidence in Bush and guarantee a Republican defeat in the elections.
If this appears to be an America-centric forecast, it is, but that is not simply because we are Americans. It is focused on the United States and Iraq because, as stated in our second-quarter forecast, this issue continues to be the driver of the international system. Russia, for example -- in its moves to re-establish itself as a great power with a sphere of influence -- is using Washington's distraction over Iraq as a means of putting the United States on the defensive. Similarly, China is using the space to pursue its own internal interests. The international system revolves around the only superpower -- and when that superpower is in trouble, everyone else plays off of that. Given the force and skill with which the Iranians have played, we might do better to call this an Iran-centric quarter.
Still, there are trends elsewhere that are of greater long-term interest. Internal Chinese politics are keying off the country's fundamental economic crisis, which has been driven by a financial system choked by bad debts and resulting social instability. The recent removal of the Chinese Communist Party chief in Shanghai -- an enormously powerful individual -- on charges of corruption shows that there is a political upheaval under way, and that the landscape is changing with increasing speed. As Russia did early this decade, so China is now doing: It is reemphasizing the state and trying to create a situation in which it can manage its problems.
But it is the failure of the United States to create a political solution in Iraq that will continue to drive the international system, and which will make the fourth quarter Iran's moment. For now, Iran is driving the system. We continue to view Iran as a rational power that is trying to assert itself within the Muslim world, within the region and within Iraq. Therefore, Tehran will continue to shift between aggression and conciliation, keeping the United States and the world off-balance.
Middle East: Iranian Ambitions, U.S. Interests and the Arab States
In our third-quarter forecast for the Middle East, we made a fundamental miscalculation. We underestimated the extent to which Iran would be willing to push geopolitically into the Middle East and demonstrate what it could do should the United States try to thwart its efforts to rise as the regional hegemon. Washington and Tehran's expected accommodation regarding the status of Iraq did not pan out, as Tehran determined it was not necessary to settle for less than a strong hand in the future of its western neighbor.
As a result, we were unable to foresee the Shia-Sunni conflict in Iraq spilling over into the region. We did not anticipate Hezbollah's move to abduct Israeli soldiers, which triggered the 34-day conflict in Lebanon, the most significant event in the region this past quarter. We missed Syria's ability to stage a geopolitical comeback after being forced to withdraw from Lebanon. In short, a single flaw in our assumptions on Iranian behavior compounded into a fundamental miscalculation of regional events.
Sunni nationalist violence continued through the third quarter, but the expected rift between transnational militants in al Qaeda and Iraqi jihadists in the Mujahideen Shura Council umbrella alliance, which we said would exacerbate matters for the jihadists, did not take place. At the national level, Iraq's principal communal groups returned to the struggle over federalism, and consequently the issue of the distribution of oil revenues. Serious rifts within the Shiite alliance surfaced, and Tehran exploited those rifts in an attempt to shape the new Iraqi state.
In the fourth quarter, Iran -- particularly its relations with Washington and the reactions of its Arab neighbors -- will be the driving force in the Middle East. Tehran has already demonstrated its reach in the region with the Hezbollah conflict, and there are signs that Tehran could encourage a new series of militant attacks inside Iraq in the near future. At the same time, there are signs of a resurgence of militants in the region, spurred by both al Qaeda and Iran. These two drivers -- Iranian assertion and resurging nonstate militants -- will keep the political and security situation in the region in flux.
The quarter will begin with Iran already taking a conciliatory approach toward the United States. The Iranians feel they are in a comfortable position to negotiate in the wake of the Israel-Hezbollah conflict, and will offer the Bush administration a diplomatic opening. Tehran's assumption is that Washington believes it would benefit from a political resolution in Iraq through Tehran in time for the U.S. congressional elections in November. The United States, however, cannot afford a deal that will empower Iran regionally. Meanwhile the Iranian government is accelerating efforts to carve out a Shiite federal region in southern Iraq and undermine U.S. attempts to broker a different kind of political agreement between Iraq's major factions at the national level. Therefore, Washington is simply unwilling and unprepared to accept a deal with Tehran that may or may not allow it to resolve the Iraqi issue but will certainly end up strengthening Iran.
If Iran cannot extract what it wants, it will have no other choice but to once again demonstrate the negative consequences of Washington's refusal to engage Tehran. With both Israel and the United States bogged down with domestic issues, Iran has room to be adventurous this quarter and pursue its larger strategy of consolidating Persian dominance in the region. A dramatic shift in the regional balance of power is taking effect, with rising Shiite influence casting a shadow over the Arab regimes. In order to continue with its aggressive geopolitical push, Iran must ensure that conditions remain ripe for an offensive aimed at forcing the United States into negotiations on Tehran's terms.
Iran will use its Shiite extensions in Iraq, Saudi Arabia, Kuwait and Bahrain to demonstrate its ability to act as the spoiler in areas where the United States is heavily invested. One key area in which Iran could create problems is Bahrain, where parliamentary elections are to be held in October. Tehran has considerable influence with the country's majority Shiite population, whose principal political groups are Iranian-leaning Islamists. Fearing Iran's rapidly expanding influence and already wary at the prospect of Iran and the United States trying to come up with a political arrangement for Iraq, the Arab regimes are pressuring Washington to counter Iranian ambitions. Meanwhile, a political resolution in Baghdad -- the basis for a U.S. exit strategy -- is quickly slipping through U.S. President George W. Bush's fingers. Iran will focus on reinforcing the idea that the United States has lost its grip in the region and that Tehran still has a number of Shiite assets it can employ against its Arab neighbors. There already have been indications of Shiite militants infiltrating Kuwait and Saudi Arabia from Iraq's heavily Shiite south.
The main focus for Iran's push against the United States will be in Iraq, where there are strong indications that Iran is arming Shiite militants to carry out a series of attacks against U.S. forces in October. Tehran has influence among a variety of proxy groups -- political as well as militant -- in the country that it could use to create problems for the Bush administration before the U.S. elections. A rising body count in Iraq will have a definite impact on the elections, a factor that Iran believes will steer the United States toward conceding to demands that Washington recognize its role in Iraq and the region. Attacks against U.S. forces in October, or even hints of a Shiite militant offensive against U.S. forces, are still unlikely to produce the desired results for Iran this quarter and will entrench the United States even further in Iraq. Meanwhile, Washington needs to contain Iran, but it does not have the assets to foment a mass uprising against the clerical regime. What it is trying to do -- and will likely intensify during the third quarter -- is activate separatist action within Iran from ethnic Arab, Kurdish, Balochi, Sunni and Azeri groups. This will be a key U.S. method to place impediments in the path of an increasingly assertive Iran.
With limited options, U.S. forces in Iraq will be forced to tough it out while former U.S. Secretary of State James Baker plays a leading role in trying to restart negotiations among Iraq's political factions. The Bush administration is counting on the Baker initiative as its way out of the current crisis; it is also the U.S. alternative to having to deal with Iran. Meanwhile, Tehran will continue efforts to consolidate its influence in Iraq through the federalism bill and by establishing a close working relationship with Baghdad. Iran also will successfully manipulate the negotiations over its nuclear program, blunting any U.S. moves to impose punitive action against Iran by toning down its belligerent rhetoric over uranium enrichment when the need arises.
The big political issue that will preoccupy Iraq for the remainder of the year will be the federalism bill tabled by the ruling Shiite coalition, the United Iraqi Alliance, which will entail intense debates and negotiations on amending the constitution of the country. There will be intense debates and negotiations on amending the Iraqi constitution. The bill is designed to alter the structure of the state by creating autonomous federal zones in southern and central Iraq along the lines of the Kurdistan region in the north. This process, which threatens the Sunnis' political and economic positions, will fuel a flare-up in Sunni nationalist insurgent violence. As has been the case before, the Sunnis feel they can use the violence to enhance their bargaining power on the negotiating table. Al Qaeda and the jihadist alliance, which has been weakened by the death of Abu Musab al-Zarqawi, will try to use this as an opportunity to revive itself under a new leader. Furthermore, Ramadan (which falls in September and October), will only add to the uptick in insurgent activity. The federalism issue and its exploitation by al Qaeda could also worsen the sectarian situation.
Domestic political developments will not meaningfully change the U.S. military posture before the year is out. The U.S. military has already dramatically departed from its plans for a drawdown. Units like the 172nd Stryker Brigade have had their deployments extended even as new units cycle into the country and the U.S. Army tightens its deployment window. As of Sept. 25, more than 140,000 U.S. troops were in Iraq and the U.S. military expects to maintain that number until at least April 2007. Previous timetables had called for 100,000 troops to remain in Iraq by December 2006.
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