Daily Archives: November 9, 2011

When it comes to Iran, the best is consistently the enemy of the good. The International Atomic Energy Agency report issued on Tuesday affirms what western governments already know or believe: that for all the sanctions and diplomacy, Iran continues to make steady progress toward producing a nuclear weapon. We might be able to make a deal that would at least bring some Iranian stocks of low-enriched uranium into the custody of a third country – starting a process of multilateral cooperation to meet Iran’s legitimate needs for nuclear fuel, while constraining its illicit activities. This would still leave Iran enough LEU to produce a bomb, and could legitimise its enrichment efforts. That would be bad. But continuing with a policy of sanctions and pressure that is not working is worse.

The Stuxnet worm does appear to have set Iran back, but new generations of cyber-viruses may be easier to defend against. Military action will remain an option, but is not certain to work, and would have deeply counter-productive political effects inside Iran and probably across the Muslim world. That leaves diplomacy.

In 2011, Brazil and Turkey brokered a deal, rejected by western powers, in which Iran would transfer 1,200kg of LEU to Turkey in return for the same quantity of nuclear fuel for a medical research reactor in Tehran. The deal fell through; and an opportunity to work with Iran within a cooperative rather than a coercive frame was lost.

Western governments should now turn back to Turkey and Brazil. Let them initiate a new round of negotiations under UN auspices – with full backing from the US, France, Russia and other powers concerned. At the least, it deprives the Iranian government of its familiar US whipping boy. At most, we might succeed in halting play and then changing the game.

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Here we go again. Europe’s debt crisis has entered a new, more dangerous phase with the yield on Italian 10-year bonds crossing the seven per cent level on Wednesday morning. This is a eurozone-era record that, if sustained, would severely destabilise the debt situation of the world’s third largest bond issuer and one of the original six founders of the modern European project.

Those who lived through the horrid days of the various emerging market debt crises will quickly recognise the factors that have come together in the last few days to form a highly destabilising cocktail. And they may well agree on what needs to be done to stop a bad situation getting worse.

There is only one institution that has an immediately-available balance sheet that could stabilise the situation in the next few days and weeks – the ECB. But before we all join the chorus urging the bank to do more, we should recognise that it, alone, cannot deliver good outcomes. Read more