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Newsletter Follow-Up, Part 3

One of the sections of the newsletter discusses geopolitical risk, particularly with regard to the Israel / Iran situation. Below is an article from the NY Times that reports on an Israeli training exercise that dovetails with what I wrote. Below it is an article that describes Iran’s response.

Geopolitical events have added a risk premium to the price of oil that we will likely see continue permanently or until there is peace in the Middle East.

June 20, 2008

U.S. Says Israeli Exercise Seemed Directed at Iran

WASHINGTON — Israel carried out a major military exercise earlier this month that American officials say appeared to be a rehearsal for a potential bombing attack on Iran’s nuclear facilities.

Several American officials said the Israeli exercise appeared to be an effort to develop the military’s capacity to carry out long-range strikes and to demonstrate the seriousness with which Israel views Iran’s nuclear program.

More than 100 Israeli F-16 and F-15 fighters participated in the maneuvers, which were carried out over the eastern Mediterranean and over Greece during the first week of June, American officials said.

The exercise also included Israeli helicopters that could be used to rescue downed pilots. The helicopters and refueling tankers flew more than 900 miles, which is about the same distance between Israel and Iran’s uranium enrichment plant at Natanz, American officials said.

Israeli officials declined to discuss the details of the exercise. A spokesman for the Israeli military would say only that the country’s air force “regularly trains for various missions in order to confront and meet the challenges posed by the threats facing Israel.”

But the scope of the Israeli exercise virtually guaranteed that it would be noticed by American and other foreign intelligence agencies. A senior Pentagon official who has been briefed on the exercise, and who spoke on condition of anonymity because of the political delicacy of the matter, said the exercise appeared to serve multiple purposes.

One Israeli goal, the Pentagon official said, was to practice flight tactics, aerial refueling and all other details of a possible strike against Iran’s nuclear installations and its long-range conventional missiles.

A second, the official said, was to send a clear message to the United States and other countries that Israel was prepared to act militarily if diplomatic efforts to stop Iran from producing bomb-grade uranium continued to falter.

“They wanted us to know, they wanted the Europeans to know, and they wanted the Iranians to know,” the Pentagon official said. “There’s a lot of signaling going on at different levels.”

Several American officials said they did not believe that the Israeli government had concluded that it must attack Iran and did not think that such a strike was imminent.

Shaul Mofaz, a former Israeli defense minister who is now a deputy prime minister, warned in a recent interview with the Israeli newspaper Yediot Aharonot that Israel might have no choice but to attack. “If Iran continues with its program for developing nuclear weapons, we will attack,” Mr. Mofaz said in the interview published on June 6, the day after the unpublicized exercise ended. “Attacking Iran, in order to stop its nuclear plans, will be unavoidable.”

But Mr. Mofaz was criticized by other Israeli politicians as seeking to enhance his own standing as questions mount about whether the embattled Israeli prime minister, Ehud Olmert, can hang on to power.

Israeli officials have told their American counterparts that Mr. Mofaz’s statement does not represent official policy. But American officials were also told that Israel had prepared plans for striking nuclear targets in Iran and could carry them out if needed.

Iran has shown signs that it is taking the Israeli warnings seriously, by beefing up its air defenses in recent weeks, including increasing air patrols. In one instance, Iran scrambled F-4 jets to double-check an Iraqi civilian flight from Baghdad to Tehran.

“They are clearly nervous about this and have their air defense on guard,” a Bush administration official said of the Iranians.

Any Israeli attack against Iran’s nuclear facilities would confront a number of challenges. Many American experts say they believe that such an attack could delay but not eliminate Iran’s nuclear program. Much of the program’s infrastructure is buried under earth and concrete and installed in long tunnels or hallways, making precise targeting difficult. There is also concern that not all of the facilities have been detected. To inflict maximum damage, multiple attacks might be necessary, which many analysts say is beyond Israel’s ability at this time.

But waiting also entails risks for the Israelis. Israeli officials have repeatedly expressed fears that Iran will soon master the technology it needs to produce substantial quantities of highly enriched uranium for nuclear weapons.

Iran is also taking steps to better defend its nuclear facilities. Two sets of advance Russian-made radar systems were recently delivered to Iran. The radar will enhance Iran’s ability to detect planes flying at low altitude.

Mike McConnell, the director of national intelligence, said in February that Iran was close to acquiring Russian-produced SA-20 surface-to-air missiles. American military officials said that the deployment of such systems would hamper Israel’s attack planning, putting pressure on Israel to act before the missiles are fielded.

For both the United States and Israel, Iran’s nuclear program has been a persistent worry. A National Intelligence Estimate that was issued in December by American intelligence agencies asserted that Iran had suspended work on weapons design in late 2003. The report stated that it was unclear if that work had resumed. It also noted that Iran’s work on uranium enrichment and on missiles, two steps that Iran would need to take to field a nuclear weapon, had continued.

In late May, the International Atomic Energy Agency reported that Iran’s suspected work on nuclear matters was a “matter of serious concern” and that the Iranians owed the agency “substantial explanations.”

Over the past three decades, Israel has carried out two unilateral attacks against suspected nuclear sites in the M
iddle East. In 1981, Israeli jets conducted a raid against Iraq’s nuclear plant at Osirak after concluding that it was part of Saddam Hussein’s program to develop nuclear weapons. In September, Israeli aircraft bombed a structure in Syria that American officials said housed a nuclear reactor built with the aid of North Korea.

The United States protested the Israeli strike against Iraq in 1981, but its comments in recent months have amounted to an implicit endorsement of the Israeli strike in Syria.

Pentagon officials said that Israel’s air forces usually conducted a major early summer training exercise, often flying over the Mediterranean or training ranges in Turkey where they practice bombing runs and aerial refueling. But the exercise this month involved a larger number of aircraft than had been previously observed, and included a lengthy combat rescue mission.

Much of the planning appears to reflect a commitment by Israel’s military leaders to ensure that its armed forces are adequately equipped and trained, an imperative driven home by the difficulties the Israeli military encountered in its Lebanon operation against Hezbollah.

“They rehearse it, rehearse it and rehearse it, so if they actually have to do it, they’re ready,” the Pentagon official said. “They’re not taking any options off the table.”

Ethan Bronner contributed reporting from Jerusalem.

June 23, 2008

Iran Says Israel Not Capable Of Threatening It

Filed at 5:12 a.m. ET

TEHRAN (Reuters) – Iran said on Monday Israel could not threaten it, a few days after a U.S. newspaper reported that Israel’s air force had apparently rehearsed a potential bombing raid of Iran’s nuclear facilities.

Iran and Israel have engaged in a sharp exchange of words this month over suspicions Tehran is looking to develop nuclear weapons, helping to push global oil prices higher.

“They do not have the capacity to threaten the Islamic Republic of Iran,” Iranian Foreign Ministry spokesman Mohammad Ali Hosseini told a news conference.

He was asked about a New York Times report on Friday that quoted U.S. officials as saying Israeli jets conducted a long-range Mediterranean exercise this month that appeared to be a practice for a mission against Iran.

“They (Israel) have a number of domestic crises and they want to extrapolate it to cover others. Sometimes they come up with these empty slogans,” Hosseini said in comments translated by Iran’s English-language Press TV satellite station.

Iran’s defense minister on Sunday accused Israel of “psychological warfare,” but said Tehran would give a “devastating” response to any attack.

On Friday, the U.N. nuclear watchdog chief, Mohamed ElBaradei, said a military strike on Iran would turn the Middle East into a fireball and prompt Tehran to launch a crash course to build nuclear weapons.

EU SANCTIONS

Western powers suspect Tehran is seeking to develop nuclear bombs and European Union president Slovenia said the 27-nation bloc was scheduled to agree a new round of sanctions against Iran on Monday over its refusal to stop uranium enrichment.

Israel, widely believed to have the Middle East’s only atomic arsenal, has described Iran’s nuclear program as a threat to its existence.

Earlier this month, Israeli Transport Minister Shaul Mofaz told an Israeli newspaper an attack on Iran looked “unavoidable” given the apparent failure of United Nations sanctions to deny Tehran technology with bomb-making potential.

Tehran, which does not recognize Israel and regularly predicts its demise, says its nuclear work is a peaceful drive to generate electricity.

Israel bombed an Iraqi reactor in 1981 and an Israeli air raid on Syria last September razed what the United States said was a nascent nuclear reactor built with North Korean help. Syria denied having any such facility.

But many analysts say Iran’s nuclear sites are too numerous, distant and fortified for Israel to take on alone.

Iran has threatened to retaliate if it is attacked. Its Shahab-3 missile, with a range of 2,000 km (1,250 miles), is capable of hitting Israel and U.S. bases in the Gulf, Iranian officials say.

(Writing by Fredrik Dahl; Editing by Dominic Evans)