Hirsh: Will the Financial Crunch Help Olmert?

Even by the uniquely bleak standards of the Middle East, things are looking pretty grim right now. Iran is still working methodically toward a nuclear weapon—effectively getting a free ride during the interregnum between George Bush and Barack Obama, both of whom are distracted by the global economic crisis. There is no military option under consideration right now: Israel appears to be restrained by Bob Gates's Pentagon, which is reportedly withholding cooperation, such as supplying Jerusalem with IFF (Identify Friend or Foe) codes. That will no doubt continue into the next administration. "I think all of us have very little time," Israel's ambassador to the United States, Sallai Meridor, said in an interview this week. He said there is still room for negotiation, but only with vastly intensified diplomatic pressure. Otherwise "you could have a catastrophic nuclear cascade in the region. And the time between that moment [Iran getting nuclear weapons capability], which could be very soon, and when nuclear weapons fall into the hands of nonstate actors or terrorists, could be not far off … Are we allowing the genies to go out of the bottle, so that our children will never be able to put them back in?"

Prospects for a two-state solution, meanwhile, are only receding. If there's no deal, and the occupied lands remain in Israeli hands, at some point "Greater Israel" becomes a land with a majority Arab population ruled by a minority of Jews. Though the birthrate numbers are in dispute, such a binational apartheid state cannot permanently endure as a Jewish entity. "The end of Zionism is in sight, brought to us by the very hands that created the binational reality on the ground in the name of Zionism," Gershon Baskin warned in The Jerusalem Post this week. Outgoing Prime Minister Ehud Olmert is frantically trying to avert that fate and, not coincidentally, rescue a legacy for himself other than as Israel's Richard Nixon—a scandal-crippled leader who is seen as responsible for his country's only lost war (Lebanon in 2006). But Olmert's negotiations with Palestinian leader Mahmoud Abbas are proving fruitless as the two of them near their deadline of getting at least an agreement in principle by the end of 2008.

Asked about the prospects, Meridor smiles slightly—very slightly—and then suggests that divine assistance might be needed with Chanukah coming up next week. "Chanukah is, among other things, a holiday of miracles," he notes. Even that's not terribly reassuring: God may have made one day's supply of oil burn for eight, but let Him try bringing Fatah and Hamas together for an hour. Especially since Hamas is using the truce to rearm through Egypt and oust Fatah from the West Bank as well as Gaza. "I'm afraid there is no good news here," says Meridor. So Olmert, despite his hints at dramatic concessions, has no Palestinian interlocutor worth talking to, which means he has no deal. And even if he somehow gets one, Likudnik-in-chief Bibi Netanyahu is leading in the polls to succeed him and promises to scuttle what's left of the "Annapolis process."

If you've already stopped reading out of disgust or despair, I won't take it personally. But before you click off, consider this one very strange sign of hope: oil, which played such a miraculous role in the Chanukah story, may be a major factor once again. The global economic crisis is terrible for our pocketbooks, but it could be beneficial to our safety. The reason is oil's precipitous plunge. Despite OPEC's decision Wednesday to cut production by 2.2 million barrels a day—its biggest reduction ever—prices continue to drop in the face of declining global demand. The new era of $40 or less (per barrel) oil is in turn diluting the influence of the energy-rich autocrats in Russia, Venezuela and Iran, who only a few months ago seemed comfortable defying the West. Most of all, it is putting Iran under the kind of pressure that Tehran has not endured for several years—especially given the signs that Iraq, where Iran once had hopes of tying down the Americans for years, is stabilizing. "For the first time in five years, those things are going in our direction, not in the direction of the Iranians," says Iran expert Karim Sadjadpour of the Carnegie Endowment.

Meridor argues that this "opens up" new prospects for putting pressure on Iran, for example by gaining a new consensus to cut off refined petroleum products. "If oil prices stay low, this may open opportunities for tough sanctions to work," he says. "When the Iranians were getting $140 a barrel, with a budget based on maybe $60 to $70 a barrel, they had a surplus they could pour into the economy to offset the impact of international sanctions … But if sanctions become really serious, and at same time oil prices remain at current levels, I think there is chance of getting the Iranian leadership to rethink their strategy."

It is just possible, in other words, that the inexorable decline in oil prices could be the variable that stops, or reverses, the downward spiral into a nuclear-armed and far more dangerous Middle East. Now bear in mind this is like one of those movies where the lead characters are facing disaster and one of them blurts out, "It's crazy, but it just might work.…" (It always does, of course, in the movies). But one possible scenario goes like this. While none of the experts I've talked to thinks that the price of oil will by itself be enough to pressure Iran into abandoning its nuclear program, it could cost Mahmoud Ahmadinejad the election in June 2009.

The fiery Iranian president, who only a few months ago was seen as a virtual shoo-in for re-election, remains deeply unpopular among Iranian elites. If his increasingly impoverished populist base abandons him, as well, the result could be the return to power of former president Mohammad Khatami or some other pragmatist. That, in turn, along with persistent economic pressure on Iran, could open the door to a broader deal—the "surge of diplomacy" that Obama advocated during the campaign. A prerequisite here would be more help from Russia, which also finds its strategic position weakened by the drop in energy prices.

If all this can be achieved—a very big "if," granted—and Iran agrees to curtail its support for Hamas and Hizbullah as part of any deal, the desperate calculus in the Palestinian territories could change, too. Fatah could gain new credibility while Hamas withers. Iran's supreme leader, Ayatollah Ali Khamenei, indicated in a speech to Tehran University last Sunday that his country was not eager for an agreement now, in part because America's low status in the Middle East gives Iran an opportunity to achieve its dreams of regional dominance, pointing up "the might and the enduing grandeur of the Islamic System." But if the 69-year-old Khamenei, who is said to be subject to depression and may also be suffering from prostate cancer, is forced to rethink his country's strategic position in the Mideast, then he may decide that discretion—and compromise—is the better part of Islamic revolutionary valor. Many Iran experts believe it is possible that once Khamenei goes, he may replaced not by another supreme leader but by a shura council that might be more willing to negotiate.

In other words, the oil card could change what has been a losing hand for the United States and Israel into a winning one. There are plenty of pitfalls, of course. The same global economic crisis that has undermined Iran's position, for example, has probably made a U.S. (and therefore Israeli) military option even less likely, since Obama knows that a new Mideast war would send oil prices soaring again and set back economic recovery. And Iran's Islamic regime has backed away, again and again, from initiatives to open up new relations with the United States; the putative threat of the "Great Satan" remains part of the ideological glue that secures the Islamists's hold on power.

But as I discovered during a trip to Iran a year and a half ago, a substantial if largely silent faction of pragmatists can still be found in Tehran. They have grown weary of their country's economic and political isolation. The U.S. strategy must be to encourage these people, whose hopes for rapprochement were shattered in 2003 when the Bush administration ignored a moderate trial balloon for a deal floated through the Swiss. "If America pursues a different approach than confronting Iran, our dealings will change fundamentally," Mohsen Rezai, a former Revolutionary Guards general and secretary of the Expediency Council, told me then. My conversations with him, and other reformers inside Tehran, also suggested that under the right circumstances, Iran may still be willing to stop short of building a bomb. "Iran would like to have the technology, and that is enough for deterrence," S. M. H. Adeli, Iran's moderate, urbane former ambassador to London, said.

I don't necessarily buy this, but my 10-day reporting trip to Iran did convince me that this is no monolithic terror state. A genuine pluralism of opinion exists there. And like any country, Iran's leaders—the right leaders, that is—might just be responsive to the right mix of coercion and negotiation. But this must be deftly done: If Obama does nothing more than to adopt the stance that his incoming secretary of state, Hillary Clinton, embraced during the primaries, merely threatening to "totally obliterate" Iran, it won't work. Instead, as Ray Takeyh of the Council on Foreign Relations wrote in The Boston Globe on Wednesday, the United States must offer Iran "an opportunity to emerge as a leading regional state so long as it tempers its nuclear ambitions and restrains its destructive regional policies." The goal must be to give the pragmatists and reformers enough ammunition to contain and divide the hard-liners. "If the world does what it needs to do in 2009, there is a significant, or a not insignificant, chance that the Iranians will have to make tough decisions," says Meridor. The alternative is too grim to even think about. "We're currently in a situation where Iran has two bases of terror, one in Lebanon called Hizbullah, the other in Gaza called Hamas," Meridor says. "Together they have more than 20,000 rockets covering all of Israel. This threat is growing. The smuggling of explosives and weapons to Gaza is continuing."

Israel, and the West, desperately need a "game changer," to use a favorite Obama phrase. Perhaps it will be oil. Out of economic calamity could come a new approach to peace. It's not much, but it may be all we have left to try.