The financial turmoil may help Israel in 2009

By Daniella Peled, December 11, 2008

As the hangover fades on January 1, watchers of world affairs can look forward to a busy schedule over the following year with the inauguration of a new US president in January, Israeli elections in February and Iranian polls in June, not to mention the ongoing global financial turmoil and rogue nuclear programmes.

In Jerusalem, policy planners have been busy with their own forecast for 2009, and a quick look throws up some interesting predictions.
On Palestine, government sources are emphatic: a continuation of negotiations but no progress towards meaningful agreement. Israel sees this as no bad thing, however. They want to focus on the perceived dividend of negotiations — to show the Palestinians that Fatah is bringing economic development, security gains and at least the prospect of some future progress in peace talks, while Hamas is just bringing misery.

President Mahmoud Abbas faces a wobbly start to 2009, with his official term running out in January, Hamas vowing not to recognise his status after that date and no new elections likely for some time. So he will need all the help he can get. And Israel’s current policies of supporting Palestinian economic development and gradually handing over security control have had some impact, with, for example, a huge surge in tourism in Jericho.

In any case, the Israelis reason, new US president Barack Obama is unlikely to embark on a major push for Israeli-Palestinian peace in the first days of his administration. Instead, they see his attention focused towards Damascus. Indirect Israeli-Syrian talks have been ongoing but the Bush administration was opposed to supporting any kind of engagement with Syria. This is likely to change.

“In late 2009 we might see the beginning of direct negotiations with the Syrians,” says a senior diplomat. “Obama may appoint a special envoy and there is potential for movement.”

Syria itself has a strong incentive: its economy is failing, it is itching under the oppressive influence of Iran and it is desperate to win some US favour to help with its ongoing woes with the International Atomic Energy Authority and the investigation into the assassination of former Lebanese prime minister Rafik Hariri.

Israel is questioning what the Syrians will give in exchange and the Syrians want guarantees over the Golan before direct talks. But if Obama wants a Middle East achievement for his first year in office, he might be willing to bang some diplomatic heads together.

And so to Iran. Israel is growing increasingly confident that it has the military capability to derail Tehran’s nuclear programme, albeit with full awareness of what potentially horrible consequences this would entail.

But time is running out. Jerusalem’s assessment is that by late 2009 Iran will be at a threshold stage, with the makings of a bomb and a delivery system and only lacking fissile material. By spring 2009, according to intelligence assessments, the atomic facility at Bushehr will have enriched uranium to military levels and Iran could take the decision to leave the Nuclear ProliferationTreaty by year end.

But here, the economic crisis is finally showing some positive benefits. Iran has been unable to realise import schemes that would have brought in £2-3 billion a year. And further, harder sanctions will be yet more effective.

Trade restrictions are working. But Israel warns of a massive sanctions gap in Asia that needs to be targeted. India buys oil from Iran and exports distillates back; Iranian trade with Malaysia and Indonesia is flourishing; and bilateral trade between Iran and China is in the dozens of billions. Dubai, used for financial transfers, is seen as the biggest hole in sanctions.

Much will depend in 2009 on the obduracy of the Iranian regime, the realism of a new US president’s foreign policy aims and action on sanctions. The only thing easy to predict is that stability is extremely unlikely.

Last updated: 11:00am, December 11 2008