The aftermath of the Russo-Georgian War is largely a matter of position-taking by two armed camps, some of whose allies are not quite so enthused as the main protagonists.

We can put much of the rhetoric aside. The French have brokered a ceasefire that the Russians have said that they intend to honour but seem to be taking an inordinate amount of time in doing so. They have their reasons.

On 16 August, the Russians were still within 20 miles of Tbilisi. An uneasy truce was maintained as Russian and Georgian forces came face to face, but it became clear that the Russians were disinclined to honour the full ceasefire as the West understood it and pull its troops back too quickly.

Rather, it consolidated its strategic control of the main highway that effectively governs the country and it smashed a bit of strategic infrastructure.

Russian sentiment would have had a victory parade in Tbilisi by now if it could have got away with it. One problem was that every time US officials demanded withdrawal, it incentivized the Russians to move forward or to delay, just to spite the weakened superpower. This is not just a victory but must be seen to be a victory for Russia.

And so we are getting into a classic case of mutual sabre-rattling, with European leaders calling for Russia to withdraw or to face ‘unspecified consequences’ (perhaps the same ‘cut off your nose’ sanctions regime that operates against Iran!).

However, Germany, France and Italy remain unenthusiastic about excessive pressure on Russia. Core Europe’s interests are still not necessarily those of the Anglo-Saxon and the East European wings of the Atlantic Alliance.

France was certainly getting embarrassed that its peacemaking efforts were being treated so cavalierly in Moscow. NATO leaders planned to meet on 19 August but with very little that they could do about a ‘fait accompli’.

Western leaders presented a ‘united front’ of sorts in public but with the rather limited aim of getting Russia to implement a ceasefire to which it had already agreed. There has been widespread criticism of US policies towards the Caucasus that had allowed the Russians to take advantage of a naïve Georgian administration.

To some extent, increasingly aggressive US rhetoric might be interpreted as an attempt to bring its more supine European allies into line, but the consensus is that Russia has won this war and that the US is simply make the best soft power job it can make of that fact.

The humanitarian stories have also not entirely gone the West’s way. As stories come out, it becomes clearer that the South Ossetians had good reason to fear a Georgian seizure of power. Some are beginning to see that consistency requires some respect for South Ossetian self-determination in the light of Western ‘acquisition’ of Kosovo.

Civilians on both sides of the conflict having suffered greatly but, whenever we read a story about suffering, we have to ask who is managing the media and to what purpose. Any analyst must be concerned that stories are being manipulated for maximum propaganda effect.

The Russians have insisted that they acted to pre-empt Georgian ethnic cleansing operations, while the invasion itself has created a serious refugee problem in Georgia. One fact on the ground is that the South Ossetian capital, Tskhinvali is in ruins, the residential Jewish quarter reduced to rubble. That is down to the Georgians.

On the other side, South Ossetian nationalists operated independently of the Russians and seem to have been highly provocative in their own right. It is, in short, a thorough mess.

Georgia is also economically damaged, though probably not as badly as many feared, given long term US commitment to the country. Putting the lie to Georgian Government claims during the war, the seaport at Poti was quickly back to normal levels of operation

Analysts are already trying to assess how the raised tension on the pre-NATO/Russian border will affect investment flows into a zone stretching back from the Caucasus to the Balkans.

Most now expect the Russians, having gathered their strategic intelligence, damaged the Sakashvili administration as much as possible and destroyed Georgian military material that might be of some use in an early recurrence of the conflict, to start pulling back today towards South Ossetia.

It is not considered likely that Sakashvili can survive. He has lacked judgement and he has damaged his country. The Russians are also about to play the West at its own game by developing a war crimes case against him.

We are not so sure whether he is doomed. His departure would create a particularly severe strategic problem for the US. Russian troops are smack down in the middle of one of their own satrapies and the defeat may remove their man. They may well have to fight hard to ensure his survival or find a pro-Western successor quickly.

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We make no apologies for coming back to the Iranian situation again and again. It is as necessary as a constant return to the politics of the Balkans in the years before 1914 or to the dog’s vomit of German aspirations in the 1930s.

The current Iranian situation represents a defining moment in West/East relations. A war might be triggered that could not be contained any more than were the dynamics of Austro-Hungarian, Russian, German, French and British troop movements nearly a hundred years ago.

The Fifth Fleet response to a recent Iranian claim that it will close the Straits of Hormuz on an Israeli attack is blunt: basically, over our dead body.

Iran has, since our last report, sentenced a businessman to death for helping the Israelis to spy on Iranian military sites – he claims to have been unknowingly trapped into espionage by Mossad.

After all the sabre-rattling and lines being drawn in the sand, there were some tentative signs that the Iranians could be more amenable to recent proposals for a settlement over the nuclear issue but, as we shall see, not too much should be read into this.

Much of the tub-thumping is for show and there are moderate voices on both sides but there is a nervousness in the air. The perceived price of failure – to act decisively on the Israeli side or to fail to react adequately on the Iranian side – is considerable and raises the stakes by the day.

The Financial Times provided a major review of the risks of an Israeli attack on Iran on 3 July. There are up to four prime targets.

Israel (to be decisive in victory) would have to mount a raid reaching right across Iran in order to make the effort worthwhile and not leave the bulk of Iran’s nuclear capacity standing.

The Financial Times also notes that, if the Straits of Hormuz were closed, such an action would risk cutting off around 40% of all seaborne traded oil, with re-routed oil having to cross 2,000km of Saudi desert, vulnerable to guerrilla or missile strikes ,to reach the Red Sea.

Even if the re-routing was a relatively smooth one, the disruption to energy flows is likely to cause something analogous to a heart attack or stroke, perhaps not fatal but massively disabling, to the world economy.

An analysis of where Iran sends its crude also shows that the main sufferers would not be the Anglo-Saxons and the Israelis but the East – Japan, China, India, South Korea and Taiwan, with Mediterranean Europe (Italy, Turkey, France and Greece) coming next in line.

South Africa would also be badly affected. It can ill afford an inflationary hit as Southern Africa as a whole tries to cope with the emergence of Zimbabwe as rogue state.

It is hard to read the runes on Israeli intentions or precisely what American policy is. The gaps in knowledge tend to allow conspiracy theory to flourish.

The explanation that best fits the facts is that a political warfare operation designed to support American attempts to corral softer allies, such as their European and Gulf partners, into a hardline policy on Iran has started to get out of hand.

The Iranians have simply ignored the weakening hegemon and have created sufficient work-arounds on sanctions to make them almost meaningless, certainly not much more than irritating and inconvenient.

The high oil price and increasing export links to East Asia, as well as a more cautious diplomacy from Russia and China that has made the West work for its few successes, has created frustration inside Israel.

Israel's biggest asset, unquestioning support from Washington, may begin to be attenuated from January 2009 if AIPAC fails to deliver the political goods by extorting commitments from Obama, so there is some pressure to do something decisive.

Like drowning men clutching at straws, London officials are spreading the rumour that everything will change in the Spring because Ahmedinejad will (not might) be ousted by his own side. Unfortunately for the rest of the West, Israelis are not intellectually challenged.

They know that this is a propaganda manouevre to ensure no aggressive action before Bush leaves office. They also know that the recent response to European sanctions from Larijani indicates that allied ‘spin’ is simplistic and desperate.

This straw-grasping by British officials in particular is important because it guides much Western media coverage. Every minor conciliatory statement is seized upon as evidence that the Iranians are ready to concede important ground without anything more substantial to show as evidence.

This has the paradoxical effect of encouraging ‘hawks’ because they start to believe that Iran is divided and that threats can create a rational fear of Western military power that will enforce behavior change.

The coverage surrounding recent statements by one of Khamenei’s Senior Advisers, Ali-Akbar Velayati, is typical. The straw was seized. The Iranians were surprised at the interpretation.

Sure enough, Velayati ‘clarified’ his position on Iranian television in ways that indicate that, yes, talks are good but that, no, the West should not expect a ‘surrender’. The Iranians are quite prepared to talk for a very long time, while the West is desperate for a quick fix.

The Israelis know that a strike might cause a whirlwind of responses that could screw up things for virtually everyone else in the world, even to the extent of creating cause for a new wave of anti-semitism from those who lost their livelihoods in far-flung parts of the globe.

But they are fairly confident that the American people in an election year will back their ‘plucky little country’ and so force a new and wobbly President into blind long term commitments to defend Israel, no matter what, for the foreseeable future.

Israel is interested in Israel and not in the fate of the Jewish diaspora. Tougher times for Jews elsewhere means more migrants and so more chance of staving off the effects of higher Arab birth rates.

Israel also has a fairly self-sufficient and resilient economy with a strong intellectual base that is likely to be more resistant than others to the global down-turn. By all accounts, it is in a position to throw the dice for a war of survival (as it sees it) and let others clean up the mess.

But we still hold to our line that Israel will not go a route which might create such a maelstrom of regional violence and global resentment that it might, eventually, challenge American popular preparedness to back the country no matter what.

Certainly, senior Israeli officials now seem to be down-playing the headlines promoting an air strike.

US military figures also seem to be making inordinate efforts to calm the Israelis and reassure the Iranians while continuing to state an intention to respond vigorously if Iran responds to Israeli aggression with its own set of radical actions in Iraq or in the Gulf.

There are so many arguments against an attack within the critical six months time frame before Bush leaves office that Israeli sabre-rattling seems to be just that and no more. 

There is the caution of American defense interests, the probable survival of the Olmert Government into 2009 because of Labour's refusal to wield the knife and the pressure to pursue diplomatic solutions to many more geographically immediate problems.

Nevertheless, few doubt that Israel could mount a strike and be successful.

It may be the air equivalent of the recent Lebanese fiasco, especially if Iranian defence systems prove more effective than many assume, but the idea that the bomber would not get through to hit at least one of the four key sites seems to be the triumph of hope over experience.

But the very process of attack is fraught with political danger. Israel can treat Syrian airspace with contempt but reaching Iran requires the violation of either Iraqi or Saudi airspace or both.

For either the US or the Saudis to permit Israeli aircraft to cross these territories is tantamount to complicity.

It would help with the consequent narrative of US involvement and could set Sunnis and Shia into a bloody confrontation that might bleed the Gulf, Iraq and Yemen dry. It could destroy the legitimacy of the House of Saud.

Nor could the Israelis knock out Iran as a power, only the Americans can do that (possibly)and even the Americans could only do so through a murderous use of firepower that would have people out on the streets across the world, half of them blaming 'the bankers and the Jews’.

The insurgency, which has turned into a simmering rather than a boiling pot, would be given cause to heat up again, supported by new inflationary pressures and hunger.

There may be proxy forces operating for Iran in Iraq, Lebanon and in Palestine, possibly in the Gulf and Yemen, and, while China might co-operate with anything that kept the Straits of Hormuz open, Russia is not so easy to placate.

It could not easily support an American dominion stretching in effect from Amman to Kabul and operating on the shores of the Caspian Sea. The SCO represents a forum for pressure on Iran but also in its support. In other words, this really could become an almighty bloody mess.

We must also remember that no one has yet proved that Iran is developing military nuclear weaponry. The history of manufactured lies in the case of Iraq could soon return to haunt America.

An attack by Israel might create an ambiguous situation where a counter-attack by Iran on US bases or interests effectively creates a double-narrative.

One side will claim that America attacked first insofar as Israel is an American agent and the other will treat the attacks by Iran as some kind of latter-day Pearl Harbour. The world will divide along bitter lines, one blaiming Islamo-Fascists and the other Neo-Imperialists.

The worry amongst moderate analysts is clear. The neo-con/Israeli political warfare strategy is predicated on Iran acting ‘rationally’ i.e. recognizing ultimate US military superiority. The neo-cons and Israelis have under-estimated what might be called ‘alternatively rational’ factors.

There is a dynamic commitment within Iran to the Iranian Republic created out of the Revolution of 1979. Weakness or concession could mean not the destruction of Iran so much as the destruction of the People’s Iran created out of much blood and sweat only thirty years ago.

There is also the potential crumbling of Iran’s self-perceived role as co-leader with Saudi Arabia (for the Sunnis) of the Middle East against Western imperialism.

Unwarranted concessions by Tehran would smash the dream and the prospect of pushing Western influence out of the region, a prospect which is now more real than at any time since Napoleon invaded Egypt.

It would look as if Western assumptions, assessments and values were things which Iran had to accept to survive. It would degrade itself (in its own eyes) to the level of a mid-sized Gulf state relying on Western protection, no better than another local Dynasty but without a Shah.

The West has consistently underestimated that Iranians have a national narrative as powerful as that of the Israelis and with as long a history. They will not blink under Western threats because their sense of survival is not as a material entity so much as a ‘spiritual’ one.

Imagine if Japanese preparedness and power in the 1940s has demanded submission of America on terms of actual military superiority.

The US would not have conceded but, if its politicians had, its Constitution would have collapsed because the political model was based entirely on a mythic narrative of revolutionary freedom from foreign oppression.

So it is with Iran – whether radical or conservative. The signals from the Iranian Revolutionary Guard and even from Larijani suggest that Iran will fight and fight hard.

The revolutionary drive that threw back Saddam Hussein may have attenuated, but the IRG has 125,000 men and can access the Basij, a volunteer force of 12.5 million (which is larger than the whole population of Israel) in some 70,000 locations.

The Al-Quds Brigade, a tried and tested partisan training and covert operations network, extends Iranian reach far beyond its borders. The Americans and Israelis will call them terrorists but others will soon call them the resistance.

Air power could smash the Iranian infrastructure in extremis (at huge loss of civilian life) but the chance of an easy land-based invasion are low without a quisling element prepared to cease power in Tehran.

I don't fancy pro-US reformers' chances of survival much past the second day of a declaration of such a war. The security services will know who they are and where they live.

Saddam Hussein operated a top-down structure which you killed by removing its head (like national socialism), whereas the Iranian system operates more like the communist system that was able to mobilize a different sort of persistent resistance in the Soviet era.

It may have degraded since the Revolution of 1979 but not so much that it could not be brought to life again by the first foot on Iranian soil.

The entire structure of Iranian national defence certainly does not depend on a command structure fearful of giving guns to rival warlords within a centralised party. It is decentralized and provincialised.

Perhaps this is why, despite all the threats to Iran not to overstep the market, the US military are highly nervous of their own political masters’ decision-making.

The Chairman of the US Joint Chiefs of Staff, Admiral Michael Mullen, has now openly expressed concern about Israel opening up a third front for the US.

As things stand, the US is pleased at progress in Iraq. It believes it can win the prize of a permanent military presence and de facto control over Iraqi oil reserves in association with a weak and vulnerable ‘democratic’ Government.

But this is not certain, agreements are currently being negotiated and Iraq is held on the calculated sufferance of the Mahdi Army and the Iranians. There is a balance of terror in Iraq that is working to the US benefit.

Tipping the balance so that Iran has nothing to lose will not mean American troops marching over the Iranian border to Tehran but a renewal of violence in Iraq in which death rates will increase and will probably force the new US President into an eventual and humiliating withdrawal.

Similarly, Mullen and others are, at last, admitting that Afghanistan is a tougher nut to crack now than at any time previously.

Despite all the war stories of derring-do by our boys, the truth is that there has been no decisive 2008 Offensive, the population is resentful and surly and the Taliban are becoming more rather than less effective.

The need to engage in direct military action to stop an apparent assault on Peshawar in Pakistan late last month tells us everything that we need to know about the war – the West is not winning, it is defending ground. 

Now, imagine an Iranian provincial army crossing the border to assist the Taliban against the imperialists - and prepared to support the 'liberation' of Islamabad, with the backing of a chunk of the Pakistani population.

Now imagine the Indians, with nuclear weaponry, stepping in to save Pakistan from itself and stop Iranians getting access to Pakistani nuclear technology and we see the prospect of hell on earth.

None of this is wholly fantastic – the trajectories of 1914 and 1939 would have been regarded as wholly fantastic in 1913 and 1938 and yet they happened, simply from pressure of events.  War abhors a vacuum and once unleashed outside set boundaries, unleash widely.

One side or the other is going to have to back down and the choice for the West is brutally simple – to ease up or to risk triggering something that will shatter the old order as much as the previous world wars did.

The assumption of the dominant powers of the time, whether European dynasts in 1914 or authoritarian dictators in 1939, was that their order was a given, that war will not change systems.

The tragedy of the next World War may be that, far from bringing the rest of the world into the liberal Western system, it could be the cause of its collapse.

The odds are still in favour of a face-saving deal between Iran and the West but we should be in absolutely no doubt what a neo-conservative or Israeli blunder would mean at this point in history …

... and I can tell Tel Aviv dead straight, we won’t be sending European children into battle to save Israel. Americans can decide for themselves which of their young they would choose to sacrifice for their ally.

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Euro-Russian relations are currently high on the political agenda with the forthcoming EU-Russia summit in Khanty-Mansiysk. Europe’s heart may be with Washington but its head will increasingly incline it to Moscow.

This is a Eurasian shift that parallels the fact that, much as Washington may want to fight with Beijing as a 'communist dictatorship', it is drawn ever closer into courtship by awareness of a common dependence on the global trading system.

It is symbolic of the state of Euro-Russian relations that EU leaders have had to trek half way across the continent to a Siberian city whose only distinguishing characteristic is that it rules the region from which half Russian oil output is produced.

But Europe has been weakened in its negotiations by the failure of the Irish to kow-tow before the technocrats behind the European Project.

The Russians are trying hard not to hide a certain supercilious smirk since they are in two minds about such things. It might be good to have one point with which to negotiate deals but not at the cost of having a militarized neo-liberal super-state throwing its weight around.

Every month that goes by that fails to result in the signing off of the compromise agreement between Atlantic liberals and continental corporatists (with the French behaving as ambiguously as ever) means that the reality of German dominance becomes clearer.

A European settlement now looks less like a containment of the biggest regional power, Germany, and more like an endorsement of its unique form of re-born earnest liberal authoritarianism.

Like all converts, Germany is a country more enthusiastic about social liberalism than those which have had it since birth. The result, of course, is a po-faced fundamentalism on rights and the environment that drives most Anglo-Saxons up the proverbial wall.

Now, the identity of economic interest between Berlin and Moscow is becoming as marked as that developing between Washington and Beijing.

The democratic deficit within the Lisbon Treaty Process is now crystal clear. The significant non-German figures who drove the compromise are falling in popularity (to dreadful depths in the case of Brown whose Party came fifth after the fascists in the Henley by-election)

Into this gap, stride German politicians quietly asserting their leadership ‘for the common good’ (providing a shiver down the spine to some).

Meanwhile, in the background, is Gazprom which, we must remember, though ostensibly a private corporation (ho, hum!) has just provided Russia with its President and is embedded in Russian political strategy.

Russia has what might be called a security-energy complex similar to America’s security-financial complex. Gazprom has already, this year, predicted a $250 oil price and it seems determined to stir things up in the market with some unusually provocative statements.

The latest pronunciamento, on the very eve of the Summit, has Gazprom’s Chief Executive, Alexei Miller, in a Financial Times interview, saying that OPEC has now lost control of the oil market completely.

With unhidden glee, he anticipates a market capitalization for his ‘company’ of $1,000bn and, without any shame or concessions to the West, states that Western companies should invest in Russia alongside state-controlled companies or, implicitly, not at all.

This is a nationalist ideology of harnessing Western finance capital to Russian state capitalist enterprises in a hybrid of capitalism and socialism that looks set to become a global standard in the next century.

What is interesting, though, is that Russian strategy need not necessarily be regarded as anti-American rather than pro-Russian or nationalist.

Miller proposes a world where Russia supplies gas to North America in a model of interdependence rather than competition, with the Shtokman Project off Russia’s north coast directed at North America through Alaska and Canada.

Of course, conspiracy theorists might enjoy suggesting that this huge corporation will ‘subvert’ Canada into its field of economic influence much as it plans to subvert Europe.

In practice, as in its Chinese relations, the US is only going to have to come to terms with the fact that it is no longer sole hegemon (which, surely, Washington now understands is not tenable in the long run) and that its future is as innovation powerhouse for the rest of the world.

This makes a US that is still wealthier than any competitor, and possibly the wealthier for not having to be the world’s policeman, but also one that is going to have to decide just how integrated it wishes to be into the global economy. 

The logic is a nationalist, even quasi-protectionist, response in which states do business in 'deals'. Cheaper Russian energy is a bargaining tool but then so are US technology and financial sophistication, credit crisis notwithstanding.

All in all, Russia feels that it is on the rise, albeit as an economic rather than a military power although few will tangle with it militarily on its own territory. NATO is well aware that there is no 'fourth time lucky' in crossing the snowy wastes for Europeans.

Creeping containment by NATO is probably reaching the limits of what it can do without creating such risks of confrontation that will be more than the European economy can bear. Chinese control of Siberia must be the ultimate own goal for the West.

The Western/Slavophile debate has also been pushed into the long grass. Pro-Western liberals and extreme ethnic nationalists have been marginalized, as economic growth and state security concentrates on maintaining a sovereign empire.

This new empire is a sort of people’s Russia, heir to the Soviet era as much as the Tsars without Soviet internationalism, without its ideological attempt to bend people out of their natural propensities to greed and ethnic identity and without its bureaucratic rigidities.

Europeans are still trying to work out where they fit into all this and whether this revived Empire is a threat or an opportunity.

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