Provocative Israeli air manouevres forced the West's favourite Iranian moderate, Ali Larijani, Speaker of the Iranian Parliament, to become very immoderate indeed last week. He had little alternative.

His ostensible attack was on the sanctions imposed by the EU but his real target was the hardline faction in the West who are undermining the efforts of moderates in both camps.

One senses from his calculated anger a deep frustration that attempts to persuade fellow Iranian conservatives of the importance of dialogue with the West are undermined by a silly political performance from Tel Aviv, backed by Washington, that merely fuels nationalism.

Larijani adopted some distinctly non-moderate language to warn the West that a military attack, if seriously contemplated, would make an Iranian response dramatic and (might) justify a commitment to a nuclear weapon: “Do not increase your costs by miscalculation”.

Much of what is going on is just sabre-rattling between Israel and Iran. Nonsensical threats and counter-threats are often designed for domestic political purposes. The Iranians are simply now giving as good as they get.

However, what Larijani is saying is that, regardless of 'bourgeois' anxieties about Ahmedinejad's economic populism and isolation from Western capital, when push comes to shove, conservative moderates will rally around a Republic under attack.

The West can then kiss goodbye to its plans to split the Iranian elite and negotiate with a moderate President in 2009. In essence, Larijani is also saying to the West that Israel needs to be put back on a leash if it wants the medium-term outcome of a regional settlement. 

The Economist this week takes Israeli sabre-rattling seriously as intent rather than as rhetoric but whoever is briefing is missing the point. The editorial makes warning noises (reflecting those of the British Establishment) that Israeli behaviour is now becoming counter-productive.

Israelis claim that Hezbollah (say) is a cat's paw of Iran. Iran claims that Israel is the agent of the West. Both are wrong. Moderates in both camps - Iran with more success - are trying to restrain independent actors with their own agenda and ability to influence matters at 'home base'.

It is one thing to undertake political warfare operations to stiffen European and Gulf spines on sanctions (since the Iranians themselves are clearly not impressed by all the palaver), it is another to drive up the oil price and cause increased tension within Iraq.

With $140 a barrel, a failed Jeddah Summit and more bad economic news to come, we see a possible blockage of Hormuz, disruption to Iraqi oil supply and explosions ripping into Gulf State oil infrastructures - maybe Gazprom knows more than we do with its $250 prediction.

Suddenly, the political warfare specialists who thought that using Israeli military threats could cause splits in the Iranian system and force a negotiation are looking like economic illiterates - and, if the West is one thing, it is greedy before it is ideological.

The Economist continues the party line that tougher sanctions are needed but with the rather absurd notion that such sanctions are required (it would seem) less to persuade Iran to negotiate than to deter Israel.

This is tantamount to saying that policy should be geared to placating a tiny little country pre-armed with nuclear weaponry by the West and relying for support on European war guilt and its superb state-of-the-art lobbying techniques in Washington. Talk about topsy-turvy.

The story developed over the weekend as the Iranians made more explicit their strategy of resistance. Iranian missiles [Shahab-3B] are now allegedly targeting key Israeli sites, including the Dimona nuclear plant.

This was another natural Iranian escalation in response to those Israeli exercises over the Mediterranean that had been widely interpreted as a ‘practice run’ for a strike on Iran and which, with new EU sanctions, had provoked Larijani's outburst.

There are suggestions, impossible to verify, that the US and Israel are collaborating on a timetable in relation to Iran. The fear is that the Bush Administration might approve an Israeli strike before the President departs office.

The Iranians are also suggesting that a response to an Israeli attack might include the blocking of sea-routes – which, of course, would bring Iran into direct confrontation not only with the US Fleet and allies but possibly China. Now that is scary!

In fact, extreme measures are as absurdly self-destructive on the Iranian as on the Israeli side but the Iranian response is signalling that an Israeli strike would not just be a case of ‘in and out’ like the recent targeted attack on Syria.

Israel would set off a chain of events that could place a dangerous level of pressure on a weakened global economy from which Iran has been excluded and which it has no incentive, unlike Saudi Arabia, to protect and defend.

Syria demonstrated a moderate response to the Israeli incursion in recognition of its relative military weakness. But relative Iranian weakness provides a rationale for an opposite response - radical and unconventional measures.

The Commander of the Iranian National Guard, Mohammad-Ali Jafari, appeared to be implying this weekend that radical measures were on the table precisely because Iran was relatively weak militarily rather than strong. Humiliation is not an option.

The implication, perhaps in an intended message to the West, was that lack of relative military and naval strength in the face of the Fifth Fleet and the US military presence in Iraq, justified economic, missile and perhaps insurrectionary war as the only reasonable means of defence.

All in all, we still incline to believe that everyone will draw back from the brink and that US tolerance for Israeli actions is largely a matter of the misapplication of political warfare theory BUT everything is very, very finely tuned - one slip and we are all in the deep doo-doo.

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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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EU sanctions, against Bank Melli, Iran’s largest bank, [an asset freeze and severe restrictions on operations] are no surprise. The Iranians have had plenty of time to make alternative arrangements.

This EU action is likely to be used by the US to persuade its Gulf allies and others to impose similar sanctions on the Bank where they can do more immediate damage.

There were also EU sanctions against specific individuals and businesses but not against Bank Saderat, despite US pressure, because the EU does not recognize Hezbollah as a terrorist group.

The EU is adopting a ‘more in sorrow than in anger’ tone. It is making it clear that it wants talks to continue, based on a programme of ‘incentives’.

The Europeans are also letting it be known that they do not approve of Israeli threats against Iran and that they expect no more sanctions before a new President is installed. Bush has used up his remaining political capital on a national obsession as neurotic as that of Britain's with Zimbabwe.

The sanctions in themselves are fairly milk and water. Russia and China had, in any case, watered down the original UN-SC Resolution proposed by the US.

As a result, the EU is truly doing a favour to Washington at the expense of its own short to medium term energy interests by exceeding any strict interpretation of UN demands. It all seems a lot of effort for only moderate results.

Western analysts are fully aware that oil at $140 works against pressure on Iran. Although financing from the West may not be possible, the Iranians are finding ‘work-arounds’ that might one day cut out Western interests entirely. 

The best bet for the West is a political change in March 2009 when the Iranian Presidency comes up for election. 

Sanctions having been exhausted in their potential, Western strategy will now shift to ensuring that Iran is ruled by a more amenable President through a combination of reassurance of the clerical establishment and support for the sort of 'civil society' that bourgeois democrats love.

Meanwhile, the Americans are extremely irritated with the Swiss (a ‘free country’ not, of course, under EU rule) who, always with an eye to the main chance, have cut a deal on gas with Iran, undercutting Bush’s unpopular attempt to deprive Europeans of trade links with Tehran.

More recently, Switzerland has been under the PR cosh for being the home of some of the business facilitators allegedly linked to the A.Q.Khan nuclear proliferation network. This and the civil society model of undermining Iranian national-populism is relevant to the next bit of news.

The Swiss currently manage Washington’s interests in Tehran. This is now not a very satisfactory arrangement. The Swiss may be highly amenable to passing on appropriate intelligence to Washington but one can bet that they did not pass on their own interest in cutting a gas deal.

Having gone just about as far as it can in pressuring Iran through alliances, it has now been reported in the Washington Post that the US Government is facing reality and looking at sending diplomats to Tehran for the first time since 1979.

The ulterior motive is not so much peace but an awareness that intelligence is poor and that the US is relying excessively on allied diplomatic networks (notably the British and Saudi) to sustain links with the conservative opposition to Ahmedinejad.

All that is being talked about here is an ‘interests section’ – basically visas and spooks. It is hard to suborn Iranian intellectuals and officials if you cannot get them to the US and you cannot get them to the US if you cannot give them a visa.

An Iranian interested in understanding more of the virtues of Western-style democracy has to make their way to Dubai to get a visa – fine for the richer members of the bazaar but impossible for the civil society activists and intellectuals who are of most long term interest to the US.

This is how Cuba is handled and it has not meant any let-up in pressure on the Castro regime.

Indeed, the newspapers tell us that solid British banks like Barclays and Lloyds TSB are running scared of the US authorities and are allegedly trying to close down accounts that are linked to doing business with Cuba.

An ‘interests section’ should not be taken as implying any less of a drive to squeeze Iranian credit in Europe and the Gulf. The idea seems to be a case of kite-flying by frustrated State Department officials, fed up with having to negotiate around dimmer neo-conservatives.

Condoleeza Rice expressed State Department frustration even as she refused to endorse the Washington Post report – “We’re determined to find ways to reach out to the Iranian people.”

In short, America wants inside the regional giant and is frustrated that it cannot undertake operations similar to those maintained in Eastern Europe prior to the fall of the Berlin Wall.

But what happens to the diplomats on the day the Israelis decide to lob a bomb into Bushehr seems not yet to have been considered.

Or is this news another indication that the attack bluff is getting tired and old, one reduced to being a tool to frighten Gulf Arabs into remaining under the Western umbrella, and that it can be ignored by all except armchair neo-conservative and Zionist die-hards?

Should Gordon Brown, instead of going to Jeddah to ask the Saudis to drive up oil production when the world knows that this will have no immediate effect on the oil price, be going to Tel Aviv instead?

Should he be asking the Israeli Government why it keeps pushing the oil price up by sabre-rattling at a country whose post-attack response could truly destabilize global energy supplies? Think a $250 spike and you have an economic and global security disaster on your hands.

With inflationary pressures at an all-time high, somebody needs to have the courage to slap the Israelis’ wrists before another silly threat puts Western workers out of a job and fingers get pointed. These are dangerous times and a bit of maturity is in order.

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