Can We Stop Iran From Going Nuclear?
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This week, we will turn our focus to geopolitics and specifically the issue of whether the US and the West can stop Iran from producing nuclear weapons -- assuming they aren't already. To the surprise of just about everyone, Iran agreed earlier this month to sit down with US diplomats and discuss the situation in Iraq. Supposedly, the issue of Iran's nuclear ambitions is not on the table; however, it is difficult to imagine that the subject will not come up.

President Bush has squandered what little "political capital" he garnered in the 2004 presidential election, so there is little or no chance that the US will use military force to eliminate or damage Iran's nuclear programs. Yet when I look at the things I worry about, an Iran with nuclear weapons is very high on my list.

With that in mind, we turn our attention this week to the latest geopolitical analysis by our old friends at, the global intelligence experts. As you will read below, I am reprinting the latest analysis on Iran from Dr. George Freidman, the founder of Stratfor. I think you will find George's analysis on the relations between Iran and the US fascinating.

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Putting Cards on the Table in Iraq

Putting Cards on the Table in Iraq

March 21, 2006 22 04 GMT
By George Friedman

The clouds couldn't have been darker last week. Everyone was talking about civil war in Iraq. Smart and informed people were talking about the real possibility of an American airstrike against Iran's nuclear capabilities. The Iranians were hurling defiance in every direction on the compass. U.S. President George W. Bush seemed to be politically on the ropes, unable to control his own party. And then seemingly out of nowhere, the Iranians offered to hold talks with the Americans on Iraq, and only Iraq. With the kind of lightning speed not seen from the White House for a while, the United States accepted. Suddenly, the two countries with the greatest stake in Iraq -- and the deepest hostility toward each other -- had agreed publicly to negotiate on Iraq.

To understand this development, we must understand that Iran and the United States have been holding quiet, secret, back-channel and off-the-record discussions for years -- but the discussions were no less important for all of that. The Iran-Contra affair, for example, could not have taken place had the Reagan administration not been talking to the Ayatollah Ruholla Khomeini's representatives. There is nothing new about Americans and Iranians talking; they have been doing it for years. Each side, for their own domestic reasons, has tried to hide the talks from public view, even when they were quite public, such as the Geneva discussions over Afghanistan prior to the Sept. 11 attacks.

What is dramatically new is the public nature of these talks now, and the subject matter: Iraq.

Not to put too fine a point on it, but the real players in Iraq are now going to sit down and see if they can reach some decisions about the country's future. They are going to do this over the heads of their various clients. Obviously, the needs of those clients will have to be satisfied, but in the end, the Iraq war is at least partly about U.S.-Iranian relations, and it is clear that both sides have now decided that it is time to explore a deal -- not in a quiet Georgetown restaurant, but in full view of the world. In other words, it is time to get serious.

The offer of public talks actually was not made by Iran. The first public proposal for talks came from U.S. Ambassador to Iraq Zalmay Khalilzad, who several months ago reported that he had been authorized by Bush to open two lines of discussion: One was with the non-jihadist Sunni leadership in Iraq; the other was with Iran. Interestingly, Khalilzad had emphasized that he was authorized to speak with the Iranians only about Iraq and not about other subjects. In other words, discussion of Iran's nuclear program was not going to take place. What happened last week was that the Iranians finally gave Khalilzad an answer: yes.

Iran's Slow Play

As we have discussed many times, Iraq has been Iran's obsession. It is an obsession rooted in ancient history; the Bible speaks of the struggle between Babylon and Persia for regional hegemony. It has some of its roots in more recent history as well: Iran lost about 300,000 people, with about 1 million more wounded and captured, in its 1980-88 war with Iraq. That would be the equivalent of more than 1 million dead Americans and an additional 4 million wounded and captured. It is a staggering number. Nothing can be understood about Iran until the impact of this war is understood. The Iranians, then, came out of the war with two things: an utter hatred of Saddam Hussein and his regime, and determination that this sort of devastation should never happen again.

After the United States decided, in Desert Storm, not to move on to Baghdad and overthrow the Hussein regime -- and after the catastrophic failure of the Shiite rising in southern Iraq -- the Iranians established a program of covert operations that was designed to increase their control of the Shiite population in the south. The Iranians were unable to wage war against Hussein but were content, after Desert Storm, that he could not attack Iran. So they focused on increasing their influence in the south and bided their time. They could not take out Hussein, but they still wanted someone to do so. That someone was the Americans.

Iran responded to the 9/11 attacks in a predictable manner. First, Iran was as concerned by al Qaeda as the United States was. The Iranians saw themselves as the vanguard of revolutionary Islam, and they did not want to see their place usurped by Wahhabis, whom they viewed as the tool of another regional rival, Saudi Arabia. Thus, Tehran immediately offered U.S. forces the right to land, at Iranian airbases, aircraft that were damaged during operations in Afghanistan. Far more important, the Iranians used their substantial influence in western and northern Afghanistan to secure allies for the United States. They wanted the Taliban gone. This is not to say that some al Qaeda operatives, having paid or otherwise induced regional Iranian commanders, didn't receive some sanctuary in Iran; the Iranians would have given sanctuary to Osama bin Laden if that would have neutralized him. But Tehran's policy was to oppose al Qaeda and the Taliban, and to quietly support the United States in its war against them. This was no stranger, really, than the Americans giving anti-tank missiles to Khomeini in the 1980s.

But the main chance that Iran saw was getting the Americans to invade Iraq and depose their true enemy, Saddam Hussein. The United States was not led to invade Iraq by the Iranians -- that would be too simple a model. However, the Iranians, with their excellent intelligence network in Iraq, helped to smooth the way for the American decision. Apart from providing useful tactical information, the Iranians led the Americans to believe three things:

1. That Iraq did have weapons of mass destruction programs.

2. That the Iraqis would not resist U.S. operations and would greet the Americans as liberators.

3. By omission, that there would be no postwar resistance in Iraq.

Again, this was not decisive, but it formed an important part of the analytical framework through which the Americans viewed Iraq.

The Iranians wanted the United States to defeat Hussein. They wanted the United States to bear the burden of pacifying the Sunni regions of Iraq. They wanted U.S. forces to bog down in Iraq so that, in due course, the Americans would withdraw -- but only after the Sunnis were broken -- leaving behind a Shiite government that would be heavily influenced by Iran. The Iranians did everything they could to encourage the initial engagement and then stood by as the United States fought the Sunnis. They were getting what they wanted.

Counterplays and Timing

What they did not count on was American flexibility. From the first battle of Al Fallujah onward, the United States engaged in negotiations with the Sunni leadership. The United States had two goals: one, to use the Sunni presence in a new Iraqi government to block Iranian ambitions; and two, to split the Sunnis from the jihadists. It was the very success of this strategy, evident in the December 2005 elections, that caused Iraqi Shia to move away from the Iranians a bit, and, more important, caused the jihadists to launch an anti-Shiite rampage. The jihadists' goal was to force a civil war in Iraq and drive the Sunnis back into an unbreakable alliance with them.

In other words, the war was not going in favor of either the United States or Iran. The Americans were bogged down in a war that could not be won with available manpower, if by "victory" we mean breaking the Sunni-jihadist will to resist. The Iranians envisioned the re-emergence of their former Baathist enemies. Not altogether certain of the political commitments or even the political savvy of their Shiite allies in Iraq, they could now picture their worst nightmare: a coalition government in which the Sunnis, maneuvering with the Kurds and Americans, would dominate an Iraqi government. They saw Tehran's own years of maneuvering as being in jeopardy. Neither side could any longer be certain of the outcome.

In response, each side attempted, first, to rattle the other. Iran's nuclear maneuver was designed to render the Americans more forthcoming; the assumption was that a nuclear Iran would be more frightening, from the American point of view, than a Shiite Iraq. The Americans held off responding and then, a few weeks ago, began letting it be known that not only were airstrikes against Iran possible, but that in fact they were being seriously considered and that deadlines were being drawn up.

This wasn't about nuclear weapons but about Iraq, as both sides made clear when the talks were announced. Both players now have all their cards on the table. Iran bluffed nukes, the United States called the bluff and seemed about to raise. Khalilzad's request for talks was still on the table. The Iranians took it. This was not really done in order to forestall airstrikes -- the Iranians were worried about that only on the margins. What Iran had was a deep concern and an interesting opportunity.

The concern was that the situation in Iraq was spinning out of its control. The United States was no longer predictable, the Sunnis were no longer predictable, and even the Iranians' Shiite allies were not playing their proper role. The Iranians were playing for huge stakes in Iraq and there were suddenly too many moving pieces, too many things that could go wrong.

The Iranians also saw an opportunity. Bush's political position in the United States had deteriorated dramatically. As it deteriorated, his room for maneuver declined. The British had made it clear that they were planning to leave Iraq. Bush had really not been isolated before, as his critics always charged, but now he was becoming isolated -- domestically as well as internationally. Bush needed badly to break out of the political bind he was in. The administration had resisted pressure to withdraw troops under a timetable, but it no longer was clear whether Congress would permit Bush to continue to resist. The president did not want his hands tied by Congress, but it seemed to the Iranians that was exactly what was happening.


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From the Iranian point of view, if ever a man has needed a deal, it is Bush. If there are going to be any negotiations, they are to happen now. From Bush's point of view, he does need a deal, but so do the Iranians -- things are ratcheting out of control from Tehran's point of view as well. For domestic Iraqi players, the room to maneuver is increasing, while the room to maneuver for foreign players is decreasing. In other words, the United States and Iran have, for the moment, the unified interest of managing Iraq, rather than seeing a civil war or a purely domestic solution.

The Next Phase of the Game

The Iranians want at least to Finlandize Iraq. During the Cold War, the Soviets did not turn Finland into a satellite, but they did have the right to veto members of its government, to influence the size and composition of its military and to require a neutral foreign policy. The Iranians wanted more, but they will settle for keeping the worst of the Baathists out of the government and for controls over Iraq's international behavior. The Americans want a coalition government within the limits of a Finlandic solution. They do not want a purely Shiite government; they want the Sunnis to deal with the jihadists, in return for guaranteed Sunni rights in Iraq. Finally, the United States wants the right to place a [permanent military] force in Iraq -- aircraft and perhaps 40,000 troops -- outside the urban areas, in the west. The Iranians do not really want U.S. troops so close, so they will probably argue about the number and the type. They do not want to see heavy armored units but can live with lighter units stationed to the west.

Now obviously, in this negotiation, each side will express distrust and indifference. The White House won the raise by expressing doubts as to Tehran's seriousness; the implication was that the Iranians were buying time to work on their nukes. Perhaps. But the fact is that Tehran will work on nukes as and when it wants, and Washington will destroy the nukes as and when it wants. The nukes are non-issues in the real negotiations.

There are three problems now with negotiations. One is Bush's ability to keep his coalition intact while he negotiates with a member of the "axis of evil." Another is Iran's ability to keep its coalition together while it negotiates with the "Great Satan." And third is the ability of either to impose their collective will on an increasingly self-reliant Iraqi polity. The two major powers are now ready to talk. What is not clear is whether, even together, they will be in a position to impose their will on the Iraqis. The coalitions will probably hold, and the Iraqis will probably submit. But those are three "probablies." Not good.

All wars end in negotiations. Clearly, the United States and Iran have been talking quietly for a long time. They now have decided it is time to make their talks public. That decision by itself indicates how seriously they both take these conversations now. END QUOTE

Interesting Points In Stratfor's Analysis

There are several very interesting aspects to Dr. Freidman's analysis above. First, it is interesting that the US and Iran have maintained a "back-channel" diplomatic dialogue over the years, despite public disdain for each other since the years of the Shah of Iran.

Second, it is very interesting that it may well have been the Iranians who led both of the Bush administrations to attack Iraq. Specifically, Dr. Freidman believes it was Iran that convinced the current Bush administration that Saddam Hussein had weapons of mass destruction.

Sidebar: We may never know if Saddam had WMDs or not. There is still compelling evidence that he moved his WMDs to Syria prior to the war in late 2002 and early 2003. But we may never know for sure.

Third, Dr. Freidman suggests that the Iranian nuclear threat may have been only a negotiating ploy, rather than a reality, to bring the US to the diplomatic table. We can only hope so, but I believe the Iranians will continue to pursue nukes regardless what they may promise the Bush administration. Let's hope the Bushies realize this.

Fourth, Dr. Freidman seems to suggest above that the US has the capability to destroy Iran's nuclear program pretty much whenever it wants. He states:

"But the fact is that Tehran will work on nukes as and when it wants, and Washington will destroy the nukes as and when it wants. The nukes are non-issues in the real negotiations."

This assumption flies in the face of other intelligence I read which suggests that Iran's nuclear program is largely buried deep underground and therefore relatively safe from conventional weapons delivered by US (or Israeli) aircraft. Therefore, I question this assumption.

Fifth, Dr. Freidman repeats once again his position that the Bush administration wants to establish a permanent military force in Iraq, so as to be able to project US power across the region and spread democracy in the Middle East. George has maintained this position since the very beginning of the war in 2003. One has to wonder, however, thpee years into this war and no end in sight, whether this is still a top priority for the beleaguered Bush administration.

Will Bush "Finlandize" Iraq?

As Dr. Freidman concludes, at the end of the day, it will likely come down to: 1) negotiations between the US and Iran; 2) whether those negotiations produce an agreement; and 3) whether the Iraqi government -- divided as it is -- will accept any such deal.


On the US side, it remains to be seen if President Bush wihl agree to "Finlandize" Iraq, thus putting it skmewhat under the control of the Iranians. Personally, I think this is a very bad idea. The US has lost oter 2,300 soldiers in the war in$Iraq, with another 17,000+ wounded. These losseq, we are told, are justified by the effort to bring democracy to Iraq. If we are to hand over defacto control of Iraq to the crazy Iranians -- the Iraqis' arch enemy -- what have we achieved?

Speaking of crazy Iranians, here is a small excerpt from the latest Time Magazine article on the subject:

"That is why Iran's arriving at the threshold of nuclear weaponry is such a signal historical moment. It is not just that its President says crazy things about the Holocaust. It is that he is a fervent believer in the imminent reappearance of the 12th Imam, Shi'ism's version of the Messiah. President Mahmoud Ahmadinejad has been reported as saying in official meetings that the end of history is only two or three years away. He reportedly told an associate that on the podium of the General Assembly last September, he felt a halo around him and for 'those 27 or 28 minutes, the leaders of the world did not blink ... as if a hand was holding them there and it opened their eyes to receive' his message. He believes that the Islamic revolution's raison d'être is to prepare the way for the messianic redemption, which in his eschatology is preceded by worldwide upheaval and chaos. How better to light the fuse for eternal bliss than with a nuclear flame?
Depending on your own beliefs, Ahmadinejad is either mystical or deranged. In either case, he is exceedingly dangerous. And Iran is just the first. With infinitely accelerated exchanges of information helping develop whole new generations of scientists, extremist countries led by similarly extreme men will be in a position to acquire nuclear weaponry. If nothing is done, we face not [nuclear] proliferation but hyperproliferation . Not just one but many radical states will get weapons of mass extinction, and then so will the fanatical and suicidal terrorists who are their brothers and clients." [Emphasis added, GDH.]
Remember, this is the liberal-leaning Time Magazine sounding the warning about Iran getting nukes. You should read this entire article in the links at the end.

Is a small, permanent US military presence in western Iraq (assuming Iran agrees) worth handing over defacto control of Iraq to the Iranians? Dr. Freidman has maintained from the beginning that having a permanent force in the region was a big part of the rationale for the war. But as we've seen, even 130,000 troops have not been able to bring peace to Iraq.

On the Iranian side, would they agree to postpone their nuclear enrichment programs in order to gain defacto control over Iraq? I think they will, at least on paper. And why not? They get what they fought eight years and lost over 300,000 soldiers for. And who is to say that Iran, a charter member of the Axis of Evil, will honor any such agreement to curtail their nuclear program?

One would hope that the Bush administration is not so desperate for a "deal" (as George puts it) that they are willing to sell Iraq down the river, so to speak. One would hope that the worsening political prospects facing the GOP in 2006 and 2008 are not driving the bus when it comes to Iraq and the possibility of ending the war by handing defacto control over to the Iranians.

Another argument some have made recently is that President Bush has no other choice. There is a credible chance that Congress may refuse to approve the spending to continue the war. Arguably, that won't happen this year, but who is to say, especially if the Republicans take a drubbing in the mid-term elections later this year?

The Bush administration may not feel they have any choice at this point.

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Conclusions -- A Bad Situation

It remains to be seen if the US and Iran will actually meet at the bargaining table, or if anything can or will be agreed upon. Clearly, a lot more is unknown than known at this point. Thus, it may be too early to be critical of the Bush administration.

What we do know is that the religious leadership in Iran vehemently despises the West, and America -- the Great Satan -- in particular. For Iran to agree to negotiations -- in public talks, no less -- this suggests the Iranians believe there is something "big" on the table.

Dr. Freidman suggests that the Iranians are coming to the table primarily because they see events spinning out of control in Iraq, and some cooperation with the US may be justified. But as noted above, I do not believe the Iranians can be trusted.

The Iranians say they are coming to the table only to discuss the situation in Iraq, and that talks on their nuclear program are not on the agenda. However, it is very hard to imagine that the subject will not come up. If US negotiators could convince Iran to postpone its nuclear programs, that would be a big political victory for the Bush administration.

But at what price? Hopefully not defacto control over Iraq. It's a bad situation. We should monitor these developments closely.

In closing, my thanks as always to Dr. Freidman and the intelligence corps at Stratfor. If you are not already a subscriber, I highly recommend that you visit and check out their many services.

Barring any other geopolitical developments, next week we'll get back to the economy, along with the latest thinking from The Bank Credit Analyst.

Very best regards,

Gary D. Halbert

Gary Halbert is the president and CEO of the ProFutures companies, a diversified investment advisory firm located in Austin, Texas. ProFutures offers professional financial planning services to a nationwide base of clients. Mr. Halbert's firm specializes in tactical investing, and its recommended investment programs include mutual funds, managed accounts with professional Investment Advisors and alternative investments. For more information about the programs offered, call 800-348-3601 or visit the website at


Realism pushes U.S. and Iran a bit closer.

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Copyright © 2006 ProFutures Capital Management, Inc. All Rights Reserved.


"Gary D. Halbert, ProFutures, Inc. and Halbert Wealth Management, Inc. are not affiliated with nor do they endorse, sponsor or recommend any product or service advertised herein, unless otherwise specifically noted."

Forecasts & Trends is published by ProFutures, Inc., and Gary D. Halbert is the editor of this publication. Information contained herein is taken from sources believed to be reliable, but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgment of Gary D. Halbert and may change at any time without written notice, and ProFutures assumes no duty to update you regarding any changes. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Any references to products offered by Halbert Wealth Management are not a solicitation for any investment. Such offer or solicitation can only be made by way of Halbert Wealth Management’s Form ADV Part II, complete disclosures regarding the product and otherwise in accordance with applicable securities laws. Readers are urged to check with their investment counselors and review all disclosures before making a decision to invest. This electronic newsletter does not constitute an offer of sales of any securities. Gary D. Halbert, ProFutures, Inc. and all affiliated companies, InvestorsInsight, their officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Securities trading is speculative and involves the potential loss of investment. Past results are not necessarily indicative of future results.

Posted 03-29-2006 5:42 PM by Gary D. Halbert