For the past two weeks, scarcely any complaint has come from Tehran -- or from guiltridden Americans on its behalf -- regarding the historic sin of the Great Satan, Uncle Sam, in foisting unnecessary weapons on the shah. Nor has the shah's view that Iran was threatened not only from Russia and Afghanistan, but by a Soviet-supplied Iraq, been obviously discredited. Indeed, the shah's foresight may even salvage his successor. One need not anticipate any early expression of gratitude by the ayatollah. Nonetheless, the shah's legacy does provide the equipment and stocks for effective combat; only the readiness of Iran's armed forces has declined under the new order.
Meanwhile, back at the ranch, no enterprising journalist or repentant liberal has yet discerned how the recent, untoward developments can be laid at the doorstep of the Chase-Manhattan Bank, David Rockfeller or Henry Kissinger. The administration, making a virtue of necessity, has publicly proclaimed its neutality in the ongoing war. National recognition of impotence may be a sign of a greater realism. Yet the administration seems rather typically to confuse making a virtue of necessity with virtue itself. There is little examination of the policy errors and the shift of power that have turned the historic Northern Tier into a region of preponderant Soviet influence and of American paralysis -- this despite even Palistan's public courting of the Soviet Union and denunciation of the United States, even as President Zia visited the White House. Why the United States feels obliged to profess its neutrality and publicly to reassure Khomeini that the United States means him no harm -- and a year after the seizure of our embassy and full public recognition that Khomeini is a detestable menace -- remains unclear.
Nevertheless, all this a significant improvement over the administration's earlier though unfullfilled desire to preserve our interests by demilitarizing the Indian Ocean. The effort to create an Indian Ocean "zone of peace" by imposing limitations on American and Soviet naval power (while overlooking overall Soviet military predondence) has been abandoned -- at least for the time being. Curiously enough, this self-cripping effort continued for almost a year after the discovery elsewhere in the administration that the entore area was "an of crisis." That effort to strip American naval power from the Indian Ocean was once again endorsed in June 1979 at the Vienna meeting with Brezhnev.
Also lost in the Iraqi-Iranian clash is the rather brief-lived, post Khomeini illusion that the unity of revolutionary Islam was a sufficient bulwark to the southward movement of Soviet power. The unity of Islam, like the unity of the Third World, can best be discerned far, far away in Washington. American forces, too little and too late, are now being deployed into the Indian Ocean. Not sufficient in themselves to deter the Soviets, at least this provides a symbolic indication of our concern.
Four AWACs (which have the special virtue of being without armament) have now been dispatched to Saudi Arabia. If an attack occurs, that should provide us with advance warning of what is going to happen -- and should dramatically improve any post-mortems. (The current rumor that the radars have been removed from the AWACs to make this action a more precise parallel to the earlier dispatch of unarmed F15s to Saudi Arabia is, I believe, unfounded.)
The European drift toward neutralism, meanwhile, continues apace. One should disregard election-year declarations that the alliance is in spendid shape. It is not. Mutual loss of confidence leaves it in its most deplorable condition since its inception in 1949. Chancellor Schmidt, despite his personal views, may well prove to be a Trojan horse for the left wing of the SPD. The Iraq-Iranian war has undermined a widespread conviction in the European community that only Israel stands in the way of a steady flow of oil. It should shake the belief that the premptive sacrifice of Israel's interests will guarantee energy "peace in our time."
The Iraqi attack has served to reunify Iran and to strengthen support for Khomeini. The hopes for war termination (in the absence of Soviet political or military intervention) are likely to prove illusory. Khomeini has demonstrated himself to be a man with vast capacity for incitement, little for restraint. His life's history has engendered a convition that remaining unyielding is the path to triumph. There is little that the Iraqis can do to extricate themselves from the war. Consequently, one must expect a continuing war of attrition, dragging on for months in gradual diminuendo as the capabilities of the two sides deteriorate.
The transitory mirage of the oil glut has correspondingly been dispelled. Given a ceiling on production capacity of some 65 million barrels per day worldwide, an oil glut is something said to occur when receding demand creates perhaps 5 percent excess capacity worldwide -- to be distinguised from the 25 to 30 percent excess capacity in other industries, not said to be characterized by glut.
While the price of energy may be one of our lesser problems, it is still a problem. At current prices, a deficit of two million barrels a day now looms -- perhaps partially compensated for by additional production elsewhere. The spot market, previously softeniong, has now snapped back -- and promises to go higher. Offers to sell have diminished sharply, although buyers have not yet felt impelled to bid up prices substantially.
More serously, the Saudi strategy in impose disipline on the OPEC hawks through increased supply now lies in tatters. We must anticipate that the Algerias, Libyas and others will seize the opportunity to boost prices by raising premiums -- with no fear that purchasers will feel free to refrain from purchasing. With Iraqi and Iranian oil removed from the market for three months or longer, prices should begin the rise -- and may well go over $40 a barrell early in 1981.
The member governments of the International Energy Agency, including our own, have pointed to the large inventories above ground and urged us to "remain calm." But those inventories are maldistributed, in any event. And past behavior suggests that, in periods of uncertainty, the last thing that either governments or firms are eager to do is to permit inventories to be significantly drawn down. The present policy is to hope that the problem will go away and, in any case, will not become too serious in terms of pice response prior to the election. If oil prices go to $40 a barrel, the recovery may stall out and inflation will be rekindled.
When governments urge us to remain calm, one usually may infer that there is something worrisome in the offing.