HFP : The toxic loan issue is THE scandal of the years 2000. It is a problem of finance coming down in the day to day reality of our cities, our existence as citizens.

Over the 1990s, early 2000, Dexia came to the conclusion that the demand of municipalities for new loans was shrinking since many had now acquired the infrastructure they needed. You don’t need four or five recreation rooms, you only need one, and once it is build, you pay the loan and it’s finished.

Dexia then got the idea to “do something new with something old” and to restore its profitability by selling to the municipalities what it called “debt management”. For example, a municipality which had an outstanding loan of let’s say 3 million euros to Dexia, and which would have paid it off entirely over the next decade, was pushed by Dexia to refinance the 3 million loan with a new loan, presented as a way to earn some money thanks to what looked as lower interest rates. The first trick involved if you take a new loan which get added to the capital you still owe from the preceding loan, is that you overextend the duration of payments (20 to 30 years). At the end of an old loan, you’re mainly repaying the capital, while if you start any new loan, you mainly are going to pay the interests first on the loan to the bank and less of the capital as such.

In a second phase of commercial prospecting with the municipalities, Dexia would tell them: “We can do even better. You can gain even more substantial margins on the interests of your loans by participating actively on the financial markets: by becoming a player on the financial markets – I never explain you how – but don’t worry, we will take care of everything, we have a solution and instead of paying a 4% interest rate on your loans, we will get you a 3.5% annual interest rate”. Of course the mayors, which try to keep local taxes as low as possible, got understandably seduced by this proposition, while in the same time, as we discover today, most of them didn’t understand what the hell they were signing.

Hence, Dexia, over the years 2000, got huge numbers of people to sign on to what is called “structured loans” which later turned into “toxic loans” because municipalities are incapable of honoring these financial commitments.

Inside these structured loans exists a purely financial mechanism which is a “currency exchange option” which the municipality will SELL to Dexia. In exchange of this sale, Dexia will offer, but only for some initial years, a lower interest rate on its loan. Dexia will extend to the municipality a loan with an interest rate below the rate of the preceding loan and the municipality will profit from a loan which depends of the bet defined by the currency exchange option it sold, via Dexia, on the markets, hoping the bet will work out favorable.

KAV: Do you mean the municipalities were turned into players of the global financial casino economy?

HFP: Absolutely. The municipality, by selling a currency exchange option to Dexia, becomes de facto the guarantee of a bet postulating that a given parity among two currencies, frequently it was the parity between the euro and the Swiss franc, would remain at a given value. The municipality would say: “I take this loan by making the bet that the euro will never drop below the value of 1.44 Swiss francs”. And at the same time, on the financial markets, there are financial firms, in a far better position than the municipality to evaluate the value of that bet, which make the inverse bet! They consider that, regarding the financial crisis that started at least in 2007, the Swiss franc will rise versus the euro and that one will need less than 1.44 Swiss francs to buy 1 euro. The consequence for this municipality is that if it takes a loan from Dexia at 3.5%, it will get the guarantee from the bank that the rate will not increase over the two initial years, but that if the exchange rate between the euro and the Swiss Franc turns against the municipality, as off the third year, the interest rate of the loan will explode. And that is what happened to many municipalities in France.

I got contacted by the municipality of Sassenage in 2011. They had and still have two loans outstanding, one which dates from 2009 and the other from 2010. The amount of both loans is a little bit more than 4 million euros each in terms of capital lent. These are “structured loans”. The index involved is the euro/Swiss franc parity and for the loans to keep their initial rates of 3.5% and 3.7%, the bet was that for 1 euro one would require less than 1.44 Swiss francs. This parity barrier was exceeded in 2011. The current rates on these loans to Sassenage are reaching 15% annually! Of course, the city was contacted by Dexia to find solutions to the situation. The first of these solutions, if one faces an adaptable interest rate that is explosing, is to consider reimbursing the entire loan in an anticipated manner. Yet, the structure of the loans makes it such that the financial compensations required to exit these loans are superior to the remaining capital to be paid.

To reimburse a 4 million euro loan, Sassenage has to come up with over 8 million euros, i.e. 4 millions of the initial capital and over 4 additional millions for the compensation for anticipated reimbursement. Why? Because, as we said before, the structured loan involves the sale of a currency exchange option on the financial markets: there exists a financial firm which bought this option from the municipality and which claims the counterpart of its contract because the value of the Swiss franc increased versus the euro. And to exit the contract, the municipality has to pay the counterpart of the sale of the option which took places months, even years earlier.

KAV: Is it Dexia itself that sells these options or does it involve another financial firm?

HFP : This mechanism was never explained by Dexia. The bank never told the municipality: “I’m buying your currency exchange option”. But we know they did, because financial experts examined these structured loans. We know today for sure that Dexia bought these exchange rate options and resold them. It is by this very activity that the bank made profits by on the loan contracts. It bought these options very cheap from the municipalities and sold them with a substantial profit margin on the financial markets.

The municipality, it has to be underlined, had a blind faith in Dexia. So each time any trouble popped up with the loan, Dexia intervened to see how to things could be settled.

It was Dexia each time which sold a new solution to the municipality in order to protect it from paying outrageous interests. But with the solutions sold each year by Dexia, the only way for the municipality to avoid paying too much interest was to take each time more risks on the financial markets.

Dexia abused of the municipality’s ignorance in matters of structured loans.

You can’t find any single document, be it a contract or commercial paper in which Dexia explains to a municipality that it becomes a vendor on the financial markets of a currency exchange option based on the parity between the euro and the Swiss franc. That information doesn’t appear anywhere. And on top, it has to be noted, and in this case we do have written documents, Dexia claimed that the Swiss franc, as a refuge currency, was exceptionally stable while the very nature of refuge currencies is their extraordinary volatility! And if Dexia did so well in reselling these options – because that’s how its profits were made out of structured loans – it was because on the financial markets, while Dexia was telling its clients that the Swiss franc was a very stable currency, there were numerous financial firms that made the opposite bet. Who said “no, no, no, this is not flying! Considering how the crisis is evolving since 2007, and considering the engagements I took in Swiss francs, I absolutely have to cover myself against the currency risk between the euro and the Swiss franc! And lo and behold! Dexia was selling en masse currency exchange options on the euro/Swiss franc parity! Today, one can speak about the quasi-bankruptcy of Dexia, that is to say, without the French and the Belgian state bailing them out for the second time – we’re talking about over 10 billion euros for the bailout of Dexia. This bank is as good as bankrupt but when you see what it has done to its own clients one cannot really say that the bank is well managed.

KAV: The case of Sassenage was examined by the Regional court of accounts. Tell us more.

HFP: One must know that in French Law, the contracts signed between two persons settle the law between these two persons. So, by law, the municipalities have the obligation to pay Dexia. But exceptions do exist. If you consider the contract to be void, if the contract has an inherent vice from the very beginning because of the behavior, in this case, of a banker, the behavior of Dexia, then you have the possibility to solicit the cancellation of the loan in question. And then the judge intervenes and it is only the judge who can allow a municipality not to honor its financial obligations towards a bank. It is according to this approach that in the case of Sassenage we went to the Tribunal of Grand Instance of Nanterre and sued Dexia for invalidity of the loans it contracted with the municipality of Sassenage. And in parallel, the municipality of Sassenage stopped paying interests on these loans. Let me be clear: the capital continues to be reimbursed, but on each yearly loan term, it stopped paying the interest. That’s normal considered where these rates stand today ; the city cannot pay these interests since it would completely destabilize its budget. Confronted with this situation, Dexia called on the Prefect to intervene. The prefect convoked the mayor and told him: “You are going to pay these interests to Dexia!” The mayor refused to do so and the Prefect called on the Regional Chamber of Accounts of the district to inscribe the payment of these interest rates as a mandatory payment.

Now, contrary to all expectations for Dexia, the Regional Chamber of Accounts did rule, in its ruling of May 31, 2012, that in effect this municipality was allowed not to pay the interests on its loan till the Tribunal de Grande Instance of Nanterre made its own ruling about the totality of its complaints notably the invalidity of its loans. This is the first time ever that a Regional Chamber of Accounts makes such a ruling. And this decision is important because we’re talking about a jurisdiction of public finances which is specialized in matters of municipal investments and therefore the ruling has a real weight.

KAV: With everything you just said, you cannot but agree with people like us which are calling for a total separation between deposit banks entitled to finance households, companies and local governments and which are deprived of the right to engage on the financial markets and investment banks on the other side the which when they engage in risky bets should be responsible for their own losses.

HFP : The issue of these toxic loans is really nothing but the illustration of the fact that over the last 20 years, be it loan contracts of financial products sold to clients by financial firms, were merely designed to guarantee profits to the financial world and in no way to their clients. Be it investments, savings or loans as those to these municipalities, the client, which believes making a good deal, which thinks gaining some money for his community and even reduce spending, has no awareness that the profitability is only certain on the side of the financial firm. It is somehow as casinos: to win the game, one has not to gamble but to owe one.

KAV: Yes, but if the entire society is handed over to a casino, we’re going to crash our heads against the wall!

HFP: It is clear that that is not desirable and if I have to be on one side or the other, I prefer to be on the side of the clients of the banks than on the side of the financial establishments.

KAV: Alright, thank you!

Common people all over the world are suffering deeply because of the high-risk speculation of the financial world, and now this same financial world is exerting immense pressure on politicians to save their monetary values, by imposing brutal austerity on the constituents. I believe that that is wrong, and that there are other alternatives. One is with re-imposing full Glass Steagall bank separation, which can help protect the population’s savings, and help to rebuild the productive and sound economy

On October 24, 2012, a motion to separate commercial and investment banking was reintroduced into the Icelandic parliament, by 17 MPs from all parties and independents, except the Independence Party, which also announced their support for the idea during the hour-long parliamentary debate held on the subject. The motion reads:

“Parliament resolves to entrust the Minister of Economic Affairs with the task of appointing a committee which is to revise the framework of banking services in Iceland in order to minimize—through the separation of commercial and investment banks—the risk of disruptions within the banking sector for the national economy. The committee is to examine the policy-making of neighboring countries in this regard, and to submit its proposals before Feb. 1, 2013.”

Were our motion passed, as it seems most likely, it should be possible for the proposals to be ready earlier than the Feb. 1 deadline.

During the parliamentary debate, these are some of the points I stressed:

• The aim of the motion is to separate commercial banking and risky investment banking in our country. Right now, investment activity is still low in Icelandic banks, believed to be about 5%, but it had reached a little over 30% before the crash.
• The co-sponsors think that it is appropriate to make this step now, in full, before investment banking takes back all power in the Icelandic banking system. Although the percentage is still small, it is growing.

Why should we separate these activities, one may ask? Separation of these two different types of financial services will reduce the systemic risk of the financial sector for the economy. While some point out that separation does not solve all problems, others stress that this is an absolute prerequisite for economic stability and honest business. Through separation, we actually ensure that public savings would not be re-used as “gambling money” in risky lending by investment banking owners. Through separation, the state can ensure that normal saving deposits would not be misused again, so that the loss due to risky loans and investments would not revert to the taxpayers and the state treasury.

Ordinary deposits, and lending to households and businesses are classified as normal or commercial banking. These deposits are largely protected by government guarantees. Should these protected deposits be put together with a speculation and risk-based investment strategy, a toxic mix is created that can place, and has placed, an entire financial system in ruins, with serious consequences for households and the Treasury, the consequences of which we know so well in Iceland.

The co-sponsors have no doubt in their minds that this toxic mixture has been a traceable cause of our banking collapse.

In a report issued by the Minister of Economic Affairs and presented in April, 2012, it says on page 84-85 that there is no doubt that the very unfortunate relationship between deposits and investment had been part of the roots of the crisis of 2008.

It says, moreover, that financial stability would seem to be strengthened with a clearer distinction between these two aspects of banking, and that currently, there are warning signs about the unfortunate connection between the two segments of the financial system here.

The authors would not preclude differentiation or separation of these segments as a future arrangement, especially if the trend is heading in the direction of the international marketplace.

In a statement accompanying our motion, we discuss how a perfect separation of these two factors was insured among the banks in the United States, after the collapse of the stock exchange in New York, and the crisis that followed. The so-called Glass-Steagall-law was in effect from the years 1933-1999, and the global financial system followed in the footsteps of the U.S. in this regard, but in 1999, it was no longer considered necessary in the United States. The law was abolished, and it took a little less than ten years from the time that financial institutions were again permitted to combine commercial banking and investment banking again, for a new banking bubble to burst in 2007-2008.

It is clear that the recent banking crisis has called for a reassessment of these issues throughout the transatlantic region. Especially since the Barclay’s bank scandal in the U.K., there has been a public debate about reinstituting Glass Steagall in the U.S., the U.K, Europe and Iceland.

The idea of implementing separation again, in the spirit of Glass-Steagall Act, has increasing support throughout the Western world. But, there are also those, especially in the United States and Great Britain who argue that a partial bank separation were better, including the British Vickers Commission’s proposal for ring-fencing – for separate departments within the same bank, or those who favor the weak Volcker-Rule for the U.S.

We, however, believe that only full bank separation would protect the population from the excesses of the speculators. Here in Iceland, we now have a unique opportunity to fully take this necessary step – and lead the way for other countries to implement full bank separation. The co-sponsors think that passing this motion is necessary so that we may continue to build/establish a sound economy of the nation, upon which the future of our nation depends.

2. First, it is essential to identify those who are responsible for this crisis. It is investment bankers in the Anglo-Saxon countries who were indulging in high-risk gambling types of trading, and created a bubble. It is quite awkward to see that nobody has been arrested who gained from this bubble. Almost all board members of liquidated or partially nationalized financial institutions during the Japanese financial crisis in 1997 and 1998, were arrested and prosecuted.

3. The main structural cause of the financial bubble in the United States and Europe from 2002 to 2007 was the complete abolishment of the Glass-Steagall Act in February 1999. It was abolished under the leadership of Treasury Secretary Lawrence Summers during the process of liberalizing financial markets in the late 20th century. Glass Steagall was enacted in 1933 in order to divide the business of banking and securities in light of the tragic experiences of the Great Depression. Surplus liquidity created by an extended period of lax monetary policy in the first decade of the 21st century under the auspices of the Federal Reserve Chairman Greenspan, fueled a so-called money game by investment banks, which was inconsistent with the laws of real demand.

4. Then there was a serious mistakes committed by governments of the United States and the United Kingdom at the liquidation of Lehman Brothers. When Yamaichi Securities closed in November 1997, the Japanese government allowed the liquidation of Yamaichi only after all cross-border transactions had been unwound. The main purpose of this was to not let the closure of Yamaichi affect overseas financial institutions and drag Japan into the epicenter of a world depression. This was not the case for the liquidation of Lehman Brothers. Lehman went bankrupt without unwinding its huge volume of cross-border transactions. This had an extraordinarily contagious effect on the world financial system, triggered a world depression comparable to the Great Depression before the Second World War. Liquidating Lehman only after all foreign transactions had been unwound could have averted a worldwide crisis.

5. The next problem involves the process of bailing out financial institutions. US authorities bailed out banks by injecting public money in order to defend the financial system. In light of our experience in Japan, there are three problems with regard to the modality of the bailout in the United States.
(i) The balance sheets of all major financial institutions were not rigidly examined by any official authority, using mark-to-market accounting;
(ii) The amount of public funds necessary to completely dispose of non-performing loans in each institution were not clearly identified;
(iii) Each institution did not dispose of all non-performing loans, making it vague to market investors whether or not non-performing loans had been left on the balance sheets.

6. The mark-to-market accounting rule was frozen as a result of pressure by the US Congress. The method of examining balance sheets of major financial institutions has not been stringent, unlike in Japan.

7. All major financial institutions avoided liquidation except Lehman Brothers, but they were kept intact through a bailout and because of their political clout. This situation made it difficult not only to launch fundamental reforms of the financial system, but to fully investigate the real cause of the financial crisis. In particular it has made it extremely difficult to investigate the responsibility of executives of major banks. As a result, top executives of major banks in the United States have not learned any lessons from the Lehman crisis. It is frightening to think that such executives are likely to make the same mistakes again.

8. Western investment banks, British and American in particular, were kept intact with unhealthy balance sheets. They have not recovered from insolvency, while superficially they look fine thanks to the bailout, relaxation of accounting rules and obscure stress test. To get out of this dangerous situation as soon as possible, they are desperately seeking high returns within a short period of time.

9. Investment banks found good victims for this purpose; countries which suffer from budget deficits caused by fiscal stimulus they made in 2009 to counter economic downturn, such as Greece, Ireland, Portugal, Spain, Italy. Banks used excess liquidity in the market, which had been supplied by central banks supposedly to enhance the economy, but which failed to stimulate the economy due to the lack of real demand. Short sales and Credit Default Swap are used as a means of attack. Consequently European countries have had to rely upon fiscal austerity.

10. This has devastating effect on the recovery of the European economy. As is well witnessed in the economic crisis in Japan, at the time of economic crisis after the collapse of the financial bubble, the household sector and the corporate sector suffered from a hangover of over-borrowing during the bubble period. They tried to squeeze their balance sheets in order to repay loans. Left alone, this would result in the shrinking of the national economy. It is the government sector that has to increase its expenditure to prop up the domestic economy by way of deficit. But, the attack by the market has made it difficult for European countries to rely upon such policies. I am afraid that the European countries are entering a vicious circle of economic contraction.

11. Fundamental change of thought to battle against the economic crisis is essential now. Instead of relying upon austerity, rules and regulations which would make it impossible for banks to attack countries, such as the Glass Steagal Law, should be introduced.

12. With the introduction of Glass-Steagal, for the purpose of splitting commercial banks and investment banks, large banks will have to conduct due-diligence in order to identify their assets and liabilities. It is highly likely that such due-diligence will reveal that investment banks are insolvent and that there are no other options for them than liquidation. Cancelling out their positions would substantially reduce the liabilities of commercial banks. It is hoped that, by conducting this process and possibly the injection of public money into commercial banks, balance sheets of financial institutions in Western countries will be cleared and confidence in the sector will be restored. This is a prerequisite for economic recovery from the crisis. The options left for us are very clear; interests of bankers or interests of the general public. The answer should be very simple.

13. Huge amounts of money have been used to bail out banks. Such money was wasted. It did not help investment banks improve their balance sheets. Instead they were engaged in another round of speculative trading. Such money should have been used, instead, to stimulate the real economy. Provision of excess liquidity by central banks has failed to create real demand and funds have been abused in attacking European governments and, thereby, brought about misfortune to the general public in those countries. Fiscal stimulus has to be used for the purpose of investments; not for the sake of government or private consumption. It should be recalled that the stimulus package in the United States in 2009 was absolutely inefficient in this regard. With the depth of economic contraction all over the world, governments should launch upon a global scale of large, infrastructure projects to create real demand on a global scale. In addition to relaxation of international rules that have prohibited private money from taking risks, such as Basel III, governments should extend an umbrella, in such forms as government guarantees, to large scale infrastructure projects so that affluent resources in the market will be mobilized effectively to take risks in those projects.

These Westerners have forgotten all about their own countries, where crisis follows crisis, and for 18 months, they have not cared about their own problems in the West. It seems as if these Westerners have a personal agenda, driven by blind fury.

The Syrian conflict was never peaceful. There was always a third, militant, barbaric group that had a violent agenda of its own. The Syrians knew it very early, after the first days of confusion, where the foreign news media said one thing, and the people on the streets another. They found out that something very strange was going on. Every Syrian became a “Sherlock Holmes,” and kept in close contact with family, friends, and others, in other cities. Every incident was investigated.

Also, Syrians outside of Syria started to follow every move, calling home daily, and then discussing the news with other Syrians to find out what their families and friends said. Many called the media in their countries, telling them that their news was untrue. But from Australia, to Denmark, to Canada, all the Western media had the same response, and they called them Syrian agents, puppets, etc., and made sure that no one could hear their voice.

I was very surprised that even a state-owned major media in Denmark was very effective and cynical in its censorship of the Syrians in Denmark, and in Syria. Instead of getting Syrians to comment on Syria, they used two non-Syrians with Arabic background, who have very little, or no knowledge, about the Syrian community, and both had exactly the same standard answers as commentators in other Western major media, as if they had all received the same manuscript!

A Hidden Foreign Attack

Very early on, it was obvious that what was happening was a hidden foreign attack on Syria, where the military, media, and cyberspace of all Western governments, had been mobilized, alongside their puppets in the Gulf. They even recruited jihadists from various countries, and armed and paid them to go to Syria to fight. Also, they created a Western-controlled Syrian opposition, comprised of people living in the West. Syrians in Syria (supporters of the government, and the Syrian opposition inside Syria) condemned this act as irrelevant. This was madness. It seemed as if the Western politicians and journalists were on drugs.

I will never forget seeing the U.S. ambassador, standing alone outside the Cham Hotel, begging people passing by to demonstrate against the government–without getting any support! Have you ever seen a foreign ambassador stand in the middle of Berlin, begging Germans to demonstrate against the German government? Can you imagine this? He has become a joke all over Syria, and this is just one of his many strange acts!

The hidden central actors in the strange opposition/revolution are [U.S. Secretary of State] Hillary Clinton, [former French President Nicolas] Sarkozy, [British Foreign Secretary William] Hague, [Israeli Prime Minister Benjamin] Netanyahu, [Lebanese Prime Minister Rafik] Hariri, and the feudal royalties in Qatar and Saudi Arabia, etc. The spiritual godfather is Adnan Arour, a very bloody sectarian, who promised to kill everybody who didn’t follow him. Living in Saudi Arabia, he had weekly prayers on Al Arabiya, telling supporters to kill people, and destroy Syria. He has even promised to kill artists, only because they support the government.

Western weapons were smuggled into Syria from the beginning; huge quantities of foreign weapons were seized, and people talked about armed foreigners. In certain poor, extremist, criminal neighborhoods, dollars were suddenly very common, as were modern satellite phones that were not sold in the market in Syria. Everything was very surreal. As if this weren’t enough, Western politicians and ambassadors seemed to be on Syrian drugs. They acted and talked like thugs, instead of well-behaved adults or diplomats.

As if launching military, political, and media wars, and sanctions against Syria weren’t enough, the Western powers are trying to dominate Syria by using the United Nations Security Council. Already in April 2011, the so-called peaceful protestors committed barbaric killings of civilians and security personnel.

Here are some examples: A farmer was tortured and mutilated, and then killed. A father driving his two sons and a nephew from school, were all killed. A 14-year-old boy was hanged for hanging up the Syrian flag at his home. A 17-year-old girl was killed. A bus bringing soldiers from their base back home was ambushed in an area where everything was still completely quiet. Nine young soldiers were killed and 25 wounded. This already happened in early April 2011, and all were committed by people who called themselves peaceful protesters. They also committed vandalism, burned private and official properties, etc.!

Kidnapping was used to pressure people into demonstrating. For example, two girls were kidnapped in April 2011, after their village refused to take part in the demonstrations. One girl returned home again, and the other is still missing.

A Last Telephone Call: `For the Country’

A security station in Jisr Shoghour, with several personnel inside, who were unaware of an attack, was set on fire by the FSA [Free Syrian Army] terrorists, and then attacked. One of the soldiers called his leader, and explained the situation: that they were surrounded by terrorists, and that they were trapped, yet resisting. At the end of their conversation, the soldier said, “Sir, we are out of ammunition…. We salute you and our President…. We send our good-byes…. Our country is in your hands now.”

Another soldier from the station called his sister, who has close family in Denmark. His last message was, “Never let these thugs take over the country. They are barbaric!”

From the beginning, every week, a number of policemen, soldiers, and other security personnel were killed in cold blood, in surprise attacks. Many were killed in brutal ways. It was clear that al-Qaeda terrorists had entered Syria, as well as special troops and hired fighters of different nationalities.

There was no revolution. It was terrorism from the very beginning! There were huge rallies in support of the government’s reform, but only small demonstrations against it, in small cities, mostly one at a time, after Friday prayers. The same people attended the demonstrations in all of these cities. These same people were obviously traveling from one place to another.

But the Western media, alongside the feudal royalties in the Gulf, never showed the huge pro-government rallies. All they showed were manipulated demonstrations against the government from YouTube, which could not be verified, because they were mostly fakes. There is an ocean of examples of fake videos and pictures. Many journalists from Al Jazeera have resigned since Spring 2011, because of the distortion of the facts about Syria. If there truly were a public uprising, why would they need to fake demonstrations and victims? Why would they have to use the same “demonstrators” in all places? Why did they need massive help from the outside?

We heard daily the Western leaders, yes, even the Saudi feudal monarch, call for democracy and freedom, and, since 2005, the same leaders in the U.S. have paid huge amounts to anti-Syrians in London, for example, to create an opposition for Syria. They even financed a TV channel for this purpose. They tell the Syrian government to step down. [[They organize conferences with themselves and the feudal royalties as hosts, and the leadership, in order for head-hunted figures, not living in Syria, to play opposition.]] The Syrian people in Syria are not being asked. When the Syrian people reject Western interference, the West uses bullets.

How democratic is that? And since when did the feudal royalties in Saudi Arabia and Qatar care about democracy and freedom? Also, YouTube seems to be drugged when it comes to Syria. While the so-called exile-opposition had no problem in having brutal videos, usually fabricated, put on YouTube, the Syrians’ YouTube videos were removed by the YouTube administration, most of the time. There was certainly a plot against Syria and the Syrian people.

A Romanian newspaper wrote already in May 2011, that the plot aimed at undermining stability in Syria had failed, thanks to the Syrian people rallying around President Bashar al-Assad. The foreign plot failed thanks to the Syrian people and their awareness. In May, a number of groups were created by citizens (mainly young ones), who wanted to bring the truth to the world. Also, well-established organizations started campaigning.

For example the “Voice of the Homeland’s Women,” launched by the Syrian Women’s Union, with the participation of a number of journalists and lawyers, started a campaign aimed at exposing the truth to the world. In May and June 2011, public groups, and political parties, etc., asked people to be careful, because there was a violent group that was organizing demonstrations, calling them peaceful.

Authors, artists, and thinkers sent an appeal addressed to the youth of Syria, saying, “Stop protesting, because suspicious groups are initiating the protests using dangerous, extremist slogans. This will reveal the real intruders, and eliminate the roots of this sedition. If it were not stopped, it would lead us towards devastation.” Syrian Kurdish parties asked the youths to keep away from these demonstrations, already during the first part of June 2011.

Syrians, especially the youth, appealed to the Western world to tell the truth, but they were totally ignored. In one effort, in mid-June 2011, they created a huge Syrian flag, 2,300 meters long. A huge crowd marched with the flag in Damascus–but no Western media gave it a glance!

In mid-June, 10 million people rallied across Syria, condemning the foreign intervention, and showing support for the reform; hardly any Western media mentioned this!

New Media Law in May 2011

In May, a committee of journalists started to draft a new media law and to set up mechanisms to reform the national media.

On May 1, the committee started setting up the basis for a national dialogue. And shortly after, a meeting was held about finding political solutions for the current challenges. The dialogue was open to all national political figures, inside and outside Syria, to achieve the national interests, and to preserve its unity and security. (Of course, we all know that the Western-made “opposition” rejected any dialogue.)

The participation of political, economic, social, religious, artistic, and cultural figures, farmers, etc., in all counties, hold regular week-long meetings

In June 2011, a number of academics, jurists, and lawyers started to write a draft to reform the judiciary by developing the laws. Committees were formed in Summer 2011 to study laws needed to fight corruption.

In addition, the following reforms were undertaken:

• A new party law in August 2011
• New Constitution in February 2012
• Election to Parliament in April 2012
• Amnesty

We don’t have many extremists in Syria, but they were the ones that the West and the Gulf states encouraged to protest, and decided to use. The extremists already tried in the beginning to create a sectarian civil war. In the streets at night, they were heard shouting “Death to the Christians” and other groups. They have destroyed many churches and mosques, and have vandalized others. Many Christian villages were threatened and attacked, in order to force them to leave their homes.

In Homs, during Autumn 2011, when the West used all means to push the Syrian Army away from the city, the Christians and others left their homes and villages when the army pulled out, because it was too dangerous to stay. As soon as the army had pulled out, the extremists, foreign terrorists, and even Western fighters entered. Those who had remained in their homes became hostages for weeks, some even for months–the terrorists threatened to use them as human shields in order to keep the Army away.

Without a political solution, the country risks slipping into civil war, with a breakdown of law and order, arbitrary killings, and the danger of sectarian conflict. If such a situation were to occur, everyone would suffer, without exception. A political solution is essential. Dialogue is the only way out of any crisis, also in Syria! Those who reject dialogue are not very great supporters of democratic principles!

It’s an honor to have been asked once again to address this important annual conference on U.S.-Arab relations. The theme of this year’s discussion is “transition within constancy.” I confess I’m still trying to figure out what that means. My best guess is that it’s something like “progress without change” – a policy approach that only Saudi Arabia has ever managed to pull off. In many ways, however, “change without progress” would be a more accurate description of most of the conundrums in the Middle East.

In any event, we are not in an encouraging position in the Middle East. We are less free of Iraq than we wish we were; groping for the exits without a plan in Afghanistan; uncertain how to deal with the Arab uprisings and their aftermath; dabbling from the sidelines in the Syrian civil war; stalemated with Iran and at odds with a belligerent Israel over it; snookered in the Holy Land; nowhere in the affections of the world’s Muslims; and in sometimes deadly peril on the Arab street.

Almost a decade ago, the United States invaded and occupied Iraq. Advocates of the operation assured us that this would be “a cakewalk” that would essentially pay for itself. The ensuing war claimed at least 6,000 American military and civilian lives. It wounded 100,000 U.S. personnel. It displaced 2.8 million Iraqis and – by conservative estimate – killed at least 125,000 of them, while wounding another 350,000. The U.S. invasion and occupation of Iraq will ultimately cost American taxpayers at least $3.4 trillion, of which $1.4 trillion represents money actually spent by the Department of Defense, the Department of State, and intelligence agencies during combat operations; $1 trillion is the minimal estimate of future interest payments; and $1 trillion is future health care, disability, and other payments to the almost one million American veterans of the war.

The only way to assess military campaigns is by whether they achieve their objectives. Outcomes – not lofty talk about a tangle of good intentions – are what count. In the case of Iraq, a fog of false narratives about weapons of mass destruction, connections to al Qaeda, threats to Iraq’s neighbors, and so forth left the war’s objectives to continuing conjecture. None of the goals implied by these narratives worked out. Instead, the war produced multiple “own goals.”

Those who urged America into war claim Iraq was a victory for our country. If so, judging by results, the Bush administration’s objective must have been to assure the transfer of power in Iraq to the members of the Supreme Council for the Islamic Revolution in Iraq, all of whom had spent the previous twenty years in the Islamic Republic of Iran. The former “Decider” made doubly sure of this outcome when Sunni and Shiite nationalist forces, like those of Sayyid Muqtada Al-Sadr, threatened the pro-Iranian politicians the United States had installed in Baghdad. Bush “surged” in additional troops to ensure that these politicians remained in office. And there they abide.

The neoconservative authors of the “surge” claim to have produced an important American victory through it. Certainly, in terms of its immediate objective of tamping down violent opposition to the regime, the “surge” was a tactical success. Still, one can only wonder about the sanity of people who argue that consolidating ethnic cleansing in Baghdad while entrenching a pro-Iranian government there represented a strategic gain for our country. The very same band of shameless ideologues, militarists, and armchair strategists who brought off that coup now clamor for an assault on Iran. One wonders why anyone in America still listens to them. Anywhere else, they would have been brought to account for the huge damage they have done.

If the United States invaded Iraq to demonstrate the capacity of our supremely lethal armed forces to reshape the region to our advantage, we proved the contrary. We never lost a battle, but we put the limitations of U.S. military power on full display.

If the purpose was to enhance U.S. influence in the Middle East, our invasion and occupation of Iraq helped bring about the opposite. Iraq is now for the most part an adjunct to Iranian power, not the balancer of it that it once was. Baghdad stands with Tehran in opposition to the policies of the United States and its strategic partners toward Bahrain, Lebanon, Palestine, Syria and Iran itself, including Iran’s nuclear programs. Iraq’s oil is now propping up the Assad regime in Syria. Iraq bought a big package of American weapons and training as we withdrew. But it’s already clear that its future arms purchases will come mainly from Russia and other non-American sources.

If the point was to prove that secular democracy is a viable norm in the Middle East, events in Iraq have borne savage witness to the contrary. The neoconservatives asserted with great confidence that the fall of a corrupt and tyrannical regime would pave the way for a liberal democratic government in Iraq. This was a profound misreading of history as well as Iraqi realities. The Salafist awakening and the sectarian conflagration kindled by our attempted rearrangement of Iraqi politics have not abated. Sectarian conflict continues to scorch Iraq and to lick away at the domestic tranquility of its Arab neighbors in both the Levant and the Gulf.

If the aim of our invasion and occupation of Iraq was to eliminate an enemy of Israel and secure the neighborhood for the Jewish state, we did not succeed. Israel’s adversaries were strengthened even as it made new enemies – for example, in Turkey – and began petulantly to demand that America launch yet another war to make it safe, this time against Iran. Mr. Netanyahu wants America to set red lines for Iran. Everyone else in the region wishes the United States would set red lines for Israel.

If the idea was to showcase the virtues of the rule of law and American-style civil liberties, then our behavior at Abu Ghraib, our denial of the protections of the Geneva Conventions to our battlefield enemies, and our suspension of habeas corpus (as well as many other elements of the Bill of Rights) at home put paid to that. These lapses from our constitution and the traditions of our republic have left us morally diminished. They have greatly devalued our credibility as international advocates of human freedoms everywhere, not just in the Middle East. We have few ideological admirers in the Arab or broader Islamic worlds these days. Our performance in Iraq is part of the reason for that.

All this helps to explain why most Americans don’t want to hear about Iraq anymore. A few weeks ago, the Congress failed to authorize funding for the continuation of the U.S. military training mission in Iraq, forcing the Pentagon to come up with the money internally. Almost no one here noticed.

On one level, the failure to fund a relationship with the Iraqi military through training represents a shockingly casual demonstration of the willingness of American politicians to write off the many sacrifices of our troops and taxpayers in our Iraq war. On another, it is an example of America’s most endearing political characteristic: our capacity for nearly instant amnesia. (“Iraq war? What Iraq war? You mean we sacrificed the lives and bodies of over one hundred thousand Americans and took on debt equivalent to one fourth of our GDP to occupy and refashion Iraq? Really? Why?”) They say the test for Alzheimer’s is whether you can hide your own Easter eggs. Apparently, we Americans can do that.

Failure is a much better teacher than success, but only if one is willing to reflect on what caused it. Our intervention in Iraq was a disaster for that country as well as for our own. It reshaped the Middle East to our disadvantage. Yet, we shy away from attempting to understand our fiasco even as those who led us into it urge us to reenact it elsewhere.

The military lessons we took away from Iraq have so far also proved hollow or false. When applied in Afghanistan, where we have now been in combat for more than eleven years, they haven’t worked. Analogies from other conflicts are not a sound basis for campaign plans, especially when they are more spin than substance. “In for a billion, in for half a trillion” is no substitute for strategy, let alone grand strategy.

Communities engaged in resistance to the imposition of government control where it has never before intruded do not see themselves as insurgents but as defenders of the established order. Counterinsurgency doctrine is irrelevant when there is no state with acknowledged legitimacy against which to rebel, no competent or credible government to buttress in power, and no politics untainted by venality, nepotism, and the drug trade to uphold. Pacification by foreign forces is never liberating for those who experience it. Foreign militaries cannot inject legitimacy into regimes that lack both roots and appeal in the communities they seek to govern.

One cannot reap the fruits of politico-military victories one has not won. Military reinforcements are not a substitute for policy failure. Surges don’t work when there is no regime with a strong, independent power base for the additional troops to prop up. Invading men’s homes and shaming them in front of their wives and children does not endear them to new codes of conduct, still less instill feminist values. Nor can one beat a set of ideas – even bad ideas – with targeted killings of militants, especially when the definition of a militant is anyone killed during a drone attack. Drones multiply enemies, fuel rage, and invite indiscriminate reprisal. They ensure that we will never run out of terrorists in Afghanistan, Pakistan, the Horn of Africa, Yemen, and elsewhere.

There is an international consensus that it’s time to leave Afghanistan, letting Afghans be Afghans. After eleven years of combat, we’re all out of patience and pretty much out of money. So far, the United States alone has spent about $575 billion. Almost 2,000 Americans have died and 16,000 have been seriously wounded in Afghanistan. In the end, the Afghan war is likely to cost us, our children, and our grandchildren about $1.5 trillion – all of it borrowed. That’s about $50,000 per person in a country where the per capita income is about $1,000.

In Chicago last May, NATO agreed on an exit plan broadly reminiscent of “Vietnamization.” It’s only thirty-seven years – less than two generations – since Saigon fell. Did our political elite really forget everything we learned in Vietnam? Apparently so. In any event, in Afghanistan, as eventually happened in Vietnam, we’re in final fallback mode. The plan this time is to train Afghans to be soldiers for their national government, not just natural warriors committed to the defense of their tribes and clans. But when those being trained are so uncommitted to this cause and so annoyed by the demeanor of their foreign trainers that they kill them, it’s hard to take “Afghanization” seriously as an exit strategy.

Al Qaeda fled Afghanistan during the battle of Tora Bora in December 2001. There has always been a possibility under the Pashtunwali (the ten ethical principles that define honor for the Pashtun people) that the Taliban might join other Afghans in agreeing to deny reentry to anti-American terrorists, including al Qaeda or other movements like it. It has never been conceivable that religious Afghans would agree to adopt Western norms for their country’s governance. No one can say we haven’t made a serious effort to transform Afghanistan, but it’s time to admit that some designs are beyond reach.

When we entered Afghanistan in 2001, we had no thought of transforming the place. Our aim was simply to bar “terrorists with global reach” from using its territory as a sanctuary or training ground in which to prepare further assaults on America and Americans. A deal that supported this essential but limited objective of strategic denial, but not the remodeling of Afghan mores, has long been open to us. Sadly, however, it may now be too late for an agreement with all concerned to deny bases to Islamist terrorists.

How much that actually matters is a question on which reasonable men and women may differ. Whatever they may think of jihadis, there can be few Afghans eager to invite further foreign intervention in their country by once again harboring “terrorists with global reach.” But it’s still worth a try to formalize an understanding on this. After all, that would vindicate our original purpose in invading the place.

Afghanistan itself has become largely irrelevant to the problem of global terrorism but the unfortunate net effect of our operations there has been to ignite a broader struggle with the Muslim world. The result has been to entrench anti-American terrorists in Pakistan, Yemen, parts of North Africa and the Sahel, and a few places in Europe and Asia, not to exorcise or contain them. Calling off the attempt to pacify Afghanistan would remove it as the potent symbol of American crusade against conservative Islam that it has become.

This brings us back to the causes of virulent anti-Americanism and its spread. For anyone with an open mind, these causes are not hard to understand. The fanatics who carried out the atrocities of 9/11 went out of their way to describe their motivations and outlined their objectives to anyone who would listen. America turned off its hearing aid. It’s still off. The grievances that catalyzed 9/11 remain not simply unaddressed but ignored or denied by Americans.

Al Qaeda saw 9/11 as a counterattack against American policies that had directly or indirectly killed and maimed large numbers of Muslims. Some of those enraged by our policies were prepared to die to achieve revenge. Still, there were few in the Muslim world in 2001 who sympathized with al Qaeda’s attack on us. There are many more now. It is not our values that they hate. It’s what we have done and continue to do. We won’t stop terrorists by trying to impose our narrative on them while ignoring theirs, however politically expedient it may be to do so. We can’t fight anti-American extremists effectively or otherwise fend off the menace they present if we refuse to consider why they attacked us and why they still want to do so.

The chief planner of 9/11, Khalid Sheikh Mohammed, testified under oath that a primary purpose of al Qaeda’s criminal assault on the United States was to focus “the American people . . . on the atrocities that America is committing by supporting Israel against the Palestinian people . . . .” In so-called “fatwas” in 1996 and 1998, Osama Binladin justified al Qaeda’s declaration of war against the United States by reference to the same issue, while levying other charges against America. Specifically, he accused Americans of directly murdering one million Muslims, including 400,000 children, through the U.S. siege and sanctions against Iraq, while “occupying” the Muslim heartland of Saudi Arabia.

Al Qaeda members have described the war strategy they ultimately adopted as having five stages. Through these, they projected, the Islamic world could rid itself of all forms of aggression against it.

In stage one, al Qaeda would produce massive American civilian casualties with a spectacular attack on U.S. soil in order to provoke American retaliation in the form of the invasion of one or more Muslim countries. In stage two, al Qaeda would use the American reaction to its attack to incite, energize, and organize expanding resistance to the American and Western presence in Muslim lands. In stage three, the U.S. and its allies would be drawn into a long war of attrition as conflict spread throughout the Muslim world.

By stage four, the struggle would transform itself into a self-sustaining ideology and set of operating principles that could inspire continuing, spontaneously organized attacks against the U.S. and its allies, impose ever-expanding demands on the U.S. military, and divide America’s allies from it. In the final stage, the U.S. economy would, like that of the Soviet Union before it, collapse under the strain of unsustainable military spending, taking the dollar-dominated global economy down with it. In the ensuing disorder, al Qaeda thought, an Islamic Caliphate could seize control of Saudi Arabia, Egypt, and the rest of the Middle East.

This fantastic, perverted vision reflected al Qaeda’s belief that if, against all the odds, faith-based struggle could bring down the Soviet Union, it could also break the power of the United States, its Western allies, and Israel. This strategy seemed ridiculous when al Qaeda first proclaimed it. It is still implausible but, frankly, has come to sound a bit less preposterous than it once did.

The immediate objective of the 9/11 attacks was explicitly to provoke the United States into military overreactions that would enrage and arouse the world’s Muslims, estrange Americans from Arabs, stimulate a war of religion between Islam and the West, undermine the close ties between Washington and Riyadh, curtail the commanding influence of the United States in the Middle East, and overthrow the Saudi monarchy. The aftershocks of Al Qaeda’s 9/11 terrorist operation against the United States have so far failed to shake the Saudi monarchy but – to one degree or another – it has realized all its other immediate goals. Among other things, it has burdened future generations of Americans with about $5 trillion in debt from the Afghan and Iraq wars, helping to thrust the United States into fiscal crisis.

Mao Zedong observed that “a single spark can start a prairie fire.” His point was that, when conditions arise that can be exploited to favor a cause, it can spread with frightening speed and ferocity. The U.S. response to 9/11 has inflamed Islamist anti-Americanism in a widening swath of the Muslim world. By the time he died, Osama Binladin surely felt entitled to pronounce the first stages of his mission accomplished. Islamist terrorism did not die with him. It lives on. One cannot decapitate a network. Nor can one shrivel an ideology by military means alone.

Islamist terrorists were initially encouraged by the extent to which the Arab uprisings of 2011 and 2012 upended the regional order in North Africa. These uprisings liberated Salafism, the tendency within Islam from which extremists draw their spiritual inspiration, from political repression. Where the uprisings succeeded, however, the changes they set in motion set back the cause of extremism by entangling Salafis in tasks of governance from which they had previously been excluded. By contrast, where the uprisings achieved only limited success or went nowhere, as in Yemen and Syria, and Bahrain, Salafist jihadism has found fertile soil in which to grow.

Overall, the past two years have represented less an Arab than a Salafist awakening. Salafi populism asserts that the failings of contemporary Muslim societies are due to their distance from the most repressive traditions of Islam and that secularism and moderation cannot be reconciled with true Islam. This view has gained major ground in the Arab world. The elected governments in Egypt and Palestine (the Muslim Brotherhood and Hamas) face their most formidable challenges not from the secular left but from the Salafist right.

The U.S. was long antagonistic to the Muslim Brotherhood and proscribed official dialogue with it. America has labeled Hamas a terrorist organization and sought to isolate it and overthrow its rule in Gaza. But the militant Salafist opposition to Muslim Brotherhood rule in Egypt seeks to revise or repudiate the Camp David accords. The opposition to Hamas seeks to end its de facto cease-fire and acceptance of Israel. If U.S. interests are to be protected, U.S. policy must recognize and deal with the emerging political realities in the Middle East, not stick to dead narratives. As Kierkegaard said: “life can only be understood backwards; but it must be lived forwards.”

The NATO approach to Libya assumed that the removal of a tyrant would somehow inevitably lead to a liberal democracy. Indeed, this was the dominant initial interpretation of the so-called “Arab Spring” in the West. Most pundits thought that, as corrupt and tyrannical governments fell, regimes that used social media to implement Western principles of democratic governance would sprout up in their place. Implicit in this was a profound lack of understanding of the political cultures of the countries where the uprisings occurred, the strength of their rulers, the diversity of the opposition in each, and the likely forces that would emerge from the success of that opposition. What actually followed Muammar Qaddhafi’s regime in Libya has been ongoing warfare between clans, tribes and ideological militias, including some determined to take advantage of any opportunity to strike at the United States. The Libya where Chris Stevens died was not the Libya of Washington’s imagination.

Wishful thinking and ignorance have nowhere been more in evidence than with respect to Syria, where the demise of the Assad regime has been just around the corner for nineteen months now and early, enthusiastic descriptions of the nature of the opposition to it have not withstood scrutiny. More than 31,000 Syrians have died to date in an escalating civil war. From a humanitarian point of view, this is appalling. But to cynics determined to deprive Iran of Syria as a strategic asset, either regime change or continuing anarchy in Syria can get the job done – so it doesn’t really matter if the war never ends. Some dream of post-Assad Syria as a platform from which to mount rollback operations against Iranian influence in Iraq. Unlike other revolts in the Arab world, that in Syria risks jumpstarting interstate conflict. Syria is already, in many respects, a proxy war between Saudi Arabia and Qatar, on the one side, and Iran and Hezbollah on the other. The fighting has begun to spill over Syria’s borders into both Turkey and Lebanon. Nearly 700,000 Syrians have sought refuge in Jordan, Lebanon, Turkey, Iraq, and Egypt. As Syrians leave, foreign jihadis arrive.

It has long been clear that the international consensus that permitted so-called “humanitarian intervention” in Libya will not be replicated in Syria. The UN Security Council’s authorization of a “no-fly zone” in Libya was blatantly stretched well past its breaking point to rationalize an open campaign of support for rebellion and regime change. This destroyed Muammar Qaddhafi’s regime and killed him. It probably also killed the possibility that the “responsibility to protect” will ever become generally accepted international law.

China now sees what happened in Libya as the deliberate exploitation of a humanitarian crisis by outside forces bent less on relieving suffering than on justifying foreign intervention to engineer regime change. Russia agrees with China on this point and, unlike China, has a substantial investment in the Assad regime to protect. Neither China nor Russia will allow the UN Security Council to repeat the Libyan precedent. In the absence of some new approach that obviates this political reality, all that can be said with assurance is that the fighting in Syria will continue to escalate until some development in Syria brings it to an end.

Syria’s neighbors seem more likely to suffer spillover from the turmoil than to enter it directly themselves. Overt foreign intervention in Syria is not impossible to imagine but it is unlikely, given its probable knock-on effects. Russia might well respond to an attempt to establish a “no-fly zone” in Syria behind the back of the UN by equipping the Assad regime with advanced air defenses, thus further internationalizing the conflict. Though neither side wants this, Syria’s air and artillery duels with Turkey could progress to the point that NATO feels obliged to act militarily. Syrian Kurdish separatists in league with their fellow Kurds in Iraq and Turkey could draw either or both countries into conflict. Iraq and Iran both support the Assad regime against its opposition. This risks their being dragged into direct participation in the fight. Then, too, as Libya shows, a sudden end to civil war can release warriors with weaponry to destabilize an entire region.

Syria is not just a horrible humanitarian disaster. It is a dangerous international dilemma. So, in its own way, is the state of U.S. relations with Syria’s ally, Iran.

Iranian-American relations are at their lowest level since the two countries first began to deal with each other officially 137 years ago. There is no serious dialogue between the two governments. People-to-people exchanges between the U.S. and Iran are nearly nonexistent, and media on both sides are biased and inaccurate in their reporting about the other. The United States has effectively outsourced its Iran policy to Israel, with the only difference between the two presidential candidates being whether to do so with or without reservation. The issue Israel cares about is whether Iran acquires nuclear weapons, not Iran’s aspirations for hegemony in the Persian Gulf region, its struggle with Saudi Arabia for leadership of the world’s Muslims, or its search for strategic advantage in Bahrain. In virtually every respect, the American view of Iran more closely mirrors Israel’s than that of the Arabs.

Israel’s view combines what can only be described as psychotic fears that Iran might attempt to annihilate the Jews in the Holy Land with entirely rational apprehensions about the impact on Israel’s military freedom of action if it loses its nuclear monopoly in the region. Few outside Israel believe that Iran’s possession of nuclear weapons would embolden it to attack Israel, given Israel’s ability to obliterate Iran in response. And no one has suggested that Iran might attack Israel with anything other than nuclear weapons – which it doesn’t yet have. But Israel’s threats to attack Iran give Iran a very convincing reason to secure itself by developing a nuclear deterrent. Given this logic, Israel’s fear of losing its nuclear monopoly in the Middle East seems likely to become a self-fulfilling prophecy.

In this connection, all concerned are playing very duplicitous and dangerous games. Iran claims that, inasmuch as nuclear weapons are immoral, it will not acquire them. Yet it seems in practice to be reenacting Israel’s clandestine weapons development program of five decades ago, developing capabilities to build and deliver nuclear weapons while denying that it intends actually to do any such thing. Israel lacks the capability to eliminate Iran’s nuclear programs but keeps threatening quixotic military action to do so. Israel’s purpose is clearly to force the United States, which could damage Iran’s facilities as Israel could not, into a war with Iran on its behalf. In pursuit of this, the Israeli prime minister has blatantly intervened in the U.S. elections in support of the Republican candidate, who has explicitly committed himself, if elected, to allow Israel to dictate U.S. policy on Iran, Palestine, and other issues in the Middle East.

The United States, joined by some of its allies, has bypassed the UN to impose what it describes as “crippling sanctions” on Iran. American politicians and pundits gloat over the suffering these are causing the Iranian people. Washington has offered Tehran no way to achieve relief from these sanctions other than complete capitulation to U.S. and Israeli demands. Meanwhile, the U.S. Congress has provided generous funding to efforts to overthrow the Iranian regime. America is working with Israel and the Mujahedin-e Khalq to carry out cyber warfare and assassinations inside Iran. By any standard, these are acts of war that invite reprisal. There is no negotiating process worthy of the name underway between the United States and Iran.

In these circumstances, instead of bringing Iran to its knees, U.S. sanctions seem far more likely to provide further evidence of the truth of Dean Acheson’s assertion that “the idea of using commercial restrictions as a substitute for war . . . is a mischievous superstition in the conduct of foreign affairs.” Politically convenient as they may be, sanctions will not end Iran’s nuclear program. To pretend they will is naive or disingenuous.

On the other hand, there are no good military options. An attack by Israel on Iran would thrust the entire region into turmoil and deal a heavy blow to the world economy, while stoking Iran’s nuclear ambitions. An attack would not permanently cripple Iran’s ability to go nuclear. Air and related attacks on Iran by the United States could set back its nuclear program but not eliminate it. They would, in fact, unite Iranians in demanding that their government develop and field a nuclear deterrent. Any attack by either Israel or the United States would result in Iranian retaliation against Israel and the Arab countries of the Gulf, while creating a far more active, long-term Iranian threat to both than at present. Such a war could deepen the dependence of the Gulf Cooperation Council countries on American military power for their defense, while simultaneously making the military presence of the United States on their soil politically precarious.

So far our diplomacy toward Iran resembles the approach we have taken with north Korea. In the absence of major adjustments in the U.S. approach to reach a compromise with Tehran, this diplomacy seems likely to yield the same result it has with Pyongyang. The only thing worse than an Iranian nuclear weapon would be an attack on Iran to stop it from developing one. The most likely prospect is that Iran, like north Korea, will eventually get its bomb. This will ensure that some other countries in the region will too, either on their own or through arrangements with powers like Pakistan to station nuclear weapons on their territory or otherwise extend nuclear deterrence against both Iran and Israel to them.

Israel and the United States, having done much to push Iran into this corner, have no common stand on how to help Iran out of it. What if Iran offers to accept truly credible verification measures to assure that it has forgone the development and fielding of weapons? There are hints that Iran may in fact be preparing such an offer for presentation after the November 6 U.S. elections. If Iran puts forward an offer that the United States considers acceptable, will Israel also accept it or try to move the goalposts? Given the Israeli hammerlock on U.S. Iran policy, could the United States actually take yes for an answer from Iran?

If the United States and Israel were to reject a forthcoming Iranian offer, should one be put forward, the entire region would have to live with the consequences. These include broader proliferation of nuclear weapons in the region. The hobbles such a bloom of nuclear deterrents in the region would impose on Israel’s ability to attack its neighbors with impunity might lead Israel finally to try diplomacy with them. Other than that, it’s hard to see what anyone would gain from the United States rejecting compromise with Tehran.

Meanwhile, U.S. diplomacy on the Israel-Palestine issue has become unsustainable. The half truths with fantasy sauce that America’s professional peace processors have cooked up for so long now have no takers. Neither the world nor a politically awakened Middle East will be fooled by happy talk about a nonexistent and unrevivable peace process. The day of reckoning is at hand. Israel must come to grips with the consequences of its successful territorial expansion. Palestinians must recognize the defeat of their aspirations for self-determination. America must acknowledge its political and diplomatic impotence. All sides must move on.

Israel has now effectively incorporated almost all the territory of Palestine, if not its inhabitants, under its sovereignty. There is no longer any prospect for a two-state solution in Palestine, unless one considers Indian reservations or Bantustans to be states. One state is a reality in Palestine. Within this state, Palestinians inhabit a jail administered by Palestinian trusties dependent on Jewish guards for their livelihood, personal safety, and authority. The Palestinians face an unpalatable but unavoidable choice between the security of prison life and a struggle for their rights in the only state they will ever live in, which is Israel. In short, the two-state solution having been strangled by the success of scofflaw Israeli settlement policies, the Palestinian question has ineluctably become one of human and civil rights within the State of Israel, not one of self-determination.

The consequences of the death of the two-state solution for Israeli Jews are already apparent. Ensuring that Israel is a democratic state that provides a national home for both Jews and Palestinians – rather than a country based on ethno-sectarian apartheid – is now the only way to realize Zionism on a basis acceptable to the world, including the vast majority of non-Israeli Jews. In default of this, Israel will suffer boycott, disinvestment, and sanctions in the West, escalating terrorism at home, rising tensions with ever more independent-minded and militarily-competent neighbors, and widening international isolation. The immediate danger is that, before civil rights and democratic liberties can be extended to the Palestinian inhabitants of Eretz Yisrael, Israeli Jews will have sacrificed these values to aggressive medievalism and racism.

Let me conclude.

Americans cannot undo our past mistakes in the Middle East. We must learn from these even as we deal with their consequences. Among these consequences is a major reduction in U.S. prestige and influence in the region. Events there are now being driven as much or more by the policies of Iran, Saudi Arabia, Egypt, Turkey, Pakistan, India, Russia, and China or by forces on the Arab street as by American preferences. The situation is evolving amidst intensifying animosity between Americans and the world’s Muslims, not just those in the Middle East.

When President Obama entered office four years ago he made a good-faith effort to deal with all of the issues I have discussed this morning. With more than a little help from our self-proclaimed friends in the region, he failed. The past four years have seen a great deal of change without much, if any, progress toward realization of any part of the U.S. agenda. They have also seen a shortage of American audacity and steadily diminishing hope for an effective U.S. role in resolving conflicts and reducing tensions in the Middle East.

Thirteen days from now we Americans will elect a president. We will do so following a campaign in which the issues before this conference were dealt with, if at all, through exchanges of posturing, misleading sound bites, and invective. The next president, whoever he is, whether he wants to or not, will have to deal with these issues as they are, not as his campaign donors or our electorate would prefer them to be. He will do so with a weakened hand. He will not succeed by pursuing the course of least political resistance at home or by doing more of the same abroad. Our country’s interests and those of our friends in the region will not prosper without painful adjustments in U.S. policy.

Why is the threat especially worrying? Because of the massive buildup of U.S. naval forces in the Persian Gulf. Because of Netanyahu’s government’s stated intention to attack Iran, despite opposition from the people of Israel. Because of President Obama’s declarations of unconditional support for Israel; and because Pakistan, a nuclear power, would probably enter the war on the side of Iran.

Most probably, a military attack on Iran by Israel would provoke an Iranian missile attack on Tel Aviv, and Iran might also close the Strait of Hormuz. The probable response of the U.S. would be to bomb Iranian targets, such as shore installations on the Persian Gulf. That might well provoke Iran to sink one or more U.S. ships by means of rockets, and if that should happen, the U.S. public would demand massive retaliation against Iran.

Meanwhile, in Pakistan, the unpopularity of the U.S.-Israel alliance, as well as the memory of numerous attrocities, might lead to the overthrow of Pakistan’s less-than-stable government. Israel’s response might be a preemptive nuclear attack on Pakistan’s nuclear installations. One reads that Russia has already prepared for the conflict by massing troops and armaments in Armenia, and China may also be drawn into the conflict.

In this tense situation, there would be a danger that a much larger nuclear exchange could occur because of a systems failure or because of an error of judgement by a military or political leader. A thermonuclear war would be the ultimate environmental disaster.

Recent research has shown that thick clouds of smoke from firestorms in burning cities would rise to the stratosphere, where they would spread globally and remain for a decade, blocking the hydrological cycle, and destroying the ozone layer. A decade of greatly lowered temperatures would also follow. Global agriculture would be destroyed. Human, plant and animal populations would perish.

We must also consider the very long-lasting effects of radioactive contamination. One can gain a small idea of what it would be like by thinking of the radioactive contamation that has made large areas near to Chernobyl and Fukushima permanently uninhabitable, or the testing of hydrogen bombs in the Pacific in the 1950’s, which continues to cause leukemia and birth defects in the Marshall Islands more than half a century later. In the event of a thermonuclear war, the contamination would be enormously greater.

We have to remember that the total explosive power of the nuclear weapons in the world today is 500,000 times as great as the power of the bombs that destroyed Hiroshima and Nagasaki. What is threatened today is the complete breakdown of human civilization and the destruction of much of the biosphere.

The common human culture that we all share is a treasure to be carefully protected and handed down to our children and grandchildren. The beautiful earth, with its enormous richness of plant and animal life, is also a treasure, almost beyond our power to measure or express. What enormous arrogance and blasphemy it is for our leaders to think of risking these in a thermonuclear war!