Monday, November 3, 2014

Analysis: U.S.- Israel Divide

Political And Diplomatic Uncertainty Fuel U.S.-Israel Divide

The coarseness of the epithet for cowardice used by an anonymous Obama administration official to describe Israeli Prime Minister Benjamin Netanyahu has seized the attention of Jerusalem and Washington. The snipe, reported by The Atlantic’s Jeffrey Goldberg, is seen by analysts as emblematic of deteriorating Obama-Netanyahu relations at a time of great political and diplomatic uncertainty.

Top officials in the Israeli and US governments are bracing themselves for possible radical changes within the next months in how the world relates to Iran and how the Palestinians pursue their quest for independence, as well as for increased turbulence in Jerusalem and the prospect of political change in Washington.

“The rhetoric from both sides, and this has been going on for some months, is a reflection of frustration, of ‘the other side doesn’t understand us the way we want to be understood, the other side is not sensitive enough to our interests,’ ” said Tamara Coffman Wittes, the director of the Brookings Institution Center for Middle East Policy.
Coffman Wittes helped shape Middle East policy at the State Department in President Obama’s first term.
The latest scuffle comes as US officials are expressing greater optimism about the likelihood of a nuclear deal with Iran and Israelis fret that the parameters of the deal could leave Iran on the verge of becoming a nuclear power.

“The bottom line is that Benjamin Netanyahu sees the potential for even a modified, defanged nuclear program as an existential threat to Israel,” said Jonathan Schanzer, the vice president of the Foundation for Defense of Democracies, a think tank that consults closely with Congress on Iran policy. “President Obama views a deal with Iran as perhaps one of the only remaining opportunities for a foreign policy legacy.”
Schanzer added, “To analyze this flap without understanding the centrality of Iran ignores the majority of what is fueling this conflict.”
As negotiations appear to be entering their final stages ahead of a November 24 deadline, it remains to be seen how much each side will give and take, and the factor of the unknown is fueling Israeli anxieties. The US national security advisor, Susan Rice, last week pledged to continue “unprecedented coordination” with Israel on Iran policy after meeting with her Israeli counterpart, Yossi Cohen.
Another unknown inciting angst on both sides are Tuesday’s midterm elections. A Republican-led Senate, by some estimations, could yield a Congress more sympathetic to Netanyahu’s appeals to obstruct what he believes would be a bad Iran agreement.

Complicating matters is lack of clarity over factors that so far have been beyond the control of the United States or Israel, among them increased tensions in Jerusalem between Jews and Arabs. The strains came to a head last week with the assassination attempt on a leader of the movement to establish a Jewish presence on the Temple Mount and the killing of his purported attacker during a raid by Israeli forces.
“You could end up with a major crisis in Jerusalem,” Miller said.
In recent weeks, Obama administration officials have intensified their calls on Netanyahu to roll back planned building in the eastern part of the city, citing the potential for an outbreak of violence. On Monday, however, a Jerusalem planning committee approved the construction of hundreds of apartments in a Jewish neighborhood of eastern Jerusalem.

Two years ago, in hushed tones at first, then ever louder, the financial world began discussing that which shall never be discussed in polite company - the end of the system that according to many has framed and facilitated the US Dollar's reserve currency status: the Petrodollar, or the world in which oil export countries would recycle the dollars they received in exchange for their oil exports, by purchasing more USD-denominated assets, boosting the financial strength of the reserve currency, leading to even higher asset prices and even more USD-denominated purchases, and so forth, in a virtuous (especially if one held US-denominated assetsand printed US currency) loop.

As Reuters reports, for the first time in almost two decades, energy-exporting countries are set to pull their "petrodollars" out of world markets this year,citing a study by BNP Paribas (more details below). Basically, the Petrodollar, long serving as the US leverage to encourage and facilitate USD recycling, and a steady reinvestment in US-denominated assets by the Oil exporting nations, and thus a means to steadily increase the nominal price of all USD-priced assets, just drove itself into irrelevance.

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