'A “serious” diplomatic process...'

The White House’s confidence in President Obama’s foreign policy record – about which we have been recently commenting – is now a settled part of Democratic campaign rhetoric. Governor Romney has yet to respond in kind, and senior Republican strategists are advising against making foreign policy a major issue. However, the troubled international landscape is likely to intrude and offer him a number of opportunities. Of these, Iran, Syria and the ongoing Euro crisis represent the most intractable problems facing the Administration. The ambiguous outcome of the May 23^rd/24^th P5+1 talks with Iran have unleashed a high-decibel duel in Washington between the respective advocates of diplomacy andconfrontation. With new reports from the IAEA that Iran may have enriched uranium to a higher-than-expected level, there is little doubt that Obama will feel increasing pressure to take tougher action. Following the Baghdad talks, US representatives have visited GCC and Israel to provide briefings and to affirm the Administration’s policy of not allowing Iran to obtain a nuclear weapon. However, US officials tell us that they believe that they have entered a “serious” diplomatic process. Given the new tighter sanctions scheduled to go into effect on July 1^st, they calculate that Tehran will soon be ready to make the necessary concessions on not enriching uranium beyond the 3.5-5% range. The Administration continues to tell us that they reject the military option and continue to make the case for restraint to Israel. On the Euro crisis, there is deepening anxiety in Washington that an orderly solution will not be found and that there will be serious knock-on impact on the US economy. At the May 19^th G-8 summit, Obama gave backing to French President Hollande’s ideas for a “growth agenda” – which parallel US actions – and added to the pressure on German Chancellor Merkel to follow a fiscally more expansive strategy. It was also agreed – albeit unannounced – that the appropriate Central Banks are ready to intervene in a crisis with substantial swap lines. Finally on Egypt, State Department strategists tell us that they are disquieted by the results of the first round of the presidential elections. As one commented to us: “The two remaining candidates represent the polar opposite of Egyptian politics. The electoral process seems to be illuminating and confirming these tensions not relieving them.”