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Scott Sullivan :
Obama's top priority must be Iraq

President-elect Obama should downplay his economic agenda in the short term in favor of his commitment to withdraw from Iraq. Here are the reasons why.

First, Obama knows that the economic crisis must be allowed run its course and that the Federal government can do little to influence the outcome. The Federal government's traditional tools of control over fiscal and monetary policy to influence the economy seem to have lost their effectiveness. In short, Obama will be unable to create a breakthrough in economic policy, no matter what direction he takes.

Second, Obama knows that his political gains from taking a high-profile role in economic affairs, even if they materialize, will quickly erode if Obama fails to stabilize Iraq. On the other hand, Obama's gains from victory in Iraq will boost Obama's moral authority and political clout on economic issues.

Third, Obama would face substantial risks by taking a lead role in economic affairs because he lacks political control over the USG's main economic agencies such as Treasury and the SEC. Secretary Paulson has steered the contracts for the $750 billion bailout of Wall Street in favor of Goldman Sachs and other pro-Republican firms. These firms have no loyalty to Obama and would not refrain from criticizing his policies.

Fourth, President-elect Obama not only lacks control of Treasury thanks to Paulson, Obama lacks control of Congress, thanks to House Speaker Nancy Pelosi. Without effective control of Treasury and the Congress, Obama will be relegated to the sidelines on economic affairs even as he gives the appearance of seeking a lead role. The public will not be fooled. As Stalin once advised his commander of the Cheka, Felix Dzerzhinsky, “Power is the one aspect of the human condition which cannot be faked.”

FiftFifth,the principal cause of the economic crisis is a perception that Bush failed as the leader of global economic policy. As long as Bush is still in office, investor confidence in the US economy will falter. In short,

Ai I Bush will be president until 20 January. Obama cannot successfully

bpdirect economic policy while Bush is still around, especially with Bush's

esongoing efforts to steer Treasury policy.

Sixth, Obama must make the right moves in Iraq today if he intends to withdraw US troops on his 16 month timetable. An Obama delay in addressing Iraq could rob Obama of political momentum to negotiate a political settlement with the warring parties. Fortunately for Obama, the way ahead in Iraq to peace and reconciliation is clear, provided Obama moves quickly. The US must downgrade US relations with Iranian forces in Iraq; upgrade US relations with the Iraqi Arabs, including the militant Sunni groups such as Saddam Hussein's Baath party, while isolating and sidelining al-Qaeda; upgrade US relations with Muqtada al-Sadr, the leader of Iraq's anti-Tehran Shi'ites; and pull Syria into Iraq's peace process by breaking Syria from Iran's orbit. Once this is done, Obama would have the military leverage to impose a settlement on Iran and the Kurds. Finally, Obama must find agreement with Russia on Iraq policy. Russia can open the door for Obama to improve relations with Iraqi Arabs, Syria, and the Arab world in general. Only after Obama gets back on track with Russia and the Arabs will he achieve political reconciliation in Iraq.

SeSeventh, Obama can actually gain leverage over economic affairs by taking a lower-profile role in the short term. This way the US public would encourage Obama to reclaim his authority over Treasury and Congress . However, Obama should fight to regain control over Treasury and Congress only after he gains significant victories in the war on terrorism.

Scott Sullivan is a former Washington government employee and was the Senior Advisor for International Economics at the Crisis Management Center of the National Security Council, 1984 -1986. Petroleumworld not necessarily share these views.

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Petroleumworld News 11/10/08

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