Posted on Monday, October 20th, 2008
By Gary Samore, Vice President and Director of Studies, Council on Foreign Relations
Welcome to the Iran nuclear forum. We’ve convened some of the world’s best experts to discuss the Iranian nuclear issue, which is certain to be one of the most important and most difficult security challenges facing the next U.S. President.
I’d like to start by setting the technical baseline. Since January 2006, when Iran resumed enrichment activities at Natanz, Iran has made significant progress towards mastering P-1 centrifuge technology and is proceeding with plans to install and operate a substantial number of P-1 centrifuge machines at the Natanz enrichment plant. Iran plans to install a total of 16 units at the Natanz plant, with each unit containing approximately 3,000 centrifuges (18 cascades of 164 machines each) for a total of approximately 48,000 centrifuges for the entire plant. According to the most recent IAEA report of 15 September 2008, a single unit of 3,000 centrifuges has been fully operational since November 2007, a second unit is about one-third completed (i.e., around 1,000 machines operating), and “installation work” is proceeding on three additional units of 3,000 machines each. Thus, when the current phase of construction is complete, Iran will have five units or approximately 15,000 P-1 centrifuges in operation at the Natanz enrichment plant. In addition to the centrifuge machines at the Natanz enrichment plant, Iran is operating a much smaller number of P-1 machines – as well as research and development on more advanced centrifuge designs – at the Natanz pilot enrichment facility.
Based on an analysis of uranium hexafluoride (UF6) feed rates as reported by the IAEA, David Albright (who is participating in this forum) estimates that Iran is now operating the P-1 machines at the Natanz enrichment plant at about 85 percent of their design capacity, which is a significant improvement over previous performance. Thus, it appears that Iran has overcome many of the technical problems that it experienced in the early stage of operating the P-1 machines, when performance was less than 50 percent of design capacity. According to the IAEA’s September report, the Natanz enrichment plant is producing about 2-3 kilograms of low enriched UF6 (i.e., less than 5.0% U-235) per day, for a total stock of about 480 kilograms of low enriched UF6.
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Posted on Friday, October 10th, 2008
By Roger Kubarych
There are two dimensions to the crisis — immediate crisis managment and long-term systemic reform.
On the first, both stock market and credit market responses to the seemingly endless string of “fixes” have been uniformly negative. Why? Because the leadership of the Treasury and Fed appeared panicked in warning of immense danger if something is not done immediately. But then when given the authority and money to act, the US Treasury does not act. “We’ll be ready in a few weeks.” Hardly reassuring. Were they incapable of forward planning? In the meantime, the original scare talk coming from Washington has made investors predisposed to believe the worst and nothing has happened to alleviate that concern. Lesson: Don’t say the sky is falling without acquiring a sturdy umbrella — and then opening it.
The second is the important issue of what happens after the crisis simmers down, which it eventually will. There are two diametrically opposite points of view, call them the Greenspan doctrine and the Volcker view. The Greenspan doctrine is that free markets overshoot and there is nothing anybody can do about that. But the good that they do during booms in creating new businesses, houses, etc. outweighs the damage done in the crashes. So don’t re-regulate the financial system.
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Posted on Wednesday, October 8th, 2008
By Michael Mandelbaum
What does the current economic turmoil portend for globalization in general? Since we are now, by common consent, in the midst of the worst financial crisis since the Great Depression, and since that event put an end to the efforts of the 1920s to reconstruct pre-World War I globalization, it is perhaps worth asking whether history is poised to repeat itself on this score. On this point two observations seem worth making.
First, free-market globalization was vulnerable last time around because, among other reasons, plausible alternatives were on offer: the centrally planned economic system that the Bolsheviks had created in the former tsarist empire that seemed immune to the plagues that struck the rest of the world; and the system of (with apologies to the twentieth century’s greatest economist) military Keynesianism that the Nazis installed in Germany that lifted that country out of the Depression earlier than the other European countries managed to escape it. Subsequent events, however, have thoroughly discredited both, and neither is a candidate for a comeback. (World War II demonstrated that while manufacturing weapons can increase productive economic activity, actually using them has the opposite effect.) As Mrs. Thatcher might put it, where some form of globalization is concerned there is no alternative. To the Asian financial crises of the 1990s the afflicted governments responded with policies — the accumulation of reserves most prominently — that modified but did not fundamentally change their economic approaches. A similar response seems likely when the current storm passes.
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Posted in Financial Turmoil and US Power, Geoeconomics | 1 Comment »
Posted on Tuesday, October 7th, 2008
By Adam Posen
I side with those (from Nye to Setser) who say this is not the end of US relative power, and that fiscal constraints will not be hugely binding.
Regarding the latter, what Japan’s actions in the 1990s show us is that fiscal policy when properly used can be effective, that running up debt in what is clearly a temporary situation is not automatically inflationary (note that yen also had a sustained major depreciation and Japan had neither rising interest rate nor inflation), and that it is net debt, not gross public debt that matters (see the work of Broda and Weinstein).
What I am much more concerned about is the US having lost the intellectual or “model setting” leadership in the global economic community. This is in large part deserved because we did get sloppy with our regulation and supervision, we were too arrogant to others, and we did too little to submit our own policies to international institutions (even under Clinton, though obviously much worse under Bush).
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Posted on Tuesday, October 7th, 2008
By Heidi Crebo-Rediker, Co-Director GSFI, New America Foundation
To Sebastian’s original forum question: is there a relationship between the financial turmoil and US power. The answer has to be yes – for both internal and external reasons.
The internal reasons are more obvious: a strong economy is critical to the ability of the US to lead, to fund national security needs, and to generate public support for any truly necessary engagement abroad to protect national security interests. This crisis has a ways to play out with consequences to the US economy ranging from bad to catastrophic (with other countries now facing similar prophesies). A home-first bias will temper foreign aid programs, just at a time when a cash rich beneficiaries of this decade’s wealth transfer out of the US are able to use financial clout for foreign aid programs or even as outright foreign policy tools. Heading deeper into debt (increasing dependence on Chinese, Japanese, Russian… reserves) could potentially limit our foreign objectives as well (see Brad’s excellent Sovereign Wealth piece).
The external impact of this crisis on US power has yet to play out, but early warning signals are not good. Over the past few years, one could count on Putin to rave about revising the world’s financial architecture (US at the center) to benefit the emerging world economic powers. We counted on a rising China buying into a legacy system it benefited from and not rocking the boat. Now we hear from friends and foes that the time to rebuild the entire financial and monetary system of the world has come. Today we focus on saving the global banking system, but after the dust settles, real questions will emerge about free-market capitalism and the role of the state (not least of which will be because the UST will rival ADIA in assets under management). It would be naïve to write this one off as a bubble born of a perfectly fine free market system – back to business as usual in a year – in the eyes of the rest of the world.
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