America and Iran, to the brink and back

Was the killing of Qassem Suleimani, Iran’s most important general, by an American drone on January 3rd a masterstroke or an act of madness? When a retaliatory missile strike by Iran on American bases in Iraq on January 8th killed nobody, it seemed that Iran was trying to calm the crisis rather than risk war. Our cover leader argues that two tests will determine whether the strike will ultimately be regarded as a strategic success: its effect on deterrence and on Iran’s regional power. Neither is yet clear; and Iran’s thirst for revenge is unlikely to be slaked. But its efforts to win international sympathy may be damaged by the crash of a Ukrainian airliner, hours after the attack on the American bases. All 176 people on board died. Canada, Britain and American officials say that their intelligence indicates that Iranian air-defence missiles brought the plane down.

General Suleimani’s assassination caused ructions in financial markets. Share prices fell and rebounded, the Brent crude oil price briefly topped $70 a barrel and gold reached its highest price for nearly seven years. Yet gold’s jump was small when compared with its 25% rise since November 2018, explained largely by falling real interest rates: as the return on inflation-indexed Treasuries has dwindled, gold, though it yields nothing, has become relatively more attractive. As we report in our Business section, many Western corporations have little to lose from a conflict between America and Iran. After decades of sanctions America Inc is absent from Iran, and many European and Japanese firms also steer clear. Last year the Middle East and Africa accounted for only 2.4% of the profits of listed American firms, according to Morgan Stanley. Makers of cement or aircraft would lose from a conflict. But arms-makers saw their share prices rise as tensions mounted.

Russia and Turkey will be keen observers of the consequences of General Suleimani’s death. They are on opposing sides in Syria (whose leader, Bashar al-Assad, is backed by both Russia and Iran) and in Libya, which has been split for years between rival governments. Turkey recently said it had begun sending troops to shore up Libya’s wobbly UN-backed Government of National Accord (GNA), which controls Tripoli but faces an insurgency led by Khalifa Haftar, who is backed by Egypt and the UAE as well as Russia. On January 8th Vladimir Putin, Russia’s president, and Recep Tayyip Erdogan, his Turkish counterpart, met in Istanbul and called for a ceasefire to start on January 13th. Turkey has much at stake in Libya, in construction and gas projects as well as in diplomacy. Russia has been promised contracts by General Haftar. Turkey will hope the GNA can make similar offers—and persuade Mr Putin to switch sides or stand down.

Two European countries got new governments this week. In Austria Sebastian Kurz returned to the chancellorship, and at the age of 33 once again became the world’s youngest leader. His right-wing Austrian People’s Party formed a coalition few had thought possible: with the Greens, who are in office at federal level for the first time. In Spain, Pedro Sánchez at last won a parliamentary vote allowing his Socialists to form a coalition with Podemos, a hard-left party. The uneasy alliance will rely for its majority on the abstention of Basque and Catalan separatists. As part of the price, the Catalans have been promised open-ended talks on the conflict in their region.

Some 11m hectares of Australia have gone up in smoke, an area almost as big as Bulgaria. Fire-ravaged south-eastern towns have received Scott Morrison, the prime minister, with hostility. Australians want to know how the extraordinary fire season, after exceptionally hot and dry weather, could have been better handled. The rest of the world wonders whether it will prompt an acceleration of the country’s laggard climate policies. Mr Morrison says that Australia is on course to beat its emissions-reduction targets. It isn’t; and Australia’s carbon emissions per person are among the world’s highest. Yet, as our leader argues, many countries, from the Mediterranean to southern Africa and central Asia, share Australia’s conditions: similar terrain and leadership that has yet to wake up to the reality of climate change.