Dealing With Iran
Israel's former--and future?--prime minister talks about the threats to peace.

The Wall Street Journal, Saturday, May 26, 2007

NEW YORK--Benjamin Netanyahu runs a few minutes late for our Monday afternoon meeting. When he arrives in his midtown Manhattan hotel suite, he explains that he has just received word from home of the latest Palestinian war crime. "Hamas fired 15 rockets into Israel today. One of them hit a car, killed a woman," says Mr. Netanyahu, the former Israeli prime minister and now leader of the opposition. The victim, 32-year-old Shirel Friedman, was on her way to see her mother.

For the 57-year-old Mr. Netanyahu, there is a sort of grim vindication in such attacks. He quit the government of then-Prime Minister Ariel Sharon in August 2005, objecting to Mr. Sharon's plan for unilateral withdrawal from Gaza. "I had a very big argument with him on this," Mr. Netanyahu recalls. "He thought that we would have the right of free action-that we would garner international support for any reaction. I thought that is a very thin sheet of ice-the international community can turn against you as quickly as it turns for you-but the overwhelming fact is that the Muslim militants and Iran will find a new base, a few miles from Tel Aviv, with the ability to cover the south of the country and the center of the country with rockets."

Five years earlier, Ehud Barak, Mr. Netanyahu's successor as prime minister, had similarly withdrawn from southern Lebanon, creating a safe haven for Hezbollah, which has periodically rocketed cities in Israel's north. In both cases, Mr. Netanyahu says, Israel's leaders were "captivated by a concept, and the concept was that we purchase security from retreat, from withdrawals-that is, that the way to stop the attacks on us is to placate our enemies by unilaterally withdrawing from territory under our control, thereby robbing them of the pretext to attack us. In fact, this was interpreted exactly in the opposite manner. . . . It was interpreted not as a sign of strength but as a show of weakness."

"There is not much difference" between Hezbollah and Hamas, Mr. Netanyahu says. "They are both supported by Iran, supplied by Iran, inspired by Iran." They share a common goal, "to get us to withdraw from more territory-of course this time not so-called occupied territory, but Israel proper. For them, any inch of Israel is occupied territory, and the 'liberation' will be culminated when Israel ceases to exist."

Iran's president, Mahmoud Ahmadinejad, made that clear in 2005, when he declared that "Israel must be wiped off the map"-a particularly chilling pronouncement given that his regime is seeking weapons that would make it capable of doing just that. "This could be the rise of the first undeterrable, fanatical nuclear power in the world," says Mr. Netanyahu. "It's an apocalyptic, messianic sect that could possess nuclear weapons, to the detriment of all mankind."

How to deal with the Iranian nuclear threat has proved a conundrum for America and the West, including Israel. Mr. Netanyahu acknowledges that military strikes would pose "complications and difficulties" and thus "should be a last resort." But diplomacy has been tried for several years with scant results.

Mr. Netanyahu proposes a third way. The Iranian regime, he argues, is economically vulnerable. He is in America to urge state and local pension funds to divest from foreign companies that do business in Iran (U.S. law already keeps American firms out).

"This could be very effective," he tells me, "because Iran is in desperate need of new investments for its sagging oil industry. It's curtailed its oil production by 7%, I think, in each of the last three years. It's running unemployment to a rate of close to 20%, and Ahmadinejad is continuously being criticized from rivals within the regime and outside the regime for failing to deliver on economic problems."

Divestment "could stop Iran dead in its tracks," Mr. Netanyahu argues. "We're talking about several dozen companies . . . that are propping up the energy sector in Iran and a few other relevant sectors. They are eminently susceptible to stock prices. Their chief executives are compensated by stock prices. Divestment depresses stock prices and immediately forces reconsideration." This in turn would squeeze "Iranian economic elites," who Mr. Netanyahu says are motivated by money, not ideology. "That elite funds and finances a lot of politicians, and when they see their own holdings and their own businesses endangered, they'll put pressure to either block the nuclear program or to change the regime."

Mr. Netanyahu believes Americans across the political spectrum could unite behind the principle that "a regime that promotes genocide cannot receive American taxpayers' savings . . . through European intermediaries." And the idea is catching on.

Last year Missouri's treasurer, Sarah Steelman, established a terror-free mutual fund and spearheaded a move to divest the $6.9 billion State Employees Retirement System from companies that do business in Iran and other terror-supporting nations. Earlier this month Florida's Legislature unanimously approved a bill mandating divestment from companies with ties to Iran or Sudan. On Capitol Hill, Sens. Barack Obama (D., Ill.) and Sam Brownback (R., Kan.) have introduced the Iran Sanctions Enabling Act, which would create a federal list of investors in Iran and shield fund managers from lawsuits if they disinvest.

The big prize, of course, is California, whose $247 billion pension fund is the nation's biggest. "I spoke to Gov. [Arnold] Schwarzenegger on this a few weeks ago," Mr. Netanyahu says. "He said he'd look into it. I'm going to call him, possibly before I leave tonight." On Tuesday an official from the Israeli Embassy in Washington emailed me that Mr. Netanyahu "did get in touch with Governor Schwarzenegger yesterday. . . . The Governor was aware of the divestment bill and said that it may get passed by the end of the summer."

With Democrats seeking retreat from Iraq, bipartisanship is in short supply in America just now. Two days after Mr. Netanyahu and I spoke, a major presidential candidate for the first time announced that he no longer even believes there is a "global war on terror." John Edwards, who voted for the Iraq war in 2002, now dismisses the entire war on terror as "a slogan designed only for politics . . . a bumper sticker, not a plan."

I ask Mr. Netanyahu if the U.S. made a mistake in liberating Iraq. He says it did not: "I think it was right to bring down Saddam Hussein, who murdered hundreds of thousands of innocent people." But he brings the discussion back to Iran. "It would have been prudent to use the rapidity of success of victory-that is, the fact that the U.S. had accomplished in three weeks what Iran couldn't accomplish in 10 years and a million casualties-to deliver a stern warning to Iran to dismantle its nuclear program. In a way, this was achieved without design with Libya's nuclear program that had been much more advanced than anyone understood. . . . That same leverage could have been used on Iran."

If Mr. Netanyahu seems preoccupied with Iran, it is not because he is dismissive of other threats, including al Qaeda. "Of the two, Iran is more dangerous, because the Sunni militants so far have not gotten their hands on a nuclear weapons program. . . . If the Taliban were to topple the current regime in Pakistan and get their hands on nuclear weapons, I would say they're more dangerous than Iran, or equally dangerous."

He sees al Qaeda as existing on a continuum with Tehran's Shiite fundamentalists: "They're now competing with each other on the soil of Lebanon to gain paramountcy-al Qaeda in the north and Hezbollah in the south. But both of them practice suicide attacks, both of them have the cult of death, and both of them are absolutely uninhibited in the use of force against their chosen enemies. Now, is there a difference? Yeah, I suppose. I think one wants to send us back to the ninth century and one wants to send us back to the seventh century." The Shiite extremists, Mr. Netanyahu quips, "give us two centuries extra."

Yet he is careful to distinguish between "militant Islam" and the broader Muslim population. "Militant Islam condemns and intimidates and kills Muslims before anyone else. That's what they're about. The infidels are defined first as the renegades of Islam-that is, Muslims who do not practice some . . . pre-medieval religious creed that is hopelessly antiquated for most Muslims and most Arabs."

Because of the militants' power to intimidate and the weak civic institutions in Arab societies, Mr. Netanyahu is wary of pushing those societies too quickly toward electoral democracy. He thinks it was a mistake to allow Hamas to compete in last year's Palestinian voting. "But I think that one element that should be expedited as rapidly as possible is the democratization of markets. I think that expanding economic freedom is just as important-in some cases more important-in moderating societies than accelerated moves to political freedoms without the proper democratic institutions."

I ask if he can point to any positive examples in the Arab world. "How about Dubai? How about the Gulf states? What you see there is quite remarkable. It also tells you that Arabs and Muslims are not inherently or genetically programmed to oppose free markets. That's just nonsense. With the right system of incentives and economic freedoms, you see this explosive growth that I, frankly, admire. . . . We always said that if we have peace, then we'll have prosperity. It may be the other way around."

In the aftermath of last summer's war with Hezbollah, public confidence in Israel's government has hit bottom. Recent opinion polls give Prime Minister Ehud Olmert a dismal 3% approval rating. Mr. Netanyahu is happy to pile on: "The right strategy . . . is to use superior force, come in from their rear, at their most vulnerable point, and use a lot of ground power to physically eliminate them. . . . None of this was done, and the people felt that this failure was too stinging to be left alone, so they want a change of government." He faults the government for "lack of experience . . . lack of decisiveness, lack of leadership." And he worries that Israel faces near-term threats on three fronts: Lebanon, Gaza and Syria, "which is arming feverishly."

Is a political comeback in his future? "I hope that we can get to elections as soon as possible," he says. "But that's a decision for 61 out of 120 Knesset members to make, and they're not going to readily part with their jobs."

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