President Obama, please use Option C to defeat Iran

Jan. 19, 2012: President Obama speaks at a campaign event at the Apollo Theatre in Harlem. (AP)

When I was on Henry Kissinger’s National Security Council Staff in the 1970’s he insisted that every presidential memoranda have three options. We thought it would be very funny to write a spoof proposing three options for a new U.S. policy toward the Soviet Union: Option A – all out war; Option B – capitulation and surrender; and Option C – something else. Somehow the memo made it all the way to President Ford’s desk before the mistake was spotted and everyone had a good laugh.

But Kissinger was right – you always want an Option C, especially when Options A and B are lousy.

That’s the nub of our problem with Iran, we’ve failed to develop an Option C.

For years we’ve had two extremely bad choices: Option A: bomb Iran, or Option B: let Iran get the bomb. Our efforts to find a third option have either failed or carried too high a price.

But now, for the first time, a credible Option C is possible– using Western resolve, Arab cooperation and Western technological advances to stress the Iranian economy to the point that it collapses and the Iranian people bring about regime change on their own.

To exercise Option A is to court disaster. An attack against Iran’s nuclear sites would be fraught with logistical difficulties. Iran would retaliate against Israel and U.S. interests worldwide, and likely make good on threats to disrupt the flow of oil through the Strait of Hormuz. The price of oil, and gasoline at the pumps, would skyrocket.

At best we would have set Iran’s nuclear program back just a few years.

At worst we would have given the Iranian regime the opportunity to rally their people ‘round their tattered flag.

Yet Option B – letting Iran get the bomb -- would be even worse. A nuclear Iran will spark a nuclear arms race throughout the region as Saudi Arabia, Turkey and others rush to acquire their own arsenals. That means the next war in the Middle East – and there is always another war in the Middle East – could well go nuclear.

An Option C has always been out of reach, but it’s not for want of trying. The Bush administration launched the second Iraq war in part to create a bulwark against Iran. They thought post-Saddam Iraq would be a strong, pro-American democracy in the heart of the Arab Muslim world and partner with us in containing Iran. They were wrong.

At best, post-American Iraq will be fragile and weak; at worst it will be in Iran’s orbit.

President Obama came into office thinking the problem rested with Bush’s failure to engage Iran diplomatically, so he immediately extended the ‘hand of friendship.’ It was promptly rebuffed, time and again.

Obama’s efforts to create an anti-Iran coalition at the United Nations, and among Iran’s neighbors in the Middle East, also failed.

And, while the new U.S. and UN sanctions have made life difficult for Iranians, they haven’t been enough to halt their nuclear weapons program or force regime change.

So far, we’ve stopped short of imposing the ultimate sanction: shutting down Iran’s oil exports. Why?

Because it would also hurt us, too. If Iran’s oil were taken off the world market oil prices would rise. If Iran blocked the Strait of Hormuz in retaliation, oil prices would rise even more. Even if the 5th Fleet were to clear the Strait almost immediately, oil prices would remain high because of increased insurance rates.

We’ve never had the ability to deny Iran its oil revenues without inflicting major damage to ourselves.

But now, for the first time, there might be a way to stop Iran’s oil exports without causing undue hardship to the U.S. and world economy.

First, the West is now united in imposing sanctions that could cripple Iran’s economy by putting a blockade around Iranian oil, but using banks instead of gunboats.

In November the U.K. agreed to sanction Iran’s central bank. In December the US Congress overwhelmingly voted for similar sanctions and President Obama signed them into law. The Europeans followed suit this week, and Japan is considering doing the same.

Even if the Chinese continue buying Iranian oil, they will press for steep price discounts, as much as 40% according to Foundation for the Defense of Democracies’ Mark Dubowitz.

Second, Saudi Arabia and other Sunni Arab oil states appear willing to use their spare capacity and ramp up oil production to compensate for any loss of Iranian oil. Saudi Oil Minister Ali al-Naimi said recently his country is ready and able to meet any increase in demand.

Finally, western oil companies have developed new technologies that allow Canada, Brazil and the United States to become major energy exporters. Advances in engineering technology now make it possible to extract oil from tar sands in Canada at competitive prices, and Canada is on track to become a larger oil producer than Iran.

The U.S. will produce oil from significant resources in the Bakken in North Dakota. Breakthroughs in mapping technologies have made it possible for western companies to “see” past through thick layers of rock and salt and discover huge oil reserves off the coast of Brazil.

We’ve developed hydraulic fracturing and horizontal drilling techniques to get natural gas from shale and “tight oil” from dense rocks in the U.S.

These technologies aren’t years away, they’re here now. In 2011 the U.S. became a net exporter of petroleum products for the first time in 62 years. We’ve now surpassed Russia as the world’s leading gas producer.

Ronald Reagan won the Cold War because he realized the Soviet Union's Achilles' heel was its failed economic model and dependency on oil exports. Working closely with selected oil producers, Reagan tightened the noose slowly, but when oil prices fell by two-thirds in the mid-1980’s, the oil-dependent Soviet regime came close to collapse. They had no money to pay for their defense buildup, social programs and most especially for imported wheat. Without that revenue, they had no choice but to come to terms.

Iran has the same problem. Oil exports account for nearly 80% of foreign exchange earnings, and more than 60% of government revenues.

If Iran can’t sell its oil, or is forced to sell at steeply discounted prices, it’s broke.

No money for the massive subsidies that keep the Iranian people fed and housed.

No money for their nuclear weapons program.

No money for their terrorist clients Hezbollah and Hamas or Syria’s thugocracy. Iran’s leaders would be lucky to keep their heads, much less their hold over government.

Even with the more limited sanctions we have imposed to date, the Iranian regime has had to cut subsidies and prices for gasoline, electricity and bread have skyrocketed. Hyperinflation has hit Iran and their currency has fallen by half since December 2010.

The new banking blockade will drain their treasury to the point of collapse and could reignite the democratic counterrevolution that the regime squashed in 2009.

As we have seen with The Arab Awakening in North Africa over the last year, regime change in the Muslim world isn’t just a pipedream. And an Iran under very different leadership is a very different story.

As former CIA Director Michael Hayden says, it’s not so much that we object to Iran getting nuclear weapons – it’s that we object to this Iran getting nuclear weapons.

Iran’s Green Movement in 2009 was the precursor to the Arab Awakening of 2011. It may also be the culmination of it and finally give us an Option C with Iran. If so, it will come just in the nick of time, because one way or another 2012 is the year of reckoning with Iran.

Kathleen Troia "K.T." McFarland is a Fox News National Security Analyst and host of FoxNews.com's DefCon 3. She is a Distinguished Adviser to the Foundation for the Defense of Democracies and served in national security posts in the Nixon, Ford and Reagan administrations. She wrote Secretary of Defense Weinberger’s November 1984 "Principles of War Speech" which laid out the Weinberger Doctrine. Be sure to watch "K.T." every Wednesday at 2 p.m. ET on FoxNews.com's "DefCon3"-- already one of the Web's most watched national security programs.