No subject

DEBKA-Net-Weekly 328 first revealed on Dec. 7 that a Washington-Tehran=20
understanding is in the making, brokered by Saudi Arabia. According to Wash=
ington=20
and intelligence sources, the first steps of the dialogue were made possibl=
e by=20
the US National Intelligence Estimate of Dec. 3 affirming that Iran=E2=80=
=99s nuclear=20
weapons program had been put on hold in 2003. This public statement effecti=
vely=20
took the US military option off the table, as stipulated by Riyadh and Tehr=
an.

The Saudis have been offering to mediate the US-Iranian dispute since the=
=20
beginning of 2007. In early November, DEBKA-Net-Weekly disclosed, the White=
 House=20
announced it was ready to deal. But first, Tehran must undertake to halt it=
s arms=20
smuggling into Iraq, guarantee non-interference in the election of the next=
=20
Lebanese president later that month and tacitly approve Syrian participatio=
n in=20
the Middle East conference at Annapolis on Nov. 27. Furthermore, Iran must=
=20
guarantee not to torpedo the conference, to which the administration attach=
ed the=20
highest importance, by unleashing its terrorist pawns against Israel.

Shortly after DEBKA-Net-Weekly=E2=80=99s exclusive disclosure, the well-con=
nected Saudi=20
journalist Jihad El-Khazen gave his version of the course of events in the =
Arab=20
newspaper Al-Hayat :

"Here is what happened: The rate of violent acts dropped in Iraq; therefore=
 the=20
American intelligence services discovered that Iran had halted its military=
=20
nuclear program in 2003. This means that the resumption of violence will ma=
ke=20
American intelligence services find out that there is a secret military pro=
gram=20
that is different from the peaceful and famous one.

The Saudi reporter went on to ask: "Is there a deal between the Bush=20
administration and Iran? I cannot categorically assert that a deal was conc=
luded=20
between the two parties through direct negotiations; however, there is an=
=20
understanding resulting in the 2007 national intelligence report.=E2=80=9D

Saudi and American sources told DEBKAfile that President George W. Bush use=
d the=20
Annapolis conference as a piece of theater, which presented a sham moderate=
 Arab=20
front against Iran to disguise the intense work underway on a Saudi-mediate=
d=20
accommodation between Washington and Tehran.

The Bush administration appears to be in the midst of developing a new fore=
ign=20
strategy based on five key elements:

1. The halt of Iranian weapons and road bomb shipments into Iraq for use ag=
ainst=20
US forces;

2. An Iranian instruction to Hizballah to open the way for the election of =
a=20
Lebanese president, in return for which Washington will not interfere with =
the=20
formation of a new government with a place of honor for the Iranian surroga=
te=20
militia.

In other words, the Bush administration is not only engaged in a sellout of=
 the=20
Israeli government but also of the pro-Western Lebanese prime minister Foua=
d=20
Siniora.

3. The cessation of Iranian arms and roadside bombs to Afghanistan.

4. The naming of Saudi Arabia as a channel for arbitrating American and Ira=
nian=20
differences.

5. A US pledge to backtrack on its charges that the Iran is engaged in deve=
loping=20
nuclear weapons. This pledge was embodied in the dramatically revised US Na=
tional=20
Intelligence Estimate compared with its estimate of 2005, and effectively l=
ifted=20
not only the American military axe from over Iran=E2=80=99s strategic and e=
conomic=20
infrastructure =E2=80=93 and possibly regime - but also tied Israel=E2=80=
=99s hands.

The radical Washington about-face has in the last ten days touched off a ch=
ain of=20
repercussions.

DEBKAfile's sources disclose that Iran=E2=80=99s extremist president Mahmou=
d Ahmadinejad=20
began purging the Iranian leadership of his opponents, emboldened by what h=
e=20
perceived as the victory of the intransigent nuclear policy he and the=20
Revolutionary Guards had pursued.

Still in crowing mode, Iran=E2=80=99s oil minister Gholam Hossein Nozari an=
nounced=20
Saturday, Dec. 8, the cessation of oil transactions in US dollars. He label=
ed the=20
greenbacks an =E2=80=9Cunreliable=E2=80=9D currency.

Less than 24 hours after the NIE was released, the Kremlin announced resump=
tion=20
of Russian work to finish Iran=E2=80=99s nuclear reactor at Bushehr and the=
 consignment=20
of nuclear fuel.

In Lebanon, the Hizballah opened the door for the election of chief of staf=
f Gen.=20
Michel Suleiman as president. To buy a stable Beirut government, Washington=
=20
accepted a pro-Syrian Hizballah sympathizer as president.

The prospects of tough UN sanctions against Iran=E2=80=99s continued enrich=
ment of=20
uranium dimmed dramatically. The Russian foreign minister Sergey Lavrov sai=
d=20
there is no point in the light of the US intelligence reassessment. Saturda=
y, the=20
Iranian ambassador in Tokyo invited Japanese investors to put their money i=
n=20
Iranian oil production which he said could be expanded by 30 percent. Tehra=
n has=20
clearly lost its fear of international economic sanctions.

Yet Israeli leaders Ehud Olmert, Tzipi Livni and Ehud Barak are still touti=
ng=20
sanctions for Iran. They hope to gloss over the serious upset in Jerusalem =
over=20
the Bush administration=E2=80=99s willingness to deal with Iran and Saudi A=
rabia at the=20
expense of Israeli concessions to the Palestinians.

Damascus-based Hamas and Jihad Islami leaders have begun marathon talks wit=
h=20
Syrian and Saudi officials on terms for an informal truce to halt their mis=
sile=20
bombardment of Israel from the Gaza Strip. They are anxious to ward off an =
Israel=20
military operation. By tying Israel=E2=80=99s military hands in the Gaza St=
rip as well as=20
Iran, the US-Saudi-Iranian understanding will serve to stabilize Hamas=E2=
=80=99 rule in=20
Gaza.

Moscow has dispatched war fleets to the Mediterranean and the northeast Atl=
antic.

A flotilla of six Russian warships including a carrier will dock at Syria=
=E2=80=99s=20
Tartous port for the first time.

Whether this ambitious package can be assembled and tied up is moot for all=
 three=20
parties, the Americans, the Iranians and the Saudis. Even if the talks are=
=20
brought to conclusion, the package could leak at the seams at any time.

Tehran does not expect the US to withdraw its naval carriers and strike for=
ces=20
from Iranian Gulf shores yet, whereas Washington does not delude itself tha=
t=20
Iranian arms shipments to Iraq and Afghanistan, or even Lebanon, will compl=
etely=20
dry up overnight.

Both Washington and Tehran have not yet abandoned their fist-shaking stance=
.

Nevertheless, it cannot be denied that a new strategic bloc has taken its f=
irst=20
steps and the first rumbles are already felt.

For Israel, the impact is more radical than a few rumbles. Its special=20
relationship with the United States has collapsed amid its worst foreign po=
licy=20
debacle in decades. The Olmert government is paying the price for the milit=
ary=20
and diplomatic mismanagement of the war against Lebanon=E2=80=99s Hizballah=
 of 2006.