Farrell: Doubling Down Again

Earlier this year, the President went all-in to get a health care bill passed. Like it or not, the gamble worked, and a significant political victory was scored. That success seems to have receded as economic ills have stayed in the front of everyone's mind. It doesn't matter the origin of the problems or how far back their genesis, the man in the seat carries the burden. With November elections looming, it would make sense for the President to try another bold stroke, if there is one to be had. Calling the somewhat willing Israelis and the extremely reluctant Palestinians to the conference table in Washington for a September 2^nd meeting might be viewed as such a stroke. But I think there is far more to this than politics.

The downside risk to the President is, to me, greater than the possible domestic political upside. Support for Israel's position has ebbed quite a bit in the US in recent months. The announcement of additional East Jerusalem development while Vice President Biden was visiting felt like an insult. The shoot-out on the high seas involving a Turkish flotilla attempting to break the embargo of Gaza that followed came close to making the State of Israel a pariah in sections of the world. Maybe it would be best to let the issue lay quiet for a while. The Israelis did put a moratorium on development, and the interminable investigation as to the facts of the at-sea conflict is just that, interminable.

But little reported was the start-up of an Iranian nuclear reactor this past weekend. Russia, with a billion-dollar-plus contract for this reactor's development, loaded fuel to start it up. The plant is in the south of Iran along the Persian Gulf and was originally built in 1974. Abandoned in 1979 just before the Shah was toppled, it was revived in 1995 with Russian assistance. This plant, the Bushehr, will enrich uranium to a 3.5% level, far too low for nuclear bombs. (I copied that right out of the paper and have no clue what 3.5% represents.) But with Iranian nuclear ability taking another step forward, now is the time to try to get the parties talking about mid-East peace, election or not. The world has long wondered if Israel would attack Iranian nuclear facilities and what would be the final provocation. Having Israeli Prime Minister Netanyahu and Palestinian President Abbas under the same tent at a significant moment in time is not a bad idea.

The summit is fraught with potentially session-ending conflicts. Secretary of State Hillary Clinton said the negotiations would cover all the issues that have blocked past meetings from occurring: The status of Jerusalem, the borders of a Palestinian State, security provisions for Israel, and the right of return for Palestinian refugees. Before, the Palestinians had listed these as issues that had to be granted to them before they would sit down. Of course, if the issues were conceded, why sit down to negotiate? And you make peace with enemies, not with friends.

Critics, notes the New York Times, view the talks as "pairing the unwilling with the unable: a strong right-wing Israeli coalition led by Netanyahu with no desire to reach an agreement, against a relatively moderate Palestinian leadership that is too weak and divided to do so." Failed talks could be worse than no talks, as a failure could finish off the weak Palestinian leadership and empower more radical organizations, like Hamas. Israel could well be acceding to President Obama's demand for peace talks to keep smooth a rocky relationship at a time of heightened Iranian risk.

President Obama's tougher stance with Israel has tempered some of his traditional support. Undertaking a high-profile initiative going into mid-term elections could, says the Wall Street Journal, "hold both opportunity and peril for him and his party." But isn't that what leadership calls for?

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Vincent Farrell, Jr. is chief investment officer at Soleil Securities Group and a regular contributor to CNBC.