A POSSIBLE alliance of convenience between Iran and Iraq is an ominous twist in the growing crisis in the Gulf. This bizarre development could greatly complicate, if not scuttle, the outlook for the embargo of Iraq and is the latest of the bitter fruits from United States policy. Thus far Iran has continued to denounce Iraq's occupation of Kuwait, and Teheran has publicly indicated no plan to make common cause with Baghdad.
Nonetheless, the possibility of Iranian-Iraqi cooperation, not merely peace, is suddenly real - a dramatic reversal that means both the quick elimination of a potential ``second front'' and the opening of a new dimension in countersanctions.
If Iran joins Iraq in confronting their common enemies, the US and Israel, the options for a quick throttling of Iraq through the use of economic sanctions alone are suddenly more limited, less certain, and much riskier.
The resolution of outstanding issues between Iran and Iraq was announced last week by spokesmen of both governments. The settlement involves repositioning the boundary in the middle of the Shatt-al-Arab waterway, as demanded by Iran, and the withdrawal of all Iraqi forces in Iran.
Particularly significant, however, is the declaration that both sides propose to return the hundreds of thousands of prisoners they hold. The prisoners have been the real issue remaining between the two countries.
The prisoner exchange confirms that the Iran-Iraq war is indeed over, which should be welcomed by the world - except that it could result in a dangerous new configuration in the Gulf.
Iran and Iraq share common enemies and perceive common rivals and competitors, which are at the present time much more important than their differences over the boundaries. Both are implacably opposed to Israel and thus to the US for its unqualified support of what both term ``the Zionist aggression.''
Both resent the Saudi-Kuwaiti policy of maintaining low oil prices for the greater good of OPEC over the longer run. Both militantly want higher oil prices in order to finance their short-term financial needs.
A common front is thus a real possibility - both can oppose the United State, Israel, and the rulers of the Arabian peninsula. In particular, both can expect real resonance throughout parts of the Arab world if they join in a common jihad against Israel and its US proxy.
The implications of this rapprochement for the embargo and blockade of Iraq are profound. Until now the prospects for success of the embargo against Iraq have been excellent. Iraq depends totally upon oil export revenues, and all major export routes have been interdicted. Even if the truck route through Jordan were to remain open, the revenues could not meet Iraq's daily needs for food and essential products.
However, if Iran supports Iraq against Israel and its allies, all bets are off because enforcing the embargo becomes not only difficult but in fact dangerous.
First of all, extending the oil embargo to include Iran, as well as Iraq, would be extremely costly. Cutting world supplies by another 3 million barrels a day could trigger a possible doubling of oil prices (as in 1979-80), because oil markets are already balanced precariously on a knife's edge.
A further oil shortfall could not be made up. There is no possible way for other producers, within or outside of OPEC, to make up for a total shortage of 7 million barrels a day from Iraq, Kuwait, and Iran - even if both the US and Japan were to make full use of their strategic stockpiles.
Thus, the economic price tag of putting an embargo on Iranian oil would be politically and economically prohibitive. The stakes would become so high that other players could well drop out of the game.
Not merely would prices perhaps double, but the ensuing physical shortage would precipitate serious recessions in most industrial countries. The 1973 oil embargo is the test. It was much smaller in scale, but it cost almost 2 million jobs in the US alone. A loss of 7 million barrels a day from a joint embargo could translate into many more millions of workers unemployed.
Second, even a restricted blockade of Iran, if allied with Iraq, becomes risky. Iran could convincingly counter any effort at a selective embargo of cargo destined for Iraq via Iran by threatening to reduce its oil production.
Such a ``counter-embargo'' could be effective because the cost to Iran is low - or it might even prove profitable. Iran's revenues already are up by at least $25 million because of the crisis-induced price rises, and a voluntary production cut by Iran - in retaliation for a US effort to cut off cargo for Iraq - could be almost self-financing: The production cut could trigger further price increases which might compensate for the volume loss, just as happened unintentionally in 1973.
An alliance between Iran and Iraq is painfully logical, given the legacy of US policy in the Middle East and the common hostility to Israel. The US ability to defend Saudi Arabia and Kuwait is now itself hostage to history.
That stigma of history is doubly reflected in the newest developments. On one hand the US intervention is seen as proof that the Gulf states are lackeys of the US and Israel, which discredits the West's actions in many Arab eyes. On the other hand, that same history provides the glue which might unite Iran and Iraq, thereby making the defense of the Gulf more difficult and much riskier.
Iraq's Achilles heel, however, is still its lack of cash. Even if it can import goods via Iran, it remains hard-pressed to pay.
The critical question now is whether Iran might bankroll some minimum level of Iraqi imports in order to challenge ``Western hegemony'' and ``Zionist imperialism.'' Today it has the motive and also the money (thanks to higher oil prices), so that the crisis could easily escalate.