China is not protecting Iran except diplomatic cover, which is not very important. Russia provides both diplomatic cover and nuclear technology. 20 or 30 years from now a dozen of states in the Middle East will have nuclear weapons. Russians are smart. They calculate that in the end Muslims will unite against Israel, and Israel will be finished. Anti-missile technology may help to destroy the missiles, but it will not protect from radiation.
Iran is just a precedent. As Iran goes nuclear, soon others will follow. Obama's calculation to build anti-missile defense against Iran will prove to be a mistake. The real problem is nuclear arms race in the Middle East, but the administration is not likely to prevent it. In so many words - I should have been more concise - I'm saying that China is not that important to award high speed rail contracts in California.

The diplomatic side of things is very important to Obama; it is part of the optics he likes to project. Splitting Russia and China diplomatically is important as it is unlikely that either will veto anything on Iran alone.

Nuclear weapons will not proliferate because the US is quickly moving the international society of states, in Hobbesian terms, from a State of Nature into a global Commonwealth led by US international sovereignty. In other words we are moving from an Anarchical Society to a Monarchical Society but only at the international level of states (the US is obviously not a traditional empire in that it directly controls the people of other nations ).

What are the main characteristics of international sovereignty? The first is a monopoly on violence. While the US is not powerful enough to bully around China and Russia, it is very close to achieving an international monopoly on violence. Not only does the US Navy control the world’s oceans, keeping them free for trade to occur, but also the only “international” (civil wars are different, analogous to a domestic squabble within a household for a national sovereign) breaches of the US monopoly on violence since the end of the cold war have been Russia’s wars in Chechnya and Georgia (which could be seen as civil wars). The war in Yugoslavia was also a breach but the US stepped in a shut it down just as you would expect a sovereign to do. All other international wars have been either launched by the US or approved through deputy nations (Israel attacking Lebanon or the Ethiopian invasion of Somalia).

The other characteristics are to coin currency (the dollar is obviously the world’s dominate currency, almost every international trade transaction throughout the world is settled in dollars.). Also sovereigns write and execute laws. This area is less clear but most international laws are heavily influenced by US wishes, including all recent free trade laws. Also the US controls global finance through its quasi-government agency investment banks like Goldman Sachs. And through intelligence agencies like the NSA, the US is able to monitor global communications.

Seen in this light the problem of Iran is not so much the nuclear weapons but the fact that they refuse to submit to US supremacy. The US goal is to coerce Iran into submission and the optics of all this will be much better with some international diplomatic solidarity. Nuclear proliferation tends to level the international playing field of power, to quote Hobbes, making even “the weakest has strength enough to kill the strongest.” The US can at the limit allow states that clearly submit to its will possess nuclear weapons but a renegade (from the US perspective) like Iran will be brought to heal, by regime change.

Seen in the Monarchical Society framework with the world resembling a medival kingdom, (the US as King, EU and Japan the nobles, the BRIC nation the aspiring merchant class, and the rest of the world pathetic peasants) it is easyier to understand the apparent paradox of the decline of US economic productivity combined with the rise of relative US global power over the last twenty years. On the one hand the US is becoming more and more parasitical (just as sovereigns always are) because a sovereign's job is not to be productive but to maintain peace and prosperity. Just like kings cement power over their realms by raising aggregate though the conspicuous consumption of their courts, we see the US gaining power over China by allowing the Chinese open access to US markets. A sovereign is supposed to be above the competitive fray of is subjects and this is why US manufacturing has been so hollowed out.

In this light Obama and friends “currency manipulator” charges are just a bit of Kabuki theatre used to quell the growing domestic anger at the hollowing out of the US manufacturing base and the resulting underemployment. In fact Obama really doesn't want to do all that much on the issue and is quite happy with the status quo of China basically sending tribute in the form of US treasuries purchases that will never be repaid.

And to keep China sweet the super train contracts will indeed go to them. We have to remember that although it is certainly an economic nuclear option, China does hold ithe power to kill the dollar and in doing so to launch a cycle that would lead to hyperinflation in the US by cutting supply and contributing to a wage-cost spiral.

How could they do this? The first step would be for China to sell hard its reserves and T-bills, driving the US currency down and interest rates up and in the process breaking the pegs other countries have set around the world to the dollar. One might object to this idea by reasoning that China would just be cutting their own throats to devalue the dollar. But to maintain this idea one must conceive of the Chinese accumulation of dollar reserves as a massing of assets. But what if one were to reframe this activity and instead viewed this process as a race to gather weapons – that is economic arms? Viewed this way, people would find it a strange argument if I claimed my enemy would just be cutting their own throats if this enemy were to drop their bombs on me because afterwards their bombs would be worthless. No, instead it is clear that the value of a weapon is in how much damage it can do.

This killing of the dollar would do quite a bit of damage, among other things it would drive interests rates higher, explode the deficit, and make imports (especially oil, remember the Chinese were able to break the Gulf Arab dollar peg) that much more expensive.

After this the next step would be to drastically RAISE the value of the yuan to somewhere near say 4 yuan to the dollar. This would serve to drastically increase labour costs in the US since the geniuses of globalization decided that by outsourcing labour it was a good idea to have de facto US workers being paid in a foreign currency. At this point the spiral would be started. Would US wealth quickly move to start investing in manufacturing in the States or would they sit on the sidelines speculating in commodities? Would other cheap labour countries move to undercut the Chinese only to receive now worthless dollars in return?

It is true that due to labour weakness, US wages would hardly budge as prices sky-rocketed but since US workers hardly produce anything any more, this would not stop the spiral. In fact the result would be many more Americans would just become dependants of the state (or left to starve) and thus their maintenance would just add more pressure on the government to monetize more debt. This would lead to further wage increases by offshore workers in the form of currency revaluations, which in turn would lead to higher prices back home in the US, which again would lead to more debt, and the race to hyperinflation is on.

So China is a significant player and will be appeased as long as they take no steps to threaten the Monarchical Society.

I don't know that I agree with all that, but it is a very interesting framework.