Leading article: The high priest's damning confession

The credibility of President George Bush's policy on Iraq has suffered another devastating blow. It is all the more powerful for having come not from a political enemy but from someone who was showered with plaudits by the administration.

Alan Greenspan is the high priest of American capitalism. For 18 years he was the chairman of the US Federal Reserve – the central bank of the world's most powerful economy – and he is widely admired by free-marketeers and right-wingers. The White House has been shaken by his declaration that the true motive for the war in Iraq was that Saddam Hussein was seen to pose a threat to the security of US oil supplies in the Middle East. "I am saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil," he says in a book to be published today.

Neo-cons in Washington were huffing and puffing yesterday that Mr Greenspan had got it wrong. The war was about democracy and the balance of power, they said, conveniently forgetting all the previously discredited justifications about weapons of mass destruction or statements that Saddam, who was hated by al-Qa'ida, was a sponsor of international terrorism.

Mr Bush's policy on Iraq looks ever more threadbare. Only stalemate on Capitol Hill is now saving Mr Bush from total political shame. On the one hand, are Republicans grown dissatisfied with the war but who do not know how to break with the President on his overarching policy. On the other, Democrats with razor-thin majorities in Senate and Congress who are unsure where to pitch the opposition to the war to attain maximum advantage in the next elections. The result is that Washington will remain locked into an unwinnable war in Iraq, at least until Mr Bush leaves office.

Worse than that, there are reports from American intelligence and defence circles – again not from his political opponents but from insiders – that the President has instructed Pentagon planners to draw up a carefully calibrated programme of escalation to lead to a military showdown with Iran. In the coming months, we can expect public denunciations of Iranian "meddling" in Iraq as justifications for cross-border raids on alleged Iranian training camps and bomb factories. A list of up to 2,000 bombing targets in Iran has been drawn up as part of Mr Bush's determination not to leave office without first ensuring that Iran is incapable of developing a nuclear weapon.

Only withering criticisms from men such as Alan Greenspan – who describes himself as a lifelong Republican – can promote the process of undermining support for such madness in the US Senate and Congress.