Persian Chess

The U.S. Ponders its Next Move

In 2009, when Barack Obama had just come into power, many compared Iranian-Western relationships with a chess match. At the time, Obama said that he was ready “to extend a hand [to Tehran] if you are willing to unclench your fist.” In Tehran, his proposal was greeted with distrust, and the Americans once again returned to their policy of “ultimatums and threats.” However, sanctions are not working, and the option of military intervention in Iran would be, according to experts, a “suicidal gamble.” Additionally, there are more and more new challenges arising in the Middle East, and Washington’s political observers do not rule out the possibility of a new political configuration forming in the region.

The third round of “P5+1″* talks on the Iranian nuclear program, which took place on June 18 and 19 in Moscow, did not lead to any significant breakthroughs. Moreover, the talks were broken off at Tehran’s initiative, because the participants did not agree to accept Iran’s proposals. If the goal of the P5+1 is to limit uranium enrichment to 20 percent purity and close the production plant in Fordow, then Tehran demands that the major powers recognize its right to develop peaceful nuclear energy. The Islamic Republic is prepared to guarantee that it will not enrich uranium beyond 20 percent purity, if the West will promise to do this on their own territory and supply Iran with 20 percent enriched fuel for their reactors. Generally, in recent years Iran has not become more agreeable, and the US and Europe are realizing that sanctions have not produced any kind of “paralyzing effect.”

Anti-West Sanctions

Of course, they have had a negative influence on the Iranian economy. However, one cannot say that it lies in ruins. One of the main tests for Iran was the shortage of foreign currency on the domestic market. Another unpleasant aspect is the rise in inflation. The prices of some consumer goods have risen one and a half to two times.

However, it’s worth mentioning that this was not so much a consequence of anti-Iranian sanctions, as it was the government’s economic policies since 2006. From 2007 to 2009, in order to lower domestic prices on a range of household goods, Mahmoud Ahmadinejad’s team allowed uncontrolled imports, significantly lowering import duties. This poorly conceived decision led to bankruptcy for a number of domestic producers, and the rise of unemployment. And then the world economic crisis came along, and it became obvious that the government was too late with its economic reforms. The most profitable moment for them—the peak of Iran’s oil-export profits—was missed. In the economic crisis period, authorities had to cut provisions for public subsidies, which naturally led to an increase in the prices of utilities, household goods and food.

The Iranian struggle with the crisis anticipates a distinctive “monetization of benefits.” For example, until recent times, Iranian car owners could obtain fuel at a discounted price by presenting special fuel cards. But now, the Majlis (Parliament) is discussing the issue of transitioning to commercial prices for fuels. The rise in prices and the elimination of indirect subsidies are designed to offset the direct grants paid by the government to the low-income sectors of the population. In March, the Cabinet decided to raise that amount from 450,000 riyals to 730,000 riyals per person per month. The president’s opponents argued against this measure. The Speaker of the Majlis Ali Larijani announced that if the government has extra money, it is much better to use it to support Iranian manufacturers.

Of course, one cannot deny that Iran’s oil revenues have decreased. After all, deliveries to Europe, suspended after the embargo went into effect, made up 20 percent of Iranian exports. However, talks on the full economic isolation of Iran are, of course, completely absurd. Not only has the Islamic Republic not reduced its export of oil to Asian and African countries; every year, it actually increases it. And it does not help that in April, Washington officials hysterically threatened to establish a list of twenty countries against whom sanctions might be imposed if they did not stop buying oil from Iran (that list includes China, India, Sri Lanka, South Africa, and Singapore). The Americans’ threats have had no effect on the developing countries, and last month, South Africa, as if on purpose, increased its oil imports from Iran by 100,000 tons.

There are some pretty good prospects opening up for Iran in East Asia. Tehran is seriously counting on offsetting the closed European market through exports to China. For a time, under pressure from the Americans, China held a “wait and see” position and tried not to invest in Iran. In 2011, many Chinese companies suspended work in Iran. Projects important to the Iranians were frozen, which of course made them unhappy: the China National Petroleum Corporation (CNPC) received two warnings from Tehran in the course of the year about “disrupting the timing of construction objectives.”

But as soon as Beijing was convinced that the US was not planning an armed invasion of Iran, cooperation was resumed. At the same time they were refusing a number of oil and gas projects in the Islamic Republic, the Chinese raised the amount of export of Iranian oil. During 2011, it rose by more than twice, compared to 2010. Indicators for 2012 suggest that this trend continues. Currently, China imports about a quarter of Iranian oil. For a while, the problem of bank payments became a stumbling block in relations between the two Asian powers, but that was resolved by agreement to pay for oil in Chinese yuan.

A similar situation arose in relations with India. Beginning in February 2012, in the course of international government consultations, a new means of settlement in Indian rupees was developed, to be carried out between the Indian bank United Commercial Bank (UCO), headquartered in Calcutta, and two private Iranian banks: Persian Bank and Karafarin Bank. As for the remaining 45 percent of payments, a preliminary agreement was reached on payments in gold.

In this way, sanctions in relation to Iran dealt a serious blow to the economy of the West, from a completely unexpected direction. The negative consequences did not come from a sharp rise in the price of oil; that did not happen. Nor from a shortage of oil in Europe. The shortage of Iranian deliveries was offset by imports from Libya, which has already reached pre-war levels of oil production. The problem was something else: the bank embargo of Iran led to a gradual decline in the dollar as the unit of currency that pays for oil. At first, just in the Islamic Republic, but later, who knows, maybe the process will spread to other OPEC countries. This will be a real financial nightmare for the US financial system, already seriously weakened by the world economic crisis. After all, the dollar’s very monopoly as the only means of payment for energy is what has kept the American currency afloat until now. It is no coincidence that many are now saying that three years ago, the UN Security Council adopted “anti-West sanctions.”

On the Eve of “Detente”?

Remember, in the late 1960s and early 1970s, the Cold War was replaced by Detente. Interestingly, this process coincided with the increase in European dependence on the import of Soviet energy. And despite the aggressive bravado of Barack Obama and Hillary Clinton, arguing that the Iranian theocracy has a “despotic nature,” the true masters of the West gradually appear behind them, who, of course, favor the weakening of Iran, but not at the cost of collapsing the world oil trade. The well-known political scientist Kenneth Waltz addresses this idea in the authoritative American journal Foreign Affairs, in his July article, “Why Iran Should Get the Bomb.”

Waltz examines three possible scenarios for the evolution of the Iranian crisis. First: the Islamic Republic, weakened by sanctions and international pressure, completely ceases its nuclear program. Second: Iran reaches a threshold level of uranium enrichment which enables it to produce nuclear weapons, but stops at that point. And of course, the third: Tehran’s authorities decide to build a nuclear bomb. “This scenario,” writes Waltz, “leads to the most favorable outcome. The Iranian elite will become more cautious, will begin to closely assess risk, and a reasonable balance of power will develop in the region: the Islamic Republic will become a real counterbalance to Israel, which currently has a nuclear monopoly in the Middle East.” We note that these words were written not by some radical anti-globalist, but a theoretician in international relations, who worked with the US State Department for many years.

An interesting twist in the West’s tactics could involve Syria. As we know, one of the reasons for the uncompromising attitude of the US and its allies toward the Assad regime is Syria’s strategic partnership with Iran. In the spring of 2011, in an interview with John Hannah, one of former US Vice President Dick Cheney’s national security advisors, a high-ranking Saudi official expressed certainty that a change of regime in Syria would be very favorable to Riyadh and the Royal House of Saud. “The King knows,” he said, “that other than the collapse of the Islamic republic itself, nothing would weaken Iran more than losing Syria.” And for the past year, Washington has been practically setting into motion the plans of their Saudi allies.

In its turn, Iran has offered and continues to offer aid to the government of Bashar Al-Assad. The reason for this aid is economic, as well as military and political. And no, however much we might try to believe the western media on this, officers of the Iranian army and members of the Islamic Revolutionary Guard are not fighting on behalf of the Syrian regime in the civil war. Assad has his own well-trained cadre. However, thanks to Iran’s financial aid, his government can pay benefits to the military and security forces. Iran also has an influence on neighboring Iraq, to prevent a full blockade of Syria. And one other important thing: at the end of May, during talks with the Supreme Leader of Iran, Ayatollah Ali Khamenei, the Syrians discussed a gas pipeline project, which is proposed to run from the Iranian border to the Mediterranean Sea.

Robert Fisk, a remarkably well-informed correspondent for Beirut’s The Independent, cites highly placed sources in Damascus and writes of a possible compromise among the West, Russia, Saudi Arabia and Iran concerning the future of Syria. The basis of this compromise is worry in some Western circles over the EU’s dependence on imports of Russian energy. As Fisk notes, now the possibility is actively being developed for two pipelines across Syrian territory: the previously mentioned gas pipeline, going from Iran to the Syrian coast (with the prospect of further export flows to Europe), and an oil pipeline from Saudi Arabia through Jordan, and also terminating on the Syrian coast. At the same time, Russia is guaranteed to observe its interests in Syria, including its base in Tartus. To accomplish this, stability is necessary. And therefore Assad, who has the support of more than half the country’s population, remains president for another two years in this scenario, in order to move forward and establish a “peaceful transfer of authority to a democratic government.”

And so, Iran is one of the key figures in the Great Game. We are witnessing a complex combination of competing geopolitical projects, ideological ambitions, phobias and grandiose economic programs. It will not be a surprise if the consequences of the Iranian crisis are directly opposite to the effects that its architects expected. Militarists, having long beaten their war drums, could end up with nothing, and an unexpected political configuration could arise in the Middle East.

*Translator’s note: Regarding the six powers involved with Iran’s nuke program, Russia refers to it with a collective number meaning “Group of Six.” Among English-speaking officials, the reference is the “P5+1 group,” the permanent members of the UNSC plus Germany.