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    Middle East
     Nov 13, '13

The limits of nuclear diplomacy
By Ahmed Ilahi

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing.

A snippet here, a brief mention there, a lot of speculation and not nearly enough information - so goes media coverage of ongoing negotiations between Iran and the United States (or the P5+1 if you insist on being politically correct).

No repeat then of the frenzied coverage following the first tentative exchanges between Presidents Barack Obama and Hassan

Rouhani. And just as well; meaningful diplomacy doesn't much lend itself to the media glare.

Now if in fact we are witnessing meaningful diplomacy, what exactly should we expect of this latest round of negotiations? Not much. That a thaw in relations between all involved would be universally beneficial is quite obvious.

Equally obvious should be the realization that Iran's pursuit of nuclear technology is not the only obstacle between itself and Western governments. It follows then that while a resolution of the nuclear dispute is an important first step, it alone will not significantly inhibit efforts to keep Iran economically and diplomatically isolated.

A quick look at the diplomatic chessboard shows clearly that for Iran, the complete removal or a substantial reduction in sanctions constitutes the highest priority. While economic isolation hasn't slowed the pursuit of nuclear technology, it has had a crippling impact on the economy.

Last year for example, Iran's oil exports fell from $95 billion to $69 billion - a loss of some $26 billion. For a country that depends on the export of oil for more than half of all government revenue, this is a significant loss and not one that can be effectively mitigated.

Rising unemployment, poverty and inflation place an ever increasing burden on the Iranian people, and by extension, on the ruling elite. The election of President Rouhani is the most visible sign yet that while the people of Iran remain wary of Western governments, they are prepared to give diplomacy a chance.

Existing sanctions bleed the Islamic Republic but their threat to US credibility while less obvious, is no less grave. Enacted by the US Congress, the "Iran Sanctions Act" and the subsequent "Iran Sanctions, Accountability, and Divestment Act" effectively prohibits all military, economic and social contacts with that country.

Crucially, this legislation also compels the US government to punish all corporations - foreign and domestic - found to be in violation of domestic law. While US punitive actions are readily accepted by its docile allies, emerging powers like China and India are not nearly as compliant.

Despite American pressure, banks and petroleum companies in both countries continue to maintain extensive - and it has to be said, lucrative - links with the corresponding sectors of Iran's economy.

China for instance remains reliant on ever increasing imports of foreign oil. Its economy continues to evolve away from manufacturing and towards consumer markets. The development of local infrastructure is a central theme in this evolution and hence the growing demand for public transportation and private ownership of cars.

None of this growth would be possible without a sufficient supply of crude oil and should put in context the prediction that Chinese oil imports will register an increase of 360% between the years 2005 and 2020. China's oil refining infrastructure means that a significant proportion of these imports will be of the "medium sour crude" variety.

And just to prove that the heavens have a sense of humor, Iran as it turns out, is one of the leading producers of this particular blend. Now, has China increased its imports of medium sour? Has it in a sense openly defied the US? No. But if history tells us anything at all, bluster and grandstanding has never been the Chinese way. Neither is retreat and surrender.

Instead, Beijing has developed a carefully calibrated Iran policy, one designed to remain flexible in the short term but not compromise its economic and energy interests in the long term. So yes, China has reduced imports of Iranian crude, but not nearly to the extent demanded by the US.

In fact, even this reduction has not shown a steady downward trend. China's Iranian crude imports fell by 21% in 2012, but the rate of decrease for the current year stands at a measly 3.5%. And that's not all. Even as China has decreased its import of crude oil, it has concurrently increased imports of fuel oil - essentially compensating the Iranian exchequer for lost revenue.

Along with China, India too is walking a tightrope across the sanctions regime, albeit for slightly different reasons. Ahead of upcoming general elections the ruling Congress Party is struggling with a slowing economy, devalued currency and an ever increasing current account deficit.

While these problems are systemic and will require a comprehensive remedy, significant fiscal relief can be had in the short term if India continues its economic engagement with Iran. Crucially, Iran accepts partial payment for oil exports to India in the Indian rupee.

Considering a third of India's import bill goes toward payments for oil, increasing its reliance on Iranian crude would effectively reduce the burden on Indian held foreign exchange. And yet like their counterparts in Beijing, policymakers in New Delhi haven't openly flouted sanctions on Iran.

Imports of Iranian crude are down by 40% in the current fiscal year and Indian refineries have turned towards Latin America and Iraq to make up the shortfall. But then this may only be a temporary shift. As a result of a 10 billion rupee sovereign guarantee from the government of India, local insurance agencies are now able to effectively secure shipments of oil from Iran.

Seeing as the sharp dip in imports was largely due to difficulty insuring these shipments, there is every possibility that the recent downward trend of Indian imports is going to reverse itself.

So how exactly are China and India able to skirt US sanctions whilst continuing to buy oil from Iran? Ironically, through a mechanism provided by the US government itself. As long as the two countries (not to mention countless others including Japan and South Korea) can show an annual decrease of 15% in imports of Iranian crude, they qualify for a temporary exemption from prosecution or a "National Security Waiver".

The very existence of this exemption however, shatters the myth of American omnipotence. Isn't American legislation powerful enough to isolate Iran? Would an undisputed superpower really have to make concessions for allies and opponents alike? Was former US defense secretary Donald Rumsfeld mistaken not too long ago when he triumphantly declared that America could "impose its reality" on the world?

As it turns out, National Security Waivers are not the only threat to an aura of American invincibility. What happens if China and India fail (or refuse) to reduce Iranian crude imports by 15% in the years ahead? Is the Obama administration really in a position to antagonize China?

In other words, is the Obama administration really in a position to antagonize the largest foreign holder of American debt, an emerging military power, and one of America's leading trading partners? Or instead, is the Obama administration able to break its strategic partnership with India? Is it able to break away from an increasingly lucrative destination for American defense contractors and possibly the single most important American ally if the pivot to Asia is to have any chance of success?

These are fairly elementary questions and yet they form no part of the official Iran sanctions narrative at the State Department. But then this is hardly surprising, considering American foreign policy in the Middle East is not really designed to benefit the American people. It is instead held hostage by a group of actors intent on preserving their own narrow interests - whatever the cost to American national security and prestige.

Take for example the Kingdom of Saudi Arabia. Saudi royals remain firmly opposed to the clerical regime in Iran - and not just because of the traditional Shi'ite-Sunni divide. The animosity runs deeper and is fundamentally about competing claims for the spiritual leadership of Islam and political supremacy in the Middle East.

In fact in terms of the Gulf region, the House of Saud views its quest for influence as a zero-sum game. Imagine the horror then in Riyadh at the newly formed ideological links that appear to bind Iraq and Iran. And yet even this alliance does not distress Riyadh as much as the specter of an economically strong Iran; an Iran able to pursue an aggressive policy of outreach to all Shi'ite minorities across the Gulf - including those in Saudi Arabia's eastern provinces.

Saudi paranoia has it that this particular demographic will destabilize the House of Saud if it gets the support of a robust Iran (that this theory is based purely on conjecture hasn't diminished its integrity in Saudi eyes). So really, sanctions designed to shackle Iran economically are a national security imperative for the Kingdom. What chance then that Riyadh will allow Washington any latitude in this matter?

Saudi Arabia incidentally is not the only American ally intent on undermining Iran's credibility. The State of Israel shares this dubious distinction. Unlike Saudi Arabia however, Israel has legitimate reasons for maintaining a hostile posture towards Iran.

Not because Iran is a military behemoth and poses an existential threat to Israel (it's not and it couldn't), but rather because Iran is the primary financial and logistical sponsor of Hezbollah. Hezbollah lest we forget, was directly responsible for Israel's forced withdrawal from South Lebanon in 2006 and remains a credible deterrent against future Israeli incursions into Lebanon.

And so when the Israeli prime minister exhorts politicians in the US and Europe to maintain an economic stranglehold on Iran, he's not just concerned about Iran's march towards nuclear weapons. If anything, the priority for Benjamin Netanyahu is to dry up funding for an organization highly trained in the intricacies of asymmetric warfare. If the price of pursuing this strategy is American credibility, than at the very least, that is a price Netanyahu is willing to pay.

But even influential allies have not damaged American foreign policy quite as severely as the American legislature. Beholden as members of Congress are to pro-Israel lobbyists for financial donations, both the House of Representatives and the Senate effectively serve as a modern day praetorian guard for the government in Tel Aviv.

As a result, even as the Obama administration continues a policy of diplomatic outreach, bipartisan efforts gather steam in Washington not just to retain existing sanctions, but to strengthen them. So regardless of what President Obama says and where Secretary or State John Kerry travels, the current administration cannot remove sanctions on Iran - the 113th Congress (and every legislative session in the foreseeable future) simply won't allow it.

It's clear then that American animosity for Iran is neither personal nor beneficial. It's just that the complex calculus of international security alliances, unceasing foreign influence and domestic political pressure doesn't allow American policymakers to stray from a predetermined and fairly narrow path.

This is not to say recent expressions of goodwill from both the US and Iran are anything but positive - far from it. However, if a diplomatic engagement has any chance of succeeding it must address the full spectrum of regional dynamics and not limit itself to the nuclear question. And that doesn't look like happening. Not yet anyway.

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing. Articles submitted for this section allow our readers to express their opinions and do not necessarily meet the same editorial standards of Asia Times Online's regular contributors.

Ahmed Ilahi is a lawyer based in Indianapolis. He can be reached at ahmedilahi@live.com

(Copyright 2013 Ahmed Ilahi)

Why France is playing 'stupid' on Iran (Nov 12, '13)



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