SPEAKING
FREELY Will the BRICS rescue
Iran? By Javad Heydarian
Speaking Freely is an Asia Times
Online feature that allows guest writers to have
their say. Please
click hereif you are interested in
contributing.
In a recent
interview, the eminent geo-strategist Ian Bremmer,
author of Every Nation for Itself: Winners and
Losers in a G-Zero World, suggested that a
"nuclear Iran" is inevitable, because in a "G-Zero
world" the emerging powers can frustrate the
West's efforts to thwart Tehran's nuclear
ambitions.
There are basically two
underlying assumptions to his argument: (1) The
rising powers have the will and the capacity to
ameliorate Iran's growing isolation; and (2) Iran
is willing to push its nuclear frontiers at any
cost.
However, recent years have displayed
a very different picture: not
only are many emerging
powers beginning to distance themselves from Iran,
but also Tehran - facing the prospects of an
economic meltdown - is beginning to re-examine its
nuclear calculus.
Emerging powers are more
explicitly prioritizing their ties with the West
at the expense of Tehran, while the moderates and
pragmatists within the Iranian leadership are
pushing for a diplomatic compromise to diffuse
rising tensions.
Iran's Post-American
foreign policy Prior to the 1979 Iranian
Revolution, the US occupied a central position in
Iran's foreign policy. America was Iran's most
important external ally, as well as a key source
of technology, investment, and trade. However,
after the 1979 "American hostage crisis",
everything changed.
Since its inception,
the Islamic Republic has had to contend with
tremendous economic pressure (beginning with
America's trade and investment embargoes) and
constant external threats, culminating in Saddam
Hussein's invasion of Iran in 1980.
Naturally, an isolated and vulnerable Iran
had to rely on the Eastern powers such as China
and Russia to enhance its national security and
retain a semblance of a functioning international
life.
After the end of the Iran-Iraq
imposed war (1980-1988), a more pragmatic Tehran,
under the leadership of President Hashemi
Rafsanjani, prioritized reconstruction and
recovery. As Iran pushed forward with a more
moderate foreign policy - complementing domestic
liberalization schemes- the 1990s underscored a
period of Iran-Europe rapprochement, ushering in
more than a decade of burgeoning investment and
political relations.
Simultaneously, Iran
stepped-up its trade-and-investment relations with
leading Asian economies, from China to South Korea
and Japan, while enhancing its security
partnership with Russia and normalizing relations
with proximate Arab countries. Soon after, East
Asian states turned into Iran's leading trading
partners, along the European Union (EU) and the
United Arab Emirates (UAE).
With the rise
of reformists (1997-2005) within Iran's political
hierarchy, Tehran further intensified its tilt to
the East, and improved ties with the EU, while
flirting with the possibility of normalizing ties
with Washington - to no avail.
The tilt
to the East In early 2000s, Iran-West
relations faced a new period of crisis. Despite
Iran's constructive role in the immediate
aftermath of the 9/11 attacks - from assisting
anti-Taliban Western operations in 2001 to
acquiescence in the run-up to the Iraq invasion in
2003 - the discovery of purportedly "clandestine"
enrichment facilities in Natanz and Arak baffled
Western powers.
Initially, the Iranians
agreed to concrete confidence-building measures
(ie, implementing an Additional Protocol (AP) and
imposing a temporary enrichment freeze) to contain
the brewing crisis, but the situation dramatically
escalated when the hardliners (2005-present) took
over the Iranian state.
The new
leadership, under President Mahmud Ahmadinejad,
upped the nuclear ante by pushing the boundaries
of Iran's enrichment capabilities, reversing prior
agreements with the West, and ignoring repeated
United Nations Security Council (UNSC) Resolutions
calling for greater transparency and cooperation
from Iran. Gradually, Iran faced not only
political isolation, but also economic isolation
as European companies withdrew from key economic
sectors such as manufacturing and energy.
In response, the Iranians sought greater
political support from traditional allies such as
Russia and China, while offering increased access
to Asian companies to tap into Iran's huge
hydrocarbon reserves and burgeoning consumer
market. Although Korea and Japan, close US allies,
intermittently tempered their immersion into the
Iranian economy, other emerging powers, especially
China, Brazil, Russia, India, Turkey, and South
Africa, deepened their presence in the country's
telecommunication, energy, consumer market, and
infrastructure sectors.
Iran's explicit
alignment with rising powers accomplished two
objectives: (1) Allowing Tehran to dampen the
impact of sanctions and growing isolation within
the Western order; and (2) Increasing the stake of
emerging economies in the stability and growth of
Iran, thus, providing Tehran with more
international support amidst intensifying external
pressure over its nuclear program.
This
trend reached its peak in 2010, when the
Brazilians and the Turks brokered a "nuclear swap"
deal to kick-start what the West failed to do from
2005-2009: convince Iran to ascertain the peaceful
nature of its nuclear program by subjecting its
high-grade uranium stockpile to compromise. When
the West turned down the deal, Turkey and Brazil
expressed their dismay by opposing a new UNSC
resolution against Iran's nuclear program.
Arguably, this was the last time that emerging
powers firmly stood by Iran.
The East
in retreat The failure of the
Turkish-Brazilian mediation was followed by
vigorous, coordinated transatlantic efforts to
bring Iran back to the negotiating table. When the
Istanbul talks in January 2011 between Iran and
the world powers ended inconclusively, and the
Chinese and Russians subsequently opposed further
sanctions, the West resorted to unprecedented
measures targeting Iran's economic lifeline: oil
exports and the Iranian Central Bank.
Precipitously, the emerging powers began
to distance themselves from Iran. While the change
in the Brazilian leadership reversed former
president Luiz Inacio Lula's embrace of Tehran,
differences over the Syrian crisis - coupled with
growing American pressure on Ankara - drove a
wedge in Turkish-Iranian relations. Meanwhile, the
Chinese began (followed by the Indians) to exploit
Iran's growing economic isolation by pushing for
barter trade, discounts and favorable credit terms
in oil purchase, and lopsided investment deals in
Iran's infrastructure and energy sectors.
Meanwhile, the Russians - the world's leading
non-Organization of the Petroleum Exporting
Countries oil producer - have been benefiting from
Iran's declining output and rising global oil
prices. For Moscow's leadership, which is facing
chronic budget-deficit and rising economic
expectations, oil prices above $100 per barrel is
a matter of political expediency.
In early
2012, as unilateral sanctions intensified,
Tehran's Eastern partners progressively downgraded
their exposure to the Iranian impasse. South
Africa, Iran's traditional trade partner,
completely halted all oil imports from Iran.
Later, South Korea, Japan, and Turkey followed
suit by significantly reducing their Iranian oil
import to gain American waivers of exemptions.
Then came India's gradual cut in Iran imports.
Meanwhile, China refused to increase its overall
intake of Iranian oil - compared to 2011 - and is
set to further exploit its position as Iran's sole
major importer.
One thing is becoming
clear: the unilateral sanctions are a testimony to
how the West is still pretty much at the center of
the international liberal order. Although emerging
powers are showing greater confidence and dynamism
in their global posture, amidst the West's endemic
economic troubles, they are also aware of the fact
that the West still represents their biggest
economic interests as a major source of capital,
technology, and consumption.
Moreover, the
West also has tremendous leverage over global
insurance and financial markets. The EU hosts
around three-quarters of the world's shipping
insurance firms as well as the world's main
network responsible for facilitating international
financial transactions, namely the Society for
Worldwide Interbank Financial Telecommunication
(SWIFT). So when the bloc imposed sanctions on
insurance coverage for Iran's oil shipments and
expelled the Iranian banks from the SWIFT, many
Eastern powers faced tremendous restrictions on
their ability to import Iranian oil.
In
fact, the Koreans are contemplating on total halt
in imports, while the Chinese, Indians and the
Japanese are pushing for sovereign insurance
coverage.
Current sanctions' are also
having long-term implications: (1) Most customers
are already shifting to Arab oil exporters by
signing multi-billion dollar short and long-term
investment and purchase deals; and (2) Iran's
declining oil exports is affecting output, forcing
the country to contemplate on permanently shutting
down some of its oilfields; and (3) Tehran's
influence within the energy markets as well as the
Organization of Oil Exporting Countries (OPEC) is
also in danger, because historical rivals such as
Iraq are rapidly catching up, while Libya, Saudi
Arabia and other producers in the Persian Gulf are
either raising total output and/or overall
production capacity.
Iran's nuclear
soul searching Oil exports constitute
around three-quarters of the country's state
revenues. Compared to last year, Iran's oil
exports are down by almost 40%. Upcoming EU
embargo could push the figure beyond 60%.
Sanctions against Iran's ports and shipping lanes
are raising transaction costs, while those imposed
on Iran's banks and oil exports are undermining
Iran's currency, which has suffered around 50%
depreciation in recent months.
The World
Bank and the IMF have markedly downgraded their
forecast of Iran's GDP growth for this year. From
a relative high of 2.5-3% growth projection in
mid-2011, the IMF is expecting only 0.36% growth,
while the World Bank is projecting a 1%
contraction for the year 2012. With declining
currency reserves and stark depreciation in the
Iranian rial - atop growing transactions costs and
economic uncertainty - the inflation rate has
risen to its highest levels in recent years, while
declining growth is undermining
employment-generation schemes.
But would
the sanctions affect Iran's nuclear calculus?
Well, some argue that Iran is an ideological
state, thus the sanctions are expected to have
negligible impact on its nuclear ambitions. During
the revolution, Iran's spiritual leader Ayatollah
Khomeini once stated, "economics is for donkeys".
Ahmadinejiad is also known for his antipathy for
conventional macroeconomic insights, always
stating his preference for "social justice and
redistribution".
However, the reality is
much more complex. The fact is that Iran is a
trillion-dollar economy in deep need of
investments, stability and growth to battle high
levels of inflation and unemployment in a country
of 75 million people lest it risks internal
socio-political instability. Also, Iran's
leadership isn't monolithic: pragmatists,
moderates, and the influential merchant class
(Bazaaris) have always emphasized the importance
of macroeconomic buoyancy.
Beyond
ideology, regime survival and political stability
constitute a central role in Iran's political
calculation.
In the past, Iran could
afford to defy the West, because it benefited from
improving ties with rising powers, trade with
European economies, and record-high oil prices.
Now, Iran is not only facing declining oil exports
and estrangement with Europe, but it is also
coming under growing pressure by the Russians,
Chinese, and the Indians to strike a compromise
with the West. Ahead of the upcoming nuclear talks
in Moscow, leaders from Beijing, New Delhi, and
Moscow have all called on Iran to cooperate with
the IAEA and resolve outstanding questions to
diffuse tensions over its nuclear program.
While India's acting Permanent
Representative to the United Nations Manjeev Singh
Puri stated, "Iran should fully cooperate with the
IAEA to restore the confidence in the exclusively
peaceful nature of its nuclear program," the
Chinese Foreign Ministry spokesman Liu Weimin
urged Iran to show more "flexibility and
pragmatism" in nuclear negotiations. On their
part, the Russians sent Foreign Minister Sergei
Lavrov to Tehran to urge the Iranians to
contribute to a fruitful resolution of the nuclear
crisis.
Sensing growing pressure from
Eastern powers, the Iranians displayed greater
urgency for compromise. Surprisingly, even the
head of Iran's parliament, Ali Larijani, who is
known for his tough stance on the nuclear issue,
struck a softer tone when he said, "…concerning
the level of uranium enrichment, Iran can define
it according to its needs and desires...".
What we are witnessing is a major shift in
Iran's international position. Gradually, Tehran
is beginning to realize that the BRICS are neither
reliable nor are they capable of meeting Iran's
growing economic and security needs as the West
tightens the noose around the Islamic regime -
precisely why Iran could eventually strike a deal
with the West.
We may be moving towards a
"G-Zero" world, but the emerging powers are still
too busy with their domestic political needs and
mercantilist objectives, while the West is showing
tremendous cohesion on issues such as Iran.
Javad Heydarian is a
Manila-based foreign affairs analyst focusing on
international security and development issues.
Speaking Freely is an Asia Times Online
feature that allows guest writers to have their
say.Please
click hereif 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.
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