The relationship between US and Iran to a new low-point

2012 Jan

The relationship between US, its Western allies, and Iran to a new low-point


Only months after his inauguration, United States President Barack Obama addressed the Iranian regime with words few could have imagined articulated by an American head of state. “We know that you are a great civilization, and your accomplishments have earned the respect of the United States,” he uttered with appropriate gravitas.

Sebastien Malo

The sentence, delivered in a video message aired for the Persian New Year, Norwuz, was to mark the start of the so-called ‘two-track policy’, a new diplomatic stance by which the US endeavored to open a dialogue with its long-time foe, Iran, while in parallel continuing to pressure it.

It was also to usher in a new rhetorical era during which allusions to Iran’s glorious past would regularly punctuate the remarks of White House and Capitol Hill staffers on the country’s politics.

But in just three years, the objectives behind references to Iran’s heydays were to change significantly.

A month ago, in an address at the Washington-based Brookings Institute, National Security Advisor for the Obama administration Tom Donilon – a close associate to the President – also peppered his speech with the usual mention of Iran’s greatness. But it was, this time, to make the point that the “ancient civilization” had decidedly turned into a “pariah state.”

Officially, the US and its Western partners continue to follow a two-track course toward Iran, their ambition remaining, publicly, to bring Iran to the negotiating table over its controversial nuclear program – which the West alleges is geared toward weaponization.

But Iran’s refusal to shake Obama’s extended hand since Washington’s initial move in 2009 appears to have finally brought about a new ice age to US-Iran relations.

Since rejecting a nuclear swap deal proposed by the Obama administration subsequent to the Norwuz speech, Tehran has repeatedly voiced offers to re-engage in further talks of an agreement. Each of these overtures has been met with radio silence from Washington.

According to commentators, the US may have turned the page, and the new-found willingness of American strategists to engage with Iran may already be a thing of the past.

“When you talk to people [at the International Atomic Energy Agency] in Vienna who are on the ground and interacting with Iran over its nuclear program, what you hear again and again is that Iran is pretending to cooperate, it is giving the appearance that it is cooperating … in resolving this crisis, says nuclear expert at the Carnegie Endowment for Peace Mark Hibbs.

“But in fact what we see on the ground is a pattern of stop-and-go actions by the Iranians which never results in a track record of cooperation and confidence-building. It doesn’t go far enough,” he adds.

The recent debacle of Iran’s bizarre – but widely acknowledged – attempt to carry out in a ‘hit job’ on Saudi Arabia’s ambassador in Washington D.C., and the subsequent storming of the British embassy in Tehran have finished to sink the relationship between the US, its Western allies, and Iran to a new low-point.

For Hibbs, despite the official line, the two-track policy has long been replaced by a one-track strategy solely focused on isolating and containing Iran.

Chief among recent developments indicative of a decision to contain Iran is a recent US-led adoption of a report voicing unprecedented criticism of Iran’s nuclear program by the United Nations nuclear watchdog, the International Atomic Energy Agency (or IAEA).

In the scolding report, the Vienna-based organization accuses Tehran of having secretly worked for years at weaponizing its nuclear technology. The allegations have been a regular charge by Western intelligence services, but their endorsement by the global body brings new credibility to them.

Iran’s obstinate unwillingness to cooperate over its nuclear program has baffled numbers of pundits, who see the Iranian republic paying a disproportionally high price in order to pursue those activities away from the scrutiny of IAEA nuclear inspectors.

As a signatory of the Nuclear Non-Proliferation Treaty’s Additional Protocol, Iran is bound to submit to stringent inspections at undeclared nuclear facilities. It has, however, refused to do so. That behavior has exposed Iran to suspicions by the US and its main ally in the region – Israel – that the program’s ambit goes beyond electricity production and is rather military in nature.

The US has since been the driving force behind every international round of sanctions that has targeted Iran, even successfully pressuring its closest allies to cut their business ties with Iranian companies.

In the aftermath of the publication of the latest IAEA report, the US, the European Union, the United Kingdom, and Canada have all adopted new rounds of sanctions targeting Iran’s financial and banking systems. There are now talks of South Korea joining them.

“These financial and banking sanctions hurt the regime a lot,” says Iran specialist at the Geneva Graduate Institute of International and Development Studies Mohammad Reza-Djalili. But the tough sanction regime has nevertheless left experts unconvinced, he adds.

“It is very difficult to commerce with Iran, but it works. For instance, with China, [with] the existence of a barter system, Chinese purchase oil and Iranians import Chinese products,” says Reza-Djalili.

“The only course of action that could have an impact, if only temporarily, is the oil embargo; oil is the jugular vein of the Iranian economy,” he adds.

But Iran has, thus far, evaded such crippling sanctions.

The country’s regional power status does provide some, but insufficient, grounds of explanation for its apparent ability to single-handedly defy a superpower such as the US. As with most epic battles, the row indeed involves more than a single titan.

While a deep-seated history of enmities has led the US government and its Western allies to conclude that they cannot do business with Iran, Iran’s friends China and Russia have, for their part, been more than willing to occupy the resulting political and market vacuum, and engage in trade with Iran.

And with good reason. According to figures by British firm BP, together, China’s and Russia’s crude oil consumption accounts for 14.3% of the world’s. In 2010, China passed the US as the world’s bigger energy consumer.

Iran, meanwhile, sits on the second largest reserves of crude oil in the world, “but desperately needs investment to develop them,” notes International Crisis Group analyst Stephanie Kleine-Ahlbrandt.

“China’s thirst for energy and its vast foreign reserves are an ideal complement to Iran,” she adds.

China, as a result, is today almost equally dependent on oil from Iran – now its third largest supplier behind Saudi Arabia and Angola – than the US is from Saudi Arabia.

According to China’s General Administration of Customs figures, some 9% of China’s total oil imports originated from Iran’s oil fields in 2010, compared to a ratio of US total crude oil imports coming from Saudi Arabia of 9.3%.

Both China and Russia are also important consumers of Iranian natural gas.

The opportunity to befriend rising powers China and Russia hasn’t been left to chance by Tehran.

According to Kleine-Ahlbrandt, Iranian authorities have been making a deliberate effort to bind China’s and Russia’s mammoth energy interests in Iran to Tehran’s well-being.

Through the so-called ‘binding-strategy’, Iranian authorities have been providing foreign companies a host of incentives to entice China’s foreign interests into the hydrocarbon industry.

As a result, Iran is one of the few Persian Gulf states that permit foreign companies to engage directly in the exploration and production sectors, making it especially attractive to Chinese, but also Russian investors.

But China’s and Russia’s interests in Iran may go beyond the simple arithmetic of barrels of oil per day.

For the Carnegie Endowment’s Hibbs, the decision in Beijing and Moscow to resist Washington’s isolationist lead can also be explained by larger strategic interests in the realm of realpolitik.

The furor of Russian authorities at the American decision to proceed with the implementation of its controversial National Missile Defense system (or NMD) in the vicinity of Russia is frequently cited as a possible way to explain why Moscow has repeatedly shielded Iran.

Following that logic, Moscow may be using Iran as a bargaining chip in its bid to rein in the American project, which it views as a threat to its ability to further its geopolitical interests among its neighbors that will host components of the NMD.

That rationale may also apply to Beijing, argues Hibbs. “If Russia is balking at cooperating with the West with an agenda on Iran because of deep problems having to do with the ballistic missile defense posture of the US, I would submit that China’s concerns in this area are even probably greater than Russia’s are,” says Hibbs.

“China has deeper insecurities regarding ballistic defense than the Russians do.”

Bound by overlapping interests, the Chinese and Russian strategy has thus been one of repeated calls for diplomacy, and of fierce opposition to means of pressure such as sanctions.

The International Crisis Group’s Stephanie Kleine-Ahlbrandt sums up China’s long-term strategy as one with which it “delays and weakens any Western efforts of sanctions, particularly those which would affect China’s economic interests in the country.”

Away from the tumult of battles of influence, meanwhile, the efforts of the Iranian authorities to deepen their relationship with the Chinese-Russian duo have been crowned with resounding success, and smoothly-run business.

According to figures released by China's General Administration of Customs in August, the volume of Iranian imported oil by China increased by 49% during the first half of 2011 compared with the same period last year, reaching around 540,000 barrels per day of oil.

China, for its part, is also profiting from Washington’s persistent attempts at diversifying Beijing’s oil suppliers, which uses its influence among its oil-producing Middle Eastern partners – Saudi Arabia first in line – to encourage them to up their oil sales to energy-thirsty Beijing.

That win-win dynamic for China is, however, not without consequences; with frustration in the US and Europe on the steady rise, calls to make China pay for its refusal to close the ranks raise the prospect of a new trade war.

In the US Congress, the agitation of policy-makers reached new heights in early November when US Senators voted unanimously to slap sanctions on Iran’s Central Bank, as well as on foreign banks that do business with it.

If adopted by Congress – where it is currently being considered by House Representatives – the bill could present a serious challenge to Chinese banks, who must deal with the Central Bank of Iran when purchasing petroleum.

For its part, the European Union is looking at a ban on Iranian oil imports, an idea which is said to be gaining momentum.

For conservative analyst at the Washington-based think tank The Washington Institute for Near East Policy Patrick Clawson, the calculus is clear.

“If Chinese banks continue with business with Iran, they are taking a big gamble,” says Clawson. “The US government may take strong action against such banks, in which case they could lose much more than they profit from Iran business.”

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