Why is Iran suddenly so interested in appeasing its public enemy number one?
Iran, Great Britain, France, and Germany agreed in principle this Sunday to a nuclear non-proliferation pact that might dramatically change the complexion of the Middle East as well as the War on Terror for decades to come.
Certainly, there are issues yet to be ironed out, and the whole package is contingent somewhat upon American approval and involvement. However, Iran has temporarily accepted a list of requests by the EU that include a continued suspension of all uranium enrichment and reprocessing activities. They have also agreed to restrictions concerning the production and purchase of centrifuges, plutonium separation, and the construction of facilities for such a purpose. In addition, they will permit verification of their compliance with these provisions via inspections performed by the IAEA. Lastly, Iran has pledged as part of this agreement to not only assist in combating terrorism, but also to support the democratic process in Iraq.
Unfortunately, none of this means much until the United States and Iran sit down at the same table to, for the first time in years, open up a serious diplomatic dialogue. This might somewhat be complicated by the announcement of Colin Powell’s resignation as Secretary of State, as well as that of Richard Armitage, the Deputy Secretary. Hopefully, this won’t become too large an issue in stalling this process.
To be sure, one needs to look at this occurrence with guarded optimism, but optimism nonetheless. This agreement could represent the beginning of a diplomatic process between the U.S. and Iran with a potential that is nothing less than awesome when viewed from both an international security perspective as well as an economic one. Serendipitously, a clever yet elegantly performed minuet between our two nations a few weeks prior might have adroitly set the wheels in motion for this outcome.
On October 19, as he was being interviewed by AP aboard Air Force One, President Bush said that he would accept an Islamic government in Iraq. "I will be disappointed. But democracy is democracy. If that's what the people choose, that's what the people choose.” This apparently sent quite a signal to Tehran, as the Iranian leadership clearly has been concerned about what kind of government their neighbor would possess after the upcoming elections. Undoubtedly, Shiite rule would thrill them. As a result, within just hours of Mr. Bush’s remarks, Iran had its own somewhat shocking proclamation when the head of their Supreme National Security Council, Hasan Rowhani, stated that Tehran supported our president’s re-election efforts.
As if that wasn’t enough, that same day, Grand Ayatollah Kazem al-Haeri, a senior Shiite leader in Iran, made a similarly stunning announcement that he was cutting ties with the upstart Shiite cleric in Iraq, Muqtada al-Sadr. When combined with the other two events, especially given the timing of all three, it quite appears that Tehran was not only trying to send signals to the U.S., but also potentially cutting off al-Sadr’s legs in hopes of advancing an election that Iran likely now would love to occur given the possibility of a Shiite government being installed. Yet, this still begs the question: Why is Iran suddenly so interested in appeasing its public enemy number one?
Likely, since the Islamic revolution occurred in 1979, we Americans have a rather jaded view of Iran. This is not a Third World nation by any means. In fact, this is a country that quite prides itself on education, and, as a result, has a very high literacy rate by comparison to most of its neighbors. Additionally, Iran has the second largest oil and natural gas reserves in the world, as well as the 18th largest population base of 69 million. Moreover, their 12th ranked GDP continues to outperform most of the globe, having shown a 4.5% expansion in 2003, and a projected growth rate of 4.4% in 2004. From an economic standpoint, this GDP puts them ahead of Brazil, Australia, Switzerland, Belgium, Sweden, Austria, Turkey, Saudi Arabia, and many others.
In sum, Iran is a potential economic dynamo that conceivably has yet to really flex its financial muscle. But, that is changing. They currently have oil export contracts with Japan, China, South Korea, Taiwan, and much of Europe, as well as natural gas contracts with Turkey, Russia, Nigeria, Algeria, and Greece, with pending operations in Bulgaria, Romania, Austria, Pakistan, India, and China. In addition, as they produce more electricity than they use, they currently sell electric power to Afghanistan, and have offered to do the same for Iraq.
However, this growth is beginning to show some serious cracks. As depicted in a recent Department of Energy briefing, “Despite relatively high oil export revenues, Iran continues to face budgetary pressures, a rapidly growing, young population with limited job prospects and high levels of unemployment; heavy dependence on oil revenues; significant (but declining) external debt; high levels of poverty; expensive state subsidies (billions of dollars per year) on many basic goods; a large, inefficient public sector and state monopolies.”
Of these economic issues, potentially the most dire is their unemployment problem. As reported in a recent Middle East Economic Survey, the troubles began in 1979 when the new government encouraged the population to procreate with the goal of having a 20 million-man army of Islamic revolutionaries. As a result, these 15 to 24-year-old “Baby Boomers” comprise 25% of the available workforce, but have a 32% unemployment rate. Unfortunately, the current GDP growth of 4.5%, though brisk by American standards, is well under the 8% required to produce enough jobs sufficient to just hold the unemployment rate at its current level. As a result, the projections are that unemployment in this demographic will increase to over 50% within the next two years.
Without question, there are a variety of other serious factors that are exacerbating the unemployment problem in Iran which are further addressed in the aforementioned MEES report. However, it is quite clear that this is reaching a cataclysmic level, and with elections next year, President Khatami certainly wants to be able to show the Iranian people that he has a plan to resolve it. Undoubtedly, this is some of the impetus for this nuclear arrangement with the EU, and why Iran wants to bring America back to the diplomatic table; Khatami must believe that the only way they’ll attain the kind of economic growth necessary to produce a sufficient number of jobs is if Iran can get America to finally end the sanctions.
From our perspective, as American corporations have not been able to actively trade with Iran since President Clinton first imposed these sanctions in 1995, this represents an extraordinary opportunity. With oil and natural gas prices quite close to non-inflation adjusted all-time highs — representing an economic impediment to the global economy — nothing would symbolize more of a tonic to the world financially than to be able to tap into Iran’s vast reserves. For instance, Iran is currently only producing about four million barrels of oil a day, down from a high of 6 million in the early 1970’s. Without significant upgrades as well as increases in the quantity of oilrigs across their nation, this number is projected to decline by about 250,000 barrels/day each year.
As a result, Iran is in desperate need of financial partners to assist them in refurbishing their oil industry, and helping them to expand their natural gas delivery capacities. Also, due to scarce and aging refineries, Iran is actually a net importer of gasoline, with this number increasing every year. When you add it all up, you have a nation rich in what the world needs, yet possessing such a dire economic condition that they are now forced to play, “Let’s Make a Deal.”
Of course, it is safe to assume that Iran would like nothing more than to be able to deal with the U.S. However, if we remain intransigent, they will continue to expand their partnerships throughout the world out of necessity. In fact, one can certainly guarantee that, in the event America chooses to not join this pact, other countries will be inclined to expand their trading relationships with Iran. Given this, it seems imperative for America to not make the same mistakes that we did following Desert Storm.
To be more precise, it is now quite apparent that countries like France, Germany, Russia, and China engaged in trade activities with Iraq after the end of the first Gulf War in ways that clearly violated the armistice. As these countries have fully demonstrated that treaties will be ignored when there is money at stake, we need to create a trading environment with Iran that will prevent another Iraq-like situation in the future wherein the international community will tolerate Iranian imperialism, aggression, or exploration into nuclear weaponry for fear that reprisals will cost them financially.
In reality, the sanctions that we currently have in force against Iran only have teeth because we represent such a powerful trading partner. However, with China, Japan, and India exploding economically, America at some point could be less important to Iran if they are forced to survive without us, and are successful in doing so. Then, with large contracts involving these three financial behemoths, along with France, Russia, Germany, et al, Iran could end up at some point in time being in a position where all of these countries were economically dependent enough upon them that it would be quite unlikely that any would participate in punitive policies implemented by the U.N. in response to some future transgression. And, since the U.S. would have no such contracts, sanctions solely imposed by us would be virtually meaningless.
By contrast, if America fully engages Iran immediately, and has its hand in developing the Iranian economy to its fullest, not only would this benefit us both financially, but also it would be significantly more painful for them in the future to not abide by any treaties that we had entered into. Beyond this, such a relationship, along with continued inspections by the IAEA, would be by far the best strategy for us to stay constructively involved in their weapons explorations endeavors moving forward, and to better be able to identify any violations of such treaties. Lastly, and maybe most important, Iran as a legitimate trading partner would likely become a much greater international ally in the War on Terror, and could, under the right trade circumstances, be required to end its funding for terrorist organizations like Hamas and Hezbollah. Likely, this would encourage Syria, who has similar economic problems, to do the same. Just imagine how this might change the landscape of the Middle East.
Given all that has transpired with the U.N.’s Oil-for-Food program, Arafat’s embezzled millions, and some rather overt betrayals by a few of our NATO allies, it should be quite clear to us that, in the end, it’s all about the money. If our goal is to export capitalism, we shouldn’t be shocked when folks start acting like capitalists. Maybe we need to keep this in mind when we finally sit across the bargaining table from Iran for the first time in many years.
slep@danvillebc.com
Read more articles by Noel Sheppard
