“A journey of a thousand miles begins with a single step,” Chinese Philosopher Lao-tzu once said. When it comes to bringing Iran — the heir of the great Persian civilization — out of the cold, the recently announced Joint Comprehensive Plan of Action (JCPA) framework agreement, after days of grueling 11th-hour haggling in Lausanne, Switzerland, between Tehran and the major powers, may very well count as that proverbial “single step.”
A final, comprehensive agreement is yet to be drafted and signed before the June 30 deadline, but by all indications we may have finally achieved a breakthrough in the decade-and-a-half-long Iranian nuclear negotiations, paving the way for an end to the Iranian nuclear hysteria and a decisive rollback of punitive Western sanctions, which have collectively punished tens of millions of ordinary Iranian citizens.
Ending punitive Western sanctions against Iran, in exchange for substantial concessions on its nuclear program, will most likely have a dramatic impact on the global economy — unlocking the world’s hottest emerging-markets-in-waiting. Iran combines the consumer market and human capital potential of Turkey, with the hydrocarbon riches of Saudi Arabia and Russia, and the mineral resources of Australia. As the BRICS (Brazil, Russia, India, China, and South Africa) struggle with various manifestations of the notorious ‘middle income trap,’ Iran represents the next great destination for foreign investors. In the near future, we may end up talking about a new, cooler acronym: The “i-BRICS”, with Iran, of course, as the “i.”
While the war-weary American people can rejoice in preventing another conflict in the Middle East, the Iranian people have wasted no chance at celebrating the promise of economic recovery and reintegration into the global community. Horns, chants and cheers have filled the air across Tehran, echoing the country’s celebrations during the 2014 World Cup.
The historic Nixon-Mao opening in the early-1970s cemented the foundations of a decades-long economically symbiotic relationship between Washington and Beijing, allowing one of the world’s most sophisticated civilizations to rejoin the community of nations — and transform the global economy along the way. The Obama-Rouhani negotiations could produce a similar outcome, allowing the Persian civilization to retake its pride of place on the global stage, unleashing the talents and potentials of 75 million Iranians, who have been besieged and isolated for years under unimaginable external pressure.
The unilateral Western sanctions against Iran were particularly devastating, since they combined targeted sanctions against Iran’s financial and oil sector with an intense diplomatic effort to convince/pressure Iran’s major Asian trade partners — namely, South Korea, Japan, China, Turkey and India — to dramatically reduce their oil imports from Iran. Washington rallied the support of major Arab oil-producing countries, such as Saudi Arabia and the United Arab Emirates (UAE), to supplant any potential shortfall in oil supply when Iran’s oil would be squeezed out of international markets.
Meanwhile, by pressuring Iran’s Asian oil partners, the West limited Iran’s pool of customers, therefore giving immense leverage to Tehran’s narrowing circle of buyers to demand heavy discounts and unfavorable terms. South Korea and Japan agreed to cut their Iranian oil imports, while India and China began exploiting the situation by forcing Iran to offer discounts and settle for barter trade.
Under growing American pressure, Iran’s most important regional trade partner, the UAE, progressively severed financial ties with Tehran, undermining Iran’s ability to import essential primary products, especially food. To up the ante, EU also imposed sanctions on Iran’s most important port operator, Tidewater Middle East Co., which has been responsible for handling much of Iran’s external trade. These moves were clearly designed to strangle the Iranian economy, going well beyond the scope of the nuclear issue — causing tremendous difficulty for ordinary Iranians.
As a result of the concerted punitive measures, Iran fell into “stagflation,” with a spike in inflation coinciding with a dip in GDP growth. Its oil exports, the chief source of foreign currency earnings, halved, while sanctions on Iran’s financial sector, including the Banke-e-Markazi (Central Bank), meant that Tehran struggled to collect its payments in international currency. Up to $100 billion of Iranian overseas assets were virtually frozen. Inflation reached as high as 40 percent, and Iran’s currency (rial) lost 60 percent of its value. Iran suffered two years of economic contraction, in 2012 and 2013. Iran’s economy would have been 15-20 percent larger today if it were not for the sanctions.
The Next Hot Destination
The expected removal of Western sanctions, particularly the targeted measures against Iran’s oil and financial sector, could pave the way for a huge and much-needed inflow of foreign investors and recovery of Iran’s oil sector and heavily-battered currency.
Within the region, Iran possesses the most sophisticated and expansive industrial base. It is among the world’s top 15 steel producers, top 5 cement producers, and has one of world’s biggest auto-manufacturing industries (ranked 13th in the world), churning out as many as 1.6 million cars annually in recent years, representing the second biggest source of employment-generation after the oil sector and accounting for 10 percent of the country’s Gross Domestic Product (GDP). With the removal of sanctions, Iran can tremendously benefit from cheaper and easier access to intermediate goods and technology for its manufacturing sector.
Despite suffering from decades of Western sanctions, Iran has astonishingly managed to stand as among the world’s leading countries in cutting-edge sciences such as nanotechnology and stem cell research. Its universities, particularly University of Tehran (Iran’s Harvard) and Sharif University of Technology (Iran’s MIT), have produced one of the best engineering, science and mathematics graduates, including Maryam Mirzakhani, who became the first woman to win the Fields Medal, the “Nobel Prize” of mathematics.
In 2012, Iran cemented its position as the leading Middle Eastern scientific power, ranking as the world’s 17th biggest producer of scientific papers, outshining Turkey and Israel. In terms of human development, Iran stands among the top countries in Asia, featuring in the “high” human development index category.
The combination of market size, natural resources, and human capital has made Iran a hugely attractive market prospect. And there hasn’t been a shortfall of interest from foreign investors, particularly from oil giants, which are considering huge investment in a post-sanctions Iran.
In recent years, Iran has hosted one of the biggest European business delegations in its modern history. Ending the sanctions, and reviving Iran’s economy, has been the key promise of the Rouhani administration, which aims to make Iran among the world’s top 10 biggest economies in the near future. With Iran’s Supreme Leader Ali Khamenei, who has the final say on Iran’s domestic and foreign affairs, repeatedly expressing his support for Iran’s negotiators, much of the Iranian establishment has rallied behind the Rouhani administration’s effort to resolve the nuclear crisis.
A final nuclear agreement will also provide Iran much-needed strategic space to diversify its external relations, allowing it to get out of the shadow of Eastern powers such as China and Russia, which have exploited Iran’s isolation in recent years. In light of sanctions against Tehran, China effectively gained privileged access to Iran’s vast energy and infrastructure sector. Meanwhile, Russia is yet to honor its earlier agreement to deliver advanced missile-defense-systems to Iran, which Tehran has desperately sought for years.
To protect its national economic welfare, Iran has reportedly agreed to significant concessions on its nuclear program: reduction of its installed centrifuges by two-thirds; halting uranium enrichment over 3.67 percent (only useful for power generation) for at least 15 years; reduction of its current stockpile of about 10,000 kg of low-enriched uranium (LEU) to 300 kg; and not building any new facilities for the purpose of enriching uranium for 15 years.
It has also agreed to subject itself to the history’s most robust inspection regime, under the auspices of the International Atomic Energy Agency (IAEA), which will even have access to uranium mines and exercise continuous surveillance at Iran’s uranium mills for 25 years. Facilities in Arak, Natanz, and Fordow will also be subject to significant inspection and reconfiguration.
As Iran open up to the world, the Obama administrations and its partners face an unprecedented opportunity to not only advance the cause of non-proliferation and avert an unnecessary and destructive conflict, but also to tap one of the world’s most promising economies. The stakes couldn’t be any higher.
This article first appeared in The Huffington Post. Reposted per author’s permission
Saudi Arabia and Iran want to be friends again
Eventually the ice-cold relationship between Iran and Saudi Arabia began to melt. The two countries sat at the negotiating table shortly after Biden came to power. The results of that discussion are finally being seen. Trade relations between Iran and Saudi Arabia have already begun to move. Although there has been no diplomatic relationship between the two countries since 2016, trade relations have been tense. But trade between Iran and the two countries was zero from last fiscal year until March 20 this year. Iran recently released a report on trade with neighboring countries over the past six months. The report also mentions the name of Saudi Arabia. This means that the rivalry between the two countries is slowly normalizing.
Historically, Shia-dominated Iran was opposed to the Ottoman Empire. The Safavids of Persia have been at war with the Ottomans for a long time, However, after the fall of the Ottomans, when the Middle East was divided like monkey bread, the newly created Saudi Arabia did not have much of a problem with Iran. Business trade between the two countries was normal. This is because the rulers of Saudi Arabia and Iran at the time were Western-backed. That is why there was not much of a problem between them. But when a revolution was organized in Iran in 1979 and the Islamic Republic of Iran was established by overthrowing the Shah, Iran’s relations with the West as well as with Saudi Arabia deteriorated. During the revolution, Ayatollah Khomeini called for the ouster of Western-backed rulers from the Middle East. After this announcement, naturally the Arab rulers went against Iran.
Saddam Hussein later invaded Iran with US support and Saudi financial support. After that, as long as Khomeini was alive, Saudi Arabia’s relations with Iran were bad. After Khomeini’s death, Akbar Hashemi Rafsanjani and Mohammad Khatemi tried to mend fences again. But they didn’t get much of an advantage.
When the Bush administration launched its invasion of Iraq in 2003, Iran’s influence in Shiite-majority Iraq continued to grow. Since the start of the Arab Spring in 2011, Iran’s influence in the region has grown. Saudi Arabia has been embroiled in a series of shadow wars to reduce its influence. It can be said that Iran and Saudi Arabia are involved in the Cold War just like the United States and the Soviet Union. Behind that war was a conflict of religious ideology and political interests. Diplomatic relations between Saudi Arabia and Iran came to a complete standstill in 2016. Iranians attack the Saudi embassy in Tehran after executing Saudi Shiite cleric Sheikh Nimar al-Nimar. Since then, the two countries have not had diplomatic relations.
Finally, in April this year, representatives of the two countries met behind closed doors in Baghdad. And through this, the two countries started the process of normalizing diplomatic relations again. The last direct meeting between the two countries was held on September 21.
Now why are these two countries interested in normalizing relations? At one point, Mohammed bin Salman said they had no chance of negotiating with Iran. And Khomeini, the current Supreme Leader of Iran, called Mohammed bin Salman the new Hitler. But there is no such thing as a permanent enemy ally in politics or foreign policy. That is why it has brought Saudi Arabia and Iran back to the negotiating table. Prince Salman once refused to negotiate with Iran, but now he says Iran is our neighbor, we all want good and special relations with Iran.
Saudi Arabia has realized that its Western allies are short-lived. But Iran is their permanent neighbor. They have to live with Iran. The United States will not return to fight against Iran on behalf of Saudi Arabia. That is why it is logical for Iran and Saudi Arabia to have their ideological differences and different interests at the negotiating table. Saudi Arabia has been at the negotiating table with Iran for a number of reasons. The first reason is that Saudi Arabia wants to reduce its oil dependence. Prince Salman has announced Vision 2030. In order to implement Vision 2030 and get out of the oil dependent economy, we need to have good relations with our neighbors. It is not possible to achieve such goals without regional stability, He said.
Saudi Arabia also wants to emerge from the ongoing shadow war with Iran in Iraq, Syria, Yemen and Lebanon to achieve regional stability. The war in Yemen in particular is now a thorn in the side of Saudi Arabia. The Saudis are unable to get out of this war, nor are they able to achieve the desired goal. Saudi Arabia must normalize relations with Iran if it is to emerge from the war in Yemen. Without a mutual understanding with Iran, Yemen will not be able to end the war. That is why Saudi Arabia wants to end the war through a peace deal with the Houthis by improving relations with Iran.
Drone strikes could also have an impact on the Saudi Aramco oil field to bring Saudi Arabia to the negotiating table. Because after the drone attack, the oil supply was cut in half. The Saudis do not want Aramco to be attacked again. Also, since the Biden administration has no eye on the Middle East, it would be wise to improve relations with Iran in its own interests.
Iran will benefit the most if relations with Saudi Arabia improve. Their economy has been shaken by long-standing US sanctions on Iran. As Saudi Arabia is the largest and most powerful country in the Middle East, Iran has the potential to benefit politically as well as economically if relations with them are normal.
While Saudi Arabia will normalize relations with Iran, its allies will also improve relations with Iran. As a result, Iran’s political and trade relations with all the countries of the Saudi alliance will be better. This will give them a chance to turn their economy around again. The development of Iran’s relations with Saudi Arabia will also send a positive message to the Biden administration. It could lead to a renewed nuclear deal and lift sanctions on Iran.
Another reason is that when Saudi Arabia normalizes relations with Iran, it will receive formal recognition of Iran’s power in the Middle East. The message will be conveyed that it is not possible to turn the stick in the Middle East by bypassing Iran. Relations between Saudi Arabia and Iran need to be normalized for peace and stability in the Middle East.
But in this case, the United Arab Emirates and Israel may be an obstacle. The closeness that Saudi Arabia had with the UAE will no longer exist. The UAE now relies much more on Israel. There will also be some conflict of interest between Saudi Arabia and the UAE. Prince Salman wants to turn Saudi into a full-fledged tourism and business hub that could pose a major threat to the UAE’s economy and make the two countries compete.
Furthermore, in order to sell arms to the Middle East, Iran must show something special. Why would Middle Eastern countries buy weapons if the Iranian offensive was stopped? During the Cold War, arms dealers forced NATO allies to buy large quantities of weapons out of fear of the Soviet Union. So it is in the Middle East. But if the relationship between Iran and Saudi Arabia is normal, it will be positive for the Muslim world, but it will lead to a recession in the arms market.
Turkey and Iran find soft power more difficult than hard power
The times they are a changin’. Iranian leaders may not be Bob Dylan fans, but his words are likely to resonate as they contemplate their next steps in Iraq, Iraqi Kurdistan, Lebanon, and Azerbaijan.
The same is true for Turkish President Recep Tayyip Erdogan. The president’s shine as a fierce defender of Muslim causes, except for when there is an economic price tag attached as is the case of China’s brutal crackdown on Turkic Muslims, has been dented by allegations of lax defences against money laundering and economic mismanagement.
The setbacks come at a time that Mr. Erdogan’s popularity is diving in opinion polls.
Turkey this weekend expelled the ambassadors of the US, Canada, France, Finland, Denmark, Germany, Netherlands, New Zealand, Norway, and Sweden for calling for the release of philanthropist and civil rights activist Osman Kavala in line with a European Court of Human Rights decision.
Neither Turkey nor Iran can afford the setbacks that often are the result of hubris. Both have bigger geopolitical, diplomatic, and economic fish to fry and are competing with Saudi Arabia and the UAE as well as Indonesia’s Nahdlatul Ulama for religious soft power, if not leadership of the Muslim world.
That competition takes on added significance in a world in which Middle Eastern rivals seek to manage rather than resolve their differences by focusing on economics and trade and soft, rather than hard power and proxy battles.
In one recent incident Hidayat Nur Wahid, deputy speaker of the Indonesian parliament, opposed naming a street in Jakarta after Mustafa Kemal Ataturk, the general-turned-statemen who carved modern Turkey out of the ruins of the Ottoman empire. Mr. Wahid suggested that it would be more appropriate to commemorate Ottoman sultans Mehmet the Conqueror or Suleiman the Magnificent or 14th-century Islamic scholar, Sufi mystic, and poet Jalaludin Rumi.
Mr. Wahid is a leader of the Muslim Brotherhood-linked Prosperous Justice Party (PKS) and a board member of the Saudi-run Muslim World League, one of the kingdom’s main promoters of religious soft power.
More importantly, Turkey’s integrity as a country that forcefully combats funding of political violence and money laundering has been called into question by the Financial Action Task Force (FATF), an international watchdog, and a potential court case in the United States that could further tarnish Mr. Erdogan’s image.
A US appeals court ruled on Friday that state-owned Turkish lender Halkbank can be prosecuted over accusations it helped Iran evade American sanctions.
Prosecutors have accused Halkbank of converting oil revenue into gold and then cash to benefit Iranian interests and documenting fake food shipments to justify transfers of oil proceeds. They also said Halkbank helped Iran secretly transfer US$20 billion of restricted funds, with at least $1 billion laundered through the US financial system.
Halkbank has pleaded not guilty and argued that it is immune from prosecution under the federal Foreign Sovereign Immunities Act because it was “synonymous” with Turkey, which has immunity under that law. The case has complicated US-Turkish relations, with Mr. Erdogan backing Halkbank’s innocence in a 2018 memo to then US President Donald Trump.
FATF placed Turkey on its grey list last week. It joins countries like Pakistan, Syria, South Sudan, and Yemen that have failed to comply with the group’s standards. The International Monetary Fund (IMF) warned earlier this year that greylisting would affect a country’s ability to borrow on international markets, and cost it an equivalent of up to 3 per cent of gross domestic product as well as a drop in foreign direct investment.
Mr. Erdogan’s management of the economy has been troubled by the recent firing of three central bank policymakers, a bigger-than-expected interest rate cut that sent the Turkish lira tumbling, soaring prices, and an annual inflation rate that last month ran just shy of 20 per cent. Mr. Erdogan has regularly blamed high-interest rates for inflation.
A public opinion survey concluded in May that 56.9% of respondents would not vote for Mr. Erdogan and that the president would lose in a run-off against two of his rivals, Ankara Mayor Mansur Yavas and his Istanbul counterpart Ekrem Imamoglu.
In further bad news for the president, polling company Metropoll said its September survey showed that 69 per cent of respondents saw secularism as a necessity while 85.1 per cent objected to religion being used in election campaigning.
In Iran’s case, a combination of factors is changing the dynamics of Iran’s relations with some of its allied Arab militias, calling into question the domestic positioning of some of those militias, fueling concern in Tehran that its detractors are encircling it, and putting a dent in the way Iran would like to project itself.
A just-published report by the Combatting Terrorism Center at the US Military Academy West Point concluded that Iran’s Islamic Revolutionary Guards Corps (IRGC) faced “growing difficulties in controlling local militant cells. Hardline anti-US militias struggle with the contending needs to de-escalate US-Iran tensions, meet the demands of their base for anti-US operations, and simultaneously evolve non-kinetic political and social wings.”
Iranian de-escalation of tensions with the United States is a function of efforts to revive the defunct 2015 international agreement to curb Iran’s nuclear program and talks aimed at improving relations with Saudi Arabia even if they have yet to produce concrete results.
In addition, like in Lebanon, Iranian soft power in Iraq has been challenged by growing Iraqi public opposition to sectarianism and Iranian-backed Shiite militias that are at best only nominally controlled by the state.
Even worse, militias, including Hezbollah, the Arab world’s foremost Iranian-supported armed group, have been identified with corrupt elites in Lebanon and Iraq. Many in Lebanon oppose Hezbollah as part of an elite that has allowed the Lebanese state to collapse to protect its vested interests.
Hezbollah did little to counter those perceptions when the group’s leader, Hassan Nasrallah, threatened Lebanese Christians after fighting erupted this month between the militia and the Lebanese Forces, a Maronite party, along the Green Line that separated Christian East and Muslim West Beirut during the 1975-1990 civil war.
The two groups battled each other for hours as Hezbollah staged a demonstration to pressure the government to stymie an investigation into last year’s devastating explosion in the port of Beirut. Hezbollah fears that the inquiry could lay bare pursuit of the group’s interests at the expense of public safety.
“The biggest threat for the Christian presence in Lebanon is the Lebanese Forces party and its head,” Mr. Nasrallah warned, fuelling fears of a return to sectarian violence.
It’s a warning that puts a blot on Iran’s assertion that its Islam respects minority rights, witness the reserved seats in the country’s parliament for religious minorities. These include Jews, Armenians, Assyrians and Zoroastrians.
Similarly, an alliance of Iranian-backed Shiite militias emerged as the biggest loser in this month’s Iraqi elections. The Fateh (Conquest) Alliance, previously the second-largest bloc in parliament, saw its number of seats drop from 48 to 17.
Prime Minister Mustafa al-Kadhimi brought forward the vote from 2022 to appease a youth-led protest movement that erupted two years ago against corruption, unemployment, crumbling public services, sectarianism, and Iranian influence in politics.
One bright light from Iran’s perspective is the fact that an attempt in September by activists in the United States to engineer support for Iraqi recognition of Israel backfired.
Iran last month targeted facilities in northern Iraq operated by Iranian opposition Kurdish groups. Teheran believes they are part of a tightening US-Israeli noose around the Islamic republic that involves proxies and covert operations on its Iraqi and Azerbaijani borders.
Efforts to reduce tension with Azerbaijan have failed. An end to a war of words that duelling military manoeuvres on both sides of the border proved short-lived. Azerbaijani President Ilham Aliyev, emboldened by Israeli and Turkish support in last year’s war against Armenia, appeared unwilling to dial down the rhetoric.
With a revival of the nuclear program in doubt, Iran fears that Azerbaijan could become a staging pad for US and Israeli covert operations. Those doubts were reinforced by calls for US backing of Azerbaijan by scholars in conservative Washington think tanks, including the Hudson Institute and the Heritage Foundation.
Eldar Mamedov, a political adviser for the social-democrats in the Foreign Affairs Committee of the European Parliament, warned that “the US government should resist calls from hawks to get embroiled in a conflict where it has no vital interest at stake, and much less on behalf of a regime that is so antithetical to US values and interests.”
He noted that Mr. Aliyev has forced major US NGOs to leave Azerbaijan, has trampled on human and political rights, and been anything but tolerant of the country’s Armenian heritage.
Process to draft Syria constitution begins this week
The process of drafting a new constitution for Syria will begin this week, the UN Special Envoy for the country, Geir Pedersen, said on Sunday at a press conference in Geneva.
Mr. Pedersen was speaking following a meeting with the government and opposition co-chairs of the Syrian Constitutional Committee, who have agreed to start the process for constitutional reform.
The members of its so-called “small body”, tasked with preparing and drafting the Constitution, are in the Swiss city for their sixth round of talks in two years, which begin on Monday.
Their last meeting, held in January, ended without progress, and the UN envoy has been negotiating between the parties on a way forward.
“The two Co-Chairs now agree that we will not only prepare for constitutional reform, but we will prepare and start drafting for constitutional reform,” Mr. Pedersen told journalists.
“So, the new thing this week is that we will actually be starting a drafting process for constitutional reform in Syria.”
The UN continues to support efforts towards a Syrian-owned and led political solution to end more than a decade of war that has killed upwards of 350,000 people and left 13 million in need of humanitarian aid.
An important contribution
The Syrian Constitutional Committee was formed in 2019, comprising 150 men and women, with the Government, the opposition and civil society each nominating 50 people.
This larger group established the 45-member small body, which consists of 15 representatives from each of the three sectors.
For the first time ever, committee co-chairs Ahmad Kuzbari, the Syrian government representative, and Hadi al-Bahra, from the opposition side, met together with Mr. Pedersen on Sunday morning.
He described it as “a substantial and frank discussion on how we are to proceed with the constitutional reform and indeed in detail how we are planning for the week ahead of us.”
Mr. Pedersen told journalists that while the Syrian Constitutional Committee is an important contribution to the political process, “the committee in itself will not be able to solve the Syrian crisis, so we need to come together, with serious work, on the Constitutional Committee, but also address the other aspects of the Syrian crisis.”
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