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Why the JCPOA Won’t Turn Iran Into the Next Saudi Arabia

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Of all the anxieties surrounding this summer’s groundbreaking accord between the United States and the Islamic Republic of Iran, concern over oil has been among the most prevalent. Once the terms of the Joint Comprehensive Plan of Action (JCPOA) are firmly in place, sanctions on Iran’s economy, including a set of rigorous restrictions on its oil industry, will begin to recede.

This could unleash a potentially-gargantuan supply of Iranian oil onto an already-saturated world oil market and augment the abilities of the Islamic Republic to influence regional politics. The Washington Institute has warned that a “post-sanctions windfall” will allow Iran to “rescue the Syrian regime, reshape Iraq’s political environment, expand its terrorist proxy activities in various theaters, and otherwise amplify the effects of its destabilizing regional posture.”

There is fuel for such speculation. Iran has the fourth-highest proven oil reserves in the world, and the second-largest gas reserves. If it gains the ability to tap these enormous resources, Iran could potentially become a major world oil and gas producer, rivaling Saudi Arabia, its major regional competitor.

Yet it is far from certain that the JCPOA will have anything like the cataclysmic effect some have predicted. Moreover, it is questionable how far Iran will push its newly-freed oil economy once sanctions are lifted, with a host of infrastructural challenges, as well as some compelling historical experience, potentially foiling the country’s rise into major petro-state status.

Before the U.S. began pressuring it to give up its nuclear ambitions, Iran was a major oil exporter, second only to Saudi Arabia among the OPEC member-states. Production reached 4 million barrels per-day (bpd) in 2007 before dropping to 3.6 million bpd in 2011; sanctions took that down to 2.85 million bpd by July of 2015, with exports dropping from 2.6 million bpd to 1.4 million bpd.

Expectations for Iran to immediately increase its production one sanctions begin to taper off are high. Iran’s oil minister Bijan Zhanganeh boasted in July that Iran would increase its national production by 1 million bpd within one month of sanctions being lifted. While more moderate analysts debate this figure, most agree that Iranian production will increase by the end of 2015, dropping the anticipated price of crude by $10-12 per barrel.

While the impact of greater Iranian production could further depress oil prices which have struggled for over a year, Iran will likely experience a sudden economic stimulus. The World Bank estimates that Iran’s economic growth forecast for 2016 could increase from 3% to a robust 5% if the JCPOA is approved, signaling a real end to the economic stagnation that set in with the sanctions regime.

Commentators and skeptics of the Iran deal have suggested that Iran’s aspirations to regional hegemony will finally become attainable once oil revenues are freed from sanctions limitations. There is the immediate impact of $150 billion in frozen assets to consider, money Iran will potentially be able to access once sanctions are lifted. This enormous windfall along with greater oil revenues will lead to a more strident Iranian policy, challenging Saudi and Gulf interests and ratcheting up support for Bashar al-Assad’s regime in Syria.

But considerable debate surrounds the precise amount of capital Iran has locked away in overseas accounts: $150 billion is the oft-quoted sum, but the Obama Administration has dropped its estimate from $100 billion to $50 billion, and one analysis in Fortune based on information from Iran’s Central Bank suggests that only $29 billion will be immediately available.

Depressed world oil prices will likely increase Iran’s oil revenues by a relatively small amount, from $50 billion to about $65 billion, roughly what it was earning in 2013 before prices fell. Rather than a sudden, tremendous surge in new assets, Iran will see a modest and gradual financial windfall over the course of 2016 and 2017.

How that new income will affect Iran’s foreign policy is difficult to say with any precision. The regime spends an estimated $10 billion per year on foreign “adventures” like the wars in Syria and Yemen, yet this amount dropped in 2014 in light of lower oil prices and seems trifling when compared to the amounts spent by Riyadh on similar endeavors. Saudi Arabia military spending surpasses that of Iran by five times and the UAE’s small force spends 50% more than Tehran on new weapon systems and arms. It is unlikely that any increase in oil revenues will upset this balance.

Support for Iran’s regional allies, proxies and clients will likely be overshadowed by investment that Iran will direct towards is domestic oil industry. Some of Iran’s most important oil fields are 70 years old and after a decade of sanctions the country’s infrastructure, from the wellhead to the refinery, has suffered considerable degradation for want of investment. Even the CIA, in a recent intelligence analysis, predicts that Iran’s economy will take precedence over support for regional allies.

An estimate from Iran’s oil ministry puts the total cost of industry upgrades at $200 billion, roughly half of Iran’s gross domestic product. Iran will have to pump a considerable amount of its new revenues into re-building its industry, and while external agents (including the massive Western oil firms like Royal Dutch-Shell, ENI and Total) have shown considerable interest in investing, the Obama Administration continues to warn off American companies, arguing that Iran’s aging infrastructure makes it a poor candidate for increased investment.

Even if its production reaches former levels, Iran must fight to win back market share from Saudi Arabia, which has increased its own production to record levels in order to force out new producers and bring the price back up. Saudi Arabia dominates the oil market and will likely continue to do so, as its production level (nearly 10 mbd) dwarfs that of Iran. Iran must effectively triple its current production level in order to compete, a feat that could take decades to accomplish.

Finally, a strong historical argument exists that might very well deter Iran from aggressively embracing increased oil production. Oil revenues largely funded the 1960s and 1970s regime of Mohammed Reza Shah Pahlavi, who pumped most of the country’s earnings into its military and expansive modernization programs. The Shah’s policies made Iran a regional power but over-heated the economy, created powerful inflationary effects and so destabilized his regime that it collapsed in the 1978-79 Islamic Revolution.

Ayatalloh Ruhollah Khomeini, Iran’s Supreme Leader, cut Iran’s oil production in half after 1980, causing it to fall from 6.6 million bpd to 3 million bpd. He believed Iran needed a “revolutionary economy” separate from the wider capitalist world.

Khomeini may have been driven by ideological concerns more than hard economics, but his reasoning was largely validated by post-1970s scholarship. Influential texts by Terry Lynn Karl, Hossein Mahdavy and Richard Auty point to a “resource curse” that affects country’s overly dependent on export earnings and rents from oil production. Today, oil-rich economies like Venezuela and Russia are struggling with such dependence.

If history is any guide, Iran will likely steer clear of such a policy, using its new oil revenues to bolster domestic economic growth and infrastructural development, shoring up the political support for its hardline regime (which has staked a considerable amount on reducing sanctions) while continuing its support for regional proxies and allies. The effect of a sanctions-free Iranian oil industry may take some years to reveal itself, but it is unlikely to be as dramatic as some have speculated. After all, the world oil market remains glutted; the Middle East remains a region riven by conflict; and neither the U.S. nor Iran have indicated that they plan to alter the nature of their postures towards one another. Iran’s oil may alter this situation, but it probably won’t upend it completely.

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Middle East

Turkey and the time bomb in Syria

Mohammad Ghaderi

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The Turkish attack on northern Syria has provided conditions for ISIS militants held in camps in the region to escape and revitalize themselves.

Turkey launched “Operation Peace Spring” on Wednesday October 9, claiming to end the presence of terrorists near its borders in northern Syria. Some countries condemned this illegal action of violation of the Syrian sovereignty.

The military attack has exacerbated the Syrian people’s living condition who live in these areas. On the other hand, it has also allowed ISIS forces to escape and prepare themselves to resume their actions in Syria. Before Turkish incursion into northern Syria, There were many warnings that the incursion would prepare the ground for ISIS resurgence. But ignoring the warning, Turkey launched its military attacks.

Currently, about 11,000 ISIS prisoners are held in Syria. ISIS has claimed the responsibility for two attacks on Qamishli and Hasakah since the beginning of Turkish attacks.

Meanwhile, Donald Trump said that Turkey and the Kurds must stop ISIS prisoners from fleeing. He urged European countries to take back their citizens who have joined ISIS.

It should be noted that the U.S. is trying to prove that ISIS has become stronger since the U.S. troops pulled out before the Turkish invasion, and to show that Syria is not able to manage the situation. But this fact cannot be ignored that ISIS militants’ escape and revival were an important consequence of the Turkish attack.

Turkish troops has approached an important city in the northeast and clashed with Syrian forces. These events provided the chance for hundreds of ISIS members to escape from a camp in Ayn Issa near a U.S.-led coalition base.

 The camp is located 35 kilometers on the south of Syria-Turkey border, and about 12,000 ISIS members, including children and women, are settled there. The Kurdish forces are said to be in charge of controlling these prisoners.

Media reports about the ISIS resurgence in Raqqa, the former ISIS stronghold, cannot be ignored, as dozens of terrorists have shot Kurdish police forces in this city. The terrorists aimed to occupy the headquarters of the Kurdish-Syrian security forces in the center of Raqqa.  One of the eyewitnesses said the attack was coordinated, organized and carried out by several suicide bombers, but failed.

In response to Turkey’s invasion of Syria, the Kurds have repeatedly warned that the attack will lead to release of ISIS elements in the region. Turkey’s President Recep Tayyib Erdogan denied the reports about the escape of ISIS prisoners and called them “lies”.

European officials fear that ISIS prisoners with European nationality, who have fled camps, will come back to their countries.

Kurdish forces are making any effort to confront Turkish troops in border areas, so their presence and patrol in Raqqa have been reduced.

Interestingly, the Turkish military bombarded one of temporary prisons and caused ISIS prisoners escaping. It seems that ISIS-affiliated covert groups have started their activities to seize the control of Raqqa. These groups are seeking to rebuild their so-called caliphate, as Kurdish and Syrian forces are fighting to counter the invading Turkish troops. Families affiliated with ISIS are held in Al-Hol camp, under the control of Kurdish forces. At the current situation, the camp has turned into a time bomb that could explode at any moment. Under normal circumstances, there have been several conflicts between ISIS families in the camp, but the current situation is far worse than before.

There are more than 3,000 ISIS families in the camp and their women are calling for establishment of the ISIS caliphate. Some of SDF forces have abandoned their positions, and decreased their watch on the camp.

The danger of the return of ISIS elements is so serious, since they are so pleased with the Turkish attack and consider it as an opportunity to regain their power. There are pictures of ISIS wives in a camp in northern Syria, under watch of Kurdish militias, showing how happy they are about the Turkish invasion.

In any case, the Turkish attack, in addition to all the military, political and human consequences, holds Ankara responsible for the escape of ISIS militants and preparing the ground for their resurgence.

Currently, the camps holding ISIS and their families are like time bombs that will explode if they all escape. Covert groups affiliated with the terrorist organization are seeking to revive the ISIS caliphate and take further actions if the Turkish attacks continue. These attacks have created new conflicts in Syria and undermined Kurdish and Syrian power to fight ISIS.

From our partner Tehran Times

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Middle East

The Turkish Gambit

Dr. Arshad M. Khan

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The only certainty in war is its intrinsic uncertainty, something Turkish President Recep Tayyip Erdogan could soon chance upon.  One only has to look back on America’s topsy-turvy fortunes in Iraq, Afghanistan and even Syria for confirmation.

The Turkish invasion of northeastern Syria has as its defined objective a buffer zone between the Kurds in Turkey and in Syria.  Mr. Erdogan hopes, to populate it with some of the 3 million plus Syrian refugees in Turkey, many of these in limbo in border camps.  The refugees are Arab; the Kurds are not.

Kurds speak a language different from Arabic but akin to Persian.  After the First World War, when the victors parceled up the Arab areas of the Ottoman Empire, Syria came to be controlled by the French, Iraq by the British, and the Kurdish area was divided into parts in Turkey, Syria and Iraq, not forgetting the borderlands in Iran — a brutal division by a colonial scalpel severing communities, friends and families.  About the latter, I have some experience, having lived through the bloody partition of India into two, and now three countries that cost a million lives.   

How Mr. Erdogan will persuade the Arab Syrian refugees to live in an enclave, surrounded by hostile Kurds, some ethnically cleansed from the very same place, remains an open question.  Will the Turkish army occupy this zone permanently?  For, we can imagine what the Kurds will do if the Turkish forces leave.

There is another aspect of modern conflict that has made conquest no longer such a desirable proposition — the guerrilla fighter.  Lightly armed and a master of asymmetric warfare, he destabilizes. 

Modern weapons provide small bands of men the capacity and capability to down helicopters, cripple tanks, lay IEDs, place car bombs in cities and generally disrupt any orderly functioning of a state, tying down large forces at huge expense with little chance of long term stability.  If the US has failed repeatedly in its efforts to bend countries to its will, one has to wonder if Erdogan has thought this one through.

The Israeli invasion of Lebanon in 1982 is another case in point.  Forever synonymous with the infamous butchery at Sabra and Shatila by the Phalange militia facilitated by Israeli forces, it is easy to forget a major and important Israeli goal:  access to the waters of the Litani River which implied a zone of occupation for the area south of it up to the Israeli border.

Southern Lebanon is predominantly Shia and at the time of the Israeli invasion they were a placid group who were dominated by Christians and Sunni, even Palestinians ejected from Israel but now armed and finding refuge in Lebanon.  It was when the Israelis looked like they were going to stay that the Shia awoke.  It took a while but soon their guerrillas were harassing Israeli troops and drawing blood.  The game was no longer worth the candle and Israel, licking its wounds, began to withdraw ending up eventually behind their own border.

A colossal footnote is the resurgent Shia confidence, the buildup into Hezbollah and new political power.  The Hezbollah prepared well for another Israeli invasion to settle old scores and teach them a lesson.  So they were ready, and shocked the Israelis in 2006.  Now they are feared by Israeli troops.   

To return to the present, it is not entirely clear as to what transpired in the telephone call between Erdogan and Trump.  Various sources confirm Trump has bluffed Erdogan in the past.  It is not unlikely then for Trump to have said this time, “We’re leaving.  If you go in, you will have to police the area.  Don’t ask us to help you.”  Is that subject to misinterpretation?  It certainly is a reminder of the inadvertent green light to Saddam Hussein for the invasion of Kuwait when Bush Senior was in office. 

For the time being Erdogan is holding fast and Trump has signed an executive order imposing sanctions on Turkish officials and institutions.  Three Turkish ministers and the Defense and Energy ministries are included.  Trump has also demanded an immediate ceasefire.  On the economic front, he has raised tariffs on steel back to 50 percent as it used to be before last May.  Trade negotiations on a $100 billion trade deal with Turkey have also been halted forthwith.  The order also includes the holding of property of those sanctioned, as well as barring entry to the U.S.

Meanwhile, the misery begins all over again as thousands flee the invasion area carrying what they can.  Where are they headed?  Anywhere where artillery shells do not rain down and the sound of airplanes does not mean bombs.

Such are the exigencies of war and often its surprising consequences. 

Author’s Note:  This piece appeared originally on Counterpunch.org

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Middle East

Could Turkish aggression boost peace in Syria?

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On October 7, 2019, the U.S. President Donald Trump announced the withdrawal of American troops from northeast Syria, where the contingent alongside Kurdish militias controlled the vast territories. Trump clarified that the decision is connected with the intention of Turkey to attack the Kurdish units, posing a threat to Ankara.

It’s incredible that the Turkish military operation against Kurds – indeed the territorial integrity of Syria has resulted in the escape of the U.S., Great Britain, and France. These states essentially are key destabilizing components of the Syrian crisis.

Could this factor favourably influence the situation in the country? For instance, after the end of the Iraqi war in 2011 when the bulk of the American troops left the country, the positive developments took place in the lives of all Iraqis. According to World Economics organization, after the end of the conflict, Iraq’s GDP grew by 14% in 2012, while during the U.S. hostilities the average GDP growth was about 5,8%.

Syria’s GDP growth should also be predicted. Not right away the withdrawal of U.S., French, British, and other forces, but a little bit later after the end of the Turkish operation that is not a phenomenon. The Turkish-Kurdish conflict has been going on since the collapse of the Ottoman Empire when Kurds started to promote the ideas of self-identity and independence. Apart from numerous human losses, the Turks accomplished nothing. It is unlikely that Ankara would achieve much in Peace Spring operation. The Kurds realize the gravity of the situation and choose to form an alliance with the Syrian government that has undermined the ongoing Turkish offensive.

Under these circumstances, Erdogan could only hope for the creation of a narrow buffer zone on the Syrian-Turkish border. The withdrawal of the Turkish forces from the region is just a matter of time. However, we can safely say that the Turkish expansion unwittingly accelerated the peace settlement of the Syrian crisis, as the vital destabilizing forces left the country. Besides, the transfer of the oil-rich north-eastern regions under the control of Bashar Assad will also contribute to the early resolution of the conflict.

It remains a matter of conjecture what the leaders of Saudi Arabia, the United Arab Emirates, and Russia agreed on during the high-level talks. Let’s hope that not only the Syrians, but also key Gulf states are tired of instability and tension in the region, and it’s a high time to strive for a political solution to the Syrian problem.

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