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The new Egyptian government

Giancarlo Elia Valori

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Within an Islamic and non-Islamic context, dangerous for his Egypt, President Ahmed Fattah Al Sisi appointed ten new Ministers in the national government and also created some new Ministries. The government reshuffle, not foreseen even by the insiders of the Egyptian regime, took place on March 23 and regarded people and roles certainly not irrelevant in any government.

Undoubtedly the aim of the government renewal is the need to better tackle the economic crisis and its political consequences, which could undermine the stability of Al Sisi’s post-Nasser regime and, above all, its effectiveness in repressing the Islamist insurgency in the Sinai region, as well as its effectiveness in the internal struggle against the Muslim Brotherhood.

Let us analyze the professional and political biographies of the newly-appointed Ministers. The new Justice Minister is judge Hossam Abdel Rehim, appointed just after his predecessor’s unfortunate statement that he would have put in jail even Prophet Muhammad if he had broken the law.

Hossam Rehim was the President of the Egyptian Supreme Court of Cassation and the Supreme Legislative Council, a body which oversees the internal administrative matters of ordinary justice.

Any appointment in this body lasts four years and is not renewable.

Amr al Garthy is the new Finance Minister, replacing Hany Kadry Dimian, who had been appointed to that post before Al Sisi’s Presidency.

While preserving the small and insufficient Egyptian growth recorded in 2015, Garthy must above all solve the severe shortage of foreign currencies and hence a significant difficulty for imports.

Furthermore the outgoing Minister, Dimian, said that Egypt would record a funding gap ranging between 25 and 30 billion dollars over the next three years.

The funds that Dimian had obtained from the World Bank before his resignation will be granted only in connection with some tax and fiscal reforms that the Egyptian government must absolutely implement.

For the World Bank this applies above all to a value added tax which is still being examined by the Egyptian Parliament.

Garhy comes directly from the business world: he worked for the Qalaa Holding, an important Egyptian financial holding operating in the oil, agrifood, transport and logistics, cement and mining sectors.

Previously Garhy had worked for the El Ahli Bank of Qatar, which deals with corporate banking and has 16 branches throughout the Emirate.

Later, before working for Qalaa, Garhy operated in the EFG Hermes and the Egyptian National Investment Bank, where he focused his activity on the matters he should address as Minister: the privatization of the Bank of Alexandria and the sale of Egyptian government bonds on international markets.

EFG Hermes is also a bank and an industrial holding company operating in seven Middle East countries, since it is now the first investment bank for the whole region stretching from Morocco to Jordan.

As Minister for Investment, Al Sisi chose Dahlia Korshed, former vice-President and treasurer of Orascom Construction, as well as former vice-President of the Egyptian Citibank.

Currently there are four female Ministers in the Egyptian government.

Al Sisi’s idea of separating this Ministry from the Ministry for Industry and Trade is the sign that the Egyptian President wants to give priority to infrastructure and industrial investment rather than to the often unproductive spending for supporting the now massive and bloated State apparatus.

We will analyze this matter later.

The main problem is that, after the structural decline of Foreign Direct Investment (FDI) following the so-called 2011 “revolution” and despite the Conference on foreign investment held by Al Sisi in Sharm El Sheikh in 2015, which was certainly not a success, FDI does not take off at all.

From January to March 2015, the Egyptian FDI had reached 2.9 billion dollars, but fell dramatically to 690 million dollars in the following quarter, only to come back again to a still insufficient level of 1.39 billion US dollars in July-September 2015.

For the time being, the safest investment in Egypt comes mainly from Saudi Arabia, which promised 8 billion dollars in project financing over five years, and from China which signed some important contracts with Egypt during the recent visit of Xi Jinping in that country.

Egypt has a primary difficult to face: it does not always succeed in repaying foreign investors, who currently have credit with Egypt to the tune of 547.2 million US dollars.

In this connection, Egypt’s Central Bank has recently announced its offer of investment certificates in local currency at a 15% interest rate, but only in foreign currencies, considering the internal devaluation rate and the persistent overvaluation of the Egyptian currency.

The new Minister for Public Affairs, Ashraf Al Sharqawi, must monitor and supervise State-owned companies and support the growth of start-ups.

He is still the administrative Director of the Cairo University and is member of the Board of the State-owned bank Misr.

Sharqawi was President of the Egyptian Financial Supervisory Authority and member, as well as executive President, of the National Auditing Committee.

With specific reference to Misr, it is worth recalling that for 92 years this bank has been carrying out an activity of investment and collection of savings from regular clients and it has so far supported the establishment and growth of many companies in all Egyptian productive and commercial sectors. Currently it co-participates in over 202 projects, including agrifood, communications, finance and housing for the poor walks of society.

Furthermore, it also operates with Islamic financial criteria.

Hence, above all, Minister Sharqawi wants to reform and liberalize most State-owned companies.

This is also what Al Sisi has in mind, while announcing he will inject 25 billion US dollars in the Egyptian Central Bank to grant loans to small and medium-sized enterprises, as well as that loans to SMEs will account for at least 20% of all the loans granted by banks, at least for the next four years.

Clearly the Egyptian President’s goal is to recreate a strong and self-propelled internal market, by using foreign funds and internal financial leverage.

Nevertheless a 12.9% official unemployment rate, slightly decreasing as against last year, is a too strong political risk to run in a situation of great “youth bulge” (as we will see later on).

The financing envisaged by Al Sisi is functional and conducive to a youth employment expansion, which is the real sore point of the Egyptian society and economy.

The new Minister for Tourism, which is a key area for the Egyptian economy, is Mohammed Yehia Rashed, who replaces the previous Minister, Hisham Zaazou, who had been reconfirmed in September 2015 by Prime Minister Sharif Ismail.

A little score to settle in anticipation of Ismail’s confirmation as Prime Minister.

For many years Rashed worked in the international hotel chain, Marriot, and was responsible for the unit dedicated to Egyptian tourism within the Kuwaiti tourist agency Al Kharafi.

The Kuwaiti company Al Kharafi has been operating for over 100 years in the building and trading sectors and is currently active in the Middle East tourist sector.

Since 1960 it has been operating as a company for the building of real estate, especially in the tourist sector, and for civil construction throughout the Gulf area.

Al Sisi’s project is clear: to put builders, real estate agents and tour operators together for expanding Egypt’s tourist infrastructure.

Tourism is vital to Egypt and is also the sector floundering in the deepest crisis of its economy.

Before the shooting down of the Russian plane last October, the Egyptian tourist sector was worth 6.1 billion US dollars (and it was worth 12.5 billion US dollars just before the 2011 “revolution”) while, since the Russian plane crash, the Egyptian tourist business has fallen by 282 million US dollars per month.

These negative effects have been recorded even after Egypt hiring the international security consultancy firm Control Risks, while Russia has not yet resumed direct flights to Egypt.

Officers of the Russian security forces are still permanently deployed in Egyptian airports, while Italy has reopened all tourist channels, especially those regarding low cost airlines.

Nevertheless, through Thomas Cook and other national agencies, Great Britain still prevents travels to Sharm El Sheikh.

The task of Minister Rashed, who has a long experience in the luxury hotel sector, will be to convince Russia and Great Britain, in particular, to reopen their tourist routes to the South of Egypt and its archaeological sites.

As Minister for Civil Aviation, Al Sisi chose Sherif Fathy, former President of EgyptAir, who also worked at high levels both for the Dutch KLM and the American Northwest airlines.

The new Minister wants to develop new “unconventional” safety and security models and, together with his colleague of the Minister for Tourism, to convince Russia and Great Britain to return to Sharm.

Mohammed Safan is the new Minister for Manpower, a role which in Egypt is also related to the regulation of employment activities and young generations’ and unemployed people’s access to the labour market.

Before being appointed Minister, Safan had been the leader of the oil workers’ union and deputy-Secretary of the Egyptian Trade Union Federation (ETUF).

Al-Sisi appointed Mohammed Abdel Atty, former Head of Egypt’s Nile Water Authority as Minister for Irrigation and Water Resources, which have been a key factor of the Egyptian economy and society as early as the time of Ramses I.

Nile’s control is certainly a relevant strategic factor, considering that, as early as King Farouk’s days, it is strategically essential for Egypt to secure the supply areas of the Nile River in Africa.

“O Solon, Solon, you Greeks are always children: there is not such a thing as an old Greek. You are young in soul, every one of you. For therein you possess not a single belief that is ancient and derived from old tradition, nor yet one science that is hoary with age.

And this is the cause thereof: there have been and there will be many and diverse destructions of mankind, of which the greatest are by fire and water, and lesser ones by countless other means”.

Plato reports in his Timeaus this speech by an Egyptian priest to Solon, but it is worth recalling that the very ancient civilization which made the Egyptians already adults was linked to the Nile River cycle.

And Nile’s security at its sources is also a serious military and security problem, particularly with regard to the long standing instability coming from the African Great Lakes region.

In fact, Minister Abdel-Atty has excellent relations with the Ethiopian authorities, which are very useful to make the project of the “Grand Ethiopian Renaissance Dam” set again into motion.

Furthermore, in his public speeches, Minister Abdel-Atty has also always maintained the need to solve, in time, the predicament of structural water shortage in Egypt.

The new Minister for Transport is Galaal Al Saleed, a former Minister in the same Department under the Government of the Supreme Council of the Armed Forces in 2011.

Later, Al Saleed became Governor-General of Cairo.

Al Sisi chose Khaled Al-Anany as Minister for Antiquities.

In 2015 Al-Anany became general supervisor of the Grand Egyptian Museum but, previously, he had been the general manager of the National Museum of Egyptian Civilization.

Finally, the last new Minister appointed by Al Sisi is Nihal El Megharbel, as vice-Minister of the Ministry for Planning.

What is the political goal of these new appointments made by Al Sisi?

Probably the aim is to buy time at internal level, while the Egyptian government gets ready for a new strategy of suasion and actual new possibilities for foreign investment, as well as attempting a controlled liberalization of domestic markets.

The substance and essence of these choices make us foresee some Al Sisi’s pessimism on Egypt’s future economic potential.

In a 205-page document made public a few days ago, Prime Minister Sherif has already announced that the unemployment rate has risen from the 9% recorded in 2009-2010 to the current 13.3%.

If we consider that, from 2009 to 2014, the total Egyptian population grew from 77 million to the current 90, the situation gets extremely problematic.

Again from 2009 to 2014, public subsidies for food and fuels doubled and, as it was easy to foresee, inflation sky-rocketed so as to force the Egyptian Central Bank to carry out a devaluation of about 13% at the beginning of March.

Meanwhile, military spending has inevitably increased and, considering what we have already said on tourism and Foreign Direct Investment, growth has dropped significantly.

Moreover market signals show that the Egyptian currency is still overvalued and hence prices have risen further.

If another devaluation does not occur, an injection of fresh (foreign) capital will be needed to support the Egyptian currency.

This is an economic and social scenario similar to the one which allowed the fall of Hosni Mubarak’s regime, within the framework of a naive operation of North American coloured revolution.

But it was the Muslim Brotherhood – by providing the Praetorian Guard to the protesters gathered to demonstrate in Tahrir Square, among which the sister of Al Zarqawi, the leader of Al Qaeda, and the Head of Google in Egypt stood out – to build Mohammed Morsi’s electoral victory, guaranteed by the Muslim Brotherhood religious welfare for the countless Egyptian proletarians.

Then the well-known Al Sisi’s bloodless coup, the discovery of Morsi’s opening to jihad in the Sinai region, and the rest is very recent history.

Al Sisi is well aware that the problem lies in the fact that wages and subsidies account for 75% of public expenditure.

Both the fall of wages, with the resulting mass revolts, and the increase in prices, which would have the same political effect, must be avoided.

The public spending that Al Sisi can never reduce is the one for the Armed Forces, the real leader of Egypt’s economy. Nevertheless the rebellions being planned could thwart all the rational efforts for reforming the Egyptian economy imagined by Al Sisi.

If the new government succeeds in reforming the economy and, with a new internal security climate, in attracting the funds necessary for what the economist Walt Rostow defined the economic take-off (with specific reference to India in the 1960s), everything will turn out well and we will have strategic security in the Suez Canal and in the Sinai region, also for the European Union.

Otherwise the Egyptian crisis will recur, with two well-known scripts: the fundamentalist coup and the arrival of capital of the jihad and the countries sponsoring it.

Or Egypt’s endless economic decline, thus making the people of the most ancient country of the Mediterranean civilization add to the huge flows of people landing onto our shores.

It is also good to think about these facts, when we ask, with good reason, to know the truth about the assassination of the Italian researcher Giulio Regeni.

Advisory Board Co-chair Honoris Causa Professor Giancarlo Elia Valori is an eminent Italian economist and businessman. He holds prestigious academic distinctions and national orders. Mr. Valori has lectured on international affairs and economics at the world’s leading universities such as Peking University, the Hebrew University of Jerusalem and the Yeshiva University in New York. He currently chairs “International World Group”, he is also the honorary president of Huawei Italy, economic adviser to the Chinese giant HNA Group. In 1992 he was appointed Officier de la Légion d’Honneur de la République Francaise, with this motivation: “A man who can see across borders to understand the world” and in 2002 he received the title “Honorable” of the Académie des Sciences de l’Institut de France. “

Middle East

Business and boxing: two sides of the same coin

Dr. James M. Dorsey

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What do a planned US$15 billion Saudi investment in petroleum-related Indian businesses and a controversial boxing championship have in common?

Both reflect a world in which power and economics drive policy, politics and business at the expense of fundamental rights.

And both underscore an emerging new world order in which might is right, a jungle in which dissenters, minorities and all other others are increasingly cornered and repressed.

Rather than furthering stability by building inclusive, cohesive societies both support trends likely to produce an evermore unstable and insecure world marked by societal strife, mass migration, radicalization and violence.

A world in which business capitalizes on decisions by a critical mass of world leaders who share autocratic, authoritarian and illiberal principles of governance and often reward each other with lucrative business deals for policies that potentially aggravate rather than reduce conflict.

No doubt, the planned acquisition by Saudi Arabia’s state-owned national oil company Aramco of 20 percent of the petroleum-related businesses of Reliance Industries, one of India’s biggest companies, makes commercial and strategic economic and business sense.

Yet, there is equally little doubt that the announcement of the acquisition will be read by Indian prime minister Narendra Modi, days after he scrapped the autonomous status of the troubled, majority Muslim region of Kashmir, as a license to pursue his Hindu nationalist policies that discriminate against Muslims and other minorities and fuel tensions with Pakistan, the subcontinent’s other nuclear power.

The ultimate cost of the fallout of policies and business deals that contribute or give license to exclusion rather than inclusion of all segments of a population and aggravate regional conflict could be far higher than the benefits accrued by the parties to a deal.

Underscoring the risk of exclusionary policies and unilateral moves, cross border skirmishes between Indian and Pakistani forces erupted this week along the Kashmiri frontier in which at least five people were killed.

The timing of the announcement of the Aramco Reliance deal in a global environment in which various forms of racism and prejudice, including Islamophobia, are on the rise, assures Indian political and business leaders that they are unlikely to pay an immediate price for policies that sow discord and risk loss of life.

Like in the case of Saudi and Muslim acquiescence in China’s brutal clampdown on Turkic Muslims in the troubled, north-western Chinese province of Xinjiang, the most frontal assault on a faith in recent history, the announcement risks convincing embattled Muslim minorities like the Uighurs, the Kashmiris or Myanmar’s Rohingya who are lingering in refugee camps in Bangladesh that they are being hung out to dry.

To be sure, Kashmiris can count on the support of Pakistan but that is likely to be little more than emotional, verbal and political.

Pakistan is unlikely to risk blacklisting by the Financial Action Task Force (FATF), an international anti-money laundering and terrorism finance watchdog, at its next scheduled meeting in October by unleashing its anti-Indian militants.

Anthony Joshua’s controversial fight with Andy Ruiz scheduled for December in Saudi Arabia, the first boxing championship to be held in the Middle East, pales in terms of its geopolitical or societal impact compared to the Saudi Indian business deal.

Fact is that Saudi Arabia’s hosting of the championship has provoked the ire of activists rather than significant population groups. The fight is furthermore likely to be seen as evidence and a strengthening of Crown Prince Mohammed bin Salman’s selective efforts to socially liberalize the once austere kingdom.

Nonetheless, it also reinforces Prince Mohammed’s justified perception that Saudi Arabia can get away with imprisoning activists who argued in favour of his reforms as well as the lack of transparency on judicial proceedings against the alleged perpetrators of the killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul. Saudi Arabia insists the killing was perpetrated by rogue operatives.

What Saudi investment in India and the scheduled boxing championship in the kingdom have in common is that both confirm the norms of a world in which ‘humane authority,’ a concept developed by prominent Chinese international relations scholar Yan Xuetong, is a rare quantity.

Mr. Yan employs the concept to argue without referring to President Xi Jinping, Xinjiang, China’s aggressive approach towards the South China Sea or its policy towards Taiwan and Hong Kong that China lacks the humane authority to capitalize on US President Donald J. Trump’s undermining of US leadership.

Mr. Yan defines a state that has humane authority as maintaining strategic credibility and defending the international order by becoming an example through adherence to international norms, rewarding states that live up to those norms and punishing states that violate them. Garnering humane authority enables a state to win allies and build a stable international order.

Mr. Yan’s analysis is as applicable to India and Saudi Arabia as it is to China and others that tend towards civilizational policies like the United States, Russia, Hungary and Turkey.

It is equally true for men like Anthony Joshua promoter Eddie Hearn and business leaders in general.

To be sure, Aramco is state-owned and subject to government policy. Nonetheless, as it prepares for what is likely to be the world’s largest initial public offering, even Aramco has to take factors beyond pure economic and financial criteria into account.

At the end of the day, the consequence of Mr. Yan’s theory is that leadership, whether geopolitical, economic or business, is defined as much by power and opportunity as it is by degrees of morality and ethics.

Failure to embrace some notion of humane authority and reducing leadership and business decisions to exploiting opportunity with disregard for consequences or the environment in which they are taken is likely to ultimately haunt political and business leaders alike.

Said Mr. Yan: “Since the leadership of a humane authority is able to rectify those states that disturb the international order, the order based on its leadership can durably be maintained.”

What is true for political leaders is also true for business leaders even if they refuse to acknowledge that their decisions have as much political as economic impact.

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Middle East

Iran: What is in store for the JCPOA?

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The Islamic Republic of Iran (IRI) continues to be in the spotlight of global politics. And even though the “Iranian problems” go beyond the Joint Comprehensive Plan of Action (JCPOA), it is the “dying” JCPOA that is the main cause of tensions in and around Iran, be it the financial and economic blow of the United States, which uses the “oil baton” to strike at the Iranian economy, the threat of war in the Persian Gulf and tanker conflicts, or Iran’s geostrategic and regional position in general.

Regrettably, we have to admit that because of Washington’s destructive moves on the global scene the JCPOA is coming under corrosion and may well turn into dust in the near future. Such a negative outcome runs counter to the interests of Russia, China, and the European Union. Therefore, they are making tremendous efforts to preserve these agreements, even if in a slightly different format after the withdrawal of the US.

Political analysts reveal two conflicting views on the future of the JCPOA. Some are sure that the days of the nuclear deal are numbered. Others believe that it can still be “saved”, but this requires the concerted efforts of the countries participating in it.

On July 28, members of the Joint Commission on the Implementation of the JCPOA gathered in Vienna at the level of political directors to focus on pressing issues the JCPOA is confronted with. Participating in the meeting were delegations from Russia, China, Great Britain, France, Germany and Iran. They discussed the negative effect of Iran’s measures to curtail its commitments under the agreement thereby aggravating the situation in the Persian Gulf.

Iran’s partners called on Tehran to refrain from further withdrawal from a number of obligations under the JCPOA. The Iranian leaders have announced that, starting from May 8, they introduce 60-day rounds to gradually curtail compliance with the requirements of the JCPOA . Early September will see a new, third phase of the Iranian struggle against US sanctions. The essence of such moves on the part of Iran is to force the European Union, and, first of all, Britain, France and Germany, to launch at full capacity the INSTEX settlement mechanism, which serves to guarantee the export of Iranian oil. Apparently, this presents a lot of difficulty and causes a lot of doubts among the founders of this financial mechanism.

Reporting on the Vienna consultations, Iranian Foreign Ministry spokesman Abbas Mousavi said that “the meeting in Vienna did not give us any guarantees about the future the JCPOA.” He pointed out that Iran is not sure of the effectiveness of European efforts within the framework of INSTEX and, therefore, about maintaining the JCPOA. Iran will decide on further steps after the forthcoming ministerial meeting of countries that act as guarantors of the JCPOA, the diplomat said.

The head of the Russian delegation in Vienna, Deputy Foreign Minister Sergey Ryabkov, remarked in this connection: “We urged the Iranians to refrain from this [from the phased exit from the JCPOA, V.S.] and explained why: the more measures are taken to reconsider commitments, even if voluntary ones, the higher the political temperature and the higher the chances that some of the participants in the JCPOA may lose temper and trigger aggravation. ”

The Russian diplomat went on to comment: “Certainly, you can follow this course, but it is getting ever more precarious. If we want Iran to refrain, and we also talked about this, the rest of the countries must redouble their efforts in order to provide Iran with an acceptable level of oil export despite all the odds and set the stage for at least some normalization of foreign economic activity.”

To what extent is this possible amid the unprecedented US pressure on Iran? Federica Mogherini, head of the EU for foreign affairs, has cautiously suggested the possibility of intensifying the work of INSTEX. “The question whether INSTEX will deal with oil is currently being discussed by the shareholders,”- she said.

But it is this very issue that determines Iran’s policy, and the choice of the directions of this policy clearly correlates with the following possible developments regarding the JCPOA.

The first way is possible if the authors of the JCPOA, the European Union, and other countries concerned can provide an “acceptable level of oil export”. In this case, Iran will return to the meticulous fulfillment of its nuclear deal commitments. However, there are great doubts that Iran’s partners will be able to satisfy its oil export needs.

American officials have warned European countries that they risk violating sanctions against Iran if they promote a barter system that could allow the export of Iranian oil. A senior White House administration official told Washington Examiner that the US Department of the Treasury had contacted the INSTEX Council to “signal dissatisfaction with the creation of a tool that helps to dodge sanctions and the dangers associated with it.”

No matter how much European politicians and diplomats would like to support the JCPOA, it seems that European business is not ready to take chances with the US sanctions.

The American oil embargo has created a situation which is unparalleled, even compared to the tough international sanctions of 2012-2016. In July, the export of Iranian oil fell to 100 – 120 (taking into account condensate and light oil) thousand barrels per day . In June, this indicator ranged between 300 and 500 thousand. In April 2018, Iran exported 2.5 million bpd , which is 25 times more than this July.

According to experts, to determine the exact amount of oil currently sold by Iran is difficult, since Tehran is using “gray” and other export options. However, the current estimates range within the above mentioned figures.

Thus, even if INSTEX begins to operate at its full “oil” capacity, even if oil is sold on a daily basis to China , Russia , and European countries, and even if the oil export is carried out with the use of all possible legal and semi-legal ways, it is unlikely that all this will compensate Iran’s losses in oil exports and, accordingly, in petrodollars.

However, even in the event of such a far from optimistic scenario, and even considering financial losses, Tehran will not profit from leaving the JCPOA, first of all, for political reasons.

The second option for Iranian policy, will most likely take shape in the context of the EU’s inability to circumvent US sanctions and thereby fulfill its obligations under the JCPOA. In this case, there could be two scenarios.

The first hypothetical option for Iranian policy amid INSTEX futility: Iran openly leaves the JCPOA. On July 29, the Iranian Foreign Ministry issued a statement in which it demanded yet again that European countries act on the conditions of the JCPOA. Otherwise, the statement said, Iran would cease to pursue its obligations under this agreement.

As part of this option, Iran terminates the implementation of the Additional Protocol to the IAEA guarantees,  puts an end to the activities of the IAEA inspectors and control by the Agency, restores its nuclear potential and activates the implementation of its nuclear program under plans which were in force before the adoption of the JCPOA. In its most radical version, Iran withdraws from the Treaty on the Non-Proliferation of Nuclear Weapons (NPT). Such a policy, in its best version for the Iranians, will lead to the complete isolation of Iran and the resumption of international sanctions, possibly under the patronage of the UN Security Council. At worst, it will lead to possible air and missile strikes by the United States and / or Israel at Iran’s nuclear facilities (let’s recall the troubled year 2012). Clearly, such a development does not suit anyone, first of all, Iran.

It should be borne in mind that the European Union (Britain, France and Germany), while opposing the United States on the JCPOA, backs Donald Trump and his team on other issues concerning Iran and its policies. These are as follows: Iran’s missile program, Tehran’s military and political activities in the Middle East, Iran’s support of Hezbollah, Hamas and other Shiite groups, which are deemed terrorist in most Western countries. Therefore, in the event of the collapse of the JCPOA, the EU will concentrate all its political, diplomatic and propaganda campaigns and, possibly, military potential, on Iran.

The second possible political option of Tehran in the conditions of INSTEX incapacity is the continuation of the policy which is currently pursued by the Iranian leadership. On the one hand, there is a well-structured and well-thoughtout phasing out of obligations under the JCPOA, which does not envisage going beyond the “red lines”. On the other hand, bringing partners as close as possible and at the same time lifting tensions in relations with opponents with a view to set the stage for negotiations

On January 29, 2019, addressing a conference on defense and security in Iran, Chief Military Advisor to the Commander-in-Chief and Supreme Leader of the Islamic Republic of Iran, Brigadier-General Yahya Rahim Safavi said that “the development of Iran’s strategic relations with global competitors of the United States, including Russia and China, is one of Iran’s major defense strategies.”

In June, China and Iran held joint naval exercises at the strategic Strait of Hormuz. In July, Iran unilaterally introduced a visa-free regime for citizens of China, as well as for residents of Hong Kong and Macau.

According to Iranian politicians and political analysts, Russia is Iran’s strategic ally in the region and elsewhere in the world. The Commander of the Iranian Navy, Rear Admiral Hossein Khanzadi, has said that Iran and Russia intend to step up maritime cooperation. According to the admiral, a memorandum of understanding was signed in Moscow on naval cooperation and the two sides plan joint military exercises in the Indian Ocean before the end of the year. “By the Indian Ocean, we mean a vast area in the northern part of the ocean, including … the Strait of Hormuz, as well as the Persian Gulf.” Later, on July 30, the command of the Iranian Navy stated that Rear Admiral Khanzadi’s words about the location of the exercises were misinterpreted. He meant the northern part of the Indian Ocean and the Oman Sea.

On August 1, the Russian Defense Ministry did not confirm either the signing of any  document, or any plans for joint maneuvers of the Russian Navy and the Iranian Navy.

Judging by these facts, Tehran is trying to use Iran’s good relations with China and Russia for its political agenda and for an effective struggle against its antagonists.

Simultaneously, Iran is seeking to alleviate tensions with its opponents as part of its policy of moderate withdrawal from the JCPOA. A few days ago, Iranian Foreign Minister Mohammad Javad Zarif announced his country’s readiness for a dialogue with Saudi Arabia, Iran’s most fierce rival in the Middle East. The two countries disagree on many issues and support parties that are at war with one another.

The most significant event of recent days is an appeal of the Iranian Foreign Minister Mohammad Javad Zarif to U.S. President Donald Trump to settle the differences between the two countries through negotiation and not succumb to the influence of advisers and allies, who, in his opinion, are pushing Washington into war with Tehran. As Mr. Zarif said “diplomacy is tantamount to common sense, not weakness.”

The Iranian diplomacy is thus demonstrating political flexibility and, at the same time, pragmatism. It seems that Tehran is playing a simultaneous game with many parties and, an all likelihood, there are two major points for Iran to gain from these games.

The first is to prolong the time it takes to make drastic decisions. In any case, it will play for time until the presidential election in the United States, due to take place in November 2020, hoping for the victory of the Democrats and, accordingly, the revival of the JCPOA and the return of Iranian-American relations to the period of 2015-2016.

The second is to score as many points as possible on playing venues around the world to create favorable conditions for undoubtedly welcome future negotiations, in the first place, with the Americans, and, preferably, with a Democratic administration.

Despite its daring and independent position, Tehran has no other pragmatic choice but negotiations. In all likelihood, the American pressure on Iran under Donald Trump will not dwindle. Given the situation, Iran’s foreign policy of the near future will move along a thorny path full of unpredictable pitfalls and unexpected turns. But obviously, all these efforts are oriented at the only option possible – negotiations. Other ways are either unrealistic, or lead to war. And this, I dare say, is something no one wants, including the United States.

From our partner International Affairs

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Middle East

U.S. – Iran tensions: Position of Baku Remains the Same

Asim Suleymanov

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The situation in the Middle East is still tense. First of all, because of the aggravating relations between Iran and the United States, that resemble a roller coaster. A temporary stabilization follows the next peak, but at a level below the previous aggravation. Then a new incident takes place or another ultimatum is given by one of the parties, and everything repeats again.

Tensions with Iran have steadily increased since U.S. President Trump withdrew the United States from the 2015 Iranian Nuclear Agreement and re-imposed harsh economic sanctions on Iran. Rouhani and other Iranian officials accuse the United States of engaging in “economic terrorism.”

The international community now is watching the development of the conflict between the US and Iran. The regular imposition of new sanctions on Iran, the start of tanker wars, the mutual threats of Washington and Tehran become a real threat to international security. The projects exempted from US sanctions include the Bushehr Nuclear Power Plant, the Fordow Fuel Enrichment Plant (FFEP) and the Arak heavy water nuclear reactor.

It seems clear the Iranians have little inclination or motivation to back down. They will probably increase the aggression toward merchant shipping, either putting mines in the Strait of Hormuz (which they did as part of the so-called “tanker wars” in the 1980s) or actually sinking a ship, probably surreptitiously using a diesel submarine.

Meanwhile, anti-Iran sanctions hit considerably Iran’s partners. They are forced to look for mechanisms of evading these sanctions and to look for new formats of interaction in order to protect existing ones.

Today, many countries reject full economic cooperation with Tehran. But the format of cooperation, aimed primarily at the implementation of global economic and transport projects, continues to exist. The next trilateral summit of the leaders of Russia, Azerbaijan and Iran is clear evidence that this format of cooperation is beneficial. All the sanctions can’t hinder it.

If we imagine that the war between the USA and Iran will start, it will become an unconditional, non-compensating disaster for all its participants. That will be a war without winners. All the involved parties will lose.

As a neighboring country Azerbaijan will inevitably be drawn into the conflict. It can turn into a catastrophe, as refugee flows and extremists will head to Azerbaijan, especially from Iranian (Southern) Azerbaijan region.

So far, the President of Azerbaijan Republic Ilham Aliyev remains the most successful leader of the South Caucasus. He is confidently controlling the ship of the state. With its reasonable policy, Azerbaijan has already ensured its own place in a multipolar world. And this place does not mean that Azerbaijan will follow Russia and China instructions. The government of Baku will act in accordance with its own interests that ensures independence and a place in the future multi-polar world.

The main thing is to continue this course being afraid of nothing, but acting within the framework of international law, if some other country commits indecent acts. A real politician should not fall prey to intimidation, the psychological attack of the West countries. This politician weighs reality, facts, actions. If Azerbaijan succumbs to such an attack, the tested methods will be applied in response such as color revolutions, external pressure and etc.

For Azerbaijan, the Islamic Republic of Iran is not just an ordinary country. First of all, Iran is the Azerbaijan Republic’s southern neighbor. The 2 states share about 618 kilometers of land borders. These two countries border each other in the Caspian Sea as well. Both countries share values from their mutual past and some elements of a common culture. Azerbaijan has the second largest Shi’i population in the world, after Iran. The membership of both countries in Muslim and regional organizations like the Organization of Islamic Conference and ECO, is an indicator of the countries’ affinities in terms of geography and religion.

The history of direct relations for the last 10 years shows that such positive and binding factors as neighborhood and the same religion are not enough to create close relations between them. Other important factors, which affect current relations between Azerbaijan and Iran, exist as well.

Azerbaijan is well aware that there can be no sovereign state in a unipolar world. This simple, but very sober and very courageous calculation dictated Aliyev’s policy of supporting the Iran-Azerbaijan-Russia format of cooperation.

The Islamic Republic of Iran plays an active role in the geopolitical struggle over Caspian oil. As major hydrocarbon exporters themselves, Russia and Iran view the new oil and gas producers in the Caspian region as a threat to their own economic interests. Just like Russia, Iran is deeply concerned over growing western capital investments and the expansion of foreign interests and presence in the region. Being unable to compete with US and European technology and capital in tapping the abundant Caspian natural resources, Iran and Russia have resorted to non-economic ways of influence in the region.

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