The 32-year old Prince Muhammad bin Salman, who is the heir to Saudi Arabia’s throne, wants at first “to eradicate the roots of Islamic extremism” as soon as possible. This means that from now on the confrontation between Shiite Iran and Sunni Saudi Arabia will be downplayed from infra-Islamic clash of civilization to a normal and natural standard of regional warfare.
The openings made by Muhammad bin Salman – designated as Crown Prince by his father after many years – such as allowing women to drive are very clear signs that the al-Saud Kingdom does no longer want to be a fundamentalist island in the Middle East nor a silent partner of the United States or of other countries.
This implies the end of Sunni-Shiite clash of civilizations and the fact that Saudi Arabia agrees to set aside its traditional role as leader of an all-out struggle with the “Ali Sect” led by Iran.
Let us not be misled by the first reactions to the Saudi official statements.
The war against Qatar is primarily a fight against the “Muslim Brotherhoods” and the clash with a natural gas power, namely Qatar, against a necessarily oil power, namely Saudi Arabia.
Other economic cycles, other buyers, other geostrategic and military development lines between Al Thani’s Qatari Emirate and the al-Saud Kingdom.
Hence, from now on, Saudi Arabia wants to avoid a radical and global war throughout the Middle East to destabilize it and thus conquer the old and modern hegemony of Islam within the Greater Middle East.
No longer pan-Islamic dreams of glory, but the protection of the Saudi Kingdom’s national interest.
Hence there are two winners in the current fight: the first is Israel and hence the countries, excluding the United States, which want to reformulate their friendly presence throughout the old Fertile Crescent.
It is also worth noting that Prince al-Walid, arrested by Muhammad bin Salman, was a fierce enemy of the current US President.
It should be recalled that the United States led by President Donald J. Trump yielded to the “Sunni NATO” project, namely the Islamic Military Alliance to Fight Terrorism, led by the Pakistani General Raheel Sharif.
The “Sunni NATO” headquarters are located in Riyadh, which still implies a hard line obviously against Iran and India, as well as support to the fight against the Afghan Taliban.
And if the “Sunni NATO” were the project of a strategic and economic internationalization of petromonarchies, thus isolating Iran in a future ever less profitable oil market?
After the six Saudi Kings, from 1932 onward, Muhammad Bin Salman has inherited de facto power in the Kingdom by his father, Prince Nayef, thus replacing his half-brother who, however, is still a member of the clan holding true power in the Saudi family, the “Sudairy Seven”.
The current strong man of the Saudi regime, namely the Crown Prince, was raised to the rank of second in the line of succession, in the first half of 2015. In fact, he has become an important personality on the world scene when ten years ago he destabilized – probably permanently – the al-Qaeda network in the Saudi Kingdom and last year decided – together with his 55-year old cousin, Mohammed Bin Nayef – to exert the utmost pressure on the Houthi rebels in Yemen, a network of Shiites linked to Iran.
For the al-Saud Kingdom, closing the doors to Iran in its area of influence means to ensure a peaceful internationalization outside the regional Islamic universe, as well as to ensure the Kingdom’s permanent social and religious stability.
Hence the war between the Shi’a Iranian Republic and the Wahhabi and Sunni Kingdom is bound to keep the Greater Middle East a hot spot and try to control the routes in the Persian Gulf, while the perimeters of the new Middle East global security are redefined outside Syria and the Lebanon.
A system that the emerging power, namely the Russian Federation, will keep out of the US control lines, while Russia will further expand to Libya, the Lebanon and obviously to the rest of the Maghreb region, not to mention the Horn of Africa and Egypt.
This is a new redesign of the Western balance of powers towards the Russian and Chinese ones – a new system emerging in the new external, but now essential peripheral areas of the Greater Middle East.
Nevertheless there is an essential symbolic and political factor which should not be forgotten in the Shakespearean Royal Palace of Riyadh.
In fact, it is today that, after many years, Prince Muhammad bin Salman directly inherits the throne from his Father – also thanks to a legal-political institution established by King Salman in 2017, namely the “Allegiance Council”, designed to make the process of succession in the Saudi Kingdom smoother and more orderly.
Born on August 31, 1985, the heir to the throne Prince Mohammed is now 37 and has already been the youngest Defence Minister in the world.
Even today, however – considering the strong autonomy of Mohammed Bin Salman – the dynastic institution founded in 2007 seems to be not yet fully operational.
Mohammed Bin Salman replaced his cousin in June 2017, as part of a major transformation of the political and strategic system inside the Saudi Royal Family.
The whole network of high-profile “corrupt people” or “traitors” arrested in an anti-corruption sweep by the future Saudi King, is made up of 49 senior officers, Princes and Ministers – a police operation devastating the entire old system of political, financial and strategic equilibria that characterized the old pact of “petrodollar laundering”, which marked the union between the United States and Saudi Arabia when Henry Kissinger negotiated the whole operation, in perfect secrecy, at the end of the “Yom Kippur War” .
The choice of Muhammad as heir to the throne, upon King Salman’s proposal, was accepted by 31 out of the 34 members of the Allegiance Council.
Hence the policy line is now clear: the Kingdom wants to govern two parallel evolutionary lines: the exit from the oil-dependent economy, which Prince Muhammad Bin Salman has envisaged in his Vision 2030 program, and the creation of regional hegemony outside oil dependence from the United States, which is now autonomous from the Middle East oil thanks to its shale oil.
In its already known project, the basis for Saudi Arabia’s future hegemony regards the acceptance of two new factors: the US future energy autonomy with its “oil and shale gas” and hence Saudi Arabia’s exit from a guaranteed military and economic balance with the United States, as well as the historic collapse of oil barrel prices – oil which, according to the Saudi leaders, must be entirely left to Shiite poverty and hence to Iran.
Hence the “Vision 2030” program wants to reduce the Saudi dependence on oil and obviously the dependence of the national economy on the public sector.
Moreover, the issue lies in making the Royal Family preserve its ability to distribute selective, but important resources to the most politically important walks of Saudi population – on a case-by case basis – to support the regime.
There is no more money for luxuries. The Saudi government’s money must be spent to preserve people’s support that is currently no longer guaranteed.
In fact, without panem et circenses, it is hard to imagine – in the future – a reasonable stability of the Saudi Royal Family. And panem et circenses will be ever less a burden on US accounts.
The future dollar equilibria and the end of the Euro as a global currency, as well as the end of the use of petrodollars by Russia and China, make us think that the new ruling class in Saudi Arabia will be ever less pro-USA and ever more multilateral.
And it is the Royal Family as such – not in the variety of its many groups – who shall bear responsibility for funds to masses and for public charity that shall increasingly bear the costs of “liberalization”, of low wages and of the deprivation of union, political and clan protections.
In fact, if Saudi Arabia does not plan its future “public charity” it will end up like the largely liberalized Lebanon or like the States that, after the crisis in the grain and food commodity market of 2008-2010, had to face the riots that – manipulated by others – later turned into the “Arab Springs”.
In this case the probable solution of the future King Mohammed will be greater democratization of choices to replace a reduction in income.
A “European” solution.
The Saudi “Vision 2030” project also implies liberalization specifically aimed at creating jobs and opportunities for companies in the service sector and in the tourist and entertainment business, in particular.
But who are the “purged” of the new Saudi regime?
They are 49 people, eleven Princes, four Ministers of the new regime that Muhammad Bin Salman – the first heir designated by his father, King Salman, to rule Saudi Arabia – has agreed to put aside forever.
There are clear signs of what will happen shortly.
In this context, it is worth recalling the very important role played by the marginalization of Al Waleed bin Talal in the new Saudi financial and political context.
Forbes reported he has a personal fortune of over 17 billion US dollars.
The investment of Prince Al Walid, the elder son of King Abdullah Abdulaziz and of Riad El Sohl, the Lebanese Prime Minister in the 1950s, are spread in the main Western areas: Twitter, Lyft, Eurodisney, Twentieth Century Fox, a tower in Jeddah, Saudi Arabia, which is the highest in the world and was supposed to open in 2019.
He sold a yacht to Donald Trump, whom he hates, but has still significant investment in Apple, News Corp., as well as the ownership of the Savoy Hotel in London and the MBC satellite TV network. Other purged officials are the Head of the Saudi Arabian General Investment Authority, Amr al Dabbagh, as well as Ibrahim Assaf, the former Minister of Finance, and finally Bakr Bin Laden, the Head of the Binladen Group, a well-known real estate and investment group.
Other purged officials include another former Saudi Minister of Finance, Adel Fakieh, a reformer from day one, as well as Khaled al Tuwajiri, a manager of the Saudi traditional economic sector.
They are all accused of having embezzled public funds to transfer them to their private accounts.
A source of enrichment and “visible consumption” of the al-Saud extended family, as Veblen would have said.
Now the family is no longer a single one and the Saudi government will have a less corporatist and, above all, less personalist logic.
This Saudi “cleansing” operation marks the end of the old link between Arab internationalization and Sunni jihadist terrorism. Muhammad bin Salman’s reforms also marks the Saudi Kingdom’s closure to the flows of the market-world, while there is the re-emergence of the clash between Shiites and Sunnis in a new Middle East, where Saudi Arabia has already established a new relationship with Russia and Israel and decided to effectively follow Xi Jinping’s model, which involves a change of the regime through a fight against “corruption”.
It was one of the world’s economic leaders, namely al-Walid Bin Talal, to agree to support Gaddafi before his end in 2011, while the shadows were already casting over the Libyan leader.
In fact, al-Walid ibn Talal attempted to sell one of its A340 Airbus for 120 million US dollars through a Jordanian broker, Daad Sharaf, who was very close to Gaddafi.
Daad Sharaf also had to receive a 6.5 million Us dollar “brokerage” fee, but Prince Al Waleed sold to others the airplane probably already used to carry the Lockerbie attacker back to Libya.
A network in which business mixed dangerously with the Saudi geopolitical operations – at a time when, on the one hand, Saudi Arabia supported the vague “fight against terrorism” and, on the other, fomented it.
There is no need to recall here the long and very significant story of the relationship between the old Chief of the intelligence services, Turki al-Faisal, a very strong representative of the “Sudairy Seven” and of the network that led part of the Saudi establishment to play the crazy, but not senseless card of al-Qaeda.
Furthermore, for al-Walid there are also charges – already known in the global financial circles – of corruption, bribery, embezzlement and insider trading.
The strong reaction of the Royal Family currently in power against the part of al-Saud members who participated in the crazy rush of the “high” oil price phase – when everything was possible, both gains and illegality, as well as economic growth and frauds – is a very effective way to win support from the Saudi people, fed up with the idle rentier or “opulent ruling class” attitudes of some members of the Royal Family.
Probably the end of the cycle between Sunni jihad and growth of the Kingdom will be the point in which the Greater Middle East will be redesigned: a de facto alliance between Saudi Arabia and Israel, both united by the Shiite danger, between the Golan Heights for Israel and South Yemen for Saudi Arabia; a new alliance between Saudi Arabia, Israel and Russia; China’s entry in the region; the new US positioning and obviously the often ridiculous irrelevance of the European Union.
The system of the future King Muhammad – after the strange death of Prince Mansur Bin Muqrin in the region of Asir, Saudi Arabia, the husband of a daughter of old King Fahd and later Custodian of the Two Holy Mosques, as well as son of Muqrin al-Abdulaziz, who had been Crown Prince from January to April 2015 – will be a political balance in which keeping the country united and preserving the link between the Royal House and the Saudi people will be the beacon of the monarchy.
No longer a predatory ruling class, also in relation to the West, but an elite who wants the Kingdom’s political expansion, as well as its economic transformation and hence the end of the oil-dependent economy – a regime that wants to play all its strategic cards, well aware that a King (the United States) is leaving and another King (the Russian Federation) is entering the scene in the region.
And also aware that Israel is now a well-acquired fact in the Middle East.
Saudi sports diplomacy: A mirror image of the kingdom’s already challenged policies
Saudi sports diplomacy is proving to be a mirror image of the kingdom’s challenged domestic, regional and foreign policies.
Overlorded by sports czar Turki al-Sheikh, Saudi sports diplomacy, like the kingdom’s broader policies, has produced at best mixed results, suggesting that financial muscle coupled with varying degrees of coercion does not guarantee success.
Mr. Al-Sheikh, a 37-year old brash and often blunt former honorary president of Saudi soccer club Al Taawoun based in Buraidah, a stronghold of religious ultra-conservatism, and a former bodyguard of crown prince Mohammed bin Salman, is together with Saud al-Qahtani among the king-in-waiting’s closest associates.
Prince al-Waleed bin Talal, one of the kingdom’s wealthiest investors, acknowledged Mr. Al-Sheikh’s ranking in the Saudi hierarchy when he made a donation of more than a half-million dollars to Saudi soccer club Al Hilal FC weeks after having been released from detention.
Prince al-Waleed was one of the more recalcitrant detainees among the scores of members of the ruling family, prominent businessmen and senior officials who were detained a year ago in Riyadh’s Ritz Carlton Hotel as part of Prince Mohammed’s power and asset grab.
Prince Al-Waleed said on Twitter at the time that he was “responding to the invitation of my brother Turki al-Sheikh.”
Mr. Al-Qahtani, who was recently fired as Prince Mohammed’s menacing information czar in connection with the killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul, was banned this week from travelling outside the kingdom. Mr. Al-Sheikh has not been linked to the Khashoggi murder.
Nevertheless, his sports diplomacy, exhibiting some of the brashness that has characterized Prince Mohammed as well as Mr Al-Qahtani’s approach, has largely failed to achieve its goals. If anything, it appears to have contributed to the kingdom’s growing list of setbacks.
Those goals included establishing Saudi Arabia as a powerhouse in regional and global soccer governance; countering Qatari sports diplomacy crowned by its hosting of the 2022 World Cup; projecting the kingdom in a more favourable light by hosting international sporting events; becoming a powerhouse in soccer-crazy Egypt, the Arab world’s most populous nation; and using the competition for the 2026 World Cup hosting rights to bully Morocco into supporting the Saudi-United Arab Emirates-led boycott of Qatar.
To be sure, with the exception of a cancelled tennis exhibition match in Jeddah between stars Rafa Nadal and Novak Djokovic, most scheduled sporting events, including this season’s opening Formula E race in December and the Italian Supercoppa between Juventus and AC Milan in January, are going ahead as planned despite a six-week old crisis sparked by the killing of Mr. Khashoggi.
Yet, if last month’s friendly soccer match in Jeddah between Brazil and Argentina and this month’s World Wrestling Entertainment’s (WWE) Crown Jewel showpiece are anything to go by, major sporting events are doing little to polish the kingdom’s image tarnished not only by the Khashoggi killing but also the war in Yemen that has sparked the world’s worst humanitarian crisis since World War Two. The sports events have so far failed to push Mr. Khashoggi and Yemen out of the headlines of major independent media.
Mainstream media coverage of Saudi sports has, moreover, focussed primarily on Saudi sports diplomacy’s struggle to make its mark internationally. One focus been the fact that Gianni Infantino, president of world soccer body FIFA, has run into opposition from the group’s European affiliate, UEFA, to his plan to endorse a US$25 billion plan for a new club tournament funded by the Saudi and UAE-backed Japanese conglomerate SoftBank.
If adopted, the plan would enhance Saudi and Emirati influence in global soccer governance to the potential detriment of Qatar, the host of the 2022 World Cup. Saudi Arabia and the UAE spearhead a 17-month old economic and diplomatic boycott of Qatar designed to force it to surrender its right to chart an independent course rather than align its policies with those of its Gulf brothers.
Saudi Arabia and the UAE have sought to engineer a situation in which Qatar is either deprived of its hosting rights or forced to share them with other states in the region, a possibility Mr. Infantino has said he was exploring.
Mr. Infantino has also said he was looking into implementing an expansion of the World Cup from 32 to 48 teams already in 2022 rather than only in 2026. An expansion of the Qatari World Cup would probably involve including others in the Gulf as hosts of the tournament. Qatari officials have all but ruled out sharing their hosting rights.
Another media focus has been alleged Saudi piracy aimed at undermining Qatar-owned BeIN Corp, the world’s biggest sports rights holder, including the rights to broadcast last summer’s Russia World Cup in the Arab world.
Mr. Al-Qahtani reportedly played a key role in the sudden emergence of BeoutQ, a bootleg operation beamed from Riyadh-based Arabsat that ripped live events from BeIN’s feed and broadcast the games without paying for rights. The Saudi government has denied any relationship to the pirate network.
The piracy has sparked international lawsuits, including international arbitration in which BeIN is seeking US1 billion in damages from Saudi Arabia. The company has also filed a case with the World Trade Organization.
FIFA has said it has taken steps to prepare for legal action in Saudi Arabia and is working alongside other sports rights owners that have been affected to protect their interests.
Mr. Al-Sheikh’s effort to create with funds widely believed to have been provided by Prince Mohammed an international Saudi sports portfolio that would project the kingdom as a regional power broker collapsed with fans, players and club executives in Egypt furious at the Saudi officials buying influence and using it to benefit Saudi rather than Egyptian clubs.
“No one, no one at all — with all due respect to Turki or no Turki … will be allowed to interfere in the club’s affairs,” said Mahmoud el-Khatib, chairman of Egyptian club Al Ahli SC, one of the Middle East’s most popular clubs with an estimated 50 million fans. Mr. Al-Sheikh had unsuccessfully tried to use his recently acquired honorary chairmanship of Al Ahli to take control of the club.
Al Ahli’s rejection of his power grab persuaded Mr. Al-Sheikh to resign in May and instead bankroll Al Ahli rival Pyramid FC. He invested US$33 million to acquire three top Brazilian players and launch a sports channel dedicated to the team.
The club’s fans, like their Al Ahli counterparts, nonetheless, denounced Mr. Al-Sheikh and the kingdom and insulted the Saudi official’s mother in crass terms during a match in September. Mr. Al-Sheikh decided to abandon his Egyptian adventure after President Abdel Fattah el-Sisi ignored his request to intervene. “Strange attacks from everywhere, and a new story every day. Why the headache?” Mr Al-Sheikh said on Facebook.
Mr. Al-Sheikh’s attempt to form a regional powerbase by creating a breakaway group of South Asian and Middle Eastern soccer federations beyond the confines of FIFA and the Asian Football Confederation (AFC) collapsed five months after the formation of the South-West Asian Football Federation (SWAFF) when seven South Asian nations pulled out with immediate effect.
The collapse of SWAFF and Mr. Al-Sheikh’s withdrawal from Egypt were preceded by his backing of the US-Canadian-Mexican bid for the 2026 World Cup against Morocco after he failed to bully the North Africans into supporting the boycott of Qatar.
Adopting a Saudi Arabia First approach, Mr. Al-Sheikh noted that the United States “is our biggest and strongest ally.” He recalled that when the World Cup was played in 1994 in nine American cities, the US “was one of our favourites. The fans were numerous, and the Saudi team achieved good results.”
That was Mr. Al-Sheikh’s position six months ago. Today, men like Prince Mohammed and Messrs. Al-Sheikh and Al-Qahtani are seething. US President Donald J. Trump is proving to be an unreliable ally. Not only is he pressuring the kingdom to come up with a credible explanation for Mr. Khashoggis’ killing, Mr. Trump is also seemingly backtracking on his promise to bring Iran to its knees by imposing crippling economic sanctions.
Saudi distrust is fuelled by the fact that Mr. Trump first asked the kingdom to raise oil production to compensate for lower crude exports from Iran and then without informing it made a 180-degree turn by offering buyers generous waivers that keep Iranian crude in the market instead of drive exports from Riyadh’s arch-rival down to zero.
Seemingly cut from the same cloth as Prince Mohammed, Mr. Al-Sheikh, drew his pro-American definition of Saudi Arabia First from the crown prince’s focus on the United States. Prince Mohammed, Mr. Al-Sheikh and other senior Saudi officials may be considering whether putting the kingdom’s eggs primarily in one basket remains the best strategy.
Whatever the case, Mr. Al-Sheikh’s sweep through regional and global sports has left Saudi leaders with little to leverage in the kingdom’s bid to pick up the pieces and improve its image tarnished first and foremost by Mr. Khashoggi’s killing but also by the trail the sports czar has left behind.
Paris Peace Forum: A missed opportunity for the Middle East
Timed to coincide with the centennial of the World War I armistice, the Paris Peace Forum (PPF) launched by French president Emmanuel Macron adopted a welcome approach to the root causes of contemporary conflict, including climate change and the double-edged sword represented by new technologies.
The forum, which took place from November 11-13, showcased projects that spoke to the innovation and collaboration critical to improving lives and reducing tensions across the globe.
Conspicuous by their absence
Even though the summit saw 65 heads of state from all over the world come together to launch the event, precious few of those leaders came from the Middle East – even though the region could benefit as much as any other part of the world from this “Davos for democracy.” While this first peace summit represented a promising start, any future editions need to find a way to make inroads with citizens in the countries where they are needed most. Of course, this is a two-way street, with leaders in those countries needing to participate in and draw lessons from such gatherings.
The Middle East’s most notable representatives at the event were Qatari emir Tamim bin Hamad al-Thani and Lebanese prime minister Saad Hariri. Their presence was fitting: while so many of their neighbors jostle with each other to secure their own geopolitical ends, Qatar and Lebanon have faced down the instability surrounding them to protect themselves from dangerous regional currents. Unfortunately, the leaders who could have really used reminding of the importance of peace were absent from the stage.
An “island” of stability
Qatar, for its part, has been the subject of a regional blockade for the best part of 18 months. A coalition of Saudi Arabia, Bahrain, Egypt and the United Arab Emirates (UAE) have all severed ties with the country since June 2017 for its alleged “support for terrorism” but more realistically for its willingness to deal with Iran against a backdrop of acrimony between the two sides of the Gulf. The Saudis, for their part, have gone so far as planning to cut Qatar off from the mainland with a new canal.
Far from buckling, however, Qatar has proven remarkably resilient and stuck firmly to a strategy of de-escalation with both sides of the Saudi-Iranian cold war. Events since have rewarded that cool-headedness. Global markets nervous about the turbulence in Riyadh are now looking to Qatar as a regional investment driver instead. Ironically enough, none other than Saudi crown prince Mohammad bin Salman praised the performance of the Qatari economy last month.
Delicate peace in Beirut
Lebanon has had greater difficulty insulating itself from the instability across its border with Syria, but Saad Hariri has nonetheless maintained a fragile domestic peace even after an apparent kidnapping and forced resignation (later rescinded) orchestrated by bin Salman in November of last year. Hariri was detained for two weeks and only released on the back of intense international pressure, apparently out of Saudi anger with the Lebanese premier for cooperating with his Shi’a Hezbollah rivals in Lebanon.
In Lebanon’s torturous system of confessional politics, however, difficult compromises are the nature of the game. Hariri and his Sunni-led political movement have no choice but to negotiate with Hezbollah’s Shi’a faction over the balance of political power on an ongoing basis to keep the country stable. Hariri’s resistance to Saudi demands for aggression has helped keep the peace between Lebanese Sunnis and Shi’a, preventing the sectarian fires that have torn Syria apart from jumping across the border.
External actors have key roles to play
Of course, none of the crises in the Middle East can be viewed in a vacuum. One key part of the program at the Paris Peace Forum summit – entitled Global Powers and the Middle East – focused on the responsibility of outside powers like the United States, Russia, China, Europe and India to find common ground and address the causes of Middle Eastern instability. Left unsaid: these same countries are often deeply involved in perpetuating these crises.
If American, European, or Russian leaders truly want to prevent conflicts in the Middle East, their first step should probably be a sort of Hippocratic oath to “do no harm.” The arms trade is a notable case in point. The Middle East is responsible for 32% of global arms imports. Saudi Arabia, Egypt, and the UAE are three of the five largest customers; their primary suppliers are the US, UK, France, Italy, and Russia.
Rather than encourage stability, this supply of weapons has fed a volatile arms race. Much of that equipment has been used by the Saudi coalition’s intervention in Yemen, which has left eight million Yemenis are the brink of starvation and the country confronting the fastest growing cholera epidemic the world has ever seen. Russia has openly used the civil war in Syria as a venue for showing off its military hardware to potential customers worldwide, even as Bashar al-Assad’s regime continues to massacre civilians.
Instead of helping their local allies arm themselves to the teeth, these outside powers should push Middle Eastern governments to change their damaging patterns of behavior and undertake the kinds of social reforms that are instrumental in easing tensions. Otherwise, systemic inequality and unaccountable leadership will continue to lay the groundwork for conflicts and crises. That might enrich weapons manufacturers, but it will do nothing to achieve the goals pursued in Paris this week.
The sanctions of a split
The tough economic sanctions imposed by the United States against Iran have aggravated conflict between Washington and its close allies. The European Union, the United Kingdom, France and Germany have expressed regret over measures taken by American President Donald Trump and signaled the need to protect their companies. Simultaneously, eight countries have received a six-month “sanctions delay” from the United States, which produced a further negative effect on the balance of strength and set the scene for a further escalation of tension.
The United States announced the resumption of anti-Iranian sanctions, which ban the purchase of Iranian oil and oil products, on November 5. The US Treasury Department pointed out that they were the “toughest” in history: “These are the toughest U.S. sanctions ever imposed on Iran, and will target critical sectors of Iran’s economy, such as the energy, shipping and shipbuilding, and financial sectors. The United States is engaged in a campaign of maximum financial pressure on the Iranian regime and intends to enforce aggressively these sanctions that have come back into effect.”
“The unprecedented financial pressure exerted by the US Treasury Department on Iran should make it clear to the Iranian regime that it will face ever-increasing financial isolation and economic stagnation until it radically changes its destabilizing behavior. From now on, the maximum pressure exerted by the United States will only increase,” – emphasizes US Treasury Secretary Stephen Mnuchin. Washington makes it no secret that the ultimate goal of the sanctions is to reduce oil exports from Iran “to zero.”
Over 700 individuals and legal entities have been put on the sanctions list, including the Iranian national air company Iran Air, more than 65 aircraft it owns, and several dozen ships of the merchant fleet. The sanctions prohibit the purchase of Iranian oil and are directed against port operators, shipping and shipbuilding companies, the financial sector, – primarily tanker insurance companies, – and also restrict operations with Iran’s banks and Central Bank.
Fines will be imposed on anyone who trades oil with Iran and works with its banking system. Secondary sanctions (fines and shutout from the dollar system) may be imposed on companies of third countries. The US also demanded that Iran should be cut off from the SWIFT international payment system. According to reports, on November 5 SWIFT suspended access of some Iranian banks to its system, but without reference to the US sanctions.
This step followed President Trump’s announcement in May this year about Washington’s withdrawal from the Joint Comprehensive Plan Of Action on the Iranian nuclear program. Adopted in 2015 with the participation of Iran, the USA, Russia, China, Britain, France and Germany, the document envisages easing sanctions against Tehran in exchange for its measures to wrap up its nuclear program under the control of the IAEA. The US president dubbed it “the worst deal ever,” saying that it does nothing to stop Iran from pursing its nuclear and missile programs. After Washington’s withdrawal from the JCPOA, the other participants expressed their commitment to this document.
Two days before the sanctions package was put into effect, US President Donald Trump made it clear that the United States was ready to conclude a new agreement with Iran on more stringent conditions. “Our objective is to force the regime into a clear choice: either abandon its destructive behavior, or continue down the path toward economic disaster”, – the US president said on November 3: “The sanctions will target revenues the Iranian regime uses to fund its nuclear program, development and proliferation of ballistic missiles, fuel regional conflict, support terrorism and enrich its leaders”. At the same time, according to Donald Trump, “the United States remains open to reaching a new, more comprehensive deal with Iran that forever blocks its path to a nuclear weapon, addresses the entire range of its malign actions, and is worthy of the Iranian people. Until then, our historic sanctions will remain in full force”.
Having introduced “unprecedentedly tough” sanctions against Tehran, Donald Trump, as part of his business approach to international affairs, left substantial “windows of opportunity” for the subsequent bargaining on a wider range of issues of the international agenda. The USA made an exception for eight states. China, India, Greece, Italy, Taiwan, Japan, Turkey and South Korea were allowed to buy Iranian oil temporarily. According to the London-based Financial Times, these countries will be able to import a limited amount of Iranian oil over the next six months.
Simultaneously, US Secretary of State Michael Pompeo said that more than 20 countries have already cut down on oil exports from Iran, reducing purchases by more than 1 million barrels per day. Independent sources indicate that average daily oil production in Iran fell from 3.8 million barrels in May to 3.3 million barrels in early October. This is quite a lot: because of the reduction, Iran loses about 1 billion dollars a month.
Given that the above exemptions from the sanctions list are temporary, the United States will likely resume political and economic bargaining with the eight countries in spring, with a view to preserve a favorable regime for these countries. In the first place, it concerns China. President Donald Trump will try to use the “Iranian factor” in order to achieve maximum concessions on trade and economic issues from Beijing. Among other things, he will probably make an attempt to force the Chinese side to reconsider joint energy projects with Russia. In the meantime, China’s response to the US decision to resume the anti-Iranian sanctions has been markedly restrained. A spokeswoman for the Chinese Foreign Ministry has called on Washington to respect China’s trade rights and expressed “regret” that the United States relaunched sanctions against Iran.
A much more resolute response came from the European Union – whose trade and economic interests are affected by anti-Iranian sanctions first. EU High Representative for Foreign Affairs and Security Policy Federica Mogherini, as well as the foreign ministers of Great Britain, France and Germany issued a joint statement in which they promised to protect their companies from restrictive US measures. “Our goal is to protect the subjects of the European economy that have legal commercial ties with Iran,” the document states.
In the meantime, the European Union is confronted with the problem of creating a specific structure that would allow European companies to continue to trade with Iran without risking falling under Washington’s sanctions. Brussels reported in October that a new mechanism of payment for Iranian oil exports should be legally ready by November 4, and would go into operation in early 2019. However, according to The Financial Times, by the time the current sanctions were introduced, the Europeans did not have even a legal foundation for the defense mechanism and had not come to agreement on the location of the corresponding “special purpose structure” (SPV). “Now we are actively discussing where the SPV will be located, who will participate in it, and are launching the process of registering it. Time is short, and given the complexity and sensitivity of this issue in the light of its geopolitical consequences, we see very rapid and effective progress,” – said a representative of the French Finance Ministry.
For Europeans, sensitivity of this issue lies in their unwillingness to come under tough Washington’s sanctions themselves – especially in the context of deepening trade and economic differences between the US and the EU. “The US authorities are demonstrating that they will act aggressively towards violators of sanctions, which boosts the effect,” warns partner of law firm Morrison & Foerster and former director of the Office for Foreign Assets Control (OFAC) of the US Treasury John Smith. “When the United States threatens to punish violators and does it in practice, examples of punished companies force others to think seriously,” he said in an interview published by the American newspaper The Wall Street Journal.
Without waiting for the sanctions regime to come into effect, Iran’s President Hassan Rouhani stated that Tehran would be able to overcome it. “America wants to bring down Iran’s oil sales, but we will continue to sell oil to break through the sanctions,” he said.
Tehran could not but point out the fact that the resumption of the US sanctions package against Iran coincided with the anniversary of the capture of the US embassy during the Islamic revolution in Tehran in 1979. Addressing his compatriots, Supreme Leader Ayatollah Ali Khamenei said: “The goal of American sanctions is to cripple and restrain the Iranian economy, but the result we obtained in reality was the country’s striving for self-sufficiency.” “The main objective of the United States in all this is to regain the supremacy it had in the period of tyranny. But this will not happen,” Ayatollah Khamenei said.
Meanwhile, Tehran does not attach any fundamental significance to the exclusion of eight states from the sanctions regime. “The Islamic Republic could sell its oil even if these eight countries were not excluded, we would still sell our oil,” said Hassan Rouhani in this regard.
The anti-Iranian sanctions imposed by Washington have not yet had a direct impact on Russia. The sanctions list published by the US Treasury contains only the Russian “daughter” of the Iranian Bank Melli – the Mir Business Bank, registered in Moscow (MB Bank). Its shareholder is Bank Melli Iran, which, according to the United States, provides multi-billion financial, material and technological support to the Islamic Revolution Guards Corps (IRGC). “Bank Melli enabled the IRGC and its related parties to transfer funds both inside and outside Iran,” the statement of the US Treasury said. JSC Mir Business Bank was registered in Moscow in 2002. Bank Melli Iran is its sole shareholder.
According to reports, the Trump administration has decided not to pursue the Russian direction in its pressure on Iran ahead of a new meeting of the presidents of Russia and the United States due to take place at the end of this year. The meeting could be held on November 11 in Paris, at events dedicated to the 100th anniversary of the end of the First World War, or — more likely — at the G-20 summit in Argentina in late November – early December this year. However, regardless of the outcome of this meeting, Russia should bear it in mind that its trade and economic ties with Iran, and in a broader context – relations with OPEC – will become the target of a new round of global games of the US administration.
First published in our partner International Affairs
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