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Iran: Protests and threat of renewed sanctions focus economic thinking

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Iranian Supreme Leader Ayatollah Ali Khamenei appears in the wake of recent anti-government protests to have put his weight behind President Hasan Rouhani’s repeated calls for reduced military and Revolutionary Guards involvement in the economy.

Mr. Khamenei signalled his support by ordering the military and the Guards to start divesting from commercial holdings and businesses not related to their core tasks except for construction projects considered essential by the government.

The order serves not only to address protesters’ grievances that were sparked in part by losses suffered by millions of Iranians a result of the collapse of fraudulent financial institutions with links to the Guards and other public institutions. The financial entities lured investors with high interest rates that they could not pay.

Mr. Khamenei’s order could also sweeten Iranian efforts to persuade Europe to put in place legal measures that would allow it to invest in the Islamic republic even if the United States imposes new sanctions and withdraws from the 2015 international agreement that curbed Iran’s nuclear program.

Europe shares many of the United States’ concern about the role of the Guards in Syria, Yemen, Iraq and elsewhere in the Middle East and the fact that it runs Iran’s ballistic missile program but has insisted that the agreement should be maintained.

A target of US sanctions, the Guards reportedly are not opposed to a reduced stake that analysts say accounts for as much as 30 percent of the Iranian economy. The Guards operate, among others, Khatam al Anbia, a huge construction company with tens of thousands of employees that is involved in civil development, the oil industry and defense businesses. The Guards build roads, operate ports, manage telecommunication networks, and own business in sectors as far flung as finance and medical.

The “top brass have realized that running companies is actually not their competency. The poor management has been a drag on the economy and–as seen in the recent #IranProtests–a risk to internal security and to the prestige of the armed forces,” said Esfandyar Batmanghelidj, an Iran analyst, commentator and business consultant.

In a world in which everything is interlinked, disinvestment by the Guards and military as well as other public institutions like the Social Security Organization, Iran’s largest pension fund, would involve privatization in a country that has found it difficult to attract foreign investment because of the threat of a re-imposition of US sanctions conditionally lifted as part of the nuclear agreement.

US President has threatened not to renew US sanctions relief in May if Europe and the US Congress failed to work towards an agreement with Iran on an addition to the nuclear accord that would restrict Iranian missile testing and development, provide for expanded inspections of Iranian facilities, and extend prohibitions on nuclear-weapons work. Iran insists that the accord cannot be renegotiated.

Europe has been pressing the Trump administration not to walk away from the accord. Iranian officials have suggested that Tehran would adhere to the nuclear deal in case of a US walkout provided that it served its interests.

For Iran to see continued merit in the deal, it would have to believe that European companies would remain interested in investing in the Islamic republic. That would require the European Union adopting legislation that would shield European companies from US secondary sanctions that would target non-American entities invested in Iran.

Privatization of military and Guards-owned companies, given Iran’s undercapitalized financial markets and its small pool of viable domestic investors, would depend on foreign investors, who in turn are unlikely to risk being penalized by potential renewed secondary US sanctions.

“Europe should put in place a viable contingency plan if the United States continues backtracking on the deal and let Washington know it’s ready to use it… Europe will need to present a package (together with China and Russia) that can entice Iran to continue abiding by the core elements of the current nuclear agreement,” said Iran expert Ellie Geranmayeh.

Writing in Foreign Policy, Ms. Geranmayeh argued that Europe should initially attempt to secure from the United States exceptions to the potential sanctions modelled on the US penalties imposed on Russia that provide relief from enforcement for European companies.

“If Washington refuses this approach, European governments should publicly warn that in any instance where the U.S. Treasury actively enforces secondary sanctions targeting European companies dealing with Iran, the European Union will revive measures similar to its ‘blocking regulation’,” Ms. Geranmayeh argued.

The blocking regulation adopted by the European Union in 1996 thwarted then US President Bill Clinton’s attempt to force Europe and others to abide by US sanctions on Libya, Iran and Cuba. The regulation made it illegal for European companies to abide by US sanctions, gave them legal cover to refuse payment of US fines, and opened the door to the EU penalizing US companies in retaliation.

In practice, European companies, if forced to choose between doing business with the United States or Iran, would likely opt to steer clear of the Islamic republic. The EU would be banking on the expectation that the Trump administration would ultimately opt to compromise in a bid to avoid a deterioration of trans-Atlantic relations.

In announcing Mr. Khamenei’s support for reducing the stake in the economy of the military and the Guards, Iranian defense minister Amir Hatami cautioned that “the degree of our success depends on market conditions and the possibility of divestment.”

Said Mr. Batmanghelidj: “If success in privatization is to be achieved…Iran’s equity market investors will need foreign investors to help carry the burden and unlock the opportunity.”

With little insight into what entities will be put up for sale, European investors, even if the EU puts legal protections in place or cuts a deal with the United States, like their Russian and Chinese counterparts, are likely to take a wait-and-see attitude. That could put efforts to reduce the military and Guards’ economic stake in jeopardy, catching it between the rock of lack of Iranian transparency and the hard place of weak domestic financial markets and a limited pool of investors.

If that were not enough, Saudi efforts to counter Iran could further dampen foreign investor appetite. In a sign of the times, South Korean construction company POSCO Engineering & Construction in which Saudi Arabia’s Public Investment Fund has a 38 percent stake cancelled a $1.6 billion contract to build a steel mill in Iran because of objections by the company’s two Saudi board members.

Dr. James M. Dorsey is a senior fellow at the S. Rajaratnam School of International Studies, co-director of the University of Würzburg’s Institute for Fan Culture, and the author of The Turbulent World of Middle East Soccer blog, a book with the same title, Comparative Political Transitions between Southeast Asia and the Middle East and North Africa, co-authored with Dr. Teresita Cruz-Del Rosario and three forthcoming books, Shifting Sands, Essays on Sports and Politics in the Middle East and North Africaas well as Creating Frankenstein: The Saudi Export of Ultra-conservatism and China and the Middle East: Venturing into the Maelstrom.

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North Africa: Is Algeria Weaponizing Airspace and Natural Gas?

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In a series of shocking and unintelligible decisions, the Algerian Government closed its airspace to Moroccan military and civilian aircraft on September 22, 2021, banned French military planes from using its airspace on October 3rd, and decided not to renew the contract relative to the Maghreb-Europe gas pipeline, which goes through Morocco and has been up and running since 1996–a contract that comes to end on October 31.

In the case of Morocco, Algeria advanced ‘provocations and hostile’ actions as a reason to shut airspace and end the pipeline contract, a claim that has yet to be substantiated with evidence. Whereas in the case of France, Algeria got angry regarding visa restrictions and comments by French President Emmanuel Macron on the Algerian military grip on power and whether the North African country was a nation prior to French colonization in 1830.

Tensions for decades

Algeria has had continued tensions with Morocco for decades, over border issues and over the Western Sahara, a territory claimed by Morocco as part of its historical territorial unity, but contested by Algeria which supports an alleged liberation movement that desperately fights for independence since the 1970s.

With France, the relation is even more complex and plagued with memories of colonial exactions and liberation and post-colonial traumas, passions and injuries. France and Algeria have therefore developed, over the post-independence decades, a love-hate attitude that quite often mars otherwise strong economic and social relations.

Algeria has often reacted to the two countries’ alleged ‘misbehavior’ by closing borders –as is the case with Morocco since 1994—or calling its ambassadors for consultations, or even cutting diplomatic relations, as just happened in August when it cut ties with its western neighbor.

But it is the first-time Algeria resorts to the weaponization of energy and airspace. “Weaponization” is a term used in geostrategy to mean the use of goods and commodities, that are mainly destined for civilian use and are beneficial for international trade and the welfare of nations, for geostrategic, political and even military gains. As such “weaponization” is contrary to the spirit of free trade, open borders, and solidarity among nations, values that are at the core of common international action and positive globalization.

What happened?

Some observers advance continued domestic political and social unrest in Algeria, whereby thousands of Algerians have been taking to the streets for years to demand regime-change and profound political and economic reforms. Instead of positively responding to the demands of Algerians, the government is probably looking for desperate ways to divert attention and cerate foreign enemies as sources of domestic woes. Morocco and France qualify perfectly for the role of national scapegoats.

It may be true also that in the case of Morocco, Algeria is getting nervous at its seeing its Western neighbor become a main trade and investment partner in Africa, a role it can levy to develop diplomatic clout regarding the Western Sahara issue. Algeria has been looking for ways to curb Morocco’s growing influence in Africa for years. A pro-Algerian German expert, by the name of Isabelle Werenfels, a senior fellow in the German Institute for International and Security Affairs, even recommended to the EU to put a halt to Morocco’s pace and economic clout so that Algeria could catch up. Weaponization may be a desperate attempt to hurt the Moroccan economy and curb its dynamism, especially in Africa.

The impact of Algeria’s weaponization of energy and airspace on the Moroccan economy is minimal and on French military presence in Mali is close to insignificant; however, it shows how far a country that has failed to administer the right reforms and to transfer power to democratically elected civilians can go.

In a region, that is beleaguered by threats and challenges of terrorism, organized crime, youth bulge, illegal migration and climate change, you would expect countries like Algeria, with its geographic extension and oil wealth, to be a beacon of peace and cooperation. Weaponization in international relations is inacceptable as it reminds us of an age when bullying and blackmail between nations, was the norm. The people of the two countries, which share the same history, language and ethnic fabric, will need natural gas and unrestricted travel to prosper and grow and overcome adversity; using energy and airspace as weapons is at odds with the dreams of millions of young people in Algeria and Morocco that aspire for a brighter future in an otherwise gloomy economic landscape. Please don’t shatter those dreams!

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Middle East

Breaking The Line of the Israel-Palestine Conflict

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The conflict between Israel-Palestine is a prolonged conflict and has become a major problem, especially in the Middle East region.

A series of ceasefires and peace negotiations between Israel and Palestine that occurred repeatedly did not really “normalize” the relationship between the two parties.

In order to end the conflict, a number of parties consider that the two-state solution is the best approach to create two independent and coexistent states. Although a number of other parties disagreed with the proposal, and instead proposed a one-state solution, combining Israel, the West Bank, and the Gaza Strip into one big state.

Throughout the period of stalemate reaching an ideal solution, the construction and expansion of settlements carried out illegally by Israel in the Palestinian territories, especially the West Bank and East Jerusalem, also continued without stopping and actually made the prospect of resolving the Israeli-Palestinian crisis increasingly eroded, and this could jeopardize any solutions.

The attempted forced eviction in the Sheikh Jarrah district, which became one of the sources of the conflict in May 2021, for example, is an example of how Israel has designed a system to be able to change the demographics of its territory by continuing to annex or “occupy” extensively in the East Jerusalem area. This is also done in other areas, including the West Bank.

In fact, Israel’s “occupation” of the eastern part of Jerusalem which began at the end of the 1967 war, is an act that has never received international recognition.

This is also confirmed in a number of resolutions issued by the UN Security Council Numbers 242, 252, 267, 298, 476, 478, 672, 681, 692, 726, 799, 2334 and also United Nations General Assembly Resolutions Number 2253, 55/130, 60/104, 70/89, 71/96, A/72/L.11 and A/ES-10/L.22 and supported by the Advisory Opinion issued by the International Court of Justice (ICJ) in 2004 on Legal Consequences of The Construction of A Wall in The Occupied Palestine Territory which states that East Jerusalem is part of the Palestinian territories under Israeli “occupation”.

1 or 2 country solution

Back to the issue of the two-state solution or the one-state solution that the author mentioned earlier. The author considers that the one-state solution does not seem to be the right choice.

Facts on the ground show how Israel has implemented a policy of “apartheid” that is so harsh against Palestinians. so that the one-state solution will further legitimize the policy and make Israel more dominant. In addition, there is another consideration that cannot be ignored that Israel and Palestine are 2 parties with very different and conflicting political and cultural identities that are difficult to reconcile.

Meanwhile, the idea of ​​a two-state solution is an idea that is also difficult to implement. Because the idea still seems too abstract, especially on one thing that is very fundamental and becomes the core of the Israel-Palestine conflict, namely the “division” of territory between Israel and Palestine.

This is also what makes it difficult for Israel-Palestine to be able to break the line of conflict between them and repeatedly put them back into the status quo which is not a solution to the Israel-Palestine conflict.

The status quo, is in fact a way for Israel to continue to “annex” more Palestinian territories by establishing widespread and systematic illegal settlements in the West Bank and East Jerusalem. Today, more than 600,000 Israeli settlers now live in the West Bank and East Jerusalem.

In fact, a number of resolutions issued by the UN Security Council have explicitly and explicitly called for Israel to end the expansion of Israeli settlement construction in the occupied territory and require recognition of the sovereignty, territorial integrity and political independence of the region.

Thus, all efforts and actions of Israel both legislatively and administratively that can cause changes in the status and demographic composition in East Jerusalem and the West Bank must continue to be condemned. Because this is a violation of the provisions of international law.

Fundamental thing

To find a solution to the conflict, it is necessary to look back at the core of the conflict that the author has mentioned earlier, and the best way to resolve the Israeli-Palestinian conflict is to encourage Israel to immediately end the “occupation” that it began in 1967, and return the settlements to the pre-Islamic borders 1967 In accordance with UN Security Council resolution No. 242.

But the question is, who can stop the illegal Israeli settlements in the East Jerusalem and West Bank areas that violate the Palestinian territories?

In this condition, international political will is needed from countries in the world, to continue to urge Israel to comply with the provisions of international law, international humanitarian law, international human rights law and also the UN Security Council Resolutions.

At the same time, the international community must be able to encourage the United Nations, especially the United Nations Security Council, as the organ that has the main responsibility for maintaining and creating world peace and security based on Article 24 of the United Nations Charter to take constructive and effective steps in order to enforce all United Nations Resolutions, and dare to sanction violations committed by Israel, and also ensure that Palestinian rights are important to protect.

So, do not let this weak enforcement of international law become an external factor that also “perpetuates” the cycle of the Israel-Palestine conflict. It will demonstrate that John Austin was correct when he stated that international law is only positive morality and not real law.

And in the end, the most fundamental thing is that the blockade, illegal development, violence, and violations of international law must end. Because the ceasefire in the Israel-Palestine conflict is only a temporary solution to the conflict.

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Iran unveils new negotiation strategy

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Image source: Tehran Times

While the West is pressuring Iran for a return to the Vienna nuclear talks, the top Iranian diplomat unveiled a new strategy on the talks that could reset the whole negotiation process. 

The Iranian parliament held a closed meeting on Sunday at which Iranian Foreign Minister Hossein Amir Abdollahian briefed the lawmakers on a variety of pressing issues including the situation around the stalled nuclear talks between Iran and world powers over reviving the 2015 nuclear deal, officially known as the Joint Comprehensive Plan of Action (JCPOA).

The Iranian foreign ministry didn’t give any details about the session, but some lawmakers offered an important glimpse into the assessment Abdollahian gave to the parliament.

According to these lawmakers, the Iranian foreign ministry addressed many issues ranging from tensions with Azerbaijan to the latest developments in Iranian-Western relations especially with regard to the JCPOA. 

On Azerbaijan, Abdollahian has warned Azerbaijani President Ilham Aliyev against falling into the trap set by Israel, according to Alireza Salimi, a member of the Iranian Parliament’s presiding board who attended the meeting. Salimi also said that the Iranian foreign minister urged Aliyev to not implicate himself in the “Americans’ complexed scheme.”

In addition to Azerbaijan, Abdollahian also addressed the current state of play between Iran and the West regarding the JCPOA.

“Regarding the nuclear talks, the foreign minister explicitly stated that the policy of the Islamic Republic is action for action, and that the Americans must show goodwill and honesty,” Salimi told Fars News on Sunday.

The remarks were in line with Iran’s oft-repeated stance on the JCPOA negotiations. What’s new is that the foreign minister determined Iran’s agenda for talks after they resume. 

Salimi quoted Abdollahian as underlining that the United States “must certainly take serious action before the negotiations.”

In addition, the Iranian foreign minister said that Tehran intends to negotiate over what happened since former U.S. President Donald Trump withdrew the U.S. from the JCPOA, not other issues. 

By expanding the scope of negotiations, Abdollahian is highly likely to strike a raw nerve in the West. His emphasis on the need to address the developments ensuing the U.S. withdrawal from the JCPOA in May 2018 could signal that the new government of President Ayatollah Seyed Ebrahim Raisi is not going to pick up where the previous government left. 

This has been a major concern in European diplomatic circles in the wake of the change of administrations in Iran. In fact, the Europeans and the Biden administration have been, and continue to be, worried about two things in the aftermath of Ayatollah Raisi taking the reins in Tehran; one is he refusing to accept the progress made during six rounds of talks under his predecessor Hassan Rouhani. Second, the possibility that the new government of Ayatollah Raisi would refuse to return to Vienna within a certain period of time. 

With Abdollahian speaking of negotiation over developments since Trump’s withdrawal, it seems that the Europeans will have to pray that their concerns would not come true. 

Of course, the Iranian foreign ministry has not yet announced that how it would deal with a resumed negotiation. But the European are obviously concerned. Before his recent visit to Tehran to encourage it into returning to Vienna, Deputy Director of the EU Action Service Enrique Mora underlined the need to prick up talks where they left in June, when the last round of nuclear talks was concluded with no agreement. 

“Travelling to Tehran where I will meet my counterpart at a critical point in time. As coordinator of the JCPOA, I will raise the urgency to resume #JCPOA negotiations in Vienna. Crucial to pick up talks from where we left last June to continue diplomatic work,” Mora said on Twitter. 

Mora failed to obtain a solid commitment from his interlocutors in Tehran on a specific date to resume the Vienna talk, though Iran told him that it will continue talks with the European Union in the next two weeks. 

Source: Tehran Times

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