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Will Iran be able to counteract US sanctions?

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American sanctions and how to confront them

The Islamic Republic of Iran (IRI) today, as in the past 40 years of its existence, is in the global spotlight as the focus of major political and economic developments.

As you know, on May 8, US President Donald Trump announced the withdrawal of the United States from the nuclear deal – the Joint Comprehensive Plan of Action (JCPOA) – and the resumption of the sanctions regime against Iran.

On August 7, the United States introduced the first anti-Iranian sanctions package that envisages restrictions on the purchase of Iranian cars, gold and metals. The sanctions also affected Iranian companies specializing in aluminum, graphite, coal, and steel, as well as those manufacturing computer programs for industrial enterprises.

On November 4, the United States will launch a second package that will deal a blow to the Iranian energy sector, in the first place, to the oil and gas industry and related industries, and will affect major transactions, that is, the IRI’s banking system.

Undoubtedly, this is a major attack on the Iranian economy. If we recall the period from 2011 to 2016, back then such international sanctions nearly threw it into an abyss in just a few months. However, today the situation is somewhat different. The anti-Iranian sanctions announced by Trump have lost their international status.

Unlike in those days, when due to Tehran’s “nuclear” persistence the entire world rose against it, today Trump’s anti-Iran initiative is not supported by anyone. The White House administration counts only on the financial and economic pressure on the disobedient and the obstinate who do not want to join the campaign against the IRI.

And these turned out to be quite a few. As they met in Vienna in July, the five participants in the nuclear deal with Iran (Russia, China, Britain, France, Germany) agreed to protect the five countries’companies from the impact of US sanctions. Russian Foreign Minister Sergei Lavrov said that the parties had also agreed to establish methods of maintaining trade relations with Iran which “would not depend on the whims of the United States.”

On August 7, immediately after the introduction of American sanctions against the Islamic Republic of Iran, the European Union adopted the so-called ‘blocking’ regulation which invalidates American sanctions against Iran on its territory, bans European companies from observing them and prohibits the implementation of any foreign court rulings adopted on the basis of these sanctions.

The coming into force of this regulation also allows all European organizations to claim compensation in court for damage inflicted as a result of implementation of these sanctions from persons responsible for this (referring to US authorities).

In late August, the EU began to discuss the possibility of creating an independent payment system, which would protect the European business from US sanctions against Iran. The project may involve central banks of France and Germany.

Moreover, at the end of August, the European Commission (EC) approved financial assistance to Iran to the amount of 50 million euros to solve the “key economic and social problems” of the Islamic Republic of Iran. The first tranche amounted to 18 million euros, which will be channeled “for projects in support of sustainable economic and social development in the Islamic Republic of Iran,” with 8 million euros allocated to Iranian private companies. Measures to support the Iranian private sector include assistance to Iranian small and medium-sized businesses, development of production and marketing chains, and technical assistance to the Iranian Trade Promotion Organization. Though small, the sums are important.

The EU will support Iran as long as the country is committed to “full and effective” compliance with the “nuclear deal”, which stipulates the lifting of sanctions, the executive body of the European Union specifies.

Despite measures to support Iran, the desire to preserve the Joint Comprehensive Plan of Action and the EU’s protests against anti-Iranian sanctions, large European and transnational companies do not really believe in the European Union being able to counteract the United States. Experts say that judging by the experience of the past, when the European Union put up resistance after unilateral actions by the White House, these not quite effective “threats” are about all the “resistance” Europe can mount, since the Iranian market, despite all its attractiveness, can not be compared with the American one. Robert Einhorn, Senior Fellow at the Brookings Institution in Washington, former advisor to the US Secretary of State, said: “Foreign companies are already experiencing difficulty doing business with Iran, and if all these difficulties  – non-transparent rules, corruption, poor management, etc. – become aggravated further by the risk of being cut off from the US market and the US financial system, then no reasoning from  European politicians will work.”

Right now, three months before the Americans introduce the main portion of sanctions, many large companies are leaving the IRI. In the oil sector – this is the French oil and gas giant Total. [1]

Fully aware of the situation, the Iranian leadership relies on cooperation with small and medium-sized foreign enterprises which are not so connected with the United States. Goliam Reza Ansari, the Iranian Deputy Foreign Minister for Economic Affairs, said recently: “There are 23 million small and medium-sized businesses in Europe, and they could assist us in bypassing US sanctions.” We must use the potential of European enterprises to meet our economic needs in times of trouble. We are planning to create a working group of experts to promote such enterprises throughout the country. ”

Many countries back Tehran’s anti-sanctions measures. They are prepared to buy oil from Iran, to invest in projects, to provide know-how and technology. First of all, in the oil and gas sector.

The Chinese economic analyst Kingji Su sayvili said that the Iranian economy is able to overcome US sanctions with minimal difficulties, since these measures are not supported by the international community. The Chinese expert emphasized that after the arrival of sanctions many major economies, including European countries, China and Russia, retained or even strengthened economic relations with Iran.

Indeed, the director of the Department of International Cooperation of China Petroleum and Chemical Industry Federation (CPCIF) said that China will continue to import Iranian oil, despite US sanctions. He underscored that the Chinese market and many other Asian markets strongly depend on Iranian oil. According to The Wall Street Journal (WSJ), the number one buyer of Iranian oil – China, which acquires about a quarter of its oil supplies, is unlikely to cut down on its purchases.

In turn, Investment Director of the Iranian National Petrochemical Company (NPC) Hossein Alimorad said that the amount of Chinese investments in the Iranian oil and petrochemical industry had not changed after the US withdrew from the nuclear deal. As Mr. Alimorad announced recently, the NPC has reached an agreement with a consortium of companies from China and the Philippines regarding a $ 7 billion investment in the petrochemical industry in Iran.

Moreover, Mohammad Mostafavi, Director of Investment of the National Iranian Oil Company (NIOC), said that China National Petroleum Corporation (CNPC) together with the Iranian Petropars can take over from Total, which has 50.1% of the stake in the joint project for the development of the 11th phase of the South Pars gas field, if the French company leaves Iran.

German company ADL recently signed an agreement on cooperation in the oil refining sector with the Iranian oil company Sepahan (SOC). The goal is to share technical know-how and knowledge to improve the quality of products, including industrial oils and lubricants. ADL will begin to implement this ambitious plan in cooperation with its Swiss and Austrian partners.

South Korea (ROK) said in mid-August that Seoul will provide financial support to companies affected by new sanctions against Iran, and will look into the possibility of doing business in alternative markets so as to minimize losses to the local economy. It is clear that South Korea, having bought 147 million barrels of oil from Iran in 2017, is more than interested in expanding oil business with it.

Undoubtedly, international support for Iran as it tries to battle Trump’s sanctions is of great value. However, perhaps no less important are the internal economic measures that Tehran is taking to repel, or at least soften the blow to the key sector of its economy – the oil and gas extraction and processing industries.

Oil import substitution

Leaders of the Islamic Republic of Iran are stepping up measures to ensure import substitution. Thus, the Iranian Oil Ministry has banned the import of 84 types of equipment for the oil industry on the grounds that such equipment can be produced domestically.

Among the equipment and products prohibited for importation are wellhead equipment, desalination facilities, anticorrosive substances, sulfur recovery catalysts, wellhead control panels, and others.

Can the Iranians solve the problem of import substitution in the oil industry, while ensuring the necessary modernization of the entire oil and gas sector?

New sanctions against Iran have created severe challenges for Iran’s oil and gas production and its petrochemical industry.

However, it should be noted that the IRI, which was under American sanctions ever since the 1979 Islamic Revolution, has been developing its own production of oil and gas equipment. This kind of work was particularly intensive the period from 2010 to 2016, when anti-Iranian sanctions were the toughest.

The head of the Iranian oil company in southern regions Hamid Bovard said in 2013 that Iranian enterprises were producing oil and gas equipment and developing prototypes for launching into production of about seven thousand items. Mr. Howard expressed confidence that such oil and gas equipment as gas pumps, turbines, ball valves and compressors will be key to the restoration of Iran’s oil industry. By that time, eight hundred projects had been launched, with investments reaching about $ 15.5 billion. All of them aim to increase the recovery rate of crude oil and oil extraction.

Today, amid the increasing pressure from the Trump administration on Iran, measures to counteract sanctions are intensifying. According to Director of the Petrochemical Company Jam Said Shirdel, the company’s specialists, in cooperation with other Iranian companies, have developed and produced 1,000 types of products and equipment for petrochemicals which were previously purchased abroad. He added that in the next two years the company will produce 20,000 types of petrochemical products.

According to Reza Khayyamyan, head of the Association of Equipment Manufacturers of Iranian Oil Companies, the Iranian producers can provide technical services and produce 80% of advanced oil equipment for the development of oil extraction and processing projects. Mr. Hayamyan said this industry employs more than 50 Iranian companies. New contracts worth more than $ 6 billion will soon be signed with local oil extraction and refining companies.

Mr. Hayamyan made it clear that import substitution of oil and gas equipment is on the list of priorities of the Ministry of Oil, which is planning to roll out 14,000 major parts.

As we see, Iran is set on mobilizing its own resources. For one, Secretary of Iran’s Supreme National Security Council Ali Shamkhani said recently that the Iranian private sector plays an important role in counteracting the economic war, which was launched against Iran by the Trump administration.

Mohammad Hosseini, member of the Board of Trustees of the National Development Fund of Iran (NDF), said that Fund will allocate 12% of financial resources to counter US sanctions against Iran.

However, it is too early to talk about a profound modernization of the entire oil and gas complex on the basis of state-of-the-art technologies. As it happens, the most advanced technologies, know-how, innovations in the oil and gas and petrochemical industry, which mark dramatic breakthroughs in this industry and its overall renovation, are concentrated and receive special protection in the laboratories of just a few of the largest oil and gas companies, which, alas, are not ready to share these technologies with Iran.

Economy and politics under sanctions

In general, the economic situation in Iran before Trump announced anti-Iranian sanctions regime was not in its best condition. But in connection with the implementation of the Joint Comprehensive Plan of Action there were hopes and faith in a better future.

Now the situation has become worse because of sanctions. The rial rate has fallen, which provoked a rush for buying dollars. This further accelerated the collapse of the Iranian rial. Compared to January, when one dollar on the black market sold for 43 thousand rials, at the end of August it trade for 107 thousand. The official rate for this period decreased from about 36 thousand to 42 thousand.

In the meantime, the opposition is seizing on every opportunity to put the blame for the current situation on President Hassan Rouhani and his liberal reform Cabinet.

In late July, opposition MPs used their constitutional right to summon the president for making a report on the effectiveness of his activities. They gave President Rouhani a month to prepare the answers to their questions and explain to them why the government had done nothing to put an end of the smuggling of goods that damages production, what caused the fall of the Iranian rial, and what triggered economic recession and rising unemployment.

On August 25  President Rouhani addressed the Majlis. In particular, he said: “We are not afraid of America or economic problems. We will overcome all difficulties <…>. You can talk about unemployment, foreign currency, recession and smuggling. I think that the problem is people’s views on the future <…>. People are not afraid of the US, they are afraid of our differences. If they see that we are united, they will believe that the problems will be solved,” the president said. At the same time, he acknowledged that part of the country’s population “had lost faith in the future of the IRI and doubts its power”.

The president’s report did not satisfy Deputies of the Mejlis, who expressed their discontent with the work of Rouhani and his government. In addition to that, the MPs struck a blow to the government’s makeup by securing the dismissal of the Minister of Economy and Finance Masoud Karbasian, Minister of Labor, Social Welfare and Cooperative Affairs Ali Rabiyyi. Dismissed earlier was the head of the Central Bank, Valiollah Seif. Abdolnasser Hemmati was appointed instead.

Thus, the political situation in Iran is no longer stable being marred by visible signs of a schism within the ruling elite. However, it would be premature to suggest a crisis of the Iranian regime. The American sanctions have jeopardized the positions of only President Rouhani and his team, which was ready for a dialogue with the West. The growing political weakness of President Rouhani and his government has given a chance to his hardline opponents to strengthen their positions and exert a significant influence on the policy of the Islamic Republic of Iran at home and abroad.

For now, removal of Rouhani is not on the agenda. Supreme leader Ayatollah Khamenei, fearing an internal political explosion, is supporting the president. However, given the situation and increasing pressure from the opposition, Rouhani’s policies (both domestic and foreign) may change, though not in the direction of reforms and liberalization.

Whether Tehran will agree to new talks with Washington, to compromises on nuclear missile programs is difficult to predict. For today, it is 100% no. This would mean a ‘political death’ for Rouhani and for the supreme leader Khamenei as well. What will happen next is difficult to say. Much will depend on the ability to retain the Joint Comprehensive Plan of Action and, most importantly, on the ability of all opponents of Trump’s anti-Iran sanctions to confront them financially and economically.

However, Ayatollah Khamenei is rather pessimistic about this. He said on August 29 that Iran should give up hopes that Europe will save a nuclear deal. In addition, he added two important things. First, the Joint Comprehensive Plan of Action is not a goal, but a means, and Iran, if it finds that the Plan has ceased to meet Iranian interests, will reject it. And the second: Iran has no intention of negotiating a new agreement with the US at any level because of the “obscenity” of such talks.

Indeed, there are no conditions and no incentives for Iran entering new talks on nuclear missile issues,

Even in case of the worst of scenarios, if the IRI economy faces serious problems, the most radical groups concentrating around the political opponents of Rouhani may come to power in Tehran. These forces will not even consider the issue of negotiations with the US. The Islamic Republic of Iran will yet again become a “besieged fortress”, but this is unlikely to affect foreign policy ambitions, especially in the region. On the contrary, they will grow under the leadership of anti-Western politicians and IRGC, forming a foundation for the military and political instability in the region.

  •  [1] Total is getting ready to leave Iran before November 4. The company is developing the South Pars gas field. Total has already invested in it app. 50 million dollars. The French make it no secret that they do not want to anger Washington. The $ 2 billion project is under threat, but these losses are nothing in comparison with the fines that could be imposed on the violators of sanctions by the US Treasury, and other consequences. The most serious threat is the “cut-off” from the US financial system. For many large companies, this threat is even worse than billions in fines. For example, over 90% of all financial transactions at Total pass through US banks.
  • [2] Wellhead equipment is a set of equipment designed for tying casing strings, sealing the wellhead (annular space, internal tubing cavity, well production diversion) during drilling, well workover and well operation mode regulation.

First published in our partner International Affairs

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Middle East

Iran regime’s Parliamentary elections and challenges facing it

Aladdin Touran

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Forty-one years have passed since the establishment of the Islamic Republic of Iran, and now the regime is entrenched in crises and facing a deadlock.

On the one hand, it faces crippling economic crises and severe budget deficits, and on the other hand, injustice and lack of freedom have turned the Iranian society into a powder keg that can explode at any moment.

According to information published by the main Iranian opposition movement, the National Council of Resistance of Iran (NCRI), in the nationwide Iran protests last November more than 1500 protesters were shot dead, while protests spread to more than 190 Iranian cities. The fact that these protests are continuing in 2020indicates that the Iranian regime’s crises are intensifying.

In the international arena, the regime is also in a very weak position. Its warmongering policies and nuclear and ballistic missile program are under the magnifying glass and pressure of the international community. U.S. sanctions have added to the regime’s crises and put it in a deadlock.

Solutions for the regime

The regime is in dire need of money to quell protests related to its failing economy. To get this money, it needs the U.S. to lift sanctions. The U.S. administration’s Maximum Pressure campaign left the regime with a dilemma of choosing between two courses of action:

It can either accept U.S. Secretary of State Mike Pompeo’s 12-point plan and conditions for normalization of relations, which would mean abandoning its nuclear and ballistic missile program and military interventions in other countries.

Or it can choose the path of contraction and confrontation. Which would require the regime to unify itself to be able to stand against the upcoming crises.

Review of the regime’s solutions

If the regime accepts all of a part of Pompeo’s 12-point plan, it would mean that the regime would end up negotiating at its weakest point. The “Death to America” chant will ring hollow. After 41 years of the Islamic Republic’s establishment, sitting at the negotiation table with representatives of the “Great Satan”, which killed the regime’s second most-important figure, General Qassem Soleimani, in January, will cause its forces to collapse from within.

It seems that the regime has chosen the path of contraction. This decision is aimed at buying time and is an investment on proxy wars in the region in order to force the U.S. to step back and lift sanctions. The regime hopes that in the next U.S. elections someone else will replace Donald Trump with a milder Iran policy.

The Supreme Leader’s decision to go down the contractive path can be seen in the regime’s so-called upcoming legislative elections. The upcoming election is the most important event through which the Supreme leader can unify its regime from within and prepare it for tougher times ahead.

The engineered elections

In Iran the legislative elections are basically engineered by the Supreme leader. Its method is as follows. First, different factions introduce their candidates. Then, the Guardian Council reviews their competence. The Guardian Council consists of 12 members. Six of them are clerics appointed by the Supreme Leader. The other six are jurists chosen by the Chief of the Judiciary. But the Judiciary Chief himself is appointed by the Supreme Leader. It is in fact a labyrinth with various entrances that leads at the end to the Supreme Leader. In fact, any concept of “moderation” in Iran is a lie and a political game to keep the people and the western countries busy. The principal conflict between the so-called “reformists” and “hardliners” is about the method of continuing the regime’s existence and a power struggle between different regime mobs.

More than 16,000 people presented themselves as candidates for the legislative elections. More than 55% of these candidates were disqualified by the Guardian Council. Some 90% of the so-called reformists candidates are among the disqualified. The Guardian Council even disqualified 90 members of the current Majlis (Parliament). State media report that from 290 seats in Majlis, 200 seats have already been assigned.

Regime’s only solution

A way out for the regime is to show a “massive” participation of people in the elections. On February 5, 2020, the Supreme leader for the first time begged the people to participate in the elections, “even if you disagree with me.” Despite the removal of the so-called reformist candidates, the regime’s President Hassan Rouhani also begged in a speech on the anniversary of the Iranian revolution on February 12, 2020 for people to participate in the elections.

The President-elect of the National Council of Resistance of Iran, Mrs. Maryam Rajavi, has called on the Iranian people to boycott the upcoming elections.

A poll on the state-run news network’s Telegram showed that 83% of the people are not willing to participate in the elections. The regime was forced to hastily remove this poll from Telegram.

The regime also failed to mobilize its forces for the annual ceremony of the marking the overthrow of the Shah’s regime. Video clips taken from Tehran’s Azadi Square during Rouhani’s speech show that the scene was empty. The regime fears a repeat of the no-show during the legislative elections.

The maximum pressure campaign on the regime must continue and the European Union must join it. It’s time that the Iranian people’s desire for a free Iran be recognized by the international community.

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Growing Political Instability in Middle East: A Case Study of Yemen

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Yemen’s full-blown war was the consequence of a series of events that succeeded one after the other. Violence escalated during the second half of 2014, when citizens grew massively discontent with the political instability of Yemen’s transitional government. Once violence became the norm, parties to the dispute quickly polarized, and as violence ramped up, polarization accelerated.

This violence more intensified because Yemen has fragile transitional government led by President Abd Rabbuh Mansur Hadi and was further debilitated when Houthi rebels captured Sanaa in September 2014. The president’s Peace and National Partnership Agreement had emerged as a kernel of hope for an early resolution to the violence, but it did not fulfil and produce its promised. Therefore, faced severe outcome and Boasted by their early success in capturing Sanaa, the Houthis had their militias take control over key institutions in the city. They installed their own people within major institutions and media outlets, and in other cases ‘puppeteer’ members of the government whose members were ultimately put under house arrest. All hopes for the Peace and National Partnership Agreement were lost in January 2015, when Hadi resigned shortly after his escape from house arrest in Sanaa. Following a brief residence in the city of Aden, he took refuge in Saudi Arabia.

Out of immediate danger, Hadi decided to revoke his resignation and continue his presidency from abroad. At the same time the Houthis decided to promote their own version of a national constitution and create their own government bodies. In the meantime, the Houthi insurgency continued, pushing all of Yemen into a civil war. Yemen’s current multipolar political landscape is nothing new. The country’s population has never—after its 1944 civil war, or since unification in 1990—taken on a single national identity. During the 2011 Arab Spring, group differences were exacerbated, but at the outset of the revolutions relative balance of power in the country was able to bring parties together, making possible negotiations at the National Dialogue Conference (NDC).

This is no longer the case, and three important developments explain the changes post NDC. First, Yemen’s political scene became radicalized and at the same time was polarized. This made any links between the groups, whether based on historical ties or cultural similarities, impossible. Second, the changing balance of power and enduring resilience of the conflicted sides has inspired optimism within each group that and would prevail and achieve dominance over others. This reduces prospects for negotiating a settlement. For example, as the Houthis consolidated their power on the eve of their complete capture of Sanaa, rejecting calls for negotiations seemed easy, and group officials seemed unfazed by the UN resolution urging them to withdraw and reverse their course. Third, the people in Yemen have no faith in a central government, and even less faith in any political process as a solution to their problems; largely due to disappointment over a long negotiating process and an ineffective transitional government. In addition, there is no leader who inspires hope, or can rally Yemenis under one flag, or for a common purpose. While President Hadi enjoys international support, at home he is unable to ensure unity amongst even his allies, let alone the whole country.

While Yemen faces an internal quagmire, regional actors, in particular the GCC states, have been increasingly engaged in the conflict. A Saudi-led military campaign, Operation Decisive Storm’ began in March 2015, based on a coalition of forces originally supported—according to Saudis officials and public statements from countries in the wider MENA region—by more than ten countries. The UAE has been a strong supporter of the military action, contributing air support that has removed any ballistic threat for the region within the first 25 days of the operation. Other GCC states and MENA countries have also positively responded to Saudi Arabia’s move for military solutions.

Civil War in Yemen

Nations of the region have pledged military support and have become engaged in the second phase of the operation, titled ‘Restoring Hope.’ One of the strategic objectives of this operation is the disabling of the Houthi insurgency and the reinstatement of Hadi as the President of Yemen. For that purpose, large groups of pro-Hadi Yemeni fighters have been provided with weapons, equipment, and necessary military training. Saudi Arabia and the UAE have more recently delivered large quantities of heavy weapons (tanks), armored vehicles, and ammunition to the pro-Hadi fighters through the newly liberated areas in Aden. Troops from the Arab countries have been involved in training. Hadi’s army, which lacks expertise in operating for much of the weaponry and equipment being supplied. Some of the foreign troops, however, are reported to be involved in military operations themselves, and not simply working in a training capacity. Operation Restoring Hope also has a humanitarian component, and its first aid planes and ships have already arrived in Aden. The United States is also providing some assistance through intelligence, aerial refueling for fighter jets, and has indicated that it would provide possible assistance in rescuing of downed pilots. The thus empowered pro-Hadi army will be the much needed ‘boots on the ground’ to complement the Saudi air campaign. If the Southern Resistance answers Hadi’s call for a united anti-Houthi front positively, and thus integrates with Hadi’s army, a quicker advancement towards Sanaa may follow. Meanwhile, the UN is still at the forefront of the negotiations in Yemen. Negotiations are not a number one priority, however, since the UN’s reputation was significantly damaged following months of less than effective diplomacy engagement in Yemen. That is not to say that UN’s efforts are futile. Anyways, UN special envoys encourage Saudi government and Yemeni government to collaborate of sign a pact, aiming to end fight between government and separatist allies in the south. UN wants to political solution of Yemeni crisis.

Oman’s Role

Except Oman, which is not part of the campaign and it is offering a venue for negotiation and are in the strong support for President Hadi. Time may prove that the UN’s ongoing shuttle diplomacy is the best way to a ceasefire, followed by peace agreement. When taking stock of the current Civil war in Yemen, it is imperative to have a holistic view of the complex conflict, and especially when seeking to find a way out of the turmoil. As things stand, a clear path towards quick conflict resolution seems impossible. The murkiness of the actual support by the Yemeni people for current leaders, ongoing shifting political dynamics, and the mixed results of militarily operations makes any conflict resolution strategy difficult to argue. This, in turn, renders many of the policy recommendations focusing on just one or another approach risky to follow.

Understanding the Conflict’s Dynamics

Yemen’s conflict is saturated with different groups, and each have unique interests. Antagonism amongst the various Yemeni groups and the process of ‘othering’ between the Zaydis from the north and the Shaga is from the central and southern parts of Yemen has been obliterating memories of coexistence and making any reconciliation unforeseeable. The current conflict has even blurred the actual differences between theZaydis branch of Shia (Fivers) and those in Iran (Twelvers). This blurring is exacerbated when the Houthis’ religion is equated with the one of the Persian belief structures and used as an argument to link the two. A March Briefing report by the International Crisis Group observed this in action, noting that the “previously absent Shiite-Sunni narrative is creeping into how Yemenis describe their fight,” primarily through the labels used by the Houthis and the Sunni Islamist party Islah.

In a way, increased use of sectarian rhetoric by the group has become a self-fulfilling prophecy. While domestically the Houthis managed to maintain control over a large part of Yemen, including the capital, this has not translated into commensurate international recognition. The group is aware that UN resolutions are clear that Hadi’s government is the only authority in Yemen. Attempts to make inroads in the international community have thus been carried out through economic ties, those aimed at Russia (which remains unresponsive) and China, which has an interest in the Yemeni oil industry. While these efforts indicate some determination to reach out to whole the international community, the Houthis have shown no state-building acumen and political alliances are made from convenience.

With little regard for other political parties, the Zaydi Shia militias have forged an unholy alliance with former president Aki Abdullah Saleh. The deal was made without regard to the two groups’ hostile history, which includes fighting in multiple wars against each other. For now, they seem to have been able to put most of their differences aside and unite against Hadi and his supporters. This alliance means the Houthis benefit from Saleh’s powerful friends in the Yemeni army, something that has contributed greatly to the Houthis’ early rise to power. The group may yet be aided by Saleh’s diplomatic skills. For his part, Saleh is on a quest to regain his lost authority.

The politically savvy former president of Yemen hopes to extend his influence through his political party, the General People’s Congress (GPC), this can be read as a move against current President Hadi, who had been a member of GPC until November 2014, when he was kicked out. His ouster was the result of a travel.

International Crisis Group, “Yemen at War’

It is important to note that Saleh’s party, the General People’s Congress has rejected the Houthi constitutional announcement from January 2015. This is just one example of their uneasy relationship. Ban and asset freeze imposed by the UN Security Council on Saleh and a few other leaders from the Houthi side. Hadi’s rivalry with Saleh and his break with the party only further speak to his inability to become a gravitational center in Yemeni politics.

At best, Hadi was able to become a rival of Saleh, use decrees to make new appointments and reassignments to reduce Saleh’s influence in the governing structures and military. Overtime, these moves have been able to attract defectors from Saleh’s faction, but without building a real base of his own. While having defectors on side is extremely useful when defections and declarations of support of Hadi from key GPC members provide a much-needed boost to the legitimacy of the current President, his overall legitimacy remains low. This is not least because of his moves to divide forces to steer against the Houthis.

His allies, the Southern (Popular) Resistance, are a secessionist movement with strong support in the South and do not share Hadi’s vision of a post-conflict Yemen. Influence also comes from Yemen’s immediate neighbors, who are generally strongly pro-Hadi. The political positions of regional actors and their interests in the different sides would indicate that regionalization of the Yemen conflict was inevitable. Saudi Arabia’s actions, however, are also in response to wider regional trends. Intervention in Yemen has a great deal to do with curbing Iranian foreign policy on at least two big issues – the Iranian nuclear deal and their role in Iraq. With the nuclear deal recently concluded without any direct input from the Saudis, and Iraq set to be an even bigger challenge in near future, Saudi involvement in the Yemen sphere seemed inevitable. Where Teheran’s involvement in Iraq is welcomed by the Western powers, and with there-engagement of Iran in the international community their role could be strengthen, Saudi Arabia does not share the West’s enthusiasm. But the situation in Yemen is different. The level of support from Iran, as secretive as it may be, is not the same as Iran’s support for the Shia militias in Iraq, the government of Syria’s Assad, or Hezbollah in Lebanon. While hesitation to become further embroiled may be very much connected to a fear of possible overstretching in the region and the fact that the Houthis are not under Iran’s direct control, It may also be the cane that Teheran has calculated the likelihood of a strong and determined response by Saudi Arabia if it were to step up involvement. Iran’s public declarations call for ceasefire, though they know the balance of power on the ground in Yemen matters a lot since it will transfer to the make-up of any negotiations table. Iran leaves little up to luck. Iranian Revolutionary guards are on the ground in Yemen, Iranian money and aid has been shipped to the Houthis. It should not be a surprise if more money were to be poured in, especially given the funds that will be made available in the wake of the Iranian nuclear deal and an unfreezing of assets. Even though weapons may be much more needed than cash, the Houthis will still be more effective in maintaining control and popularity if they have no huge financial challenges.

Saudi Arabia Role

For the leadership in Riyadh, Yemen continues to be a foreign policy priority. The Kingdom acted as patron to Yemen’s government from the 1980s onwards, and it never accepted foreign influence in the country. In the 1960s Egypt’s then president Gamal Abdel Nasser tried to expand his Pan-Arab revolution to Yemen, only to see his efforts neutralized by the Saudis. This time around, as Iran employs their ‘revolution export ‘strategy, similar determination exists in the House of Saud and its key allies to thwart it. No accounting of the current conflict in Yemen would be complete, however, without accounting for terrorist groups. The best way to look at this issue is to understand the historical role of al-Qaeda of the Arabian Peninsula (AQAP), and its relatively recent branch of Daesh (The Arabic acronym for the group known as the Islamic State in Iraq and Syria or ISIL). AQAP is considered the most powerful of al-Qaeda’s branches after the death of Osama Bin Laden.

Moreover, a terrorist group with a long legacy in Yemen. Many men who fought alongside Bin Laden in Afghanistan at the end of the last century came back to Yemen and to found AQAP. Indeed, since 1990, leaders of the largest Islamic military groups in this country have claimed ties to Bin Laden.6 With the creation of AQAP, allegiance to Bin Laden’s successor Ayman al Zawahiri was declared, and has been reasserted repeatedly since. The newly appointed leader of the AQAP Qasm al-Rimi, who assumed his position after the death of Nasir al-Wuhayshi in June2015, made the same oath of allegiance when he took power. With such strong roots in Yemen, it would be difficult for ISIL to take over as a leader in the jihadist movement in the country. Further dividing ISIL and the AQAP is the firm policy of the latter for the gradual establishment of a caliphate when the ‘right conditions’ are met. This is already underway in Yemen and is not an ideology that is shared by the now rival terror group. As far back as 2009, the AQAP issued a recruitment call to aid in establishing an Islamic caliphate in Yemen.

The call anticipated the departure of Saleh from power, and the opportunity was taken at his departure to create new institutions in Yemen toward the goal of the caliphate. Further distinguishing the two groups, AQAP maintains that consultation with respectable scholars and influential leaders in the Ummah are a sine qua non for the establishment of a supranational entity. For AQAP, this serves as a source of unity and legitimacy. It is also cited in the attempts to challenge the authority.

Iran’s Role

Iran is seeking of wider legitimacy speaks to the priority of alliances for AQAP, which has indeed demonstrated success in gathering more allies amongst tribal leaders in Yemen than ISIL. These alliances are largely based on a common interest to deter any advancement of the Houthis, rather than any shared ideals for the future political reorganization of Yemen. Therefore, it is difficult to assess how long these alliances may endure, but, without a better alternative, it is likely the tribes’ current cooperation with AQAP will remain in place as long as Houthi movement provides a need for it. This means AQAP is well positioned to expand its governing territory, at least for the duration of the Yemeni crisis. ISIL may also expand their influence in Yemen, but they are unlikely to be a major player in the crisis.

While the group loyal to al-Baghdadi is increasingly popular in the media, it has had limited success in Yemen. The group will need to be accounted for, however, in the aftermath of the war and during a possible peacemaking process. Both AQAP and ISIL have declared that the Houthis deserve to be killed, however, ISIL has far more extreme methods and are prone to terrorist acts, which deepen the sectarian rift.Each of these parties is operating, moreover, in a country with limited economic prospects. In addition to high unemployment, water and food shortages, oil exports are failing to produce enough revenue for the government, due to the fall in oil prices and declining oil production because of the conflict. This means that the nation is not and will not be economically self-sufficient in the near future. The crisis in Yemen has all of the necessary conditions of a conflict that will continue for many years to come. Pro-Hadi forces have had a few recent successes securing territory in the south, which has further boosted their capabilities, allowing an increase of weapons shipments, as well as military and humanitarian aid in the south.

Conflict’s Unclear Future

The mercurial dynamics of the Yemini conflict and the multiple possible pathways upon which it might develop make planning unclear. Various scenarios explore multiple probable trajectories, and the many stakeholders – both domestic and regional – prefer diverse and conflicting outcomes. What does seem unlikely is that an outcome will be left to the will and capabilities of any one party to determine the outcome alone.

The four scenarios below represent the four poles of possible outcomes that current stakeholders may have to accommodate in any possible solution. The scenarios are fluid and represent a spectrum of possible outcomes. The X-axis represents the stability of Yemen, with outcomes ranging between its two extremes: war and peace. The war extreme examines the possibility of protracted conflict, where the war in Yemen continues at its current level, or even worse, at a heightened level of violence. At the other end of the spectrum is a peaceful solution, which assumes a peaceful resolution to the crisis. While obviously the peaceful solution is desirable, it is important to note that a resolution does not assume positive peace or an imminent reconciliation.

On the contrary, considering that this is a near-term analysis, certain ungoverned territories or sporadic violence should be expected even in the most optimistic future. The Y-axis tackles the issue of integrity. It assumes a possible return to the process of solidifying a unified Yemen, on the one hand, or dividing the territory into two separates entities on the other. ‘Integration’ marks the preservation of the country’s existing borders, regardless of its level(s) of decentralization (e.g. federation), where the opposite extreme reflects the endemic lack of national cohesion and thus represents the possibility of dividing the country in two separate states/territories. Such a scenario includes the possibility of reverting back to the pre-1990 borders, or even an alternative re-drawing of the map.

Stability and integration are key factors for the future of the country. Stability as a criterion is an overarching theme, vital for enabling further discussion on political, economic, and social issues. In other words, depending on the stability of the country and whether there is war or peace in Yemen, different policies should be applied. Integration on the other hand, provides a lens through which to examine key political developments that are equally unpredictable. Ultimately, having one or two countries on Yemen’s current territory would completely change the political landscape, and consequently, the strategies employed to reach a peaceful resolution. Understanding how these two factors combine helps complete the possible pictures of Yemen over the next few years.

Fluid Control and Power

A first scenario, based on Yemen’s current dynamics, plots a possible future for the country along the ‘development’ of the status quo. In this scenario, the country remains undivided as a political unit, but the war is unceasing and offensive operations are continuously being launched. Consequently, different parties gain or lose control of territory based on successful military/insurgent advances. This makes a map of territorial control one that constantly morphs, even within short time intervals. Such a future remains very much like today’s Yemen, where ongoing lashes between the Houthis and pro-Hadi insurgents in large cities like Aden and Taiz have given mixed results for each side. Earlier in the year the Houthis had managed to quickly gain a large territory in their quest to capture Aden, and it was then that they also overtook the al-Anad Air Base in Lahij. With the recent success of the popular resistance troops and Hadi’s supporters in retaking much of that same area, it is also possible that a further Houthi retreat may follow. A similar situation is seen in the battle for Taiz, the battle over which could go on for any length of time.

Warring Territories of Yemen

A second scenario posits that a certain level of war fatigue on the ground will result in a divided Yemeni territory, to be controlled by different groups. War-weariness may not be enough for the warring parties to conclude a peace process and may instead only serve to limit the conflict to the frontlines. A war-weary end to hostilities would simply entrench parties in their positions and focus each on defending areas under their control. The Houthis would then likely control the northern part of current-day Yemen, while the forces loyal to the regime in exile (which would likely return to Yemen under these conditions) could successfully defend the southern and central areas of the country.

Although still divided on how the future political map of Yemen should look, Hadi loyalists and the Southern Resistance (Hirak) are likely to keep a fragile and to a degree united front in the fight against their common enemy. Small areas of ungoverned territory may also exist in the current al-Qaeda controlled areas, with neither party willing or able to conquer the other territories. Under this outcome, the conflict would be expected to manifest through clashes alongthe frontlines, but sporadic terrorist attacks beyond these areas could not be ruled out. Military operations from regional state actors would also likely continue. However, without the ground support of Hadi’s loyalists, the air campaign would likely produce limited results.So far, success in regaining control of territory from the Houthis has been in areas in the south where the Houthi movement does not have massive support. It will be increasingly difficult to repeat these territorial gains in the north, which are areas of Houthi strongholds. This is, why the battle may be limited to the frontlines and over time a de facto disintegrated country could be created, as no institution has authority over the full territory.

Two Yemens

If violence is halted, the future of Yemen will be decided by the largest and most relevant parties in the country, in conjunction with help from the international community. One possible outcome in this direction would be for the negotiators to acknowledge that a Westphalian nation-state is impossible on this territory, and instead conclude an agreement to divide Yemen. This will not be a quick or easy process, but it has significant support in the county, especially in the south. The Popular Committees in the south and Hadi’s army fighting against the Zaidi Shia Islamist group there neither belong to a single tribe nor share a common strategic objective – just a common enemy. Clashes in mid-July – when control over Aden was claimed back from the Houthis – represented for some fighters the liberation of the nation’s second largest city. For the members of the region’s separatist movement, it was a liberation of their old (and possibly future) capital. For Saudi Arabia, this means having in what would become Northern Yemen, a neighbor that is no friend of theirs, and another, Southern Yemen, which will inherit the AQAP problem.

Reconciliation and Coexistence

While currently ineffective, peace negotiations may eventually lead toward a permanent cease-fire and a deal that will preserve the unity of Yemen. This could come to pass in one of two ways. First, as the result of an effective and creative diplomacy, or second, because of the success of Operation Restoring Hope, which seeks to put President Hadiin charge of Yemen and the surrender of the Houthi movement and Saleh’s forces. Whatever means peace talks may emerge, however, the years to follow are sure to be difficult.

Conclusion

One way the road to stability could be eased, is through a possible rebirth of the Peace and National Partnership Agreement, or PNPA 2.0. This agreement, or a new form following similar lines, could revive internal political dialogue in the country. A successful agreement would mean that post conflict institutions would have to be agreed upon, and integration of different demographic groups would be expected to take place at various levels in the government. While a clear step forward, a PNPA 2.0 would merely begin the process of reconciliation and give hope for a prolonged stability. An international peacekeeping mission might also be necessary to keep the terms of any agreement in its in initial phases, as a united and relatively stable Yemen could slowly rebuild as a federal system.

However, since the terrorist organizations operating in the country will certainly not be part of the negotiations process, and not seen as a possible actor that could be integrated into the reconstructed national institutions, they will likely remain a problem for the next government of Yemen as well as the international sponsors of the peace process.

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Middle East

Thwarting Iranian Influence is Key to Iraq’s Security

Saad Khoury

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The mass uprisings in Iraq over the past several months have many factors in common, the most salient of which include ordinary citizens decrying economic hardship and rampant corruption among the ruling elite. With that agenda in mind, protesters seek to weaken the grip of the Iranian regime that has entrenched itself in Baghdad’s political and economic affairs.  

How Far is Iran’s Reach in Iraq?

While the 2011 Arab Spring reacted to similar events in Tunisia, Egypt, Syria, and Yemen, recent uprisings in Lebanon and Iraq are distinguished by Iran’s dominance over economic and political relations there.

As Iran’s closest Arab neighbor and home to the Arab world’s largest Shi’a population, no country in the “Shi’a crescent” feels Iran’s influence more profoundly than Iraq. Since the US invasion of Iraq in 2003 and the overthrow of Saddam Hussein, then Iran’s main rival in the region, Tehran has sought to exploit the years of marginalization felt by Iraqi Shi’a’s in order to empower them. Many exiled Iraqi’s who sought refuge in Iran during Saddam’s rule returned after his fall to take up positions of authority in light of the power vacuum left by the US invasion

Many of these Iraqis, once in exile, have become the leading power brokers in Iraq, many of whom have expressed a keen willingness to follow the political roadmap laid out by their former benefactors and protectors in Tehran.

Nonetheless, the overbearing weight of these Iranian backed actors in Iraq has led to economic ruin in the country. Faced with high youth unemployment, high inflation, and a lack of essential services, Iraqi are growing tired of Tehran calling the shots in their country. To add insult to injury these Iranian proxies have relentlessly employed harsh crackdowns to retain their influence, wealth, and control within both private and public spheres. This authoritarian dominance also prevents the Gulf States, Iran’s regional rival, from providing Iraq with crucial investment opportunities. 

Iranian Influence Supersedes Ethnicity and Religion In Iraq

In Iraq, a fragile balance of power has seen institutions parceled out to various corrupt ethnic and religious elites. 

This endless and brazen cycle of placing Iran-backed politicians in power to represent the Iraqi people is holding Iraq back from progress and prosperity. In this realm, it isn’t religion, ethnicity, or background that bring Iranian puppets together. It’s their mutual understanding that they need each other and Tehran’s backing if they want to continue to gain wealth and maintain the status quo they have built. 

The converse is also true. Opposition to Iran is not drawn on sectarian lines, but rather, large swathes of the country’s Sunni and Shi’a population are taking to the streets to call for an end to Iranian interference. 

How can Iraq Reclaim its Sovereignty

Protesters in Iraq have only recently transcended fault lines to form a united front. Regardless of ethnicity, religion, or social background, protesters are united to overturn their country’s Iranian backed elites that have been siphoning out money and resources, while placing an inexorable toll on the economy in the process.

In response to these massive protests, Iranian-back proxies in Iraq have cracked down mercilessly against protesters, with up to 600 demonstrators being killed since the movements began. 

Moreover, the death of General Qassem Soleimani, Iran’s most senior military commander and al-Muhandis, the head of the powerful pro-Iran Iraqi Popular Mobilization forces, has been a big blow to Iranian operations in Iraq. 

With the loss of its two most prominent actors in the Iraqi theatre, Iran’s puppeteers are scrambling to fill the power vacuum. Though they have decided to confer their confidence in Muqtada Al-Sadr and Al-Amiri Hadi temporarily, Tehran’s influence is beginning to show cracks as attempts to unite a fractured support network are proving futile. 

In tune with protestors’ calls to reject Iran, Iraq’s pro-sovereignty opposition groups are growing in popularity. Anti-Iranian and nationalist messaging from groups like the National Wisdom Movement and the National Independent Iraqi Front resonate strongly with demonstrators who decry the economic stagnation caused by Iran’s impact on their country’s politics. 

Taking advantage of the blow dealt with Iran through Sulemani’s death to end the confessional system in Iraq will be crucial for the success of the Iraqi protest movement. Though it is too early to tell if these protesters can flush out Iran’s deep-rooted influence in Iraq entirely, supporting genuine pro-sovereignty Iraqi leaders will leverage their initiatives. These leaders, and the protests movements they represent, are exposing cracks in Iraq’s circles of power as they stand resilient in the face of increasingly violent crackdowns. 

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