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The tension between Iran and the United States

Giancarlo Elia Valori

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At the beginning of last summer, precisely on May 8, 2018, US President Donald J. Trump carried out one of his old projects, i.e. to explicitly walk out of the Joint Comprehensive Plan of Action (JCPOA) reached between Iran, the United States, China, France, Russia, the United Kingdom + Germany and the European Union on July 14, 2015.

 The IAEA inspectors spend 3,000 days a year, on average, checking Iran’s nuclear facilities, and so far they have not ascertained any particular Iranian infringement of the 2015 agreement.

 Immediately after the US action, the EU adopted a blocking statute, based on the fact that the USA had unilaterally stated that Iran had not publicly declared a previous nuclear programme, prior to the JCPOA.

  According to the 2015 Treaty, Iran had agreed to destroy its arsenal of medium-enriched uranium, as well as to eliminate 98% of its low-enriched uranium production, and to finally reduce the number of its gas centrifuges for the selection of isotopes by two thirds, for a period of 13 years starting from the signing of the agreement with the P5 + 1, namely the JCPOA.

 For the subsequent 15 years, in fact, Iran had committed to enrich its uranium by only 3.67% compared to the levels before the signing of the agreement, without building other centrifuges for the following 10 years as from the signing of the JCPOA, while the enriched uranium production had to be reduced to the activity of a single first-generation centrifuge.

 As previously mentioned, the EU put in place a blocking statute mainly to protect EU-based companies from the effects of US sanctions against Iran. In May 2019, however, IAEA established that Iran had basically complied with the JCPOA, except for some doubts about the number of centrifuges actually in operation.

 Immediately after the US withdrawal from the treaty, Iran reaffirmed its acceptance of the treaty of July 14, 2015, along with France, Germany and Great Britain, while the Russian Federation and China explicitly supported Iran, which stated that only the USA had unilaterally and illegally withdrawn from the agreement.

 According to President Trump, one of the political reasons for the US withdrawal from the JCPOA was the resulting strengthening of his positions during the negotiations with the North Korean leader, Kim Jong Un, while the former US President, Barack Obama, said that the US withdrawal from the treaty of July 14, 2015 left the USA torn between two equally suicidal choices: a completely nuclearized Iran or the quick breaking out of another war in the Middle East.

 The only countries supporting President Trump, against the nuclear agreement with Iran, were Saudi Arabia, the traditional enemy of the Iranian Shiites, and obviously Israel.

 The US President also added that the USA would cooperate with the EU to “put pressure” on Iran, but the European Union implemented a project, called Instrument in Support of Trade Exchanges (INSTEX), to avoid the negative effects of US sanctions on European companies. INSTEX, officially announced on 31 January 2019, is led by Per Fischer -former Head of Financial Institutions at Commerz bank -as President, and includes Simon McDonald, permanent undersecretary for foreign affairs of Great Britain, Miguel Berger, Head of the economic office at the German Foreign Ministry, and Maurice Gourdault de Montaigne, Secretary General of the French Foreign Ministry (“and of Europe”, as the official formula states). The whole body does not include senior managers of the banking system and of commercial institutions.

A political organization that has political purposes vis-à-vis Iran and the USA, not a real starting point for continuing to do business in Iran.

 Hence for many countries, including Iran, INSTEX is more a political move to differentiate themselves – with difficulty – from the USA than an effective and operational system against the US sanctions on Iran.

 On April 29, Iran announced it had set up the Special Trade and Finance Institute (STFI) to monitor the INSTEX activities and thus favour Iran-EU trade even during the US sanction regime.

 The Iranian President of STFI is Ali Askar Nouri, former consultant of Iran Zamin Bank and the Institute also includes Hamid Ghanbari, former director of the Central Bank of Iran, Farshid Farrokh, manager of the Refah Bank, and finally some other managers coming from the Iranian banking system.

 Given the low political level of the Iranian STFI, it is likely that the Iranian government does not trust the INSTEX system at all as a way to really solve the trade relations between the EU and Iran.

 The European system also implies that the profit generated from the purchase of Iranian oil by companies having their headquarters in the EU must be transferred to the INSTEX “special-purpose vehicle”.

 Nevertheless, considering the general US restrictions on the sale of Iranian oil, in all likelihood the EU “special-purpose vehicle” will be increasingly linked to ever smaller Iranian funds and hence will not be in a position to collect enough liquidity to justify reasonable trade with Europe.

 Moreover, considering that the major buyers of Iranian oil belong to non-European States, it is equally unlikely that these countries, namely China, India, Korea and Japan, will accept to transfer their payments to INSTEX.

 Moreover, considering the US regulations, even if the EU vehicle really worked, Iran could spend all the funds included in the EU mechanism only for medicines and- to a little extent – for food.

 Hence no mechanism to protect Iran-EU trade can be created unless agreements are also made with the USA.

 However, who is really hit by the US sanctions? Rather than the political and military actions of the Iranian government, what is really destroyed is Iran’s private economic sector.

 Currently the Iranian population is equal to 82 million inhabitants, with an economic ranking that places the Shiite Republic of Iran in the eighteenth position in the world.

 In the case of Iran, another reason for the economic crisis led by foreign countries is the devaluation of its national currency, namely the rial.

 The local government’s inflationary actions, the restriction of foreign currency assets and the related slowdown in growth, with an inflation rate at 13% and an unemployment rate at 12.3%, are drastic measures. This is official data from the Iranian government, which is apparently much more acceptable than real data.

 Furthermore, the Shiite regime has imposed restrictions for as many as 1,300 types of product, in addition to the escape from the dollar in transactions and the preferential use of the Euro in international trade.

 In the real exchange market, currently the rialis worth 90,000 as against the US dollar, while at the end of last year one dollar only was worth 42,840 rial. An induced Weimar-styleinflation, which is destabilizing for every social system.

 The Euro, however, is not a currency that has the characteristic of being a Lender of Last Resort, as Paolo Savona often says- hence its global use is inevitably very limited.

 Therefore the rial should still decrease by at least 10% in the exchange with the US dollar.

At official rates, bank interest is already at 24%. Hence, in these crisis contexts, the Euro is therefore not allocable, while the role of the Chinese renmimbi is growing, considering China’s vast purchases of Iranian oil – which will not last forever.

 If not to maintain a game of tensions with the USA, on the part of China, pending the trade war that inflames the two major players in global economy, namely the USA and China.

 Transfers abroad- to the EU in this specific case – cost the Iranian companies at least 20% of the total capital transferred.

 It should also be recalled that oil sales are worth only  40% of Iran’s total GDP, considering that the largest sector of the Iranian economy is services, which account for 51% of GDP, followed by tourism (12%), the real estate sector, and finally the mining sector (13%) and agriculture (still at 10%).

 What could be a possible solution? The greater economic correlation between Iran and China, considering that the commercial crisis between the United States and China is almost simultaneous to the crisis between Iran and the USA – and it has quite similar strategic potentials.

 Hence for the United States the effects will be the maximum pressure available against Iran, in addition to greater US military presence in the Middle East and the damage caused by the USA to the European allies still tied to the signing of the 2015 JCPOA.

  It is also impossible not to think about the inevitable negative reactions on the Nuclear Non-Proliferation Treaty, already under pressure from various parts.

 Moreover, the bilateral relations between China and Iran are still growing significantly, at economic, political and strategical levels.

 Furthermore, China currently imports 11% of its oil from Iran, in addition to an investment of over 5 billion US dollars for the technological upgrading of the refining and transport of oil and gas.

 China has also invested in the urban transport system, particularly in the Tehran subway, as well as in regional motorways and in the Mehran Petrochemical Complex, in addition to a credit line of the Chinese State financial holding (CITIC) to the Iranian government, amounting to over 10 billion US dollars.

 The China Development Bank has also guaranteed additional 15 billion US dollars – up to a transfer of capital – between Iran and China, which, as stated by Hassan Rouhani, the current leader of the Iranian government, are expected to reach 600 billion US dollars.

  Currently Iran is China’ second trading partner, after the United Arab Emirates, and is also capable of permanently supplying the Shiite republic with advanced weapons.

  Therefore, it is a real “substitution of Iran’s imports” both from the EU and, obviously, from the USA, which enables China to create an economic and military outpost in the Persian Gulf, capable of opposing – in a short lapse of time-the US strategic presence in the region. Not to mention the EU countries’ military set-up and arrangement in the Middle East.

 Moreover, also the USA knows that, considering the asymmetric structure of Iran’s military forces, a clash with Iran could be very costly and even burdensome for the United States, which probably could barely penetrate the Gulf, while it is still believed that a direct North American action on Iranian soil is currently ever more difficult.

 Meanwhile, Iran is struggling to create new markets for its oil, in areas that cannot be integrated into the JCPOA and the US system.

 The target countries of Iran’s expansion are Brazil, China – as usual – but also India, which can be decisive today, considering that the Iranian production reached only 400,000 barrels per day last May, less than half of the sales in the previous month and even below the 2.5 million barrels per day of April 2018.

Everything started with an annual income from Iranian oil of approximately 50 billion US dollars.

  Currently, however, according to US experts, oil proceeds have fallen by at least 10 billion US dollars, after the US re-imposing full sanctions last November.

 The situation is still better for Iranian exports – also to Turkey – of petroleum by-products, such as urea, but above all for the sales of natural gas, liquefied petroleum gas, biofuel, methanol, and even other non-oil energy products.

 Iran accepts payments either in currencies other than the dollar or with the old trade-in system, which is a traditional and widespread system in the oil world.

 However, let us revert to the bilateral political crisis between the USA and Iran.

 After the sanctions renewed by President Trump, Iran has started again to enrich uranium to 20% and has also announced it would update the Arak reactor, which was part of the Iranian military system and produced plutonium.

 Moreover, Iran claims that the Arak reactor is still subject to the JCPOA rules and that its productive activity will end soon.

 In Natanz, another important centre for the Iranian production of enriched uranium, the extraction of isotopes has increased significantly. As Iranian leaders themselves say, this extraction should be increased by 400% compared to the JCPOA rules.

 It should be recalled that the treaty of July 14, 2015 limits the production of uranium to 300 kilos of uranium hexafluoride (UF6), which has a real content of active and useful uranium to the tune of 202.8 kilos.

 On a strictly military level, the USA has already sent to the Persian Gulf region a group of warships, including the aircraft carrier Abraham Lincoln and four destroyers armed with missiles. Furthermore, some B-52 bombers have been deployed in the Al-Obeid US base, Qatar, in addition to over 120,000 soldiers, distributed in the various US facilities in the Middle East, although President Trump has said that the shipment of these troops is a fake news.

 Nevertheless, this shipment has recently been confirmed by the US Administration.

 However, on May 12 last, Iran’s Revolutionary Guards, the so-called Pasdaran, attacked four-seven large commercial ships in the port of Fujrairah, one of the great world hubs in oil maritime trade. Other data has not been provided to the press.

 Allegedly, they were vessels belonging to companies based in the United Arab Emirates.

 It is also likely that at least two of those ships were of Saudi nationality.

  Another attack of obscure Iranian origin occurred on May 19, when a Katjuscia rocket was fired against the US Embassy in Baghdad, but without causing victims.

 On May 14, however, Supreme Leader Ali Akhbar Khamenei said that “there would be no war against America”. At the same time, however, the Iranian Rahbar does not want to re-open the nuclear talks with the United States.

  Both because Khamenei does not want to give the impression of rapidly succumbing to the United States – and here the Shiite regime could even self-destruct – and because, in all likelihood, reopening negotiations would imply the end of Iran’s nuclear ambitions.

 It should be noted that there is also the oil issue for the USA itself.

 Tension in the Gulf leads to a fast and significant increase in all OPEC crude oil prices while, even considering its higher extraction costs, the US oil is also capable of producing profit, in a context of quick and uncontrollable growth in the OPEC oil barrel prices.

The United States has now reached a production of at least 2.5 million barrels per day, which makes the USA attentive to any possible useful hedging on OPEC oil, with a view to exploiting any geopolitical crisis that – in the oil market – always has immediate consequences on the oil barrel price.

  It should also be noted that the Strait of Hormuz is twenty miles wide. It is technically impossible for Iran to control or block it all.

 Iran, however, can use strong cyberattacks against the oil networks of the neighbouring States that, in various ways, are also all linked to Saudi Arabia.

 Nevertheless, Saudi Arabia and the United Arab Emirates have alternative pipelines that can easily bypass the Strait of Hormuz.

 Even in the case of an Iranian unconventional attack, Saudi Arabia can sell at least 6.5 million barrels per day and currently the USA is much less exposed to an oil shock like those of the 1970s, given that the American economy is less oil-dependent and particularly considering that the national production of American (and Canadian) oil and gas is such as to ensure an acceptable level of oil use, even without the North American purchases from OPEC countries.

 In 2019, however, China has agreed to keep on buying oil and gas at low prices in Iran, at a level ranging between 700,000 and 800,000 barrels per day.

 Iran has no interest in dealing with the United States, right now that a new presidential election cycle is starting.

  On June 8 last, Iran officially declared that it would break some other restrictions included in the JCPOA if the 2015 treaty continues not to provide the expected economic benefits to Iran.

 The remaining parties that adhered to the JCPOA have recommended Iran to comply – even unilaterally – with the agreement of July 14, 2015 – and these countries are China and the United Kingdom.

 The EU, however, will continue to carry out checks on Iran’s compliance with the JCPOA, both in the collection of heavy water and in the production of enriched uranium, which is essential for building nuclear weapons.

 On a strictly economic level, Iran has abolished the oil subsidy regime for the population – a cost of 38 billion US dollars a year, equal to approximately 20% of GDP.

 As both the International Monetary Fund and the World Bank have noted, this is the first aspect to be kept in mind.

 Nevertheless, in a context like the sanction regime, it is impossible to maintain a policy of internal liberalizations.

 However, on a purely strategic level, what could all this mean, insofar as a permanent geoeconomic clash is emerging between Iran and the United States?

 For example a much harder and more continuous war in the Lebanon than we have already experienced.

 Or a clash with Israel involving Assad’ Syrian Army, the Hezbollah, some units of Iran’s Revolutionary Guards and even Hamasin the South.

 A long-term war capable of slowly consuming both the material and soldiers of the Jewish State and its  international support.

 Or a new war in Syria, between the Golan Heights and the areas close to Damascus, forcing Russia to play a military role in Assad’ Syria and creating a clash between Israel and Russia, again on Syria alone.

Or another possibility could be a direct confrontation between Israel and Iran, with airstrikes on the territory of the Shiite republic and the whole panoply of means available for non-conventional actions.

 Or finally a clash throughout the Middle East, with the possible presence of Saudi Arabia and Iran’s coordination of all Shiite forces inside and outside the opposing countries.

 It is from this viewpoint that we must evaluate the above mentioned strengthening of the US military structure throughout the Middle East.

 It should also be noted that the 120,000 US military to be deployed in the various US bases in the region are more or less the same – in number – as those that were used in the attack on Saddam Hussein’s Iraq in 2003.

 Meanwhile, the economic crisis is tightening on Iran: last March oil exports fell drastically up to reaching only 1.1 million barrels on average, while Taiwan, Greece and Italy stopped their imports and the major importers, namely  China and India, reduced their purchases from Iran by 39% and 47% respectively.

 The more the crisis deepens in Iran, the more likely the option of a regional war – probably triggered by Iran – becomes.

 The probable clash between Iran and the United States, Israel and Saudi Arabia must be assessed in the framework of this very weak balance between a possible anti-Shiite war and a careful evaluation of the effects and results of a probable war against Iran and on how it will leave the Middle East.

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

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Middle East

Will Gulf States Learn From Their Success in Handling the Pandemic?

Dr. James M. Dorsey

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The economic fallout of the coronavirus pandemic for Gulf states has done far more than play havoc with their revenue base and fiscal household. It has propelled massive structural change to the top of their agenda in ways that economic diversification plans had not accounted for.

Leave aside whether Gulf states can continue to focus on high-profile, attention-grabbing projects like Neom, Saudi Arabia’s $500 billion USD 21st century futuristic city on the Red Sea.

Gulf rulers’ to do list, if they want to get things right, is long and expensive without the burden of trophy projects. It involves economic as well as social and ultimately political change.

Transparency and accurate and detailed public reporting go to the core of these changes.

They also are key to decisions by investors, economists, and credit rating companies at a time when Gulf states’ economic outlook is in question. Many complain that delays in GDP reporting and lack of easy access to statistics complicates their decision-making.

Nonetheless, if there is one thing autocratic Gulf governments have going for themselves, beyond substantial financial reserves, it is public confidence in the way they handled the pandemic, despite the fact that they failed to initially recognize crowded living circumstances of migrant workers as a super spreader.

Most governments acted early and decisively with lockdowns and curfews, testing, border closures, repatriation of nationals abroad, and, in Saudi Arabia, suspension of pilgrimages.

To be sure, Gulf countries, and particularly Saudi Arabia that receives millions of Muslim pilgrims from across the globe each year, have a long-standing history of dealing with epidemics. Like Singapore, South Korea, and Taiwan, they were better prepared than Western nations.

History persuaded the kingdom to ban the umrah, the lesser Muslim pilgrimage to Mecca, in late February, days before the first case of a Covid-19 infection emerged on Saudi soil.

Beyond public health concerns, Saudi Arabia had an additional reason to get the pandemic right. It offered the kingdom not only an opportunity to globally polish its image, badly tarnished by human rights abuses, power grabs, and the killing of journalist Jamal Khashoggi, but also to retain religious influence despite the interruption in the flow of pilgrims to the kingdom.

“Saudi Arabia is still a reference for many Muslim communities around the world,” said Yasmine Farouk, a scholar of Saudi Arabia at the Carnegie Endowment for International Peace.

It also allowed Saudi Arabia to set the record straight following criticism of its handling of the Middle East Respiratory Syndrome (MERS) in 2012 when the kingdom became the epidemic’s epicenter and in 2009 when it was hit by the H1N1 virus.

Saudi Arabia is also blamed for contributing to a public health catastrophe in Yemen with its frequent indiscriminate bombings.

A country in ruins as a result of the military intervention, Yemen has grappled for the past four years with a cholera epidemic on the kingdom’s borders.

Trust in Gulf states’ handling of the current pandemic was bolstered by degrees of transparency on the development of the disease in daily updates in the number of casualties and fatalities.

It was further boosted by a speech by King Salman as soon as the pandemic hit the kingdom in which he announced a raft of measures to counter the disease and support the economy as well as assurances by agriculture minister Abdulrahman al-Fadli that the crisis would not affect food supplies.

Ms. Farouk suggested that government instructions during the pandemic were followed because of “trust in the government, the expertise and the experience of the government [and] trust in the religious establishment, which actually was following the technical decisions of the government.”

To be sure, Ms. Farouk acknowledged, the regime’s coercive nature gave the public little choice.

The limits of government transparency were evident in the fact that authorities were less forthcoming with details of public spending on the pandemic and insight into available medical equipment like ventilators and other supplies such as testing kits.

Some Gulf states have started publishing the daily and total number of swabs but have yet to clarify whether these figures include multiple swabbings of the same person.

“It is likely that publics in the Middle East will look back at who was it that gave them reliable information, who was it who was there for them,” said political scientist Nathan Brown.

The question is whether governments will conclude that transparency will be needed to maintain public confidence as they are forced to rewrite social contracts that were rooted in concepts of a cradle-to-grave welfare state but will have to involve greater burden sharing.

Gulf governments have so far said little about burden sharing being allocated equitably across social classes nor has there been transparency on what drives investment decisions by sovereign wealth funds in a time of crisis and changing economic outlook.

Speaking to the Financial Times, a Gulf banker warned that the Saudi Crown Prince Mohammed bin Salman “needs to be careful what he spends on . . . Joe Public will be watching.”

Headed by Prince Mohammed, the kingdom’s sovereign wealth fund has gone on a $7.7 billion USD shopping spree buying stakes in major Western blue chips, including four oil majors: Boeing, Citigroup, Disney, and Facebook. The Public Investment Fund is also funding a bid for English soccer club Newcastle United.

The banker suggested that Saudi nationals would not appreciate “millionaire footballer salaries being paid for by VAT (value added tax) on groceries.” He was referring to this month’s hiking of sales taxes in the kingdom from five to 15 percent.

The fragility and fickleness of public trust was on display for the world to see in Britain’s uproar about Dominic Cummings, a close aide to Prime Minister Boris Johnson, who violated lockdown instructions for personal reasons. Mr. Johnson is struggling to fight off demands for Mr Cummings’ dismissal.

To be sure, senior government officials and business executives in the Gulf have cautioned of hard times to come.

A recent Dubai Chamber of Commerce and Industry survey of CEOs predicted that 70 percent of the United Arab Emirates’ companies would go out of business in the next six months, including half of its restaurants and hotels and three-quarters of its travel and tourism companies.

Saudi Finance Minister Mohammed Al-Jadaan warned earlier this month that the kingdom would need to take “painful” measures and look for deep spending cuts as a result of the collapse of oil prices and significantly reduced demand for oil.

Aware of sensitivities, Mr. Al-Jadaan stressed that “as long as we do not touch the basic needs of the people, all options are open.”

There was little transparency in Mr. Al-Jadaan’s statements on what the impact would be on employment-seeking Saudi nationals in a labor market where fewer migrant workers would be available for jobs that Saudis have long been unwilling to accept.

It was a missed opportunity considering the 286 percent increase in the number of Saudis flocking to work for delivery services.

The increase was fueled by an offer by Hadaf, the Saudi Human Resources Development Fund, to pay drivers $800 USD a month, as well as a newly-found embrace of volunteerism across the Gulf.

The surge offered authorities building blocks to frame expectations at a time when the kingdom’s official unemployment rate of 12 percent is likely to rise.

It suggested a public acknowledgement of the fact that well-paying, cushy government positions may no longer be as available as they were in the past as well as the fact that lesser jobs are no less honorable forms of employment.

That may be the silver lining as Gulf states feel the pressure to reinvent themselves in a world emerging from a pandemic that potentially will redraw social, economic, and political maps.

Author’s note: This story was first published in Inside Arabia

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Foreign intervention in Libya

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Since the ouster of Muammar Gaddafi in 2011, Tripoli has transformed into an appalling sight of consistent injustice, rising fundamentalism and morbid law and order situation. Amidst the whirlwind of fractured institutions and failed socio political system in Libya, foreign countries have also found a suitable battleground for fighting their proxy wars. Currently, there are two governments operating in libya, each claiming to reflect the genuine mandate of Libyan people. The United Nations backed government of National Accord, under the leadership of President Fayaz al serraj is being supported by Turkey, Qatar, Italy and publically by all western democracies. Whereas, a shadow government, is being maneuvered from the eastern city of Tobruk. It enjoys the support of Saudi Arabia, Egypt, France and the United Arab Emirates.

In 2012, less than a year after NATO intervention, Libyans turned to polls, in the pursuit of voting for an efficient leadership. As a result of elections, the General National Congress or GNC came into power. It was tasked with devising a constitution within the next eighteen months. Despite, it’s full capacity, the government failed to deliver on time due to evident disorganization and post-gaddafi mayhem, which was still at large. However, Libyans again went to vote in 2014, electing a House of Representatives or HoR in power, this time. These elections were repudiated and their result was declared illegitimate by GNC, on the claims of low voter turnout and series of violence which engulfed the entire electoral process, across the country. Rejection to form government, forced HoR to flee Tripoli and establish itself in Tobruk, where they aligned themselves, with Libya’s strong man, commander Khalifa Haftar and his Libyan National Forces.

Haftar had remained a part of Libya’s political arena for as long as Muammar Gaddafi had, he joined the military in 1961 and served in its ranks until, the Chad misadventure of 1987, which not only made him fall out with Gaddafi, but also enforced him into exile in the United States. Nonetheless, Haftar returned to Libya after the war and started rebuilding his former network of loyalists who worked with him decades ago, and ended up establishing the Libyan National Forces. His forces launched “Operation Dignity”[1]in 2014, with the official intentions of relieving Libya from local militias, radical nationalism and religious fundamentalism.

Amidst the chaos of political deterioration and significant power vacuum, foreign countries started to manipulate the Libyan crisis for their own interests. Turkey is a regional player, and is severely concerned about their maritime trade route. For, being surrounded by hostile neighbors, Turkey finds it hard to trade through any other channel smoothly, except Mediterranean which it shares with Libya. Thus, it is actively vouching for a friendly government in Tripoli. Turkey’s parliament has recently passed the controversial law that has permitted the deployment of Turkish troops on Libyan soil, in order to support al Serraj’s government. Meanwhile, states like Italy and France are  interested in Libya’s oil resources, and are also supporting respective governments as per their interests. International oil companies such as Italian Eni, French Total and Russian Taftnet, along with British Petroleum are on and off, getting exploration and management contracts to tap oil resources, with the Libyan National oil corporation. Where Russian mercenaries are fighting on ground with Haftar’s forces, France has also provided covert logistical support to his forces, each interested in their own share of resources.

Furthermore, the United Arab Emirates, Cairo and Kingdom of Saudi Arabia are eagerly backing Haftar’s LNA for the sake of preventing another wave of Arab spring, to reach their borders. UAE has conducted airstrikes on Benghazi in 2014, from an Egyptian base in Libya, in order to support Haftar’s operation Dignity. They have also recently established their own base in eastern province of Al-Khadir, to support further LNA’s advances. Kingdom of Saudi Arabia has also pledged it support to Haftar under the crown prince, Muhammad Bin Salman. As, just before Haftar’s Tripoli offensive,  Riyadh promised him millions to buy tribal leader’s loyalties and to financially support the fighters in LNA.

Another reason behind Arab countries ardent sponsorship is, the question of muslim brotherhood. LNA has vowed to eliminate all the elements of religious extremism, including the muslim brotherhood. Cairo, UAE and KSA are known for their crack down on the brotherhood, while Turkey and Qatar are assumed to support the political activities of organization. Such difference in approaches has also led these countries into a state of perennial proxy war with each other.  

Recent Moscow talks and Berlin conference, in the beginning of this year, has indeed provided an opportunity for all the parties in conflict to come on the negotiating table, and draw out strategies for adherently following the Libyan arms embargo of 2011, for effective ceasefire. Yet, without a proper policy in place, which can prevent foreign interventions in Libyan domestic crisis. It will create a potential environment for Tripoli to transcend into a turmoil similar to Syria and Yemen. War in Libya, has already incited an endless cycle of unnecessary fighting, uncountable deaths and a vicious void of ills like; human trafficking and smuggling. From, exponential worth of 53.2 billion dollars in 2012 to 4.6 billion dollars in 2016, Libya’s natural revenues have shrunken conspicuously over the last decade. In addition to that, with global coronavirus pandemic still out and loose, conflicts like one in Libya have a higher potential of turning into a major confrontation. It’s a textbook example of how precarious the situation might get, if not taken sensibly, by international community.


[1] Anderson, Jon Lee. “The unravelling.” The New Yorker 23 (2015).

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The Coronavirus and Conflicts in the Middle East

Aleksandr Aksenenok

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The question of the political and socioeconomic consequences the COVID-19 pandemic will have for global development has prompted heated analytical discussions among leading politicians, economists and political scientists. The range of opinions is staggering, varying from “the world will never be the same” (Henry Kissinger) to “the pandemic will accelerate history rather than reshape it” (Richard Haass). Should we, therefore, expect radical shifts in the global leaders’ thinking or will the dangerous inertia of the last two decades ultimately come out on top?

The only thing most people agree on is that the coronavirus has plunged the world into a global, multidimensional crisis. This crisis is made particularly acute and unpredictable by the developments that predated it: the slowdown of global economic growth, the collapse of oil prices, socioeconomic differentiation, the rapid increase in military spending, protracted “unresolvable” conflicts and the growing threat of losing control amid geopolitical rivalry. There are new nuclear missiles, cyber- and biotechnologies, “hybrid wars,” and the consequences of all these trends are not yet entirely clear, which makes this rivalry far more dangerous than the USSR-US confrontation.

Thus far, it is difficult to say confidently what direction these developments will take and whether they will become a turning point. In any case (and here Russian and Western analysts agree), the statesmanship, competency and acumen of all world leaders will be put to the test, as will their ability for reasonable compromise. This “test” will be particularly relevant for those states in the greater Middle East that are involved in various conflicts and for their leaders, whose ambitions are, at this historical juncture, under powerful pressure from both within and without; this test may be even more relevant there than in other parts of the crumbling, yet interconnected world.

“Old” internal conflicts in Syria, Libya and Yemen, new-type protest movements demanding a change of the ruling elites (the “everyone means everyone” slogan) in Algeria, Lebanon and Iraq, balancing on the brink of an armed conflict in the Persian Gulf – this chronic instability constantly feeds into mutual enmity, the preference for solutions by force, and overall thinking along the lines of “winner takes all.” Regional wars remain a sore point on the Russia-West global agenda, which is already overburdened with many acute problems. At the same time, it has become apparent that domestic driving forces increasingly trump extra-regional influences such as the geopolitical rivalry between Russia and the US, between Western states (France, Italy, Germany, Greece), including Turkey, as is happening in Libya, between the regional powers themselves (Saudi Arabia, Iran, the UAE, Qatar) in Yemen, or between all of them in Syria.

The pandemic has affected Libya, Syria and Yemen to a lesser degree than the US and West European states. At the same time, the number of cases is still growing and is gradually approaching the limits of their capacities as these countries are exhausted by protracted wars and external aggressions. In that sense, they have much in common, which causes concern to the UN’s specialised agencies, the International Committee of the Red Cross (ICRC), and non-governmental humanitarian organisations. The ICRC has warned in a press release that “it will be nearly impossible to fight COVID-19 in countries already devastated by conflict unless a concerted response by states and humanitarian organisations is launched immediately.”

Despite appeals from the UN Secretary-General, from Russia, the US, several leading European states and other members of the international community, military hostilities are still raging in the region; they periodically abate and then flare up again. It takes a strong state, suppressing political violence, and a legitimate authority to succeed in combating the consequences of military conflicts in the Middle East in the middle of the pandemic. In the meantime, these three regional conflict centre have still not restored their territorial integrity, the principal criterion of national sovereignty, and the prospects for a final settlement appear quite vague.

The fight for territories continues. Local administrations of those states’ constituent parts largely depend on non-state actors, various militias, including those of a terrorist persuasion. International humanitarian aid is either inaccessible in many areas or is used for political purposes. Healthcare systems have been completely destroyed or significantly undermined, transport and commercial communication lines have been interrupted, while, according to the UN, about 38.4 million people (25 million in Yemen, 11 million in Syria and 2.4 million in Libya) are in need of humanitarian aid. Until recently, the World Health Organisation had no information about Huthi-controlled areas of Yemen, including the number of COVID-19 cases. Overcrowded city centres, prisons and camps for refugees and displaced persons are seen as the source of the infection.

Syria is a special case in the general picture of Middle Eastern conflicts amid the coronavirus pandemic. The outcome of the internal confrontation will have far-reaching consequences. If compromise solutions are found, a settled Syrian conflict might serve as a precedent for the global community and as a model and a key for resolving other conflicts. Alternatively, if Damascus fails to learn the lessons of 2011, this conflict might become a powder keg under the prospects of Syria’s stable domestic development. Not should we rule out the possibility of the country being split into areas of influence with socioeconomic rehabilitation in each area carried out by external sponsors (mostly with the help of Russia, Iran and China in Damascus-controlled lands, by Turkey in the northwest, and with the support from the US and some Gulf states in the east). The latter variant, though, appears the least probable.

At the extended meeting of the government in early May, President Assad made a powerful statement similar to the one made in the summer of 2015, when the Syrian regime was on the verge of collapse, and the President acknowledged publicly for the first time the dearth of domestic military resources, emphasising the need to “preserve useful Syria.”[1]  This time, now that the regime appears to have bolstered its positions thanks primarily to Russia, Assad has again warned the Syrian public and the global community that, if the coronavirus cases spike, Syria would face a “real catastrophe.” The current relatively low level of infection (there were 47 cases at that time), he said, did not mean Syria had avoided the danger. The World Health Organisation lists Syria among high-risk countries.

The President had more than enough reasons to make this statement. In late 2019, only 64% of the country’s hospitals and 52% of its medical outposts were still operating, while about 70% of healthcare workers found themselves among refugees and displaced persons. The geographical distribution of the medical institutions that are working is highly uneven: two-thirds of them are in Damascus, in the provinces of Latakia and Tartus, while there are none in Deir ez-Zor in the country’s east. According to the Brookings Institution, there are 1.4 medical workers per 10,000 people and a grand total of 100 ventilators in Idlib. Immediately after the first coronavirus cases were recorded, food and medication prices went up 20–40% on top of the existing inflation.

Since the first coronavirus cases were recorded on 22 March, Syria’s government has been mobilising its internal capabilities in three areas:

First: preventing the spread of the infection within the area under its control. In Syria’s northeast (Afrin, Idlib), similar measures are being introduced by local authorities that are under the influence of Turkey and several groups that have been declared terrorists, and by the Kurdish administration in inner Syria east of the Euphrates. The announced administrative and legislative measures envisaged even harsher steps than international standards suggested. A curfew was imposed immediately, external borders were closed, control was stepped up over transport between provinces and between the cities within them. This was a vital step for Syria, with its close commercial ties and cross-border contacts with Lebanon, Jordan and Iran (Syria has particularly intensive contacts with the latter). As of late April, Iran accounted for 79.1% of all coronavirus cases in the Middle East; Arab states of the Persian Gulf accounted for 12.1%, and other states for 8.8%. Territorial fragmentation, however, stands in the way of coordinating the fight against the coronavirus throughout the country. It is creating serious difficulties in handing out the international aid that is coming into Syria.

Second: mitigating the socioeconomic consequences for the regime, especially because surges in protests have been recorded since last spring, including in regions with predominantly Alawite population. The government imposed state price regulation, primarily for food, medications and essential goods. Fuel subsidies were maintained and bread stamps were introduced for people in particular need. At the same time, a set of solutions was introduced to remove administrative and bureaucratic procedures for import contracts on essential goods. Syrian importers working with such goods were offered preferential currency exchange rates. The government’s emergency decisions also included exempting individual types of business from taxes for April and gradually (since the first ten days of May) lifting restrictions on work in industrial and service sectors.

Third: concentrating the fragmented financial resources within the inner circle of the President’s power. This could mean transitioning to a policy of centralised distribution of the reduced state revenues, which means the authorities intend to be more decisive in fighting corruption and the “shadow economy” (between 2010 and 2017, GDP fell from USD 60.2 bn. to USD 17 bn.). The experience of many states, including European ones, shows that enhanced financial discipline is a must at a time of crisis, especially in collecting taxes and combating illegal economic activities.

Yet, as regards Syria, Arab and Western media focused rather on looking for sensations than on providing a balanced analysis of the situation with a view to helping find ways out of the crisis that had been compounded by the threat of the coronavirus pandemic. Regrettably, the media show the latest economic steps undertaken by the Syrian government through the lens of the conflict between the President and his cousin, Syria’s wealthiest businessman, multibillionaire Rami Makhlouf.

His business empire does, indeed, span a range of key economic sectors: telecommunications, oil and gas, banking, construction, real estate, commerce, etc. The rise of Rami Makhlouf began soon after Assad came to power, during the short period of liberal economic reforms. During the war, his standing in Syria’s economy was consolidated significantly by the preferences given in exchange for charitable activities and financing militias loyal to the government. Now is the time to pay the bills and some of his assets have been frozen. The conflict peaked when the Syrian oligarch decided to publicise the economic dispute about paying Syriatel’s taxes totaling USD 180 m. He did this at a juncture that was critical for the country. Consequently, the conflict was broadly politicised and resulted in rumourmongering about a split in the presidential elites similar to the late 2017 events in Saudi Arabia (Crown Prince Mohammad bin Salman had several members of the royal family temporarily detained on allegations of large financial claims against them).

Incidentally or otherwise, precisely in April and May, the western and Arab media were inundated with various speculations concerning Russia-Syria relations. Distorted interpretations were given to those articles in the Russian media and on Russian social networks that contained benign criticism of Damascus’ inflexible policies in political settlement and of the widespread corruption getting in the way of reconstruction and handling the most pressing socio-economic problems. These articles were presented as allegedly reflecting the Russian political elites’ discontent with President Assad personally.

Deliberately fake news affected even the Russian International Affairs Council (RIAC), whose expert materials always contain objective analysis and verified facts, whether people like it or not. At the instigation of Syrian opposition sources, citing some RIAC paper, fake news was disseminated about Russia, the US and Turkey (with possible participation by Iran) having some plan about removing Assad from power and establishing a “transitional government” consisting of representatives of the “Syrian regime,” the opposition and “Kurdish militias.” Even more regrettable is the excessively emotional response by some “members of the public” in Damascus itself, expressed in the spirit of the ideological rhetoric of the past, of the outdated black-and-white foreign policy notions. They classify members of the Russian expert community (journalists serving purely corporate interests do not count) as “those in favour” and “those against,” into “pro-Western” and “patriotic.” The former naturally strive to “undermine the allied relations” between Russia and Syria.

Meanwhile, despite the many barriers dividing the world, cooperation in fighting the coronavirus pandemic, this “common enemy” as Antonio Guterres called it, is being gradually established, but things are far more complicated in the Syrian conflict.

Besides the WHO, the International Red Cross and some other international organisations, real external aid to Syria’s government is provided only by Russia, China and, to a lesser degree, Iran, with limited aid coming from some European and Arab states. With the start of the coronavirus outbreak, Russia launched humanitarian deliveries to Syria, bringing in face masks, coronavirus testing systems, and other medications and medical equipment. Food aid has been no less important for Syrians. In April, Russian grain, which had previously been in short supply on the market, was delivered to the port of Tartus.

Although the European Union expressed its support for the UN Secretary General’s appeal to lift the sanctions off several states, including Syria, so that the needed medical and humanitarian aid could be provided, in practice, Europe’s contribution is doubtful. First, EU member states have no consensus on Syria and, second, European companies are, as in the case of Iran, extremely wary of secondary US sanctions.

The stance of the Trump Administration is, like that on several other foreign political issues, rather ambiguous, not to say hypocritical. On the one hand, they introduce all kinds of “exceptions,” “authorisations” and “special licences” for providing humanitarian aid to Syria and some other states during the fight against COVID-19. This procedure is detailed in a relevant paper by the US Department of the Treasury dated 16 April 2020 (Department of the Treasury, Washington DC, Office of foreign control, Fact Sheet: Provision of Humanitarian Assistance and Trade to Combat COVID-19). On the other hand, the US is putting “maximum pressure” on Syria, stepping up its verbal threat campaign against President Assad personally and warning those countries, including Arab states, that are willing to provide Syria with the necessary financial and material support, about the consequences. European experts believe that, even if Syria agreed to use the offer of exemptions from the sanctions, this would hardly produce any results because of the large number of duplicate sanctions imposed over the last 20 years and also the “bewildering” bureaucratic procedures.

Many statements made by official US representative for Syria Engagement James Jeffrey in recent months are just as contradictory and confused. One day, he says the US does not want to overthrow the Syrian regime and supports the launch of the Constitutional Committee; another day, he says that Assad is utterly unacceptable, which can be understood to mean that he is unacceptable even as a presidential candidate at the elections to be held under Resolution 2254. Statements about his contacts with Russian partners and unwillingness to intervene in Russia-Syria relations do not jibe with his words that the purpose of the US is to let Russia get bogged down in Syria. As for jointly fighting international terrorism, there is a certain slyness there, as well, concerning Hay’At Tahrir al-Sham, which apparently cannot really be considered quite terrorist since it has never carried out terror attacks outside Syria and only fights the Assad regime.

The reality is that the coronavirus pandemic caught Syria in the midst of an unsettled conflict and social tensions, a destroyed infrastructure, limited internal reserves and financial resources. We need to understand that in this emergency the way out of the crisis or the simple act of meeting the urgent needs of the people, regardless of their political preferences, is closely linked to the integral progress in several areas: mobilising internal economic resources and creating conditions equally favourable for the work of public-private partnerships and foreign investors; providing a safe environment for refugees to return; creating an atmosphere conducive to national reconciliation; what is required politically is for these efforts to be enshrined through specific steps taken in compliance with UN Security Council Resolution 2254, largely spearheaded by Russia.

 [1] See: A. Aksenenok. “The Syrian Crisis: A Thorny Journey from War to Peace” [in Russian] // Valdaiskie zapiski [Valdai Memoranda] No. 104, Valdai Discussion Club. P. 11.

From our partner RIAC

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