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From Nuclear to NewClear

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In the course of many visits to Iran over the years I have come to realise that no country is the subject of such fascination and mistrust in Iran as the United Kingdom. So my friends at ‘Tehran Times’ are interested to hear my thoughts in relation to Anglo-Iranian relations following the recent UK election. 

This election was fought and won by Johnson’s Conservative party in order to “Get Brexit Done” so that the UK will now definitively – after three years of political paralysis – leave the European Union. I believe this result to be positive for Iran for two reasons, the first being Prime Minister Johnson as a person, and the second being the new role and responsibilities of Johnson’s office as UK Prime Minister in international diplomacy and commerce for an independent UK.

Johnson as a Person

“Those are my principles, and if you don’t like them….well, I have others…..” Groucho Marx.

As with President Trump it is a mistake to view Prime Minister Johnson through the lens of rational statecraft. Johnson combines intelligence, idleness and pure expedience in equal measure. He owes his success to his capacity to delegate strategy and responsibility to capable and diligent subordinates such as Dominic Cummings, the Grand Vizier to Johnson’s Byzantine Caliph.

Perhaps the most important point for Iran’s decision-makers to bear in mind with PM Johnson is that, like his father Stanley before him, he genuinely likes and respects Iran and Iranians, and the country’s great culture, history and heritage. So, all things being equal, the accession to power of Johnson as a person is positive for Iran.

Johnson as UK Prime Minister

Unfortunately, all things are very far from equal for Iran in terms of access to the global economy, and the question is to what extent Iran’s access may improve after UK’s imminent Brexit departure from the European Union under Johnson’s leadership.

While much is made of the UK’s special relationship with the US, this has been poisoned by a unilateralist Trump administration which is thoroughly despised by the UK ruling class from which PM Johnson springs.  Despite a great deal of pro-American and anti-European rhetoric from within Johnson’s party, the reality is that, not least for geographic reasons, two thirds of UK trade is with EU members and this is unlikely to change soon. 

PM Johnson is  pragmatic enough, and has a big enough parliamentary majority for the next five years, to allow his more anti-European & pro-US elements to say what they like while he does what he likes. So what practical steps could be taken to improve UK/Iranian relationship?

Trade Clearing

That PM Johnson is willing to engage with Iran was clear from his visit to Tehran two years ago in December 2017. Unfortunately for him, his predecessor PM Theresa May, under instructions from the US, killed the release to Iran via the banking system of long outstanding funds which could open the way to further trust-building measures. 

New financial technology (Fintech) presents new options for innovative UK trade clearing which enable bank payment channels to be transcended. In the energy field, the UK may go beyond the political EU Energy Union project which aimed to both create a pan-European market in energy as a commodity and support the Euro as a currency by securing € denominated debt on energy. 

The fundamental flaw of the INSTEX mechanism is that it is reliant on banks as payment channels, and no major bank wishing to clear dollars is prepared to participate in INSTEX even for trade permitted under US sanctions. The UK may now transcend the INSTEX Euro trade clearing mechanism by creating a complementary trade clearing system in London. 

So a new UK/Iran trade clearing system may directly connect businesses wishing to supply for use in Iran permissible technologies such as desalination and renewable energy in particular.

How may this be achieved?

Petro Fintech

Financial Technology is the combination of law & accounting with information and communications technology (ICT). A new generation of online businesses emerged around 2001 from the ‘Internet Bubble’ of complex and crazy ventures. A similar new wave of Fintech is now emerging from the initial wave of “Blockchain” secure shared databases and “Coin” financial instruments with complex and vulnerable connections to the conventional financial system.

In the field of energy fintech Venezuela’s Petro instrument is an excellent case study. The first problem with this Petro is that it is technically backed, not by (say) gasoline or diesel fuel which the average Venezuelan can use, but by heavy grades of crude oil useful only to a few complex refineries. Secondly, this technical oil backing is useless even to complex refineries because Venezuela will not accept the Petro from them instead of dollars or even Euros in payment for oil.

In October 2008, the global banking system froze and the oil price collapsed, which OPEC mistook for lack of demand, but was simply due to the inability of oil buyers to clear payments using bank channels. Meanwhile, in Tehran I proposed, at a major conference chaired by H E Nematzadeh, a simple prepay instrument (“Petro”) returnable in payment for fuel supply. 

As an energy prepay (“credit”) instrument Iran’s reality-based Petro will be issued by fuel producers or refiners, not by Iran’s banks or government. The NewClear combination of transparent issuance, professional system management and mutual assurance by a Protection and Indemnity (P&I) club agreement will enable a Petro Clearing Union. 

Proofs of Concept

Every network is founded by its first connection. There is no reason why Iran’s frozen assets in the UK, whether long outstanding debts, or ongoing gas production, cannot be mobilised using simple effective energy credit clearing. In this way, projects may be mobilised in Iran exempt from US sanctions and with suppliers and contractors willing and able to implement them, but unable to access conventional payment via banking channels.

Moreover, in Iran itself, all of the elements now exist to rapidly introduce the Petro domestically in order to reduce the initial frictions from reducing subsidies. 

My colleagues and I stand ready, as we have since 2004, to at last commence the implementation of a new generation of financial technology both domestically and in bilateral UK/Iran trade clearing: in this way Iran may advance from nuclear to NewClear agreements.

From our partner Tehran Times

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Middle East

China-Arab Relations: From Silk to Friendship

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China and the Arabs have a long and rich economic and cultural history, and this distinguished relationship still exists today, with a promising future. This bilateral relationship between the two nations is based on the principles of respect and non-interference in internal affairs or foreign policies. Therefore, China’s relationship with the Arabs as well as with other nations is unique and a model to be followed. If you meet a Chinese person, the first phrase will be “Alabo” or an Arab in Mandarin, and he/she will welcome you. The Chinese state’s dealings with its counterparts can be measured based on the model of this Chinese citizen. China deals with the Arabs on the basis of friendship and historical ties.

The history of Sino-Arab relations goes back to the Tang Dynasty, and these relations developed with the flourishing of trade between the two nations. Since China was famous for its high quality silk, this trade route was called the “Silk Road”. Baron Ferdinand Freiherr von Richthofen, better known in English as Baron von Richthofen, was a German traveller, geographer, and scientist. He is noted for coining the terms “Seidenstraße” and “Seidenstraßen” = “Silk Road” or “Silk Route” in 1877.

Chinese-Arab relations have developed in contemporary history. In 1930, China established official relations with the Arab Republic of Egypt and the Kingdom of Saudi Arabia. A library in China was named the “Fouad Islamic Library”, after the late Egyptian king, “Fuad the First”. In 1956, Egyptian President Gamal Abdel Nasser cut ties with China and established relations with the Communist People’s Republic of China and inaugurated an embassy in Egypt. In the same year, the Arab League established relations with the People’s Republic of China. By the year 1990, all Arab countries cut their relations with the Republic of China and established diplomatic relations with the People’s Republic of China.

In 2004, the China-Arab Cooperation Forum was established, and today it is considered a milestone for the Sino-Arab relationship. At its inauguration, Chinese Foreign Minister Li Zhaoxing delivered a speech stating:“The Arab world is an important force on the international scene, and that China and the Arab countries have enjoyed a long friendship. Our similar history, our common goals and our broad interests have been credited with enhancing cooperation between the two sides; no matter how the international situation changes, China has always been the sincere friend of the Arab world”. The China-Arab Cooperation Forum was officially established during the visit of Chinese President Hu Jintao to the headquarters of the League of Arab States in January of 2004.

Hu Jintao indicated at that time that the formation of the forum is a continuation of the traditional friendship between China and the Arab world. The Chinese president said at the time, “The establishment of the forum is conducive to expanding mutual cooperation in a variety of fields. He added that China had made four proposals; First, maintaining mutual respect, fair treatment and sincere cooperation at the political level. Second, strengthening economic and trade relations through cooperation in the fields of investment and trade, contracted projects, labor services, energy, transportation, communications, agriculture, environmental protection and information. Third, expand cultural exchanges. Finally, conducting training for the employees.”

During the second session of the forum in Beijing in 2006, China showed its sympathy for the issues of the Arab world and its interest in the peace process between Palestine and Israel, since China is a peace-loving country; it presented the idea of “a nuclear-free Middle East”. China is the best friend of the Arab countries today. Although some Arab countries have strong relations with the West whose policy does not match the Chinese policy, but all Arab countries agree on friendly and good relations with the People’s Republic of China.

The Arab citizen is not interested today in the foreign policy of the US, the deadly weapons of the US and Russia, or European culture, but rather the livelihood and economy, and this is what China provides through its wise economic policy. In 2013, Chinese President Xi Jinping launched the Belt and Road Initiative, or New Silk Road, which will restore glow to China-Arab relations; as the Arab world is in a strategic location on the initiative map. Thus, the Arab countries are an important partner for China in the initiative. Although the volume of trade exchanges between China and the Arab countries exceeded 200 billion US dollars, which increased 10 times over the past decade, there was no commercial and institutional arrangement to facilitate trade between the two sides.

China, as a peaceful and non-invasive country, aims to promote economic cooperation with Arab region on an equal basis because it considers the Arab world a historic partner. The historical experience of the Arabs with the Chinese through the Silk Road has confirmed that China differs from the nations of colonialism and imperialism, which consider the Arab region a place rich in natural resources only. In his historic speech at the Arab League, Chinese President Xi stressed that China will not seek to extend influence and search for proxies in the Middle East. The Chinese initiatives will contribute to establishing security and stability through economic development and improving the people’s livelihood, in line with the post-2015 development agenda and the aspirations of the Arab people for a better life, as the Chinese experience proves that development is the key to digging out the roots of conflicts and extremism in all its forms.

China is a neutral country and does not favor the use of violence. During the Syrian crisis, for example, the Chinese envoy to the Security Council raised his hand three times, meaning that China, with its wise diplomacy, supported the Syrian regime without entering the military war. During the recent Chinese military parade, Chinese President Xi Jinping revealed some Chinese military capabilities and thus sent a message to the enemies that China will always be ready if a war is imposed on it, and a message of support to China’s allies. The Arab region today needs a real partner who possesses economic and military power and international political influence, such as China; to ensure the success of the Belt and Road Initiative, and to consolidate the China-Arab relations and raise it to the level of a strategic alliance.

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The analysis of developments in relations between Turkey and Israel

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The fear of Biden’s Administration, the concern over the Abraham Accords (see below), the positioning of the geopolitical status in the Middle East, and the safeguarding of interests in Israel are the main factors through which Turkish President Recep Tayyip Erdoğan seeks to improve relations with Israel which, however, he connects to the Palestinians.

The statements made by Turkish President Erdoğan’s on developments in relations with Israel have confirmed media reports of his repeated attempts to reach an understanding on several controversial issues, as well as paving the way for the re-establishment of diplomatic relations. The statements made by President Erdoğan, as well as other Turkish officials, have stressed the connection between the change in Turkish-Israeli relations and Israel’s policy towards the Palestinian issue.

The “linking principle” connecting the two issues has been a key factor in Turkish foreign policy since the 1950s, and it operates in the range between words and deeds, which at times have also led to severe crises in the relations between the two countries.

At the time Turkey opposed the partition plan, but recognised Israel and maintained diplomatic relations with it. Relations were suspended after the second Arab-Israeli war in 1956, when Turkey recalled its diplomatic representative from Tel Aviv, announcing he would not return there “until a just solution to the Palestinian issue was found in accordance with UN Resolutions”.

After rising to power, President Erdoğan has developed the aforementioned “linking principle”. Against the backdrop of Israel’s actions with the Palestinians, Turkey has increased its political and economic support for its Muslim brethren and caused crises.

President Erdoğan’s recent statements have been made against the backdrop of this policy: on the one hand, the Turkish President has expressed his country’s desire to improve relations with Israel and continue intelligence cooperation; on the other hand, he has maintained that Israel’s treatment of the Palestinians is “unacceptable”.

It is important to note that Turkey will not relinquish the “linking principle”, which differs from the principle of the new Arab normalisation, based on the separation between the Palestinian issue and relations with Israel. The so-called Abraham Accords, such as the recognition of the State of Israel by the United Arab Emirates in September last year: the third Arab country to formally recognise Israel, after Egypt and Jordan; the fourth one if we considers Mauritania’s “frozen” recognition.

The policy implemented by President Erdoğan is not only shaped by foreign relations, but is also a Turkish internal issue in which public opinion plays a key role. It seems that until elections are held in Turkey (scheduled for June 25, 2023), there will be no complete normalisation with Israel. The majority of the Turkish population supports the Palestinians and their rights, feels full solidarity for them and opposes the Israeli presence.

Moreover, President Erdoğan regards the Palestinian issue as an important factor in building a renewed Turkish Muslim national identity. These stances increase his popularity and strengthen people’s support for him and his party, as well as his authority and prestige in the Muslim world.

At the same time, however, this policy also has pragmatic implications: President Erdoğan is not severing ties with Israel, but merely creating actions that lead to symptoms of “diplomatic” crises.

Despite this wait-and-see attitude, economic ties between Turkey and Israel are flourishing. According to official data, in 2018 exports from Turkey to Israel were worth 6.5 billion dollars and imports 1.9 billion dollars (excluding diamond trade and tourism).

Following the crisis in relations and the expulsion of the Israeli Ambassador from Turkey (May 2018), exports had fallen to 4 billion dollars in 2019 and imports to 1.7 billion dollars. Although declining, there are still deep economic ties.

Trade relations, however, are not the decisive factor in determining the nature of Turkey-Israel relations. There are four issues that are believed to have led Turkey to review its relations with Israel:

1. Turkey has welcome the new U.S. President, Joe Biden, with caution and fear that he will oppose Turkish activities in the region. The U.S. leader may also be very tough on security, armaments and minority rights in Turkey. Some believe that improved relations with Israel will calm down the situation with President Biden, and the U.S. Congress and the Zionist lobby will be able to contribute to this result. It is not known, however, whether Prime Minister Benjamin Netanyahu will be as good a mediator with Biden as he was with Donald Trump.

2. Turkey is seeking to remove the isolation imposed on it due to the distribution of marine economic zones in the Eastern Mediterranean area, and is trying to bring Israel on its side to develop a joint stance and oppose such subdivisions. According to Israeli sources, Turkey has made Israel a generous offer to expand its area of control over the marine economic zones, in exchange for Turkey’ siding with Greece, Cyprus and Egypt. Israel has reacted cautiously, both because it much weighs President Erdoğan’s intentions and because it is actually interested in strengthening its relations with the above stated countries.

3. Turkey is worried about the Abraham Accords for normalisation with Israel, particularly the aforementioned one with the United Arab Emirates, and Turkey aims at limiting their influence and status as a further “undertaking” of Arab rivals. Turkey endeavours to dismantle a rising alliance between the Arab countries and Israel. After all, we wonder why Turkey is not instead trying to improve its ties with Arab countries to achieve the same goal. Could it still be because of history and traditional mutual dislike?

4. Turkey is trying to relieve the pressure on its activities in Israel and Palestine as a result of the possible improvement in relations with Israel. Turkey funds important projects in Jerusalem and Israel is trying to contain and restrain it. Conversely, an improvement in Israeli-Turkish relations could release the Israeli brake.

To date, no official Israeli response has been provided to Turkish statements. Israel’s media speak of suspicion and coldness in response to the Turkish rapprochement, with fears that President Erdoğan is preparing a ploy, a trick aimed not at improving his relations with Israel, but at sabotaging Israel’s relations and contacts with other countries.

However, leaks from senior Israeli officials indicate that their country has set conditions for restoring relations, which include ending Turkey’s ties with Hamas and transferring Turkish projects to Jerusalem through Israeli channels, as well as abstaining from voting against Israel in international organisations and adopting a balanced position between Israel and the Palestinians.

It is not yet clear what the fate of Turkey-Israel relations will be in the coming months, with President Biden in the White House and after the Israeli elections held on March 23, 2021. It is important to note, however, that Turkey will not give up the “linking principle”, which differs from the new principle of Arab normalisation, based on the separation between the Palestinian issue and relations with Israel.

The Turkish “linking principle” is a real need for Turkey- hence the Palestinian leadership must work with Turkey to maximise common goals, especially with regard to Jerusalem, the Al-Aqsa Mosque and Gaza.

Not easy steps to make, but not impossible either.

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The Exceptionality of the Hashemite Rule in Jordan

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In the tumultuous politics of the Middle East, the Hashemite Kingdom of Jordan has traditionally steered a cautious and successful course in international relations. This course largely relies on a multidimensional foreign policy and the cementing of relations with regional and western countries. Jordan is a valuable strategic partner of the United States and the European Union in the heart of the Middle East. Amman’s strategic role is reflected in the military cooperation and joint global counterterrorism operations including as a member of the Global Coalition to Counter ISIS and in meeting the overwhelming humanitarian needs of more than 1.5 million Syrian refugees.

Jordan is also a pragmatic neighbor of Israel. The 1994 Jordan-Israel peace treaty has enabled water sharing arrangements between the two countries, security cooperation, Jordanian overflight of Israeli territory, and the conduct of joint Israel-Jordan exercises to respond to natural disasters. A representative case was the 2004 joint exercise to counter environmental effects of pollution in the Red Sea. The peace treaty has notably provided the context for enhanced economic, trade and tourism ties.

The kingdom has also served as honest broker in Palestinian-Israeli peace efforts in support of the two-state solution, always abiding with the late King Hussein’s principle that “Jordan should not be, cannot be, will not be a substitute for the Palestinians themselves as the major aggrieved party on the Arab side in a process that leads to peace”. Amman has served as credible intermediary for Israel and the Palestinians to suspend tensions at multiple occasions like for example in the old city of Jerusalem, particularly at the Temple Mount/Haram Al-Sharif where the kingdom pursues a successful administration of religious funded schools favoring moderate religious education and religious tourism. Jordanian moderation guarantees co-existence of the three monotheistic religions in Jerusalem at a time when on the contrary, counties like Turkey funnel millions of dollars in charity projects in Jerusalem promoting extreme Islamic ideologies.

Reform Programs and Initiatives

Jordan’s moderation stems from the Hashemite rule that has confronted internal and external challenges maintaining stability that is conducive to national, and western interests for the region. The exceptionality and uniqueness of the Hashemite rule derives from its historical legacy, modernity, direct descendant of Prophet Mohammed and its posture as vanguard of reforms. Among significant reform initiatives was the “Jordan First-Al Urdun Awlan” campaign of 2002-2003, that articulated a comprehensive vision of economic and political reforms. The initiative provided the formation of a national committee to deal with different economic and political issues that ultimately led to the introduction of a parliamentary quota for women and the enactment of anti-corruption measures.

A blueprint for political, economic, and social reforms was provided by the 2005 Jordanian National Agenda that approached the reform process in a holistic, rather than a piecemeal, way. Its findings produced the “We Are All Jordan-Kulna al Urdun” document. The document was a clear attempt at political reform and selected a list of fifteen priorities that paved the way for significant legislative initiatives. A prominent initiative was the enactment of an anti-corruption law that established an anti-corruption committee with broad powers and included in its definition of corruption actions related to nepotism (wasta).

An additional reform program is the Jordan 2025 National Vision and Strategy” launched in 2014that provides for economic reforms through policies and measures that aim at sustainable economic growth, support of small and medium-sized businesses, women’s participation in the labour market, financing mechanisms for public projects (PPP partnerships) and public investments on health, education and food security, digital economy, and green infrastructure. The coronavirus pandemic however has hit hard the kingdom’s economy to such an extent that economic reform initiatives are expected to bear fruits at a later stage taking into consideration the current global economic downturn considered to be the worst since the Great Depression. Jordan’s Gross Domestic Product (GDP) contracted in 2020 by 2.3 percent after growing 2 percent in 2019 due to losses in state revenues because of fewer remittances and a weakened tourism market.

To cope with the direct negative effects of the pandemic on its state budget, Jordan received $396 million from the International Monetary Fund (IMF) in May 2020 in the form ofemergency assistance. The amount of finance was specifically funneled to address the kingdom’s balance of payments needs and allow for higher spending on healthcare, and assistance to households and companies most affected by the pandemic. Despite that the IMF provided in March 2020 another multi-year $1.3 billion loan package to Jordan, the pandemic has caused at least a $1.5 billion shortfall in its balance of payments.

Modernization and Democratization

The Hashemite exceptionality legitimizes and ensures viability of rule over Jordan that constitutes a model of a modern Arab democratic country.The Jordanian leadership has taken over the last decade practical steps to unleash a deep political reform process to reflect Jordan’s vision of comprehensive reform, modernization, and development. Chief among reform measures was the introduction of a new constitution that came into force in 2011 and included amendments to 42 constitutional articles. Most prominent was the establishment of a constitutional court and an independent elections oversight commission, and the provision that the dissolution of the parliament entails the dissolution of the government. A major concession was also the curtailing of some of the King’s powers with most representative, the revoke of his power to cancel parliamentary elections. It is also noteworthy that the Jordanian leadership initiated in 2013 the Democratic Empowerment Programme called “Demoqrati” under the umbrella of the King Abdullah II Fund for Development, with the aim to instil the principles of active citizenship and empower individuals and democratic institutions.

In practical terms, the kingdom has demonstrated effectiveness and respect of democratic processes when, despite the pandemic, Amman proceeded with holding parliamentary elections in 2020. A recent poll conducted by the Centre for Strategic Studies at the University for Jordan in mid-March 2021 showed that 36% of Jordanians trust the current parliament, and 38% trust their electoral district parliament representatives, which constitutes the highest percentage of trust given to the parliament since 2014. The election of 100 new parliament members in the current House of Representatives guarantees renewal of political representation that is one of the main pillars of democracy. Elections were held in Jordan in a timely manner enhancing democratic governance and institutions. Jordanian elections were held in accordance with constitutional provisions when on the contrary at least 41 countries and territories around the world postponed national elections and referendums using the pandemic as a pretext according to data released by the Stockholm-based International Institute for Democracy and Electoral Assistance.

Overall, Jordan’s Hashemite leadership has unleashed a multidimensional reform process throughout the years that reflects the kingdom’s vision of comprehensive modernization and development in a way that can be translated into realities on the ground and provide a blueprint for a better future, not only for Jordanians, but for the people of the region.

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