The last few days have been a tumultuous period in the Gulf and particularly in Iran where the killing of Qasem Suleimani, the Iranian missile attack on U.S. forces in Iraq, the massive funeral processions in Iraq and Iran, bringing unity in Iran after demonstrations against the hike in oil prices, the unintentional shooting down of a Ukrainian civilian passenger aircraft with numerous Iranian, Canadian and other passengers on board and the subsequent unrest in Tehran and other cities were notable. Where have they all led up to?
In an interview to the German Weekly Der Spiegel, reproduced in the Tehran Times on January 25, Iranian Foreign Minister Zarif spelt out the Iranian position on the situation in Iran. He said, “The strike against the military base in Iraq, from which the U.S. conducted its operation, was Iran's formal military response. There was no intention of causing any casualties with the missile attack – we were executing our right to self-defense in a proportionate manner. But the real response will come from the people of the region, who are showing that they are absolutely disgusted with the U.S. behavior” and that in response to the message sent by the Americans, Iran had responded by telling the Americans that “the action (counter strike) has ended and that we will not take any more action if they don’t take any more action – and that we are not responsible for the actions of others.”
In response to a question about Iran being less compliant with the JCPOA and the EU’s decision to invoke the clauses in the JCPOA which would take the matter to the UN for imposing UN sanctions on Iran, Zarif said that the EU had no justification for resorting to this and would face a tough fight in the UN Security Council. He was not aware then that the EU decided on January 24 as announced by EU foreign policy chief Josep Borrell that “the participating countries of the Joint Comprehensive Plan of Action (JCPOA) nuclear deal have agreed to extend the timeline of the agreement's dispute settlement process due to the complexity of the issues involved”. He emphasized that Iran could and would reverse all the measures and return to full compliance with the JCPOA conditions as in previous statements emphasised that Iran would not build a nuclear device since there was a fatwa (religious decree) from the leader that it was not morally permitted.
The Americans have of course been emphasizing that the Iranians are facing considerable economic pointing out that President Rouhani has said that as a result of sanctions Iran had lost $200 billion, its economy had contracted by as much as 14%, and that more than a quarter of young Iranians were jobless. He claimed that Iran is also facing a banking crisis with roughly half of all bank loans in arrears and inflation was at 40 percent. In terms of new efforts the U.S. has announced new restrictions on the steel and aluminum industries of Iran and has also placed fresh restrictions on Iranian officials including Admiral Shamkhani, the Iranian National Security Adviser. Seasoned analysts in Washington are, however, convinced that these are symbolic and make little difference to the Iranians.
The American emphasis on not raising the temperature is owed largely to the fact that Trump does not want a fresh military confrontation with Iran since this will adversely impact his reelection campaign, particularly in the Bible Belt from which he derives his core support. There the principal sentiment strengthened, no doubt by the release of the Afghanistan Papers, that the U.S. must pull out of all foreign entanglements and particularly those in the Middle East.
There is however another compelling reason. All the important members of the GCC sent emissaries to the U.S. or spoke to Secretary Pompeo asking for de-escalation and this was reflected in the press handouts issued by the State Department after visits of high level emissaries from Saudi Arabia and calls made by him to his counterparts in the UAE and Kuwait. De-escalation became the mantra even while fresh but largely meaningless sanctions were being imposed.
Within the area, the GCC countries, keenly aware that in the event of an escalation they far more than U.S. forces in the region would be tempting targets, persuaded them to reach out to Iran.
The most notable of these efforts perhaps was the claim by the acting Prime Minister of Iraq that Iraq had conveyed a message from Saudi Arabia to Iran and that Suleimani was bringing the Iranian response when he was assassinated. What exactly had been proposed by Saudi Arabia has not been made public by the Iraqis but clearly the effort was to de-escalate.
The UAE not only took steps to reduce its involvement in the war against the Houthis in Yemen but also sent emissaries to Iran to resume negotiations on the dispute regarding the three islands in Iran’s possession but claimed by the UAE. The Houthi attack on the forces of the Saudi supported government on January 20 will not fundamentally change the Saudi effort to seek some sort of understanding with the Houthis.
While President Trump has said that America is not only self sufficient in fossil fuels but has developed a large export capacity, it cannot make up for disruption of oil supplies from the Gulf. Any conflict that led to the blockage of the Strait of Hormuz could, according to an estimate by JPMorgan, drive up oil prices by 126% to more than $150 per barrel, and even a more limited disruption – such as a one-month blockade – could push the price up to $80 per barrel.
The impact on world trade and particularly on the fragile economies of the developing world of which Pakistan is a part would be disastrous. The GCC countries themselves, while making development plans to reduce their dependence on oil revenues, need at this time an increase, not a decline in their oil revenues.
For them the Iranian assertion that the proportionate response to the assassination of Suleimani was all they intended doing unless the Americans undertook military operations was reassuring but made it all the more imperative for them to persuade their American ally to refrain from escalation of the conflict.
Iran, according to American calculations, has a dire economic situation. According to one estimate its foreign exchange reserves are at about $100 billion but of these they can, because of various sanctions on banks holding these reserves, draw upon only $10 billon of this amount. This, even with strict controls on foreign exchange transactions, would last for less than a year. Iran has however lived with such sanctions for a long time, and has developed ways and means for evading them. They have perfected methods developed during the Iraq-Iran War to sell their oil, albeit at deeply discounted prices through transfers at sea or through clandestine exports to Turkey, Syria and Iraq. American surveillance has been enhanced but no one can claim that all or even a substantial part of such transfers can be checked.
Moreover, the Iranians are likely to continue to receive some measure of support from China and Russia and as the recent action on the JCPOA by the EU suggests, perhaps even manage to get the EU to make the INSTEX – a vehicle to provide some relief to the Iranians as part of the effort to secure continued adherence by Iran to the JCPOA.
The Houthi attack on the government forces in Yemen notwithstanding we have after the tumultuous events earlier in January entered into a period of relative calm. It seems, at the time that article is being written, that the domestic unrest prompted by the rise in gas prices and by the unintentional shooting down of the Ukrainian aircraft has been brought under control.
More importantly, despite the American desire for regime change in Iran, there is no viable alternative for the current regime in Iran. No one can think of the Mujahideen-e-Khalq as a genuine alternative.
What one can say however is that within the current power structure in Iran the hands of the “hardliners” have been strengthened and that those seeking accommodation – this may include President Rouhani and Foreign Minister Zarif – are relatively less important. It is significant in this regard that the candidates rejected by the Council of Guardians are for the most part those who could be considered “moderates”.
Making an assessment of what lies ahead is a risky business but in my view (1) the current regime in Iran is not going to change, (2) Iran will find the means to carry on at least for the next year or more on the resources it has and which may be added to if the EU joins Russia and China in offering some sanctions relief, (3) the U.S. will continue to refrain from escalating military confrontation and may even move, as part of Trump’s reelection campaign, towards reducing its military presence in the region. The tumult in Iraq, Lebanon and Syria is currently in Iran’s favor. This may change as the local uprisings against corruption and mismanagement take an anti-Iran turn but Iranian influence will still remain an important factor in these regional countries and also of course in such Gulf countries as Qatar and Kuwait.
The writer is a former Foreign Secretary and Ambassador to the U.S. and Iran. Presently he is Head of the Global and Regional Studies Centre in the Institute of Business Management, a Karachi based University.
E-mail: [email protected]
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