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Time for Reality Check in Iran

Dilip Hiro

LONDON - While US President George Bush has not explicitly excluded a military option to stop Iran's nuclear program, he and his European allies are currently pursuing economic sanctions to compel Tehran to cease enriching uranium as required by the UN Security Council. However, Iran's technological advance, the rocketing price of oil and the split among the council's permanent members may converge to foil the sanctions, inducing the international community to scale down its demand. As International Atomic Energy Agency Chief Mohamed ElBaradei has argued, the goal now must be to prevent Iran from expanding its enrichment program to massive, industrial-level production.

ElBaradei's comment reported in the New York Times came against the background of hardening Western stance on Iran. British Prime Minister Gordon Brown warned on November 13 that, if Iran continued to ignore the Security Council demand to suspend uranium enrichment, Britain would call for tougher UN sanctions, including a ban on foreign investments in its oil and gas industry.

The next logical step would be a ban on the purchase of Iran's oil and gas. But given Iran's long coastline, its fluvial borders with nine countries, and China and India's unquenchable thirst for petroleum, it would be impossible to enforce such an embargo.

The November 15 report of the International Atomic Energy Agency (IAEA) provided fresh opportunity for the US to reiterate its hard line. Describing Tehran's cooperation with the IAEA as "selective and incomplete," the US Mission to the IAEA said, "Iran still refuses to fully disclose the past and present as the IAEA expects, and to suspend fully its proliferation-sensitive activities as the Security Council demands."

Its statement stemmed from the IAEA conclusion that Iran's cooperation was "reactive" rather than "pro-active," and that the IAEA's grasp of the full scope of the nuclear program was "diminishing" due to Tehran's suspension of the Additional Protocol that arms IAEA inspectors with extra rights. But Iran had signed up to the Additional Protocol voluntarily and suspended it in retaliation to the IAEA decision to refer its case to the Security Council.

The US Mission seems to have overlooked the IAEA statement: "Iran has provided sufficient access to individuals and has responded in a timely manner to questions."

On the opposite side, Iran's nuclear negotiator Saeed Jalili, said, "All the claims that Iran's nuclear activities have a military agenda and are deviant are untrue." His conclusion rests on the IAEA statement that it had not discovered evidence that Iran was enriching uranium to a level that would produce bomb-grade fuel. Therefore, he argued, the basis for the sanctions "has collapsed."

Actually, the two sets of Security Council sanctions, centered on boycotting certain Iranian companies and denying travel visas to some Iranian officials, have had a marginal impact on Tehran as it rides a wave of record high oil prices. If state-owned firms A, B and C are stigmatized, all the Iranian government need do is to set up new companies P, Q and R to conduct the old business under a different guise. With Dubai - a commercial center of laissez-faire capitalism populated by tens of thousands of Iranians - next door, this is a simple exercise.

Ratcheting up UN sanctions to embargo investments in Iran's hydrocarbons will be a hard sale. Stiff resistance will come from Russia and China.

After much prevarication, Russia's president Vladimir Putin last week gave a go-ahead to the shipment of nuclear fuel for the power plant that a state-owned Russian company is on the verge of completing near Bushehr in Iran - an unmistakable sign of his divergence from Western policy on Iran.

Moscow is keen to see Iran stay within the IAEA ambit. A Russian official told the Guardian on Friday, "We are most concerned that Iran is cornered and they walk out of the [nuclear] Non-Proliferation Treaty, and break relations with the IAEA."

China is the world's second largest oil consumer, with its consumption doubling every five years. It currently imports half of its petroleum needs, a proportion that will rise to 70 percent by 2020. In their desperate search of hydrocarbons, Chinese state-owned oil companies have invested afar as Ecuador. In contrast to Ecuador's proven oil reserves of 4.7 billion barrels, Iran's deposits amount to 137.7 billion barrels. Iran also has the second largest gas reserves after Russia. That makes the prospect of Beijing going along with a ban on investments in Iran's hydrocarbon industry remote.

Therefore, it comes down to the EU deciding to outlaw such investments. That would create opportunities for Chinese companies.

Consider the case of Germany, which - with $5.6 billion trade with Iran, involving 1,700 companies, in 2006 - is the foremost European trading partner of the Islamic Republic. Bowing to Washington's pressure, German firms reduced business with Iran by 18 percent in the first half of 2007. China stepped in, with its exports to Iran up 44 percent in the first quarter of this year.

The one Security Council resolution that will critically damage Iran's economy is a ban on the buying of its hydrocarbons. Once again, China is likely to resist, but it's possible that Beijing will yield to pressure by Washington and abstain.

Enforcing this resolution would stop supplies from the second largest oil exporter in the Organization of Petroleum Exporting Countries. With the price of an oil barrel hovering around $95 per barrel, the ensuing upsurge will push the price to record heights.

In any event, such a resolution is almost impossible to implement.

Iran has 900-mile long shoreline, covering the Persian Gulf and extending into the Arabian Sea, not to mention the Caspian. It will be a formidable task to police such a coast. Then there's Dubai, a smugglers' paradise. During the 1980s Iran-Iraq War, it served a useful purpose for Tehran to get the civilian and military materials it could not procure directly due to Western sanctions.

Iran has land borders with seven countries. Oil is in such demand that it will be smuggled overland by trucks not only to Turkey and Armenia but also to Pakistan and Afghanistan, which border China.

The Afghan mafia has a well-oiled system of exporting heroin. It won't take much ingenuity to diversify into importing Iranian oil for re-exporting it to China. The Iranian Revolutionary Guards - charged with safeguarding the country's borders and already placed on the US list of terrorist organizations - will be glad to oblige.

When the UN banned oil trade with Iraq in the 1990s, the Iranian Guards allowed small seacraft to pick up petroleum from Iraqi ports and sail within the territorial waters of Iran for a fee of $7 a barrel until the craft reached Dubai. The US Navy could do nothing but watch.

Therefore, it again comes down to the EU banning oil purchases from Iran. This embargo will not apply to China and India, free to buy the Iranian crude, particularly if it comes at a discounted price.

The best course for the international community, therefore, is to accept the argument of IAEA chief Mohamed ElBaradei. Now that the Iranians have mastered enrichment of uranium, he says, we should focus on persuading them to refrain from producing enriched uranium on an industrial scale.

That would mean adopting a Security Council resolution that supersedes the one demanding cessation of uranium enrichment - a measure within the powers of council members. This would keep Iran tied to the Non-Proliferation Treaty and the IAEA and cap its program while preventing a slide to military strikes or ineffective sanctions leading to a split between the Western and non-Western permanent members of the Security Council.

Dilip Hiro is the author of Secrets and Lies: Operation "Iraqi Freedom", The Iranian Labyrinth, and most recently, Blood of the Earth: The Battle for the World's Vanishing Oil Resources, both published by Nation Books.

© 2007 Yale Global Online

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