Conflicts Forum’s Weekly Comment 29 November – 6 December 2013

Conflicts Forum

Three clear dynamics have chacterised the recent period since the signing of the Geneva Accord by the P5+1 and Iran. The first – for now – is a fierce resurgence of the proxy ‘war’ between Iran and Saudi Arabia.  Saudi Arabia has not responded to proffered Iranian olive branches, but continues to escalate in Lebanon (which is becoming dangerously brittle); in Iraq, which is edging toward the worst levels of internal conflict comparable to the height of the 2003 war; and in Syria, where Sayyed Hassan Nasrallah recently warned that we should expect ‘harsh confrontations’ on several fronts – in the run up to the 22 January Syria negotiations.

The passage from ‘olive branch’ to open conflict has been marked by each side in its own way: In a lengthy interview on television, the Secretary General of Hizballah, who rarely mentions Saudi Arabia by name, and traditionally skirts making direct accusations against Arab states, said that the al-Qae’da-leaning, Lebanese movement who [‘credibly’] claimed responsibility for the bombing at the Iranian embassy in Beirut, was directly financed and supported by Saudi intelligence.  Nasrallah also said that Saudi intelligence was behind the upsurge of daily violence in Iraq; and added that in Syria, Saudi Arabia continued to frustrate talks, preferring instead to pursue (the chimaera) of opposition military leverage on the ground: “Saudi Arabia is determined to keep on fighting until the last bullet and last drop of [Syrian] blood”, the Secretary General noted.

Equally, King Abdallah in a frigid and much postponed meeting with the Lebanese President earlier this month, uttered no more than a few sparse, laconic, one or two-word, throw-away lines to Suleiman: offering only the insubstantive response of ‘InshAllah’ to Suleiman’s quest for endorsement to his remaining as President; saying ‘no’ to any formation of a government in Lebanon; and  urging rather, that the President should turn the Lebanese army on Hizballah: to use the military force of Lebanon’s national army against a major component of its own people for its intervention in support of the Syrian government – this latter demand forming the essence of Abdallah’s message to the President.

But whilst there are no auguries here suggesting de-escalation, let alone reconciliation between Saudi Arabia and Iran for the moment, there are reports of disagreements within the Saudi royal family: a number of senior princes have written to the king’s chef de cabinet to complain about Prince Bandar’s poor management of Saudi Arabia’s interests.  This letter of complaint essentially connects with the second of our three dynamics, which is Saudi Arabia’s growing isolation.  Some senior al-Saud are disquieted at Saudi Arabia’s posture.

Indeed, Iranian diplomacy has been pursuing a prepared, and highly active, charm campaign across the region, which is leaving Saudi Arabia quite diplomatically isolated – even within the GCC.  Qatar has been even talking with Hizbullah (the Saudi bête noir); UAE is making contact with Damascus; Bahrain has invited Iranian participation at the Manama conference; and the UAE and other Gulf states have welcomed the Geneva Accord — all amidst an almost continuous shuttle of senior Iranian diplomats around the region, telling Gulf leaders that they have nothing to fear from an emergent Iran, but rather much to expect from a Gulf ‘reset’.  The non-Saudi GCC states have long bristled at Saudi ‘arrogance’.  They are opening to Iranian olive branches (recognizing that their Syria policy has failed) – even if the al-Saud for the moment cannot.

And, as a part of this campaign of isolation – in the lead up to Wednesday’s OPEC meeting – Iran’s oil minister directly challenged Saudi Arabia in its most sensitive anatomy – by warning that Iran intended to pump as much oil as it can, when (and if) sanctions are lifted, irrespective of its effect on prices: Zanganeh said that his country was determined to regain its share “under all circumstances”:  “We will produce 4 million even if the price drops to $20.”  In practice, such a fall of this magnitude simply is not going to happen –  the oil price finally will be determined by growth in Asian demand as well as shifts in global supplies; but Iran’s threat can impact on Saudi Arabia. 

President Rowhani has started a significant reform campaign hoping to bring oil production back to the pre-sanctions level of 4.2 million barrels per day within six months, and increase it to the pre-revolution level of 6 million barrels per day within 18 months. To be clear, both goals are not attainable within their respective time frames, but significant increases are possible.  Iran might be expected to revive about half of its offline production within 12 – 18 months – about 500,000 to 750,000 bpd, but a return to pre-sanctions levels is likely to be measured in years, rather than months – and would rise at a slower pace. 

Iraq – closely co-ordinated with Iran – similarly stated that it wants push its output to pre-war levels within a year (however there are logistical constraints which mean that Iraq is likely to fall short of its goals), and

Libya (less plausibly) suggested that it aspires to return to 2m bpd – once (if) the unrest subsides.   No one imagines that Iran actually wants oil to fall to basement prices, but the point is clear – any significant fall will hurt Saudi Arabia, which now needs oil at $100:  Iran is exposing that Saudi Arabia’s OPEC ‘card’ is mostly bluff:  It has less influence in the GCC than before, after the collapse of its main policies; and less ability to leverage OPEC as a tool – than it once had.  The potential increases from Iran and Iraq may become simply too large for Saudi Arabia to absorb, given the kingdom’s increased domestic requirements – making Saudi Arabia a responder to events, rather than a determiner of market outcomes.

The OPEC meeting showed that for all the huffing and puffing by some Saudis about how the kingdom might respond to Obama’s ‘betrayal’ their threats largely are hollow.  There is considerable skepticism about the reality and the likelihood of claims to a new strategic alliance with Israel (beyond their longstanding, but unacknowledged co-operation) – and Saudi commentators dismiss the threat of Saudi acquiring a ‘bomb’ as unthinkable (see here).

To rub Saudi’s isolation in, the Iranian minister noted to journalists that he hopes Exxon Mobil Corp., Royal Dutch Shell Plc, BP Plc, Eni SpA and Statoil ASA will invest in Iran and that Iranian officials would be meeting with international companies in London in March.  Saudi Arabia has always tried to warn off IOCs against any involvement in Iran.  Iran has not yet approached any U.S. oil companies, Zanganeh said, though he has spoken to some (US) businesses that are based in Europe, and hopes to meet with them in March. “I’m not sure they would like me to mention their names,” he said in an interview posted on the Oil Ministry’s news website Shana. 

It is not of course just oil companies that are lining up for talks in Iran.  Queues of businessmen are forming at Iranian consulates around the world.  And this is causing alarm in certain quarters.  In a joint op-ed in the Wall Street Journal,penned by two former US Secretaries of State, Henry Kissinger and George Shultz, the duo specifically warns (in respect to their concerns arising from the agreeing of the interim Accord) that “for individuals, companies and countries (including some allied countries), the loss of business with Iran has been economically significant. Most will be less vigilant about enforcing or abiding by sanctions that are the subject of negotiations; and which seem to be ‘on the way out’. This risk will be enhanced if the impression takes hold that the U.S. has already decided to reorient its Middle East policy toward rapprochement with Iran. [CF added emphasis]. The temptation will be to move first, to avoid being the last party to restore or build trade, investment and political ties. Therefore, the proposition that a series of interim agreements balancing nuclear constraints against tranches of sanctions relief – is almost certainly impractical. Another tranche [of sanctions relief] would spell the end of the sanctions regime.

The Secretaries, however, may be a little late with their caution.  Much of the rest of the world now sees that America’s need to winnow down its Middle East commitments in order to have the slack necessary to re-ploy its military and its diplomacy efforts towards Asia; the growth of Sunni extremism as a threat both to western interests and the stability of the region; and the shifting mood of the American electorate against further Middle East wars (who US polls suggest, support the Iranian Accord by a margin of 2-to-1) are all impelling America towards finding an agreement with Iran.  In short, the Sunni elites and the radical Sunni Islamist movements (acting for a shared objective) have lost the war to compel the US and Europe to ‘contain’ and besiege Iran to the point at which the county implodes. 

But here too is the third dynamic. The push-back against the Interim Accord is beginning to gather its forces: articles byJohn Hannah and the joint op-ed by Kissinger and Shultz are evidence of this. The latter article implicitly acknowledges that at its heart the negotiations are about power in the Middle East – warning about an Iran, freed from an onerous sanctions regime, emerging “as a de facto nuclear power leading an Islamist camp, while traditional allies lose confidence in the credibility of American commitments and follow the Iranian model …”.

In the last Weekly Commentwe argued that the template on which the talks were being held (the focus being on technical nuclear details, whilst the – more crucial – wider issues of an emergent Iran as a regional power, were not explicitly being addressed) provided a golden opportunity for opponents who disliked the political implications to try to undermine it on its technical implications.  The EU3 had laid down the basis for undermining a process  when they ‘copied and pasted’ the Iraq salami-slicing negotiations structure onto the Iran negotiations in 2004.  The US Secretaries rather more plainly say they don’t care for an emergent Iran, whose orientation and politics is not to their taste (the meat of the first half of the article, deprecating Iran’s non-western ethos), they instead say that the issue really is Iran’s potential break-out capacity, adding rather unconvincingly a luke-warm assertion that whilst “we should be open to the possibility of pursing an agenda of long-term cooperation”, they then qualify even this ‘openess’ by adding, “But not without Iran dismantling or mothballing a strategically significant portion of its nuclear infrastructure” [CF’s emphasis].  

They know of course, that Iran would never agree to this. It would be a deal breaker: they and their allies could breathe a sigh of relief, and return America to an onerous sanctions regime.  Break-out capacity is a theoretical concept that if you know enough about enrichment, then you know enough to make a weapon.  This, in a simplistic way, is evidently true, but all nuclear states by very the terms of this definition, must have this ‘break-out’ capacity.  But it does not follow that it is not possible to distinguish between peaceful and weapons enrichment.  Indeed President Obama in an interview with Jeff Goldberg in the Atlantic said as much: the President said then, that the US knows that Iran does not have a weapons programme; that it has not made a decision to have one; and that if it did, the US would have at least a year’s forewarning of such a decision.  That was said plainly before any measures of increased surveillance and assurance are put into place, and which surely will be the at the core of the future negotiations.  Obama is saying that peaceful and weapons enrichment can be distinguished – if the US is that confident that they would have so much advance notice of any Iranian change of ‘decision’.

Nonetheless Iranians are disturbed by such articles and the threats issuing from both Democratic and Republican Senators and Congressmen to press ahead with fresh sanctions legislation on Iran – despite the fact that any further sanctions immediately would terminate the Accord.  There is quite wide skepticism in Iran that the US system (as opposed to Obama per se) ultimately will prove able to accommodate a solution with Iran.  Hence the psychological race, on the one hand, between conveying the ‘inevitability’ of the new balance of power unfolding in the Middle East – with the advent of an ‘emerged’ Iran, and on the other hand, those seeking to convey the ‘inevitability’ of long-term sanctions, based on requiring Iran to do the impossible: to positively prove absolutely and for all time – a negative.


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