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Lagniappe
America's
Iran Gamble and how Iran is benefiting from it
By
Adam Lambert
America's Iran gamble and how Iran is benefiting from it Iran made several
attempts at diplomatic outreach towards the US in 2001, 2002 and 2003, but
the Bush administration made the decision to rebuff and ignore these gestures
and Iran quickly became an enemy of the Bush administration. One consequence
of these decisions was the election of Mahmoud Ahmadinejad as President as
the more moderate leadership in Iran was pushed aside.
However,
there is another side to this story, and another large consequence
to the United States and its
economy, as
well as its energy policy (both current and future). And as
a result of this gamble by the Bush administration, Iran has
taken the opportunity to strengthen its position in the global
economy, all while the US economy is floundering, its standing
and influence in the world decreasing, and it is being shut
out of a growing global alliance with respect to much of the
world’s oil.
It
still remains to be seen whether there will be any oil deals
in Iraq. However, with the price of oil
exceeding $100
per barrel as of early 2008, Saudi Arabia rebuffing President
Bush’s attempts to have them increase the output of oil
and the number of alliances and deals Iran has entered into,
it is clear that the decision to ignore Iran in 2001, 2002
and 2003 was a poor one with far-reaching ramifications.
One
example, going largely unreported, is Iran’s forging
of alliances with China, Russia and Venezuela – three
countries who control a vast amount of oil and wealth – as
the United States has weakened its relationship with these
countries over the same time period. We look to explore these
alliances and discuss their impact on the United States.
The first and most obvious impact here is the Iranian oil
bourse, which, according to the Asia Times:
[w]as a discreet, almost hush-hush affair, but after almost
three years of stalling and endless delays it finally happened.
Now more than ever, it may also signal a geoeconomic earthquake,
a potentially shattering blow to US dollar hegemony.
The Iranian oil bourse - the first oil, gas and petrochemical
exchange in the Islamic Republic, and the first within the
Organization of Petroleum Exporting
Countries (OPEC) - was launched on Sunday by Iran’s Oil Minister Gholam-Hossein
Nozari, flanked by Minister of Economy and Financial Affairs Davoud Danesh
Ja’fari, the man who will head the exchange.
Officially called the Iranian International Petroleum Exchange
(IIPE), it is widely known in Iran and the Persian Gulf as
the Kish bourse, named after Kish island, a free zone (declared
by the shah) in an ideal laissez faire setting: lots of condos
and duty-free malls, no Khomeini mega-portraits and hordes
of young honeymooners shopping for made-in-Europe home appliances.
Now, it remains to be seen whether this will work or not.
And there are some who think that it will most certainly not
work, including energy banker Jerome a Paris. But this is one
of a number of consequences that have arisen from the US approach
to Iran.
Relations with China
An
article in the Washington Post right after the 2004 election
shines a light on a deal between China
and Iran that was predicted
to cost the US leverage in dealing with Iran’s nuclear
program (and a weapons program that a recent National Intelligence
Estimate found was discontinued in 2003). Not only was this
prescient in that the Bush administration got little cooperation
when it came to sanctions or negotiations with Iran, but also
when it came to other important Middle East issues:
A major new alliance is emerging between Iran and China that
threatens to undermine U.S. ability to pressure Tehran on its
nuclear program, support for extremist groups and refusal to
back Arab-Israeli peace efforts.
The relationship has grown out of China's soaring energy needs -- crude oil
imports surged nearly 40 percent in the first eight months of this year, according
to state media -- and Iran's growing appetite for consumer goods for a population
that has doubled since the 1979 revolution, Iranian officials and analysts
say.
---snip---
The burgeoning relationship is reflected in two huge new oil
and gas deals between the two countries that will deepen the
relationship for at least the next 25 years, analysts here
say.
Last month, the two countries signed a preliminary accord
worth $70 billion to $100 billion by which China will purchase
Iranian oil and gas and help develop Iran's Yadavaran oil field,
near the Iraqi border. Earlier this year, China agreed to buy
$20 billion in liquefied natural gas from Iran over a quarter
century.
Add
this to the fact that Japan is already a major importer of
oil from Iran, and you have further alliances
being built
by Iran – all while the United States, under the current
administration, continues to weaken existing relationships
with other major countries around the world.
Relations with Venezuela
It
is also no secret that Iran, under Ahmadinejad, has forged
alliances with Venezuela and its leader, Hugo
Chavez. While
there has been much discussion regarding the views that Chavez
and Ahmadinejad hold towards the Bush administration (it should
be noted that Chavez has entered into a number of agreements
to provide lower-cost oil to low-income communities here in
the United States), there hasn’t been as much discussion
about an alliance being forged between the two countries in
an attempt to get OPEC to trade in currency other than the
US dollar:
Hugo Chavez's visit to Mahmoud Ahmadinejad in Tehran followed
a failed weekend attempt by the firebrand duo to push the Organization
of Petroleum Exporting Countries away from trading in the slumping
greenback.
Their proposal at an OPEC summit was overruled by other cartel members led
by Saudi Arabia, a strong U.S. ally. But the cartel agreed to have OPEC finance
ministers discuss the idea, and the two allies' move showed their potential
for stirring up problems for the U.S.
The alliance between Chavez and Ahmadinejad has blossomed
with several exchanged visits - Monday's trip was Chavez's
fourth time in Tehran in two years - a string of technical
agreements and a torrent of rhetoric presenting their two countries
as an example of how smaller nations can stand up to the superpower.
---snip---
As the dollar weakens, oil prices have soared toward $100
a barrel. Chavez said over the weekend at the OPEC meeting
in Riyadh, Saudi Arabia, that prices would more than double
to $200 if the U.S. attacked Iran or Venezuela.
"The U.S. empire is coming down," Chavez
told Venezuelan TV, calling the European Union's euro a better
option and saying
Latin American nations were also considering a common currency.
Needless to say, if the US dollar continues its slide against
other currencies as it has done over the past few years, there
will be less incentive for it to be used in trading, not to
mention other economic impacts.
Relations with Russia
Even
before 9/11, the United States and Russia had a golden opportunity
to partner and forge a strategic
alliance – especially
in light of the amount of oil that Russia controls within its
borders. However, once Russia made its displeasure about invading
Iraq clear and the United States invaded anyway, relations
between the two countries began to strain. This worsened over
the past few years, with former Russian President Vladimir
Putin being fairly open about his feelings toward what the
Bush administration’s policies were.
This
squandered opportunity for the United States has resulted
in a “double whammy,” hurting America by shutting
us out and adding another country to the list of those who
are making energy deals without us. As pointed out recently
in the Asia Times, Russia and Iran – the two countries
with the largest natural gas reserves – have forged a
substantial deal:
While
Washington, facing European Union discomfort and frank opposition
from Russia and China, remains obsessed
with another
round of United Nations sanctions against Iran, the facts on
the ground spell an overwhelming "expansion of mutual
cooperation" in the energy sector between Iran and Russia.
Iran holds the world's second-largest proven natural gas reserves,
behind only Russia. Alexei Miller, chief executive of Russia's
state-run gas exporter Gazprom,
recently visited Tehran and met with Iran's Oil Minister, Gholam-Hossein Nozari.
The result is that Gazprom will develop "two or three" blocks of
the monstrous South Pars gas field in Iran and its daughter company, Gazpromneft,
will also be part of a huge oil project in Iran. Gazprom has been in South
Pars since 1997, alongside TotalFinaElf of France and Malaysia's Petronas.
What
does this mean for Iran and its ability to export more oil,
especially when it will likely not be
to countries that
are named “the United States”? The short answer
is, a lot:
Reza Kasaeizadeh, the managing director of Iran's National Gas Company, now
insists that Iran will supply no less than 10% of the world gas market in the
next 20 years; currently it's only 1%. Iran, at the moment, exports gas only
to Armenia and Turkey. When South Pars phases 17, 18 and 19 are developed by
2013, that will be a whole different ball game. South Pars - which Iran shares
with Qatar - is the largest gas field in the world. Annual output of its eight
blocks on the Iranian side stands at 73 billion cubic meters; in the next few
years it will easily reach 200 billion cubic meters.
Conclusion and Lessons (not) Learned
So what does this all mean for the United States? When crafting the US energy
policy, the Bush administration looked to invade Iraq and use that “model” to
control oil reserves throughout the Middle East. It excluded any cooperation
with the world’s other oil producers, and as a result we have the following:
Saudi Arabia is a tenuous ally at best, and has all but blackmailed
the United States to stay in Iraq;
Three of the countries with the most oil reserves (Iran, Russia,
Venezuela) are all working together at the expense of the United
States – sometimes
because of the Bush administration aggression; and
China, clearly the next economic superpower and the country that as of 2006
held the second largest amount of US debt has joined in this alliance – also
at the expense of the US.
It is easy to see how these alliances will form a very strong bloc in the global
economy over the next few years, if not longer. And it is easy to see how the
United States’ approach to dealing with each of these countries contributed
to the alliances – or at least being shut out of these alliances. Unfortunately
for the United States (in many ways), the big winner here is Iran, and we are
the big loser. It does make you wonder just what was going on when US officials
secretly met with Iran banking officials.
While the “official reason” was that it was about money laundering
and terrorism financing, there is no doubt a growing concern that the United
States is going to be left out of a growing shift in global alliances with
respect to energy and currency. That this is occurring is not surprising – but
the extent of this impact on the United States and its economy can be far-reaching.
Imagine what could have been had the Bush administration taken
a different approach towards Russia, Iran and China.
Adam
Lambert is a tax consultant living and working in the New
York City area. Blogging under the name “clammyc”,
he has researched and written extensively on issues involving
Iraq, the Bush administration and the “war on terror”. Petroleumworld
does not necessarily share these views
Editor's
Note: This commentary was originally published by ePluribus
Media,
on 04/01/2007. Petroleumworld reprint this article in the
interest of our readers.
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