The Iran Refined Petroleum Sanctions Act: Prudence or Prelude?

Published on August 9, 2009 in Natural Gas, Politics and Trade. 0 Comments

“He’s the elected leader.” Those were the words of White House Spokesperson Robert Gibbs (later retracted) one day ahead of Ahmadinejad’s inauguration in Tehran this past Wednesday. Concurrently, American media circles reawakened to the unlikelihood of Iran meeting the Obama-imposed September deadline. What should be done when, months after a fraudulent election and weeks after struggling to put together a cabinet, a disordered Iran fails to respond to American diplomatic overtures?

For many, two words suffice: tougher sanctions, shorthand for the Iran Refined Petroleum Sanctions Act. Consider recent comments made by R. Nicholas Burns, former Undersecretary of State and leader of Bush’s Iran strategy, “Draconian sanctions did not make sense in 2005 and 2006 but given the new weakness and vulnerability of the Ahmadinejad government, much tougher sanctions make sense now.” The assertion that regime instability somehow additionally opens Iran to the intended consequences of sanctions is problematic enough. But Burns further advocates that Obama be given complete autonomy when threatening, imposing or waiving the economic penalties and it is this condition that reveals much about its policy prospects.

Firstly, the condition is there to attract multilateral participation– if the US succeeds in winning allies for the imposition of a gas embargo, Obama’s promise of flexibility is meant to keep the coalition together. Continued loopholes are implicit and economic interests in diverse, participating countries are less threatened than might first meet the eye. Between February 1999 and June 2006, an estimated $80 billion + worth of foreign investment went into Iran’s energy sector despite the existence of the Iran Sanctions Act (ISA, originally ILSA), passed into law in 1996.

A quandry: For sanctions to stand a chance at being effective the targeted country must perceive that the costs of defiance are greater than the costs of compliance. Without the participation of China, Russia, Germany, the UAE et al. this calculation is unlikely (and even more so because Iran’s hardliners can be expected to use foreign pressure toward consolidating power). Yet gathering an effective coalition will require flexibility– if not in letter then in lax enforcement. So in both instances the sanctions stand to be neutralized.

More ominously, studies on sanctions (check out the Peterson Institute website if you haven’t already) demonstrate that their efficacy toward authoritarian and semi-authoritarian regimes is lost unless backed by a willingness to progress toward the military option. Far from a prudent substitute for the rush to war, sanctions can become a prelude– in this case we may be seeing a slow but sadly predictable march. -SW

A Shadow Big Enough to Hide… A Sultanate

Published on August 6, 2009 in Uncategorized. 0 Comments

A spokesman for Sultan Qaboos intimated last month, perhaps inadvertently, that the Sultan might be a bit edgy about making his first state visit to Iran since the Revolution around now—But the Sultan did come, just in time for Ahmediejad’s swearing in, and with all of his energy, trade, gas and economy ministers in tow. Was the idea that the shadow of that event was so big that it could hide the Sultanate? Hard to believe, but maybe it was. Noone outside the two parties seem to want to touch this with a ten foot pole.

Over the last three days, the two countries signed agreements and MOUs related to “mutual security, and the fight against smuggling and crime, including the exchange of related information”, “environmental, technical and professional cooperation”, and “cultural exchange”. The list goes on. Apparently Muscat will even open a Farsi language institute shortly. Particularly notable are agreements governing the long-discussed joint development of Hengam gas field and setup of a joint 500 MW power station within Qeshm Free Zone (see recent posts for more on QFZ).

All of this is page 4 news in the Saudi-financed Asharq Al Awsat (the visit itself sort of made the firont page yesterday), and doesn’t seem to have hit the US papers but minimally. Of course, the Omanis need much of what Iran can offer in terms of assistance, and the Iranians need the diplomatic boost, but does this seem like the actions of a Gulf State itching for nuclear power and/or a nuclear shield to protect itself from its evil neighbor to the north? In fact this is the long-awaited denouement of an escalating series of very senior and mainly commercial exchanges dating back more than 2 years. –EDC

How Do You Say "Awkward" in Farsi?

Published on August 4, 2009 in Politics. 0 Comments

Here’s a video from Ahmadinejad’s election certification ceremony on Monday. Much was made about Ahmadinejad kissing Khamenei’s hand at his 2005 inaguration, so it seems significant that this year yielded an awkward rebuff when Ahmadinejad went in this year. The moment is getting quite a ton of play in Arab media. I got an urgent text message alert yesterday on my phone from the Egyptian-run Middle East News Agency, and below is a series of frames that Asharq al-Awsat splashed on today’s front page. A CBS news video flagged by Juan Cole cited this as evidence of “cracks in the leadership.” But given the events of the last two months, I’d say this is more nick in the varnish than crumbling foundation. -WW

nokiss

Rezaee: Economic Federation Better Than Stagnation

Published on August 3, 2009 in Education, Free Trade Zones and Politics. 0 Comments

In a pre-election debate, Ahmedinejad paid challenger Mohsen Rezaee (An arch conservative and former head of the Revolutionary Guards, who also holds a Ph.D. in Economics from Tehran University) ta’arof as one of the few candidates with ‘new ideas’. He then mocked Rezaee’s proposal to divide Iran into nine economic regions or ‘focal points’ as wholly unworkable: “How can one have economic federalism without political and administrative components? “, he asked.

Rezaee replied that he actually did mean economic federalism, not full federalism, and that matters of international policy, defense, etc. remain with the center. Rezaee explained that while there might be 40-45 provinces or more, each with their own devolved political and security functions, economic blocs would be much larger: “There might be nine economic administrators with full visibility on the activities of their respective regions. These would be responsible for their regional economic blocs and (report to) the president.” Ahmedinejad responded by saying that that dividing the country into nine administrative units was in fact not a new concept, as it had been proposed at one time by the Sepah (Revolutionary Guards). Furthermore, Ahmediejad told Rezai, “economic administration without political or social direction is without meaning.”

The federal question has been one that has plagued Iran for centuries, with decentralisation (or, more precisely, lack of central control) being both a cause of Iran’s economic stagnation, as well as the hallmark of some of the more productive periods in Iran’s past. As Springborg and Clement put it, Iran’s modern dysfunction has been a failure to globalize. Rezaee’s conception of economic federalism relates somewhat to the policies of former president Hashemi Rafsanjani, whose attempts at privatisation and export-promotion through China-esque Free- and Special Economic Zones have met with limited success. While these ideas are only sketches of plans thus far, they do constitute thought, in contrast to Ahmedinejad’s vigorous defense of the status quo.

–EDC

The Beginning of the End or the End of the Beginning for Rafsanjani?

Published on August 2, 2009 in Politics. 0 Comments

Some call him the kingmaker, for his deep influence over the Iranian political process. No surprise, then, that in the wake of the disputed elections, the recently publicly pro-Reformist Ayatollah Hashemi Rafsanjani would become the object of a very personal counter attack from the usulgaran, or ‘extreme conservatives’.

As a number of prominent reformists go on trial accused of fomenting election disturbances a host of hardliners have come looking for blood, and it’s Rafsanjani’s. Ayatollah Jennati during last week’s Friday prayer, alleged that Rafsanjani, Khatami and Mousavi had conspired together to disrupt the elections for at least three years [Jennati lost to Rafsanjani in 2007 elections for Chairman of the Council of Experts, which 'elects' the Supreme Leader]. Shariatmadari, editor of regime mouthpiece Kayhan, today announced that Rafsanjani was guilty of treason.

The Iranian newspaper Fars reports that six well-known reformists on trial in Tehran, have “confessed” that the elections were completely clean, and that Rafsanjani has been driven since his 2005 Presidential election loss to Ahmedinejad to put a limit to the power of Ayatollah Khamenei (and the concept of Vilayat-e Faqih, or rule of the Jurist) and to exact personal revenge.

While Rafsanjani took a big hit in recent years with pervasive charges of corruption and influence-dealing, he seems to have reclaimed some of his popularity, particularly in comparison to Mousavi, whose Reformist credentials are truly ersatz. Many clearly feel his almost “Republican” approach to international trade and politics offers the most promising path to a steady opening with the West. The battle between Rafsanjani and the Supreme leader for the Supreme Leader’s absolute influence will do much to decide the character of Iran’s inevitable transformation.

–EDC

NYUAD: Success in Numbers

Published on July 30, 2009 in Education, Politics and Trade. 0 Comments

In a little more than a year, a large pair of scissors will come across a large red ribbon and thus mark the inauguration of nothing short of the world’s biggest experiment in higher education. NYU Abu Dhabi will welcome its first students. As detailed in a recent two-part report by John Gravois in The National (Part I, Part II), NYU administrators have aggressively sought to preempt many of the challenges plaguing other Western degree programs in the Gulf, namely low student enrollment and an inability to recruit and then retain faculty.

NYUAD’s team on the ground has been given a sizable time window (at least in relative terms) through which to problem solve. The ambitious project was first announced in October 2007. By way of contrast, Michigan State University was asked to set up shop in neighboring Dubai inside of a year. Despite offering coursework with obvious links to the local economy (including degree programs in Business Administration and Construction Project Management), MSU-Dubai has experienced early troubles with enrollment, attracting just 40 students in 2008-2009.

For the fall of 2010 NYUAD will take in no more than 100 students but then projects to grow– and grow quickly– to 2,000 undergraduates and 800 graduates. To arrive at these numbers NYUAD is employing a strategy that is surprising as it represents a marked break from regional precedent.

The case of Qatar Foundation and its Academic Bridge Program serve as perhaps the most prominent divergence. Qatar Foundation sets enrollment targets for Qatari nationals and each of the six American universities located in Doha’s Education City. Even as the targets are non-binding, the Bridge Program gives an additional year to two years of preparatory schooling for Qataris transitioning to university. In so doing, the available pool of qualified local students is increased and low numbers across the Education City campuses are given a boost.

NYUAD has taken an entirely separate approach. The enrollment of a desired number of Emiratis is neither explicit nor implicit. University President John Sexton believes that UAE nationals are likely to be only a tiny percentage of the student population and he is unabashed in saying so. There is no preparatory, foundation year program. Instead, Sexton and NYUAD have ramped up admissions requirements and dubbed the Abu Dhabi venture NYU’s “honors college.” The “global education” offered at NYUAD will attractively combine with unparalleled financial aid packages– international students who would otherwise attend the Ivies (or else NYU’s Washington Square campus) will opt for freshman orientation Gulf-style. An estimated 40 to 50% of the student body will be made up of Americans.

By all accounts, NYUAD will open its doors with an impressive faculty. Whether the university can reach a total of 2,800 enrolled students, however, remains to be seen. Some observations about their efforts to date:

1) There will assuredly be dynamic tension between the appeal of an exciting, newly-established institution– indeed, perhaps the beginnings of the future of higher education itself– and a half-formed university experience. With less than 100 first-year students, the extracurricular opportunities on offer are sure to be limited. Abu Dhabi is likely to be a jarring introduction to the American freshman who traditionally stays in-country for his or her undergraduate experience (and all the more so given the UAE’s average highs of 102 degrees Fahrenheit in September). Whether NYUAD will be able to retain students from one year to the next is a question that needs considering.

2) There will assuredly be tension, no less dynamic, inspired by the availability of world-class education– expensively funded by the Emirate– and its inaccessibility to the local population. Relative to Dubai, Abu Dhabi has long-demonstrated a consistent uneasiness with the course and speed of societal change, the size and composition of its expatriate population and the loss of local heritage and culture. The issue of NYUAD’s labor policy has already cropped up and could become particularly thorny. In the absence of a large Emirati student contingent, NYUAD’s ability to meaningfully link up with the community and its existing universities becomes all the more vital.

3) Lastly, NYU is wisely utilizing the Institute of International Education toward identifying potential applicants. The IIE (the American non-profit responsible for administering the Fulbright) does not have a relationship with neighboring Iran. Before its Revolution, Iran had the single highest population of international students in American universities. NYUAD’s success in enrolling even a handful of students from Iran would do more than add to student numbers. It would also bolster Sexton’s case for the emergence of the Global Network University and its potential implications for the 21st century.

-SW

Arvand Free Zone: Pass Through for Pistachio Kings?

Published on July 19, 2009 in Politics and Ports. 0 Comments

Tabnak.ir this week carried a piece alleging abuses of power and position within Iran’s Arvand Free Zone (AFZ), under the heading, “Free Zone is a Pass-through for Regime Favorites.” Located along the Iran-Iraq border in Khuzestan, AFZ is one of Iran’s most ambitious free zone/special economic zone projects, and site of Khorramshahr port.

The story alleges that one connected individual got his job as Director of AFZ Flight Operations based on ‘exaggerated reports’ of his work experience, limited to “purchasing buses and setting up coolers.” Further, the brother in law of one of President Ahmediejad’s ‘best buddies’ was allegedly promoted to the post of the Director of Free Zone Investments immediately after Ahmedinejad was confirmed in his second term. In a third case, a scandal following the appointment of a son of the Chief of Staff of defeated Presidential candidate Mir Hussain Musavi to another high FZ appointment caused the relevant department the Free Zone to be quietly ‘neutralised.’ President Ahmedinejad, asked on a recent tour of the area where the Zone’s revenues were coming from, allegedly replied “I’ll look into it.”

The piece ends by questioning whether one of Iran’s high profile free zones have become simply a pass through for temporary directors, friends of those in high places and those looking for experience in the “Pistachio” business (a clear reference to the basis for former President Ayatollah Rafsanjani’s vast wealth). Arvand Free Zone was the subject of some controversy in 2005, after the British Ahwazi Friendship Society published documents it alleges shows the Iranian regime’s plan to relocate thousands if not hundreds of thousands of ethnic Arab Ahwazis from Arvand to make room for a 5000 sq km demilitarized zone, which it additionally alleged would facilitate Iran’s ‘de facto’ annexation of Basra–which its report notes is ‘literally a stone’s throw’ from the Zone in places (23 Teer 1388).

–EDC

The Wiles of Qeshm

Published on July 13, 2009 in Uncategorized. 0 Comments

In an article posted in Farsi to the Qeshm Free Zone Authority (QFZA) website, a senior official at QFZA says he is seeing a spike in the number of Dubai-based investors expressing interest in Qeshm Free Zone: “With the growing crisis in the countries of Persian Gulf, and due to a collection of economic problems in Dubai, many investors are leaving the region and coming to QFZ, offering as it does ample land, various financial inducements, and favorable conditions for industrial investment. ” Not content to fire a shot across the bow of mammoth facilities to the South, the QFZA official also took the opportunity to remind his government that Qeshm industry is in need of active protection and support of the state, if it is to make the most of its largely virtual amenities. All of which concludes with my favorite quote of the week: “I expect that with growth, industry on Qeshm island will see future expansion in its heavy and light industrial projects.” As for Dubai, one expects all’s not yet lost.

-EDC

G8->Iran->Oman->Syria

Published on July 12, 2009 in Uncategorized. 0 Comments

Asharq Al Awsat, in its July 12 print edition, quotes Iranian officials as saying they are preparing a ‘new package’ of positions on international security, politics and international relations. This reformulation, apparently, is to serve as the basis for ‘renewed discussions’ with the West, and follows warnings from the G8 Summit that Iran has “until September to engage in negotiations over its nuclear program or face even more painful sanctions.” At roughly the same time, Iranian foreign minister Manuchehr Mottaki announced the Islamic Republic is on the verge of signing a security pact with the Sultanate of Oman, an agreement Omani Foreign Minister Yousef bin Aloui said would lead to a “new stage in the bilateral relationship…and a firm basis for growing cooperation with Iran.” [Interestingly, a picture above the story shows bin Aloui and Iranian President Ahmedinejad under a large map, on which is prominently written "Persian Gulf"]

Thickening the diplomatic stew, the Syrian government paper “Tishreen” reported today that Syrian president Bashar Assad received a letter from Sultan Qaboos urging Syria to take advantage of ‘positive Arab environment’ to help find a common solution to security issues facing the Arab states.

Clearly, Oman continues its traditional role of “balancer” within the GCC and Arab world in general, hoping to keep all sides in the game, and talking. These are not new moves, for during the last two years Oman has been increasingly public in its high-level engagement with Iran on commercial matters–particularly during the last months of the Bush administration, when US-Iran tensions hit their last trough. Oman, which has strong historical/commercial/security ties with Iran, clearly feels it is in the position to say what many other States in the Gulf will not, or cannot: i.e., a hot conflict between the West and/or “centrist”, Sunni Arab states and Iran over nuclear issue has the potential to set the region–Iran included–back a good many years.

-EDC

Does a Disordered Iran Risk Pushing Damascus toward Riyadh?

Published on July 10, 2009 in Politics and Security. 0 Comments

In the latest issue of In the latest issue of The Atlantic, staff writer Jeffrey Goldberg asks his readers to imagine the possibility of a Jewish-Sunni alliance. At a moment in history when both Israel and the Middle East’s predominantly Sunni states are ostensibly threatened by Iran, Goldberg posits that such a configuration would effectively challenge Tehran’s rise. It would be “grand, if necessarily implicit” alliance.

Goldberg is correct in that Iran’s ambitions, when coupled with the instability and fallout of its elections, are already forcing a recalibration of interests among regional policymakers. We may yet see surprises. We will not, however, see a Jewish-Sunni alliance. If we were to draw on the lessons of 1991– when American policymakers scrambled to stop Israel from entering, and possibly fracturing, the Gulf War coalition– a military alliance with Israel would, at this time, be hard-pressed to move from the realm of the implicit to the practical. In the practical, a Jewish/Sunni fighting force would surely threaten the internal stability of the participating Sunni regime. And if an alliance is not practical, then what good is it?

Instead forging an alliance with Syria is worth much more. The struggle for Syria is alive and well, it is only the players that have changed. Iraq is no longer vying with an ascendant Egypt for control of Damascus. Instead Cairo and Baghdad have been eclipsed and then enveloped, if only imperfectly, into the larger Saudi-Iranian rivalry. Syria is Iran’s most important and longstanding regional alliance– one forged and maintained more out of pragmatism than shared ideology. And as such it may now be appropriate to ask if Tehran has overstretched, if the alliance doesn’t project to be far more trouble than it’s worth, and if Damascus is nearing the borders of the Riyadh camp.

For now Asad is safely perched on the fence. Ahmadinejad visited Damascus as recently as May but Riyadh has also made significant overtures. In March Asad met alone with Hosni Mubarak and King Abdullah ahead of the Doha Summit and reports suggest that the Saudi King offered Damascus aid that would offset that already being given by Tehran, an estimated $1 billion (Qatar’s investment of $4 billion might also be jeopardized by a shift). A further promise of mobilized Arab backing in the peace process was extended. And for as much as the Iranian-Syrian relationship has given Damascus vital strategic depth in the Levant, if past is precedent, then even a temporary détente with Riyadh could act to improve the Syrian position in Lebanon. Of course, a full break– a grand shift– would mean abandoning Damascus’ Lebanese and Palestinian proxies, an unlikely outcome unless accompanied by tangible American and Israeli assurances. The significance of even a partial break in the Syrian-Iranian alliance should therefore not be underestimated.

Yet a grand shift in Syrian strategy becomes conceivable when considered against the backdrop of economic crisis and a long-stalled local economy. Tens of thousands of Syrians working in the Gulf have lost their jobs this year and will have to return home. Syrian expatriates remitted an estimated $850 million in 2008. Syria could reasonably calculate that a move away from Iran would relieve anxieties among Gulf policymakers and perhaps convince Washington to lift its policy of economic sanctions. The June visit of Mid East envoy George Mitchell, and the announcement of the return of an American ambassador to Damascus may suggest that the Obama administration is willing to chart a new path with Syria and bring actual pressure to bear on Israel over the Golan.

There is little to suggest that Syria could survive a face-to-face confrontation with Israel and as Israel becomes more bellicose toward Iran, Damascus may be looking for a way out of its alliance. But such a grand shift in strategy is almost always precipitated by an economic crisis. When Egypt left the Arab Camp it was facing the failure of socialist economic policies at home. When Syria last faced a grave economic test with the fall of the Soviet Union, it willingly committed 19,000 of its troops to fight another Arab state and, in so doing, win back financial support from the Gulf as well as improved relations with the West.

With a politically unstable and diplomatically overstretched Iran offering little to boost a floundering Syrian economy, Damascus could increasingly look to Riyadh and Washington. It would have to be convinced, however, that the Obama administration, unlike the Bush administration, operates independently of the wishes of Tel Aviv. Goldberg’s Jewish-Sunni alliance is fanciful. But a Washington-backed Damascus-Riyadh-Cairo axis– as briefly existed just after the first Gulf War– could be the unexpected outcome of disorder in Iran and the new struggle for Syria. -SW