Squeezing Iran: Sanctions and oil

Discussion in 'West Asia & Africa' started by Neil, Jul 26, 2010.

  1. Neil

    Neil Senior Member Senior Member

    Jun 23, 2010
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    Revolutionary Guard's empire

    Iran has embarked on a remarkable - many would say bizarre - experiment in business management.

    Domination of a fairly sophisticated, energy-rich economy has been handed to a secretive military organisation that started out as a religious militia.

    The Islamic Revolutionary Guard Corps is now believed to control a third of the Iranian economy.

    Some experts put the figure much higher, although all estimates are a matter of conjecture.

    The force was created by Ayatollah Khomeini 30 years ago to protect the state and defend the principles of his Islamic revolution.

    Its improbable journey to becoming a powerful business network is bound up with Iran's response to American pressure and international sanctions, which are intended to persuade Tehran to abandon alleged plans to develop nuclear weapons.

    Among many other activities, the guard - often referred to by the acronym IRGC - is suspected of playing a central role in organising Iran's nuclear programme.

    In state of siege
    That is why the IRGC has been the prime target of four successive rounds of United Nations sanctions.

    "By focussing on the Revolutionary Guards for sanctions, by making it clear to financial institutions around the world that doing business with the Revolutionary Guards puts at risk their access to the US financial system, I think they will be under significant pressure," explains Stuart Levey, the man in charge of US policy-making on this issue.

    He has an impressive job title: under-secretary for terrorism and financial intelligence at the US treasury.

    But there's no guarantee of success.

    Indeed, some people argue sanctions and isolation are actually counterproductive because they create the conditions in which hardline groups, like the Revolutionary Guard, can extend their influence over politics and the economy.

    "We are not in normal circumstances," says Abbas Edalat, an Iranian anti-sanctions campaigner and maths professor at Imperial College London.

    "Iran has been subjected to threats of regime change, threats of military attack. In these circumstances it is not at all strange that the military gets increasingly more economic power in the country."

    Speaking of the guard, he continues: "This is the force that the government can trust to run the economy when Iran is in a state of siege."

    That is not a view Mr Levey is ever likely to accept.

    "It's hard to argue that the Revolutionary Guard would have wanted to be singled out in UN Security Council resolutions for sanctions," he says.

    Well concealed
    No doubt the debate will continue.

    But there's little dispute about the extent of the guards' business ambitions.

    "What we do know is that they are trying to infiltrate every single aspect of the economy and are trying to engage in any kind of economic activity, both legal and illegal," explains Ali Alfoneh, an Iranian research fellow at the conservative-leaning American Enterprise Institute.

    The IRGC has been building its economic influence for more than 20 years but the process has greatly accelerated since President Mahmoud Ahmadinejad - himself a former guardsman - took office in 2005.

    In that period, the organisation's construction arm, Khatam al-Anbia, has won hundreds of lucrative government contracts in areas like construction, usually without having to bid.

    It has also advanced through apparently rigged privatisations and part privatisations of state enterprises that, for example, saw a company affiliated to the guards take ownership of the national telephone service.

    The guard is by far the largest investor on the Tehran stock market.

    From car manufacturing to mining and clothing, even online shopping, there are few industries they aren't involved in, although often it's hard to tell what they control because it's well concealed.

    "The Revolutionary Guard usually engages in trades [on the stock exchange] through front companies with names that vary and change all the time," says Mr Alfoneh.

    "They do not want to be perceived as an economic enterprise. They consider themselves and they want to be considered as saviours of Iran, especially from the Iran-Iraq war," he adds.

    New business
    And that's where the guard's business empire began.

    The organisation emerged from the eight-year-long conflict with Iraq in the 1980s as a formidable fighting machine, with organisational and engineering skills to match.

    These skills were put to good use in post-war reconstruction, and the guard has been expanding its business activities ever since.

    Much more recently, the IRGC has developed a new line of business.

    Firms affiliated to the guard have been awarded multi billion-dollar contracts to open up Iran's largest offshore gas field, South Pars.

    They have filled the gap left by international energy groups like Shell, Repsol and Total, who have pulled out in response to US pressure and tensions with the government in Tehran.

    In economic terms, it may seem mad to entrust the development of one of the nation's most important assets to a military organisation that has no known expertise in energy extraction.

    But the politics are easy to understand.

    President Ahmadinejad wants to free strategic industries from foreign influence.

    But in a clandestine way, the guard is heavily involved in the outside world.

    Remarkably for an organisation that's embedded in government, it runs a massive smuggling operation. It brings in everything from contraband to scarce consumer goods, even alcohol which is banned in Iran.

    The IRGC is a complex organisation with many different layers.

    Some Western analysts see it as a kind of state within a state with its own agenda. Others regard it as directly under the control of hardline elements within the government.

    The reality may lie somewhere in between.

    It may be both an arm of the state and a power in its own right.

    One thing is clear. This is an odd way to run a modern economy.

    * Khatam al-Anbia construction firm: employs 20,000 workers and boasts of hundreds of government contracts
    * Iran Telecommunications Company - 50% stake bought in government privatisation scheme
    * Angouran - the largest lead and zinc mine in the Middle East
    * Bahman Automobile Manufacturing Group - (manufactures the Mazda brand) - 45% stake
    * Iran electronics industry - comprises electronic, computer and communications companies
    * Iranians' Mehr Economic Institution - financial institution with hundreds of branches (one of the largest banking networks in Iran)

    ''They (the guards) do not want to be perceived as an economic enterprise. They consider themselves and they want to be considered as saviours of Iran”

  3. Neil

    Neil Senior Member Senior Member

    Jun 23, 2010
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    China and Iran.....

    Captain Abdolaziz Moarref spreads a blueprint over the desk in front of him, and shows me his company's design for a heavy-duty tug boat.

    Behind him, in his Shanghai office, are the flags of China and Iran.

    For four years he has been working hard to build up his business.

    The captain - he prefers to be known by the title that dates back to his sea-faring days - helps clients to build ships here in China.

    He works for firms in Africa, the Middle East, and his home country, Iran.

    But in the last few weeks, part of his business has dried up.

    At around the same time that the United Nations agreed new sanctions against Iran to try to pressure it to abandon its nuclear programme, he says Chinese banks stopped accepting letters of credit from Iran.

    He blames the UN Security Council.

    "Because of these sanctions now, this year I have stopped my business. I cannot export anything to Iran," he says.

    "We cannot buy even normal goods, necessary things for our people".

    Iranian President Mahmoud Ahmadinejad visited Shanghai last month, a few days after the UN decision to tighten the sanctions.

    There was chaos.

    He was mobbed by reporters and supporters as he toured the Iranian pavilion at the World Expo.

    But none of China's senior leaders came to meet him.

    Captain Moarref complains that "politics is now getting in the way of economics".

    He believes Iran has every right to pursue a nuclear programme, but he is unhappy that the issue appears to be harming his business.

    It is a concern recognised by academics like Professor Zhu Weilie, a Middle East expert from Shanghai International Studies University.

    He points out that Chinese merchants have traded with their Persian counterparts for centuries along the silk routes.

    "There has never been a problem between these two peoples," he says.

    He believes his country's ties with Iran are being tested by the nuclear crisis, but he insists they will not be broken.

    The professor believes China will do what it can to try to bring the Iranians back "into the international system".

    "We are not hugging them close like a friend," he says, "but we are friendly."

    At Shanghai's World Expo, in the pavilion built by state-owned oil companies, it soon becomes clear why China feels it is important to maintain those ties.

    The huge building - one of the most popular on the site - is filled with exhibits designed to remind Chinese people why oil is so important.

    A 3D film at the pavilion shows what would happen if the oil ran out.

    No plastic, no paint, no clothes even - producing shrieks of horror from the audience.

    Thirst for oil
    Searching for stable and long-term sources of oil has long been a priority for the Chinese government, and Iran is one of the most important sources it has.

    Tehran supplies about 14% of the crude oil Beijing needs.

    So, should the international community decide to tighten the sanctions even further and cut that supply, China would suffer.

    So too would the rest of the world though, says oil analyst Qiu Xiaofeng.

    "If Iran was stopped from producing oil, the rest of the world would struggle to make up the capacity, so the oil price would go up," he says.

    "That would be bad for everyone. Not just for China, an oil importer, but for the US and others - anyone importing oil".

    The problem for China is that even if it keeps the oil flowing from Iran at current levels, its thirst for energy keeps increasing.

    By the middle of this decade, more than half of China's population will live in cities.

    That will create huge additional needs for power, and make the sources of the energy China imports - countries like Iran - more and more important if China's growth and development is to continue.

  4. Neil

    Neil Senior Member Senior Member

    Jun 23, 2010
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    Do sanctions work....??

    Do economic sanctions work? Past experience provides little hard evidence to go on.

    Professor Adam Roberts is a research fellow at Oxford University - one of the great British figures in the study of international relations.

    "There are very few cases where you can definitely identify sanctions as having had a success, except sometimes in combination with other factors," he says.

    "Arguably they contributed something to the change in white minority Rhodesia that led to black majority rule; arguably the sanctions against South Africa were one factor that contributed to change there."

    But, he insists, sanctions were only one factor among many, including guerrilla opposition in the country itself.

    "So", he concludes, "it is impossible to say in either of these cases that sanctions were the decisive factor."

    In July 2010 President Barack Obama signed into law a series of tougher bilateral sanctions against Iran.

    These were intended to turn the screw on Tehran and to bolster existing United Nations Security Council sanctions.

    The hope was that the mix of UN and bilateral sanctions - tougher measures are already being planned by the European Union - would persuade Iran to change its mind and halt its uranium enrichment programme.

    So far they don't seem to be working.

    Nonetheless, since the end of the Cold War sanctions have been used much more frequently as a tool of international diplomacy.

    Veteran diplomat Sir Jeremy Greenstock, Britain's ambassador to the UN between 1998 and 2003, says the fundamental reason for the popularity of sanctions is "that there is nothing else between words and military action if you want to bring pressure upon a government".

    "Military action is increasingly unpopular and in many ways ineffective in a modern legitimacy-oriented world, and words don't work with hard regimes. So something in between these is necessary. What else is there?" he asks.

    Sanctions are all very well, but if they are to work they must be universally applied.

    And as Nicholas Burns, the most senior professional US diplomat in the Bush Administration says, as far as Iran is concerned this is just not happening.

    "Many countries are effectively ignoring them or, like China, undercutting them," he says.

    Indeed he argues that China has become the largest trading partner with Iran since these UN sanctions have come into effect.

    "They are a very difficult and sensitive policy instrument", he concludes and, echoing Adam Roberts' view, he says "there are very few examples looking back over the last 25 to 30 years where sanctions have actually succeeded".

    In many ways sanctions also have a poor track record in terms of their impact upon a country's economy.

    They have tended to hit home against the ordinary people - the ruled - rather than against the rulers who are often the real target for pressure.

    Children perished
    The experience in Iraq during the 1990s is a case in point.

    The air attacks in the US-led war to liberate Kuwait hit Iraq's infrastructure hard.

    They exacerbated an already difficult situation caused by the imposition of sanctions.

    Professor Joy Gordon, of the Global Justice Programme at Yale University, has just written a new study on the impact of these sanctions.

    The combination of the bombing strikes and the sanctions were devastating, she says.

    "Iraq had the wealth to rebuild," she says, "but the devastation of the infrastructure and then the almost total cut-off of exports and imports, meant that Iraq was - in the words of a UN envoy - reduced to a pre-industrial state and then was kept, more or less, close to that condition for over a decade after."

    The debates on how many perished, especially children, continue to this day.

    She argues in her book that the best estimate of excess child mortality - the number of children under five who died during the sanctions who would not have perished had pre-war and pre-sanctions conditions continued - is between 670,000 and 880,000.

    Smart' sanctions
    Adam Roberts says that the figure may be significantly lower.

    But there was hardship and suffering and he has no doubt about the lesson of the Iraq experience.

    "Very often it is the case that the first people to suffer from sanctions are the population generally and the powerful people - the people in the regime - can find ways of getting around sanctions," he adds.

    The disproportionate damage to Iraq's civilian population encouraged policy-makers to think again about sanctions and how they are applied.

    Sir Jeremy Greenstock says that the whole Iraq episode underscored the fact that economic sanctions are not a tool that works quickly.

    "They take a long time. Therefore we want to try to devise an instrument that gets through to the decision-makers at a sharper pace than just the collapse of the total economy, from which too many people suffer."

    Thus were born "smart" or "targeted" sanctions, aimed against the rulers rather than the ruled.

    But is there enough clarity as to what these smart sanctions against Iran are really for?

    Were they seeking to change the Iranian government's behaviour on the nuclear issue? Were they about isolating Iran? Or was the idea, perhaps, to change the regime in Tehran altogether?

    In response Sir Jeremy Greenstock says: "Well perhaps all of those things", before going on to acknowledge that sanctions are still a blunt instrument.

    "The bluntness is excused to some extent because there is no other instrument but we have to recognise that there are all sorts of unintended consequences and we have to try to mend those as we go along, if we insist upon using sanctions in the first place."

    Sanctions can also have another down side.

    They can provoke a defensive reaction on the part of the target country and its population.

    Blitz spirit
    Adam Roberts says some have called this the "Battle of Britain" effect; a reference to the days in 1940 when Britain stood alone against everything the German Luftwaffe could throw at it.

    "The problem is how to prevent these sanctions from leading to very strong nationalist resentment in Iran itself. When Iran was attacked by Iraq in 1980, the international community did not come to its aid. It did not sanction the attacker, Iraq - and that's remembered in Iran."

    "In the Iranian regime's official pronouncements there is a sense that only we can look after ourselves," he says.

    "And in these circumstances it's a very difficult task to gauge the sanctions correctly so that they don't exacerbate the problem that they are designed to address."

    All in all then, sanctions appear a problematic tool at best.

    Maybe they work, to an extent, but only in concert with other measures.

    Carrots may be equally as important as sticks.

    It's by no means clear that smart sanctions are necessarily any smarter.

    Indeed they may take even longer to work and over time they may still involve considerable damage to a country's wider economy.

    Nonetheless in a limited diplomatic armoury, between words and warfare, there may indeed be little else.

    * Prohibit Iran from buying several categories of heavy weapons including attack helicopters and missiles
    * Carry out inspections of cargo shipments to and from Iran including seaports and airports
    * Block financial transactions and ban the licensing of Iranian banks if they suspect a link to nuclear activities
    * Target a number of individuals - including senior nuclear officials - and companies with asset freezes and travel bans

    Last edited: Jul 26, 2010
  5. Neil

    Neil Senior Member Senior Member

    Jun 23, 2010
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    Guide: How Iran is ruled

    Of a total population of about 65 million, more than 46 million people - all those over 18 - are eligible to vote. Young people constitute a large part of the electorate with about 50% of voters being under 30.

    Voter turnout hit a record high at 80% in the 1997 elections which delivered a landslide victory for reformist President Mohammad Khatami. Women and young people were key to the vote.

    But with disillusionment growing, only about 60% of the electorate voted in the final round of the 2005 election which brought hardliner Mahmoud Ahmadinejad to power.

    The president is elected for four years and can serve no more than two consecutive terms.

    The constitution describes him as the second-highest ranking official in the country. He is head of the executive branch of power and is responsible for ensuring the constitution is implemented.

    In practice, however, presidential powers are circumscribed by the clerics and conservatives in Iran's power structure, and by the authority of the Supreme Leader. It is the Supreme Leader, not the president, who controls the armed forces and makes decisions on security, defence and major foreign policy issues.

    All presidential candidates are vetted by the Guardian Council, which banned hundreds of hopefuls from standing in the 2005 elections.

    Conservative Tehran mayor Mahmoud Ahmadinejad became president in 2005 after he defeated former president Akbar Hashemi Rafsanjani in a second round run-off poll. Mr Ahmadinejad is Iran's first president since 1981 who is not a cleric.

    Mr Ahmadinejad replaced reformist Mohammad Khatami who was elected president in May 1997 with nearly 70% of the vote. He failed to get key reforms through the Guardian Council and was hampered further after conservatives won back a majority in parliament in elections in 2004.

    Members of the cabinet, or Council of Ministers, are chosen by the president. They must be approved by parliament, which in 2005 rejected four of President Mahmoud Ahmadinejad's initial nominees for his hardline cabinet. Parliament can also impeach ministers.

    The Supreme Leader is closely involved in defence, security and foreign policy, so his office also holds influence in decision-making. Reformist ministers under former President Khatami were heavily monitored by conservatives. The cabinet is chaired by the president or first vice-president, who is responsible for cabinet affairs.

    The 290 members of the Majlis, or parliament, are elected by popular vote every four years. The parliament has the power to introduce and pass laws, as well as to summon and impeach ministers or the president.

    However, all Majlis bills have to be approved by the conservative Guardian Council.

    The first reformist majority was elected in 2000, but this was overturned four years later in elections in 2004. Many reformist candidates were banned from standing.

    The current speaker of the parliament is Ali Larijani, a former chief nuclear negotiator.

    The responsibilities of the Assembly of Experts are to appoint the Supreme Leader, monitor his performance and remove him if he is deemed incapable of fulfilling his duties. The assembly usually holds two sessions a year.

    Although the body is officially based in the holy city of Qom, sessions are also held in Tehran and Mashhad. Direct elections for the 86 members of the current assembly are held every eight years and are next due in 2014.

    Members are elected for an eight year term. Only clerics can join the assembly and candidates for election are vetted by the Guardian Council.

    The assembly is dominated by conservatives. Its current chairman is former President Akbar Hashemi-Rafsanjani, who lost the 2005 presidential election to President Mahmoud Ahmadinejad.

    This is the most influential body in Iran and is currently controlled by conservatives. It consists of six theologians appointed by the Supreme Leader and six jurists nominated by the judiciary and approved by parliament.

    Members are elected for six years on a phased basis, so that half the membership changes every three years.

    The council has to approve all bills passed by parliament and has the power to veto them if it considers them inconsistent with the constitution and Islamic law. The council can also bar candidates from standing in elections to parliament, the presidency and the Assembly of Experts.

    Reformist attempts to reduce the council's vetting powers have proved unsuccessful and the council banned all but six of more than 1,000 hopefuls in the 2005 elections.

    Two more, both reformists, were permitted to stand after the Supreme Leader intervened. All the female candidates were blocked from standing.

    The role of Supreme Leader in the constitution is based on the ideas of Ayatollah Khomeini, who positioned the leader at the top of Iran's political power structure.

    The Supreme Leader, currently Ayatollah Ali Khamenei, appoints the head of the judiciary, six of the members of the powerful Guardian Council, the commanders of all the armed forces, Friday prayer leaders and the head of radio and TV. He also confirms the president's election. The Leader is chosen by the clerics who make up the Assembly of Experts.

    Periodic tension between the office of the Leader and the office of the president has often been the source of political instability. It increased during former president reformist Mohammad Khatami's term in office - a reflection of the deeper tensions between religious rule and the democratic aspirations of many Iranians.

    The Iranian judiciary has never been independent of political influence. Until early last century it was controlled by the clergy. The system was later secularised, but after the revolution the Supreme Court revoked all previous laws that were deemed un-Islamic. New laws based on Sharia - law derived from Islamic texts and teachings - were introduced soon after.

    The judiciary ensures that the Islamic laws are enforced and defines legal policy. It also nominates the six lay members of the Guardian Council. The head of the judiciary, currently Ayatollah Mahmoud Hashemi Shahrudi, is appointed by, and reports to, the Supreme Leader.

    In recent years, the hardliners have used the judicial system to undermine reforms by imprisoning reformist personalities and journalists and closing down reformist papers.

    The armed forces comprise the Revolutionary Guard and the regular forces. The two bodies are under a joint general command.

    All leading army and Revolutionary Guard commanders are appointed by the Supreme Leader and are answerable only to him.

    The Revolutionary Guard was formed after the revolution to protect the new leaders and institutions and to fight those opposing the revolution.

    The Revolutionary Guard has a powerful presence in other institutions, and controls volunteer militias with branches in every town.

    The Council is an advisory body for the Leader with an ultimate adjudicating power in disputes over legislation between the parliament and the Guardian Council. The Supreme Leader appoints its members, who are prominent religious, social and political figures.

    In October 2005, the Supreme Leader gave the Expediency Council "supervisory" powers over all branches of government - delegating some of his own authority as is permitted in the constitution.

    It is not clear exactly how much this will affect the Council's influence, although observers say it is likely to strengthen the position of its present chairman, former President Hashemi Rafsanjani, who was defeated in the 2005 presidential elections by Mahmoud Amadinejad.

  6. Patriot

    Patriot Senior Member Senior Member

    Apr 11, 2010
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    Ahmedabad, Gujarat, India
    Japan turns on the sanctions squeeze on Iran news

    [​IMG]Tokyo: Japan's biggest energy explorer, Inpex Corp, said Friday it would withdraw from Iran's Azadegan oil field project, in a move aimed at pre-empting any US move to put it on a sanctions list. Iran is under a fresh round of sanctions from the United Nations under US sponsored resolutions for refusing to stop enriching uranium to possible weapons-grade capability.

    Iran claims the programme is for peaceful purposes.

    "Inpex Corp. has reached an agreement with Iran's state oil company that its subsidiary will withdraw from the Azadegan oilfield development project," the Japanese government-backed company said in a statement. It had a 10 per cent stake in the project.

    The move follows up on a 3 September decision by Japan to suspend new oil and gas investments in Iran and to freeze the assets of 88 organizations and 24 individuals.

    ''If we had kept the stake in the project and became a target of US sanctions, we may not be able to use US financial institutions,'' spokesman Kazuhiko Itano told reporters in Tokyo. ''Our understanding is that we don't have to pay a penalty to Iran.''

    The current round of sanctions on Iran are the fourth such set by the UN.

    Iran is the fourth-biggest oil supplier to energy-starved Japan.

    Other Japanese companies have already complied with or are falling in line with the sanctions.

    In August Japanese auto major Toyota suspended auto exports to Iran indefinitely.

    A recent discovery Azadegan is one of the biggest oil fields discovered anywhere in the world in the past three decades. It is located 80 km (50 miles) west of Ahvaz, close to the Iraqi border.

    The field holds 33.2 billion barrels of oil in place and 5.2 billion barrels of recoverable reserves.

    It was originally to have been developed by Inpex. However, under worsening geo-political conditions Inpex significantly lowered its stake from 75 per cent to 10 per cent in 2006.

    China National Petroleum Corporation (CNPC) picked up where Tokyo shied away and signed a $2 billion deal with Iranian NIOC in January 2009 to develop the north Azadegan oilfield. Under phase 1, capacity will reach 75,000 barrels per a day. The second phase should double production to 150,000 bpd. The contract is for 12 years.

    Moving on sanctions

    Japan had already begun reducing its intake of Iranian crude earlier. Though relatively high price of Iranian crude may also be a reason for reduced imports, another reason for a fall in volumes could be the fear that Japanese banks would reduce credit lines for companies doing business with Iran, according to Japanese refining company officials.

    This would leave Japanese oil companies limited access to yen funds for Iranian transactions. Since 2007 Japanese oil refiners and trading companies have paid for crude oil imported from Iran in yen rather than US dollars at the request of Iran.

    So far Japanese sanctions don't include restrictions on crude oil imports, due to government concerns about the country's energy security as Japan imports almost all the oil it uses.

    Most of Japan's imports from Iran are Iranian Light and Iranian Heavy grades and it is costlier than similar grades produced by Saudi Arabia and other Middle Eastern countries. If Japan no longer had access to Iranian crude for whatever reason, other suppliers have ample spare capacity and comparable crude grades are available in spot markets, officials said.

    Possible substitutes include Omani and Qatari crude and Iraq's Basra crude.

  7. The Messiah

    The Messiah Bow Before Me! Elite Member

    Aug 25, 2010
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    Iran is probably the only country in the middle-east we can have good relations with....we should invest there.

    They are also a enery rich country so we will benefit aswell.
  8. amoy

    amoy Senior Member Senior Member

    Jan 17, 2010
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    any implication for Iran to open air for china's Su-27 to join Turkey's Anatolian Eagle military exercise ?

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