EKIP– Expert Club for Economics and Politics A Different Opinion
The question is how is it possible for Iran to continue progressing on its nuclear program under unprecedented sanctions? How is the non-Persian country surviving under US pressure? What is the future in the region? How will the nuclear threat develop after the upcoming presidential elections?
And the winner is: “Argo”! These words echoed in the homes of hundreds of millions around the world, following the Oscars. People who have seen the film remember the heroic exploits of the sexy Ben Affleck. Disguised as a film director, but in fact an ordinary CIA agent, he goes to Tehran to save a handful of American diplomats from the clutches of the Islamists, who had just taken power in 1979. The American mission, of course, succeeds, and the stupid Iranians are presented as beasts who slaughter and hang.
However, those who have not seen the film may remember the myth of Jason and the Argonauts, who set off in search of the Golden Fleece on the ship "Argo". Pelias, Jason's uncle, insists on receiving the fleece, in exchange for which he will cede power over the city of Iolk to Jason. Tomorrow, like the Argonauts, the P5+1 group, including representatives of the five permanent members of the UN Security Council and Germany, is heading to Kazakhstan for the next round of negotiations on Iran's nuclear program. The Golden Fleece is more than just stopping uranium enrichment; the goal is to eliminate Iran as a regional leader in the Middle East and restore the dominant position of the United States.
Unlike the Argonauts' mission or Ben Affleck's, no concrete development is expected after tomorrow's meeting. The disagreements between the great powers, for the third consecutive meeting, are preventing the formation of a common position. Russia and China are firmly against tightening sanctions against Iran, although both countries do not want to allow a second nuclear power in the region (now it is only Israel). Their geopolitical interests, which include mainly military and energy cooperation with Iran, are stronger than the threat of nuclear war in the region. China imports about half a million barrels of oil a day from Iran, while Russia is building the Bushehr nuclear power plant and until a year ago was selling ballistic missiles to Iran. And here I will not even dwell on the common desire of China and Russia to prevent the expansion of US influence in the region.
Meanwhile, the Argonauts are facing a rather resourceful defender of the Golden Fleece. Sanctions against the Iranian government have so far failed to break the regime's will to continue enriching uranium. A declassified report by the International Atomic Energy Agency (IAEA) on Friday showed that Iran is installing new, more advanced centrifuges for enriching uranium, while increasing capacity by several thousand new machines at the Natanz and Fordow centers. The Islamic Republic currently possesses 167 kg. of uranium enriched to 20% (one level above that needed to produce a nuclear weapon) and is rapidly approaching the 240 kg. needed for a first nuclear bomb. According to Israeli intelligence, Iran will have a nuclear weapon by May-June of this year.
A game of nerves
The question is how can Iran continue to make progress on its nuclear program under unprecedented sanctions? Since the EU banned imports of Iranian oil in July last year, Iranian supply has fallen by more than half a million barrels per day, while over the past 12 months, the country's total crude oil production has fallen by 1 million barrels to 2.65 million per day. Exports of black gold, which provide ¾ of the country's income, have plummeted to less than a million barrels. The results were not long in coming, with the Iranian rial collapsing against the dollar and the euro, and unofficial inflation exceeding 70%. Meanwhile, the sanctions have limited the country's imports of basic products, including medicines and equipment needed in the manufacturing sector.
And yet, Iran is surviving. The central bank has frozen the rial exchange rate, using its huge foreign exchange reserves (about $70-80 billion) for this purpose. The low exchange rate of the Iranian currency has made many Iranian goods of poor quality competitive on international markets, thus increasing exports. The country's low debt and stable fiscal position, in turn, protect it from a payment crisis and will ensure peace for at least a few more years under the same economic sanctions. Not only that, but many US allies are resisting their implementation. Japan, South Korea, India, Turkey and others were excluded from the sanctions list for the second time in a row and will be able to import oil and gas from Iran at least until May.
In an attempt to stop trade with Iran, the United States imposed a new ban earlier this month that restricts the transfer of dollar and euro funds deposited in foreign banks back to Iran. This will prevent Iran from receiving payments from its oil and gas customers. Instead, the country will be forced to accept local currency as payment, allowing it to purchase only goods and services from the customer country. Iran was also banned from trading in precious metals, which would break the gas-for-gold barter scheme that currently operates with Turkey.
How effective the new sanctions will be is still too early to say. One thing is certain: Iran continues to pursue its goals and is not ready for compromise solutions. The proposal of US Vice President Joe Biden for direct negotiations with Iran was immediately rejected, as was the compromise option of lifting the ban on gold trade in exchange for the shutdown of the nuclear center in Fordow. So the negotiations in Kazakhstan will pass peacefully. Both sides will assure each other that there is a will for compromise, but one will not come.
Is time running out for a peaceful solution?
The likely failure of the talks will strengthen Netanyahu’s conservative Israeli cabinet’s desire for a military strike. After the parliamentary victory in January, his government is ready for bolder measures. However, Israel is still waiting for a clear, unambiguous promise from Obama of military support in case of possible bombing. Such support is unlikely. America is preoccupied not only with its domestic problems, but also with the Syrian crisis, which is increasingly becoming a Pandora’s box. The United States cannot risk a regional war when the global economy is so fragile and a possible sharp rise in oil prices could send it into another recession.
Iran is also in a waiting process. Presidential elections are coming up in June, when the clique around Ahmadinejad will most likely be removed, and a candidate close to Ayatollah Khamenei will come to power. He, for his part, has expressed his desire for a diplomatic solution to the conflict several times, even issuing a so-called fatwa, a sacred law condemning the use of nuclear weapons as a sin. Under his pressure, Iran recently announced that, as a sign of goodwill, it will transform part of its uranium enriched to 20% into nuclear fuel for the several power plants under construction. Thus, the Hollywood scenario of the heroic saving of the world by the Argonauts is unlikely to be repeated. The Golden Fleece, at least for now, remains invisible. One thing is certain - tomorrow, with their statements, the diplomats from the ship "Argo" will aim for the golden statuette for acting.
