January 18, 2012
Banking on Sanctions
Let’s start with red lines. Here it is, Washington’s ultimate red
line, straight from the lion’s mouth. Only last week Secretary of
Defense Leon Panetta said of the Iranians, “Are they trying to develop a
nuclear weapon? No. But we know that they’re trying to develop a
nuclear capability. And that’s what concerns us. And our red line to
Iran is do not develop a nuclear weapon. That’s a red line for us.”
How strange, the way those red lines continue to retreat. Once upon a
time, the red line for Washington was “enrichment” of uranium. Now,
it’s evidently an actual nuclear weapon that can be brandished. Keep in
mind that, since 2005, Iranian Supreme Leader Ayatollah Khamenei
has stressed that his country is not seeking to build a nuclear weapon.
The most recent National Intelligence Estimate on
Iran from the U.S. Intelligence Community has similarly stressed that
Iran is not, in fact, developing a nuclear weapon (as opposed to the
breakout capacity to build one someday).
What if, however, there is no “red line,” but something completely different? Call it the petrodollar line.
Banking on Sanctions?
Let’s start here: In December 2011, impervious to dire consequences
for the global economy, the U.S. Congress — under all the usual
pressures from the Israel lobby (not that it needs them) — foisted a
mandatory sanctions package on the Obama administration (100 to 0 in the
Senate and with only 12 “no” votes in the House). Starting in June, the
U.S. will have to sanction any third-country banks and companies
dealing with Iran’s Central Bank, which is meant to cripple that
country’s oil sales. (Congress did allow for some “exemptions.”)
The ultimate target? Regime change — what else? — in Tehran. The proverbial anonymous U.S. official admitted as much in the Washington Post,
and that paper printed the comment. (“The goal of the U.S. and other
sanctions against Iran is regime collapse, a senior U.S. intelligence
official said, offering the clearest indication yet that the Obama
administration is at least as intent on unseating Iran’s government as
it is on engaging with it.”) But oops! The newspaper
then had to revise the passage to eliminate that embarrassingly
on-target quote. Undoubtedly, this “red line” came too close to the
truth for comfort.
Former chairman of the Joint Chiefs of Staff Admiral Mike Mullen
believed that only a monster shock-and-awe-style event, totally
humiliating the leadership in Tehran, would lead to genuine regime
change — and he was hardly alone. Advocates of actions ranging from air
strikes to invasion (whether by the U.S., Israel, or some combination of
the two) have been legion in neocon Washington. (See, for instance,
the Brookings Institution’s 2009 report Which Path to Persia.)
Yet anyone remotely familiar with Iran knows that such an attack
would rally the population behind Khamenei and the Revolutionary
Guards. In those circumstances, the deep aversion of many Iranians to
the military dictatorship of the mullahtariat would matter little.
Besides, even the Iranian opposition supports a peaceful nuclear program. It’s a matter of national pride.
Iranian intellectuals, far more familiar with Persian smoke and
mirrors than ideologues in Washington, totally debunk any war
scenarios. They stress that the Tehran regime, adept in the arts of
Persian shadow play, has no intention of provoking an attack that could
lead to its obliteration. On their part, whether correctly or not,
Tehran strategists assume that Washington will prove unable to launch
yet one more war in the Greater Middle East, especially one that could
lead to staggering collateral damage for the world economy.
In the meantime, Washington’s expectations that a harsh sanctions
regime might make the Iranians give ground, if not go down, may prove to
be a chimera. Washington spin has been focused on the supposedly
disastrous mega-devaluation of the Iranian currency, the rial, in the
face of the new sanctions. Unfortunately for the fans of Iranian
economic collapse, Professor Djavad Salehi-Isfahani has laid out in
elaborate detail the long-term nature of this process, which Iranian
economists have more than welcomed. After all, it will boost Iran’s
non-oil exports and help local industry in competition with cheap
Chinese imports. In sum: a devalued rial stands a reasonable chance of
actually reducing unemployment in Iran.
More Connected Than Google
Though few in the U.S. have noticed, Iran is not exactly “isolated,”
though Washington might wish it. Pakistani Prime Minister Yusuf Gilani
has become a frequent flyer to Tehran. And he’s a Johnny-come-lately
compared to Russia’s national security chief Nikolai Patrushev, who only
recently warned the Israelis not to push the U.S. to attack Iran. Add
in as well U.S. ally and Afghan President Hamid Karzai. At a Loya Jirga
(grand council) in late 2011, in front of 2,000 tribal leaders, he
stressed that Kabul was planning to get even closer to Tehran.
On that crucial Eurasian chessboard, Pipelineistan, the Iran-Pakistan
(IP) natural gas pipeline — much to Washington’s distress — is now a
go. Pakistan badly needs energy and its leadership has clearly decided
that it’s unwilling to wait forever and a day for Washington’s eternal
pet project – the Turkmenistan-Afghanistan-Pakistan-India (TAPI)
pipeline — to traverse Talibanistan.
Even Turkish Foreign Minister Ahmet Davutoglu recently visited
Tehran, though his country’s relationship with Iran has grown ever
edgier. After all, energy overrules threats in the region. NATO member
Turkey is already involved in covert ops in Syria, allied with hardcore
fundamentalist Sunnis in Iraq, and — in a remarkable volte-face in the
wake of the Arab Spring(s) — has traded in an Ankara-Tehran-Damascus
axis for an Ankara-Riyadh-Doha one. It is even planning on hosting
components of Washington’s long-planned missile defense system, targeted
at Iran.
All this from a country with a Davutoglu-coined foreign policy of
“zero problems with our neighbors.” Still, the needs of Pipelineistan
do set the heart racing. Turkey is desperate for access to Iran’s
energy resources, and if Iranian natural gas ever reaches Western Europe
— something the Europeans are desperately eager for — Turkey will be
the privileged transit country. Turkey’s leaders have already
signaled their rejection of further U.S. sanctions against Iranian oil.
And speaking of connections, last week there was that spectacular diplomaticcoup de théâtre,
Iranian President Mahmoud Ahmadinejad’s Latin American tour. U.S.
right-wingers may harp on a Tehran-Caracas axis of evil — supposedly
promoting “terror” across Latin America as a springboard for future
attacks on the northern superpower — but back in real life, another kind
of truth lurks. All these years later, Washington is still unable to
digest the idea that it has lost control over, or even influence in,
those two regional powers over which it once exercised unmitigated
imperial hegemony.
Add
to this the wall of mistrust that has only solidified since the 1979
Islamic revolution in Iran. Mix in a new, mostly sovereign Latin
America pushing for integration not only via leftwing governments in
Venezuela, Bolivia, and Ecuador but through regional powers Brazil and
Argentina. Stir and you get photo ops like Ahmadinejad and Venezuelan
President Hugo Chavez saluting Nicaraguan President Daniel Ortega.
Washington continues to push a vision of a world from which Iran has
been radically disconnected. State Department spokesperson Victoria
Nuland is typical in saying recently, “Iran can remain in international
isolation.” As it happens, though, she needs to get her facts straight.
“Isolated” Iran has $4 billion in joint projects with Venezuela
including, crucially, a bank (as with Ecuador, it has dozens of planned
projects from building power plants to, once again, banking). That has
led the Israel-first crowd in Washington to vociferously demand that
sanctions be slapped on Venezuela. Only problem: how would the U.S. pay
for its crucial Venezuelan oil imports then?
Much was made in the U.S. press of the fact that Ahmadinejad did not
visit Brazil on this jaunt through Latin America, but diplomatically
Tehran and Brasilia remain in sync. When it comes to the nuclear dossier
in particular, Brazil’s history leaves its leaders sympathetic. After
all, that country developed — and then dropped — a nuclear weapons
program. In May 2010, Brazil and Turkey brokered a uranium-swap
agreement for Iran that might have cleared the decks on the U.S.-Iranian
nuclear imbroglio. It was, however, immediately sabotaged by
Washington. A key member of the BRICS, the club of top emerging
economies, Brasilia is completely opposed to the U.S. sanctions/embargo
strategy.
So Iran may be “isolated” from the United States and Western Europe,
but from the BRICS to NAM (the 120 member countries of the Non-Aligned
Movement), it has the majority of the global South on its side. And
then, of course, there are those staunch Washington allies, Japan and
South Korea, now pleading for exemptions from the coming boycott/embargo
of Iran’s Central Bank.
No wonder, because these unilateral U.S. sanctions are also aimed at
Asia. After all, China, India, Japan, and South Korea, together, buy no
less than 62% of Iran’s oil exports.
With trademark Asian politesse, Japan’s Finance Minister Jun Azumi
let Treasury Secretary Timothy Geithner know just what a problem
Washington is creating for Tokyo, which relies on Iran for 10% of its oil needs. It is pledgingto
at least modestly “reduce” that share “as soon as possible” in order to
get a Washington exemption from those sanctions, but don’t hold your
breath. South Korea has already announced that it will buy 10% of its
oil needs from Iran in 2012.
Silk Road Redux
Most important of all, “isolated” Iran happens to be a supreme matter of national security for China, which has already rejected the latest Washington sanctions without a blink.
Westerners seem to forget that the Middle Kingdom and Persia have been
doing business for almost two millennia. (Does “Silk Road” ring a bell?)
The Chinese have already clinched a juicy deal for
the development of Iran’s largest oil field, Yadavaran. There’s also
the matter of the delivery of Caspian Sea oil from Iran through a
pipeline stretching from Kazakhstan to Western China. In fact, Iran
already supplies no less than 15% of China’s oil and natural gas. It is
now more crucial to China, energy-wise, than the House of Saud is to the U.S., which imports 11% of its oil from Saudi Arabia.
In fact, China may be the true winner from
Washington’s new sanctions, because it is likely to get its oil and gas
at a lower price as the Iranians grow ever more dependent on the China
market. At this moment, in fact, the two countries are in the middle of
a complex negotiation on the pricing of Iranian oil, and the Chinese
have actually been ratcheting up the pressure by slightly cutting back
on energy purchases. But all this should be concluded by March, at
least two months before the latest round of U.S. sanctions go into
effect, according to experts in Beijing. In the end, the Chinese will
certainly buy much more Iranian gas than oil, but Iran will still remain
its third biggest oil supplier, right after Saudi Arabia and Angola.
As for other effects of the new sanctions on China, don’t count on
them. Chinese businesses in Iran are building cars, fiber optics
networks, and expanding the Tehran subway. Two-way trade is at $30
billion now and expected to hit $50 billion in 2015. Chinese businesses
will find a way around the banking problems the new sanctions impose.
Russia is, of course, another key supporter of “isolated” Iran. It
has opposed stronger sanctions either via the U.N. or through
the Washington-approved package that targets Iran’s Central Bank. In
fact, it favors a rollback of the existing U.N. sanctions and has also
been at work on an alternative plan that could, at least theoretically,
lead to a face-saving nuclear deal for everyone.
On the nuclear front, Tehran has expressed a willingness to
compromise with Washington along the lines of the plan Brazil and Turkey
suggested and Washington deep-sixed in 2010. Since it is now so much
clearer that, for Washington — certainly for Congress — the nuclear
issue is secondary to regime change, any new negotiations are bound to
prove excruciatingly painful.
This is especially true now that the leaders of the European Union
have managed to remove themselves from a future negotiating table by
shooting themselves in their Ferragamo-clad feet. In typical fashion,
they have meekly followed Washington’s lead in implementing an Iranian
oil embargo. As a senior EU official told National Iranian American
Council President Trita Parsi, and as EU diplomats have assured me in no
uncertain terms, they fear this might prove to be the last step short
of outright war.
Meanwhile, a team of International Atomic Energy Agency inspectors
has just visited Iran. The IAEA is supervising all things nuclear in
Iran, including its new uranium-enrichment plant at Fordow, near the
holy city of Qom, with full production starting in June. The IAEA is
positive: no bomb-making is involved. Nonetheless, Washington (and the
Israelis) continue to act as though it’s only a matter of time — and not
much of it at that.
Follow the Money
That Iranian isolation theme only gets weaker when one learns that
the country is dumping the dollar in its trade with Russia for rials and
rubles – a similar move to ones already made in its trade with China
and Japan. As for India, an economic powerhouse in the neighborhood,
its leaders also refuse to stop buying Iranian oil, a trade that, in the
long run, is similarly unlikely to be conducted in dollars. India is
already using the yuan with China, as Russia and China have been trading
in rubles and yuan for more than a year, as Japan and China are
promoting direct trading in yen and yuan. As for Iran and China, all
new trade and joint investments will be settled in yuan and rial.
Translation, if any was needed: in the near future, with the
Europeans out of the mix, virtually none of Iran’s oil will be traded in
dollars.
Moreover, three BRICS members (Russia, India, and China) allied with
Iran are major holders (and producers) of gold. Their complex trade ties
won’t be affected by the whims of a U.S. Congress. In fact, when the
developing world looks at the profound crisis in the Atlanticist West,
what they see is massive U.S. debt, the Fed printing money as if there’s
no tomorrow, lots of “quantitative easing,” and of course the Eurozone
shaking to its very foundations.
Follow the money. Leave aside, for the moment, the new sanctions on
Iran’s Central Bank that will go into effect months from now, ignore
Iranian threats to close the Strait of Hormuz (especially unlikely given
that it’s the main way Iran gets its own oil to market), and perhaps
one key reason the crisis in the Persian Gulf is mounting involves this
move to torpedo the petrodollar as the all-purpose currency of exchange.
It’s been spearheaded by Iran and it’s bound to translate into an
anxious Washington, facing down not only a regional power, but its major
strategic competitors China and Russia. No wonder all those carriers
are heading for the Persian Gulf right now, though it’s the strangest of
showdowns — a case of military power being deployed against economic
power.
In this context, it’s worth remembering that in September 2000 Saddam
Hussein abandoned the petrodollar as the currency of payment for Iraq’s
oil, and moved to the euro. In March 2003, Iraq was invaded and the
inevitable regime change occurred. Libya’s Muammar Gaddafi proposed a
gold dinar both as Africa’s common currency and as the currency of
payment for his country’s energy resources. Another intervention and
another regime change followed.
Washington/NATO/Tel Aviv, however, offers a different narrative.
Iran’s “threats” are at the heart of the present crisis, even if these
are, in fact, that country’s reaction to non-stop US/Israeli covert
war and now, of course, economic war as well. It’s those “threats,” so
the story goes, that are leading to rising oil prices and so fueling the
current recession, rather than Wall Street’s casino capitalism or
massive U.S. and European debts. The cream of the 1% has nothing against
high oil prices, not as long as Iran’s around to be the fall guy for
popular anger.
As energy expert Michael Klare pointed out recently, we are now in a
new geo-energy era certain to be extremely turbulent in the Persian Gulf
and elsewhere. But consider 2012 the start-up year as well for a
possibly massive defection from the dollar as the global currency of
choice. As perception is indeed reality, imagine the real world — mostly
the global South — doing the necessary math and, little by little,
beginning to do business in their own currencies and investing ever less
of any surplus in U.S. Treasury bonds.
Of course, the U.S. can always count on the Gulf Cooperation Council
(GCC) — Saudi Arabia, Qatar, Oman, Bahrain, Kuwait and the United Arab
Emirates — which I prefer to call the Gulf Counterrevolution Club (just
look at their performances during the Arab Spring). For all practical
geopolitical purposes, the Gulf monarchies are a U.S. satrapy. Their
decades-old promise to use only the petrodollar translates into them
being an appendage of Pentagon power projection across the Middle East.
Centcom, after all, is based in Qatar; the U.S. Fifth Fleet is
stationed in Bahrain. In fact, in the immensely energy-wealthy lands
that we could label Greater Pipelineistan — and that the Pentagon used
to call “the arc of instability” — extending through Iran all the way to
Central Asia, the GCC remains key to a dwindling sense of U.S.
hegemony.
If this were an economic rewrite of Edgar Allan Poe’s story, “The Pit
and the Pendulum,” Iran would be but one cog in an infernal machine
slowly shredding the dollar as the world’s reserve currency. Still, it’s
the cog that Washington is now focused on. They have regime change on
the brain. All that’s needed is a spark to start the fire (in — one
hastens to add — all sorts of directions that are bound to catch
Washington off guard).
Remember Operation Northwoods,
that 1962 plan drafted by the Joint Chiefs of Staff to stage terror
operations in the U.S. and blame them on Fidel Castro’s Cuba.
(President Kennedy shot the idea down.) Or recall the Gulf of Tonkin
incident in 1964, used by President Lyndon Johnson as a justification
for widening the Vietnam War. The U.S. accused North Vietnamese torpedo
boats of unprovoked attacks on U.S. ships. Later, it became clear that
one of the attacks had never even happened and the president had lied
about it.
It’s not at all far-fetched to imagine hardcore
Full-Spectrum-Dominance practitioners inside the Pentagon riding a
false-flag incident in the Persian Gulf to an attack on Iran (or simply
using it to pressure Tehran into a fatal miscalculation). Consider as
well the new U.S. military strategy just unveiled by President Obama in
which the focus of Washington’s attention is to move from two failed
ground wars in the Greater Middle East to the Pacific (and so to China).
Iran happens to be right in the middle, in Southwest Asia, with all
that oil heading toward an energy-hungry modern Middle Kingdom over
waters guarded by the U.S. Navy.
So yes, this larger-than-life psychodrama we call “Iran” may turn out
to be as much about China and the U.S. dollar as it is about the
politics of the Persian Gulf or Iran’s nonexistent bomb. The question
is: What rough beast, its hour come round at last, slouches towards
Beijing to be born?
Pepe Escobar is the roving correspondent for Asia Times, a TomDispatch regular (where this column originally appeared), and a political analyst for al-Jazeera and RT. His latest book is Obama Does Globalistan (Nimble Books, 2009).
