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Analysis | Iran's Nuclear Program: Still No Breaking Point in Sight


02 Apr 2012 23:29Comments

New oil sanctions could be devastating, but Khamenei regime shows no sign of backing down.

Hossein Afshar is a pen name for an Iranian analyst based in Europe.
[ comment ] As the international community struggles to find a way out of the Iranian nuclear tangle, it finds itself more in need of sophisticated pressure mechanisms. In Tehran, meanwhile, all the effort provides further evidence to Supreme Leader Ayatollah Ali Khamenei that the very survival of his Islamic Republic is at stake. He grows more uncompromising while the region grows more volatile.

U.S. President Barack Obama on Friday signed a memorandum to further tighten economic sanctions' grip on the Islamic Republic of Iran by crippling the regime's ability to export oil.

Under a law signed in December, the president had until last week to decide whether significant reductions in oil purchases from Iran would not lead to a drastic, destabilizing price spike in global oil markets. The signing of the memorandum triggers a set of sanctions that will punish banks which facilitate petroleum-related purchases in any country that does not demonstrate "significant reductions" in Iranian oil imports by June 28 by cutting them off from the U.S. financial system. The move is the latest in a series of measures taken by the United States and its allies to force the Islamic Republic to abandon its nuclear ambitions.

The Islamic Republic needs to prove its nuclear program is genuinely peaceful. The main question haunting the international community for almost a decade is the logic behind Iran's persistent, costly investment in a uranium enrichment program unrelated to its fuel needs. The main product of the program has arguably been the country's isolation. Iran can reclaim the position it deserves in the international community through resolution of the nuclear issue, its leaders are told.

Khamenei begs to differ.

He says the faceoff is not about the nuclear issue, or democracy, or human rights; it's about Iran's oil and gas reserves. In an Iranian New Year address to thousand of pilgrims in the Shia holy city of Mashhad two weeks ago, Khamenei called ignorant those who think that "retreat in the nuclear issue would end the American hostility." He charged, "Their hostility is because Iran strongly protects its national oil and gas reserves."

Last October, he was in the west of the country warning Iranians, "The way to success is that, faced with the enemy, one shall not take even a single step back, lest this may provoke the enemy to come forward."

Khamenei believes the aim is to "bring the Iranian nation to its knees" or at least his definition of the Iranian nation. He may be right. The nuclear issue is just the leading edge of the Islamic Republic's issues with the outside world, of which there are many -- its support for the embattled Assad regime in Syria most prominent at the moment.

But what does that mean for Khamenei? What would resolution of Iran's outstanding issues with the international community, from regional conflicts to nuclear development, from human rights to free elections, leave of his powers? He is right in his thinking that by taking the first step back on the nuclear issue, he's got a mile to go that can only end in his own dismissal. What powers would he be able to exercise in a democratic Iran with a genuine, unleashed private sector?

The nuclear program was deemed by some in Tehran as a bargaining chip, continuously growing in value and never to be given away. It was a source of power for a regime that does not belong to any significant regional or transregional power blocs, but the nuclear program has turned into the Islamic Republic's riskiest bet.

The latest banking and oil industry sanctions are said to be designed to compel Tehran to cooperate with the international community, the United Nations, and its nuclear watchdog, the International Atomic Energy Agency. The talks on April 13 will help reveal whether they are persuasive. If talks fail, come July, finding buyers for its petroleum and petroleum products and transfer of revenues could prove unprecedentedly difficult for Iran.

World leaders of world powers remind decision makers in Tehran they will not tolerate an Islamic Republic with nuclear weapons capability. Tougher sanctions, they say, are meant to yield a nonmilitary solution to the issue and effect a change in Iran's behavior.

However, the Tehran regime regards compelled behavioral change as synonymous with regime change. The real question, often avoided, is whether the big powers can afford to live with an Islamic Republic, even a nonnuclear one, ready to meddle in the region and beyond. They can't.

A 2011 survey of opinion in the Arab world jointly conducted by the Brookings Institution and University of Maryland tells us that a growing number of respondents perceive Iran's nuclear program as peaceful and fewer believe it should be pressured to abort it. Bottom line, a smaller share of Arabs see Iran's potential acquisition of nuclear weapons as negative -- 35 percent, down from 46 percent in 2009.

War is not even an option. The United States, its European allies, and even the vociferous Israel are well aware an attack could have a domino effect in an already chaotic Middle East. Israel, in particular, gains more from the talk of a war than it would from an actual military conflict. It is bribed to be patient.

On the other side, an already faltering Iranian economy can hardly survive without oil revenues. The Iranian government has been making more and more political use of those revenues in recent years, in the shape of cash payouts to the general populace and substantial low-interest loans to the especially loyal.

The scope of the nuclear program in Iran is growing, but so is inflation. The Islamic Republic will be fortunate if it is able to check the rate of inflation for the current Iranian year that began on March 20 at no more than 30 percent. With a rial that lost half its value last year and higher overhead costs, cheap imported goods are swiftly becoming a memory. Of course, economic mismanagement is amplifying the impact of sanctions as well.

Slimmer oil revenues further weaken the feeble rial. According to the monthly report from the Organization of the Petroleum Exporting Countries (OPEC), the country's crude production for March dropped to almost 3.4 million barrels per day (b/d), while based on Iranian Oil Ministry figures, daily domestic consumption stands at 1.7 million b/d. This leaves Iran with a modest capacity of 1.7 million b/d for export.

On Friday, as Obama was signing the memorandum, his secretary of state was talking to King Abdullah of Saudi Arabia. The king's support for the maintenance of pressure on Iran through the expanded supply of oil is crucial. Among other subjects discussed was a Gulf Cooperation Council-integrated missile shield. The six oil-rich monarchies that comprise the GCC regard Iran as by far the most serious regional threat to their interests. The Persian Gulf may not be very wide, but the cross-gulf chasm is fast growing deeper.

Copyright © 2012 Tehran Bureau

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