Difficult customers


“The wave of the Islamic revolution will soon reach the entire world.” 
Iran's President elect — Mahmud Ahmadinejad 30/06/2005

Such statements give Ahmadinejad the image of an enemy of the West. This has raised the level of concern in Western capitals as Iran of 2005 in terms of conventional warfare capability is far more potent than at any time since the revolution of 1979. 

Added to the sense of concern is Iran's nuclear program which Tehran claims is required to fill its power generation shortfalls.

Levels of concern reached new highs today when suddenly Iran said that the EU 3 countries of UK, France and Germany have until tomorrow August 1 st to submit their security, political and economic proposals to the Iranian government. According to the Iranian statement if the EU fails to submit its proposal, Iran will re-start nuclear activity under the supervision of the UN at its Esfahan plant. It must be noted that activities at Esfahan are not related to Uranium enrichment.

The EU 3 meanwhile have just issued a statement saying that they will submit their proposal next week as no previous promises had been made to the Iranian to have their offer ready for August 1 st .

Through its statement today Iran has certainly upped the anti.

The burning question is why? Is it due to the election of the conservative President Mahmud Ahmadinejad? More importantly, what is Iran's nuclear negotiation strategy going be now that the entire Iranian political hierarchy is under the rule of the conservatives?

The following analysis will examine Iran's claims and needs regarding its nuclear program. The analysis will address the West's concerns and suspicions. It will then address the political and economic factors which will impact the direction of Iran's negotiation strategy. This piece will be concluded by answering the most important question of all: will Iran under the conservatives continue with the talks or will it ultimately break off with negotiations to continue with its nuclear program?

Iranian needs and rights
The Iranian government claims that it has a legal right to develop its nuclear capability which it claims are for peaceful purposes; mainly to boost Iran's energy production capacity.

A close examination of both claims proves that the Iranian government is right.

With Iran's real GDP expected to grow by 6% next year and with a growing young population demand for power is growing at 7-8% annually.

Meanwhile Iran wants to reduce the use of its own oil and gas for energy production as they are better used for exports. Financially this is a very sound strategy as Iran's daily consumption of 1.5 million barrels of oil per day means that currently the country's coffers are missing out on $75 million of income a day.

At the same time with decreasing water resources the use of hydroelectric as means to produce power is becoming less viable.

Therefore nuclear energy in the long term is the most economically viable method of energy production.

Subsequently Iran aims to produce 7,000 MW of nuclear power (representing 10% of its total supplies) by 2020 through the construction of 20 nuclear power plants.

It must be noted that Iran's claims regarding its “inalienable” right to a nuclear program for peaceful purposes are in fact backed up by the Article 4 of the Nuclear Proliferation Treaty (NPT). This treaty gives all sovereign countries the right to use nuclear energy as long as they are for peaceful purposes, as per Iran's claims.

Tehran's insistence to enrich uranium also means that its nuclear program can be used to produce atomic weaponry.

Suspicions that Iran would use its civilian nuclear program for military means were heightened after IAEA inspections found traces of highly enriched Uranium. The percentage of enriched Uranium found was more correspondent to the enrichment levels needed to produce an atomic bomb rather than the levels needed for civilian energy production as Iran has claimed.

Meanwhile according to the Wisconsin Project Iran has been developing other nuclear capabilities for military use. These include development of both molecular laser isotope separation (MLIS) and atomic vapour laser isotope separation (AVLIS) at the Laser Research Centre in Tehran. According to the report Iran has also been indigenously producing neodyne ytterbium-aluminum (Nd-YAG) lasers.

This factor is the source of increased genuine concern not just for Israel and the US which are singled out by Iran as its enemies, but also for Iran's economic allies such as the EU and the Persian Gulf countries.

A nuclear Iran will not only be a potential source of political and military threat, it can also have economic repercussions. By becoming nuclear Iran will be the first member of OPEC with doomsday capability. Therefore if in the future Tehran decides to hurt the US economy by pushing up the price of oil through production cuts at OPEC, it will have a much stronger bargaining position as a nuclear country than it does now. 

So far the EU has managed to convince the Iranian government to halt its enrichment program. With negotiations set to restart next week, what should we expect from Tehran?

New chapter
The election of Ahmadinejad will significantly change the face and presentation of Iran's strategy at the negotiation table.

However the core goals and mechanisms behind the Iranian negotiation strategy will remain the same. 

As proscribed by Iran's constitution Iran's supreme leader who currently is the Mashad-born Ayatollah Seyed Ali Khamenei holds total and absolute constitutional power which is given to him by the Guardian Council. The President however holds 10% of the constitutional power.

It is the supreme leader- not the President- who has in the past and will in the future have the final word over the execution of Iran's nuclear negotiations with the EU.

However the noted difference in Iran's approach towards the west will be felt by the absence of the approachable Ayatollah Khatami, who charmed diplomats with his deep knowledge of Philosophy (so much so that Moscow University awarded him an honorary PhD in the subject). Although Ayatollah Khatami was not directly involved in the negotiations, nevertheless his reformist image did provide Iran with more diplomatically manoeuvrability against countries such as the US who wanted Iran to be isolated internationally, and immediately.

Instead now the West, especially the EU will face conservatives who are going to follow a policy of anti-Western rhetoric and hostile posturing which will also be part of Iran's negotiation strategy.

Such posturing will consolidate Khamenei's standing with the conservative political bodies such as the Guardian Council.

It will also increase Khamenei's popularity with the conservative sector of the Iranian society to whom the nuclear question has become a symbol of Iran's sovereign rights and further proof that the West clearly discriminates against Iran. As far as they are concerned why is it that other countries such as the US, China, Pakistan and India who have the bomb don't get threatened with sanctions and veiled threats of military attacks? However Iran who is spending day and night professing its innocent nuclear intentions gets chastised.

The forecasted increase in Iran's anti-Western posturing at the negotiation table is also expected to serve as a tool to extract more concessions from the EU. This is something which many conservatives thought reformists such as Ayatollah Khatami and Ayatollah Rowhani were not good at.

It is also possible that Iran will walk out of the negotiations, however, these will be for temporary periods only.

It is the Opinion of meepas© that it is very unlikely that Iran will break off from the negotiations altogether.

This prognosis is based on the understanding by the conservatives including Ahmadinejad that if Iran stops negotiating with the EU it will mean that Iran will be referred to the Security Council for the imposition of economic sanctions.

Ahmadinejad is from the same Revolutionary Guards movement and ideological background as General Mohsen Reza i. It was General Reza i who in 1988 convinced Ayatollah Khomeini that despite the fact that Saddam Hussein is viewed as the enemy of Islam the revolution and the Iranian people, if Iran continues with the war the revolution risks losing its rule.

As a result Ayatollah Khomeini, despite having a political and a personal vendetta against Saddam came to the logical conclusion that the war had to be stopped. The human and financial cost of the war, US economic embargo and diplomatic and economic isolation was becoming too much to bear for the revolution.

The conservatives including Ahmadinejad are also realistic enough to realise that if the talks with the EU fail they risk economic sanctions.

Engines of the revolution
Possible sanctions especially from the EU are a serious threat to Iran's industrial infrastructure, 75% of which operates on production machinery and spare parts from EU countries. This is something which the Iranian economy can not afford as it is already suffering from inefficiencies related to its inability to purchase American equipment due to US sanctions.

With the low quality of Chinese and Russian industrial equipment being the cause of many jokes in Iran, it is engineering products from mainly France, Germany and the UK which run Iran's industries (especially oil).

More importantly, food is a major import for Iran's economy. Iran's biggest supplier of food is the EU. The inability to purchase food for its population due to potential sanctions is a serious concern for the Iranian government.

Being referred to the UN for economic sanctions is also likely to have a negative impact on Iran's economic relations with its Persian Gulf neighbours. This could have a sever impact on Iran's exports as Tehran recently concluded two massive gas deals totalling $17 billion with Oman and Kuwait. Furthermore Iran has a booming trade relation with the UAE totalling $8 billion a year which it will not want to lose as there are close to 4500 Iranian companies who have invested in the oil rich UAE.

With former allies such as Syria economically and diplomatically weakened and with Libya back in the good books of the West, sanctions will also mean serious diplomatic isolation for Iran.

Experience has shown conservatives especially Ahmadinejad and his Developers of Iran faction (called Abadegaran in Farsi) that the engines of the revolution need trade and economic development as their fuel, not more unemployment and poverty which could be caused by sanctions.

Such beliefs were reinforced through observation of what happened to Saddam's regime. First the sanctions severely weakened the Baathist regime and subsequently this was used as a precursor for those opposing his regime to attack and overthrow it. The Iranian conservatives don't want the same. The presence of hundreds of thousands of US troops sitting on the eastern, southern, western and north western borders of Iran are good enough reasons as to why not.

Meanwhile with the need to create 500,000 jobs a year for Iran's young populating sanctions will mean more unemployment for the biggest sector of the Iranian society.

It was the young and the economically disenchanted including Mr Ahmadinejad himself who revolted against the political establishment in 1979. The ruling hierarchy in Tehran takes Iran's young seriously as their numbers make up the majority of the Iranian population. Although the regime may not be willing to provide them with the opportunity for political reform, having them hungry and unemployed in the streets will certainly raise the level of internal threat.

So far actions by Ahmadinejad prove that he is for the development of the economy. Just two days after his election he voiced his support for Iran's ultimate symbol of Western capitalism ie. the Tehran's Stock Exchange which has a total market cap of $45 billion.

Ahmadinejad has also promised to reform Iran's bureaucracy ridden Oil Ministry because continued corruption and inefficiencies translates into reduced ability to finance the country's operations, 80% of which comes from the sale of oil.

To conclude in the coming months and perhaps in the coming year it is expected that Iran will act in a more hostile manner towards to West as means of extracting more concessions and time for its nuclear program. However Iran will continue to deal with the West because as any Iranian Businessman would tell you it is better to have difficult customers than no customers at all.

Meir Javedanfar is a Middle East Analyst at MEEPAS.

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