Where is Iran Heading?

On 14 July, Iran has offered the US direct talks in order to discuss about its nuclear programme and issues connected to terrorism but the US administration turned down the offer. The denial of a dialog, which is very unusual in international diplomacy, shows only how complicated the different issues concerning Iran have become. Nevertheless, as an important regional player, its actions can not only determine the faith of Iran but the course of the whole area. Therefore it is worth scrutinizing the US and Russian stance against the country.

After the war in Iraq, the US seems determined to increase its influence in the Gulf region. How fare it can go experienced Japan which came under US pressure not to conclude a $2 billion deal to develop a section of Iran's giant Azadegan oil field. The field is expected to hold recoverable reserves of some 6 billion barrels. It is a key project for Iran as the country tries hard attracting foreign investments for its oil and gas industry. According to the US, the deal should not be signed until Iran allows international inspectors access to its nuclear facilities and stops supporting the Lebanese Hezbollah movement, which the US classified as terrorist group. According to Washington it would be very unfortunate if such a huge oil and gas deal would be signed at a moment, Iran is stepping up efforts to further its nuclear programme.

However, if the Japanese will bounce back from the agreement, there could be others that will replace them. China has been very eager to diversify its resources of energy supplies. In recent years, diplomatic relations between China and Iran have been improving. One of the last trips the Chinese ex-prime minister, Jiang Zemin, undertook was a visit to Teheran where he pledged for stronger Sino-Iranian relations. Chinese National Oil Company (CNPC) has been working in Iran for years and would be likely to take the opportunity to participate in such a huge upstream project. The company could even receive very favourable terms as the competition is weak, due to the absence of major US companies. Sinopec, another Chinese oil major, has also Iran experience as it helped to construct storage facilities at the Caspian port of Neka, and to upgrade the Tehran and Tabriz refineries. These contracts have not attracted much attention in Washington some years ago but the attitude towards Iran has changed. There remains the question if China?s new Prime Minster, Hu Jintao, wants to risk US-Chinese relationships. Taken the low profile of the country during the war in Iraq into account, it can probably be denied.

Another candidate for the development of Azadegan is Gazprom, the Russian gas monopoly, which was a partner of Total and Petronas in a $2 billion project in Phase 2 and 3 of the south Pars gas development. Gazprom is not the only Russian company, active in Iran. Tatneft hopes soon to sign a contract for the exploration of the Morgan field which is expected to hold 700 million bbl of reserves. The exploration will require around $100 million.

Today, Russia is probably the closest ally of Iran. It is the main source of Iranian arm supplies and the two countries have become closer, agreeing on several geopolitical issues like the US influence in the Middle East or security problems in Central Asia. Russia is also responsible for the construction of a nuclear power plant in Bushehr. This commitment has come in for fierce international criticism although Iran claims that the nuclear power plant will be only used in the civil sector and that the country would not pursue a nuclear arms programme. Despite the criticism, Russia will continue the project as long as Teheran will strictly obey the Nuclear Nonproliferation Treaty, which both nations signed. However, there are also warnings in Russia that Iran might be tempted to interfere in Russian business in the Caucasus, especially in Chechnya. The two countries have definitely competing interests and with Iran?s nuclear advances, their strategic alliance might fall apart in the future and become a threat for the Russian security.

In Iran, US interference is seen as an attempt to minimize the growth of the domestic economy. The country?s economy relies heavily on oil export revenues which contribute around 80 percent of the export earnings and 40 percent to 50 percent of the government budget. Despite high oil revenues, US sanctions hampered the economy and Iran is facing budgetary pressures, a rapidly growing, young population with limited job prospects and high levels of unemployment. The country is also burdened with a high portion of short term debts, expensive state subsidies, a high level of poverty and inefficient state monopolies.

Iran's complex political system combines elements of a modern Islamic theocracy with a slight approach of democracy. The whole system operates under a Supreme Leader who is, in theory, appointed by an elected body but is in practice answerable to no-one. Today, the ruling elite is confronted with the already mentioned domestic and international issues. But its main challenge will be a legitimacy problem. Even an autocratic regime needs a certain portion of public agreement to accomplish its agenda. It seems as this is still given in Iran. However, the Mullahs and their power have been heavily challenged by students and other liberal opponents, asking for more rights and political freedom. However, the US proclaimed revolution has not yet broken out. The Iranian opposition consists until now only of President Khatami and his supporters, some reform-minded legislators as well as students and intellectuals. Any further attempt by the US to interfere in domestic Iranian politics can only help conservative mullahs who do not want any change in the actual systems. A lot of Iranian people, although critical against their political system, would not accept American interference at all.

Today, it can hardly be determined where Iran is leading to. It seems however clear, that countries that cultivate an open approach to Iran like Russia and China do more to foster change there. More and more, citizens are not satisfied with the Iranian revolution anymore and start to confront their theocratic leaders with the request for more personal freedom and democracy. But as long as the proponents of more rights can be brand marked as American supporters, their change of succeeding is low as the ruling elite still holds all means of power in its hands. However, the US has the unique change to build a progressive pluralistic state in Iraq. Like in Iran, the majority of the Iraqi population is Shiites. Iraq could become a positive example in the Middle East which would have an enormous influence on Iran. More people than the today?s small opposition could be encouraged to stand up against the regime in their country, which could bring the required pressure for change.


Author: Andreas Wild