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US policy increasing iran power { March 2008 } Original Source Link: (May no longer be active)
http://thejournal.epluribusmedia.net/index.php/op-ed/36-opinion/68-americas-iran-gamble-and-how-iran-is-benefiting-from-ithttp://thejournal.epluribusmedia.net/index.php/op-ed/36-opinion/68-americas-iran-gamble-and-how-iran-is-benefiting-from-it
America's Iran Gamble and how Iran is benefiting from it
Written by Adam Lambert
Tuesday, 01 April 2008 12:58
Iran made several attempts at diplomatic outreach towards the US in 2001, 2002 and 2003, but the Bush administration made the decision to rebuff and ignore these gestures and Iran quickly became an enemy of the Bush administration. One consequence of these decisions was the election of Mahmoud Ahmadinejad as President as the more moderate leadership in Iran was pushed aside.
However, there is another side to this story, and another large consequence to the United States and its economy, as well as its energy policy (both current and future). And as a result of this gamble by the Bush administration, Iran has taken the opportunity to strengthen its position in the global economy, all while the US economy is floundering, its standing and influence in the world decreasing, and it is being shut out of a growing global alliance with respect to much of the world’s oil.
It still remains to be seen whether there will be any oil deals in Iraq. However, with the price of oil exceeding $100 per barrel as of early 2008, Saudi Arabia rebuffing President Bush’s attempts to have them increase the output of oil and the number of alliances and deals Iran has entered into, it is clear that the decision to ignore Iran in 2001, 2002 and 2003 was a poor one with far-reaching ramifications.
One example, going largely unreported, is Iran’s forging of alliances with China, Russia and Venezuela – three countries who control a vast amount of oil and wealth – as the United States has weakened its relationship with these countries over the same time period. We look to explore these alliances and discuss their impact on the United States.
The first and most obvious impact here is the Iranian oil bourse, which, according to the Asia Times:
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[w]as a discreet, almost hush-hush affair, but after almost three years of stalling and endless delays it finally happened. Now more than ever, it may also signal a geoeconomic earthquake, a potentially shattering blow to US dollar hegemony.
The Iranian oil bourse - the first oil, gas and petrochemical exchange in the Islamic Republic, and the first within the Organization of Petroleum Exporting Countries (OPEC) - was launched on Sunday by Iran’s Oil Minister Gholam-Hossein Nozari, flanked by Minister of Economy and Financial Affairs Davoud Danesh Ja’fari, the man who will head the exchange.
Officially called the Iranian International Petroleum Exchange (IIPE), it is widely known in Iran and the Persian Gulf as the Kish bourse, named after Kish island, a free zone (declared by the shah) in an ideal laissez faire setting: lots of condos and duty-free malls, no Khomeini mega-portraits and hordes of young honeymooners shopping for made-in-Europe home appliances.
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Now, it remains to be seen whether this will work or not. And there are some who think that it will most certainly not work, including energy banker Jerome a Paris. But this is one of a number of consequences that have arisen from the US approach to Iran.
Relations with China
An article in the Washington Post right after the 2004 election shines a light on a deal between China and Iran that was predicted to cost the US leverage in dealing with Iran’s nuclear program (and a weapons program that a recent National Intelligence Estimate found was discontinued in 2003). Not only was this prescient in that the Bush administration got little cooperation when it came to sanctions or negotiations with Iran, but also when it came to other important Middle East issues:
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A major new alliance is emerging between Iran and China that threatens to undermine U.S. ability to pressure Tehran on its nuclear program, support for extremist groups and refusal to back Arab-Israeli peace efforts.
The relationship has grown out of China's soaring energy needs -- crude oil imports surged nearly 40 percent in the first eight months of this year, according to state media -- and Iran's growing appetite for consumer goods for a population that has doubled since the 1979 revolution, Iranian officials and analysts say.
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The burgeoning relationship is reflected in two huge new oil and gas deals between the two countries that will deepen the relationship for at least the next 25 years, analysts here say.
Last month, the two countries signed a preliminary accord worth $70 billion to $100 billion by which China will purchase Iranian oil and gas and help develop Iran's Yadavaran oil field, near the Iraqi border. Earlier this year, China agreed to buy $20 billion in liquefied natural gas from Iran over a quarter century.
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Add this to the fact that Japan is already a major importer of oil from Iran, and you have further alliances being built by Iran – all while the United States, under the current administration, continues to weaken existing relationships with other major countries around the world.
Relations with Venezuela
It is also no secret that Iran, under Ahmadinejad, has forged alliances with Venezuela and its leader, Hugo Chavez. While there has been much discussion regarding the views that Chavez and Ahmadinejad hold towards the Bush administration (it should be noted that Chavez has entered into a number of agreements to provide lower-cost oil to low-income communities here in the United States), there hasn’t been as much discussion about an alliance being forged between the two countries in an attempt to get OPEC to trade in currency other than the US dollar:
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Hugo Chavez's visit to Mahmoud Ahmadinejad in Tehran followed a failed weekend attempt by the firebrand duo to push the Organization of Petroleum Exporting Countries away from trading in the slumping greenback.
Their proposal at an OPEC summit was overruled by other cartel members led by Saudi Arabia, a strong U.S. ally. But the cartel agreed to have OPEC finance ministers discuss the idea, and the two allies' move showed their potential for stirring up problems for the U.S.
The alliance between Chavez and Ahmadinejad has blossomed with several exchanged visits - Monday's trip was Chavez's fourth time in Tehran in two years - a string of technical agreements and a torrent of rhetoric presenting their two countries as an example of how smaller nations can stand up to the superpower.
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As the dollar weakens, oil prices have soared toward $100 a barrel. Chavez said over the weekend at the OPEC meeting in Riyadh, Saudi Arabia, that prices would more than double to $200 if the U.S. attacked Iran or Venezuela.
"The U.S. empire is coming down," Chavez told Venezuelan TV, calling the European Union's euro a better option and saying Latin American nations were also considering a common currency.
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Needless to say, if the US dollar continues its slide against other currencies as it has done over the past few years, there will be less incentive for it to be used in trading, not to mention other economic impacts.
Relations with Russia
Even before 9/11, the United States and Russia had a golden opportunity to partner and forge a strategic alliance – especially in light of the amount of oil that Russia controls within its borders. However, once Russia made its displeasure about invading Iraq clear and the United States invaded anyway, relations between the two countries began to strain. This worsened over the past few years, with former Russian President Vladimir Putin being fairly open about his feelings toward what the Bush administration’s policies were.
This squandered opportunity for the United States has resulted in a “double whammy,” hurting America by shutting us out and adding another country to the list of those who are making energy deals without us. As pointed out recently in the Asia Times, Russia and Iran – the two countries with the largest natural gas reserves – have forged a substantial deal:
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While Washington, facing European Union discomfort and frank opposition from Russia and China, remains obsessed with another round of United Nations sanctions against Iran, the facts on the ground spell an overwhelming "expansion of mutual cooperation" in the energy sector between Iran and Russia.
Iran holds the world's second-largest proven natural gas reserves, behind only Russia. Alexei Miller, chief executive of Russia's state-run gas exporter Gazprom, recently visited Tehran and met with Iran's Oil Minister, Gholam-Hossein Nozari. The result is that Gazprom will develop "two or three" blocks of the monstrous South Pars gas field in Iran and its daughter company, Gazpromneft, will also be part of a huge oil project in Iran. Gazprom has been in South Pars since 1997, alongside TotalFinaElf of France and Malaysia's Petronas.
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What does this mean for Iran and its ability to export more oil, especially when it will likely not be to countries that are named “the United States”? The short answer is, a lot:
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Reza Kasaeizadeh, the managing director of Iran's National Gas Company, now insists that Iran will supply no less than 10% of the world gas market in the next 20 years; currently it's only 1%. Iran, at the moment, exports gas only to Armenia and Turkey. When South Pars phases 17, 18 and 19 are developed by 2013, that will be a whole different ball game. South Pars - which Iran shares with Qatar - is the largest gas field in the world. Annual output of its eight blocks on the Iranian side stands at 73 billion cubic meters; in the next few years it will easily reach 200 billion cubic meters.
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Conclusion and Lessons (not) Learned
So what does this all mean for the United States? When crafting the US energy policy, the Bush administration looked to invade Iraq and use that “model” to control oil reserves throughout the Middle East. It excluded any cooperation with the world’s other oil producers, and as a result we have the following:
* Saudi Arabia is a tenuous ally at best, and has all but blackmailed the United States to stay in Iraq;
* Three of the countries with the most oil reserves (Iran, Russia, Venezuela) are all working together at the expense of the United States – sometimes because of the Bush administration aggression; and
* China, clearly the next economic superpower and the country that as of 2006 held the second largest amount of US debt has joined in this alliance – also at the expense of the US.
It is easy to see how these alliances will form a very strong bloc in the global economy over the next few years, if not longer. And it is easy to see how the United States’ approach to dealing with each of these countries contributed to the alliances – or at least being shut out of these alliances. Unfortunately for the United States (in many ways), the big winner here is Iran, and we are the big loser. It does make you wonder just what was going on when US officials secretly met with Iran banking officials.
While the “official reason” was that it was about money laundering and terrorism financing, there is no doubt a growing concern that the United States is going to be left out of a growing shift in global alliances with respect to energy and currency. That this is occurring is not surprising – but the extent of this impact on the United States and its economy can be far-reaching.
Imagine what could have been had the Bush administration taken a different approach towards Russia, Iran and China.
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