Big Powers' Hostility With Iran And : Thirst For Nuclear Fuel Market
By Rahil Yasin & Rudo de Ruijter
15 August,
2008
Countercurrents.org
LAHORE: The US, Israel and other Big Powers, all possessors of nuclear warheads, accuse Iran of pursuing a clandestine nuclear programme. They have threatened to take military action against Iran if it does not halt uranium enrichment. But the chances of a US or Israeli attack on Iran are off the beaten track because the risks to the world economy far outweigh potential benefits of such action.
An attack would likely leave Iran angry, more nationalistic, fed up with international inspectors and nonproliferation treaties, and more determined than ever to obtain nuclear weapons.
Big Powers suggest that successful testing of a nuclear device by Iran would spur chaotic nuclear proliferation. They go on to mention the Saudis, Turks, Egyptians, and Algerians. Surely Israel is viewed an even greater threat and more fundamental adversary by these countries than Iran. Yet Israel has had the bomb for decades! Why is it that Iranian success would prompt these countries to develop weapons when Israel's long-standing possession of nuclear arms has not? The premise suffers from an additional weakness -- it assumes that Iran will successfully develop a nuclear device some time in the near future. Since when did Iran become such a scientific powerhouse? What is known of the Iranian nuclear programme suggests that they are years away from being able to obtain fissile materials in sufficient quantities -- and there are very significant technical hurdles to be leapt in terms of the construction of a weapon, even when enough plutonium is on hand. Despite innuendo, I'm not aware of any credible report of an Iranian program to build nuclear weapons. Big powers' claim ought to recognize the high level of uncertainty regarding successful nuclear weapons development by Iran.
But the factual reason is different. Big powers are taking possession of the global nuclear fuel market. So for, new IAEA regulations should keep newcomers away. The US, UK, France, Germany, Russia, China and Japan have become the world's nuclear filling stations. Under the auspices of the IAEA, these suppliers would be looking for dictating the rules, the prices and the currencies they want to get paid in. Iran has become the pretext and test case for their plans.
American political analyst George Friedman says an attack on Iranian nuclear facilities would be 'cataclysmic to the global economy'.
Iran has threatened to blockade the Strait of Hormuz, through which a quarter of the world's crude is exported, if its nuclear facilities are targeted. It pumped about 3.85 million barrels of oil a day in June, according to data compiled by Bloomberg.
Crude oil prices may subsequently rise to 'more than $300 a barrel', which will be 'cataclysmic to the global economy and stock markets' even over a short period.
In latest developments, the world's fourth-largest oil exporter Iran plans to boost shipments to fast-growing energy consumers China and India and may reduce the flow to other buyers which would also hurt American interests in the region.
State-run companies of Asian economies keen to secure future energy supplies are less susceptible to US pressure to stay out of the Islamic Republic and are taking a bigger role in its energy sector. China and India are growing economies. It is obvious to everybody they need more energy.
Iran is opening offices in Bombay and Beijing to focus on deals to sell more crude. If Iran increases volumes to them it will reduce quantities to some others and have less for spot sales.
Rising oil consumption from China and India has offset falling demand in top energy consumer the United States.
Iran ships about 450,000 barrels per day (bpd) of its 2.5 million bpd crude exports to China and about 380,000 bpd to India.
NIOC aims to seal a deal to boost crude sales to Indian refiner Reliance in September. Reliance will run the crude at the giant new 580,000 barrels per day (bpd) Jamnagar refinery, scheduled to start operations later this year.
NIOC and Reliance already have in place a deal exchanging crude exports for gasoline. The exchange saves both companies from having to open letters of credits with banks to guarantee shipments.
Reliance restarted fuel exports to Iran in July after halting shipment last year when French banks Calyon and BNP Paribas stopped offering credit on the deals in response to western political pressure.
Iran is importing fuel oil from Turkmenistan. Iran has halted its own fuel oil exports to help it cope with a drought, which in turn has contributed to higher fuel oil prices on the Asian market. Tehran has also increased gas oil imports for power generation.
The water shortage has knocked out most of the country's 7,000 megawatts of hydroelectic power generation capacity, meaning Iran has been burning twice as much fuel oil for power generation as a year ago. So for, Iran desperately needed nuclear energy to meet its domestic energy requirements.
Asia can provide the finance Iran needs to develop its oil and gas reserves, the world's second largest, limiting the impact of US sanctions and pressure, a top Iranian oil official said.
"The financial world is not just in the western hemisphere," Hojjatollah Ghanimifard, vice president for investment affairs at Iran's state oil company NIOC, told Reuters in an interview.
"Iran's call on international financing for oil and gas can easily be moved to the east from the west."
A study had shown that Iran's Caspian region contains an estimated 21 billion barrels of oil and gas equivalent, he said.
Tehran is a signatory to the Non-Proliferation Treaty and its enrichment activities are aimed at electricity generation and further peaceful applications of nuclear technology. This follows a UN nuclear watchdog declaration that Iranian enrichment does not exceed 3 percent, which is consistent with electricity generation.
The NPT is a treaty not only to stop proliferation of nuclear arms, but also to help develop civil nuclear energy. In the treaty, the nuclear-weapon states (US, Russia, China, France and England) promised nuclear disarmament. (So far, they have not kept their promises.) The other members had to sign agreements with the International Atomic Energy Agency (IAEA), NPT's watchdog, for the implementation of controls. IAEA's agreement with Iran entered into force on May 15, 1974. Iran's nuclear energy programme started in the rule of Shah Reza with the help of the US and then France, Australia, West Germany, Denmark, Argentina, India and UK, provided help in different sectors to develop nuclear energy. Discussions took place with Pakistan and Turkey for regional nuclear cooperation. The Iranian budget for the atomic energy rose from $ 30 million in 1975 to $ 1 billion the following year and still more reactors were ordered from the US. By the end of 1978, with not a single reactor completed, the Shah ran out of money. Meanwhile, popular opposition against the Shah's blood shedding oppression rose to a climax.
By 1977, all opposition movements finally united and in January 1979, the Shah fled the country. Khomeini returned to Iran in triumph and on April 1, 1979, the Islamic Republic of Iran was established by referendum.
The first time accusations against Iran became visible when the International Atomic Energy Agency on June 16, 2003 announced that Iran had not reported an importation of uranium in 1991 and its subsequent stocking and processing. That is true. But from a confidential IAEA document of June 6, 2003, we learn it contained just 130 gram of uranium. According to article 37 of the official agreement between the IAEA and Iran, in force since May 15, 1974, nuclear materials containing less than 1 kilo of uranium are exempted from the IAEA safeguards. The IAEA accusations made the world believe that Iran had violated the rules. Iraq's 'weapons of mass destruction' like propaganda provided the world an opportunity to stop Iran from pursuing its civilian nuclear energy needs which is the exclusive right of every sovereign nation to acquire for fulfilling its energy needs.
So, if the so-called proofs against Iran appear to be fabricated, what is the real issue? I think the general idea is clear to all. Iraq and Iran have 10.5 and 10 percent of world's oil reserves respectively. The US remains world's largest oil consumer with 25 percent of world's oil consumption. Today it has less than 2 percent of world's oil reserves. Its dependency on foreign oil is rapidly increasing and, according to Bush, 60 percent today.
With its excessive energy consumption the US thinks, it is necessary to have pro-US governments in Iraq, Iran and, (for the UNOCAL pipeline project), also in Afghanistan. During the Cold War Saddam Hussein in Iraq and Shah Reza in Iran were useful US' allies, but those days are over. Thanks to Bush we now have wars in Afghanistan and Iraq. Iran is located in between. Considering the reputation, the US has built up in Iran a spontaneous uprising of a pro-US government is not likely to happen soon.
Another thing that explains Bush aggressive stance against Iran is its part in the weakening dollar. A new Iranian oil bourse, if successful, may even trip up US' hegemony.
At a glance, this is how it works. The world's oil and gas is traded in US-dollars. Since 1971, the US has enjoyed the advantage of being the petrodollar supplier to the world. Supplying dollars to foreign countries means the US can print money and purchase goods, services and investments with it. Since the foreigners need these dollars to buy oil, and keep them also in use in the international trade outside the US, the US has never had to deliver anything in return. Merely supplying money means free shopping. This is how US foreign debt grew to 3,200,000,000,000 dollars today. If at some point, the world starts selling the trillions of dollars they currently hold, the exchange markets would be flooded with dollars, and, as a result, the value of the dollar would drop to next to nothing. It would trigger a financial crisis, but if the dollar becomes worth next to nothing, it means the foreign debt would vanish. So it is very advantageous to deliver currencies that are permanently needed and wanted abroad. And that is the case as long as the world needs dollars to buy oil and gas.
But with today's sky-rocketing debt, the dollar has become vulnerable. When Saddam Hussein switched to the euro on November 6, 2000, the exchange markets were temporarily flooded with dollars. With Iran considering a similar switch since 1999 and maybe more OPEC countries to follow, speculations and decreasing trust had set in motion a long descent of the dollar, which could lead to its collapse. By the end of 2002, the dollar rate had fallen 18 percent. This probably explains why the US could not wait and, on March 20, 2003, it even overruled the UN Security Council and invaded Iraq. The Iraqi oil trade has been switched back to dollars since June 6, 2003. In spring of 2003, Iran also switched to the euro, and during the two years that followed the dollar rate lost another 12 percent.
The US free shopping advantage only works for as long as foreign countries need additional dollars. So, each time oil prices rise on the US controlled International Petroleum Exchange (IPE) of London and New York Mercantile Exchange (NYMEX), more dollars are needed in the world. As 85 percent of the oil trade takes place outside the US, for each extra dollar needed inside the US, seven dollars are needed outside which result in free shopping.
To increase the foreign dollar demand still further, the US Federal Reserve sells Treasury Bonds to foreigners, which reduces the amount of dollars abroad. This increases foreign demand for dollars and raises the exchange rate. To stop the exchange rate from rising continually, new dollars have to be "delivered" to the foreigners, resulting again in free shopping. If the US wants to lower the dollar rate it can just import more. In fact, as long as world demand for dollars keeps growing, the US can decide itself about the rate of their currency and enjoy free shopping.
Iran wants to establish an independent non-dollar oil bourse. Assuming it succeeds in creating enough trade to establish a recognized world oil price, and assuming they keep the price stable, oil prices on IPE and NYMEX cannot rise freely anymore. The credit carrousel may stop. The Iranian Oil Bourse will not only reduce the power of IPE and NYMEX, it will also have its influence on the exchange rate between dollars and euros. If oil gets cheaper in euros, there will be a rush on euros. And vice versa. The US and EU both see this bourse as a risk.
The oft-repeated but mistaken belief, that one could fabricate unnoticed highly enriched uranium in a civil nuclear plant, now serves Bush' contention that enrichment should remain in the hands of world's nuclear-weapon states.
The new world order comes in the form of new safeguards within the IAEA control system. Considering the spirit of the Additional Protocol we should not count on equal rights or fair relations.
Within the Non-Proliferation Treaty countries, only the nuclear-weapon states, plus Germany, the Netherlands and Japan have enrichment facilities today. The rest of the NPT countries would see their rights to enrich uranium taken away. In exchange, they will get the solemn promises of the nuclear-weapon states, that the latter will always deliver the nuclear fuel. Promises? Weren't these the countries that promised in 1968 to strive for their nuclear disarmament? As we know, they did not keep their word up to now. Worse, France has even developed a new generation of nuclear weapons to make the step to nuclear war easier and progressive. France and the US are still using their nuclear arsenal to threaten the world. Non-nuclear-weapon states should now give away more rights and become dependent of IAEA's club of nuclear fuel suppliers?
To seduce non-nuclear-weapon states, this new plan promises lower electricity prices. Today, on a global scale, enrichment facilities would have about twice the capacity the world needs. By preventing the construction of new enrichment facilities, a better use could be made of the existing capacities. This would enable lower prices for enriched uranium, and thus of electricity. Should we believe these words? The enrichment industries are not driven by the concern to lower world's electricity prices. In spite of the world's over-capacity the Europeans are considerably expanding their production in the UK, Netherlands and Germany. They strive for more market share and more profit! And if by new IAEA regulations no new competitors are allowed on the market, this can only result in excessive pricing of enriched uranium, and thus of electricity.
The new plans foresee a highly regulated and closely monitored fuel supply distribution system. The IAEA would become the intermediate between fuel producing and fuel consuming members. At first glance this may look like a trustworthy construction, since the IAEA is a UN body. However, the IAEA is also the policeman in the system. I do not think it is wise to let policemen trade with the parties they should inspect. Besides, the UN is not some sort of democratic and integer government that would be able to guarantee their policemen's impartiality.
The plans for the distribution system recommend minimal national stocks and joint regional buffers in different host-countries. Strange, isn't it? The purpose of minimal stocks inside the countries and regional stocks elsewhere is hardly to defend as a security issue. Even with enormous stocks of 3.5 percent enriched uranium you cannot produce any nuclear weapon. Why would the IAEA want countries to dispose of only small quantities of fuel at a time? I fear there is only one plausible answer: to keep the non-nuclear-weapon states in a firm grip. That is a lot of power for our NPT-watchdog. This power goes far beyond what is needed for their inspections. Even far beyond the needs of a safe nuclear fuel distribution system. This is pure power to overrule nations' sovereignty. If a nation does anything that the watchdog or its masters do not want, the fuel tap can simply be closed to obtain its immediate submission. It smells like a dictatorship on world-level. Of course, the fuel supplying countries will never be affected. They produce their own fuel.
In theory the master of the IAEA is the United Nations Organization. But does it work that way in reality? The IAEA has a difficult role, because it cannot ignore tensions and conflicts of interest between NPT members. The IAEA's independence from parties' national interests is constantly under strain. Its limited budget forces the IAEA to make choices, which are influenced by occurring conflicts. During the embargo against Iraq, we witnessed an IAEA driven crazy by Bush, who demanded each time more and more thorough controls. The dog was sent out over and over to make sure Iraq could be safely invaded. Although the IAEA has the obligation to keep all sensitive information from their investigations undisclosed, the US military constantly received sensitive information, with which they prepared the invasion in 2003. (And finally, to invade Iraq, Bush simply overruled the UN's Security Council…)
Today, we see the same US' influences in the IAEA's investigations in Iran. Bush shouts and the dog runs to search for the stick. The rules for the new world order are presented as "an idea of ElBaradei and a proposal of Bush". I presume that both plans, the IAEA's Multi-National Approach (NMA) and Bush' Global Nuclear Energy Partnership (GNEP), will merge into a final version dictated by the US.
Of course, getting a firm grip on all non-nuclear-weapon states as soon as they get addicted to nuclear energy is a major strategic coup. But there are far more advantages for the nuclear fuel suppliers. United under the umbrella of the IAEA, the market will be completely regulated. As all of them cooperate in the same organizations and all of them will be interested in the highest possible earnings, together they will set world's nuclear fuel price. Just like today's world's oil prices are decided on the market places of IPE and NYMEX, nuclear fuel prices will be decided by the happy few.
Now comes the tricky part. Nuclear fuel has to be paid for. The question is: in what currency (or currencies) will the customers have to pay? These currencies will become the most needed and wanted currencies in the world. You can compare it to today's US-dollar.
Apparently these currencies have not been decided yet. But, if each fuel supplier asks to be paid in its own currency, the world would widely accept Japanese yens, Chinese yuan, Russian rubles, euros, British pounds and US-dollars. There will probably be some preferential order due to each supplier's capacity to deliver nuclear fuel. Each of these countries will know the advantages of the supply of their currencies to the rest of the world. Of course, in the long run, each of them will also experience the negative effects on their economies and, after decades, let their currency collapse to get rid of the built up debt. In short, this is what can happen with multiple world currencies. However, the fact that the plans mention, that the IAEA should become the intermediary between suppliers and customers, makes it reasonable to suppose that the IAEA will decide in which currency the customers will have to pay. Bush surely hopes that this will be the dollar. When nuclear fuel has to be paid exclusively in dollars, demand for US-dollars and therewith the US hegemony will be assured for many decades to come.
With the project for a new world order prepared discretely in the background, we now have an anti-Iranian alliance of the US and E3. They smell the opportunity for a coup to seize world's nuclear fuel market. To succeed, they would just need some legal sauce on the prohibition of uranium enrichment by non-nuclear-weapon states, with Iran as example. And a UN Security Council resolution would be enough, if it legalizes IAEA's stand that it can forbid countries to enrich uranium.
Of course, they would make it impossible for Iran to stay within the Non-Proliferation Treaty then. To succeed their coup, they will have to take care, that Iran does not leave the organization before a resolution is successfully voted. For if so, there would not be any ground for a resolution anymore. Countries outside the Non-Proliferation treaty, like Israel, India, Pakistan, Cuba and Brazil are free to enrich uranium and do what they want.
The question is: will the US and E3 succeed in seducing Russia and China?
In the
event, that such a coup of the nuclear-weapon states would succeed,
it would probably put the Non-Proliferation Treaty and the UNO under
enormous strain. These organizations might loose all credibility and
see many non-nuclear-weapon states leave. The result may be opposite
to what these organizations were designed for.
Rahil Yasin is a working journalist, freelance columnist, and researcher based in Lahore, Pakistan, He can be reached at [email protected].
Rudo de Ruijter is an independent researcher based in Netherlands, He can be reached at [email protected].
