The
Bush Administration’s
Economic War On Iran
By Peter Symonds
13 February, 2007
World
Socialist Web
Amid
the continuing US military build up in the Persian Gulf, the Bush administration
is already conducting an economic war against Iran aimed at bringing
the country to its knees. The most overt element of this campaign is
the attempt by the Treasury Department and other US agencies to force
governments, major banks, oil corporations and other businesses in Europe
and Asia to cut off investment, loans and financial arrangements with
Tehran.
US demands go far beyond
the limited sanctions imposed by the UN Security Council in December
over Iran’s nuclear programs. They hit directly at the economic
ties with Iran established by Europe and Asia over the past decade or
so. The Bush administration’s campaign makes clear that its chief
objective in the confrontation with Tehran is to reassert US dominance
over the energy-rich country at the expense of its rivals. American
claims that Iran is making nuclear weapons and “meddling”
in US-occupied Iraq are simply convenient pretexts.
Washington has already indicated
it will push for tougher sanctions when Iran is again brought before
the UN Security Council on February 21. Meanwhile, American officials
have exploited the looming threat of war as well as existing US legislation,
which provides for penalties against US or foreign companies investing
in Iranian energy reserves, to strong-arm European banks and firms into
cutting ties.
In late January, the US made
a concentrated effort to block Iranian attempts to attract desperately
needed capital to upgrade and extend its oil and gas infrastructure.
One European executive told the Washington Post that a US State Department
official had bluntly warned that Iran was “hot and going to get
hotter”. Another executive said: “The [US] administration
is putting the full-court press on foreign companies and is going all
out to impress upon them that it would be a mistake to do anything with
[Iran].”
Not surprisingly, Washington’s
bullying and threats have provoked resentment in government and business
circles in Europe. A European oil consultant told Associated Press:
“All the oil companies will tell you that they are having regular
visits from the US embassies in their countries... Nobody in Europe
is going to give up the opportunity of doing business with Iran just
for the sake of pleasing the Americans.”
The targetting of oil companies
was aimed at undermining a meeting in early February in Vienna organised
by National Iranian Oil Co (NIOC) to offer new oil blocks to foreign
investors. Despite American threats, more than 200 representatives from
over 50 international oil companies attended. Just a week earlier, the
Anglo-Dutch energy giant Shell ignored US pressure and signed a multi-billion
deal with Iran to develop a Liquefied Natural Gas (LNG) project based
on the South Pars field.
The Bush administration has
no intention of letting up. Speaking on February 7 in Munich, the US
ambassador to the International Atomic Energy Agency (IAEA), Gregory
Shulte, declared: “Let me be frank: From the US perspective, the
Security Council took too long and produced too little. European countries
can do more—and should do more.”
Shulte specifically targetted
the provision of government loans to facilitate trade, asking: “Why,
for example, are European countries using export credits to subsidise
exports to Iran? Why, for example, are European governments not taking
more measures to discourage investment and financial transactions?”
According to the US, European governments provided Iran with $18 billion
in loan guarantees in 2005. These included Italy $6.2 billion; Germany
$5.4 billion; France $1.4 billion; and Spain and Austria $1 billion
each. The US is also pressuring major international banks to cut off
ties with Iran.
The provision of government-sponsored
trade credit is a widespread international practice. It is neither illegal
nor does it contravene the provisions of the UN sanctions on Iran. Washington’s
determination to choke off economic relations with Tehran is aimed as
much at its rivals as against Iran. Over the past decade, the European
Union (EU) has become Iran’s largest trading partner, selling
machinery, industrial equipment and other commodities in return for
energy supplies. The US, on the other hand, has almost no trade with
Iran, having maintained a virtual economic blockade on the country since
the ousting of close American ally, Shah Reza Pahlavi, in 1979.
European governments and
corporations are not the only targets. China faces the prospect of US
retaliation over its trade deals with Iran. Iran and China’s biggest
offshore oil producer, CNOOC, announced in December a preliminary deal
worth an estimated $16 billion to develop Iran’s offshore North
Pars gas field. The agreement is already being investigated by a US
congressional committee to determine whether economic penalties can
be brought against CNOOC under the recently renewed Iran Sanctions Act.
India has been threatened
with the same Act, which provides for US sanctions against any foreign
company that invests more than $40 million in Iran’s energy sector.
The US ambassador to India, David Mulford, pointedly announced that
he had informed India’s External Affairs Minister Pranab Mukherjee
of the legislation prior to the minister’s trip to Iran last week.
India is involved in a major $7 billion gas pipeline project from Iran
through Pakistan, a project that the US has opposed.
The Bush administration has
been pressuring Russia to halt work on Iran’s nuclear power plant
at Bushehr, which is virtually complete. After the $1 billion contract
is finished, Russia has the prospect of further large construction deals
as Tehran plans to build additional power reactors. Washington has also
sharply criticised Russia’s sale of arms to Iran, including its
recent purchase of advanced anti-aircraft missile systems.
The oil price weapon
A comment last month in the
London-based Times entitled, “New US strategy on Iran emerges
from Davos,” characterised the Bush administration’s economic
offensive as “an economic pincer movement consisting of financial
diplomacy on one side and energy policy on the other”.
The first half of the pincer
is aimed at cutting Iran off from international finance and trade. Iran
is the world’s fourth largest producer of oil, but desperately
requires investment to upgrade and expand its infrastructure. According
to the article, the second half involves deliberately depressing world
oil prices in order to undermine Iran’s income from oil exports.
The Bush administration’s chief ally in the attempt to lower oil
prices is Saudi Arabia, which regards Iran as its main regional rival
and, as the world’s largest producer, is able to expand production
to rein in prices.
The Times article explained:
“Iran’s economy depends entirely on oil sales, which account
for 90 percent of exports and a roughly equal share of the government’s
budget. Since last July, a barrel of oil has fallen from $78 to just
over $50, reducing the government’s revenues by one third. If
the oil price fell into the $35 to $40 range, Iran would shift into
deficit, and with access to foreign borrowing cut off by UN sanctions,
the government’s capacity to continue financing foreign proxies
would quickly run out. Iran has reacted to this threat by calling on
OPEC to stabilise prices but, in practice, only one country has the
clout to do this: Saudi Arabia.
“Earlier this month,
in a highly significant statement, Ali al-Naimi, the Saudi Oil Minister,
publicly opposed Iranian calls for production cuts to halt the decline
in prices. Mr Naimi’s pronouncement was cast as a technical matter
unconnected with politics, but it seemed to confirm private warnings
by King Abdullah that his country would try everything to thwart Iran’s
hegemony in Iraq and throughout the region, whether by military intervention
or more subtle economic means.”
Iran’s production costs
at $15-18 a barrel are far higher than Saudi Arabia’s $2-3 a barrel,
so lower world prices would hit Tehran far more than Riyadh. Saudi Arabia
has, of course, denied any political motive behind its refusal to cut
production and lift oil prices. The Times, however, is not alone in
speculating about a deliberate Saudi-US strategy to undermine the Iranian
economy.
Commenting on falling oil
prices, the New York Times noted last month that other motives, than
purely commercial ones, “seem to be at work, too, including the
Saudis’ desire to restrain Iran’s ambitions in the region.
How much influence the United States has exerted is an open question.
Vice President Dick Cheney met with King Abdullah of Saudi Arabia in
Riyadh in November, but his office would not say if oil was discussed.
The White House has been supportive of the Saudi energy policy, and
President Bush and his father are close with Prince Bandar bin Sultan,
the Saudi national security minister and former ambassador to Washington.”
A US-based Saudi security
adviser Nawaf Obaid, who, like Prince Bandar bin Sultan, advocates a
more aggressive Saudi policy to block Iranian influence, openly floated
the idea of using oil prices as an economic weapon in an article in
the Washington Post in November. “If Saudi Arabia boosted production
and cut the price of oil in half, the kingdom could still finance its
current spending. But it would be devastating to Iran, which is facing
economic difficulties even with today’s high prices,” he
explained.
The degree to which such
a plan is now in operation is unclear. What is undeniable is that the
Bush administration is waging an economic offensive against Iran in
order to undermine its economy and to weaken the government as the US
prepares for military aggression. The broader objectives of the economic
and military strategy are identical: to establish US dominance over
Iran and its energy reserves as part of its ambition for American hegemony
throughout the Middle East and Central Asia.
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