Iran as Bric-A-Brac?

[don]

By Vijay Prashad

The United States has taken steps to pressure its allies outside Europe to move away from imports of Iranian oil. US State Department spokesperson Victoria Nuland specifically mentioned India and China when saying on February 21 that her government was "having talks with countries around the world about the implications of the [sanctions/embargo] legislation with regard to our expectation that countries will increasingly wean themselves of dependence on Iranian oil."

Asked about an opinion piece from former Under Secretary of State Nicholas Burns, who wrote that India's decision to continue trade with Iran "isn't just a slap in the face for the US - it raises questions about its ability to lead", Nuland brushed Burns off as "a private citizen".

The commercial pressure on India has begun to show. The Indian Export Credit Guarantee Corporation, which underwrites the risk of Indian exporters, said that it would not halt insurance cover for exports to Iran but that it is become "very cautious" and "will try to keep our exposure at the minimum level."

With the Turkiye Halk Bankasi unable to provide third-party financial intermediation and with Dubai-based middlemen unable to easily deal with Iranian firms, about US$3 billion in Iranian arrears against Indian traders have built up since December 2010. These commercial headaches have soured India-Iran business relations.

On February 24, SWIFT, the main financial messaging service for international money transfers, threatened to cut Iran out of its network. The Society for Worldwide Interbank Financial Telecommunications (as SWIFT is less commonly known) deals with about 10,000 member banks and transmits 17 million financial messages per day. In 2010, 19 banks and 25 financial institutions in Iran transmitted 2 million messages through the SWIFT network.

Based in Brussels, SWIFT is vulnerable to the upcoming European embargo of Iran. Its corporate leaders, Yawar Shah (Citigroup) and Stephan Zimmermann (UBS), are ingrained in the Atlantic financial architecture and unwilling to stand up to the political pressure from their capitals. Avi Jorisch, a former US Treasury official told Bloomberg, "This is a financial equivalent of warfare." SWIFT has never before expelled a country in this fashion.

Commercial fears among Indian traders and political pressure from Washington has moved the Indian government to seek refuge in Saudi Arabia. Saudi Assistant Minister for Petroleum Affairs Abdul Aziz Bin Salman bin Abdulaziz came to India and met India's Minister of State for Petroleum and Natural Gas, R P N Singh, on February 23. Abdulaziz noted that Saudi would be glad to increase sales of oil to India, and that if India were to approach Saudi Aramco, its needs would be covered.

India has already begun to "wean" itself off Iran's oil - it imported 22 million tonnes in 2009-10 and 16 million tonnes in 2010-11. India's imports from Iran spiked in January because crude to China had to be redirected over a market price dispute. In the short term, India will continue to buy from Iran because its refineries are adjusted to Iranian crude. It will require a financial and technological investment to alter the refining designs. There has been as yet no public discussion about this problem.

IAEA's "serious concerns"

Pressure on India ramped up after the International Atomic Energy Agency (IAEA) team returned from Tehran and delivered its report on February 24. The report does not offer any smoking gun. Iran continues to enrich uranium, which it is technically allowed to do by the nuclear Non-Proliferation Treaty (NPT), "under Agency safeguards". The problem lies in "Iraq Territory": "Since 2002, the Agency has become increasingly concerned about the possible existence in Iran of undisclosed nuclear related activities involving military related organizations, including activities related to the development of a nuclear payload for a missile, about which the Agency has regularly received new information."

The IAEA finger points to one location: Parchin, only 20 kilometers southeast of Tehran (not an ideal place to have a nuclear weapons testing site). The IAEA caviled, "Iran did not provide access to Parchin, as requested by the Agency during its two recent visits to Tehran."

The IAEA director general's report is disingenuous in its silence on the previous visits of inspectors to Parchin, as Gareth Porter has noted. (See The cadence behind Iran's atomic block, Asia Times, February 25). The November 2011 report pointed out that an undisclosed source said that the Iranians have conducted tests at Parchin since 2000. In January and in November 2005, IAEA teams visited Parchin, took environmental samples and left satisfied that the complex did not have any relationship to nuclear weapons. After the second visit, the IAEA noted that there was "no relevant dual-use equipment or materials in the location visited". Yet, the bugbear of Parchin remains.

Until 1992, the IAEA was a modest investigatory and verification body in the UN system that made sure that nuclear materials in NPT states did not slip from energy production to the making of nuclear weapons. Article IV of the IAEA Treaty guarantees that a member state might "develop research, production and use of nuclear energy for peaceful purposes without discrimination."

At a Security Council Summit in January 1992, the Atlantic powers dragooned the IAEA into becoming its "nuclear watchdog". Non-proliferation of nuclear weapons became its main goal, and not twinned with nuclear disarmament. In other words, the IAEA operated within the confines of "nuclear apartheid", no longer challenging the nuclear weapons states to roll back their nuclear arsenals.

In addition, the IAEA investigations began to question the right of certain countries to enrich uranium for energy purposes. The US-EU position is to deny Iran its own enrichment and reprocessing infrastructure, even if it fulfills the IAEA safeguard requirements for verification. Iran's deliberations with the IAEA are part of an attempt to keep some room for it to negotiate around the maximalist demands of the Atlantic powers.

Fearmongering about military strikes might be theater for the intensification of the sanctions regime into a full-blown embargo. White House spokesperson Jay Carney's interpretation of the IAEA report is that Iran has refused "to abide by international obligations". Actually, it has refused to accept the maximum demands of the Atlantic powers.

The White House does not seem keen on military action on Iran, with the director of national intelligence telling a Congressional committee on January 31 that Iran has no designs to weaponize its nuclear program. The Obama administration has, however, used dangerous rhetoric ("all options on the table") to hornswoggle countries like India into the embargo that it wishes to set up by the summer of 2012.

Burns' statement that India does not show its "ability to lead" is a threat that the US might not endorse India's bid for a permanent seat on the UN Security Council. This is a political game, with "Iran" used as a weapon to subordinate countries like India to the economic and political domain of the US. The US is playing with fire, pushing the "Iraq option" in Iran not for regime change necessarily, but in a Cold War against the emergent states (Brazil, Turkey, India, China).

Vijay Prashad is Professor and Director of International Studies at Trinity College, Hartford, United States.

http://www.atimes.com/atimes/Global_.../NB29Dj05.html

[don]

Re: Iran as Bric-A-Brac?

seems to often be a pipeline or two in the woodpile . . .

KARACHI - Iran has agreed to provide US$250 million to help Pakistan build its end of a gas pipeline between the two countries after Pakistani institutions, including Oil and Gas Development Co Ltd (OGDCL) and National Bank of Pakistan (NBP), refused to provide funds for the project because of US sanctions imposed against Iran at the beginning of this year.

Domestic funding for the project is crucial because the US and international sanctions against Iran are likely to block Western and multilateral funding. Deeply indebted Pakistan had earlier planned to borrow $300 million from local banks and $210 million in equity from state-owned companies.

State-owned OGDCL, Pakistan's largest petroleum company, fears that financing an Iranian project could prompt the withdrawal of foreign shareholders, while NBP is concerned that involvement would lead to closure of its foreign branches due to US sanctions.

The United States has warned Islamabad that the gas pipeline project could violate US restrictions on major financial deals with Tehran, imposed as part of efforts to have Iran abandon its nuclear program, which the US says will lead to nuclear weapons.

Under a sovereign-guarantee agreement related to the Iran pipeline project, Pakistan is bound to start gas flows in 2014 or face a penalty the equivalent of $8 million per day.

Russia has shown interest in financing the IP project if Pakistan were to award a $1.2 billion pipeline contract to its energy giant, Gazprom, without going into a bidding process.

Another possibility is to approach China National Petroleum Corp for financing of the project.

Asim Hussain, Special Assistant to the Prime Minister on Petroleum and Natural Resources, on February 28 told the media in Islamabad that Iran had offered to provide $250 million financing for laying the pipeline infrastructure, against $500 million asked for by Islamabad.

Islamabad and Tehran are firmly committed to implementing the project despite US opposition. Under a $7.6 billion deal the two countries signed in June 2010, Iran is to export 21.5 million cubic meters per day of natural gas to Pakistan by the end of 2014.

Last year, Pakistan awarded a $55 million consultancy services contract for IP pipeline to German firm ILF Engineering Services, which is working in collaboration with the National Engineering Services of Pakistan.

The Gazprom financing proposal came during a four-day visit to Moscow by Foreign Minister Hina Rabbani Khar to Russia last month.

"If Pakistan accepts the demand of Russia and awards the contract to Gazprom, the largest explorer of natural gas in the world, Moscow will also provide financing for the project," The Express Tribune reported a Pakistani official as saying. "However, Pakistan has not shown any willingness to grant the contract without inviting bids from competing parties, which will violate its Public Procurement Regulatory Authority rules."

In 2010, the country sought Chinese investment by offering an engineering and procurement deal for the construction of the pipeline project to China, the major buyer of Iran’s oil and gas. China had shown interest in joining the pipeline project, originally planned to supply Iranian gas to India via Pakistan, after India's withdrawal in 2009.

China is set to be the real beneficiary of sanctions imposed on Iranian oil by the West, as it will be able get more oil from Iran at lower rates. One aspect of China joining the pipeline project would be the possibility of it being extended to China's northwestern province of Xinjiang.

The former government of president Pervez Musharraf asked China to import what would have been India's share of the pipeline gas pipeline after India pulled out. The Chinese link could be laid alongside the Karakoram Highway, which connects Pakistan's northern region of Gilgit Baltistan with western China.

Pakistan is keen to import Iranian gas to alleviate shortages of gas that are crippling industry and daily life. Its gas shortfall is forecast by the government to reach 2.22 billion cubic feet a day this year.

The US has offered Islamabad help in developing a Tukmenistan-Afghanistan-Pakistan-India (TAPI) pipeline as an alternative to the Iran project, and has offered to provide gas at cheaper rates from US energy firms. The US has also threatened Islamabad with economic sanctions if work on IP project is not stopped.

Beyond the gas pipeline, Iran has said it can provide 80,000 barrels of crude oil to Pakistan on a three-month deferred payment. A Pakistani delegation is scheduled to visit Iran next week to discuss the crude oil supplies on credit.

"The deferred payment facility should be forward-looking, otherwise the disparity between the rupee and dollar can hurt us," The Express Tribune reported Asim Hussain as saying.

Pakistan's currency is steadily weakening against the US dollar, with the rupee trading at around 90 to the dollar after losing more than 5% against the US currency since last June.

Islamabad is also considering a proposal, currently in the process of finalization, to use wheat exports to Iran to pay for oil imports. Iran agreed last week to import one million tonnes of wheat and 200,000 tonnes of sugar in exchange for export of fertilizer and iron ore to Pakistan.

Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a development analyst in Pakistan.
http://www.atimes.com/atimes/South_Asia/NC02Df03.html