Stratfor (Global Inteligence)

[AzariLoveIran]

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A very interesting analysis


Considering a U.S.-Iranian Deal

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What would the United States offer if Iran made meaningful concessions on its nuclear program, and what would Iran want in return? In other words, forgetting the nuclear part of the equation, what did Hillary Clinton mean when she said that Iran can be reintegrated into the international community, and what would Iran actually want?

Recall that in our view, nuclear weapons never have been the issue. Instead, the issue has been the development of an Iranian sphere of influence following the withdrawal of the United States from Iraq, and the pressure Iran could place on oil-producing states on the Arabian Peninsula. Iran has long felt that its natural role as leader in the Persian Gulf has been thwarted, first by the Ottomans, then the British and now by the Americans, and they have wanted to create what they regard as the natural state of things.

The United States and its allies do not want Iran to get nuclear weapons. But more than that, they do not want to see Iran as the dominant conventional force in the area able to use its influence to undermine the Saudis. With or without nuclear weapons, the United States must contain the Iranians to protect their Saudi allies. But the problem is that Iran is not contained in Syria yet, and even were it contained in Syria, it is not contained in Iraq. Iran has broken out of its containment in a decisive fashion, and its ability to exert pressure in Arabia is substantial.

Assume for the moment that Iran was willing to abandon its nuclear program. What would the United States give in return? Obviously, Clinton would like to offer an end to the sanctions. But the sanctions on Iran are simply not that onerous with the Russians and Chinese not cooperating and the United States being forced to allow the Japanese and others not to participate fully. But it goes deeper.

Iran's Historic Opportunity

This is a historic opportunity for Iran. It is the first moment in which no outside power is in a direct position to block Iran militarily or politically. Whatever the pain of sanctions, trading that moment for lifting the sanctions would not be rational. The threat of Iranian influence is the problem, and Iran would not trade that influence for an end to sanctions. So assuming the nuclear issue was to go away, what exactly is the United States prepared to offer?

The United States has assured access to oil from the Persian Gulf -- not only for itself, but also for the global industrial world -- since World War II. It does not want to face a potential interruption of oil for any reason, like the one that occurred in 1973. Certainly, as Iran expands its influence, the possibility of conflict increases, along with the possibility that the United States would intervene to protect its allies in Arabia from Iranian-sponsored subversion or even direct attack. The United States does not want to intervene in the region. It does not want an interruption of oil. It also does not want an extension of Iranian power. It is not clear that Washington can have all three.

Iran wants three things, too.

First, it wants the United States to reduce its presence in the Persian Gulf dramatically. Having seen two U.S. interventions against Iraq and one against Afghanistan, Iran is aware of U.S. power and the way American political sentiment can shift. It experienced the shift from Jimmy Carter to Ronald Reagan, so it knows how fast things can change. Tehran sees the United States in the Persian Gulf coupled with U.S. and Israeli covert operations and destabilization campaigns as an unpredictable danger to Iranian national security.

Second, the Iranians want to be recognized as the leading power in the region. This does not mean they intend to occupy any nation directly. It does mean that Iran doesn't want Saudi Arabia, for example, to pose a military threat against it.

Third, Iran wants a restructuring of oil revenue in the region. How this is formally achieved -- whether by allowing Iranian investment in Arabian oil companies (possibly financed by the host country) or some other means -- is unimportant. What does matter is that the Iranians want a bigger share of the region's vast financial resources.

The United States doesn't want a conflict with Iran. Iran doesn't want one with the United States. Neither can be sure how such a conflict would play out. The Iranians want to sell oil. The Americans want the West to be able to buy oil. The issue really comes down to whether the United States wants to guarantee the flow of oil militarily or via a political accommodation with the country that could disrupt the flow of oil -- namely, Iran. That in turn raises two questions. First, could the United States trust Iran? And second, could it live with withdrawing the American protectorate on the Arabian Peninsula, casting old allies adrift?

When we listen to the rhetoric of American and Iranian politicians, it is difficult to imagine trust between them. But when we recall the U.S. alliance with Stalin and Mao or the Islamic republic's collaboration with the Soviet Union, we find rhetoric is a very poor guide. Nations pursue their national interest, and while those interests are never eternal, they can be substantial. From a purely rhetorical point of view it is not always easy to tell which sides' politicians are more colorful. It will be difficult to sell an alliance between the Great Satan and a founding member of the Axis of Evil to the respective public of each country, but harder things have been managed.

Iran's ultimate interest is security against the United States and the ability to sell oil at a more substantial profit. (This would entail an easing of sanctions and a redefinition of how oil revenues in the region are distributed.) The United States' ultimate interest is access to oil and manageable prices that do not require American military intervention. On that basis, Iranian and American interests are not that far apart.

The Arabian Factor and a Possible Accommodation

The key point in this scenario is the future of U.S. relations with the countries of the Arabian Peninsula. Any deal between Iran and the United States affects them two ways. First, the reduction of U.S. forces in the Persian Gulf requires them to reach an accommodation with the Iranians, something difficult and potentially destabilizing for them. Second, the shift in the financial flow will hurt them and probably will not be the final deal. Over time, the Iranians will use their strengthened position in the region to continue pushing for additional concessions from them.

There is always danger in abandoning allies. Other allies might be made uncomfortable, for example. But these things have happened before. Abandoning old allies for the national interest is not something the United States invented. The idea that the United States should find money flowing to the Saudis inherently more attractive than money flowing to the Iranians is not obvious.

The main question for the United States is how Iran might be contained. The flow of money will strengthen Iran, and it might seek to extend its power beyond what is tolerable to the United States. There are potential answers. First, the United States can always return to the region. The Iranians do not see the Americans as weak, but rather as unpredictable. Challenging the United States after Iran has achieved its historic goal is not likely. Second, no matter how Iran grows, it is far behind Turkey by every measure. Turkey is not ready to play an active role balancing Iran now, but in the time it takes Iran to consolidate its position, Turkey will be a force that will balance and eventually contain Iran. In the end, a deal will come down to one that profits both sides and clearly defines the limits of Iranian power -- limits that it is in Iran's interest to respect given that it is profiting mightily from the deal.

Geopolitics leads in one direction. Ideology leads in another direction. The ability to trust one another is yet a third. At the same time, the Iranians cannot be sure of what the United States is prepared to do. The Americans do not want to go to war with Iran. Both want oil flowing, and neither cares about nuclear weapons as much as they pretend. Finally, no one else really matters in this deal. The Israelis are not as hardline on Iran as they appear, nor will the United States listen to Israel on a matter fundamental to the global economy. In the end, absent nuclear weapons, Israel does not have that much of a problem with Iran.

It would not surprise me to find out that the United States offered direct talks, nor to discover that Clinton's comments could not be extended to a more extensive accommodation. Nor do I think that Iran would miss a chance for an historic transformation of its strategic and financial position in favor of ideology. They are much too cynical for that. The great losers would be the Saudis, but even they could come around to a deal that, while less satisfactory than they have now, is still quite satisfactory.

There are many blocks in the way of such a deal, from ideology to distrust to domestic politics. But given the knot that is being tied in the region, rumors that negotiations are being floated come as no surprise. Syria might not go the way Iran wants, and Iraq is certainly not going the way the United States wants. Marriages have been built on less.

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Well folks .. here you have it


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[AzariLoveIran]

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Iran's Stake in Iraq's Oil

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With much of this oil and infrastructure development taking place in Iraq's Shiite-concentrated south, the biggest external beneficiary of Iraq's increased oil output would be Iran. Through a web of alliances including Iraqi politicians, unions, oil syndicates and militias, Iran is already well positioned to extract oil revenues from southern Iraq via informal channels. This allows Iran to draw from a large stash of resources to maintain its regional influence while insulating itself against an intensifying sanctions campaign targeting Iranian oil exports.

Analysis

Over the past couple of years, oil production in Iraq's Shiite-majority southern region has been steadily rising thanks to the Rumaila, West Qurna Stage 1 and Zubayr supergiant oil fields that were auctioned off to foreign companies in 2009. Sitting on 115 billion barrels of proven oil reserves, more than 80 percent of which is concentrated in the south, Iraq has the potential to rival Saudi Arabia's production rate of roughly 10 million bpd within the decade.

Iran is especially interested in the prospect of increased oil production in southern Iraq. Tehran has built a complex oil smuggling network that allows it to bring in significant revenues from southern Iraq's oil production. These funds enable Iran to maintain its influence in the region while preparing to defend itself against more stringent sanctions against its oil exports.
Southern Iraq's Oil Expansion Plans

Most of Iraq's oil lies in large and shallow oil fields very close to the coast on transit lines that do not cross population centers. This makes the oil relatively easy and inexpensive to extract and thus highly profitable. But years of sanctions, war and insurgency have dilapidated the country's energy infrastructure. According to oil-pricing agency Platts, Iraqi oil production rose to an average 2.653 million barrels per day (bdp) in 2011, a 12 percent increase from 2010's average of 2.364 million bpd. Iraqi Oil Ministry data indicates that the country has a production capacity of around 2.9 million bpd, with ongoing efforts to meet a production target of 3.4 million bpd by year's end. The problem is that Iraq has not completed the critical upgrades to its export and storage infrastructure necessary to cope with a significant rise in production. Southern Iraq's oil production is thus largely limited to what it can export, which is roughly 1.89 million bpd.

Plans to alleviate this bottleneck are under way, with an ambitious project to more than double the export capacity of Basra's oil terminals from about 1.89 million bpd to about 4.8 million bpd by 2014. Four single-point mooring facilities, each expected to add another 850,000-900,000 bpd in export capacity, are supposed to be completed by 2014. The project has encountered repeated delays; the Jan. 25 ceremonial inauguration of the first terminal has been delayed three times, but a member of Iraq's south export expansion team told Reuters that the terminal would be ready to receive crude vessels in February after pipeline connections and testing were completed. The second terminal should be ready within six months, while the third will be operational by the end of 2012 and the fourth by the end of 2013.
Iran's Stake in Iraq's Oil

Though it is unlikely that Iraq will be able to meet all its production targets and project deadlines, there is no doubt that it has a chance to significantly elevate its energy status in a relatively short time. Because much of this energy activity is taking place in Iraq's mostly Shiite-populated south, in close proximity to the Persian Gulf, the country most focused on Iraq's energy prospects is Iran.

When the United States completed its military withdrawal from Iraq at the end of 2011, it left the door open for Iran to consolidate its influence in an energy-rich country at the heart of the Arab world. The influence of Iran, a predominantly Shiite state itself, is most entrenched in Iraq's Shiite-majority south. Though many Shiite Iraqi politicians are opposed, Iran's geopolitical ambition is to make southern Iraq an extension of itself, thereby allowing Iran to vastly, albeit indirectly, increase its share in the global energy market. With the U.S. sanctions campaign against Iran intensifying, this is an especially critical goal for Tehran.

Iran is well-positioned to reap the benefits of increased Iraqi oil production. According to Stratfor sources, roughly 10 percent of Basra's oil production is smuggled, most of which ends up in Iran for export. The market value of the oil that is stolen each day is roughly $20 million, providing a significant source of funds from which Iran can draw to protect itself against sanctions.
The Iraq-Iran Smuggling Route

The main smuggling route from Iraq to Iran begins at the Khor al-Zubayr, oil terminal where the bulk of Iraq's southern oil converges. Smugglers will drill holes in the pipeline at the oil terminal and load containers of oil into small boats. The boats are manufactured locally in Basra and typically carry between 70 and 120 barrels of crude. From there, the boats take the crude down the Khor al-Zubayr waterway out to the Persian Gulf, where it is loaded onto tankers bound for Iran.

Significant amounts of theft also occur farther down the smuggling route near al-Faw Peninsula, where smugglers make holes in underground pipelines, using hydraulic perforation equipment to avoid fires. Much of the oil leaks into artificial lakes in the area, where tankers come and load it. From the al-Rasas isle near al-Faw Peninsula, crude can travel by boat up the Bahmanshir River (a tributary of the Karun River) to the Abadan refinery in Iran for processing and export.

Oil smuggling along the river known as the Shatt al Arab also occurs, though it is much less common due to the hazardous nature of the waterway and increased monitoring along the route. High-speed Iraqi boats are used to travel along the Shatt al Arab to Iranian territorial waters, where they unload their cargo, but the route is costly due to the number of bribes that need to be paid along the way.

Rampant smuggling has long been a characteristic of Iraqi oil production, so it makes sense that current infrastructure and business practices in southern Iraq allow ample room for oil theft. Metering systems to gauge oil flow and detect disruptions are more prevalent in the Basra and Khor al-Zubayr ports but are largely absent along the rest of the oil transit route. Many of the meters are damaged and deliberately not repaired to facilitate smuggling. Moreover, Basra oil officials involved in the illicit oil trade are known to play a role in delaying repairs to holes in pipelines to give the smugglers more time to operate.
Iran's Oil Smuggling Network in Iraq

Iran has an extensive network of politicians, oil unions and cartels, and militias that it uses to reap the benefits of Iraq's southern oil production. The multiple players and complex ideologies that make up Iraq's Shiite landscape require Iran to devote a lot of time and resources to managing the various stakeholders in Iraq's southern oil industry. This variety also allows Iran to play the different sides off one another to preserve its control over the oil smuggling network.
Political Groups

Ideally, Iran would like to see southern Iraq evolve into a single, Shiite-dominated state within an Iraqi federation that would serve as an Iranian satellite. Theoretically, such a state would allow Iran to carve out a more defined sphere of influence among the Iraqi Shia to help manage important tasks like distributing revenues from the oil smuggling network. Iran's desire for a distinct Shiite state in Iraq may explain why Iran's closes political allies, the Islamic Supreme Council of Iraq (ISCI), have been the strongest proponents in parliament of establishing a single Shiite region in the south. However, the majority of the Shiite groups in the south, such as the Dawa Party, the Sadrite movement and the al-Fadhila party, have opposed the idea. These groups work closely with the Iranians but are more nationalist and still see a need to preserve a high degree of political autonomy from Iran.

Al-Fadhila is the most entrenched in Iraq's oil smuggling business. Basra residents are even known to refer to al-Fadhila, which means "virtue" in Arabic, as the "Islamic Oil Party." The party is firmly Iraqi nationalist and has been highly resistant to Baghdad's attempts to bring more foreign energy expertise to the south for fear of seeing its regional clout undermined, but its leader, Sheikh Mohammad Yaqubi, is friendly with Iran. Al-Fadhila has a significant presence in the Southern Oil Co. and maintains a strong relationship with the trade union of workers in the Basra oil industry. The party will typically pay Southern Oil Company of Iraq employees who collaborate with it in oil theft around $5,000-$10,000 per 1,000-barrel shipment. Al-Fadhila is also the leader in southern Iraq when it comes to using oil revenues to buy the allegiance of local political groups, gangs and the Basra police force.
Militias

Iran plays a significant role in managing the various militias involved in oil smuggling in southern Iraq. In return for protecting Iran's energy interests and eliminating resistance to the Iranian-run oil smuggling networks, the militias get a significant cut of the profits. When one militia grows too powerful, Iran will typically find ways to dilute its strength by developing competing splinter groups and integrating militia members into the security apparatus and sometimes even the political process. Iran's strategy of managing Iraq is to alter the key Shiite leaders it deals with, which ensures that no one becomes strong enough to consider abandoning or turning against Iran. This dynamic is illustrated in Iran's handling of Iraqi nationalist Shiite leader Muqtada al-Sadr and his Mehdi Army, Asaib al Haq (which splintered from the Sadrites with Iranian backing) and the rise of the Hezbollah Brigades in the Iranian oil smuggling network.

Al-Sadr and his following have traditionally been vehemently nationalist and has taken care to distance itself from Iran. When Qais al-Khazali, who studied under al-Sadr's father, Grand Ayatollah Mohammed Sadiq Sadr, split from the group in 2004 to form his own faction, Iran developed a tight relationship with Khazali's group. Khazali eventually formed his own militia, Asaib al-Haq (League of the Righteous), with heavy Iranian financial and military assistance.

In 2007, al-Sadr fled to Iran in the face of threats from the U.S. military and his own Shiite rivals. Al-Sadr announced that he was deactivating the Mehdi Army in 2008 in exchange for entry into the Iraqi government. The Sadrites now hold 40 seats, a majority of the ruling Shiite coalition's seats in parliament, and control seven ministries, which al-Sadr remains under Iran's influence. Whereas at the beginning of the decade, the Sadrite movement enjoyed more autonomy in southern Iraqi affairs, the Promised Day Brigade, which evolved out of the Mehdi Army, now sits well within the Iranian sphere of influence.

While the clout of the Sadrites waned in the south and rose in the central government, Asaib Ahl al-Haq became the primary militia Iran would rely on to run its business in Basra. The militia has proved particularly effective in containing tribal resistance to Iran's operations in Basra, most of which came from Sheikh Kazim al-Unayzan, who leads the south clan council and whose following is said to exceed 3 million Shia. An illustration of Asaib Ahl al-Haq's utility to Iran was witnessed when tribal Sheikh Mohammad al-Bahadli, chief of the council of liberation and construction, formed his own militia called Asad Allah al Ghalib. This militia, according to a Stratfor source in the region, was quickly put down by Asaib Ahl al-Haq. Asaib Ahl al-Haq also has a reputation of liquidating Iran's rivals in the south, including clan leaders, officials at Basra and Umm Qasr ports, and employees of the Southern Oil Company of Iraq who refuse to cooperate in Iran's oil smuggling network.

In line with previous tactics, Iran appears ready again to diversify its militia assets and has played a key role in pressuring the Iraqi central government to welcome Khazali and Asaib Ahl al-Haq into the political process. In early January, the Iraqi government announced that Asaib Ahl al-Haq has not turned in its weapons but that it has agreed to lay them down and plans to participate in the next parliamentary elections under a new name.

With Asaib Ahl al-Haq entering the political arena, Iran has already prepped another key Shiite militant patron -- the Hezbollah Brigades -- to backfill Asaib Ahl al-Haq's role in protecting the oil smuggling business. The Hezbollah Brigades have not expressed any interest in entering the political process and have stressed the need to play a leading militant role in the south. Marginal groups that have an Islamist orientation and that have politically accommodated themselves to Iran in exchange for oil dividends include Harakat Sayyid al Shuada, Hizb Tha'r Allah al Islami, Shuhada al Mihrab, and the March 17 Party of Sheikh Abdullah al Ishmain.
Iran's Oil Syndicate

The main Iranian figure who manages the Basra oil syndicates is Gen. Qassem Suleimani, the commander of the Quds Force of the Islamic Revolutionary Guard Corps (IRGC). Suleimani plays a key role in buying patronage in Basra and the rest of the south using the revenues from stolen oil. Most of the money is deposited in branches of IRGC-owned banks in Iraq. Suleimani's network covers the tasks of arms smuggling, oil smuggling to Iran, the collection and dissemination of oil revenues, and the abduction (and sometimes assassination) of anti-Iranian figures in southern Iraq.
Tehran's Leverage over Baghdad

Iran's control over oil smuggling in Basra is institutionalized and well beyond the ability of the central government in Baghdad to control. Though Iran is in the process of consolidating Shiite influence in Iraq, it has no desire to see a strong central authority in Baghdad that could try to undermine its already well-entrenched leverage in the south. As a result, Iran has quietly but firmly resisted Iraqi Prime Minister Nouri al-Maliki's attempts to wield exclusive control over the government and his efforts to augment his military and political strength in the south. In fact, Iran's most effective way of ensuring its influence over the political authorities in Baghdad is by maintaining a strong grip over its oil smuggling operations in the south. Iran uses its energy clout in Iraq to ensure that Iraqi government authorities, including al-Maliki, get a hefty share of monthly revenues from the oil theft -- amounting to millions of dollars -- giving Baghdad less inclination to protest Iranian interference in Iraqi affairs.

Iran's significant and growing influence over Iraq's oil industry cuts to the heart of the U.S. challenge in trying to contain Iran in Iraq. When it comes to critical policy decisions on extending the U.S. troop presence in Iraq or in accepting major military assistance from the United States, Iran has ample financial might from the oil revenues it earns through smuggling to influence the minds of Iraqi decision-makers. Likewise, U.S.-led efforts to tighten sanctions and cut into Iran's bottom line fail to take into account the millions of dollars Iran is able to bring in daily through its shadowy channels throughout Basra.

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add to this 95% of Arabian Oil in Shia part of Arabia now rising up against Wahhabi Al saud

Ahmadinejat will be swimming in Oil


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[AzariLoveIran]

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With Georg Friedman

very comprehensive, accurate analysis .. I like him, no BS like David


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[AzariLoveIran]

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Interesting article by Friedman in Stratfor


Like the Spaniards, who, in the generation after Columbus' voyage, lacked a clear sense of the reality they had created, Americans have no clear sense of the world they find themselves in. This fact continues to define how the world works.


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[AzariLoveIran]

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Confronting Iran (from Zionist view)


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