by Mitchell Plitnick

We’ve all seen it in movies and television shows. A man with a gun is pointing at an innocent, making demands of the “good guys.” When our heroes do not deliver, the man shoots the innocent and tells our heroes that it was their fault. Do we buy it? Of course not.

via LobeLog

by Mitchell Plitnick

We’ve all seen it in movies and television shows. A man with a gun is pointing at an innocent, making demands of the “good guys.” When our heroes do not deliver, the man shoots the innocent and tells our heroes that it was their fault. Do we buy it? Of course not.

On or around August 6, 1945, US Air Force jets dropped copies of two leaflets on Japanese cities, including Nagasaki, according to the Harry S. Truman Library. Both included a similar message: You saw what we did to Hiroshima. If you don’t want the same thing to happen to you, overthrow your emperor. Failing that, flee your cities.

In fact, the leaflets were dropped on Nagasaki (and Hiroshima) only after the city had been hit with an atomic bomb. Previously, leaflets had been dropped on dozens of Japanese cities warning of devastating bomb attacks (these did not reference atomic bombs), and indeed those cities were devastated. But, of course, with so many cities being targeted, it would not have been possible for Japanese citizens to flee in great numbers even if their government would have permitted such mass flight.

So why drop the leaflets at all? This memo describes the purpose as psychological warfare aimed at Japan. It has been noted elsewhere that it has the ancillary benefit of making these strikes, both the carpet bombings and the atomic attacks, seem much more humane to US citizens and the rest of the world. Does all of this sound familiar?

It should, because we’ve heard much the same story coming from Israeli Prime Minister Benjamin Netanyahu from the moment the latest Israeli onslaught against the Gaza Strip began. We’ve been told ad nauseum about the great care Israel takes to avoid Palestinian casualties. They drop little bombs on rooftops just before the big bombs. They send text messages and automated phone calls. And yes, they drop leaflets.

So why, with all these extraordinary measures, are the vast majority of the dead and injured in Gaza civilians? Why have more than 100 Gazan children been killed? Why are 35-50,000 Gazans displaced, and why are all of these numbers growing and getting more disproportionate with each passing day?

Israel wants you to think that Hamas is using these civilians, the children as well, as human shields. At this point, there are only three groups of people who could possibly believe that in the face of overwhelming evidence to the contrary: 1) Those who are simply ignorant; 2) Those who will believe anything Israel says no matter what; and 3) The congenitally stupid. Sadly, it seems these groups comprise a very large part of the population in the West.

Despite that unfortunate reality, there does appear to be a strong sense that Israel is acting, at the very least, disproportionately or irresponsibly. Much, though far from all of the mainstream coverage of the fighting has focused on the devastation being experienced in Gaza. It is reminiscent of the 2008-09 onslaught, dubbed Operation Cast Lead, but in that event, the comparatively (and one must stress that word) negative coverage of Israel’s action took much longer to coalesce.

Really, it is astounding that people can continue to cling to the frankly absurd notion that “Hamas is responsible” for the civilian casualties in Gaza. I oppose almost everything Hamas stands for; they are a regressive, anti-democratic, faith-based organization with antiquated ideas about women, and with repressive ideas of government. The organization clearly did rise to prominence through acts of terrorism, and they continue to commit war crimes.

But their crimes are clearly dwarfed by Israel’s actions. Columnist Dalia Scheindlin described Gaza as “…an area that [Israel] has already imprisoned by occupation from 1967, and then through suffocating border, movement, import and export control since 2007. Its residents have been stateless since 1948.” None of that just happened; Israel did that, and security concerns cannot justify such actions, according to international law. Not to mention basic ethics.

In this case, however, loathe as I am to admit it, it is Hamas that is the one standing and seeing the innocent being held hostage, and who has to watch as Israel kills the innocent for Hamas’ refusal to surrender. One can question, as I certainly have, whether Hamas made the right choice in rejecting a ceasefire which they had good reason to see as little more than terms of a surrender in order to stop Israel before it pushed things even further, as it did this past weekend in the Gazan town of Shujaya. But that doesn’t change the fact that it was Israel holding the gun to the head of the Palestinian civilians. It is not, and has never been, the other way around.

The notion that Israel is trying to avoid civilian casualties is belied by the reality that Israel has made no secret of the fact that it targets the homes of Hamas leaders where their children, and their families live. It is belied by eyewitness accounts of Israeli actions. Even the United States has told Israel it is “not doing enough” to prevent civilian casualties in Gaza. Coming from America, that is a very damning indictment indeed to be directed at Israel in what is generally perceived here in the US as a time of war.

Finally, one has to ask the Israeli government this question: when you tell the Palestinians to run, where, in one of the most overcrowded places in the world with sealed borders, are they supposed to run?

Secretary of State John Kerry forgot he was at Fox News when, during a commercial break, he spoke on the phone to an aide and said, sarcastically about Israel’s efforts, “It’s a hell of a pinpoint operation.” Fox aired it immediately to put Kerry on the spot, and Kerry of course scrambled to cover his tracks, but his perspective was already out.

There can be little doubt that the US and our good friend in Egypt, General-President al-Sisi would love to see Netanyahu wipe out all of Hamas, but that is not possible. Meanwhile the Obama administration has to be concerned about the potential for the latest Gaza onslaught to cause the West Bank to boil over, and possibly even get intertwined with broader regional conflicts. Every civilian death raises that possibility a little higher.

But there remains a steadfast refusal to confront Israel, especially on a “security matter,” and never mind that Netanyahu willfully set this entire scenario up from the moment he heard about the deaths of the three young Israeli settlers last month. Incredibly, on the same day as his gaffe, Kerry told CNN that “Israel is under siege by” Hamas. Apparently, Hamas is sealing off Israel’s borders, ports and airspace and severely limiting most goods and almost all exports from crossing the borders. This is turning reality on its head. But it is no less than what we have come to expect from public US pronouncements.

Still, it seems like much of the global public, and even much of the mainstream media, is starting to understand that this Israeli government, much more than the ones in the past, is the one holding the gun to the heads of innocents. Perhaps the massive rise in street hooliganism so reminiscent of fascism and right-wing authoritarianism in so much of the world is attributing to this growing reality.

Whatever the cause, it cannot have escaped Israel’s notice that even the United States is having a hard time supporting Netanyahu’s story with a straight face given the blatant discrepancy between the facts as everyone sees them and the Israeli line. As with the US in 1945, the purpose of the leaflets is to sell the story, not to protect civilians. But this isn’t 1945, and people can see a lot more for themselves. In any case, Israel may have used this tactic one time too often.

Photo: Rescue crews search for survivors in Shujaya after the Israeli attack which left 72 dead in the town. Credit: Joe Catron/ Published under a Creative Commons License

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by Marsha B. Cohen

Last week marked the 68th anniversary of the WWII destruction of the Japanese cities of Hiroshima (Aug. 6) and Nagasaki (Aug. 9) — the first and only deployment of nuclear weapons in human history. Within moments of the nuclear explosions that destroyed these cities, at least 200,000 people [...]]]> via LobeLog

by Marsha B. Cohen

Last week marked the 68th anniversary of the WWII destruction of the Japanese cities of Hiroshima (Aug. 6) and Nagasaki (Aug. 9) — the first and only deployment of nuclear weapons in human history. Within moments of the nuclear explosions that destroyed these cities, at least 200,000 people lost their lives. Tens of thousands subsequently died from radiation poisoning within the next two weeks. The effects linger to this day.

Israeli Prime Minister Benjamin Netanyahu has implied that this would the be fate of Israel if Iran was allowed to obtain nuclear weapon-making capabilities, including the ability to enrich high-grade uranium. To prevent this from happening, the economy of Iran must be crippled by sanctions and the fourth largest oil reserves in the world must be barred from global markets, as the oil fields in which they are situated deteriorate. Israel — the only state in the region that actually possesses nuclear weapons and has blocked all efforts to create a Middle East Nuclear Weapon Free Zone – should thus be armed with cutting-edge American weaponry. Finally, the US must not only stand behind its sole reliable Middle East ally, which could strike Iran at will, it should ideally also lead — not merely condone — a military assault against Iranian nuclear facilities.

Netanyahu invariably frames the threat posed by Iranian nuclear capability (a term that blurs distinctions between civilian and potential military applications of nuclear technology) as “Auschwitz” rather than “Hiroshima and Nagasaki”, even though the latter might be a more apt analogy. The potential for another Auschwitz is predicated on the image of an Israel that is unable — or unwilling to — defend itself, resulting in six million Jews going “like sheep to the slaughter.” But if Israel and/or the US were to attack Iran instead of the other way around, “Hiroshima and Nagasaki” would be the analogy to apply to Iran.

A country dropping bombs on any country that has not attacked first is an act of war, as the US was quick to point out when the Japanese bombed Pearl Harbor — and this includes so-called “surgical strikes”. In a July 19 letter about US options in Syria, Gen. Martin Dempsey, the Chairman of the Joint Chiefs of Staff, reminded the Senate Armed Services Committee that “…the decision to use force is not one that any of us takes lightly. It is no less than an act of war” [emphasis added].

If the use of atomic weapons on Hiroshima and Nagasaki during wartime remains morally and militarily questionable, one might think that there would be even less justification for a military strike on Iran, with whom neither Israel nor the US is at war. Of course, there are those who disagree: the US is engaged in a war on terror, Iran has been designated by the US as the chief state sponsor of terrorism since 1984 and so on. Therefore, the US  is, or should be, at war with Iran.

“All options are on the table” is the operative mantra with regard to the US halting Iran’s acquirement of a nuclear weapon. But if bombs start dropping on Iran, what kind will they be? In fact, the 30,000 lb. Massive Ordnance Penetrators (MOPs) that could be employed against Iranian nuclear facilities are nuclear weapons, since they derive their capability of penetrating 200 feet of concrete in the earth from depleted uranium. Furthermore, some Israelis have darkly hinted that, were Israel to confront Iran alone, it would be more likely to reach into its unacknowledged nuclear armoury if that meant the difference between victory and defeat.

Given all this, comparing the damage that would be done by bombing Iran with the destruction of  Hiroshima and Nagasaki is not farfetched. It also reveals some troubling parallels. In the years prior to the Japanese bombing of Pearl Harbor in 1941, President Franklin D. Roosevelt, in response to what the US regarded as Japanese expansionism, imposed economic sanctions on Japan in 1937. Just before the US entered the war, an embargo was placed on US exports of oil to Japan, upon which Japan was utterly dependent.

In 1945, it was already clear that Japan was preparing to surrender and that the outstanding issue at hand was the status of its emperor. There was neither a military nor political need to use atomic weapons to bring an end to the war. Numerous justifications for dropping atomic bombs on Japan were invoked, but nearly all of them were challenged or discredited within a few years after the war ended. Three are particularly noteworthy today, as we continue to face the prospect of war with Iran.

Saving lives: US Secretary of War Henry Stimson justified the decision to use atomic weapons as “the least abhorrent choice” since it would not only would save the lives of up to a million American soldiers who might perish in a ground assault on Japan, it would also spare the lives of hundreds of thousands of Japanese civilians who were being killed in fire bombings. President Harry Truman also claimed that “thousands of lives would be saved” and “a quarter of a million of the flower of our young manhood was worth a couple of Japanese cities.” But as Andrew Dilks points out, “None of these statements were based on any evidence.”

Speaking in Warsaw, Poland on June 12 — two days before the Iranian election that he declared would “change nothing” with regard to Iran’s alleged quest to develop nuclear weaponry — Netanyahu used the opening of an Auschwitz memorial to make his case. “This is a regime that is building nuclear weapons with the expressed purpose to annihilate Israel’s six million Jews,” he said. “We will not allow this to happen. We will never allow another Holocaust.” About the Iranians who would perish after an Israeli attack, Netanyahu said nothing.

Justifying expenditures: The total estimated cost of the Manhattan Project, which developed the bombs dropped on Japan, was nearly $2 billion in 1945, the equivalent of slightly more than $30 billion today. Secretary of State James Byrnes pointed out to President Harry Truman, who was up for re-election in 1948, that he could expect to be berated by Republicans for spending such a large amount on weapons that were never used, according to MIT’s John Dower.

A recent report by the Congressional Research Service shows that Israel is the single largest recipient of US aid, receiving a cumulative $118 billion, most of it military aid. The Bush administration and the Israeli government had agreed to a 10-year, $30 billion military aid package in 2007, which assured Israel of funding through 2018. During his March 2013 visit to Israel, President Barack Obama, who had been criticized by the US pro-Israel lobby for being less concerned than previous American presidents about Israel’s well being and survival, pledged that the United States would continue to provide Israel with multi-year commitments of military aid subject to the approval of Congress. Not to be outdone, the otherwise tightfisted Congress not only approved the added assistance Obama had promised, it also increased it. An Iran that is not depicted as dangerous would jeopardize the generous military assistance Israel receives. What better way to demonstrate how badly needed those US taxpayer dollars are than to show them in action?

Technological research and development: One of the most puzzling questions about the decision to use nuclear weaponry against Japan is why, three days after the utter devastation wreaked on Hiroshima, a second atomic bomb was dropped on Nagasaki. It was unnecessary from a militarily perspective. Perhaps the answer exists in the fact that the Manhattan Project had produced different types of atomic bombs: the destructive power of the “Little Boy”, which fell on Hiroshima, came from uranium; the power of “Fat Man”, which exploded over Nagasaki, came from plutonium. What better way to “scientifically” compare their effectiveness at annihilation than by using both?

The award winning Israeli documentary, The Lab, which opens in the US this month, reveals that Israel has used Lebanon and Gaza as a testing ground for advances in weaponry. Jonathan Cook writes, “Attacks such as Operation Cast Lead of winter 2008-09 or last year’s Operation Pillar of Defence, the film argues, serve as little more than laboratory-style experiments to evaluate and refine the effectiveness of new military approaches, both strategies and weaponry.” Israeli military leaders have strongly hinted that in conducting air strikes against Syria, the Israeli Air Force is rehearsing for an attack on Iran, including the use of bunker-buster bombs.

The Pentagon, which reportedly has invested $500 million in developing and revamping  MOP “bunker busters”, recently spent millions building a replica of Iran’s Fordow nuclear research facility in order to demonstrate to the Israelis that Iranian nuclear facilities can be destroyed when the time is right.

Gen. Dempsey arrived in Israel on Monday to meet with Israel’s Chief of Staff Benny Gantz and Israel’s political leaders. Members of Congress from both political parties are also visiting — Democrats last week, Republicans this week — on an AIPAC-sponsored “fact-finding” mission. No doubt they will hear yet again from Israeli leaders that the world cannot allow another Auschwitz.

The world cannot allow another Hiroshima and Nagasaki either.

by Jasmin Ramsey

Press reports about medical supply shortages in Iran, some of which have described devastating consequences, have been surfacing in the last two years, while debate rages on about who’s responsible — the Iranian government or the sanctions regime. Siamak Namazi, a Dubai-based business consultant and former Public Policy [...]]]> via Lobe Log

by Jasmin Ramsey

Press reports about medical supply shortages in Iran, some of which have described devastating consequences, have been surfacing in the last two years, while debate rages on about who’s responsible — the Iranian government or the sanctions regime. Siamak Namazi, a Dubai-based business consultant and former Public Policy Fellow at the Woodrow Wilson Center for International Scholars, admits the Iranian government shares responsibility but says sanctions are the main culprit. Humanitarian trade may be exempted from the sanctions, says Namazi, but that isn’t enough when the banking valve required to carry out the transactions is being strangled. “[I]f [sanctions advocates] maintain the sanctions regime is fine as it is, then how come they try to promote substitution from China and India?” asks Namazi. The following Q&A with Namazi was conducted in Washington, DC.

Q: You recently authored a policy paper published by the Woodrow Wilson Center where you essentially blame medical shortages in Iran on Western sanctions. How did you reach this conclusion?

Siamak Namazi: We concluded that the Iranian government deserves firm criticism for mismanagement of the crisis, poor allocation of scarce foreign currency resources and failing to crack down on corrupt practices, but the main culprit are the sanctions that regulate financial transactions with Iran. So, while Tehran can and should take further steps to improve the situation, it cannot solve this problem on its own. As sanctions are tightened more and more, things are likely to get worse unless barriers to humanitarian trade are removed through narrow adjustments to the sanctions regime.

My team and I reached these conclusions after interviewing senior officers among pharmaceutical suppliers, namely European and American companies in Dubai, as well as private importers and distributors of medicine in Tehran. We also spoke to a number of international banks. None of us had any financial stake in the pharmaceutical business, whatsoever, and we all worked pro bono.

Q: What is your basis for this claim given the humanitarian exemptions to the sanctions regime that allow for the trade of food and medicine?

Siamak Namazi: The US Congress deserves kudos for passing a law making it abundantly clear that humanitarian trade in food, agricultural products, medicine and medical devices are exempted from the long list of sanctions against Iran. This law is the reason why the Western pharmaceuticals can do business in Iran. I sincerely applaud that gesture.

Unfortunately, what we see is a case of what lawyers refer to as “frustration of purpose.” Iran can in theory purchase Western medicine, but in practice it is extremely difficult to pay for the lifesaving drugs it needs. Despite the Congressional directive, a number of Executive Orders that restrict financial transactions with Iran remain in place, making it all but impossible to implement that exception.

Sanctions also limit Iran’s access to hard currency. The country’s oil sales are seriously curtailed and have effectively been turned into a virtual barter with the purchasing country, mainly China and India.

Q: Not all Iranian banks are blacklisted by the US and there is a long list of small and large international banks that could carry out humanitarian transactions. Why can’t Iran use these channels for importing the medicine it needs?

Siamak Namazi: The non-designated Iranian banks are small and lack the international infrastructure required to wire money from Tehran to most foreign bank accounts. They rely on intermediary banks to process such transactions. Unfortunately, it’s extremely difficult, if not outright impossible, for these Iranian banks to find such counterparts, even when they are trying to facilitate fully legal humanitarian trade.

In the end, Iran needs to go through many loops and plays a constant cat and mouse game, creatively trying to find a channel to pay its Western suppliers of medicine. Not only does this increase the costs of medicine for the Iranians, it also causes major delays. In the meanwhile, pharmacy shelves run empty of vital drugs and the patient suffers.

Q: Isn’t that just a reflection of the international banks being too cautious rather than shortcomings in US sanctions laws? In a recent testimony to the Senate, US Treasury Undersecretary David Cohen was clear that no special permission is required to sell humanitarian goods to Iran and foreign financial institutions can facilitate these permissible humanitarian transactions.

Siamak Namazi: What Mr. Cohen actually said is that all is fine “as long as the transaction does not involve a U.S.-designated entity,” meaning a sanctioned Iranian bank.

How, exactly, does an international financial institution guarantee that none of Iran’s main banks, all of which are blacklisted, were involved in any part of the long chain involving a foreign currency transfer from Iran? Recall that foreign currency allocation for pharmaceutical imports start with the Central Bank of Iran, which is blacklisted. Maybe the CBI wired these funds to the non-designated Iranian bank from monies it holds in say, Bank Tejarat or Bank Melli, potentially adding further layers of banned banks to the chain.

Given the severity of the risk involved — fines that have reached nearly $2 billion in recent months — international banks seek clear indemnity. They want legal clarification that basically says, “You will not be fined for clearing humanitarian trade with Iran, period.”

So far Treasury has refused to grant such a measure, though recent comments by senior officials suggest that the US government has sent out delegations reassuring the banks, without actually making any changes to the letter of the law. While this is a welcome move, and indeed one of the recommendations in the report published by the Wilson Center, it is far from sufficient.

Q: You say that Iran has a hard time finding a banking channel to pay for Western medicine. At the same time, for the first time in many years, Iran purchased $89 million in wheat from the US in 2012. Why were they able to find a banking channel to pay for wheat, but have difficulty purchasing medicine?

Siamak Namazi: My claim is supported by recent US trade statistics showing that exports of pharmaceuticals to Iran dropped by almost 50 percent, but these numbers are ultimately misleading. My understanding is that US trade data only reflects exports from an American port, directly entering an Iranian port, which is a thin slice of the overall trade. This is while most companies send their goods to Dubai, Europe or Singapore and cover the entire Middle East, including Iran, from these hubs. So, when the statistics refer to a drop of sales of medicine from around $28 million in 2011 to half that figure in 2012, the figure grossly misrepresents the scale of the problem.

Let me stress this point again: the loss of $14 million in American-made drugs does not make for a crisis. The real problem is exponentially bigger than this. We are talking about the loss of hundreds of millions of dollars worth of American and European medicine.

You must also keep in mind supplier power in trade. Wheat is a perfectly substitutable good, so Iran is bound to find one supplier that is willing to sell its wheat with extended credit terms, until it secures the hard currency and banking channel to pay for it. A vital drug is often perfectly un-substitutable; meaning that a single company — most often American or European in the case of the most advanced medicines — enjoys a 20-year patent to manufacture it. So if Iran cannot find a banking channel to reimburse the manufacturer for it, it will have to do without that medicine until it can pay.

Q: Why can’t Iran procure its medicine from China, India or Japan — the countries it’s selling oil to?

Siamak Namazi: Iran has already increased its purchase of medicine and medical equipment from all the countries you listed. However, as I stated earlier, due to the highly regulated and patented nature of the pharmaceutical business, vital drugs are often un-substitutable.

Even when there is an alternative drug made by the Chinese, Indians or Japanese, there is an additional barrier. Medicine has to be registered before its importation is permitted. Just like the US has the Food and Drug Administration, Iran, like most countries, has an equivalent body that must approve the medicine. The specific molecule must be registered after thorough testing. In Iran, this process takes an exceedingly long time and should no doubt be improved, though recently they have taken steps to expedite it by making exceptions. The Ministry of Health sometimes allows a drug that was approved for sale in another country to also be imported and sold in Iran. But this rushed process has had major consequences in terms of side-effects. There are even press reports of deaths when substandard drugs were imported.

To be honest, I don’t understand the logic of the advocates of this solution. They argue that the existing humanitarian waivers are sufficient and claim any shortage of medicine in Iran is the consequence of Tehran’s own mismanagement. I have even heard accusations that Iran is intentionally creating such shortages to create public outrage against the US. But if they maintain the sanctions regime is fine as it is, then how come they try to promote substitution from China and India? Besides denying Iranian patients their right to receive the best treatment there is, aren’t they also rejecting the American pharmaceutical companies’ right to conduct perfectly legitimate business?

Q: To be fair, Iran’s own former health minister, Marzieh Vahid Dasjerdi, also accused the government of failing to allocate the necessary resources and lost her job after doing so.

Siamak Namazi: I actually commend the former health minister for her courageous intervention and have also voiced my concern about the misallocation of hard currency in various forums.

That said, I am not in a position to know or comment on the exact nature or circumstances of her dismissal. I can only reference our direct research and findings. We found and verified ample cases where Iran had allocated hard currency for vital medicine, yet the purchase fell through because they could not find a banking channel. This includes the sale of an anti-rejection drug needed for liver transplants by an American pharmaceutical that ultimately failed. Can you imagine waiting years for a donor and when your operation time arrives, being told that you cannot have it because the drug you need is missing?

You need not take our word for it. It is very easy for the US government to verify our claims by talking to the American pharmaceuticals that do business with Iran, or even by reviewing some of OFACs own files. In fact, the US industry lobby USA*Engage recently wrote a letter refuting Undersecretary Cohen’s claims that American companies have no problems dealing with Iran. In their own words: “Despite … clear Congressional directive and long-standing policy, the U.S. Treasury implements Executive Branch unilateral banking sanctions in a manner that blocks the financial transactions necessary for humanitarian trade.”

Q: So is there a solution to all this?

Siamak Namazi: Absolutely, and I have spelled it out in my op-ed in the International Herald Tribune and also in the Wilson Center report. It simply makes no sense to say humanitarian trade is legal, but the banking channel needed to facilitate the trade is restricted. In the case of medicine, the solution is arguably simpler than other humanitarian goods. With fewer than 100 American and European companies holding patents to the most advanced drugs needed, we can craft narrow, but unambiguous exemptions to the banking restrictions, essentially allowing these companies to sell medicine to Iran without undermining the sanctions regime overall.

To address the shortage of hard currency, Iran should be allowed to convert some of its current holdings in Chinese, Indian and other banks around the world into hard currencies for the exclusive purpose of buying medical supplies. Alternatively, the US could revisit its earlier decision on the matter and allow European companies that owe billions of dollars to Iran to settle this debt by paying a pharmaceutical company on Iran’s behalf.

US policymakers are reminded that medicine is highly subsidized in Iran. Imported drugs receive hard currency allocations at a greatly subsidized rate and are again supported through government-owned insurance companies. That means that the Iranian government ultimately gains far fewer rials for every dollar it allocates to an importer of medicine than it does selling its hard currency to importers of most other goods.

– Siamak Namazi, a Middle East specialist whose career spans the consulting, think tank and non-profit worlds, is currently a consultant based out of Dubai. His former positions include the managing director of Atieh Bahar Consulting, an advisory and strategic consulting firm in Tehran. He has also carried out stints as a fellow in the Wilson Center for International Scholars, the Center for Strategic and International Studies and the National Endowment for Democracy. A frequent contributor to international publications and conferences, he has authored chapters in six books and appeared regularly as a commentator in the international media. He holds an MBA from the London Business School, an MS in Planning & Policy Development from Rutgers University, and a BA in International Relations from Tufts University.

by Sara Vakhshouri

In the last week of April, the US Energy Department issued a report showing that Iran’s crude oil and condensate exports have dropped to their lowest level in the past 26 years. The Energy Information Administration (EIA) estimates that Iran’s net oil export revenue in 2012 was $69 [...]]]> via Lobe Log

by Sara Vakhshouri

In the last week of April, the US Energy Department issued a report showing that Iran’s crude oil and condensate exports have dropped to their lowest level in the past 26 years. The Energy Information Administration (EIA) estimates that Iran’s net oil export revenue in 2012 was $69 billion, down from $95 billion in 2011.

In 2012, the average export of crude oil and condensate declined to around 40 percent, from 2.5 million barrels a day (mb/d) in 2011 to about 1.5 mb/d in 2012. Due to the substantial drop in exports and a lack of sufficient storage capacity, the EIA estimates that Iran had to reduce 17 percent of its crude oil and condensate production. Iran was, on average, the second largest producer of OPEC in 2012. But for some months, its production fell below Iraqi levels for the first time since 1989, moving it from second to third place.

This dramatic drop in oil production and exports are the result of the US and EU sanctions implemented since late 2011 that targeted Iranian oil income, which makes up 80 percent of Iran’s total export earnings and about 60 percent of the government’s revenue.

The new sanctions ban European insurance companies from offering any coverage to refineries that process Iranian crude oil. Although a tight market combined with higher prices has made up for some of Iran’s income losses, it is believed that these sanctions have hurt Iranian oil exports in an unprecedented and significant way.

The new sanctions also present a major challenge for Iran to sell its oil to major customers, particularly India, Japan and South Korea. According to the US Energy Department, Iran’s crude oil export to India and South Korea is particularly going to be influenced by these sanctions as their refineries rely mainly on European insurance companies. Previously, Iran could skirt the EU ban on insurance by offering its domestic insurance. But the new sanctions make this impossible. This means Tehran is going to have an even harder time marketing and selling its crude oil: its major customers have to start searching for alternative supplies in the market.

The refinery overhaul season is also going to make it harder for Iran to sell its oil. The second quarter of each year is the period for maintenance overhaul for refineries in the Northern Hemisphere that results in a seasonal decline in demand. It is expected that the spike in Iranian crude oil from the last quarter of 2012 will drop once again due to the new EU restrictions on refinery insurance and seasonal demand.

It is not expected that Iranian crude oil production will rise soon. According to the EIA report, Iran’s oil production in 2012 was around 700 thousand b/d, lower than in 2011. The natural production decline of Iran’s matured fields is playing a major role in curbing its crude oil production. Iran needs to invest in its oil fields in order to maintain its production but the large scale of prohibitions on investments in the country’s oil and gas fields imposed by the US and EU prevents any further increase of the country’s production.

Iran is unlikely to agree to curb its nuclear programme unless the U.S. and its Western allies are prepared to ease tough economic sanctions imposed against the Islamic Republic over the past decade, according to a major new report signed by more than three dozen former top U.S. foreign-policy [...]]]> via IPS News

Iran is unlikely to agree to curb its nuclear programme unless the U.S. and its Western allies are prepared to ease tough economic sanctions imposed against the Islamic Republic over the past decade, according to a major new report signed by more than three dozen former top U.S. foreign-policy makers, military officers, and independent experts.

While recent sanctions “may well help bring Iran to the negotiating table, it is not clear that these sanctions alone will result in agreements or changes in Iranian policies, much less changes in Iran’s leadership,” the report, “Weighing Benefits and Costs of International Sanctions Against Iran”, concludes.

“If Iran were to signal its willingness to modify its nuclear program and to cooperate in verifying those modifications, Iranian negotiations would expect the United States and its allies, in turn, to offer a plan for easing some of the sanctions,” according to the 86-page report.

But, “(a)bsent a calibrated, positive response from the West, Iran’s leaders would have little incentive to move forward with negotiations,” it stressed, noting that the administration of President Barack Obama should have a plan at the ready that would make clear how and in what sequence Washington might ease sanctions in exchange for Iranian cooperation.

The new report, which is signed by 38 foreign policy luminaries, including three Republican former cabinet secretaries, former Federal Reserve Chairman Paul Volcker, and half a dozen retired Army and Marine Corps generals with substantial Middle East experience, comes at a particularly sensitive moment.

On the one hand, Congress, prodded by the powerful American Israel Public Affairs Committee (AIPAC), is moving to enact as part of the 2013 defence bill tough new sanctions against foreign companies and individuals still doing business in several key Iranian economic sectors.

The final bill, which may seek to reduce Obama’s ability to “waive” such sanctions, could also include policy language adopted by the House urging the administration to build up its military presence in the region to make the threat of an attack against Iran’s nuclear facilities more credible.

On the other hand, the administration, which opposes the pending sanctions package and any limitation on the president’s waiver authority, has been meeting with its partners in the P5+1 group -the U.S., Britain, France, Russia, China, and Germany – to forge a common negotiating position in preparation for a new round of talks with Iran that will probably take place next month.

In the clearest statement to date, Secretary of State Hillary Clinton last week said Washington was also willing to engage Tehran on a bilateral basis in order to gain an accord.

She and other officials have said in the past that Washington is willing to ease sanctions in return for Iran’s cooperation, but the administration has been vague about the timing, suggesting it would consider taking such steps only after Tehran took specific concrete steps.

These include shipping its stockpile of 20-percent enriched uranium out of the country, closing its Fordow enrichment plant, and clearing up long-pending questions by the International Atomic Energy Agency (IAEA) about Tehran’s possible past research into the military applications of nuclear energy.

“So far, neither the United States nor the UN Security Council has stipulated the precise criteria that Iran must meet to trigger the lifting of sanctions, or the sanctions that would be lifted in exchange for Iran’s actions,” noted the new report, which was also signed by more than a dozen retired top-ranked diplomats, including former U.N. ambassador Thomas Pickering. “There is no action-for-action plan that all parties understand.”

Given the prominence and bipartisanship of the signatories, who also included Michael Hayden, a retired four-star Air Force general who served in top intelligence positions under Bill Clinton and George W. Bush and advised Mitt Romney in his unsuccessful election bid against Obama, the new report could well influence both the debate in Congress and within the administration.

The Iran Project’s first report – on the costs and benefits of a possible U.S. or Israeli military attack on Iran – received considerable attention here after its release in mid-September.

That report, which concluded that even a massive U.S. assault would set back Tehran’s nuclear programme by only four years at best, highlighted the growing concern in establishment foreign-policy circles about the beating of the war drums by the right-wing government of Israeli Prime Minister Benjamin Netanyahu and its supporters here.

Like its predecessor, the latest report, does not advocate a particular policy.

But it notes that the benefits of U.S. sanctions against Iran “have often been taken as a given,” in part because they offer an alternative to military action. The costs of sanctions, on the other hand, have not been “routinely addressed in the public or policymaking debate”.

Moreover, it said, “sanctions alone are not a policy,” and their effectiveness “will depend not only on the sanctions themselves, but also on the negotiating strategy associated with them.”

Assessing the costs, as well as the benefits, of sanctions, it said, should “enhance the quality of debate about the sanctions regime and the role of sanctions in overall U.S. policy toward Iran.”

Among the benefits sanctions have provided, according to the report, have been a slowdown in the expansion of Iran’s nuclear programme; a relative weakening of its conventional military capabilities; growing concerns in the regime about public unhappiness with the economy which “appears to have been significantly weakened” as a result of these measures.

It also cited “some indications of a greater willingness on the part of the Iranian leadership to negotiate seriously” over its nuclear programme, although the report also expressed doubt “that the current severe sanctions regime will significantly affect the decision making of Iran’s leaders – any more than past sanctions did – barring some willingness on the part of sanctioning countries to combine continued pressure with positive signals and decisions on matters of great interest to Iran.”

On the costs side of the ledger, on the other hand, the report cited tensions between the U.S. and Russia, China, India, Turkey, and South Korea, among other countries, which have been pressed to comply with Washington’s increasingly comprehensive sanctions.

It also noted increased influence by hard-line factions, such as the Iranian Revolutionary Guard Corps (IRGC), over the cash-strapped economy; the political empowerment of those same factions which can depict the sanctions as U.S.-led aggression; and the sanctions’ potential negative humanitarian impact as U.S. and foreign companies and groups that sell or provide food and medicine to Iran find the licensing procedures too burdensome and the banks needed to provide credit for such transactions increasingly unwilling to do so.

Insofar as the sanctions lower the quality of life for the average Iranian, they may also contribute to long-term alienation between the two countries.

In addition, the sanctions are creating “new international patterns of trade” that are resulting in increased market share for Chinese and Indian goods in Iran at the expense of Western products, while the “rapid expansion of unofficial, black-market trade between Iran and Afghanistan, Iraq, Pakistan, and Turkey is distorting and undermining the economies of those states and the region,” according to the report.

By Richard Javad Heydarian

A key foreign policy consequence of President Barak Obama’s reelection is the growing possibility of face-to-face talks between the United States. and Iran. Both the US Secretary of State Hillary Clinton and Iran’s Foreign Minister Ali Akbar Salehi have expressed, albeit conditionally, their respective governments’ openness [...]]]> via Lobe Log

By Richard Javad Heydarian

A key foreign policy consequence of President Barak Obama’s reelection is the growing possibility of face-to-face talks between the United States. and Iran. Both the US Secretary of State Hillary Clinton and Iran’s Foreign Minister Ali Akbar Salehi have expressed, albeit conditionally, their respective governments’ openness to engage in comprehensive bilateral talks — for the first time in almost three decades — to primarily resolve the ongoing nuclear standoff.

Beyond the issue of urgently resolving the Iranian nuclear question, purportedly to prevent an Israeli pre-emptive strike and an Iranian nuclear bomb, the Obama administration’s growing interest in directly engaging Iran may have something to do with timing, opportunity, and leverage.

There is a feeling in Washington that the recent transatlantic sanctions may have created enough pressure  — and damage to Iran’s economy — to potentially extract major unilateral concessions from the Iranian regime. Namely, a “stop-shut-ship scenario”, whereby Iran would curb its enrichment capacity, open up all aspects of its nuclear program, shut down its heavily-fortified nuclear facilities, and ship out its stockpile of above 3-5 percent enriched uranium in exchange for some nominal — yet to be clarified — incentives from the West.

Since the imposition of Western sanctions against Iran, beginning in late-2011 and intensifying by mid-2012, the Iranian economy has begun whimpering on an unprecedented scale. Iran’s oil output is at its lowest in more than two decades, while oil exports have been halved; the inflation rate has surpassed the 25 percent barrier, while the budget-deficit is reaching its highest level in the last decade; and, the Iranian currency (rial) has lost about 80 percent of its value in less than a year. The sanctions against Iran’s ports, shipping industry, financial sectors, and central bank, Bank-e-Markazi, have also made it increasingly difficult to conduct even the most benign kind of international transactions, from the import of medicines, to food, diapers and medical equipments.

However, there are some recent indications that Iran’s economy is not exactly in a desperate shape, or at least not as frail and fragile as the Obama administrations hopes it to be.

According to the Paris-based International Energy Agency’s (IEA) most recent report, Iran’s oil exports have rebounded sharply – by around 30 percent – after seven months of steady decline, thanks to new contracts with giant Asian customers, China and South Korea. With oil exports constituting more than three-quarters of export earnings, Tehran is now in a relatively better position to defend its falling currency. In fact, the rial has indeed experienced some recovery in recent weeks, appreciating from the record-low of 37,000 rials against 1 dollar in early October to around 27,000 rials against 1 dollar today. Of course, the most recent financial and hydrocarbon sanctions by the European Union will further complicate the process by which Iran intends to translate its rising exports into a stronger local currency.

Another surprising development is in the tourism sector, which has also experienced an unexpected spike. “Although most sectors of Iran’s economy are struggling and oil revenue has steeply declined, foreign purchasing power is at an all-time high in Iran due to a plunge in the value of the Iranian currency, the rial,” reported Jason Rezaian of the Washington Post.

The Iranian government has circumvented transatlantic sanctions by an ingenious mixture of manifold countermeasures. It has negotiated sovereign insurance deals with major customers such as China, India, Japan, and South Korea, while considering barter deals (sweetened by heavy discounts and flexible payment arrangements) to woo major customers and continue large-scale oil trade. Iran has also expanded its tanker storage capacity by purchasing/building new oil-transporting vessels, smuggled oil through neighboring countries like Iraq, and stealthily transported oil — with off-the-radar and/or or ‘foreign flagged’ ships — from its ports to major destinations in East Asia. This explains Iran’s ability to increase oil exports by almost 30 percent in November, compared to previous months.

Moreover, the government has instituted some draconian measures to stave-off the impact of sanctions. It has further slashed imports, postponed its subsidy cuts, reduced money supply, raised interest rates, and jailed so-called ‘currency manipulators’. It has also encouraged domestic manufacturing. Aside from the government’s recent ban on imports of around 77 luxury products, atop reductions in 52 other non-essential goods, the fall of the Iranian currency  — especially in the black market – has also eroded the competitiveness of imported capital goods, which have hammered local producers in recent years.

It’s important to note that the Iranian government has considerable foreign exchange reserves, estimated at between $80-100 billion, giving it significant ability to sustain imports for an extended period and defend its currency amid growing international restrictions. With a multi-tiered foreign exchange system, the government has an ability to cushion the most vulnerable sectors — incidentally, the backbone of the regime – against major disruptions in the import of basic commodities. After all, Iran’s structurally high inflation more the product of a loose monetary policy and major subsidy cuts that begun in 2010.

In some ways, it is Iran’s relative resilience  — and ability to avoid a total collapse — that may explain its willingness to explore direct talks with Washington. Tehran feels that it has enough wiggle room to avoid total unilateral concessions and negotiate a more mutually-favorable, face-saving outcome — perhaps, before it’s tool late.

- Richard Javad Heydarian is a Philippine-based foreign affairs analyst, specializing on international security and economics. He can be reached at jrheydarian@gmail.com

It’s not easy for a European observer of US politics to understand why the US Congress seems so much more concerned by Iran’s nuclear activities than by those of North Korea (the DPRK). Congressional pressure on the White House to put a stop to Iranian activities seems never-ending and Congressional majorities [...]]]> via Lobe Log

It’s not easy for a European observer of US politics to understand why the US Congress seems so much more concerned by Iran’s nuclear activities than by those of North Korea (the DPRK). Congressional pressure on the White House to put a stop to Iranian activities seems never-ending and Congressional majorities for anti-Iranian resolutions are staggering. In comparison, when did Congress last pass a resolution requiring the administration to take action against the DPRK?

On the face of it, this makes little sense. To a European, North Korea looks to be a greater and more actual threat to US interests than Iran.

North Korea is sitting atop enough plutonium for perhaps a dozen nuclear weapons. Two underground nuclear tests have shown that the North Koreans are able to put together nuclear devices, though experts surmise that these are still somewhat rudimentary.

North Korea has also acquired the capacity to enrich uranium. Western experts have seen a relatively small enrichment plant at the main DPRK nuclear research centre. There has been speculation that there exists a larger plant deep within the mountains in the North of the country.

Iran has no plutonium. Iran possesses enough low-enriched uranium for half a dozen nuclear weapons but has so far shown no sign of wanting to enrich this material to the 90% level required for weapons. The Iranians are not suspected of having conducted nuclear tests; they may not be capable of assembling a workable nuclear explosive device.

North Korea expelled the inspectors of the International Atomic Energy Agency (IAEA) at the end of 2002, and has only allowed them back in for a brief period since. Over the last ten years no state has received as many IAEA inspections as Iran, whose two enrichment plants were declared to the IAEA before they started to operate.

North Korea withdrew from the Nuclear Non-Proliferation Treaty (NPT) in early 2003, having failed to correct the nuclear safeguards non-compliance declared by the IAEA in 1993. Iran corrected its pre-2004 safeguards failures within two years of their discovery; it expressed regret over these transgressions; and ever since it has affirmed the fullest of commitments to the NPT, to which it became a party fifteen years before the DPRK.

North Korea’s nuclear weapons are viewed as a threat by two of the US’s most valuable allies: Japan and South Korea (the ROK). These two allies are crucial to the US’s defence of its strategic interests in the Western Pacific. In the event of hostilities between the US and China (heaven forefend!) Japan would offer the US vital staging facilities, akin to those the US would have enjoyed in the UK if the US needed to go to war on the European mainland.

US strategic interests in South West Asia are on the wane. The US is now self-sufficient in natural gas and imports less than 12% of the crude oil it consumes from the Gulf; it could quite easily switch to African and American suppliers if Saudi and Iraqi supplies were threatened. Over the last decade the risk of Iraqi transfers of WMDs to Al Qaeda and Al Qaeda acquisition of safe havens in the Middle East has been eliminated (albeit at a price!).

Since the end of the Cold War, over twenty years ago, no single power has been capable of challenging US influence in South West Asia, whereas China is increasingly seen in the US as an emerging challenger to the US in East Asia.

When it comes to making belligerent noises, Iran’s leaders can’t hold a candle to those of North Korea. And the average alienist would surely find it easier to treat the former than the latter.

In 2011 US merchandise exports to the Far East were worth $286 billion and imports $718 billion. Comparable figures for South West Asia, including Turkey and Israel, were $71 billion and $108 billion. Far Eastern investors supply the US with a far larger percentage of external credit than do Middle Eastern investors. Far Eastern corporations are major employers and tax-payers in the United States.

All of these very basic facts must be familiar to Congressional staffers, if not to members of Congress. So how can one explain the disproportionate attention that Congress pays to Iran’s nuclear activities?

I have a theory. But I think it would be more appropriate for me to leave readers to come up with their own answers. I suspect that most will be honest enough to admit to themselves that they have a pretty shrewd idea as well.

This past week a couple of articles have been published that hint at the central incoherence of the United States’ Iran policy. The arguments are not necessarily new, but they show in concrete terms how the stated objective of US sanctions, which is to change the calculations and behavior of Iran’s [...]]]> via Lobe Log

This past week a couple of articles have been published that hint at the central incoherence of the United States’ Iran policy. The arguments are not necessarily new, but they show in concrete terms how the stated objective of US sanctions, which is to change the calculations and behavior of Iran’s leaders, is undermined by the same sanctions that end up weakening – at times even endangering – the domestic forces presumably required to leverage the sanctions’ power and result in a change of behavior.

Virginia Tech economist Djavad Salehi-Isfahani explains how the sanctions regime is threatening Iran’s bond to the global economy, not only through the straight-jacketing of the middle class and private sector, which is the promoter of that bond, but also hindering the point of view that is supportive of that bond. In other words, instead of helping to promote a developmental state whose behavior is moderated by the multi-faceted links created, the sanctions regime strives to sever those links based on the claim that severing those links will eventually make the Islamic Republic a better global citizen!

James Ball’s article in the Washington Post is even more damning. The domestic actors striving to change the behavior of the Iranian state, it turns out, do not merely constitute unfortunate collateral damage. They are the direct recipients of policies that deny them protective tools, leaving them vulnerable to significantly more powerful entities which always find ways to get around sanctions and access the instruments of repression that they need to carry out their objectives.

These arguments are slightly different from the suggestion that sanctions are a form of collective punishment with the Iranian population ending up as the victims of Iranian leaders and foreign powers locking horns. The sanctions policy is assessed in the way that all policies should be assessed: What is the policy intended to do, who is supposed to benefit from it or be harmed by it, and are the policy instruments aligned with the policy objectives. In this case, the evidence offered suggests they are not.

There are, however, other ways of addressing the question of inconsistency between instruments and objectives. One way is to ignore the inconsistency while giving rhetorical lip service to the sublime cause of the Iranian people freeing themselves from the yoke of dictatorship. The objective of this policy, it is said, is to change the behavior of the Iranian government. External pressure will also eventually payoff on its own. No need to worry about what sanctions will do to Iran’s social fabric, economy, and the private sector in the meanwhile. Sanctions are both feasible and effective given American muscularity and the Iranian historical tendency to give in to overwhelming pressure eventually. This formulation is apparently based on a joke Iranians make about themselves: “Iranians never give in to pressure unless it is lots of pressure.” As for those freedom-loving Iranians, they’ll find a way to foment change in Iran and aim it in a favorable direction even in spite of us making their path more difficult because of their incredible desire and energy to be free.

The problem with this argument lies first in giving a lofty role to desire (as opposed to instruments for fulfilling that desire) and second, in refusing to acknowledge that in no country is there “a people” with a collective desire. Iran, like elsewhere, is a country consisting of a multiplicity of interests, desires, power centers, and a differentiated population with vastly different means of access to resources. Democracy, like elsewhere, will not arise out of Iranian collective desire but out of negotiations and accommodations among these multiple interests. This very basic point is not rocket science – especially given the US’ own experience with democracy. The refusal to understand this point reveals either the shallowness of the commitment to any kind of democratic project in Iran or a naïve hope that external pressure will delegitimize the regime and open a path for a more democratic Iran.

But perhaps I am searching for coherence in the wrong places. The US’ Iran policy is not that incoherent if the objective is not aimed at changing the calculus of the Iranian government and rather intended to simply harass, isolate, or even destabilize Iran. In fact, one can argue that the Obama Administration, unlike the Bush Administration, has found a perfect formula for this intent, which is also a good fit for the way the American bureaucratic structure works.

Rather than confronting Iran with an all-out sanctions regime, the US has settled on an escalating sanctions regime. Every couple of month or so, it announces a new set of sanctions to keep the Islamic Republic off balance and in search of new ways to get around sanctions. Of course, this is partly necessitated by the reality of the oil market. The complete shut off of Iran’s oil exports would have had a drastic effect on oil prices. But in any case, an escalating sanctions regime is a much better tool for harassment – or what some in Iran call psychological and economic warfare – than an all-out sanctions regime.

The Iraqi sanctions regime is a good example of why going for an all-out sanctions regime is not a good instrument; after a while, the sting wears off and ways are found around it. Even Donald Rumsfeld, by July 2001, was suggesting that one US policy option was to “publicly acknowledge that sanctions don’t work over extended periods and stop the pretense of having a policy that is keeping Saddam in the box when we know he has crawled a good distance out of the box”.

An escalating sanctions regime, on the other hand, assures that the initiative remains in US hands and the Islamic Republic – and by implication the people who live and work in the Islamic Republic – are kept off balance. It also has the added value of making a whole lot of people in various bureaucracies work hard for their paycheck.

The folks at the Treasury Department strive hard to find new ways and new entities to sanction; folks in the State Department work hard to get exemptions for allies (and even non-allies) who presumably have done well in reducing their oil imports from Iran exactly at the same time that the Treasury is tightening the noose in some other areas. Folks in the Department of Energy also work hard to determine exactly how much of Iranian oil can be kept off the market before prices rise.

And the game continues.  Just watch to see what happens after the six-month exemption period is up for Japan, South Korea, and…

The US’ Iran policy cannot be considered incoherent if the policy objectives and the instruments have become the same. It can still be considered immoral for trying to add to the economic woes of a good part of the Iranian population – irrespective of the fact that the Iranian government is most responsible for those economic woes – particularly at a time when so many people in the world are already suffering from unemployment and economic downturn. But it is not incoherent. It is intended to harass and it is doing so in a calculated and now rather routine, bureaucratic way. Weaning from routines and habits will be hard.