The New Balance of Power in the Middle East (part II of II)

In part I of the New Balance of Power in the Middle East, I wrote of a political scenario that relates to the current turn of event in Iran followed by a question where I asked whom you thought would most benefit if this reality never took place. In part II, I aim to answer this question by looking at the self-interest of those countries that have profited from an isolated, closed off and weakened Iran over the past 30 years and why there is great apprehension from a possible rekindling of ties between the United States and Iran in the region.

Having lived and traveled across the Middle East since 2000 I can unequivocally state that the normalization of relationship between Iran and the United States is a political reality least desired by countries in the region purely based on socio-economic reasons as this new bond will forever shift the social and political balance of power in Iran’s favor.

So what has happened since 1979?

We all know that not long after the US hostage crisis in Tehran, Iran was hit with a US imposed trade embargo that stopped all American companies from doing business with the new Islamic regime that came to power, at least on paper. This trade and commerce handicap gave new born countries in the region such as the United Arab Emirates enormous lead time to build up their economies by capitalizing on the established good relationships with the West. As such, city states such as Dubai soon became a transit gateway of goods, commodities and services for Iran making the United Arab Emirates a profiteer of circumstance.

Since the early days of the 1979 revolution the volume of re-export trade from around the world including smuggled American goods such as computers, home electronics, car parts, grain, wheat, sugar, all the way to insurance and banking services have amounted to well over US $ 14 billion dollars, annually. In 1994, US trade officials estimated that more than a quarter of the $1 billion worth of American goods alone entering Dubai were in fact shipped to Iran. In 1997, the U.S. shipped almost $11.6 billion worth of goods to the U.A.E., the bulk of which went to Dubai. That was a 230 percent increase over the previous five years which meant that despite growing tensions in the Middle East the flow of American contraband on its way to Iran didn’t slow down, it surged. Experts estimate that between 30 and 40 percent of those goods (between $3 billion to $5 billion worth) were then reexported, and according to US embassy figures, that’s only from transactions that could be accounted for since most experts know there are no official numbers. Thus over the past 30 years Iran has been the U.A.E.’s No. 1 trading partner and what a one-sided relationship it has been.

In an interview done by Christopher Stewart in 1998 with Nasser Hashempour at the time deputy president of the Iranian Business Council in Dubai Hashempour talks about the importance of Iran to Dubai. “Iranians have a very big role here, and Dubai knows it.” Iranians have partnerships in about 9,500 businesses in the emirates, according to Hashempour, the bulk of which are involved in exporting. Some are connected to the Iranian government and military (the Sepah). There are 450,000 to 500,000 Iranians living in the U.A.E., with three-quarters of them in Dubai. The number of Iranians in Dubai has almost doubled in the past five years, and they account for about a quarter of the city’s total population. Iranians here also have a lot of money—estimates run as high as $300 billion in assets. Many Iranians would not be in Dubai, Hashempour says, had it not been for American policy.

Without a doubt, American companies such as HP, Cisco Systems, Microsoft, Dell, Black and Decker, Apple, Xerox, pharmaceuticals and healthcare companies such as Procter & Gamble and many others are all operating in Iran through a network of distributors. In 2007 Xerox for example stated that the company had terminated its ties with Iran and as a result its profits dropped from US $9.6 billion to US $7.7 billion dollars which clearly shows the value of the Iranian market.

So, it is evident that under the current climate and Dubai’s dependency on Iran it would be to Dubai’s disadvantage if a US – Iran relationship were to blossom any time soon especially now that Dubai is experiencing a US $120 billion dollar debt.

On a sociopolitical level Saudi Arabia has also profited from Iran’s Islamisization as it has eliminated the pressure on the Kingdom to modernize its legal and political system over the past 30 years. With a focus on Islamic way of governance and the implementation of its Sharia law any talk of democratization has been a nonstarter discussion which has worked well to the advantage of Saudi ruling elite. In the absence of Civic participation and openness in political affairs, Saudi Arabia has been given a Cart Blanche to rule the country as it pleases. Needless to say that in 30 years we have only seen a glimpse of a few cases where world media has drawn attention on Saudi’s violations of human rights, in cases of child abuse (child brides), women’s rights violations and harsh and inhumane punishments of its citizens under Sharia law. With a democratic Iran Saudi’s closed society will come under the spotlight as it will now have an open society to compete with in the Middle East region.

As for Russia the interest is purely tactical. Russia has profited from Iran’s isolation in a number of ways. Over the past 30 years Moscow has had exclusive access to the Iranian market in areas of heavy industry such as oil and gas, the airplane industry, infrastructure projects and what is now a point of contention Iran’s nuclear plant development not to mention military and arms sales. The other tactical interest has been with regards to the Caspian Sea. Despite a unified non-aggression stance, disagreements among the Caspian Sea states go back to the treaties of 1920 and 1941 between Imperial Iran and the Soviet Union. These treaties divided the Caspian Sea between Iran and the USSR, delineating both water and seabed rights based on the shoreline of each state. Since the collapse of the Soviet Union and the creation of three new states on the shores of the Caspian in 1991, Russia and Iran have had to draw new lines that allow each of the new states shares of the Caspian resources. Yet what has been cleverly designed by the Russians is their independent treaties with each of the new states - Azerbaijan, Kazakhstan, and Turkmenistan that reduced Iran control from 20 percent down to about 14 percent of the seabed and thus putting Russia in greater control of the Caspian sea.

One final interest of Russia worth mentioning is over Irans natural gas reserves and how Russia aims to prevent Iran from laying a pipeline that would connect the country with European markets. While Iran has the second largest gas reserves in the world, Russia aims to prevent its southern neighbor from creating a direct pipeline into Europe. The reason is very simple. With such a gas pipeline in to Europe Russia will lose its monopoly and price fixing leverage. For this reason, Russia is attempting to push Iran to take its focus off of cash rich markets of Europe to build a pipeline heading east between Iran, Pakistan and India. The manifestation of such a plan will place Iran at a disadvantage as the country will no longer be able to make better profits from such a relationship and will leave Russia as the exclusive provider of natural gas into Europe.

So I conclude that Iran is in a very challenging position with many players actively trying to prevent any hopes of democratization plans from taking root in this strategic country in the Middle East region. I sincerely hope that the people of Iran will wisely seek their own best interest and recognize that the solution to Iran’s success lies only in a path towards democratization and the enhancement of strong relationship with the United States and the FREE world. We have a lot to gain and so does the free world. Payandeh Iran.