It should not come as a surprise that after experiencing a new stalemate in solving the Iranian nuclear crisis, „intelligence sources” leaked that Israel would not warn the US before attempting to destroy Iran’s unchecked and secret nuclear facilities. The real question is what would be the result of such a pre-emptive attack and if it is a viable threat or just a bluff?
Acting through its ambassadors, the European Union has announced the imposition of an oil embargo on Iran from July 2012 on as well as placement of sanctions against Iran’s Central Bank, which aim to disrupt the funding of the country’s nuclear programme. But will that suffice? Will it have any effect? Or will it rather be importers bearing the costs? In response to the declaration of the embargo, the Brent price of oil skyrocketed between 23rd and 29th January to $111 per barrel.1 Iran is the second largest producing country in OPEC that supplies 2.5 million barrels per day, out of which 450 thousand are sent to EU countries. If the stoppage of the Iranian supply is not substituted by some alternative source, the embargo on the trading of Iranian oil can significantly harm European economies.
The Oil from Saudi Arabia
Speaking through its Commissioner for Energy Günther Oettinger, the European Union boldly announced that imports from Saudi Arabia will cover the Union’s consumption needs. A difficulty lies in the fact that relying on the oil reserve capacity of Saudi Arabia, which has always played the role of a safety measure, is becoming increasingly problematic. Even a short disruption of the drilling of oil in Algeria, and in Libya during the recent civil war, were sufficient to deplete Saudi reserve capacities.
When Wikileaks published diplomatic cables in 2010, what many analysts had been claiming for some time became public: Saudi Arabia has been lying about its oil reserves. They are lower than it officially claims. As everything indicates, it won’t be in the position to extract more than 12 million barrels a day. Given that the whole world experiences increasing demand, this will push up the prices of black gold to yet unprecedented heights. Oil will keep flowing even without Iran, but then we should not be surprised when the price will jump to somewhere between $120 to $150 per barrel during the summer.
Let’s look at the issue from a different angle. Who can lose out on the disruption of Iranian oil supply is obvious. It won’t be Russia, China, India, nor Turkey, but the European Union. (Allegedly, Japan will only decrease the level of supply.) Iran will now have to sell to these countries for a lower price. Higher prices will be especially beneficial to Saudi Arabia, which needs expensive oil in order to have sufficient funds for bribing its inhabitans, whose uprising would cause a true Arab spring and large problems to the United States, which are publicly supported by the Saudi regime that also allows them to build strategic military bases on its soil.
What really bothers the Americans
According to the treaty between the US and Saudi Arabia from the early 70s, the trading in oil with OPEC is concluded exclusively in US dollars (the famous term „petrodollars“ emerged as the result of the treaty). It is quite simple, really: if you ensure that oil will be traded in US dollars only, the countries needing oil for their economy’s development will be forced to obtain your currency. And this is exactly the reason why the American FED can today print dollar banknotes on big scale.
In the 30 years of functioning of the petrodollar system, the US has run a semi-monetarist trade regime, which has in practice entailed that in exchange for its goods, a country in question has received printed dollars. Besides being highly profitable to the US, the country’s foreign trade could prioritise import over export, leading to a decreased demand for the production of export goods.
This model could predominate only as long as the international political standing of the United States was unshakeable. But as the importance of new seats of power of the East and South increases, the appetite for a new, more just global ordering grows too. Emerging economies that have huge consumption of oil suddenly feel that dollar is detrimental to their growth and want to get rid of it. On the other hand, for the US a breakthrough of euro, juan or yen as the means of exchange would entail that they would have to quickly balance out their trade deficit – and for the largest economic entity in the world this would mean a several years long, painful transition.
When mentioning Iran it is useful to remember the fate of its Iraqi neighbour (indeed, among other countries). Since it is highly interesting that the accusation that Iraq own weapons of mass destruction came few months after Saddam Hussein announced that he will sell oil exclusively in euro. The bizarre leader of Libya, Muammar Kaddafi, was on friendly terms with Western politicians for years and no one was concerned too much by repressions against opposition – not until the moment when he announced the plan to create a pan-African oil trading regime, which hoped to force out the US dollar by creating the “African denari”.
In the past, Iran tried to weaken the dollar’s influence on trade and minimise the dollar transactions made for its oil, and at the end of 2008 it completely succeeded thanks to the founding of the Iranian oil commodity exchange. Japan pays for oil in yens, while others in euro.
To facilitate transactions for oil exports to India, Iran recently concluded a treaty with two important Indian banks. And in order to avoid any disputes with the US, Iran has chosen banks that have no direct engagement with the United States. Russian Gazprombank is expected to play the role of an intermediary. Latest information so far indicate that India has agreed to this unprecedented deal and thus became the first recipeint of Iranian oil who will pay for the supply in gold instead of by dollar.
If joined by China, this initiative will have yet unforeseeable consequences. Gold once again starts to fulfill the role of currency and the United States watch this development with unease. Since more than by the alleged Iranian nuclear programme, they are threatened by a collapse of the dollar’s hegemony. The explanation for the present war drumming and dispatching of flotillas to the Persian Gulf can thus also be an effort to get rid of the weakest link on the ‘anti-dollar front’ that would send to Russia and China a first, but resounding warning signal.
* Translated from Czech by Stanislav Maselnik. Originally published on Revue Politika.
- Brent is a trading classification of a kind of crude oil sourced from the North Sea that serves as a major benchmark for petroleum production from Europe, Africa and the Middle East. ↩
It should not surprise anyone that the USA is withdrawing from Afghanistan soon after Osama bin Laden has been killed. Combined with the pullout from Iraq and the shaky political situation in other Middle Eastern countries, the European Union is on its way to face the greatest security threat of its existence.
US President Barack Obama has announced recently that he is pulling out ten thousand troops from Afghanistan and another twenty-three thousand next year with the rest staying for a few more years at most. In other words, the Americans consider this battlefront as one that they can soon leave in the “capable” hands of the Afghan national security forces. It is a no brainer, that Afghanistan is going to be a nest of terrorists and ravaged by armed struggle for many years to come, but no NATO country can maintain its participation for much longer. There is not enough money and no will to keep this commitment.
Iraq is a much more serious case since it lies between Iran and Syria, the main players of the Iranian axis, and Hezbollah, which is “just” a junior member of the franchise. At least this was true until the recent crisis of the Assad regime. Anyhow, it is very unlikely that the fragmented Iraqi political elite could hold its stance against the Iranians and their allies without the presence of the coalition forces led by the USA. Power-vacuums cannot exist for long and Iran has many advantages in Iraq. One is the Shiite population, which amounts up to 65% of the total population, the second is the favorable geographical location and the third is the sheer size of Iraq. The third is important because, for example, Saudi Arabia could not throw a few thousand soldiers across the border as it did to save their allies in Bahrain, only a few months ago, since it would require a much larger force to “pacify” Iraq.
After a US pullout from Iraq there is only one thing that can seriously hurt any Iranian ambition for an “empire” stretching from the Eastern Mediterranean to the heart of Central Asia and that is the fall of the Assad regime. A few months ago, Syria was considered one of the most stable countries in the region, but now it seems that they are on the doorstep of a new civil war. Until now, there have been 1400 deaths and the Syrian army is not holding itself back. There are reports that Hezbollah and the Iranian Revolutionary Guard is aiding President Assad, their closest ally in an otherwise hostile world. The greatest threat is that Assad and his accomplices can ignite everything around them. Hezbollah is already talking about opening a new front in Northern Israel and Turkey is very agitated about the possibility of an overspill effect of the conflict into its territory as Syrian troops are marching next to its borders.
We could say that the American withdrawal is a good thing, they can beef up their capabilities to fight wars elsewhere and it is true that today 100.000 US soldiers and a serious amount of military hardware are locked at Afghanistan. Nevertheless, Obama has made it clear that the United States has to focus inwards and cut down on public debt, put the country back on a sustainable track. I do not believe that we are facing another era of an isolationist America, but their commitment to a secure world order will be reduced in real terms, leaving gaps behind them in the security establishment of all regions.
As I wrote before, the European Union will soon face the consequences of the reduced American presence in the Middle East. The main question is whether we can fill in the void, or other actors with unfriendly or even hostile intents will take the initiative instead. It is possible to counter these negative forces by aiding domestic groups in Middle Eastern countries, using proxies and by these methods, the military aspect can be minimized (but not eliminated) in the short run. There are signs pointing in the direction of a revised European Neighborhood Policy, as many European politicians (for example, British PM David Cameron) have acknowledged the failure of our previous efforts to reshape the Middle East. These positive trends are overshadowed by the internal problems of the euro-zone, but if both the USA and the EU are turning inwards at the same time, other actors will make their move. By the time we would solve our domestic questions, our maneuvering space would be seriously reduced, especially in such a turbulent region as the Middle East.
At least three major features shape any political entity’s power in international relations: resources, fears and ambitions. Today we see that the European Union has immense resources, like a grand economy, population, territory etc. but it lacks the ambition to act as a major power. At least, no member state wants to sacrifice much of its own sovereignty for a greater international role of the EU. Today it seems that the only way the European integration could be pushed forward is by understanding the risks of not being a superpower. The Middle Eastern security situation after the US pullout could provide such an example and alert European decision makers. However, the more time the European Union wastes by inaction, the greater price we are going to pay in the long run.
In this introductory article, I will examine what kind of threats and possibilities does the current power vacuum in the Middle East present to Europe. I will argue that the way the European Union can influence the region will be an indicator of whether Europe can become a great power in the XXI century.
The blame game against the West is experiencing its renaissance among many in the Middle East for supporting the corrupt and highly authoritarian regimes of many Arab states during the last few decades. While on one level this criticism can be justified, the actual situation concerning the European Union (and its predecessors) is even more severe, since European countries were only going with the flow without having a real impact on the political system of the Arab regimes. Accepting the blame is easier, because by this we can maintain the delusion that Europe still has a serious influence over its neighbors, but the reality is that the European Union has a long way to go to if it wants to put real pressure on other countries without the aid of the United States. For the time being let us consider “European influence” as a neutral phenomenon, later I will argue for its necessity.
One might say that “Europe” never had any say in the Middle East, rather individual European powers had. While this observation is true, it is still shameful that France, the United Kingdom and the rest of the EU countries together cannot assert their agenda of human rights and stability. During the Cold War, this was a less important issue, but now, during an era of emerging great powers, it will be very important whether Europe has a stable and cooperative neighborhood, or it will be surrounded by failed states and also by allies of its potential adversaries. This realization had to come during a time of a grand turmoil affecting the region from Morocco to Iran, which has shown, that the corrupt but stable Arab regimes in the end cannot provide security neither to their own people, nor to European countries. On the contrary, they are the reason behind civil war-like situation such as the ones we experience in Libya and recently in Yemen too.
This upheaval in the Greater Middle East region has provided an opportunity for many (mostly regional) powers to fill in the ever-deepening vacuum and the European Union is only one and maybe the least active player in this struggle (except for the isolated and half-hearted intervention in Libya). Our main concern should be the growing Iranian influence in the territories in question. We sat through the rise of Hezbollah in Lebanon, the Hamas’ in the Gaza Strip; but Iraq, Syria, Bahrain and Yemen are also quickly turning into battlegrounds where conservative forces have to face an aggressive Iranian expansion. The main problem with this process is not the fall of the corrupt old regimes, but the possible emergence of another, much more hostile tyranny, which has its origins in Iran. The theocratic regime has secured its grip over its own people in Iran, by crushing all opposition back home, but in the meantime, it has been preaching “democracy” abroad, when its interests dictated it. No one should doubt that peoples of the Middle East have their right to elect their own government and set their foreign policy until the point that it is not threatening others. Europe is facing a completely new security threat, where from the Eastern shores of the Mediterranean Sea to the heart of Central Asia, an extremely anti-Western and hostile power is on the rise. The possibly threatening Iranian nuclear program combined with the continuing development of advanced ballistic missile systems is more than enough to make any European politician worried. A sad thing is that it seems that almost every Western and Arab leader understands the risk, but apart from increased economic pressure and numerous speeches, they do not act against this emerging threat. This European passivity and indecisiveness has become a dangerous habit.
There are other “question marks” in the region, mainly Turkey and Egypt. Turkey seems to be at the crossroads between European integration and an independent foreign policy. The former outcome could be the greatest asset for the European Union to stabilize the Middle East, counter the rising Iran and what is maybe the most important aspect, provide all the countries in the region with a vision that is democratic, highly prosperous and authentically Muslim. An independent and possibly bitter Turkey, rejected by the West, could mean an ally for Iran and counter any European attempt to stabilize the region. These are the two extreme ends of the spectrum, but it is easy to see which one is more beneficial for all the parties involved. Time will tell if the new Egypt will turn into a democratic country, which could rally the other Arab countries Nevertheless, a powerful Egypt could pose some risks too, as we could see under the Nasser regime.
At this point, we have to understand that the most threatening prospect of the current processes in the Middle East is not the new order that hostile actors could create, but rather the emerging chaos that an intensifying power struggle in the region would cause. Today our main concerns should be the spread of biological, chemical and nuclear weapons, the illegal mass migration to Europe, and the eroding security of trading and supply routes together with the violence committed against the local populations: Christians, Jews and Muslims alike. The situation is bad and we do not see any sign of stabilization in the near future. With the rise of China, India and other emerging powers, combined with the steady decline of the United States (due to its unmanageable public debt and other factors), the European Union will face a completely new international situation. The resources of the Middle East will become even more precious targets for other global powers than they are today and therefore the fight for them will be even more ruthless. If Europe wants to create a vision for itself and therefore the international order, it has to protect its vital interests in its surrounding and also the civilian population against local and also global actors, because this is what the European Union stands for. The expanding integration has the potential to fulfill these tasks, but it has to make a steady commitment to certain values, not just in rhetoric, but in its actions too. This will not be an easy shift from the Cold War routine, where Uncle Sam would protect the weak Western European countries against the Soviet Union. Truly standing on our feet will be costly, but the price we all would have to pay will be much higher if we continue to ignore the threatening signs. The peoples of the Middle East and Europe need a positive vision and an increased cooperation between these actors is one of the key tools to deliver this beneficial outcome, which is a more assertive Europe that can protect itself and contribute to a stable and prosperous world order.