April 27, 2019
by Ramin Mazaheri for The Saker Blog
If 7,000 Greeks can stop the Persian empire at the narrow pass at Thermopylae, I think it’s absurd to think Iran can’t stop 20-30% of global oil traffic at the 3 kilometer-wide shipping lane in the Strait of Hormuz. That would, of course provoke a global crisis and economic disaster.
That’s the “nuclear option” for Iran. It is reportedly part of a military plan called “Ghadir”, which evokes the alpha letter of modern Iranian Islamic history – Ghadir Khumm is the location where Prophet Mohammad anointed Imam Ali his successor, but (those who came to be called) Sunnis amazingly rejected the Prophet’s wishes. Shia – which means “partisans of Ali” – did not.
The US has severely overestimated their military capability to defend this attempt to politicise oil and get Iranian oil exports to zero. Mining the strait, mini-subs, kamikaze speedboats – all of these will be hugely effective against anything the US Navy has. For all the US drones and satellites and aircraft carriers, there is no way they can protect the Straits of Hormuz long-term, not any more than they could hold any of a thousand Afghan mountain passes long-term. Should we trust history or the sales pitches of corrupt Pentagon contractors?
No military can stop endless kamikazes. But who wants to be a kamikaze? What could produce the desire to be a kamikaze?
$0 in oil sales may do it.
There is undoubtedly a part of the Iranian psyche which now wants a final showdown. The years of talking, talking, talking about the JCPOA pact on Iran’s nuclear energy program… and then its failure, thanks to US unilateralism and spineless European hypocrisy, has created a lot of existential angst for Iranians. How can Iranian diplomacy work when the opponents refuse diplomacy and honor?
That is an existential and philosophical question, but there is also a lot of undeniable frustration since the inhumanly effective 2012 Triple Sanctions (US, UN, EU). Iranian society has been forced to become perceptibly more desperate, more coarse, less warm, less Iranian – it is difficult to admit this.
Iran cannot be forced into starvation indefinitely. That is why blocking the Strait of Hormuz – if it ever happens – will certainly be accompanied with an ultimatum: the West must end Iran’s isolation and finally accept the Iranian Islamic Revolution of 1979. The world must live with us, finally, because it cannot live without us in the 21st century.
Unfortunately, due to Islamophobia, even more so than 40 years of media-led Iranophobia, nobody in the West is going to burn a draft card for Iran. The opposition to the obviously immoral war on Iraq produced just a day of street protests in the US – hardly worth the effort. Neither is Iran in the position of the USSR, meaning it has no chance to save the West from racist fascists – after all, the West supports the racist fascists (Taliban in the 1980s, ISIL today, et al).
Because nobody in the West will put any pressure on the governments to stop the oppression of Iran, perhaps Iran has to force the issue by closing the Strait of Hormuz? Is Iran backed into a corner?
I say no, because Iran is not going to sell $0 in oil in month of May.
Firstly, should Iran be worried? Answer: no. The world needs Iranian oil (and revolutionary culture)
When is the last time the US policy worked out in the Middle East? Afghanistan, Iraq, Syria, Yemen – all have had their growth retarded, but are not destroyed… just like Iran.
As Pepe Escobar pointed out, it’s much easier to retard the Colombian dream of Eurasian integration by attacking its weakest major point – Iran, as opposed to China and Russia.
The bottom line is: can the US do what it claims – reduce Iranian oil sales to $0. No, they cannot.
It certainly seems like the US is foolishly believing self-aggrandising and duplicitous claims from Gulf princes, who are overestimating their oil production abilities.
However, we must first remember that Saudi hatred for Iran is not based on religion – even though “Saudis are not Muslims – they are Wahhabis,” as the regional saying goes – it is based on politics: they hate Iran for proving that all monarchies are immoral, ineffective, undemocratic and a hindrance to the type of democracy Muslims want (Islamic socialist). Their animosity is based on Iran’s ability to make Muslims aware of their modern Islamic socialist rights, and to show how acquiring these rights does not – as the West insists – require the exclusion of their culture, history and religion. Iran, in the manner of all true revolutionaries, insists on constantly couching it in these drastic but honest terms, thus continually flouting their rebellion and their success in the face of the horrific Gulf monarchs.
But the Gulf monarchs, shockingly, are liars: They will NOT be able to give China and India enough replacement oil.
Saudi production peaked at 11 million bpd (barrels per day) last November, which was the system’s maximum stress level, but is now down below 10 million. Offsetting Iranian production – getting up to at least 12 million bpd – thus seems impossible: “A 2-million-bpd Saudi production increase would move the Kingdom’s oil production into unchartered territory and would wipe out completely the kingdom’s spare capacity,” according to Gary Ross, head of global oil analytics at S&P global, via Reuters.
Anyway, Saudi Arabia is not going to increase oil production in May despite the sanctions – they want higher prices to continue bankrupting shale oil / fracking. Because the Saudi state full of disorganised and egotistical princes, they are also full of conflicting agendas.
As far as the UAE, they produce only 3 million bpd, so they aren’t capable of tipping the output scales drastically.
Furthermore, OPEC is at its lowest production since 2015, and Venezuela and Libya show no signs of regaining former glories anytime soon. Even if slow increases from the Saudis and UAE arrive, there are other drains on oil inventories to offset even before cutting off Iran.
So why should Iran feel like we aren’t needed anymore?
Only an administration as filled with incompetents as the Trump administration is could take such lies and mixed signals seriously. But the US is about Israel first, corporations second and everyone else last, therefore any attempt to foment regional stability and higher oil prices makes their constituents happy. Of course, it also advances capitalism-imperialism.
Iran – still no retreat, no surrender… still no big deal
Even just moderately-intelligent Westerners know that “Iran sanctions aren’t a realistic path to peace”, because the sanctions are not designed for peace, but for fomenting internal civil war and to support regional US imperialism.
There is another way Iran could decisively end Western antagonism: simply accede to Western demands, as encapsulated by US Secretary of State Mike Pompeo’s totally-absurd 12 demands. All Iran has to do is – just like the North Vietnamese, North Koreans, Cubans and Chinese – is renounce their revolution entirely, like Egypt, post-Sankara Burkina Faso and now, to a lesser extent, Julian Assange-betraying Ecuador.
I examined what steps Iran would have to actually take in order to get the Cold War called off in this article, Iran detente after Trump’s JCPOA pull out? We can wait 2 more years, or 6, or…., which caps my upcoming book on Iran.
Beyond Pompeo’s fatheaded nonsense, it all comes down solely to capitalist-imperialist logic: Iran must sell off a controlling chunk of the nation into Western hands. There is no way Iran will do that – there are just too many people who are too committed to upholding the 1979 Revolution, the Constitution and Iranian sovereignty.
It’s not as if Iran’s politicians are as out-of-touch, arrogant and stupid as a Persian Gulf prince: the current budget is based on only exporting just 1.5 billion barrels per day with a price of only $54 per barrel (or $83 million per day) because we all knew back in early 2016 that a Trump presidency would hit Iran, Cuba and Palestine the hardest. The price is already around $70. If we assume that things really progress badly, we must also assume the price of oil will rise – a price of $80 means Iran needs to sell just 1 million barrels per day ($80 million per day) to stay under budget. Last month, with some countries already instituting cutbacks, Iran sold 1 million barrels.
The reality is that it is all about China and India for Iran – they sell 3 times more oil to them than even Iran’s #3 customer. Reports are conflicting, negotiations are ongoing – we can’t truly say with 100% confidence what will happen in Beijing and New Delhi.
But… India is the more compliant nation, and they are reportedly going to reduce sales to 100,000 bpd using a rupee payment system. The links are going to remain open, and that is all that matters – the numbers will certainly be fudged. Long-term, Iran is quite happy to sell oil in non-dollar denominations and be the pioneer in that move away from the petrodollar.
Regarding China: Some reports say China will actually increase imports from Iran up to 1 million bpd, totally sabotaging the US. I would hold out absolute certainty until the US and China signs their trade deal next month. However, I highly doubt China is going to sabotage the key node – and the absolutely key energy node – in their Belt and Road Project. China might sell out Iran for a couple years, perhaps during the Trump administration, but long-term? No way. China is not an island, and Iran is the only country which has proven to be revolutionary enough for Red China to trust, which is why they have such serious multi-decade plans already signed. Hard to predict the future, but there’s always both short- and long-term considerations, and long-term China and Iran are united, firmly.
Beyond the two big customers, Turkey says they will flout sanctions, but Turkey also talks a much better game than they punch.
Regardless, Iran will still sell oil “illegally”. Iran, as Foreign Minister Javad Zarif recently joked, has a “PhD in that area” of sanctions-busting. Iran was the first modern nation to barter oil for something other than US dollars, and they will be the first nation (I predict) to successfully implement a national crypto-currency.
Iran will obviously send oil to places like Turkey (and India, as Iraq is a top-3 supplier for them) through friendly Iraq. Will Iran lose some profit as a result? Yes, but it’s not like Iranian oil is going to be sold for pennies on the dollar to Iraqis – we are talking minor losses of 10-20%, I’d guess. Over decades that’s significant, but if we are talking about enduring 2 or 6 years more of Trump, then it’s certainly not enough to bankrupt Iran, which is the goal of the illegal US tactic. Crucially, it is certainly fair to assume that now-higher oil costs will offset this new surcharge for sanctions-busting via Iraq.
Regarding bankruptcy: It’s hard to say exactly how much hard currency reserves Iran has, but the IMF said $100 billion in 2017. What reduced oil sales really means – again, $0 won’t happen – is a cutback in new projects.
What does that mean? It means cutting out future infrastructure projects, as well as savings into the National Development Fund. Just as Cuba prioritises their far, far fewer pesos for health, education and food, so will Iran – neither country will starve, neither country will relent… and Iran will still make billions selling oil, unlike Cuba. The years of worsened sanctions has meant things like: Iran have to postpone record breaking projects, like Niayesh Tunnel, the 2nd-largest urban tunnel in the world, finished in 2013, or the Sadr double-decker Expressway, also finished in 2013… but only for a few years. It has meant things like: Iran will get all the global infrastructure in place and start broadcasting PTV Français, and even tap yours truly as its Paris correspondant, but a lack of money means that all the journalism is done solely in Tehran for now. But someday I’ll be reporting in French, Inshallah.
Of course, sanctions do more than retard Iranian growth – the existential angst leads to unnecessary inflation, reluctance for private domestic investment in the “real economy”, and major cutbacks in quality of life for the average Iranian. But, as I’ll point out later – Iran is not Yemen, which is what the US mistakenly thinks they can achieve.
People on the left and the right in Iran actually welcome each new tough sanction with a Persian carpet rollout – it necessarily fuels the “Resistance Economy” championed by Leader Ali Khamenei and others. There is no doubt that a sanctioned people do not just throw up their arms and quit – domestic capacities, initiatives and genius must be honed and further created. In 1995 Iran produced almost no cars – by 2010 they were 14th in the world and the undisputed Middle East leader. These are the types of things I am talking about, but which are not possible without socialist-inspired central planning and central control over industries.
Iran also has recent experience instituting a true War Economy, with rations and coupons to enforce economic egalitarianism, and that is another counterpunch to the US. It also creates countless future economic and cultural benefits.
The Iranian government are not Yemeni rebels, who have no factories, no bureaucracy, no refineries – and thus they are starving, sadly. The Iranian government is the stable status quo, and the status quo always has a million levers to pull before things get hairy… but because they are socialist-inspired, Iran’s government has three million levers. As I have repeatedly demonstrated over the years, the Iranian government controls essentially 100% of the non-Black Market and non-carpet economy. So, far beyond oil, the government actually has the power to completely mobilise the economy in favor of the People, which is something that Eurozone nations no longer have.
The end for US unipolar dominance will arrive swiftly. Iran’s reversal of isolation will also be swift, just as – all of a sudden – the US made detente with China in 1971 after decades of the same sanctions and exclusion Iran deals with. But detente certainly cannot happen during Trump’s first term, given how the US Deep State has so effectively mobilised against him to neuter his once-diplomatic foreign policy plans.
There is no long-term game plan for ending the phobia of Islamic democracy – in 2019, only Iran’s continued determination and success is the answer. Giving up in order to sell oil “legally” is not an answer, nor necessary. Iran has domestic levers to pull for years, and the experience to pull the right ones.
Maybe someday Iran will finally strike back and play their “now the talk really starts” exterior lever – closing the Straits of Hormuz? Iran is all about “neither East nor West but the Iranian Republic”, but I still don’t think that will happen until China feels secure enough to give the signal that they back Iran to the hilt, and that won’t come until the Belt and Road Initiative is further along.
As far as “more sanctions” – certainly disagreeable, but never terminal for Iran.
Ramin Mazaheri is the chief correspondent in Paris for Press TV and has lived in France since 2009. He has been a daily newspaper reporter in the US, and has reported from Iran, Cuba, Egypt, Tunisia, South Korea and elsewhere. He is the author of I’ll Ruin Everything You Are: Ending Western Propaganda on Red China. His work has appeared in various journals, magazines and websites, as well as on radio and television. He can be reached on Facebook.
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