For Oil-Rich Iran, Friends are Not Proving Hard to Find

May 27, 2008
The Financial Times
Anna Fifield in Tehran

Just weeks after Jakarta became the only United Nations security council member to abstain from the latest resolution on Tehran’s nuclear programme, Iranian President Mahmoud Ahmadi-Nejad feted his Indonesian counterpart as his “brother”.

“We will take actions to create international peace,” Mr Ahmadi-Nejad said during Susilo Bambang Yudhoyono’s visit to Tehran in March.

They signed five memoranda of understanding, including one to build a $6bn oil refinery in Indonesia. Meanwhile, Mr Yudhoyono (below left) asserted: “Iran’s nuclear programme is of a peaceful nature and must not be politicised.”

This has become a familiar pattern. While Washington is spearheading a campaign to isolate Iran because of its nuclear defiance, Tehran has developed a global strategy using chequebook diplomacy to shore up support for its nuclear programme and help deflect western pressure. A big oil supplier will always have friends, it seems, at a time of sky-high prices and rising fears over supply.

As with the Indonesian summit, Tehran’s talks with developing world leaders often end with Iranian pledges of aid and investment and reciprocal support for Tehran’s right to nuclear energy. In his three years in office, Mr Ahmadi-Nejad has become one of Iran’s best-travelled leaders, making overseas trips almost every month. His itinerary over the past year reads like one of the Bush administration’s “outposts of tyranny” lists: visits included Belarus, Syria, Turkmenistan, Venezuela and Sudan.

Iran has made dozens of investments in the countries Mr Ahmadi-Nejad has visited: 10 flour factories in Venezuela, a dam and power plant in Mali, a $1.5bn (£760m, €950m) loan for infrastructure projects in Sri Lanka, rehabilitating an oil refinery in Zimbabwe.

There is no doubt that these projects are political rather than economic, says Saeed Leylaz, a columnist and outspoken critic of Mr Ahmadi-Nejad’s government. “To understand the diplomatic behaviour of the Islamic Republic of Iran, you have to see that the US is in the middle of it,” he says. “All of our diplomatic efforts are revolving around our nuclear project, and our nuclear project revolves around our relations with the US.”

This is not to say these countries will necessarily be blinded by Mr Ahmadi-Nejad’s largesse: some analysts point out that central and south American countries have happily accepted US aid and then become virulently anti-Washington.

Whether or not they prove ultimately successful, Iran’s recent diplomatic efforts have highlighted the increasingly global nature of its ambitions. “Iran has a global policy of neutralising the effects of the sanctions regime,” says Kaveh Afrasiabi, a US-based political commentator. “The sanctions regime has spurred Iran to look for new friends and to form alliances with them against the US’s global hegemony – and Iran has a lot of economic chips to play.”

Indeed, Saeed Jalili, Iran’s national security adviser, recently said that Iran wanted to become a “global power” and to promote an activist foreign policy prioritising “global justice”.

Rising oil prices mean that Mr Ahmadi-Nejad has had the funds to court allies, despite Iran’s worsening economic situation. Precisely because of rising oil prices, moreover, many developing nations have never been more in need of assistance. One analyst in Tehran said recently that oil at $120 a barrel freed Mr Ahmadi-Nejad’s hand – at that price, Iran could expect to earn $340m a day, or $125bn this year – in oil income.

“If we make some trouble in Lebanon and increase the oil price by $3 a barrel, we will earn an extra $3bn,” the analyst said. “So it makes good business sense to give $500m to Hizbollah.”

Iran is using its huge energy resources to court influence with economic giants as well as small nations. Despite strong US opposition, India welcomed Mr Ahmadi-Nejad to New Delhi this month for talks on a $7.6bn gas pipeline from Iran to Pakistan and India.

The US’s faltering nuclear power agreement with India called for the Bush administration to report on Indian efforts to “isolate, and, if necessary, sanction and contain” Iran.

But India, which imports about 70 per cent of its oil and gas, is looking for new sources of long-term energy to fuel its booming economy, and has been looking at alternatives to nuclear power.

“The litmus test for Iran’s success with this policy will be the finalisation of the pipeline,” says Mr Afrasiabi, because it would clearly illustrate whether India prioritised its relations with the US over its need for energy.

Iran’s global ambitions would be strengthened, analysts say, if Iran joined regional bodies such as South Asia’s 10-nation Economic Co-operation Organisation and the Shanghai Co-operation Organisation, an inter-governmental security grouping headed by Russia and China, which Iran applied to join in March. (Iran was granted observer status, a position denied to the US when it applied in 2005.)

Michael Bell and Mahjoob Zweiri of the University of Jordan say there are obvious incentives to let the world’s second-largest holder of oil and gas reserves into the SCO, adding that it would constitute a significant political statement.

“It shows that two of the world’s most powerful nations have no qualms about aligning with Iran,” they wrote in a recent paper. “Becoming a full SCO member would help Iran counter the US-led strategy to isolate Tehran to compel the regime to curb its nuclear energy programme.”

Washington does not fully grasp the fact that Tehran has a global strategy to win allies, says Michael Rubin, an Iran analyst at the conservative American Enterprise Institute in Washington. “We are in a global struggle against Iran, but Iran is playing chess and we are playing checkers,” Mr Rubin says. “The US can’t hope to counter Iran’s growing influence if first we are blind to what Iran is doing, and second, if Iran has a strategy and we don’t.”