Nuclear Threat or Energy Prey?

Iran may have no nukes, but it has plenty of oil and gas

Wednesday 20 August 2008, by John Foster

Reprinted from the CCPA Monitor Economic, Social and Environmental Perspectives Volume 15 No.3 July/August 2008

Iran is a major oil producer and exporter- the fourth largest in the world. Its proven reserves of oil are the world’s third largest, and those of natural gas rank second. These reserves have figured in previous conflicts with neighbours and world powers. Could they be involved in the current bellicosity towards Iran?

Iran occupies a strategic location in the Middle East. In size, it is bigger than Quebec. It stretches from the oil-rich Persian Gulf in the south to the oil-rich Caspian Sea in the north. It borders the Strait of Hormuz, through which about one-quarter of the world’s oil passes by tankers every day.

Iran shares land borders with seven neighbours: Armenia, Azerbaijan and Turkmenistan to the north; Pakistan and Afghanistan to the east; and Turkey and Iraq to the west. Just across the Persian Gulf lie Kuwait, Saudi Arabia, Bahrain, Oman, Qatar, and the United Arab Emirates. Most of these neighbours are under the U.S. military umbrella. Iran remains a proud and independent nation, outside U.S. control.

Iran enjoys good relations with China and Russia. China is a major investor in Iran and has surpassed Japan as the largest importer of Iranian oil. Russia is helping build the Bushehr nuclear power station and is extending military cooperation. The European Union is a major importer of Iranian oil and is interested in importing Iranian gas via the Nabucco pipeline project. Iran is also friendly with Pakistan and India, with whom it plans to build a 2,800-km natural gas pipeline. It has good relations with Afghanistan, which was once part of ancient Persia and has strong linguistic and cultural ties with Iran.

The United States has been active in its efforts to isolate and harass Iran. It accuses Iran of intending to develop nuclear weapons. Intentions, of course, are very difficult to pin down. What Iran undoubtedly wants to do is generate electricity from nuclear power plants, saving oil and gas for other uses. Its nuclear power aspirations date back to the 1950s when they were supported by the United States. Iran is a signatory of the Nuclear Non-Proliferation Treaty, which explicitly allows the development of civilian nuclear power. The U.S. and others have accused Iran of having a clandestine nuclear weapons program. Investigations continue, but so far the UN’s International Atomic Energy Agency has found no evidence to support such a charge.

The history of U.S. allegations against Iraq, Iran’s neighbour, may be relevant. Initially, President George W. Bush claimed that Iraq had weapons of mass destruction. But none was ever found. Last year, General Abizaid, former commander of U.S. forces in the Middle East, affirmed that Iraq was “largely about oil.” The (made-in-USA) Iraqi oil law, which offered exceptionally favourable terms to foreign oil companies, supports this conclusion. Could the same motivation be driving U.S. policies with regard to Iran? Western powers interfered in Iran several times in the 20th century. During World War II, Britain and the Soviet Union occupied Iran to secure its petroleum for the Allies.

Western meddling occurred again in the 1950s. In 1951, Iran’s democratic government nationalized the Iranian assets of the Anglo-Iranian Oil Company (later British Petroleum). Foreign companies blackballed Iran and no oil flowed for 18 months. Then the CIA engineered a coup in 1953 to topple the democratically elected government and put the Shah back in power. A foreign oil consortium took over and the oil flowed again.

In the Iran-Iraq war (1980-88), the U.S. supported Saddam Hussein. Among the reasons for his attack on Iran was a desire to take complete control of the Shatt al-Arab border river and acquire the adjacent province of Khuzestan. This province has 90% of Iran’s oil and gas reserves. The remaining 10% are in the Persian Gulf, which is heavily patrolled by the U.S. Navy.

Although Iran expelled foreign oil companies after the Islamic Revolution of 1979, it reopened the door for investment after its crippling war with Iraq. European and Asian companies signed huge contracts, but the White House blocked American companies from doing business in Iran. U.S. oil firms have remained out of Iran for the past 30 years— and are very unhappy about losing business opportunities there.

Now the U.S. and others have imposed new sanctions against Iran. The Bush administration denies it is seeking to provoke Iran, but Seymour Hersh, the respected investigative journalist for The New Yorker, thinks otherwise. He quotes a senior Pentagon advisor: “This White House believes that the only way to solve the problem is to change the power structure in Iran, and that means war.”

Scott Ritter, former U.N. weapons inspector, reports that the U.S. has increased clandestine activities and intensified plotting against Iran. He foresees the possibility of intensive aerial bombing of Iran before Bush leaves office.

Bush and Iranian President Mahmood Ahmadinejad have both used inflammatory rhetoric, though some of Ahmadinejad’s widely-quoted threats are distorted translations. What is clear is a desire for regime change by both sides and that any military attack would have world-wide consequences.

The Bush administration maintains that the problem is Iran’s quest for nuclear weapons. Canadian Prime Minister Harper appears to be going along with Bush; in 2006, he called Iran “the biggest single threat the planet faces.” Iran, however, is surrounded by U.S. military bases, including those in Iraq and Afghanistan, so both its sovereignty and its petroleum are the ones under threat.

n his new book, Scott McClellan, former White House press secretary, describes how the Bush administration manipulated public opinion during the run-up to the Iraq war. The U.S. Senate Select Committee on Intelligence has confirmed this view. Senator Jay Rockefeller, chair of the committee, reported that “the administration repeatedly presented intelligence as fact when in reality it was unsubstantiated, contradicted, or even non-existent.” McClellan says the media were “complicit enablers,” who failed to seek out the truth. He asks whether this could be happening again with regard to Iran.

Sorting out truth from fiction is an ongoing challenge. Canadians would be wise to question whether the current dispute about Iran is only about the nuclear issue. Iran’s petroleum resources, and the wealth and power they represent, are a crucial, under-reported part of the story.

John Foster is an international energy economist with 40 years of worldwide experience in energy and international development. He has a unique combination of work experience- with two oil companies British Petroleum and Petro-Canada and two international banks World Bank and Inter-American Development Bank.

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