Does Iran Have The Upper Hand?

Iranian Trump Cards
Iran could "win" Without Nukes

Richard Clarke On Iran









The first time I met Richard Clarke, I was role-playing the president of the United States during a weekend war game hosted by the Security Studies Program at the Fletcher School. That game, held annually and dubbed "SIMULEX," is run by staff from the nation's military graduate schools, such as the National War College and the Army War College. This particular year, 1997, Clarke was observing the progress of the game, as he had a special interest in the scenario.The full scenario is too complex to explain here, but what Clarke was interested in was the fact that an Islamic Chechen separatist group was threatening to detonate a suitcase nuclear device in the Dupont Circle Metro (subway) station here in Washington, D.C. As president of the United States, I found that rather annoying. Especially after we learned that it was an elaborate Chechen bluff, pulled off by a classmate who was a former Navy SEAL. But the scenario had another component, which brings me back to Richard Clarke's comments yesterday at the Center for National Policy, a non-partisan think tank led by Tim Roemer. Richard Clarke, of course, was the head of counterterrorism at the National Security Council at the time of the 9/11 attacks. At the time of the attacks in New York and Washington, Clarke was in the process of being reassigned, having determined that the Bush administration was willingly ignoring the threat from Al Qaeda, preferring instead to focus on turning China into a near-peer strategic threat.

That other scenario element was the simultaneous but opposing movement of Russian and Iranian troops into Azerbaijan, which was, in the scenario and is in real life, an American client and major oil-producing state. Knowing that the Iranians and Russians were racing to be the first in Baku, I ordered my envoys to open talks with both Moscow and Tehran. In the meantime, I initiated a rapid deployment of U.S. forces from Turkey to Azerbaijan. Immediately, my secretary of defense, a military fellow at Fletcher who in real life had just returned from duty in Incirlik, Turkey, protested. He said the United States would never open talks with the Iranians. Never. It was, in our own simulated way, gross insubordination. Everyone else around the table agreed with him. So yesterday it was sweet vindication to hear Richard Clarke, who I believe was in the room at the time of the mutiny, declare that in today's real-world escalation with Iran, there is no military solution to Iran 's efforts to acquire nuclear weapons. Clarke's comments on Iran were prompted by an alarmist question by an unidentified member of the audience who wanted to know what Clarke thought we should do about Iran presumed nuclear weapons program. Clarke's first response was to chastise the questioner for
mischaracterizing the strategic situation in the Persian Gulf. Whereas the questioner tried to paint a picture of a crazy Ahmadinejad leading a rogue Iran and threatening the rest of the Middle East, Clarke insisted that such a portrayal is extremely dangerous. Rather, Iran must be understood as a state with many centers of intern al power, not only populist Ahmadinejad but the elitist Ayatollah Khameini and the more moderate former President Rafsanjani. Power and decisionmaking is distributed between these three centers and that must be used to create an opportunity for de-escalation. The rationale for diplomatic de-escalation and not unilateral military action was Clarke's other point. In a nutshell, Iran has the ability already to make America pay for such a move. Iran, in Clarke's view, has thoroughly infiltrated southern Iraq with intelligence and military personnel. Should the U.S. or Israel drop one bomb on the Bushehr nuclear facility, says Clarke, these forces in Iraq have the capability to make the current insurgency look like child's play, implying that Iran can trigger the Iraqi civil war we've been fearing. Not only that, Iran has the capability to virtually shut down the flow of energy (oil and gas) from the Persian Gulf. Finally, Iran could quite quickly turn up the heat in Afghanistan, where it holds considerable influence with warlords Washington needs to maintain stability. Any of these moves would be an extremely effective check on American military action. Furthermore, characterizing Iran as irrationally seeking to acquire nuclear weapons is impossible to sustain. From Iran's perspective, Clarke reminded us, Bush has labeled it a member of the "axis of evil" and has since invaded and occupied its two largest neighbors, Iraq and Afghanistan. From Iran 's perspective, it is surrounded by an aggressive, unpredictable United States that is willing to lie to its own people to make war in Iran 's front yard. Clarke is very clear: because of these reasons and the simple fact that the United States has no capacity to invade and occupy Iran, the only alternative is to deal. For Clarke, that means working with the moderates, a situation much more difficult since the moderate, dialogue-seeking former-President Khatami was replaced with the conservative-populist Ahmadinejad. That shift happened, in no small part, due to the way in which the Bush administration confronted Iran on the one issue that would push voters towards more conservative leadership. Instead of the true moderate Khatami, now we are forced to work with the weaker and more conservative Rafsanjani.

There is another card that Iran presumably still holds against the United States, one Clarke alluded to only indirectly, that is, Iran 's ability to destabilize Saudi Arabia. On June 26, 1996, Khobar Towers, a U.S. military barracks in Saudi Arabia, was attacked by a truck bomb, killing 19 American service members and injuring 500. Clarke served as counterterror czar at the time. At first, the U.S. suspected Al Qaeda. After a deeper investigation, however, the Clinton administration determined that the operation was inspired and led by Iranian intelligence. Ten years have passed since Khobar and Clarke makes it sound like we know even less about the oil kingdom. Indeed, Clarke claims that the United States is in the same situation in Saudi Arabia as the one in which we found ourselves in the months before the Shah's regime fell in 1979. We simply have no understanding of how stable or unstable the Saudi regime is. If Iran could successfully attack an American military target in Saudi Arabia in 1996, undoubtedly they could also target the ruling family or the kingdom's oil facilities. Ironically, all this analysis actually supports the Iranian claims that they are not seeking nuclear weapons, only the full nuclear cycle for civilian energy. To check the United States, Iran doesn't need nuclear weapons. It already has that capacity.

-Patrick Doherty

Who Will Control Iran's Oil and Natural Gas?

BEWARE THE IDES OF MARCH?
War Drums beat louder, this article is definately worth another review



Published on Monday, April 11, 2005 by TomDispatch.com
Oil, Geopolitics, and the Coming War with Iran
by Michael T. Klare

As the United States gears up for an attack on Iran, one thing is certain: the Bush administration will never mention oil as a reason for going to war. As in the case of Iraq, weapons of mass destruction (WMD) will be cited as the principal justification for an American assault. "We will not tolerate the construction of a nuclear weapon [by Iran]," is the way President Bush put it in a much-quoted 2003 statement. But just as the failure to discover illicit weapons in Iraq undermined the administration's use of WMD as the paramount reason for its invasion, so its claim that an attack on Iran would be justified because of its alleged nuclear potential should invite widespread skepticism. More important, any serious assessment of Iran's strategic importance to the United States should focus on its role in the global energy equation. Before proceeding further, let me state for the record that I do not claim oil is the sole driving force behind the Bush administration's apparent
determination to destroy Iranian military capabilities. No doubt there are many national security professionals in Washington who are truly worried about Iran's nuclear program, just as there were many professionals who were genuinely worried about Iraqi weapons capabilities. I respect this. But no war is ever prompted by one factor alone, and it is evident from the public record that many considerations, including oil, played a role in the administration's decision to invade Iraq. Likewise, it is reasonable to assume that many factors -- again including oil -- are playing a role in the decision-making now underway over a possible assault on Iran. Just exactly how much weight the oil factor carries in the administration's decision-making is not something that we can determine with absolute assurance at this time, but given the importance energy has played in the careers and thinking of various high officials of this administration, and given Iran's immense resources, it would be ludicrous not to take the oil factor into account -- and yet you can rest assured that, as relations with Iran worsen, American media reports and analysis of the situation will generally steer a course well clear of the subject (as they did in the lead-up to the invasion of Iraq). One further caveat: When talking about oil's importance in American strategic thinking about Iran, it is important to go beyond the obvious question of Iran's potential role in satisfying our country's future energy requirements. Because Iran occupies a strategic location on the north side of the Persian Gulf, it is in a position to threaten oil fields in Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates, which together possess more than half of the world's known oil reserves. Iran also sits athwart the Strait of Hormuz, the narrow waterway through which, daily, 40% of the world's oil exports pass. In addition, Iran is becoming a major supplier of oil and natural gas to China, India, and Japan, thereby giving Tehran additional clout in world affairs. It is these geopolitical dimensions of energy, as much as Iran's potential to export significant quantities of oil to the United States, that undoubtedly govern the administration's strategic calculations.
Having said this, let me proceed to an assessment of Iran's future energy potential. According to the most recent tally by Oil and Gas Journal, Iran houses the second-largest pool of untapped petroleum in the world, an estimated 125.8 billion barrels. Only Saudi Arabia, with an estimated 260 billion barrels, possesses more; Iraq, the third in line, has an estimated 115 billion barrels. With this much oil -- about one-tenth of the world's estimated total supply -- Iran is certain to play a key role in the global energy equation, no matter what else occurs.

It is not, however, just sheer quantity that matters in Iran's case; no less important is its future productive capacity. Although Saudi Arabia possesses larger reserves, it is now producing oil at close to its maximum sustainable rate (about 10 million barrels per day). It will probably be unable to raise its output significantly over the next 20 years while global demand, pushed by significantly higher consumption in the United States, China, and India, is expected to rise by 50%. Iran, on the other hand, has considerable growth potential: it is now producing about 4 million barrels per day, but is thought to be capable of boosting its output by another 3 million barrels or so. Few, if any, other countries possess this potential, so Iran's importance as a producer, already significant, is bound to grow in the years ahead. And it is not just oil that Iran possesses in great abundance, but also natural gas. According to Oil and Gas Journal, Iran has an estimated 940 trillion cubic feet of gas, or approximately 16% of total world reserves. (Only Russia, with 1,680 trillion cubic feet, has a larger supply.) As it takes approximately 6,000 cubic feet of gas to equal the energy content of 1 barrel of oil, Iran's gas reserves represent the equivalent of about 155 billion barrels of oil. This, in turn, means that its combined hydrocarbon reserves are the equivalent of some 280 billion barrels of oil, just slightly behind Saudi Arabia's combined supply. At present, Iran is producing only a small share of its gas reserves, about 2.7 trillion cubic feet per year. This means that Iran is one of the few countries capable of supplying much larger amounts of natural gas in the future. What all this means is that Iran will play a critical role in the world's future energy equation. This is especially true because the global demand for natural gas is growing faster than that for any other source of energy, including oil. While the world currently consumes more oil than gas, the supply of petroleum is expected to contract in the not-too-distant future as global production approaches its peak sustainable level -- perhaps as soon as 2010 -- and then begins a gradual but irreversible decline. The production of natural gas, on the other hand, is not likely to peak until several decades from now, and so is expected to take up much of the slack when oil supplies become less abundant. Natural gas is also considered a more attractive fuel than oil in many applications, especially because when consumed it releases less carbon dioxide (a major contributor to the greenhouse effect). No doubt the major U.S. energy companies would love to be working with Iran today in developing these vast oil and gas supplies. At present, however, they are prohibited from doing so by Executive Order (EO) 12959, signed by President Clinton in 1995 and renewed by President Bush in March 2004. The United States has also threatened to punish foreign firms that do business in Iran (under the Iran-Libya Sanctions Act of 1996), but this has not deterred many large companies from seeking access to Iran's reserves. China, which will need vast amounts of additional oil and gas to fuel its red-hot economy, is paying particular attention to Iran. According to the Department of Energy (DoE), Iran supplied 14% of China's oil imports in 2003, and is expected to provide an even larger share in the future. China is also expected to rely on Iran for a large share of its liquid natural gas (LNG) imports. In October 2004, Iran signed a $100 billion, 25-year contract with Sinopec, a major Chinese energy firm, for joint development of one of its major gas fields and the subsequent delivery of LNG to China. If this deal is fully consummated, it will constitute one of China's biggest overseas investments and represent a major strategic linkage between the two countries.

India is also keen to obtain oil and gas from Iran. In January, the Gas Authority of India Ltd. (GAIL) signed a 30-year deal with the National Iranian Gas Export Corp. for the transfer of as much as 7.5 million tons of LNG to India per year. The deal, worth an estimated $50 billion, will also entail Indian involvement in the development of Iranian gas fields. Even more noteworthy, Indian and Pakistani officials are discussing the construction of a $3 billion natural gas pipeline from Iran to India via Pakistan ¬ an extraordinary step for two long-term adversaries. If completed, the pipeline would provide both countries with a substantial supply of gas and allow Pakistan to reap $200-$500 million per year in transit fees. "The gas pipeline is a win-win proposition for Iran, India, and Pakistan," Pakistani Prime Minister Shaukat Aziz declared in January. Despite the pipeline's obvious attractiveness as an incentive for reconciliation between India and Pakistan -- nuclear powers that have fought three wars over Kashmir since 1947 and remain deadlocked over the future status of that troubled territory -- the project was condemned by Secretary of State Condoleezza Rice during a recent trip to India. "We have communicated to the Indian government our concerns about the gas pipeline cooperation between Iran and India," she said on March 16 after meeting with Indian Foreign Minister Natwar Singh in New Delhi. The administration has, in fact, proved unwilling to back any project that offers an economic benefit to Iran. This has not, however, deterred India from proceeding with the pipeline. Japan has also broken ranks with Washington on the issue of energy ties with Iran. In early 2003, a consortium of three Japanese companies acquired a 20% stake in the development of the Soroush-Nowruz offshore field in the Persian Gulf, a reservoir thought to hold 1 billion barrels of oil. One year later, the Iranian Offshore Oil Company awarded a $1.26 billion contract to Japan's JGC Corporation for the recovery of natural gas and natural gas liquids from Soroush-Nowruz and other offshore fields. When considering Iran's role in the global energy equation, therefore, Bush administration officials have two key strategic aims: a desire to open up Iranian oil and gas fields to exploitation by American firms, and concern over Iran's growing ties to America's competitors in the global energy market. Under U.S. law, the first of these aims can only be achieved after the President lifts EO 12959, and this is not likely to occur as long as Iran is controlled by anti-American mullahs and refuses to abandon its uranium enrichment activities with potential bomb-making applications. Likewise, the ban on U.S. involvement in Iranian energy production and export gives Tehran no choice but to pursue ties with other consuming nations. From the Bush administration's point of view, there is only one obvious and immediate way to alter this unappetizing landscape -- by inducing "regime change" in Iran and replacing the existing leadership with one far friendlier to U.S. strategic interests. That the Bush administration seeks to foster regime change in Iran is not in any doubt. The very fact that Iran was included with Saddam's Iraq and Kim Jong Il's North Korea in the "Axis of Evil" in the President's 2002 State of the Union Address was an unmistakable indicator of this. Bush let his feelings be known again in June 2003, at a time when there were anti-government protests by students in Tehran. "This is the beginning of people expressing themselves toward a free Iran, which I think is positive," he declared. In a more significant indication of White House attitudes on the subject, the Department of Defense has failed to fully disarm the People's Mujaheddin of Iran (or Mujaheddin-e Khalq, MEK), an anti-government militia now based in Iraq that has conducted terrorist actions in Iran and is listed on the State Department's roster of terrorist organizations. In 2003, the
Washington Post reported that some senior administration figures would like to use the MEK as a proxy force in Iran, in the same manner that the Northern Alliance was employed against the Taliban in Afghanistan. The Iranian leadership is well aware that it faces a serious threat from the Bush administration and is no doubt taking whatever steps it can to prevent such an attack. Here, too, oil is a major factor in both Tehran's and Washington's calculations. To deter a possible American assault, Iran has threatened to close the Strait of Hormuz and otherwise obstruct oil shipping in the Persian Gulf area. "An attack on Iran will be tantamount to endangering Saudi Arabia, Kuwait, and, in a word, the entire Middle East oil," Iranian Expediency Council secretary Mohsen Rezai said on March 1st. Such threats are taken very seriously by the U.S. Department of Defense. "We judge Iran can briefly close the Strait of Hormuz, relying on a layered strategy using predominantly naval, air, and some ground forces," Vice Admiral Lowell E. Jacoby, the director of the Defense Intelligence Agency, testified before the Senate Intelligence Committee on February 16th.

Planning for such attacks is, beyond doubt, a major priority for top Pentagon officials. In January, veteran investigative reporter Seymour Hersh reported in the New Yorker magazine that the Department of Defense was conducting covert reconnaissance raids into Iran, supposedly to identify hidden Iranian nuclear and missile facilities that could be struck in future air and missile attacks. "I was repeatedly told that the next strategic target was Iran," Hersh said of his interviews with senior military personnel. Shortly thereafter, the Washington Post revealed that the Pentagon was flying surveillance drones over Iran to verify the location of weapons sites and to test Iranian air defenses. As noted by the Post, "Aerial espionage [of this sort] is standard in military preparations for an eventual air attack." There have also been reports of talks between U.S. and Israeli officials about a possible Israeli strike on Iranian weapons facilities, presumably with behind-the-scenes assistance from the United States. In reality, much of Washington's concern about Iran's pursuit of WMD and ballistic missiles is sparked by fears for the safety of Saudi Arabia, Kuwait, Iraq, other Persian Gulf oil producers, and Israel rather than by fears of a direct Iranian assault on the United States. "Tehran has the only military in the region that can threaten its neighbors and Gulf security," Jacoby declared in his February testimony. "Its expanding ballistic missile inventory presents a potential threat to states in the region." It is this regional threat that American leaders are most determined to eliminate. In this sense, more than any other, the current planning for an attack on Iran is fundamentally driven by concern over the safety of U.S. energy supplies, as was the 2003 U.S. invasion of Iraq. In the most telling expression of White House motives for going to war against Iraq, Vice President Dick Cheney (in an August 2002 address to the Veterans of Foreign Wars) described the threat from Iraq as follows: "Should all [of Hussein's WMD] ambitions be realized, the implications would be enormous for the Middle East and the United States.... Armed with an arsenal of these weapons of terror and a seat atop 10 percent of the world's oil reserves, Saddam Hussein could then be expected to seek domination of the entire Middle East, take control of a great portion of the world's energy supplies, [and] directly threaten America's friends throughout the region." This was, of course, unthinkable to Bush's inner circle. And all one need do is substitute the words "Iranian mullahs" for Saddam Hussein, and you have a perfect expression of the Bush administration case for making war on Iran. So, even while publicly focusing on Iran's weapons of mass destruction, key administration figures are certainly thinking in geopolitical terms about Iran's role in the global energy equation and its capacity to obstruct the global flow of petroleum. As was the case with Iraq, the White House is determined to eliminate this threat once and for all. And so, while oil may not be the administration's sole reason for going to war with Iran, it is an essential factor in the overall strategic calculation that makes war likely.

Michael T. Klare is a professor of peace and world security studies at Hampshire College and the author of Blood and Oil: The Dangers and Consequences of America's Growing Dependency on Imported Oil (Metropolitan Books).
© 2005 Michael Klare

Oil War US versus China?

RESOURCE WARS
China Making Big Oil Moves

The country's steps to secure reserves have prompted worries about political implications.

By Don Lee, Times Staff Writer

SHANGHAI — Anyone who thought China's global quest for oil would be slowed by its failed attempt to acquire Unocal last summer should think again.In recent months, Chinese oil companies have made a string of moves aimed at securing overseas reserves — moves that have broader economic and political implications for China and the United States, the world's two biggest consumers of crude. State-controlled CNOOC Ltd., which abandoned its bid for Unocal after it triggered political opposition in Washington, said this month that it would spend $2.3 billion for a large stake in a Nigerian oil field. Now the Hong Kong company is reportedly eyeing a possible offer for an oil producer in Kazakhstan that may be worth $2 billion. Last fall China's largest oil company, China National Petroleum Corp., took control of PetroKazakhstan for $4.2 billion. A month ago, China National Petroleum and India's Oil & Natural Gas Corp. teamed up to buy Petro-Canada's stake in Syrian oil fields for $573 million. That came after China National Petroleum led a Chinese consortium that outbid the Indian company for oil assets in Ecuador in a $1.4-billion deal. "Wherever there's oil, that's where we'll go," said Gong Jinshuang, a senior engineer at China National Petroleum.For Beijing, securing oil and other forms of energy is crucial to sustaining the nation's strong economic growth. In about a decade, China has gone from being a net exporter of crude to one that relies on imports for 40% of its oil needs. By 2030, China's dependence on foreign oil is expected to rise to 60%, which is the current level for the U.S.China's "go-out" energy strategy, formalized in the fall of 2004, has pushed its oil companies to pursue deals abroad and its political leaders to forge stronger ties with resource-rich nations, including those governments that are at odds with the U.S., such as Iran and Sudan.Energy also has been a central part of China's deepening relations with developing countries in Africa and Latin America, some of which have become disillusioned with the U.S. and the West. In a recent visit to Beijing, Bolivia's new populist president, Evo Morales, called China an ideological ally and invited the Chinese to invest in the Andean country's large natural gas reserves.Some Western analysts see these relations as signs that China and the U.S. are on a collision course over oil. Two years ago, China and Iran signed a $70-billion deal in which China's Sinopec Group would develop Iran's Yadavarn oil field in exchange for agreeing to buy millions of tons of Iranian liquefied natural gas.China's economic links with Iran are seen as a major factor in the Asian country's reluctance to support American and European calls to refer Iran's nuclear program to the United Nations Security Council. Chinese officials, for their part, have sought to dispel notions that political ambitions underlie the country's global hunt for oil. Beijing also has been highly sensitive to widespread reports last year that blamed China for the sharp run-up in global crude prices. Recently Chinese officials issued a report showing that the nation's consumption of oil actually flattened in 2005, after increasing by 15.4% in 2004.The report stumped analysts. The International Energy Agency had forecast China's oil consumption last year to have grown by 3%. Chinese analysts say the discrepancy may have been caused by a drop in oil storage in 2005, along with a greater supply of other sources of power.Still, China continues to struggle with oil and diesel shortages, and the Paris-based energy agency is projecting that China's oil demand will grow again this year, by 5.9%, in turn helping boost overall global demand by 2.2% this year, from 1.3% in 2005. The upshot is that there's likely to be more upward pressure on crude prices, especially amid tight supplies and heightened political tensions. Wenran Jiang, a China specialist at the University of Alberta in Canada, says the recent oil deals by CNOOC and China National Petroleum indicate that the "scar from Unocal was not that big…. They are not going to disengage."For CNOOC, which is publicly traded in Hong Kong and New York but majority owned by the Chinese government's China National Offshore Oil Corp., the Nigerian oil and gas deal marks its first base in Africa and the company's biggest acquisition. Still, it's just one-eighth of the $18.5 billion that CNOOC offered for Unocal, the El Segundo-based oil company that was eventually taken over by Chevron Corp. after some in Congress sought to block CNOOC's bid, citing security concerns.As with its Unocal offer, CNOOC asserted that its investment in Nigeria's Akpo field was for commercial reasons. Analysts said the company was likely to sell its share of the project's oil output to Europe and the U.S. rather than to China because of the transport costs.Although this deal won't directly increase China's oil reserves, Akpo should help boost the country's natural gas supply, said Han Xiaoping, chief information officer at Falcon Power Ltd., a consulting firm in Beijing. "The priority task of CNOOC is to be larger," he said. "That is very important to solve China's energy shortage."Fu Chengyu, the USC-trained chief executive at CNOOC, said the Nigerian acquisition was in line with the company's strategy of building its reserves and diversifying its assets. Akpo's recoverable reserves of oil have been estimated at 620 million barrels. Company executives declined to comment about reports that CNOOC was weighing a bid for Canada-based Nations Energy Co., the owner of a large oil field in Kazakhstan. Yang Fuqiang, Beijing chief of the U.S.-based Energy Foundation, said that in hindsight it was a good thing the Chinese didn't buy Unocal. The price was too high, he said. "It was trying to take too big of a bite." As for Chinese oil companies, Yang said, you'll find them continuing to prowl the globe. "With the high demand in China, they will keep going," he said. "Even if they fail many times, they will never stop to go out to the international market."*

Times researcher Cao Jun in Shanghai contributed to this report.