Iran's pain triumph of rhetoric

There are cynics among us who would argue that the European Union's oil sanctions against Iran, which went into full effect on July 1, are a double triumph for Israel's Prime Minister, Benjamin Netanyahu.

If you assume that the real reason for his apparent hysteria over the alleged threat of Iranian nuclear weapons is to divert international attention from illegal Israeli settlements in the occupied Palestinian territories, then his strategy has been a spectacular success.

The main reason Israel's allies are imposing these sanctions is to head off an Israeli military strike against Iran that would destabilise the entire region.

In the meantime, no-one is talking about the Palestinians.

In addition, the wily Netanyahu gets a bonus because the sanctions really will hurt Iran economically.

It is Israel's most dangerous and implacable enemy, and suddenly its oil exports, and with them its hard-currency earnings, will be cut in half. Not a bad return on an Israeli policy that cost nothing except some threatening rhetoric.

Not everyone is convinced that Netanyahu's wild talk about attacking Iran is just hot air. A whole parade of senior Israeli military and intelligence officials has gone public to say there is no imminent threat of Iranian nuclear weapons, and that attacking Iran pre-emptively would be stupid.

Clearly, they think Netanyahu is a mad dog, but many others remain unconvinced.

In any case, the question is not Netanyahu's strategy, but whether these sanctions will hurt Iran so much that it has to give up its cherished programme for an independent capacity to enrich nuclear fuel to make the pain stop.

The answer is: probably not, but they're going to hurt a lot.

The European Union normally takes about one-fifth of Iran's exports. If Iran cannot find new markets elsewhere, the loss of those exports would be serious but not crippling. However, at the same time, the United States is imposing punitive measures on countries elsewhere that continue to buy Iranian oil, and Europe has banned its maritime insurance companies from selling cover to ships carrying Iranian oil.

European companies still dominate the global market for maritime insurance, so that matters.

While the most powerful countries outside Europe can safely defy the US's threat of punitive measures, knowing that they can negotiate exemptions, many weaker countries have no choice but to obey the US's demands.

A week ago, an Iranian official admitted privately that the country's oil exports had already fallen 20 to 30 per cent from the normal level of 2.2 million barrels a day. It is estimated that by July 1, the day all the sanctions came formally into effect, lost sales of Iranian oil amounted to more than a million barrels a day, about half of the usual total.

This is not a trivial matter for Tehran. Given that the price of oil is also significantly down and that Iran is heavily discounting oil sales to its traditional customers to keep them from defecting, its ability to pay for imports will be severely constrained – in a country where the average price of 10 basic foods has risen 70 per cent in three months.

As well, Iran is already storing oil offshore in tankers, but that is only a short-term solution to the problem of what to do with the unsold surplus. It is also cutting back on how much oil it pumps.

But after a certain point, Tehran can no longer deal with the problem simply by cutting production at all its wells. It has to start shutting some down.

The longer the sanctions last, the more difficult it will become for the Iranian regime.

Yet there is almost no chance that Iran will back down. This is a country that has faced a century of exploitation and humiliation at the hands of the West, and even those Iranians who loathe the regime will close ranks in defence of their nation's right to enrich its own nuclear fuel.

On the other side, US President Barack Obama will continue to tighten the screws, because he dares not gamble that Netanyahu is only bluffing about attacking Iran, at least until he has won re-election in November.

There is no sign that other oil-exporting countries will show solidarity with Iran, and there is enough oil on the market at present that nobody else will go short of it because of the embargo.

So it will be a long confrontation, and a miserable experience for the average Iranian, but for the rest of the world, it will just be a news story.

* Gwynne Dyer is a London-based independent journalist whose articles are published in 45 countries.

Manawatu Standard