Forthcoming nuclear talks with Iran critical for global economy: report

Global fears of a regional war in the Middle East have escalated recently and were reinforced with the size of the military presence in the Arabian Gulf and the Mediterranean Sea, a recent report by the International Center for Development Studies said.

The London-based organization pointed out in its report, a copy of which was received by Al Arabiya, that those concerns coincided with the continuing instability in many countries of the region following the events of the Arab Spring.

All of these things cast a shadow on the world economy which is already suffering from the crisis of sovereign debt in Europe and weak economic growth rates.

This has clear reflection on the social stability of many European countries such as Greece, Spain and Italy, having strikes and protests over austerity policies pursued by the governments of these countries to reduce the effect of the economic downturn and the subsequent crises.

The global markets instability has shown the significant impact of two important events: the negotiations with Iran over its possession of nuclear weapons, known as the (5 +1) and the U.S. elections later on this year.

Iran has been threatening to shut down the Strait of Hormuz, through which more than 40 percent of the world's oil is delivered.

This issue had a clear impact on the world oil market prices. Western sanctions imposed on the import of Iranian oil have also contributed to a further rise in price which reached $125 per barrel.

Worldwide shortage of energy supplies

This led to a shortage of energy supplies around the world. Saudi Arabia and other oil countries try to fill the gap of Iran in order to reach the level of 12.5 million barrels per day after that was up to 10 million barrels per day.

Iran has questioned the ability of Saudi Arabia to reach this level of production while Europe, the United States and Japan have their fears of not being able to succeed the blockade imposed on Iran on the one hand and accelerate the pace of production to support the exhausted economies on the other.

Saudi Arabia confirmed in more than one occasion its ability to fill the gap in global markets. Also, the return of Iraq and Libya strongly to oil markets reduces the fears of shortages in supply.

China and India helped to reduce the potential effects of the western blockade imposed on the Iranian oil by continuing to import it.

Iran has been able to find appropriate ways to sell its oil and to achieve significant financial returns of up to $55 billion, according to Iranian officials. While Europe suffers from high energy costs, which has negative impact on their economies.

Iran, according to the report, appears to have come to realize very well that any rise in the price of a barrel of oil does not harm them as much as it harms the economies of consuming countries that are imposing a blockade and economic sanctions.

This understanding was reflected on Iran’s recent policy of escalating tension in the Middle East and the world. Iranian intervention in Iraqi affairs and encroaching on their joint oil fields (from the viewpoint of Iran) would work in its interest. So Iran has recently resorted to a policy of tensioning the political climate in this strategic region for it can have direct effects on the economy of the United States and its allies.

The report underlined that Iran tries from time to time to raise controversial issues, as it happened recently regarding the UAE islands, where Iran took number provocative actions including the visit of the Iranian president to one of these islands, setting up missile bases and the procedures of annexing these islands to provinces in Iran.

These and other acts were clearly designed to raise tension in the oil-rich region.

High oil prices have begun to have its impact on the lives of the average American citizen. This is no good for president Obama’s campaign for presidential elections later this year.

The U.S. administration realized that this game can no longer continue once the causes of tension created by Iran are sorted.

From this starting point, the United States designed a set of procedures to calm the atmosphere in the Middle East and alleviate the situation of chaos as follows:

Iraq-wise

The United States of America pressed heavily on the different Iraqi parties to return to the negotiating table to talk and move away from the language of escalation that prevailed recently between Baghdad and the Kurdish region over the backdrop of oil contracts.

The administration of president Obama advised president Barzani to return to dialogue with Baghdad and resolve outstanding differences between them as soon as possible.

This can be looked at as a U.S. support for Maliki’s government, which has close ties with Iran.

Syria-wise

With respect to the Syrian file, there were clear signals from the U.S. administration to accept the idea of giving a chance for international observers after months of talk about the overthrow of the Syrian regime and, if necessary, arming the opposition.

Arabian-Gulf-wise

The United States of America committed itself to sit Iran and UAE around the negotiating table to resolve the problem of the islands (disputed) through the International Court of Justice.

This American position comes despite the fact that Iran has deployed missiles and weapons on these islands.

Worldwide-wise

The United States and its allies in the European Union agreed to join the negotiating table with Iran (5 +1 talks) scheduled to be held in Baghdad on May 23, 2012, without any conditions.

This is an important development in the attitudes of Western countries, which opposed any negotiations unless Iran showed a more flexible position.
The other interesting thing is the remarkable statement of the chief of staff of the Israel Defense Forces, Benny Gantz, who stated that he doesn’t believe Iran will decide to make nuclear weapons and that Iranian key decision makers are rational.

According to Gantz, western pressure on Iran by means of diplomacy and economic sanctions has had an effect on Tehran’s rulers.

It is clear from the foregoing that Iran has been trying recently to raise the crisis internationally, while the United States and its allies are turning towards a truce.

According to the report, the Iranian regime faces public unrest lead by reformers and advocates of public freedoms. Also the corruption of several associates of president Ahmadinejad has been an issue for public debate in Iran. In addition, Iran is trying to ease the economic sanctions imposed on it.

Iran keeps on maneuvering

For all these reasons, the Iranian government keeps on maneuvering by threatening to cut off oil supplies to Europe and to target oil tankers in the Strait of Hormuz, and by provoking UAE over its islands, .

On the other hand, the U.S. administration would like to calm things down in its efforts to recover the global economy, as well as to ensure a smooth flow of energy supplies of oil and gas without any rise in prices that America and its partners in the European Union cannot bear.

In addition, president Obama is well aware that electoral choices are closely linked to its ability to provide a good economic situation inside the U.S. and the ability to reduce unemployment and provide more jobs and move the wheel of the U.S. economy.

The U.S. administration is betting heavily on the ability of economic sanctions to escalate the popular protest movement inside Iran, just as in the case of Iran’s ally, Syria.

The U.S. administration believes that the fall of the President Assad’s regime is the beginning of the fall of the Iranian regime.

The report said that according to the above and to the statements of Western and Iranians officials, the likelihood of a deal between Washington and Tehran over Iran’s nuclear capabilities is realistic and required at least from an economic standpoint.

The Iranian acceptance to halt the enrichment of Uranium to the level of 20 percent and to stop the program of enriching Uranium higher than the borders of medical isotopes will be subject to a set of conditions.

As a gesture of goodwill, Iran expects a partial and gradual abolition of economic sanctions on companies dealing in and transporting Iranian oil, and lifting the international embargo on Iranian banks.

But this deal would be a political truce between the parties that will not last for long as it relates to oil prices and the ability of producing countries like Saudi Arabia, Iraq, Libya and South Sudan to increase its oil exports.

On the other hand, this deal is directly linked to the outcome of the upcoming U.S. election. Pressure groups in the U.S. Congress would prefer the option of tightening sanctions on Iran, even if it took a high cost, while Obama prefers to continue the policy of diplomacy that do not lead to high political and economic risks. Also, Obama’s approach takes into consideration reducing the cost of living and finding more jobs for the American citizens.

The question is how long this tug of war will last between Iran and the United States before they cut off the rope?