The Oil War II and How Iran Can Strike Back

Tuesday, December 2, 2014

A Joint Iran-Russia Maneuver in Persian Gulf Can Send A Message 

Kaveh L. Afrasiabi    

We are now in the middle of an undeclared “oil war" led by Iran's traditional nemesis in the region, Saudi Arabia, which is singularly responsible for last week's OPEC impasse over the need to curtail production. Widely interpreted in the Western media as Saudi Arabia's 'gift' to the Americans to hit Russia and Iran with it as a potent weapon in the Ukraine and nuclear crises, the so-called "oil card" has resulted in the steep decline of oil prices since June, 2014, coinciding with the Saudis' other "ISIS card" that began to wreak havoc in Iraq around the same time. 

This is reminiscent of the 1980s when the Saudis dutifully played their role in the American design to wreck the Soviet economy through an oil price collapse. According to Igor Gaidar, a former minister of economy, this was clearly the mortal blow that brought the Soviets to their knees. In his book, titled “The Oil Card: Global Economic Warfare in the 21st Century”, author James Norman has provided a detailed account of the CIA-led covert war that accompanied the oil war against Soviet Russia, relying on a mix of tactics including the deliberate manipulation of oil and trading markets and Saudis sudden increase of their output from 2 to 5 million barrels a day, forcing a huge decline in oil prices to the detriment of oil-dependent Soviet Union. Back then, the Soviets made the mistake of passively taking the blows without ever finding any suitable countermeasure. Another author, Peter Schwizer, in his well-documented book titled “Victory: The Reagan Administration’s Secret Strategy” that hastened the collapse of Soviet Union has written that this strategy’s main element was a systematic campaign to “reduce dramatically the Soviet hard currency earnings by driving down the price of oil with Saudi cooperation.” Three decades later, due to US’s secrecy, there is still a great deal of unknown about the US’s oil-based offensive against Soviet Union that crippled the latter and won the cold war for the West. 

A historical de ja vu, the Saudis have now embarked on re-enacting their past controversial role, albeit with the modification of adding Iran as a target, in light of the recent concerted efforts by the Saudis to demonize Iran as an “occupying force" that is "part of the problem" in a vast stretch of Arab lands from Syria to Iraq to Lebanon and Yemen, to paraphrase the Saudi foreign minister, Saud Al-Faisal. Riyadh is reportedly already selling oil below the average spot price at $50 to $60 per barrel in the Asian markets and North America, according to Rashid Abanmy, President of the Riyadh-based Saudi Arabia Oil Policies and Strategic Expectations Center. The Gulf states will be less affected by the price drop, Abanmy has noted.    

Clearly, the Saudis' intention is to economically weaken both Iran and Russia and thus render a useful and timely service to their Western protectorate powers. Their refusal to heed the concerns of Iran, Venezuela, and a number of other OPEC members at the latest OPEC meeting is indicative of a boundless Saudi arrogance that is bound to backfire against them and multiply their problematic relations with both Tehran and Moscow, who nowadays see themselves as victims of a highly malicious energy warfare led by a strong US ally that partly dances to the rhythm of its own tune, even though this is a highly dangerous gambit and carries negative ramifications on their own oil-dependent  economy. In the coming weeks and months, grappling with the hard-currency shortfalls due to the oil war, the governments in Iran and Russia will be forced to re-evaluate their budgetary policies and will likely slash some of their social expenditures in order to deal with the sudden collapse of oil prices.   

Riyadh's other intention is ostensibly to avoid a "bad nuclear deal" between Iran and the West, by weakening Iran economically and thus forcing Tehran to accept a less than honorable deal, one that does not translate into an Iranian 'free rein' or "sphere of influence" politics in the region. Still rattled by last year’s secret US-Iran talks in Oman, the Saudis feel less than secure about their traditional monopoly of US's amity in the region, hoping to somehow put a stop on the express train of US-Iran rapprochement. If so, then of course the Saudi ruling elite is up for a rude awakening, in light of the stern warning by Iran's Supreme Leader that Iran will never accept a deal that transgresses its’ red lines', and the train has left the station.     

Nor is Riyadh correct in propagating an Iranophobic security discourse in the GCC (Gulf Cooperation Council) region, which is in contradiction to the growing phenomenon of economic interdependence between Iran and a number of GCC states such as Oman, Kuwait (which is poised to receive gas from Iran), and UAE. Compared to Saudi Arabia which has a negligible trade relations with Iran, these other GCC states are sure to benefit from the end of Iran sanctions presently inhibiting trade with Iran. Despite the sanctions, Iran's trade with GCC is well over $30 billion dollars per year and will likely jump noticeably much higher if the nuclear talks succeed.  For the Saudis, a closer Iran relations with the smaller GCC states, whom the Saudi rulers have long controlled and made subservient to themselves under the banner of containing the 'Iran threat," is a nightmare, particularly since the Saudi political structure is slowly but surely crumbling by the weight of societal modernization, which has not yet reached the political system unfortunately, although it is only a  matter of time, no matter how the archaic rulers resort to such outside fears as "Persians are coming" to deflect attention from their own structural problems at home and in the GCC region.   

No doubt, it is a sheer mistake to solely blame the Saudis for the current oil 'price crash' that has foisted on the horizon the ominous prospect of even $40 a barrel, down from $115 a mere five months ago. The market forces of supply and demand have played the principal role, but as Russia's President has rightly noted, "at some moments of crisis it starts to feel like it is the politics that prevails in the pricing of energy resources.” This refers first and foremost to the sinister political decision of Saudis to refrain from any output reduction as part of their "geo-economics" game of strategy vis-a-vis Iran and the Shiite-dominated Iraq, which is presently suffering by the hordes of GCC-backed ISIS terrorists. This double whammy of Wahhabist poison will no doubt culminate in a self-poisoning chariot to regional instability and increased tensions with Iran and Russia should the Saudis continue to 'play with the fire' that will inevitably spread to their own kingdom sooner or later. As the Saudis savor their 'moment of revenge' against their Persian neighbor today, they must also bear in mind the tsunami of anti-Saudi passions they may have generated in Iran, Iraq and elsewhere in the Middle East due to their self-seeking mischief -- which is rooted in their inability to properly understand the causes of tensions and unrest that are not in any way reducible to Iran. It is indeed the Saudis' Iranophobic reductionism that is a source of the problems in Persian Gulf today.    

But, if the Saudis are under the illusion that their economic warfare will go unchallenged, as it did in the1980s, and Iran will simply confine itself to verbal expressions of grudges, then they are seriously mistaken and are up for a big surprise. Their fateful decision to unleash the 'oil card' has definite ramifications throughout the region and it will not be long before the pre-modern ruling elite is struck with the reality of serious backlashes against them, which can conceivably come in different forms and stages.   

As far as Iran is concerned, the Saudis have now added to their sins a concerted and malicious public campaign to frustrate the Iran nuclear negotiations, in light of Saudi foreign minister's unusual show up in Vienna and meeting with the US Secretary of State John Kerry in the middle of the last round of talks in Vienna. According to the media reports, the Saudi minister pressed Mr. Kerry against making a deal with Iran,  particularly one that left Iran with a nuclear "threshold capability." Although his mission must be considered a partial success, the Saudi Minister must still reckon with the probability of a nuclear deal a few months down the road, which will likely result in enhancing Iran's role and status in the region. Simultaneously, the Saudis may need to prepare themselves for closer Iran-Russia cooperation to offset their perceived "Saudi threat" that is, economically speaking, existential in nature.    

Henceforth, a more robust Iran-Russia cooperation vis-a-vis the Saudis is called for based on shared concerns and security outlooks, and can conceivably include a joint Iran-Russia maneuver at the Saudi’s front yard in Persian Gulf. Such a development, as a logical response to the confrontational economic warfare waged by the Saudis and others, will likely send shivers throughout the worn-out kingdom that is nowadays desperately trying to impose its will on the smaller GCC states; Riyadh dreads the recent improvements in Iran's relations with such GCC states as Oman and Kuwait, and is determined to reverse the momentum in its favor. It wants to neutralize the Iranian threat and in so doing it has also antagonized Russia as well, thus facing the big question of how to escape the giant bear that can flex its military muscles anytime. After all, this is not Cold-War 1980s and Russia and Iran have come a long way and realized that inaction is not an option.

*Kaveh Afrasiabi, PhD, is the author of several books on Iran’s foreign policy. His writings have appeared on several online and print publications, including UN Chronicle, New York Times, Der Tagesspiegel, Middle East Journal, Harvard International Review, and Brown's Journal of World Affairs, Guardian, Russia Today, Washington Post, San Francisco Chronicle, Boston Globe, Mediterranean Affairs, Nation, Telos, Der Tageszeit, Hamdard Islamicus, Iranian Journal of International Affairs, Global Dialogue.

Key Words: Oil War II, Iran, Iran-Russia Maneuver, OPEC, Saudi Arabia, ISIS, Systematic Campaign, Oil Prices, US-Iran Talks, Nuclear Deal, Iranophobia, Gulf Cooperation Council, Afrasiabi

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*Photo Credit: Mehr News Agency, IRNA

*These views represent those of the author and are not necessarily Iran Review's viewpoints.

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