Iran: Another Oil War in the Making


As preparations for war against Iraq intensified in the fall of 2002, neo-conservatives in Washington were fond of remarking that "the road to Tehran runs through Baghdad." The toppling of Saddam Hussein was to be the first step in remaking the map of the Middle East through military force. Syria and Iran were on the hit list, and even Saudi Arabia was suggested as a candidate for regime change.

Three years after invading Iraq, the U.S. military is bogged down but that hasn't cooled the ardor for invading Iran. Since late last year, the Bush administration has stepped up pressure on Iran. While there is no certainty that the United States will attack, the timing is suspicious: Why threaten a military strike possibly involving nuclear weapons against a country that, even by CIA estimates, is ten years away from building an A-bomb? In many ways, it seems a replay of the Iraq War: attack a reactionary Middle East regime with vast oil reserves over the issue of weapons of mass destruction and terrorism, pressure or bribe other countries and international institutions to join in the campaign, talk diplomacy but place intolerable conditions that doom any negotiations, all the while preparing for war.

The maneuvering against Iran is part of a larger neo-conservative project to ensure U.S. global supremacy for the 21st century. The plans have been kicking around since 1992 when then-Defense Secretary Dick Cheney oversaw Undersecretary for Policy Paul Wolfowitz in drafting a Pentagon planning document that stated, "In the Middle East and Southwest Asia, our overall objective is to remain the predominant outside power in the region and preserve U.S. and Western access to the region's oil."

The larger goal was to prevent the emergence of a "new rival" on the scale of the Soviet Union, or even significant regional powers. After being formalized as the Project for a New American Century in 1997, the plan was put into action after the September 11 attacks. The network of U.S. bases established since then have been aimed at intervening in "critical" regions: the Middle East, Southwest Asia, Russia and former Soviet republics, East Europe, and East Asia. The main targets are China and Russia, which are seen as potential rivals. But Western Europe and Japan are targets in a different way. While they are defined as allies, the U.S. goal is to keep them dependent through military might and control of strategic oil and natural gas reserves.

All about oil
With regard to Iraq and Iran, it's all about the oil. Tom O'Donnell, a physicist at the University of Michigan who studies the "globalized oil order," says the reason a conflict with Iran is coming to a head now is because "there is a shortage of capacity in the oil sector and that can only be made up by the Gulf States in the Middle East, and Iraq and Iran are way below potential." O'Donnell says that the International Energy Agency estimates that by 2020 the world will need a three-quarter increase in pumping capacity over 2001 to meet growing demand and that big oil projects "take seven to ten years to come on line." Hence, the urgency felt by the U.S. government to deal with Iran now.

Even today, the world is facing limits on crude oil production, as evidenced by record-high oil and gasoline prices. This is not due to "peak oil"-the idea that there are present-day geological limits to production-but rather U.S. foreign policy. The Middle East contains about two-thirds of the world's known liquid crude oil reserves. After Saudi Arabia, Iraq and Iran are number two and three in the region and world, but have seen their oil industry hobbled by U.S. policy.

For Iraq, sanctions kept oil exports under two million barrels a day after the oil-for-food program was established in 1997 (and virtually nothing for the six years prior to that). Iraq was also thwarted from making basic repairs to its oil industry. From 1998 to 2001, Iraq applied to purchase some $2.5 billion in spare parts for its oil industry allowed to it under the sanctions, but received only $953 million in goods.

In terms of Iran's oil industry, U.S. policy has been to throttle its development. On March 15, 1995, President Clinton issued Executive Order 12957, which banned U.S. companies from investing in Iran's oil and natural gas industries. This was followed up two months later by another executive order forbidding all U.S. trade and investment with Iran. Then, in December 1995, Congress passed the Iran-Libya Sanctions Act, which threatened punishment of any foreign company investing more than $20 million in Iran's energy sector in a single year.

O'Donnell says few foreign companies are willing to make substantial investments in Iran's energy sector because of the U.S. sanctions and recent threats by the Bush administration to penalize banks that provide financing to Iran. But "everyone is clamoring for investment, including American companies," he adds. The Bush administration won't allow Iran's oil production to grow under the clerical regime, argues O'Donnell, because that will allow Iran to use oil as a weapon. Iran pumps 3.8 million barrels of oil a day, but it only exports 2.7 million. In an interview with Reuters Television on April 19, International Energy Agency Executive Director Claude Mandil underscored why Iran is currently unable to use oil as a weapon. Mandil said, "If we have to offset Iranian exports ... we have kept over 4 billion barrels (of stocks), which can last several years."

Iran has repeatedly offered to give up uranium enrichment almost completely, as part of a "grand bargain" with the United States. In return, Iran wants a security guarantee that it will not be attacked, and sanctions lifted off its energy sector. After the fall of Baghdad in April 2003, Iran offered the Bush administration a "respectable effort to lay out a comprehensive agenda for U.S.-Iranian rapprochement," the Washington Post reported on June 18. Iran "suggested everything was on the table-including full cooperation on nuclear programs, acceptance of Israel, and the termination of Iranian support for Palestinian militant groups." Flush with "victory" however, the Bush administration spurned the proposal.

As a precursor to negotiations, the Bush administration is demanding that Iran suspend all enrichment activity. In return, it's offering Iran spare parts for aging airliners (from Boeing), support for entry into the World Trade Organization and light-water reactors. Iran has turned down the offer of light-water reactors, however, noting that it would be required to import enriched uranium to fuel them, leaving the country vulnerable to political pressure. Light-water reactors are also less efficient at producing plutonium than heavy-water reactors, one of which Iran has at Arak. Abundant in natural uranium, Iran says the issue is its legal right to enrich uranium for whatever type of reactor it employs.

By giving up its one trump card- uranium enrichment-this deal would leave Iran with almost no bargaining power, no security guarantee, and no lifting of sanctions. The United States is essentially making an impossible demand on Iran, says O'Donnell, "because they want to inflame the conflict. They want to do it over nuclear weapons because it would look bad to do it over oil."

Domestic discontent
At the same time, Iran's ruling elite, often referred to as hardliners, as opposed to the opposition labeled reformists, also benefits from the confrontation with the United States. Faramaz Farbod, a native of Iran and an adjunct professor of political science at Moravian College in Bethlehem, PA, explains that President Mahmoud Ahmadenijad is "a second-generation revolutionary, a throwback to the 1979 era." During the Islamic revolution in the late seventies, the hardliners used the hostage crisis to sweep away dissent. Now, says Farbod, "some would probably welcome a limited U.S. attack. It would allow them to get rid of all their opponents. Even short of a military confrontation, the present political confrontation also helps the hardliners in repressing dissent."

"These guys are not Saddam Hussein," says Farbod, "they have a social base, albeit probably a shrinking one." He describes the hardliners' base as the domestic petite bourgeoisie, while their discourse is aimed at the poorer classes. Ahmadenijad's government promises them "cheaper bank loans and tapping into oil reserve" funds to prop up the system of food and fuel subsidies.

If Ahmadenijad "can't remove the U.S. sanctions on Iran, he can't deliver on these promises," says Farbod. "This is one of their goals [in trying] to remove U.S. sanctions with the bargaining chip of uranium." Iran is in an economic crisis that will only worsen, says Farbod. "The official unemployment rate is 15 percent. To keep pace with this rate, the government needs to create about 700,000 jobs a year. Most economists point to the fact that the government can produce only half of this. With unemployment, we have the problem of poverty. The population in Iran has doubled since the revolution. The economic situation is worse than in the late nineties. Many people have two, three jobs."

There are three facets to the economic crisis, explains Farbod. The first is "the petroleum curse, which makes for laziness on the side of the economic sector of countries that rely on petroleum." About half of Iran's governmental budget comes from oil and gas exports. The second is "the massive control that secretive foundations have over the economic lifeline of the republic, which are unaccountable. These are pseudo-religious foundations, since religion is political in Iran. They control almost all the domestic economic activities-service, agriculture, manufacturing. They have their tentacles everywhere.... We have no idea how the funds are used."

The third aspect is the U.S. sanctions, which "have limited the amount of direct foreign investment." The sanctions also negatively affect "the climate of domestic investment by increasing the general insecurity of economic activity. Removing the sanctions would lead to greater growth, greater Foreign Direct Investment, increase the investment security domestically, and domestic sources of capital would feel more secure to invest their resources."

Ahmadenijad came to power following the failures of the reformists under former President Mohammad Khatami. Stymied by conservative factions, Khatami was "more interested in maintaining the regime of clerical power than reforming it." Farbod says during the 1990s, "The whole dominant political discourse inaugurated by Khatami was on social freedoms, social democracy, participatory democracy, religious democracy, and civil society." These themes have now been supplanted by "the economy, security, nuclear development."

But, Farbod adds, "These are code words. Ahmadenijad has introduced this discourse of independence that goes in part to the 1979 revolution as well as to the early 1950s when Iran's popular Prime Minister Mohammed Mossadeq nationalized the oil industry, took on the British empire, and gained tremendous popular respect at home. The regime's focus on security and nuclear development is aimed-at least in part-at reproducing this legitimizing discourse."

Looking ahead, it would be a mistake to think that the United States will not attack Iran because it's bogged down in Iraq, argues O'Donnell. Writing in the June issue of Z Magazine, he suggests that the United States would first try to cripple Iran's air force, making Iran "susceptible to ground incursions by various forces hostile to the regime. These might include Kurdish, Azerbaijani, and other nationalist separatist forces, which have long fought against Iran's central government."

Iran is clearly in a fix. The mullahs are loath to capitulate to U.S. demands since this would imperil them at home, while the United States has succeeded in uniting all the major capitalist powers behind it. Even Russia and China have demanded that Iran suspend uranium enrichment. Having had numerous chances to resolve the conflict peacefully, the Bush administration seems eager for war. An attack against Iran may come this fall, in an attempt to influence congressional elections. But even if it doesn't, the Bush administration still has two-and-a-half years left to stir up trouble.

A.K. Gupta

A.K. Gupta was a member of the WIN Publications Committee and has written extensively about the Iraq War for the Indypendent, Z Magazine and Left Turn.  He is currently writing a book about the history of the war.  Gupta was previously the international news editor of the Guardian Newsweekly from 1989 to 1992.  His writings on the Iraq War can be found at