Strategic Trust-Building

Sayyari’s statement was swiftly followed by a warning from Washington that any attempt to close the strait would “not be tolerated.” Following these exchanges, the price of oil jumped by $4 a barrel and has remained over $100 a barrel even as Iran concluded its 10-day naval exercises and despite a return of Libyan oil to world markets and weakening U.S. demand. Below, an examination of what is at stake and what might be done to avoid a dangerous conflict in a militarily and economically vital world region: 

The World's Most Important Oil Choke-point

The Strait of Hormuz tops the list of global energy security concerns. Leading into the Gulf of Oman and the Arabian Sea, the strait is the only possible route for tankers transporting crude from the oil-rich states of the Gulf to world markets. Iran controls the strait’s northern coast, while Oman and the United Arab Emirates own the southern coast. The entire strait is only 112 miles long, and at its narrowest point it is only about 21 miles wide.

According to the U.S. Energy Information Administration, daily oil flow through the strait amounted to almost 17 million barrels in 2011, up from between 15.5-16.0 million in 2009–2010, that constituted roughly 35 percent of all seaborne traded oil. Roughly 90 percent of all Gulf oil, or 20 percent of oil traded worldwide, leaves the region on tankers that must pass through this narrow waterway, as land pipelines do not provide sufficient alternative export routes.

A Mounting Standoff

Tensions between Iran and the United States fueled fears of supply disruptions as Iran threatened to take action if the U.S. Navy moved an aircraft carrier, the USS John C. Stennis, back into the Gulf. In most analysts’ assessments, the jump in oil prices was likely to continue as long as Tehran continued its threats to use force against U.S. warships patrolling the strategically vital Strait of Hormuz at the mouth of the Gulf.

The tough rhetoric exchanged between Tehran and Washington over the waterway comes in the wake of the latest wave of sanctions that Washington says are designed to discourage the Iranian state from developing nuclear weapons. Late last month, U.S. President Barack Obama signed legislation imposing sanctions against Iran’s central bank intended to make it more difficult for the country to sell its oil. The Iranian escalation is seen in Washington as evidence that tighter sanctions are finally beginning to bite.

Tougher measures against Tehran are also expected to be announced at the end of this month by EU foreign ministers who have signaled that they will agree to impose an embargo on Iranian oil imports. Iranian officials have made clear they would view an oil embargo as an act of “economic war,” and that they could respond by closing the strait.

Exacerbating these tensions are internal factors in the United States and Iran, where political groups are positioning themselves in anticipation of crucial parliamentary elections in Iran in March and the U.S. presidential elections in November.

The Iranians are pledging not to back down militarily. Iran’s latest military exercise is seen as a clear signal that it has a deterrent capacity, making it capable of inflicting unacceptable harm on anyone thinking of attacking it. Moreover, following the Iranian navy’s exercises, the naval commander for the Islamic Revolutionary Guards Corps (IRGC), Rear Admiral Ali Fadavi, announced that the IRGC’s own drills will take place in February. On the same day, the Israeli military said it was preparing for joint exercises with the United States to rehearse missile defense and cooperation between the forces. Theses maneuvers, which will involve thousands of troops, have been planned for some time and were hailed by Israeli and U.S. officials as their biggest ever joint drill. Hopefully, the massive exercises will remain just that, but with three armies on the playing board, one spark could be enough to ignite an all-out war.

The United Kingdom has also joined the United States in pledging a tough response to any Iranian threat. Philip Hammond, the British defense secretary, said during a visit to Washington: "Disruption to the flow of oil through the strait of Hormuz would threaten regional and global economic growth. Any attempt by Iran to close the strait would be illegal and unsuccessful." Hammond followed on his warning by sending the Royal Navy's newest and most advanced ship, the destroyer HMS Daring, to the Gulf for its first mission. Meanwhile, there is speculation that Israel might attack Iran's nuclear facilities, claiming that it is a front for acquiring nuclear weapons, or at least a capacity to make them.

A Great Power’s Vulnerability  

Although the regional dominance of the U.S. Fifth Fleet, not to mention the other military assets that Washington could deploy from local bases, is not in question, Iran has invested shrewdly in asymmetric warfare capabilities specifically designed to counter U.S. technological superiority. To that end, it has emphasized the procurement of numerous types of guided missiles, many of them placed on light, highly mobile and relatively cheap platforms on land, in the air and at sea.

Iran could also strike at U.S. economic interests in the Gulf, such as oil facilities and tankers, and block ships by laying mines, as it did during its war with Iraq in the 1980s. And, despite the damage that the Syrian uprising is doing to the relationship between Iran and its other Middle Eastern allies, Tehran could still call on Hezbollah and Hamas to inflict as much damage as possible on its adversaries.

The Market’s Watchful Eye  

Extended closure of the Strait of Hormuz would remove one-fifth of the world’s oil from the market causing a supply shock of the type not seen since OPEC’s heyday. Even if the strait were not to physically close, a military conflict in the area could cause oil prices to skyrocket in anticipation of a supply disruption, and prices would remain high until markets are assured that free and safe passage has been restored. A sharp rise in oil prices would prove catastrophic to the world economy. Energy analysts say even a partial blockage of the strait could raise the world price of oil by $50 a barrel or more within days, and that would quickly push the price of a gallon of regular gasoline to well over $4 a gallon in the United States. This would have serious effects on the world economy, and would surely send the United States economy back into recession.

Despite such deterrents to armed confrontation, a miscalculation is possible that could cause an overreaction from one side or the other. If allowed to continue, the current heated-up situation could quickly turn into a military confrontation that would prove disastrous to all parties involved.

Finding A Way Out

More than ever, a de-escalation of tensions is required, and an open line of communication between rival militaries in the Gulf is needed. It is not clear how such de-escalation would take place, but the January 4 surprise trip by Turkish Foreign Minister Ahmet Davutoglu to Tehran could have be designed for such a purpose.

In fact, at a joint news conference on January 5 with Iranian Foreign Minister Ali Akbar Salehi, Davutoglu indicated that he carried a message from EU foreign policy chief Catherine Ashton in regards to the resumption of talks in Istanbul between Iran and the “P5+1” group, composed of the five permanent members of the U.N. Security Council plus Germany. If and when the meeting takes place, the parties would still have to overcome the main obstacle which hindered previous rounds, namely agenda setting. The P5+1 has wanted to tackle the issue of the Iranian nuclear enrichment program, while Iran prefers to include this issue in the overall negotiations over what Iranian Secretary of the Supreme National Security Council Saeed Jalili termed “security issues that affect Iran regionally and globally.”

What is necessary is for Iran, the United States and its allies to return to the negotiating table in order to resolve the litany of grievances and not to allow these grievances to spill over into a military confrontation.

Raymond Karam is a program assistant for EWI's Regional Security Initiative.

Viktor Ivanov, director of the Federal Drug Control Service (FSKN) of the Russian Federation, discussed the global drug trade and the key role of poppy production in Afghanistan with a diverse audience representing numerous U.S. federal agencies, uniformed and civilian military officials, civil society, industry and diplomatic missions.

Ivanov argued that the global drug trade is closely tied to the world financial system, where drug money represents a “at least half” of global criminal flows. These funds, he said, in some cases provide much-needed liquidity in the financial system at a time of crisis.

“In order to develop adequate solutions, we need to have a better picture of global drug flows,” Ivanov said. He added, “Two obvious drug flows are Latin American cocaine and Afghan heroin.”

Ivanov was in the United States for meetings in Chicago of the U.S.–Russia Bilateral Presidential Commission's Drug Trafficking Working Group, of which he is co-chair. FSKN and EWI, as part of an ongoing collaboration, worked with the Chicago Tribune to produce an infographic and interview with Ivanov exploring the complex dynamics of "Afghanistan’s heroin pipeline" (PDF).

Speaking with the Tribune, Ivanov underlined the role of international civil society in confronting the issue of drug production in Afghanistan during a time of conflict.

“[O]ur group and I personally are engaged in extensive cooperation with leading U.S. think tanks, especially the EastWest Institute, and also such as the Center for Strategic and International Studies, the Nixon Center (now the Center for the National Interest), the Institute for Democracy and Cooperation,” and others, Ivanov told the Tribune.

Ivanov noted that drug production is a consistent source of income for some, and said fundamental changes in the economy of Afghanistan are necessary to undermine the rationale for cultivation.

“The key way to liquidate global drug trafficking is to reformat the existing economy and to shift to the economy that excludes criminal money and provides reproduction of net liquid assets, [that is], to the economy of development, where decisions are based on development projects and special-purpose credits,” Ivanov said.

According to the United States, “Iran is keeping open the option of developing nuclear weapons”. This written statement of 10 February 2011 by the Director of National Intelligence, General James Clapper, implies a belief that Iran was not then developing nuclear weapons. Clapper also said that Iran believes it can deter its adversaries with its conventionally armed missiles. There are other reports in the public domain from US intelligence agencies supporting these views. In 2007, the CIA assessed with high confidence that Iran called a halt to its nuclear weapons program in 2003.

Intelligence sources have told this author that the Iranian government appears to have decided to abandon its nuclear weapons work in 2003 and that it did not return to that nuclear weapons design or testing after 2003. At the same time, Iran does continue to develop two enabling technologies for developing nuclear weapons should it choose to do so, enriched uranium and ballistic missiles. This is exactly what U.S. intelligence officials appear to be saying in public on the record. Iran is obliged under its international legal commitments to reveal all military related aspects of its nuclear program, whether these were in the past or the present. The current United Nations Security Council resolutions and continued concerns of the International Atomic Energy Agency (IAEA) about Iran’s military nuclear activities relate to the period of Iranian weapons related work before the end of 2003, and to Iranian concealment after 2003 of that previous activity.

The recent IAEA Board of Governors’ report (8 November 2011) includes a special Annex that “provides a detailed analysis of the information available to the Agency to date which has given rise to concerns about possible military dimensions to Iran’s nuclear programme”. The Report and its Annex reveals no specific evidence of Iranian government development of a nuclear weapon that is specifically dated by the report after 2003. The report claims a good knowledge of events before 2003, but acknowledges that the “Agency’s ability to construct an equally good understanding of activities in Iran after the end of 2003 is reduced, due to the more limited information available.”

The IAEA report goes on to say: “The information indicates that Iran has carried out some research activities that might be relevant to the development of a nuclear explosive device.” This does relate to activities dated “after 2003”, but the report notes that the activity also had civil applications. 

The report says that IAEA information “indicates that prior to the end of 2003, these activities took place under a structured programme, and that some activities may still be ongoing.”  It appears to reveal uncertainty whether such activities continued after 2003 at all. It does not describe a comprehensive set of weaponization activities that continued after 2003, rather some inconclusive evidence that possibly it did. By contrast, the IAEA has very detailed information on different strands of weaponization research and design that occurred up to the end of 2003, such as trigger design and safety arrangements for nuclear testing. The IAEA report can be faulted in many places for putting dates on certain information and the activities described in that information and not on others, or conflating past events of almost a decade ago and the present, as in the excerpts above. The report can be faulted for not indicating which military activities “may” be “ongoing” and when exactly they occurred. Those governments holding well-sourced evidence of Iranian nuclear weapons development after 2003 should share it publicly. The IAEA report is not that helpful in trying to get at the facts. It paints a less than convincing picture that the Iranian government is now pursuing a weaponization program. 

Read this piece in New Europe

Photo: "Thiep Nguyen (01611296)" (CC BY-SA 2.0) by IAEA Imagebank

Recently the authors of this piece participated in an Atlantic Council program for young emerging Turkish and American foreign policy leaders, during which we met with former U.S. Ambassador to Turkey Jim Holmes of the American Turkish Council. To signify the surprisingly low volume of bilateral trade, Ambassador Holmes removed one M&M candy from a three pound (1.4 kilogram) bag and held it in front of us. The point was clear: if this bag of M&Ms represents the volume of all U.S. global trade, this sole M&M represents the volume of U.S.–Turkey trade.

This relationship has historically been one-sided, with the United States leading. However, since the 2008 financial crisis, this dynamic has started to change. The United  States is struggling economically, with high unemployment, stagnant economic growth, and political in-fighting. Turkey, on the other hand, has a booming economy and an increasingly independent foreign policy. Prime Minister Erdoğan coasted to reelection in June 2011 and has bold plans to make Turkey a top-10 global economy in terms of size by 2023, the 100th anniversary of the Turkish Republic. Turkey is aggressively reaching into foreign markets. Relations with Iran are underpinned by economics and imports of Iran’s natural gas. Turkey is taking the lead in investing in northern Iraq and driving economic growth there as a result. Likewise in much of Africa, in places such as Sudan, Ethiopia, and Kenya, Turkey’s investment in infrastructure bolsters economic development in a way that only China can rival. Prime Minister Erdoğan recently visited lawless Somalia to highlight famine relief, something no foreign leader had done in nearly 20 years. Turkey is developing soft power in regions of the world where American influence is decreasing.

In broad strokes, these two allies are moving down different paths: one looking inward after a rough period, the other looking outward amidst a boom period. This misalignment more than anything explains the occasional disruptions that occur in the relationship. However, there is one important area where increased emphasis would be mutually beneficial and underpin the relationship in a way that would likely realign the alliance moving forward and supersede all else: increased trade.

Just as Turkey’s foreign policy stock is rising because of increased soft power facilitated by an extended global business reach, so the United States has an opportunity to increase soft power in the critical Middle East region on the back of improved business ties with Turkey. Turkey shares borders with and has reach into Iran and Syria, and it increasingly has clout with these nations – likely greater than the United States. While this sounds frustrating from an American perspective, perhaps, in this era of revitalized coalitions following NATO’s intervention in Libya, Turkey’s regional influence can help the United States regain influence. To get to something that more closely resembles that sort of partnership, however, the United States has to bring more to the table. The United States should aggressively incentivize trade with Turkey and encourage entrepreneurs to look to Turkey.

It is bizarre that, between these two powers that are also NATO allies, bilateral trade was a paltry $14.8 billion in 2010, despite the fact that Turkey is the 17th largest economy in the world, and the United States is the largest. In 2010 the U.S. bilateral trade with China was $457 billion, compared with $178 billion with Germany, and $49 billion with India. Turkey’s unusual status as one of the few economies of note with which the United States enjoys a trade surplus ($6.3 billion in 2010), driven by three-fold growth in U.S. exports to Turkey, during which Turkey exports to the United States have remained constant, adds to the lopsided nature of this relationship. Traditionally underpinned by defense industry trade, this surplus reflects the degree to which security concerns over the past half century eclipsed economic interests and Turkey’s potential as a trading partner. As a result, Turkey is finding new markets and potentially new allies elsewhere on the back of capitalism. Analysis by the authors shows that both the United States and Turkey are expanding trade relations around the globe.  

From 1990 to 2010, with the rise of the Turkish middle class, Turkey’s number of export partners increased, and the share for each of the top 10 trading partners decreased as Turkey exported to more and more markets. Likewise, Turkish industries imported goods from more countries. As a result, even though trade growth with Turkey’s main trading partners, such as the United States, has remained flat, the cumulative effect for Turkey regardless has been one of economic growth because of Turkey’s entrance into new markets. Turkey has diversified its reach.

Turkey’s exports should be finding their way onto more American retail racks. This is where policymakers come in and need to continue to aggressively work together, as the White House’s Framework for Strategic Economic and Commercial Cooperation and its private sector counterpart, the U.S.–Turkey Business Council, have begun doing. On both sides, regulations that lead to protectionism should be eliminated. The United States should reexamine preferential trade terms for Turkey in textiles (currently only 0.6% of U.S. textile imports come from Turkey). Turkey is a member of the WTO, and the United States should investigate the further elimination of duties wherever possible. Visa procedures for Turkish business people should be loosened. Technology and know-how transfers should be aggressively promoted, as these play an essential role in strengthening strategic partnerships and stimulating joint technological projects. Young entrepreneurs should look to Turkey.

The logic is simple and straightforward. From a macro perspective, trade can underpin diplomacy. It is clear that the time has come for U.S.–Turkey relations to adapt to changing realities with respect to both countries and the global economy they are part of. A valuable market for American goods at a time when the world’s superpower seeks to recover its economic health, Turkey too stands to benefit through capitalizing on the as yet unrealized potential of American export markets. Even as the nature of Turkey’s relations change in the region where it sits and around the world, its longstanding friendship with the United States is one both governments have a vital stake in deepening. The time is right to increase trade.

Nathan Wendt is an Associate and D.C. Representative at the EastWest Institute. Idil Bilgic Alpaslan is a PhD candidate at Brandeis University, IBS and R&D Coordinator at TOBB University of Economics and Technology. Rennie A. Silva is a Researcher at the University of Maryland Laboratory for Computational Cultural Dynamics. U. Baris Urhan is a Research Associate at the Economic Policy Research Foundation of Turkey, TEPAV and the Middle East Technical University Department of Economics.

Before Clinton’s visit, Sehgal writes, the United States had two widely differing objectives: (1) to deliver a final wake-up call for Pakistan’s military and its intelligence services and (2) to try to stop the rapid deterioration in the U.S.–Pakistan relationship over accusations that the Pakistani intelligence service ISI is working with the Haqqani network. 

Click here to read Sehgal's piece in The News.

"Most immediately, the world is expecting a deeper reduction in the largest nuclear arsenals," Ban said. "This should include limits on both non-strategic nuclear weapons and non-deployed weapons. And by weapon reduction, I mean weapon destruction." 

Ban spoke at the nuclear disarmament consultation, convened at U.N. Headquarters by the EastWest Institute, The Global Security Institute, and the James Martin Center for Nonproliferation Studies. The event marked the third anniversary of Ban's speech at a similar meeting in 2008, in which he unveiled a plan for nuclear arms reduction worldwide.

"This is the third time I’ve spoken at a conference organized by the EastWest Institute. At the first, in 2008, I launched a five-point proposal for achieving a world free of nuclear weapons," he said. "Thank you very much for your strong commitment and support for raising the awareness of the international community."

EWI Board Co-Chairman Francis Finlay emphasized the value of Ban's leadership on the issue. "Mr. Secretary-General, your strong voice and moral authority on this issue are still needed," Finlay said. 

The consultation continued Monday with panels and candid discussion on the practical challenges of nuclear arms reduction.

General T. Michael "Buzz" Moseley, former chief of staff of the U.S. Air Force and now Perot Distinguished Fellow at EWI, said new kinds of weapons have changed the place of nuclear weapons in the international security sphere. Precision missiles and the potency of cyber weapons have changed the battlefield, he said.

"With the existing stockpiles of nuclear weapons aging, the demonstration of unbelievable, conventional precision, the continued proliferation of warheads, and the added complexities of cyber warfare, the time is right to re-double our efforts," Moseley said.  

The NDF was convened on the 66th United Nations Day, and Ban directed our attention to the future.

"Exactly one week from today, the world will welcome the 7 billionth member of our human family. We are 7 days from 7 billion," Ban said. "What kind of future will that child have? We know that world of tomorrow is shaped by the decisions we make today. A world free of nuclear weapons is a concrete possibility. Let us realize that dream so that 7 billion people can live in peace and security."

Click here to read Ban Ki-Moon's comments in full.

Click here to read General Michael Moseley's comments in full.

Click here to read John Edwin Mroz's comments in full.

Click here to read Francis Finlay's comments in full.

Click here to read Jonathan Granoff's comments in full.

Click here to read Mani Shankar Aiyar's comments in full.

Click here to read a report from the U.N. News Centre.

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