Inside Intel / The race against the bomb
The United Arab Emirates has assumed a central place in the United States' strategy to tighten an economic siege against Iran. The importance of the oil emirates, which are located on the coast of the Persian Gulf, is growing as it becomes less likely that the United Nations Security Council will impose additional sanctions against Iran.
America's attempt to curry favor was evident in U.S. Under Secretary of the Treasury David McCormick's visit to Dubai about two weeks ago. He came to convince leaders to toughen their stance against Iran and to join forces with the U.S. in tightening an economic siege against the ayatollah state. Total exports from the U.A.E. to Iran come to $10 billion annually. "We hope," said the American official at a press conference, "that Abu Dhabi will follow in the footsteps of the international community."
What makes the U.A.E. one of the key players in the worldwide struggle being led by Washington against President Mahmoud Ahmadinejad's regime is the fact that it serves as a transfer point for Iranian business - more importantly, its clandestine business affairs. About half a million Iranians live in the U.A.E., which is considered a very important base of operations for Iranian companies. According to Bush administration sources, Bank Meli, which is the largest bank in Iran and was recently added to the U.S. boycott list, has branches in the U.A.E. with financial assets of $1.5 billion.
But many of the Iranian businesses do not operate openly in the U.A.E. Many Iranian shell companies are listed and are active in bypassing international sanctions and attain what the country needs for its nuclear and missile programs. For example, the U.A.E. served as a central base of operations for the smuggling network of Pakistani Dr. Abdul Khader Khan. The establishment of the network was initiated in the 1990s by the father of Pakistan's nuclear bomb, who is a national hero in his country. He recruited Britons, Swiss, Germans and Malaysians, and with their help wove a tangled web of shell companies that traded with Iran from Abu Dhabi and transported the equipment to Iran on cargo ships. Khan's network sold Iran the plans, drawings, notes and components that enabled it to secretly build the centrifuge plant in Natanz, where it enriches uranium.
The U.A.E. is a particular favorite of companies and offices operated by the Revolutionary Guards. The Revolutionary Guards is a skilled and well-equipped force of about 125,000, who constitute the backbone of the Iranian regime. The Guards is for all intents and purposes an army, with an air force, a navy and a strategic arm. This arm is in charge of the long-range missiles (Shihabs, which are capable of hitting Israel), and is also implementing Iran's clandestine nuclear program.
But the Guards is not only a military force. In fact, it is a financial empire, with hundreds of companies catering to every facet of life in Iran: construction and infrastructure, banks, insurance companies, oil companies, health services, etc. By dint of the fact that the Guards are in charge of the nuclear and missile programs, they have also established a dense network of shell companies whose job it is to purchase the necessary equipment, knowledge and technology. The acquisition efforts are concentrated in Europe and Asia, and are directed mainly at the acquisition of vital dual-purpose equipment. Ostensibly, the equipment serves civilian purposes, but it can be used for the nuclear program. In recent years, the Western intelligence community exposed Iran's acquisition efforts on several occasions. Precise information was transferred to the security services of Spain, Italy and Austria, which stopped the cargo that was supposedly destined for companies and businessmen operating in the U.A.E.
The Guards' shell companies also personally compensate senior officials involved in the work. Iran is one of the most corrupt countries in the world, and bribery is a business tool and a way of life in Iran - from the district policeman, the clerk who issues driving licenses, the general, up to Grand Ayatollah Ali Khamenei, who is considered (along with former president Hashemi Rafsanjani) one of the richest men in the world.
Without the U.A.E.'s sophisticated banking system, senior officials in the Tehran regime would have difficulty fueling their private bribery industry and promoting their nuclear program. The U.S. administration has no illusions that the U.A.E. will completely put an end to the Guards' shell companies, but it hopes that in the wake of McCormick's visit, at least supervision will be increased, making activity more difficult.
About two weeks ago, in an unusual step, the U.S. administration added the Revolutionary Guards (as well as banks and companies) to the boycott blacklist. This is the first time the U.S. is including a military organization of a sovereign country on the blacklist. American firms, and in effect any American, is forbidden to trade and to do business with the Revolutionary Guards or any of their companies. This is mainly a symbolic decision, because since Ruhollah Khomeini came to power in February 1979, the U.S. has had no commercial ties with Iran. But the decision is also meant to serve as a warning signal to the international community that governments or companies that maintain commercial ties with the Guards are liable to find themselves in a headlong collision with the U.S.
Germany carries on as usual
In a week from now, two important reports about Iran's nuclear program are scheduled to be published. One is that of the International Atomic Energy Agency (IAEA). The second will be written by the office of Javier Solana, who is in charge of the European Union's foreign policy making. These reports will explain to what extent Iran is really cooperating with its promise of a few months ago to reveal the history of its nuclear program. The information about the history of the program can help experts assess how advanced the program is.
According to Israeli intelligence, if Iran continues to develop the program at the present rate, it will be able to produce the first nuclear bomb in about a year and a half to two years. According to CIA estimates, Iran is encountering technological problems, and therefore it is more likely it will have its first bomb in only about five years. Whatever the case, if the reports say Iran is carrying on with the uncooperative behavior that has characterized it for years, is lying and hiding information, and thus violating its international commitments, it will be easy for the U.S. to convince the other four permanent members of the UN Security Council to decide to impose sanctions against Iran for the third time - and this time harsher ones.
Representatives of the five permanent members of the Security Council - Russia, China, France, Great Britain, the U.S. and Germany, which is working on behalf of the EU on this matter - met last week in London. At the conclusion of the discussions, they announced that they had begun to write a draft decision for the Security Council, to impose new economic sanctions against Iran.
The problem is not only the refusal and foot-dragging of China and Russia. Iran is one of the most important oil suppliers for China's accelerated economy. Russia is building the nuclear reactor in Bushehr to produce electricity, and sells weapons to Iran. Despite German Foreign Minister Frank-Walter Steinmeier's remarks in an interview with Haaretz last week, Berlin is not enthusiastic about imposing sanctions either, because of its widespread commercial ties with Iran. Germany engages in the most trade with Iran of all the countries in the world.
Therefore, serious sanctions against Iran will act as a boomerang against hundreds of German firms. On the other hand, decisions regarding sanctions and punitive economic measures are Washington's main means of persuasion at this stage of the struggle against Iran.
The Bush administration is trying to send the following message to the international community: If you are opposed to letting Iran continue to enrich uranium, and are afraid that Iran will achieve the capability of developing nuclear weapons, and if you don't want us to attack it militarily, you must agree to the imposition of sanctions. Tough sanctions, according to American and Israeli logic, will hurt Ahmadinejad's regime and may convince Khamenei that the damage caused by the nuclear program and the defiant and arrogant words of the Iranian president are a strategic burden rather than a strategic asset.
When the question comes down to the survival of the regime versus a nuclear program, it can be reasonably assumed that Khamenei will choose survival and will give up the nuclear program, at least temporarily. But the U.S. administration has no illusions. Even if it succeeds in convincing China and Russia to consent on a third Security Council decision, which is very doubtful, clearly it will not be able to serve as a real whip and an economic threat to Iran. For that reason, the administration is operating in another channel, which seems to be more effective.
It is applying heavy pressure on Western governments and firms to adopt punitive measures, not only in the context of the weak Security Council decisions on sanctions, and to initiate unilateral steps as well. The heavy pressure from Washington is directed mainly at international financial institutions and banks. The aim is to convince them to stop granting Iran credit, particularly for its oil industry, which is crying out for investments. In addition to the Revolutionary Guards, the U.S. blacklist also includes the Guards' engineering and construction firms (including its military engineering units), which are developing oil fields in Iran.
McCormick, in his visit to Abu Dhabi, and other senior officials in the Treasury Department are talking about the fact that in this attempt to "dry up" Iran, they are achieving a certain degree of success. The Washington Post reported about 10 days ago, based on administration sources, that at least 40 European banks had already decided to cut back their dealings with Iran.
These include banks in France, Germany and Italy. In 2005, the German banking system granted $2 billion in credit to companies trading with Iran. Recently the German government announced that the credit would be reduced this year to $700 million. France has reduced the amount of trade with Iran from $6 billion to less than $4 billion, and under the tough policy of President Nicholas Sarkozy, it will continue in this direction. Under this pressure, the French oil company Total, the Italian company Eni and the British Royal Dutch Shell have decided to stop the feverish negotiations they were conducting to begin new oil and gas initiatives in Iran.
Apparently the American pressure is bearing fruit not only in Europe. Recently the Russian oil company Lukoil announced it was also discontinuing its development work in an Iranian oil field "because of the American sanctions." Lukoil made the decision for fear that its widespread business interests in the U.S. would be harmed. There are also signs that Chinese oil companies are hesitant about investing in drilling for oil in Iran for similar reasons.
But it is still a long way before the sanctions and the punitive measures - both those of the Security Council and the unilateral ones - will lead to Iran's surrender.