Hello, I am Bruno Lédion, the director of Fodasun which aims to bring people together and then to pacify relations, particularly between France and Iran. You are the 3rd guest of what is intended to be a monthly meeting for the moment. Today’s theme will be “What prospects for the Iranian economy in the post-Tump era?” “.
I am going to take the liberty of introducing you, you are Michel Makinsy, managing director of Ageromys International, researcher associated with IPSE (Institute for Prospective and Security of Europe), scientific collaborator at the University of Liège and specialist in Iran, first of all thank you for responding to our invitation.
Particularly in a particular context since there has been an important change for Iran with the election of a new president of the United States, Joe Biden, who follows Donald Trump, whose presidency was marked by the policy known as “maximum pressure” on Iran by means of economic sanctions on the country in particular to bring it back in quotes “to the negotiation table”, we will say willingly or by force, Donald Trump is gone, for the moment his policy continues technically, although the new president has announced that he intends to return to the agreement with Iran, and therefore to possibly lift the pressure on Iran, but what have been the results of this Trump policy and what were the expected results?
« The expected results were to achieve at least a radical change of Iranian positions in almost all areas. On the one hand in nuclear power, not only to respect the nuclear agreement of July 14, 2015, but to go much further, and in the minds of Trump and those around him, or even to abandon any nuclear program, even civilian, whatever it is. Second, give up its arsenal of ballistic missiles. Third, abandon all activity in support of its allies in the Middle East and find itself practically aligned with the wishes of American policies. This is the official goal, hiding behind a slightly less official goal but that we see in the words of Trump’s entourage, it was in fact purely and simply a change of regime. In Trump’s mind, it was about pushing with the help of maximum pressure and sanctions practically the population to revolt against the current power. To provoke not only the fall of the Government with a radical change of policy and even, the fall of the theocratic regime, the disappearance of the Guardians of the Revolution. Obviously, this stated objective has totally failed. Since we have seen it, we will come back to the state of the Iranian economy, but the power holds, and even worse, Trump, I have fun saying it with a very bad joke, won his regime change, simply it is the opposite of what he expected to know that it is ultra conservatives who won the legislative elections of February 2020, conservatives extremely close to the Revolutionary Guards. Second, in the presidential elections of June 2021, it is expected that he will be a conservative candidate very close to the Revolutionary Guards who, saving a happy surprise of course, will win the ballot. Practical conclusion, Trump claimed to stir up a democratic revolt, he resulted in the strengthening of his worst enemies, the Revolutionary Guards. So on this side, it is a rather remarkably unprecedented failure in terms of strategic calculation or which rather reflects an absence of strategic calculation.
On the other hand, these sanctions produced extremely important economic effects. I remind you that when Rouhani came to power during his first term in 2013, he found inflation at 40% and, in the space of a year, he brought inflation down to 13 and then quickly to 10%. And now, with the sanctions, we have an economy that is on its knees, with oil exports that have been divided by 2/3, non-oil exports that are increasing again but have also been cut, a financial strangulation with a critical weight which is the depletion of foreign currency reserves which are essential for the development of the country. This I want to note, even before Trump arrived, the Iranians were quite short of foreign exchange. And there, they are strangled, it is a weakness of the Iranian economy since with the sanctions, it is having great difficulty in finding banks which accept monetary transactions, and since Iran does not have or has practically more and has dried up its foreign currencies, I mean inside the country, we will come back to the external aspect, Iran is obliged to engage in barter operations, extremely complicated, oil for something else, etc. . Nevertheless Iran has very large reserves in a certain number of countries, blocked assets, important. The case of South Korea was recently recalled, where there is just over $ 7 billion blocked, which resulted from previous transactions but which the Americans block and prevent the South Koreans from using, including for humanitarian exchanges. That is to say, the financing by Iran of purchases of vaccines and medicines urgently requested with the Covid epidemic. And so there are in a whole series of countries quite important assets, which Iran cannot touch because of not only sanctions, but pressure exerted by the Americans because I remind you that the humanitarian sector is expressly exempted from sanctions. , so normally everything should be fine. But in fact, despite official statements from the Trump administration, Iran is failing to pay for its drug purchases, including through the Swiss mechanism that was put in place under OFAC’s official blessing, the US Treasury. So very serious shortage of foreign currency, unemployment which in my opinion exceeds 15% of the working population. Probably more since the unemployment statistics are very largely false because, for historical reasons, a good part of the unemployed are not registered. In particular by the fact that they cannot be undivided. No more extremely important partial unemployment. A good chunk of the industry is believed to run between 30% and 40% at the best of its potential. We have an inflation which is officially between 35 and 40%, and which for essential goods can reach 70%.
I stop for a second because here we are, calmly discussing numbers, it’s abstract, but imagine the housewife, wanting to buy her kilo of tomatoes with inflation at 70%! It is literally tragic! People are in survival operations, that is, there is an insane mass of people who are below the poverty line, unemployment, as I just said, is hitting extremely hard, and there is has more and more people who do not even have enough to eat properly. So we are in a situation of major crisis, morale, from what the Iranians tell us, in the socks. Not only because the crisis is catastrophic, but in addition because they have no prospects, they say to themselves “what will happen to us tomorrow? “/
And on top of that was added the Covid crisis which is out of control ».
I was going to come there because indeed, there is this parameter of the Covid which adds to the difficulties?
« The Covid crisis is out of control for several reasons, not because the Iranian health system is bad, on the contrary, Iran has a very good health system with good universities, good researchers, good doctors, etc. But the organization, it is not exactly the same thing, of the health system as elsewhere, it is a bit of a common feature of the Iranian administrative organization, even of companies, is faulty, they do not do not come out. And then they have, I was referring to the problem of purchasing health products, the financial means to buy the vaccines that were ordered by the WHO platform, the Pfizer vaccines, are blocked. So Iranian leaders say it’s because of the Americans and the pressures, opinions on this are mixed. That is to say, we think there is American pressure, as we have mentioned about the South Koreans, but we think that there are also within the Iranian decision-making apparatus political tensions to give preference to vaccines made in Iran, Russia, China and others, on which we have no idea in terms of performance with regard to the treatment of the pandemic. Behind that there are political struggles of an extreme harshness, led in particular by the Guardians of the Revolution, which I would say go beyond the orientations and the control of the Ministry of Health and which make, if I may say so, their small kitchen in order, ultimately, to develop their own hold in a sector in which they were not necessarily in the majority, namely the health sector.
So we have an extremely tense economic situation, and impatience. This also explains some test balloons even emanating from the Guide and the hardliners of the regime to perhaps find the elements of a compromise. This is why the Guide declared in his first speech of the year on January 8 that he was hostile to any conversation with the United States, and that we will never negotiate with the enemy, that he It was necessary first of all to give priority to resistance, to fend for oneself, to turn to good friends, the Chinese, etc. But, the Guide always leaves a door ajar, if Rouhani finds a way to negotiate, in other words, not the return to the JCPOA, which does not necessarily concern the Iranian leaders, but a lifting of sanctions, then we do. will satisfy ».
I even believe that the Guide said that we should “not wait a single second”…?
« Exactly. And so indeed on the one hand we say that we will never talk to the villainous Americans but on the other, if they lift the sanctions, we will not refuse it nonetheless ».
This leads me to ask you the following question, we have a new tenant at the White House in the person of Joe Biden who has announced that he wants a different policy with Iran, and who also announces that he wants the return of the United States. in the nuclear deal with Iran, is that a realistic scenario for you and to what extent can it be achieved?
« This is somewhat the subject of the analysis that we published in the Cahiers du Moyen-Orient. Our diagnosis today is that there is an impasse. This stalemate is as follows, Joe Biden and Antony Blinken, his new secretary of state have said this very clearly, the United States is ready to return to the nuclear deal, if Iran returns to it first. However, the Iranians have responded clearly, we are ready to come back, and I am going to add nuance, to the respect of all our obligations, that can be done quickly, they said, and that poses no major problem, but, this what is interesting is that the Iranians are not necessarily asking that they become officially full members of the JCPOA again. Why ? Well the reason, as we have seen in a few cryptic sentences, is that, if they enter into the agreement, they reacquire the ipso facto right, to launch the process, this time legally, snapback. And that, the Iranians do not want.
So they are asking the Americans, and for that matter the Europeans, to come back to the obligations of the agreement, and in practice, to the lifting of sanctions. And behind that and it is not expressed as explicitly as I tell you, but the meaning is there, the Iranians first want explicit or even written guarantees that banking and financial channels, and oil exports and a certain number of goods, in particular petrochemicals, will be made more fluid, without the risk of either sanctions or pressure. And both are extremely important. This would imply written commitments on the part of the Biden administration, particularly not only no doubt of the president and his secretary of state, but above all written commitments of OFAC, which is the secular arm of the administration. And experts thinking about it believe that, in fact, the Iranians are waiting for the US administration to issue so-called comfort letters, that is, comfort letters that would be addressed to banks, to companies, especially European ones, saying, here we are, we can assure you that if the Tartempion bank wants to carry out a transaction with Iran under legitimate conditions, not only can it do so, but secondly, we will not seek to punish it and three , we will not put nasty pressure on her. And that is a prerequisite for the Iranians who have made it clear, in my opinion very clearly, that if they do not have the uncertainty that these sanctions and pressures, the two are different, and combined, but if they are not lifted, they are not interested in starting a negotiation! However, I have just looked again before we talk about the state of the situation, in his first official statement as Secretary of State, Blinken, yesterday Wednesday declared that the Iranians must start above all to respect their obligations . So of course we can easily guess that the Americans are not waiting for them to meet all the obligations straight away, but they want them to take the first step. However, until now, this is totally unacceptable for the Iranians as long as they do not have the minimum guarantees that I have just indicated. And that is why I believe we are at an impasse right now. France followed in the footsteps of the Americans with a statement which was reported by Reuters I believe from a spokesperson or an Elysee official after the first conversation between Macron and Biden, France reiterated, according to Reuters , that Iran must first meet its obligations before the Americans do the same. In French, this is called an impasse ».
Is this part of the usual pre-negotiation game or can it be a lasting stalemate?
« So that can be part of the maximalist positions on both sides. We also remember that some time ago, the Iranian authorities even said, “what we want is the return of the US to the JCPOA, but also compensation for all losses and damages. that you caused us. Besides, Rouhani went back knowing that Biden, even in the best case, would never grant it. But that can be part of the maximalist positions. We know it from the conversations behind the curtains. It can be part of the maximalist positions insofar as we must not forget that Biden to play with the tough ones who also exist among the Democrats! Because with us in France we think that the Democrats are clones of Mr. François Bayrou. That’s not exactly how it looks when you know the American political class, there are people in Democrats who are as enraged as Trump and even see some even more enraged than some of their Republican colleagues. The Republicans are for a part pragmatic conservatives and for another part rabid, as we have seen recently. But not all Democrats are kind centrists, well behaved, etc. There are enrages who, like some of their Republican colleagues, are the transmission belts of their colleagues in Israeli Likud. We know them, we have seen them. So all this to tell you that these maximalist positions of the Americans can also be explained by the fact, largely, that Biden must give pledges to these people, insofar as it must be remembered that in the Senate, he has not a real majority. He was tied with the casting vote of Kamala Harris, the vice-president. So he has an excessively narrow room for maneuver in Congress, especially if he wanted, which does not seem topical on the visible horizon, to lift the primary sanctions, which are within the competence of Congress and over which he has no power. . So we can think that he is obliged to give pledges. And that is why he has also said in previous statements that he would continue to use the arsenal of sanctions, but in a targeted manner and secondly, after consultation with partner allies, so it’s not in the wild. But he still spoke of sanctions, of targeted sanctions, it’s no big deal. So he has not at all given up the arsenal of sanctions, which means that he has not given up the tool of coercion, which he does not want to give up, or cannot give up, if he doesn’t want to have a problem with his fragile majorities ».
This allows me to bounce back because we are going to leave the United States-Iran duality a little to recall that the agreement also includes Europe and in particular France. What were the major European and French groups present in Iran before the American withdrawal?
« First, I would like to point out that there were not only large groups present in Iran. There were a lot of medium-sized businesses. Regarding the major groups, we know them, there was Total, the PSA group, Renault among the “stars” if I may say so. PSA withdrew completely, Total withdrew completely, but Renault maintains a small presence. This can be explained by the following fact: the strategy and approach to the Iranian market by PSA and Renault have always been completely different. PSA sold parts of vehicles that were assembled on site and it worked very, very well. From memory I believe that Iran represented something like 10% of the PSA group’s export market. So the closure was a very nasty blow. Renault had an extremely different strategy, and more focused on the future, it was a strategy of industrial cooperation, in fact with the ambition to create with the Iranians the largest economic industrial pole in the entire Middle East. What does it mean ? This means that today Renault has an excessively good profile in Iran, Renault is still present in Iran, with an excessively low level but wants to preserve the future, would like to maintain a certain industrial cooperation which has remarkably success. With a view to restarting this project for a large automotive hub in the Middle East when things get better. But besides that, there is another success story, which was devastated by the sanctions, which were launched in June 2013 therefore under Obama, which directly and officially targeted the Iranian automotive sector and in fact, the French industry. . Let me explain, it turns out that in 2013, I was one of the people, I was certainly not the only one, who advised the sector of French automotive equipment manufacturers, who had done a remarkable job of more than 10 years of establishment , with his federeration of the vehicle industries, and which over the years had succeeded in becoming the foreign market leader in the automotive sector in Iran, controlling between 70-80% of the market! And in June 2013, Obama released an Executive Order that officially must punish the Iranian auto industry that supposedly was making money to make the bomb, I’ll pass you on the delirium, and in fact it was about eliminate from the market the French who occupied 80% of it following a hard work and this is one of the great successes We protested violently to the government so that it would make a scandal with the Americans, it did not do it. Obviously it was under Monsieur Fabius and Monsieur Hollande. And, as a practical conclusion, we were horrified to see that by the time Obama released this Executive Order, the Iranian press contained full pages of advertising labeled “GM (General Motors), we are back! (We are back) “. The same people who told us “do not trade with the terrorist state” supported American industry at arm’s length. This to say that there was very clearly for us an American strategy of unfair competition under the umbrella of sanctions to kick the Europeans out of the Iranian market ».
There were protests …?
(After a technical break, the interview resumes for a 2nd part)
« Apart from this sector, there are a certain number of companies in the food industry which are present, there is in particular Bel, from the cheese-dairy sector. There is an Emirati Carrefour franchisee, Hyper Star, who is present and still very active, officially it is not a French company. So there are a number of companies in the pharmacy industry that are trying to maintain a presence. In fact the big French labs, because this sector is not sanctioned, try to maintain their presence.
It’s very difficult, because of the Covid, etc. where there are considerable tensions and due to the blocking of financial flows, even for the drug sector. But there is a strong desire from the French pharmacy sector to maintain a presence. We also know that, in the agricultural sector, there are a certain number of groups that would also like to maintain a presence. As long as the big sanctions that cover the oil sector are not lifted, the rest waits ».
So that ties in with my next question, namely how the Iranian economy has adapted to sanctions, the impact on the daily life of Iranians, you spoke about it earlier, there are still cases, especially on the medical level, difficult cases, and also the impact on economic exchanges inside the country and with the outside, the most affected sectors, and then indeed difficulties, plus the Covid and certain difficulties for deliver drugs, vaccines, etc. So how has the Iranian economy managed to cope with all of this?
« So there’s a big word called resilience. What the Iranians call resistance. In fact, the Iranians are kind of the champions of resourcefulness. They have a capital of engineers, of very high quality, it is something that we do not repeat enough, there are excellent Iranian scientific and technical universities which deposit engineers of very high quality. There is an industrial culture in Iran. We cannot say it enough. It is probably the only true industrial country in the Middle East. And so they rolled up their sleeves in almost all sectors, with a program I would say “empowerment”, “indigenization”, technologies, etc. And, I have to say, they’ve made a huge effort. They also continued to work on infrastructure, particularly railways, with the help of the Chinese, who financed them. And in other sectors and in particular, the agricultural and agrifood sector, they have developed a lot of innovations, and retraining, and we can say that the Iranians are boasting a little, the non-hydrocarbon sector has developed considerably, they say. even that it has or would have vocation, in terms of exports, to surpass oil. In fact, this is not entirely correct. In Iranian exports, products such as so-called condensates are classified as non-oil, which are in fact recovered oil that is recovered by operating a gas field. So in fact it is recovered oil that is exported. They have also developed petrochemicals enormously, with products such as ethanol etc. which have the advantage, compared to crude oil, of having a considerably higher added value. And so they developed exports mainly to China, several Asian countries and secondly, neighboring countries. The problem with China is that China, which as you know signed a 25-year agreement, which is not finalized by the way, is the main buyer of Iranian oil and a lot of other things. The big problem is that China is not paying. What do I mean by that? This is because the yuan being a non-convertible currency, China actually pays in goods or in infrastructure costs. This does not suit the Iranians because on the one hand, China, and this already existed under Ahmadinejad, had taken on the bad habit, in a period of sanctions, of buying Iranian crude with considerable discounts. If I take a fictitious example, let’s imagine that Iranian crude costs 100 dollars, already in normal times, it is a fictitious price of course, in normal times it is never bought above 80 dollars. This is because Iranian crude, for the most part, is heavy oil, loaded with impurities, sulfur, whatever you want, and expensive to refine. So Iranian heavy crude is already being bought cheaper. But on this the Chinese, who are not philanthropists, have obtained discounts of around 15%. They did this under Ahmadinejad and they are doing exactly the same now. And they are paying Iran money with 15th grade goods that they flood the Iranian market with, and it’s devastating because it pulverizes the fabric of Iranian SMEs. The Iranians actually hate the Chinese, when you talk to them, because they blackmail them I would say shamelessly, give them investments in public works in infrastructure and bring in agents for a number of other things and their buy their damn oil, etc. So big market in China, a number of expanding markets in other Asian countries, which sometimes act as intermediaries with China, I think of Indonesia, Malaysia, Vietnam to some extent. And then with its neighbors, Iran has developed currents that it is amplifying, with Iraq, to which it sells oil on which we put a little “Iraqi oil” paint, but everyone knows it, of course and for Iraq, Iran seeks to recover foreign currencies which belong to Iran and which are stored and therefore there are overdue negotiations between Iraq and Iran to be able to release these currencies, release which the United States opposes. So they are trying to develop very complex mechanisms to barter (barter) compensation, oil against dollars or euros, in fact euros since the accounts in Iraq are in euros. And they try to do the same with India, for example with India they have a barter in national currency. That is to say an account in Iranian toman versus Indian pound. And so that makes frighteningly complicated mechanics. They are doing the same with Turkey, and neighboring countries. And so with Russia, about which we do not have a lot of information, they are developing similar systems, with exports to Russia of Iranian oil, we also think that part of Iranian oil towards China goes through Russia and Kazakhstan. But that still does not solve the crucial foreign exchange problem, which Iran desperately needs and lacks. And that is why he is excessively impatient with the lifting of the blockade on foreign currencies in quotes ».
We can call them sanctions circumvention mechanisms, Europe itself had announced that it had worked on a circumvention mechanism that it had called “INSTEX” …?
« So the INSTEX mechanism, already we must be clear on this, it is not a mechanism for circumventing sanctions ».
In any case it had been presented in this way …?
« The French authorities have categorically denied this. It was in the journalistic comments that it was said that it was done to circumvent, in fact it is a tool which is lawful with regard to the current sanctions since it concerns exclusively humanitarian goods and goods which are specifically exempted. US sanctions. So it does not circumvent the sanctions, it is an improper vocabulary. Simply INSTEX is a compensation mechanism which is managed on the European side by the three Europeans (France, United Kingdom and Germany) by a public limited company which in fact performs a sort of accounting exercise to check the balance of the parties. On the European side and the Iranian side, each must find partners within his own sphere who can pay for the operation. In other words, INSTEX has the particularity of excluding cross-border flows of finance. There is a second mechanism, which was set up by the Americans, called the Swiss mechanism, which is based on the Geneva bank BCP, which is a classic export mechanism open to pharmaceutical laboratories, because it mainly concerns the pharmaceutical sector, which has a permanent establishment or a subsidiary but permanent and not ad hoc, not a letterbox, in Switzerland and which can export drugs or medical devices to Iran, by being paid by the famous Geneva bank who has an account that belongs to Iran. There was a first transaction with the Novartis laboratory in Switzerland. And since then, it has been blocked because the Americans are blocking the Iranians from replenishing the account opened in this bank. And that’s why there have been no other transactions since the Novartis transaction. There are several dozen companies lining up to be candidates for this mechanism, which has a second feature, the transaction must be the subject of a valid authorization issued by the OFAC which requires an insane mass of information to the labs and in fact what the analysts are assuming is that under the guise of preventing the labs from handing the “ugly Revolutionary Guards” to profit from this transaction, or sanctioned people, this is in fact a way to provide Americans with market information that American companies will use. Because in principle, an American laboratory which would have an active subsidiary in Switzerland could carry out this transaction and, in Iran, the observers note that there are American laboratories which deliver, by various and varied channels, drugs in Iran. And therefore from a European point of view, because the European laboratories said to themselves, “ah but why not take advantage of this windfall, there was a big hesitation because the information that OFAC is asking for amounts to delivering the entire commercial strategy. , all plans, all partners to direct competitors! So in fact for the European industry which would like to use this tool, there is a serious reluctance. And on top of that, the Americans put pressure on the banks that held Iranian assets, and which the Iranians had asked to carry out transfers to fund the Geneva bank account. So the two are currently blocked, and one of the priorities of the Iranians is to ask the Biden administration to reopen the floodgates, not to create any more obstacles and to allow it to work ».
What could be one of his first gestures …?
« t is a first expected gesture ».
Do you think that in the years to come, we will see a shift from Iran to Asia, and in particular to China, where will Iran continue the policy that ‘she calls “neither east nor west, Islamic Republic”? Will Iran continue to play a central role? Because we hear Guide Khamenei speak not of the Middle East but of Western Asia, with a representation of the world behind it, so how you see things evolving and we imagine that it will also depend on the American attitude to all this …?
« So let’s say that the official posture of the Guide is what we call the“ Go East ”posture. Turn to the East, the West only wants us badly, so let’s look to people who want us good. Besides, I gave you to understand that the people in question do not necessarily want them well. There is also a traditional mistrust, I mentioned towards the Chinese, but also towards the Russians, since the famous Treaty of Turkmanchai, in 1828, which is still present in the Iranian cervical meanders. So against bad luck, good heart, Iran has embarked on an Asian strategy, with a very important component that is not limited, far from it, to China. The most interesting aspect, in my opinion, of this strategy, which will last, is the growing establishment with success in Central Asia. There is a sophisticated strategy towards an India, Pakistan and Afghanistan trinomial, with a strategic element, which is the port of Chabahar. The port of Chabahar is this port which gives a breath of fresh air to the Central Asia zone ».
Besides, the port of Chabahar had been more or less spared from the sanctions?
« This is what is very important, is that, while there are sanctions in all directions, it should be known that, exceptionally, America has granted, and renewed to India waivers and authorizations allowing India to invest in the port of Chabahar. And on this, American policy has not changed. Where does the paradox come from? It is quite simply that as America prepares for the outright abandonment of Afghanistan into the hands of the Taliban, with Pakistani subcontracting, it was necessary to give the unfortunate Afghans a little breath of fresh air. The idea is to create corridors that would leave Afghanistan to neighboring countries, to allow import and export and to survive. And in this case, the Indians have negotiated the authorization to be able to invest in Chabahar. Chabahar is developing but slower than previously thought for somewhat complicated reasons. They are mainly of two types. The first reason is in fact the Indian internal indecision. The Indians, at the same time repeat that for them this port is strategic, that they invest in it, and at the same time, a year ago, had sweetened the ¾ of the credits intended for these investments, which is not d ‘a totally obvious logic. It is believed that there are internal divisions in India, it is also believed that there is a factor which weighs, it is that, although the Americans have given the green light, they exert monstrous pressure on the Indians. In fact they want to persuade the Indians to give up the purchase of the S-400, of Russian anti-missile systems, which infuriates the Americans and which puts in the balance the purchase of the pretty little F-35 toys. And so they put pressure on the Indians, who have been forced to considerably reduce financial contributions to Chabahar.
But, the Iranians continued to invest and above all, something funny happened is that the Pakistani port of Gwadar, supported at arm’s length by the Chinese who, at the same time, are building a military base next to it, said shrewdly to the Indians, “but never mind!” All of this is complementary, we will work things out and we will declare that the two projects complement each other and even you Indians, we will help you. And this quite funny thing happens, we see the Chinese offering to the Indians to provide them with equipment for the development of the Indian part of the port, while they are competitors. And so the Iranians rub their hands together, “our soup is ours”, and finally the two move on. The projects are progressing with in particular the key points of this history which are finally the railway infrastructures on which the Chinese are the main contributors, on both sides of the border that is to say on the Iranian side and the Afghan side, with the boxes of Iranian construction. The Pakistanis are going through a rather gloomy phase at the moment because the Chinese are having difficulties, they seem, and diminishing their financial support. In particular on the famous CEPC, which is the big Sino-Pakistani infrastructure hub and suddenly the Pakistanis were forced to call on the Saudis to help to co-finance this. On the Iranian side we see, with great satisfaction, that the Chahabar project is moving forward. This is durable. Iranian Central Asia implantation is lasting, the links, despite the avatars of the Haut-Kharabagh crisis with Turkey, and Azerbaijan are lasting, especially since Iran, despite the unfortunate Armenians, is has been sided with Azerbaijan for a long time for an extremely simple reason, which is that they need the Turkish-Azeri blessing on the watershed of the Caspian, where there is gas, it is for that the Iranians have let go of the unfortunate Armenians to whom they give some small consolation prizes because they favor solidarity around the Caspian file. And I come back to the central point, to the development, with Azerbaijan and Turkey of railway infrastructure. Rail is one of the keys to the development of the area and, even if Iran, as we know, much prefers Western technologies rather than resorting to the Chinese, they will keep the Central Asia strategy. They would like not to put themselves in the hands of the Chinese, but for the moment they have no choice ».
After that if there is an opening it will allow Iran to be in a position of pendulum according to its own interests?
« Yes, by the way if memory serves, to be quite precise Mr. Salehi, who is the Iranian nuclear boss, who made an exceptionally interesting declaration of paradigm shift, said that Iran must be” neither east, nor west ”, it’s interesting ».
In any case, it meets the historical foundations, especially in the discourse of the last decades. Suddenly, can we imagine that China and Russia come to replace the Westerners in particular because they believe that if the Americans return to the agreement, that does not mean that they will open their arms wide and and that Europe on the other side did not necessarily, at least in the eyes of the Iranians, played the JCPOA game during the Trump years, so will some replace the others and if so, in which sectors or precisely, are we going to end up in a position of pendulum?
“I would say that as long as the noose is not loosened, the Iranians have no choice. But they are in a hurry to loosen the vice, and would prefer in particular for advanced technologies to rely on the French, the Germans and the Italians. I also find that we do not talk enough about the Italians who are very present in Iran. Last fall I attended an impressive webinar hosted by Italians and Iranians where the Italian Ambassador to Iran said in substance “but you know us, Iran will be a critical market and that’s why now, we are prospecting province by province, sector by sector, with a three-year horizon. The Germans are extremely present. But there are countries that we talk about less, I take the case, for example, of Denmark where we learned, at the end of this autumn, that Denmark had built a production unit for medicines. The biggest Danish pharma lab, Novo Nordisk has built a drug manufacturing plant in Iran, which means that not everyone is sitting idly by.
And I regularly point this out around me, while we cross our arms and there are other Europeans who do not cross their arms … ».
Exactly, what is the game of French companies …?
« I am convinced that there are many mid-size companies, medium-sized companies which remain very interested in the Iranian market. And who would like, as soon as the opportunity arises, to resume transactions. I think there are more companies than you think that keep informal relations with their Iranian partners, I am convinced of that. And this is also the advice we give to them, when it comes to large groups, I think their number 1 problem is exposure to American risk, that is to say that they will wait for very solid guarantees from the United States and there, I would like to stress, not only the absence of risk of sanctions, but also of pressure, because the pressures are, contrary to what the we believe, often we confuse the two, but it is not the same thing but it is as dangerous as the sanctions. Simple example, a pension fund receives the kind advice of a large group and causes the stock market to plunge, it hurts a lot! Systematic boycotts of the French or European box, it can hurt. And so on. So I think that, when it comes to the large groups, they will demand concrete guarantees that they could not obtain when the JCPOA was in force, and that in theory they could make a transaction, they will ask for what letters of comfort are called from OFAC saying “Mr. Societe Generale, Mr. BNP, Mr. Credit Agricole, we assure you that you will not only have no sanction, but also no pressure.” There, that poses the political problem, will Biden and his administration have enough power against a certain number of pressure groups, not only within the administration, so that they stop their noxious maneuvers. It is not at all demonstrated. Hence the caution of large groups, who will probably go to taste the bath water before putting the baby in, but who will be very careful because they have been scalded ».
Zarif, the Minister of Foreign Affairs, used to talk about an Iranian foreign policy with Iran’s direct neighbors and in particular those in the Gulf with a desire to work with neighbors first, “neighbors first”, to to paraphrase Trumpian “America first”. In a highly regionalized economy, how do you see relations between Iran and its Gulf neighbors, and in particular in the context of reconciliation between Qatar and its Emirati and Saudi neighbors?
« Trade relations are different from political relations. Because every market is different. The Iraqi market is a very important market for Iran, where it is excessively present there, and at the option of the Iraqis too present, in particular by companies closely linked to the Guardians of the Revolution. With an excessively offensive trade policy, which is also perceived as aggressive. I would give just one example, to take control of a good part of the cement market, a few years ago, the Iranians, whose cement needs are not satiated by national production, flooded Iraq with cement, to pulverize Iraqi competitors, who did not recover, when Iran was forced to import cement to meet its national needs. So these are extremely aggressive policies, often by groups led or controlled by the Revolutionary Guards. And I used to say, when we talk about Iran’s policy of economic penetration into Iraq, as in Syria for that matter, to say that they feed on the beast. That is to say that we are paying for fraternal help with all possible quotes, by taking control of parts of the economy, businesses, etc. This explains in Iraq, apart from the much talked about political interference, Iran is also not very well regarded by large segments of the population because they take over part of the economy.
With the United Arab Emirates, relations were much more balanced since it was only trade. Sanctions on the one hand but also the relative quarrel, I insist on the relative word melts bilateral trade. There are still some but things will not resume as before. Because the Emirates were a bit of a hub for Iran’s trade with a whole host of countries. It turns out that on the Iranian side, the bazaar has reorganized. If in an ideal world there was a complete renormalization between the UAE and Iran, trade flows would not pick up, in my opinion, in the same way. So the emirates have not only because of the sanctions but also a partial element due to Saudi Arabia. Because in fact the two are very competitive, especially in Yemen, etc. And even with regard to the United States, the emirates have lost something in history. The Iranians lost something, but they reorganized themselves in a different way. Exports go elsewhere. So relations with other monarchies should not in my opinion take on a gigantic scale. Can there be a political normalization, it is also one of the aspects of post-JCPOA negotiation. The central point is this. The Iranians, the Russians elsewhere and the Chinese say, “we must create a regional security system, between regional partners. Iran, moreover, had claimed it for an eternity but was not credible and in particular for a reason which one speaks very little. I am also very surprised that we never talk about it, it is because Iran had offered the Emirates in particular this great regional security partnership including all the little comrades. But at the same time Iran blocks the dispute that exists with the UAE in the islands of Abu Moussa and Petits and Grande Tunb, which it has occupied since the period of the independence of the Emirates. The Iranians say, “We have historic rights to these islets, and therefore we refuse. What some, including your modest servant try to make understand is that, if the Iranian rights are incontestable, it is not understood why they refuse to submit this dispute to an international arbitral jurisdiction, if they have rights in the jurisdiction. will recognize. They refuse to do so. Why I bring up this point is because it diminishes the credibility of Iranian regional security proposals encompassing only local stakeholders, who do not want to hear about a complete exclusion of America. It is hard to see the Emirates and Saudi Arabia saying, “we are going to come to an understanding with the Iranians, because they are going to eat us alive, they are going to send us projectiles at our beautiful refineries, etc.” There still has to be an American umbrella behind it.
And the episode that happened 2-3 months ago with the “Abraham Accords” and the UAE’s rapprochement with Israel actually fits into a strategy that was outlined by Trump, but which will most likely be continued. by Biden. It is in fact the subcontracting, with American support, but the subcontracting all the same, by the local countries of their own security. Because it makes it possible to free from the American physical presence, while providing dumpsters of material, more or less useful but in any case very expensive, etc. This is the American vision which greatly annoys the Iranians ».
Besides, maybe that’s why Biden suspended arms deliveries to the region …?
« So Biden did indeed call for a review of arms supplies to Saudi Arabia, for a lot of reasons, including because of the Yemeni fiasco. And for the UAE because he felt that no guarantees had been given to the Emiratis. What’s interesting is that there’s a slightly more sophisticated American plan, which was sketched out by Jack Sullivan, who is the senior security adviser, in which he says, “I don’t believe in the creation of an apparatus of a bureaucratic regional security organization, I rather believe in a policy of small, informal steps. He insisted a lot, which I personally find very intelligent, Jack Sullivan is a type who is very intelligent, on the notion of informal, to, based on confidence measures, persuade each other to have exchanges which initially would be bilateral, and would gradually become multilateral. The idea is clever. It doesn’t mean that it will work, but at least it has the merit of being clever and of not being the copy and paste of the previous proposals. The question which arises is how it will coexist, with the probable non-disappearance, even if it decreases, of the support in material, in the absence of men since that, it will inevitably decrease, American on the ground.
It is certain that Biden will have given the Saudis an ultimatum to drop Yemen, which is a total fiasco which costs a fortune and in which France was very imprudent to wet itself. This is one of the strategic mistakes that must be taught in military schools as the good example not to make. It’s a Vietnam bis, a fiasco as we do not do much. So here we are, we won the chocolate medal with the Saudis, from the post Vietnam fiasco. So there is an unknown which is how this dynamic will take, and how will it be articulated. Nevertheless, with military support which will be doubled by the Europeans, France, quite happily, has its say in the UAE, where there is a good relationship of trust on the military level, which it does not is not far-fetched because there, it makes sense, there is a strategic objective which is the Detoit of Hormuz, the Indian approaches a little further, so there, I was very mean about the case Yemeni but on the French posture with regard to the UAE, there, that makes sense but we do not yet see very well how it will take. What is certain is that any approach, whatever it is, will have to go through confidence-building measures by the various parties, Iranians of course, but all the others as well. It will most certainly be at the heart of the pre-negotiations that will take place, or we may have already started, behind the curtains. That is certain ».
