Iran turns to BRICS nations to demolish Trump's wall of sanctions
Iran turns to BRICS nations to demolish Trump's wall of sanctions
Analysis: Brazil, Russia, India, China and South Africa all offer potential markets for Iranian oil, but all will be wary of US retaliation, notes Omid Shokri Kalehsar.
8 min read
BRICS nations may offer a market for Iranian oil [Getty]
The countries of the BRICS grouping, except for Russia, are broadly categorised as developing countries or emerging economies.
Due to their rapid growth and the influential pull of their markets - making up half the world's population - these countries, Brazil, Russia, India, China and South Africa, have emerged as major global players in recent years.
These states are united in their concern for reforms to be made to the world financial system to increase stability, and calls are being made to re-evaluate the prominence of the dollar, given the heavy debt the United States finds itself in.
BRICS have largely drawn focus on such economic and trade issues, but with increased power, signs are emerging that these countries desire a role in a panoply of broader political affairs and global conflicts including those concerning Palestine, Yemen, Afghanistan, Syria, Korea and Iran.
Despite broadly similar concerns vis-à-vis American economic and political might, Iran's basis for relations with BRICS varies according to each country. It pays to highlight where these concerns coalesce and where they depart regarding each member:
China
The stability of the global oil market lies in the hands of major importing countries, including China. Any bout of economic crisis or political insecurity experienced by oil exporting countries has a direct impact on China's energy security and economic growth. Thus, political and economic stability has always been strongly supported by Beijing.
China is not happy with American supremacy over energy resources and energy transmission routes in the Middle East and Chinese officials fear that in the event of any conflict between the two countries, the United States has the power to cut off China’s supplies in one fell swoop.
Iran hopes that, in the absence of European co-operation due to sanctions, Chinese and Russian companies will have the gumption - rather more disentangled from the reach of the United States as they are - to continue to invest in the Iranian oil and gas industry. However, it should be noted that during the previous sanctions, Chinese companies left Iran's oil and gas industry as a precaution due to the consequences that violating sanctions may have had on other global investments and projects.
There is no guarantee that these companies will now invest in Iran's energy industry after this second series of sanctions.
China's state-owned and privately owned enterprises have always been steered by the Chinese government in terms of deals with supplier nations, with the desired result being further political influence and more affordable oil and gas products. It is likely that the Chinese government will reduce oil imports and stall investments in Iran so as not to antagonise the United States. Thus, the relationship between China and Iran has a chance of blossoming provided the right international settings are achieved vis-à-vis Iran's relationship with the West.
Russia
Russian companies are ready to participate in the energy industry of Iran.
Last year, contracts for the development of Aban and Persia Fields were signed with Russia's Zarobzhanga. Similarly, negotiations between Iranian authorities and Lukoil have seen recent movement in the past month over development of the Bangestan Reservoir, Mansouri Square, and Water Taymour Oil Field.
Considering current developments in the energy market and the reinstatement of US sanctions, attracting foreign capital and technology to the Iranian energy industry will be understandably harder to achieve. Realising the goals of Iran's Sixth Development Plan and Vision Document depends on foreign investment, which requires a reduction of political risk in the country - even in the case of Russian companies.
A change of attitude in foreign policy and an attempt to eliminate tension with neighbouring countries would mark a step toward attracting foreign investors, but despite political ties and gestures in solidarity with Iran, Russia in fact benefits greatly from the sanctions regime, given it is one of the world's largest producers of petroleum and gas.
India
In recent months, the US has increased its oil exports to India, and has signed a twenty-year contract to export LNG to the world's largest democracy. Iraq and Saudi Arabia are also seeking to increase their share of the Indian market. Saudi Arabia, as a US ally, is struggling to reduce Iran's role in the Indian energy market. If Iran wants to maintain its share in India and use the facilities of Indian companies in the oil fields, especially in the common area with Saudi Arabia, Iran needs an active energy diplomacy in the region.
Tensions in relations with neighbouring countries and the resolution of problems with the United States are the only way to preserve regional energy markets, including in India.
Indian private companies have good experience and enough financial resources to attract the Iranian market. The problem is that a legal framework is needed to attract foreign investment, as well as an effective and rapid decision-making process, and political stability - especially in the international context.
In recent years, Iran-India relations have warmed in addition to energy sectors in the transit areas, and the Chabahar port of Iran has become a bridge to the markets of Afghanistan and Central Asia, providing India with an exceptional opportunity to bring forward its trade relations.
This issue is important given India's growing competition with China to gain more influence in the region's markets for New Delhi, and India, with a rational decision to deal with US regional policy, can make more of its opportunities.
The port of Chabahar is of special importance for the countries of Iran, India, Afghanistan, Pakistan and, generally, Central Asia, and facilitates trade and access to these countries. Chabahar has a strategic importance for India, at the point of connecting this emerging economic power to its target markets in the countries of Central Asia, and onwards with Eastern Europe and the Caucasus.
India, of course, can also use Pakistani ports to connect its markets in Central Asia and the Caucasus, but Chabahar is both more politically and economically reliable than Pakistan's ports. Therefore, the geopolitical and geostrategic significance of the Chabahar port has led India to invest heavily in developing and managing this free trade area and to cooperate with Iran in this regard.
South Africa
Over the past decade, the Iranian government has been trying to make more of a political impact on the African continent. The number of trips between high-ranking Iranian and African leaders has increased dramatically over the years, but it does not seem that in practice the development of Iranian relations with Africa will be lucrative for Tehran either economically or politically.
However, in response to the changing global conditions Iran finds itself subjected to, the country is attempting to find new allies. South African companies are keen on cooperating with Iran and have a good platform in the area of joint investments - one of which includes oil producing units.
South Africa and other regional powers have become important actors in the economic and political arena with economic growth and political and international activities that can achieve positive achievements such as playing and expanding South-South cooperation.
Brazil
US sanctions on Tehran have particular meaning for Brazil, which sells Iran 90 percent of its agricultural imports. Iran will find it difficult to finance Brazilian imports with the onset of sanctions. Banking transactions will be difficult. Most Brazilian banks have not agreed to trade directly with Iran, as its deals with the United States have a greater impact on Brazilia's economy, and so have attempted to circumvent sanctions with a European model and is dealing with Middle Eastern banks.
Iran is Brazil's primary trading partner in the Middle East, with a trade volume of $2.6 billion - mostly helped by the foothold the country provides to the 600 million people in the surrounding markets, including Central Asia, the Caucasus, Iraq and Afghanistan.
Almost allies
Despite their dynamic differences and sometimes clashing economic and political interests, the BRICS group represents a powerful axis in the global economy, with an independent and capable banking system providing more integrated cooperation with a sub-tier of developing countries.
However, all are struggling to balance rapid growth with economic stability. India is currently under severe pressure to make economic reforms, while the issues facing Brazil, Russia, and South Africa relate more to growth itself. China, despite its mature economy, is struggling with growing debt and the complication of "shadow banking" and "surplus capacity".
BRICS are united in their negative views of the US sanctions against Iran, with Indian officials warning that the move would only increase global oil prices and may lead to shortages in supply. So far, with the new sanctions entering their second month, oil prices have risen by about 20 percent, leading many BRICS officials to begin seeking ways around the sanctions regime.
The South African Minister of Commerce has stated that while the country would go along with sanctions imposed by the Security Council, unilateral US-imposed sanctions would be against Pretoria's interests. A major issue pertaining to the BRICS is their relative remoteness and the lack of recognition of each other's capabilities, leading to, and a result of, a lack of coordination despite active joint meetings between business officials, cooperatives, and NGOs.
Despite the lack of coherence, and differences in the internal political and economic context of each of these countries, given their political, economic and demographic status, they are naturally set to become one of the world's most powerful intergovernmental institutions, and can even challenge the political and economic domination of old institutions.
In this respect, BRICS is the best example of the "emergence of others" against the West; a position that surely has the potential to provide opportunities for Iran. China and India will continue to buy Iranian oil, but even they, along with other BRICS members, remain diplomatically unable to fully ignore US demands.
Omid Shokri Kalehsar is a Washington-based senior energy security analyst.
His primary research interests are in the field of energy diplomacy, US energy policy, the geopolitics of energy, Iran-Russia relations and Iran-Turkey relations.
Follow him on Twitter: @ushukrik
Due to their rapid growth and the influential pull of their markets - making up half the world's population - these countries, Brazil, Russia, India, China and South Africa, have emerged as major global players in recent years.
These states are united in their concern for reforms to be made to the world financial system to increase stability, and calls are being made to re-evaluate the prominence of the dollar, given the heavy debt the United States finds itself in.
BRICS have largely drawn focus on such economic and trade issues, but with increased power, signs are emerging that these countries desire a role in a panoply of broader political affairs and global conflicts including those concerning Palestine, Yemen, Afghanistan, Syria, Korea and Iran.
Despite broadly similar concerns vis-à-vis American economic and political might, Iran's basis for relations with BRICS varies according to each country. It pays to highlight where these concerns coalesce and where they depart regarding each member:
China
The stability of the global oil market lies in the hands of major importing countries, including China. Any bout of economic crisis or political insecurity experienced by oil exporting countries has a direct impact on China's energy security and economic growth. Thus, political and economic stability has always been strongly supported by Beijing.
China is not happy with American supremacy over energy resources and energy transmission routes in the Middle East and Chinese officials fear that in the event of any conflict between the two countries, the United States has the power to cut off China’s supplies in one fell swoop.
Iran hopes that, in the absence of European co-operation due to sanctions, Chinese and Russian companies will have the gumption - rather more disentangled from the reach of the United States as they are - to continue to invest in the Iranian oil and gas industry. However, it should be noted that during the previous sanctions, Chinese companies left Iran's oil and gas industry as a precaution due to the consequences that violating sanctions may have had on other global investments and projects.
 |
It is likely that the Chinese government will reduce oil imports and stall investments in Iran so as not to antagonise the United States |  |
China's state-owned and privately owned enterprises have always been steered by the Chinese government in terms of deals with supplier nations, with the desired result being further political influence and more affordable oil and gas products. It is likely that the Chinese government will reduce oil imports and stall investments in Iran so as not to antagonise the United States. Thus, the relationship between China and Iran has a chance of blossoming provided the right international settings are achieved vis-à-vis Iran's relationship with the West.
Twitter Post
|
Russia
Russian companies are ready to participate in the energy industry of Iran.
Last year, contracts for the development of Aban and Persia Fields were signed with Russia's Zarobzhanga. Similarly, negotiations between Iranian authorities and Lukoil have seen recent movement in the past month over development of the Bangestan Reservoir, Mansouri Square, and Water Taymour Oil Field.
Considering current developments in the energy market and the reinstatement of US sanctions, attracting foreign capital and technology to the Iranian energy industry will be understandably harder to achieve. Realising the goals of Iran's Sixth Development Plan and Vision Document depends on foreign investment, which requires a reduction of political risk in the country - even in the case of Russian companies.
A change of attitude in foreign policy and an attempt to eliminate tension with neighbouring countries would mark a step toward attracting foreign investors, but despite political ties and gestures in solidarity with Iran, Russia in fact benefits greatly from the sanctions regime, given it is one of the world's largest producers of petroleum and gas.
India
In recent months, the US has increased its oil exports to India, and has signed a twenty-year contract to export LNG to the world's largest democracy. Iraq and Saudi Arabia are also seeking to increase their share of the Indian market. Saudi Arabia, as a US ally, is struggling to reduce Iran's role in the Indian energy market. If Iran wants to maintain its share in India and use the facilities of Indian companies in the oil fields, especially in the common area with Saudi Arabia, Iran needs an active energy diplomacy in the region.
Tensions in relations with neighbouring countries and the resolution of problems with the United States are the only way to preserve regional energy markets, including in India.
Indian private companies have good experience and enough financial resources to attract the Iranian market. The problem is that a legal framework is needed to attract foreign investment, as well as an effective and rapid decision-making process, and political stability - especially in the international context.
In recent years, Iran-India relations have warmed in addition to energy sectors in the transit areas, and the Chabahar port of Iran has become a bridge to the markets of Afghanistan and Central Asia, providing India with an exceptional opportunity to bring forward its trade relations.
This issue is important given India's growing competition with China to gain more influence in the region's markets for New Delhi, and India, with a rational decision to deal with US regional policy, can make more of its opportunities.
The port of Chabahar is of special importance for the countries of Iran, India, Afghanistan, Pakistan and, generally, Central Asia, and facilitates trade and access to these countries. Chabahar has a strategic importance for India, at the point of connecting this emerging economic power to its target markets in the countries of Central Asia, and onwards with Eastern Europe and the Caucasus.
India, of course, can also use Pakistani ports to connect its markets in Central Asia and the Caucasus, but Chabahar is both more politically and economically reliable than Pakistan's ports. Therefore, the geopolitical and geostrategic significance of the Chabahar port has led India to invest heavily in developing and managing this free trade area and to cooperate with Iran in this regard.
South Africa
Over the past decade, the Iranian government has been trying to make more of a political impact on the African continent. The number of trips between high-ranking Iranian and African leaders has increased dramatically over the years, but it does not seem that in practice the development of Iranian relations with Africa will be lucrative for Tehran either economically or politically.
|
South African companies are keen on cooperating with Iran and have a good platform in the area of joint investments | |
Twitter Post
|
South Africa and other regional powers have become important actors in the economic and political arena with economic growth and political and international activities that can achieve positive achievements such as playing and expanding South-South cooperation.
Brazil
US sanctions on Tehran have particular meaning for Brazil, which sells Iran 90 percent of its agricultural imports. Iran will find it difficult to finance Brazilian imports with the onset of sanctions. Banking transactions will be difficult. Most Brazilian banks have not agreed to trade directly with Iran, as its deals with the United States have a greater impact on Brazilia's economy, and so have attempted to circumvent sanctions with a European model and is dealing with Middle Eastern banks.
Iran is Brazil's primary trading partner in the Middle East, with a trade volume of $2.6 billion - mostly helped by the foothold the country provides to the 600 million people in the surrounding markets, including Central Asia, the Caucasus, Iraq and Afghanistan.
Almost allies
Despite their dynamic differences and sometimes clashing economic and political interests, the BRICS group represents a powerful axis in the global economy, with an independent and capable banking system providing more integrated cooperation with a sub-tier of developing countries.
However, all are struggling to balance rapid growth with economic stability. India is currently under severe pressure to make economic reforms, while the issues facing Brazil, Russia, and South Africa relate more to growth itself. China, despite its mature economy, is struggling with growing debt and the complication of "shadow banking" and "surplus capacity".
BRICS are united in their negative views of the US sanctions against Iran, with Indian officials warning that the move would only increase global oil prices and may lead to shortages in supply. So far, with the new sanctions entering their second month, oil prices have risen by about 20 percent, leading many BRICS officials to begin seeking ways around the sanctions regime.
The South African Minister of Commerce has stated that while the country would go along with sanctions imposed by the Security Council, unilateral US-imposed sanctions would be against Pretoria's interests. A major issue pertaining to the BRICS is their relative remoteness and the lack of recognition of each other's capabilities, leading to, and a result of, a lack of coordination despite active joint meetings between business officials, cooperatives, and NGOs.
Despite the lack of coherence, and differences in the internal political and economic context of each of these countries, given their political, economic and demographic status, they are naturally set to become one of the world's most powerful intergovernmental institutions, and can even challenge the political and economic domination of old institutions.
In this respect, BRICS is the best example of the "emergence of others" against the West; a position that surely has the potential to provide opportunities for Iran. China and India will continue to buy Iranian oil, but even they, along with other BRICS members, remain diplomatically unable to fully ignore US demands.
Omid Shokri Kalehsar is a Washington-based senior energy security analyst.
His primary research interests are in the field of energy diplomacy, US energy policy, the geopolitics of energy, Iran-Russia relations and Iran-Turkey relations.
Follow him on Twitter: @ushukrik
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