Tag: Iran
Iran needs more than sanctions lifted
On Wednesday, the Johns Hopkins School of Advanced International Studies and the Middle East and Central Asia Department of the International Monetary (IMF) fund hosted ‘After Sanctions: Challenges Facing the Iranian Economy.’ Masood Ahmed, Director of the Middle East and Central Asia Department at the IMF, gave a presentation on the condition of the Iranian economy during the past four years. He then participated in a discussion with Martin Cerisola, Assistant Director of the Middle East and Central Asia Department at the IMF, Nadereh Chamlou, an international development advisor, and Suzanne Maloney, Deputy Director of the Foreign Policy program at the Brookings Institution. Vali Nasr, Dean of the Johns Hopkins Paul H. Nitze School of Advanced International Studies, moderated.
Ahmed explained how the past four years have been difficult for Iran. The introduction of harsh sanctions in 2011 hit the Iranian economy hard. Oil exports declined by nearly 50 percent, the economy shrank, the exchange rate declined, and inflation increased.
Removal of sanctions will boost the economy immediately: production and the export of oil will increase, the cost doing business will decrease, and transactions will become easier. Maintaining this boost in the long-run should be the goal. Some chronic problems existed prior to the sanctions, so the economy can only make a full recovery if these are addressed properly. Concentrating on all facets of the economy is not just important for Iran, but for the countries it trades with. Primary trading partners India, China, Turkey, and Iraq stand to gain immediately from the removal of Iranian sanctions.
Iran has to adjust in order to sustain a strong economy. Iran will have to:
- Live with the oil price fluctuations
- Create a better macroeconomic policy framework
- Construct a more conducive business environment
- Revamp its productive structure
With lower oil prices comes a big loss of revenue and growth. Iran will have to become less dependent on oil price volatility. Other challenges include improving the business climate, restructuring banks, and creating more employment in sectors with the highest productivity. Currently, the most employment is in sectors with the lowest productivity. Iran has one of the least flexible labor markets, so finding a creative solution to unemployment is a pivotal reform Iran should take on. Overall, though, the fundamentals of the Iranian economy are strong. The country is resource-rich, its market size is beneficial, it has a highly skilled labor force, and the infrastructure is there and only needs to be modernized.
Nasr asked what sort of investment Iran’s economy requires. Ahmed replied that investment is most needed for modernizing, improving, and sustaining oil production. Cerisola said they need enough investment to sustain eight percent growth projections. Two hundred million dollars is needed for oil alone.
The panel then addressed reforms. Chamlou said the parliament asked the government to submit another version of a six-year plan because not enough substance was in the original plan. Iran is in need of deep-rooted reforms, and she hopes that outside pressure and investors will bring about these reforms. With the amount of investment that will come in, the government and business sectors will both have to alter their practices.
Maloney then discussed how President Rouhani would help Iran open up to foreign investment. He was elected because of his focus on both prosperity and national security. He has put together a fantastic team to lead Iran into a better economic position. The ideological divide in Iran will challenge Rouhani. His political rivals will look to make certain opportunities more difficult for him. But Rouhani does have an excellent ability to build alliances and seems to be savvy about the issues he takes on.
Ahmed believes the removal of sanctions will help the Iranian economy, but it will not solve all the problems. Managing expectation and fostering consensus is critical to success. Structural challenges are formidable and require extensive reforms. Maloney added that if Iran does not see the economy boom quickly enough, that it could see some political backlash.
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A view from inside the nuclear negotiations
On February 9, Wilson Center hosted ‘Inside the Iran Negotiations: A Conversation with Chief Negotiator Ambassador Wendy R. Sherman.’ Jane Harman, Director, President, and CEO of the Wilson Center, introduced Sherman, and Robert S. Litwak, Vice President for Scholars and Director of International Security Studies at the Wilson Center, prompted questions for Sherman to consider.
After nearly 20 months of negotiations, a nuclear deal with Iran was reached in 2015. The negotiations took place over a four-year period. The first two years of talks did not accomplish much, but Sherman was able to assess the Iranian mindset.
A major change occurred when President Hassan Rouhani assumed power. While Rouhani is a part of the revolutionary zeal and is a cleric, he is not a strict hardliner unwilling to compromise. He had to address the serious economic problems the regime faced, or else face dissent from dissatisfied constituents. After Rouhani came to power, Sherman took part in secret bilateral talks with Iran. Ultimately, the secret negotiations were brought to the formal table, as Iran proved it was serious about halting production of nuclear material.
The P5+1 formal negotiations proposed a comprehensive plan of action where Iran would no longer enrich uranium beyond a specified level and refrain from producing plutonium. Sherman claimed that this deal was written so Iran could never have a nuclear weapon. If Iran breaks its end of the bargain, the US will reimpose sanctions and military action will be considered.
She added that though sanctions never stopped Iran from producing nuclear material, they did bring Iran to the negotiating table. The nuclear deal is written as a long-term solution. It will remain durable because it is in everyone’s best interests to comply. The deal also guarantees access to Iranian facilities. Iranian production of nuclear material will be closely monitored. The only way for Iran to sidestep this deal would be to produce nuclear material covertly, which is nearly impossible.
Negotiations not only involved the US and Iran coming to an agreement, but also creating a solution the P5+1 could agree upon. Getting all actors to agree was a complex process. Sherman teased that she negotiated with the P5+1 countries the most, and only negotiated a fair amount with Iran. Outside actors affected the negotiation process, too. She dealt with Prime Minister of Israel Benjamin Netanyahu’s criticism of the deal, always remaining in contact with Israel throughout the negotiation period. The US also shared information about the process with Israeli experts and Gulf allies, and always looked for outside input.
Sherman said implementation will be a major challenge. The US received information that someone in Iran had injected gas into a more advanced centrifuge, which the Iranian negotiators seemed to know nothing about. Whether it was someone trying to sabotage the deal, or the restrictions were understood, is unclear.
If there is significant noncompliance in the future, a 30-day period is available to resolve the problem. Communication and transparency is key to this deal’s success. A channel of communication has been established, which has boosted US-Iranian relations, but it is unclear whether communication will generate trust. Grievances are deep on both sides.
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The ceasefire/humanitarian trap
Secretary of State Kerry is in Munich at the annual security conference reportedly talking with Russian Foreign Minister Lavrov about a ceasefire and humanitarian access in Syria, focused on Aleppo and the north. That’s where Russian air attacks have decimated both the Syrian opposition fighters and their civilian supporters in recent days.
Let’s leave aside the question of whether Kerry should ever speak with Lavrov again after his mendacity of the past several months, when he led the admittedly gullible Secretary of State to believe that Moscow might make common cause with Washington against the Islamic State (ISIL). Instead, Moscow’s main military targets in Syria have been relative moderates. But we all have to talk with people who have treated us shabbily. The question is whether there is any hope of a ceasefire and humanitarian access.
Surprise: the answer is yes.*
At some point the Russians, the Iranians and Bashar al Assad are going to conclude that they have reached their main objectives. Going further will result in diminishing returns. Having displaced well over 100,000 people and besieged several hundred thousand more, the triumvirate will not want to feed and shelter them, much less provide medical care and sanitary facilities.
Particularly if the Kurdish forces in northern Syria, who are friendly with the Russians and the Syrian government, are able to seize the stretch of the border with Turkey that they don’t already control, Moscow will want to halt its offensive and consolidate its gains. In addition to dumping the humanitarian burden on the UN (which gets its resources from the US, the Europeans and the Gulf), from Moscow’s perspective agreeing to a ceasefire would reduce the (already small) risk that Turkey will enter the fray to block Kurdish advances.
Should the Americans, Europeans and Gulf states fall into the ceasefire/humanitarian trap?
They don’t have much choice. There appears to be no real possibility of a military response to the Russian-backed offensive. Syrian suffering is monumental. The Europeans will want to use humanitarian assistance to stem the tide of refugees. The Gulf states will feel obligated, not least because they too don’t want the refugees. The Americans have never stinted on humanitarian relief.
There is something wrong with this picture. Moscow and Tehran have created the current humanitarian crisis in northern Syria. They, not the Americans/Europeans/Gulf, should be paying to alleviate the humanitarian consequences of their military advances. So far as I am aware, neither Moscow nor Tehran has anted up a ruble or a rial. All the assistance they provide to the government in Damascus goes to the regime and areas the regime controls.
It is high time for the Americans to tell Lavrov that we expect Russia to do its part. Putin wants Russia to be counted among the great powers. He should start spending like one. I’d start the bidding at $2 billion from the Russians for UN humanitarian relief efforts and settle for $1 billion.
I’d also make it clear that Moscow’s indiscriminate bombing entails responsibility for post-war reconstruction. The Russian approach in Syria resembles what Putin did in Chechnya: level and rule. Post-war Chechnya cost Moscow a bundle. The bill for Syria will be many times that. Assad’s international opponents may feel obligated to provide humanitarian assistance to his Syrian opponents as they are chased from their homes, but they should not provide any assistance to rebuild a Syria still ruled by Assad or his regime. That is a Russian and Iranian responsibility.
Washington has already provided over $5 billion in humanitarian assistance to Syrians inside and outside the country. American aid is distributed inside Syria both in regime and opposition controlled areas. But if Assad wins this war, we’ll have to take a much harder-nosed attitude when it comes to funding reconstruction.
*For the record: I wrote this before the Russians proposed a March 1 date, and well before the proposed cessation of hostilities.
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Dire
Iraq’s Kurdistan Region is making noises about conducting a referendum soon to decide its political future. A drafting committee is working on the wording of the proposition. President Barzani and his PDK are committed to conducting the referendum this year.
Whatever the wording, Kurdistan’s largely young Kurdish population will understand it to be about independence. Ditto the large Kurdish diaspora, which referendum advocates want to enfranchise. Most of Kurdistan’s now substantial Arab population of people displaced by war will not be able to vote.
The outcome is predictable: 90% and likely more will vote yes, whatever the precise wording.
The case for Kurdistan’s independence is on the face of it compelling. Saddam Hussein’s regime mistreated its population, chasing Kurds from their homes and even out of the country. Kurds were even gassed during the 1988 Anfal campaign. Kurdistan won a large measure of autonomy in the 2005 Iraqi constitution, but the relationship between Baghdad and Erbil has been at best rocky since then. The Kurdistan Regional Government (KRG) has not received all the oil revenue it is entitled to, it has had to defend its own territory from the Islamic State without help from Baghdad and it faces demands from its population, most of whom no longer speak Arabic, for complete independence. The KRG claims to be a democracy and to treat minorities well.
So why shouldn’t it happen?
The geopolitical circumstances are not favorable. While Kurdistan has vastly improved its relations with Ankara, large parts of eastern Turkey were slated at the end of World War I to become part of a Kurdish state. Turkey will not want to see independence for its southern neighbor while it represses a violent Kurdish rebellion on its own territory, for fear of the irredentist consequences. Iranians feel even more strongly on this issue: what the Kurds call “eastern Kurdistan” is inside the Islamic Republic. Iran’s population is not much more than 50% Persian. Tehran will fear the Kurds won’t be the only ones looking to get out. The Baloch have been rebelling since 2004.
Iraqi Kurds naturally look to the Americans for support. Washington was vital to their survival in the 90s, when it protected them with a no-fly zone in northern Iraq. The Kurds supported the 2003 American invasion of Iraq and happily hosted American forces. The KRG has welcomed Iraqi Christians displaced by ISIS and maintains friendly relations with the US, even welcoming American investment and admitting Americans without the visas the Baghdad government requires. My Kurdish friends ask plaintively: don’t the Americans want a new friendly ally in the Middle East? One with at least a nominal commitment to multiethnic democracy?
Washington might, but it has global concerns, which include maintaining the sovereignty and territorial integrity of Georgia, Ukraine and Moldova, where Moscow is supporting breakaway territories in each of those countries. Independence for Kurdistan would open the proverbial Pandora’s box, strengthening Russian arguments and undermining the international consensus that has formed against independence for South Ossetia and Abkhazia, the annexation of Crimea and the rebellion in Donetsk and Luhansk, as well as the aspirations of Transnistria. China will be no less opposed to Kurdistan’s independence than the Americans, for fear of the implications for Tibet.
Even inside Iraq, there are issues. The boundaries of Iraqi Kurdistan are not agreed. While the KRG seized the so-called “disputed territories” during its offensive against the Islamic State in 2014, Baghdad has not agreed that they belong within Kurdistan. The KRG is offering to conduct referenda in these territories on whether they want to join with Kurdistan, fulfilling a provision of the Iraqi constitution. But doing that while the KRG is in control is unlikely to convince Baghdad that a free choice is being made.
At current oil prices around $30/barrel, the KRG is nowhere near having the financial resources to be independent. Baghdad isn’t providing the funding it should, but independence would leave Kurdistan even worse off. It is still an oil rentier state, despite its hopes for a more diversified economy. My guess is that oil prices in the future will have a hard time going over $70-80/barrel, because above that level massive quantities of unconventionally produced oil and gas (as well as other alternatives) will come on line. The KRG needs closer to $100/barrel to meet its financial requirements with oil production even well above current levels.
Advocates of an independence referendum are claiming that it would be prelude to a re-negotiation of the relationship with Baghdad, not necessarily a one-way street to independence. Anyone who knows young Kurds will doubt that after voting for what they think of as independence they will accept some sort of confederal arrangement to stay nominally inside Iraq. An independence referendum is far more likely to be prelude to still another war, in which Arabs (both Sunni and Shia) fight Kurds to determine the borders they have failed to agree on for more than a decade.
The implications of a referendum without prior agreement, both on the legitimacy of the process and on Kurdistan’s borders, are dire.
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Assad is fulfilling his own prophecy
With Syrian government and Iranian forces encircling Aleppo aided by Russian air attacks, it behooves us to consider what happens if President Assad wins. He is close to achieving his main goal by taking control of what he regards as “useful” Syria, which includes the corridor north from Damascus at least to Aleppo and west to Lebanon and the Mediterranean.
This Assad victory would not defeat ISIS, which controls territory to the east of this corridor, or the Kurdish forces that control most of the border with Turkey. Neither ISIS nor the Kurds have clashed more than occasionally with Syrian government forces, the Iranians and Russians. The Kurds appear to have an explicit understanding with the regime, which maintains government facilities within Kurdish-controlled territory. The regime and ISIS stay out of each other’s way.
Aleppo was once the largest city in Syria, with more than 2 million inhabitants. How many remain is unclear. Tens of thousands have fled in recent days north to the Turkish border, where they are blocked from entering. Many more presumably remain in the city, some in areas that have long been regime-controlled. If the encirclement of opposition areas is successful, they face starvation, bombardment and eventual surrender. Large parts of the city are already destroyed.
Idlib, to the soutwest of Aleppo, is also under attack and at risk of being cut off from Aleppo and from Turkey.
Judging from what has occurred elsewhere, there will be little effort to rebuild, except in areas dominated by or repopulated with Alawites and Shia. Syria’s Sunnis and others who have opposed Assad will be left to fend for themselves. Neither Russia nor Iran has provided significant reconstruction aid, the bill for which will be well over $100 billion. The Europeans, Americans and Gulf have provided most of the humanitarian assistance, relying in part on the United Nations, but they will presumably be unwilling to pay for reconstruction in areas where the regime regains control.
With moderate rebel forces defeated in the north, the odds are that the extremist forces of Jabhat al Nusra (JN), an Al Qaeda affiliate, and the Islamic State (ISIS) will gain. JN cadres appear to be mainly Syrian. ISIS is not. We should expect that whatever moderate Syrian forces remain will ally with JN, which will continue to fight. ISIS relies heavily on foreign fighters and is much less likely to attract many Syrians. Kurdish and allied Arab forces have been pressing south towards Raqqa, which is the de facto “capital” of the ISIS caliphate, but taking the city would require a far bigger Arab force than appears to exist right now.
In the south, moderate forces are holding up a bit better, but they have not come under the same kind of intensive regime, Russian and Iranian assault mounted around Aleppo. ISIS has been active in a small part of the south, but so far without any big success. It remains to be seen what will happen there.
A regime takeover of Aleppo and Idlib will end any serious military prospects for the moderate non-Kurdish opposition, except in the Azaz pocket near the border with Turkey. Even there, the Kurds and regime, Iranian and Russian forces may combine to push them out and force displaced Arabs into Turkey. Assad would be glad to add to Erdogan’s woes.
Assad has long wanted the contest in Syria to be seen as a fight between his regime and the extremists. He is getting close to driving the relative moderates off the battlefield, fulfilling his own prophecy. The consequences for many Syrians, for Turkey and for the prospects for peace will be disastrous.
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Kurdistan keeps reinventing itself
On Wednesday, SAIS hosted an event entitled “Kurdistan: Re-Inventing Itself, Yet Again.” Sasha Toperich, Senior Fellow and Director, Mediterranean Basin Initiative, Center for Transatlantic Relations, SAIS made opening remarks. Hemin Hawrami, Director, Foreign Relations Office, Kurdistan Democratic Party gave a keynote address, which was followed by a panel discussion. Rebeen Pasha, WYLN Senior Fellow, Mediterranean Basin Initiative, introduced and moderated the panel. Panelists included Hawrami and Salam Mohammad Islam, Chief Executive Director, Rwanga Foundation.
Toperich explained that Iraqi Kurdistan has a 600 mile front with ISIS and 1.8 million refugees/IDPs. Baghdad has not provided the KRG with the funding it promised. Iraqi Kurdistan is a flag without a country and a safe harbor for minorities affected by ISIS atrocities. The different groups in Iraq should be able to chart their own destinies while being reconciled with each other. If Iraq must remain united, the Kurds must be able to take out their own loans and revive their economy. He strongly supports the KRG’s independence referendum.
Hawrami stated that Iraqi Kurdistan is an important actor in a chaotic Middle East. Many of Iraqi Kurdistan’s challenges are external. ISIS is a symptom of sectarianism in Iraq and developments in Syria. A military response to ISIS is a short-term solution. ISIS was a terrorist organization but became a terrorist state when it captured Mosul. The KRG warned Baghdad about ISIS, but Maliki didn’t listen. When ISIS attacked the KRG, they aimed to:
- Gain control of disputed areas claimed by the KRG.
- Stop the independence referendum.
ISIS is a combination of Takfirism and Ba’athism. The KRG has a three-phase counter-ISIS strategy:
- Stopping ISIS.
- Rolling back ISIS.
- Defeating ISIS.
Over 1,600 Peshmerga sacrificed their lives to accomplish the first two goals. The KRG remains threatened; there are still daily skirmishes. But defeating ISIS requires liberating Mosul; the Iraqi government isn’t yet finished with Ramadi. Liberating Mosul requires boots on the ground (Sunnis and Peshmerga). But they will need more equipment. The Peshmerga have been unpaid for four months but are still fighting.
Iraqi Kurdistan has experienced three shocks since 2014:
- Maliki cut the budget for the KRG in February 2014.
- The influx of 1.8 million refugees and IDPs.
- Low oil prices.
Until 2013, Iraqi Kurdistan was the only region in the Middle East and North Africa with double-digit economic growth. Had it been independent, its rank in the areas of openness and governance would have been comparable with Malaysia and Indonesia. Unemployment was at 6% but is now ~25%. The poverty rate has jumped from 3% to 13%. The KRG is still learning how to govern; more still needs to be done. Kurdistan wants dialogue with Baghdad (not military conflict) but doesn’t want to be part of another decade of sectarianism and bad governance. Dialogue with Baghdad has improved; they now have a joint committee with Baghdad that meets monthly.
That is why they are holding the referendum (hopefully this year), which is not for immediate independence but asks what people want for their future. It will be for all citizens of Iraqi Kurdistan, including those in the diaspora.
The Kurds have been victims since Sykes-Picot but the borders are now only on maps. The KRG hopes these borders can be redrawn through peaceful coexistence and wants to add to the number of functioning political entities in the region. The KRG has become a safe haven for Iraqi Christians, most of whom now live in Kurdistan. Iraqi Kurdistan is a villa in the jungle that must be protected.
Pasha stated that he sees both challenges and opportunities for Iraqi Kurdistan. He grew up under Saddam and couldn’t imagine a future without Saddam. If we detach ourselves from the current situation, we can focus on Kurdistan’s future potential. Investing in young people is key for Iraqi Kurdistan’s future since 2/3 of the population is under 30.
Hawrami, in response to a question, said the Kurds believe the disputed territories are Kurdish and have waited ten years for censuses and referenda in these areas. Since the Iraqi Army’s retreat, the KRG has provided security but won’t impose a military status-quo. The KRG will hold special referenda in these areas for them to decide if they want to be part of Kurdistan. The KRG will also not accept interference by the Popular Mobilization Units (PMUs). If these areas choose to join Iraqi Kurdistan, the KRG will provide them with special status based on power-sharing and equal opportunities.
Another audience member asked about KRG-Turkey relations. Hawrami explained that Turkey and the KRG have common interests; they have strong economic ties and the KRG supports the peace process in Turkey. Out of 3,300 foreign companies working in Iraqi Kurdistan, over 1,300 are Turkish. Turkey has not publicly rejected the independence referendum and recognizes that Iraqi Kurdistan adds to the stability of the region. Iraqi Kurdistan is not a threat to its neighbors.
A third audience member asked if it has become increasingly difficult for non-Kurds in Iraqi Kurdistan. Hawrami responded that 1.4 million of the KRG’s IDPs are Arabs (Sunni and Shia) and the Kurds have provided them education. Their children are learning Kurdish. Thousands of Sunnis fled Ramadi during the military operation there and weren’t accepted in Baghdad because the PMUs feared they would change the demographics. They went to Kurdistan instead; the Kurds believe in freedom of religion. Islam has begun referring to citizens of Iraqi Kurdistan as Kurdistanis rather than Kurds, since 25% of the population is now non-Kurd.
Islam spoke about how effectiveness depends on efficiency. Since 1991, when Kurdistan achieved some self-governance, it has been at best effective but could have been more efficient and could have dealt with its challenges better. Instrospection is healthy for societies and Iraqi Kurdistan is still learning. In the early 1990s, CSOs in Iraqi Kurdistan were focused on humanitarian relief. They moved in the direction of democratization and development in the late 1990s, and especially post-2003.
The Rwanga Foundation’s vision is for education for all. They provide services, build capacity and design policies. They work on entrepreneurship and encourage youth to believe in themselves; youth are not only the leaders of tomorrow but also of today. Partnerships between CSOs, the government and the private sector will be important. Rwanga also provides humanitarian assistance in Sinjar. So far, Rwanga has completed 80 projects and has helped about 1 million people.
In the panel discussion, Pasha asked what is needed to rebuild liberated areas. Hawrami argued that ensuring security is paramount. The Peshmerga can do this, but more international assistance is needed for economic reconstruction. Islam noted that Sinjar needs more services for people to return.
Asked what Iraqi Kurdistan is doing to invest in good governance, Hawrami responded that the democratic process in Kurdistan began in 1992, but democracy also requires a culture of accountability and transparency. Iraqi Kurdistan was rural until the 1960s but the Ba’athists destroyed villages and moved people to urban camps. This transformed the people from producers to consumers. To increase productivity, the KRG has encouraged investment and boosted the private sector. The Kurds have institutions for accountability but democracy is an ongoing process. Many flaws remain. Fighting ISIS has made the Peshmerga stronger and the economic crisis will make the economy stronger because Kurdistan will enact reforms.
Hawrami noted that Iraqi Kurdistan looks to increase its trade relations with Iran, but won’t take sides in the regional sectarian conflict and won’t accept Iranian intervention in the disputed areas. Islam asserted that Kurdistan is on the right track, but there have been ups and downs. Developing the mentality of democracy takes a generation.
To conclude, Hawrami stated that the US must accept that the “one Iraq” policy is a failure and that Iraq is already divided. Washington must protect Kurdistan as a stable force in the region. Islam reiterated the importance of focusing on youth.
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