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Analyzing Iran’s Foreign Policy;
The Prospects and Challenges of Sino-Iranian Relations
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Lucinda Ruth de Boer (0106658) Msc International Relations (ISHSS) Amsterdam, July 2009

Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Analyzing Iran’s Foreign Policy;
The Prospects and Challenges of Sino-Iranian Relations

MSc Programme International Relations 2008-2009 Research Project: The Political Economy of Energy 2009 International School for Humanities and Social Sciences University of Amsterdam

Author: Lucinda Ruth de Boer Student number: 0106658 Email: lucindardeboer@hotmail.com

Amsterdam, July 2009

Supervisor: M. Parvizi Amineh Second Reader: E.P. Rakel

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Table of Contents

Maps ........................................................................................................................................................ 7 Acknowledgments ................................................................................................................................. 11 1. Introduction .................................................................................................................................... 12 1.1 Research Question and Hypothesis............................................................................................. 12 1.2 Theoretical Framework ............................................................................................................... 13 Classical Geopolitics......................................................................................................................... 14 Critical Geopolitics ........................................................................................................................... 14 Energy Scarcity ................................................................................................................................. 19 Authoritarian Regimes ...................................................................................................................... 20 1.3 Methodology ............................................................................................................................... 22 1.4 Organization of the work ............................................................................................................ 23 2. The Iranian State-Society Complex................................................................................................... 24 2.1 Nation-building (1850-1979) and the nature of the IRI’s regime ............................................... 24 Nation-building in Iran, 1850-1925 .................................................................................................. 24 Nation building in Iran, 1925-1979................................................................................................... 27 The Nature of the IRI’s Regime........................................................................................................ 32 2.2 Power structures in the IRI.......................................................................................................... 35 2.2.1 The Formal Power Structure in the IRI ............................................................................... 35 2.2.2 The Informal Structure in the IRI ........................................................................................ 40 2.2.3 Factionalism......................................................................................................................... 41 2.3 The Economic Bases of Political Factions in Iran ...................................................................... 43 2.4 Conclusion .................................................................................................................................. 44 3. The Iranian Oil- and Gas Complex ................................................................................................... 46 3.1 A Brief History ........................................................................................................................... 46 3.2 Energy Situation in Iran .............................................................................................................. 48 Iran and Demand-Induced Scarcity................................................................................................... 48 Nuclear Energy as an Alternative Energy Source for Iran................................................................ 52 Iran and Supply- Induced Scarcity ............................................................................................... 53 Iran and Structural-Scarcity.......................................................................................................... 60 3.3 Energy Infrastructure in Iran....................................................................................................... 60 3.4 The National Iranian Oil Company............................................................................................. 63 3.5 Energy Policy as a Fundamental Pillar of Iran’s Foreign Policy ................................................ 65

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

3.6 Conclusion .................................................................................................................................. 67 4. The IRI’s Foreign Policy................................................................................................................... 69 4.1 Formal Structure of Foreign Policy Decision-Making in the IRI ............................................... 69 4.2 Foreign Policy by the IRI under supreme leader Khomeini, 1979-1989 .................................... 72 Iran and the United States, 1979-1989.............................................................................................. 74 Iran and the Persian Gulf States, 1979-1989..................................................................................... 76 Iran and the Soviet Union, 1979-1989 .............................................................................................. 76 4.3 Foreign Policy by the IRI under the Presidency of Rafsanjani, 1989-1997................................ 77 Iran and the Persian Gulf States, 1989-1997..................................................................................... 79 Iran and the Caspian region, 1989-1997 ........................................................................................... 79 Iran and the United States, 1989-1997.............................................................................................. 81 4.4 Foreign Policy of the IRI under the Presidency of Khatami, 1997-2005.................................... 84 Iran and the US, 1997-2005 .............................................................................................................. 85 Iran and European countries, 1997-2005 .......................................................................................... 86 Iran and Central Asia, Russia and China, 1997-2005 ....................................................................... 87 Iran and the Arab States, 1997-2007................................................................................................. 88 Iran and India, Pakistan and Afghanistan, 1997-2005 ...................................................................... 89 4.5 Foreign Policy of the IRI under the Presidency of Ahmadinejad, 2005- .................................... 90 Iran and the United States, 2005-...................................................................................................... 92 Iran and the Arab States, 2005-......................................................................................................... 93 Iran and Russia, 2005- ...................................................................................................................... 94 4.6 The Iranian Nuclear Issue as a Symbol of the Confrontational Relationship between Iran and the West .................................................................................................................................................. 94 4.7 Conclusion................................................................................................................................... 99 5. Sino-Iranian Relations..................................................................................................................... 102 5.1 Historical Overview of Sino-Iranian Relations......................................................................... 102 5.2 Sino-Iranian nuclear cooperation .............................................................................................. 108 5.3 The Shanghai Cooperation Organization and Iran’s bid for membership................................. 111 5.3.1 The Shanghai Cooperation Organization........................................................................... 111 5.3.2 The Shanghai Cooperation Organization and Iran ............................................................ 113 5.4 The Sino-Iranian Economic-Energy relationship...................................................................... 116 The Sino-Iranian Economic Relationship ....................................................................................... 116 The Sino-Iranian Energy Relationship............................................................................................ 118 5.5 Conclusion: Prospects and Challenges of Sino-Iranian Relations for Iran’s foreign policy..... 125

6. Conclusion....................................................................................................................................... 129 Nederlandse Samenvatting…………………………………………………………………… …….131 Appendix I Proved Oil Reserves at the End 2008............................................................................... 132 Appendix II History of Iran’s Nuclear Program.................................................................................. 133 Appendix III China on Iran’s 2009 Presidential Elections.................................................................. 135

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Bibliography……………………………………………………………………………… …………138 Figure 1.1 Factors of Foreign Policy Practices ..................................................................................... 17 Figure 2.1 Overview of the Religious Supervisory Bodies in the IRI................................................... 37 Figure 2.2 Formal Power Structure in IRI............................................................................................. 39 Figure 3.1 Total Energy Consumption in Iran, by Type (2006)……………………… …………..50 Figure 3.2 Energy Subsidies by Sector in Iran, 2003 ............................................................................ 51 Figure 3.3 Iran Oil Production versus OPEC Quota ............................................................................. 53 Figure 3.4 Top Proven World Oil Reserves, January 1, 2009 (billion barrels)..................................... 54 Figure 3.5 Main Oil and Gas Fields and Energy Infrastructure in Iran................................................. 55 Figure 3.6 OPEC Crude Oil Production, 2008 (million barrels per day) .............................................. 56 Figure 3.7 Share of World Crude Oil, 2007 .......................................................................................... 57 Figure 3.8 World Natural Gas Reserves by Country, January 1, 2009 (Trillion Cubic Feet) ............... 58 Figure 3.9 Iran’s Existing Natural Gas Pipelines .................................................................................. 61 Figure 3.10 Iran-Pakistan Pipeline………………………………………………………… ………. 63 Figure 3.11 the National Iranian Oil Company ..................................................................................... 64 Figure 3.12 US and World Events & Oil Prices.................................................................................... 66 Figure 4.1 Iranian Foreign Policy Decision-Making............................................................................. 71 Figure 4.2 Iranian Opinion on Nuclear Weapons and Islam ................................................................. 96 Figure 4.3 Forces that shape the Iranian nuclear policy ........................................................................ 98 Figure 5.1 Map of member and observer states to the Shanghai Cooperation Organization .............. 112 Figure 5.2 Gas Proved Reserves (cu m) SCO……………………………………………. …114 Figure 5.3 Gas Proved Reserves (cu m) SCO+ Iran ……………………………………………… ..114 Figure 5.4 Oil Proved Reserves (bbl) SCO……………………………………………………..… 114 Figure 5.5 Oil Proved Reserves (bbl) SCO+ Iran................................................................................ 114 Figure 5.7 Top Sources of China’s Crude Oil Imports ....................................................................... 121 Figure 5.8 Foreign Investment in Iran’s Oil and Gas Industry, 1999-2004 ........................................ 124 Table 3.1 Oil Revenues Iran in $ million, 1954-1976 ........................................................................... 48 Table 3.2 GDP and Population Growth Rates in Iran, 1971-2030……………………… …..49 Table 3.3 Key Energy Indicators for Iran.............................................................................................. 50 Table 3.4 Top World Oil Producers, 2007 (thousand barrels per day)………………………… …56 Table 3.5 Top World Oil Net Exporters, 2007 (thousand barrels per day) ........................................... 57 Table 3.6 Top Iranian Crude Oil Export Destinations, 2003-2007 ....................................................... 58 Table 3.7 Iran’s Net Exports/Imports Natural Gas in Billion Cubic Feet ............................................. 59 Table 5.1 Volume of China’s Imports and Exports with Iran in US$ 10 000, 2003-2007.................. 117 Table 5.2 China’s natural growth rate in %, 1997-2004……………………………… …119 Table 5.3 China’s Total Primary Energy consumption in Q Btu, 1998-2008 ..................................... 119 Table 5.4 China’s Average GDP Growth rate in %, 1999-2009 ......................................................... 119 Table 5.5 Top World Oil Net Importers, 2007.................................................................................... 120 Table 5.6 Chinese Oil Imports (m/bd), 2004-2030 ............................................................................. 123 Table 5.7 China’s Crude Oil Imports from Iran,1983-2003................................................................ 123 Map 1 Iran ............................................................................................................................................... 7 Map 2 Middle East .................................................................................................................................. 8 Map 3 China ............................................................................................................................................ 9 Map 4 Strait of Hormuz......................................................................................................................... 10 Map 5 Strait of Malacca ........................................................................................................................ 10

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Abbreviations

AEOI AIOC APOC CROS DG ECO ENRC FDI GCC IAEA IRP NCRI NIOC NOC NPT NTI OECD OIC OICC OPEC SCO SNSC

Atomic Energy Organization Iran Anglo Iranian Oil Anglo Iranian Oil Company Anglo Persian Oil Company Caspian Republics Oil Swap (project) Director General Economic Cooperation Organization Esfahan Nuclear Research Center Foreign Direct Investment Gulf Cooperation Council International Atomic Energy Agency Islamic Republican Party National Council of Resistance of Iran National Iranian Oil Company National Oil Company Non Proliferation Treaty Nuclear Threat Initiative Organization for Economic Cooperation and Development Organization of the Islamic Conference Organization for Islamic Culture and Communications Organization of Petroleum Exporting Countries Shanghai Cooperation Organization Supreme National Security Council

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Maps
Map 1 Iran

Source: CIA, the World Fact Book

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Map 2 Middle East

Source: CIA, the World Fact Book

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Map 3 China

Source: CIA, the World Fact Book

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Map 4 Strait of Hormuz

Source: EIA, Country Analysis Brief World Oil Transit Chokepoints

Map 5 Strait of Malacca

Source: Wikimedia.

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Acknowledgments

This research will probably be my last work at the university. This thought has crossed my mind before, but this time I am pretty sure. However, I am thankful for having had the opportunity to take part in this Research Project (The Political Economy of Energy) since it immensely changed my thoughts on the value of resources. This research-exercise has definitely increased my academic skills. I am thankful to Dr. Mehdi Parvizi Amineh. His critiques have been explicit, but it has led me to strive for a research that comes closest to perfectionism. If I succeeded, I don’t know, but I at least was driven by it. I would also like Dr. Eva Patricia Rakel who has supported me in my work throughout these last months and tried to make me understand the complexity of the political structures and policies of the IRI. A special word is for Louise who has helped me out for the second time by correcting my English. Louise told me to have developed square eyes as a result. Thank you, Louise. En dan als laatste wil ik graag de grootste dank uitspreken voor de twee dierbaarste personen in mijn leven: mama en Duan. Jullie steun is oneindig geweest. Het schrijven van een scriptie vergt veel begrip van naasten. Ik heb echter meer vam jullie mogen ontvangen dan begrip alleen. Ik heb jullie steun oprecht gewaardeerd. Heel erg bedankt voor alles.

Lucinda Ruth de Boer July 3, 2009

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

1.

Introduction

This research aims to give an insight into the overall foreign policy of Iran and the prospects and challenges of Sino-Iranian relations. From a strategic and geopolitical point of view, Iran is significant in terms of the world’s energy. Iran is located between the Caspian region where, after the disintegration of the Soviet Union, many players tried to gain access to the oil and gas reserves; and the Persian Gulf region which accounts for the world's largest single source of crude oil. Moreover, the Strait of Hormuz, through which roughly 40 percent of all seaborne traded oil or 20 percent of oil traded worldwide is transported, borders Iran in the South. Iran is considered to be the most economical route for the transportation of energy. Furthermore, Iran is estimated to possess the world’s third largest proven oil reserves and second largest gas reserves. These characteristics of Iran are important when considering rising global demands for energy and decreasing energy supply sources. The growing scarcity of energy impacts on the international political arena. The scarcity of energy has led to a situation where political power has gradually moved into the hands of those who possess the resources. The most important factor responsible for the steep rise in the global demand for energy is China. At the moment, China is the world’s second largest energy consumer and imports around 44 percent of its oil. Approximately 40 percent of China’s imported oil comes from the Middle East and 15 percent of this is from Iran. China’s growing presence in the Middle East is motivated by the Chinese search for energy so that it can meet its domestic demands. Sino-Iranian relations have expanded during the last decade which can be attributed to their reciprocal needs for energy security. While under the pressure of international economic sanctions, Iran needs to secure its exports so that it can preserve the present regime and the economy. China, on the other hand, faces the challenge of meeting the domestic demand for energy, which rises annually by 3.4 percent.

1.1 Research Question and Hypothesis With these facts in mind, this research paper aims to answer the following question:

“What are the prospects and challenges of the Sino-Iranian relationships for Iran’s future foreign policy?”

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

In order to answer the above, the research has focused on the following sub-questions: What have been Iran’s foreign policy practices since the establishment of the Islamic Republic of Iran? And which factors have influenced and/or determined the making of Iranian foreign policy? What are the incentives for Iran and China to build an increasingly expanding and intensifying relationship? The hypothesis is that the intensification of Sino-Iranian relations has been mainly triggered by China’s search for a future energy supply, and facilitated by the ‘open attitude’ of Iran towards China. The conditions that favour their relationship are that China and Iran have no previous history of conflict and that Iran appreciates Chinese non-interference in domestic issues. However, as a result of the intensification of Sino-Iranian relations, Iran will, implicitly or explicitly, expect political support from China in forums such as the United Nations or the Shanghai Cooperation Organization. Chinese political support may contribute to a strengthening of Iran’s political and economic position in the region and in the world. Yet, I believe that Sino-Iranian relations are vulnerable to external pressures. Although Iran plays an important role in the security of China’s energy supply, China aims to diversify its supply sources in order to prevent dependency on only one supply source. The future scenarios of Iran’s limited export capabilities are important here. They will seriously hamper all of Iran’s foreign relations since these are, for a large part, determined by Iran’s energy resources. Furthermore, US-Iran relations have also had a large influence on Sino-Iranian relations. The labelling of Iran by the outside world and of the outside world by Iran has led to reactionary politics that have influenced the mind sets of all participants. Researching within the theoretical framework of critical geopolitics aims to make Iran’s foreign policy better to understand. It will become clear that Iran’s foreign policy is shaped by more than its national interest. Historical and social features play important, additional roles.

1.2 Theoretical Framework The theoretical framework within which research on Iran’s foreign policy is conducted is formed by Critical Geopolitics. Critical Geopolitics allows the research to go beyond the traditional, realist scope of the study and looks at the significance of the complexity of the Iranian state wherein factionalism, ideology and nationalism play a large part in the making of its (foreign) policy. It must be accepted, however, that premises of the classical approach to geopolitics are included in the research, since critical geopolitics has its origins in classical geopolitics.

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

The theoretical framework will be supplemented by an energy-scarcity model and a theoretical background on authoritarian regimes.

Classical Geopolitics As an academic field of study, Geopolitics (in general) analyses the relationship between territoriality and politics. Napoléon I is quoted to have said to the King of Prussia in 1804: “La politique de toutes les puissances est dan leur géographie.”
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And although this conclusion may be short-sighted, the

quote very well illustrates the idea behind scrutinizing the link between territoriality and politics. Classical thinkers like Aristoteles, Thucydides and Montesquieu already considered the relationship between territoriality and politics as an important object of study. In 1899 the Swede, Rudolf Kjellén, was the first person to use the neologism ‘geopolitics’. Kjellén believed that the state was a complete and living organism, functioning in an organic way both internally as well as externally. In this belief, Kjellén was largely influenced by Friedrich Ratzel (1844-1904) who played a key role in the origins of modern political geography and thought of the state in a social-Darwinist manner. Political geographers in general describe the interconnection between geography and politics. They analyze the impact of the geographical location and features of a state on the state’s foreign policies. For instance, Halford Mackinder who further developed ‘political geography’ after Kjellén, predicted that land powers would take over from sea powers and that Eurasia would rise to become the heartland of the world. A state’s foreign policy is influenced by whether it is landlocked or coastal, large or small, possesses resources or is dependent on the resources of others etc. The interconnection between geography and politics can be discussed since it can objectively be observed. According to classical geopolitics, an objective approach to reality is possible since reality and the observer are distinct. An important premise of classical geopolitical theory is that the theory departs from the rational-actor assumption, in which the objective state’s interests are naturally pursued. Theory is based upon probability and consists of the empirical, logical and intuitive formulation of facts (Kelly, 2006: 26). The origins of geopolitics can be found in the realist school of International Relations that assumes that states are the pre-eminent actors in world politics and their primary objective is survival.

Critical Geopolitics An alternative, critical analysis framework of the relationship between territoriality and politics became the focus of critical geopolitical studies roughly between 1988 and 1998. Changes in the world order after the fall of the Berlin Wall and the Soviet Union and the increase of interdependency caused by globalization led to the reconsideration of the definition ‘territoriality’. Instead of being a descriptive term intended to cover the study of foreign policy and grand statecraft, geopolitics was conceptualized as a form of political discourse (Ó Tuathail & Agnew, 1992). The theoretical

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Quoted in Criekemans (2007: 69).

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

framework of critical geopolitics fused elements from political realism, Liberalism, Marxism and constructivism and enhanced these elements with spatial variables (Houweling & Amineh, 2003: 315). The new research tradition was identified as follows:
“The focus of critical geopolitics is on exposing the plays of power involved in grand geopolitical schemes. Both the formal codification of geopolitics in grand theory and the practical deployment of geopolitical reasoning in the conduct of foreign policy are the objects of analyses. Fundamental to this process is the power of certain national security elites to represent the nature and defining dilemmas of international politics in particular ways. From a geographical perspective this can be described as their power to write international political space by constituting, defining and describing security, threats and perceived enemies in regularized ways (cf. Foucault). These representational practices of national security intellectuals generate particular ‘scripts’ in international politics concerning places, peoples and issues (cf. Derrida, Said). Such ‘scripts’ then become part of the means by which (great power) hegemony is exercised in the international system” (Ó Tuathail, 1992: 438).

Critical geopolitics believes in a connection between ‘geography’ and governmentality’. Geography is considered by critical geopolitical scientists as crucial to the functioning of ‘governmentality’ (Criekemans, 2007: 577). This way, the employment of geography is captured in a discourse which creates or sustains ‘power’. A critical geopolitical approach to the world takes note of social, cultural and political practices and underscores the plurality of space. According to Critical Geopolitics, space is not only demarcated by material state boundaries, but additionally defined by conceptualized borders. The plurality of space allows for multiple possible political constructions. Social, cultural and political processes are formative in such political construction (Criekemans, 2007: 582). These representations of space are symbolic of “how we define what is right and wrong and whom we identify with and against” (Agnew, 1994: 55). Both the material as well as the conceptualized boundaries are object of study within Critical Geopolitics. The emergences of networks of power that are not captured by singularly territorial representations of space have caused state boundaries to become culturally and economically porous (Agnew, 1994: 72). Another ontological element of the critical geopolitical approach concerns the actors in the international political arena. Critical geopolitics questions the ‘naturalness’ of the state-centric, Realist framework of analysis. Critical Geopolitics extends the state-centric vision of the world to other levels of analysis since geopolitical reasoning does not limit itself to the state level. Besides, the state is susceptible to pressures and therefore changeable (Criekemans, 2007: 584). The end of the Cold War, and the collapse of a military superpower without any military action taken, revealed the power of domestic weakness. The end of the Cold War led to critical geopolitics considering self-constructed identity as a social force that impacts behaviour (Houweling & Amineh, 2003: 321). Contrary to a spatial demarcation of territory (which is operated in classical geopolitics), the definition of the state in

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

critical geopolitics entails the exercise of power through a set of central political institutions (Agnew, 1994: 53). This thesis will support such a functional conception of ‘social spaces’ in which territorial delineation is no longer the most important expression of state power. State power is derived from “a government’s capability to bring about and exploit exchanges between social-economic and cultural differentiated societal spaces in different jurisdictions anywhere on the world in order to serve the selfinterest”. Cross-border activity serves to access resources beyond legal borders and connects the domestic society and its institutions to the external world (Houweling & Amineh, 2003: 325). The conception of world order and its current or aspired position in it will be operative regarding a state or non-state actor’s power-projection. These concepts are shaped by history and influenced amongst other things, by geography and culture (Houweling & Amineh, 2003: 327). The projection of power by state and non-state actors is guided by a conceptualization of world order. This conceptualized world order subsequently changes as a result of power-projection activities (Houweling & Amineh, 2003: 328). The difference between classical and critical geopolitics becomes very clear when one considers the interpretation of its epistemology. According to the approach of critical geopolitics, a ‘pre-discursive’ perception does not exist. ‘Reality’ and ‘truth’ do not exist since a subjective image, that is constructed and influenced by ideology, is in control. (Kelly, 2006: 37). ‘Reality’ and ‘truth’ only exist inside the mind and will of agents (Houweling & Amineh, 2003: 316). Critical geopolitics can never be objective because the geopolitical opinions of individuals, including state persons - the observers - and the object, are inseparable. According to critical geopolitical theory, geopolitics is a ‘practice of state persons’ rather than an international reality that can objectively be described (Ó Tuathail & Dalby, 1998: 2). Critical geopolitical theory regards ‘a state’s interests’ to be subjective and therefore subject to those of the individual ambitions of decision-makers rather than the “altruistic needs of the nation” (Kelly, 2006: 26). The intermediate variable between social reality and actor behaviour is moulded by human constructions of identity (Houweling & Amineh, 2003: 323). In addition, whereas classical geopolitics considers the ‘environment’ as an objective variable, critical geopolitical scientists stress the fact that the environment should be approached as an inter-subjective reality formed by ‘interventions of discourse’ through which it gets a particular value (Criekemans, 2007: 586). In this respect Houweling & Amineh point to the social phenomena such as commodified oil or the axis of evil which do not exist outside the human mind (Houweling & Amineh, 2003: 330). These notions originate in the theoretical school of constructivism that adheres to the idea that the interaction of individuals triggers the construction of ‘social reality’. From a critical geopolitical point of view, geopolitics is approached as a discourse. Fundamentally different from classical geopolitics, critical geopolitics claims that geography cannot be separated from politics and/or ideology (Criekemans, 2007: 579). Through discourse analysis, critical Geopolitics

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

tries to deconstruct the representational practices of the political elite in order to reveal the ‘spatialization’ of international relations. Discourse then equals a sort of power structure, yet there is no set definition on ‘discourse analysis’. Discourse-analysis pays special attention to the manner in which policy makers represent, use and even legitimize “territoriality” in their foreign policy; the socalled ‘scripting of foreign policy’ (O Tuathail & Agnew, 1992; 200). Operational in this process of scripting are the ‘geopolitical visions’, ‘geopolitical codes’, ‘geographical imagination’, ‘geopolitical culture’ and ‘geopolitical tradition’ that influence foreign policy practices. The factors influencing foreign policy are further developed by E.P. Rakel in figure 1.1. The figure developed by E.P. Rakel will indicate the direction of the methodology followed by this thesis. Figure 1.1 illustrates the interconnection between geographical imagination, geopolitical vision and geopolitical culture. Geographical imagination is part and parcel of both geopolitical vision as well as geopolitical culture. Geographical imagination can be defined as “(…) the way in which influential groups in the cultural life of a state define that state and nation within the world. It addresses the primary acts of identification and boundary-formation that population groups within a state engages” (Campbell quoted in Rakel, 2008: 42). Ideas of geographical imagination contribute to the geopolitical visions of the actors that function in a state-society complex. Geopolitical visions are “any ideas concerning the relation between one’s own and other places, involving feelings of (in)security or (dis)advantage (and/or) invoking ideas about a collective mission or foreign policy strategy” (Dijkink quoted in Rakel, 2008: 42). At the same, the geographical imagination contributes to the geopolitical culture of a state. Figure 1.1 Factors of Foreign Policy Practices

Geograhical Imagination

Geopolitical Visions

Foreign Policy Practice by other Countires

Geopolitical Culture

Foreign Policy Practices

Geopolitical Visions of other Countries

Geopolitical Tradition

Political and Economic Interests

Source: Rakel, Eva Patricia, (2008), The Iranian Political Elite, state and society relations, and foreign relations since the Islamic Revolution, Academisch Proefschrift Faculteit der Maatschappij en Gedragswetenschappen Universiteit van Amsterdam, p.43

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Both geopolitical culture as well as geopolitical vision have a direct effect on foreign policy practices. The geopolitical culture of a state is thus influenced by geographical imagination as well as by geopolitical tradition and political and economic interests. “Geopolitical culture is the practice that make sense of a state and its identity, position and role in a world of states. All states, as territorially embedded entities with distinctive histories and geographies, have geopolitical cultures. These cultures are formed not only by the institutions of a state, its historical experiences and geographical embeddedness, but also by networks of power within society, debates over national identity, prevailing geopolitical imaginations, codified geopolitical traditions and the institutional processes by which foreign policy is made in the state. The category ‘geopolitical culture’ is an encompassing one within which these concepts can be more precisely identified” (O’Loughlin, Ó Tuathail, Kolossov, 2005: 325). Geopolitical traditions are thus part of the geopolitical culture and describe the “range of relatively formalized and competing schools of geopolitical thought that comprise the ‘high culture’ of a state’s geopolitical culture. Each tradition is a canon of thought on state identity, the national interest and normative foreign policy priorities” (O’Loughlin, Ó Tuathail, Kolossov, 2005: 325). A proper understanding of Iran’s foreign policy needs an historical perspective. With the Iranian Islamic Revolution, the Iranian people had shown the ability to transform the structure within which they operated. Collective human action changed the regime in Iran. The transformative ability of the Iranian people evolved from feelings that stemmed from decades of foreign intervention and dissatisfaction with the regime under the Shah and manifested itself in the revolution of 1979. The establishment of the Islamic Republic therefore signalled more than the mere replacement of a regime; the Islamic Republic found legitimacy in its society. The regime of the Shah had been highly dependent on outside power to retain power within domestic society. Islam had played an important role in the Iranian national consciousness and had become part of the Iranian people’s identity. The new structure of Iran, the velayat-e faqih system, can thus be perceived as evolving from history. A state’s identity, domestic actors and private interests all count as social forces that impact on foreign policy behaviour. Inputs from domestic society affect foreign policy and therefore a proper analysis of the state of society in Iran is indispensable. Foreign policy can be perceived as an expansion of the state of a society to the international level. The analysis of the state of society in Iran in chapter 2, will investigate the power-structures that have influenced and determined the direction of Iranian foreign policy, and in light of this research, Iran’s relationship with China. Those in power anticipated the public’s feelings on security, nationalism and ideology, to support their ambitions and interests so as to legitimize foreign policy. Iran’s vast resources play an important role in its foreign policy since they influence its perception of power. The scarcity of energy model that is presented below will contribute to the reader’s understanding of how either the possession of, or dependency upon other energy sources, affects the

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

development of foreign policy. Oil and gas are not merely economic commodities; the control over territory and its resources can be considered as important strategic assets (Amineh & Houweling, 2007: 377). The model is particularly useful in the analysis of Sino-Iranian relations. The new Chinese energy policies, as described in chapter 5, have had a huge impact on its relationships with Iran. China’s global hunt for energy has triggered a distinct social strengthening of Sino-Iranian relations. This chapter will be concluded with a theoretical background on authoritarian regimes in the Middle East. The nature of a political system and in this case the Iranian political system will be useful in the recognition of power structures in the Iranian state. The nature of the Iranian political system and its implications are taken into consideration in chapter 2.

Energy Scarcity The concept of energy security has become an important feature of global geopolitics. This may be due to an increasing vulnerability in the relationships between those who possess, and those who are dependent on the import of energy resources. This vulnerability is caused by the fact that energy resources are exhaustive and the global demand for energy is ever expanding. Homer-Dixon presented the situation as follows: “Qualitative degradation or quantitative depletion reduces the total size of the pie. A growing number of people sharing the pie implies that each share of the pie shrinks. And finally, if the pie is distributed in pieces of unequal sizes, some may be too small for people to survive on” (Gleditsch and Urdal, 2002: 283). Even though non-hydro renewables like solar- and wind energy are rapidly growing, fossil fuels will remain dominant for at least the coming twenty years (World Energy Outlook, 2006). The increasing scarcity of resources will trigger more aggressive policies to satisfy needs (Amineh & Houweling, 2007: 388). The energy scarcity model in Amineh and Houweling distinguishes three main causes of scarcity: 1) demand-induced scarcity; 2) supply-induced scarcity; 3) structural scarcity (Amineh & Houweling, 2007: 374). Underlying this triangle lies the securing of resources by major stakeholders.

Demand-induced scarcity Scarcity that is induced by demand refers to the decrease of per capita availability of oil and gas from fixed stocks by rising global consumption. The decrease of per capita availability can be attributed to three factors: (i) population growth in consuming countries, (ii) rising per capita income in highincome countries, and (iii) technological change (Amineh & Houweling, 2007: 374).

Supply-induced scarcity The scarcity of supply relates to the dwindling of world stocks. Clearly this scarcity interacts with that induced by demand. The dwindling of world stocks impacts on the mindset of state and non-state participants. It provokes a process of competitive power projection (Amineh & Houweling, 2007:

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375). Nations dependant on imports will try to secure future access to resources by engineering internal regime change or by territorial conquest (Ibid.). Expectations on supply-induced scarcity are hard to establish, since new oil and gas fields are regularly discovered. An instance is the discovery of the Azadegan oil field in Iran in 1999 which is reported to have the capability of fulfilling 6 percent of the Japanese annual import.

Structural scarcity “Structural scarcity is supply-induced by the deliberate action of a major power, by non-state actors such as major oil companies, or by producer cartels such as the Organization of Petroleum Exporting Countries (OPEC)” (Amineh & Houweling, 2007: 375). Structural scarcity reflects a situation of unequal access to particular resources. This last ‘cause’ of scarcity does not presume actual scarcity if the resource were to be distributed evenly (Gleditsch & Urdal, 2002: 284). The energy scarcity model will be linked to the case-study in the chapters 3 and 5: in chapter 3, the energy scarcity model will be applied to the energy situation in Iran and in chapter 5 the energy scarcity model will be applied to the energy situation in China and to the corollary analysis on SinoIranian relations.

Authoritarian Regimes There have never been more democracies in the world then there are now, yet the regimes of the majority of states in the Middle East remain authoritarian. Juan Linz defines authoritarianism as “[p]olitical regimes with limited, not responsible, political pluralism; without an elaborated and guiding ideology, but with distinctive mentalities; without intensive nor extensive political mobilization, except at some points in their development, and which a leader (or occasionally a small group) exercises power within formally ill-defined limits but actually quite predictable ones” (Linz quoted in Brownlee, 2007: 26 and Chehabi, 2003: 63). Overall, studies on the “authoritarian persistence” of the Middle East focus on the conditions that enable authoritarianism to remain viable (Hinnebush, 2006: 375); why democracy has failed to consolidate in the region or why most Middle Eastern states have failed to initiate transition at all (Bellin, 2004: 142). Answers to these research questions are often found in cultural, social, institutional and economic conditions or a combination of all of the above. Middle Eastern (political) cultures such as Islam, ‘oriental despotism’, patrimonialism, ‘patriarchalism’, ‘small group politics’, mass passivity (Hinnebusch, 2006: 375) and historical legacies (Weiffen, 2008: 2587), are often mentioned as a variable that may obstruct democratization and sustain authoritarian regimes. Undeniably, culture shapes the perception of political legitimacy through which authoritarian regimes may be ‘acceptable’ to certain peoples (Hinnebusch, 2006: 376). The important role that religion plays in the Middle East may result in political legitimacy being found

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

in Islam. For example, the unacceptability of secularization is the result of a particular interpretion of Islam that considers the synthesis of religion and politics inherently synthetic (Weiffen, 2008: 2587; Bellin, 2004: 141; Amineh & Eisenstadt, 2007: 137). In general, it is argued that Islam is not necessarily an obstruction to democracy or inherent to authoritarianism. Room for interpretation creates a diversity of interpretations in the Islamic world which may either be favourable to or in opposition to democracy. Another cultural variable that may sustain authoritarianism in the Middle East is the ‘cultural loyalty’ to traditional small groups, a legacy of a tribal tradition that, to a certain extent, withholds society from association (Hinnebusch, 2006: 376) This created societies inured to “despotic and patrimonial forms of rule” that have now erupted into a more “moderate version of patrimonial rule resting on three sources of legitimacy: tradition, religion, and oil rents” (Weiffen, 2008: 2588). The associative failure undercuts the “development of countervailing power in society that can force the state to be accountable to popular preferences” (Bellin, 2004: 139). The absence of independent civil society organizations in a majority of the Middle Eastern countries at the time of modern nation-state formation has had a profound impact on the countries’ development. Nation-state formation developed in a space in which social structures were characterized by the dominance of notable classes. Patterns of political development in the Middle East in this respect should take into account the specificities of class formation (Kiely, 2007: 186). The region’s specific economic conditions encourage existing class formations and seriously impact on the particular politics of the Middle East in the sense that it allows for the dilution of accountability by the state toward society. Traditional Modernization Theory would argue that democratization is dependent on the level of economic development since social mobilization would increase the tendency to political participation. Yet, the Middle Eastern political economy features ‘rentierism’ which breaks the link between economic development (material wealth) and democratization. Middle Eastern countries may be materially wealthy but this wealth does not unleash the expected social changes and economic diversification that, according to modernization theory, are essential for democratization (Weiffen, 2008: 2589). Rentierism not only results in stifling the mobilization of the people in order to demand representation but most importantly “(…) the dependence of regimes on external sources of rent, whether petroleum revenues or aid, attaches the interests of elites to external markets and states and buffers them from accountability to their populations” (Hinnebusch, 2006: 379). Since the rentier state draws on revenues from abroad, it does not have to subject its citizens to taxation Besides, “(…) such a state supports its citizens economically and is the main source of private revenues through government expenditure” (Weiffen, 2008: 2589). Oil wealth in general is aligned to the sustainment of a large coercive apparatus that is able to respond to (unlikely) political upheaval (Weiffen, 2008: 2589; Bellin, 2004: 143; Hinnebusch, 2006: 382). The coercive apparatus in Middle Eastern regimes has proven to be particularly robust. This robustness is shaped by the following four

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variables: maintenance of fiscal health; successful maintenance of the international support networks2; level of institutionalization, the degree to which it faces popular mobilization and the existence of a credible threat (Bellin, 2004: 144). Like the regimes, the coercive apparatus in most Middle Eastern countries is also governed by patrimonialism (Bellin, 2004: 149). Weiffen argues that the interplay of both cultural and economic factors, the cultural-economic syndrome, determines the sustenance of political regimes in the Middle East; “(…) in countries affected by the cultural-economic syndrome, autocratic regimes benefit from a triple legitimacy: a tradition of neo-patrimonial rule, their religious orientation (ranging of course, from mere public support of Islamic religious practice to an explicitly theocratic state), and their ability to provide their citizens with the amenities of a rentier state” (Weiffen, 2008: 2590). Still, the processes of globalization and growing interdependence cannot be escaped by the Middle East. The Middle East will undeniably be affected by an increasingly competitive international environment. Most countries that depend on one natural resource are caught in a “staple trap.” The unavailability of export commodities to complement or replace the staple, may, through competitiveness, force countries to diversify their economies and thereby economically modernize (Weiffen, 2008: 2594). “(…) beyond the actual climate of hostility of many Arabs toward the West, there is growing pragmatism and realism in the Muslim world: in an age of globalization, the necessity to cooperate and trade with the rest of the world is no longer deniable” (Weiffen, 2008: 2599). Currently, the Middle East lingers in a “transition to modernity” (Hinnebusch, 2006: 378). This may well be a situation in which the pro’s en cons are being carefully weighed. Economic modernization is necessary to catch up with the rest of the world, but at the same time it is likely to trigger social changes and will undoubtedly influence culture. Such changes will not be thought desirable by the political elites if their positions in society are to be weakened by them. The research will argue that the nature of the IRI’s regime is closest to an authoritarian regime type. The authoritarian regime type has impacted the Iranian state-society relations and is explanatory for the power structures in the IRI. The argument will be developed in chapter 2.1.

1.3 Methodology The thesis will qualify as qualitative research with a critical research paradigm. Within the critical research paradigm, the approach of critical geopolitics will be used. The type of qualitative research in this thesis is a case study. The research will draw a complex and holistic picture of the foreign policy of Iran and its relationship with China and will attempt to describe and understand this. Although qualitative research can hardly escape subjectivity, the thesis strives for objectivity as much as possible. The data used for the research include books, journal articles, newspaper articles and original documents. Where necessary, the analysis will use quantitative data in order to support the
2

Contrary to Western standards of democratization, the West’s security concerns regarding a reliable oil supply and the ‘Islamist threat’ take precedence over its disapproval of authoritarianism.

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text. Books that have laid the groundwork for this thesis include ‘The Iranian Political Elite, State and Society Relations, and Foreign Relations since the Islamic Revolution’ (by E.P. Rakel) and ‘China& Iran; Ancient Partners in a Post-Imperial World’ (by J.W. Garver). The journal articles stem from a wide range of journals like Journal of Third World Studies, Security Dialogue, Strategic Analysis, Middle East Policy, Journal of South Asia and Middle East Studies, The Review of International Affairs, and Perspectives on Global Development and Technology. For the purposes of quantitative data, the databases of among others, British Petroleum (BP); Energy Information Administration (EIA); the International Energy Agency (IEA); and the Iranian Ministry of Petroleum have been used.

1.4 Organization of the work First the state-society complex in Iran will be examined in chapter 2. This will give an insight into the Iranian regime and identify its power structures. Chapter 3 will examine the gas- and oil complex in Iran. The chapter starts by giving a brief historical overview of Iran’s energy complex. Thereupon chapter 3 will present a technical overview of Iran’s resources, location, pipeline complex etc. Then, the chapter focuses on the National Iranian Oil Company (NIOC) and will establish its role in Iran’s politics and economy. Chapter 4 will analyze the foreign policy practice of Iran. It will examine the decision-making process and will set out foreign policy practices distinguished by four different periods; 1979-1989, 19891996; 1996-2005; 2005- . Chapter 5 will pay particular attention to Iran’s relations with China. The chapter will set out a brief historical overview of relations, and identify key elements in the Sino-Iranian relationship: the nuclear issue, the Shanghai Cooperation Organization (SCO) and the economic-energy relationship. The chapter will conclude by developing the prospects and challenges of Sino-Iranian relations. Chapter 6 includes the conclusion.

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2. The Iranian State-Society Complex
In the light of the critical geopolitical theoretical framework, chapter two will analyse the state-society complex in Iran. Such an analysis allows for the political, economic and cultural processes that unfold within state borders to be taken into consideration and enables this research to study the state in a historical perspective. This chapter will focus on the self-constructed Iranian identity, the political system of the IRI and factionalism among the Iranian political elite. Chapter 2 will provide an overview of the formal and informal power structures in Iran. The analysis of the Iranian state-society complex in Iran will examine the domestic input that explains foreign policy. Iranian foreign policy is the object of study in chapter 4.

2.1 Nation-building (1850-1979) and the nature of the IRI’s regime

Nation-building in Iran, 1850-1925 Two political cultures have dominated the history of modern Iran: pro-secularism and Islamic nationalism. The establishment of the Islamic Republic of Iran (IRI) caused the transformation of the pro-secular political culture of Iran into a radical critique of western culture and civilization (Amineh & Eisenstadt, 2007: 145). The new political ideology of the IRI was an Islamic-‘nationalist’-based political ideology that brought forth related social forces (Amineh & Eisenstadt, 2007: 130).3 The origins of the extension of Islam as a political ideology can be found in the expansion of European capitalism and civilization. The proclamation of an Islamic order was meant to act as a response or counterforce “to the marginalization or subordinations of these traditional social forces in the industrialized-based social order” (Amineh & Eisenstadt, 2007: 132). Iran produced such a response, particularly during the rule of the Qajar Empire (1786-1921.) The developments towards modernity not only guided the transition of the empire to a modern nation-state, but also prompted the elevation of Islam as an “eruption of nationalism” (Amineh & Eisenstadt, 2007: 132). The latter strengthened Islamic features in both local culture and national consciousness (Amineh & Eisenstadt, 2007: 133). In the Qajar Empire, state and society found themselves at different levels where the state controlled society (Abrahamian, 2008: 33) Iran under the Qajar Empire was a highly decentralized state in which state-powers were delegated to local notables (Karshenas, 1990:42). The population of Iran in the 19th century can be categorized into four main sociological classes: 1) the landed upper class, 2) the propertied middle class, 3) the urban wage-earners, and 4) the rural population (Abrahamian, 1979:
3

Shi’ism was already politically institutionalized in Iran in 1501 under the Safavid Empire; the institutionalization served the distinction between the Persian and Ottoman Empires (Rakel, 2007: 162). Ever since, Shi’ism has played an important role in Iranian nation- and state-building (Ibid: 162).

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389). The Qajar dynasty and the local notables both belonged to the landed upper class in Iran. The Qajar dynasty ruled the country with oriental despotism and exploited and manipulated communal divisions. The Iranian population had not been able to form socio-political classes due to communal barriers that were the consequences of geography, linguistic differences and religious divisions. Besides, the hierarchical social organization within the communities contributed to communal divisions as well. (Abrahamian, 1979: 390). These particular Iranian state-society relationships were weakened by Western encounters; Iranian capitulations to Russia and Britain coincided with the European Industrial Revolution which led to the incorporation of Iran into the European world-system. This incorporation implied a transformation of the Iranian pre-capitalist economy into a market economy (Abrahamian, 1979: 391). As a result of the transformation of the Iranian economy, the Iranian society witnessed the emergence of a socioeconomic class, the bourgeoisie. The bourgeoisie consisted of regional bazaars that recognized the state-wide interests and its foreign competitors. The bourgeoisie, as a response to Western influence in Iran, fell back on traditional culture in which Islam played an important role. Western intervention in Iran thus led to a redefinition in terms of Islam. “The ulama supported this development, and therewith strengthened the domestic culture and national consciousness (…)[S]ocially it was founded on the traditional economic sector around the bazaar, which was subordinated by western economic penetration. Culturally, it was upheld by the religious institutions, which assumed a new power position” (Amineh & Eisenstadt, 2007: 132-133). Besides a small middle class, the modern intelligentsia evolved from the new institutions that were in fact set up by the Qajar to strengthen their position vis-à-vis the foreigners. The intelligentsia was strongly influenced by ideas from the French Enlightenment and considered constitutionalism, secularism and nationalism a necessary means for the establishment of a modern, strong and developed Iran (Abrahamian, 1979: 395). The impact of the changes within Iranian society became obvious during the ‘Tabacco- incident’ in 1891-1892. Shah Nasar al-Din sold a concession that dealt with Iranian tobacco production, distribution and exportation, to an Englishmen. This concession led to local strikes, which soon turned into national rebellion. Abrahamian identifies the ‘Tabacco--incident’ as the dress rehearsal for the Constitutional Revolution in 1905. The national rebellions encouraged fruitful cooperation between the bourgeoisie and intelligentsia and revealed the weakness of the coercive instruments of the Qajar Shah (Abrahamian, 1979: 400).

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

The Iranian economic crisis in 1905 pushed the transformed Iranian society into the violence that would result in a revolution.4 The social base of the revolution was rather narrow since it was predominantly drawn from the bazaar (Ansari, 2003: 54). The revolution was led by a committee of guild masters (Abrahamian, 1979: 406). Abrahamian notes that although the modern intellectuals, inspired by Western ideas, acted as advisers to the revolutionaries, the “traditional guild members of the bazaar were the actual revolutionaries” (Abrahamian, 1979, 413). The 1905 Constitutional Revolution shifted power from the royal court that was ruled by the Qajar Shahs to the newly established parliament (majlis) that was initially dominated by the urban middle class. At the outset the government system changed from a despotic to a parliamentary monarchy and the conception of social order transformed from a hierarchical and patrimonial system to a supposedly democratic and egalitarian one (Abrahamian, 1979: 387). A written Constitution declared Shi’ism to be Iran’s official religion5 and recognized the ulama as supreme rulers of Islamic law (Amineh & Eisenstadt, 2007: 133; Ansari, 2003: 54; Abrahamian, 2008: 35). Musher al-Dowleh, who had received his education in Russia and France, served as a key figure in the drafting of the new Constitution. His foreign education was noticeable in the final text of the Constitution. (Abrahamian, 2008: 48). Iran’s encounters with the West (Britain and Russia) had a twofold impact on Iranian society: ideologically and economically. Both were reflected in the emergence of a representative class, the intelligentsia and the bourgeoisie respectively. The emergence of the intelligentsia and the bourgeoisie signalled the transformation of Iranian society which had previously consisted of purely sociological classes, to a society in which gradually classes came to share similar ideological and economic attitudes. Whether the revolution of 1905 was mainly driven by the intelligentsia or the bourgeoisie (and the ulama) is in this case not important; the emergence of classes based on similar attitudes had shown the transformative ability of collective human action. The Iranian Constitutional Revolution of 1905 well reflects the importance of state-society interaction. Furthermore, as a response to Iran’s encounters with the modern West, Iranians fell back on nationalism in terms of traditional culture. Islam provided a tool to distinguish ‘us’ from ‘them’. This ‘redefinition’ of Iranian nationalism in terms of Islam continues to impact on Iran’s foreign policy behaviour today.

This research will operate on the definition of ‘revolution’ that was set out by Abrahamian; a revolution means “a sharp, sudden, and often violent change in the social location of political power, expressing itself in the radical transformation of the regime, of the official foundation of legitimacy, and of the state conception of the social order”(Abrahamian, 1979, 386). 5 Abrahamian (2008) notes that with the declaration of Shi’ism to be Iran’s official religion, cabinet positions were reserved only for Shi’i Muslims, p. 48.

4

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

In 1910, the constitutional movement split into two parties; the intelligentsia, represented by the Democratic Party, and the bourgeoisie by the Moderate Party (Abrahamian, 1979: 413). The ideas of the two parties on issues like secularism, women in society and the role of Shari’a in the judicial system differed significantly. Ideological differences erupted in violent assassinations on both sides. (Abrahamian, 2008: 58). The establishment of a social order that aimed to be both liberal and constitutional was unable to succeed due to the lack of modern material conditions after the Constitutional Revolution (Amineh & Eisenstadt, 2007: 133). The government became immobilized as a result of party rivalries. In the meantime, World War I had elevated Iran to a battleground for powers like Russia, Germany and Britain. Iran in the 1920s, harmed by the consequences of World War I and an immobilized government, provided an opportunity for General Reza Khan to stage a military coup in 1921.

Nation building in Iran, 1925-1979 With the support of both Islamic and secular national forces, Reza Khan became Shah in 1925 and created the Pahlavi dynasty (Amineh & Eisenstadt, 2007: 133). From 1921 till 1926, the rule of Reza Khan was completely politically legitimate. This started to change from 1926 onwards when Reza Khan increasingly began to rule as an absolute ruler, supported by modern coercive institutions (Abrahamian, 1979: 386). Between 1926 and 1931, Reza Khan still received some support from the modern middle class, but after 1931 he lost the support of all social classes (Katouzian, 2003: 37). Reza Shah intended a Western-style modernization of Iran, in the same way that Kemal Atatürk had transformed Turkey. Both countries, Iran and Turkey, aimed to be fully accepted by the system of nations (Chehabi, 1993, 222). Amineh and Eisenstadt note that Reza Shah “inaugurated 50 years of intensive and rapid state-led modernization in a traditional and fragmented society within a mainly rural or nomadic-tribal country” (Amineh & Eisenstadt, 2007: 133-134). During his reign, Reza Shah provided Iran with an extensive state-structure that was built on two main pillars: the military and the bureaucracy (Abrahamian, 2008: 67). The building of this state-structure was largely facilitated by revenues from oil royalties. Socioeconomic progress under Reza Shah would have led in a natural manner, to the cultural transformation of the Iranian society. Instead, Reza Shah enforced cultural transformation for the sake of Western-style modernization. His efforts included an attack on the religious community which created strong sentimental support for them amongst the Iranian people. All of the Pahlavi Shahs stressed nationalism in terms of pre-Islamic Iran in order to underwrite Western-style modernization (Amineh & Eisenstadt, 2007: 134) The Anglo-Soviet invasion of Iran in 1941 destroyed Reza Shah. Muhammad Reza, his son, succeeded Reza Shah as the Shah of Iran. The period between 1941 and 1953 was characterized by the semirestoration of constitutional order (Amineh & Eisenstadt, 2007: 130). The role of the notables that had

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ruled the country from 1906 to 1921 became more prominent once again (Abrahamian, 2008: 100). The allied occupation of Iran was followed by a growth in education, technology and the liberalization of political activity (the rise and development of democratic institutions) which all contributed to the development of a new level of political awareness. This triggered the rise of a new social force that attempted to mobilize the masses by popular nationalism (Ansari, 2003: 54). The socialist movement that resulted in the Tudeh Party (party of the masses) emerged in 1941. Their party program called for the mobilization of the workers, peasants, progressive intellectuals, traders and craftsmen of Iran to fight the class structures that produced despots and dictators: “this class structure continues to create petty Reza Shahs- oligarchs in the form of feudal landlords and exploiting capitalists, who, through their ownership of the means of production continue to control the state” (Abrahamian, 2008: 108). The success of the Tudeh Party was suppressed by the government and it was outlawed in the late 1940s. The Tudeh Party was important for the development of Iranian society since it had made society aware of the fact that the state should be an expression of society and that politics was for the Iranian masses (Karshenas, 1990:83). The Party furthermore reinforced the national identity in terms of pre-Islamic Iran and raised the demand for the nationalization of the British-owned oil industry (Abrahamian, 2008: 112-113). The socialist movement that was organized by the Tudeh Party was succeeded by the nationalist movement in the early 1950s and was led by Muhammad Mossadeq. Mossadeq was able to mobilize the masses around the call for the nationalisation of the oil-industry in Iran. When Mossadeq became the first democratically elected prime minister in Iran’s history, he created a National Iranian Oil Company (NIOC) that took over the Anglo-Iranian Oil Company. The nationalisation of the Iranian oil industry led to a crisis between Mosaddeq and the Shah, who was backed by Britain and the United States. Mossadeq increasingly encroached upon the power of the Shah in the name of the Iranian people. The crisis was ended by the 1953 coup, led by the CIA and backed by British intelligence, which overthrew the Mossadeq government. The Mossadeq incident left a deep scar on Iranian society. The overthrow of the Mossadeq government was facilitated by outside powers that interfered in Iranian domestic issues. The coup in 1953 can be compared to the Tabacco-incident in 1891. In both instances the voice of the Iranian people was not heard and domestic matters were decided by foreigners. Both situations allowed foreign powers to interfere within the Iranian state, and in both instances, harmed the political legitimacy of the rulers of Iran. Both situations increased distrust of foreign powers and led to a reassertion of nationalism in terms of tradition and thus Islam. The Tabacco-incident was identified by Abrahamian to be a dress rehearsal for the Constitutional Revolution in 1905. In the same light, it is likely that the 1953 coup lay at the roots of the Islamic Revolution in 1979. The 1953 coup had

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

encouraged the Iranian people to perceive the Shah, Britain and the United States as one large combined enemy. Reza Shah, with the financial and military help of the US, restored royal autocracy to Iran and carried on with the state-led industrialization that was initiated by his father (Ansari, 2003: 55). Yet, the social forces that had prompted the organization of the Tudeh Party and the National Front revealed persistent networks that were organized around Iranian nationalism and that were able to anticipate the emotions of most Iranians; “(b)y appearing to have sold his country to the United States, the Shah provided the ideal opportunity for a hitherto middle-ranking cleric to establish himself as the leading credible opposition” (Ansari, 2003: 56). The White Revolution in 1963 that advocated foundations for a modern industrial society and made use of anti-Islamic propaganda exacerbated the rift between ulama and the state and provided the impetus for the emergence of a new type of ulama, inspired by Khomeini, and a new type of religious student (Amineh & Eisenstadt, 2007: 134). Khomeini developed a Shi’i definition of political power and transformed the concept of velayat-e faqih (jurist’s guardianship) into a political project to be institutionalized in Iran (Rakel, 2007: 163). Khomeini’s interpretation of Shi’i Islam is described by Abrahamian as a form of clerical populism (Abrahamian, 2008: 146). Throughout the 1960s and 1970s the concept was further crystallized on the basis of a “modern ideologization of religion” (Amineh & Eisenstadt, 2007: 143). Islam was transformed into a revolutionary and populist political ideology. This movement that opposed the Shah’s authoritarian regime attracted a wide array of social classes. The state was protected from being accountable to the Iranian population by petroleum revenues and had not even included the new urban middle class that had emerged from a modernized economic structure, in Iran’s politics (Amineh & Eisenstadt, 2007: 146). The processes of economic and political modernization did not run parallel in the decades of the Reza Shah’s rule. By the mid-1970s tensions between state and society could no longer be denied. In the light of Huntington’s book on “Political Order in Changing Societies”, the Shah established the Resurgence Party in 1975. Huntington’s work had suggested that a one partysystem could prevent revolutions that were the result of rapid “modernization” in the economic and social realms (Abrahamian, 2008: 149). The creation of the Resurgence Party led to two important consequences for the regime (Abrahamian, 2008: 151): 1) it intensified state control over the salaried middle class, the urban working class, and the rural farm cooperatives; 2) the state threatened to intervene in the traditional middle class- the bazaar and the clerical establishment. The latter intervention weakened the fragile links that already existed between the state and society under Reza Shah.

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Khomeini had been able to combine major strands of Iranian political thought into a form of religious nationalism that represented “the dramatic expressions of collective will that overthrew the Shah” (Ansari, 2007: 57). The 1979 Iranian Islamic Revolution had transformed the meaning of Shi’ism from religion into a “highly politicized doctrine” (Abrahamian, 2008: 5). As mentioned before, the Islamic Revolution was supported by a wide social base that was united in its aim of ending the Shah’s reign and thereby ridding the country from external interference. “The Islamic fundamentalist revolution as promulgated in Iran signals an entirely new civilizational orientation, a new phase in the development of modernity. It was this distinct combination of modern and anti-Enlightenment and anti-Western cosmological visions- as developed in the framework of new globalizing processes and intercivilizational visions- that distinguished the Iranian Islamic revolution from the classical ones, even while bringing out some of its paradoxical similarities”(Amineh & Eisenstadt, 2007: 154). The Islamic Revolution had, just like the Constitutional Revolution in 1905 “erupted like a volcano, because of the overwhelming pressures that had built up over the decades deep in the bowels of Iranian society” (Abrahamian, 2008: 155). Like the Constitutional Revolution, the Iranian Islamic Revolution in 1979 fundamentally reached to the roots of the social location of political power and radically transformed the official foundation of legitimacy and the state conception of social order. After the Islamic Revolution in 1979 the political elites were formed by the clergy and religious laypersons (Rakel, 2008: 25).The establishment of a new social order was not, this time, hindered by material conditions. In the light of the previous situational sketch, the Iranian Islamic Revolution was indeed the eruption of a volcano that could no longer deal with a regime that it considered unrepresentative of Iranian society. It was one that, instead, represented foreign interests. The Iranian Islamic Revolution was believed to be an expression of the voice of the true Iran. Nation building in Iran has thus predominantly been influenced by foreign power-intervention, class formation and the fall back on traditional culture. Iranian historical experiences of foreign economic and political involvement have influenced the way in which Iranians define their state and nation in the world. Historical experiences have also impacted on Iran’s relations with other state and non-state actors; it has given a particular meaning to Iran’s conception of ‘security’. These perceptions have invoked a particular foreign policy strategy that will be analyzed in chapter 4. With the establishment of the Islamic Republic, Khomeini gave priority to national independence over domestic political freedom. The above analysis points out that a persistent tension has always existed between internal freedom and external independence in Iran’s history. This tension still remains today because no balance has yet been struck between the two. In the eyes of Ramazani, the protest movement that followed the June 2009 presidential election is an expression of the unaddressed historical deficit of domestic freedom (Ramazani, June 29, 2009).

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The remaining part of this chapter will expose the power relations in the Islamic Republic. First, the nature of the political system of the IRI is analyzed.

Photo 2.1 Reza Shah Pahlavi

Photo 2.2 Mohammad Reza Shah Pahlavi

Source: Saikal, Amin, (1980), The Rise and Fall of the Shah, (Princeton University Press, Princeton, New Jersey).

Photo 3 the Iranian Islamic Revolution

Source: Saikal, Amin, (1980), The Rise and Fall of the Shah, (Princeton University Press, Princeton, New Jersey).

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

The Nature of the IRI’s Regime The Iranian Islamic Revolution had changed the social order and the foundations of the state’s legitimacy, which in the Islamic Republic rests on divine sovereignty (article 56 Constitution of Iran 1979). Yet, the political system of the IRI remained non-democratic. The analysis of the nature of the IRI’s regime follows the work of E.P. Rakel (Rakel, 2008: 29); Rakel operates on the Linz’ categorization of political systems (Totalitarian and Authoritarian Regimes 1975/2000) and makes a distinction between the years that Khomeini was the supreme leader of the IRI (1979-1989) and the years after Khomeini’s passing (1989-2009). The political system of the Islamic Republic (and for that matter the political system of Iran under the Pahlavi Shahs) qualifies as non-democratic as it does not allow for the free formulation of political preferences without excluding any political office from that competition or prohibiting any members of the political community from expressing their preference by norms requiring the use of force to enforce them (Linz quoted in Rakel, 2008: 29). Although in Iran both the president and the parliament (majlis) are chosen by the people, the suitability of the candidates that run for election is determined by the Guardian Council beforehand.6 The 2005 presidential elections in Iran were, for instance, profoundly shaped by the prior determination of the Guardian Council on the eligibility of the candidates that intended to run for the presidency. The election of former president Khatami in 1997 and the reformist takeover of the parliament thereafter had led to political tensions between the conservatives and the government. In order to prevent a repetition of such a situation, the 2005 candidates that were allowed to compete, consisted of one reformist and five conservative candidates of which Ahmadinejad was the most conservative and closest to Khamenei (Hen-Tov, 2006-07: 165). Among the non-democratic political systems, Linz makes a distinction between totalitarian and authoritarian regimes. According to Linz’ definition of a totalitarian regime, the regime has to have “an ideology, a singly mass party and other mobilizational organizations, and concentrated power in an individual and his collaborators or a small group that is not accountable to any large constituency and cannot be dislodged from power by institutionalized, peaceful means”(Linz quoted Rakel, 2008: 29). The political system of the IRI under the political and religious leadership of supreme leader Khomeini (1979-1989) can be considered to be close to totalitarian. The Shi’i definition of political power that was developed by Khomeini and the system of velayat-e faqih became the ideological pillars of the Islamic Republic and Islamic ideology strongly influenced policy formulation (Rakel, 2008: 32). Furthermore, the Islamic Republic had one party, the Islamic Republican Party (IRP). However, Rakel notes that the elusiveness on the interpretation of the basic jurisprudence of the IRI (Islamic jurisprudence or fiqh) allowed for disagreement amongst the Iranian political elites which in a

6

The role of the Guardian Council will be further elaborated in paragraph *

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way impaired the totalitarian character of the regime. This research supports Rakel in her findings, but moreover points to the distinction that should be made between the de facto and in law situation in the political system of the IRI. The constitution of 1979 “[c]ombined Khomeini’s theocratic ideas with republican institutions inherited and adapted from the constitution of 1906. Significantly, this basic law did not mandate rule by a single party, leaving room for the development of somewhat representative institutions on the one hand, and the emergence of multiple (and competitive) power centres on the other” (Chehabi, 2003: 50). Iran’s institutional structure was determined by its particular post-revolutionary constitution that attempted to accommodate a wide range of views that had all supported the overthrow of the Shah’s regime. In law, the constitution reflected less of a totalitarian political system than Khomeini had been able to establish de facto. His strong personality enabled Khomeini to keep the factions together under this complex constitutional arrangement. Both the occupation of the US embassy in November 1979 and the Iran- Iraq war (1980-1988) contributed to distracting attention from domestic, factional clashes and focused on the united defeat of an external enemy/ threat (Ansari, 2003: 58). In the years after Khomeini’s passing, the political system of the IRI has supported an authoritarian regime in law and de facto. Authoritarian regimes differ from totalitarian regimes in the sense that authoritarian regimes allow for limited political pluralism. Juan Linz defines authoritarian regimes as “[p]olitical regimes with limited, not responsible, political pluralism; without an elaborated and guiding ideology, but with distinctive mentalities; without intensive nor extensive political mobilization, except at some points in their development, and which a leader (or occasionally a small group) exercises power within formally illdefined limits but actually quite predictable ones” (Linz quoted in Rakel, 2008: 29). The successor of the supreme leader Khomeini, supreme leader Khamenei, did not possess the same degree of authority that Khomeini had and was not able to suppress different factional ideas on the IRI’s policies. The death of Khomeini proved the importance of the strength of the leader to keep the particular statesystem together and running. The leadership of Khamenei as the supreme leader of the IRI led to a split between political and religious leadership. In fact, an amendment to the constitution in 1989 rearranged the relationship between the supreme leader and the president, who then became more powerful and led to a sharing arrangement. The importance of Islamic ideology has been decreasing since the death of the supreme leader, Khomeini (Rakel, 2008: 30). Islamic ideology has had to make way for pragmatism in order to secure the survival of the Islamic Republic. Accordingly, Islamic ideology has become less significant in policy-making in Iran (Rakel, 2008: 30). Legitimate political pluralism and regular presidential and parliamentary elections may be indicative of democratic features in the Iranian regime. Conversely, this “hybridism”7 occurs under manipulated conditions which undo the democratic nature of these features. The election of the reformist cleric
7 Browlee describes a “hybrid regime” as a new authoritarian subtype in which an authoritarian system displays features of democracy such as elections and parliaments (Brownlee, 2007: 25).

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Muhammad Khatami in 1997 as president and the reformist takeover of the Majlis in fact answered society’s call for fundamental political reforms. Those elections were described by many as a referendum on the government’s relations with society (Gheissari & Nassr, 2004: 98). Nonetheless, “(…) conservatives operated against the Khatami administration primarily through state bodies supervised or appointed by the supreme leader. In practice, conservatives utilized the upper house of parliament, the judiciary, and paramilitary forces to stifle reformist opponents (…) the defeat of reform efforts through constitutional means from 1997 to 2005 not only demoralized reformist politicians but also alienated the broader population from political life” (Hen-Tov, 2006-07: 164). The competing power centres that are inherent in Iran’s constitution may be exceptional, compared to other Middle Eastern authoritarian regimes, but at the same time they are relative if one considers the ‘defeat’ of the Reformists by the Conservatives during and after the Khatami presidency. Gheissari and Nasr note that elections in Iran are ‘real’ in the sense that they determine the relative influence of the various power centers, but restricted, considering the fact that elections are only open to the semiopposition8 (Gheissari & Nasr, 2004: 98). Since then the ‘conservative consolidation’, elections, which are supposed to be indicative of democracy, have been operative in promoting and strengthening the authoritarian political order and serving the objectives of “marshalling mass support in legitimizing the development of the regime’s nuclear program for greater influence in the region (…) the elections, in a sense create a collective sentiment of solidarity for the government as the embodiment of the national identity, despite the undemocratic nature of most of the governmental institutions” (Rahimi, 2007: 289). In recent years, elections have been increasingly used as a means of popular mobilization to legitimize the political system and its policies instead of acting as mere “factional management” (Gheissari & Nassr, 2004: 97). However, this may be a reaction to an actual gradual decreasing of support for the political system of the IRI. Whereas initially Khomeini had encouraged national independence over domestic political freedom, the latter has gradually received more attention. In his election campaign, Khatami repeatedly referred to “democracy”, “civil society” and the “rule of law” and in fact challenged the “theocratic reality of the state”(Gheissari & Nassr, 2004: 100; Jahanbegloo, 2003: 128). Khatami’s presidency triggered a debate on democracy and constitutional change in Iran’s post-revolutionary politics. While Khatami’s words and presidency promised a possible democratization of the regime, Khatami “proved unwilling to challenge Khamenei’s authority” (Gheissari & Nassr, 2004: 100; Rahimi, 2007: 286). Clashing factions in Iran leave, according to Institutional theory, room for democratization. Brownlee argues that where initial elite conflicts continue, rival elites supersede party and form tactical alliances. This in turn causes the ruling alliance to fragment and the elites defect to the opposition. Such a scenario may lead to the opportunity for democratization (Brownlee, 2007; 38). But although Khatami’s
8

Linz defines ‘semi-oppositions’ as those groups that are not dominant or represented in the governing group but that are willing to participate in power without fundamentally challenging the system”.

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presidency created a new momentum for democractic debate to emerge, “(…) the reformists ultimately squandered this chance at transforming Iran” (Brownlee, 2007: 4). Eva Bellin argues that “(…) democratic transition can be carried out successfully only when the state’s coercive apparatus lack the will or capacity to crush it. Where that coercive apparatus remains intact and opposed to political reform, democratic transition will not occur” (Bellin, 2004: 143). In this light, Chehabi remarks that the former president received large support from the Iranian people, but he did not control the means of coercion (Chehabi, 2001: 70). The protests that followed the 2009 presidential elections in Iran are described by Western media as an Iranian outcry for democracy. Whether the protests reflected a democracy struggle in society or a power struggle within the Iranian regime, the coercive apparatus in Iran at the moment consists mainly of those who support Ahmadinejad. Any attempt for a democratic transition is thus met by a coercive apparatus that opposes political reform and supports the current regime. The protests that followed the presidential elections have been met by brutal suppression and more than a thousand arrests by the Revolutionary Guards and the Basji militia. Estimations report that some twenty people got killed.

2.2 Power structures in the IRI

2.2.1 The Formal Power Structure in the IRI According to the formal power structure of the IRI, the supreme leader is the highest official. The Iranian Constitution of 1979 determines that the leader is the ultimate source of authority and power in the country. The powers of the supreme leader vary from the delineation of general policies of the Islamic Republic to the supreme command of the Armed Forces (article 110 Constitution Iran). At the time of the creation of the ‘Office of the supreme leader’ in 1979 (Rakel, 2008: 52), the supreme leader was either elected by the people or by the Assembly of Experts. However, an amendment to the original constitution in 1989 removed the option of popular election of the supreme leader. In the IRI there are three sets of state-institutions (in order of hierarchy) (Moslem, 2002: 33-34): 1) religious supervisory bodies; 2) republican institutions; 3) religious foundations (See Figure 2.1). The following paragraphs will set forth the roles and position of the different state-institutions within the political system of the IRI.

2.2.1.1 The Religious Supervisory Bodies The religious supervisory bodies have a common aim to ensure the implementation of Islamic precepts in all public activities taking place in the Islamic Republic of Iran. The religious supervisory bodies “[h]ave overriding authority that supersedes all other decisions made within the political system, and

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

over and above the three branches of government” (Moslem, 2003: 33). The religious supervisory bodies can be divided in two groups (Moslem, 2002: 33): (1) religious super-bodies that consist of: a) The Guardians Council, b) The Assembly of Experts, c) The Expediency Council. (2) the “extended arms” of the supreme leader.

The Guardian Council, the Assembly of Experts, the Expediency Council The Guardian Council tests laws passed by parliament (majlis) against Islamic law. The Council is then able to veto any interpretations of the Constitution (Moslem, 2002: 30). Furthermore, the Guardian Council has “supreme oversight of the elections for the majlis, the Assembly of Experts and the presidency” (Rakel, 2008: 54). Thus, even though the parliament is elected by the Iranian people, the Guardian Council determines beforehand the suitability of the candidates. The same goes for the presidency. The Guardian Council consists of six clerical and six non-clerical jurists. The clerical jurists are the six selected clerical elites and are appointed by the supreme leader. The non-clerical jurists are appointed by the parliament but only after a recommendation of the head of the judiciary (Rakel, 2008: 54). The head of the judiciary is, however, according to the constitution, appointed by the supreme leader (article 110 (6) (b) constitution Iran) which in the end means that the supreme leader controls the composition of the Guardian Council. The functioning of the Guardian Council clearly undermines the authority of the popularly elected parliament since the parliament is devoid of sovereignty without the existence of the Guardian Council (Moslem, 2002: 32). The office of the Assembly of Experts was created in 1982 (Moslem, 2002: 30). The Assembly consists solely of clergy (83 members) and is elected by the Iranian people for a term of 8 years (Rakel, 2008: 54). Note that the members of the Assembly of Experts are ‘pre-selected’ by the Guardian Council before being eligible for a public vote. The key task of the Assembly is the selection of the next supreme leader from its own ranks. The Assembly can dismiss the supreme leader in case he does not live up to his duties (Moslem, 2002: 30; Rakel, 2008:54). The Expediency Council was established in 1988 and is mainly an arbitration body that mediates between the majlis and the Guardian Council regarding disputes over laws (Moslem, 2002: 32; Rakel, 2008: 54). In addition, the Expediency Council is authorized to make laws in the Islamic Republic (Moslem, 2002: 32). The 31 members of the Council are appointed by the supreme leader (Rakel, 2008: 54).

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

The ‘extended arms’ of the supreme leader The “extended arms” of the faqih refer to those organizations that are “entrusted to ensure that the religiousness of the regime remains intact” (Moslem, 2002: 33-34). The bodies that are in the hands of the supreme leader are not mentioned in the constitution and have no legal status. The influence of the “extended arms” is significant since they operate on different levels in the political and social establishment. The most important institutions in these respects are: the Office of the Representatives of the supreme Leader, the Association of Friday Prayer Leaders, and the Special Court for the Clergy (Rakel, 2008: 54). The representatives of the supreme leader have penetrated into all state, civilian and military institutions. They are responsible for the functioning of these institutions in accordance with the supreme leader’s requirements (Rakel, 2008: 54). The Friday Prayer Leaders are financially supported by the executive branch of government but, except for responsibility to the supreme leader, they are independent. “[T]he Friday Prayers have served as powerful propaganda forums for the Conservative faction of the Iranian political elite. The Friday Prayers have been very influential in setting the tone on important political issues, especially foreign policy issues” (Rakel, 2008: 55). The Special Court for the Clergy has the responsibility for prosecuting those of the clergy who give an interpretation to Islam that could undermine the official state ideology. The Court for the Clergy can cooperate with the judiciary, but generally functions independently (Rakel, 2008: 55).

Figure 2.1 Overview of the Religious Supervisory Bodies in the IRI

Supreme Leader

Religious Supervisory Bodies Religious Super-Bodies
Guardian Council Assembly of Experts Expediency Council

“Extended Arms”
Represen tatives S-Leader Friday Prayer Leaders SCC

Source: based on Moslem, Mehdi, (2002), Factional Politics in Post-Khomeini Iran, Syracuse University Press; Rakel, Eva Patricia, (2008), The Iranian Political Elite, state and society relations, and foreign relations since the Islamic Revolution, Academisch Proefschrift Faculteit der Maatschappij en Gedragswetenschappen Universiteit van Amsterdam.

2.2.1.2 Republican Institutions Second in the hierarchy of state institutions are the three traditional branches of republican government: the legislative, the executive and the judiciary. These branches of government in Iran cannot equate to the principles of the separation of powers and equality since they rank second in the

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

hierarchy and are thus subordinate to the powers of the supreme leader and the religious supervisory bodies. (Moslem, 2002: 33). The Iranian parliament is chosen every four years by the people after preselection by the Guardian Council. The 1979 government originally captured the posts of both president and prime-minister. However, the post of prime minister was abolished under the presidency of Rafsanjani (1989-1997) who arrogated the powers of the prime-minister to the presidency (Ansari, 2003: 59; Rakel, 2008: 55). The president is the second most powerful person of the political elite and possesses wide responsibilities concerning economic and socio-cultural matters. Note that the president is not responsible for the foreign policy of the Islamic Republic, nor does the president control the armed forces (Rakel, 2008: 56).

2.2.1.3 The Religious Foundations The third set of state-institutions is comprised of the numerous bonyads (foundations).The bonyads can be distinguished in public, private and charitable-Islamic foundations (Buchta, 2000: 73). Bonyads are religious foundations that “[h]ave control over large parts of the economy and are entrusted with safeguarding the Islamic and revolutionary principles of the IRI” (Rakel, 2008: 57). The religious foundations in principle have the purpose of providing social services (Hen-Tov, 2006-07: 174), but in fact the foundation engage in wide ranges of activities including trade and industry. The bonyads have existed for a long time in Iran but became socially and economically significant after the Islamic Revolution in1979; in the light of religious obligation, the new government attempted to create an Islamic economic framework in which independence, self-sufficiency and distributional justice would figures as key components (Saeidi, 2004: 480). The assets of wealthy businessmen that could be associated with the Shah were confiscated and transferred to these bonyads. The creation of the bonyads and their assigned responsibilities led to the foundations working parallel to state enterprises (Saeidi, 2004: 480; Rakel, 2008: 57). The religious foundations are mentioned in the constitution in Iran and thus have legal status. Contradictory is the fact that although these religious foundations are considered to be governmental bodies, the foundations are solely responsible to the supreme leader and not to the central government (Moslem, 2002: 34; Rakel, 2008: 57). This justifies the label ‘semigovernmental organizations’ (Rakel, 2008: 57). These bonyads are however tangled with the regime through their close ties to the supreme leader9 and have been able to prevent the emergence of an independent class through political pressures and economic favoritism (Hen-Tov, 2006-07: 174). “[T]he foundations have become pivotal actors in the power struggle among different factions of the Iranian political elite, not only in terms of mass mobilization, ideological indoctrination and repression, but also as financial resources to the Conservative faction”(Rakel, 2008: 58). The foundations are tax exempt but are allocated 58 percent of the state budget (Buchta, 2000: 73). The foundations have a fundamental stake in the Iranian economy with an estimated account of 35% of
The bonyads are directly responsible to the supreme leader. Additionally, the supreme leader appoints the heads of these religious foundations.
9

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Iran’s total gross national product and over 40% of the non-oil sector of the Iranian economy (Saeidi in Rakel, 2008: 58).

Figure 2.2 Formal Power Structure in IRI SUPREME LEADER

Religious supervisory bodies

Assembly of Experts

Guardian Council

Representa tives Supreme Leader Special Court Clergy

Friday Prayer Leaders

Expediency Council

Religious foundations

Head of Foundation for the Oppressed and Disabled

Head of Martyrs’ Foundation

Head of Imam Reza Foundation

Head of Judiciary Republican Institutions

Head of Regular Military

Head of IRGC

Head of Law Enforcement Forces

Parliament President

Council of Ministers

IRANIAN PEOPLE

Elects Appoints Confirms

Source: Rakel, Eva Patricia, (2008), The Iranian Political Elite, state and society relations, and foreign relations since the Islamic Revolution, Academisch Proefschrift Faculteit der Maatschappij en Gedragswetenschappen Universiteit van Amsterdam, p. 53.

Considering the importance of the bonyads for the Iranian economy, the withholdings of economic and accounting information by the foundations to the public causes a severe defunct in the efficiency of the Iranian economy. Reforms however are most likely to harm the interests of the foundations and the people attached to it. The religious foundations are noted to have enough political power to oppose reform (Saeidi, 2004: 495). Besides, Saeidi notes that “[t]he process of democratization is impossible

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

without improving the flow and transparency of these organizations’ financial information to the market participants, investors, and creditors, and without removing their tax exemption and implicit and explicit subvention from the budget and baking system” (Saeidi, 2004: 498). The most important foundations are: the Bonyad-e Mostazafan va Janbaza (Foundation for the Oppressed and Disabled); the Bonyad-e Shahid (Martyrs’ Foundation); the Bonyad-e Astan-e Quds (Imam Reza Foundation) (Rakel, 2008: 57).Of the three largest economic organization in Iran, two of those are bonyads, the Foundation for the Oppressed and Disabled and the Imam Reza Foundation. The largest economic organization in Iran is the National Iranian Oil Company.10

2.2.2 The Informal Structure in the IRI Power in the Islamic Republic of Iran is not only determined by the constitutional arrangements that institutionalized religious and revolutionary organizations parallel to those of the central government. Informal and personal relations have significant influence on decision-making processes in Iran. Buchta argues that broadly the informal power structure comprises of four ‘rings of power’ (Buchta, 2000: 7): 1) the ‘patriarchs’; 2) state functionaries and administrators; 3) the power base of the regime; 4) formerly influential individuals and groups. The compositions of the rings of power are not limited to those who are employed in the formal state structure. The informal power structure influences the decision-making of IRI policies. Alamdari defines the current informal power structure as clientelism, which qualifies as a non-class power structure and represents a structured relationship between patron and client (Alamdari, 2005: 1286-1287). Clientelism in Iran had emerged after the death of Khomeini that, as was touched upon earlier in this chapter, made an end to absolute and unified hierarchy of power vested in the supreme leader. The clientelistic power structure emerged in Iran as a result of the Shi’a multiple hierarchies of power, the rentier state and numerous financially self-sufficient religious organizations that were formed after the Iranian Islamic Revolution (Alamdari, 1299). Former president Rafsanjani expressed that in Iran many preferred to form bonds instead of political parties, because it leaves them unaccountable (Rafsanjani quoted in Alamdari, 2005:1291). The impact of the informal power structure becomes very visible is one considers that more than 60 percent of Iran’s foreign trade takes place outside government administrative rule, the number of illegal ports is estimated to be over 200 and the total annual value of smuggled goods in Iran over $9.5 billion (Alamdari, 2005: 1291).

10

More on the National Iranian Oil Company in chapter *.

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2.2.3 Factionalism This research is in agreement with Buchta’s point of view that factionalism overrides the distinction between formal and informal power structure and controls both power structures. The importance of factions in Iran results from the fact that there are no legal political parties in Iran. Though the first eight years of the Islamic Republic had harnessed the Islamic Republican Party as a means for the conduct of modern mass politics, factionalism caused the party to close down. Since the closure of the Islamic Republican Party, no political party was legally established. During and after the Revolution in 1979, Iran witnessed severe struggles for power among the revolutionary forces. The rivalries among the Iranian political elites are a typical facet of the pluralistic structure of the Shi’i clergy that was touched upon before in this chapter (Buchta, 2000: 11). The fact that differences amongst the factions over the years increased instead of declined distinguishes Iran from other countries that, like the Soviet Union and China, managed to bring forces together and consolidate power after “intragroup conflicts”(Moslem, 2002: 3). Continuous conflicts of interest impacts the factions’ ideas on economic, socio-cultural and foreign policy (Rakel, 2008: 65). Moreover, the loss of the regime’s “ideological hegemony” after the death of Khomeini intensified the divisions among the factions in its search for the regime’s political legitimacy (Kazemzadeh, 2007: 426). Factionalism has negatively affected policy making in the Islamic Republic. In principle, the Iranian factions differ in their interpretation regarding the model of a religiously sanctioned Islamic state (Moslem, 2002: 3). With the establishment of the Islamic Republic, Khomeini had introduced his system of velayat-e faqih but declined to offer society the real meaning(s) of the concept;11 “[b]ecause Khomeini’s words and actions don’t provide a blueprint, the factions have resorted to […] the Iranian constitution, the fiqh […] and the views of other Islamic ideologues and/ or activists to justify their version of the genuine prototype of an Islamic republic. Consequently, although rhetorically united under the mantle of Islam, factions in post-Khomeini Iran are ideologically quite distinct” (Moslem, 2002: 4-5). The next paragraphs will broadly set out the leading factions in Iranian politics and their ideas. Note that even though the Iranian political landscape is roughly divided in competing factions, these factions should not be conceived as homogenous groups with coherent ideas (Rakel, 2008: 60). At the same time, the factions are all shaped and bound by common experiences in the opposition to the Pahlavi regime and loyalty to the founder of the Islamic Republic, former supreme leader Khomeini (Buchta, 2000: 11).

The Conservative Faction The conservative faction can be recognized as the “traditional right”. This faction has a political/ideological mindset (Khajehpour, 2009) in which cultural conservatism is emphasized. The
This vagueness in the system proved instrumental in the maintenance of “factional balance” (Moslem, 2002: 4).
11

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

conservative faction adheres to a highly orthodox interpretation of the Shari’a (Moslem, 2002: 5). In general, the conservative faction favors relations with Islamic countries over other non-Islamic countries since the conservatives distrust international powers. The political/ ideological mindset is currently represented by the Office of the supreme leader Khamenei and his Representatives. The constituency of the conservative faction reflects the bazaar and the clergy (Bjorvatn & Selvik, 2008: 2317).

The Pragmatist Faction The pragmatist faction, together with the reformists, belongs to the “modern right”. The pragmatist faction has a strategic/ pragmatic mindset (Khajehpour, 2009) and is mainly concerned with the country’s international strategic position. The pragmatist faction favors economic modernization to proceed hand in hand with the maintenance of liberal socio-cultural views (Moslem, 2002: 5). Probably the most prominent pragmatist representative is Ali Akbar Hashemi Rafsanjani, Iran’s president from 1989 till 1997. Under his presidency, the country started to address economic and political problems that had been untouched and that had increased, in the populism dominated decade under Khomeini (Gheissar & Nasr, 2004: 96). The pragmatist faction predominantly represents the “merchant mentality” (Khajehpour, 2009). During the years of Rafsanjani’s presidency, pragmatists tried to find ways in which the theocracy could be rationalized (Gheissari & Nasr, 2004: 96). The strategic/ pragmatic mindset prevails in the Expediency Council and before Ahmadinejad’s presidency was at the center of foreign policy decisions (Khajehpour, 2009). The pragmatist faction reflects the interests of the technocrats and businessmen (Bjorvatn & Selvik, 2008: 2317).

The Reformist Faction The reformist faction is a modern right faction that is dominated by a technocratic mindset which pushes to modernize and professionalize the country’s technological infrastructure (Khajehpour, 2009). In general, the reformist faction looks favorably upon an improvement of relations with the West. The heydays of the reformist were the years between 1997 and 2005 when in both the presidential and parliamentary elections the reformist faction was victorious. The reformists owed their electoral victories to their emphasis on political reforms in election campaigns. In 1997 Seyed Mohammad Khātamī succeeded Rafsanjani as the Islamic Republic’s president. Under Khatami two important ideas that were prominent in the Iranian political culture were, the anti- West and antisecularism stance. These were reconsidered and given new meaning by examining the legitimisation of “[W]estern ideas and prepared them for authentification through traditional Iranian/Islamic discourse” (Ansari, 2003: 61). The reformist faction appeals mainly to intellectuals and students (Bjorvatn & Selvik, 2008: 2317). The statistics indicate that 50% of the Iranian population is under 20 years old and 66% under 30 years old and this may lead to a successful outcome for the reformist faction.

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Neo-conservatives The ‘project’ of ‘conservative consolidation’ led to the presidency of Mahmoud Ahmadinejad in 2005. Yet, at the same time the ‘conservative consolidation’ and confrontations with the reformists, led to a split within the conservative faction (Rakel, 2008: 76). The neo-conservative mindset is determined by revolutionary nationalistic ideas (Khajehpour, 2009) and attaches itself very much to the radical left era of Khomeini. “[T]hey argue that the Iranian society has been unsuccessful in realizing the revolutionary Islamic principles” (Rakel, 2008: 75). This particular outlook stems from experiences during the Revolution and the Iran-Iraq war in the 1980s and depends on revolutionary ideals such as anti-imperialism, political independence and state sponsored redistributive-egalitarian economic policies (Khajehpour, 2009; Moslem, 2002: 5). As was mentioned before, the presidency of Mahmoud Ahmadinejad brought to the fore a new political elite, which mainly consists of those with military and security backgrounds. Conservatives with political and nationalistic mindsets regained power over government branches, but the supreme leader, Khamenei, was repeatedly forced to back down when facing Ahmadinejad’s “confrontational style of rule” (Rakel, 2008: 76). The neo-conservatives are supported by soldiers, war veterans and the socially deprived (Bjorvatn & Selvik, 2008: 2317).

2.3 The Economic Bases of Political Factions in Iran The distinction of the political factions on their economic bases singles out two major groups: the Moderates (including the Pragmatist and Reformist Faction) and the Conservatives (Akhavi-Pour & Azodanloo, 1998: 69). The economic bases of the political factions determine the strength of the different political factions (Rakel, 2008: 64) and the factions’ ideas towards government policies. While the economic system in the IRI is state-led, the conservatives “[h]ave been able to control and manage several key financial and economic resources independent of the state” (Akhavi-Pour & Azodanloo, 1998: 82). Incomes from fiscal revenues as well as non-official sources of income (mosques, the Shi’ite holy shrines and sites, and the religious foundations) form the economic base of the Conservative Faction. This economic base has led the Conservative Faction to protect the traditional sectors of economy and only partly promote privatization. The economic base of the Moderates comprises only official sources of revenue that are generated with fiscal tools (Akhavi-Pour & Azodanloo, 1998: 82). Latter group pleads for privatization. Both factions depend to a large extent on the rent from oil and gas exports. The research on the authoritarian regime type has shown that these rents are detrimental for the survival of the regime. The interests and income that accompanies control over the Iranian resources makes the political elites in power willing and able to suppress opposition in order to stay in power and leave the regime unchanged.

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2.4 Conclusion As chapter 1 already pointed out, Critical Geopolitics recognizes the inputs from domestic society on the explanation of foreign policy; it contends the state-society complex as the object of selection. Within this state-society complex, human constructions of identity functions as the intermediate variables between social reality and actor behavior (Houweling & Amineh, 2003: 323). Chapter 1 has explained in what manner historical experiences of external political and economic involvement, like the Tabacco incident, the oil concession and the 1953 coup, and failed modernization in Iran have impacted the human constructions of the Iranian identity. Encounters with the West have shaped and changed the geopolitical culture; Western encounters for instance led to the emergence of the representative classes of the bourgeoisie and the intelligentsia after the Tabacco incidents in 1981 and in the run up to the Iranian Constitutional Revolution in 1905. Furthermore, as a response to Iran’s encounters with the modern West, Iranians fell back on nationalism in terms of traditional culture. Islam provided a tool to distinguish ‘us’ from ‘them’. This ‘redefinition’ of Iranian nationalism in terms of Islam continues to impact on Iran’s foreign policy behaviour today. Iranian historical experiences of foreign economic and political involvement have influenced the way in which Iranians define their state and nation in the world. Historical experiences have also impacted on Iran’s relations with other state and non-state actors; it has given a particular meaning to Iran’s conception of ‘security’. With the establishment of the Islamic Republic, Khomeini gave priority to national independence over domestic political freedom. Chapter 2 pointed out that a persistent tension has always existed between internal freedom and external independence in Iran’s history. This tension still remains today because no balance has yet been struck between the two. Chapter 2 has defined the political system of the IRI as ‘authoritarian’. The nature of the regime had not changed with the Islamic Revolution. Yet, the Iranian Islamic Revolution fundamentally reached to the roots of the social location of political power and radically transformed the official foundation of legitimacy and state conception of social order. The Islamic Revolution also brought forth new political elites that consisted of clergy and religious laypersons. The establishment of the IRI also created two power structures that both influence policy making in the IRI: a formal and an informal power structure. The formal power structure consists of republican institutions and religious bodies in which the latter are higher in hierarchy. The informal power structure is very important to consider in analyzing the policies of the IRI. This research has described the informal structure as ‘clientelism’.

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Factionalism cuts through both the formal and informal power structures and divides the IRI in broadly four factions. Factions differ in their geographical imagination, and geopolitical visions. Different factions attach different weight to elements like ideology and national interest that together comprise the geopolitical culture. For a proper analysis on foreign policy practices in the IRI one cannot exclude analysis on the statesociety complex. The chapter has shown how important the process of nation building has been for the thought on state identity. Furthermore, the chapter illustrated the complexity of the different power structures in Iran.

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3. The Iranian Oil- and Gas Complex
The scarcity of energy has turned oil and gas into important features of global geopolitics. Over a relatively short time period oil and gas oil and gas have changed from being merely natural resources, into economic commodities and have gradually become ‘political leverage’. Iran’s vast resources play an important role in its economy and politics. Moreover, in just over a century, Iran’s natural resources have become a fundamental feature of the identity of the Iranian people. The possession of Iranian resources is conceived by the Iranians to be a part of their nations’ strength. This chapter will provide a brief history of the energy sector in Iran and will set out the Iranian energy situation on the basis of the energy scarcity model. It will provide a technical overview of the gas and oil complexes in Iran and will then focus on the National Iranian Oil Company.

3.1 A Brief History In 1901, the British government was the first party to take advantage of the Iranian energy reserves. At a time when Britain and Russia sought for geo-strategic control over Asia, the importance of Iran was soon recognized. In 1901, the British William Know D’Arcy and Shah Muzzafffar al-Din agreed to the exploration and exploitation of Iranian oil in its Southern provinces. The deal covered a 60 year concession (Rakel, 2009: 17). In return, Iran would receive 20.000 pounds sterling beforehand, 20.000 pounds sterling in stock and 16 percent of future profits (Brumberg & Ahram, 2007: 9). The oil concession given to D’Arcy occurred at a time in which the Qajar Empire faced a large government deficit due to its efforts to strengthen their state in an attempt to limit foreign penetration (Abrahamian, 2008: 38). The oil concession was only one aspect of a series of concessions and of the borrowing of money. Another important concession that preceded the oil concession was that given to the British on tobacco. As was pointed out in chapter 2, the tobacco concession caused large social consequences. The D’Arcy concession was followed by the establishment of the Anglo-Persian Oil Company (APOC)12 in 1908 with the help of British ministers. As with the tobacco concession, the transformation from D’Arcy’s privately held APOC to a British NOC was perceived by the Iranians to be an encroachment on Iranian state assets. From the time that the British took over a majority interest in the APOC, Iranian hostility toward the oil company grew. It is interesting to note that in the period between the Constitutional Revolution and the military coup by Reza Shah in 1921, the government was not able to centralize their power and local notables created their own policies, including foreign policy. This meant that some of the leading notables agreed to protect the oil installations that were located in their territories in return for an annual subsidy and a 3 per cent share in APOC (Abrahamian, 2008: 57).
The name Anglo-Persian Oil Company changed to Anglo-Iranian Oil Company in 1935 when Iran became the new name of Persia.
12

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Brumberg and Ahram note that Reza Shah in 1929 posed a challenge to APOC from within Iran. The Shah challenged the legitimacy of APOC and after failed negotiations, unilaterally abrogated the British concession. The Shah based his abrogation on the argument that the control of oil formed a core component of Iran’s sovereignty (Brumberg & Ahram, 2007: 11). Before the League of Nations could rule on the dispute between Iran and Britain, the British guaranteed Iran a greater share of the profits in 1933. By accepting the revised concession, the Shah disappointed the Iranian people and reinforced the negative image that they already held of their autocratic ruler. In fact, the Iranians suspected that the Shah was beholden to Britain. Social changes enabled Prime Minister Mohammad Mossadeq to change Iranian oil into a political symbol in 1951. The Tudeh Party in the 1940s was the first social movement that had organized a general strike throughout the oil industry in 1946. The strike exacted better working conditions for the labourers in the oil industry. Mossadeq mobilized a mass movement around the oil industry (Abrahamian, 2008: 116). The mobilization of the masses for the cause of the nationalisation of oil de facto reflected the general dissatisfaction of the Iranian people. Mossadeq nationalized the properties and infrastructure of AIOC and abrogated the British concession. The National Iranian Oil Company (NIOC) was established as the successor to the AIOC. Two years later, the 1953 coup forced Mossadeq to step down. The 1953 coup impacted on the Iranian image of the United States: “it tarnished the Americans with the British brush - Iranians began to see the main imperial enemy as no longer just Britain but Britain in cahoots with America. It destroyed the National Front and the Tudeh Party” (Abrahamian, 2008: 122). Under the Shah, the NIOC’s position in the Iranian oil industry was secure but it had to operate in conjunction with a consortium of British, American and French IOC’s. The new arrangement improved the Iranian position in comparison with the situation of 1933, but was perceived by society as meddling in Iran’s domestic affairs. Rising oil revenues enabled the Shah to build a massive Iranian state-apparatus with modern coercive means (see Table 3.1). By the mid-1970s Iran had become the world’s fourth largest oil producer and the world’s second largest oil exporter. The strong position of Iran in the world oil market was mainly caused by the OPEC decision13 to quadruple international oil prices due to the 1973 Arab-Israeli War (Abrahamian, 2008: 123). The Iranian Islamic Revolution had a large impact on the energy sector in Iran. The new constitution determined that the NIOC was to be publicly owned and administered by the state. Foreign companies could not be granted any rights to the natural resources of Iran. However, through ‘buy-back’ constructions, foreign contractors, operating through an Iranian affiliate, are allowed to participate in the exploration and development of Iran’s resources (World Energy Outlook, 2005). In 1979, the
Iran was one of the founding members of OPEC in the 1960s, which helped strengthen the position of the producing countries. The establishment of OPEC had been operative in dissolving the international consortium in 1973.
13

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Islamic Republic created a Ministry of Petroleum that would supervise the NIOC. This supervisory role is nowadays mainly undertaken by the majlis, now that the Ministry of Petroleum and the NIOC have developed a “symbiotic relationship” (Brumberg & Ahram, 2007: 26). The new policies of the Iranian energy sector significantly reduced the financial resources of the government.

Table 3.1 Oil Revenues Iran in $ million, 1954-1976 Year Oil revenues Oil Revenues as % of foreign receipts 1954-55 1956-57 1958-59 1960-61 1962-63 1964-65 1966-67 1968-69 1970-71 1972-73 1973-74 1974-75 1975-76 34.4 181 344 359 437.2 555.4 968.5 958.5 1,200 2,500 5.000 18,000 20,000 15 43 60 60 70 76 65 53 54 58 66 72 72 exchange

Source: Abrahamian, Ervand, (2008), A History of Modern Iran, Cambridge University Press, p. 124.

However, since the presidency of Khatami, Iran has increasingly made efforts to attract foreign investment, particularly in the energy sector (World Energy Outlook 2005)

3.2 Energy Situation in Iran This paragraph will address the energy situation in Iran, according to the energy scarcity model that was presented in chapter 1. Although Iran has a vast amount of natural resources, the country is increasingly concerned about the high growth of domestic energy consumption. The energy scarcity model will conceptualize the energy situation in Iran.

Iran and Demand-Induced Scarcity The main reason for an increasing demand for energy in Iran was increased incomes which have been enhanced by crude oil export revenues, population growth and urbanisation (World Energy Outlook,

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2005). The current population of Iran consists of nearly 70 million people and annually increases by about 1 percent (see Table 3.2). Projections estimate the Iranian populations to grow to nearly 80 million people by 2015. About 40 per cent of the Iranian population is under 20 (Marcel, 2006: 110). Energy consumption in Iran rose by 54 percent between 2000 and 2006. Rakel notes that the annual Iranian growth in energy consumption is five times more than the world average (Rakel, 2009:18). Future projections estimate that the primary energy demand in Iran will increase with an annual average rate of 2.6% in 2003-2030 (World Energy Outlook, 2005). The main sectors responsible for this growth in demand are the power sector and transport.

Table 3.2 GDP and Population Growth Rates in Iran in the Reference Scenario (average annual rate of change in %), 1971-2030 1971199020032010202020032003 GDP Population Active labour force GDP capita
Source: World Energy Outlook, 2005

2003 4.6 1.5 3.1 3.0

2010 4.5 1.3 3.5 3.2

2020 3.4 1.4 2.9 2.0

2030 3.0 0.9 2.3 2.2

2030 3.6 1.2 2.8 2.3

3.3 2.6 3.1 0.7

per

In 2003, 98 percent of the primary energy demand was met by oil and gas (see Table 3.3). The remaining 2 percent was met by hydro energy and coal (see Figure 3.1). Oil consumption in Iran amounted to approximately 1.7 million bbl/d in 2007. Domestic oil demand is mainly determined by the need for gasoline and diesel. Diesel consumption was roughly some 550 thousand bbl/d in 2007 of which 90 percent was domestically produced (IEA, 2009). For its gasoline supply and other light fuels, Iran largely depends on imports due to its refinery limitations. By June 2007, the government implemented a rationing system by which motorists were permitted a monthly ration of gasoline at subsidized prices. This lowered Iran’s monthly gasoline imports by nearly 50% (EIA, 2009). Iran aims to become a gasoline exporter by 2012. Apart from the demand for gasoline and diesel, the overall domestic demand for oil in Iran is declining because of the further integration of natural gas into Iran’s energy consumption. The Iranian government encourages the domestic use of gas by providing gas subsidies in order to save more oil for export. Domestic demand for oil is estimated to fall to 41% percent in 2030 (World Energy Outlook, 2005).

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Table 3.3 Key Energy Indicators for Iran 1971 19 0.6 0.11 84 4.3 93 12 0 41 2003 136 2.1 0.28 48 2.6 65 50 -2.3 349 19712003* Total (Mtoe) Total primary energy demand per capita (toe) Total primary energy 3.0% -1.5% 6.9% 3.7% primary energy demand 6.3%

demand/GDP** Share of oil in total primary energy demand (%) Net oil exports (mb/d) Share of oil exports in production (%) Share of gas in total primary energy demand (%) Net gas exports (bcm) CO2 emissions (Mt)
Source: World Energy Outlook, 2005

Figure 3.1 Total Energy Consumption in Iran, by Type (2006)

Source: EIA, Country Analysis Brief Iran (last updated February, 2009)

In 2007, Iranian domestic gas consumption was estimated at 3.9 Tcf (EIA, 2009). Domestic demand was mainly determined by marketed production (70 percent), and enhanced oil recovery gas reinjection (30 percent). Besides, 285 million cubic feet was lost due to flaring. For the next ten years,

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the consumption of natural gas is expected to grow by 7 percent a year. The share of natural gas in the total energy demand is estimated at 55 percent by 2030. The strong growth in natural gas consumption will be caused mainly by power generation and the residential sector (World Energy Outlook, 2005). Between 1960 and 1976 the Iranian economy expanded fivefold and was one of the world’s fastest growing economies. This economic growth was largely facilitated by a rapid growth in oil production. Economic growth suffered during the Islamic Revolution and the Iran-Iraq war (1980-1988). However, since 1989 the Iranian economy has grown by approximately 5 per cent per annum. The GDP (PPP) of Iran grew by 7.96 percent in 2008 (Index Mundi). Greater oil production and higher prices, plus a rising flow of private investment have stimulated economic growth in Iran. The hydrocarbons sector still accounts for over 20 percent of GDP in Iran and provides over half of central government revenues. As was mentioned before, rapidly increasing domestic energy consumption in Iran has led to concerns for the government. Energy subsidies have led to a distortion in the market. Domestic energy prices are far below the cost of production and opportunity (World Energy Outlook, 2005). The World Energy Outlook shows that the energy subsidies and the subsequent price distortions have seriously hampered the uptake of energy-efficient appliances, and led to high energy intensity (World Energy Outlook, 2005). The energy subsidies were initially introduced as a social policy to support lowincome households. However, in 2003, the energy subsidies amounted to 10 per cent of the Iranian GDP (World Energy Outlook, 2005). Political considerations are probably the main cause for the energy subsidies remaining in place. Their removal would affect a large part of Iranian society and in particular, the poorest people in the country. Consequently, the removal of energy subsidies is likely to result in a social upheaval which might impact on the stability of the regime.

Figure 3.2 Energy Subsidies by Sector in Iran, 2003

Source: World Energy Outlook, 2005

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Due to its growing domestic demand for energy, Iran, particularly in the last years, stresses the importance for nuclear energy for the Iranian energy sector. The Iranian nuclear effort has led to serious political tensions which will be expounded in chapter 4. However, the following paragraph will focus on nuclear energy as an alternative energy source for Iran.

Nuclear Energy as an Alternative Energy Source for Iran According to the West, the possession of large deposits of oil and gas justify the denial of nuclear development since the deposits make nuclear energy a redundant energy source. Yet, Iranian development of nuclear energy dates back to the time that the Shah ruled Iran and no-one in the global arena seemed to oppose these developments. The Iranian response to the argument of the redundancy of nuclear energy includes reference to other important oil and gas producers14 that also rely heavily on nuclear energy for energy generation and other peaceful purposes, but more importantly point to the large Iranian domestic consumption. The Iranians are aware that a large and, due to population growth, increasing domestic consumption will be at the expense of the Iranian economy which primarily leans on oil- and gas exports. Note that a rapid downfall of exports will substantially affect the government revenues that keep up the Iranian “welfare-state”. Iran relies for eighty percent of their foreign currency on oil and oil accounts for forty-five percent of Iran’s annual budget (Wood, 2007: 291). It must be mentioned that uncertainties concerning export capabilities make the Iranian regime vulnerable. In this respect, striving for alternative energy resources is likely to be high on the Iranian agendas. In 2005, the Iranian Oil Ministry Deputy for International Affairs Hadi Nejad-Hosseinian said that Iran could run out of oil reserves in 90 years; officials of the NIOC recently analyzed that Iranian export could decline to zero within 12-19 years (Stern, 2007: 377); an article in the New York Times in 2003 points to the possibility of Iran becoming a net oil importer by 2010. Despite the large deposits of oil and gas, Iran largely suffered from years of under-investment, limited access to technology, energy subsidies and inefficiency of Iran’s state-planned economy. Thereby, Iran, like the rest of the region, witnesses a substantial growth in demand for electricity. This leads to the following conclusions: 1) The gap between Iran’s energy consumption and production is widening (energy consumption rises much faster than production); 2) The poor refining capacity necessitates Iran to import a relatively high amount of refined oil products; 3) The impressive rise in gas production has been predominantly used for domestic consumption;
Countries that possess large reserves but also actively make us of nuclear energy are for instance Russia and Canada.
14

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4) Iran has become increasingly reliant on electric power. Electric power consumption rose from 58 terawatt-hours in 1990 to 169 terawatt-hours in 2005, annually growing with some 8%. 5) Iran repeatedly has not been able to reach the OPEC production quota which may be an indication of already declining oil export (Stern, 2007: 378).

Figure 3.3 Iran Oil Production versus OPEC Quota

Source: Stern, Roger, (2007) “The Iranian Petroleum Crisis and United States National Security” in Proceedings of the National Academy of Science (PNAS), 104, 1, p. 378.

In light of these conclusions, Wood notes: “it may be more profitable and energy efficient to exploit nuclear technology, freeing up the gas reserves to produce petrochemical products and gas-to-liquids transportation fuels, then much value and export revenue can be generated from the gas”(Wood, 2007: 291).

Iran and Supply- Induced Scarcity World stocks of oil are decreasing, yet Iran ranks third in the world’s proven oil reserves and second in the world’s gas reserves. This important position in the world energy markets is likely to increasingly affect policies towards Iran and those of Iran itself.

Iran’s oil reserves As from January 2009, Iran’s proven oil reserves, which means those reserves that can be exploited with currently available technology at conservatively projected prices, place Iran third in proven world reserves (see Figure 3.4). Iran’s reserves are only topped by those of Saudi Arabia and Canada and account for 10 percent of the world’s total proven petroleum (EIA, 2009). Statistics on the current state of reserves in the world are not realistically able to estimate undiscovered and underlying reserves. Nevertheless, the US Geological Survey that is referred to in the World Energy Outlook 2005 put undiscovered recoverable resources at 67 billion barrels. 60 percent of Iran’s proven reserves are located in six oil fields (see Figure 3.5). For Iran, the discovery of new oil reserves in the last

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decade has strengthened its position on the table of statistics of world oil reserves. For instance note that the oil field at Azadegan was, in 1999, was reported to have the capability of fulfilling 6 percent of the Japanese annual oil import and is Iran’s largest discovery in 30 years. Another example is the reserves of the oil fields near Gavaneh which amount to around 100 million barrels (Howard, 2007: 5).

Figure 3.4 Top Proven World Oil Reserves, January 1, 2009 (billion barrels)

Source: Oil & Gas Journal, January 1, 2009

Recently, the Iranian Oil Minister announced the discovery of eight new oil fields in the oil rich southwestern province of Khuzestan (Tehran Times, April 26, 2009). Iran also has about 100 million barrels of proven reserves in the Caspian area, but due to a lack of technological development, the use of this region is not maximized. Howard notes that the Iranian announcements on discoveries of oil and gas fields often coincide with important political developments that could affect Iran in a negative manner. An example of this is the nuclear issue. Regarding production, Iran is OPEC’s second largest producer after Saudi Arabia (see Table 3.4). Iran produced 4.1 million barrels per day (bbl/d) of total liquids in 2007 of which 3.8 million bbl/d consisted of crude oil (EIA, 2009). The production statistics for 2008 are a bit lower due to the cut in OPEC’s production quota. The Iranian deputy oil minister for production recently announced that Iran's oil production capacity reached about 4.3 million barrels/day in 2008 (Payvand, June 1, 2009). These figures roughly represent 4 percent of global production (Howard, 2007: 6). However, production levels in the Islamic Republic have yet to reach the 6 million bbl/s of crude oil that Iran, under the Shah, was able to produce in the 1970s (EIA, 2009). Iranian oil production and exports experienced a serious blow when it was isolated from the international community after the Islamic Revolution, and again during the war between Iran and Iraq. At present, Iran aims to increase its oil production by over 4.5 million bbl/d by 2010 and 5 million bl/d after 2015.

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Figure 3.5 Main Oil and Gas Fields and Energy Infrastructure in Iran

Source: World Energy Outlook, 2005

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Table 3.4 Top World Oil Producers, 2007 (thousand barrels per day) Rank 1 2 3 4 5 6 7 8
Source: EIA, Country Energy Profiles

Country Saudi Arabia Russia United States Iran China Mexico Canada United Arab Emirates

Production 10,248 9,874 8,457 4, 034 3,912 3,500 3,422 2,942

A negative development for Iranian crude oil production is the maturing of its oil fields. Iran’s fields annually decline with an estimated 8 percent onshore and 11 percent offshore (EIA, 2009). In order to counterbalance this natural decline and develop new fields, the Iranian oil sector needs substantial investments. Foreign investment in the Iranian energy sector is hampered by international sanctions. Production targets by the NIOC have consistently not been met, largely due to the high domestic demand (Brumberg & Ahram, 2007: 13). Production capacity has thus not been met in Iran, which means that, unlike Saudi Arabia, Iran has enormous growth potential. already produces today (Klare, 2005). Figure 3,6 OPEC Crude Oil Production, 2008 (million barrels per day) If Iran’s capacity were maximized it would be able to produce another 3 million barrels per day on top of the 4 million it

Source: EIA Short term Energy Outlook, January 2009

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Figure 3.7 Share of World Crude Oil, 2007

Source: OPEC website (www.opec.org)

Iran mainly exports Iranian Heavy Crude Oil which accounts for 990.000bbl/d, followed by Iranian Light at 746.000 bbl/d. Statistics on Iranian oil exports indicate approximately 2.4 million bbl/d of oil. It is projected that Iranian oil exports will grow by up to 6.8 million bbl/d in 2030. These projections depend heavily on access to foreign technology and capital. Iran will need $80 billion of cumulative investment in 2004-2030 (World Energy Outlook, 2005). As a recent analysis has indicated, there is the possibility that Iran will no longer be able to export oil by 2015 (Stern, 2007: 1). Asia is currently Iran’s biggest export market.

Table 3.5 Top World Oil Net Exporters, 2007 (thousand barrels per day) Rank 1 2 3 4 5 6 7 8
Source: EIA, Country Analysis Brief

Country Saudi Arabia Russia United Arab Emirates Norway Iran Kuwait Nigeria Venezuela

Production 8,038 7,054 2,507 2,340 2,326 2,291 2,082 1,960

The 2007 listings show that Iran ranks fifth in the world’s oil net export (see Table 3.5). Iran relies heavily on oil export revenues They represent around 70 percent of total export earnings, 40-50 percent of the government budget and 10-20 percent of GDP. Since oil revenues tend to fluctuate, the GDP experiences cyclical changes. In order to offset the effects of oil price fluctuations, the Oil

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Stabilisation Fund was established in 2000. Oil revenues exceeding the budgeted amount are transmitted to the fund. If the oil revenues are lower than the budget allocation, the central bank uses the fund to compensate for the shortfall. Since the establishment of the Fund, the Iranian government has drawn more than was budgeted (World Energy Outlook, 2005). Table 3.6 Top Iranian Crude Oil Export Destinations, 2003-2007 Country Japan China India South Korea Italy France South Africa Greece Netherlands Spain 88 130 115 138 105 139 113 93 79 194 115 118 188 128 189 193 143 134 197 131 128 172 173 196 2003 685 247 2004 630 263 2005 571 284 2007 523 411 374 258

Source: EIA, Country Analysis Briefs 2006 & 2009

Iran’s Gas Reserves Iran’s gas reserves are the second largest in the world after Russia (see Figure3.8). According to the most recent estimate on Iran’s gas reserves, published in January 2009, gas reserves stand at 991.6 trillion cubic feet (Tcf). Iran’s proven reserves resemble approximately 16 percent of the global gas reserves (World Energy Outlook, 2005). The majority of Iran’s gas reserves are located in nonassociated fields and have not yet been developed (EIA, 2009). Figure 3.8 World Natural Gas Reserves by Country, January 1, 2009 (Trillion Cubic Feet)

Source: Oil & Gas Journal, January 1, 2009

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The biggest Iranian natural gas fields include the South and North Pars, Tabnak, and Kangan-Nar. South Pars is described as one of the great jewels in Iran’s energy crown. Because of its size, it needs to be developed in phases. The Pars Oil and Gas Company, a subsidiary of the NIOC, has control over the South Pars projects. The development phases have been offered to national and international bidders (Howard, 2007: 6). The gas that comes from the development of the South Pars is predominantly used for two purposes (World Energy Outlook, 2005): (1) the boosting of domestic natural gas consumption and (2) the reinjection of ageing oil fields. Both serve the purpose of increasing the availability of oil for export. The use of the gas in this way is the most remunerative possibility at the moment. In 2000, the Iranian gas reserves increased by 12 percent after the South Pars was re-evaluated and new discoveries were made (World Energy Outlook, 2005). At the same time that the Iranian Oil Minister announced the discovery of eight additional oil fields in April 2009, he also revealed the discovery of a gas field with an estimated reserve of 6 Tcf (Tehran Times, April 26, 2009). The production of natural gas in Iran started some thirty years ago, but since the late 1990s, production has followed an organised development plan (World Energy Outlook, 2005). The high level of Iranian domestic demand limits Iran’s export of natural gas. However, in 2007 Iran exported more than it had imported (see Table 3.7). Iran aims to become a net exporter by 2010. At present it is utilising only a small share of its gas reserves. If the Iranian government could gradually eliminate the subsidies on the energy markets, oil exports could increase by 3 percent in 2030, and gas exports by 30 percent (World Energy Outlook, 2005). It must be noted that there are analysts who argue that although the prospects for Iranian resources appear favourable, without (foreign) investment there may not be enough resources to allocate for export. In 2004, Chinese investment in the Iranian oil fields was assured when a deal was signed between Iran and China.15

Table 3.7 Iran’s Net Exports/Imports Natural Gas in Billion Cubic Feet Year 1998 2000 2002 2004 2007
Source: Based on EIA 10 Year Energy Data Series.

Net Imports/Exports -61.8 -93.6 -149.4 -57.9 3.5

15

More on the Sino-Iranian energy relationship see Chapter 5.

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Iran and Structural-Scarcity Due to Iran’s strong position on the world energy markets, it is able deliberately to cause a supply induced scarcity. As a member of OPEC, Iran can be linked to the OPEC policies of the 1970s during the Arab-Israeli war. However, Iran is also able to distort the oil markets as an independent state. For instance, in 2006, the officials of the IRI threatened to use the “oil weapon” if the UN Security Council adopted sanctions against Iran in the light of Iran’s nuclear program. The supreme leader, Khamenei, warned that Iran would disrupt oil shipments in the Persian Gulf if the United States made a wrong move over the Iranian nuclear issue (Diba, 2006: 1). Iran, in this respect may be able to ship oil in the Strait of Hormuz, one of the world’s most important oil chokepoints that borders Iran in the South. Due to its strategic location on the north side of the Persian Gulf, Klare notes that “Iran is in a position to threaten oil field in Saudi Arabia, Kuwait, Iraq, and the United Arab Emirates, which together possess more than half of the world’s known oil reserves” (Klare, 2005). Not only could its strategic location be used to serve as an “oil weapon”; but stopping the flow of Iranian oil to the market would also lead to serious disruptions. And even though the United States may try to stay uninvolved in Iran, distortion of the world oil market, caused by Iran, would also affect the United States. Moreover, over and above the powers of the government, Iranian society is also able to impact on the disruption of Iran’s oil exports. During the Iranian Islamic Revolution, strikes stopped the flow of oil from Iran’s southern fields. These disruptions caused a sharp rise in oil prices in the early 1980s. The protests that have followed the presidential elections in June 2009 have not impacted on the oil exports from Iran as yet. Any shortfall from Iran is likely to be dealt with by OPEC. However, these situations once more point out the vulnerable and reinforcive relationship between state and society in Iran.

3.3 Energy Infrastructure in Iran Iran is strategically located. The North borders the Caspian Sea and the South borders the Persian Gulf, and most importantly, the Strait of Hormuz. About 40 percent of all oil traded by sea is shipped through the Strait of Hormuz. The accessibility of foreign markets is an important feature for the optimal use of Iran’s natural resources. The Iranian energy infrastructure includes seven export terminals that have, in total, capacities of 7 million bbl/d. Iran’s largest terminal is located at Kharg Island. The Abadan and Bandar Mahshahr terminals are predominantly used for the export of refined products (World Energy Outlook, 2005). Iran has nine refineries. The refining industry in Iran is outdated and needs modernisation. The industry currently lacks conversion capacity and is inefficient (World Energy Outlook, 2005). The lack of conversion capacity is reflected in Iran’s high gasoline imports. Since Iran wants to become a gasoline exporter, the industry needs investment. Estimates on investment show a need for $ 16 billion

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over the period 2004-2030. Iran is currently discussing cooperation in its refining activities with China, Indonesia, Japan, Malaysia and Singapore. The Iranian Tanker Company is the largest oil tanker fleet in the Middle East (Rakel, 2009: 19). In 2007 Iran had a total of 19161 kilometres of gas pipelines, 8438 kilometres of oil pipelines, 7936 kilometres of pipelines for refined products, 570 kilometres of pipelines for liquid petroleum gas, and 397 kilometres of pipelines for gas condensate (Global Security). Iran’s pipeline network was initially designed for domestic use but has been widely expanded during the last decade. In 2008, Iran’s domestic gas pipeline network consisted of five operating trunklines (Iranian Gas Trunklines-IGAT), two trunklines under construction and two trunklines planned. These trunklines connect the gas producing southern provinces of Iran (Kuzestan and Bushehr provinces) to the consumption centres in the northern part of the country. Since 2001 a gas pipeline has operated between Iran and Turkey. The pipeline is over 2.500 kilometers long and Turkey normally imports 30 mcm per day. The Iran-Turkey pipeline is connected to the South Caucasus pipeline in Erzurum (Turkey).

Figure 3.9 Iran’s Existing Natural Gas Pipelines

Source: Stratfor

An Iranian-Armenian gas pipeline has operated since December 2006 and was officially opened in March 2007. The Iran-Armenia pipeline is 140 kilometres long. The capacity of the pipeline is 1.1 bcm of natural gas annually, but by 2019 this will be increased by up to 2.3 bcm. The contract was signed for 20 years. For each cubic meter of Iranian gas, Armenia is supposed to return 3 kwh of electric energy to Iran (OilGas). In 2008, Iran signed a deal with the Swiss Utility company Elektrizitaetsgesellschaft Laufenburg that included the supply of 5.5 billion cubic meters of Iranian gas to Switzerland. After 2012, the volume

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of supply will increase. The transport of Iranian gas will make use of the existing Turkish-Iranian pipeline (Reuters, February 10, 2009). It remains undecided whether Iran will participate in the Nabucco gas pipeline projects. The Nabucco pipeline will connect the Caspian states to Austria and the rest of the EU via Turkey. Iran could become an additional supplier to the Nabucco gas pipeline. However, the United States has, so far, fiercely opposed Iranian participation. The most recent Iranian deal on gas pipelines is its deal with Pakistan (see Figure 3.10). In May 2009, both countries agreed on a 1.300-mile natural gas pipeline to export 150 million cubic meters of gas from Iran’s South Pars field to Pakistan. This deal covers a time period of 25 years.

Figure 3.10 Iran-Pakistan Pipeline

Source: US Government

The Iran-Pakistan pipeline could carry serious geopolitical weight. Iran conceived the pipeline as an alternative for its economic development if it suffered from US and UN sanctions. More important is the fact that the pipeline could easily be extended to China or India. This would increase the political and economic inter-dependence between Iran and China and/or India. However, the relations between Iran and Pakistan have been volatile over the years. This is best illustrated by the fact that one day after the signing of the Iran-Pakistan pipeline deal, a Pakistani militant organization (the Jundullah) claimed responsibility for a deadly suicide attack in Iran earlier that month; “Iran (…) warned that Islamabad’s failure to act against the Jundullah network could jeopardize the future of the pipeline project” (Luft, 2009).

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3.4 The National Iranian Oil Company The gas and oil sector in Iran is controlled by the National Iranian Oil Company (NIOC) which ranks amongst the top two or three largest oil companies in the world. This research follows the minimalist definition on National Oil Companies (NOC) that is put forward by Valerie Marcel. According to the minimalist definition, NOCs are not restricted to those companies owned entirely by government and in possession of exclusive rights over the domain (Marcel, 2006: 5). The energy sector in Iran has been re-organised in 1997 which led to the establishment of four main state-owned companies: the NIOC, the National Iranian Gas Company, the National Petrochemical Company and the National Iranian Oil Refining and Distribution Company (World Energy Outlook, 2005). Latter three companies are technically independently incorporated under the Ministry of Petroleum, but function as affiliates of the NIOC (Brumberg & Ahram, 2007: 12). The boundaries between the Ministry of Petroleum and the NIOC are blurred (Marcel, 2006: 102). The range of activities under the responsibility of the NIOC is wide: from crude oil and gas exploration to production and marketing. 27 Subsidiary companies work under supervision of the NIOC in order to execute the NIOC’s responsibilities (Ministry of Petroleum, Annual Report 2004-2005). Although the NIOC functioned as an instrument of state control until the beginning of the 1990s, private (domestic) firms have gradually obtained a share in the oil company.16 An official of the Ministry of Planning is quoted to have said that “the lack of budgetary support is the only bottleneck the Iranian oil industry is facing in its expansion plans” (Marcel, 2006: 150). Investment programs by the NIOC are hindered by the fact that the Iranian state regularly draws on the funds of the NIOC. The NIOC lies at the basis of the structure of the Iranian welfare state. Nearly all government spending is financed by income that is generated by the NIOC (Brumberg& Ahram, 2007: 24). This had led to a “hybrid” ownership between a state and private firm (Brumberg & Ahram, 2007: 7). The hybrid ownership resulted in a delicate act of balancing business strategy against a state-sanctioned mandate. Buy back schemes mainly facilitate foreign investment in the Iranian energy sector (Marcel, 2006: 150). However, access to capital faces political obstacles as a result of American lobbying, and US and UN sanctions. The private share in the NIOC has not been looked upon favorably by the Iranian state and resulted in some friction between the oil sector and the state. Yet, Brumberg and Ahram note that the opening up of the oil sector to private investment has not yielded political reform and that in fact the privatization of the NIOC as pursued, provided for protection of the political elite and carries on their interests by informal means (Brumberg & Ahram, 2007: 5). The design of the NIOC has furthermore led to the possession of unique capacities to get its own way, formally or illegally. The close ties between the NIOC and the state allow for the NIOC to stay updated as regards law- and
Since 1990, the economy of Iran is guided by a series of five-year plans that among others advocate the reduction of the state’s management role in favour of market mechanism.
16

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policy-making and therewith exert influence to their advantage. Besides, public officials have proven vulnerable to preferential treatments by the NIOC through which “the NIOC has captured certain properties of the state” (Brumberg & Ahram, 2007: 8). Through these capacities, the NIOC has control over the degree of competitiveness in the field (which also impact foreign influence). The NIOC can also join political alliances.

Figure 3.11 the National Iranian Oil Company

Source: Marcel, Valerie, (2006), Oil Titans- National Oil Companies in the Middle East (Chatham House, London), p. 280.

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The NIOC operates in two different settings: one is national and the other is economic/ industrial. Since its establishment, the NIOC has to compromise on two often contradicting demands: the fact that oil is an economic commodity that must be traded in order have value; and the conception of oil as an inalienable national patrimony that symbolizes Iran’s national strength (Brumberg & Ahram, 2007: 14). The corporate culture of the NIOC has been affected by their initial role of becoming “national custodians of the most prized and political commodity of less-developed countries”; therefore, the economic impact of the NIOC investments on society are taken into consideration in NIOC operations (Marcel, 2006: 56). The contradicting demands on the NIOC have led the NIOC not always to act, and be able to act, as a commercial rational actor.

3.5 Energy Policy as a Fundamental Pillar of Iran’s Foreign Policy Since the beginning of the 19th century, Iranian oil has had a prominent position on international oil markets. Under the Shah’s vision of restored Iranian greatness, oil played an important role in the emergence of Iran as a modern nation state. The revenues from oil concessions enable the Shah to pursue a policy that aimed to transform Iran from a primarily rural country into a global power. The most significant change in energy policy that followed the Islamic Revolution was the relation between the state and the NIOC. All sectors of the Iranian economy were to be publicly owned and administered by the state. This implied that the remnants of the concessionary agreements in the Iranian oil industry were unilaterally abrogated (Brumberg & Ahram, 2007: 17). The Iranian Constitution of 1979 included articles that explicitly addressed the ownership and administration over Iran’s natural resources:
“Public wealth and property, such as uncultivated or abandoned land, mineral deposits, seas, lakes, rivers and other public waterways, mountains, valleys, forests, marshlands, natural forests, unenclosed pastures, legacies without heirs, property of undetermined ownership, and public property recovered from usurpers, shall be at the disposal of the Islamic government for it to utilize in accordance with the public interest. Law will specify detailed procedures for the utilization of each of the foregoing items (article 45 Constitution Iran 1979). “any form of agreement resulting in foreign control over the natural resources, economy, army, or culture of the country, as well as other aspects of the national life, is forbidden” (article 153 Constitution Iran 1979).

After the Islamic Revolution, the NIOC was tasked with the distributive policies of the Islamic Republic; rents were to be distributed to key constituencies (Brumberg & Ahram, 2007: 7). The rearrangements of priorities made efficiency and sustainability of the oil company subordinate to distribution. The new director of the NIOC, Hassan Nazih, aimed at reducing foreign involvement in the Iranian oil industry and diminishing of domestic reserves by lowering the production.

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The outlook of strategies was determined by a short-term perspective. Brumberg and Ahram note that “this marketing practice was clearly intended to reduce Iran’s susceptibility to boycott by Western oil producers and to diversify the Islamic Republic’s political and economic connections. But this approach clearly undercut the credibility of the OPEC price fixing mechanisms and damaged NIOC’s credibility as a reliable and professional organisation” (Brumberg & Ahram, 2007: 18). Overall, the Islamic Republic had tried to become less dependent on oil revenues. Yet three factors led eventually to an increase in dependency (Brumberg & Ahram, 2007: 19): the costs of war (i.e. IranIraq war), deteriorating economic conditions and a population boom. In order to gradually allow for private investment, Rafsanjani had proposed a change in the interpretation of article 44. This proposition formed the incentive for the development of ‘buy-back’ contracts.

Figure 3.12 US and World Events & Oil Prices

Source: WTRG Economics

It is argued that since the late 1990s, Iran has reiteratively advocated lower supply and higher prices for oil within the OPEC framework. However, the Iranian attitude may be determined by the inability of Iran to meet the OPEC quota (Brumberg & Ahram, 2007: 32). Under the presidency of Khtami, Iran actively sought for Asian investments in the Iranian energy sector. Although the consideration on Asian partners already had been initiated under Rafsanjani, Khatami personally visited Japan in 2000 in order to invite the Japanese to take part in the Iranian Azadegan oil field (Brumberg& Ahram, 2007: 34).

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In 2001, the disagreement regarding the division of the Caspian Sea lead to the interdiction of BP vessels that were conducting research in an Azerbaijani field by the Iranian naval and air forces (Brumberg & Ahram, 2007: 33). The election campaign of Ahmadinejad had partly focused on the fight against corruption. Ahmadinejad is quoted to have said: “I will cut off the hand of the mafias of power and factions which have a grasp on oil (…) people must see their share of oil money in their daily lives” (MEES, July 4, 2005). Shortly after Ahmadinejad got elected as the new Iranian president, the NIOC was called to submit a new charter for the oil company in which the dimensions of the relationship between state and company were illuminated and codified (Brumberg & Ahram, 2007: 30). In light of the anti-US foreign policy by Ahmadinejad, Iran has forged close relations with Venezuela. The NIOC participates in the development of Venezuela’s oil and PetroPars will be involved in Iran’s oil development. The relationship between Iran and Venezuela is primarily given in by political motives (Brumberg & Ahram, 2007: 36).

3.6 Conclusion Commodified oil and gas have become social phenomena. They gained particular value through interventions of discourse. Growing energy demand and declining energy stocks have led to a situation of energy scarcity in which political power seems to gradually move into the hands of those who possess the resources. Iran holds an important position in the world energy markets. This has had a large impact on Iran’s foreign policy practices. However, oil is in Iran more than an economic commodity. Oil is mainly received by the Iranians to be an inalienable national patrimony that symbolizes Iran’s national strength. Both conceptions triumph in the National Iranian Oil Company. The structure and functioning of the NIOC is determined by Iran’s history in which nationalism and fear for imperialism are dominant determinants. Since its establishment, the NIOC has compromised on two, often contradicting demands: the fact that oil is an economic commodity that must be trade in order to have value; and the conception of oil as an inalienable national patrimony. These conceptions have rendered foreign investments nearly impossible; the only way for foreign companies to get involved in the Iranian energy industry is through the so-called buy-back contracts. Moreover, the current structure does not allow for substantial private investment. It is likely that this will not change any time soon, since rents from oil and gas are important incomes for the economic bases of the political factions and serve regime survival. This situation has left Iran with an inefficient energy industry.

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As a result of the inefficiency of the domestic Iranian energy industry and severe outside pressures through economic sanctioning and political lobbying, the energy industry in Iran lacks behind. Iran needs technological knowledge and foreign investment to keep its production levels stable. The growing domestic demand is a big problem for Iran since Iran basically runs on oil –rents derived from exports. The civilian purpose has been the reason put forward by Iran to develop a nuclear program. However, it is likely that Iran’s aims for nuclear energy are underpinned by the same rationale as oil: they both count as an expression of national independence. As a member to the NPT, Iran argues that they are as entitled as any other state to nuclear energy for civilian purposes.

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4. The IRI’s Foreign Policy
Chapter 4 analyzes the foreign policy of the IRI. The chapter starts with a synopsis of the formal process of foreign policy decision-making in the IRI. Then, in line with the work of E.P. Rakel (The Iranian Political Elite, state and society relations, and foreign relations since the Islamic Revolution, 2008), the chapter analyzes the foreign policy of the IRI in four distinct time periods: first, the foreign policy of the IRI under supreme leader Khomeini (1979-1989); second, the foreign policy of the IRI under former present Rafsanjani (1989-1997); third, the foreign policy of the IRI under Khatami (1997-2005); and fourth, the foreign policy of the IRI under Ahmadinejad (2005- ). Chapter four focuses mainly on Iran’s relations with the United States, the Soviet Union/Russia and the Persian Gulf states. Iran’s relations with China will be discussed separately in chapter 5.

4.1 Formal Structure of Foreign Policy Decision-Making in the IRI The formal structure of foreign policy decision-making in the IRI is made up of bodies of the government and the religious hierarchy. The decisions of the formal structure may be influenced by informal, outside forces in the form of information that is derived from diplomatic channels, security agents, miscellaneous media sources, libraries abroad, individual citizens, think tanks, scholarly authorities and/ or the OICC (Organization for Islamic Culture and Communication) (Maleki, 2002: 39). However, the formal structure of foreign policy decision-making consists of the following offices (see Figure 4.1): the supreme leader, the president, the Guardian Council, the foreign minister, the Supreme National Security Council (SNSC), the parliament and the Expediency Council. The final word on foreign policy matters lies with the supreme leader; the supreme leader approves or disapproves of foreign policy initiatives (Maleki, 2002: 45). Since the supreme leader remains in power for as long as he lives or until the moment he is dismissed by the Assembly of Experts (see chapter 2.2.1.1), the foreign policy of the IRI remains largely stable. Important foreign policy decisions that were directed by the supreme leader were, among others, the following: (1) Iran’s neutrality during the allied attack on Iraq in 1991; (2) the non-intervention in Afghan internal affairs; and (3) the support of the Palestinians in the Arab-Israeli conflict (Maleki, 2002: 45). Additionally, Khamenei has so far tried to avoid American interference in Iran’s domestic politics and has looked favourably upon Iran-EU economic cooperation arrangements (Rakel, 2007: 182). Even though the final word on foreign policy matters lies with the supreme leader, the office of the president is the most important institution involved in foreign policy making (Rakel, 2007: 165). The president of the IRI leads the SNSC and has the authority to sign treaties, protocols, contracts, and agreements concluded by the Iranian government with other governments, as well as agreements pertaining to international organizations, after obtaining the approval of the Islamic Consultative

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Assembly (article 125 Constitution Iran 1979). The president furthermore approves ambassadors after the recommendation of the foreign minister (article 128 Constitution Iran 1979). The SNSC was established in 1989 through an amendment to the IRI constitution of 1979. The SNSC replaced the former Supreme Defense Council. The larger aim of the SNSC is to safeguard the IRI’s national interests which include its sovereignty and territorial integrity. The responsibilities of the SNSC include the following: (1) Determination of the defense and national security policies within the framework of general policies determined by the Leader; (2) Coordination of activities in the areas relating to politics, intelligence, social, cultural and economic fields in regard to general defense and security policies; and (3) Exploitation of the materialistic and intellectual resources of the country for facing internal and external threats (article 176 Constitution Iran 1979). The SNSC is made up of the heads of the executive, legislative, and judicial branches of government; the Chief of the Supreme Command Council of the Armed Forces; the official in charge of the Management and Planning Organization; two representatives nominated by the supreme leader; the ministers of Foreign Affairs, Interior, and Intelligence; a minister concerned with the subject, and the highest authorities of the Armed Forces and the IRGC (article 176 (2) Constitution Iran 1989). The presidency of the SNSC lies with the president of the IRI (Maleki, 2002: 40). The SNSC plays a key role in foreign policy debates (Rakel, 2007: 165); and the SNSC has been the leading office in the progress of the IRI’s nuclear program. Since the presidency of Ahmadinejad, the composition of the SNSC is dominated by men with military and/ or security backgrounds (Global Security website: 2009). Iran’s current atomic negotiator, Saeed Jalili, previously served as director-general of the ‘office of the supreme leader’ and has been an advisor to Ahmadinejad since 2005 (Reuters, Oct. 20, 2007). The parliament is not allowed to interfere in the executive foreign policy decision making process. Yet, it discusses foreign policy matters. (Rakel, 2007: 162). Furthermore, it has to approve international treaties, protocols, agreements and contracts. The parliament has a permanent committee on foreign policy that carries out initial discussion about bills and motions. The Guardian Council makes recommendations and develops guidelines for foreign policy (Rakel, 2007: 165). Moreover, it tests the government’s foreign policy against the IRI-constitution and therefore against Islamic law. The Expediency Council is not party to the foreign policy making-process. However, concerning foreign policy matters, it functions as a mediator between the Council of Guardians and the parliament if necessary, and it can propose guidelines for the overall policy of the IRI.

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Figure 4.1 Iranian Foreign Policy Decision-Making

Source: Maleki, Abbas, (2002), “Decision Making in Iran’s Foreign Policy: A Heuristic Approach” in Journal of Social Affairs, 19, 73, p. 48

Foreign policy decisions are, like all other policies in the IRI, influenced by different factional groups. Roughly, the foreign policy orientations of the Iranian political elite can be divided into two groups (Rakel, 2007: 166; Maleki, 2002: 43): 1) the Conservative faction, and 2) the Pragmatist and Reformist faction. The Conservative faction “emphasizes the identity of the Islamic Revolution and the return to Islamic values” (Rakel, 2008: 147). In light of the durability of the Islamic Republic, the Conservative faction promotes close relations with Islamic countries and distances itself from the United States as crucial courses in their foreign policy. The Pragmatist and Reformist factions emphasize that Iran is a nation-state that has to expose itself to and make international trade and political ties with other states in order to safeguard Iranian national interests (Maleki, 2002: 43; Rakel, 2007: 166). Iranian foreign policy is the result of the interplay between “its domestic situation, not merely factional politics, and its external environment, not merely superpower behavior” (Ramazani, 1989: 202). This chapter will now analyze foreign policy in the IRI from 1979-2009.

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4.2 Foreign Policy by the IRI under supreme leader Khomeini, 1979-1989 With the establishment of the Islamic Republic, the course of Iranian foreign policy took a drastically different direction from the one it had followed under the Shah. The Iranian Islamic Revolution had been an expression of dissatisfaction with both the domestic and foreign policies of the Shah; by the mid-1970s, the Iranian people perceived the growing Iran-US relations as a threat to Iranian independence. The consequence of these threatening pre-revolutionary perceptions emerged in the new foreign policy direction of the IRI. The priorities of the IRI’s foreign policy were determined on the basis of the root causes of the Iranian Islamic Revolution. Historical experiences of external political and economic involvement in Iran led to the formulation of a foreign policy that was based on the principle of ‘equilibrium’ (Ramazani, 1989: 204). The foreign policy based on the ‘equilibrium’principle emulated relations with other states on the basis of equality. This non-alignment policy was advocated by both the provisional Prime Minister Barzagan and the first Foreign Minister Sanjabi. They had been inspired by the policies of Mohammad Mossadeq in the early 1950s which aimed to end British domination in order to safeguard Iran’s independence. Because of historical sensitivity, the principle was prominently presented and emphasized in Iran’s relations with the United States and Russia. Sanjabi had identified four pillars on which the non-alignment policy was based: 1) history; 2) the country’s geographic position; 3) the spiritual and humanist ideals of Islam; and 4) the principle of complete reciprocity in relations with other countries (Ramazani, 1989: 205). However, both Bazargan and Sanjabi envisioned the realization of the new IRI foreign policy in the context of the existing world order that consisted of modern nation-states. The nonalignment policy aimed to define the position of the IRI as equal to other states and nations in the existing world order and not to be inferior. However, Khomeini did not accept the existing world order and aimed at an Islamic one. Khomeini thus disagreed with the interpretation of the non-alignment policy. Ramazani in this respect suggests distinguishing between Khomeini as an “Islam firster” and Bazargan as an “Iran firster” (Ramazani, 1989: 205). This distinction corresponds to the difference between the Radical and Conservative Left factions at that time. The rift between Khomeini and Bazargan, which basically resulted from different geopolitical visions, became evident during the occupation of the US embassy in November, 1979. The occupation reflected a “strong anti-imperialist sentiment” (Rakel, 2008: 149). The seizure of the US embassy profoundly impacted on the course of foreign policy in the IRI and on the foreign policies of other states towards the IRI. The hostage taking became the crucible of Iran’s confrontational foreign policy for most of the next decade.

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Prime Minister Bazargan, contrary to supreme leader Khomeini and the Radical Left did not support the US embassy hostage taking. The Radical Left objected to US-Iran negotiations concerning the hostage taking since Iran was believed by the radicals to be able to stand up to US power in the region; negotiations or cooperation with the US in this respect posed a threat to the revolutionary government (Kurzman, 1998: 66). It is suggested that consolidation of Khomeini’s power was the real rationale behind the US embassy hostage taking and that the occupation did not originate in enmity against the US (Rakel quoting Gary Sick, 2008: 156). This would imply that the prevailing Iranian enmity against the US was used by Khomeini in order to legitimize his policies of domestic power-consolidation. However, indisputably the American perceptions of a threat after the overthrow of the Shah’s government did play a role in the US embassy hostage taking. Against the background of continuing support for the nonalignment policy by Bazargan’s successor, Bani-Sadr, the revolutionary idealists developed a second major foreign policy direction that differed from that of the Conservative Left. This new foreign policy orientation, which was ideological in character, was comprised of two policy issues: “Neither East nor West, but the Islamic Republic” and “Export of the Revolution” (Ramazani, 1989: 208). The first, “Neither East nor West, but the Islamic Republic” indicated an explicit rejection of all state relations with either the Soviet Union or the United States that dominated and preserved the existing world order and all governments aligned to these two powers. The second, “Export of the Revolution” referred to an ideal Islamic world order. As regards the latter policy orientation, Khomeini stated that the export of the revolution should occur through Islamic ethical behaviour instead of force (Ramazani, 1989: 208). By referring to the “Export of the Revolution” as the legitimatization of IRI policies during the Iran-Iraq war (and as a means to mobilize the masses), Khomeini hid the actual rationale for the IRI policies which concerned national security interests. The revolutionary idealist beliefs concerning the IRI’s foreign policy took root in Iran after the US embassy hostage crisis. In 1981, the Radical Left replaced the Conservatives as the IRI’s leading faction. As a result, Iranian foreign policy was guided by two main policy beliefs that can broadly be categorized as “revolutionary idealists” and “revolutionary realists”; “[t]hey both believe that Islam is, and should be, the prime unit of people’s loyalty in the Iranian polity, but they sharply differ on the relative weight of “Iranianness” and “Islamicness” in the Iranian identity” (Ramazani, 1989: 211). Moreover, the two directions differ in their attitude towards the current international order. Whereas the realists accept the existing order, but are hoping for a future Islamic world order, the idealists cannot reconcile to the present world order and actively pursue the establishment of an Islamic world order. It is in this respect important to note that Khomeini did not support the international system of territorially bound nation-states that he considered was “the product of man’s limited ideas” (Ramazani, 2005: 214). Idealists and Realists also had been divided on post war reconstruction after

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the war with Iraq and the role of foreign capital and technical know how in the reconstruction. Khomeini and his foreign policy orientation do not fit either the revolutionary idealist category or the revolutionary realist category; Khomeini had always expressed a preference for the intermingling of idealism with realism and at the same time, the overall interests of Iran necessitated that Khomeini shift between factions (Ramazani, 1989: 211-213). Not long after the proclamation of the radical principles on which the IRI’s foreign policy was supposed to rest, a different, softer, interpretation was attributed to the two principles. Rakel remarks that this‘re-interpretation’ encompassed a more pragmatic orientation towards both domestic and foreign policy (Rakel, 2007: 168). Ramazani attributes this more pragmatic orientation to Khomeini’s perception of having secured the Islamic Revolution and the subsequent Islamic Republic (Ramazani: 2005: 217). The so-called ‘open-door’policy basically advocated that “rational sound and healthy relations” served Iranian interests and ideology best. Considering the Iranian situation at that time, it is most likely that political and economic interest overrode ideology and became decisive factors in the IRI foreign policy making. Socioeconomic reasons and battlefield setbacks were also the reason for the acceptance of UN Security Council Resolution 598 ended the Iran-Iraq war in 1988 (Ramazani, 1989: 214). The ‘open-door’ policy transformed the rejection of all relations with the United States and the Soviet Union to the rejection of domination and elevated the ‘export of the revolution’principle to a mere model of behaviour at home to act as an example abroad (Ramazani, 1989: 212213).

Iran and the United States, 1979-1989 The hostage taking of the US embassy had a detrimental impact on Iran-US relations. It was a final psychological blow to trust between the two states. Due to the friendly relations with Iran under the Shah, the US was overwhelmed by the anti- American sentiments of the Islamic Revolution; before the Revolution, Iran was considered to be America’s closest ally in the Persian Gulf. Besides, 21 percent of all Iranian imports came from the United States and this made the United States Iran’s biggest trading partner (Estelami, 1999: 1-2). As a result of the Iranian Islamic Revolution, diplomatic relations between Iran and the Unites States deteriorated. But with the US embassy hostage crisis, economic relations were also adversely affected. The first formal sanctions that were imposed on Iran were effective from April 1980 until early 1981 and covered the banning of US exports to Iran. Subsequently in 1984 sanctions against Iran were renewed by the Arms Export Control Act and Export Administration Act which limited US exports to Iran but left US oil companies untouched (see Table 4.2). In the late 1980s the incidents of the flagging of a Kuwaiti oil tanker and the shooting down of an Iranian airliner led to the further deterioration of economic relations. As a result, all Iranian imports were banned and US oil companies were prohibited from importing Iranian oil into the US. Iran responded to the US sanctions and the withdrawal of its largest trading partner by seeking to

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diversify its economic and trade relations with smaller European countries, Eastern Europe, Islamic and non-aligned nations (Estelami, 1999: 1-3). The end of the hostage crisis did not improve Iran-US relations due to the Iran-Iraq war. “[B]elieving that the increased activities of the United States in the Persian Gulf, beginning as early as February 1979, aimed at the containment and ultimate destruction of the revolutionary regime, the Iranians saw the United States as the real instigator of the Iraqi invasion of Iran on September 22, 1980”(Ramazani, 1989: 209). Kurzman refers to the cliché that Iranians have longer and better memories than Americans. However, the revolutionary idealists in Iran transformed the resentment of United States involvement in the country into a means of mass mobilization which makes any contact with the United States vulnerable to accusations of collaboration (Kurzman, 1998: 65).

Table 4.1 Imports to Iran in % by Source of Supply, 1975-1988 United States PreRevolution (1975-1978) Revolution and Iraq War (19791988)
* The high rise in ‘other’ sources of supply comprises imports from smaller European countries, Eastern Europe, Islamic and non-aligned nations. Source: Estelami, Hooman, (1999), “A Study of Iran’s Responses to U.S. Economic Sanctions” in Middle East Review of International Affairs, 3, 3, p. 3

Western Europe 48.7

Japan 15.8

Other 17.0

18.5

1.8

47.8

13.0

37.4*

Geo-strategic considerations and its interests in the region prevented the US from ignoring the existence of the IRI (Rakel, 2008: 157). Yet, the credibility and reputation of the US in the region was damaged though by the Iran Contra Affair. While the US propagated a serious anti-IRI stance in the region and in the world, in 1986 arms sales to Iran by the US, despite its own initiated trade sanctions on Iran, became public (Rakel, 2008: 157). Another sensitive issue in Iran-US relations became the IRI’s support of Islamic movements outside Iran. The support of the Islamic movements often contravened US democratization efforts and is largely opposed by both the US as well as Israel (Rakel, 2007: 168). The support of Islamic movements by the IRI outside Iran can be seen as a form of power projection by the IRI.

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Iran and the Persian Gulf States, 1979-1989 The Islamic Revolution in Iran and the subsequent dominant revolutionary ideological foreign policy orientation of the IRI led to the establishment of the Gulf Cooperation Council (GCC) in 1981. 17 The Persian Gulf states felt threatened by the dedication of the revolutionary idealists and their intention of spreading the Islamic Revolution and besides they did not want to get involved in the Iran-Iraq war. Khomeini had expressed his wish to see the Persian Gulf states adopt similar governments to that of the IRI, cut their ‘subservient ties’ with superpowers and find safety under the Iranian security umbrella (Ramazani, 2004: 7). The establishment of the GCC was fully supported by the United States and the United Kingdom (Mafinezam & Mehrabi, 2008: 69). The GCC was intended to function as a ‘protective mechanism’ (Ramazani, 1989: 210). By the establishing the GCC, the separate Persian Gulf states chose to go beyond territorial delineations in order to bring about a ‘protective mechanism’ that would best serve their national self-interests. The relations between Iran and the Persian Gulf states was severly damaged during the first years of the IRI. Initially, although having declared themselves neutral, the Persian Gulf states provided logistic and financial support to Iraq during the Iran-Iraq war (Rakel, 2007: 169). Other factors that adversely affected Iran’s relations with the Gulf States were the alleged support by Iran in 1982 to overthrow the government in Bahrain; the explicit support for Shiite militants who bombed several Western embassies in Kuwait in 1983; the rioting of Iranian pilgrims during the Hajj in Mecca in 1987; and the islands between Iran and the UAE that Iran had occupied since 1971(Özar, 2004: 310). Ultimately, the Iran-Gulf States relations were improved halfway through the 1980s at a time when the IRI’s foreign policy orientation had become more pragmatic.

Iran and the Soviet Union, 1979-1989 During the reign of the Shah, Iran’s relations with the Soviet Union had been complicated by its close relations with the United States. During the Islamic Revolution, the Soviet Union sided with the opposition against the Shah (Rakel, 2008: 155). In the early years of the Iran-Iraq war, the Soviet Union supported Iran and expanded economic cooperation with the Islamic Republic. However, the revolutionary ideological foreign policy orientation of the IRI also affected Soviet-Iran relations; the Soviet Union was considered one of the dominant powers that preserved the world order rejected by Khomeini. At the same time, as a neighbouring country of Iran, the Soviet Union did not welcome the foreign policy idea of exporting the Islamic Revolution (Ramazani, 1989: 210; Özar, 2004: 314). The Soviet invasion of Afghanistan and Soviet arms supplies to Iraq (after 1982) were most detrimental to the relations between the Soviet Union and Iran. The diplomatic scandal around the Soviet intelligence community in Tehran also lent substantial negative weight to the relations between the two states (Rakel, 2008: 155). The more pragmatic orientation in the IRI’s foreign policy
The member countries of the Gulf Cooperation Council are Saudi Arabia, Kuwait, Oman, Qatar, Bahrain, and the United Arab Emirates.
17

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increased the need for restoring relations with the Soviet Union. Yet, improving these relations was weighed against the development of cooperation with China (Rakel, 2008: 155). Nevertheless, in 1990, gas exports from Iran to the Soviet Union were resumed following the signing of an economic and trade agreement in 1989 by the then Parliamentary Speaker, Rafsanjani. Although the role of ideology in Iranian foreign policy was pervasive under Khomeini, it did not explicitly exclude pragmatic national interests from foreign policy making. The Iran Contra Affair possibly provides the best example. The pragmatic national interest in foreign policy making, which was partly related to restoring Iran’s international legitimacy in the world, became more important after Khomeini’s death in 1989.

4.3 Foreign Policy by the IRI under the Presidency of Rafsanjani, 1989-1997 The foreign policy of the IRI since 1989 has been influenced by two significant changes in the IRI’s domestic order: 1) Khomeini’s passing in June 1989 and 2) the new power sharing arrangement between the supreme leader and the President. Additionally, external elements, the end of the Iran-Iraq war, the end of the Cold War and the disintegration of the Soviet Union, had large implications for the foreign policy of the IRI. The disintegration of the Soviet Union has been of great geopolitical importance to Iran. The SU disintegration left the region with a vacuum in which both Iran and Turkey tried to establish a dominant position which was based on linguistic, religious and cultural ties with the newly emerged states. The end of the Iran-Iraq war took a heavy weight off Iranian shoulders and enabled Iran to envision such a regional position. A strong regional position would facilitate the process of thereintegration of Iran into the international community and would contribute to restoring Iran’s international legitimacy. The new power sharing agreement between supreme leader Khamenei and the President of the IRI increased the influence of the President. Whereas Khomeini had solely ruled over the IRI’s policies, Khamenei agreed to establish a more dual power structure (Ramazani, 1992: 394). The presidency of Rafsanjani and the upper hand of the Pragmatists in the IRI’s politics further shifted the ideological foundations of the IRI’s foreign policy to the advantage of the national interest (Rakel, 2008: 158). The IRI’s foreign policy under the presidency of Rafsanjani mainly focused on the reconstruction of the IRI, militarily (as a deterrent to Iraq) and economically, but also on restoring the international legitimacy of the IRI.

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Analyzing Iran’s Foreign Policy; the Prospects and Challenges of Sino-Iranian Relations Lucinda Ruth de Boer

Initially, Rafsanjani tried to encourage reconstruction “through cooperation with advanced industrial states and Persian Gulf countries, and a liberal economic policy” (Rakel, 2007: 171). Economic reconstruction was guided by a so-called FiveYear Plan and triggered a ‘new oil policy’. The new policy was extended by emphasizing the Iranian relations with the GCC and Saudi Arabia in particular. An interesting aspect of the new oil policy was the ‘new realism’. The Iranian oil Minister suggested that in the new realism, the emphasis lay on the “reason of state as opposed to chiliastic ideological crusade” (Ramazani, 1992: 395). Three considerations underpinned Rafsanjani’s foreign policy (Alam, 2000: 1631): 1) Iran cannot change the region’s political map; 2) Iran must try to adjust to a new balance of power in the region in which the US had played a major role in creating the new balance of power; 3) Iran should establish relations with Saudi Arabia because of its importance in the GCC. The aim of the IRI to establish regional security was supported by all political factions (Rakel, 2008: 159). Iranian domestic politics was divided on the direction of its foreign policy in the new world order. While the supreme leader Khamenei supported and favoured Arab cooperation, president Rafsanjani saw (economic) prospects in a reorientation of Iranian foreign policy towards the North and East of the IRI. The outcome of the domestic difference of opinion on foreign policy led to a policy in which the IRI wished to fulfil the role of bridge between North and South (Rakel, 2008: 165). Divisions within domestic politics on foreign policy orientations were achieved further prominence during the Gulf War. While officially Iran was amongst the first countries to condemn the Iraqi invasion of Kuwait, Rafsanjani’s policy was not supported on a large basis (Rakel, 2008: 166). Opposition to Iran’s official policy emanated from the notion that the Gulf War in fact reflected a war between Iraq and the US. “Both former Interior Minister Ali Akbar Mohtashami and Supreme Leader Khamenei called for a jihad” (Rakel, 2008: 166). Rafsanjani legitimized his ‘anti-Iraq policy’ (although Iran officially had declared its neutrality) by implying that the US military expansion in the region could easily adversely affect the IRI (Rakel, 2008: 166). The IRI’s foreign policy practices under Rafsanjani were initiated by both important domestic and external changes. The new power sharing agreement between the supreme leader and the President had a large impact on the direction of the IRI’s foreign policy. The upper hand of the Pragmatist faction in the IRI’s politics led to a dominant vision wishing to engage Iran in the existing world order. Ideology became less important in the geopolitical culture of Iran. This point of departure largely influenced the geopolitical visions of the Pragmatist faction who believed that within this world order, Iran would play a dominant regional role. External changes, the disintegration of the Soviet Union and the “remaining vacuum” enabled such an Iranian vision to emerge. Moreover, the end of the Iran-Iraq war made it possible for the IRI to spend money on issues other than warfare. Instead, economic reconstruction and reintegration of Iran into the international community were the crucibles of the

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IRI’s foreign policy during the presidency of Rafsanjani. Rafsanjani’s foreign policy did not retain much from the revolutionary principles proclaimed in the early years of the Islamic Republic.

Iran and the Persian Gulf States, 1989-1997 During Rafsanjani’s presidency, the foreign policy of the IRI towards the Persian Gulf states recognized long-term and short-term goals. For the long term, Iran aimed at regional security in the Persian Gulf. Regarding the short term, Iran aimed at the containment of Iraq and reconciliation with the states of the GCC (Ramazani, 1992: 394). Rafsanjani’s foreign policy objectives in the Persian Gulf necessitated a reconciliatory approach toward the states of the Persian Gulf. In its reconciliatory stance towards the Persian Gulf, Iran paid particular attention to the improvement of is relations with Saudi Arabia (Rakel, 2008: 159). Diplomatic relations between Iran and Saudi Arabia in 1988 were broken off after the bloody hadj in 1987. Relations were restored in 1991 due to the common enmity of Iran and Saudi Arabia towards Iraq (Ramazani, 1992: 399). Signs of their improving relations were visible during the meeting of the Organization of Islamic Conference (OIC) in which Saudi Arabia supported the presidency of Iran and the visit of Rafsanjani to Saudi Arabia in February and March 1998 (Rakel, 2008: 161). The IRI under Rafsanjani’s presidency not only worked on its bilateral relations with the GCCcountries, but also approached the GCC as a whole in the light of regional security arrangements. While the twelfth summit of the GCC states in Kuwait in December 1991, stressed the bilateral relations with the IRI in the service of common interests, future security arrangements for the Persian Gulf had excluded the IRI and instead favoured a foreign presence in the Gulf. Ramazani suggests that the exclusion of the IRI stemmed from the lingering suspicion of Iran’s intentions (Ramazani, 1992: 403). Other reasons that could have played a role in the exclusion of Iran in the regional security arrangements were the active opposition of the US to including Iran in these arrangements; the disarray on agreeing to priorities among the GCC-members themselves; and the conflict between the UAE and Iran on the three strategically important islands of Abu Musa and the Greater and Lesser Tunb (Rakel, 2008: 160). The Abu Musa crisis gave the US an opportunity to offer military protection to the Persian Gulf countries and consequently the US established bilateral contracts with individual Persian Gulf countries (Rakel, 2008: 161).

Iran and the Caspian region, 1989-1997 The disintegration of the former Soviet Union and the emergence of new independent republics in Transcaucasia and Central Asia added another dimension to Rafsanjani’s foreign policy. Rafsanjani pursued an active “Northwest Asian policy” which was driven by the specific interest of preventing

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the US from dominance in the CEA (Rakel, 2008: 163) and by other, more general, interests of the IRI. The interests that underlie the IRI policy can be divided into four groups (Ramazani, 1992: 404): (1) The perpetuation of the dissolution of the former Soviet Union and the prevention of the growth of a new Russian empire due to Iran’s historical experiences and the insurance of CIS members to respect its predecessors’ commitments to Iran; (2) To contain actions of ethnic revivalist movements in the former Soviet Azerbaijan, across the border from its own eastern and western provinces of Azerbaijan; (3) The potential opportunities of Northwest Asia creating new possibilities for economic cooperation. In this respect, the IRI can fulfil the role of a bridge between Northwest Asia and the Persian Gulf; (4) The projection of Iran as an Irano-Islamic role model to Northwest Asia. Rafsanjani emphasized the need to close the gap between rich and poor at home and abroad; “[b]ereft of decades of dependence of the industrialized region of the former Soviet Union, the underdeveloped centrally controlled, and ecologically devastated economies of the Northwest Asian republics cry out for help, and Iranian leaders are offering all the help they can give”. The latter Irano-Islamic role model functions more as a means to an end than as an interest. The common history of Iran and the CEA region was operationalized in the Iranian approach to the CEA region in order to secure its own interest in the region (Amineh, 2003: 83). The emerging Iranian interests in this region coincided with the mutual distrust between Iran and the GCC in the early 1990s. “[I]ranian policy-makers stated that Iran should no longer focus on Persian Gulf countries, if the latter were not willing to give up their American orientation. Iran should rather stress the importance of countries such as India, Pakistan, CEA and China, which were more sympathetic to Iran” (Rakel, 2008 quotes Marschall: 162). In the light of Rafsanjani’s plans for economic development, the independence of the CEA states signalled the emergence of a new “economic trade center” (Rakel, 2008: 162). Iran’s efforts to establish cooperative relations resulted in 1992 in an enlargement of the Economic Cooperation Organization (ECO) with the accession of seven new members: Azerbaijan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan and Afghanistan (Amineh, 2003: 84). The ECO had initially been established in 1977 between Iran, Turkey and Pakistan and had existed for only two years at the time of the Iranian Islamic Revolution. In 1985, however, the Organization was re-established and provided with a legal basis in 1990. Nowadays, “[t]he ECO is one of the largest economic alliances in the world comprising a population of 300 million and encompassing an area of seven million km2” (Amineh, 2003: 84). The stimulus behind the ECO is the promotion of trade, transport, energy and industrial and agricultural cooperation. Since 2000, ECO-members have emphasized energy cooperation and trade. Yet, the ECO’s achievements so far have been rather limited mainly due to the “absence of a dense network on transportation links” (Rakel, 2008: 162) and sufficient financial resources (Amineh, 2003: 84). The

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flourishing of ties between the CEA and Iran has been opposed by the US because of Iranian influence in the CEA-region and the unsettled dispute on the legal regime of the Caspian Sea (Rakel, 2008: 163). Besides, Iran has some bilateral problems with Azerbaijan. The rule of Azerbaijan’s Popular Front from June 1992 till June 1993 had called for the unification of Iranian Azerbaijan with the newly created independent republic of Azerbaijan. Iran now fears that such sentiment will constitute a threat to the IRI’s territorial integrity (Amineh, 2003: 85; Rakel, 2008: 164; Freedman, 1997: 101). The issue on Azerbaijan has been one of the reasons why Iran has valued relations with Russia. More importantly, Rafsanjani’s efforts to rebuild Iran’s military strength can be met by Russia. “Given Iran’s need for sophisticated arms, President Rafsanjani has been careful not to alienate either the Soviet Union or Russia” (Freedman, 1997: 101). As was mentioned before, the rapprochement between Iran and Russia has emerged since the late 1980s when major, mainly military, agreements were signed between the two countries. The disintegration of the Soviet Union and the emergence of Russia and the other independent republics enabled Iran to let go of its historic negative feelings towards the Soviet Union and more or less restart its relations with Russia on a clean slate. This relationship expanded after the Gulf War and the corollary increased US presence in the Persian region due to the GCC’s countries pro-American stance. Russia saw Iran as an important market for Russian arms and nuclear technology. It demonstrated its diplomatic independence form the US and was an ally in the control of Azerbaijan and the Taliban, and checking Turkish influence (Freedman, 1997: 93). Even though at that time Russia had distanced itself from its Middle Eastern policy and instead focused on the “near abroad”, Russia’s relations with Iran were untouched and even improved; “Iran’s critical geographical position enabled it to play a role in both Central Asia and the Transcaucausus as well as in the Persian Gulf” (Freedman, 1997: 100). Russia embraced the opportunity to ‘invest’ in Iran now that the country had undergone a profound isolation from the US. The Russia-Iran relations were regarded as an important counterweight to US influence and NATO expansion in the region. Besides, Iran regarded Russia as an “important link in its efforts to counter US attempts to isolate it” (Freedman, 1997: 93). However, the weakness of the Iranian economy had caused friction in the IranRussia relationship as Iran developed difficulties in repaying its debt to Russia. Additionally, Iran walked on a thin line while balancing its interests between the new republics and Russia (Freedman, 1997: 106).

Iran and the United States, 1989-1997 The relations between Iran and the United States during Rafsanjani’s presidency remained fixed on controversial issues: “[T]he Bush administration insists that Iran is developing weapons of mass destruction, is still sponsoring terrorism, remains the chief opponent of the Arab-Israeli peace process, and continues to be guilty of human rights violations. The Rafsanjani administration, on the other hand, contends that Washington continues to be hostile to revolutionary Iran, that is its aspiring to

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world domination, conspiring to prevent Iran from achieving its legitimate security and economic objectives in the newly independent Muslim republics of the former Soviet Union, and that it is waging a deliberate propaganda campaign against Iran in the name of protecting human rights and the non-proliferation of nuclear weapons” (Ramazani, 1992: 393). During Rafsanjani’s presidency, Iran experienced heavy US sanctions (see Table 4.2). Alam argues that the motivation behind the US sanctions against Iran were to isolate Iran and cripple its economy so that Iran was not able to emerge as a power in the region that could challenge US interests and elsewhere (Alam, 2000: 1633). Since the end of the Cold War, the US policy towards Iran has been determined by three issues (Rakel, 2008: 164): (1) Securing the continuation of access to reliable oil and gas sources in an increasingly competitive area; (2) The prevention of the emergence of an anti-US axis between Iran, Russia and China. The prevention of such an axis forms the primary reason for the US to object constructions of pipelines that run through Iran; (3) The US relations with Israel have affected US policy towards Iran. Besides, several other factors like the dislike of Iran’s desire to possess weapons of mass destruction, terrorism and the Middle East Peace Process have all played a role in the determination of US policy. The sanctions that were imposed by the US included the Iran Non-Proliferation Act in 1992; the IranLibya Sanctions Act (ILSA) in 1996; and the “dual containment” policy in 1993. Following the end of the Iran-Iraq war, US trade restrictions were slightly relaxed under the Bush administration; “[I]n 1989 […] the US removed some of its prior trade restrictions and agreed to release close to $600 million of Iran’s frozen assets in the US. In late 1991, Bush allowed a limited amount of Iranian crude oil into the United States […] US allies in Europe were also more openly conducting business with Iran”(Estelami, 1999: 4). Yet, the Clinton administration soon after its instalment launched the “dual containment” policy that formed a substantial part of their new Gulf policy and aimed to isolate Iran and Iraq politically, economically and militarily (Rakel, 2007: 172). Conversely, Iran had offered lucrative contracts to American companies and the West, which had raised the US to Iran’s fifth largest importer in 1994 (Estelami, 1999: 5). The US expressed concerns about the expanding relations between Iran and Russia and more importantly, the Russian construction of a nuclear power reactor in South Iran (Estelami, 1999: 5). In 1995, Iran was once more subjected to a total trade ban after all American companies were prohibited from any involvement in developing Iran’s petroleum industry. The restrictions followed the later cancelled Conoco- deal between Iran and a subsidiary of the Dupont Corporation (Estelami, 1999: 6). The restrictions from 1995 were succeeded by the ILSA in 1996. The ILSA aimed at halting the development of Iran’s oil industry. “[B]y prohibiting US firms’ involvement in Iran’s oil industry, and restricting that of non-US firms to an investment cap of $20 million per year, the policy aims to prevent international assistance in developing Iran’s oil

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sector”(Estelani, 1999: 7). The fact that the ILSA has an extraterritorial nature led to friction between the US and other countries that are willing to invest in Iran. More importantly, the US policies adversely affected their own American companies who suffered serious setbacks in a competitive arena from which they were excluded and in which they could not compete. Under Rafsanjani, Iran opted for a confrontational policy to challenge US imposed sanctions. Instead of trying to engage in dialogue with the US, Iran has sought other partners with which to cooperate.

Table 4.2 Imports to Iran in % by Source of Supply, 1979-1999 United States PreRevolution (1975-1978) Revolution and Iraq War (19791988) Postwar Reconstruct ion (19891992) Dual Containme nt (19931996) Iran-Libya Sanctions Act (1996-) 18.5 1.8 Western Europe 48.7 47.8 15.8 13.0 17.0 37.4 Japan Other

2.1

52.1

11.4

34.4

3.3

45.8

8.3

42.6

0.0

44.9

6.4

48.6

Source: Estelami, Hooman, (1999), “A Study of Iran’s Responses to U.S. Economic Sanctions” in Middle East Review of International Affairs, 3, 3, p. 3

The presidency of Rafsanjani occurred at a time when the power structures inside and outside Iran had changed drastically. The IRI’s foreign policy orientation transformed from a “Neither East, nor West” to “both North and South” in nearly a decade (Ramazani, 1993: 393). The role of ideology in the IRI’s foreign policy orientation further decreased during the presidency of the pragmatist Rafsanjani. Rafsanjani’s visions of elevating Iran to a regional power led to a strengthening in relations with numerous states; those from the Persian Gulf, but especially the newly independent states. A reflection on Iran-US relations during the presidency of Rafsanjani illustrates that the current state of relations (2009) between Iran-US is very similar to that in the early 1990s and are still fixed on controversial issues rather than looking past them.

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4.4 Foreign Policy of the IRI under the Presidency of Khatami, 1997-2005 The domination of the Reformist Faction in the institutionally Conservative-dominated power structure has transformed Iranian political culture since 1997 (Alam, 2000: 1649). Even though Khatami focused predominantly on domestic issues, his emphasis on democracy and civil society in the domestic situation were positively reflected in his foreign policy orientation. Rakel notes that the IRI’s geopolitical culture and its foreign policy orientation both provided a democratic dimension (Rakel, 2008: 167). Foreign policy orientation under Khatami followed Rafsanjani’s pragmatic considerations of the national interest in Iranian foreign policy, but added a democratic dimension (Ramazani, 2004: 9). Khatami continued the rapprochement policy that Rafsanjnai had instigated. Yet, Khatami established policies more firmly and followed a pro-active approach. Khatami’s bid for the integration of Iranian society into the modern international system was unprecedented (Ramazani, 2004: 9). The foreign policy of Khatami came to be known as Khatami’s or Iran’s “détente policy” and covered the normalisation of relations with all countries (Alam, 2000: 1631). The leading discourse in Khatami’s “dialogue of civilisations” was determined by Khatami’s worldview of “peace, stability, security, progress and prosperity” (Alam, 2000: 1635). The détente policy created friction within the domestic political sphere concerning the normalisation of Iran’s relations with the United States and Israel (Alam, 2000: 1632). After his presidential victory, Khatami actively sought a rapprochement with the US (Alam, 2000: 1632). It may seem obvious that rapprochement with the US was objected to by supreme leader Khamenei and the conservative faction. Khatami’s foreign policy became successful. Rakel notes that even Khatami’s internal enemies recognized the success of his foreign policy, not least because of the need to provide for Iran’s oil income, which is detrimental to the development of Iran’s economy (Rakel, 2007: 178; Rakel, 2008: 173). The administration of Khatami increased efforts to attract foreign investment into predominantly the energy- and telecommunication sectors (World Energy Outlook, 2005). However, to the outside world, Iranian foreign policy has appeared inconsistent and contradictory since the Islamic Republic’s president calls for a “dialogue of civilisations” while at the same time the Islamic Republic’s supreme leader considers dialogue with the US even more harmful than establishing ties with that country (Alam, 2000: 1633). The same contradiction can be seen in Khatami´s “dialogue of civilisations” and his continuing support for radical Islamic organizations. Khatami and Khamenei seemed to have different ideas on how Iran could project its power. While Khatami has realized that Iran’s position in the world would be strengthened through a democratic foreign policy approach, Khamenei still thinks that state power needs to be connected to forms of warfare. Rakel remarks that these contradictory messages to the outside world hamper a real transformation in the substance of Iranian foreign policy that remains determined by the goals of Islam, anti-Americanism, anti-Israel and independence (Rakel, 2007: 179). Yet, the victory of the reformists in Iran’s parliamentary elections of 2000, in general positively impact upon the minds of the world towards Iran. The General Assembly of the United

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Nations even declared the year 2001 as the “United Nations Year of Dialogue among Civilizations” (Rakel, 2007: 179). The aftermath of 9/11 seriously impacted on Iranian foreign policy; “[a] whole new geopolitical trajectory has been foisted in the two main theatres of Iranian foreign policy: the Persian Gulf and Central Asia and the Caucasus region, warranting a new appraisal of Iran’s foreign policy and priorities”(Afrasiabi & Maleki, 2003: 255). Iran’s foreign policy decision-makers were divided on whether or not the regional situation that emerged after the US interference in Afghanistan was beneficial for the Islamic Republic. The Bush administration allowed for such insecurity to take root in Iranian politics since it had categorized Iran as a part of the “axis of evil” and obviously operated a clearly anti-Iran policy. Khatami’s administration responded by pursuing an active “preventive diplomacy” and tried to continue its reconciliatory approach while proving the incorrect assessment of the American categorization of Iran. The foreign policies of the IRI under Khatami aimed to enhance national security and optimize gains from solidarities and alliances; a new flexible approach to the US, forging closer ties with Russia and a deepening of the Khatami-led cooperative détente with Europe all contributed to improving Iran’s role and legitimacy in the international community (Afrasiabi & Maleki, 2003: 256).

Iran and the US, 1997-2005 In Khatami’s first statement on foreign policy, the newly elected president addressed the American people and “[s]tressed similarities between the American and Iranian revolutions with regard to the “compatibility of religion and liberty” (Rakel, 2008: 173). The electoral victories of the reformist faction in both the presidential and parliamentary elections and its reconciliatory attitude toward the US provoked a softening of sanctions against Iran under the Clinton administration. But although the reformists took a reconciliatory stance toward the US, at the same time they were cautious and emphasized that “[o]ur movement (i.e. the reformist movement0 was a domestic phenomenon and should not be seen as evidence that Iran had set aside revolutionary or Islamic principles to please the West, particularly the United States”(Alam, 2000: 1635). The new and softer approach by the US included the lifting of some sanctions but also consisted of apologies by the American government for their support during the overthrow of the Mossadegh government and the unconditional support for Iraq during the Iran-Iraq war (Alam, 2000: 1637). The conciliatory rhetoric positively impacted on Iran, but has been completely disregarded by Bush policies towards Iran (Ramazani, 2004: 9). This new softer approach by the United States towards Iran is presumed to have anticipated the reformist domination in the IRI. Alam argues that the new approach can be considered as a deliberate move of the US to appease the reformers and to strengthen their hands. The US had come to realize that it could not bypass the strategic importance of Iran after it had let go of Afghanistan as a transit route to Central Asia; “[i]n the changing global scenario, strategic and economic interests in West Asia and

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Central Asia have compelled the US to normalise relations with Iran because it is the only stable and safe transit route to access breakaway republics of the former Soviet Union” (Alam, 2000: 1637). Even though former-president Clinton and the US Secretary of State at that time Ms. Albright repeatedly referred to the new and softer US policy towards Iran, mutual antagonism hindered reconciliation; The memory of the Iranians that had been referred to earlier in the thesis, stood in the way of ‘real’ rapprochement between the two countries (Ramazani, 2004: 9; Alam, 2000: 1635). Additionally there seemed not to be an opportunity for reconciliation; the US was not willing to lift its sanctions on Iran; and the Conservative Faction opposed friendlier relations with the US (Rakel, 2008: 174). The aftermath of 9/11 legitimized lingering feelings of suspicion on the Iranian side towards the US. Rakel touches the spot when she notes that: “[K[hatami made clear his condemnation of these actions (i.e. the events of 9/11). The Iranian government even helped the US to overthrow the Taliban government in Afghanistan; they helped to establish the interim government of Hamid Karzai and gave US 500 million to reconstruct Afghanistan. In return, President George W. Bush included Iran in the “axis of evil” and left the option open of a pre-emptive war against Iran, if it supported radical Islamist groups with WMD”(Rakel, 2008: 174). After the American reorientation in foreign policy following 9/11, Iran was included in the plans for a “Greater Middle East”. Containment policies were replaced by regime change and soon the US invaded Iraq. Iran recognized the impact of the US invasion and possible occupation of Iraq on the Islamic Republic and the region and declared itself neutral. Gasiorowski points to the fact that although the Iranian attitude was very moderate and conciliatory towards the US in particular, the Iranian government continued to pursue activities like uranium-enrichment, intermediate- rangemissile programs, and supporting Hezbollah and radical Palestinian factions (Gasiorowski, 2007: 128). All of these activities were perceived by the US as threatening activities.

Iran and European countries, 1997-2005 Khatami had the largest success in his reconciliatory policy with Europe. Iran’s relations with Europe had been distorted after the Salman Rushdie affair in 1988 when supreme leader Khomeini issued a fatwa against Salman Rushdie. However, Khatami in 1998 declared that “we should consider the Salman Rushdie issue as completely finished” (Ramazani, 2004: 10). President Khatami was the first president since the Iranian Islamic Revolution in 1979 to visit European countries. In the years 1999 and 2000, Khatami paid visits to France, Germany, and Italy and even met the pope in the Vatican City. During the visit of Italian Foreign Minister Lamberto Dini, Khatami expressed the belief that for “the Iranian nation nothing is more intolerable than attacks on its historical identity as well as insult and incursion on its national strength and security […] Iranian national and government would not

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spare any efforts to safeguard their historical credit strength and dignity” (Khatami quoted in Alam, 2000: 1638).

Iran and Central Asia, Russia and China, 1997-2005 The relations between Iran and Russia that were significantly improved under Rafsanjani were further expanded during the presidency of Khatami. Alam remarks that Iran and Russia have three interests in common that underscore cooperation: the interests in the region; a shared perception on security in the region; and the interference of outside powers in the region (Alam, 2000: 1639). The areas in which cooperation intensified were the nuclear industry, the arms industry, and oil and gas (Alam, 2000: 1640). The growing relationship between Iran and Russia prevented the US from exerting as much influence in the region as it wished to do. In the year 2000 the US had offered Russia $100 million if Russia promised to end the reprocessing of nuclear fuel and cancel the Bushehr project. Russia refused the American offer since a continuation of the Russian nuclear industry would be more prosperous (Alam, 2000: 1639). During the years of Khatami’s presidency, an Iran-Russia-China axis began to take shape: “[s]trong protest against the National Missile Defence programme of the US by both China and Russia, reflect growing uneasiness in the relationship between US-China and US-Russia, and a fast growing triangular relationship between Iran, China and Russia to ward off the US influence in the region, and to defend their nation’s security if any threat emanated from the US”(Alam, 2000, 1640).18 The events of 9/11 signified an intensification of Iran-Russia relations. The realignments in Central Asia and Transcaucasia in favour of the US have strengthened suspicions in both Iran and Russia. The Iran-Russia relations further intensified after the signing of the North-South Corridor Agreement in 2000. Arfrasiabi & Maleki explain that a North-South Corridor will connect Russia and Indian ports via Iran. However, the realisation of the Corridor will most likely depend on the support of international financial institutions that, due to US pressure, will not financially back the project. Another cooperation initiative that would intensify relations in the Iran-Russia-China axis would be Iran’s admission to the Shanghai Cooperation Organization (SCO). In 2005, Iran together with India and Pakistan joined Mongolia in its observer-status to the SCO. Iran’s admission as an observer was perceived as a provocation by the West (Rakel, 2007: 180). The consideration of current and future relations between Iran and the SCO are important. Iran would probably benefit substantially from a fully fledged membership and has therefore repeatedly requested the SCO for membership in the Organization. Yet, the admission of Iran to the SCO is a politically delicate issue. Not only would Iran’s admission impact on the global energy arena, the admission would at the same time indicate a clear undermining of US imposed sanctions. This step would imply support from Russia and China for Iran over the US (Rakel, 2008: 171).19

18 19

Iran’s relations with China will be further expounded in Chapter 5. Chapter five will deal in more detail with Iran’s possible membership to the SCO.

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Since 2002 the Khatami administration had laid down a new policy toward the ECO. Beyond traditional cooperation initiatives, Khatami emphasized security cooperation within the ECOframework (Afrasiabi & Maleki, 2003: 259). The ECO’s success still remains relative, which can mainly be attributed to Iran-Turkey competitive relations. The Caspian Sea’s legal regime dispute continues to affect the relations between Iran and the other littoral states of the Caspian Sea (including Russia). The Iranian attitude towards the legal solution has remained largely unchanged over the last decades. The dispute adversely affects foreign investment in the Caspian Sea’s energy projects (Afrasiabi & Maleki, 2003: 262). Yet, pipelines between Iran and the other separate littoral states has facilitated oil swaps and intensified economic relations.

Iran and the Arab States, 1997-2007 An important turning point in Iran’s relations with the Arab States was the summit of the Organisation of the Islamic Conference (OIC) in Tehran in December 1997. At the time of the OIC meeting, Khatami had been the Islamic Republic’s president for nearly 5 months. Yet, the conciliatory message of the Khatami administration had attracted a large number of attendants to the summit (Alam, 2000: 1641). The decision to hold the summit in Tehran had already been taken in 1991 under the presidency of Rafsanjani. The OIC meeting in Tehran at the same time signalled an attitude of normalisation by the Arab States towards Iran (Alam, 2000: 1641). Khatami saw the Arab countries as particularly important for prosperity and security in the region and, like Rafsanjani, recognized the important role of Saudi Arabia. The improvement in relations between Iran and Saudi Arabia during Khatami’s presidency was unprecedented (Ramazani, 2004: 10). Aside from regional security concerns, good relations with the Arab states would positively contribute to OPEC policies and investments by the Gulf States in Iran (Rakel, 2007: 179). Relations between Iran and the Arab states thus improved and not least as a result of the shift in the IRI foreign policy that had now become guided by national interest instead of ideology. Iran’s radical Shii ideology differs from the Arab approach to Islam. The importance of the national interests went beyond the ideological differences of opinion. Yet, the dispute over the Abu Musa and Greater and Lesser Tunb Islands lingered and continue to hamper the Iran-Arab states relations. Although Khatami was in favour of dialogue with all countries, the policy towards Israel remained as obdurate as in earlier regimes (Alam, 2000: 1644). The Iranian attitude on Israel (non-recognition of the legal existence of Israel) continuously affects Iran’s relations with Europe and the US in a negative manner (Rakel, 2008: 177). Since the 1990s, Iran, under the guise of the OIC, has been actively involved in “conflictmanagement”. Iran played a mediating role during disputes, amongst othersin Tajikistan, NagornoKarabakh and Afghanistan (Afrasiabi & Maleki, 2003: 257-258). When president Khatami

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temporarily chaired the OIC, he involved the OIC in the Chechen conflict. It deserves attention to take note of Iran’s foreign policy orientations towards Afghanistan. Afrasiabi and Maleki point to the fact that prior to 9/11 Iran had repeatedly indicated the danger that the Taliban posed to regional security (Afrasiabi & Maleki, 2003: 258).

Iran and India, Pakistan and Afghanistan, 1997-2005 Iran’s relations with Afghanistan have been volatile. After the dissolution of the USSR and the rise of the Taliban in Afghanistan, Iran actively supported those Afghan factions that were able to block or oppose the factions supported by the US, Saudi Arabia and Pakistan (Alam, 2000: 1645). While Khatami denounced the Taliban government as constituting a threat to the stability and security of the region, Iran did not want to get into an armed conflict with Afghanistan. Iran instead called for a moderate government to be installed in Afghanistan. Alam indicates two clear reasons for the Iran’s strong opposition to the Taliban government (Alam, 2000:1646): the first reasons relates to ideological considerations since the Taliban represents a Sunni extremist, anti-Shia regime. The second reason has a strategic nature: the Taliban had guaranteed security and safety for the pipelines route through Afghanistan and Pakistan which would link Central Asia to the international energy markets bypassing Iran and Russia. The relations between Iran and Pakistan have been adversely affected by their opposition over Afghanistan. Yet, Iran-Pakistan relations in general are not bad. The countries expanded their cooperation of military, nuclear and missile technology. The fact that both countries import military and missile technology from China has created the potential for a “triangular military cooperation” (Alem, 2000: 1646). The Chief Executive of Pakistan, General Pervez Musharraf, paid a visit to President Khatami in 2000. Khatami then referred to the cultural and Islamic foundations of the Pakistani-Iranian relationship (Alam, 2000: 1647). Indo-Iranian relations focus predominantly on two issues: regional security and energy. These two issues are interlinked since peace and stability in the region supports the “best possible use of energy supplies in the region”. The maintenance of good relations with Iran suits India’s foreign policy which focuses on energy security. Economic development in India involves an increase in energy demand; Iran is thus a logical strategic partner for India. Iran is availed with the densification of the oil and gas transportation networks. In 2000, India co-signed the North-South Corridor Agreement which connects Europe and India via Russia and Iran. Alam remarks though that “[I]ndo-Iranian relations […] are still marred by mutual suspicion and distrust in which Kashmir has been a major stumbling block that has soured the Indian governments perspective” (Alam, 2000: 1647).

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4.5 Foreign Policy of the IRI under the Presidency of Ahmadinejad, 2005Ahmadinejad became Iran’s president in August 2005 and was re-elected in June 2009. During his election campaign in 2005, Ahmadinejad promised social justice at home and moderation abroad (Ramazani, 2005b:1). But almost immediately after his election, it became clear to the Islamic Republic and the rest of the world that the Islamic Republic would not continue the rapprochement policies of Rafsanjani and Khatami. The election of Ahmadinejad signalled a prompt shift in the IRI’s foreign policy outlook and instantly destroyed Iran’s reputation that it had so carefully tried to restore from the mid-1980s. Ahmadinejad belongs to the most extreme wing of the hard-line faction, the Young Conservatives. Chapter two has already explained that the neo-conservative faction or the Young Conservatives consists of those who were involved in the Iran-Iraq war and the oppression of the domestic opposition since the establishment of the Islamic Republic. Clearly, Ahmadinejad’s geographical imagination influences the course of the IRI’s foreign policy. Ahmadinejad, unlike his predecessors refers to Khomeini’s revolutionary foreign policy orientations. Ahmadinejad would like to see Shiite fundamentalists rule the world and Iran to dominating the region and the world (Kazemzadeh, 2007: 431). Ideology has regained a more prominent place in foreign policy decision-making since Ahmadinejad’s presidency. Kazemzadeh notes that Ahmadinejad’s speech to the UN General Assembly in September 2005 includes a call to action to change the world (Kazemzadeh, 2007: 432). Such a call resembles the initial IRI foreign policy orientation. However, both Rafsanjani and Khatami had departed from this point of view and instead considered the IRI’s integration in the existing world order better suited to the national interests of the Islamic Republic. President Ahmadinejad’s verbal attack on Israel referred back to the revolutionary rhetoric of the first year of the Islamic Republic (Ramazani, 2005b:1). The policies of Rafsanjani and Khatami are considered by the neo-conservative/ Young Conservative faction as “a betrayal of the ideals of the revolution and ineffective in warding off America’s threats” (Kazemzadeh, 2007: 445). Besides, whereas Khatami, and to a lesser extent Rafsanjani, saw the West as a constructive force in Iran’s economic development, Ahmadinejad blames the West for Iran’s current economic affairs. Ahmadinejad disapproves of the global power structure and in particular criticizes the legitimacy of the UN Security Council and its actions (Rakel, 2008: 177). These visions have clearly undermined Iranian legitimacy in the way that they did in the early 1980s; Ahmadinejad thus does not recognizes international legitimacy as a form of state power. Ahmadinejad has found sympathy for his ideas among the populations of developing countries outside the Middle East (Rakel, 2008: 178). A debate amongst analysts is taking place on whether or not Ahmadinejad’s ideas reflect the policies of the regime. Those who argue that Ahmadinejad’s ideas do not reflect the policies of the regime point to the delegation of more power by Khamenei to Rafsanjani (currently chairman of the Expediency Council); the rejection of the hard-line parliament of four of Ahmadinejad’s appointed

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nominees for cabinet posts; and the rejection of the first three Ahmadinejad nominated ministers for oil, in order to oppose the reflection of regime policies in Ahmadinejad’s ideas (Kazemzadeh, 2007: 424). Yet, on the other hand, it is argued that since the inner circle of Ahmadinejad shares his ideas, it can reasonably be assumed that Ahmadinejad’s policies are indeed reflective of the regime’s ideas. (Kazemzadeh, 2007: 424). The recent re-election of Ahmadinejad as the IRI’s president made it very clear that a power struggle within the regime had occurred and that Ahmadinejad’s ideas are not representative of the policies of the whole regime. The regime is in fact divided into the old clerical elite and Ahmadinejad and “his new elite”. The election of president Ahmadinejad left another mark on Iran’s foreign policy and nuclear negotiations: as soon as Ahmadinejad assumed office he dismissed some forty ambassadors and diplomats who were supportive of the rapprochement policies of Rafsanjani and Khatami towards the West. Moreover, Ahmadinejad convinced Khamenei to send away Rouhani as secretary of the SNSC since Rouhani is considered to be close to Rafsanjani (Kazemzadeh, 2007: 444). All and all this led to the pursuit of a confrontational policy by the IRI under Ahmadinejad towards the United States, Israel and the European Union. The belief in the end of the power of the United States, and the rise in the power of Iran support these confrontational policies with the confidence that is needed to make the policies appear credible. The rise of world oil prices has strengthened the financial resources of the regime and Iran’s ability to upset the world oil markets (Gasiorowski, 2007: 127). The rise in oil price (from $ 33 per barrel in early 2004 to $70 in August 2005) has allowed the Islamic Republic to “threaten retaliation against its critics while rewarding those countries, notably China that took its side” (Howard, 2007: xii). Yet, the “new aggressiveness” of the Iranian foreign policy is constrained by three factors (Gasiorowski, 2007: 129-131): popular discontent; economic conditions; and the relatively limited capabilities of the Iranian armed forces. Popular discontent in the Islamic Republic stems from bad economic conditions and the isolationist policies towards Iran. Supreme leader Khamenei continually ‘neutralizes’ these tensions and aims to pursue rather more moderate policies. This explains the rationale for Khamenei to avoid confrontation with the US and to expand economic relations with the EU (see also Rakel, 2007: 182). Apart from the question of whether or not Ahmadinejad’s policies reflect Khamenei’s ideas, the supreme leader recognizes the need to weaken or balance radical elements in the IRI’s foreign policies for the benefit of domestic order. This latter reasoning also explains Khamenei’s endorsement of the disputed presidential electoral victory of Ahmadinejad in June 2009. Although the protests after the 2009 elections were massive, the protests were carried out largely by the ‘educated’ and ‘urban’ classes of society. If the supreme leader Khamenei had decided to cast his doubts on the election results, domestic disturbances would have erupted among the poor and the rural which form a much larger group than those who have recently been protesting on the streets of Tehran. Some analysts argue that overall there has been more continuity than change in Iran’s foreign policy during the presidency of Ahmadinejad. The pursuit of their missile and nuclear programs, and support

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for Hezbollah is foremost. Ahmadinejad though, has taken a tougher stance on these issues and at least pursues a more aggressive policy towards Iraq (and the Western presence in Iraq) (Gasiorowski, 2007: 129).

Iran and the United States, 2005Under Ahmadinejad’s presidency, the Islamic Republic has followed a fierce anti-American foreign policy. This partly stem from the humiliating attitude of the US towards Iran in the aftermath of 9/11. Even though Iran had taken a conciliatory stance towards the US during Rafsanjani’s presidency and was even ready to enter into a dialogue under Khatami, the categorization of Iran as belonging to the axis of evil must have had a fundamental impact on the feelings of the Iranians. Bush’s anti-Iranian policies strengthened anti-American voices in the Islamic Republic and in a way, allowed for the rise of people like Ahmadinejad. Ironically, the extreme policies of Ahmadinejad may now be legitimized by Bush’s anti-Iranian policies in the days of Khatami. Ahmadinejad has provoked the US during the tenure of his presidency. A month after Ahmadinejad’s presidential election, his now well-known confrontational speech to the UN General Assembly included an attack on the US and Israel and contained conspiracy theories about the 9/11 terrorist attacks (Kazemzadeh, 2007: 432). In May 2006 Ahmadinejad wrote a letter to US President Bush in which he critically condemned US and Israeli policies. Ahmadinejad’s letter was the first from an Iranian President to his American counterpart since the Islamic Revolution. Kazemzadeh notes that Ahmadinejad’s letter can be perceived as an imitation of the letters of the Prophet Mohammed to his enemies and the supreme leader Khomeini’s letter to former Soviet president Gorbachev. Moreover, Kazemzadeh remarks that judging from the letter, a complete lack of comprehension on the part of Ahmadinejad becomes utterly obvious. The letter repeatedly refers to issues, like human rights, where the record of Iran is far worse than that of the US (Kazemzadeh, 2007: 439). Rakel however argues that the letter indicated a willingness on the side of Iran to start direct talks with the US. This Iranian willingness was not favourably responded to by the US (Rakel, 2008: 183). When Barack Obama was chosen as America’s new president, Ahmadinejad sent Obama his congratulations. The American media reported that apart from the congratulations, the tone was similar to that of a letter Ahmadinejad had sent to President Bush in May 2006. The strategic review of Afghanistan revealed that the Obama administration is interested in engaging with Iran on Afghanistan. Both countries, the US and Afghanistan, participated in the UN-backed “Hagueconference on Afghanistan” in March 2009 in which Iran pledged to participate in rebuilding Afghanistan. Iran was represented by Iranian Deputy Foreign Minister Mohammad Mehdi Akhundzadeh. Currently, the US Secretary of State, Hillary Clinton has expressed positive thoughts on Iran attending a meeting on Afghanistan in June 2009.

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Even though it appears as though tension between the countries is relaxing somewhat, Obama is determined to stop Tehran from building a nuclear bomb. In this respect, the US Congress is reported to be considering a gasoline sanctions bill that would penalise companies supplying petrol to Iran. Iran imports up to 40% of its petrol. Poor relations between Iran and the US also impacts on US relations with Russia, China and India since these countries do not object to Iran´s nuclear program (Rakel, 2008: 183). In fact, the response to President Obama’s Nowruz statement by supreme leader Khameini reveals not much in the way of reconciliation. Khamenei ends his response by stating that: “if you go on with the slogan of discussion and pressure, saying that you will negotiate with Iran, and at the same time impose pressure, threats, and changes, then our nation will not like such words. We do not have any experience with the new US President and Government. We shall see and judge”(Khamenei, March 2009). Obama’s tone on the suppression of the protests that followed the 2009 presidential elections initially remained cautious. However, he has now declared that "there is no doubt that any direct dialogue or diplomacy with Iran is going to be affected by the events of the last several weeks" (Reuters, June 26, 2009). Ahmadinejad accuses the United States and Britain of having fomented the post-election violence in Iran.

Iran and the Arab States, 2005Iran’s relations with the Middle East are impacted on by the anti-Zionist policies and support of the Palestinian cause by the Ahmadinejad-administration. Ahmadinejad has called for “wiping Israel off the map” and sees its destruction as the only solution to the Middle East crises (Rakel, 2008: 178). The increased military presence of the US in the Persian Gulf region has been one of Ahmadinejad’s rationales for extending relations with Saudi Arabia. Saudi Arabia and Iran agree with each other on support for the Iraqi government and the Palestinian case (Rakel, 2008: 179). Recently, Iran and Russia have pushed for the idea of a gas cartel that would include Russia, Iran, and Qatar, Algeria and Venezuela and together account for 70 percent of the world’s natural gas reserves (Rakel, 2008: 179). However, media sources now reveal that Qatar is no longer interested in a gas cartel which would rule out the possibility of its formation. Reasons for Qatar’s rejection are said to be rooted in a new competition with Russia in Western markets. In 2007, SNSC president Rouhani reiterated Rafsanjani’s previous interests in a security and cooperation arrangement within the Persian Gulf region. Rakel notes that for the same reasons the Persian Gulf countries would most likely not include Iran in any new security arrangement (Rakel, 2008: 180). As regards Iran’s relations with the Middle East, its involvement in Afghanistan needs to be mentioned. Iran applies a similarily “softly, softly” power approach towards Afghanistan as it does to Iraq (Rakel, 2008: 180). The Iranian approach has been welcomed by the Afghani government. The most recent development in Iranian-Afghanistani relations is the proposal of jamaat-e-Islami.

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Pakistan Chief Munawar Hasson suggests a four-nation bloc comprising Pakistan, Iran, Afghanistan and China to restrain the influence of the US and NATO in the Middle East. Recent developments further include the trilateral agreements that have been reached between Iran, Pakistan and Afghanistan. Tehran hosted a meeting between the three countries in May 2009 which aimed at discussing ways to fight extremism and terrorism, drug smuggling and trafficking and other regional security problems as well as the reconstruction of Afghanistan. During the meeting, Iran and Pakistan signed an important gas deal as well. The meeting and the corollary agreements are strongly supported by supreme leader Khamenei. The tripartite cooperation is based on a common culture, history and language. The three countries agree on the opinion that foreign intervention and extremism are the root causes of regional problems.

Iran and Russia, 2005Ahmadinejad and Putin share the belief that the US is their principal adversary, which provides their relations with a substantial base for agreement. However, other disagreements between Russia and Iran have limited the extent of their cooperation (Katz, 2008: 202-203). These include: the UN Security Council action over the Iranian nuclear issue; completion of the Bushehr nuclear reactor; how Iran will obtain commercial grade enriched uranium, differences concerning a possible alliance between the two countries, what use will be made of Russia’s Gabala radar station in Azerbaijan, and over natural gas, oil and the delimitation of the Caspian Sea. An interesting factor in their relationship is how much they differ on how much each needs the other. (Katz, 2008: 218). Russia perceives the Iranian regime as dependent on Russia’s protection against the US. On the contrary, in Iran, many believe that Russia does not want to lose Iran to other powers like China, India, Japan and/ or Europe. Iranian-Russian relations are also influenced by the SCO. Russia is a full member of the SCO and Iran is an observer. It has been noted before that Iran aims at a fully fledged membership. Iran’s latest bid, in March 2009, was rejected as “member states deem Tehran, which is currently embroiled in a dispute with the international community over its nuclear program, too big a liability”. Membership would have provided the Islamic Republic with a mutual assistance guarantee, which compels the aid of fellow SCO members in the case one of them being under attack by a foreign state.

4.6 The Iranian Nuclear Issue as a Symbol of the Confrontational Relationship between Iran and the West Iran’s nuclear issue has become a symbol of the confrontational relationship between Iran and the West (Bonab, 2009: 172). Whereas Iran has repeatedly claimed the peaceful nature of its nuclear programs, the West, and in particular the United States, have since the mid-1980s questioned this. Bonab identifies the cause of these opinions to be rooted in different perspectives on both sides

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(Bonab, 2009: 172). In Western eyes, security considerations dominate the debate on nuclearization. In line with this view, Shen for instance identifies three main reasons for a possible covert Iranian military nuclear program (Shen, 2006: 57-58): 1.) Israel’s acquisition of a nuclear deterrent is an open secret; 2.) the development of nuclear weapons by Iraq in the 1980s; 3.) and the, as perceived by the Iranians, threat of the US. These perceptions have led some analysts to argue that in the case of Iran leaving the NPT, it will be able to develop a nuclear bomb in six months. However, Bonab argues that contrary to the neo-realistic lens of Western policy making, the Iranians view the nuclear issue from the perspective of domestic politics and the West’s long standing double standards on dealing with the Islamic Republic of Iran during the last 30 years; “according to them (i.e. the Iranian political elite), accepting the Western preconditions on the nuclear issue would only be an introduction to being forced to comply with the West’s intrusive demands in other areas, such as human rights, terrorism, and Israel. Furthermore, history plays an indisputable role here” (Bonab, 2009: 173). Ahmadinejad identified the international attitudes towards Iran’s nuclear developments as ‘nuclear apartheid’ (Bahgat, 2006:323). Within Iranian politics, the nuclear issue is exceptional. Contrary to (foreign) policy orientations, the nuclear issue in Iran is not dominated by factionalism;
“The right to develop nuclear power is a matter of national pride, where the population is largely united behind the regime (…) developing an indigenous nuclear capability would go a long way in restoring a sense of pride and respect. Driven by these popular and official sentiments, the Iranians insist that they have an “inalienable right’ to produce nuclear fuel and to be self-sufficient in their nuclear program” (Bahgat, 2006: 323).

More than eighty percent of Iranians say that it is “very important” for “Iran to have a full fuel cycle nuclear program” which would give Iran the capacity to produce nuclear fuel for energy production (World Public Opinion in Iran, 2008; see Figure 4.2). Although the nuclear issue is not necessarily dominated by factionalism, four basic outlooks on the Iranian nuclear program within the political elites can be distinguished (Hadian, 2008: 574-575). These are: (1) a small group within the elites that does not consider nuclear energy an essential for Iran mainly due to environmental and economic reasons; (2) the people that do support the acquirement of nuclear energy who primarily base their argument on the country’s need for alternative energy and national pride. Supporters of this stance occur throughout Iran, but the strongest support can be found among university students and government officials. At the same time, this group is against nuclear weapon technology; (3) influenced by the security environment of Iran, there are some Iranians that favour the capability of producing nuclear weapons rather than actually to possess a nuclear weapons capability; (4) justified by the international community’s hostile attitude towards Iran, there are a small number of Iranians that support the acquirement of nuclear weapons. Decision making on the Iranian nuclear program is represented by the relevant and influential political factions (Hadian, 2008: 574).

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Figure 4.2 Iranian Opinion on Nuclear Weapons and Islam

Source: World Public Opinion, Public Opinion in Iran, 2008.

Although Bonab argues that the Iranian perspective is determined by domestic politics and the double standards of the West, the security factor in Iranian policy making should not be minimized. The repeated threats by the US since the early 2000s, to strike Iranian nuclear sites and to adopt a strategy of regime change, must have had an impact on Iranian nuclear policy making (Bahgat, 2006: 318). US and Iranian behaviour seems to have reinforced one another. The invasions in Iraq and Afghanistan and the large US military presence in the region may well have contributed to the continual Iranian ignoring of UN Security Council Resolutions. Along these same lines, Hadian describes “strategic loneliness” to be a key characteristic of Iranian perceptions (Hadian, 2008: 574).This particular characteristic originates from the Islamic Revolution, but was strengthened during the Iran-Iraq war, in which the majority of the world expressed its support for the Iraqi side. Hadian notes that “(t)his created an Iranian psychology that lacks trust in international institutions and alliances, which emphasizes reliance on its own resources, both mental and physical, for national protection and defence (Hadian, 2008: 574). The perception of the threat on both sides forms the most likely and one of the most important obstacles that stands in the way of a fruitful debate on the Iranian nuclear issues (see Figure 4.3). For a long time, the United States pressurised possible suppliers (among others China and Argentina) to abstain or withdraw from nuclear cooperation with Iran. However, since revelations on undeclared Iranian nuclear facilities in August 2002 by the National Council of Resistance of Iran (NCRI)20, Iran’s nuclear programme has led to substantial political tensions and a worsening of relations between Iran and the West. After intensive contact between the IAEA and Iran, the IAEA stated that Iran failed to report certain nuclear materials and activities. Iran agreed in the fall of 2003 to the signing of an additional protocol

20

The NCRI is an Iraqi-based opposition group.

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to the NPT21 and to suspend the enrichment of uranium. Besides, under the Paris Agreement between Iran and the EU-3 (Germany, France and Great Britain) and in accordance with the NPT, the EU-3 explicitly recognized Iran’s right to civilian nuclear programmes. When in 2005, contrary to its recognition of 2003, the EU-3 demanded that Iran abandoned enrichment, Iran distanced itself from the implementation of the Additional Protocol of the NPT. Nearly a year later, in November 2004, the IAEA published findings on Iranian negligence about reporting on its nuclear program (Shen, 2006: 57). Thereupon, Iran signed the Paris Agreement with the EU-3 (France, Germany and Great Britain) which was directed at a continuation of the temporary suspension of enrichment and conversion activities and committed Iran to finding a long-term diplomatic solution (NTI, 2009). The Iranian stance was completely reversed in 2005 when Iran notified the IAEA that it would continue its uranium enrichment programs and submitted its nuclear history to the IAEA which knew about “the quantity of centrifuges and other nuclear technologies that it purchased from the nuclear black market in the 1980s” (Shen, 2006: 57). Besides, Tehran rejected the Long Term Agreement that was proposed by the EU-3. In 2005, the IAEA adopted a resolution on Iranian non-compliance with the Safeguards Agreement (NTI, 2009), which automatically led to a report to the UN Security Council by the IAEA. Bahgat remarks that the IAEA decision to vote on the resolution instead of adopting it by consensus, suggests a division among the members in the international community on how to handle the situation (Bahgat, 2006: 311). Early in 2006 the IAEA board of governors referred the matter to the UN Security Council. Thereupon, Iran announced a halt to voluntary cooperation with the IAEA beyond the NPT. The referral of the Iranian nuclear issue to the UN Security Council was followed by a series of UN Security Council Resolutions22 demanding the suspension of enrichment activities, the banning the international transfer of nuclear and missile technologies to Iran and to freeze the foreign assets of twelve individuals and ten organizations involved with the Iranian nuclear program (NTI, 2009). So far, the UN Security Council has issued five resolutions that have addressed the Iranian nuclear issue. Gradually, the sanctions packages included in the UN Security Council Resolutions has intensified. President Ahmadinejad, however, continues to ignore them by continuing to enrich uranium. Since 2002 when political tensions around Iran’s nuclear program increased, the European Union and in particular the EU-3 team has largely been involved in dealing with the Iranian nuclear program (Bahgat, 2006: 325). Bahgat points out that although the European Union supports the US objective of preventing Iran from acquiring nuclear weapons capabilities, the European Union favours a “conditional engagement” approach over economic sanctions and the threats of military strikes (Bahgat, 2006: 325).

The signing of the Additional Protocol to the NPT allows for more aggressive inspections by the IAEA (Bahgat, 2006: 310). 22 UN Security Council resolutions that address the Iranian nuclear issue are the resolutions 1696 (July 31, 2006), 1737 (December 23, 2006), 1747 (March 24, 2007), 1803 (March 4, 2008), 1835

21

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Since the conservative faction has regained a large degree of control in the Iranian power structure after 2005, the conservative view has steered the direction of the Iranian nuclear program. The conservative faction insists on the peaceful nature of Iran’s nuclear program but believes that Iran, like any other member of the NPT, has the right to the full fuel cycle (Haghighatjoo, 2006: 4). The Iranian nuclear issue has become very much involved with Iran’s future foreign policy. Threat perceptions have led the United States into actively pressurising other countries not to cooperate with Iran’s nuclear development efforts. Giving in to such pressure impacts, in turn, on the Iranian perceptions of such countries. Basically, the confrontations concerning the nuclear issue are representative of the confrontations that Iran has with the outside world. It represents a constant struggle that is determined by a confrontational history and mistrust. Those countries that do not share in a confrontational history with Iran, or whose relations with Iran are not obstructed by distrust are caught in this ‘principled-matter’ in which one can side can be seen as the ‘good’ represented roughly by the United States or the ‘evil’ represented by Iran. And even though the IAEA has not found any real evidence pointing in the direction of a military angle to Iran’s nuclear development programs, conceptions can only determine where one stands.

Figure 4.3 Forces that shape the Iranian nuclear policy
Perception of (security) threats

Domestic economic and political dynamics National Pride

Iran’s Nuclear Policy

Organizational imperatives of involved agencies Source: Based on Bahgat Bahgat, Gawdat, (2006) “Nuclear Proliferation: The Islamic Republic of Iran” in Iranian Studies, 39, 3; Hadian, Nasser, (2008) “Iran’s Nuclear Program: Background and Clarification” in Contemporary Security Policy, 29, 3: 573-576; Bonab, Rahman G., (2009) “The Spectrum of Perceptions in Iran’s Nuclear Issue” in The Middle East Institute Viewpoints: the Iranian Revolution at 30, February 2009, www.mideasti.org.

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4.7 Conclusion Chapter 4 aimed to analyze the foreign policy practices of the IRI. Chapter 2 and chapter 3 have helped to establish those factors that have had an impact on the IRI’s foreign policy practices. In the course of this chapter it became clear that of the foreign policy practices of the IRI are determined by an interplay between “its domestic situation, not merely factional politics, and its external environment, not merely superpower behavior” (Ramazani, 1989, 202). The revolutionary ideological foreign policy principles that had been proclaimed by Khomeini with the establishment of the IRI made the role of ideology in Iranian foreign policy pervasive from 19791989. Yet, it did not explicitly exclude pragmatic national interests from foreign policy making. The Iran Contra Affair possibly provides the best example. The pragmatic national interest in foreign policy making, which was partly related to restoring Iran’s international legitimacy in the world, became more important after Khomeini’s death in 1989. The presidency of Rafsanjani occurred at a time when the power structures inside and outside Iran had changed drastically. The IRI’s revolutionary ideological foreign policy orientation had already softened since the mid-1980s, but in fact transformed from a “Neither East, nor West” to “both North and South” during the presidency of Rafsanjani. The role of ideology in the IRI’s foreign policy orientation significantly decreased since 1989. Rafsanjani’s visions of elevating Iran to a regional power led to a strengthening in relations with numerous states; those from the Persian Gulf, but especially the newly independent states. A reflection on Iran-US relations during the presidency of Rafsanjani illustrates that the current state of relations (2009) between Iran-US is very similar to that in the early 1990s and are still fixed on controversial issues rather than looking past them. Foreign policy orientation under Khatami continued to follow the pragmatic considerations of national interest, but added a democratic dimension. During the presidency and the domination of the reformist faction in the IRI’s power structures, foreign policy orientations reflected the domestic focus on democracy and civil society. The election of Ahmadinejad signalled a prompt shift in the IRI’s foreign policy outlook and instantly destroyed Iran’s reputation that it had so carefully tried to restore from the mid-1980s. Almost immediately after his election, it became clear to the Islamic Republic and the rest of the world that the Islamic Republic would not continue the rapprochement policies of Rafsanjani and Khatami.

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Throughout the years, support for Shi’ a Islamic armed groups has been a form of Iranian power projection. Even in the foreign policies under the presidency of Khatami, this support continued. It is interesting to note, however, that although the power structures of the Islamic Republic are inherent to conflicting policy orientations; there is relative agreement over foreign policy, especially when Iran experiences a ‘threat from outside’.

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Photo 4.1 Supreme Leader Khomeini

Photo 4.2 Supreme Leader Khamenei

Source: Iran Chamber Society

Source: Iran Daily.com

Photo 4.3 Former President Rafsanjani

Photo 4.4 Former President Khatami (1997-2005)

Photo 4.5 President Ahmadinejad

Source: Iran Chamber Society

Source: Iran Chamber Society

Source: Iran Chamber Society

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5. Sino-Iranian Relations
After the analysis of the IRI’s foreign policy, chapter six will pay particular attention to Iran’s relations with China. Sino-Iranian relations, in particular Sino-Iranian energy relations, have been rapidly expanding since the 1990s. The expansion of the IRI’s relations with China may have important economic and political consequences for Iran considering the growing role of China in the world. The chapter will start by giving a historical overview of Sino-Iranian relations and then focus on key elements within the relationship such as the Iranian nuclear program, the Shanghai Cooperation Organization (SCO) and probably most importantly, the energy-economic relationship. The chapter will subsequently expound the prospects and challenges of Sino-Iranian relations for the IRI.

5.1 Historical Overview of Sino-Iranian Relations Even though Iran and China established diplomatic relations relatively recently, in 1971, relations between the two countries can be traced back to the 2nd century BCE. Han China and the Parthian Empire of Persia established close diplomatic and trade relations in the pre-Islamic period through what came to be called the Silk Road. The conquest of the Parthian empire by the Sassanids did not interfere with the functioning of the Silk Road (Gentry, 2005: 111). The take-over of both Persia and China by the Mongolian Empire in the 13th century further increased the contact between the two states. The Silk Road and the exchanges that took place via its route would have a profound and lasting impact on Sino-Iranian relations (Garver, 2006: 13-15). The legacy of the Silk Road forms part of the historical foundation of present day cooperation and agreements. The Shah’s Iran and the Peoples Republic of China initially disapproved of each other. The Shah did not like the communist take over in 1949 and even established diplomatic relations with Taiwan in 1956. The PRC perceived Iran as a US puppet in the Middle East (Gentry, 2005: 112). These perceptions were changed in the 1960s when the apparent positive changes in US-SU relations created feelings of insecurity in Iran as well as China. The US-Soviet Union détente in the 1960s led to a feeling of a shared threat for China and Iran, who both distrusted the Soviet Union. When China and the Soviet Union declared one another enemies, Iran chose to side with China (Gentry, 2005: 112). In the 1960s, Iran’s relations with China were primarily based on political cooperation. Note that in the economic sphere, China in the 1960s and 1970s was far behind in the technological developments that were already flourishing in the West and were available to Iran. In addition, Iran and China basically exported the same products to the same countries (Garver, 2006: 32). The energy situation that has become an important feature in current Sino-Iranian relations did not exist in the 1960s and 1970s when China itself exported petroleum. China supported the Shah in his efforts to restore Iranian greatness and his attempts to elevate Iran into the region’s pre-eminent country. The Shah had announced a “hands-off policy” after Britain

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withdrew its military forces east of Suez in 1969. In the Shah’s view, the handling of Persian Gulf security affairs should be determined by its littoral countries and must exclude interference from the big powers. China favoured the prominent regional role of Iran - predominantly in the light of trying to counterbalance the big powers, especially the Soviet Union and its influence in the region. The Shah highly valued Chinese support for his policies. He recognized China, with seven hundred million people and nuclear weapons, as an important power (Garver, 2006: 33). Iran supported the entry of the PRC to the UN in 1971 and Iran and China established diplomatic relations in the same year. Good relations with Beijing led to Soviet fears of a China-Iran, and possibly US bloc. Ironically, these roles would be reversed nearly fifty years later when the US feared an anti-US Chinese, Iranian, and Russian coalition. Nevertheless, both Russia and China, albeit for different reasons, favoured the Shah’s ideas of promoting Iran as a regional power in the Persia Gulf. Another important aspect of Chinese support for the policies of the Shah stemmed from Mao Zedong’s idea that, in order to end oppression, non-Western nations that had been oppressed by Western imperialism in the modern era should be united. The control over oil by the oil producers was considered to be an important factor that could lead to the creation of a new world order. In Mao’s view, Iran held a central position in this new configuration of world power because of Iran’s strong national consciousness and the Shah’s repeated challenge of Western oil companies in his country. Furthermore, the Shah was in favour of the push for the redefinition of relations between oil-producing countries and the large international oil companies within OPEC (Garver, 2006: 37). The “hands-off policy” by the Shah would encourage, in Mao’s view a new world order. Even though Mao passed away in September 1976, the Chinese support for the handling of security matters in the Persian Gulf by the Persian Gulf-countries themselves, without foreign power intervention, would remain a key element in Chinese policies towards Iran (Garver, 2006: 51). Iran under the Shah and China under Mao balanced alliances for the benefit of their own security. Iran and China both feared domination of the Persian Gulf region by an extra regional big power which would disadvantage them both. China therefore supported Iranian policies which would eventually lead to Iran’s regional domination. However, at the same time neither party wanted to alienate itself from the US or the SU. Sino-Iranian relations that had evolved since the late 1960s, with Iranian appreciation of China’s growing power and Chinese support for Iran’s ambitious regional efforts suffered a serious setback during the Iranian Islamic Revolution. Garver notes: “[T]he same Chinese support that won the Shah’s gratitude produced bitterness among the Islamic insurgent forces soon to take power in Iran” (Garver, 2006: 56). It appeared that everything and everyone closely aligned to the Shah was despised by the revolutionary regime. China was included in the “Nor East, Nor West” attitude of Iran. Therefore

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Sino-Iranian relations initially fluctuated and resembled US policies toward Chiang Kai-shek and later the PRC in the late 1940s. China was ‘punished’ for its good relations with pre-revolutionary Iran just as the US was punished for its relations with pre-revolutionary China (Garver, 2006: 58). Although Gentry remarks that relations between the IRI and the PRC were cordial right from the establishment of the Islamic Republic (Gentry, 2005: 113), this is disputable, considering Khomeini’s initial radical and ideological foreign policy attitudes and Iranian suspicion of China. However, a combination of pragmatic needs and civilizational similarities soon reinvigorated the relations. Iran needed help in the war it waged with Iraq and China was still convinced of the geopolitical strategic importance of Iran. Unlike Sino-Iranian relations under the Shah, which were basically and primarily focused on the perception of a shared threat from the Soviet Union, relations became more substantial (Gentry, 2005: 113). But although Sino-Iranian relations soon improved after the Islamic Revolution, the global political arena had undergone profound changes. The Islamic Revolution and the US embassy hostage crisis had turned the US from an Iranian ally into an Islamic Republic enemy. The US had begun economic warfare against the Islamic Republic and any new ‘friend’ of revolutionary Iran was not favourably looked upon. The US vision of the ‘new’ Iran was a constraint to the relations of other actors in the global arena with the IRI. At the same time, domestic changes within China resulted in important consequences. When Mao passed away and Deng Xiaoping took over in 1978, Chinese foreign policy underwent significant changes. Mao’s ideas in fact had been very similar to those of Khomeini. Deng Xiaoping aimed at a rapid economic development of the PRC in order to catch up with the rest of the world; “[T]he goal was to draw on the assets of the capitalist world to modernize socialist China, and
Deng understood that achieving this would require maintaining Sino-US comity. Unless Washington threatened such core Chinese interests as Beijing’s claim to Taiwan or CCP control over Chinese society, China would not confront the Unites States” (Garver, 2006: 61; underlining by author).

The reorientation of Chinese foreign policy, the enmity between the US and Iran, and the desire for good relations with both the US and the IRI has led to a precarious Chinese balancing act in order to serve the national interest. This policy continues to this day and will continue as long as China’s development for the major part depends on cooperation with the US and China’s core interests are not touched upon. Even though Sino-Iranian relations soon improved23, the relationship had been harmed and on the Iranian side there was much mistrust of the PRC that had been closely aligned to the Shah and the US. China made substantial efforts to restore its relations with Iran by stressing cultural similarities. China

Garver notes that in the first two years after the establishment of the Islamic Republic, there were not high- or mid-level interactions between Iran and China. By 1985, these interactions, however, became frequent.

23

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even offered a personal apology to Ayatollah Khomeini in which the Chinese minister of foreign affairs apologized for his visit to Iran under the Shah and expressed support for the IRI. China also abstained in the UN Security Council vote after the US embassy hostage crisis (Garver, 2006: 64-65). It did not, however, abstain from voting in the Security Council meetings on the Iran-Iraq war in September 1980, and in fact voted in favour of the UN Security Council Resolution that called upon both parties to refrain from any further use of force and to settle disputes by peaceful means. This again resulted in a setback in Sino-Iranian relations. Real rapprochement between the new regime of Iran and the PRC only came about with another shift in Chinese foreign policy in 1982 that encompassed a policy of independence. China adjusted its global alignment away from close association with the US. Garver partly attributes this shift to the ‘Iran factor’ since Sino-Iranian cooperation seemed to differ from the Chinese close alignment to the US (Garver, 2006: 73). After 1982, Iran and China stressed similarities in their foreign policy attitudes that both included policies of, “Nor East, Nor West ” and independence. The relations were even further enhanced by the Sino-Iranian cooperation agreement regarding Iran’s nuclear program in 1985. In the light of Deng Xiaoping’s economic developmental aims, China identified its limits of cooperation with Iran. In the background of the process of ‘true rapprochement’ between China and Iran (albeit with certain limitations) the war between Iran and Iraq raged. And although China formally proclaimed neutrality in the Iran-Iraq war, it seized the opportunity to provide Iran with material supplies since other traditional trading partners had isolated Iran. The Iranian mistrust and resentment of China when it voted in favour of the UN Security Council resolution in September 1980 was subordinate to Iran’s need for help in its war with Iraq. The arms sales by China to Iran during the Iran-Iraq war largely contributed to an establishment of Iranian trust in the Chinese and therewith a normalisation of relations (Garver, 2006: 80). The fact that China sold arms, but did not interfere in its domestic politics was a policy that had been highly appreciated by the Iranian regime ever since China had welcomed the Shah’s proclamation of the ‘hands-off policy’ in the early 1970s. Additionally, Chinese help in the Iranian nuclear program was perceived by the Iranians as a true intention of cooperation by the Chinese. Both factors were further appreciated when China also provided Iraq with munitions during the Iran-Iraq war. China, as well as the Soviet Union, balanced their interests during the Iran-Iraq war between the UN and Iran and Iraq respectively. Although China urged Iran to accept UN Security Council Resolution 598, which Iran did in July 1988 when China held the chair of the Security Council, both China and the Soviet Union voted repeatedly against the imposition of an arms embargo by the UN (Garver, 2006: 88-91). The rebuilding of Sino-Iranian relations on the basis of national interest was facilitated, and sometimes maybe even justified, by an emphasis on the “emotive component”. Garver notes that:

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Sino-Iranian relations in the first years of the 1990s grew closer but underwent a significant change by 1996. Again, predominantly external changes forged and distanced China and Iran from each other. The end of the Iran-Iraq war transformed China’s main role in Iran from weapons supplier to main partner in post-war (economic) reconstruction. Even though the Iranian regime developed good relations with China in the 1980s, Khomeini’s “Nor East, Nor West” principle, to a certain extent, prevented the development of a maximum level of intensity in the Sino-Iranian relationship. With the death of Khomeini and society’s demand for better living conditions, Iran increasingly started looking to China as an important ally. China responded to Iran’s interests since Iran not only provided China with a large market for its products but continued to be operative in Chinese geopolitical imperatives in the Middle Eastern region. These imperatives had shifted from containing Soviet power to balancing and preventing further expansion of US power in the Middle East (Garver, 2006: 96-97). Iran and China shared the vision that with the disintegration of the Soviet Union, the United States would be able to relatively easily expand their control and consequently dominate the region. The deterioration of SinoUS relations due to the Tiananmen Square protests in June 198924 further strengthened Sino-Iranian relations since both countries were perceived by the majority of the West as ‘pariah states’ (Gentry, 2005: 114). However, China remained careful and sensitive to the fact that it must not alienate the US. Iran was pushed closer to China partly because it lost the Soviet Union, and to a certain extent, the European countries as possible alternatives. The Soviet Union no longer existed as such and EuropeanIranian relations were distorted by the Salman Rushdie affair. More importantly, Iran was impressed by China’s development in the 1980s and did not fear that cooperation with China would turn into domination by China (Garver, 2006: 100). China and Iran grew closer not only economically (particularly due to a doubling of oil purchases by China from Iran in the 1990s25) but their interests also converged at the level of a common vision. As referred to earlier, both countries feared an expansion of US power in the world and in the Middle Eastern region in particular. The new world order that was declared by US president Bush sr. in 1990 was unacceptable to China as well as to Iran (Garver, 2006: 103) and US intervention during the Gulf War was perceived as a threat to the region. Garver remarks that the Gulf War strengthened the parallels between Iran and China. The two countries held the same positions concerning the war and both recognized that the conclusion of the war was
These protests are considered to count as one of the strongest challenges to the authoritarian method of governing by the Chinese Communist Party since 1949. The United States sympathized with the protestors and condemned the crushing by forces of the protests by the Chinese military. 25 Gentry remarks that in 1993 China ceased being a net exporter of oil, see, Gentry, 2006: 114.
24

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beneficial to US hegemonism (Garver, 2006: 105). Meanwhile China and Iran expanded cooperation in military and nuclear developments. They even initiated cooperation with third countries, such as the Sudan (Garver, 2006: 108). China disagreed with the US policy of dual containment and instead recognized Iran’s right as an NPT member to develop nuclear energy for peaceful purposes. At the same time, due to a fear of nuclear weapon development by Iran, US pressure on Iran mounted and China thereafter seemed not prepared to align too closely with Iran. By 1996, substantial weakening in the relations between China and the United States endangered China’s development and therefore caused the Chinese to modify their foreign policy. To some extent China gave in to American pressure and terminated nuclear cooperation with Iran in 1997. Furthermore, China halted sales to Iran of anti-ship cruise missiles (Garver, 2006: 115). Yet, China refused to support ILSA in 1996 (Gentry, 2005: 114). Note that, ironically, whereas deterioration in Sino-US relations resulted in China distancing itself from Iran in 1996, deterioration in Sino-US relations resulted in China approaching Iran in 1999. The war in Yugoslavia and NATO’s unauthorized intervention in Kosovo and the US bombing of the Chinese embassy in Belgrade contributed to revived relations between China and Iran. Sino-Iranian relations since 1999 have focused on expanding cooperation on the basis of common interest. Anti-US ideas still held a central position in the relations and were enforced under the American presidency of Bush jr. Important to note is that although cooperation between Iran and China has largely increased, China refrained from referring to Sino-Iranian relations as a ‘partnership’ (Garver, 2006: 118). This is remarkable since Iran has formed partnerships with quite a few countries and regional organizations. Important commercial exchanges between Iran and China were, among others, the Tehran subway project in which China was involved, the export of oil from Iran to China and China’s involvement in the development of Iran’s oil fields. In 2001, China supported the Iranian effort to declare the year one of ‘dialogue among civilizations’. The presidency of Bush jr highlighted and reinforced the similarities of political views between Iran and China. China publicly disapproved of the American categorization of Iran belonging to the ‘axis of evil’ and both countries opposed the American invasion of Iraq in 2003. China feared that US efforts condemning Iranian nuclear development would eventually lead to the overthrowing of the Iranian regime and thereby further enhancing America’s position in the Middle East (Garver, 2006: 124). Sino-Iranian relations have been mainly determined by mutual economic interests. However, through shared historical experiences of external political and economic involvement, similar visions on their own power and status in the world have emerged in Iran and China. Both disagree with the current world order in which the US dominates. This has caused China to support Iran’s ambitions for a strong regional role in order to counter balance American influence and to secure Chinese interests. By supporting Iran’s regional role and intensifying Sino-Iranian relations, China, predominantly through

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its national oil companies has been able to expand its power in the Middle East. Iran has proved a willing partner for Chinese involvement. Sino-Iranian relations have offered Iran an opportunity to undermine US power; China has enabled Iran to circumvent economic sanctions and thereby in a way released Iran from subjection to Western rules. Historical good ties between Iran and China have facilitated cooperation but can not be considered to be the main drivers behind it. Since national interests and pragmatism figure as crucibles in Sino-Iranian relations, it must be acknowledged that for the sake of their interests both countries depend on the current world order in which the US still dominates. Until the moment China takes over the role of the US in world affairs, China will have to take into account US interests from a subservient position.

5.2 Sino-Iranian nuclear cooperation Between 1985 and 1997, China and Iran cooperated in the field of nuclear development. China had started developing a substantial nuclear industry in 1955 with the help of the Soviet Union. While the Soviet Union and the Unites States agreed on the Non-Proliferation Treaty in 1968, Mao did not want to participate in this attempt to prohibit all, but five states (which included China), from acquiring or developing nuclear weapons. Mao perceived this to be a “superpower effort to maintain global military dominance” (Garver, 2006: 140). Although China had developed a large nuclear industry, it had not reached high standards when it came to the utilization of nuclear energy for civilian purposes. The need for the latter became more pressing as the Chinese demand for energy rapidly started rising. The United States used the purchase of nuclear technology for civilian utilization as leverage for China’s accession to the NPT. In 1984 China joined the IAEA and in 1991 became a member of the NPT. Garver identifies five factors that may have helped to change China’s stance towards the nonproliferation agreement as set out in the NPT (Garver, 2006: 141):
(1) China’s desire for US civilian nuclear technology; (2) Development of a cohort of Chinese specialists on non-proliferation affairs; (3) Sustained US pressure combined with a desire to stabilize relations with Washington; (4) Desire to be recognized as a sober, responsible leading nation of the world;

(5) Recognition that as an NPT nuclear weapons state, China’s interests were served by limiting the
number of states that possess nuclear weapons.

Nonetheless, even though China was not party to the NPT until 1992, most nuclear cooperation arrangements between China and Iran were reported to the IAEA and subjected to inspections (Garver, 2006: 143). As was mentioned before, Sino-Iranian nuclear cooperation started in 1985 with a, then still undisclosed, agreement on cooperation, aiming at the development of nuclear energy for peaceful purposes. China supplied Iran with materials and Iranians went to China to learn about nuclear reactor design (Garver, 2006: 144). The Chinese and Iranians cooperated further in the mining of and

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exploration for uranium in Iran. In general, most developmental activities in which China helped Iran took place at the ENRC (Garver, 2006: 143). In 1990 China and Iran concluded a ten-year agreement on further nuclear cooperation. Garver notes that the most distinctive aspect about this cooperation agreement was the fact that it was publicly announced afterwards. Previous cooperation agreements had been kept secret (Garver, 2006: 146). Another important development was the fact that in 1991 China supplied Iran with 1600 kilograms of uranium products which enabled Iran to research the nuclear fuel circle (Garver, 2006: 147). China has gradually distanced itself from Iran since the mid-1990s; partly due to payment problems on the Iranian side, but more significantly as a result of US pressure on China. By 1997, China had suspended the building of a 300-megawatt reactor and pledged to the United States not to undertake any new nuclear cooperation with Iran (Garver, 2006: 154). US pressure on China was supported by mounting evidence of the Iranian nuclear development programs, some of which were not reported to the IAEA. China’s reputation in the international arena and cooperation with the United States proved to be the limit of China’s willingness to cooperate with Iran on nuclear development. Since its accession to the NPT, China committed itself to the promotion of non-proliferation. China gradually acknowledged that it is in its own interests to constrain the transfer of nuclear technology, especially in areas that would undercut China’s energy security. Beijing in particular worries about the transfer of technology to non-state actors. (Shen, 2006: 60). As regards China giving in to US pressure, Garver points to the difference in Chinese policy toward Pakistan and Iran. In Pakistan, China was not willing to give in to US pressure as it did in the Iranian case. According to Garver, this indicates the degree of importance of Iran to China. The Chinese value Pakistan more than they do Iran. Yet, Gentry remarks that while China in 1997 officially pledged to halve cooperation in the nuclear development field, “there have been many reports since this pledge that the Chinese government and a number of private Chinese firms have continued to supply nuclear equipment and material to the Islamic Republic” (Gentry, 2005: 118). China’s cooperative attitude towards Iran regarding nuclear development was underpinned by, debatably, economic motivations, geopolitical strategizing or a combination of both (Gentry, 2005). In my view, a combination of economic motivations and geopolitical strategizing is the most likely. In the process of development, Iran with its nearly seventy million inhabitants provides a large market for China with substantial income profits and foreign currency. Besides, China is aware of not only the strategic location of Iran, but also its strength and power in the region. Additionally, one may argue that although China has become a member of the NPT, Mao’s ideas on the NPT as a “superpower effort” undermining the right of Third World countries to develop nuclear technology, continues to linger in the Chinese mindset. Over the years, Beijing has been particularly sensitive to external interference in a country’s domestic affairs. Therefore, as long as China is convinced of Iran’s nuclear

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development for peaceful purposes, it favours no interference. The latter mindset has impacted much on overall Chinese policies. Although officially China no longer technically and materially supports Iran’s nuclear development programs, it has offered Iran considerable political support in this respect. In 2004, China, together with Russia and ten other countries opposed the referral of Iran’s nuclear development from the IAEA to the UN Security Council (Bahgat, 2006: 310). China made it clear that it favoured solving the problem within the framework of the IAEA rather than in the UN Security Council. Wood notes that China is clearly keen on maintaining strong political and economic ties with Iran in order to protect and expand their bilateral energy interests (Wood, 2007: 294). After the decision for immediate sanctions against Iran was removed from the IAEA resolution for referral to the UN Security Council, China voted in favour of the referral. The first UN Security Council resolution concerning the nuclear issue, resolution 1696, was proposed by the permanent members of the Security Council plus Germany and demanded a halt to Iran’s uranium enrichment program. China also voted in favour of UN Security Council resolution 1737 that included the imposition of sanctions on Iran. However, before the UN Security Council voted on resolution 1737, China and Russia objected repeatedly to the draft versions of the text. The draft resolution was thus seriously amended before it was put to the vote and was approved by both China and Russia. China has voted in favour of subsequent UN Security Council Resolutions, which have further tightened sanctions on Iran. At first sight, China’s voting behavior at the UN Security Council concerning the Iranian nuclear issue has not shown much political support for Iran. Nevertheless, China engaged in a bilateral dialogue with Iran shortly after the passing of UN Security Council resolution 1737. During the Sino-Iranian dialogue, Iran, although noting that China had sided with the rest of the permanent Security Council members, made it clear that there would be little disruption of Sino-Iranian commercial cooperation (Lanteigne, 2007: 9). Moreover, in an explanation of the Chinese vote in March 2008, the Chinese ambassador to the UN, Wang Guangya, offered an explanation which somewhat softened the repeatedly harsh votes against Iran. Mr. Guangya pointed out that the resolutions do not aim at punishing Iran; rather the resolutions must urge Iran to return to the negotiating table; “[T]he sanction measures are not targeted at the Iranian people and will not affect the normal economic and financial activities between Iran and other countries. All the sanction measures are reversible”. Mr Guangya once more stressed that China believed that the best way to solve the issue was through diplomatic negotiations. The Chinese preference for solving the Iranian nuclear issue through diplomatic means arises from a philosophy of peaceful conflict resolution, coupled with the need for energy cooperation (Shen, 2006:65). It remains doubtful whether the Sino-Iranian bond will ever be so close that China will use its veto power in their favour.

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China’s attitude towards the Iranian nuclear issue may become increasingly determined by the SinoIranian economic energy relationship. However, it is to be expected that in the near future, Chinese support for Iran will depend on the use of its nuclear development for peaceful purposes. Thereafter, China’s reputation and Sino-US cooperation will be carefully balanced. The Iranian nuclear case will brings clarity to Beijing’s foreign policy preferences.

5.3 The Shanghai Cooperation Organization and Iran’s bid for membership Iran applied for membership to the SCO. The following paragraphs will explain about the SCO and the implications for Iran and the SCO when Iran becomes a member to it.

5.3.1 The Shanghai Cooperation Organization The SCO consists of six members (Russia, China, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan) and four observers (Iran, Pakistan, India and Mongolia). The geographical areas of all of the SCO members represents around 25% percent of the world’s population, 8 percent of the world’s proven oil reserves and about 30 percent of proven natural gas reserves (Brummer, 2007: 186). The institutionalization of the SCO in 200126 followed the establishment of the Shanghai Five in 1996 which had established a security system mainly focused on combating terrorism. The SCO was designed as an “intergovernmental network” which would have regular meetings and annual summits (Bailes et al, 2007: 5). The interstate relations within the SCO are based on partnerships, not union (Ünver Noi, 2006: 86). The SCO was transformed into an international organization in 2004 and in the meanwhile, among other situations, has become a UN observer (Ünver Noi, 2006: 84). While the SCO initially focused on security cooperation, the areas of cooperation expanded over the years. Since 2002, the SCO has emphasized economic cooperation and in the last years the SCO has given priority to cooperation in the fields of energy, information technology and transportation (Ünver Noi, 2006: 86). The Declaration of the Establishment of the SCO declares its objectives to be to:
“strengthen mutual trust and good-neighbourly friendship among the member states; encouraging effective cooperation among the member states in political, economic and trade, scientific and technological, cultural, educational, energy, communications, environment and other field; devoting themselves jointly to preserving and safeguarding regional peace, security and stability; and establishing a democratic, fair and rational new international political and economic order.”

The SCO is guided by the ‘Shanghai Spirit’, which is deliberately different from the norms that are currently promoted by the “United States and like-minded powers”. The Shanghai spirit refers mainly to non-interference in domestic issues. Bailes et al. interpret the Shanghai spirit as providing the SCO
26

Uzbekistan joined the SCO only when in became institutionalized in 2001.

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members with a work basis while at the same time challenging the threat of strategic and philosophical unipolarity in international relations (Bailes et al, 2007: 6). It is important to note that the SCO Charter disregards the respect for human rights. As a corollary, Bailes et al conclude that the disregard for human rights might impact on the “SCO’s standing in the world and its chances of developing positive relations with other groups” (Bailes et al, 2007: 8). The SCO Charter determines that membership of the SCO “shall be open for other States in the region that undertake to respect the objectives and principles of this Charter and to comply with the provisions of other international treaties and instruments adopted in the framework of SCO. The admission of new members to SCO shall be decided upon by the Council of Heads of State on the basis of a representation made by the Council of Ministers of Foreign Affairs in response to an official request from the State concerned” (article 13 SCO Charter). In 2004, during the fourth summit meeting at Tashkent, Mongolia became an ‘observer state’ in the SCO. Iran, Pakistan and India followed in 2005.27 All observer states have in an interest in trade cooperation arrangements with Central Asia and in particular in the field of energy.

Figure 5.1 Map of member and observer states to the Shanghai Cooperation Organization

Source: Bailes, Alyson JK, Pál Dunay, Pan Guang, Mikhail Troitskiy, (2007), ´The Shanghai Cooperation Organization- A Regional Security Institution”, SPIRI policy paper, 17.

27

Official SCO statutes, however, did not mention the possibility of admitting ‘observer states’ to the SCO.

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5.3.2 The Shanghai Cooperation Organization and Iran Iran has been an SCO observer since July 2005. In March 2008, Iran requested fully fledged membership of the SCO. So far, Iran’s applications have been rejected. In March 2009, the SCO indicated that Iran’s dispute with the international community over its nuclear program stood in the way of Iranian membership. It is obvious that full membership of the SCO would be beneficial for Iran, economically and politically. Membership of the SCO might help Iran to repair some of the damage that has been done to the Iranian economy through US and UN sanctions. Iran is particularly interested in the energycooperation within the framework of the SCO. The SCO may facilitate the much needed investment and infrastructural development for Iran’s gas and oil complex. Furthermore, Brummer argues that membership in an organization like the SCO, with members like Russia and China, although it offers no security alliance or anything like it, can have a large impact on the ‘national security concerns’ of the Iranians (Brummer, 2007: 190). Already, since the presidency of Rafsanjani in the late 1980s, the Islamic Republic has been looking for security arrangements in which Iran could participate.28 SCO membership might be able to modify the perceptions of the Iranian people who have a fear of dominance by outside powers. Membership would secure a mutual assistance guarantee for Iran in the event that the country comes under attack by a foreign state. The possibility of an unhindered interference in Iranian domestic issues would then probably significantly decrease. This could trigger a substantial change in Iran’s geopolitical vision which is part and parcel of any country’s foreign policy. However, Iran’s inclusion in the SCO would not only impinge on the policies of the Islamic Republic. It is plausible to argue that policies of, for instance the United States, would also change if Iran became a full member of a credible organization like the SCO. The United States would recognize the relations of Russia and China with Iran and thus SCO-membership might be able to put limitations on American policy towards Iran. Furthermore, admittance to the SCO would contribute to Iran’s efforts to convince the world of its credibility. The SCO is probably one of the few significant international organisations that looks at Iranian membership. One may in addition argue that, from a security perspective, Iranian SCO membership is likely to positively impact on Iran’s domestic stability which would further benefit the region’s stability. The region’s stability in turn, is important for the security of the Middle Eastern energy supply. At the same time, if Iran became a member of the SCO, it would hold membership in two ‘energy organizations’, the SCO (possibly the SCO energy club) and OPEC. Brummer notes that this “is a dangerous and presumptuous political agenda for Tehran as the heavy hands of both Russia and China can be notoriously persuasive” (Brummer, 2007: 197). The stake in a share of world resources by the SCO would significantly increase if Iran were to be admitted into the SCO (see Figure 5.3-5.5). The SCO’s gas reserves would then increase from a 30 to

28

This was further expounded in Chapter 5 on Iran’s foreign policy.

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50 percent share of the world’s resources and the SCO’s oil reserves would be enlarged from 8 to 18 percent (Brummer, 2007: 186). Such a large increase in the share of world resources would clearly benefit the scope of energy cooperation within the SCO, which in recent years has been emphasized as a central focus of the organization. High expectations of the Caspian area resources further strengthens this claim. Part of elevating energy cooperation as one of the fundamental aims of the SCO, was the proposal of former President Putin to create an SCO “energy club” that would predominantly focus on the coordination of the energy market processes (Brummer, 2007: 187). The strategic location and the large resources of Iran would make it a valuable member of such a club. In fact, Iran’s participation in an ‘SCO energy club’ would put its bilateral energy relations with both Russia and China29 in the larger framework of the SCO. In view of energy security, a stable Iran is helpful for both Russia and China. The SCO in this respect could play a large role.

Figure 5.2 Gas Proved Reserves (cu m) SCO Figure 5.3 Gas Proved Reserves (cu m) SCO+ Iran

Figure 5.4 Oil Proved Reserves (bbl) SCO

Figure 5.5 Oil Proved Reserves (bbl) SCO+ Iran

Source: Brummer, Matthew, “The Shanghai Cooperation Organizations and Iran: a Power-full Union” in Journal of International Affairs, 60, 2 (2007): 185-198.
29

More on Sino-Iranian energy cooperation in paragraph *

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Iran’s admittance into the SCO would also expand the SCO’s influence on the Persian Gulf. Since its establishment, China’s trade with the Central Asian and Caspian regions has grown tremendously (Lanteigne, 2007: 11). A similar development may evolve if the SCO stretches its sphere of influence to the Persian Gulf region. Iranian membership of the SCO would have a great impact on the international political arena. The green light for Iranian membership of the SCO could be perceived as Russia and China siding with Iran against the United States. Iran’s membership might lead to the perception of the organization as being anti-American in character, which could negatively affect the organisation’s reputation. In October 2006, an Iranian diplomat expressed the opinion that the observer status of Iran in the SCO has already led the US to becoming more “sensitive” to the organization (Lanteigne, 2007: 12). Whereas the Iranian nuclear issue seems to form the biggest obstacle for Iran joining the SCO, Brummer points to the opportunity that the nuclear issue provides for the SCO (Brummer, 2007: 188): the SCO might enhance political credibility significantly if it is able fruitfully to negotiate with Iran. As was touched upon in the previous paragraph, the rules on admission of new members to the SCO remain rather vague. During the summit meeting in June 2009, Russian President Medvedev expressed the SCO’s need to speed up work on draft documents that regulate the admission of new members to the organization. This may indicate the SCO’s ideas and agreement on the admission of new full members to the SCO. Otherwise, speeding up processes are not required. The SCO appears to be trapped in a situation in which it has to choose between conflicting interests. As mentioned above, Iran has a lot to offer, especially in the area of energy supply. However, inclusion of Iran in SCO membership could signal the expanding influence of the SCO in the Middle Eastern region which would be seen by the United States as a threat to its national interests. Admitting Iran into the SCO is likely to adversely affect the SCO’s relations (and possibly bilateral relations of the separate members) with other political actors like the United States and the West whose economies remain important for the individual SCO member countries. Most experts agree that both Russia and China do not wish for an open confrontation between the SCO and the West. Since Russia and China have different expectations from the SCO, the pros and cons of Iranian SCO-membership are weighted by their own interests. China is more focused on trade and investment in the Central Asian region in which the SCO plays a facilitating role. However, China considers the credibility of the SCO as a very important feature of the organization’s legitimization (Brummer, 2007: 189) and Iran’s membership clearly would not contribute to SCO credibility. In this respect, former US Secretary of Defense Donald Rumsfeld has often been quoted; Rumsfeld pointed to the, in American eyes, contradictory situation of inviting one of the leading terrorist nations in the world to an organization that had its origins in standing against terrorism. Russia on the other hand perceives the SCO as a club of energy producers in which Russia aims to play a primary role (Ünver Noi, 2006: 82). And although Iran’s vast resources are important in this respect, including Iran as a member of the SCO could mean an

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opportunity for Iran to encroach upon Russia’s regional hegemony as regards oil and gas exports. Yet, granting Iran observer status in the SCO could be seen as providing Russia and China with a strong political card. The United States and the West will try to prevent fully fledged membership of Iran in the SCO. In this way, the prospect of Iranian full membership has acquired a certain political leverage. Yet, it seems that Russia and China need to be careful in playing their Iranian card so as to prevent a serious backlash. Sino-Iranian relations within the framework of the SCO thus once more reflect a careful balancing act between comity with the United States and the West and China’s relations with Iran. It is doubtful whether China will ever fully support Iranian SCO-membership. On consideration of China’s strategy towards Iran so far, it appears that China will recognize the limitations of its cooperation with Iran. Instead of supporting Iran’s admission to the SCO, China is more likely to expand its bilateral relations with Iran and continue to work on preventing the SCO as being characterized as anti-Western and anti-American.

5.4 The Sino-Iranian Economic-Energy relationship The Sino-Iranian Economic Relationship The Iranian Islamic Revolution did not directly impact on Sino-Iranian economic relations. Yet, indirectly, as a result of the Islamic Revolution and the establishment of an Islamic regime, the void that was left by traditional trading partners leaving Iran, created favourable conditions for Chinese involvement. Just before the Islamic Revolution, China had opened itself up to international markets which obviously included Iran (Garver, 2006: 237). China played an important role in Iran’s post war development which was tackled through the First Five Year Economic, Social and Cultural Development Plan. From the Iranian point of view, SinoIranian economic cooperation was attractive since China did not allow business to interfere with Iranian domestic affairs. Furthermore, China proved to be relatively insensitive to Western pressures (Garver, 2006: 241). Beneficial from the Chinese point of view was the fact that Chinese firms were familiar with working under conditions in which the state dominated the economy, since Mao’s policies were only abolished during the 1980s. Yet, despite the positive sentiment towards cooperation with China, Iran considered China’s technological level of capital goods to be inferior to those of the West. Still, China was, albeit to a certain extent, able to assist Iran in its efforts to industrialize. Sino-Iranian economic cooperation began in 1982 with Chinese help in the construction of a dam in Southern Iran and the enhancement of the Iranian fishing industry in the Persian Gulf (Garver, 2006: 242). Since the end of the Iran-Iraq war, Sino-Iranian trade has expanded and has established a pattern in which China supplies Iran with industrial equipment, technology, engineering services and munitions in return for the Iranian supply of oil, minerals and base metals to China (Garver, 2006,

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244). Since 1989, Iran has urged China to expand Iranian non-oil imports to China which indicates that Iran is aware of the vulnerability of Sino-Iranian relations. Between 1990 and 2001 the average annual growth in Sino-Iranian trade amounted to 55 percent. Until 2000, Iran witnessed a deficit in trade with China, but since 2000, Iranian oil exports to China have led to a reversal of the situation (Garver, 2006: 239). In 2003, China could cover the 42 percent of its oil imports from Iran with the export of capital goods (Garver, 2006:248). China and Iran cooperated substantially in the fields of mining, agriculture and transportation. Furthermore, China assisted Iran in the education of Iranian technicians and engineers. The most recent figures indicate a further expansion of bilateral trade to $ 27 billion in 2008 which signals a 35 percent growth over 2007. In 2007, China had become Iran’s third largest trade partner (IranTracker, June 23, 2009). In May 2009, a joint Sino-Iranian economic conference resulted in a number of agreements totalling $17 billion in economic cooperation. Under these agreements, China pledged to assist in the development of Iran’s railway system and Iran committed itself to building a trade center in the Muslim province of Xingjian (IranTracker, June 23, 2009). In the same month China participated in a large conference on foreign direct investment in Iran. These progressive cooperation developments occurred despite the UN Security Council sanctions that were, amongst others, supported by China. The economic cooperation between China and Iran is hard to depict on a company-level since there is a multiplicity of powerful economic actors (among other the Iranian bonyads) in the Iranian economy on which the state has not control; the Foundation for the Oppressed and War Disabled contracted in 1997 to buy 10 cargo planes from a Chinese corporation (Calabrese, 2006:12). The Tehran metro project deserves a separate mention. Large-scale Chinese financial support and the joint acquisition of advanced technologies has become the main feature of this project. Instead of cooperating with Western firms that proved expensive, Iran asked China to undertake the task. Although China was not experienced in this area, the Iranian company dealing with the Tehran metro project disliked the dominant bargaining position of the Western companies. Instead, both the Iranian and Chinese sides recognized a common interest in the purchase of advanced Western subway technology (Garver, 2006: 261).

Table 5.1 Volume of China’s Imports and Exports with Iran in US$ 10 000, 2003-2007 Imports 2003 2004 2005 2006 2007 330736 449069 678668 995846 1330560 +35% +51% +47% + 34% Exports 231516 255476 329659 448895 728405 +10% +29% +36% +62% Total 562252 704546 1008327 1444741 2058965

Source: Based on China Statistical Yearbooks, 2005, 2006, 2007, 2008.

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Figure 5.6 Composition of China’s Trade with Iran

Source: PRC’s Customs Yearbook, Beijing 2003 in Garver, John W., (2006), China & Iran- Ancient Partners in a post-imperial world, University of Washington Press, Seattle and London.

The Sino-Iranian Energy Relationship Before turning to the Sino-Iranian energy relationship, China’s energy situation will be briefly set out below in accordance with the energy- scarcity model that was presented in chapter 1. The overview of the Chinese energy situation provides a background to the analysis on Sino-Iranian energy relations.

China and Demand-Induced Scarcity Concerning population growth, the overall world population is estimated to increase from 6.4 billion in 2005 to 8 billion in 2030 and almost 9 billion in 2050 (World Bank, 2005). Non-OECD (Organisation for Economic Co-operation and Development) countries will experience the highest population growth. China is one of the countries which is expected to have one of the largest population growth (IEO, 2008a). During the last decade China witnessed a sharp decrease in population growth. As table 5.2 illustrates, China’s annual population growth rate fluctuated between 5-6 percent in the last five years. In its International Energy Outlook 2009 report the EIA predicts that the world market energy consumption is projected to increase by 44 percent from 2006 to 2030. This projection indicates a decrease when compared to the International Energy Outlook 2008 report, due to the slower overall rate of economic growth in this year. The combined share of China and India’s energy consumption in 2006 was 16 percent of the world’s total energy consumption; this share is expected to increase to 28

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percent by 2030. The largest projected increase in energy demand is for non-OECD economies. The steady increase in China’s primary energy demand is illustrated in table 5.3. Although there is a considerable gap between oil consumption and production in China, the production and consumption of both gas and coal are at a relatively equal rate. The share of gas in China’s energy mix is very small (around 5 percent in production and consumption). However, whereas the percentage of oil in China’s total energy mix is expected to decrease, the percentage of gas in likely to rise. Table 5.2 China’s natural growth Rate in %, 1997-2007 Year Natural Growth Rate in % 10.06 9.14 8.18 7.58 6.95 6.45 6.01 5.87 5.89 5.28 5.17 Table 5.3 China’s Total Primary Energy consumption in Q Btu, 1998-2008 Year Total Primary Energy Consumption (Quadrillion Btu) 37.3 37.2 37.2 39.4 43.3 50.6 60.0 66.8 73.8 NA NA

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Source: China Statistical Yearbook 2008

Source: EIA, China Ten Year Energy Data Series

Table 5.4 China’s Average GDP Growth Rate in %, 1999-2009. Year 1999 2001 2003 2005 2007 2008 2009 (Ja) Average GDP Growth Rate in % 6.70 7.45 9.43 10.08 12.08 9.13 6.10
Source: Trading Economics.

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Economic growth can be considered to be the main reason for the changes in energy demand. In all the non-OECD countries combined, the GDP on average increases by 4.9 percent per year, compared to 2.2 percent average growth in OECD countries. In the reference to International Energy Outlook 2009, an annual average GDP growth rate of 6.4 percent is estimated for China. Table 5.4 illustrates China’s growth in GDP over the last ten years. China’s growing economy does make the country more dependent on energy imports. The sectors primarily responsible for the steady increase in Chinese energy consumption are industry and manufacturing. China intends to continue with massive consumer and manufactured goods production for domestic and foreign markets (Hayward, 2009: 4).

China and Supply-Induced Scarcity In 1993, China became a net oil importer which is important because of its position in the world oil market. Currently, China is the world’s third largest oil importer behind the United States and Japan. The fact that China is becoming increasingly more dependent on energy affects China’s concerns over supply-induced scarcity. Demand-induced scarcity in general correlates to higher prices, which adversely affects China economic growth. Moreover, figure 5.7 shows that China imports most of its crude oil from the Persian Gulf region. In accordance with the theoretical explanation of the energyscarcity model in chapter 1, the dependency on the Persian Gulf region will influence China’s policies towards this region. Not only will stability in that region benefit China; power projection will lead to the further development of bilateral relations with countries in this region. Any study on Sino-Iranian relations will have to take into account such development. China’s ‘global hunt for energy’ created a social force at the transnational level that increasingly influences the basis of Sino-Iranian relations. Table 5.5 Top World Oil Net Importers, 2007 (Thousand barrels per day)
Rank Country Imports

1 2 3 4 5 6 7 8 9 10

United States Japan China Germany South Korea India France Spain Italy Taiwan

12,224 4,874 3,653 2,310 2,184 1,919 1,879 1,583 1,553 967

Source: EIA, Country Energy Profiles

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Figure 5.7 Top Sources of China’s Crude Oil Imports

Source: EIA Country Analysis Brief China (last updated August 2006)

China and Structural Scarcity China’s petroleum is delivered by sea and is therefore vulnerable to the potential disruptions of sealanes (Garver, 2006: 265). China’s imports from the Persian Gulf region have to pass through two of the world’s most important oil chokepoints: the Strait of Hormuz and the Strait of Malacca. The chokepoints are a critical part of the global energy security due to the high volume of oil that is traded through these narrow straits. Good Sino-Iranian relations favour access through the Strait of Hormuz that borders Iran in the South. In this respect, it is important to point to Iran’s possible future membership in the SCO. If energy-cooperation further develops into a key feature of the SCO and Iran becomes an SCO member, China could become less vulnerable to situations of structural scarcity. Deteriorating Sino-American relations in the 1990s and the rapid increase of oil imports impacted on China’s energy policy and led to closer relations with major oil-producing states (Garver, 2006: 265). Iran’s minister of oil in 2004 said that Iran and China both needed energy security, Iran for supply and China for demand (Garver, 2006: 265). Besides supply-security, the Iranian oil and gas industries need direct foreign investment in order to preserve their export capabilities. Chinese interests in establishing a Sino-Iranian energy relationship became obvious in the early 1990s. China preferred involvement with Iranian oil development projects over mere purchases since this would better guarantee the continuation of Iranian oil sales to China and would further expand the market for Chinese capital goods to Iran (Garver, 2006: 265). As table 5.7 illustrates, China started importing oil from Iran in 1988. From 1992, Chinese oil imports from Iran have shown a steady annual increase. Latest figures indicate that by 2008 the import of Iranian oil amounted to 18 million

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tons which accounted for 14, 7 percent of China’s total imported oil (Guoqing, 2009). This makes Iran a crucial energy partner for China. In early 2000, China played an important role in the development of the Tehran Caspian Republics Oil Swap (CROS) project. Chinese involvement in this particular project has been important since it occurred at a time when the US tried very hard to contain Iran. Garver in this respect notes that: “it is safe to assume that Sinopec was motivated by purely commercial considerations. Yet it is virtually certain that Sinopec would not have proceeded in such a sensitive venture as the Neka project (i.e. the Iranian Caspian port which would be the main port for Caspian oil under CROS) without a green light conveyed from higher levels of China’s government (…) the essential calculation (…) was probably that (…) European firms had already violated Washington’s taboo on cooperation with Iranian oil projects, and given that, it would be difficult for Washington to target Sinopec”(Garver, 2006: 274). During the last decade and in particular over the last five years, China made, and still makes, a significant effort to guarantee its energy supplies from Iran. Long-term contracts without political preconditions or clauses have elevated China to one of Iran’s most favoured partners in energy cooperation. China has became a key partner in Iran’s energy development since 2004 when the Chinese oil companies ‘Zhuhai Zhenrong’ and ‘Sinopec’ signed major deals on the supply of liquefied natural gas from Iran to China over a period of 25 and 35 years respectively. Besides, Sinopec took the leading role in the development of the Yadaravan oil fields. The deal on the Yadaravan oil fields is the biggest energy deal by an OPEC-member so far (Hayward, 2009: 3). In this year China and Iran again further expanded economic cooperation. In March and June 2009, two important gas deals were signed between China and Iran. The deals were worth respectively $ 3.2 and $ 5 billion (IranTracker, June 23, 2009). The deals were both related to the development of Iran’s South Pars Gas Field. An important feature of the Sino-Iranian economic relationship is the mutual trust in each other that underlies energy cooperation. Both countries believe that the other is resistant to US political pressure (Garver, 2006: 265). For China, Iran is its only Middle Eastern energy supplier that is not dominated by the United States or any other power. And although Japan has had historical energy trade dominance in Iran,30 Iran values China as a more reliable partner since it is not as vulnerable to US pressure as Japan. In 2004, Japan for instance had attached an escape clause that would allow it to suspend cooperation if Iran and the IAEA reached confrontation over Iran’s nuclear program (Garver, 2006: 271). Considering Iran’s particular history and sensitivity to foreign intervention in domestic issues, such an escape clause created some reluctance on the Iranian side to cooperate with Japan. In fact, it strengthened the position of China whose “Shanghai spirit” is valued by Tehran. Brummer remarks that Japan’s historical trade dominance in Iran may well be endangered if Iran is admitted to the SCO (Brummer, 2007: 196). Such a scenario might even create tension between Beijing and Tokyo.

30

Statistics on the Iranian supply to Japan were given in Chapter 3 ‘The Iranian oil- and gas complex’.

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The economic relations between China and Iran are highly valued, especially by Iran, since expansion of relations occurred at a time when the United States aimed to politically and economically isolate Iran. Large gas and oil deals this year again encouraged this confidence. During a meeting between the Iranian and Chinese presidents, President Hu Jintao said: “we are quite confident that friendly and profound economic relations between the two countries should continue forever” (TehranTimes, June 23, 2009). These words, from president to president, are considered by the Iranians to have more meaning than the Chinese support for UN resolutions and sanctions regarding Iran’s nuclear program.

Table 5.6 Chinese Oil Imports (m/bd), 2004-2030 Year 2004 2009 2010 2015 2020 2025 2030 Chinese Oil Imports 3,4 7,85 9,60 11,40 13,50 16,10 18,79

Source: Hayward, David L.O., (2009), “China’s Oil Supply Dependence” in Journal of Energy Security, June 2009, p. 1.

Table 5.7 China’s Crude Oil Imports from Iran,1983-2003 Year 1984 1987 1988 1990 1991 1992 1993 1994 1995 1996 1999 2000 2002 2003 Metric Tons 0 0 9,987 301,240 55,000 114,990 67,860 69,119 931,105 2,311,105 3,949,291 7,000,465 10,629,865 12,393,834 US $

Source: PRC’s Customs Statistical Yearbook 1983-2004 In Garver, John W., (2006), China & Iran- Ancient Partners in a post-imperial world, University of Washington Press, Seattle and London.

1,637,790 39,534,000 7,641,000 15,574,000 9,513,000 8,715,000 121,317,000 337,072,000 519,838,000 1,464,018,000 1,901,986,000 2,635,085,866

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Figure 5.8 Foreign Investment in Iran’s Oil and Gas Industry, 1999-2004

Source: Garver, 2006: 276

Source: Garver, John W., (2006), China & Iran- Ancient Partners in a post-imperial world, University of Washington Press, Seattle and London

Sino-Iranian energy relations have emerged from a situation of in which energy has become a scarcity. China’s economic growth has made the country increasingly dependent on the import of energy. This situation has required China to move beyond its state borders. Chinese national oil companies have facilitated such a move and have established important cooperation arrangements with resource- rich countries. China’s energy imports from resource-rich countries carry two implications: the need for import has made China more dependent on its suppliers, but at the same time provided an opportunity for China to project its power. In this respect, oil is used as a politicized commodity for strategic purposes (Dorraj & Currier, 2008: 74). Latter also holds true for Sino-Iranian relations. Interesting to latter relation is though that gaining control over territory that hold large stocks usually occurs through internally engineered regime change or territorial conquest (Amineh & Houweling, 2007). In the case

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of Sino-Iranian relations, none of the two methods seems to be applicable. China has been appreciated by Iran for its Shanghai Spirit which withholds China from interfering in Iran’s domestic affairs. Moreover, China’s involvement in Iran is not conceived by Iran as unwanted penetration or as a threat to its national independence. Latter Iranian conceptions have been facilitated by good historical relations, but more fundamentally by a shared struggle against previous humiliation by the West.

5.5 Conclusion: Prospects and Challenges of Sino-Iranian Relations for Iran’s foreign policy International sanctions that are imposed on Iran due to its nuclear development programs have adversely affected the Iranian economy, but have not led to isolation of the Iranian economy. The isolation of the Iranian regime that is mainly directed by the United States needs to be placed in light of the larger aim of regime change; isolating Iran, the United States has tried to engineer regime change in the IRI. The United States have been always well aware of the strategic and geopolitical importance of Iran and still would have been a close ally of Iran wouldn’t it have been so that the Iranian Islamic Revolution resulted in the establishment of the IRI. If we in this context turn to SinoIranian relations, one thing becomes clear: through expanding and intensifying trade relations with Iran, China has undermined Iranian isolation of Iran and helped to keep the Iranian regime in tact. . China’s penetration of the Middle East, which originates in its search for energy, has allowed Iran to formulate an alternative foreign policy that to a certain extent tried to circumvent the West (Dorraj & Currie, 2008:74). Iran’s trade relations with China have so far been very profitable for Iran; China has helped developing Tehran’s lagging energy, security, and nuclear infrastructure and technology (Vakil, 2006: 63). Sino-Iranian economic-energy relations and the subsequent long-term deals have provided Iran energy and security guarantees. Sino-Iranian relations are underpinned by historical references. History has had a profound impact on the views of both countries on the relations between its own state and other places; it has shaped the countries’ geopolitical visions and cultures of both countries. All this has led to the pursuance of a similar kind of foreign policy strategy. However, as was mentioned earlier in this chapter, the real rationale behind Sino-Iranian cooperation lies in strategic interests and does not built on shared affinities. The advancement of the Sino-Iranian relationship has been supported by a constituency in government, business and industry and to some extend in society as well (see Figure 5.9) (Calabrese, 2006: 6). Calabrese further points out that the Iranian domestic struggle on how to ensure grip on political power but at the same time advance the Iranian economy has been conductive to consolidation of Sino-Iranian relations (Calabrese, 2006: 6).

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Figure 5.9 Views of Other Countries’ Influence

Source: World Public Opinion, Public Opinion in Iran, 2008.

Cooperation on the nuclear and military developments preceded the current Sino-Iranian energy relationship. Yet, latter relation has become increasingly important since China depends ever more on the imports of energy; “China’s efforts to cultivate ties with Iran subsumed in its global hunt for access to natural resources, expanded overseas market shares, and political influence have propelled Sino-Iranian relations forward”(Calabrese, 2006: 5). US sanctions provided favourable conditions for China to invest in the Iranian energy sector that is in need for FDI. In this respect the United States has been an enabling factor to the Sino-Iranian relationship (Calabrese, 2006:4). Due to the energy scarcity situation, oil has become a politicized commodity (Dorraj & Currier, 2008: 74). In 2005, advisor to supreme leader Khameini, Dr. Velayati stated that: “The Chinese know that both in view of securing a market for their goods, as well as ensuring their supply of energy, they are increasingly linked to the Middle East and the Persian Gulf reign. These bonds will become increasingly stronger and more decisive as time goes by. Therefore, if today some of the officials of our friendly country, China, look with suspicion and caution at a comparison and weighting their interests with the West and with the Islamic world, especially with the Middle East, and the Persian Gulf region and Iran, tomorrow in they will take strategic decisions about their future with greater resolve” (Calabrese, 2006: 12). Although the expansion of ties with China and Russia have facilitated the observers status of Iran to the SCO, Iran would overestimate Chinese political support if it expects it to be permanent. The geopolitical implications would be gigantic in case Iran gets admitted to the SCO. Membership to the SCO would turn Iran into an even stronger regional power which is able, through membership of the SCO, to exert its state power from the Caspian Region to the Persian Gulf. Although Iranian membership to the SCO is likely to even beter secure energy supply to China, support for such membership is not likely to happen in the short term.

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Challenges in the Sino-Iranian relationship are multiple. China is not as committed to committing a strategic partnership as is Iran. Although China is interested in Iran in a commercial manner, it does not want to get too much engaged with Iran in the political sphere (Garver, 2006:291). Latter policy is related two aspects: 1) the Sino-US relationship; and 2) the image and reputation of China as a responsible power. In this respect, it seems as if Iran overestimates the Chinese political will to cooperate with Iran. Or maybe Iran is just trying to push its luck? There are not many other directions in which a confrontational Iranian foreign policy like the current one can go. It was expected that China would risk its energy and economic cooperation in case it would support the UN sanctions in light of Iran’s nuclear program. After several UN-resolutions on the Iranian nuclear issue, including the imposition of sanctions, all of which were supported by China, Sino-Iranian economic and energy relations are expanding. Sino-Iranian commercial relations are still tremendously important and far outweigh Sino-Iranian commercial ties. As this chapter has shown, China does sometimes give in to US pressure concerning Sino-Iranian cooperation. Latter might influence China’s current objections to fully fledged Iranian SCO-membership. Ending nuclear cooperation in 1997 was the most prominent recent example. Just like Sino-US relations have been an enabling factor, Sino-US relations have acted as a complicating factor to Sino-Iranian relations (Calabrese, 2006: 12). However, in the author’s view the main challenge for Sino-Iranian relations lies in Iran’s export capabilities. If Iran can no longer supply China the necessary amounts of oil and gas, what will be left from Sino-Iranian relations? Due to the negative business climate of Iran, private sector investment in Iran is not very significant and taking into consideration Figure 5.6, 80 percent of Chinese imports from Iran consist of oil. The future export capabilities of Iran depend on Western advanced technologies. China has been able to invest in Iran, but has not sufficient technical knowledge to help Iran develop its energy industry in a manner that secures export. Although China supported the UN sanctions in the light of Iran’s nuclear development plans, the Chinese tone is not as harsh as that of the United States. China repeatedly made clear that it favours diplomatic solutions in the Iranian nuclear issue; China has opposed the “power-politics”-approach. This attitude may be in accordance with Chinese diplomacy, but this somewhat lenient attitude may also have to do with the Chinese interest in Iran’s nuclear energy development. Just like the United States had supported Iran to develop nuclear energy in order to be able to export more fossil fuels, China may be availed by such developments. In conclusion, Sino-Iranian relations are likely to further expand. Iran’s resources “provide Tehran with leverage that it is clearly prepared to use not just for economic gain but also to advance broader strategic objectives” (Calabrese, 2006: 14). So far, Iran did predominantly gain Chinese economic

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support. Although China is able to tone down sharp political convictions of the United States towards Iran, China has recognized the limits of its political support. While the trades balance points in favour of Iran, the author contends that there is an uneven balance in the Sino-Iranian relationship in which Iran comes off worst. Yet, this all may change if Iran does succeed in becoming an SCO member or in case China continues to gain strength as a political and economic actor and gains more latitude in its foreign policy decision making. “China sees itself as the leader of a new world economic order to eventually become the world’s leading economy by 2020/30 and to thereby acquire a dominant hegemonic position in world affairs and geopolitics”(Hawyard, 2009:3). Both situations would seriously impact Iran role in the region and therewith Iran’s role in the world. Nonetheless, both scenarios are in Chinese hands. There is nothing much the IRI can do about it.

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6. Conclusion
Iranian foreign policy practices are incredibly difficult to understand. This is parly due to the multiple power structure in the foreign policy decision-making process of the IRI. The structure of foreign policy decsion-making has been marked by institutional complexity ever since the establishment of the Islamic Republic. However since the death of Khomeini, factional fighting has gained a prominent role along side the institutional complexity in the foreign policy decision making process. Factionalism overrides the distinction between informal and formal power structures and cuts through both. This research has been conducted within the theoretical framework of Critical Geopolitics. During the course of the research the theory of Critical Geopolitics has proved to be very useful in the analysis of the IRI’s foreign policy. On the basis of Figure 1.1, the following conclusions can be drawn: The geopolitical visions of the IRI have been dominated by a prominent idea on a strong role of Iran in the region. This vision is present in all factions, but determined in different contexts. The research has shown that Iran tried to establish such role by repeatedly searching for regional security arrangements or most recently membership to the SCO. However, the geopolitical visions have been strongly impacted by the geographical imagination. The visions of the factions on the place of Iran in international relations have been impacted by the way these factions have determined the state and the nation in the world. This latter for instance becomes clear by referring to the initial tension between provision Prime Minister Bazargan and supreme leader Khomeini. Although both shared the historical experiences that had led to the Islamic Revolution and similar ideals, Bazargan envisioned those in the current world order of nation states whereas Khomeini wanted to change this world order to an Islamic one. Geopolitical tradition in the IRI has been of fundamental importance in the current geopolitical culture in Iran. Historical experiences of external political and economic involvement and failed modernization in Iran have deeply impacted the Iranian state identity. The recognition of the human construction of ‘identity’ as the intermediate variables between social reality and actor behavior has been the biggest strength of the Critical Geopolitical approach in the analysis of the IRI’s foreign policy. The countries foreign policies are still partly determined by a somewhat extreme form of nationalism and national pride. In its foreign policies, the IRI seems to continuously feels the need for proving the country’s independence and equal position to other states. The IRI tries to project its power through uninterrupted support for Shi’a militia and through such effort as the development of nuclear energy irrespective of the threats by the United States or the United Nations.

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Political and economic interests of the political factions as a factor to foreign policy practices in the IRI has been most important in the light of the survival of the regime. This research established that Iran’s relations with China have been most influenced by pragmatic considerations. Much of the potential of the Sino-Iranian relations depends on factors that are outside the control of the IRI. The factors that influence foreign policy practices in the IRI are predominantly favourable to Sino-Iranian relations. However, the crucibles of the foreign policy practices by China are fundamental for the future of Sino-Iranian relations.

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Samenvatting
Met behulp van de theorie ‘Kritische Geopolitiek’ tracht deze scriptie het buitenlands beleid van de Islamitische Republic Iran te analyseren. Kritische Geopolitiek stelt de onderzoeker in staat verder te kijken dan realistische, rationele staatsoverwegingen als bepalende factoren in buitenlands beleidsvorming. In de Kritisch Geopolitiek, het grotere complex bestaande uit staat en maatschappij wordt tot object van analyze verheven. Een model dat is ontwikkeld door Eva Patricia Rakel heeft factoren die het buitenlands beleid bepalen volgens de Kritische Geopolitiek bijeen gebracht. Deze factoren bestaan uit geografische verbeelding, geopolitieke cultuur, geopolitieke visies, geopolitieke tradities, politieke en economische belangen en de geopolitieke visies en buitenlands beleid door andere landen. Wanneer dit model toegepast wordt op de situaties in de Islamitische Republiek dan wordt duidelijk dat er een constante strijd woedt tussen ideologie en het staatsbelang als bepalende factoren in het Iraanse buitenlands beleid. Het onderzoek heeft de belangrijke machtsstructren binnen de Islamitische Republiek proberen de belichten en geprobeerd het belang van eerdere Iraanse ervaringen met buitenlandse inmenging in het land aan te tonen. Het onderzoek schetst verder een overzicht van het olie en gas complex in Iran en toont aan hoe belangrijk de grote hoeveelheden olie en gas voor Iran en Iraans buitenlands beleid zijn. Na een uitgebreide algemene analyze van het Iraanse buitenlands beleid sinds 1979, wordt in het laatste hoofdstuk speciale aandacht besteedt aan Iran’s relaties met China. Een versterking van deze relatie zou grote geopolitieke implicaties met zich mee brengen. Het laatse hoofdstuk geeft dan ook antwoord op de centrale onderzoeksvraag van de scriptie: “what are the prospects and challenges of Sino-Iranian relations for the IRI’s foreign policy?”

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Appendix I Proved Oil Reserves at the End 2008

Source: BP Statistical Review of World Energy, June 2009

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Appendix II History of Iran’s Nuclear Program First efforts regarding Iran’s civil nuclear development were undertaken by a US-Iran cooperation arrangement in 1957 which formed part of the US Atoms for Peace Program (Shen, 2006: 56; NTI). Iran became a member to the NPT as a non-nuclear weapon state in 1968 and ratified the treaty in 1970. Brumberg and Ahram point to the encouragement by the US in the 1970s to develop an Iranian nuclear energy program that could be used for the substitution of the increasing domestic energy demand. The development of nuclear energy could thus contribute to the extraction of more oil for export (Brumberg & Ahram, 2007: 38). In 1973, the Shah made public his ambition to develop an indigenous nuclear technology that was to be supervised by the Atomic Energy Organization of Iran (AEOI). The Shah planned the construction of up twenty-three nuclear power plants by the year 2000 (Wood, 2007: 299). Besides Iranian-US cooperation, Iran also worked together with France, Germany, Namibia and South Africa in the field of nuclear development. It is noted that by the time of the Iranian Islamic Revolution, Iran had developed “an impressive baseline capability in nuclear technologies” (NTI, 2009). Even though the peaceful nature of the Iranian nuclear programs was assumed, it is sometimes claimed that the Shah intended to build a nuclear weapons capability. These suspicions clearly contradict the Shah’s call to create a nuclear weapons free zone in the Middle East (Bahgat, 2006: 309). Nuclear development in Iran suffered a setback with the Islamic Revolution; much of Iran’s nuclear talent fled Iran following the Revolution and initially supreme leader Khomeini opposed to the nuclear programs since he believed that the programs contradicted the basic tenets of Islam (Bahgat, 2006: 309). Yet the Iraqi threat concerning the use of nuclear weapons against Iran in the Iran-Iraq war triggered the revival of the programs (Garver, 2006: 143). In general the geographical proximity of various nuclear powers, such as India, Pakistan and Israel, is argued to have impacted Iran’s security perceptions. In 1984, Khomeini started seeking international assistance in the completion of the Bushehr nuclear power plant. Isolationist policies by the US, however, hindered foreign investment. In that same year, Iran opened the Nuclear Research Center at Esfahan (ENRC) in which a lot of activities concerning the development of nuclear energy took place. Note that the ENRC had not been declared a nuclear facility to the IAEA until 1992 (Garver, 2006: 143). Following the establishment of the Research Center, in 1985 Iran secretly launched a uranium enrichment program. Latter was only revealed to the IAEA in 2003 (Garver, 2006: 143). Since Iran was unable to find any Western partners for its nuclear programs, Iran worked closely with Russia and China. Even the assistance program of the IAEA to help Iran as regards enriched uranium fuel gave way under US pressure in 1983. Russia agreed with Iran to complete the Bushehr reactors under safeguards of the IAEA. Nowadays, 2009, the Bushehr reactor is close to becoming operative.

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The development of the Iranian nuclear industry has had severe consequences for Iran’s international relations.31 Over the years, with some short periods of suspension, Iran continued making an effort to enrich uranium. The ‘Iran profile’ by the NTI indicates that, as of February 2009 Iran had accumulated 839 kilograms of low enriched uranium. This however does not necessarily reflect the workings on a ‘nuclear bomb’. President Ahmadinejad repeatedly declared the civil power purposes of the nuclear program. Fierce debates dispute the significance of this uranium-accumulation as regards the estimation of time needed for the development of possible nuclear weapons. Yet, the production of nuclear weapons is conceived to be contrary to the principles of Islam and nearly 60% of the Iranian people support this conception (World Public Opinion, 2008). Moreover, in 2005 supreme leader Khamenei issued a fatwa forbidding the production, stockpiling and use of nuclear weapons. This fatwa is important considering the future direction of the Iranian nuclear development since the supreme leader in Iran controls the nuclear program. Iran, however, continues to claim the right to develop nuclear energy for peaceful purposes and in particular in the light of developing an alternative energy resource. As a member of the NPT Iran has the right to undertake research on nuclear science and technology (Shen, 2006: 57). It is important to note that every state, regardless of NPT status, has the right to develop nuclear energy for peaceful purposes. Even more significant is the fact that a state can withdraw from the NPT whenever this state deems necessary. A non-NPT member states then has the legal right to even develop nuclear weapons (Shen, 2006: 59).

The ‘politicization’ of the nuclear issue and the impact of nuclear development on Iran’s foreign policy will be discussed in the Chapter 5 ‘Iran’s Foreign Policy’.

31

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Appendix III China on Iran’s 2009 Presidential Elections
While the oppression of the protests that followed the 2009 presidential elections in Iran have provoked lots of international reactions, China did not say much about it. Chinese media report scanty on the upheaval in the Islamic Republic. The Chinese government called for stability in Iran and says President Mahmoud Ahmadinemad should be supported as the “choice of the Iranian people” (Globalpost.com, June 17, 2009). China expressed support for the continuation of the current regime. Apart from the official responses, Chinese state-run media include hints that western media may have contributed to the heated election contest and disputed results. Some reactions to the Iranian electionprotests on a Chinese blog (iFeng.com) include the following:
“I support Ahmadinejad. He is one of the only three leaders of the countries who say no to America. He is a brave and dignified country leader”.

“National interest overrides everything else”. The protests in Iran in June and July 2009 resemble very much the Tiananmen Square protests in China in 1989. The loyalty of the security and military forces to the regime brought an end to the demonstrations.

Source: Dwane Powell, copyright 2009 Creators Syndicate.

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leaves

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in

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(May

24,

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