It's all about oil

The United States has deployed an extra aircraft carrier battle group for the Persian Gulf in order to rattle the sabre in the nuclear standoff with Iran. Given the experience with dodgy intelligence during the lead up to the invasion of Iraq it is worth reflecting on just how real is the purported Iranian nuclear threat.

The Iranian nuclear program is long standing and can be traced all the way back to the Shah who held power prior to the 1979 revolution. At the time Henry Kissinger stated, the “introduction of nuclear power will both provide for the growing needs of Iran’s economy and free remaining oil reserves for export or conversion to petrochemicals”.

Today, one of the main pillars of the argument that Iran’s nuclear energy program is actually a cover for a weapons program is the notion that oil rich Iran has no economic need for nuclear energy. Asked to explain the shift Kissinger responded that Iran under the Shah was an allied power.

The recent crisis began when US intelligence disclosed to the International Atomic Energy Agency (IAEA) that Iran was building a secret uranium enrichment facility.

In other words, if Iran were an ally of the United States then the intelligence on Tehran’s uranium enrichment facility would most likely have never made it to the International Atomic Energy Agency.

If the IAEA is to solely rely on intelligence from the US then it becomes likely that the only covert nuclear programs that the IAEA refers to the UN would be ones the US doesn’t like: it would effectively become an instrument of US policy. Earlier this year the IAEA refused to condemn Israel for its own, albeit outside of the Nuclear Non-Proliferation Treaty (NPT) framework, nuclear weapons.

But how seriously should we take the economic argument? A Los Alamos National Laboratory study, which is often cited in these debates, argued that Iran has no economic rationale for a civil nuclear energy program. However, the terms of reference of the report were quite limited for the report only looked at Iran’s enrichment program, not its entire array of nuclear activities.

A more comprehensive study appeared in the The Proceedings of the National Academy of Sciences of the United States, which concluded that Iran faces a grave energy crisis because it needs to import oil-based products given that it has inadequate refining infrastructure and growing domestic demand due to demographic growth. This energy crunch threatens the regime’s long term viability, the study surmises.

It is not obvious that Iran has no economic rationale for a nuclear energy program and if it does then it does not matter who is in the presidential palace in Tehran given this structural need.

The only factors that could ameliorate this structural need would be external, but Iran has long been the subject of a US policy of containment, a key plank of which used to be support of Saddam Hussein during the period when he committed his worst atrocities. The screws have been tightened some more in recent times, especially in relation to financial sanctions and oil sector sanctions.

Iran’s response has been measured, contrary to most news comment, which characterises it as being “hardline”. Interestingly, it has also intensified a power struggle in Tehran between moderates and conservatives.

This progressive tightening of the screws, given the energy crisis that Iran faces, could easily be seen in Tehran as reflecting a policy of regime change. Similar perceptions in Pyongyang led to the recent North Korean nuclear test.