It does not take much expertise to understand that the current tightness of the oil market is in large part due to the situation in Iran and Iraq. As is well-known, Iran and Iraq have the highest proven oil reserves in the world after Saudi Arabia. Iran also has the highest proven natural gas reserves after Russia. But oil and gas production in both countries remains far behind their capacities. The case of Iraq is too well-known to require elaboration. But Iran also produces much less oil and gas than it could. The main reasons are the U.S.-led sanctions regime and the international economic boycott of Iran.

The consequences for the Iranian energy industry have been devastating. As the U.S. Energy Information Administration (EIA) observes [.pdf], Iran’s oil production has declined from 6 million barrels per day (BPD) of crude oil in 1974 to 3.8 million BPD in 2006. “Iran’s oil fields need structural upgrades including enhanced oil recovery (EOR) efforts such as natural gas injection,” states the EIA. “Iran’s fields have a natural annual decline rate estimated at 8 percent onshore and 10 percent offshore, while current Iranian recovery rates are 24-27 percent, 10 percent less than the world average. It is estimated that 400,000-500,000 bbl/d of crude production is lost annually due to reservoir damage and decreases in existing oil deposits.” The Iranian government aims to boost its oil production to 5 million BPD, but the EIA does not believe a production increase will happen at least through 2012. As the agency notes, to increase its production, “Iran will need foreign help.” In natural gas the situation is in many ways even worse. More than 60 percent of Iranian proven natural gas reserves have not been developed. Iran hardly exports any gas at all.

Of course, the Iranian government also bears responsibility for the abject state of the oil industry. Since hard-liner Mahmoud Ahmadinejad was elected president in 2005, investment conditions for private foreign companies have worsened. The Iranian policy of keeping out Western companies is, in fact, the mirror image of the Western policy of sanctions. Both policies seriously hamper Iranian economic development. To break this deadlock, what the West needs to do is to stop treating Iran as its worst enemy, put an end to sanctions, and instead encourage business and political relations as much as possible. That way the position of the hardliners inside Iran would be undermined and the prospects for peace and stability in the Middle East would be greatly enhanced.

Ending Tyranny

Such a policy of “détente” is exactly the opposite of current Western policy toward Iran. Although the threat of U.S. military action has receded, the American government remains on a collision course with Iran. It has repeatedly said that “nothing is off the table.” The Democratic opposition in Congress fully supports this confrontation policy, as does the EU. French President Nicolas Sarkozy has even upped the ante recently by saying that the U.S.-Iranian “standoff” is “the world’s greatest crisis” and that the world is confronted with a “catastrophic alternative: an Iranian bomb or the bombing of Iran.”

The U.S. and Europe continue to insist that Iran end its uranium enrichment program, which they claim is part of an Iranian plan to develop an atomic bomb. They have persuaded the Security Council of the United Nations to join in this demand. Iran refuses to give up enrichment. The fact is that Iran is acting within its rights. It is entitled under the Nuclear Proliferation Treaty (NPT) to pursue enrichment of uranium. The NPT requires that member countries cooperate with the International Atomic Energy Agency (IAEA), whose task it is to see to it that their nuclear projects are used for peaceful purposes only. Iran does so, and the IAEA has repeatedly stated that it has found no evidence that Iran is developing a nuclear weapon. There is thus no legal basis for instituting sanctions against Iran, as the Security Council has done  let alone for tightening these sanctions or taking military action against Iran.

Indeed, it is not Iran but rather the U.S. that is acting in violation of the NPT. The treaty requires the owners of nuclear weapons to assist the other signatories in developing their own peaceful nuclear energy programs. In fact, the U.S. is boycotting Iran and is supporting three countries  India, Pakistan, and Israel  that have developed atomic bombs while opting out of the NPT. These three countries surround Iran. The NPT also requires the U.S. and other signatories to reduce their nuclear arsenals. Instead, the Bush administration is modernizing and expanding the American nuclear arsenal. As of the year 2000, the U.S. nuclear arsenal comprised 5,400 multiple-megaton warheads atop intercontinental ballistic missiles, 1,750 nuclear bombs and cruise missiles ready to be launched from B-2 and B-52 bombers, a further 1,670 “tactical” nuclear weapons, plus some 10,000 nuclear warheads stored in bunkers (Chalmers Johnson, Sorrows of Empire, 2004, p. 64).

Many argue that Iran is a special case. It is not considered a “normal” country, because it is supposedly run by a bunch of mad, fanatical mullahs who would not hesitate dropping an atomic bomb if they had one. This image of Iran is apparent in the rhetoric employed by Western leaders. Bush has said that “Iran’s actions threaten the security of nations everywhere” and that Iran is “the world’s leading state sponsor of terrorism.” Tony Blair, the former British prime minister, has claimed that Iran is “the greatest enemy of peace in the world.” In a speech he made in several Gulf countries, Blair said that the world is engaged “in a monumental struggle between those who believe in democracy and moderation, and forces of reaction and extremism.” In this epic contest, Iran is ideological enemy number one, Blair stated. Public opinion in Western countries largely seems to have accepted this view of the Iranian regime as evil, irrational, and unpredictable.

World Peace

How “evil” is Iran really? Although Tony Blair does not acknowledge it, Iran is a democracy, of sorts, whereas the Gulf states that are supported militarily and politically by the U.S. and the UK, not to mention Saudi Arabia, are not. Iran is hardly a perfect democracy; its unelected clergy are in many ways the ones who rule the country. The Iranian government also frequently tramples on human rights: it violates freedom of speech, imprisons people for their views, and does not allow many social freedoms that we take for granted. Such evils should be opposed, of course. But the same can be said of countries such as Saudi Arabia, Egypt, and China, yet those countries escape being labeled part of the “axis of evil.” Iranians also have the freedom to move in and out of their country and interact with people abroad, with not too many restrictions. For these reasons alone, Iran can by no stretch of the imagination be called a totalitarian country.

More to the point is that Iran cannot credibly be called a threat to “world peace.” The Iranian regime has never invaded another country, initiated a war, or tried to impose its rule by military means on other nations. It is equally false to claim, as President Bush has done, that Iran “is the world’s leading state sponsor of terrorism.” Iran has always opposed al-Qaeda, it does not sponsor terrorist acts in Western countries, and it has never supported the Taliban, even though Bush has claimed that it does. Iran does support Hezbollah and Hamas, but these are groups that fight against what they believe to be the repressive policies of Israel.

Military-Industrial Complex

Conversely, we may ask, how “good” is the United States really? Is the U.S. a force for “moderation and democracy” in the world? Unfortunately, the historical record does not bear this out. Since the end of World War Two, the U.S. has supported dozens of murderous dictators both financially and militarily: for example, Joseph Mobutu of Zaire, Augusto Pinochet of Chili, Suharto of Indonesia, Saddam Hussein of Iraq, the shah of Iran, Anastasio Somoza of Nicaragua, Fulgencio Batista of Cuba, and dictatorships in Greece, Portugal, Pakistan, Egypt, and many other countries. In 1954 the CIA sabotaged the elected government in Guatemala. The U.S. invaded Panama in 1989, killing 3,000 to 4,000 civilians. It trained and supported death squads in El Salvador. It supported the Taliban, brought the Ba’ath Party to power in Iraq, and sold material for chemical weapons to the regime of Saddam Hussein.

Why has U.S. foreign policy been so much at odds with the high-minded moral ideals touted by its leaders? In my view, this must be ascribed to the fact that within the U.S. a huge military-industrial-bureaucratic complex has come into existence over the last decades, fed by hundreds of billions of dollars in military spending, which has created a policy dynamic of its own, based on its own financial and political interests rather than on any “democratic” ideals. This complex has seriously corrupted the American political system, the one having become so intertwined with the other that its ruling elites effortlessly job-hop back and forth. To give one example, as former CIA officer Philip Giraldi pointed out last year, “at least 43 former employees, board members, or advisers for defense contractors are currently serving or have recently served in policy-making positions in the Bush administration.” To mention just a few examples, former undersecretary of defense and World Bank president Paul Wolfowitz worked as a consultant for Northrop Grumman, maker of the B2 bomber and other weapon systems; Gordon England, former secretary of the Navy, was executive vice president at General Dynamics, producer of the Abrams tank and the Trident submarine; former secretary of state Colin Powell served on the board of Gulfstream Aerospace, a weapons supplier to Kuwait and other Gulf states; Lynne Cheney, wife of Vice President Dick Cheney, sat on the board of arms producer Lockheed; and Powell A. Moore, former assistant secretary of defense, was vice president for legislative affairs at Lockheed. American military contractors not only fund politicians on a grand scale, they also give financial support to universities, research institutions, and the media. In many cases they own television networks, film studios, newspapers, and so on. When similar connections are observed in Russia, Western commentators are quick to point out the “corruption” of the Russian system, but they ignore the same situation in the U.S.

The U.S. military-industrial-bureaucratic complex is not confined to the borders of the United States. As historian Chalmers Johnson has documented, the U.S. has over the last decades created a worldwide “empire of military bases.” “Not including the Iraq and Afghanistan conflicts,” Johnson writes, “we now station over half a million U.S. troops, spies, contractors, dependents, and others on military bases located in more than 130 countries, many of them presided over by dictatorial regimes that have given their citizens no say in the decision to let us in.” The U.S. seems to have fallen into the trap that former U.S. president and Army Gen. Dwight Eisenhower warned of in his famous, prophetic farewell speech in 1961, in which he coined the term “military-industrial complex.” Eisenhower warned that the U.S. “must guard against the acquisition of unwarranted influence by the military-industrial complex.”

Coup D’Etat

When it comes to Iran, the U.S. and the UK have never shown any interest in supporting “freedom” and “democracy.” Since the start of the century, the Anglo-Persian Oil Company, later the Anglo-Iranian Oil Company, now BP, had an exclusive concession to Iranian oil. In 1947, Iranian oil workers went on strike against the atrocious conditions under which they had to work (no vacation, no sick leave, no disability compensation, no electricity, no running water). The British broke the strike by force, leaving dozens of strikers dead. The Iranian parliament then called for the renegotiation of the concession  a proposal promoted by the highly popular politician Mohammed Mossadegh. As the company resisted tooth and nail and tensions rose, the Iranian parliament in 1951 approved a new proposal by Mossadegh, who was soon elected prime minister by the parliament, to nationalize the oil assets. The shah, Reza Pahlavi, felt he had no choice but to sign the bill into law. The British reacted by organizing a boycott of Western oil companies against Iran, which led to a severe economic crisis. Then, Britain, with the encouragement of elderly statesman Winston Churchill, engineered a coup d’etat against Mossadegh in 1952, which failed. At that time Iran was still looking for support from the United States, where Mossadegh was a highly popular figure. (In 1951 Mossadegh had been declared “Man of the Year” by Time magazine!) When Eisenhower became president in 1952, the British managed to convince the Americans to support them. In a joint British-American coup organized by the CIA in 1953, Mossadegh was ousted and jailed. The exiled Shah Mohammed Reza Pahlavi was brought back to Iran. He immediately went on to brutally repress his political opponents, sentencing hundreds of Mossadegh’s supporters to death. As oil historian and Eni strategist Leonardo Maugeri observes in his new book, The Age of Oil, “A dictatorial regime then replaced the only democratic and  paradoxically  Western-oriented experience Iran would ever know.”

For the next 25 years the U.S. faithfully supported the regime of the shah, who was no force for “democracy and moderation.” The shah’s Savak, notes British Middle Eastern expert and veteran journalist Robert Fisk, was the most notorious and murderous secret police force in the Middle East  “its torture chambers among the Middle East’s most terrible institutions.” None of this mattered to the U.S. and other Western countries, since the shah, as Fisk notes, was “the guardian of our oil  during his regime, international oil companies exported 24 billion barrels of oil out of Iran.” U.S. support for the shah was so strong that “a permanent secret U.S. mission was attached to Savak headquarters,” where the tortures took place. Ironically, in view of the current nuclear conflict with Iran, the U.S. in those days did its best to push nuclear power stations upon the shah. The shah’s nuclear ambitions were aborted only when the Iranian people rose up against his regime in 1979.

The story of American wrongs against Iran does not end there. A year after the Ayatollah Khomeini came to power, the Iraqi dictator Saddam Hussein invaded Iran. The Reagan administration decided immediately “to do whatever was necessary and legal” to prevent Iraq from losing the war. The U.S. gave $5.5 billion in “loans” to Saddam to buy arms. Shipments from the U.S. and other Western countries to Iraq included bacterial cultures to make weapons-grade anthrax (The Sorrows of Empire, pp. 223-224). In 1984, the president’s special Middle East envoy, Donald Rumsfeld, visited Baghdad to show his support for Saddam. When Saddam carried out his infamous mass murder of the Kurds in Halabja on March 16, 1988, with Western-supplied chemical weapons, the American government incredibly put the blame on Iran (see A Poisonous Affair by Joost Hiltermann). The Iranians by that time had complained to the UN Security Council many times about the use of chemical weapons by Iraq against Iranian troops, but the Council did not see fit to condemn Saddam.

Rebellious Province

The current conflict  the U.S.-Iranian standoff, as Sarkozy has it  cannot be understood without reference to this historical context. On the one hand, Iran is what it is today in large part as a result of Western policies: the Iranian people turned to radical Islam as a liberating force because the so-called forces for moderation and democracy supported the tyranny of the shah; they turned to socialism and state intervention as the result of abuses and exploitation by Western oil companies.

On the other hand, the U.S. singles out Iran as a “force of evil” not because it has, in fact, such an evil regime, but because Iran refuses to subject itself to American military, political, and economic interests  because it resists America’s striving for world hegemony. With a bit of exaggeration Iran might be called a rebellious province of the U.S. global empire. As a Shi’ite, Persian nation, Iran is also of course a threat to the regional hegemony of America’s most important ally, Saudi Arabia, and the other Arab Gulf states.

Clearly there is no moral or historical justification for the current U.S. and Western policy of confrontation toward Iran. What is more, it is counterproductive. It favors the hard-liners and extremists inside Iran and makes it difficult for pro-Western voices to be heard. What should be done is to reverse this policy. The EU in particular should take the lead in ending all sanctions against Iran and welcoming that country back into the international community. This would give moderate forces inside Iran a great boost. Then, who knows? “Regime change” might come about after all  peacefully, and by the Iranian people’s own choice. The threat of nuclear war would disappear, and the world would be a safer, better place  with more oil and gas to boot.

Reprinted courtesy of the European Energy Review.