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Editor's Note:
This is the fourth in a series of SUSRIS "Items of Interest" providing transcripts from the recent Middle East Policy Council (MEPC) Capitol Hill conference series panel on the Future of the Middle East: Implications for the United States. The panel, held on June 26, 2007, featured five distinguished specialists on Middle East affairs, introduced by MEPC President Chas W. Freeman, Jr. The first three parts were provided separately and are posted on SUSRIS.org. Additional panel presentations will be distributed via SUSRIS over the next several days.
The Future of the Middle East: Strategic Implications for the United States
Middle East Policy Council Capitol Hill Conference Series on U.S. Middle East Policy
Moderator/Discussant
Chas W. Freeman, Jr., President, Middle East Policy Council
Speakers:
F. Gregory Gause, Political Science Professor, University Of Vermont
Fareed Mohamedi, Partner, Head Of Markets And Country Strategies And Practice, PFC Energy
Afshin Molavi, Fellow, New America Foundation
Wayne White, Former Deputy Director, Near East And South Asia Office, INR, State Department
Anthony Cordesman, Arleigh A. Burke Chair In Strategy, CSIS
[For
other presentations in this series Click
Here]
Afshin Molavi
Fellow, New America Foundation
Washington, DC
June 26, 2007
I will touch on a couple of things about what Fareed Mohamedi said.. ..I have been spending a lot of time in the GCC recently, and I share Fareed's optimism. I would like to note that in some respects we almost have two Middle Easts forming. When you look at the region today, you see, this sort of arch of crisis/instability - potential instability - from Egypt through Israel, Lebanon, Syria, Jordan, Iraq, Iran - Northern tier of countries in the region. And then, when you're in the GCC countries in particular, it's almost if you're in a different Middle East. Let me give you an example.
I was in Muscat, Oman, a couple of years ago at the Chedi Hotel - a beautiful hotel which I recommend to all of you on your next trip to Muscat, Oman - and lying on the beach and I had a crisis of my own. I had run out of suntan lotion. So I went back to my room, and I turned on the television. CNN International had a headline, you know, "Crisis in the Middle East." There was another bombing in Gaza. And, you know, it didn't feel like a crisis from Muscat, Oman, or in Dubai, where I was earlier. In the height of the Israel-Lebanon war -
Israel-Lebanon-Hezbollah war - Saudis, more than 10 million of them, were on a stock buying frenzy. It was the most highly anticipated initial public offering in Saudi Arabia, and half of Saudi Arabia's adult population bought stock in the King Abdullah Economic City - the MR project.
So you do almost have these two Middle Easts forming.
 I would like to stick to my topic of Iran. When we think about a U.S. retreat from Iraq, a word that often comes up is "vacuum." And, a few words down from that word "vacuum" you often see the word "Iran" pop up as the potential for filling that vacuum. And it has also become fashionable to ask the question, "Who has won the two post-9/11 wars?" And the fashionable answer has become "Iran has won the two post-9/11 wars." And, to some extent, you can understand this response. I mean, the strategic climate has shifted in Iran's favor as a result of the two post-9/11 wars.
The perception is Iranian power is on the rise. Consider the Taliban with whom Iran -- the Taliban was never a serious threat to the Iranian state, but the Taliban did -- was a foe of Iran, and they did provide Saudi Arabia and Pakistan power on Iran's border in the East. Saddam Hussein's Iraq was contained, but Iran did not have nearly the kind of influence they had in Mesopotamia that they do today. So the strategic climate has shifted in their favor and - but I think we tend to go overboard to some extent in our assertions of Iranian power. Les Gelb at the Council on Foreign Relations said we attribute to Iran free power almost.
And when you look at Iran's economy, you look at the state of its oil industry, you look at its lack of economic integration with the world, it doesn't look like a very powerful state. So let me just go over some of these issues because I'd like to make an argument, to some extent puncturing the myth of Iranian power. Now, again, having said that the strategic climate has shifted in their favor, it is important to know that Iran's economy is in quite a bad shape. Iran experiences anything from 15 to 20 percent inflation, a widespread unemployment and underemployment, stagnant wages. President Mahmoud Ahmadinejad has been drawing down Iran's rainy day oil fund, there has been a massive amount of capital flight from Iran, particularly to Dubai, since Ahmadinejad has come into power.
When you look at -- I did something yesterday. I sort of just poked around the web and looked at Iran by indexes, and I looked at the various indexes that are out there. For example, the
World Bank IFC Doing Business report, where Iran ranks very poorly at 119, just ahead of Albania and just behind Guatemala. Interestingly, when you look at the World Bank IFC Doing Business reports, the - in the Middle East region, the countries that come out looking very good are the GCC countries. Saudi Arabia ranks the highest in measures of the ease of doing business, followed by Kuwait, Oman, and the
UAE.
When you look at the World Economic Forum Global Competitiveness rankings, Iran ranks very poorly.
The Heritage Foundation index of economic freedom - Iran again ranks very poorly. If you look at the -- there's a wonderful website called
Dinar Standard, I don't know if you've looked at it, but it looks at business in the Muslim world. And this is -there's something called the "Top 100 Muslim World Companies." And when you look at that, you see some of these public-private partnerships that Fareed was talking about, doing very well. But you also see that the private sector of Iran of the top 100 there's only three companies, Iranian companies, in the top 100, two of which are state-owned. Whereas you do see something - dozens of Turkish companies, and several Saudi companies, and several Malaysian companies. Take a look at the telecom world. You find companies like Egypt's Orascom Telecom that are making regional waves and global waves.
When Saudi Arabia launched its recent GSM license, you saw major telecom providers around the region bidding for it - Iran was absent from the scene. And then, just when you look at the
UN Human Development index, Iran again ranks poorly. Now, again - so these are sort of things that the world economic forum crowd likes to look at, but when we think about power, you think okay, oil and military. And in the case of Iran's oil, oil reserves are depleting fast. Iran is producing four million barrels per day. It exports two and a half because it uses 1.5 at home. As a result of lack of refinery, lack of investment in its oil infrastructure, Iran imports 40 percent of its gasoline needs. It has some of the cheapest gasoline in the world. And this - they've been talking about a gasoline rationing system for a long time. They still haven't been able to put that together.
Iran's oil minister notes that Iran needs $100 billion in investment to reach its target of five million barrels a day of production. Where they will get this investment? There's an Arabic saying -"Allahu `alam" - "Only God knows." And the Persian saying -
faghat khoda meedooneh. There's very little in the way of investment moving to Iran as a result of a wide variety of things from sanctions - and oil industry analysts, consultants, people like Mehdi Varzi and Narsi
Ghorban, they have written often that many energy companies are willing to brave sanctions. But Iran is not providing them proper terms.
Now, in terms of the military, we have the expert on Iran's military here. I would highly recommend Anthony Cordesman's reports on Iran's military, particularly the report
"Weakling or Hegemon," but just some of the - I think we do overplay, in a sense, Iran's military abilities as well. You've got about 1,600 mainly obsolete tanks. Iran's war planes are aging, and its most sophisticated weapons systems are its defensive ones. And so this is not a picture of a country that has done a great deal to maximize its power. So where does Iran derive some of the power that we're talking about?
I think, to some extent, it derives - they have a certain amount of spoiler power. Their influence, as Chas Freeman noted, with
Hezbollah, their influence with Hamas, their influence in Iraq, influence in Afghanistan. Interestingly Iran has influence in places that we value in a sense. And so in a sense we had given them their power -- because if Iran had militias in Central African Republic, or in Southern Philippines, perhaps we wouldn't be so worried about Iran's power.
I think it is worth noting that we are experiencing this historic boom. Not in the Gulf - not only in the Gulf region, but there is even a new Silk Road that it's forming of trade between the Middle East and Asia. Iran likes to talk about itself as formulating independent foreign policy, but it's very much isolated from the region. Even if you compare Saudi Arabia's relations with China and Iran's relations with China, Saudi Arabia's relations with China seem to be more strategic, and China seems to view Saudi Arabia as more of a strategic partner. Whereas Iran's relations with China are more mercantile. We can get into that and talk about that to a great extent.
But in the midst of this historic Gulf boom, in the midst of this growing new Silk Road of trade and investment between the Middle East and Asia, Iran is to some extent the sick man of the new Silk Road. Its economy is diseased, somewhat sclerotic. And so we go back to the original question: who has won the two post-9/11 wars? Iran has won - I would argue - the two post-9/11 wars, but it's not necessarily from things of Iran's own doing. It has far more to do with what we have done in the region. Thank you.
Ambassador Freeman: Thank you very much. I think that is a useful reminder that by virtually any conventional measure, Iran is a weak state, and perhaps we should be more concerned about the prospect of Iranian failure than about the prospect of Iranian success. But the fact remains that, even if it's not an effective competitor with others in the region, or with us, all things being equal, we have made enough mistakes that it has been able to scavenge many advantages for itself. So I would agree with you that it is especially a scavenger in many respects, rather than a country that is on a roll.
Links
BY AFSHIN MOLAVI ON SUSRIS.ORG
ABOUT THE SPEAKER
 Afshin Molavi is the author of
Persian Pilgrimages: Journeys Across Iran (Norton, 2002), which was nominated for the Thomas Cook literary travel book of the year and described by
Foreign Affairs as �a brilliant tableau of today�s Iran.� A former Dubai-based correspondent for the
Reuters news agency and a regular contributor to The Washington Post from Iran, Mr. Molavi has covered the Middle East and Washington for a wide range of international publications. His articles and
op-eds have appeared in
The New York Times, Foreign Affairs, The Financial Times,
Smithsonian, National Geographic, BusinessWeek, The New
Republic, Foreign Policy, The Christian Science Monitor, The
Nation, the Journal of Commerce, and The Wilson Quarterly, among other publications. He comments regularly on Iran and the Middle East on
CNN, the BBC, National Public Radio, and other broadcast outlets. Born in Iran, but raised and educated in the West, Mr. Molavi holds a master�s degree in Middle East history and international economics from the Johns Hopkins University Paul H. Nitze School of Advanced International Studies. He has also worked at the International Finance Corporation, the private-sector development arm of the World Bank.
As a Fellow at the New America Foundation, Mr. Molavi studies the links between economic development and democratization, with a special emphasis on the Middle East. He argues that the region�s widespread economic failure represents the largest obstacle to regional democratization because it creates societies that have weak middle classes that are overly dependent on the state or susceptible to the utopian promises of undemocratic opposition forces. At New America, he will also examine the �New Silk Road��the growing trade, cultural, diplomatic, and business ties between the Middle East and Asia. Mr. Molavi is also interested in issues related to global economic development, globalization and culture, and the economics of immigration.
Source: New
America Foundation
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