20 April 2007

Influencing Iran

Now that the Iran hostage drama has all but been forgotten and while we wait for the next escalation in the nuclear standoff, we are clearly in a period of quiet diplomacy. The question is, who is best placed to achieve possible results? Or, coming at the query another way, which global power is Iran's closest trading partner?

I'll give you a clue: Think about Britain. We are America's largest trading partner, as are they ours. That is reflective of the importance and, historically at least, the mutual influence between ourselves and our trans-Atlantic cousins.

So, what of Iran? A neighbouring Islamic oil-rich state, perhaps? Another Persian or Shi'a Muslim ally? Or one of the rapidly developing, oil-hungry countries in the far-east?

No – the European Union, accounting for more than a third of total market share and 44% of Iran's imports.

Some argue that the EU is therefore uniquely in a position to restrict Iranian access to nuclear technology and precision machinery through a trade embargo. However, this ignores certain other facts, such as that Iran's oil reserves are second only to those of Saudi Arabia and Iran last year purchased around one billion pounds worth of goods from Britain. If Europe doesn't buy from Iran, then countries such as China will quickly snap up the spare oil capacity and Pakistan the spare gas capacity, while others like Russia will be more than happy to sell Iran the equipment and expertise it seeks – the only economy that will be damaged by sanctions will be ours.

There is, however, another possibility. Coming yet another way at our original question about who is best placed to achieve possible diplomatic results, which global power has greatest potential to increase their trade with Iran?

The answer to that is, of course, America.

The United States has imposed a full trade embargo on Iran since 1995, but in reality to little effect as the Iranians have been able to find alternative markets elsewhere. If the White House were to adopt the recommendations of the Iraq Study Group and lift economic sanctions against the theocratic regime, they would raise living standards among the millions of Iranian citizens who were persuaded at their last presidential elections to give up on the seemingly slow progress of the reformists and to take a chance on the "man of the people." By developing trade links with the Islamic republic, America would be improving the lives of ordinary Iranians, fomenting popular pressure for political freedom to match their newly-gained economic liberties. At some point, however, the time for such a long-sighted approach to overcome the current impasse will run short.

America has it within its power to undermine the mullahs' regime and promote democratic reform. Whether it chooses to exercise that power could have global ramifications for us all in the coming years.