Farewell, 'Death to America!'
The infamous Islamic Revolutionary Guard Corps commemorated the thirty-fourth anniversary of the beginning of the Iran Hostage Crisis on November 4th with the biggest "Death to America" parades and flag burning photo-ops in the last decade. These festivities even included competition among different units to see who could most creatively depict Iran's hatred of America. But away from the media; the Iranian government and the Obama State Department are actively negotiating for a strategic détente to try to offset America's loss of power in the Middle East as a result of administration's disastrous Arab Spring initiative. The Revolutionary Guard antics are for public consumption. They control big pieces of the Iranian economy and stand to financially gain by any rapprochement with the United States.
On November 4, 1979, an angry mob, calling themselves the Muslim Student Followers of the Imam's Line, overran the United States Embassy in Tehran and took more than 60 Americans hostages. The students originally considered storming the Soviet embassy because they were "a Marxist and anti-God regime", but chose the American Embassy for "Announcing our objections from within the occupied compound would carry our message to the world in a much more firm and effective way." Over the next 444 days (November 4, 1979 to January 20, 1981), President Jimmy Carter was thoroughly humiliated and America has essentially been at war with Iran ever since.
Iran holds the world's second-largest natural gas reserves and fourth-largest proven oil reserves. Iran is the world's third-largest natural gas producer and the second largest OPEC oil producer. Crude oil production fell in 2012 due to lack of foreign investment and technology, but Iran remained third-largest exporter of crude oil. With investment, Iran could easily double oil production and could begin massive export of natural gas.
Although the show of anti-Americanism by the IRGC was scripted to display continuing anger of the Iranian people against the "Great Satan"; nothing could be further from the truth. Iran's economy has suffered tremendously from U.S.-led sanctions. In preparation for the anniversary, a week ago Tehran authorities took down the dozens of anti-American billboards that had been a visible reminder of the two countries' antagonism for many years.
The IRGC gained control of most aspects of Iran's oil industry and wide swathes of the Iranian economy during the Western decade of embargos. If the U.S. and Iran reach a comprehensive agreement, Western investors will be looking for an opportunity to revive Iran's dilapidated but potentially lucrative energy sector where the Revolutionary Guards hold a dominant stakes. The Guards understands the lucrative nature of normalizing relations with America and want a prominent seat at the negotiating table between the Islamic Mullahs and the Iranian politicians.
Iranian President Hassan Rouhani also benefits from the Revolutionary Guard's demonstrations, because it makes him look like he will need more concessions from the Americans to cut a deal. This is a classic bargaining tactic and he obviously wants the maximum benefits in exchange for Iran agreeing to reduce its nuclear activities.
Rouhani understands that the U.S. is not going to make any big and obvious concessions at this time,without protracted negotiations that lead to Iran offering verifiable freezing of uranium enrichment and opening of itself up to real inspections of all nuclear facilities. What Iran wants is to renegotiate energy export deals with its major trading partners. Iran wants to shift from trading oil for bartered goods on highly unfavorable terms. They want to return to a system where Iran can use its foreign currency earnings on energy exports to shore up their Central Bank and channel investment toward much-needed development projects.
The Iranian media has reported that Iran's parliamentary speaker Ali Larijani struck a deal with the Chinese leadership for Beijing to unfreeze $22 billion worth of hard currency payments that Beijing owes to Tehran, but that are stuck in a Chinese bank escrow account due to sanctions. According to the reported terms of the deal, China would channel the cash into badly-needed development projects in Iran, such as major refinery upgrades. There has been no official Chinese confirmation of the deal, but the United States would need to agree to not publicly object to this or any similar deals.
The Obama Administration's Arab Spring initiative has dramatically undermined America's influence and security for access to oil throughout the Middle East. Instead of a hundreds of million people embracing democratic institutions and greater acceptance of women's rights, al Qaeda and Salafist warriors have gained dominant power and huge numbers of new recruits. Oil supplies from North Africa have shriveled and Saudi Arabia, the United Arab Emirates, and Iraq now face political instability.
China, India, and Japan are completely dependent on imported oil from the Middle East. Sanctions against Iran have increased their reliance for energy on potentially unstable Gulf states. Without a negotiated end to the sanctions, it is only a matter of time before one or more of these nations breaks the sanctions and moves to full importation of Iranian oil for hard currency.
Reuters just reported that representatives from Iran, Israel, the United States and unnamed Arab states attended a secret Nov. 2 meeting in Switzerland to discuss banning nuclear weapons in the Middle East. The Iranian Revolutionary Guards have gained power and profit during the Western sanctions. But with oil production falling and no way to exploit their natural gas reserves, the Revolutionary Guards' business model is beginning to shrivel. If Iran and the United States can negotiate a reduction in tensions the Revolutionary Guards stand to be a prime financial beneficiary.