Did Iran Just Blink?

2011 was not easy on Iran. Tactically speaking, the regime’s brand suffered from stunts like the foiled assassination plot targeting Saudi Arabia’s ambassador to Washington and the November assault on the British embassy in Tehran. There’s reason to believe both episodes have the regime’s fingerprints on them. Strategically the game is changing too.  While long-time American allies were forced from power, uprisings eventually erupted in Syria—the “Jesus pin” of Iran’s strategic constellation, which affords it access to favored proxies in Lebanon and the Palestinian territories. Sure there were some small victories to be celebrated by the regime: they captured an American drone, possibly revealed dozens of spies, and opened the Bushehr nuclear reactor on September 12. But the promising chaos of 2011 never translated into concrete gains. Meanwhile, Turkey changed from friend to foe, the Gulf Cooperation Council took a hands-on approach to regional unrest, and the US will maintain 40,000 military personnel within striking distance of Iran for the foreseeable future.

This realization might best explain Iran’s unexpected outreach to Saudi Arabia this week. On Tuesday, Iran’s Oil Minister, Rostam Qasemi, agreed to a new crude oil output framework in line with Saudi Arabia’s production goals. OPEC agreed to maintain an output level of 30 million barrels per day. Remember it was only six months ago that Iran led price hawks to demand a decrease in production. Such a move would raise prices, of course, and benefit Iran because it—like many other OPEC members—already operates at maximum capacity. And so it wants the highest price per barrel. Meanwhile, Saudi Arabia and Gulf Arab producers with spare capacity sought higher production (instead of higher prices) so that a fragile global economy might not be harmed further. (Note: spare capacity is the ability to pump more oil as necessary and moderate prices.)

The June 8 OPEC meeting was an embarrassment. Saudi Oil Minister Ali Naimi memorably said it was OPEC’s worst ever. Leading up to the meeting, President Ahmadinejad was caught in a public spat with Ayatollah Khamenei. He tried in April to dismiss Intelligence Minister Heidar Moslehi. The Supreme Leader denied the president, however, and Ahmadinejad instead dismissed three other ministers, including Iran’s oil minister.  In a daring attempt to enhance his status while under pressure from conservative opponents at home, he appointed himself caretaker oil minister shortly before OPEC’s June 8 meeting in Vienna. The Guardian Council denied him on constitutional grounds. Ahmadinejad then appointed a friend, Mohammed Aliabadi. Prior to his appointment as oil minister on June 2, Aliabadi was best known for threatening to boycott the 2012 Olympics in London because the Committee’s stylized numerals for “2012” could instead be misread as “ZION.” He previously served as vice president of athletics. Seriously.

Aliabadi’s performance was less than stellar. Even though Iran held the OPEC presidency in 2011 and the country is the organization’s second-largest producer, Saudi Arabia and Gulf Arab producers went ahead and expanded production in spite of Iran. Only one month later, after Aliabadi’s failure and Ahmadinejad’s stunning setbacks at home, the president appointed an IRGC commander to run Iran’s oil affairs. It was this new minister, Rostam Qasemi, who arrived at OPEC’s December meeting with a very different tone, approach, and result. This shift in posture is all the more dramatic given what happened on Monday.

Iran’s Intelligence Minister—the one Ahmadinejad failed to dismiss in April—visited Saudi Arabia two days ago in a surprise visit. He met with Crown Prince (and Interior Minister) Nayef and Saudi Intelligence chief Muqrin. According to the spokesman for Iran’s Foreign Ministry, Moslehi hoped to convince his Saudi counterparts that the alleged assassination plot was bogus. I have no doubt that the meeting was stiff but friendly enough. The Saudis are not prone to emotional outbursts when hosting members of foreign governments—even those representing their arch-nemesis. As much as I would like to be a fly on the wall for the meeting, the most revealing comments probably came afterwards, in private, and were made once the parties were separate. One would assume that Tehran insisted on the meeting since their official made the trip; this might also explain why the Saudis accepted. Moslehi did not meet the king but did meet the man who may soon inherit the throne. He might even have relayed a message from Ayatollah Khamenei.

The OPEC announcement and Moslehi’s visit suggest Iran wishes to improve relations with Saudi Arabia before the Kingdom is asked by the European Union to replace lost Iranian crude. Next month, the EU will consider new sanctions against Iran’s oil and banking sectors that could result an embargo against Iran. If it happened–and I doubt it will–the EU would presumably turn to those with spare capacity to make up the difference. According to the Associated Press: “Iranian oil Minister Rostam Ghasemi [written above as ‘Qasemi’] said he had met with Saudi counterpart Ali Naimi and gained a pledge that the Saudis would refrain from flooding the market with extra oil in case an international embargo on Iranian crude hurt Tehran’s ability to sell its petroleum.” Qasemi’s emphasis on an unconfirmed verbal agreement that would handicap EU sanctions reveals what Tehran is most worried about. Beyond this, official denials claiming Iran will not target Turkey’s new radar system or practice shutting down the Strait of Hormuz—through which 40 percent of world crude passes daily—suggest Iran’s hard-liners may be having second thoughts about their confrontational approach.

Iran’s strategic portfolio is in jeopardy, economic sanctions make life uncomfortable, and diplomatic isolation is reaching new depths after several European countries withdrew their ambassadors to Tehran after Britain’s embassy was attacked. It’s hard to believe Iran’s efforts to reconcile with an historic rival are disconnected from this year’s many troubles.

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