Iran Watch: Oil, oil everywhere

With all the talk about an April 13 date being set for nuclear talks between Iran and the world's top powers, another important milestone got lost in the shuffle: today, March 30, when President Obama is required by a U.S. sanctions law to determine whether, as Reuters puts it, "the price and supply of non-Iranian oil are sufficient to allow consumers to 'significantly' cut their purchases from Iran." If the answer to that question is yes, then, beginning in June, the United States can proceed with its effort to isolate Tehran by sanctioning foreign banks that continue to purchase Iranian oil.

Obama's conclusion? There may not be oil, oil everywhere, but there's enough of it to greenlight sanctions. The Associated Press has more:

The president said he based his determination on global economic conditions, the level of spare oil capacity, and increased production by some countries, among other factors. He said he would keep monitoring the global market closely to ensure it can handle a reduction of oil purchases from Iran.

With oil prices already rising this year amid rising tensions over the nuclear dispute between Iran and the West, U.S. officials have sought assurances that pushing countries to stop buying from Iran would not cause a further spike in prices.

That's particularly important for Obama in an election year that has seen an increasing focus on gas prices.

Iran meter: Obama's decision clears a path for the administration's aggressive sanctions strategy, which it favors over military conflict.

But there's a wrinkle. Globalization has proven a double-edged sword for sanctions regimes. As scholars Steve Smith, Amelia Hadfield, and Tim Dunne note, an interdependent world economy can make countries more vulnerable to international sanctions. Yet globalization also means that countries facing sanctions can seek out alternative markets and suppliers.

This reality has been on vivid display recently. Bloomberg takes a look today at how China and India are evading U.S. and EU financial sanctions by buying Iranian oil in exchange for local currencies or goods such as wheat, soybean meal, and consumer products. During a meeting in New Delhi this week, the BRICS group of emerging world powers -- Brazil, Russia, India, China, and South Africa -- declared that they would continue trading with Iran in defiance of U.S. sanctions.

This doesn't necessarily mean Western sanctions are doomed. Turkey, the fifth largest buyer of Iranian oil, announced today that it would cut imports of oil from Iran by a tenth in the face of U.S. pressure. And the Congressional Research Service's Kenneth Katzman tells Bloomberg that Iran's "junk-for-oil" program with countries such as China and India is economically unsustainable. "Iran cannot stabilize the value of its currency with such unorthodox payment methods," he explains.

But the big question is whether, come June, the United States will actually sanction Chinese and Indian banks -- an action fraught with political landmines. Obama's announcement today doesn't get us much closer to answering that question.

For more support for keeping the Iran meter at Natanz to Worry About, check out Amir Oren's argument for why Israel may be postponing an attack on Iran and Karl Vick's report on Israel's intelligence services scaling back covert operations inside Iran. (And for a gripping account of how an Israeli strike might play out, read Gary Sick.) 

Note to readers: Earlier this month, I dismissed the importance of Azerbaijan's pledge to prevent any country from using its territory as a launching pad for an attack on Iran, arguing that Israel probably wouldn't strike Iran through its neighbor to the north anyway.

This week, Mark Perry reported at Foreign Policy that Azerbaijan has granted Israel access to airbases near its border with Iran, which could heighten the prospect of an Israeli strike. Authorities in Azerbaijan have denied the allegations, and some others have expressed doubt that Israel would actually use Azeri airbases as part of an attack. But the report does raise the question of whether my headline -- "You can stop worrying about Azerbaijan" -- needs revising. 

Saul Loeb/AFP/Getty Images


The Dams of Chongqing

Mapmakers and geologists divide the Yangtze River, the third largest in the world, into three sections: China's mighty "Mother River" begins in the Tibetan plateau, slowly gathering strength as it meanders through a relatively barren expanse of rock and ice; then rather suddenly, the river begins to run rapidly as it plunges down a steep gradient, meanwhile swerving around hairpin turns and through steep gorges; in the final stretch, the river courses across relative flatlands and past increasingly large cities before emptying out into the Pacific Ocean near Shanghai.

The upper-middle section is the Yangtze's contested stretch. The steep gradient and fast-running water make it enticing to dam developers, yet this section is also spawning ground for about 40 species of endangered fish, including the Chinese paddlefish, Dabry's sturgeon, and the Chinese suckerfish.

After construction began on Three Gorges Dam -- which changed the river's hydrology and drastically reduced the habitat of fish dependent on low-range rapids to lay and hatch eggs -- China's central government established a protected zone where dams could not be built: the "Upper Yangtze National Nature Reserve for Rare and Endangered Fish" was designated along a free-flowing stretch of the Yangtze between Tiger Leaping Gorge and Three Gorges Dam. It lay, notably, within the boundaries of sprawling Chongqing municipality.

Yesterday, however, ground was broken in Chongqing for development of the Xiao Nan Hai power station. A massive cascade of at least 14 dams is now slated for construction between Tiger Leaping Gorge and Three Gorges Dam. How can this happen? The reason is that in late 2011, the boundaries of the national fish reserve were moved upstream, in spite of the protests of Chinese environmental groups and a series of critical articles in state-run media.

To move a national reserve's boundaries would have required the sign-off of the national Ministry of Environmental Protection, the Ministry of Agriculture (which oversees fisheries), and the State Council. To make this happen would have required the advocacy of someone with substantial political capital.

The developer of the dam cascade is the Three Gorges Dam Corporation, and local media estimate project costs will tally about 33 billion RMB ($5 billion). That's a hefty sum, even though the overall economics of the project are questionable. In terms of per-kilowatt costs, "it will be 2 to 4 times more expensive than dams above and below it," says Li Bo, head of the Beijing-based NGO Friends of Nature, adding: "It's really the last straw for the fish - this is the only remaining free-flowing stretch on the main course of Yangtze River."

Plans to build dams on this section of the Yangtze have been floated since at least the early 1990s, but economic and environmental concerns have repeatedly tabled dam proposals. That changed in 2009 when the Chongqing municipal government, under the leadership of recently deposed Party Secretary Bo Xilai, began to advocate strongly for the Xiao Nan Hai hydropower project, adding it to its list of key projects for the 12th Five-Year Plan period (2011-2015).

One might wonder if pushing the dam project forward was as much about raising Chongqing's GDP -- padding it with that 33 billion RMB -- as about keeping the lights on. "The beneficiary of this dam is going to be Chongqing municipality completely," notes Li Bo. "And we don't understand why one municipality has such a power to abuse nature and threaten the biodiversity of the whole nation."

Since 2009, Li Bo and other Chinese environmentalists have repeatedly surveyed scientists about potential impacts and written concerned letters to Beijing ministries and to the Chongqing Municipal Government. (A video created by the Chinese NGOs about the expected impacts of the dams is visible here.) "This is an extremely important area for biodiversity - and yet all these unbelievable [regulatory] barriers have fallen," says Ma Jun, author of China's Water Crisis and director of the Beijing-based Institute of Public & Environmental Affairs. "It's a very hastened process, even by Chinese standards."

Yet perhaps none of this is surprising in Chongqing. In recent years, the southwestern metropolis has earned a reputation as a place where breakneck development has been advocated at any cost - where varied obstacles, from green regulations to local mobsters, have been unsentimentally flattened. Chongqing's growth target for 2011 was 13.5 percent GDP, the highest in China. And it was this startling growth rate that helped propel Chongqing's former Party Secretary onto the national radar and almost into the very innermost sanctum of Chinese politics. Until his star came crashing down.

The sad irony now is this: The brakes have been slammed on Bo Xilai's political career - but not on all his tenure wrought.