George Friedman: Hi my name is George Friedman and I'm chairman of Stratfor, and what we're going to be doing today is talking a little bit with Michael Nayebi — the Middle East expert we have. We're going to be talking a little bit about Iran and where we stand in the negotiations between the United States, European Union and the Iranians. Welcome Michael. Where are we?
Michael Nayebi: What we've seen since the supposed breakdown of negotiations between Iran and the P5+1 group in Geneva last weekend, is that negotiations behind the scenes have been continuing. So, the Iranians have had a chance to take some of the proposals from the Americans and some of the European allies back home and see what sort of support they can get from their home base for them, including some proposals which — leaks are indicating — bring back some of the limits and restrictions on the domestic refining from the 2009 round of negotiations.
George: What are those limits like?
Michael: They involve some removal of enriched uranium out of Iran. They are going to place caps on enrichment activities at different centers, with greater inspections by the IEA.
George: You know, in going back over this, one of the things I've written about in the Geopolitical Weekly was the kind of logic that was here. The United States wants to get out of the Middle East. Not get out so much, but they don't want to have a military footprint bogging them down. The Iranian strategy of trying to create a sphere of influence collapsed. Their reversal in Syria has been marked. The situation in Iraq is not as stable as they hoped it would be. The financial situation resulting from the sanctions are more intense than I expected them to be. Both sides need a deal. The United States needs a deal because they need to have a balance to the Saudis, they need to have a balance in the region. They can't just be on one side or the other of the Islamic world. And working with the Iranians allows them [that]. The Iranians need to get out of the situation because they really have walked into their own fist. What happened in Syria certainly hurt them, but these sanctions, I think they're surprised at how badly it hurt them. So we really seem to be on the verge of a strategic breakthrough, whatever the details are.
Michael: I agree. I think the American's impetus here is their regional ambitions, however, their global attention span needs to shift away from the Middle East. And they need a balance of power to include Iran. So they can do that, but I think the Iranians' domestic concerns…of course, the sanctions were not designed to create economic collapse and bring and the regime themselves, but they were intended to put enough pressure on the government in Iran to come to negotiating table, and I think we've seen that. The economy, much like the United States and other countries across the world, is the primary concern of the average Iranian. With rising inflation, lower job opportunities and an increased aspiration to distribute the country's oil and gas wealth, and help propel the country into middle class status. The government has to be able to meet those demands.
George: Well, they're not going to do that simply with oil sales.
Michael: No they're not.
George: For one thing, their oil production capability has to be dramatically upgraded. Secondly, being an oil producer gets questioned a lot of the time when new technologies come in that might attack the price of oil. So they're really going to have to…what they really want to do — and this is surprising because the Ayatollah Khamenei appears to accept this — they need to try to modernize their economy. They can't do that without foreign investment. And they've got to have a relationship with the United States.
Michael: Absolutely. At over 70 million the Iranian population is far too large to be supported by its hydrocarbon sector. To a similar extent as the, you know, small oil gulf monarchies across the Persian Gulf from Iran: they need to bring in foreign technology and investment to expand their manufacturing sector. They cannot just employ people with a population that size, just off oil and gas. They need to be able to better feed themselves; they need agricultural investment. As you said, what they are looking to do is not just necessarily end sanctions to sell more oil, but rather welcome the international community into Iran to help Iran emerge from decades of stymied economic growth.
George: Well, it's going to be — not just welcoming in the international community, that's hard do — it's going to have to be staged and careful. But in the end, something I wrote a couple of years ago (a book called The Next Decade) has a chapter predicting that there was going to be a rapprochement between the United States and Iran — I called it a reversal. You wind up at these moments in history when only a radical break with what went down in the past will happen, and will always be with someone you despise. I remember, when I was young, the rapprochement between Nixon and Mao Zedong. Two men who loathed each other, distrusted each other, had the vilest things to say about each other. But they also needed each other to contain the Soviet Union at the time. The same thing with Iran — one is the evil empire, the other is a great Satan. These are the moments in geopolitics that are really extraordinarily, historically, interesting because it's a moment when history is made. And what's really interesting to me is the way in which last week's discussions ended. It didn't end with any hint that the negotiations were over. They ended with a very clear commitment to continue the negotiations. Which are going to begin assuredly. I'm sure that behind the curtain a great deal conversations have gone forward. It is a kind of compulsion. It's interesting, of course, to take a look at some of the other players in the region; Saudi Arabia, Israel. They're not happy at all. What are your thoughts on that?
Michael: If you're Israel, who has built your national defense strategy on having this this large external threat, and positioning yourself in a way that brings the American industrial base and their military prowess to come boost your own limited capabilities, you need that Iranian threat there. They need a geopolitical environment in the Middle East which keeps the US engaged, that has US skin in the game.
George: I think there you're right. They don't want the United States to become neutral in the Middle East. Their national strategy depends on a commitment to Israel's survival. But of course, the American position is that the United States is committed to Israel's survival. Israel's survival is not at stake, and if we negotiate away the nuclear weapons that the Iranians have, then Israel is even more secure. So this is not an issue. I think even more frightened than the Israelis are the Saudis.
Michael: Well absolutely. You have their historical competitor in the region coming to some sort of deal or negotiation with the United States, and Saudi Arabia has built its post Cold War identity as being that partner to the United States in the region.
George: And reading back to its founding, it was a partner of Britain or the United States. What moves do you think the Saudis are going to make?
Michael: I think the Saudi's have already begun their rhetorical campaign against the negotiations, but they're very limited in what they're going to be able to do. Part of their fear and their trepidation stems from the fact that they are naturally such a weak country, and they need that strong, foreign backer in the United States. They're very unlikely to engage in some sort of military action or militant support. They can't afford playing with international oil markets. A lot of the tools that they had in the past have been severely reduced, or will hurt them now as much, if not more, than their opponents. So we're going to see, I thin, a Saudi Arabia that's forced to accommodate begrudgingly.
George: How can these talks fail? What can go wrong?
Michael: As we saw after the Geneva talks, with the unannounced but known need for the Iranian negotiating team to go back home to get approval from the other politicians, or the supreme leader in Iran…We've seen some grumblings out of some conserve hardline groups in Iran, like the Revolutionary Guard Corps and some of those entrenched business interests that don't want to see liberalization of the Iranian markets. We could see, you know, there's always speculation — could they try and remove the president, remove the supreme leader. Could there be a coup? These things in the end are ultimately very damaging, either to the Iranian economy, or internal domestic political stability. So, I think while we might see some attempts at shaping the negotiations to better serve the interest in Iran, we're unlikely to see a successful campaign domestically that would derail the talks, either through violence or intimidation of the political leadership that's currently engaged in negotiations to the last.
George: Well you have the problem both sides: you have strong forces in the United States who oppose settlement. You have strong forces inside Iran who oppose a settlement. But what's really interesting is how little criticism there's been so far in the United States. And what's really impressive is Ayatollah Khamenei's very public support for President Rouhani. And so on that basis, I think there's a real chance of going forward. Anyway Michael, thank you!
Michael: Thank you.
George: And, this is George Friedman, and I thank you for joining us, and I hope to see you again soon I hope.