Iran's Adventures in Latin America

Iran's Adventures in Latin America

By Richard Javad Heydarian, November 18, 2010

As the United States continues to isolate Iran over its nuclear program, the Islamic regime is engaging in a foreign policy counter-attack with profound strategic consequences. The theater of strategic warfare between the United States and Iran has expanded well beyond the Middle East.

Under immense short-term pressure from both within and without, the Iranian leadership has chosen to pursue a grand strategy in the most unlikely corners of the world. From sub-Saharan Africa to Latin America, Iran is selling arms, offering aid and investments, and otherwise establishing a new pattern in south-to-south relations as it battles what President Mahmoud Ahmadinejad calls “Western arrogance.” Iran’s greatest achievement in Latin America is its strong ties with oil-rich Venezuela and its burgeoning friendship with rising great power Brazil. This bid for greater influence in the U.S. backyard has not yet led to a direct confrontation. But with a nuclear agreement still up in the air, Iran’s “Latin connection” may well pose an unwelcome challenge to the Obama administration.

Iran’s Charm-Offensive

Encircled by unfriendly, if not hostile, neighbors - most allied with the United States – Iran has relied on subtle diplomacy in its quest for national survival, regional acceptance, and recognition. Since the Islamic revolution in 1979, Iran has focused on developing ties with two major countries with veto powers in the UN Security Council: China and Russia. In the aftermath of the Iran-Iraq War, Iran’s growing foreign policy pragmatism encouraged its leaders to forge deeper ties with developing nations as well as with the lucrative markets of Europe. During this period, Iran strengthened its ties with Asian giants such as India, Japan, and Korea. In the late 1990s, reformists in Iran widened the circle of diplomatic contact to include Turkey and Venezuela.

After 9/11, Iran intensified its foreign policy experimentation. Although increasingly isolated from the Western order, Iran has actually gained significant ground in its ties vis-à-vis the developing world. In its own backyard, Iran has strengthened its position in the Persian Gulf by engaging in aggressive diplomacy with the Gulf Cooperation Council (GCC). It currently enjoys strong ties with Qatar and stable relations with Bahrain and Oman. 

Iran has also been at the forefront of rhetorical pronouncements, initiatives, and grand agreements adopted by the Non-Aligned Movement (NAM), which encompasses a majority of the world’s population. In 2008, Iran hosted the 15th meeting of NAM Foreign ministers with 118 countries, 15 observers, and eight regional and international organizations attending the mega-event. The meeting concluded with a pledge of support for Iran’s nuclear program. Iran is set to hostthe 16^th NAM summit in 2012. In Africa, Iran has established strong ties with Nigeria, South Africa, Senegal, and Kenya. In exchange for diplomatic support from key African nations, especially in the UN General Assembly, Iran has offered generous packages of aid, investments, and technology transfers. For instance, Iran has become one of the leading importers of Kenya’s tea exports and a major investor in the country’s energy and infrastructural sectors. In addition to offering humanitarian aid on at least 93 occasions, Iran has helped to mechanizeZimbabwe’s agricultural sector.

Following in the footsteps of China and Russia, Iran is aggressively courting the left-leaning powers in Latin America, challenging the United States in its own backyard. One of the fruits of Iran’s diplomatic labor in Latin America was Brazil and Venezuela’s vote in the 35-member IAEA Board of Governors. In late November 2009, as Iran’s secret enrichment plan was revealed, Brazil abstained and Venezuela opposed a resolution that called on Iran to halt uranium enrichment and immediately freeze the construction of its new nuclear facility near Qom. In economic terms, Venezuela is Iran’s biggest market in Latin America, while Brazil is the continent’s biggest exporter to Iran.

Iran-Venezuela Alliance

Iran’s relationship with Venezuela is similar to its ties with Syria in the Middle East: a strategic alliance reinforced by underlying ideological alignment and burgeoning economic interdependence. This mutual cooperation permeates every aspect of the state and the society. Iran is not only a political ally of Venezuela in the Organization of Petroleum Exporting Countries (OPEC), but it is also becoming a major investor in the country’s economy and is increasingly integrated in the financial and banking system.

Iran and Venezuela are launching joint ventures in sectors such as energy, agriculture, manufacturing, housing, and infrastructure. In 2007, the two countries announced that they were finalizing a $2 billion joint-fund for their numerous projects, including those in Nicaragua, Bolivia, and other partner countries. Already a major investor in the $4 billion Ayacucho oil field joint project, Iran agreed in 2008 to invest an additional $760 million in Venezuela’s energy sector. In 2009, Venezuela agreed to invest $760 million in Iran’s South Pars gas field. In late October 2010, as collective sanctions on the Iranian economy started to bite, Venezuela offered an $800 million investment package in Iran’s Pars Field gas sector. 

Because of its own limited domestic reserves available for its nuclear program, Iran has also actively helped Venezuela in mining uranium. The Carnegie Endowment estimates that Venezuela has 50,000 tons of unmined uranium. Cultural and educational ties are also improving with both countries establishing a joint academic program on socialism, removing visa restrictions, and beginning direct flights between Tehran and Caracas. Iranian businessmen are flocking to Caracas, building factories and establishing many new ventures.

Iran’s own financial system remains undeveloped – thanks to decades of state-centered economics and several UN resolutions against Iran’s nuclear program. Venezuela provides a perfect opportunity for Iran to engage in numerous international financial transactions beyond the restrictions imposed by Washington and its allies. Iranian banks are already establishing subsidiaries in Venezuela, such as the International Development Bank in Caracas, an independent subsidiary of Export Development Bank of Iran.

While Venezuela strengthens Iran’s position in the Saudi-dominated OPEC and the Western-dominated International Atomic Energy Agency (IAEA), Iran helps Venezuela in advancing its leftist-socialist agenda in a region that is still skeptical of Hugo Chavez’s style of anti-Americanism. Globally, the two countries reinforce each other’s anti-U.S. agenda.

Iran-Brazil Partnership

Chavez’s regular chats with Ahmadinejad have become a familiar scene in the international media. But last November’s close confab between President Ahmadinejad and President Da Silva (Lulu) astonished the world and jolted policymakers in Washington. The message was clear: Iran’s strategic maneuvering in the region has entered a new phase of growing south-to-south relations in the face of Western decline.

The relationship between Brazil and Iran is not an alliance, since the degree and extent of cooperation between the two countries is not as strategically deep and politically intertwined as in an alliance. But the strategic value it holds for both countries is undeniably huge. As Iran searches for relationships with influential countries that are sympathetic to its nuclear policy and have a vote in the Security Council, Brazil is thinking about playing the “Iran card” to catapult itself to the apex of international hierarchy. For Brazil, developing a special relationship with Iran would increase its stake in the major security issue occupying the minds of the world’s top policymakers. This would gradually reinforce Brazil’s argument for permanent membership in the Security Council and improve its global credentials as a new, responsible great power capable of resolving pertinent international issues. 

In May 2010, Brazil joined with Turkey to broker a nuclear agreement with Iran, the Tehran Declaration, which called upon the Islamic regime to transfer a portion of its nuclear material for enrichment abroad. Although the United States and its allies sidelined the deal, the declaration positioned Brazil at the center of the nuclear standoff between Iran and the West. By opposing sanctions against Iran, and aggressively calling for diplomatic resolution of the problem, Brazil has become an unlikely guarantor of Iran’s sovereign rights. Iran could not ask for more. It chose Brazil, along with Turkey, as its main mediators in the upcoming nuclear negotiations that will take place later this month, likely in Turkey.  

Brazil is also interested in investing in Iran’s vast energy resources. In 2003, Brazil’s Petrobas obtained the rights to explore Iran’s vast offshore oil reserves in the Persian Gulf. The following year, Petrobras signed an even larger explorationdeal with Iran to drill in the Caspian Sea. Dismal for decades, trade between the two countries has recently increased – although a huge amount has traditionally been through a triangular trade network with the United Arab Emirates. After a momentous visit by the Brazilian Foreign Minister to Tehran in 2007, Iran announced that it would increase bilateral trade by as much as $10 billion. Currently, bilateral trade stands at $1.3 billion.

Challenging the Monroe Doctrine?

U.S. supremacy in the Western Hemisphere is far from over. But it is unclear whether the United States is contemplating any concrete foreign policy measures to counter Chinese, Russian, and even Iranian strategic incursions into its own backyard. On the other hand a new political wave has swept across the Americas. Observing the shift of global economic order toward greater multipolarism, many Latin American countries are beginning to diversify their trade and political relations beyond the Americas. Persistent economic growth, and the gradual relative decline of the United States, is injecting a new sense of confidence in the hearts of many left-leaning leaders in the region to explore ties with countries in Asia, Africa, and Europe. The rise of economies in oil-rich Middle East and East Asia signals the opening of new opportunities for major-exporting countries, agricultural giants, and resource-rich nations such as Brazil. 

Despite the gradual shift of power from West to East, neither Brazil nor Venezuela is fundamentally altering its foreign policy orientation. Chavez is under immense pressure to improve domestic economic conditions. Iran, alone, cannot supply Venezuela with what it needs. Brazil, meanwhile, would not endanger its substantial economic ties with the United States and its allies. Still, Latin America’s largest country has become an indispensable partner in crafting a sensible diplomatic solution to the simmering conflict in the Middle East, though it remains to be seen whether Brazil’s new president Dilma Rousseff will be as pro-active as her predecessor in pushing for a Brazilian role in resolving the Iran-West nuclear stand-off.

In the end, the United States has enough leverage to temper the intensifying relationship between Latin American powers and Iran. But the United States is also spending considerable political capital in convincing its main European allies to isolate Iran. This diplomatic effort has the unintended consequence of forcing Iran to find friends elsewhere. In the end, then, the United States is in part responsible for Iran showing up in its backyard and challenging the Monroe Doctrine.