Iran: Its Relations with the World and Turkey*
Sema KALAYCIOĞLU
Prof. Dr. Sema KALAYCIOĞLU
Release Date : 11/3/2014
Iran: Its Relations with the World and Turkey* Iran has long been suffering, socially, economically and politically because of the “smart sanctions”. In addition to the burden of sanctions the falling price of oil is likely to strain the Iranian economy further.  In a country where there are 78 million people, there are immediate and urgent needs for food, drinks, textiles, medical and pharmaceutical products, transport vehicles and all other goods and services, which may not be sufficiently produced domestically. As we all know no sanctions are smart enough and fully effective as they are often bypassed through many illicit channels. Nevertheless, “smart sanctions” and the isolation that comes along make the ordinary Iranians suffer most to a point, where they have opted for change in the Iranian politics.
 
Partly due to sanctions there is 14.9% official unemployment and 50% inflation in Iran. The urgent duty of the Ruhani administration must be to ensure the provision of reasonably priced products to Iranians. Imports from outside must start, so that industrial productivity in manufacturing picks up. Iran also needs to export more so that the 35-40 billion dollar worth of current account deficit narrows. For all those reasons it is very important for Iran to reintegrate with the rest of the world.
 
Iran in No Shortage of Market Alternatives
 
Iran has alternative markets to sell its valuable natural resources even under the “smart sanctions”. But it needs to reform itself, upgrade its physical, legal, institutional and economic infrastructures to stimulate economic growth, and find markets for its exportable in more favorable terms to prosper. Iran has been replacing its traditional partners within the scheme of the South-South dialogue in recent times, to overcome the difficult times. China, India and the Emirates as well as countries of Africa have become important trade partners for Iran. Those countries are likely to stay by Iran for a long time to come even after and even if sanctions of the West are completely lifted.

Iran’s Most Important Comparative Advantages
 
Aside from its absolute advantage in oil, natural gas, and uranium and other precious minerals and mines, Iran is a country which has an important technological endowment, engineering expertise, and know-how, rich stocks of uranium and most importantly great devotion and dedication to their Patria (vatan). It was the West, which helped Iran develop nuclear programs since 1950s, and even flirted with the USA during the Clinton administration. Iran has the capacity to enrich uranium on its own and operate a nuclear facility without the assistance of others.
 
Iran has deep rooted scholarly traditions, prolific literary culture, scientists, engineers, and mathematicians that win medals. Highly qualified human resources are assets for any country.  This is one comparative advantage of Iran, which has been preserved despite the 30-year long isolation from the rest of the world and the brain drain the authoritarian regime has long come to accelerate.
Therefore it is not surprising to see Iranians especially in diplomatic and technical international negotiations to hold the upper hand with their calm, well informed and self-confident diplomacy.

An Important Must: Confidence-Building
 
It is my contention that the resentment of the US and its Western allies against Iran stems from 2 reasons: 1. Growing fear of the West because of the alleged intentions of Iran’s nuclear enrichment. 2. Iran’s closer relations with Russia in recent years, which developed because of Iran has tense relations with the West. The latter is understandable especially under the recent developments regarding Russia- Ukraine gas wars. But the former one is not fully comprehensible because it was the West, which introduced Iran the nuclear programs in the first place, and Iran has had the capability to pursue it alone since then.

Reassuring the World At the Expense of Domestic Opposition
 
What may be causing problem in relations can only be explained by the “lack of confidence” (not to the country per se, but to authoritarian figures, actions of whom cannot be controlled and therefore suspected of) the world has when it comes to Iran. Iran has to ensure the world about its trustworthiness.
 
Nuclear enrichment has long been a crown and a prestige project for Iran. It has therefore proven so far that the project will not be abandoned under any circumstances and under any pressure or stress. However, for understandable reasons and need to show compromise Iran has so far and will probably continue to restrict its nuclear enrichment in the Natanz and Fordow nuclear facilities to levels according to Western demands, despite the domestic tensions the concessions it gives to relinquish  the process partially if not completely. But Iran has to take the necessary steps forward for confidence-building that it values peace more than regional and global friction.

An Indispensible Ally with Staunch Decisiveness
 
What’s most admirable about Iran is its principled foreign policy of not sacrificing an ally upon any interest or for a future promise. This simply is an outcome of knowing where it stands, its ability to combine its historical role with modern times needs, having exceptionally competent diplomatic bureaucracy and diplomacy.
 
Pacta sunt servanda (“agreements must be kept” as the oldest principle of international law) is what can be traced in Iran’s staunch policy of support when it comes to Syria. Yes its national interests also coincide with this support regarding the Hormuz Straight beyond any ideological affinity. But it is very important for a country like Syria to have the Iranian position behind it at this very critical juncture of history.

Iran Still has Leverage on the Oil Prices
 
As one of the most important oil producers, Iran still has leverage over the crude oil prices, even if it does not use it very frequently and cannot do so because of the sanctions. Nevertheless, if the nuclear talks between Iran and the P5+1 fail or cannot reach a certain level of understanding on November 24th, 2014, the low price, which is due to the oil gush may take an upward trend and increase abruptly.
 
Yes Iran has caught a wind of change through democracy so far. Despite the difficulties, which still exist, I see better designed relations with the West now for Iran. I see a more conciliatory Iran now in terms of political dialogue and approaches towards regional issues without making any sacrifice on main principles, giving undesirable concessions and turning back to allies.
 
No country could be penalized for ever.
 
Iran is definitely at a stage, where it has shown determination and will for change and has been trying to grab reforms and attempts for transformation firmly. The world is sensitive about and responsive to it too. There are still serious concerns, which are expected to be cleared by November 24th, 2014, when the next nuclear talks take place between Iran and the USA.

The dismantling of sanctions seems precautious. Sanctions regarding banking and finance will be with Iran for a while, while 4.2 billion- dollar sanction compensation support and 2 billion- dollar worth of additional trade pledge have become effective since the summer of 2014. Has the 100 billion dollar worth of delayed foreign investments started yet? You tell me. But am sure there are many countries and companies, which are ready to join the club of “invest in Iran” as sanction regarding investment ends. No country could or should be penalized for ever. Not especially a resourceful country like Iran.

Time to Give a New Chance to Iran
 
Aside from the general distrust the West has against Iran, there are four types of fear: 1. The fear that Iran may practice it if fully develops nuclear power 2. The uncertainty and unease the Iranian rhetorical threats create for the Middle East and for the West 3. The exports of and support to extremism in Lebanon, Gaza and the Gulf countries 5. The open and direct threat Iran constitutes against Israel.
 
However, since the elections Mr. Ruhani has been making small gestures to reassure the world that it has chosen a path of normalization. If this is well taken Iran must be granted another chance for it. So why not give Iran another chance?
 
Besides the West, which sanctions Iran also deprives itself from what Iran may offer. It also suffers from big opportunity losses, because of sanctions. Therefore any rapprochement between Iran and the West must be welcomed and not to be suspected of any wrong doing

Things Iran Could do on the Way
 
Domestically the new Iranian administration must be more sensitive to the voice of its people (after all vox populi est vox Dei) to prove that it pursues a path for more democratization. It has to gear all its public policies toward the welfare of its people. Iran must upgrade its physical, institutional, legal and technical infrastructure and eradicate uncertainties, the bureaucratic procedures reflect to foreign customers, visitors and investors.
 
At a regional level Iran is expected to promote stability instead of instability. If normalization process is not interrupted Iran is expected to facilitate (catalyze) peace. Specifically on the issues of Syria, Israel-Palestine (Hamas) and the Hizbullah, Iran plays a key role for many complicated, historical and ideological problems
 
Iran happens to be a successful trader. It can lead Gulf trade to further success in terms of goods and especially tourism and financial services.   From the angle of regional power balance, Iran can be a correcting or regulating force in the Egypt and Turkey rivalry. To improve its trade relations with its traditional and non-traditional partners it has to stop the “barter trade” for its own benefits, and for the benefit of the World trade. Also it has to use non-gold monetary means of payments, for transparency. Business environment in Iran must be improved in terms of starting business, business applications, licenses, taxation and all sorts of bureaucratic transactions are concerned. Corruption and bribing must be eradicated for transparency and accountability. 

Would Renaming the Gulf be Any Help?
 
I often wonder whether it is possible to soften hegemonic outlooks or positions if not claims over locations as well as food, drink or a well-known name. Iran needs to look at the Gulf from this point of angle. Why call it Arabian or Persian Gulf? Is it not possible to rename it as “Gulf of Persarabia (Irabia)” or simply “Our Gulf” in both languages to alleviate rivalry and to promote potentials for cooperation over natural resources and maritime routes?
 
 Is the Gulf not just another geological touch of God, which belongs to all nations surrounding it? The world expects Iran to normalize its relations with its Gulf neighbors (the sizes of which are tiny, but the voices of which are as high as their wallets), by halting its national claims on the tiny islands.

Turkey’s Hopes and Expectations
 
Turkey has centuries of relations with Iran. Currently both countries have trade, which is close to $20 billion in volume. Approximately 650 Iranian firms are active in Turkey as of 2014. However, difficulties concerning the Iranian regulations and market penetration possibilities impede the Turkish firms from exploring the Iranian market. However, Turkey is very well aware of the reality that, when Iran normalizes its relations with the rest of the world, there will be many countries from all directions ready to start business with Iran.

Although it gives a large deficit in trade Turkey hopes and spends effort to improve its trade with Iran and aims to reach $30 billion in 2015. For that objective, in January 2014 Turkey signed a “preferential trade” agreement with Iran, to improve the trade of farm products and manufacturing goods upon lowered and eventually zeroed tariffs, as well as the trade-equivalent fees and charges. The agreement is still needs to be ratified through parliamentary procedures before it becomes effective. As a member of the European Customs Union (CU), this is a courageous step for Turkey, which obviously violates the rules of the CU treaty and at times, when Iran is still under international sanctions.

Urgent Need for Modern Payments Systems
 
 Turkey’s expectation is to increase trade and mutual investment in regular ways, beyond barter and/or shady dealings, which involve jewelers and gold dealers as intermediaries.   If hard international currencies are not desired, additional currency arrangements can be reached for the Iranian Rial and the Turkish lira to boost trade and make it transparent so that the corrupt practices also terminate. The humble level of the 20 billion- dollar worth of trade volume must be increased upon the up to date financial methods and transactions. Regular international and regionally beneficial border trade can only increased through the improvement of financial infrastructure of Iran.  Potential traders demand, opening of  a joint regional bank, preferably closer to the border; wish to see the Van-Hoy land road to be repaired; wish to see the inauguration of an Iranian consular delegation in the city of Van and definitely want regular foreign currencies to be used instead of gold transactions in the trade. 

To Reach an Expectation-Perception Balance
 
If Iran is expected to help the USA and its coalition against the IS in Syria and Iraq, the sanctions must be lifted. However, if Iran is expected to choose between the sanctions and Assad, Iran is likely to choose the sanctions despite their harmful impacts on the Iranian economy, then turn its face against an old ally. Therefore, the Iranian support of the Assad regime is not bargaining chip for the old (kadim) and strong trader Iran. The USA and the Western Europe are less enthusiastic and eager to remove Assad now anyway.
 
From the point of ideology, one may have every reason to believe that if and only if Saudi Arabia and Qatar were to leave their radical and fundamentalist approaches, Iran may revise its position as well, without endangering its interests in and around the Hormuz Straight.
 
Iran would definitely prefer to reintegrate with the world and become a part of the global order as it deserves. For if Iran shows decisiveness to curtail its nuclear enrichment and its support of destabilizing regional factions, its relations with the US are likely to improve. If its relations with the USA and the world are normalized many issues in the Middle East may settle with greater ease as well. Furthermore, if trusted, its littoral neighbors around the Caspian Sea may feel confident about reaching reasonable, rational, and equitable t sharing of the seabed resources.
 
When it comes to the expectation of a unilateral relinquishment of the uranium enrichment by Iran, I do not think that it is possible. However, upon negotiations, Iran will probably reduce the amount of enrichment to desirable limits. We may certainly expect significant reductions, more openness to international scrutiny and inspection, more cooperation with outsiders. We may even expect Iran to consider other renewable energy sources than nuclear in due time and will definitely be a leader for cooperation in the Middle East on energy issues and give assistance and show inclusion to its poor neighbors like Armenia.

In Conclusion
 
It is my sincere thoughts that Iran is not likely to develop nuclear energy for a deadly arsenal. It is not likely to use nuclear energy for destructive purposes, because any nuclear blast, it may cause in the region is likely to effect immediately and directly affect Iran. Iran is too responsible country to cause a nuclear disaster within its own turf. Furthermore it has enough common sense and rationality to avoid any such wrongdoing. For that I have hard time understanding the Saudi and the Gulf country concerns over the Iranian intentions.

However, despite the fact that Iran is still considered “as one of the main threats to stability in the region” it has to give more confidence to its neighbors for a breakthrough in reconciliation talks with the West. If done so this should be considered as a major breakthrough. Because aside from a possible  improvement in the Iranian relations with the West, if any dialogue can start between Iran and Israel, it may mean an indispensible leverage over the latter for the Israel-Palestine dispute.

The international isolation against Iran because of the “smart sanctions” crippled the Iranian economy for sure. But it has also harmed the Western economies upon the opportunities, which could have been available with the Iranian oil and gas in international markets. Over the last 30 years and for the last 4-5 years, the relations of the international community and Iran have proven only a “lose-lose” situation.  There must be ways to transform it into a win-win for everybody
 
I believe it is an urgent need for Iran to upgrade its infrastructure in general and also the ones related to the natural gas and oil fields, refineries and pipelines because of its weakened economy. If normalization in relations is realized then along side with the global ones, Turkish firms may also participate in the reconstruction and upgrading activities, in addition to the improvement of trade, equipped by the most up-to date financial instruments and institutions. . Iran will definitely export and import more, at more reasonable terms and conditions if the country can diversify its production, upgrade its transport systems, improve road and communication conditions, and facilitate its bureaucratic procedures.
 If sanctions were to be lifted, then Iranians will be able to travel abroad with greater ease, and Iran will attract more tourists. As the world returns to Iran it would be a new opportunity to enjoy what that great country may offer in terms of history, sight- seeing and culture

*Prepared for the “Turkey – Iran Van Forum” on the “Turkey – Iran: Sectoral and Financial Deepening”  23-25 October 2014 
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