Why Iran Wants Russia in OPEC

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Pro-western Ayatollah Khatami’s decision to withdraw his presidential bid does not spell the end of Iran’s efforts to break out of isolation. The Iranian government has decided to lobby the OPEC oil-producing cartel to invite Russia in as a member, in what is clearly a bid to improve its own diplomatic and economic position.

“The ground is ready in OPEC to accept Russia as a new member,” declared Iranian Oil Minister Gholam Hossein Nozari on the eve of the OPEC meeting in Vienna on March 15. Last December, Russia’s deputy prime minister said that his country was considering the invitation to join the organization.

What is good for Tehran is bad for the U.S. Such a development should worry the Obama administration for a host of reasons. First and foremost, if Russia joins the cartel, it would significantly strengthen its relations with a whole list of Middle Eastern countries, including Saudi Arabia, Qatar, Kuwait, and Bahrain — all close U.S. allies.

America may well find that a stronger voice from Moscow in the region may translate into lost U.S. trade and a reduction in U.S. influence as Russia’s increases. After all, such countries depend greatly on oil for their income. With Russia becoming an important player in the oil market, sealing its position with an OPEC membership will make it increasingly difficult for those countries to ignore Russia’s desires.

With such backing from the Middle East, Russia may well be emboldened to strengthen its position in the Caucasus region and won’t be in the mood to show a spirit of compromise in places such as Georgia. This would make it harder to return Tbilisi to the American sphere of influence.

Potential economic damage to the U.S. also needs to be considered. Iran’s hope is that by including Russia, OPEC will have a bigger say in the production of oil, thus increasing the leverage of the oil-producing cartel. This would then enable them to cut production and push the price of oil to higher levels. Until now, the fact that Russia — one of the biggest oil producers — has not been a member of OPEC has meant that at times when OPEC has cut production, Russia has not followed suit. On a number of occasions, this damaged OPEC’s plans to raise oil prices.

After months of lower prices, Russian membership in OPEC could result in oil prices climbing again. This is good for Iran. Higher oil prices mean a strengthened economy and a boost to President Mahmoud Ahmadinejad’s chances of reelection. Recently, the Iranian leader has been trying to boost his popularity by increasing the Iranian New Year (March 21) bonus for retired staff to $200.

But with the U.S. government extending sanctions by a year and oil prices sitting at $47 instead of $147 (as was the case in July 2008), Ahmadinejad needs all the economic help he can get. With Russia on board in OPEC, he would have a better chance of increasing oil prices and Iranian income. This would provide him with more funds to spend on his conservative policies and more funding at his disposal to spend on his nuclear program and support for Hamas and Hezbollah.

Having Russia as a member of OPEC would also strengthen Tehran’s position against Washington, especially regarding talks over the nuclear program.

Iran is worried about Barack Obama’s popularity in the U.S. and his influence in the international arena. This is true to such an extent that Iran initially planned to launch its new Omid satellite on January 20, which also happened to be the day of Obama’s inauguration. The launch, however, was postponed to February 2, due to bad weather.

Nevertheless, the very fact that Iran wanted to welcome Obama’s term with such public muscle flexing is a clear sign that Tehran is worried about Obama’s potential reaction to its intransigence in nuclear talks and whether the president will leverage that into stronger sanctions or even war.

As a member of OPEC, Russia would make Moscow increasingly dependent on Iran, not only regarding the export of its goods but also regarding its cooperation in important issues such as setting production quotas. Tehran’s hope is that such leverage can be used to continue its nuclear program while fending off any possible increase in sanctions.

So what can the U.S. do about it? Obviously, continuing investment in alternative energies is crucial. Cooperation with Azerbaijan also needs to be expanded: the Nubucco pipeline will bring gas from the Caspian sea to Europe via Turkey, thereby reducing Europe’s dependency on Russian gas.

The Nabucco project gains even more importance in light of the fact that Iran is also trying to become a gas supplier to Europe through its own pipeline from the Caspian Sea, which will run into Europe via Turkey.

The Cold War may be over, but Moscow has not given up its ambition to become a superpower. A useful counter strategy by the U.S. would be to boost the status and power of the G20 group of countries. With the financial crisis worsening every day, such a move would deny Russia the opportunity to use the crisis to boost its power and influence around the world, as it did when Moscow waded in to save the Icelandic central bank by loaning it four billion Euros.

Acquiring OPEC membership would not only be another notch in Moscow’s belt, it could have the unpleasant side effect of helping Iran’s nuclear program and strengthening Tehran’s support for Hamas and Hezbollah.

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