Revisiting Iran’s Relations with Venezuela and Argentina

The growing economic relationship between Argentina and Iran has been compared to a pact with the devil, but does this rather extreme metaphor have any justification in real life, or is it a product of rhetorical overkill?  In 2002, President George W. Bush included Iran in his “Axis of Evil,” speech, yet this inflammatory statement itself has not deterred Latin American countries, particularly Argentina and Venezuela, from increasing their economic ties with Tehran as of late. The two countries’ rationales for cozying up to Iran are essentially economic, but they also are political. From 2003 to 2005, Argentina was saddled with a withering debt to GDP ratio ranging from 165 to 127. The U.S. debt to GDP ratio is around 100. [1] Argentina’s current financial problems are due e to a turbulent periods in the country’s history. Meanwhile, Venezuela, under the leadership of the late President Hugo Chávez, has been busy taking a non-Western orientation of its economy—hence, its interest in non-traditional trade partners, such as Iran.

These economic relationships have had the effect of undermining the sanctions, which the United States and other nations placed against Tehran in 1979. In 2007 political scientists David Lektzian and Mark Souva, commenting in The Journal of Conflict Resolution, noted that sanctions levied on non-democratic nation-states can often force such countries to charge more for items produced domestically. [2] This in turn causes nations to be more hesitant to trade with a country that has sanctions against it.  Yet, if anything, Argentina has intensified its dealings with Iran. This occurred even after the U.S. strengthened its sanctions against Iran in 1995, when U.S. President Bill Clinton signed Executive Order 12959, which unilaterally terminated U.S. trade with Iran on the grounds of the country’s purported funding of international terrorism. [3] Meanwhile, political scientists have discussed that sanctions are an ineffective method for executing change if all nation-states do not respect the implementation of these through regulations. [4] The fact that Argentina and Venezuela are participating in trade with Iran significantly undermines some of the impact of the U.S.-led embargo against the country.

The allegations that Iran has been funding terrorism and its citizens purportedly committed terrorist acts in the Western Hemisphere are, in part, based on the charge that Tehran was almost incontestably behind the 1992 bombing of a Jewish community center, AMIA, and the 1994 attack against the Israeli embassy in Buenos Aires.  Public awareness of these deadly attacks recently returned to the front page after Iran agreed to participate with Argentina in a controversial truth commission involving the 1992 AMIA attack. [5] There also has been a noticeable case of corruption involving the complicit practicing with Argentine police officers who were involved in the investigation of the bombing of Jewish facilities in Argentina, as well as outrage from Israel over Tehran’s compliance in the matter. [6] The likelihood of involvement of Argentina’s financial relations with Iran is not entirely unexpected, even given the crimes that the Iranian government may have committed, or helped to execute, on Argentine soil.

Argentina- Iran Relations

Some analysts would surprisingly argue that the Argentine-Iranian relationship has proven to be mutually beneficial. The Economist analyzed the relationship, explaining that,

[Iran] is suffering from shortages of many essential goods, and is desperate for allies and trade partners. Argentina has not honoured the sanctions…During Ms. Fernández’s presidency, Argentine exports to Iran have soared from $319 [million USD] to $1.08 billion [USD].  [7]

Argentina is starting to increasingly drift away from the “West” with which it has incurred a great deal of economic debt, in order to cultivate a trade partnership from which it financially has benefited instead of being ostracized by the global community. Several news outlets have consistently argued that Argentina is key to help maintain social and economic stability in Iran the country. For example, The Christian Science Monitor wrote, “Argentina has cut Iranian crude imports to comply with existing sanctions, but [it] continues to export large volumes of agricultural goods, helping to avoid food shortages that would likely trigger social unrest.”  [8]

Argentina is walking a narrow line today in helping to support an economic relationship with Iran, while respecting some of the sanctions in terms of oil trade between the two countries. Argentine President Cristina Fernández de Kirchner discussed via Twitter how Argentina has weathered the storm of the global economic crisis by starting to develop, in 2003, substantial domestic industries. [9] One industry cultivated was oil production. In 2012 Argentina nationalized its oil industry, the Yacimientos Petrolíferos Fiscales (YPF), previously privately owned by the Spanish company Repsol. With this act of nationalization, Buenos Aires has put at risk its traditional trade relations with Spain, which can no longer count on the Argentine government to respect privately owned industries. [10]

In 2011, Argentina produced 751.36 thousand barrels of oil a day. [11] This is compared to the average 622,000 barrels used a day in used in 2011. [12] Buenos Aires would like nothing more than to be able to maintain a stable oil trade with Iran without incurring any negative global judgment. “Iran imported 202,000 tons of soy-oil in July-September 2012, up from 83,000 tons in July/September 2011.”  [13] Since food commodities are not a part of the sanctions, Argentina is taking full advantage of trading food with Iran in order to pave the way for future significant trade relations. The way things currently stand, expanded trade is a viable option for Argentina, and from the perspective of Buenos Aires, this should occur sooner than later. Though, Argentina is currently selling soy-oil to Iran both Iran and Argentina have financial credibility problems: Iran concerning existing sanctions, and Argentina with the International Monetary Fund (IMF) structures regarding credit and trade opportunities. Tehran of course, has had international sanctions placed on it and Buenos Aires is currently in hot water with the IMF due to inaccurate inflation statistics, to the point that there has been talk of Argentina being evicted from the IMF, having only recently been censured. [14] In retaliation, Argentina has vowed to not to do business with the IMF in the near future.   If Argentina gets in another economic lurch—the IMF could lower the Argentine credit rating, resulting in greater hesitation by other countries, and possible private creditors, to extend financial lines to Buenos Aires.

Venezuela- Iran Relations

Iran and Venezuela in recent years have increased the scope of their economic ties.  As CNN reported,  “Over the years, the two nations have signed more than 270 accords, including trade deals and agreements on construction projects, car and tractor factories, energy initiatives, and banking programs.” [15] Iran and Venezuela have numerous economic pacts, aid, and credit agreements. Unfortunately, they ultimately often turn out as little more than hot air. According to Fars New Agency, which professes to be an independent Iranian news agency,  “the Iranian Offshore Engineering and Construction Company (IOEC) …will soon sign a contract to build an offshore oil installation construction yard in Venezuela.” [16] If this report proves reliable, then Tehran and Caracas will be solidifying their relationship in a post-Chávez world through oil deals. Venezuela is currently selling weapons to Iran, which is not in compliance with the weapons sanctions placed on Iran. [17] Caracas claims that based on its definition of state sovereignty, Venezuela should be able to sell goods to anyone that it desires.  In 2009, the word was that Caracas was willing to sell uranium to Tehran, which caused uproar in the global community, but this so called claim lacked even a semblance of truth. [18]

The relationship that Argentina has now struck with Tehran can also be seen in a light favorable for relations with Havana and Caracas. The Economist spells out the rationale for an economic relationship developing with Tehran, but it must meet the test of whether it can bring self executing capacities in the relationship between Buenos Aires-Tehran, a bona fide relationship, not only as a gesture to the leftist governments in Cuba and Venezuela, but requires it to come into being. Furthermore, Iran is prepared to provide generous terms to those willing to bypass ties to the West if they prove that they can be reliable partners. [19] Throughout June 2010, there were various reports emerging from Caracas of projects involving the installation of Argentine and Iranian factories in Venezuela. [20] With the political and economic future of Venezuela currently up in the air, Argentina may wish to tread carefully when approaching the country.

The Stake of Future Alliances

 If Argentina continues to increase its diplomatic and financial ties with Iran, Buenos Aires may end up deciding to burn its bridges with the United States and Europe. Then again, this relationship could prove to be lucrative as Argentina accesses the severely untapped Iranian market in which Caracas is also quite eager to participate.  In coming years Buenos Aires and Caracas will need to carefully forge paths to build global economic relations, especially with countries recovering from the world economic crisis, and ready to be once again contenders themselves. They may chose to take a path that involves cooperation with China, or even consider going back to augmenting their historical ties with the U.S. and Western European nations.

 

Jennifer Aron, Research Associate at the Council on Hemispheric Affairs

Please accept this article as a free contribution from COHA, but if re-posting, please afford authorial and institutional attribution. Exclusive rights can be negotiated.

For additional news or analysis on Latin America, please go to: Latin News

 

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[1] “Argentina Government Debt to GDP, “Trading Economics, 2012, http://www.tradingeconomics.com/argentina/government-debt-to-gdp .

[2] Lektzian, David and Mark Souva, The Journal of Conflict Resolution , Vol. 51, No. 6 (Dec., 2007), pp. 848-871 Published by: Sage Publications, Inc., http://www.jstor.org/stable/27638583.

[3]  “What You Need To Know about US Economic Sanctions An overview of O.F.A.C. Regulations involving Sanctions against Iran” U.S. Department of Treasury Office of Foreign Control http://www.treasury.gov/resource-center/sanctions/Programs/Documents/iran.pdf.

[4] Early, Bryan R. , “Sleeping With Your Friends’ Enemies: An Explanation of Sanctions-Busting Trade,” International Studies Quarterly, 2009, 53, no. 1: 49-71, Academic Search Premier, EBSCOhost.

[5] “Argentine MPs agree Iran accord to probe AMIA attack,” Press TV, March 2, 2013, http://www.presstv.ir/detail/2013/03/02/291559/argentine-mps-agree-iran-accord-to-probe-amia-attack/ .

[6] “Amia bombing: Argentina and Iran agree truth commission, “BBC News, January 28, 2013, http://www.bbc.co.uk/news/world-latin-america-21225832.

[7] “Argentine-Iranian relations A pact with the devil?” The Economist, Jan 29, 2013, http://www.economist.com/node/21571077 .

[8] Schmall, Emily,  Why Argentina is reaching out to Iran, Christian Science Monitor Feb 1,2013, http://www.minnpost.com/christian-science-monitor/2013/02/why-argentina-reaching-out-iran.

[9]  Cristina Fernández de Kirchner, Twitter post, February 14, 2013, https://twitter.com/CFKArgentina.

[10]  Bronstein, Hugh,” Argentina nationalizes oil company YPF” Reuters, 4 May 2012, http://www.reuters.com/article/2012/05/04/us-argentina-ypf-idUSBRE8421GV20120504.

[11] “Argentina”, Independent Statistic & Analysis U.S. Energy Administration, 12 February 2013, http://www.eia.gov/countries/country-data.cfm?fips=AR.

[12] The Real World Argentina Questions and Answers, CIA World Fact Book, 2012, http://cia-world-factbook.realclearworld.com/q/282/8047/How-much-oil-did-Argentina-use-in-2011.

[13] , “Iran expected to import 100.000 tons of Argentine soy-oil in 4Q,” Merco Press October 31, 2012,  http://en.mercopress.com/2012/10/31/iran-expected-to-import-100.000-tons-of-argentine-soy-oil-in-4q.

[14] The IMF and Argentina Motion of censure The fund blows the whistle,  The Economist, 9 Feb 2013,  http://www.economist.com/news/americas/21571434-fund-blows-whistle-motion-censure.

[15] Mungin, Lateef and Shoichet, Catherine E., What’s next? Chavez’s death leaves many questions, CNN, 6 March 2013, http://www.cnn.com/2013/03/06/world/americas/venezuela-chavez-what-next/index.html.

[1][16] FARS News Agency, March 12, 2013, http://english.farsnews.com/newstext.php?nn=9107152376.

[17] “Venezuelan arms maker to continue Iran trade despite US bans,” Press TV, February 17, 2013 http://www.presstv.ir/detail/2013/02/17/289415/venezuelan-cavim-to-up-ties-with-iran/.

[18] Padgett, Tim , “Chávez to Iran: How About Some Uranium?” Times World, October 8, 2009, http://www.time.com/time/world/article/0,8599,1929256,00.html.

[19] “Argentine-Iranian relations A pact with the devil?” The Economist, 29 Jan 2013, http://www.economist.com/node/21571077 .

[20] Wiñazki, Nicolás, “Chávez financió con fondos chinos proyectos argentinos e iraníes,” Clárin, March 12, 2013, http://www.clarin.com/politica/Chavez-financio-proyectos-argentinos-iranies_0_881311895.html.