Biden Middle East Policy: Need to disentangle United States from Iran-Saudi Arabia rivalry

The Biden administration will face a number of challenges in the Middle East over the next four years. The diplomatic landscape of the region offers the United States ample opportunities to offer peace initiatives. 

Some have been successful and enduring, like the 1978 Camp David Accords between Egypt and Israel. There have also been many more notable failed attempts, such as the stalled talks between Israelis and Palestinians during the Obama administration.

Diplomacy does not have to be big and bold to be successful. The Biden administration has an opportunity to stabilize the Middle East by disentangling from the regional rivalry between Iran and Saudi Arabia. This has the prospects of reducing the temperature of relations between these two regional rivals and possibly even prompting them to settle some of their differences on behalf of regional stability.

One may like it or not, the United States has become party to the rivalry between Iran and Saudi Arabia. Of course there are profound issues related to wars in Syria and Yemen and instability in Iraq and Lebanon that separate them. But much of the enmity they harbor for each other relates in no small way to Washington. Iran sees Saudi Arabia (and Israel) as the tip of the spear of US efforts to undermine it. Iran sponsored attacks on Saudi oil facilities in 2019 after Washington’s maximum pressure campaign is prima facie evidence of this.

Saudi Arabia has felt little incentive to even entertain diplomacy with Iran given the large US military footprint in the Persian Gulf and Trump’s hostility toward Iran. Not only is the United States a party to the Iran-Saudi rivalry, but it has hardened the resolve of both sides, driving them further away from diplomacy, with negative consequences for the entire region.

The United States lacks the capacity to persuade either of the regional rivals toward rapprochement. But Washington can play a constructive role by extricating itself from the role of central character in this conflict. This will require recalibrating relations with Saudi Arabia, supporting Riyadh but also making sure that it does not continue using Washington as a crutch for shunning diplomacy.

It also necessitates the United States working to ensure that the Abraham Accords between Israel and the UAE are used as a bridge for building further regional cooperation and not merely as a cudgel for deepening hostilities to Iran. And it will necessitate the United States moving toward a diplomatic track with Iran, starting with rejoining the 2015 nuclear deal, on the condition that Tehran reverts to compliance.

The US will need to use leverage to move a stubborn Iran into a more constructive regional role, but skillful diplomacy can deprive Iranian leaders of the narrative that their regional adventurism is a necessary defensive crouch for deterring a hostile Washington.

Disentangling the United States from the regional rivalry between Iran and Saudi Arabia won’t ensure peace between the two regional powers. But it can force Iran and Saudi Arabia to deal with each other on their own terms, and not hide behind relations with Washington.

If successful in cooling the temperature of relations between these two powers, it can also possibly have other benefits, such as sucking some of the oxygen out of the proxy conflict dimension of the civil wars roiling Syria and Yemen and helping stabilize Lebanon and Iraq.

While the United States can’t start a peace process between Iran and Saudi Arabia, peace should be the objective of the US diplomacy. Rebalancing relations with friends and foes would go a long way toward this objective. Steady resolve rather than bold diplomacy might be just what the region needs from Washington right now.

Jewish groups laud Trump impeachment

Several Jewish organizations have welcomed the impeachment of US President Donald Trump by the House of Representatives and condemned him for his role in the storming of the US Capitol last week.

At a rally given at The Ellipse, adjacent to the White House, on 6th January, Trump spoke to several thousands of his supporters, whom he had told to attend via Twitter. He called on them to march to the US Capitol building and demand that Congress not certify President-elect Joe Biden’s victory in the 3rd November 2020 presidential election.

 “You’ll never take back our country with weakness. You have to show strength and you have to be strong. We have come to demand that Congress do the right thing and only count the electors who have been lawfully slated,” Trump said, among other provocative comments.

The House of Representatives impeached Trump for high crimes and misdemeanors, with the article of impeachment stating that Trump “willfully made statements that, in context, encouraged – and foreseeably resulted in – lawless action at the Capitol, such as: ‘if you don’t fight like hell you’re not going to have a country anymore,’” and that these remarks incited the crowd to interfere with Congress’s certification of the election results.

The American Jewish Committee (AJC), one of the oldest and respected US Jewish organizations, said it welcomed the passage of the impeachment resolution and reiterated its “unqualified condemnation” of Trump’s actions, which it said “run counter to the democratic values we hold dear,” and disqualify the president from continuing to occupy his office.

“He has subverted the will of American voters by falsely alleging, without evidence that the November 2020 election was illegitimate, beset with fraud, and ‘stolen.’ Beyond that, he has incited his followers to commit acts of insurrection which involved an assault on a sacred edifice and which resulted in chaos, injury, and death,” the AJC said in a statement on Wednesday afternoon.

It added that “public officials charged with responsibility for addressing such conduct” use all means possible to hold Trump to account for what happened, including in the courts.

The Union for Reform Judaism said it applauded the passage of the article of impeachment “for his incitement of violence against the United States government,” and urged the Senate to convict him on this charge.

“President Trump’s behavior has shaken our democracy to its core. The president’s language and his actions preceding the riot and in the days since are an abdication of moral leadership,” said the URJ in its statement.

The organization said that “the expression of remorse is central to the act of teshuva, repentance” but that “rather than accept responsibility or express contrition for the role that his words played in the desecration of the Capitol and the deaths of at least six individuals, including two Capitol Police officers, President Trump has stood by his disproven lies and provocative rhetoric.”

The organization noted that Trump said in a video he tweeted out as the riot and invasion of the Capitol was underway that he loved his supporters involved in the attack, “among them white supremacists who rampaged through the House and Senate, some armed, some dressed in clothes bearing racist and antisemitic words and symbols.”

The left-wing J Street organization, which called for Trump’s removal from office immediately after the storming of the Capitol, also welcomed the passage of the article of impeachment.

“The House just voted (for the second time) to make clear what a majority of Americans know to be true: Trump is a danger to our democracy and is not fit to be our president. He never has been and should never have the opportunity to hold elected office again,” the organization said on Twitter.

The Pompeo ploy

In a sign of inability to prevent the incoming administration from rejoining the 2015 Iran nuclear deal, US Secretary of State Mike Pompeo has resorted to what he took from the CIA archives to cook up a new story against Iran.

Lately, Pompeo participated in an event at the National Press Club in Washington, DC to level new accusations against Iran for its alleged links to the al-Qaeda (AQ) terrorist group. Pompeo claimed that Iran has become a “new Afghanistan” in terms of hosting al-Qaeda leaders.

“Al-Qaeda has a new home base: it is the Islamic Republic of Iran. As a result, bin Laden’s wicked creation is poised to gain strength and capabilities. We ignore this Iran-al-Qaeda nexus at our own peril. We need to acknowledge it. We must confront it. Indeed, we must defeat it,” the hawkish top US diplomat claimed.

Pompeo pointed out that the United States has taken drastic measures against al-Qaeda since the 9/11 attacks. These measures, Pompeo claimed, have pushed the al-Qaeda members to search for a new haven.

“That effort drove al-Qaeda to search for a safer haven, and they found one. The Islamic Republic of Iran was the perfect choice,” he claimed. The outgoing US secretary of state went to say that Iran still has links to al-Qaeda.

Pompeo did not present any evidence to support his allegations, and, in fact, some of these allegations are nothing new. However, they elicited a strong response from Iran and Russia.

Iran termed Pompeo’s claims as “warmongering lies.”

“From designating Cuba to fictitious Iran 'declassifications' and AQ claims, 'we lie, cheat, steal' is pathetically ending his disastrous career with more warmongering lies. No one is fooled. All 9/11 terrorists came from @SecPompeo's favorite ME destinations; NONE from Iran,” Iranian Foreign Minister Mohammad Javad Zarif tweeted in response to Pompeo’s remarks.

Iran’s Foreign Ministry also rejected the allegations as “baseless,” calling on Pompeo to “die of anger.”

“Resorting to such ploys and threadbare and baseless claims can, by no means, help the terrorist US regime correct its path, which is full of mistakes, and restore the unjustifiable image of the officials of this regime,” Saeed Khatibzadeh, spokesman for Iran’s Foreign Ministry, said in a statement. “As martyr Beheshti aptly put it, Mr. Pompeo! Be angry and die of this anger,” the spokesman continued.

Pompeo accused Iran of supporting al-Qaeda while ignoring his predecessor’s admission that it was the US that “created” and “funded” al-Qaeda. Former US Secretary of State Hillary Clinton said many times that the US has created and funded al-Qaeda to defeat the Soviets in Afghanistan.

“Let’s remember here that people we are fighting today, we funded 20 years ago. And we did it because we were locked in the struggle with the Soviet Union; they invaded Afghanistan. And we did not want to see them control Central Asia and we went to work. And it was President Reagan in partnership with the Congress led by Democrats, who said you know what? Sounds like a pretty good idea. Let’s deal with the ISIS and the Pakistani military, and let's go recruit these mujahidin. And great, let's get some to come from Saudi Arabia and other places, importing their Wahhabi brand of Islam, so that we can go beat the Soviet Union. And guess what? They retreated. They lost billions of dollars, and it led to the collapse of the Soviet Union,” Clinton infamously said testifying before a Congressional committee.

But why does Pompeo ignore these facts? The question is simple, because he hates the 2015 Iran nuclear deal – officially known as the Joint Comprehensive Plan of Action (JCPOA) – and wants to make sure that the incoming Biden administration would not be able to return to it.

This was on full display during his Tuesday speech. Pompeo sought to use the alleged links between Iran and al-Qaeda to warn against reviving the JCPOA. He claimed that before 2015, Iranian authorities had strictly restricted the movement of al-Qaeda members living inside of Iran, “putting them under virtual house arrest.”

“But I have to say today that is not the situation. Indeed, everything changed in 2015 – the same year that the Obama administration and the E3 – France, Germany, and Britain – were in the middle of finalizing the JCPOA,” Pompeo noted.

He then tried to imply that Iran may use its links to al-Qaeda to put pressure on JCPOA signatories to revive the nuclear deal.

“Imagine that al-Qaeda starts carrying out attacks at Iran’s behest, even if the control is not perfect.  Who is to say that this isn’t the next form of blackmail to pressure countries back into a nuclear deal?” Pompeo asked.

Pompeo is clearly trying to torpedo any future effort to revive the JCPOA. Over the past few years, he has taken many measures to ensure that the nuclear deal will not be revived. Pompeo led the Trump administration’s efforts to change the logic of sanctions and, in some cases, reimpose previously imposed sanctions under non-nuclear-related authorities, including the U.S.’s counterterrorism sanctions authority. The main purpose of these measures was to create what pro-Trump experts call a “wall of sanctions,” a strategy that aims to make it harder for the Biden administration to lift sanctions against Iran.

Establishing links between Iran and al-Qaeda may be intended to make it even more difficult for the incoming US administration to lift sanctions that were re-imposed under United States counterterrorism sanctions authority.  Pompeo may have succeeded in doing so.

In his recent interview with the website of the Leader’s office, Zarif said that a US return to the JCPOA will not be enough anymore because the US has imposed pre-JCPOA sanctions and changed their logic to terrorism-related authorities, which made the lifting of sanctions even more difficult.

According to Zarif, when the JCPOA was negotiated there was a different kind of sanctions imposed on Iran and the JCPOA has outlined how these sanctions would be lifted but the situation has changed after the Trump administration pulled out of the JCPOA.

“Over the past four years, Trump worked to hollow out the JCPOA and impose sanctions that even if the U.S. returns to the JCPOA, they will remain in place. For example, they (the Trump administration) removed nuclear-related sanctions on our Central Bank and Petroleum Ministry and imposed sanctions on them under counterterrorism authority. They basically changed the logic of sanctions,” Zarif said.

UAE aspires to become Israel’s largest trading partner?

Bilateral trade between Israel and the United Arab Emirates (UAE) could realistically reach as high as US$6.5 billion in several years, which would make the UAE one of Israel’s largest trading partners, Samir Chaturvedi, CEO of the Khalifa Industrial Zone Abu Dhabi (KIZAD), said at the UAE-Israel Peace and Prosperity Roundtable, presented by The Khaleej Times and The Jerusalem Post.

“I think that’s a realistic goal, not overly optimistic, “Chaturvedi said in a fireside chat on increasing bilateral trade. “Both of our economies are similar, in terms of size, population and innovation.”

David Leffler, Director General of the Economy Ministry, agreed.

“Both economies are export-oriented, and there are many reasons to be optimistic,” he said. “For example, the UAE imports about US$58 billion of precious stones and metals every year, and Israel imports US$12 billion. That can come out of that.”

Therefore, Leffler said, after all the official ceremonies about peace, the next step is for the countries’ business communities to get to know each other.

In a talk on preparing for a decade of economic transformation, Hamad Buamim, CEO of the Dubai Chamber of Commerce & Industry, expressed hope that normalization between the two countries will open up new opportunities in the post-pandemic world.

The year “2020 was a very difficult year, and everyone is looking for new markets to support economic recovery,” he said.

Buamim singled out tourism, healthcare, agriculture, food security and pharmaceutical equipment as areas ripe for new channels of cooperation.

A joint project with Israel’s Chamber of Commerce to map out other opportunities for collaboration will also help educate both sides and facilitate future cooperation, he noted.

In a panel on collaboration opportunities, Khalid al-Marzooqi, Commercial Director of KIZAD, noted that business “free zones” in Abu Dhabi offer a deregulated environment that helps create environments that are conducive for the ease of doing business.

Dr. Ibtesam al-Bastaki, Director of the Public-Private Partnership Department of the Dubai Health Authority, noted that Dubai’s government encourages public-private partnerships on many projects that allow it to split the risks with investors and provide potentially lucrative returns for dedicated investors.

Nir Hollander, Country Manager of Israel, Cyprus and Greece for cloud computing company Nutanix, noted that Israel and the UAE have a lot to learn from each other.

“Israel, the Start-up Nation, is said to have the most start-ups in the world outside of Silicon Valley, and Emirati society is known to be very innovative. The challenge will be to build infrastructures that will support future collaboration and trust for a long time.”

Biden appeasing Iran would be bad for US security, says Mike Pompeo

Lifting sanctions on Iran while it maintains its nuclear aspirations will endanger America and the world, US Secretary of State Mike Pompeo warned in an interview for The Jerusalem Post-Khaleej Times conference.

“If we appease Iran, if we underwrite Iran, if we allow Europeans to reenter [Iran] and create wealth for the kleptocrats at the head of this theocracy, that would be a bad thing for the region’s security, for Europe’s security and for American security,” Pompeo said.

Pompeo expressed hope that President-elect Joe Biden’s administration “will recognize that this is not 2015…The whole world can recognize that Iran is the destabilizing influence in the whole Middle East.”

The Trump administration left the 2015 Iran deal in 2018, and has maintained a “maximum pressure” sanctions campaign against the Islamic Republic. Biden has said he intends to bring the US back to the Joint Comprehensive Plan of Action, the Iran deal’s official name, along with an Iranian return to compliance.

Iran has repeatedly violated the agreement, most recently declaring last week that it would enrich uranium up to 20% in the underground Fordow facility.

As a result of the “maximum pressure,” Pompeo said “it’s very clear that Iran is more isolated than it has ever been.”

“Our decision to abandon the ridiculous thing called the JCPOA, which enabled, armed and provided resources and money to the largest state sponsor of terror in the world…put Iran in a place where it had to make hard decisions about its own economy, whether to feed its own people or fund Shi’a militias in Iraq and Syria,” he said.

Should Iran change its ways, the US can engage with its regime, Pompeo said, but “if they don’t, the US has to make sure it is part of a coalition that works alongside each other to promote stability in the Middle East.”

Building that coalition was one of the major factors in launching the Abraham Accords, in which the United Arab Emirates established diplomatic relations with Israel in August, followed by Bahrain, Sudan and Morocco.

“One of the things that enabled the Abraham Accords was America’s recognition that the most important players in this effort [against Iran] were the countries in the region, Gulf states, Israel – all those players were truly impacted,” Pompeo said.

Still, Pompeo said those countries did not just normalize ties with Israel because of the US; “it happened because it was the right thing to do.”

“Those sovereign nations came to the Abraham Accords…because it was the right thing for their own people,” he said. “These commercial, security and diplomatic relationships will continue to grow, and I hope the US will be an encouragement for that.”

The Abraham Accords has allowed the countries to partner with Israel to be “safer, more prosperous and more secure,” Pompeo said.

Normalization with Israel is “the right direction of travel for the entire region,” he added.

Asked if the rioting at the US Capitol last week was an obstacle to more countries establishing relations with Israel in the final days of US President Donald Trump’s term, Pompeo said he saw no correlation whatsoever.

“It’s not binary, normalizing or not. We see lots of countries moving in the right direction even if they have not formally signed the Abraham Accords,” he said.

Pompeo projected that Muslim-majority nations in Asia and Africa will likely be next to have open ties with Israel.

“It truly augurs well for security in the region,” he said.

Asked about the Pompeo Doctrine, his declaration that the State Department no longer sees settlements as illegal per se, he said: “We knew we had to recognize reality", adding that the US recognition does not undermine security for any country in the region. 

Similarly, Pompeo said that Jerusalem as the capital of the Jewish people and Israeli sovereignty in the Golan Heights are “just reality, and we recognized it.”

“We were told if we recognize those things all hecks would break loose and that didn't materialize,” he added.

At the same time, Pompeo said that the Trump administration worked to find a solution to the Israeli-Palestinian conflict, calling its peace plan “a real, true pathway for better existence for the Palestinian people.”

“The Palestinian leadership must get on board,” he said.

Chinese investment in undersea cable projects upsets United States and Australia

Moves by Chinese corporations to buy into undersea cable projects and telecommunications companies in the Pacific islands have become a point of major concern for Australia and the United States over the possibility of spying. This region has long been the backyard of Canberra and Washington. 

Now they increasingly find themselves fighting over influence with Beijing, which has strengthened its presence there by building infrastructure. The US has warned Pacific island nations about security threats posed by a bid by China's Huawei Marine to build a US$72.6 million undersea cable linking the Federated States of Micronesia, Kiribati and Nauru.

Washington sent a diplomatic note to Micronesia in July expressing strategic concerns about the project as Huawei Marine and other Chinese companies are required to cooperate with Beijing's intelligence and security services. It noted in a follow-up report that Republican senators Ted Cruz and Marco Rubio told Micronesia in a letter dated 18^th September 2020 that China could leverage its way into the project to wage "campaigns of espionage and geopolitical coercion."

Huawei Marine used to be under the umbrella of Huawei Technologies, the Chinese telecommunications equipment maker that has been targeted by the US sanctions, before it was acquired by China's Hengtong Group.

The East Micronesia Cable project is backed by the World Bank and Asian Development Bank. The bidding process ended in May and the World Bank and ADB are currently reviewing the bid evaluation report, according to sources.

An undersea cable is needed to improve the weak telecommunications infrastructure in the Pacific islands. Such equipment is important from a security standpoint due to the massive volume of data that flows through it. Because Washington is responsible for Micronesia's defense under a decades-old agreement, it apparently has concerns that Beijing will be able to get its hands on military and other classified information.

"Companies that are required to cooperate with their home government's intelligence agencies and to conceal such cooperation, as is the case with Chinese companies, pose risks to the integrity and security of data travelling through undersea cable systems," said Michael Shoebridge at the Australian Strategic Policy Institute.

Australia has removed Huawei Marine from an undersea cable project in the past. In 2018, it decided to finance construction of an undersea cable between Sydney, Papua New Guinea and the Solomon Islands, and excluded Huawei Marine, which had already received an order from the Solomon Islands. And in October, it decided to finance the connection of a submarine internet cable to the Pacific island nation of Palau along with the US and Japan.

There has also been talk of Chinese companies entering the mobile-phone business in the Pacific islands. Australian media reported that China Mobile is interested in acquiring the Pacific operations of Jamaica's Digicel.

A spokesperson for Digicel confirmed to Nikkei that the telecom has received unsolicited approaches from a number of parties with respect to its Pacific operations. The spokesperson declined to comment further as discussions with the parties are confidential.

Digicel is believed to control 90% of the mobile market in Papua New Guinea and more than half in Vanuatu and Tonga. The Australian government is considering offering financial support to local bidders circling the Pacific operations of Digicel to block Chinese companies from acquiring the politically sensitive assets, according to the Australian Financial Review.

South Pacific island nations have come to the forefront in the battle for dominance between the U.S. and China, and hold geopolitical significance for Washington and its ally Canberra.

Beijing held a videoconference with 10 of the region's 14 island countries in late November. Even though the topic of the meeting was the coronavirus pandemic, the joint press release issued afterward included a line stating that "Pacific Island Countries reaffirmed to uphold the One China principle," which asserts that Taiwan is an inalienable part of a single China.

The Solomon Islands and Kiribati both severed diplomatic ties with Taiwan in September 2019 and switched to Beijing. China had reportedly been offering infrastructure support to both countries for some time, and agreed that October to fund a stadium for the Solomon Islands.

The US and Australia worry that if Beijing builds structures in the region that can be put to military use, it could monitor their military activities.

A Chinese company and the fisheries minister of Papua New Guinea have signed a memorandum of understanding to build a US$147 million "comprehensive multi-functional fishery industrial park," according to the UK's Guardian newspaper.

The proposed site of the facility is only about 200 km from Australian shores. The possibility has been floated of the Chinese side building a port for this business, which could further stoke tensions in the area.

German Chancellor threatens 8-10 weeks lockdown

EUR resilience remained remarkable on Tuesday. The common currency ended the day higher against the USD and JPY despite German Chancellor Merkel’s warning that the lockdown may last for 8 to 10 weeks if the numbers don’t improve. 

Reportedly, she told her conservative party counterparts that “If we don't manage to hold off this British virus, we will have a 10-fold incidence by Easter.” The government also warned that there could be no travel until late May. Germany reintroduced lockdown measures in early November but restrictions that include travel limitations, closures of schools and non-essential businesses were tightened this week only. 

Lockdown until April all but assures another technical recession with a contraction in the fourth quarter of 2020 and first quarter of 2021. EUR should be much weaker, but it continues to be supported by virus optimism, low interest rates, the persistent rally in stocks and lackluster demand for USD. 

We saw this same resilience in the fall when EUR/USD shrugged off early signs of a second wave. Will EUR/USD finally break down? Probably but it may take a more meaningful correction in stocks to draw away risk on flows.

Meanwhile, GBP soared on the back of less dovish comments from Bank of England Governor Bailey. Despite the UK’s virus troubles, he expressed skepticism about the effectiveness of negative interest rates and that it was too soon to talk about the need for more stimuli. Bailey said the idea was “controversial.” He also noted that the pandemic had a lesser than expected effect on inflation. 

The USD gave back its gains amidst little economic data. There’s talk that the Fed could considering tapering sooner than previously suggested. With virus cases raging across the nation, it is far too early for this type of speculation. Still, Fed President Bostic continues to suggest that he’s in that camp in saying that prices are stronger than expected. 

US inflation numbers are due for release Wednesday – CPI is expected to be stronger than expected with gas prices and average hourly earnings on the rise. This week’s US economic reports should be firmer, keeping the possibility of a dollar recovery in play.

All three of the commodity currencies traded higher on Tuesday with AUD leading the gains. No major economic reports were released from any of these countries, leaving USD weakness and the intraday recovery in stocks driving demand for those currencies.