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Stratfor briefing: Iran/Saudi Arabia/Iraq 19 May, 1999

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Global Intelligence Update
May 20, 1999

Plans Debated for Future of Iraq


While the UN debates whether to extend Iraq's "oil for food" 
program or to replace it with some other plan, Iraq's neighbors 
are attempting to devise their own plan for containing Iraq 
without Western interference.  The Arab League has called for the 
U.S. and Britain to stop bombing Iraq, but have not suggested an 
alternate containment strategy.  However, the recent visit of 
Iranian President Mohammad Khatami to Saudi Arabia may have laid 
the groundwork for an alternative plan.


The UN mandated "oil for food program," which allows Iraq to sell 
$5.2 billion worth of crude oil every six months to pay for 
humanitarian supplies, expires on May 24.  The UN Security 
Council is scheduled to meet on May 21 to discuss extending the 
program an additional six months, as well as two alternative 
proposals that have been recently floated.  Russia has put 
forward a plan, backed by China and France, that would suspend 
sanctions on Iraq for a period of 100 days.  The suspension would 
only be extended if Iraq verifiably cooperated in disarmament 
efforts.  The Russian plan also calls for unfreezing Iraq's 
overseas assets.  A competing proposal put forward by Britain and 
the Netherlands would maintain the sanctions against Iraq, but 
would lift the ceiling on Iraqi oil exports and allow foreign 
companies to invest in Iraq's oil sector if Baghdad allowed UN 
weapons inspectors to return to Iraq.

Russia has said that it will not support any new resolution that 
does not involve at least a partial lifting of sanctions against 
Iraq.  The U.S., in turn, rejects any plan involving suspension 
or lifting of the sanctions.  Interestingly, however, an 
anonymous U.S. official told the Associated Press that the U.S. 
did not rule out the British-Dutch proposal, depending on how it 
was implemented.  While the U.S. reportedly rejects a major 
overhaul of Iraq's oil industry, U.S. officials are reportedly 
receptive to a plan in which foreign investment would help Iraq 
meet its "oil for food" sales quota.  U.S. Secretary of State 
Madeleine Albright two weeks ago called on Security Council 
members to consider and develop an earlier draft of the plan.

Iraq has reportedly rejected the British-Dutch plan as nothing 
more than an excuse to maintain sanctions on Iraq, while 
simultaneously reducing Iraq to "an entity under the trusteeship 
of the United Nations."  Iraqi Foreign Minister Mohammad Said al-
Sahhaf sent a letter to UN Secretary General Kofi Annan on May 
19, charging that the "oil for food" program had failed and that 
the humanitarian crisis in Iraq had worsened.  Al-Sahhaf said 
that Iraq was unable to sell enough oil even to reach the UN 
mandated maximum, due to the deterioration of Iraq's oil 
infrastructure and low international crude oil prices.  Moreover, 
al-Sahhaf and Iraq's Oil Ministry on May 19 charged that the 
United States and Britain had blocked 208 contracts Baghdad had 
signed for repairs of Iraq's oil infrastructure.  Under the "oil 
for food" program, Iraq is allowed to import $300 million worth 
of spare parts and equipment to repair and maintain its oil 

Al-Sahhaf concluded that, in the face of U.S. and British hostile 
interference in the "oil for food" program, the only logical, 
legal, and moral solution would be for the UN to lift the embargo 
on Iraq.  Al-Sahhaf was echoed by the official Iraqi newspaper 
Al-Iraq, which on May 19 wrote, "There is no point continuing 
with this game of oil for food, which amounts to a hemorrhage of 
Iraqi resources."  The newspaper claimed that the program "only 
serves the imperialist interests of the criminals keeping in 
place the embargo."

As the UN Security Council debates Iraqi sanctions and the 
possible renewal of the "oil for food" program, Iraq's neighbors 
may be stepping up efforts to take Iraqi containment into their 
own hands.  On May 19, at the conclusion of a four day visit to 
Saudi Arabia by Iranian President Mohammad Khatami that marked a 
major milestone in the two countries' rapprochement, Saudi 
Foreign Minister Prince Saud al-Faisal declared, "The results of 
the visit... will have a positive impact on the whole region, 
with the two countries able to play a key role in resolving 
conflicts in the region."  During the visit, Iranian Foreign 
Minister Kamal Kharrazi announced that he and his Saudi 
counterpart had "formulated a long-term mechanism for resolving 
problems in the Muslim world."

According to the Iranian news agency IRNA, during a meeting with 
Saudi Crown Prince Abdullah bin Abd al-Aziz al-Saud, Khatami 
noted it was "disturbing to imagine that the big regional states 
and their nations may have to depend on others to provide 
security in the region."  Khatami reportedly added that Iran and 
Saudi Arabia, "had the potential to safeguard the security of 
this vital region."  

The first portion of the Abdullah-Khatami meeting, during which 
Khatami put forward Iranian-Saudi security cooperation as a 
substitute for U.S. meddling in the region, was attended by 
Second Deputy Prime Minister and Defense Minister Prince Sultan 
bin Abd al-Aziz al-Saud, who is close to the U.S. and whose son 
is the Saudi Ambassador to the U.S.  The second half of the 
meeting occurred behind closed doors, and it was not reported 
whether Prince Sultan was involved.  Prince Sultan later held a 
banquet for Khatami and the Iranian delegation.  In a separate 
though potentially related development, Iran and the UK announced 
on May 18 that they were upgrading diplomatic relations, 
exchanging ambassadors for the first time in 20 years.  Still, 
despite the apparent nod being given to Iranian diplomacy by the 
U.S. and the UK, the Saudi-Iranian official joint statement at 
the conclusion of Khatami's visit condemned foreign interference 
in Iraq's internal affairs.

Khatami's stay in Saudi Arabia also included a visit to the 
headquarters of Saudi Aramco in Dhahran.  There, Saudi Oil 
Minister Ali Ibrahim Naimi stressed that the recent upturn in oil 
prices was due in large part to the cooperation and leadership 
efforts of Saudi Arabia and Iran.  At a separate meeting with 
Khatami in Jeddah, Naimi declared that Saudi Arabia and Iran 
"have reached an agreement," though he did not elaborate.  Naimi 
and his Iranian counterpart Namdar Zangheneh vowed that the two 
countries would continue to cooperate to maintain and improve oil 
prices.  Khatami and Saudi Crown Prince Abdullah also discussed 
oil issues in depth.

So, Iran and Saudi Arabia appear to have reached agreements to 
collaborate in resolving regional conflicts and to collaborate in 
attempting to control oil production and prices.  Iraq is a 
source of regional conflict and a potentially unsettling force 
affecting oil prices.  Despite their condemnation of foreign 
interference in Iraq, the two countries' rapprochement and joint 
endeavors appear to have the blessing of the U.S. and the UK.  
Kuwait, too, has called for closer relations between Iran and the 
GCC.  Additionally, judging by Iraqi allegations and Iranian 
military maneuvers, "foreign interference" in Iraq can apparently 
be translated to read "European and American interference."

Whether the Iranian-Saudi movement toward regional security 
cooperation -- evidently focused first on replacing he U.S.-UK 
effort in Iraq -- is occurring as a result of or in spite of the 
stumbling NATO campaign in Yugoslavia is unclear.  Whether it is 
occurring at the urging of the U.S. and the UK or with only their 
grudging acceptance is also unclear.  And just how Saudi Arabia 
and Iran plan to deal with Iraq is downright opaque.  

Nevertheless, Iraq seems seriously concerned.  In recent days, 
Baghdad has condemned Iran for secretly conspiring with the 
United States to stab Iraq in the back.  Baghdad has also accused 
Iran of fomenting an uprising in the south in March and of 
courting the U.S. by training and arming infiltrators of southern 
Iraq.  And Saddam Hussein has reportedly begun to warn his troops 
and supporters of an impending cataclysmic battle.  If Iraq 
needed more reason to worry, Iran's Revolutionary Guards have 
launched major military exercises in Khuzestan province, near the 
southern Iraqi border.  The 8,000 troop exercises, which 
commemorate the liberation of Khorramshahr from Iraqi occupation, 
include airborne operations and live fire exercises with 
artillery and tanks.  Additionally, a new coalition of Iraqi 
opposition groups will reportedly travel to the U.S. next week, 
allegedly with Iran's blessing, to seek U.S. support for another 

According to Iraqi opposition sources, cited in the London based 
newspaper Al-Hayat, Syria too is concerned about Iranian 
intentions in Iraq, and has requested clarification from Tehran.  
Interestingly, Khatami visited Syria immediately prior to 
visiting Saudi Arabia, and Saudi Crown Prince Abdullah has 
departed on a multi-country trip that will take him to Syria as 

Clearly, Iran is pushing its idea of a regional security grouping 
to deal with regional unrest without foreign interference.  It 
appears to have received a positive response from Saudi Arabia 
and Kuwait, and to have at least the tacit support of the U.S.  
And the proposal is far enough along to have the Iraqis and 
Syrians concerned.  Now it remains to be seen if the traditional 
forces driving Iran and the Arab states apart can be kept in 
check long enough to operationalize the Iranian proposal.


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