Published November 22, 2012
BUENOS AIRES, Argentina – Argentina is running out of wiggle room in a billion-dollar showdown over foreign debts left unpaid since the country’s world-record default a decade ago, and the stakes couldn’t be higher for President Cristina Fernandez.
She risks triggering another historic debt default if she doesn’t agree to pay the so-called “vulture funds” she blames for much of Argentina’s troubles.
Fed up with Argentina’s refusal to honor its debts despite losing in appellate court, U.S. District Judge Thomas Griesa in New York said he is determined to make Argentina pay at least something to the plaintiffs.
His idea is to tap into the money Argentina already pays to other bondholders, by making banks that process the payments divert some of the money to the plaintiffs. U.S. financial institutions would become his enforcers, either helping to satisfy the judgment or “aiding and abetting” a crime.
The unprecedented idea was broadly upheld on appeal last month and Griesa tried to push the case closer to resolution late Wednesday by lifting a legal stay, and issuing an order directing Argentina to make a first round of payments into an escrow account on Dec. 15, when the country is scheduled to make payments to the other bondholders.
The idea has sent jitters through the legal departments of the most powerful financial institutions in the United States.
The U.S. Federal Reserve and the Clearing House, a trade group representing the world’s largest commercial banks, warned that Griesa’s remedy could have severe consequences for the backbone of the U.S. financial system, which automatically moves an average of $2.6 trillion a day in half a million transfers between more than 7,000 banks.
The Federal Reserve’s legal brief, filed Sunday, said the entire system depends on transfers being “immediate, final and irrevocable” when processed. Requiring intermediaries to identify, stop and divert payments according to court orders “would impede the use of rapid electronic funds transfers in commerce by causing delays and driving up costs.”
The plaintiffs dismissed the concerns, saying that the only bank at risk would be Argentina’s “paying agent,” the Bank of New York Mellon, which should be held responsible by the court if it doesn’t guarantee compliance.
Still, the Federal Reserve’s filing pleased Fernandez so much that she cited it in a speech Monday night.
“When an Argentine says something, the President of the Argentines or the economy minister, well, everyone comes out to criticize them, but now it’s (Federal Reserve Chairman Ben) Bernanke talking, honey, and everyone shuts their little mouth,” she said.
As with so many other things involving Argentina, these debts date back to the bloody dictatorship that ruled from 1976-1983. The military junta tripled the country’s foreign debts. By 2001, the burden had become unsustainable and the economy collapsed. Argentina’s $95 billion default still stands as a world record.
Sovereign debt is supposed to be paid no matter who runs a country, but Fernandez has always considered this defaulted debt to be illegitimate, forced onto the Argentines by dictators acting in concert with international financial speculators. She and her late husband and predecessor Nestor Kirchner, who took office in 2003, have never made any payments on the defaulted bonds.
Instead, they offered new bonds paying less than 30 cents for each dollar owed in default, and by 2010, 93 percent of the original bondholders agreed to the swaps. The debt relief granted by these “exchange bondholders” enabled Argentina to climb out of a deep economic crisis, and many analysts have described it as a model for Greece and other debt-burdened countries to consider.
Hold-outs led by NML Capital Ltd., an investment fund owned by U.S. billionaire Paul Singer, refused the swaps, insisting on payment in full plus interest, even though some bought the defaulted debt for pennies on the dollar after Argentina’s economy collapsed. Singer’s lawyers have traveled the world since then seeking to embargo Argentine assets, even getting its navy ship Libertad seized in Ghana as collateral. But they have never collected.
The judge’s solution to all this is to force Argentina to pay the holdouts an equal amount each time it makes a payment to the exchange bondholders.
This prompted an outcry from a group of exchange bondholders who collectively own $20 billion in the restructured Argentine debt. They said they “already suffered tens of billions of dollars in losses,” and that it’s not fair to harm their already diminished returns so that a few holdouts can earn up to 200 percent on their original investments.
If allowed to stand, this kind of remedy will make it impossible for other countries to get critical debt relief, they argued.
The holdouts’ response: “Those parties made a business judgment to accept assurances of prompt payment rather than being forced to litigate against the Republic around the world, as the plaintiffs have been forced to do at tremendous expense.”
Argentina, meanwhile, has told the judge that its responsibility ends once it delivers the cash to the Bank of New York Mellon, which in turn pays the exchange bondholders. This bank, in turn, said it would suffer lawsuits from all sides if it did anything other than process the payments as intended.
There was no immediate indication from Argentina’s government late Wednesday about how it would respond to Griesa’s ruling.
The judge said he was taking the action precisely because of “inflammatory declarations” made by Argentine officials, who have vowed not to pay a cent to NML Capital Ltd.
“It is the view of the District Court that these threats of defiance cannot go by unheeded, and that action is called for,” Griesa wrote.
Argentina is running out of options. Anything short of full payments could trigger holders of all sorts of Argentine bonds to demand immediate payment in full.
“In reality, what I think they’re looking for is to provoke a technical default,” the president said Monday night. “What’s a technical default? It’s when you pay, but not in the right time, or manner, or place. For example, you don’t pay in New York so that they don’t seize the money.”
The exchange bondholders warned that if this happens, “the injunction will have turned a relatively minor default into a cataclysmic default that will further unsettle the already fragile global economy.”
Fernandez sought to calm matters, noting that Argentina has $45.3 billion in reserves and a much lighter debt burden than it did years ago.
But if Argentina pays the plaintiffs the $1.43 billion they are demanding, Moody’s Investors Service said it could set a legal precedent for other holdouts who together claim nearly $12 billion in unpaid debts.
A default, meanwhile, could put more pressure on an economy already suffering from capital flight and dangerously high inflation. Argentine debt is already rated by Moody’s as junk, so the government has few other places to turn for financing.
The holdouts blamed all this “emergency litigation and anxiety” on Argentina’s “unrelenting bad faith,” and predicted that if it is finally given no other alternative, it will submit to the courts’ will.
“There is no reason to believe — and common sense rejects — the notion that Argentina would harm its reputation and credit, and unnecessarily allow tens of billions of dollars of debt to accelerate, simply to avoid paying the plaintiffs $1.43 billion,” they said.
April 14, 2012 10:27 pm by Jude Webber
Any hostile moves on YPF, the Spanish-controlled oil company, by the pro-nationalisation government in Buenos Aires could have implications that go way beyond the companies and investors at the heart of this bitter tug-of-war.
Why? Because Argentina is sitting on what geologists and energy experts widely agree is one of the world’s most attractive reserves of unconventional gas and oil – known as shale – which are trapped deep in the bedrock below ground.
Shale is potentially a very big deal indeed. It turned the US from energy importer to exporter – something that Argentina, which spent $9bn importing fuel last year, ought to take note of.
Argentina has about a third of the US shale reserves, but they are less deep (which makes them cheaper and easier to access), seams are two to three times thicker than in the US and, for now at least, Argentine shale is concentrated in the Vaca Muerta (Dead Cow) formation, rather than being spread out across the country.
So all other things being equal, shale producers should be brushing up their Spanish and heading south. Several big players – including ExxonMobil, Total and Apache – and smaller companies already have. But it is YPF which has the biggest acreage, and it estimates that as much as $250bn will be needed to develop a viable shale industry over the next decade.
No one’s pockets are that deep, so partnerships are the way to go. Except that regulatory concerns are raising red flags before investors’ eyes now.
YPF has been publicly criticised, stripped of a string of concessions after being accused of underinvestment and now the government is analysing how to give the Argentine state a bigger role in the company – something that, according to some proposals circulating in the government, could translate into the expropriation of as much as 50.01 per cent of the company.YPF is currently controlled by Repsol of Spain, which has 57.43 per cent, and 25.46 per cent is in the hands of the Eskenazi family’s Petersen Group. Just over 17 per cent is traded on stock markets.
So enthusiasm among potential new players in the shale sector – where some were prepared to invest as much as $10,000 to $12,000 per hectare, according to industry sources – is screeching to a halt. “This is damaging shale (prospects), of course,” Alieto Guadagni, a former energy secretary, told beyondbrics.
The government has been berating YPF for what it perceives as a failure to invest enough, yet the concerns its nationalization dream are raising risks reducing investor appetite – which is perverse. And if concerns over contracts were not enough to dampen investors’ spirits, the prospect of partnering with a state that likes fast results and dislikes repatriation of dividends may give pause for thought.
What is worse is that the shale prospects represent energy that Argentina badly needs. Underinvestment in the sector, analysts and industry players say, is the direct result of a regulatory regime that keeps prices in Argentina well below the international market.
As Guadagni put it, Argentina pays domestic gas producers some $2.8 per million British Thermal Units, yet shells out some $11 per million BTU for gas from Bolivia (produced, ironically, by Repsol YPF), and some $17 for liquefied natural gas to plug its huge energy deficit.
Meanwhile, the cost to Argentines for their domestic gas is about 50 US cents per million BTU of gas, and drivers of vehicles that run on compressed natural gas pay around $1.
“The big question is whether these plans for YPF will improve or worsen Argentina’s prospects for recovering its energy self-sufficiency,” Guadagni said.
Argentina had a $3bn energy surplus in 2006. This year, Guadagni reckons the deficit will be $6bn to $7bn, ballooning to $12bn in 2013. Argentina’s policy of cheap domestic energy to stoke demand and economic growth worked well after the country’s default of nearly $100bn in 2001. But it isn’t working now.
- Repsol YPF ups Argentine shale potential (mb50.wordpress.com)
- Spain warns Argentina over energy nationalisation (1oneday.wordpress.com)
- Argentina plots next moves in bid to control YPF (sfgate.com)
- Repsol YPF ups Argentine shale deposit potential (seattlepi.com)
- YPF Said to Lose Oil Partners as Government Cracks Down (businessweek.com)
Posted on February 8, 2012 at 6:08 pm by Associated Press
SANTIAGO, Chile — Repsol YPF on Wednesday raised the estimate for potentially recoverable oil and gas in its part of Argentina’s “Vaca Muerta” (Dead Cow) basin to the equivalent of nearly 23 billion barrels, indicating a total shale deposit big enough to enable Argentina to challenge the United States in non-conventional petroleum production.
But it cautioned that exploiting the formation would need a huge expansion in Argentina’s oil and gas industry, requiring thousands of wells, hundreds of drilling rigs and a national push to attract the necessary talent, equipment and investment at a time when other countries are competing to increase energy resources.
The company’s shares traded on the Buenos Aires stock exchange jumped 8 percent after the announcement.
Repsol YPF SA, a majority-Spanish-owned company, issued the statement from Madrid shortly after its president, Antonio Brufau, returned from a series of closed-door meetings in Argentina with government officials who have been pressuring the company to increase exploration and development.
The pro-government newspaper Pagina12 in Buenos Aires said Repsol YPF has been paying out more in dividends than it has made in profits in Argentina, and suggested President Cristina Fernandez might consider nationalizing the company’s Argentine operations so the money could instead be used to increase Argentina’s energy capacity.
Juliette Kerr, a Latin America energy analyst at IHS in London, discounted the possibility of nationalization, saying Argentina can’t afford a buyout. The idea was never openly endorsed by Fernandez or her Cabinet ministers.
Company spokesmen and government officials declined to comment on the talks this week.
But Wednesday’s statement, made as a filing to Spain’s securities regulator, provided a stark analysis of Repsol YPF’s commitment to Argentina and how much would have to change for the country to realize its energy dreams.
“If exploration proves successful in the Vaca Muerta formation and immediate intensive development began in the area, in 10 years its capacity could double Argentina’s existing gas and oil production. This would require a vast investing effort that would reach $25 billion per year in order to develop all the existing prospective resources,” it said.
Repsol YPF said in November that it had discovered 927 million barrels of recoverable oil and natural gas in the shale deposit. But even 23 billion barrels ranks below Brazil’s recent deep-sea oil discoveries, which experts estimated at up to 55 billion barrels, or the 296 billion barrels of proven crude reserves that Venezuela claims.
Argentina currently has only 80 drilling rigs and would need at least 100 more, along with upgrades in all sectors of its oil and gas industry, to capitalize on the potential of the deposit in western Neuquen province, the company said.
Repsol YPF currently is the leader in exploring in this area, having invested $300 million in exploration, mapping and initial development, but has claims on less than half of the formation, which stretches over 7.4 million acres. Many other companies would need to make substantial investments for the area to achieve its potential, it said.
So far, only a tiny fraction of the Vaca Muerta foundation has been developed, producing 700,000 barrels as of December, and the statement suggested that Brufau didn’t give in to the pressure for huge new investments right away.
“The company aims to drill 20 wells in 2012, solely and jointly with several partners, to continue investigating prospective resources,” it said.
The statement suggested international investors may be holding back until they have confidence that Argentina will guarantee government policies and labor unrest won’t get in the way of eventual profits. Instead, Argentina has been withdrawing energy exploration subsidies, dealing with a punishing oil workers strike and making it more difficult for multinational companies to move their gains out of the country.
- Repsol YPF confirms 1 billion barrels of shale oil (seattletimes.nwsource.com)
- Repsol YPF confirms 1 billion barrels of shale oil (sfgate.com)
- Repsol YPF confirms 1 billion barrels of shale oil (seattlepi.com)
- Repsol YPF confirms 1 billion barrels of shale oil (newsok.com)
- Rig Hired by Spain’s Repsol Arrives off Cuba (mb50.wordpress.com)
- Repsol Announces Huge Shale Oil Find in Argentina (ibtimes.com)
- Repsol shares soar on big Argentina shale oil find (seattletimes.nwsource.com)
- Repsol shares soar on big Argentina shale oil find (seattlepi.com)
- On Energy Production, U.S. Isn’t Keeping up with the Joneses (mb50.wordpress.com)
Soros-Rockefeller-Rhodes protégé – tried to allay a default by engineering a new sovereign debt bond mega-swap.
Exactly ten years ago Argentina suffered a full-scale financial and governmental collapse. That was the end-result of over a decade of doing exactly what the IMF, international bankers, rating agencies and global “experts” told us to do.
Then President Fernando de la Rúa kept applying all IMF recipes to the very last minute, making us swallow their poisonous “remedies”.
It all began getting really ugly in early 2001 when De la Rúa could no longer service Argentina’s “sovereign debt” even after driving the country into full “deficit zero” mode, slashing public spending, jobs, health, education and key public services.
By March 2011, he had brought back Domingo Cavallo as finance minister, a post Cavallo had already held for six years in the nineties under then-President Carlos Menem, imposing outrageous IMF deregulation and privatization policies that weakened the state and led straight to the 2001 collapse.
Well, it wasn’t really De la Rúa who brought back Cavallo but rather David Rockefeller (JPMorgan Chase) and William Rhodes (CitiCorp), who personally came to Buenos Aires to tell/order President De la Rúa to name Cavallo… or else!
So, by June 2001, Cavallo – a Trilateral Commission member and Soros-Rockefeller-Rhodes protégé – tried to allay a default by engineering a new sovereign debt bond mega-swap which increased public debt by $51 billion, but did not avert total collapse that December.
What then? De la Rúa and Cavallo protected the bankers, avoiding a massive run on all banks by freezing all bank deposits. “Corralito” they called it – “the crib” – whereby account holders could only withdraw 250 pesos per week (at the time, equivalent to $250; after the 2002 devaluation, equal to $75).
Argentina’s economy all but collapsed; people took to the streets banging pots and pans, screaming and yelling, calling all bankers ‘thieves, criminals, crooks, swindlers and robbers’ but… the big mega-bank bronze gates all remained tightly shut. No one got their money back.
Half of bank deposits were in dollars. Again, no one got their dollars back, but just as pesos at a fraudulent rate of exchange after devaluation had been imposed and Argentina’s so-called “convertibility” Currency Board that Cavallo had imposed a decade earlier pegging the peso to the dollar at an unrealisticone-to-one parity, was dropped.
Clearly,this was a massive banker-orchestrated, government-backed robbery of the assets and savings of 40 million Argentinians.Half our population quickly fell below the poverty line, GDP contracted by almost 40% in 2002, millions lost their jobs, their savings, their homes to foreclosures, their livelihoods and yet… not one single bank folded or collapsed!
Amid rioting in Buenos Aires and major cities and brutal police repression that left 30 dead on the streets, De la Rúa boarded his helicopter on the rooftop of the “Casa Rosada” presidential palace and abandoned ship. That last week of December 2001, four presidents successively went by until finally the bankers, the media, and the US State and Treasury Departments accepted Eduardo Duhalde as provisional president. He finally named finance minister Roberto Lavagna, a founding member of the local CARI, the Argentine Council on Foreign Relations, which is the local New York CFR branch.
Argentina was used as a testing ground by the global power elite to learn how a full-scale financial, monetary, banking and economic collapse can be controlled and its social consequences suitably engineered to ensure that, with time: (a) the bankers came out unharmed, (b) “democratic order” is re-instated and the new government imposes another sovereign debt mega-swap, balance their numbers, and calm the people down (or else!), and (c) put big smiles back on bankster faces…Business as usual!
The lessons learned in Argentina in 2001/3 are today being used in Greece, Ireland, Spain, Italy, Iceland, the UK and the US.
So, “Occupy Wall Street” demonstrators, lend me your ears! You haven’t got a chance! The global money masters already made their financial war game exercise in Argentina.
At one point it got so bad that New York Times journalist Larry Rohter (later alleged by the Brazilian government to have ties with the CIA) had the gall to suggest the territorial break-up of Argentina to “solve” our debt crisis. The title of his perverse article, published on 27 August 2002, said it all: “Some in Argentina see secession as the answer to economic peril”, specifically targeting our natural resources-rich Patagonian region…
Then, the global power elite finally got their man when Néstor Kirchner became president in May 2003. Kirchner retained the finance minister, Lavagna, engineered yet another sovereign debt mega-swap running 42 years into the future (!); he paid the IMF the full amount they claimed of $10 billion (in cash, in dollars and with no deductions; i.e. absolutely most-favored creditor status!) getting nothing in return; he further weakened Argentina’s military, dumbed-down education, media and culture, and ended up imposing his wife Cristina as successor.
Clearly, lots of lessons were learned from the “Argentine experience,” which come in so handy when dealing with those rowdy, poorer Europeans today.
So, one decade on…. anyone for a tango? Adrian Salbuchi
- Ten years after economic collapse, Argentina is still in recovery | Vicky Baker (guardian.co.uk)
- Strange bedfellows: Argentina helped in unpaid debts case by Federal Reserve … – Edmonton Journal (edmontonjournal.com)
- US banks turn heat on Argentina for debt default (thehimalayantimes.com)
- Argentina Must Pay $1.33 Billion to Owners of Bonds – Bloomberg (bloomberg.com)
- US banks, funds file against Argentina remedy (kansascity.com)
- US banks, funds file against Argentina remedy (foxnews.com)
September 27, 2011
• Iranian President Mahmoud Ahmadinejad was invited to visit President Hugo Chávez on September 24, but the trip was postponed as the Venezuelan head of state recovers from cancer.
• Ahmadinejad partially empties UN Hall with some of his harshest statements.
• Iranian influence in Latin America is sometimes more fiction than fact.
• Befriending Iran’s repressive regime is somewhat contradictory for Latin American governments that openly crow their respect for democracy and human rights. Does Brazil really mean to have a creditable relationship with one of the most disreputable players and human rights violators?
• In an ironic twist, Chávez is credited for mediating with the Iranian government to free two American hikers.
• The attacks against Israeli centers in Argentina in 1992 and 1994 continue to be a source of tension, but in Buenos Aires, business comes first.
The Islamic Republic of Iran and Latin America have been fostering closer relationships for more than a decade, working towards building cohesive diplomatic relations and strengthening economic agreements. These ties began with Cuba’s championing of the 1979 Iranian revolution, and today those connections also extend to Argentina, Brazil, Bolivia, Ecuador, Nicaragua, Paraguay, Peru, Uruguay, and the ever-controversial Venezuela, with these amplified ties being sedulously cultivated by Tehran. Due to Iran’s internal politics, such as its controversial nuclear program, its contemptible human rights record, and its often tense, if not minatory, relations with the U.S., initiatives between Tehran and the Western Hemispheric states have come under heavy critique. As a result, there is speculation and differing interpretations over the existing level of influence that Iran currently enjoys in several nations of Latin America.
A Brief Overview
Ironically, as relations with the U.S. and European countries have deteriorated, Iran’s relations with the Global South have, if anything, noticeably progressed. Perhaps as a direct result of the U.S. placing Iran within the ‘axis of evil’, the Persian state began pursuing relationships with African governments and, within the last decade, an increasing number of Latin American countries, as a strategy to counteract U.S.-backed ostracism and efforts to diplomatically isolate Tehran. The apparent reasons for these alliances are:
(a) to gain economic advantage as well as much-needed relief and collegiality to cope with the consequences of U.S.- imposed sanctions;
(b) to counterbalance the geopolitical effect of U.S. policy in both the Muslim World and Latin America;
(c) to garner a sympathetic attitude and support for its nuclear program;
(d) to gain recognition in an increasingly prominent part of the Western Hemisphere, and in Washington’s sphere of influence, in order to achieve political prestige in the international community. This also helps, in part, divert the attention among the Iranian people, particularly in the aftermath of the 2009 Iranian election fraud that prompted massive repression of the dissenting democratic opposition.
The most pertinent questions, however, remain to be answered: Has the long term impact of these increasingly intimate relationships, such as the one between Caracas and Tehran, been fully analyzed? Are the initiatives and maneuverings carried out by some Latin American governments solely due to their impetuousness and lack of long-term goals? Notwithstanding the immediate economic advantage of gaining new markets, the long-term political ramifications and disadvantages of doing business with what the free world considers a horrendously corrupt regime places the Latin American region into a precarious situation. Latin America’s good will initiatives and human resources could be more wisely expended in dealing with nations that do not carry out egregious abuses towards its own citizens.
Case Study: Argentina
In March 1992, the Israeli Embassy in Buenos Aires was the subject of a bomb attack. It has been established that a pickup truck loaded with explosives, and driven by a suicide bomber, smashed into the front of the embassy, killing thirty-three and wounding as many as 242 persons. In July 1994, the Asociación Mutual Israelita Argentina (AMIA; Argentine Israelite Mutual Association) building in Buenos Aires was the target of an attack that killed eighty-five people, while scores more were injured.
The violent Islamist militant organization Hezbollah has been regarded as the culprit behind these attacks, but there have been rumors that the Iranian government, including some members of the current administration in Tehran, may have been more directly involved. The Persian state has repeatedly declared its innocence regarding its involvement in both attacks. In July 2011, Iran’s Foreign Ministry stated that “the Islamic Republic of Iran, as one of the major victims of terrorism, condemns all acts of terror, including the 1994 AMIA bombing, and offers sympathy with the families of the victims of the explosion […] Iran’s Foreign Ministry expresses regret that 17 years on from the occurrence of this crime, the truth behind it has not been revealed yet and the identities of its real perpetrators are still shrouded in mystery.” Furthermore, an article published by Press TV (a semi-official Iranian news agency) in July argues that, “under intense political pressure from the United States and the Israeli regime, Argentina formally accused Iran of carrying out the attack on the Jewish community.” Most independent observers, however, dismiss this rhetoric merely as tactical method to confuse the subject.
Tensions between Iran and Argentina took a new twist in early June 2011, when Iranian Defense Minister Ahmad Vahidi visited Bolivia. General Vahidi is wanted by Argentina for allegedly masterminding the 1994 bombing. Buenos Aires asked La Paz to apprehend the Iranian official, but he returned to Tehran before any decision by the Bolivian government could be made. As Iran continues to promote its influence in Latin America, the controversy over the Argentine bombings will continue to be a sore point for the foreseeable future. The Argentine-Persian relationship, or lack thereof, presents a fascinating case study of a state trying to improve relations with another while at the same time attempting to overcome a violent recent past that includes state-sponsored terrorism.
Trade and Investments
During recent years, Iran has expanded its economic cooperation with many Latin American states, entering into substantial trade agreements with Venezuela, Bolivia, Peru, Brazil and, somewhat surprisingly, Argentina. The International Monetary Fund (IMF) stated in a report issued in December 2009 that Brazil is Iran’s largest trade partner in Latin America. Last year, Iran’s state radio announced that bilateral trade with Brazil had increased to more than USD 2 billion in 2009-10, an increase from USD 500 million in 2005, and was forecast to reach USD 10 billion in the next 5 years.
Argentina is Iran’s second largest trading partner in the region, despite the fact that Buenos Aires has accused Tehran of the 1992 and 1994 bombings. Trade relations remained at marginal rates throughout the 1990s, but commercial activity never ceased entirely, and by 2008 bilateral trade had soared to USD 1.2 billion, dramatically overshadowing the 2007 figure of USD 30 million.
In addition, relations between Iran and Venezuela are a mixed bag of actual achievement and diplomatic rhetoric. According to the IMF report, and in spite of highly cordial political and diplomatic relations, bilateral trade between Venezuela and Iran did not advance in the same way as it did for other Latin American countries. For example, while Brazilian and Argentine trade with Iran has increased by 88 percent and 96 percent since 2007 respectively, Venezuela’s trade increased by only 31 percent in the same period. Following the increase in trade with Brazil and Argentina, Venezuela became Iran’s fifth largest trade partner in the region.
Moreover, Iran has pursued deeper trade and diplomatic relationships with Bolivia as well. Trade and energy agreements between La Paz and Tehran, signed in September 2007, confirmed the increasingly friendly nature of ties between the two countries. Iran’s involvement in the Bolivian economy extends to investment in and technological support for industrial projects such as dairy factories, agriculture, mining, and hydroelectric dam construction. Additionally, in July 2009, Tehran agreed to provide USD 280 million in low-interest loans to La Paz. Finally, Peru is also a growing importer of Iranian products, as is Ecuador. The expansion of trade ties follows an overall regional trade ‘offensive’ by Iran in recent years. IMF data analyzed by the Latin Business Chronicle indicates that Iran-Latin American trade skyrocketed by 209 percent in 2008, totaling a robust USD 2.9 billion. What this data tells us is that there is certainly a potential for trade to grow between Iran and several Western Hemisphere states, however Iran’s trade numbers are dwarfed by the region’s other trade partners, like the U.S., China and Europe.
To Washington’s increasing concern, the Brazilian Deputy Foreign Minister Maria Louisa met with her Iranian counterpart, Ali Ahani, in Brazil in early August 2011. The Brazilian official described Iran as one of “the important partners of Brazil” and an “influential” country. Louisa noted that Tehran and Brasilia would attempt to increase the level of mutual ties “considering the developments of the two countries in different fields.” The Iranian Deputy Foreign Minister, for his part, hailed “the friendly and good relations” between both states and said that the governments of Iran and Brazil are eager to expand ties. Given the grim status quo between Washington and Tehran, at some point in the near future, the White House is bound press the issue, and Brazilian President Dilma Rousseff may have to choose whether her government will pursue closer relations with Washington, or with Tehran.
According to the Iranian International Newspaper Ettelaat, Iran has nearly doubled the number of embassies and cultural centers it maintains in Latin America. The number of embassies increased from six in 2005 to ten in 2010, and Tehran is building cultural centers in seventeen Latin American countries. Additionally, Iran has successfully negotiated no-visa agreements with Nicaragua, Venezuela, and Bolivia. It can also be argued that although relations have been strained with Argentina since the terrorist bombings, the continued trade between the two countries is a signal that geopolitical interests have gradually taken precedence over efforts to apprehend the perpetrators of the attacks. Argentina’s reaction to the visit of Defense Minister Vahidi to Bolivia does point out that Buenos Aires has not forgotten Iran’s alleged role, but that ultimately other initiatives have taken priority.
Nevertheless, if we consider Iran’s repressive regime, its brutal crackdown on dissenting voters, and the continued suppression of what most nations, particularly in the West, consider a wholly organic and legitimate uprising, it is difficult to comprehend the continued warming of relations with its Latin American partners. Nations are certainly free to pursue close relations with any states they wish, but it is baffling, considering the Iranian government’s repressive record when it comes to its own population, that Latin American governments, many of which repeatedly publicly proclaim their respect for human rights, want to befriend a thoroughly toxic nation like Iran. So what could be the reasons why Latin American countries continue to welcome the Iranian government’s overtures? Simply put, Latin American nations want an alternative to what some regional players see, at times, as U.S. imperialism. This is exemplified by the Chávez and Ahmadinejad pact signed in 2007 to formulate an “Axis of Unity”, particularly against the U. S.
In order for Iran to gain the geopolitical strength that its revolutionary leaders so fervently aspire to obtain, the country continues to play its U.S- as-an-imperial power card as aggressively as possible. It also plays a powerful role in pushing its Latin American partners into recognizing Palestine as a counterbalancing force against U.S. and Israeli influence. When it comes to assessing geopolitical gains, the common denominator between Latin America and Iran is economic advancement, rather than the counterbalancing of geopolitical power. Venezuela’s President Chávez is the exception to this rule, as, even though Venezuelan-Iranian economic relations are fairly robust, a major factor for this close rapprochement is that Chavez and the Iranian government are fairly ideologically aligned (at least regarding their views on Washington).
Support for Iran’s Nuclear Program
Venezuela, Cuba, and Syria were the only three countries that supported Iran’s nuclear energy program when the UN voted on it in 2006. However, there is little doubt that support has been increasing throughout Latin America due to Iran’s diligent pursuit of such backing. Now Bolivia and Brazil are also offering their measured support for Tehran’s civilian nuclear program. In addition, the ever-vociferous Venezuelan leader has officially stated that Iran has a legitimate right to its nuclear program and that Venezuela supports Tehran’s quest for peaceful nuclear technology.
The Future of the Iran-Latin America Alliance
Chávez’s present personal medical issues, and the recent U.S.-imposed sanctions on Venezuelan oil company PDVSA (Petróleos de Venezuela S.A. – Venezuelan Petroleum S.A) for dealings with Iran, could serve to weaken the Venezuelan-Iranian nexus. This is because Venezuela’s current ideological views – particularly its foreign policy – ultimately derive from Chávez, and it is unclear what a post-Chávez Venezuela would look like. Would his political party maintain its unity and continue Chávez’s ideology, or would another course be taken? In addition, the Venezuelan military has declared its support for Chávez to the point that some organizations are concerned as to what would happen if another political party were to win the upcoming presidential election. What this means for Tehran is that its closest ally in Latin America is not Venezuela but rather its leader, and it is difficult to foresee how diplomatic ties would be affected by a transition of leadership.
Late September 2011 saw an interesting development, as the Iranian government recognized mediation initiatives by Chávez to free two American hikers held in an Iranian prison since 2009. According to statements by the Venezuelan Vice Minister of Foreign Affairs, Temir Porras, the Venezuelan government agreed to help Shane Bauer and Josh Fattal after receiving a request for help from the hiker’s friends. It has also been reported that Noam Chomsky signed a letter asking for Chávez’s help.
Although various news sources have reported an increase in the establishment of Iranian embassies in Latin America, a Latin daily source indicates that, at least in the case of Nicaragua, such plans have failed to come to fruition. This is particularly interesting as there had been rumors circulating that Iran’s embassy in Managua is, or was supposed to be, some kind of massive intelligence hub involving an unusually large number of staff, which, by default, would put U.S. interests in the region at risk. In reality, the Iranian Embassy in the Central American country may be nothing more than somewhat large.
In mid-June, an Iranian analyst published a piece in the Iranian newspaper Jaam-e Jam entitled “Failure of the United States to break relations between Iran and Brazil.” The analyst explains that Iran’s initiatives in Latin America “change the quiet backyard of the United States to a dangerous backyard for that country, because the expansion of Iran’s economic and political relations with the countries of that region is indicative of the failure of U.S. efforts to impose sanctions and threats on Iran.” The analyst also discusses how relations between Tehran and Latin America affect Israel:
Changing the United States’ quiet backyard to a dangerous backyard has also created major concerns for Tel Aviv, in addition to Washington. Such worries have intensified to the point that Shimon Peres, the head of the Zionist regime, left for a visit to Latin America, which is considered the first official visit of this sort to Latin America in the course of several decades, only a few days before the visit of Mahmoud Ahmadinejad.
The bottom line seems to be that Latin America sees Iran’s involvement in the region in terms of economic interests. Additionally, it may allow the region to gain a foothold in the Muslim world, with the secondary benefit (at least possibly in Venezuela’s case) of reducing U.S. influence in the region. Meanwhile, as interpreted by the aforementioned Jaam-e Jam analysis, Tehran sees its rapprochement with Latin America mostly in terms of its impact on Washington and Tel Aviv.
Finally, it is interesting to observe that Brazil, Latin America’s powerhouse and a nation that is currently attempting to obtain a permanent seat on the United Nation Security Council, has also increased the pace of diplomatic ties with Iran. Brasilia has gone on record to declare its support for Tehran’s civilian – albeit controversial – nuclear program. It may soon become apparent to Itamaraty diplomats that they will have to choose between Washington and Tehran as their primary overseas partner.
In the interest of creating a just and prosperous hemispheric community, it is important for regional nations to continuously evaluate the scope and breadth of the burgeoning economic aid pacts and political gains being devised between Latin American countries and Iran. This survey must also include a gauging of the inherent merits of these gains and an evaluation of whether they are more fictive than real. A closer examination of the Islamic Republic of Iran depicts an undemocratic governing body heavily burdened by religious dogma, underdeveloped financial standards, institutional corruption and self-imposed non-transparency, a legal system hardly worthy of the name, the absence of any civil liberties, and atrocious human rights violations.
Iran’s current leadership can hardly be described as providing a suitable alternative to traditional U.S. domination and a sphere of influence. Even if counterbalancing U.S. power in Latin America can become more than a fantasy, and grow into a viable plan to amplify the resonance of democracy in the region, the advantages derived from an arrangement with Iran must be weighed against the costs of introducing another form of despotic influence into the democratically fledgling Latin American region.
- The Up-and-Coming Presence of India in Latin America (mb50.wordpress.com)
- *Yawn* Iran to send it’s MASSIVE Naval Might to US Waters (erickbrockway.com)
- Iran Mass-Produces New Missile, Rejects ‘Hot Line’ Idea With America (nytimes.com)
- Chavez supporting growth of Hizbollah terror network in Latin America (video) (creepingsharia.wordpress.com)
- Argentina Praises Iran Offer in Bombing Probe (time.com)
- Don’t put international cooperation on Iran at risk (thehill.com)
- Argentina praises Iran help offer in bombing probe (seattletimes.nwsource.com)