Checking the Pulse in the Gulf: A Conversation with Jean-Francois Seznec

Published: April 16, 2012

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Editor’s Note:

Last month we opened a series of conversations with specialists on Gulf affairs concerning the “war drums” that were being beaten in Israel and the United States over the Iranian nuclear program. We first spoke with Professor James Russell an associate professor in the Department of National Security Affairs at the Naval Postgraduate School in Montery, CA. In an exclusive SUSRIS interview he said, “An attack by the United States or Israel, or both, on Iran would be an absolute disaster for the region. It would be an immensely destabilizing event and it would raise the prospect of a wider, regional war. I don’t think anyone has a clear idea of how such a war would end.” He added that he was not in favor of the United States “being somehow forced, or dragged into a war at Israel’s prompting. The United States clearly has a strategic interest in preventing Iran from becoming a nuclear weapon state, but I do not believe the threat to the country warrants a pre-emptive strike or preventative war.” Russell noted, “There is no military solution to this problem. It’s a political problem and requires a political solution.”

Today we are pleased to add to this dialogue the voice of Dr. Jean-Francois Seznec, an Associate Professor at Georgetown University’s Center for Contemporary Arab Studies who has extensive business experience in the Gulf. His research centers on the influence of the Arab-Persian Gulf political and social variables on the financial and oil markets in the region. Dr. Seznec brings years of business experience in the Gulf to his academic credentials. He was recently in the Gulf and is a regular visitor and interlocutor with key policymakers and thought leaders in the region.  We asked Dr. Seznec to comment on the beating “war drums”, the impact on Saudi Arabia of a crisis with Iran and the effect on U.S.-Saudi relations.

We commend to your attention a new special report by CNN’s Christiane Amanpour which aired this week on the subject of the Iranian nuclear program. It provides background and context to the issue and shares the views of experts on the topic. You can find the half hour broadcast, in three parts, on SUSRIStube.com, one of our companion web sites.

We also suggest that you consult the SUSRIS Special Section titled “Challenge of Iran – 2012″, for more reference material on this important issue. Some of those links are included below along with links to Dr. Seznec’s earlier conversations with SUSRIS.

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Checking the Pulse in the Gulf: A Conversation with Jean-Francois Seznec

[SUSRIS] Thank you for talking with us about the impact on US-Saudi relations and interests of a potential conflict in the Gulf over the Iranian nuclear program. The recent visit of Prime Minister Netanyahu to Washington, President Obama’s remarks at the conference of AIPAC, an Israeli lobbying group, and statements by Republican presidential candidates have heightened concern about war drums in the Gulf, especially the notion that Israel’s window for a preemptive strike against Iran is closing. How do you view these developments?

[Dr. Jean-Francois Seznec] I cannot believe that anyone in Israel would really be serious about attacking Iran directly from Israel. I just don’t see that as a military possibility or even a political possibility. I just cannot fathom that the Israelis would do this at this point. In my view Netanyahu was just bluffing to try to get as much as he could from the United States while he was in Washington. There are rumors that he may have obtained bunker-busting bombs and promises of much more support from the United States than he may have had in the past.

Yes, there have been a lot of war drums being beaten in Washington but it seems to have quieted a little bit since the Netanyahu visit and the AIPAC conference. I hope the sanity is coming back to the world here.

[SUSRIS] Americans hearing these conversations may be using the filter of presidential election year politics. However, they must be looked at from a different perspective among U.S. Gulf allies? You are a regular visitor to the GCC countries and have recently returned from the Gulf. What is your sense of reaction there to talk of military strikes on Iran?

[Seznec] They are absolutely amazed over the reactions by the U.S. at this point. They know that if Israel attacks Iran it would be dreadful for the region. They know that if Iran were attacked, there would be an immediate direct or indirect retaliation against Israel. That probably would be through Hezbollah out of Lebanon. In the Gulf the worries would be that Iran would send a rain of missiles on strategic targets, places like Abqaiq, the oil center of Saudi Arabia, and oil loading facilities of the region, like the port at Ras Tanura. They also worry about Iranian cells in the Gulf Arab countries that could be activated to create havoc.

The Gulf’s Arab countries very much would want to see a regime change in Iran, but not if it’s a regime change that’s precipitated from outside especially if brought about by a military conflict initiated by Israel. In no circumstances could they back such a conflict, as it would delegitimize them in the eyes of their own people.

I believe that the speeches and editorials calling for an Israeli strike on Iran bewilders many of America’s friends in the region. Of course, the leadership in the Gulf realizes, the United States is in a political year, the so-called “silly season” in Washington. However, I think the Gulf states are worried that this is a very dangerous environment and events could easily get out of control.

[SUSRIS] Do you believe they see that a strike on Iran by the United States and, or Israel on Iran will necessarily involve them?

[Seznec] They would have to be involved. There’s no way they can avoid being involved. Let’s face it. Look at the map. If Israel decides to attack, they probably would have to fly over Saudi Arabia, because it’s the shortest route and they would have problems with fueling otherwise. I understand there are reports about Israel having a relationship with Azerbaijan, which could enable them to pre-position or refuel near Iran, but, in my opinion, Azerbaijan would be unlikely to provoke its immediate neighbor. I believe that Gulf Arab airspace would be involved to some extent. That means Gulf countries, especially Saudi Arabia which spans the Arabian Peninsula, would actually see the attacking aircrafts and would be accused of knowing what was happening. So Saudi Arabia would probably be pointed out by Iran as being in support of Israel. That is not something the Saudi leadership today would want to live with.

[SUSRIS] It is difficult to assess all of the consequences of an Israeli attack, given the many scenarios possible, but can you comment in a general way what Saudi decision makers must have to be considering?

[Seznec] Yes, I think they are faced with a very serious dilemma. It is difficult to know how they would react.

Let me add an anecdote about this dilemma. I’m teaching a graduate class at Georgetown University on socio-politics of the Gulf right now and I ran a simulation that is apropos. It’s a small class of about ten people and they were assigned to role-play the Saudi security cabinet meeting. The meeting consisted mostly of “Princes”, plus the finance and oil ministers. The scenario was very simple. You have just learned that an Israeli strike force has taken off to attack Iran and will fly over Saudi Arabia. What do you do?

It was very interesting to have the students assume the perspective of King Abdullah, Crown Prince Nayef, defense minister Prince Salman, all of the leaders. They all had different points of view. Someone said let’s warn Iran, and another one said we couldn’t do that because the source of the warning would be known. At the end of the process, the decision of the cabinet was to do nothing. I discussed that result with a Saudi friend. He said, “Yes, that makes a lot of sense and would be the most likely outcome.”

Every power center in Saudi Arabia has a different agenda, but when faced with a decision of this nature there was no good solution to the problem, so inaction was the result.

[SUSRIS] Let’s talk about the U.S.-Saudi relationship in relation to the challenge from Iran and the potential for conflict. Riyadh has been saying “something” must be done about Iran, but has warned against that “something” being anything that would make a mess of the neighborhood. Meanwhile sanctions on Iran have been ratcheted up, and appear to be having an impact on Iran. Do you think the Gulf states and Saudi Arabia in particular support the approach taken by the United States regarding Iran – apart from the urgings of Israel and its supporters for a military strike? Are they satisfied, do you think, that the sanctions approach is the right course and is what they would like to see proceed?

[Seznec] Yes, I think they like this approach. I think they view it as probably the only solution to the problem. Whether or not that means that the regime will fall in Iran, we and they just don’t know.

They may be a little worried that China may try to bust the sanctions, but then again, President Wen Jiabao was in Saudi Arabia not long ago, and I’m sure these issues were discussed. It is true that China has decreased its purchases of oil from Iran, so the Saudis must feel confident that the sanctions will have some effect over the long run. Everybody is prepared to wait and wait and wait, and ultimately think it is going to drive Iran to the brink.

[SUSRIS] Saudi Arabia has been standing by their historic commitment of using its spare oil production capacity to calm the global energy market. What does that mean in the current case?

[Seznec] It’s all speculative. No one outside Saudi Aramco knows exactly how far they could go in terms of production. They probably could go up to twelve and a half million barrels from ten and a half they are producing now. If so, it would certainly help.

Iran has not stopped production. Iran is probably trying to sell its oil, and considering the sanctions probably has to do so at a discount. If we could rely on China to buy that oil at a discount it would be very helpful because it could have a substantial discount. Indeed, Iranian oil revenues would really suffer, and perhaps counter intuitively could bring about a price decline. The actual supply of oil has not declined, demand is fully met. If in this market the Iranians are seeking to discount their oil sales to China, undoubtedly the barrels to China will be displaced to Europe or other Asian country. Altogether, the price will end up being impacted by the Iranian discount and should bring about a general decline from today’s level.

You asked earlier about remarks from presidential candidates. Let me point out to the Republican candidates that all their noise about Iran is only fueling – no pun intended – speculation about the Strait of Hormuz and Israel warmongering talk and thus directly increasing the cost of gasoline to the American people. Perhaps we should point this out to them and we may see a change in their boisterous arguments.

[SUSRIS] Do we see any effects on the Gulf economies – change in trade and investment patterns or other adaptations – apart from oil production over the tensions with Iran?

[Seznec] Well I was in the Gulf for just one week on this recent visit. I’ve been in the Gulf very often in the past year, probably five or six times. I find that the economy is doing very well.

There have been some issues related to Iran such as the UAE limiting new Iranian accounts. The elites in Iran have accounts in Dubai and they are investing their money in Dubai. But it is now becoming more difficult. So, the UAE banks now will have a little less liquidity. However, it does not seem to have impacted the economy. In fact, I’ve found that the economy in Dubai was very good in spite of the crisis. The same applies to Abu Dhabi and the same in Qatar. So I didn’t feel a sense of worry in the economic realm.

[SUSRIS] Can you talk about the GCC and U.S. and the nature of the friendship and alliance that we have especially when there are challenges like the Iran nuclear program?

[Seznec] Saudi Arabia and the rest of the GCC countries have a love-hate relationship with the United States. Everybody likes American businesses. Everybody knows that the U.S. is ultimately the potential defender of the Gulf against Iran. On the other hand, everybody’s extremely upset at the obvious kowtowing of the Obama Administration to Netanyahu. So that’s really a push-pull situation. On the other hand, the local economies are doing well and the U.S. is selling a lot of goods over there, in spite of the misgivings about the US in the region.

[SUSRIS] On your many visits to the Gulf do you sense that anybody is concerned about American staying power and presence and wherewithal in the Middle East?

[Seznec] I’m not sure they’re worried so much about it, but there’s been a lot of talk about it. And everybody knows that China is not going to replace the United States for the next generation. It’s going to take many, many years before China can build the military strength that would come even close to what the United States has in the Gulf today.

But yes, they see that the U.S. is moving its emphasis to the Far East and that the U.S. influence in the Gulf will decline. And let’s face it; if the price of oil really did decline very substantially, then of course the importance of the Gulf would decline. They know about that, and they’re trying to live with it as best as they can at this point. I can’t say they are losing sleep over the decline of American presence in the region, but they know that it’s coming.

The Gulf sees that Iraq is really past us and that Afghanistan is likely to be past us probably faster than anybody thinks. However, we still will need the U.S. Navy headquartered in Bahrain to defend the Strait of Hormuz, fight piracy and help with the winding down of Afghanistan operations. We’re still going to need the big air force base in Qatar as a deterrent to Iran. Most importantly we will need the commercial links. We sell a lot of cars, we sell a lot of arms, we sell a lot of computers to the region, and I think that’s going to continue.

[SUSRIS] Let’s talk about Gulf unification. There had been some discussion of bringing in Jordan and Morocco previously but at the GCC meeting in Riyadh in December the leaders pushed forward this notion. In addition to expansion of membership there’s more details about a European style “union.” What’s going on here?

[Seznec] Jordan and Morocco are not likely to join the GCC soon. As to a Union similar to the European Union, there’s only one country that’s really eager to join the union and that’s Bahrain for obvious reasons. The fact, however, is that Bahrain is already – although not officially – unified with Saudi Arabia whether they like it or not. I think the UAE and Qatar probably have some grave reservations about being part of a union.

I attended a meeting in December in Riyadh where Prince Turki actually called in public for unification and having the people of the Gulf represented in one elected Majlis Ash Shura. No one mentioned the composition of the government of this union but one would assume it would be mainly led by Saudi Arabia. That would make the UAE and Qatar extremely nervous. So I think there will be some token steps in the direction of unity, but nothing truly substantial.

[SUSRIS] Thank you for taking time to share your perspective on the challenge of Iran in the Gulf and other important issues of the day.

About Jean-François Seznec

Jean Francois Seznec

Dr. Seznec is a Visiting Associate Professor at Georgetown University. His research centers on the influence of the Arab-Persian Gulf political and social variables on the financial and oil markets in the region. He is focusing on the industrialization of the Gulf and in particular the growth of the petrochemical industry. He holds a MA from Columbia University [1973], a MA and his Ph.D. from Yale University [1994]. He has published and lectured extensively and is interviewed regularly on national TV, radio and newspapers, as well as by the foreign media.

Dr. Seznec has 25 years experience in international banking and finance of which ten years were spent in the Middle East, including six years in Bahrain as a banker. Dr. Seznec is a founding member and Managing Partner of the Lafayette Group LLC, a US based private investment company. He uses his knowledge of business in the Middle East and the United States to further his analysis of the Arab-Persian Gulf.

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SUSRIS Exclusive Interviews with Dr. Seznec:

On SUSRIS.com and SUSRISblog.com

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