[chilefuturo] Fwd: Brazil, Iran: A Troublesome Relationship for the U.S. - Outside the Box Special Edition

  • From: Carlos Contreras <clubcientifico@xxxxxxxxx>
  • To: chilefuturo@xxxxxxxxxxxxx
  • Date: Thu, 4 Mar 2010 23:20:51 -0300

EEUU presiona y amenaza a Brazil. Pretende prohibir a Lula establecer
relaciones comerciales con Iran.

---------- Forwarded message ----------
From: John Mauldin and InvestorsInsight <wave@xxxxxxxxxxxxxxxxxxxxx>
Date: 2010/3/4
Subject: Brazil, Iran: A Troublesome Relationship for the U.S. - Outside the
Box Special Edition
To: clubcientifico@xxxxxxxxx

  <http://www.investorsinsight.com/members/JohnMauldin.aspx> Contact John
Mauldin <http://www.investorsinsight.com/members/JohnMauldin.aspx>
Volume 6 - Special Edition
March 4, 2010

Brazil, Iran: A Troublesome
Relationship for the U.S.
From Stratfor

World economies I get: currency, trading, deficits, surpluses... World
politics is another story. I follow what happens: summits, policy changes,
elections: but what does it mean for energy markets, potential threats,
actual relations between countries? These situations define our future -
financial and otherwise.

Today I'm sending you a piece from STRATFOR on the relationship between Iran
and Brazil - and what it means for energy, trade, U.S. sanctions, and this
rising power in the South. STRATFOR is my go-to source for all things
geopolitical. The great thing about it is that it's not just available to
government agencies, Fortune 500 corporations and financial advisers such as
myself. Rather, you too can access their content. Sign up here for
STRATFOR's free weekly intelligence
highly recommend it for investors at any level.

John Mauldin
Editor, Outside the Box

[image: Stratfor Logo]
* Brazil, Iran: A Troublesome Relationship for the U.S.*

Stratfor Today » <http://www.stratfor.com/analysis> February 26, 2010

[image: image001]
Iranian President Mahmoud Ahmadinejad (R) and Brazilian President Luiz
Inacio Lula da Silva shake hands in Brasilia on Nov. 23, 2009

U.S. Undersecretary of State William Burns traveled to Brasilia on Feb. 25
in advance of a trip by U.S. Secretary of State Hillary Clinton to Brazil on
March 3. The diplomatic preparation work in which Burns is involved centers
on Brazilian President Luiz Inacio Lula Da Silva's intensifying
long-distance relationship with Iran. For now, the Iranian-Brazilian love
affair does not stretch far beyond rhetoric, but Washington sees a growing
need to keep Lula's foreign policy adventurism in check, particularly when
it comes to Brazil forging nuclear and banking ties with Iran.

Related Links

   - Brazil and Iran: An Unlikely
   - The Iranian Saga

U.S. Undersecretary of State William Burns, the State Department's point man
on Iran, traveled to Brasilia on Feb. 25 to lay the groundwork for U.S.
Secretary of State Hillary Clinton's visit to Brazil on March 3. Usually,
such a visit would not require extensive prep work by an undersecretary, but
from Washington's point of view, Brazil has moved up in the list of
diplomatic priorities. The reason? Iran.
Getting Keen on Iran

Brazilian President Luiz Inacio Lula Da Silva has been getting cozy with
Iran as of late. On Feb. 24, da Silva came to Iran's defense, asserting that
"peace in the world does not mean isolating someone." He also defended his
decision to follow through with a scheduled visit to Iran on May 15 in spite
of Iran's continued flouting of international calls to curb
uranium-enrichment activity and enter serious negotiations on its nuclear
program. He scoffed at the notion that his trip had turned into a scandal
and said when he travels to the Persian Gulf, he is "going to negotiate with
Iran and sell things to Iran so that Iran can also buy things from Brazil."

The basic question running around Washington in regards to da Silva's
behavior is, "What gives?" The United States has long considered da Silva a
crucial ally and bridge to the Latin American left. Sharing a common vision
with da Silva for business-friendly policies, Washington has relied on the
charismatic Brazilian leader to help balance against the more antagonistic,
anti-imperialist agenda espoused by leaders like Venezuelan President Hugo
Chavez. This is not to say that da Silva was a card-carrying member of the
pro-United States camp, but he would take extra care to walk a fine
diplomatic line between the United States and its adversaries, like Cuba and

Lately, however, da Silva and his Cabinet appear to be going out of their
way to telegraph to the world that Iranian-Brazilian relations are
blossoming, putting Brazil within firing range of one of Washington's
biggest foreign policy imperatives. Brazilian officials reacted warmly to
Iranian President Mahmoud Ahmadinejad's controversial victory in the June
2009 presidential election and were quick to roll out the red carpet for the
Iranian president when he paid a state visit to Brazil in November 2009.

Tehran is more than happy to receive such positive attention from Brasilia.
Brazil holds a nonpermanent seat on the U.N. Security Council, and U.N.
sanctions against Iran require the support of at least 9 of the 15 council
members. In addition to having to deal with potential Russian and Chinese
vetoes among permanent members, the United States also has to take into
account that it will not have the vote of Brazil, which is not satisfied
with its temporary seat and is using its foreign policy credentials to seek
global support for a permanent seat. Even rhetorical support from an
emerging power like Brazil helps Iran in gathering diplomatic fodder to try
to prevent a sanctions coalition from amalgamating.
Brasilia's Global Emergence

Da Silva has several strategic motives for publicly playing defense for
Iran, most of which have very little to do with Iran itself.

Though Brazil has existed in isolation for much of its post-colonial history
with most of its attention occupied by internal political and economic
turmoil, the country now finds itself, uniquely, in a stable enough position
to start reaching abroad and developing a more assertive foreign policy.
Brazil has the political and economic heft to declare itself the regional
hegemon, regardless of whether the states in Brazil's immediate abroad are
prepared to accept such a reality. In addition to boasting a rapidly
modernizing military and a burgeoning energy sector that will place the
country among the world's top energy producers within a decade, Brazil has
membership in practically every internal grouping that it can find
membership in. As da Silva famously said earlier this month, "Brazil is part
of the G-20, G-7, G-8, G-3. In short, any G they make they have to call
Brazil. We are the most prepared country in the world to find the G-spot."

With an ambitious foreign policy agenda being charted out in Brasilia, da
Silva apparently sees some diplomatic benefit in promoting a more contrarian
view to the United States. In addition to getting close to Iran, da Silva
made a point recently of staunchly defending Chavez's government as a
democracy (while referring to his own country as a "hyper-democracy"), and
he continues to press the United States to lift its trade embargo against
Cuba. By carving out a more controversial position for itself in the
international arena, the Brazilian government is looking to gain some
credibility in places like Tehran and Caracas to promote itself as a
mediator in their thorny dealings with the United States.
Taking Risks at Home

Despite the overabundance of mediators in the Middle East and Brazil's
glaring lack of leverage in the region, da Silva remains fixated on the Iran
portfolio. This policy does not come without political risks for da Silva.
Within Brazil, many are puzzled and uncomfortable with the idea of Brasilia
publicly aligning itself with Tehran when even countries like Russia and
China (who, unlike Brazil, actually have substantial relations with Iran)
are taking care to diplomatically distance themselves every time the regime
flouts the West's demands to show some level of cooperation on the
enrichment issue.

Indeed, da Silva's decision to politically embrace Ahmadinejad when he came
to visit Brazil last year had a polarizing effect on the Brazilian political
scene. Da Silva is in the last year of his term and his popularity is still
soaring, but his Iran policy could be problematic for his chosen candidate,
Brazilian Cabinet Chief Dilma Rousseff, in the run-up to the October
presidential election.

When Israeli President Shimon Peres arrived in Brazil to get a pulse on da
Silva and his Iran agenda prior to Ahmadinejad's visit in late 2009, Sao
Paulo state Governor Jose Serra, Brazil's main opposition leader, took the
opportunity to invite Peres to his state, where he made a pro-Israeli speech
and later condemned da Silva's reception of Ahmadinejad. Serra is already
leading Rousseff in polls by 11 percentage points. Conscious of Brazil's
percentage of Jewish population (less than 1 percent of total population)
and a sizable number of Brazilians growing leery of da Silva's foreign
policy adventurism with Iran, Serra can be expected to hone in on this issue
in his campaign. It remains to be seen whether domestic politics in Brazil
will lead da Silva to back off his Iran outreach should it prove detrimental
to Rousseff's campaign.

The Brazilian business community has not yet reacted strongly to da Silva's
diplomatic flirtations with Tehran, but the further da Silva goes in this
Iran initiative, the more problems he could create for Brazilian traders who
are heavily integrated with the West. Along this vein, it will be important
to watch for signs that the United States will seek to retaliate where it
hurts Brazil most: In its pocketbook. There already has been talk of
restricting access to U.S. financing in the oil and natural gas sector in
Washington; and at a time when Brazil has high hopes for the sector,
alienating the United States and its high-technology firms could develop
into a serious roadblock.
Not Ready to Throw Caution to the Wind?

So far, Washington and others can find comfort in the fact that Brazil and
Iran currently do not have much to boast of beyond the diplomatic fanfare.
Although Brazil is Iran's largest trading partner in Latin America, the
total annual trade between the two remains small at roughly $1.3 billion
(with Brazil making up most of this trade through meat and sugar exports).
And since Brazil is already self-sufficient in oil, the country simply does
not have a big appetite for Iranian energy exports to support a major boost
in this trade relationship.

Although Da Silva may see the strategic benefit for now in promoting himself
as an advocate of the Iranian regime, he also seems to be conscious of when
to take a step back. Much to Washington's discontent, Brazil made a foray
into the Iranian energy market in 2003 when state-owned Petrobras obtained
exploration and drilling rights in the Caspian Sea under a $34 million
agreement. Petrobras, however, said in November 2009 that it was pursuing an
end to its activities in Iran, claiming that their technical evaluation
concluded that the project was no longer commercially viable. Though
Petrobras insisted the decision to leave was not made under political
pressure, the announcement came as the United States was gearing up
sanctions against Iran's energy sector, perhaps shedding a ray of light on
Brazil's pragmatism in handling the Iranian portfolio.

Da Silva's Cabinet also has shown similar restraint in dealing with Iran's
nuclear controversy. Brazil has a modest nuclear power program — complete
with two nuclear power plants in operation and one under construction,
enrichment facilities and a small reprocessing plant. Iran has tried to
claim in the past that Brazil has offered to enrich uranium on Iran's behalf
(similar to how it exaggerates Japan's willingness to ensnare itself in
Iran's nuclear program); however, Brazilian Foreign Minister Celso Morim and
local technicians have denied that they would do so, claiming that Brazil
does not have sufficient technology to take part in such a deal.

But Washington is not taking chances on Brazil's newfound interest in Iran —
hence the U.S. diplomatic entourage that is now making its way to Brasilia.
In a tone reminiscent of a parent lecturing a teenager coming of age, U.S.
State Department spokesperson Philip Crowley said Feb. 25, "Clearly Brazil
is an emerging power with growing influence in the region and around the
world, and we believe that with that influence comes responsibility."
How Far Will Da Silva Go?

While most of the Iran-Brazil relationship consists of diplomatic theater,
there are two areas of potential cooperation that could be game changers for
the United States: banking and nuclear energy. Iran is facing escalating
sanctions pressure over its nuclear program. One of the many ways Iran has
tried to circumvent this threat is by setting up money-laundering operations
abroad to keep Iranian assets safe and trade flowing. In Venezuela, where
Chavez will more readily take on an opportunity to stick it to Washington,
and in Panama, where banking transparency is an ongoing concern, Iran has
forged ties between local banks and Banco Internacional de Desarrollo CA, a
subsidiary of Export Development Bank of Iran (EDBI), to give Iran indirect
access to the U.S. financial system. EDBI already has been blacklisted by
the U.S. Treasury Department for directly supporting Iran's nuclear weapons
program and the Islamic Revolutionary Guard Corps. The blacklist affords the
United States both the ability for sanctions on Americans dealing with these
banks and a pressure lever against foreign firms interested in keeping their
U.S. assets safe.

Iran has tried a similar banking tactic in Brazil. When Ahmadinejad paid a
visit to Brazil in May 2009, Iranian EDBI and Brazilian banking officials
drafted a memorandum of understanding that was on the surface a mere
agreement to facilitate trade between the two countries. But facilitating
banking cooperation could mean a lot of things, including the establishment
of Iranian banks in Brazil to evade the U.S. sanctions dragnet. Brazil
already is believed to direct most of its trade with Iran through the United
Arab Emirates to avoid attracting negative attention, but Iranian banks on
Brazilian soil would not be easy to hide and would not be ignored by the
United States.

Then there is the ever-controversial nuclear issue. Reports also emerged in
the Brazilian press Feb. 26 that Brazil's Office of Institutional Security,
which answers to the president, has begun consultations with technicians in
Brazil's nuclear program to establish what points can be included in a
possible nuclear deal with Iran that could be signed during da Silva's visit
to Iran in May. The O Globo report does not specify what points of
cooperation are being discussed, but Brazil reportedly is working on a new
uranium-refining technique called magnetic levitation, which is being
developed by the navy at the Aramar lab in Sao Paulo. The news follows a
Brazilian announcement from early 2009 that the country is pursuing uranium
enrichment on an industrial scale, with a goal to produce 12 tons of
enriched uranium for nuclear power supply.

Brazil not only is working toward self-sufficiency in nuclear power but also
may be positioning itself to become a supplier of nuclear fuel for the
global market. Such a move could boost Brazil's mediation credentials in
dealing with countries like Iran, but would draw ire from the United States
and Israel, which do not want to see Iran acquiring additional nuclear fuel
unless Tehran first makes concrete guarantees on curbing the Iranian
enrichment program. Adding to these nuclear tensions is Brazil's continued
refusal to sign an additional International Atomic Energy Agency protocol
for strengthened safeguards in the lead-up to a Nuclear Nonproliferation
Treaty review conference scheduled for May. Brazil maintains that it has
enough legal mechanisms to prove the peaceful nature of its program, which
Iran will echo in defense of its own nuclear activities.

Da Silva has yet to finalize who all will be accompanying him to Tehran this
May as the first Brazilian president to visit the Islamic republic. With da
Silva pushing the envelope, STRATFOR will be watching closely to see whether
discussions among Iran and Brazilian banking and nuclear officials could
transform a relationship resting mostly on paper and rhetoric into a real
threat to U.S. interests.

[image: JMbuttonTD]<http://ce.frontlinethoughts.com/CT00316401MjczMzA0.html>

John F. Mauldin

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