Both Iranian and Venezuelan officials have blasted the US for the measures and have vowed to defy them.
To understand the context around what this means, how significant it is for the US and where the relationship between Iran and Venezuela could be headed, The Cipher Brief tapped expert Norm Roule, former National Intelligence Manager for Iran at ODNI.
The Cipher Brief: Give us a sense of the background of the relationship between Iran and Venezuela.
Roule: Great question. Iran's relationship with Latin America is more profound than is often appreciated. The foundation of Iran's relationship with Venezuela began in 1960, when they were among the first five oil-producing countries to form the Organization of the Petroleum Exporting Countries (OPEC). Their relationship for the next several decades focused on oil issues. Caracas was among the first countries to recognize the Islamic Republic following the overthrow of the Shah in 1979, but even then, their relationship centered on oil.
However, during the 1990s, Iran worked hard to develop commercial and ideological allies in Latin America. Tehran expanded trade with Argentina, Brazil, Bolivia, Cuba, Peru, and Venezuela. It was also during this same period that Iran established cultural centers aimed at spreading its ideology among the region's Muslim population. Iran eventually established a web of terrorist assets that were responsible for carrying out the March 1992 bombing of the Israeli Embassy and in July 1994, the bombing of the Argentine Israelite Mutual Association in Buenos Aires. During this period, Iran saw its trade with Brazil and Argentina – despite the terror attacks – expand significantly. Such trade provided Iran with useful cover for the travel of its personnel as well as that of its Arab operatives.
The Cipher Brief: How did this relationship expand with the arrival of Hugo Chavez in 1998?
Roule: In the years that followed Chavez's election, the world saw a remarkable number of senior leadership visits between the two countries. Iranian President Mohammad Khatami and President Hugo Chavez exchanged visits several times during the former's tenure. The relationship further blossomed during the administration of Iranian President Mahmoud Ahmadinejad beginning in 2005.
Norman T. Roule, Former National Intelligence Manager for Iran, ODNI
Rarely has history put two more unusual anti-U.S. characters together. Their meetings in Caracas, Tehran, and once in London gave them a chance to empower each other's anti-American propaganda in what they called "a revolutionary axis." Caracas also helped Iran expand its relations with Ecuador, Bolivia, and Nicaragua. Venezuela also supported Iran in the United Nations. This was all during a period when each country was pushing back on U.S. attempts to isolate them diplomatically.
As relations between the two countries tightened, Venezuela and Iran concluded around 300 commercial agreements and project plans involving car and tractor production, cement, and petrochemical plants, as well as transportation projects. For a short time around 2011, there were even direct flights between Tehran and Caracas. The total value of projects during this period reached somewhere between $15B and $20B, however, like similar agreements Tehran signed elsewhere in Latin American and Africa; most of the projects were embarrassing failures due to mismanagement, poor quality control, and a failure of each side to provide promised investments.
More ominously, this period also saw public reports of discussions between Venezuelan and Iranian military and security officials regarding uranium mine development, UAV sales, and even missile cooperation. In 2008, Turkish customs officials opened a shipment of Iranian tractor parts destined for Caracas and discovered Iranian explosive lab equipment and chemicals. Venezuela also reportedly provided false documents to Iranian intelligence personnel, which caused many experts to wonder how this would facilitate operations by Lebanese Hezbollah in the tri-border area between Argentina, Brazil, and Paraguay.
Iran's military interest in the region was not limited to Venezuela. We should also recall that in 2011, Iran's Defense Minister Ahmed Vahidi – who preceded Qassem Soleimani as head of the Qods Force – visited Bolivia during this same period to build military ties. This was despite his being sought by Interpol for his involvement in the 1992 AMIA attack.
With the 2013 death of Chavez and the arrival of Iranian President Hassan Rouhani, the relationship grew more distant. Political turmoil in Venezuela distracted Caracas’ leadership, and Rouhani had little time or money to spend on unprofitable foreign ventures so far from home.
The Cipher Brief: What is the incentive by each side to cooperate now?
Roule: As Tehran and Caracas saw their economies wither under the pressure of U.S. economic sanctions, the relatively meager benefits of their relationship took on greater import. In 2019, they each sent new ambassadors who had played an earlier role in building a relationship between the two countries. Later that year, and early this year, Iran flew equipment and technicians to help restore operations at Venezuela's massive Paraguaná Refinery. The highly publicized gasoline-for-oil shipments are the latest chapter of a growing effort by two desperate countries to squeeze profit from their relationship.
In return, Iran reportedly received gold bullion from Venezuela's Central Bank and mining operations that continue in that country. Iran has also established a commercial presence in Venezuela involving companies owned by Iran's Revolutionary Guard. Thus, in addition to the propaganda value found in their mutual show of defiance, they derive modest economic benefits in a world where few such opportunities are available.
The Cipher Brief: Is their strategy working?
Roule: Not in any significant way. They certainly have tried to create as much propaganda as possible over their ability to evade U.S. sanctions. But the trade is insufficient to change their strategic posture. Despite its acquisition of gold bullion, Iran's currency continues to plummet to historic lows, and its banking system remains among the most fragile and corrupt in the world. Venezuela welcomes the gasoline shipments, but gas shortages and blackouts have returned. The U.S. has ramped up sanctions against the ships, crews, and businessmen operating between the two countries. It seems these sanctions are discouraging other shippers from participating in this trade.
The Cipher Brief: How far is Iran willing to test U.S. resolve in terms of its (Iran) cooperation with Venezuela?
Roule: We are likely seeing the parameters of Iran's actions. Tehran certainly doesn't seek a conventional conflict with the U.S. Iran's current tactics allow it to continue the current level of trade while gaining propaganda points.
The Cipher Brief: Do you think a military confrontation between the U.S. and Iranian naval vessels is more likely if Iran continues to push its involvement with Venezuela?
Roule: Unless the Iranians openly try to introduce weapons systems to Venezuela, such as they did in Yemen in 2015, I think this is unlikely. Iran will keep its ships in international waters, and the U.S. will focus on sanctions and legal measures to impede Iran's transfer of technology, oil, and weapons.
The Cipher Brief:Should this relationship concern U.S. policymakers? Is there an increased risk of terrorism in the western hemisphere with Iran's growing involvement in South America?
Roule: Yes, to both questions. Iran's Revolutionary Guard and military continue to play a leading role in Iran's trade and foreign policy. Thus, Tehran's ties to Caracas will be shaped by some of Iran's most dangerous leaders. This trend will continue as Iran's leadership continues evolving to a military dictatorship that began in 2003.
Norman T. Roule, Former National Intelligence Manager for Iran, ODNI
Looking forward, Iran's likely preferred path with Venezuela will resemble the one developed during the Chavez regime. Iran could easily establish a flow of advisors, technicians, missiles, drones, and similar assistance to Caracas, much as it does with the Houthis, Hezbollah, and the Assad government in Syria. This would not take a significant Iranian presence, but the impact of Iran's presence would be felt regionally.
Use of Caracas as a base for terrorism that is focused against the region – or even the U.S. – is certainly possible. Those who believe this to be unlikely should recall that the Iranian Qods Force plot to assassinate the then-Saudi Ambassador to the United States was initiated from Mexico. Had that attack succeeded, it is not unreasonable to think that the United States and Iran could have gone to war.
The Cipher Brief: What should we expect in the next 6-12 months?
Roule: Although Iran will likely seek to grow the relationship at its current pace, we should ask what a possible return to the Joint Comprehensive Plan of Action (JCPOA) nuclear deal would mean. One could make a case that the inexorable militarization of Iran's leadership will mean that Tehran will use a portion (albeit small) of its renewed oil revenues to expand its influence in Caracas and the rest of Latin America. Any expansion of Iran's presence or operations in Venezuela risks destabilizing an already troubled region or even activities that could lead to a conflict between Iran and the United States.
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