International Interests and Strategies of the Key Players

Relations and Strategy



Western Countries Interest in the Middle East

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Lavya Bakshi (3082)






























Motivated for Choosing the Study

While Arab countries are going through massive
political change, the role of the United States in the Middle East region is
changing. The political ties between the US and the newly emerging democracies
are likely to be weaker than has been the case under dictatorship. At the same
time, tensions between the US and Iran are rising and getting close to a
boiling point.

 To explore
the potential outcomes of these developments and to come up with possibilities
for reducing the tensions in the region more effectively, one needs to examine
how the interests and strategies of the actors involved have shaped their
multi-lateral interactions.

 Thus, the
questions are: What are the objectives of the United States in the Middle East?

How do those objectives interact with the interests
of different countries in the region; in particular, those of America’s biggest
adversary, Iran, and the closest US ally, Israel?

What are the options of these stakeholders in
avoiding tension and unnecessary conflict?

 How are the
recent political developments in Arab countries influencing these relations and
the possible outcomes?

There is a vast literature that examines the above
questions from various angles across the field of international relations.

This project is an attempt to address these
questions jointly in an interdisciplinary context, taking into account the
economic as well as political dimensions of the US relationships with Middle
Eastern countries in the global context. The project particularly highlights
the role of Iran, Israel, and the GCC in these relationships.

and Nature

and Strategies of the Key Players

Interests and Strategies

 US businesses
and consumers have a keen interest in ensuring a reliable and efficient flow of
oil. While they mostly prefer lower oil prices, they understand that little can
be done to control the price when it is market driven. However, they are
concerned about supply disruptions and potential holdups by major producers. To
deal with this concern, US policymakers find it necessary to maintain military
and political presence in the Persian Gulf area to ensure that trade routes
remain open and the oil-rich countries there have “friendly” governments. They
are also keen to keep out potential rivals (e.g., Russians, who have
historically tried to extend their influence in the region).



Interests and Strategies

 Turning to
Israel’s objectives and characteristics, there are a number of issues that need
to be listed. To begin with, Israel has been important for Jews generally
around the world as a focal point and symbol of identity. So, they sympathize
with its cause and want to see it survive and prosper. However, realizing this
goal has been a challenge. Formation of Israel was associated with a great deal
of violence and dispossession of a large part of Palestinian population.
Consequently, despite the fact that peoples of different ethnicities and
religions had lived together in that area relatively peacefully for centuries,
Arabs came to see Jewish settlers as their enemies.

Interests and Strategies

 Iran’s utmost
interest in its external relations emerges from its need to ensure the security
of its territory and its natural resources (and their marketing options),
especially oil, gas, and marine resources. Some of these resources are shared
across Iran’s borders with its neighbors and have been subject of dispute in
the past. Iran also suffers from a long history of superpower intervention and
manipulation, aimed at gaining leverage over and its policies and resources. At
times foreign forces have invaded parts of Iran or have supported external or
internal proxies to destabilize the country.

and Strategies of Other Major Players: The EU

The EU’s interests and strategies in Middle Eastern
region are similar to those of the US. However, the EU’s interests are much
more focused on economic issues, with the non-oil components also having
somewhat more weight. The EU has a particular interest in helping the Middle
East develop economically and politically so that the immigration pressure from
the region would diminish. In terms of strategic difference, the EU countries
focus more on the North Africa region, while the US is more focused on military
presence in the Persian Gulf, where it is the dominant foreign power































The current interactions among the strategies of the
players in the Middle East have produced a fragile equilibrium that does not
seem to be sustainable.

 Iran faces
serious internal and external constraints in reaching accommodation with the
United States. To fend off pressures and threats from the West, especially from
the US, the Islamic Republic has been building its military deterrent

 It has also
been developing its nuclear technology, which can give it industrial as well as
potential military advantages. In addition, Iran has tried to find allies
around the world as well as the region’s population. The former part of its
strategy has brought it to rely on China and Russia, while the latter part has
led it to be vocal against the US and Israel.

The leaders of the Islamic Republic do not see much
chance of accommodation with the United States under the current circumstances
because they perceive the US as intent to influence Iran’s internal politics
and undermine it as an independent power. The basis for this perception is
Iran’s own experience under the Shah as well as the situation they observe in
most Arab countries aligned with the US.

The situation might change if the US comes to accept
Iran as an independent power, as it did in the case of China in the 1970s. But,
Iran and the US have not reached such a stage yet. To deal with Iran’s
strategy, the United States has been using its levers around the world to
increase economic and political pressures on Iran.

The pressure on Iran has so far remained focused on
increasingly tougher economic and diplomatic sanctions. Given the internal
coordination difficulties and the prospects of being undermined if it gives in
to the Western pressure, the Islamic Republic has not been in a position to
bargain with the US. Inevitably, it has focused on expanding its military
strength and regional influence to deter a military attach.

 The US,
Israel, the EU, and the GCC, on the other hand, have grown increasingly wary of
Iran’s path. Most other Arab countries, which are aligned with the US have kept
their distance from Iran, but are not active followers of the US strategy. Most
other countries that are not under direct US influence seem to see Iran not so
much as a threat that they see it as a challenge or even an opportunity.

 As a result,
getting them to participate in pressuring Iran further has been difficult for
the US and its allies. Syria and, to some extent, Lebanon have tried to benefit
from their connections with Iran.


This has spanned the US negotiations with the EU, China,
Russia, India, and many other countries. But, these efforts have had limited
success due to the benefits that most of those countries get from maintaining
relations with Iran and because of their interest in keeping Iran as a
bargaining chip in their dealings with the United States.


A possible scenario is that under pressure, Iran
might leave the Nuclear Non-Proliferation Treaty (NPT), and reinforce the
suspicion that it is developing or has access to nuclear weapons.

 This might
drive the US or its allies to rash action, including a pre-emptive military
strike on Iran, with disastrous consequences.

But, it may alternatively create an arms race and
militarized standoff around the Persian Gulf.

This would make oil trade costly and impose
significant economic costs on many people, especially Iran’s population. So,
are there any possible ways that would allow the tensions to diminish and help
establish a more stable and productive equilibrium?

for the Future

The sweeping political change in parts of the Middle
East the Arab Awakening, should change some of the equations in ways that may
help move the equilibrium in less destructive directions.

As a result of the uprisings, new Islamist-oriented
governments should emerge in important parts of the Arab world, especially in
Egypt, Libya, Tunisia, and Yemen. These regimes are likely to be less friendly
towards the United States and Israel than their undemocratic predecessors.

The new governments should be be more sympathetic towards
Iran, but most probably not in any position to form any alliance the Islamic
Republic. The GCC countries need to adjust their positions closer to those of
the new regimes in the region and, as a result, reduce their cleavages with
Iran. This will reduce the United States’ ability to maneuver against Iran in
the Middle East region.Accounting for Investments in Associates in Consolidated
Financial Statements


objective of this Standard is to set out principles and procedures for
recognising, in the consolidated financial statements, the effects of the
investments in associates on the financial position and operating results of a


This Standard should be applied in accounting for investments in associates in
the preparation and presentation of consolidated financial statements by an
2. This Standard does not deal with accounting for investments in associates in
the preparation and presentation of separate financial statements by an

is clarified that AS 23 is mandatory if an enterprise presents consolidated
financial statements. In other words, if an enterprise presents consolidated
financial statements, it should account for investments in associates in the
consolidated financial statements in accordance with AS 23 from the date of its
coming into effect, i.e., 1-4-2002 (see ‘The Chartered Accountant’, July 2001,
page 95).
2. Attention is specifically drawn to paragraph 4.3 of the Preface, according
to which Accounting Standards are intended to apply only to items which are


For the purpose of this Standard, the following terms are used with the
meanings specified:
3.1 An associate is an enterprise in which the investor has significant
influence and which is neither a subsidiary nor a joint venture4 of the
3.2 Significant influence is the power to participate in the financial and/ or
operating policy decisions of the investee but not control over those policies.
3.3 Control:
(a) the ownership, directly or indirectly through subsidiary(ies), of more than
one-half of the voting power of an enterprise; or
(b) control of the composition of the board of directors in the case of a
company or of the composition of the corresponding governing body in case of
any other enterprise so as to obtain economic benefits from its activities.
3.4 A subsidiary is an enterprise that is controlled by another enterprise
(known as the parent).
3.5 A parent is an enterprise that has one or more subsidiaries.
3.6 A group is a parent and all its subsidiaries.
3.7 Consolidated financial statements are the financial statements of a group
presented as those of a single enterprise.

Standard (AS) 13, ‘Accounting for Investments’, is applicable for accounting
for investments in associates in the separate financial statements of an
Accounting Standard (AS) 27, ‘Financial Reporting of Interests in Joint
Ventures’, defines the term ‘joint venture’ and specifies the requirements
relating to accounting for investments in joint ventures.

The equity method is a method of accounting whereby the investment is initially
recorded at cost, identifying any goodwill/capital reserve arising at the time
of acquisition. The carrying amount of the investment is adjusted thereafter
for the post acquisition change in the investor’s share of net assets of the
investee. The consolidated statement of profit and loss reflects the investor’s
share of the results of operations of the investee.
3.9 Equity is the residual interest in the assets of an enterprise after
deducting all its liabilities.
4. For the purpose of this Standard significant influence does not extend to
power to govern the financial and/or operating policies of an enterprise.
Significant influence may be gained by share ownership, statute or agreement.
As regards share ownership, if an investor holds, directly or indirectly through
subsidiary(ies), 20% or more of the voting power of the investee, it is
presumed that the investor has significant influence, unless it can be clearly
demonstrated that this is not the case. Conversely, if the investor holds,
directly or indirectly through subsidiary(ies), less than 20% of the voting
power of the investee, it is presumed that the investor does not have
significant influence, unless such influence can be clearly demonstrated. A
substantial or majority ownership by another investor does not necessarily
preclude an investor from having significant influence.

In considering the share ownership, the potential equity shares of the
investees held by the investor are not taken into account for determining the
voting power of the investor.

The existence of significant influence by an investor is usually evidenced in
one or more of the following ways:
(a) Representation on the board of directors or corresponding governing body of
the investee;
(b) participation in policy making processes;
(c) material transactions between the investor and the investee;
(d) interchange of managerial personnel; or
(e) provision of essential technical information.


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