Understanding the Iran end game

Many Russian leaders have little confidence in the United States' economic and strategic policies.

They believe a pre-emptive air strike on Iran would be a disaster but they fear that the US and/or Israel will make that mistake.

At the ADC Hayman Leadership retreat, I learned from Alexey Pushkov, a member of the Russian State Duma, why Russia has such a deep-seated apprehension about American policies.

Go back around 21 years to when the Russian communist regime broke down. President Boris Yeltsin had taken power but needed help. He turned to American officials to assist in the transition and obtained much of his advice from United States officials in Washington. But that advice led Russia into enormous problems.

The Americans advised Yelstin to sell off state assets to quickly raise funds. Clearly that process was flawed, and valuable assets and businesses were virtually given by the state to people who were part of organised crime and were to dominate the Yeltsin government.

At the same time, the income support that so many Russians were reliant upon disappeared. With nothing to replace it, regular Russians were thrown into crushing poverty. The continuing low life expectancy is a legacy of those failed policies.

While Russia may sometimes follow United State policy they learned the hard way that Washington's solutions do not always work – something Americans themselves now understand.

In Syria, we see an illustration of how Russia and America have come to very different conclusions over the best way to handle the situation. In this particular case both paths have failed. The Russians and Iranians backed the Syrian government while urging them to come to a compromise with the rebels. The Americans and the Saudis backed the rebels. Neither has achieved a knockout blow and the country has deep civil war.

In Iran, Russia has supported the US sanctions because it does not want a nuclear armed Iran on its border. As you will see in a fascinating video interview with Alexey Pushkov, he believes that it is likely the United States will bomb Iran. But he emphasises that if they were to take that course it would not prevent Iran gaining nuclear weapons and, worse still, it would actually make that course inevitable. Once Iran has nuclear weapons it will trigger a nuclear arms race unstable region.

Alexey Pushkov believes that if you are going to undertake military intervention in Iran the only way to do it successfully is to combine bombing with a ground invasion. But it's clear that the United States has no stomach for a ground invasion in the light of its experiences in Iraq and Afghanistan.

He believes that the US will ultimately make the decision to strike Iran, to prevent them from completing their nuclear program.

He further believes the US does not fully appreciate the political repercussions that will take place across the Middle East as a result.

Any US/Israel bombing strike on Iran will push oil prices much higher and, as Pushkov explains, Russia does well when the oil price is around $US100 a barrel or higher. If the oil price falls to $US60, then the Russian economy is put under considerable pressure. But, he says, he would much prefer to have lower oil prices than for the Middle East to suffer what will take place in the aftermath of a bombing strike.

Part of the problem in negotiating a settlement to enable Iran to complete a nuclear program, without actually having nuclear weapons, is that there is no trust between the US and Iran. As a result, it is very difficult to get Iran and US delegates in the same room and third party brokering is not satisfactory.

Alexey Pushkov clearly believes this is the most dangerous threat in the world today. And his sentiments were backed up by defence personal from both the US and Australia.

Meanwhile, Russia is at last harnessing the great mineral potential of Siberia.

It has opened a pipeline to provide gas straight into China and is working on one to go to Vladivostok. There it would be converted to LPG and exported to the Asian region.

This will put Russia in direct competition with Australia in the Asian LPG market. I am not sure of the Russian gas costs but our LPG industry is at the higher end of the cost curve given the escalating costs of delivering the gas to Gladstone and in erecting plants.

That means that we face a combination of the US and Russia plus the Middle East and Africa competing for gas markets. It is going to be a much tougher environment than any we have seen before.