Oiling the axis - Iran and Venezuela develop closer ties

Venezuela and Iran could barely be two more culturally distant countries, with very few obvious motives to become allies. Yet their two current governments, led by President Hugo Chavez and President Mahmoud Ahmadinejad respectively, are forging an ever tighter financial, political, military and perhaps nuclear alliance that intends to shift the balance of world power. This was most recently demonstrated by Chavez' visit to Iran in July, his third such trip in two years. The reasons for their 'strategic alliance', as unusual as it may seem, are multiple.

The key element uniting the two countries is oil. Venezuela and Iran are the fifth and second largest members of the Organisation of Petroleum Exporting Countries (OPEC), together accounting for about 20 per cent of OPEC's total output. It was in 2000, when Chavez hosted an OPEC heads of state summit in Caracas aimed at "refounding" the cartel, that the Caracas-Tehran axis began to develop.

Iran's then president Mohammed Khatami was an enthusiastic OPEC participant at the Caracas meeting. Following the summit, both countries became the two most ardent price 'hawks' within OPEC, lobbying for deep output cuts to force prices higher and increase their countries' export revenue.

This Iran-Venezuela alliance within OPEC has caused friction with Saudi Arabia, the world's largest oil exporter and a nominal ally of the US, which favours more modest crude prices by seeking higher output. Nonetheless, the Venezuelan and Iranian goal of higher prices has come about owing to a number of factors, including a lack of refinery capacity, geopolitical tensions in the Middle East, an increase in demand and climatic conditions, helping to drive up the price of crude oil from around USD28 per barrel in 2000 to an average of USD65 during 2006.

Caracas and Tehran have found common cause in favouring higher oil prices for political ends: as a lever to pull the balance of power away from oil-consuming countries, especially the US, which is still the world's biggest consumer.

According to Alberto Garrido, a Venezuelan political analyst who has charted the historical rise of Chavez: "Chavez sees himself and Ahmadinejad as brothers defining a strategic anti-US alliance that is part of an ambitious and well-structured global project."

Chavez claimed in January that the US' stance towards both Caracas and Tehran has the same root cause: "The aggression against Venezuela and the threats against Iran have the same imperialist objective: to dominate our oil reserves."

Yet Venezuela under Chavez, a radical populist, has sought to counter the traditional US political hegemony over Latin America exactly by using its oil revenues to expand its diplomatic influence in the region, by offering oil at subsidised prices, loans at discounted interest rates and cash. Chavez has been relatively successful in countries such as Bolivia, Ecuador, Nicaragua and in some countries in the Caribbean, especially Cuba, Chavez' closest ally in Latin America.

Furthermore, Caracas has shored up tactical alliances with centrist governments in countries such as Argentina, Brazil and Chile. Overall, his strategy has led to a virtual collapse in diplomatic relations between Caracas and Washington, with the administration of US President George W Bush accusing Chavez of undermining democracy in the region.

Meanwhile, the US relationship with Iran revolves around the subject of Tehran's atomic development programme, which is fiercely opposed by Washington. The UN's International Atomic Energy Agency (IAEA) believes that Iran is progressing in its project to enrich uranium, although they are uncertain about the pace of Iran's success rate.

Despite the passage of two UN Security Council resolutions against Iran, Tehran has failed to meet a series of deadlines to suspend enrichment, adding to tensions with the US. In late May, Bush called for a fresh round of tougher international sanctions against Iran to dispel it from further pursuing its -nuclear course.

Chavez has firmly backed Tehran on the nuclear issue in the face of US and EU opposition. In September 2005, when the IAEA's 35 member board of governors adopted a resolution accusing Iran of breaching international nuclear safeguards, Venezuela was the only country to vote against it, a posture that Ahmadinejad hailed as "brave and judicious". 688 of 2801 words