Forcing Hard Choices on Tehran
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Iran's conventional offensive options are limited. It does not pose a ground threat to any of its neighbors because of the small size and limited capabilities of its ground forces, although it could launch limited air, or rocket and missile strikes into neighboring countries (as it did in Iraq on several occasions during the 1990s). The main conventional threat from Iran is in the naval arena -- in particular, the threat it poses to the flow of oil from the region, and to the ability of the United States to project power in the Gulf. Thus, on June 4, 2006, Supreme Leader Ali Khamenei warned, 'If the Americans make a wrong move toward Iran, the shipment of energy will definitely face danger, and the Americans would not be able to protect energy supply in the region.' Iran's mines, missiles, fleet of fast attack craft, submarines (including several new minisubs), several hundred small boats, jet-ski assault craft, and combat divers could wage a 'naval guerilla warfare' campaign that could temporarily disrupt shipping through the Strait of Hormuz, although the strait is probably too wide and deep to be blocked or obstructed for long. Thus, in March 2005, Defense Intelligence Agency director Vice Admiral Lowell E. Jacoby told the Senate Armed Services Committee, 'We judge Iran can briefly close the Strait of Hormuz, relying on a layered strategy using predominantly naval, air, and some ground forces.'
A ban on foreign investment in the Iranian oil industry would also seem to be a potentially powerful tool, because Iran badly needs investment to rejuvenate its aging oil fields, production from which declines by 300,000 barrels per day (b/d) each year. Nevertheless, an investment ban would be even less likely than a gasoline cutoff to affect Iran's nuclear calculus. For one thing, the ban would at best affect production only after a lead time of several years. Foreign investors are already shunning Iran over fears of future political problems with the West. But more important, Iran's difficulties in attracting significant foreign energy investment ment have led its elite to discount the prospect that foreign investment will boost Iran's oil output. In July 1998, sixteen oil blocks were put out for bidding, of which only four were awarded in the next eight years; no major contracts have been signed since early 2004. On top of that, the atmosphere for foreign investment in oil has gotten worse under Ahmadinezhad, whose team is generally suspicious of foreigners. Only four foreign oil rigs were operating in Iran in August 2006, when Iranian armed forces attacked and seized one of the rigs whose owner had been in a commercial dispute with Oriental Oil Kish, a politically well connected Iranian firm said to have close ties to the Revolutionary Guard. Using the military to advance commercial claims against foreign firms is not likely to improve Iran's image as a place to invest.
The international community would be unwise to base its policy toward Iran on the assumption that the Islamic Republic will fall soon. For better or worse, the international community will have to deal with the current Iranian government as long as it is in power. But recognizing the necessity of dealing with the current government does not mean that the international community should take steps that might prolong the life of the Islamic Republic. Perhaps the following is the best way to think about the dilemma: 'Two clocks are ticking in Iran: the nuclear clock and the democracy clock. The strategic objective of western policy must be to slow down the nuclear clock and speed up the democracy clock. Our problem is that some of the things we might do to slow down the nuclear clock are likely to slow down the democracy clock as well.'
Iran's economy has been boosted by high oil prices, which raised oil and gas exports from $23 billion in 2002-2003 to $55 billion in 2006. The oil exports have allowed much higher government spending, much of it off-budget and therefore particularly prone to manipulation for political gain of the hardliners. Despite this short-term windfall, Iran is vulnerable to international economic pressure for two basic reasons. First, the country suffers from deep structural economic problems. Having pegged his reputation on his ability to help the ordinary man, Ahmadinezhad faces serious problems delivering. He has the daunting task of living up to the high expectations of Iranians, who remember when their economic situation was much better than it is today and who realize how badly their country has slipped under the Islamic Republic. The International Monetary Fund (IMF) forecasts that even if oil prices remain at their present high level, unemployment will steadily increase in years to come. In its 2003 report, the usually sober and understated World Bank summed up the 'daunting unemployment challenge' with strong words: 'Unless the country moves quickly to a faster path of growth with employment, discontent and disenchantment could threaten its economic, social, and political system.'
Iran, however, would be acutely vulnerable to military strikes against its economic infrastructure. Its economy is heavily dependent on oil and gas exports, which provide 75 percent of its foreign exchange earnings. Nearly all of its major oil and gas fields are located in the exposed southwest corner of the country and in the Gulf -- where all six of its major oil terminals are also located -- and nearly all of its oil and gas exports pass through the Strait of Hormuz. The five main ports located on the Persian Gulf handle about 75 percent of all imports by tonnage, while Iran's sea lines of communication in the Gulf are vulnerable to interdiction along their entire length.
The best explanation of why stalling is a wise strategy for Iran was provided by Rohani in his remarkable speech: if Iran is able to build any given capability, the chances are slim that it will be pressed to give that up. Confirming Rohani's analysis was the international reaction to Iran's successful start-up of its uranium conversion plant. Once that plant was working, Russia proposed that the great powers compromise with Iran by allowing Iran to convert uranium but not to enrich it. Not surprisingly, Iran's response was to rush into operation its enrichment program, whereas previously Iran had not introduced nuclear material into the centrifuges it had built. And the immediate reaction of some prominent international analysts was to say that because Iran had mastered enrichment technology, Tehran would have to be permitted to keep it; the best that could be hoped for would be to limit the number of centrifuges Iran operates.
Nonetheless, Iran may not yet have a nuclear weapons program, much less a bomb -- and Washington certainly cannot provide proof of either. The only evidence about whether Iran has an active nuclear weapons program comes from intelligence sources, and much of world opinion is, in the wake of the Iraq War, skeptical about claims based on intelligence. A better approach would be explaining that Iran cannot be permitted to complete the facilities under construction, because those facilities will allow Iran to quickly make a bomb if it so decides. The experience in Iraq demonstrates the merit of understating the problem and confining complaints to that which is known with complete certainty.
A 'grand bargain' between the United States and Iran, under which the two countries settle the major differences between them, is even less likely. The barriers to reaching such a bargain are just too high to expect that a deal could be made in time to stop Iran's nuclear program. Many complicated issues separate the two sides, such as the questions of terrorism, Israel, and the tangled web of financial claims -- some still under dispute in a tribunal set up in The Hague by the 1981 Algiers Accord ending the Tehran embassy hostage crisis. Fur thermore, the two sides distrust each other profoundly, and each is so bitterly divided internally that reaching domestic consensus on an accord with the other -- an accord that will inevitably involve difficult concessions -- may require protracted discussions at home. Strikingly, longtime advocates of a more-active U.S. diplomatic engagement with Iran who signed a 2004 Council on Foreign Relations report concluded that a grand bargain is 'not a realistic or achievable goal.'
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