Middle East Economic Survey
VOL. LII
No 43
Dealing With Iran’s Nuclear Ambitions
By Jahangir Amuzegar
Dr Amuzegar is a distinguished economist and former member of the IMF Executive Board.
The seven-year stalemate between the major world powers and the Islamic Republic regarding Iran’s nuclear energy program was brought to an end in a highly publicized meeting in Geneva on 1 October. The talks between Iranian officials and the permanent members of the UN Security Council plus Germany (5+1 group) was the culmination of a protracted stop-go process dating back to 2003 when Britain, France and Germany engaged Iran in a series of “constructive dialogues” aimed at avoiding military conflicts. Two more attempts in 2005 and 2006, presenting a combination of sticks and carrots to the Islamic regime, proved futile, and finally three UN Security Council resolutions demanded that Iran halt the enrichment program, while imposing some punitive measures. A subsequent session in 2008, this time with US participation, also proved useless.
During this period, Iran persistently claimed that its uranium enrichment facilities at Natanz, its heavy water reactor in Arak, and other nuclear activities elsewhere in the country were part and parcel of its overall program aimed at producing nuclear fuel for peaceful purposes. Tehran’s argument was that the program was not a matter of choice but one of necessity because Iran had to be able to follow all the steps in the nuclear fuel cycle from mining to fuel output in order to be sure of a secure, domestic supply for its nuclear power plants. The suspicion in most of the rest of the world, however, was that the program was intended to develop nuclear weapons. The latest CNN poll in mid-October 2009 showed that nine out of 10 Americans believe that Iran is intent on developing a nuclear bomb.
Divergent Motives
The two sides entered the talks with somewhat different motives, purposes and postures. Iran was mainly interested in: (a) deflecting the talks’ focus on its nuclear program by linking it to other issues; (b) dragging out time in protracted deliberations in order to avoid new sanctions; (c) obtaining sufficient enriched uranium for its research reactor; and (d) making sure that the West, and not Iran, would be blamed if negotiations should fail to produce palpable results. To this end, shortly before the meeting, Tehran submitted a five-page proposal entitled ‘Cooperation for Peace, Justice and Progress,’ listing 19 topics for discussion including: protecting human dignity, tackling the root causes of terrorism, saving the environment, codifying space exploration, combating factors detrimental to economic security, and finding new ways of managing the global financial system! Called by a Western diplomat a request for “holistic conversations,” the proposal made no mention of nuclear issues. Tehran’s steadfast position on the issue was that its nuclear file was “closed” and its uranium enrichment program was its indisputable and “inalienable” right under the Non Proliferation Treaty. Rejecting a statement early in September by the US representative to the UN nuclear watchdog agency that Iran had enough low grade uranium to produce one nuclear weapon, Iran’s Supreme Leader said on 20 September that “we fundamentally reject nuclear weapons and prohibit their production and use.” And President Mahmoud Ahmadinejad reiterated that “we do not see need for such weapons.” Iran was thus determined to press for the discussion of its package proposals on other issues such as world political management, disarmament, terrorism, regional security, and the reform of the United Nations!
The main thrust of the meeting for the West, however, was to get Tehran to agree to suspend its nuclear activities on the basis of an offer made in June 2008. That offer, called the “freeze for freeze,” required Tehran to stop its nuclear fuel production for six weeks in return for the UN and the US holding back from imposing any new sanctions for six weeks in order for substantive negotiations to be conducted on other outstanding issues. For the United States, France and Britain, time and the nuclear topic were of the essence. They wanted to: (a) make sure that by their announced informal deadline of December 2009 Iran would comply with all UN resolutions, or face substantial new sanctions; and (b) induce reluctant Russia and China to go along with them. Russia and China as usual followed a wait and see attitude as they regarded Iran’s “threat” somewhat differently from that of the West. They considered Iran not as a threat but an actual partner and potential ally to check US influence in the region.
Both sides, however, entered the talks from a position of reduced strength. Weakened by reports of a fraudulent presidential election in June 2009, and questions raised about his administration’s legitimacy, and the harsh and inhumane treatments of post-election demonstrators by the Basij militia, President Ahmadinejad had already softened his stand significantly by: (a) offering the international community access to Iranian nuclear scientists for the first time; (b) proposing to buy medical uranium from other countries (including the US); (c) expressing hope for a change in relations with Washington; and (d) offering to assist the US and NATO in Afghanistan. Similar weaknesses could be detected on the majors’ side. Still entangled in Iraq, bogged down in Afghanistan, facing strategic differences with Pakistan, and needing Tehran’s support in solving the Israel-Palestine dispute, Washington and its NATO allies had to proceed with extended hands. Thus, unlike the George W Bush administration that placed Iran in “the axis of evil” and linked US formal participation in negotiations to Iran’s suspended enrichment, President Barack Obama dropped that requirement and pledged to negotiate extensive security commitments demanded by the Islamic Republic.
For these reasons, both sides resorted to some clever psychological warfare to gain leverage before the negotiations started. During the G-20 summit in Pittsburgh in late September 2009, President Obama, flanked by leaders of France and Britain, dramatically disclosed the discovery of a clandestine uranium enrichment facility near the holy city of Qom hidden in an underground bunker, designed to make weapon-grade uranium – in clear violation of the three UN resolutions. The “revelation”, however, was a matter that all three countries’ intelligence services knew, and had under surveillance since 2006, but kept it secret to use it in an appropriate time. The Islamic Republic, in return, test-fired two longest-range ballistic missiles – Shahab 3 and Sajil 2 – shortly before 1 October as a clear warning of its possible retaliation in case of any foreign military action.
The Meeting’s Outcome
The results of the October meeting were rather modest. Iran “agreed in principle” to: (a) open its recently unveiled uranium enrichment plant to international inspection within two weeks in order to make sure it is not intended for military purposes; (b) ship some 80% of its 3,300 pounds stockpile of already low grade uranium to Russia and France for further enrichment into fuel rods for use in a nuclear research reactor (sold to the Shah’s government by the US in the mid-1970s); and (c) hold a follow-up meeting to resume further negotiations. The US delegation took a rather conciliatory posture during the session, and the chief US delegate had a private one-on-one talk with his counterpart – apparently for the first time in 30 years. Following the Geneva meeting, Iran’s representatives met with technical experts in an intense two and a half days of negotiations on 19-21 October in Vienna to work out details of the uranium shipment. The IAEA inspectors were to visit the Qom facilities on 25 October to make a check on its design.
President Barack Obama in a somber tone called the outcome “a constructive beginning” toward “serious and meaningful engagement.” The other major powers considered Iranian “concessions” as part of an “intensive process” of “confidence-building”. The European Union foreign policy chief found the session a good “start”. US Secretary of State Hillary Clinton called the talks “productive”, and opening the “door to progress”. Iran’s deputy foreign minister considered the results a “win-win” situation.
The shared satisfaction with the meeting’s outcome was hardly surprising. Based on past experiences, everyone’s expectations before the meeting were so low that anything short of an immediate adjournment would have been considered a success. On the whole, however, the Islamic Republic seems to have come out a winner by claiming some positive gains. First, Iran made no commitment to halt its uranium enrichment program, and none was apparently asked by the West – reversing the Bush administration’s main pre-conditions for a dialogue. Second, its pledge to allow the IAEA to visit the Qom facility was actually no concession since such inspections are part of the country’s routine obligation under the Non Proliferation Treaty. Third, the shipment of lightly enriched uranium to Russia – once honored – would, of course, reduce the possibility of their being used for making weapons; but with a reported 8,000 centrifuges already installed and operating at Natanz, they can be replaced in a short time. Fourth, Tehran’s “tactical retreat” in these areas provided Russia and China with further excuses to oppose any new UN or US sanctions. Fifth, allowing Iran’s stockpiled uranium in violation of UN sanctions to be used by an Iranian nuclear research facility tacitly legitimized Iran’s past behavior, and implicitly recognized its right to continue enrichment in its own soil. Sixth, according to a trade publication, Iran’s stockpile of low grade uranium had been contaminated with certain impurities which would cause centrifuges to fail. By agreeing to ship it abroad, they managed to get it decontaminated in a specialist French company. Finally, the very fact that the meeting was conducted constructively, that the agenda was not broadened to include the regime’s gross human rights violations as was almost universally demanded, and that the Ahmadinejad administration’s legitimacy was de facto recognized by the major powers, were all a triumph for the Islamic regime.
The 5+1 group, too, could claim some gains. First, despite Iran’s earlier position that the nuclear issue was off the table, nothing else seems to have been discussed in the meeting. Second, Iran’s stockpile of low grade uranium was to be reduced below the quantity needed to produce a nuclear bomb. Third, Iran agreed to purchase higher grade uranium from foreign sources, and accepted for the first time to have its own nuclear stockpile further enriched outside its territory. Fourth, Iran promised to continue discussing the forbidden subject later in the month and beyond with its Western partners. And, finally, UN Secretary General Ban Ki- Moon placed the organization’s leadership clearly behind the West’s position that Tehran must show the world that it has no intention of developing nuclear weapons.
31 December Deadline
The major powers’ decision is now to move into further intensive discussions in late October, and to give Tehran the last chance option before 31 December to come on board. Mrs Clinton has stated that the US cannot wait for ever, and talked about imposing “crippling sanctions” if the talks failed. The current position of Washington and the European Union is thus to isolate, and punish the Iranian regime if meaningful agreement is not reached by the year’s end.
In the meantime, the debate on how to deal with Iran after 31 December continues in the nuclear watchdog agency, the halls of the US Congress, the White House, the world press, and various think-tanks. The IAEA admits that it has “no concrete proof of an on-going warfare program in Iran,” but harbors “concerns about Iran’s future intentions.” An initial IAEA report (not yet made public due to its lack of positive proof) has raised concerns about evidence indicating Tehran’s efforts to build nuclear warheads and long-range missiles. Seizing on this disclosure, both US Republican and Democratic lawmakers have called for immediate new sanctions on Iran. The public disclosure of Iran’s new secret nuclear facility has also allowed President Obama to shift his public focus from direct engagement toward forming an international agreement for adopting tougher and more concerted actions against the Islamic Republic. His hope is that the revelation of a new Iranian deception will reduce the reluctance by Russia and China about adopting sterner sanctions on Tehran.
The reactions to the Geneva meeting’s conclusions in American neo-con circles have been expectedly passionate and negative. The feeling is that the Geneva conference bestowed legitimacy and a semblance of equality and respectability to Tehran’s “shaky” government in the aftermath of the contested June election. Iran’s olive branch in Geneva, it is held, will now enable it to “clean up” the Qom facility before the inspectors get in. Iran will continue its nuclear program, and will follow the North Korean model by lying, cheating, striking deals and reneging on and on. Based on these assumptions, it is suggested that if by early 2010 there should be no progress in negotiations, President Obama would have to fulfill his previous commitment to “use all elements of American power to prevent Iran from developing a nuclear weapon” – including military intervention.
The right-wing press reactions have been naturally negative and dismissive. A major US newspaper editorial portrays Iran’s “olive branch” as a means of acquiring new legitimacy and enhanced global standing without the slightest intention of stopping the nuclear program designed to give it a new power in the region and new leverage against Washington. Reference is made to new Western intelligence reports indicating that, contrary to the US National Intelligence Estimate in 2007, Iran never stopped clandestine efforts to design a nuclear warhead. Another report, attributed to “senior staff members” of the UN nuclear agency, also claims that Iran has acquired “sufficient information to be able to design and produce a workable atom bomb.
Proposed Measures
There is no doubt that reaching a workable agreement with Tehran will not be easy, and that negotiations may in fact end in a deadlock. What then? The ready answer is new and further “paralyzing” sanctions to constrict Iran’s transportation, financial, and energy sectors thus cutting the country’s economic link to the rest of the world. The feeling in most American circles is that properly broadened and deepened sanctions can work against the Iranian regime if they are made unbearably costly by targeting the country’s economic Achilles’ heel. Suggested measures include: (a) targeting insurance and reinsurance companies as well export credit agencies that underwrite the risks of the country’s shipments to and from the country; (b) further pressing major banks around the world to cut their ties with Iranian banks; (c) restrictions on Iranian shipping and air access to foreign destinations; and (d) a cut-off of investment and sale of equipment involving the country’s oil and gas industries – the lifeblood of the Iranian economy – and an embargo on the sale of gasoline and refined oil products to Iran
The problems with all such sanction proposals are many. First, history suggests that the effectiveness of sanctions depends not much on their intensity and comprehensiveness, but on the universality of commitment to their enforcement. Historically, the only clearly successful sanctions were those imposed on South Africa by the United Nations in 1962 onward – for three reasons. First, the cause – apartheid – was roundly denounced by all nations; second, South Africa had no geo-economic significance at the time; and, third, the ruling minority regime had no appreciable influence in the region. In Iran’s case, the situation is vastly different for precisely the opposite reasons. The Islamic Republic’s alleged intension of producing a nuclear bomb, while feared, abhorred and rejected by a very large majority of nations, is by no means a consensus position. The regime’s anti-Israeli surrogates in the region – Hezbollah, Hamas, and the Islamic Jihad – and arguably its current Latin and American bed-fellows (Venezuela, Nicaragua, Bolivia) may, in fact, not be terribly upset about such an eventuality. Some Shi'ite diehards may in fact rejoice about the possibility of a new ‘Shia bomb’ since everyone else – Christians, Buddhists, Sunnis, and atheists – already has it. Second, Iran is a major producer and exporter of oil – a vital commodity where a slight interruption in its supply results in disturbing price changes. And, the regime’s ability to influence political fates of Iraq, Afghanistan, Lebanon, and even some Muslim countries of the former Soviet Union is immense.
To most everyone’s regret, therefore, there is not as yet a great international will for tougher UN sanctions against Iran, and support for an all-out US sanctions is also by no means universal. Tehran flagrantly boasts about flouting past UN sanctions by exporting prohibited military wares to 50 countries. Iranian city bazaars and shopping centers are replete with American goods indirectly sold to, or smuggled into, the country. The main task of Washington and its European allies is thus to marshal worldwide cooperation for effectively robust measures. Interestingly enough, the European governments, which were ardent supporters of negotiations with Iran in the past, have now become so frustrated with the futility of their previous “constructive dialogues” as to become ardent advocates of a tough stance. Impatient over the nuclear standoff, France is now spearheading the move for swift punitive actions.
The same, however, is not true of the other veto-powered members of the UN Security Council. China, for example, is opposed to sanctions as a matter of principle and has been reluctant to impose them in other cases. China’s participation in the Geneva meeting was with no “sense of urgency” and no intention of chastising a country that is its major trade partner, its second largest oil supplier, and a lucrative magnet for its oil and gas investments. While openly opposing Iran’s pursuit of nuclear weapons, and trying not to alienate Washington, China’s differences with the West on Iran are not only economic but also strategic and ideological. Beijing’s heavy dependence on foreign oil for its unquenchable transportation demands, would not allow it to support any tough sanction measures that might raise oil prices. China’s state-owned energy behemoths, Sinopec and CNPC, have in recent years taken over Iranian oil projects abandoned by the Japanese and French firms – estimated worth $120bn. China’s statements on Iran in various international meetings have also been usually milder than the rest. Iran’s potential economic and military strength is seen not as a threat to China, but, instead, a welcome challenge to both American and Russian influences in the area. On 15 October, Chinese Premier Wen Jia-bao assured a top Iranian official of “close coordination in international affairs” with the Islamic Republic.
Russia is similarly reluctant to levy heavy and effective sanctions on Iran for a number of reasons. Russia is a major supplier of military weapons, airplanes and nuclear technology to the Islamic Republic. Moscow is also a founding member and a major partner in the newly established “organization of gas exporting countries”. The Russians are equally worried about a hostile Iran making mischief in the Muslim countries surrounding its territory. Some cynics argue that Moscow is not interested in resolving the dispute since it actually considers heightened tension in the area as a spur to higher oil and gas prices essential to its economic prosperity. In any event, after a meeting with Mrs Clinton on 13 October, Russian Foreign Minister Sergey Lavrov told reporters that “threats, sanctions, and threats of pressure” against Iran would be “counter productive.” The statement was echoed the following day by Prime Minister Vladimir Putin in Beijing, who said it was “premature” to threaten sanctions against Iran.
As a result, Washington is now reportedly seeking the cooperation of 11 “likeminded” countries – the old Group of Seven plus Saudi Arabia, Australia, South Korea, and the UAE – which purchase 60% of Iran’s oil, and provide more than 70% of Iran’s import needs (including 50% of gasoline imports) to agree on a new set of sanctions if the second round of negotiations fails to produce concrete results.
The second major problem with sanctions is that they usually would not affect the targeted regime or government, but would impose severe hardships on the ordinary people – as the Cuban, Iraqi and Libyan cases attest. By all indications, years of US and UN sanctions and threats of further restrictions, while raising Iran’s business transaction costs considerably, have not weakened the Islamic regime’s resilience, or forced it to change its behavior. By contrast, both Supreme Leader Khamenei and President Ahmadinejad have on more than one occasion welcomed the sanctions as a spur to domestic efforts toward greater self-sufficiency. Opponents of sanctions argue that these measures may actually result in strengthening the financial power and influence of Iran’s Revolutionary Guards, further militarizing Iran, and providing a field day for smugglers and domestic mafia elements.
Third, sanctions at times may also have such unintended consequences of strengthening the regime’s hand against domestic dissents. For example, blocking refined gasoline export to Iran – considered the regime’s Achilles heel – and currently enacted by both houses of the US Congress – may in fact be welcome by the regime. There is no doubt that reducing by more than one-third of the country’s gasoline supply will cause unprecedented traffic disruptions. Yet, apart from the fact that enforcing such a measure involves a naval blockade and possible military response from Tehran, the measure’s success in achieving the intended goal is greatly in doubt. First, even if all current European and Asian suppliers stop selling gasoline to Iran, other refiners – Chinese, Malaysian, Russian, Venezuelan and many more in the Islamic world – might not bend to the US pressures. Second, any interruption would be temporary as Iran is now stock piling gasoline, working on massive upgrading of its refineries, and building new ones. Third, there will be rampant smuggling of gasoline into the country in search of higher prices. And, finally, if all these measures prove ineffective, the government would, ironically, find the outcome a blessing in disguise as: (a) it would be relieved from paying several billion dollars for gasoline imports; (b) it would find it more politically convenient to further reduce the current gasoline rations – thus easing Tehran’s horrendous traffic jams and suffocating air pollution; and (c) blame all pains and sufferings on foreign enemies. For these reasons, almost all the Islamic regime’s opposition leaders at home and abroad object to such measures.
Plan B: Thinking The Unthinkable
Contrary to President Obama’s positive tone, highly conciliatory position, and genuine willingness for meaningful and productive engagement with the Islamic Republic, the current political climate in the United States regarding the Tehran government seems to be highly charged. The argument currently enjoying widespread favor is that the only policy option that Tehran truly fears, and the only one that gives the negotiations any chance of success, is a credible threat of military action on the part of the West to destroy Iran’s nuclear facilities.
Repeated statements by the US Secretary of Defense, various top military leaders, and prominent security analysts attest to the fact that the military option (a) requires repeated air strikes and still cannot destroy all hidden nuclear facilities; (b) does nothing but to buy time as Iran would start rebuilding its facilities; (c) is likely to trigger a horrendous Iranian retaliation and a vast regional conflict; (d) could triple oil prices and cripple world economic recovery; and (e) would most probably trigger a popular rally around the regime out of pure national pride. But Russian President Dmitri Medvedev believes that any Israeli attack on Iranian nuclear facilities would result in a humanitarian disaster, a vast number of refugees, and Iran’s wish to take revenge not only upon Israel, but upon other countries as well.
Nevertheless, the military option has very large support. Not only American neo-cons and Israeli hawks, but also a surprisingly sizeable segment of ordinary citizens, reportedly advocate harsher measures against the Islamic Republic. A Fox News poll on 1 October showed that: (a) 69% of the American respondents thought President Obama was not tough enough with Iran; and (b) 61% said US should use force to prevent Iran from obtaining nuclear weapons. Among them, 53% of democrats and 73% of Republicans supported military actions. A subsequent Rasmussen survey also found that 32% of Americans consider Iran as the biggest threat to the US security, and 51% think President Obama should be more aggressive with Tehran. A Pew poll in early October also found 61% of American respondents favoring military actions to prevent Iran from acquiring the bomb. Proponents of the military options propose various tactics – ranging from a naval blockade to an actual pre-emptive bombardment. Some go as far as warning that the longer the US delays playing hardball with Iran, the sooner Israel is likely to strike – particularly now that the Nobel Peace Prize given to President Obama has ruled out US strike against Iran. The so-called “Bipartisan Policy Center in Washington” endorsed the eventual attack.
Prospects Of A Positive Détente
By all indications, neither side is now willing to see a breakdown of talks. The Islamic regime is ideologically, politically, economically, and socially facing the biggest challenges in its 30-year history. Its very concept of the velayat-e faqih is now increasingly questioned not only by secular elements but also by some of the grand ayatollahs. Politically, the Ahmadinejad government is fighting both secular and clerical forces at home, and is not wishing to open another front abroad. The Iranian economy is this year facing its poorest GDP growth rate in a decade. And, Iran’s post-June election society is in an unprecedented turmoil, constantly questioning the regime’s legitimacy. It is also argued that Iran has already acquired the full knowledge of making the bomb and therefore may be more amenable to a grand bargain. The United States and the European Union, in turn, are grappling with a number of domestic and foreign policy problems –economic and banking crisis, the Arab-Israeli peace process, turmoil in Iraq, Afghanistan and Pakistan.
Yet, if the past is any guide, future negotiations are likely to be long and hard. And the price asked by Tehran for cooperation might be high. Any concession on Iran’s part is likely to be in return for securing full diplomatic legitimacy, recognition of a prominent role in the region, and most pointedly an iron-clad guarantee that there would be no foreign attempt at regime change. In the words of a security analyst, Iranian negotiators know that the nuclear issue has always been about the nature of the regime itself. If the major powers should be unwilling to pay this price, then living with a nuclear Iran under a set of safeguards may not be the worst option among the currently available. Non-partisan experts now believe that even if Iran can produce and deliver a workable nuclear weapon, it would not opt to deploy it for a number of reasons: worldwide condemnation and censure; encouraging other nations in the region to seek their own; and, most significantly, deterrence, ie retaliation and mutual annihilation. For these reasons, it is argued that under the worst scenario, the Islamic regime can be effectively isolated and contained until it changes from within. Nuclear bombs in different hands make all the difference.