Iran and Nuclear Diplomacy

Q1: Does Iran desire and is it on the verge of developing a nuclear weapons capability?

A1: While there are conflicting accounts on this issue, Iran’s interest is most likely in obtaining the ability to develop nuclear weapons without in fact having nuclear bombs. The Iranian regime has calculated that the so-called Japan option, where they have the capability but not the actual weapons, provides the greatest security at the least cost. This option reduces the likelihood of a U.S. or Israeli attack, while delaying a rapid development of nuclear capabilities by other regional players.

The development of nuclear energy for power gives Iran a legal umbrella under which it can follow such a strategy. Nuclear power for energy is an option that the populace strongly supports, and this has become a matter of national pride. A military strike on Natanz or other nuclear facilities may delay Iran’s ability to develop nuclear weapons, but it could also have the undesirable effect of rallying the populace in support of a regime that many perceive to lack legitimacy. Factions of the regime that have argued against the development of nuclear weapons may subsequently support nuclear weapons development.

Q2: Is Iran serious about negotiations with the 5+1 group? Is the offer to export Iranian low-enriched uranium for further enrichment in Russia and France a delaying tactic?

A2: Time will tell, but the Iranian regime is now facing a degree of opposition from the population, challenges from different internal power groups, and the ratcheting up of pressure from abroad. It is probable that in their analysis, reducing the least dangerous threat (the international pressure) is desirable. Iran agreed to a meeting with the West and in the October 1 session also agreed in principle to send most of its low-enriched uranium (LEU) to Russia and France for further enrichment so as to fuel an Iranian reactor that produces medical isotopes. This agreement is encouraging; however, even if it comes to pass, the devil is in the details. The extent of shipment, its timing, and alternative production capacity in Iran may reduce the significance of the offer. If action does occur in a timely manner, then Tehran will not have at its disposal enough material to develop a bomb quickly. Although this will partially defuse the immediate issue, the long-term problem persists. Iran will not stop its LEU project for nuclear power generation and will need nuclear power generation for electricity. One must recall that the country’s nuclear program actually began with the shah, at the time a strong U.S. ally.

Iran’s issues are much broader than its nuclear enrichment, however. Iran is concerned about the U.S. presence to its south, west, and east. It is leery of U.S. intentions, while at the same time wishing to play a more dominant role in the region. Iran also has major issues of illegal immigration and narcotics trade. It is fearful of internal problems with the Sunni, Balch, Azeri, and Kurd minorities. And on the economic front, it needs to provide jobs to its millions of unemployed youth. These issues far outweigh the narrow nuclear matter that is of paramount concern to the United States.

Q3: Will crippling sanctions be effective, or have they been counterproductive and supported segments of Iran’s economy that are most threatening to U.S. interests?

A3: Tougher economic sanctions have had little impact in humbling the Iranian regime. Iran has effectively evaded U.S. sanctions through third-country smuggling and purchasing from alternative producers. The hope is that eventually these stricter sanctions will take their toll and make it more difficult for the regime in general and the Revolutionary Guard Corps in particular to profit. However, recent information has shown that the sanctions have actually helped the main U.S. adversary, the Revolutionary Guard, by allowing it to collect some $25 billion in bribes. Although the hope is that rising costs and limited access to goods will ultimately anger Iran’s population, it is questionable whether economic hardship will result in a populace uprising. If history is any guide, it is in periods of relative prosperity that the Iranian public has demanded more say in the operation of the state, more transparency, and greater civil liberties.

Q4: What then was the cause of the civil unrest after the contested elections?

A4: The Iranian regime’s own economic, social, and political actions have done more damage to the economy than sanctions. With only 1 percent of the world’s population, Iran has 16 percent of the world’s gas reserves, 10 percent of oil reserves, and ranks seventh in mineral wealth. The population is well educated, and with some 66 percent of the population under 30 years of age, Iran has a potentially vibrant work force. The nation is technologically wired with one-third of the population having access to the Internet and over two-thirds having access to cell phones. Its physical infrastructure is satisfactory, and its location is ideal for trade in multiple directions. Yet its economy is in shambles—not so much because of sanctions but due to the theocratic oligarchy, inefficient and large central government, corruption, and lack of transparency. The private sector has been reduced to minor industries and trade. The cost of starting and conducting business is high, there is no investment in R&D, and the government’s provocative foreign policy has frightened away investments. Iran will need over $30 billion a year of foreign investment in the next decade, but capital is fleeing the nation at unprecedented levels. Reports indicate that some $350 billion of Iranian investment reside in the United Arab Emirates (UAE) alone. These funds are housed in some 10,000 companies, which explains the 300-plus weekly flights between the two countries.

The petroleum export revenue that has flowed into the coffers of the regime has further aggravated the situation and strengthened the hands of the regime in general and the Revolutionary Guard in particular. The Guard was recently the winner of the privatization of a major telecom operation, buying for $2 billion assets that were valued at $6 billion.

The Revolutionary Guard has been the beneficiary of this economic mess, while the poor have only a minimal standard of living and the middle class and the youth are frustrated. Bureaucratic incompetence, along with disregard for meritocracy and the imposition of antiquated Islamic codes of conduct on a growing youth population, is the primary cause of dissatisfaction. The lack of civil liberties adds to opposition to the regime.

Q5: Are there any effective actions that can pressure the regime to modify its behavior?

A5: Although sanctions on trade have helped the Revolutionary Guard, the financial controls and sanctions have had the effect not just of raising the cost of transactions but also increasing the risk that the funds, once identified, can be confiscated. This is in fact an effective way of bringing the key players to the table. Financial flows through the banking system can be tracked, and if they belong to key adversaries, or their fronts, the funds can be confiscated. Indeed, the Turkish government was able to track and confiscate $18.5 billion of alleged Revolutionary Guard funds as they were transiting Turkey. Identifying the $350 billion in the UAE and requiring an accounting of the origins and owners of those funds would be a good start. Once the funds are tracked and/or confiscated, it would be a good time to sit down with the Guard leaders and talk the proverbial turkey.

Iran’s Nobel Peace Prize winner, Shirin Ebadi, has argued that paying so much attention to Iran’s nuclear ambitions at the expense of democracy and freedom is both a tactical and moral error. Ms. Ebadi argues that Ahmadinejad “is at the lowest level of popularity one can imagine…and if the West focuses exclusively on the nuclear issue, Ahmadinejad can tell his people that the West is against Iran’s national interest and rally people to his cause. But if the West presses also on its human rights record, he will find himself in a position where his popular base is getting weaker and weaker by the day.” There is some logic in this position. While we need to continue to impose targeted financial sanctions on key figures in the regime and tightly limit possible nuclear technology access, we should not forget that it is the people who are discouraged by the regime’s behavior that will likely bring about modification of that behavior if not removal of the regime itself.

Fariborz Ghadar is a distinguished scholar and senior adviser at the Center for Strategic and International Studies in Washington, D.C.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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