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a CANADIAN SECURITY INTELLIGENCE SERVICE publication
November 1995
Unclassified
Editors Note:
The principal reasons for Iran's isolation from the mainstream international community are, at least on the surface, relatively easy to list: the absence of formal diplomatic relations with the USA since the hostage-taking incident in 1979; Iran's alleged nuclear ambitions; its opposition to the Middle East peace process; its support for terrorists in the region; its internal human rights abuses; assassinations of those opposed to the régime abroad; the "eternal fatwa" calling for the death of author Salman Rushdie; and in May 1993, the American government's announcement of its "dual containment policy" aimed at Iraq and Iran. Most recently (April 1995), the American Administration imposed a total trade embargo on Iran and has subsequently sought the support of its allies in Europe, the Middle East and Asia. Clearly the noose has tightened, and the rhetoric has heightened.
Below the surface, what is behind this hardening of attitudes? How has Iran, and the rest of the international community, reacted?
The author, Dr. Wm. Millward, is a regular contributor to these pages, as CSIS' Strategic Analyst on the Middle East.
Disclaimer: Publication of an article in the COMMENTARY series does not imply CSIS authentication of the information nor CSIS endorsement of the author's views.
After a period of relative quiescence, when the United States and its coalition allies were preoccupied with the lingering threat of Iraq under Saddam Hussein, the American government and some congressional leaders have gradually upgraded their anti-Iran rhetoric. Not content with demonizing the Islamic Republic as a rogue state and pariah in the international community, American officials have recently followed up with concrete actions designed to punish Iran for what they consider objectionable behaviour. This apparent hardening of attitudes, and escalation of anti-Iran rhetoric and actions, come at a time when Iran has been absorbed with its own economic and social problems and has been comparatively quiet on the regional and international scenes. These developments puzzle many of Washington's friends and allies, who wonder what may be motivating this shift of emphasis at this time.
Relations between Iran and the United States have become an important barometer of current foreign policy positions and trends in both countries. To an extent, their mutual relations have in fact become hostage to these trends. The long absence of formal diplomatic relations between the two governments since the seizure of the U.S. Embassy and hostage-taking incident of 1979 runs contrary to the historic internationalist and cosmopolitan traditions of both states. Despite the great difference in age between the two societies, neither state has been allowed the luxury of serious or prolonged isolationism for a variety of historical and geostrategic reasons. The predominant internationalist impulse of both countries, though situated on opposite sides of the globe, would normally be expected to bring them into a degree of constructive engagement and advantageous commercial exchange, despite their traumatic disagreement 16 years ago.
But both societies have a strong sense of national identity and a propensity for the imperial mission, either in the classic tradition of the eastern regional empire, [we are reminded that Iran was one of the ancient world's earliest superpowers], or in the neo-imperialist mould of a modern superpower, able and willing to project its power regionally and globally when its national and international interests are deemed to be threatened. These two imperial traditions are at loggerheads in the Persian Gulf and the Middle East region generally; and on the issue of terrorism, they clash on an international front. Recent American decisions suggest that greater effort will be made to impose a measure of containment and isolation on Iran which is incompatible with that country's historic reflexes and self-image. The question that engages the attention of foreign policy analysts in both states is whether such efforts can have any serious expectations of success.
In the aftermath of Desert Storm and the application of sanctions on Iraq by the international community, the American government unveiled its own policy of dual containment [DCP] in May 1993. The DCP was brought forward initially by Martin Indyk, now American Ambassador to Israel. A former American Israel Public Affairs Committee [AIPAC] staff member, Indyk became a Clinton White House adviser on Middle East policy as a member of the National Security Council. The DCP was designed to neutralize the threat of Iraq under Saddam Hussein's leadership, and limit the capacity of the Islamic régime in Iran to create mischief in the region. The objectives of the policy were to effect a change of government in Iraq, but not in Iran. For the Islamic Republic of Iran the intent was to apply sufficient pressure to induce change in the régime's behaviour, considered unacceptable in several respects, including its quest for nuclear weapons, domestic human rights abuses, support for terrorist activities in the region and assassination of alleged régime opponents abroad, and its shrill opposition to the Middle East peace process. The DCP soon came to be known as the Iran Containment Policy, and skeptics quickly discounted the notion that there was no intention to encourage a change of régime in Tehran, as in Baghdad.
The DCP was widely criticized by domestic and foreign observers, chiefly because of its assumption that the United States would receive the support and assistance of its allies needed to make the policy hurt Iran badly enough to bring about behavioural change. The hoped-for support was not forthcoming for the reason that European and Japanese investments in the Islamic Republic would be put at risk by applying economic pressure on the Iranian government. Only Israel among American allies signed on to the policy unequivocally. By summer 1994 the Israeli Foreign Ministry had set up a special unit to appeal to the industrialized countries to limit their economic ties with Iran and refrain from selling advanced technology to the Islamic Republic because its support for terrorist activity in the region and outside, and its desire to acquire a nuclear program, made it a paramount threat.
By November 1994, both domestic and foreign cri-tics charged that the DCP was being applied inconsistently and was showing few results. The American administration thereupon conducted an Iran policy review at which Secretary of State Christopher is said to have recommended a full trade embargo. This suggestion was opposed by the Departments of Commerce, Defense, Energy and the Treasury, all of whom argued that it would have little effect on Iran's behaviour and only hurt American companies. The Administration found itself facing an even more aggressive competitor in foreign policy from the newly installed Republican Congress.
On 6 March 1995, Conoco Inc. announced that its Dutch-based subsidiary, Conoco Iran S.V., had signed a $1 billion contract to develop Iran's offshore oil resources, the first energy agreement between the USA and Iran since 1980. Senator Alphonse D'Amato (Rep-NY) seized the initiative and promised to hold congressional hearings aimed at tightening the economic embargo on Iran. This move led the Administration to counter with an Executive Order under the authority of the International Emergency Economic Powers Act, aimed at preventing American companies from developing Iranian oil and gas reserves, effectively precluding the Conoco deal.
Iranian officials reacted to the cancellation of the Conoco deal by insisting that it would have no significant impact on Iran's oil production plans, and that Iran would quickly find other partners for oil development. While official Iranian reaction was predictably defensive, other Iran-based critics emphasized the short-sightedness of the decision which would deprive the USA of an opportunity to strengthen economic ties and improve its relations generally with Iran. By July 1995 the National Iranian Oil Company [NIOC] was able to sign a $600 million contract with the French oil company Total SA to develop oil fields in the Persian Gulf.
Meanwhile, Iran and South Africa signed an agreement for the lease of two underground oil storage tanks at Saldanha Bay on the Atlantic coast of South Africa. This permits Iran to store 15-20 million barrels of Iranian crude for sale in Europe and elsewhere on a joint-venture basis, thus enhancing its international marketing position. While in each of these transactions the USA appealed to the government concerned not to promote trade and development contracts with Iran, there has been no positive response to date.
Item six in the Republican Congressional Caucus's 'Contract With America' calls for a strong national defense, including, among other elements, "...a missile defense system against rogue dictatorships". Whether the authors had Iran specifically in mind we cannot be sure, but it seems safe to assume. Following their sweep of American elections last November, it was only a matter of time before competition with the Administration to confront and deal with rogue behaviour among world states would fire up the anti-Iran sentiment in political circles and precipitate action.
On 30 April 1995 President Clinton announced a total trade embargo on Iran, pre-empting prospective legislation in Congress to implement a secondary boycott on trade with foreign companies doing business with Iran. The fact that he made this announcement at a dinner in New York sponsored by the World Jewish Congress only lent added fuel to Iranian critics who claimed it was further proof that his policies were driven by Zionist interests. The Clinton fatwa, as one Washington newspaper described it, prohibited all American companies, and foreign branches under their control, but not separate foreign subsidiaries, from trading with and investing in Iran. The rationale for this measure was that it would curtail Iran's drive for nuclear weapons and its support for terrorism.
The thirty-sixth annual AIPAC conference held in Washington, D.C. 7-9 May, 1995 illustrated the rising concern about Iran in the American capital. At the opening plenary, AIPAC's executive director, Neil Sher, told the audience that "containing Iran" was number one on the list of the lobby's priorities, ahead of the more traditional aims of supporting continued aid to Israel and securing the status of Jerusalem as Israel's capital. The same conference featured three panels that dealt primarily with Iran. One report of the conference's proceedings claims that the Islamic Republic was described as, among other things, the source for the export of "radical Islamic fundamentalism", a nation on the "brink of nuclear capability" and an alleged financier of terrorism around the world. A clear perception was presented that Iran represented the greatest threat not only to Israel today, but also to peace and stability in the region and the world. Every prominent American and Israeli official who attended the conference, including President Clinton and then Prime Minister Rabin, spoke of the Iranian threat. The same theme has been articulated by other American and Israeli leaders for the past year and more. These pronouncements demonstrate a remarkable congruence of viewpoint on Iran and its alleged global threat on the part of the two governments. Clearly, the Islamic Republic is currently their number-one demon.
Reaction to this move was more or less predictable. Despite appeals to America's allies to join the embargo, the Europeans and Japanese declined. A consensus on the denial of dual-use nuclear technology was one thing, but a total trade boycott was more than any of the allies had bargained for. The Europeans preferred to continue their policy of "constructive engagement" rather than resort to punitive sanctions. Using the analogy of relations with the former Soviet Union, where dialogue was maintained even on contentious issues such as human rights, with ultimately positive results, the Europeans have preferred to keep their trade options and communications channels open, in the belief that this gives them an avenue of influence, and that Iran is not, under its present leadership, irredeemable or impervious to reform.
China and North Korea both condemned the embargo as meddling in the internal affairs of developing nations and promised to make efforts to increase their trade with Iran as a partial counterweight. Even Jordan, a nominal ally of the USA in the Middle East, and dependent on debt relief for help in overcoming the economic morass caused by the embargo on Iraq, declined to join the new embargo. Further, Jordan indicated its desire to upgrade trade ties with Tehran and open an Iranian trade fair in the kingdom.
Reaction in Russia was muted; Moscow's policy towards Iran is ambivalent. On the one hand it is heavily engaged with sophisticated arms sales, including submarines and the provision of nuclear assistance in the completion of the Bushehr reactors left unfinished by the Germans. It also provides training programs for Iranian specialists. Despite American objections to these moves, the programs are going ahead. The dominant motive in Russia-Iran relations currently appears to be economic. The relationship is being nurtured by high-level visits by officials on both sides. A recent visitor in Moscow was the Iranian Minister of Intelligence and Security, Ali Fellahiyan, hosted by his Russian counterpart, Yevgeny Primakov.
On the other hand Moscow has concerns about the real and potential influence of Iran in the former Soviet republics such as Azerbayjan, Tajikistan and Turkmenistan. It has a natural interest in preserving its own influence in these lands as a bulwark against the possible spread of Islamist sentiment there in favour of Iran. To an extent the American position is helpful to Russian policies in raising objections to energy pipelines running through Iran and limiting Iran's access to international financing.
A wide variety of motives and factors are at play here. For Moscow, there are the factors of traditional geostrategic interest, competition with the West for influence in the Middle East generally, the cultivation of sources of hard currency, and the desire to show potential buyers that Russia is a reliable supplier of modern technology. For Tehran, Russia provides a valuable means of demonstrating it cannot be isolated, and serves as a counterweight to Western pressure. Despite its condemnation of Russian goals and actions in Chechenya, Tehran pays for continued Russian support by muting its criticisms of Moscow.
The reaction in Iran to the announcement of the American embargo was defiant. Officials insisted the embargo would have little or no effect on the Iranian economy. Other partners would soon be found to purchase the 500,000 b/d of Iranian crude previously lifted by American companies, and the drilling equipment and spare parts purchased from American firms would either be made up locally or in joint venture industries by agreement with the Russians. Other suppliers of oilfield technology and equipment, especially those desperate for dollars, would rush to fill any vacancy in an Iranian market vacated by the USA.
What the IRI authorities could not prevent was a drastic decline in public confidence in the domestic economy and currency. The ban caused panic among ordinary Iranians, businessmen, importers and others, who feared the move could help push the already troubled economy deeper into recession. In the two weeks following the embargo's announcement, the Iranian rial fell to its lowest level against the dollar since the revolution. This retreat was in addition to the 30% loss of value experienced by the rial in a three-week period in January. At that time there was a rush to buy American dollars which reduced the rial to 7,000 to the dollar. The government followed up by banning free currency exchange and set a fixed rate for the rial of 3,000 to the dollar. In late January 1995, authorities arrested 330 currency dealers and seized $2.5 million in a crackdown on unauthorized currency transactions.
The short-term prospects for Iran as a result of the embargo are difficult to estimate. The prohibition on American companies lifting Iranian crude could threaten Iran's oil market share until new customers can be found. NIOC officials will be watching closely to see that other OPEC producers do not increase their output at Iran's expense. This suggests that Iran could also seek a higher OPEC quota for 1996 if the producers' group decides on a higher output ceiling at its year-end meeting. These same officials are perhaps overly optimistic; the embargo has to be renewed each year, but if it has solid bipartisan congressional support, as it would appear, this will not be a problem unless and until future elections bring a change of leadership and, perhaps, new policies. In the meantime American firms are hostage to current regulations.
Another short-term disadvantage for Iran may be that the government's mishandling of the currency crisis, coupled with slightly lower oil revenues, will leave it an estimated $4.5 billion to $6 billion short for debt-servicing purposes next year. If other producers, such as Saudi Arabia, increase their overall output, and traditional customers like Japan cannot be persuaded to buy more Iranian crude, Iran may have to lower its prices to compete in finding new customers. Whether this shortfall will mean fundamental damage to the Iranian economy will depend to a large extent on how long it lasts.
By and large the Islamic Republic has managed to defend itself and its economic interests tolerably well since the American embargo came into force in June 1995. On 1 October 1995, President Rafsanjani presided at the opening of the 21st Annual International Trade Fair in Tehran and declared that it represented a clear response to the desire of the US Administration to isolate Iran. Although it had attended this event in 1993 and 1994, in 1995 the United States was noted for its absence. Fifty-three countries, including Canada, and 800 commercial enterprises participated. First-time attendees this year included Iraq, Mexico and South Africa.
Disapproval of Iran's behaviour, reinforced by a constant stream of anti-American rhetoric, appears to have broad bipartisan support in American political and policy-formulation circles. The objections are usually laid out with reference to its 1) nuclear weapons ambitions, 2) support for terrorism, including the assassination of régime foes abroad, 3) attempts to destabilize neighbouring régimes, 4) opposition to the Middle East peace process, 5) domestic human rights abuses, and the fatwa against Salman Rushdie.
Perhaps the most controversial aspect of Iranian behaviour in its international implications is the alleged ambition of the country's ruling élite to acquire a nuclear weapons capability, despite regular official denials of any such intention. The country has had a nuclear program since the 1960s. It signed the Nuclear Non-proliferation Treaty [NPT] in 1970 and this year supported the move to have the treaty made permanent. Régime spokespersons justify their claim for the peaceful nature of Iran's nuclear program by alluding to the fact that the Vienna-based International Atomic Energy Agency [IAEA] has regularly inspected Iran's facilities and never found any indication of the diversion of nuclear materials to a military program.
There are currently two causes for concern in this regard. The first is a perception of Iran's wide-ranging procurement activities in Europe and elsewhere stretching back over several years, which suggest military intentions. This program includes the search for nuclear materials and equipment, technical know-how and trained experts. The second is the January agreement between Russia and Iran for the former to complete the construction of an unfinished power plant in Bushehr. A collateral secret protocol signed by the heads of the two countries' atomic energy organizations committed them to negotiate further scientific co-operation, including the building of a gas centrifuge plant in Iran for enriching uranium.
At the USA-Russia summit in Moscow on 10 May 1995, President Yeltsin, on American urging, agreed not to supply the centrifuge plant because of its potential for creating weapons-grade fuel. Aside from this concession, the rest of the agreement remains intact and raises further concern that it will boost Iran's potential for ultimately acquiring nuclear weapons. The United States and Israel are the driving force behind the campaign to prevent Iran from acquiring the equipment and know-how to go nuclear. Both governments agreed at a joint press conference in January that at its present pace it could take Iran 7-15 years to develop nuclear weapons. That time could be shortened if Iran succeeded in obtaining fissile materials from abroad. But current agreements in place with Russia and China, it is feared, "... could bring Iran significantly closer to a nuclear weapons capability and provide a cover for secret, illegal procurement activities in supplier countries."
Despite the fact that there are serious technical and financial problems in the implementation of these agreements, and that any facilities they might provide would be subject to IAEA inspection, there is still broad concern in supplier countries sufficient to lead many of these states to join an informal agreement not to provide sensitive technology and equipment to Iran. The USA claimed in June that 23 countries had signified their adherence to this agreement. Iranian authorities have frequently voiced their support for the concept of the Middle East as a nuclear weapons-free zone, but have insisted on their right to pursue peaceful nuclear energy programs as permitted by the NPT. In the meantime Israeli spokespersons regularly assert that they will do their best to prevent Iran from reaching a nuclear option. On May 11, then Foreign Minister Shimon Peres told Israeli radio, "Iran is trying to acquire a nuclear option, but Israel has no intention of permitting it to attain this objective."
In the final analysis there may be no need for Israel to take any steps in this regard. The United States has formally added Iran to its nuclear war plan, the Single Integrated Operational Plan [SIOP]. According to a report by William M. Arkin in the July-August issue of The Bulletin of the Atomic Scientists, "far more effort has gone into fighting Iran than into forestalling conflict". He points out that although Iran does not have nuclear weapons at present, and may not be able to produce any in the near future, the United States Strategic Command (STRATCOM) has made that country its first "counter proliferation" target, adding sites there to what Arkin calls its "generic template for small-scale [nuclear] attack." Iran is the first priority ["in the bull's eye"] in a new emphasis on targeting the Third World. With this kind of advance preparation it appears unlikely the American military would want to hand off the initiative to, or allow itself to be pre-empted by, Israel.
A collateral concern is with Iranian interest in the acquisition of ballistic missiles, stemming from its eight-year war with Iraq [1980-88]. Iran turned to China and North Korea for aid in the transfer of missiles, or the technology to produce them. Recent Western concerns have focused on Iran's attempted acquisition of North Korea's 1,300km-range Nodong-1 missile, which would bring most of Israel within range. Despite a firm order of 150 of these missiles by Iran, and offers to collaborate in the local production and test-firing of them there, Japanese objections to the project appear to have stalled it, at least temporarily. In the meantime reports of Chinese delivery of ballistic missile components, propellant ingredients and guidance systems to Iran have further aggravated USA-China relations.
Since its inception, the Islamic Republic has been opposed to the policy of peace negotiations between Israel and its Arab and Palestinian neighbours. This position is based on the ideological objection of Ayatollah Khomeini to the concept of a Jewish state in predominantly Muslim lands, including the Islamic holy sites in Jerusalem. It is no small irony that the example of comparatively smaller numbers of Jews successfully establishing a state in the Middle East based on the ideological premise of membership in a particular faith could have served as a source of inspiration and rationale for the creation of an Islamic Republic.
Opposition to the peace process on ideological grounds is one thing, and direct action to obstruct or sabotage the negotiations another. Official spokesmen regularly repeat the dictum that the Islamic Republic will not take any steps to derail the process, although they believe it is unfair and stacked against the Palestinians. A variant of this position is the claim that if Israel and Syria are able to negotiate an end to their differences, the Islamic Republic will be content. In his 2 July interview with CNN, President Rafsanjani put the IRI view succinctly: "We have said that our view of the peace is that the people of Palestine have been oppressed, and this is not a question of peace. This is a fire on the ashes. [But] we have not taken any practical measures in this regard."
Moral and some financial support for Hamas, Palestine Islamic Jihad and Hizbollah, which began long before the Oslo accords were conceived, are apparently not to be considered practical steps. The financial aid is allegedly given under the heading of humanitarian assistance and not for military purposes, and once given the Iranian authorities have no way of controlling how the funds are actually used. The amounts involved are speculative because of the difficulty of monitoring the transfer of funds.
The Islamic Republic is unlikely to take any further concrete measures to oppose the peace process between Israel and the PLO, but it will almost certainly continue to lend moral and some financial assistance to Islamic groups opposed to this process. However, recent reports have suggested that the IRI has in fact reduced the amount of financial support it provides Hizbollah. Iranian spokespersons regularly insist that support for Hizbollah in South Lebanon is justified because it is resisting Israeli occupation of Arab/Muslim land. When the Israeli occupation ends, so will Iran's assistance to Hizbollah.
The Iranian government will also continue to express its disapproval of increasing ties between Israel and the Muslim states, particularly in Central Asia. The Islamic Republic News Agency [IRNA] recently quoted Iran's Foreign Minister, Ali Akbar Velayati, as having told the Azerbayjani President, Haydar Aliev, that "the Zionist régime (Israel) is a sworn enemy of the Moslem Ummah (nation)..." and therefore "...any kind of rapprochement between a Moslem state and Tel Aviv would also be harmful to regional peace and security."
The issue of IRI positions toward the peace process has been fraught for some time with the added burden of polarizing statements and attitudes from both Israeli and IRI sources. If some IRI officials believe Israel to be a "sworn enemy" of the Muslim Ummah, the feeling is reciprocated in official circles in Israel, at least as far as the IRI is concerned. Recent reports in the Israeli newspapers Maariv and Yediot Aharonot, citing military sources, allege that the Iranian secret services had recruited an Israeli citizen in Turkey to undertake the assassination of the late - Prime Minister Yitzhak Rabin, and to use other Israelis to conduct espionage at the Israeli nuclear site of Dimona. According to Maariv, Herzl Rad has been accused of spying for and "lending assistance to the enemy". The indictment against him includes the charge that he gathered information from Israeli military sources "in order to assist Iran in its war against Israel and with the objectives of undermining the security of the state."
In conditions of "cold war" between the two states it can be assumed that the IRI's ideological opposition to the peace process will continue unabated, even if it is not a core national security issue for Iran. No form or degree of international pressure is likely to bring any significant change in this position because the régime has invested too much of its claim to religious legitimacy and defence of Muslim interests in this one cause. It cannot retreat further now without dangerous erosion of its domestic credibility already under siege.
The charge of terrorism against the Islamic Republic encompasses a variety of activities: support for resistance movements in regional states seeking to overthrow their régimes (Bahrain, Egypt, Algeria); moral and perhaps logistical support for groups like Hamas and Palestine Islamic Jihad seeking to undermine the Middle East peace process or to revenge Israeli attacks on Hizbollah targets in South Lebanon; support for surrogate hostage-taking; collaboration with Sudan in the training of Islamic extremists who conduct operations on an international front; and direct responsibility for the elimination of former régime politicians and dissidents on foreign soil.
The United States has rated Iran as the principal state sponsor of international terrorism. On May 11, American intelligence officials claimed Iran was providing $100 million annually to groups like Hizbollah and Hamas. President Rafsanjani has denied categorically that Iran gives any financial aid to Hamas, claiming it gets adequate funding from Arab sources. In addition to sponsorship, Iran is also accused of engaging in terrorist activities itself, primarily under the heading of eliminating its opponents abroad. In many of the cases under this heading there is insufficient evidence to inculpate the Iranian government directly, but the suspicion is strong. On 6 December 1994 a French court convicted Ali Vakili Rad of having murdered Shapour Bakhtiar, the Shah's last Prime Minister, in Paris in 1991. He was sentenced to life in prison. A former bureau chief of the Iranian broadcasting network, Mas'