The obvious place to start to assess the options to prevent Iran from acquiring a nuclear weapons capability is with the policy in place. The United States settled on a carrot-and-stick strategy toward Iran after toying with others. None offered the same payoff of convincing Tehran to forgo its nuclear program at a reasonable cost to the United States with minimal risks. It is the “Goldilocks” solution: it fits just right for most Americans. It fits so well that it is hard to imagine that there was a time when its few advocates (including this author) were excoriated by both the left and the right. Many assume that it has been our policy all along.
The problem with this policy option, therefore, is not that it does not fit, but that it may not work. This idea may seem bizarre given how well the policy seems to be working. After all, as the Obama administration rightly argues, the United States has built an unprecedented international coalition of states all cooperating—to a greater or lesser extent—with this approach. That has led to unprecedented international and multilateral sanctions on Iran, which in turn has created unprecedented economic problems for the Islamic Republic. However, just because the policy has successfully attained these intermediate goals does not mean that it will succeed in achieving its ultimate objective.
As isolated and besieged as Iran may be, there is real reason to doubt that its government will make meaningful compromises on its nuclear program despite the painful impact of the sanctions. So far, Tehran has resisted, and while even some Iranian hardliners are suggesting at least a tactical retreat, the Supreme Leader has insisted that Iran will never give in. He believes the United States is only interested in the overthrow of his regime.1 In his own words after talks with the IAEA collapsed in February 2012, “With God’s help, and without paying attention to propaganda, Iran’s nuclear course should continue firmly and seriously. Pressures, sanctions and assassinations will bear no fruit. No obstacles can stop Iran’s nuclear work.”2
Despite all of the tactical successes that the carrot-and-stick strategy has racked up so far, the realization of its strategic goal remains out of reach. Many people are beginning to ask what else the United States could do, and whether it is time to shift to more extreme measures, such as the use of force.
But before we conclude that the patient is dead, it is worth asking whether he can be resuscitated and reinvigorated. The carrot-and-stick strategy is perfectly tailored to America’s needs when it comes to Iran. We should be loath to abandon it. That has been the conclusion of the Obama administration, and their initial response at the start of their second term was to ask if they could pursue the same policy but do it better, by doing it bigger: a renewed offer of engagement, a more enticing deal on Iran’s nuclear program, and the threat of even harsher punishments if Iran remains recalcitrant. Once again, this policy is not stupid. Politically, it makes good sense, and from a strategic perspective, it would be ideal if Washington could pull it off. The only question is whether we can.3
The carrot-and-stick approach, or what the Obama administration has called its “Dual Track” policy to Iran, relies on the debate within Iran over the relative importance of its nuclear program compared to the country’s economic and political well-being.4 On the one side of this debate are Iran’s moderates, including figures such as former presidents ‘Ali Akbar Rafsanjani and Khatami, and now President Rowhani; and on the other, radical hardliners such as Guardian Council head Mohammad Jannati and the leadership of the Revolutionary Guard. The moderates have argued that while it would be great for Iran to have a nuclear deterrent, the country’s highest priority is its decrepit economy. They argue that the only way for the regime to maintain its control over the country is to rebuild its legitimacy, which in turn will require demonstrating to the Iranian people that they can deliver prosperity and good governance. Not surprisingly, the moderates have indicated a willingness to compromise on the nuclear program so as to rebuild Iran’s ties to the global economy. For their part, the more ideologically minded hardliners have downplayed the importance of the economy and instead emphasized Iran’s role as regional hegemon, spreading the Islamic Revolution, and their deep-seated fear that the United States is seeking to overturn the regime—all of which, in their minds, argue for the continuation of the nuclear program and even the acquisition of a nuclear deterrent.5
Poised at the fulcrum of this debate is the Supreme Leader, Ali Khamene’i. Khamene’i is unquestionably the deciding vote. The key assumption of this policy, and it is nothing but an unproven although not unreasonable assumption, is that even though Khamene’i has shown sympathy for the hardline position, he is capable of being swayed to side with the moderates. Thus, the idea is to design a comprehensive incentive structure that will convince Khamene’i and his closest advisors that Iran would be better off agreeing to compromise on the nuclear program. It is a strategy intended to help bolster the arguments of Tehran’s moderates against those of its hardliners by reinforcing the formers’ argument that Iran will enjoy huge benefits for agreeing to compromise, and will suffer excessive harm by refusing.
The practical aspects of the strategy are meant to offer Iran a series of attractive rewards if it agrees to compromise and impose an ever more stringent string of punishments on Iran if it resists—hence a “carrot-and-stick” strategy. The “sticks” portion of the policy are well understood: they are the sanctions that have been imposed unilaterally by the United States, multilaterally by the West, and internationally by the UN Security Council since 2003. These sanctions have prohibited arms sales to Iran, severed its ties to the international financial system, choked off aid and foreign investment, and curtailed its oil exports and thus its government revenues. The “carrots” piece of the strategy is both less understood and less practiced. In theory, the carrots could have included not just the lifting of the sanctions, but economic assistance, an end to Iran’s international isolation, and mechanisms to address Iran’s legitimate security concerns. They could also include a comprehensive rapprochement with the United States.
The carrot-and-stick approach became the guiding principle of America’s Iran policy during the George W. Bush administration, albeit grudgingly. At first, the Bush administration did not have a defined Iran policy. In current American politics, it is often the case that one side or the other will dismiss its rivals’ approach to an issue by claiming that they “don’t have a policy.” That is rarely the case, and what the partisans typically mean is that they don’t like their rivals’ policy on a given issue. However, in the early years of the Bush 43 administration, for Iran this lack of a policy was literally true. The administration was divided between its neoconservative wing, which wanted to overthrow the Iranian regime—either militarily as they had done with the Taliban and Saddam Husayn, or by an aggressive covert action campaign—and its realist wing, which had no interest in taking on another challenge beyond Afghanistan and Iraq. Moreover, none of these courses of action seemed simple, easy, or even plausible given the complexities of Iranian politics. Consequently, they relegated Iran to the “too hard box.”
Not surprisingly, the Bush administration’s early moves toward Iran were often contradictory. They accepted covert Iranian help against the Taliban and al-Qa’ida after the 9/11 attacks, but then President Bush named Iran as part of the infamous “Axis of Evil” in his 2002 State of the Union address. Many of his neoconservative underlings even mused indiscreetly about bringing regime change to Tehran after Kabul and Baghdad.
Only after the surprising progress of Iran’s nuclear program was revealed in 2002–2004 did Washington adopt a deliberate approach to Tehran. When it did, it chose a version of the carrot-and-stick, albeit one much heavier on the stick than the carrot, in keeping with the administration’s conservative proclivities. Nevertheless, the U.S. officials charged with implementing the administration’s policy of diplomatic pressure on Iran played a weak hand well. Despite the constraints placed on them—particularly their inability to offer significant positive incentives to Iran or to other key international actors to secure their cooperation—they devised novel financial sanctions that caused real pain in Tehran and convinced reluctant foreign governments to apply ever greater pressure, including six UN Security Council resolutions enacted under Chapter VII of the UN Charter.
OBAMA TAKES OVER. When the Obama administration took office in January 2009, they too adopted a carrot-and-stick approach, but they did so readily, even eagerly. In unsurprising contrast with their predecessors, the new administration initially favored the carrots over the sticks.
It seems that engagement was President Obama’s preferred approach toward Iran. He raised the idea during the election campaign, and his Democratic and Republican rivals alike lambasted him for it.6 When Obama took office, he embraced engagement as the principal focus of his Iran policy, although he also made clear that his policy was one of carrot-and-stick and that he would turn to sanctions and other forms of punishment if Tehran proved uninterested in his offers of engagement. He spoke of establishing direct discussions with the Iranian government, stressed that he wanted a relationship of mutual respect, and offered to renounce any efforts to overturn the Iranian regime.7 He wrote two private letters to Khamene’i offering a sincere effort at reconciliation and indicating he had no goal to overthrow the Iranian government.8 He offered to open an American interests section (a small diplomatic mission, much smaller than a full embassy and without an ambassador) in Tehran as a tangible sign of the administration’s determination to repair relations with Iran. He offered conciliatory gestures to Tehran, including calling the regime by its preferred name—something no American president had done before—and broadcast them on all channels, in public and in private, and through a wide variety of interlocutors.9 As late as the fall and winter of 2012, Washington was still sending private messages to Iran that it wanted direct talks to try to resolve the nuclear impasse and begin a process of more general reconciliation.10 After Obama’s reelection in November 2012, Washington again reached out to Tehran and offered to resume the nuclear talks.11
There are those who argue that the Obama administration’s effort at engagement was only a brief, halfhearted flirtation. My friend Trita Parsi has disparaged Obama’s approach to engagement with Iran as “a single roll of the dice.”12 While I respect Trita’s erudition, I disagree with his characterization of the administration’s thinking and its conduct.13 My own experience of their approach was that they were sincere in their desire to secure a rapprochement with Iran and sustained this effort for at least a year before refocusing on sanctions. I saw this determination time and again in my own conversations and arguments with senior Obama administration officials, certainly throughout 2009, but well after then, too.
In fact, during the second half of 2009, after Iran’s disputed presidential election in June, the birth of the Green Movement and its brutal suppression by the regime in the summer of that year and on into the fall, the Obama administration was noticeably (even reprehensibly) quiet about Tehran’s gross violations of human rights. As many commentators observed, the administration barely condemned the events there, and was criticized by conservative Americans, liberal Europeans, human rights groups, and Iranian opposition figures for its silence. This reticence was not accidental but deliberate. As senior administration officials explained, they believed that they had to convince the Iranian regime that the United States was not trying to overthrow them if they were going to get Iran to accept the offer of engagement and agree to a deal on the nuclear program. They said that they felt bad for Iranian oppositionists being killed, tortured, and imprisoned by the regime, but they were not going to make a bunch of “empty statements” condemning the human rights abuses and so jeopardize engagement and a deal on the nuclear issue.14 As Karim Sadjadpour and others have pointed out, Iranians recognized this American choice, too; many in the Iranian opposition were “concerned that the U.S. has focused far too much on the nuclear issue and far too little about their plight.”15 The administration was so intent on securing a nuclear deal that they were willing to condone the regime’s brutality to get it.
In the spring of 2010 I traveled to Beijing to meet with a range of Chinese officials to discuss Iran. What I found most striking about these conversations was that, unprompted, many of the officials I met with volunteered that they felt that the Obama administration had “done everything that Iran needed if it wanted a rapprochement” with the United States.16 Several of them pointed out that, given China’s own history of having engaged in the difficult process of rapprochement with the United States in the 1960s and ’70s, they knew what a genuine change looked like and what each side needed to make it work. They believed that the Obama administration was sincere and had done what was necessary if Iran were interested. They indicated then that if Iran were not willing to accept the American offer, Beijing would take this recalcitrance as a sign that Iran was not sincere and so China would join the West in imposing heavy sanctions on Iran through the UN Security Council. Less than two months later, Beijing made good on that threat, stunning the Iranians by voting in favor of UNSC Resolution 1929, which banned all weapons sales to Tehran and enabled the financial and oil sanctions on Iran that have proven so crippling to the Iranian economy. It had been assumed that Beijing would continue to oppose sanctions on Iran on principle, because China has extensive trade with Iran and because the Chinese government feared giving the United States a precedent to go to war with Iran as it had done with Iraq. China’s decision to support Resolution 1929 demonstrated which party the Chinese felt was trying to resolve the impasse, and which was not.17
FROM ENGAGEMENT TO SANCTIONS. In late 2009, the Obama administration all but gave up on its initial bid at reconciliation with Tehran. It remains official U.S. policy that Washington will begin direct talks with Tehran aimed at resolving the nuclear impasse and, in the longer run, restoring good relations between Iran and America. Obama administration officials continue to indicate that this preference is real. But the events of the fall of 2009 convinced American officials that neither a resolution nor a rapprochement was likely, at least not in the short term, and not until Tehran became convinced that its stubbornness would prove costly.
In October of that year, representatives of the P-5+1 countries (the five permanent members of the UN Security council—the United States, Britain, France, Russia, and China—along with Germany) met with Iranian officials first in Geneva and then later in Vienna. The P-5+1 proposed a confidence-building agreement in which Iran would agree to ship out 80 percent of its stockpile of LEU. In return Iran would receive processed uranium in the form needed to produce medical isotopes by the Tehran Research Reactor (TRR). At that time, Iran was claiming that it needed the LEU to fabricate new plates to refuel the TRR, while the rest of the world feared that Iran would take its stockpile of LEU (which was approaching the amount needed for a single nuclear weapon) and begin enriching it to bomb-grade purity for use in a weapon. Thus, the deal would allay international concerns and meet Iran’s ostensible desire to refuel the TRR. In Vienna, the Iranian representative, Saeed Jalili, agreed. But when he reported back to Tehran, his superiors quashed the deal. The TRR proposal appeared to the international community to be a “no-brainer.” If Iran was just interested in civilian uses, why not ship out the LEU in return for fuel for the TRR, which would be difficult to enrich to bomb grade? Tehran’s refusal convinced Washington and its international partners that Iran was not looking for civilian uses.18
The Iranians claimed, both at the time and since, that they turned down the TRR deal because they did not trust the international community to make good on its pledge to provide Iran with the uranium assemblies for the TRR. In the past, both Germany and France have reneged on nuclear agreements with Iran for diplomatic and security reasons, so Iran does have reason to fear depending on the West for its nuclear needs. Others have opined that Iran’s refusal said less about the intentions of its nuclear program and more about the Supreme Leader’s paranoid obsession with the United States, to the extent that any deal that the United States favors must, ipso facto, be bad for Iran—even if he may not be able to see how it would be.19 Along these lines, in the summer of 2010, after the passage of Resolution 1929, Khamene’i dismissed a deal with the United States by declaring, “The change of behavior they want—and which they don’t always emphasize—is in fact a negation of our identity. . . . Ours is a fundamental antagonism.”20 Indeed, Iran later accepted a very similar proposal worked out by Brazilian president Luiz Inácio Lula da Silva and Turkish prime minister Recep Tayyip Erdogan, but the West rejected that deal, both because by then Iran’s stockpile of LEU had grown to the point that the amount to be shipped out represented barely half of the Iranian stock, and because the P-5+1 concluded that this was merely a desperate bid by Iran to avoid the impending blow of UNSC Resolution 1929, the most powerful sanctions resolution measure imposed on Iran, and a direct response to Iran’s intransigence both in refusing Obama’s offers of reconciliation and the TRR deal.21
In response, the administration shifted its energy, attention, and diplomatic efforts to the sanctions track. Here they excelled. In large part because so many countries around the world were convinced by the sincerity of their peaceful overtures to Tehran, the administration found widespread support for adopting harsh new sanctions on Iran. Moreover, the administration proved deft in its approaches to countries such as China, Russia, India, and Japan, all of which had voiced their opposition to Iran’s nuclear program in the past but had done little about it—at least in part because they did not trust the intentions of the Bush 43 administration. Likewise, Obama’s diplomats convinced the Saudis and other Gulf Arabs to use their economic clout in support of the case for sanctions against Iran in ways that no other administration had ever been able to do.22 As a result, by the summer of 2012, Washington could boast of having put together an unprecedented coalition of states determined to put pressure on Iran, which in turn produced unprecedented levels of international sanctions on the Islamic Republic.
It was a remarkable diplomatic performance. Of course, Washington did not do it all on its own. It had help from a number of other countries, including France, Britain, Germany, Canada, the UAE, Saudi Arabia, Denmark, and Israel, to name the most active. Three of these deserve fuller mention. For decades, the United States and the Kingdom of Saudi Arabia have shared a close strategic relationship, agreeing on nearly everything—at least everything big—under the Middle Eastern sky. However, it has been a constant frustration of American diplomats that the Saudis rarely do anything to advance our common strategic purposes. Typically, Washington and Riyadh agree on what needs to be done, and then the Saudis leave it to the United States to do it. It was a constant source of frustration throughout the 1990s, whether the matter was Iran or Iraq or forging an Arab-Israeli peace. Not so this time around. This time the Saudis came through big. They went to the Chinese and guaranteed Beijing that they (and the Kuwaitis and Emiratis) would see to all of China’s oil needs if the Chinese joined the sanctions on Iran—a major source of Chinese oil.23 It proved to be a key piece of the international diplomatic effort against Iran.
The second diplomatic key was Israel. Since 2002 the Israelis have been panicked about the Iranian nuclear program. Every few months Jerusalem, particularly in the figure of Prime Minister Benjamin Netanyahu, has gone on a media rampage, decrying the Iranian nuclear program as the four horsemen of the apocalypse rolled into one. The Israelis, and Netanyahu in particular, have been reproached for “crying wolf” over the Iranian nuclear program by many, and accused of worse by some. Many Americans, Europeans, and others find Israel’s endless warnings annoying, frustrating, even maddening. Even some of the most perspicacious now blame Israel itself for the problems, accusing Jerusalem of having engineered and “distorted” American policy on Iran. But had it not been for the Israelis’ beating the Iran drum, the world—and probably the United States—would have forgotten about the Iranian nuclear program long ago. Most countries did not care, and for much of the past ten years, the United States wanted to focus its attention on other matters, whether that was Iraq under Bush 43 or domestic priorities under Obama. Moreover, much of the willingness of European and East Asian nations to take unprecedented steps and impose unprecedented sanctions on Iran was driven by their fear that if the Israelis did not see other countries doing everything they could to stop Iran’s program peacefully, then Jerusalem would try to do it militarily and the result would be a catastrophic war across the Middle East. Had it not been for the Israelis’ repeatedly sounding the alarm, enraging though that may have been, the Iranians probably would have crossed the nuclear threshold long ago.
As important as the Israelis were in rousing many European states to action, there was one that moved on its own and played a critical role by doing so: France. Since the 1960s, France has insisted on pursuing an independent foreign policy, even withdrawing its military forces from the common NATO framework at the height of the Cold War. In so doing, Paris became the darling of the Third World and the bête noire of Foggy Bottom. I am not going to defend French foreign policy for those long decades (the French drove me to madness with their coddling of Saddam Husayn when I worked in the U.S. government). However, in spite of that—or perhaps because of it—no one has played a more helpful role on Iran than France. Early on, the French government under Jacques Chirac, but continuing through the administrations of Nicolas Sarkozy and François Hollande, applied a principled nonproliferation stance to Iran’s nuclear program. Paris decided that Iran could not be allowed to have nuclear weapons or even the latent capability to make them and there could be no exceptions to this position. Since then, France has been the staunchest member of the anti-Iranian coalition, taking the hardest line in negotiations. It has been France, not Britain, that has demanded that Washington not “go wobbly” on the Iranians. Moreover, the French have proven themselves creative, flexible, and adroit in their diplomacy. By consistently taking much harder-line positions than those of the United States, they have been invaluable in allowing Washington to look moderate on Iran. In many ways, France has been spending all of the diplomatic capital it saved up from five-plus decades of thumbing its nose at the United States, and the United States and many other countries have been the beneficiaries. For numerous governments, the fact that France has been taking a harder line on Iran than the Americans has brought them around to the view that it must be right to follow Washington’s more reasonable lead. It is hard to know just how many countries lined up with the West because of French exertions and Paris’s principled stance, but it was no small number.
THE SANCTIONS. As a result of all of this diplomatic energy to make Tehran pay a price for its noncompliance with the binding resolutions of the UN Security Council, a range of powerful sanctions now hobbles Iran. While a complete list would require more space to enumerate than it would be worth, even a summary of these restrictions is daunting:
• The UN Security Council has banned the supply of all materials and technology related to ballistic missiles, nuclear energy, or nuclear weapons to Iran. It has banned the export of all major weapons systems (tanks, warplanes, helicopters, artillery pieces) to Iran. It has frozen the assets of key individuals associated with Iran’s nuclear program and prohibited their travel abroad. It has banned all financial ties or the provision of financial services to a list of Iranian entities involved in Iran’s nuclear program, including Iran’s Central Bank and other major financial institutions. As a specified element of the ban on financial transactions, it has prohibited insurance companies from providing insurance or reinsurance to Iranian ships—another major hindrance to Iranian oil exports. It has frozen the assets and prohibited all interaction with a number of designated Iranian entities associated with its nuclear program.
• For the United States, a number of laws and executive orders dating back to the Bush 43, Clinton, and earlier administrations bans virtually all U.S. economic interactions with Iran. Americans may only export food, medicine, and a short list of other humanitarian goods to Iran. In effect, all imports from Iran, all financial transactions, all services, and all investments in Iran are prohibited.24
• Another series of U.S. laws and executive orders imposes secondary sanctions on third parties conducting business with Iran related to the Iranian hydrocarbons industry or its financial sector, buying Iranian petroleum products, providing sensitive technologies, transferring currency to Iran in payment for Iranian goods, or conducting financial transactions with Iran related to entities involved with Iran’s nuclear program (and, in some cases, terrorism and human rights violations). Several of these regulations impose penalties on foreign entities that have commercial contact with designated Iranian individuals and entities connected to the Iranian nuclear program, support for terrorism, or human rights violations.25
• The European Union (EU) has imposed an embargo on Iranian oil purchases, frozen the assets of Iran’s Central Bank, and restricted its trade and the provision of financial services, insurance and reinsurance, and technology to Iran.26
• Canada, Australia, Japan, South Korea, India, Switzerland, and other countries have adopted a range of lesser sanctions in addition to those imposed by the UN.
• The Society for Worldwide Interbank Financial Telecommunication (SWIFT), the international financial transaction web, has disconnected all of Iran’s major banks—including its Central Bank—from its network, further attenuating Iran’s financial ties to the global economy.27
THE MISSING CARROT. As skillfully as the Obama administration has engineered the imposition of crippling sanctions on Iran, its handling of the Dual Track approach has not been flawless. While I disagree with many of the administration’s critics on the left about Washington’s sincerity or determination to pursue engagement with Tehran, I agree that what has been offered to the Iranians has been sorely lacking.
The administration’s thinking appears to have been that it would offer Iran a genuine process of reconciliation, and as part of that process Iran would agree to give up or curb significantly its nuclear program. Meanwhile, the United States would dismantle its sanctions apparatus and the result would be normal economic and diplomatic relations between America and Iran that would, in and of themselves, be highly beneficial to Iran. Later, after the administration shifted to the sanctions track, the principal carrot became the lifting of sanctions—or even just the promise that no new sanctions would be imposed. In other words, the “carrot” was that we would stop beating them with the stick.
Since we don’t know why Iran has not responded either to Obama’s effort at engagement or to the impact of the sanctions, we cannot know for certain whether the absence of meaningful carrots beyond the offer of engagement was part of the problem. But there is reason to believe that it might have been. The Iranian economist Bijan Khajehpour warns that most Iranians believe that the sanctions are entirely punitive because they do not see any carrots—any incentives to change their behavior. He warns that this plays into the regime’s narrative that the West just wants to hold Iran back.28 For his part, because Khamene’i fears and loathes the United States—and has repeatedly said that he sees engagement with the United States not as a benefit to Iran, but as a subversive ploy intended to undermine the Islamic Revolution—offering him specific incentives tied to specific Iranian actions on the nuclear track might have worked better. For instance, Khamene’i might have been more comfortable agreeing to a specific limit on the Iranian program, such as halting enrichment beyond 5 percent, in return for a similarly specific offer from the other side, such as an international agreement to subsidize the construction of nuclear power plants in Iran.
We cannot know if a more concrete, tit-for-tat approach to compromise would have succeeded where the nebulous offer of “engagement” failed, but it could not have hurt and there is evidence to suggest that it might have worked. After Iran rejected the 2009 TRR deal in Vienna, Tehran floated a number of compromise positions that posed a more sequenced process in which Iran would receive incremental returns for making equivalent concessions, rather than the original proposal, which would have required Iran to ship all of the LEU up front. Thus, as well as the Obama administration has managed the carrot-and-stick, or Dual Track, policy so far, there is still room for improvement. A revised policy, especially one that featured more discrete and tangible benefits for Iran in response to specific concessions, might do better the next time.
Since engagement did not succeed and few other carrots were on offer, the ultimate verdict on the first four years of the Obama administration’s Iran policy must rest on the impact of the sanctions on Iran. The evidence that sanctions are having a pronounced impact is extensive.29 As early as December 2010, Iran decided to cut the subsidies on fuel prices they provided the Iranian people, in part to deal with the economic pressure from the first rounds of sanctions. The decision caused prices to quadruple overnight. Iranians protested in the streets, forcing the regime to deploy its Law Enforcement Forces to keep order.30 The EU prohibition on purchasing Iranian oil—coupled with American and European efforts to convince China, India, Japan, South Korea, and other countries to reduce their own imports of Iranian oil—have had an even more profound effect. Together, these efforts more than halved Iranian oil exports, falling from 2.3 million barrels per day on average in 2011, to just 1.1 million barrels per day on average in 2012.31 By early 2013, these cuts were costing Tehran $4–8 billion per month in lost oil revenues.32 By the fall of 2012, Iran’s currency, the rial, had plunged to 35,000 to the dollar—a 300 percent drop from December 2011.33 In that same period, unemployment ballooned by 36 percent and prices rose 87–112 percent.34 By September 2012, inflation had reached 50 percent, and Iranians feared the situation would worsen. “Everyone from the butcher to the industrialist will say that beneath the surface they are months from economic collapse,” one Iranian told a Time magazine journalist at that time. Another confessed that while she believed that Iran should have nuclear weapons, it was not worth the hardships caused by the sanctions.35 Crime, corruption, and smuggling are about the only things thriving in Iran.36
Iran’s economic difficulties produced a renewed debate among its leadership. Moderates and pragmatists, banished from the center of power but still with access to media outlets, renewed their calls to negotiate with the West over the nuclear program to get the sanctions lifted.37 Likewise, during the late summer of 2012, Iran converted some of its 19.75 percent enriched uranium to assemblies for the Tehran Research Reactor (making it difficult to use the same uranium for a weapon), which many in the West saw as an Iranian gesture of goodwill.38
Of far greater interest, however, were signs that even some of the regime’s core supporters, the hardline elements, were beginning to entertain the notion that Tehran should make some compromises to ease the sanctions burden. In December 2012, Khamene’i’s principal mouthpiece, the newspaper Kayhan, published a remarkable article titled “Worn-out Revolutionaries and the Conspiracy of the Poisoned Chalice.” The title alludes to Khomeini’s speech at the end of the Iran-Iraq War in which he said that he would accept a cease-fire with Iraq even though it was more bitter to him than drinking a cup of poison. In the hardline version of history, it was Rafsanjani and other moderates who pushed Khomeini to do so. In this case, the Kayhan piece admitted that there were numerous voices agitating for compromise with the West, although it mocked them as the “regretful, worn-out” revolutionaries, who have “always adopted a pragmatic, tolerant strategy and mild-mannered approach which is in pursuit of amicable relations with the enemies of the revolution.”39 Days later, Iran’s foreign minister, Ali Akbar Salehi, also stated that both Iran and the international community “have reached a conclusion that they must exit the current stalemate.”40 These comments struck many outside observers as signs that key elements within the regime were now advocating a settlement of the nuclear issue to get the sanctions lifted.
However, as always in Iran, nothing is that simple. First, it is not clear that the sanctions will cause the Iranian economy to “collapse,” whatever that may mean, or even that the stress that they can apply will be enough to force the regime to change. Mohammad Ali Shabani, an Iranian political analyst, summed up the situation as, “If you’re talking about collapse, that is not happening.”41 Although inflation is bad, Tehran has so far avoided any balance-of-payments crisis. The loss of Western trading partners has opened the door to Chinese firms, such that Sino-Iranian trade has gone from just $3 billion in 2002 to more than $44 billion in 2011.42 In February 2013, the New York Times reported from Tehran, “The sanctions, while the source of constant complaint and morbid jokes, have not set off price riots or serious opposition to the Iranian government. In fact, the past year has not been all that bad.” The Times quoted Saeed Ranchian, a Tehran shopkeeper, who observed that given Iran’s currency predicament, “you would expect people to buy less. But in Iran, when prices go up, people start buying more, fearing even higher prices . . . [the country’s economy] has rules that no one understands.”43
Even at its current, greatly reduced level of sales, Iran was estimated to have made roughly $45 billion in oil revenues in 2012, still twice what it earned in 2000, and just shy of the $49 billion Iran needed to cover its latest government budget.44 Historically, Iran has gone long periods without exporting significant oil when it felt it necessary for national purposes. In 1979–81, Iranian oil exports fell by 80 percent as a result of the hostage crisis, the Iranian Revolution, and the Iran-Iraq War, but Tehran did not shift course.45 Likewise, in 1951–53, when the Iranian government under Mohammad Mosaddeq fought the British over the nationalization of the Anglo-Iranian Oil Company (today’s BP), Iran could not export any oil, yet did not change its policy until the government was overthrown.46 In 2012, when the oil sanctions began to take effect, Iran had at least $70 billion in hard currency reserves and the regime was making money by playing the currency market. In a way that only he could, Iranian president Mahmud Ahmadinejad claimed in October 2012, at the height of the panic over sanctions, that the Iranian people were better off economically than they had been when he came to office.47 While that claim may be hard to justify, it is certainly the case that many of Tehran’s most powerful have not only survived, but in fact have thrived on the sanctions. Indeed, those lobbying the regime about the sanctions are more often pressing it to reform its economic policies than its nuclear policies.48
True experts on the Iranian economy have long urged caution about the impact of the sanctions. Bijan Khajehpour notes that even with oil exports having dropped to roughly 1 million barrels per day from sanctions, the per capita income Iran gets from crude is only down to about $750 per year, still above the historical average of the Islamic Republic.49 Djavad Salehi-Isfahani likewise warns that the structure of the Iranian economy—in which the regime controls nearly all foreign exchange—diminishes the impact of the devaluation of the rial. He notes that the government protects the cost of essential items, which matter most to lower-class Iranians, the principal supporters of the regime. Middle-class Iranians, who rely more on the black market for luxury goods and have savings that are getting diminished (or wiped out), are the ones getting hurt. That is not good for the regime, but neither is it disastrous. As Salehi-Isfahani has put it, “Does all this mean that Iran’s economy is on the verge of collapse, as Israel’s Finance Minster reportedly said? The answer is no, because most of the economy is shielded from this exchange rate, though not from the ill effects of the sanctions, which will continue to bite for a while. Would it cause sufficient economic pain that would push the Iranian government to make concessions in its nuclear standoff with the West? The answer is not likely. The multiple exchange rate system, as inefficient as it is, will protect the people below the median income, to whom the Ahmadinejad government is most responsive.”50
My Brookings colleague Suzanne Maloney, one of the finest scholars of Iranian political economy, echoes these warnings in a conclusion worth quoting at some length:
With $70–100 billion in reserves, a diversified economy, and well-honed capabilities for smuggling, sanctions-busting, and insulating the regime from sanctions, Iran may well be able to ride out this pressure for the short-term and even beyond. The outcome is more likely to be the corrosion of the economy, rather than its outright collapse. Of course, what really matters is the psychological impact—both on the population and on the leadership. Panic is fueling the run on the black market, and if the sense that things are spinning out of control intensifies, all bets are off. And while the economic catastrophe and popular dissatisfaction add urgency for Tehran to find some accommodation on its nuclear ambitions, it seems unlikely that they would produce a dramatic or immediate about-face. The regime has every reason to fear economic pressure and the nascent backlash within society—but the deep mistrust of Washington’s intentions and its conviction that its adversaries at home and abroad will exploit any concession as a sign of weakness almost surely outweighs any pragmatic impulses. They know that their repressive instruments are plenty capable of managing the home front.51
Perhaps of greatest importance, there is no sign that the Supreme Leader has changed his mind about negotiations with the West. Khamene’i has consistently and publicly indicated that the sanctions will never change his mind about the nuclear program. At the darkest hour, when the rial was collapsing in the fall of 2012, Khamene’i announced that Iran would not change its course. He dismissed the currency slide as the mistakes of Iranian bureaucrats, and told the West that their economic problems were far worse than Iran’s: “The West’s economy is frozen. You are worse off and you are moving towards collapse and recession. These problems cannot bring the Islamic Republic to its knees.”52 In early 2013 he ruled out direct talks with the United States to end the impasse, saying, “Talks will not solve any problems. . . . You are holding a gun against Iran saying, ‘Talks or you’ll fire.’ The Iranian nation will not be frightened by such threats.”53 Echoing the Supreme Leader’s position, President Ahmadinejad warned the West, “You think that by resorting to oil and currency issues, you are able to press the Iranian nation and stop it from its path? You are wrong. Maybe this works like a quick tap on the brakes in driving, but the Iranian nation will find its way quickly and will continue.”54
In all of the hubbub over the December 2012 Kayhan piece, what seems to have been overlooked is that the article’s principal point was that the Supreme Leader (as well as Kayhan) was uninterested in compromise. It notes that the moderate position has been opposed by “a hardened, uncompromising, combater of Arrogance [i.e., Western/U.S. hegemony] that is demanding perpetual resistance against the West and endurance against the pressure of sanctions. This is the current backed by the Supreme Leader” (emphasis added). It argued:
Sanctions are the subterfuge of the worn out revolutionaries to prevail on society and the Supreme Leader to accept their beliefs. By exaggerating the effects of American and European Union financial and economic sanctions, they constantly emphasize this point that the pressure of the superpowers has reached intolerable levels and they can’t be resisted any longer. . . . It seems that the worn out revolutionaries at this sensitive point have the intention with their engineered targeting of the conditions of country and application of pressure from all directions to the Supreme Leader, to force him of his own volition to drink the poisoned chalice and retreat; withdrawing from revolutionary positions and [thus initiate] negotiations with America. . . . They want to inflame and make insecure the political atmosphere by offering incorrect analyses and relating all the problems to foreign sanctions and thereby provoke public emotions, so that the Leader has no other choice but to submit to their demands for the preservation of the interests of the country and the revolution.55
None of this writing reads much like the words of a leader ready to make an about-face. Seyed Hossein Mousavian, a former Iranian ambassador and member of its Supreme National Security Council, explains that Khamene’i’s “mind-set is that under threat and pressure, to show flexibility or compromise would be seen as weakness. Therefore under such conditions, he consolidates and hardens his position. This is critical in understanding the position of Iran on nuclear negotiations.”56 Khamene’i and the hardliners have always emphasized Iran’s willingness to sacrifice to achieve its paramount goals.57 Moreover, Iran’s hardliners have argued that the experience of both Pakistan and North Korea shows that the West may try to pressure Iran to desist before it has acquired nuclear weapons, but once it crosses the nuclear threshold, the West will be forced to accept reality and lift the sanctions.58
Iranian officials can also point to signs that the sanctions are already beginning to erode.59 In December 2012, South Korea—which had been the first Asian nation to cut Iranian oil purchases—resumed its import of Iranian crude, along with Taiwan. Likewise, Japan offered to cover the insurance for Iranian oil shipments, skirting the EU ban on maritime insurance for Iran.60 India too is setting up a fund to back local insurers that import Iranian oil.61 Iran also found creative ways to get around the sanctions to export its oil. During the summer of 2012, Iranian oil exports had dipped to an average of just 400,000 tons per month, but were up to nearly 650,000 tons per month during the fall.62 During the first quarter of 2013, Iranian fuel oil exports rose a further 12 percent over the last quarter of 2012.63 Meanwhile, Russia and China have been lukewarm to the idea of further pressure on Iran, and in October 2012, Russian deputy foreign minister Gennady Gatilov stated, “Any additional sanctions against Iran would be perceived by the international community as an instrument for regime change in Tehran.”64 All of this hesitation may help bolster Khamene’i in his beliefs that Iran can withstand the sanctions, and that it must do so, lest it fall to the nefarious plots that he assumes the United States is spinning to subvert the Islamic Republic.
All things considered, it seems unlikely that the status quo will produce the outcome that we desire. Still, the current policy has produced many positive developments for the United States, from the unification of the international community around sanctions to placing enormous pressure on the Iranian regime by means of those sanctions. For that reason, the first possibility we ought to consider in terms of a new Iran policy that can move beyond the status quo is whether it is feasible to take the current policy and enhance it. If it is pursued with more vigor and more resources, will it achieve our goal? Given how far the current policy has already taken us, why not see if we can tweak it in the hope that it can get us the rest of the way to our goal?
As in 2009, when the Obama administration first took office, a revamped carrot-and-stick approach should start with a new offer of reconciliation to the Iranians. The second Obama administration has already done that. This is important because the only way that this policy will succeed is if we can convince the Iranians that we are serious about finding a negotiated solution. The United States will have to persuade Tehran, and specifically Khamene’i, that we will take “yes” for an answer from them. That means that if Iran agrees to make the kinds of extensive concessions on its nuclear program that the United States seeks (and quite likely, similar compromises on terrorism and Iran’s other mischief-making in the Middle East), the United States and the wider international community will end their efforts to isolate and punish Iran.
However, it is important to understand that the process of reconciliation and engagement will almost certainly not be enough to convince Tehran to change its behavior. It simply hasn’t worked so far: not with Obama, not with Clinton, not with Bush 41, not with Reagan. Every time that the United States has made a good-faith offer of reconciliation with Iran and promised to lift the extant sanctions, it has failed to move Tehran. The Iranian leadership does not seem to believe that it needs a better relationship with the United States and its allies, and Iranian hardliners fear that such a process would be a cover for America to undermine and overthrow the Islamic regime. In Karim Sadjadpour’s words, “For Khamene’i, the carrots are the sticks.” This is why the Obama administration’s offer of engagement had no impact on Tehran, and why a new effort needs to go well beyond it.
If a renewed effort to make this policy work is to succeed where it has failed in the past, it will need to go further than what was tried in the past. That does not mean abandoning the offer of engagement—quite the contrary. The United States should continue to hold out the prospect of a normal, peaceful relationship as our preferred end state. However, Washington will have to go well beyond the vague offer of an eventual rapprochement and put a more attractive and tangible set of benefits for Iran on the table than successive American administrations have so far been willing to do. It will mean offering Iran concrete benefits tied to specific Iranian actions that could be taken in an incremental and reciprocal fashion. We do something that the Iranians want in return for their doing something that we want. The specific incentives would need to be determined through a process of negotiation with both Iran and America’s allies. In many cases, they are likely to be complex. However, most will probably fall into four broad categories: nuclear energy and technology, economic inducements, security guarantees, and political incentives.
NUCLEAR ENERGY AND TECHNOLOGY. This set of incentives is complicated. Let’s start with the easy part. On the nuclear front, previous offers during the Bush 43 administration included attractive terms to allow Iran to build light-water reactors to generate power and arrangements for Iran to participate in an international program to master enrichment technology. Light-water reactors can be more easily monitored, are harder to convert to military purposes, and spent fuel would be returned by arrangement to the providing country so that it could not be employed for bomb making. Since Iran has insisted that it wants only technology and energy from its nuclear program, Tehran would have to be offered this opportunity regardless of whether its claims are genuine.
What will be far harder for many Americans and other Westerners to accept is that, as part of any negotiated resolution with Iran, we are going to have to make concessions regarding the Iranian uranium enrichment program. It is true that there is no good reason why Iran should need this capability. Iran’s intent in acquiring it is almost certainly to create a breakout capability, if not to build a nuclear arsenal itself. But given how much the Iranians have invested in their nuclear program, how much progress they have already made, how committed to it they have become, and how much pain they have endured to hang on to it, it is simply not plausible that they will agree to do away with it altogether. Even the Israelis understand this, with former Israeli Defense Intelligence chief Amos Yadlin and Yoel Guzansky acknowledging that, “(in) any possible deal between the international community and Iran, Iran will be granted legitimacy for enriching uranium.”65 No less an Iran hawk than former defense minister and prime minister Ehud Barak has indicated that he is ready to accept ongoing Iranian enrichment and even possession of a small stockpile—but only up to 3.5 percent purity.66 If we are going to find a negotiated settlement to the current impasse, we are going to have to allow the Iranians to retain certain aspects of their current nuclear program. The key is which aspects.
At this point, we cannot say with certainty that the Iranian hardline leadership is ready to accept any limits on the Iranian nuclear program. A number of Iranian officials have suggested that Tehran would be willing to agree not to enrich any more uranium to 19.75 percent purity (often rounded up to “20 percent”). In October 2012, Foreign Ministry spokesman Ramin Mehmanparast said, “If a guarantee is provided to supply the 20 percent (enriched) fuel for the Tehran Research Reactor, our officials are ready to enter talks about 20 percent enrichment.”67 A day later, Foreign Minister Salehi confirmed this intent, announcing, “If our right to enrichment is recognized, we are prepared to offer an exchange. We would voluntarily limit the extent of our enrichment program, but in return we would need a guaranteed supply of the relevant fuels from abroad.”68
These statements suggest several things. First, they imply that the Iranians may be willing to accept some limits on their nuclear program, although just because the foreign minister said they are willing to accept limits does not mean that they are. Second, they indicate that Iran may be willing to agree to limits on the purity to which they are allowed to enrich uranium. While that is not meaningless, it is not as generous as it sounds because the number and quality of centrifuges that Iran retains is as important in establishing a breakout capability as the quality of the LEU it retains. That is why any deal with Iran should also include limits on the numbers of centrifuges Iran is allowed to retain, if not the quality of those centrifuges as well.
However, these statements also reinforce Tehran’s constant refrain that it will never agree to give up all enrichment, and must be allowed to continue to enrich uranium to lower levels of purity. That being the case, any negotiated settlement with Iran is going to leave Tehran with some breakout capability. As long as Iran is left with the capacity to enrich uranium, the right to perform some enrichment activity, and a stockpile of LEU—all of which the Iranians have stated over and over again are the bare minimum that they would accept—then Iran will have a breakout capability. It could be a breakout window as wide as many months, perhaps even a year, but Iran will have the capability to manufacture the fissile material for a nuclear weapon. Unfortunately, at this point in time, that is the best we are going to get. If we are not willing to agree to a deal with Iran that leaves them with such a relatively long-term breakout capability, then there is no point pursuing a carrot-and-stick approach, the ultimate goal of which is to conclude just such a deal.
Because any plausible deal with Iran will leave Tehran with some kind of a breakout capability, even a distant one, it must also include provisions for an intrusive inspections and monitoring regime, to detect any covert Iranian efforts to evade the terms of the deal, and provide ample warning if Iran decides to break out.69 On this score, there is also some reason for optimism. In 2003 Iran agreed to the Additional Protocol of the NPT, which provides for no-notice, surprise inspections and the ability of IAEA inspectors to go anywhere in Iran—roughly akin to what we had in Iraq in the 1990s. Although at the time we thought that the inspections in Iraq were not working, we learned after the 2003 invasion that they had worked. When coupled with harsh sanctions that Saddam was desperate to see lifted, the inspections kept finding enough of Iraq’s hidden WMD programs in 1991–95 that they convinced him to give up his programs altogether sometime thereafter. That should give us confidence that the same kind of inspection regime in Iran would be likely to detect any covert nuclear activities there as well—and probably would deter the Iranians from even trying—as long as they too were tied to harsh sanctions.
That may just be the rub. Iran has not implemented the terms of the Additional Protocol even though it has signed it. Therefore, any new deal with Iran must be tied to Tehran’s implementation of the Additional Protocol. If it fails to do so, it must face the immediate reimposition of the sanctions. However, the experiences of Iraq and other countries demonstrate that it is difficult to get the UN Security Council to agree to impose harsh sanctions in response to violations. It typically takes a long time, enormous diplomatic lifting, and blatant recalcitrance on the part of the violator. Building on the lessons from Iraq, any deal with Iran should instead leave the existing sanctions in place permanently, but have them suspended temporarily, and subject to renewable suspensions that the Security Council would have to regularly vote to enact. In this way, anytime that the inspectors determined that Iran was violating the terms of the agreement, it would require nothing more than an American (or French or British) veto to bring the sanctions back into effect.
Many Americans and Israelis insist that any nuclear agreement must require Iran to close the Fordow centrifuge enrichment plant, which the Iranians built deep inside a mountain to render it impervious to attack by Israel and possibly the United States as well.70 We can certainly ask for its closure, but we should not be hopeful. The only reason that we want Fordow closed is that without it, Iran’s nuclear program is much more vulnerable to attack by the air forces of the United States, Israel, and others. That is not the kind of rationale that is likely to appeal to most of the peace-loving nations of the world. For their part, the Iranians have invested an enormous amount in Fordow to diminish their vulnerability and are unlikely to give that up. Alaeddin Boroujerdi, the head of the Iranian parliament’s national security and foreign policy committee, made the point that “Fordow will never be shut down because . . . our national duty is to be able to defend our nuclear and vital centers against an enemy threat. . . . This suggestion is meant to help the Zionist regime.”71 What’s more, unlike with enrichment itself, the West has no legal basis to demand that Fordow be shut down now that it has been declared to the IAEA for regular inspections.
ECONOMIC INDUCEMENTS. Given the depleted state of Iran’s economy, economic inducements are likely to be the most straightforward element of a new international overture to Iran. Under the Bush administration, Tehran was offered membership in the World Trade Organization, the lifting of international sanctions, and the resumption of its pre-sanctions trade agreements with Europe and Japan. These inducements were not enough to convince Iran to take the deal. The Obama administration offered only vaguer promises of the same—along with a willingness to sell Iran spare parts for its aged fleet of Boeing airliners. The latter was a laughable incentive.
A last bid to make the carrot-and-stick approach work with Iran will have to include the promise of greater economic rewards. These should include:
• The prospect of loans and other support from international financial institutions such as the International Monetary Fund and the World Bank.
• The lifting of not only international sanctions but unilateral sanctions against Iran as well, particularly the comprehensive unilateral sanctions imposed by the United States.
• A universal settlement of all claims between Iran and the United States (which include monies owed for some Iranian arms purchases, the freezing of assets, and other matters that the Iranians believe constitute a sizable amount of money).
• The provision of positive inducements for expanded international trade and investment in Iran, including trade credits and investment guarantees for foreign firms putting capital into Iran.
• Development assistance for Iranian agriculture, infrastructure, education, energy, and environmental modernization.
In addition, offering to lift the unilateral American sanctions against Iran—which the Bush administration was never willing to offer explicitly because of its attachment to regime change—could have a major impact on Iranian thinking because the average Iranian and the regime’s chief economic officials desire it.
SECURITY GUARANTEES. Whatever other purposes it may serve, Tehran’s pursuit of a nuclear weapons capability is almost certainly meant to deter attacks against Iran. Consequently, another set of positive incentives that the international community will likely have to offer are guarantees for the security of the country and its regime—two quite different things.
Many Americans have suggested that the United States pledge not to attack Iran or try to overthrow its government, as President John F. Kennedy did for Cuba as part of the resolution of the Cuban Missile Crisis. Such a pledge may or may not be necessary, but Washington should not assume that it will be sufficient. Tehran will likely want more concrete actions by the United States (and other countries) if it is to give up the safety of a potential nuclear arsenal—even a theoretical one. It is critical that the international community, and especially the United States, provide such tangible demonstrations of good faith both because it is unlikely that the Iranian people will be swayed otherwise, and because it can assuage the residual fears of European and Asian publics that the United States is using the diplomatic process to set up a military operation against Iran.
The more difficult challenge will be to diminish the conventional military threat posed to Iran by American forces in the Middle East and the Indian Ocean without sacrificing America’s commitments in the region. The United States has vital interests in the Persian Gulf, and Washington intends to maintain significant conventional military forces in the region for the foreseeable future. Given the power of the American military, those forces will always constitute a threat to Iran.
The United States could make unilateral concessions to Tehran related to military deployments, such as agreeing to station no more than one aircraft carrier battle group in the Gulf or Arabian Sea at any time. However, Tehran is unlikely to view this arrangement as much of a concession because of how easy it would be for the United States to break that agreement if it ever chose to do so. The problem is further compounded by Washington’s understandable unwillingness not to go much beyond that (assuming it is willing to go even that far) for fear of jeopardizing its ability to respond to problems in the fragile Gulf region. A new security architecture in the Persian Gulf is probably the only realistic way to meet Iran’s legitimate security concerns in a manner that would be palatable to the United States and its allies in the region. A Gulf security process could follow the successful Cold War European model by starting with security discussions, building to confidence-building measures, and eventually reaching arms control agreements. Thus the United States ought to be willing to offer the inauguration of just such a process, using the Commission on Security and Cooperation in Europe (CSCE) as a starting point. Such a process would hold out the potential for Iran to secure constraints on the deployment and operation of American military forces in the region in return for their agreement to take on equivalent limitations on their own forces.72 Interestingly, a senior Iranian diplomat has already suggested the same in a Western newspaper.73
POLITICAL ACCEPTANCE. Any agreement encompassing—but hopefully not limited to—Iran’s nuclear program would also have to address Iran’s regional aspirations as well. A key question will be whether Iranians are ready to be accepted as a legitimate participant in the international politics of the Middle East, but not the dominant state in the region, as many Iranians seem to want. Views on this matter vary in Tehran, but it is unclear what the Iranian leadership would accept. Direct negotiations with Iran should help ascertain whether compromise is possible. Under no circumstances, however, should the United States grant Iran a position of dominance, nor should we leave any ambiguity about what we see as Iran’s appropriate role in the region. Our allies in the GCC fear that Washington hopes to resurrect the alliance with a domineering Iran that the Johnson and Nixon administrations tried to use to keep the peace of the Gulf. Helping Iran address legitimate security concerns and allowing it a political role in the region does not mean granting Tehran regional hegemony.
If Iran can be persuaded to make significant compromises on its nuclear program—and its support for terrorism and other anti–status quo activities—by positive inducements alone, that would be fantastic. But the history of the Islamic Republic should make us skeptical. At the very least, we need to be prepared for them to resist the urge, for some time if not permanently. If that is the case, it will be wise to have a well-developed set of new disincentives with which to try to convince the Iranians to change their minds.
The question is really what we still have left to try in the category of sticks. Specifically, what haven’t we tried already? And if we haven’t tried it already, is it because there were good reasons not to?
COVERT ACTION. I left the CIA almost two decades ago, and I have no idea what those guys are up to now. But I have noticed that the New York Times is overflowing with articles sourced to senior Obama administration officials claiming that the United States has an active covert action program against Iran.74 In a stunningly unusual event, the head of Britain’s external intelligence agency, MI6, Sir John Sawers, took credit for MI6’s involvement in a covert action campaign to derail Iran’s nuclear weapons work.75 The Times and other media outlets seem convinced that the U.S. government has mounted an aggressive cyberwarfare campaign against Iran that has disrupted Iran’s nuclear program by attacking the program’s computer networks.76 The most famous piece of malware that the United States reportedly developed—along with the Israelis—was the Stuxnet virus that played havoc with the operation of Iran’s nuclear centrifuges, delaying the Iranian program by as much as two years.77 The Iranians believe that the second most famous malware to attack their computer networks, the Flame virus, was built in Israel, and one senior Israeli official implicitly confirmed this notion.78 Since then, Tehran has claimed to have suffered from or defeated other cyberattacks on its nuclear, security, and oil infrastructures.79 These attacks have been so threatening that Tehran has taken the extreme step of disconnecting several of its main Persian Gulf oil terminals from the Internet to protect them from cyberattack.80
Someone is also killing Iranian nuclear scientists, cutting power lines to their nuclear facilities, blowing up their missile bases, and conducting other forms of sabotage.81 I have no proof, but I have a lot of Israeli friends who seem to be enthusiastic about these attacks. Israeli (and American) journalists seem to be just as certain that Mossad is behind the assassinations and sabotage campaign as their American counterparts are certain that CIA and the National Security Agency are involved in the cyberwar campaign.82 At least one former senior Israeli official has implied that Israel is part of this effort, and the Iranians have not exactly been quiet in claiming that this campaign is the work of the Israelis with assistance from the United States and Great Britain. For instance, in July 2012, former Israeli national security advisor Uzi Arad responded to a question from the IDF Radio network regarding an attack on Israeli officials in Bulgaria that Israel believed was conducted by Iranian assets, saying, “We are, to a large extent, the initiators. . . . Mainly, we’re leading a struggle against Iran. We’re not a passive side. And the other side is the defending, deterring, and attacking one.”83 At times, the Iranians have claimed that they had proof of American involvement.84 The Iranians have also asserted that the Israelis, Americans, and British have been arming and encouraging Kurdish, Baluch, and Arab separatists.85 The author Mark Perry has interviewed sources who claim to have seen classified U.S. memos that absolved the CIA of any involvement with the Baluch but indicated that Mossad was supporting them.86
Even if all of this chatter is only partially true, it strongly suggests that the Western allies have an aggressive covert action campaign going on against Iran. Which raises the question of how much have Western covert actions been responsible for Iran’s new willingness to talk about its nuclear program, and how much could they help convince Iran to make real concessions in the future?
We cannot know for certain. The Iranians complain enough about these attacks that we can say that they do not like them. But no Iranian has directly tied covert action attacks—cyber, assassination, sabotage, support to disaffected Iranian ethnic groups—to the need to negotiate with the West. So far, that argument has been reserved for sanctions. This distinction is noteworthy because the covert attacks are part of the Iranian conversation. The hardliners lump together the covert action campaign, the sanctions, and Western support for the Green Movement and other democratic oppositionists as elements of the “soft war” they claim the West is waging against Iran to try to topple the Iranian government. They justify making no concessions based on the need to fight back. The moderates and pragmatists ignore this argument and focus on the hardships created by the sanctions to argue that Iran must make some compromises on the nuclear issue.
Several U.S. military officers familiar with the U.S. cyber effort against Iran have all used the same phrase with me: “We are already at war with Iran” in the cyber arena. They have described fending off constant attacks by Iran and implied that the United States has hurt Iran more than they have hurt us.87 If that is the case, it is just not clear how much more we could ratchet up the pressure on Iran in the cyber world. To the extent that we can do even more damage to Iran in the future through ramped up cyber and covert action attacks, we should be careful. People die from these attacks. Beyond the moral dimensions, we need to recognize that killing people can cause an adversary to overreact, especially when it is an adversary as paranoid and xenophobic as Iran’s Islamic regime.88
MORE SANCTIONS? In the end, it is the sanctions that got us to the current point. To the extent that it is now possible to imagine that Iran might accept real constraints on its nuclear program, it is because of the sanctions. Especially because of the uncertainties of covert action, if Iran does not respond to renewed offers of engagement and tangible benefits, we will inevitably have to turn to sanctions once again to try to achieve that objective.
There are two ways to think about ratcheting up sanctions on Iran. To borrow phrases from the military, they are either “vertical” or “horizontal” escalation. Vertical escalation of the sanctions would refer to clamping down even harder on Iranian commerce. The problem is that we are already maxed out at this point. Other than exporting humanitarian goods such as food and medicine to Iran, all American commerce with Iran is prohibited. The same is largely true for Europe. Even the French, the hardest of the hard line when it comes to Iran, confess that there isn’t much more that Europe can do. The last sanction that they are holding in reserve is to forbid Iran from conducting transactions in euros with non-EU countries, a move that would hurt Iran, but probably not enough to convince them to change their minds. Paris feels the need to have at least one more sanction available in the event that Iran refuses the P-5+1 again, but the French do not seem sanguine that it will make much difference.
That’s where horizontal escalation comes in. Horizontal escalation would mean convincing other countries to join the current Western sanctions. Because there is so little left in terms of vertical escalation, any further intensification of sanctions will need to focus on horizontal escalation. To this end, in late 2012, conservative American congressmen began working on what they referred to as “comprehensive commercial sanctions” against Iran. These sanctions would seize or freeze all Iranian assets overseas and prohibit all imports into Iran except for food, medicine, and some communications equipment (to help Iran’s pro-democracy opposition). Under this legislation, any country that refused to comply with its terms would be banned from trading with the United States.89 If this legislation were enacted and enforced, and if other countries complied with it, it would re-create the same draconian, comprehensive sanctions on Iran that the United Nations imposed on Iraq during the 1990s.
CAN THE SANCTIONS WORK? In recent decades, when the United States has levied economic sanctions against countries, we have tended to do so expecting the psychological blow from the mere imposition of these penalties to be enough to cause the targeted state to reverse course. When the United States led the international community in imposing sanctions on Iraq to try to force Saddam Husayn to give up his WMD programs in 1991 after the Persian Gulf War, the resolutions naïvely included a 145-day clock for him to do so.
Sanctions do not work this way in practice. To the extent that Saddam complied with the resolutions (and he did comply with the spirit of the resolutions, although he refused to acknowledge that he had), it seems to have taken him four to five years. Even then he never complied with the letter of the resolutions and intended to violate their spirit as soon as the sanctions were lifted.90
With Iran we have once again imposed crippling sanctions in the expectation that the Iranian regime won’t want to allow their economy to erode (or perhaps even collapse). We have done so under the assumption that long before that point, Tehran will agree to change its behavior on one of its most important policies to accommodate American (and global) demands. The problem is that, historically, sanctions don’t work that way. Richard Haass has proven himself to be both one of the ablest policymakers and most accomplished foreign policy thinkers of the past thirty years, and it is telling that he concluded his own study of the utility of sanctions for American diplomacy by observing that sanctions “are unlikely to achieve desired results if the aims are large or the time is short.”91
Sanctions have an uneven record in general. Former undersecretary of state for economic affairs Stuart Eizenstat found that “[s]anctions offer a decidedly mixed bag of beneficial and damaging results to policymakers.”92 Academic work on sanctions has largely borne this out.93 A famous 1990 study of 115 cases of sanctions found that they “worked” only 34 percent of the time.94 Daniel Drezner has pointed out what he calls the “sanctions paradox,” in which sanctions work best when the target country is a democracy and an ally of the sanctioning state.95 Neither is the case for Iran. Although sanctions rarely succeed on their own in coercing a nation to change its behavior, they can often accomplish other, lesser goals, such as weakening the target state or forcing it to curb its activities. Moreover, sanctions can be helpful in laying the predicate for even harsher measures—typically military—by demonstrating that the targeted state cannot be persuaded by anything short of force. Of course, for the case at hand, sanctions are only useful in this last way if we are looking to go to war with Iran. If we aren’t, and I am not, this last point does little good.
The work on sanctions most relevant to our current impasse with Iran remains Meghan O’Sullivan’s 2002 book, Shrewd Sanctions, which looked at four cases of sanctions against Middle Eastern rogue regimes (including Iran) during the 1990s. O’Sullivan, who would go on to senior positions in the Bush 43 administration, including deputy national security advisor for Iraq and Afghanistan during the surge in Iraq, demonstrated that “[s]anctions whose primary aim is to change certain behaviors of a leadership are in some respects the most difficult to fashion.”96 In which case, “[t]he structure of sanctions must be flexible enough to accommodate and encourage gradual changes in the behavior of the target, ideally by allowing restrictions to be lifted or letting them lapse incrementally as the country takes actions desired by the United States. . . . Sanctions used for this purpose must be accompanied by a dialogue between the two countries, preferably in a regular and institutionalized way that allows each side to articulate its expectations and demonstrate the reforms it has undertaken. . . .”97 That we have none of that with Iran might make us skeptical that our current sanctions will work at all, let alone quickly.
What all of this work demonstrates is that sanctions only rarely cause a major shift in the targeted state’s behavior. And when they do work, they take years, even decades, to do so. Libya was a charter member of the U.S. terrorism list in 1979 and came under a set of sanctions associated with that list. Between 1986 and 1996, the Reagan, Bush 41, and Clinton administrations shut down all American commerce with Libya and began to press other countries to do the same. By the end of the Clinton administration and the start of the Bush 43 administration, Qadhafi had taken some steps to try to get back into the good graces of the United States: He had closed terrorist training camps, severed Libyan support for radical groups, and was even trying to play peacemaker in Africa. In September 2000, he gave a speech announcing his desire to rejoin the international community. In December 2003, after months of secret negotiations with the United States and Great Britain (and following the rapid American military campaigns against Afghanistan and Iraq), Qadhafi announced that he would abandon all of his WMD programs and permit international inspectors full access to all of his WMD facilities to verify his compliance; he even created a $2.7 billion compensation fund for victims of the Pan Am 103 bombing over Lockerbie, Scotland, in 1988. Libya was ultimately a major success for American policy, but it took decades and may have required the collapse of the Soviet Union (Libya’s former superpower patron) and the threat of an American invasion, on top of sanctions, to produce that result.98 And Libya is tiny compared to Iran: in 2004 it had one-fifteenth of Iran’s current population and one-thirteenth of Iran’s gross domestic product.
Sanctions can be difficult to sustain over time, something Iran’s hardliners are betting on. A big problem with sanctions is that once Country A has imposed sanctions on Country B, Country A can end up fighting with its allies and trade partners, rather than with Country B. All through the 1990s and 2000s, the United States fought with its European and East Asian trading partners over their commercial relations with Iraq, Iran, Libya, Sudan, North Korea, Cuba, and so on. The fights sometimes became vicious and distracting, and created rifts between the United States and our key allies when we most needed to be working in lockstep.99 In 2012, the United States imposed sanctions on Chinese, Singaporean, and UAE companies for their relations with Iran, all of which created as many problems for Washington’s relations with Beijing, Singapore, and Abu Dhabi as they did for Iran’s economy.100 It is especially problematic with a major oil producer like Iran, where efforts to limit its oil sales can have an impact on the price of oil—and through it the global economy. In October 2011, Khajehpour estimated that the Iran sanctions then imposed had boosted global oil prices by $8 per barrel while oil analyst Bob McNally’s estimate in 2012 was a similar $5–10 per barrel.101
For the target state, undermining the sanctions is often its principal goal, and it will devote all of its political and economic energy to do so. Just as frequently, maintaining the sanctions is just one of many things to which the states applying the sanctions must attend. For that reason, even bigger and more powerful states may find it hard to sustain tight sanctions around smaller countries over time. Iraq during the 1990s is an obvious example, but the same problem has already begun with Iran. Ironically, it is often Iraqi banks and smugglers who are helping Tehran to bust the financial and oil sanctions.102 By early 2013, U.S. government officials warned that Iran was finding ways to get around the financial sanctions by using fake financial institutions, informal couriers, and criminal enterprises—all practices that Tehran will doubtless expand.103
ARE WE REPEATING THE MISTAKES OF IRAQ? Hopefully, just suggesting that we are following the same course we took with Iraq will sound a cautionary note. The effects of our policy toward Iraq after 1982 have been complicated. There were things that we did that worked out the way that we hoped, and other things that did not. The story of the containment and sanctions against Saddam were part of that complicated history. The combination of sanctions and inspections did convince Saddam, eventually, to give up his WMD programs—although not his aspirations. However, at the same time, the sanctions were a failure because they proved self-defeating.
Obviously, the tragic implosion of Iraq during the 1990s was not all the fault of the sanctions. Saddam Husayn bears at least half of the blame, arguably more. He refused to comply with the UN Security Council resolutions and used the sanctions to create suffering among his own people for his personal benefit—stoking international sympathy for their lifting and to punish disloyal elements of the Iraqi populace. Nevertheless, we cannot blame it all on him, either. The sanctions were overly severe and poorly designed. They helped to gut Iraqi society. They probably caused thousands, and possibly tens or even hundreds of thousands, of deaths.104 They undermined Iraq’s health and educational systems. They concentrated heretofore unheard-of power in the hands of the central government. They further damaged Iraq’s oil, transportation, and communications infrastructures, all of which had been battered by a decade of Saddam’s wars. They helped to take what had been one of the most progressive and modern societies of the Arab world and set it back by decades. They turned many Iraqis against the United States even as they also hardened many Iraqi hearts against Saddam.105
Worse still, as the damage that the sanctions (as manipulated by Saddam) were doing to Iraqi society became ever more apparent, they turned international opinion increasingly against the entire effort to contain Saddam Husayn.106 In the late 1990s, I served on the staff of the U.S. National Security Council as the director for Persian Gulf affairs. One of my primary responsibilities was holding together the containment of Iraq. What I saw was that as hard as we fought against it, as hard as we tried to convince the world that the sanctions were not responsible for any of the death and suffering in Iraq—that there were provisions for Iraq to import food and medicine, that the Iraqis were exaggerating the extent of the problems, and that Saddam was deliberately depriving his own people to cause death from starvation and disease—it did not matter. It wasn’t that no one believed us; they generally did. It was that they did not care. The people of the world just wanted the suffering of the Iraqi people to end, and if Saddam would not do the right thing then the United States and the UN had to instead. And so, by the end of the 1990s, the support for sanctions on Iraq, indeed for the containment of Iraq, was evaporating. The sanctions were collapsing, and Saddam was able to smuggle and cheat more and more. Less than ten years after Saddam’s invasion of Kuwait, many countries were simply ignoring the sanctions.107
Consequently, still another lesson from our unfortunate Iraq experience that we ought to have learned but appear to be in danger of repeating is that if we make the sanctions on Iran too harsh, they are likely to become unsustainable. It is why O’Sullivan and other scholars of sanctions warn, “Sanctions should almost never be allowed to cause any form of extreme deprivation.”108 Although the current Iran sanctions do not ban exports of medicine, the impact of lower import revenues and higher inflation is making it harder for Iranians to get access to medical supplies, including lifesaving medicines.109 A comprehensive analysis by the International Crisis Group warned, “Arguably, the most negative consequence (of the sanctions) has been to seriously undercut the healthcare system.” Medicine has become extremely expensive and there are shortages of specialized drugs for cancer patients, hemophiliacs, diabetics, and people with multiple sclerosis and other serious conditions.110 Iran may already be setting in motion an effort to take a page from Saddam’s playbook and begin to undermine the sanctions against it by portraying them as having an outsize effect on the wider Iranian populace. In response to new EU sanctions in October 2012, the regime referred to them as “inhuman.”111 It was an incongruous note and perhaps a taste of things to come.
Because the sanctions seem to have had such a powerful impact on Iran, there is a strong temptation to just keep doubling down on them, but the evidence suggests that would be a mistake. There comes a point when they do no more good, and can do great harm, both to the people of Iran and to the strategy they are meant to enforce. We are rapidly approaching that point with Iran, if we have not passed it already.
There is one last aspect of the revised carrot-and-stick policy that is worth mentioning: the name. Many Iranians bristle at the name “carrot-and-stick” because they say it is derived from the metaphor of how one leads a mule. They say that they find this humiliating and offensive.
An old Chinese saying observes that “the beginning of wisdom is to call things by their right names.” Our Iran debate desperately wants for such wisdom. For now, in this context, when our nation needs to have an open and honest conversation about which strategy to pursue toward Iran, I think it important to call things by their right names rather than adding to the confusion with euphemisms. And as for Iranian sensibilities . . . well, what I find objectionable is thirty years of Iran killing Americans in Lebanon, Saudi Arabia, Iraq, Afghanistan, and elsewhere. When the Iranian regime stops doing that I would not only be willing to change how we describe our policy, I would be willing to change the policy itself.