Meeting the Challenge: U.S. Policy toward Iranian Nuclear Development (Page 3)

Continued from Page 2

Current Situation in Iran (Continued)

Do Iran’s Energy Needs Justify its Nuclear Program?

Iran’s electricity consumption is growing approximately eight percent per year. By 2012, its annual consumption could be between 202 and 289 billion kilowatt hours. Until recently, the Iranian government has managed to keep production above demand, but in 2008 had to institute a series of scheduled blackouts in Tehran as demand exceeded production. Such shortages have led some Iranian officials to question the wisdom of continued Iranian electricity exports, an important Iranian soft power component, to countries such as Iraq. Three-quarters of Iran’s production is natural gas-fired; seven percent is hydroelectric, and the remainder oil-fired. While the Iranian leadership unveiled plans for a wind power plant near Yazd, this remains off-line and will not have much impact on Iran’s total electricity production.

Iran’s Ministry of Energy estimates that Iran will have to increase its capacity by a third to 60 gigawatts by 2015. It is in this context that the Iranian government justifies the one gigawatt Bushehr nuclear reactor, and perhaps seven more such reactors, with similar capacity, by 2020. Additionally, Iran and Turkey plan to build three natural gas-fired power plants with a capacity of six gigawatts as well as joint hydroelectric plants starting in 2008. Developing nuclear power may free up natural gas and petroleum for export or domestic use. The Iranian government argues that seven gigawatts of nuclear power generation would free up 190 million barrels per year of oil, equivalent to 13 percent of the country’s current production, or $7 billion annually at 2005 prices.

Should observers accept that energy needs alone motivate the Islamic Republic’s nuclear program, Tehran’s nuclear calculation is unwise. The majority of Iran’s natural gas reserves have yet to be developed. Iran already relies on natural gas-fired plants to produce about 75 percent of its electricity. Increasing that production capacity would not appear to require major infrastructure investments. Six of Iran’s most populous cities—Tehran, Mashhad, Isfahan, Shiraz, Tabriz, and Ahvaz, already have direct access to natural gas pipelines; Mashhad, Ahvaz, and Shiraz are close to major refineries.   Should the Islamic Republic reform its investment climate, it could develop natural gas processing plants, pipelines, and power plants in a manner more economically attractive than with nuclear power.

Furthermore, while Iranian leaders cite a desire to become self-sufficient in energy production as a reason for their nuclear investment, number crunching suggests Iran will become dependent upon imported uranium. As Iran’s estimated conventional uranium resource is only between 15,000 and 30,000 tons, operating all its planned reactors would deplete Iran’s uranium reserves by 2023,[1] making Iran dependent upon external sources. Both the relative expense of the Islamic Republic’s nuclear program and its limited uranium resources suggest it is unlikely that energy needs alone motivate Tehran.

Energy Subsidies

The Islamic Republic has become increasingly energy-dependent. According to the International Energy Agency, Iran already consumes more energy than all but 15 other countries. Between 1990 and 2006, for example, car ownership in Iran grew by 250 percent.[2]

While the Islamic Republic is self-sufficient in diesel and kerosene, its refining capacity was sufficient to fulfill only about 60 percent of domestic demand until at least June 2007. Tehran had to purchase the remainder from other sources, including India, Kuwait, and Venezuela.

In June 2007, the government instituted a gasoline rationing scheme to reduce its consumption growth, facilitate equitable distribution, and increase prices.

Individuals could purchase 100 liters of gasoline at the subsidized price of 1,000 rials per liter (approximately $0.42/gallon), although taxi drivers had an allotment of 800 subsidized liters per month.   Analysts estimate that rationing initially reduced gasoline imports by as much as half, although politically-motivated exceptions have whittled away some of the gains. In December 2007, the government raised the individual quota to 120 liters per month, and in March 2008 introduced a scheme to enable individuals to purchase gasoline above their quota at a still-subsidized price of 4,000 rials per liter. In June 2008, further revisions eliminated rations for all domestic cars with engines larger than 2000 cubic centimeters and all imported cars with engine capacity greater than 1300 cubic centimeters. Owners of these cars must buy gasoline at the higher price of 4,000 rials per liter. Tehran currently spends perhaps $5 billion per year to import refined gasoline, drawing down its foreign exchange reserve fund.

By linking rations to drivers through drivers’ licenses and the issuance of ‘smart cards’ with which to purchase petrol, the Iranian program has achieved Tehran’s three objectives: (1) lessening vulnerability by forcing a 25-30 percent reduction in consumption; (2) creating a equitable mechanism to undercut potential discontent; and (3) establishing a price mechanism to enable it to phase out expensive subsidies.

While Iran’s heavy subsidization of gasoline for consumers was once a major weakness, encouraging consumption and black market smuggling to neighboring states where the price of gasoline was higher, Tehran has reduced its vulnerability and, to some extent, pre-empted outside action to create additional economic pain.

Inefficient Social Welfare Policies

Inefficient social welfare policies implemented after the 1979 Revolution are a systematic drain on the Iranian economy. While the official welfare effort has succeeded in reducing the proportion of the population below the poverty line from 47 percent in 1978 to 19 percent in 2003, over seven million Iranians—10 percent of the population—benefit from the government’s officially-sanctioned social welfare network.   The official social welfare system overseen by the Ministry of Welfare and Social Security has clear criteria and stipulated benefits for unemployment compensation, old age pensions, disability pensions, survivor benefits, and medical benefits. In addition, the main official relief agencies are the Welfare Organization and the Imam Khomeini Relief Committee, both overseen   by the Ministry of Welfare and Social Security.   The Imam Khomeini Relief Committee assists as many as seven million Iranians with basic foods. Both the Committee and the Welfare Organization provide social welfare services to women-headed households, a significant phenomenon in Iran both because of Iran-Iraq War widows and high divorce rates. The Ministry of Welfare and Social Security has set up some 7,000 job centers for female heads of households, providing vocational training among other services. Other ministries that oversee or give out social welfare benefits are the Ministry of Housing and Urban Development, the Ministry of Agricultural Jihad, and the Ministry of Labor and Social Affairs. 

Tehran’s social welfare strategy includes the provision of implicit subsidies, not only for gasoline but also for medicines, bread, and other goods.   The World Bank calls these subsidies “untargeted and ineffective” and not disproportionately benefiting the poor.   Much of the benefit of subsidies goes to Iranians who are middle class or even affluent. For example, the Imam Khomeini Relief Committee provides education assistance to about 600,000 students, including university scholarships, and also provides marriage dowries to a broad array of Iranians, not necessarily just those who are below the poverty line.   Critics charge that the government is trying to eliminate poverty through handouts and charitable transfers rather than by generating employment.

Revolutionary Foundations, Cooperatives, and IRGC Fronts

A number of institutions distort the Iranian economy, welfare policies, and hamper general reform. First among these are the Revolutionary Foundations. Because these bonyads are not under the authority of the Ministry of Welfare and Social Services, but are rather run by key clerics and other former or current government officials, the bonyads’ criteria for deciding who should receive social welfare is often arbitrary. Needy Iranians who are not well-connected or who are perceived as unsympathetic to the regime may simply not receive social welfare benefits.

Because the bonyads account for perhaps 33 percent to 40 percent of Iran’s total gross domestic product, they distort normal market forces in Iran. In the wake of the 1979 revolution, the bonyads have come to enjoy significant economic and political privileges.   Several of the bonyads, the heads of which are appointed by the Supreme Leader, control vast assets given to them by the state. Together, they may employ as many as five million Iranians and give social welfare to several million more. The bonyads create a large constituency of support for the regime among the working and lower classes. 

The bonyads’ privileges are vast. They enjoy tax exemption and customs privileges, preferential access to credit and foreign exchange, and regulatory protection from private sector competition.    Using these preferences, some of the major bonyads have been able to establish monopolies in the import and distribution of various items.

Beyond their distortion of the economy, some bonyads—especially the Foundation for the Oppressed and Disabled—appear involved in procurement of technology utilized in Iran’s indigenous weapons and nuclear programs. Because they are not formally part of Iran’s government, they can operate outside official scrutiny of foreign governments, and therefore illicitly procure equipment that might not be approved for export to Iran.

There may be as many as 123 different bonyads in Iran, but most experts focus only on the largest and best known of them:

• The Foundation for the Oppressed and Disabled (Bonyad Mostazafan va Janbazan).   The largest and most important of the bonyads, it took over much of the assets of the former Shah and his associates who fled Iran after the Islamic revolution.   Headed by Mohammad Forouzandeh, the chief of staff of the Revolutionary Guard in the late 1980s and a former Defense Minister. It now manages over 400 companies and factories, worth perhaps $12 billion, and is the largest economic entity in Iran after the government.   The Foundation is active in food and beverages, chemicals, shipping, metals, petrochemicals, construction materials, dams, towers, farming, horticulture, animal husbandry, tourism, transportation, hotels, commercial services, and financing. Officially, the Foundation uses the profits from these ventures to assist 120,000 families of veterans and victims of the 1980-88 Iran-Iraq war, as well as large segments of the poor, but also may be involved in illicit imports and support for Iranian proxy groups abroad.

• The Martyr’s Foundation (Bonyad Shahid). This foundation also assists families of those killed or maimed in the Iran-Iraq war.   It owns several companies involved in mining, agriculture, construction, and import-export.

• Imam Reza Foundation. Based in Mashhad in northeastern Iran, it used donations from eight million pilgrims to the Shrine of Imam Reza to buy up 90 percent of the arable land in its area. The estimated value of this land could be as high as $20 billion. The largest employer in Khorasan, the Foundation runs 56 companies including a Coca-Cola plant, automobile manufacturing, and two universities.   It is headed by Ayatollah Abbas Vaez-Tabasi, who serves on the powerful Expediency Council that is headed by former President Akbar Hashemi-Rafsanjani.   Vaez-Tabasi’s son is married to Khamenei’s daughter.  

• The 15 Khordad Foundation, named for the anniversary of the beginning of Khomeini’s 1963 agitation against the Shah, the Foundation became famous when, in 1989, it offered a $1 million bounty to anyone who killed Salman Rushdie, author of the Satanic Verses. 

• The Isargaran Foundation, also controlled by former Revolutionary Guard officers, provides services to the families of those killed or taken prisoner in the Iran-Iraq war.   

Another phenomenon distorting the economy is the cooperatives which forcibly constrain and control private enterprise in a number of economic sectors. The Ministry of Cooperatives, in theory, oversees the operations of cooperatives, but, in practice, allies or relatives of regime heavyweights run the cooperatives outside the oversight of the Ministry. The best known cooperative is the Rafsanjan Pistachio Growers Cooperative. Run by the cousin of former president Akbar Hashemi-Rafsanjani, who is chairman of the powerful Expediency Council, the cooperative claims to represent over 70,000 pistachio farmers who control a crop whose export is worth perhaps $1 billion.

The Islamic Revolutionary Guards Corps are also playing an increasing role in the economy. Ahmadinejad was a commander in the Guard during the 1980-88 Iran-Iraq war; his presidency has only enhanced the Guard’s influence.   Its motivations for expanding its economic role are apparently to provide rewards for senior officers, and to generate revenue to supplement the budget allocated to the Guard by the government.

The Guard has formed contracting firms to bid on government projects, using its strong political influence to win business to the detriment of both the private sector and foreign investment. In one recent example, “Ghorb,” an IRGC-owned firm, received a $2.3 billion contract to develop two phases of Iran’s large South Pars gas field.[3] The IRGC apparently exerted political muscle to take the contract away from what most industry experts consider a more capable Norwegian firm.   In another example of IRGC muscle-flexing, the Guard briefly closed down the new international airport in Tehran to oust an Austrian-Turkish firm from airport operations so that the IRGC could take over.

The Politics of Reform

Many Iranian officials acknowledge the weaknesses of Iran’s economy, and argue for reform. However, differences among Iranian leaders–in part caused by their different constituencies–have deadlocked all attempts for broad structural reform of the economy.   Both the 2005 presidential election campaign in which Ahmadinejad emerged victorious, and Iran’s 2009 presidential campaign which is starting, have highlighted these issues. In 2005, Ahmadinejad campaigned on a platform of redistribution of wealth rather than poverty-alleviation through growth. Ahmadinejad and his allies favor an extensive state role in the economy, including state management of factories and other entities that can provide employment for the working classes. Since taking office, he has tried to authorize below-market interest rates and price controls.

As a former Revolutionary Guard officer himself, he is close to other former Guards and those who run the various revolutionary foundations, particularly the Foundation of the Oppressed and Disabled. He supports their work in distributing social welfare to the poor. He does not favor eliminating the preferences that the revolutionary foundations enjoy because he depends on the revolutionary foundations to provide social payments to his core lower class base. He is also less attracted than are other Iranian politicians to greater economic interaction with Europe and other Western countries. For example, he is not interested in joining the World Trade Organization or reaching a free trade agreement with the European Union. Ahmadinejad believes that his lower class constituents would not necessarily benefit from a more export- and growth-oriented economy. They generally do not buy imported European-made luxury goods.

Rafsanjani, Ahmadinejad’s main competitor in the 2005 election and a continuing rival, represents another pole in the debate over economic reform.   Rafsanjani is a Khomeini disciple who has been a leading figure throughout the Islamic Republic’s political history. As one of Iran’s richest men, Rafsanjani believes the Islamic Republic would benefit from freer trade. He has chafed as Ahmadinejad’s confrontation with the West triggered economic sanctions, and has sought to have Khamenei rein Ahmadinejad in before the West subjects the Islamic Republic to greater economic pressure.

Bazaar merchants (bazaaris) represent another major economic interest in the Islamic Republic.   They control not only an important engine of Iran’s economy–the import and export of goods–but also have a voice in several newspapers, including Resalat. Khamenei has, throughout his career, been supportive of the bazaaris. They and their allies tend to oppose too large a state role in the economy and favor increased trade to expand the market for Iranian goods. Some Iranians, however, complain that bazaaris engage in “crony capitalism,” by trying to control certain markets by acting in concert, such as jointly boycotting supplier companies to force concessions.

Table 2: ECONOMIC INDICATORS

Source: Central Intelligence Agency The World Fact Book (2008); Lehman Brothers

Geopolitical State of Play

Russian and Chinese reluctance to sanction or otherwise coerce the Islamic Republic highlights the importance of gauging the geopolitical state of play. Iran’s relations with the rest of the region are complex. Much of this has to do with growing sectarian awareness. While the Shi‘a account for only ten to fifteen percent of the world’s Muslim population, they represent nearly half of all Muslims in the heart of the Middle East, between the shores of the Mediterranean and the Iranian frontier with Afghanistan. In December 2005, King Abdullah II of Jordan warned publicly of a growing “Shi‘a crescent” stretching from Iran, through Iraq and Syria, to Lebanon where Hezbollah, an Iranian client, threatens the Lebanese government.

Much tension revolves around the situation in Iraq. Indeed, Iranian activities in Iraq are a concern not only to the United States, but also to almost every regional country. U.S. authorities have accused the Islamic Republic of supporting and supplying both Shi‘i militias and Sunni insurgents. 

Iran’s motivations to exert its presence in Iraq are both strategic and religious. Dissidents in Iraq have catalyzed every major revolution or mass movement in modern Iranian history. Utilizing the telegraph lines, clerics in the Shi‘i holy cities of Najaf and Karbala helped coordinate mass protests during the 1905-1911 constitutional revolution which ended absolute monarchy in Iran.

While the Shah exiled Khomeini in 1963 amidst his agitation against modernizing reforms, Khomeini maintained his influence from his Iraqi residence through smuggled audiotapes from Iraq into Iran. 

Religion is ironically the Islamic Republic’s Achilles heel. The concept of clerical rule upon which Khomeini built his theocracy remains a minority interpretation within the larger Shi‘i community. Iraqi President Saddam Hussein insulated the clerical government in Iran from having to face dissident clerical voices since he himself sought to mute public clerical discourse. His regime’s collapse, however, renewed a vibrancy in the Shi‘i shrine cities that threatens to undermine the Supreme Leader’s attempts to control religious practice inside Iran. Every time an ayatollah in Najaf contradicts the Supreme Leader, even on matters as technical as the sighting of a new moon, it undercuts the Islamic Republic’s authority. 

This provides one motivation for both direct Iranian involvement in Iraq and the activities of Iranian-backed militias who seek to impose through force what might not be in the hearts and minds of Iraqi Shi‘a. Grand Ayatollah Ali Sistani, for example, survived for years under Saddam when many of his clerical cohorts did not by remaining mindful of who around him had the guns.

The Iranian strategy is multifold. By maintaining low-level insurgency and hampering the establishment of a stable democracy in Iraq, Tehran can both keep the U.S. military occupied and, in theory, have ample targets should U.S. officials order an air strike against Iranian nuclear facilities.

The unofficial battle for supremacy in Iraq is not the only geopolitical phenomenon which can complicate diplomacy intended to resolve the Iranian nuclear conflict. There is also tension among the Gulf Cooperation Council states. Even before the Islamic Revolution, Iran and Saudi Arabia competed for primacy in the Persian Gulf, although as monarchies they found common ground both in opposition to Soviet penetration and also to the radical successor regimes which overthrew monarchies in Egypt and Iraq. Tehran and Riyadh both cooperated to defeat communism in Oman. However, both countries sparred over oil pricing policy and clashed over issues of Islamic versus Iranian identities.

The 1979 Islamic Revolution redefined the Iranian-Saudi rivalry. The Iranian government sought to export revolution and launched an anti-Saudi propaganda campaign. Tehran inflamed Saudi Arabia’s Shi‘a minority and incited sectarian division at the Hajj. Saudi support for Baghdad during the Iran-Iraq War further strained relations, although there was a brief détente following the 1990 Iraqi invasion of Kuwait. Still, such a détente is tenuous. Tehran’s involvement in the 1996 Khobar Towers bombing has further strained relations.

Iran’s relationship with smaller Persian Gulf states is also tense. Bahrain, a small island nation in which a Sunni minority rules a majority Shi‘i population, blames Iran for instability in 1995 and 1996. The United Arab Emirates and Iran continue to spar over Abu Musa and the disputed Tonb islands. Among Arab countries, only Syria enjoys strong relations with Iran.

The Military Background

Any discussion of military options and scenarios can only take place with proper attention to Iran’s geography, its own military structure, and the posture of regional militaries.

Geography

Modern Iran is four times the size of California or, put another way, is larger than Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, Connecticut, New York, Pennsylvania, New Jersey, Delaware, Maryland, the District of Columbia, Virginia, West Virginia, North Carolina, South Carolina, Tennessee, Kentucky, Ohio, Indiana, Illinois, and Michigan combined. It is a topographical fortress. The Zagros Mountains, rising abruptly from the Iraqi plain, guard Iran’s western frontier. Some of the peaks top off at more than 12,000 feet. Sir Arnold Wilson, a British diplomat assigned to Iran at the end of World War I, described “The great rampart of the Zagros range... [as] one of the most striking features of West Asia.” They stretch for almost a thousand miles along Iran’s frontiers with Turkey and Iraq before turning inland in the swampy province of Khuzistan.

Much of northern Iran is likewise guarded by the Alburz Mountains. Mount Damavand, on a clear day visible from Tehran, reaches 19,000 feet. A strip of rice paddies and jungle guards the coast of the Caspian Sea to which Iran families flock to escape Tehran’s blanket of pollution and enjoy beach resorts and greenery. These stretch into the hills and grasslands of Khorasan, home of Iran’s second largest city, Mashhad. 

South of Khorasan are highlands, mountains interspersed with sandy and gravel-strewn plains, but little water. This region, called Sistan, is harsh and isolated. Further south is the hot, rugged, and somewhat lawless region of Baluchistan, where summer temperatures can soar to over 120 Fahrenheit. Home to one of Iran’s small Sunni minorities, Baluchistan has long been resentful of the Iranian government headquartered 700hundred miles away. With no oil and little agricultural potential, Baluchistan is a center of smuggling and drug trade, and is a chief transit point for opium produced in Afghanistan and Pakistan. In recent years, Baluchi bandits have taken a number of Western tourists hostage, and there have been a number of clashes not only between Iranian security forces and smugglers, but also between Iranian military units and the Jundallah terrorist group operating from across the Pakistani border. Baluchistan ends in rugged hills and mountains along the shores of the Arabian Sea, dotted only with the occasional fishing village.

The interior of Iran is vast, covering over300,000 square miles. Much of central Iran is desert, or rocky plain, interspersed with barren hills and mountains. 

Iran's Strategic Capabilites

Iran’s conventional armed forces are large but poorly trained and combat ineffective. They lack the logistical ability to project military power much beyond Iran’s borders.  Iran’s Revolutionary Guard Corps (IRGC), into which the paramilitary Basij Resistance Force was incorporated in 2008, enforces adherence to Islamic customs, defends revolutionary values, and is loyal to the Islamic Republic’s most hard-line factions.    The Supreme Leader appointed new leaders to the IRGC and the Basij in 2007.

Now that Saddam Hussein’s regime has fallen, Iran perceives itself to face few external threats beyond that from the U.S. military.   Iran’s neighbors are not capable of mounting a major threat against Iran (See Tables 3 and 4)   Even if the Persian Gulf states were to act in concert they could not be certain of outgunning Iran.   Nor do Iran’s immediate northern neighbors pose a significant threat to Iran, at least in terms of traditional, quantitative net assessments of military capabilities.

Iran, particularly the IRGC, has acquired a structure for unconventional warfare that partly compensates for its conventional weakness.   Former CENTCOM commander Gen. John Abizaid said in March 2006 that the IRGC Navy, through its basing and force structure, gives Iran a capability to "internationalize" a crisis in the Strait of Hormuz.   In his confirmation hearings on January 30, 2007, Abizaid’s replacement, Admiral William Fallon, said that "Based on my read of their military hardware acquisitions and development of tactics... [the Iranians] are posturing themselves with the capability to attempt to deny us the ability to operate in [the Strait of Hormuz]."  Although many experts believe that U.S. forces could quickly reopen the Strait if Iran closed it, Iran has tried to demonstrate that it is a capable force in the Persian Gulf.  It has conducted at least five sets of major military exercises since August 20, 2006, including at least one in which a Shahab-3 missile was fired. CNN reported on February 21, 2007, that Iranian ships have widened their patrols, coming ever closer to key Iraqi oil platforms in the Persian Gulf.    Several weeks later, the IRGC seized 15 British sailors in disputed waters. After parading the sailors as hostages on Iranian television, Iranian authorities released the British sailors. While some diplomats and commentators suggested the British boat capture may have been a rogue IRGC operation, Iranian officials signaled their approval not only by, a year later, parading the captured boats through Tehran during a military parade, but also by publicly decorating the IRGC colonel in command of the operation.

In the event of conflict, Iran might use suicide boat attacks or lay mines in the Strait of Hormuz.  In April 2006, Iran conducted naval maneuvers including test firings of what Iran claims are underwater torpedoes that can avoid detection, presumably for use against U.S. ships in the Persian Gulf, and a surface-to-sea radar-evading missile launched from helicopters or combat aircraft.  U.S. military officials said the claims might be an exaggeration, although it is conceivable that such tactics could result in heavy damage to U.S. ships in the event of conflict.   The potential danger to U.S. ships was again in evidence in early January 2008 when five IRGC Navy small boats approached U.S. Navy ships in the Persian Gulf in what U.S. officials called a “provocative act” and were warned off without armed confrontation.    The incident could have represented an Iranian attempt to determine whether “swarming” of U.S. ships could compensate for superior U.S. firepower.

Largely with foreign help, the Islamic Republic is becoming self sufficient in the production of ballistic missiles and, by U.S. accounts, already has the largest inventory of ballistic missiles in the Middle East.   Tehran appears to view its ballistic missiles as an integral part of its strategy to deter or retaliate against forces in the region, including U.S. forces.  The Shahab-3 is capable of hitting Israel, and it is conceivable that Iran might fire such missiles at Israel in the event of conflict with the United States, much as Saddam Hussein did with SCUD missiles during the 1991 Persian Gulf War. However, the Iranian missiles are not believed to be accurate enough to hit specific military targets, but rather would serve as a type of “terror weapon” to threaten Israeli civilians.   Iran might also possess chemical or biological warheads for the Shahab-3 which would multiply their terror effect. The Iranian missile capability must be considered in weighing the Islamic Republic’s strategic threat, but they are unlikely to be decisive in any actual conflict with U.S. forces in the Persian Gulf.

The IRGC’s Qods Force is a force multiplier because of its ability to activate and supply movements abroad such as Lebanese Hezbollah, Iraqi militias and terrorist groups or even the Taliban, with which it appears to maintain operational relations across the sectarian divide. Such groups conduct terrorist attacks against the United States and its allies, or attack U.S. troops attempting to stabilize Iraq and Afghanistan. This capability gives Iran leverage to deter direct U.S. combat against Iran or to widen any conflict with the United States to other parts of the region.   

Table 3: Iran’s Military Capabilities

Source: Congressional Research Service

Table 4: Other Regional Military Capabilities

Source: Congressional Research Service

Terrorist Proxies

Iran might also turn toward terrorist proxies to amplify its response to conflict with the United States. Hojjat ul-Eslam Mojtaba Zolnour, the deputy representative of the Supreme Leader in the Revolutionary Guards, said at a July 13, 2008 speech in Kermanshah that the Islamic Republic would respond to any U.S. attack with strikes on more than 30 different U.S. bases.[4]  Policymakers must consider the ability of these movements to cause unrest in allied states, to attack Israel and other U.S. allies, to conduct terrorist attacks, and to confound U.S. policy objectives in any calculation of an Iranian response.

Although Iran lacks the capability to conduct a successful landing on the Arabian Peninsula from across the Persian Gulf, and its coastal missile force is perceived as too inaccurate to damage severely or permanently Persian Gulf energy facilities, the Persian Gulf states are concerned about Iran’s ability to stir up dissent among Shiite dissident movements.

During the 1980s and early 1990s, the Islamic Republic, utilizing both Qods Force and the Ministry of Intelligence assets, sponsored Shi‘i extremist groups opposed to the Sunni Muslim-led monarchy states of the six-member Gulf Cooperation Council  (Saudi Arabia, Kuwait, Bahrain, Qatar, Oman, and the United Arab Emirates).  During the 1980s, Iran sponsored disruptive demonstrations at annual Hajj pilgrimages in Mecca, some of which were violent, and it funded Saudi Shiite dissident movements such as the Organization for the Islamic Revolution in the Arabian Peninsula and the successor organization, Saudi Hezbollah. It is the latter group that Riyadh believes responsible for the June 25, 1996 Khobar Towers housing complex bombing, which killed 19 U.S. airmen.  These activities represent an effort by Iran to "export" its Islamic revolution, although during Khatami’s presidency Iran reduced support for such dissident movements.

Saudi Arabia, in particular, has become alarmed at the emergence of a pro-Iranian government in Iraq and at the Islamic Republic’s ascendancy in Lebanon and other regional Shi‘i movements.  Saudi Arabia sees itself as leader of the Sunni Muslim world and views Shi‘i Muslims as both heretical and internally threatening.  Currently, Saudi leaders are concerned about Iran’s nuclear program, but they are also concerned about the potential for Iranian reaction against the Kingdom should the United States take military action to stop Iran’s program.  This might explain why King Abdullah has hosted and maintained dialogue with Ahmadinejad and other senior Iranian officials.

Bahrain is particularly vulnerable because its population is mostly Shi‘i. In 1981 and again in 1996, Bahrain officially and publicly accused Iran of supporting Bahraini Shi‘i dissidents, groups such as the Islamic Front for the Liberation of Bahrain, Bahrain-Hezbollah, among others, in efforts to overthrow the ruling al-Khalifa family.  

Emirati concerns about Iran’s intentions run deep. In 1971, Iran seized two other islands, Greater and Lesser Tunb, from the emirate of Ras al-Khaymah, as well as part of Abu Musa from the emirate of Sharjah.   Abu Dhabi suspicions have not diminished since the April 1992 Iranian expulsion of Emirati security forces from the Persian Gulf island of Abu Musa, which Iran and the United Arab Emirates shared under a 1971 bilateral agreement. 

Qatar is wary that Iran might seek to encroach on its large North Field (natural gas), which is adjacent to Iran’s South Pars field, and through which Qatar earns large revenues for natural gas exports.  Qatar’s fears were heightened on April 26, 2004, when Iran’s deputy Oil Minister said that Qatar is probably producing more gas than "her right share" from the field and that Iran "will not allow" its wealth to be used by others.

Perhaps nowhere is Iran more capable of retaliating against the United States militarily than in Iraq, where it has trained and armed several militias, including Moqtada al-Sadr’s Jaysh al-Mahdi. The main thrust of Tehran’s strategy in post-Saddam Iraq has been to persuade all Shi‘i Islamist factions to work together to ensure Shi‘i political dominance and to silence vocal opposition to the concept of velayat-e faqih in Iran.  However, U.S. officials assert that, as part of its effort to build influence in Iraq, the Islamic Republic supplied militias and insurgent groups with arms, including highly lethal explosively-formed projectiles that have killed over two hundred U.S. soldiers.  U.S. forces have, in fact, caught several Iranian Qods Force operatives red-handed as they sought to transfer weapons to Shi‘i militias in December 2006 and January 2007. In two high-profile sweeps, U.S. troops arrested two Qods Force operatives in a compound belonging to the Supreme Council for the Islamic Revolution in Iraq, and soon after arrested five others in an Iranian liaison facility in Erbil, the largest city in Iraqi Kurdistan.  In December 2007 and January 2008, U.S. and Iraqi military officials released ten of the detained Iranians.

Tehran can also act against the United States and Israel through Lebanese Hezbollah. Founded by Lebanese Shi‘i clerics sympathetic to Iran’s Islamic revolution, the group committed terrorism against U.S. targets throughout the 1980s and 1990s, including the October 1983 bombing of the U.S. Marine barracks in Beirut, attacks on U.S. Embassy Beirut facilities in April 1983 and September 1984, and the hijacking of TWA Flight 847 in June 1985, in which a Hezbollah terrorist beat and murdered off-duty U.S. Navy diver Robert Stetham.  Hezbollah also bombed Israel’s embassy in Buenos Aires in 1992 and, two years later, bombed the Jewish community center in Buenos Aires, killing 85. An Argentine investigation determined that senior Iranian officials including the Supreme Leader had ordered the attack, and Iranian IRGC officers provided assistance to Hezbollah. 

The Islamic Republic has long been Hezbollah’s major arms supplier; it provides more than $100 million annually to Hezbollah. Recent Iranian shipments to Hezbollah have included "Fajr" and Khaybar series rockets that, in 2006, Hezbollah fired at the Israeli city of Haifa (30 miles from the border), and over 10,000 Katyusha rockets that were fired at cities within 20 miles of the Lebanese border.   In addition, Iranian authorities have also supplied Hezbollah with unmanned aerial vehicles that Hezbollah flew over the Israel-Lebanon border on November 7, 2004, and April 11, 2005. Israeli forces shot down at least three of these Hezbollah unmanned aerial vehicles during the 2006 fighting. On July 14, 2006, Hezbollah apparently hit an Israeli warship with a C-802 sea-skimming missile, which had also been supplied by Iran. UN monitors and international diplomacy have failed to prevent Iranian officials from re-supplying Hezbollah in contravention of the ceasefire. In May 2008, Hezbollah forces briefly turned their guns on fellow Lebanese when they seized West Beirut from the Lebanese Army, although, their demonstration of power complete, they later withdrew. 

Not only does Hezbollah remain a potent proxy for Iranian action or retaliation, but Tehran might also use Hezbollah to create a diversion and deflect attention and pressure from Iran’s nuclear program. Should Hezbollah, for example, reignite the summer 2006 conflict with Israel, the ensuing crisis would occupy U.S. and international diplomacy and, in so doing, distract focus on the Islamic Republic’s nuclear program.

Iran might use its relationship with Palestinian terrorist groups in any broad, sustained conflict with the United States.   Even if these groups did not directly target U.S. citizens, they could conduct suicide bombings against Israelis or moderate Arab targets that that would communicate an impression of U.S. policy failure. The State Department report on international terrorism for 2007 accused Iran of providing rhetorical, financial, and operational support to Hamas, Palestinian Islamic Jihad, the Al Aqsa Martyr’s Brigades, and the Popular Front for the Liberation of Palestine-General Command.  Of these groups, Palestinian Islamic Jihad is closest politically to Iran, although Hamas is moving closer to Tehran. 

Iran could also try to act against the United States in neighboring Afghanistan, both by undermining the central government and by instigating attacks on U.S. forces.   While Iran has historical enmity toward the Taliban, this does not preclude tactical cooperation. NATO forces have intercepted Iranian weapon shipments in the Hilmand province during periods of enhanced Taliban activity. Tehran has also taken steps to make western Afghanistan more dependent upon the Iranian electrical grid and transportation system to the detriment of that region’s links to the central government. This will enable Iran to enhance its influence and pressure over Afghanistan in the future.

And while sectarian differences may seem to obviate any alliance between Iran and al-Qaeda, pragmatism may allow the Iranian government to overcome any antipathy.  The 9/11 Commission suggested a low level of tacit cooperation, mostly involving free transit for jihadis training in Afghan terror camps. Since January 2002, U.S. officials have said it is unclear whether Iran has arrested senior Al Qaeda operatives who are believed to be in Iran. These figures are purported to include Al Qaeda spokesman Sulayman Abu Ghaith, top operative Sayf al Adl, and Osama bin Laden’s son, Saad.  U.S. officials blamed the May 12, 2003 bombings in Riyadh, Saudi Arabia against four expatriate housing complexes on these operatives, saying they have been able to contact associates outside Iran.

Iran’s Nuclear Program

History of Iran’s Nuclear Program

The Islamic Republic’s nuclear program and accompanying U.S. concerns have a history going back at least two decades. Although the Shah laid the initial groundwork for an Iranian nuclear program, Iran’s nuclear drive did not begin in earnest until a decade after his fall. In 1989, the Russian government offered to complete the Bushehr nuclear reactor begun by the German company Siemens 15 years earlier. Much to Washington’s consternation, the Russian government began to work actively on the Bushehr plant in 1992, although Moscow did later cancel a 1995 agreement to build a centrifuge plant to produce highly enriched uranium. Delays caused by the difficulty of incorporating Russian technology into German-built facilities pushed back the promised completion date from 2000 to 2008. Technological constraints delayed the development of Iran’s program, rather than any lack of intent or effort on the part of the Iranian regime. With the Russian shipment of 82 tons of lightly enriched uranium fuel, Bushehr may now power up to full capacity by December 2008.

Iranian officials justify their program in many different ways. Some argue that energy needs motivate the programs; others cite prestige or even security concerns. As the Islamic Republic develops a nuclear capacity, it will be impossible to determine Tehran’s intent. While the 2007 U.S. National Intelligence Estimate suggests Iran ended its nuclear weapons program in 2003, ambiguity surrounds Iranian goals. Indeed, it is quite likely that the Iranian government has yet to decide whether or not they will build a bomb and transform an ostensibly civilian program into a military program. In the short-term, Tehran may not exercise its capacity but, should Iran develop the know-how, in the long-term, it probably will.

Iranian authorities long maintained a covert program alongside their declared nuclear reactor at Bushehr. Pressure mounted on Tehran to explain their covert enrichment program after the Mujahidin al-Khalq exposed details and satellite photos of facilities at Natanz and Arak. When the IAEA finally inspected Natanz in February 2003, they found that the Iranian program was further along than even U.S. intelligence had expected. Iran had already completed 164 centrifuges, was constructing 1,000 more, and was building a facility to accommodate 50,000, enough centrifuges to produce enough bomb-grade material for as many as twenty crude weapons per year. 

Iran’s nuclear facilities are dispersed across the country. The Islamic Republic operates an enrichment plant in Natanz and a uranium conversion facility in Isfahan. It is building a light-water research reactor in Bushehr with Russian assistance and a heavy water production plant near Arak, approximately 150 miles south of Tehran. It operates research facilities complete with small research reactors in Tehran and Isfahan. Uranium mines near the central city of Yazd provide raw material, although inspectors have also found traces of plutonium and highly enriched uranium, suggesting that the Iranian nuclear program also receives support from outside proliferators. Whereas once the Iranian government remained dependent on foreign expertise and imports, purchasing Chinese, Swiss, and German calutrons and a Belgian cyclotron, for example, as the Islamic Republic completes its centrifuge cascade (see Appendix D) it will have all components in place to enjoy a fully autonomous nuclear program.

In recent years, the Islamic Republic has accelerated progress. Debate exists, however, over whether Iran is successfully operating the cascades in unison and what technical hurdles remain in mastering this process. As of May 2007, the IAEA reported that Iran was running roughly 1,300 of its centrifuges at Natanz; by July 2008, IAEA officials speaking to the press said that the Islamic Republic had installed 4,000 centrifuges, although only 3,500 were running regularly. The Agency also believes that Iran has already produced roughly 75 kilograms of over 4 percent enriched uranium and can produce between 50 and 90 kilograms more per month. If Iranian authorities wish to make a crude bomb’s worth of 90-percent enriched uranium, they would need between 500 and 700 kilograms of this material to produce 20 kilograms of 90 percent enriched uranium.

IAEA inspections have cast doubt on the Iranian government’s assertions that the Islamic Republic’s program is for peaceful purposes only. A June 6, 2003 IAEA report found that the Iranian government could not explain the presence of uranium metal in its nuclear fuel cycle, since “neither its light water reactors nor its planned heavy water reactors require uranium metal for fuel.” When the Iranian government explained that such metal was contamination on equipment purchased from Pakistan, it contradicted its earlier assertions that their enrichment program was entirely indigenous.  However, it appears that Iran developed centrifuge enrichment using technology imported from Pakistan.  The role of Pakistani nuclear scientist A.Q. Khan remains unclear, although it is known that he did travel to Tehran. IAEA inspections have also found traces of bomb-grade uranium at other sites, and revealed that Iranian scientists have experimented with Polonium-210, a substance used to initiate the chain reaction leading to the detonation of a nuclear bomb.

Iranian officials have never admitted to having a nuclear weapons program, but in response to international pressure they temporarily suspended their enrichment program in 2003, although they later restarted their program and subsequently reported that they had successfully enriched uranium. While Iran claims that its centrifuge enrichment program is for peaceful purposes and is intended to provide low-enriched uranium fuel for its Russian-supplied nuclear power reactor (a VVER-1000 PWR) at Bushehr, unresolved issues led the IAEA Board of Governors on September 24, 2005 to find Iran to be in non-compliance with its safeguards agreement under the Nuclear Non-Proliferation Treaty. 

Defiance

The Iranian government shows no sign of bowing to international pressure to halt a nuclear program in which it has invested billions of dollars gained from trade and oil exports over the years. On July 23, 2008, Ahmadinejad rejected international demands that the Islamic Republic cease enriching uranium, and called on the permanent members of the UN Security Council to accept reality.[5] Two days later, while delivering the regular Tehran Friday sermon–the regime’s official statement of policy–on behalf of the Supreme Leader, Rafsanjani dismissed Western diplomats’ demands for a nuclear freeze. The defiance–coming after the five permanent members of the United Nations Security Council and Germany met with Iran’s nuclear negotiator to discuss an incentives package to bring the Islamic Republic into compliance with its obligations–marks just the latest chapter in an ongoing saga.

Across the Islamic Republic’s political spectrum, Iranian officials defend their right to nuclear power. The Iranian government interprets the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) to ensure that right, and says that the Treaty enables Iran to enrich uranium to provide low-grade fuel (3-5 percent U-235) for a nuclear reactor. Here, though, the devil is in the details. The same enrichment technology can manufacture weapons-grade uranium. The Iranian interpretation may be less than accurate from a U.S. legal standpoint. The State Department has yet to clarify to Congress whether it accepts the Iranian interpretation of its right under the Non-Proliferation Treaty to enrich uranium to low-grade fuel levels and, if so, under what basis it has come to that conclusion.

IAEA inspection reports (Appendix A) provide a timeline of international concern regarding Iran’s nuclear program dating back to 2003. Apprehensions about Tehran’s nuclear ambitions, however, predate the IAEA inspection reports. The 2007 National Intelligence Estimate reported that Iran maintained a nuclear weapons program at least until 2003, and confirmed that its dual use nuclear development has continued ever since. 

International concern about Iran’s past cheating is heightened by its failure to ratify the IAEA’s 1997 Additional Protocol.  The genesis of the Additional Protocol lays in past inspection failures.  Before Operation Desert Storm in 1991, the Iraqi government had successfully deceived IAEA inspectors about the scope and purpose of the Iraqi nuclear program.   The Additional Protocol increases the depth and frequency of inspections.  Even if Iran ratified the Additional Protocol, however, the IAEA does not have the capacity to detect diversion of a bomb’s worth of fissile material from nuclear fuel plants within the time period it takes Tehran to complete the diversion.  As IAEA inspectors have visited the Islamic Republic’s declared nuclear facilities, they have had difficulty resolving anomalies and answering questions about Iranian activities. 

On September 24, 2005, the IAEA Board of Governors found Iran to be in non-compliance with its safeguards agreement under the Nuclear Non-Proliferations Treaty.  After a renewed attempt to break the diplomatic impasse, the IAEA referred the Iranian case to the United Nation’s Security Council which, on December 23, 2006, unanimously passed UNSCR 1737, imposing sanctions on some trade and technology sharing.  The Security Council augmented these sanctions with the passage of UNSCR 1747 on March 24, 2007, and the passage of UNSCR 1803, on March 3, 2008.

Ironically, the United States is not in compliance with UNSCR 1747 because the U.S. Treasury Department has yet to designate under U.S. law those individuals and entities which UNSCR 1747 targeted.  The process of designation is more complicated in the United States than in the European Union because of U.S. requirements for due process.  Under various Executive Orders, the U.S. Treasury Department must hold a substantive, evidentiary review, the conclusions of which go to the Office of Foreign Asset Control whose lawyers must certify the process.  The designation then goes to the U.S. Department of Justice which reviews the proposed designation in the context of litigation risk.  Once the legalities are worked out, the interagency process must concur, usually at the Policy Coordination Committee level.  Such a process from start to finish can take weeks, months, or years.  Lawyers, however, disagree whether such a drawn out process is necessary, or whether the U.S. government has authority under the UN Participation Act to designate directly.

Even if the U.S. government fulfills its existing sanctions commitments, the Iranian government may find its pre-existing trade relationships capable of mitigating the bite of sanctions.  The Russian government has repeatedly sought to delay or downgrade sanctions.  There remains no prohibition on nuclear cooperation with Iran.  Russian officials still assist in construction of the Bushehr reactor because, so long as Moscow protects its ability to provide such assistance by threatening to veto any Security Council resolution that would restrict it, such nuclear assistance remains permissible.  Likewise, while the UN Security Council has prohibited the export of arms from Iran, in order to protect Iran as a Russian market, Russia has threatened to veto proposals in the Security Council to ban the export of arms to Iran.

There are three explanations for Russian intractability.  First is strategic calculation.  Moscow lost the Warsaw Pact and has since sought to create a new alliance, of which the Islamic Republic could be an important part.  After having lost the other former Soviet states, Russia may be trying to re-establish its near abroad.  Second is money.  After the end of the Cold War, the Ministry for Atomic Energy (Minatom) fell on hard times.  The government did not have money to fund new projects.  Minatom—since renamed the Russian Federal Atomic Energy Agency (Rosatom)—found a new market in Iran.  Third, Russian-Iranian nuclear cooperation may also span into the criminal sphere.  Even if the Russian government sought to end its nuclear enabling of Iran, there may be enough Russian scientists who are willing to assist Iran privately in areas such as laser enrichment.

Beijing is also reluctant to impose harsh sanctions or further Chapter VII resolutions as forceful action against Iran might undercut its perceived energy security.  However, the Chinese government is more likely to work behind the scenes than use its Security Council veto.