by Vali Nasr
The administration did claim success on another front. By mid-2010, clandestine initiatives to penetrate and subvert Iran’s nuclear program were up and running. A particularly nasty computer worm called Stuxnet had been delivered (some reports indicate with Israel’s help) into the intranet that supported Iran’s nuclear program. Stuxnet interfered with the mechanisms that control the highly synchronized spinning of thousands of centrifuges at extremely high speeds. That wreaked havoc in the system, and the damage to the centrifuge infrastructure significantly slowed Iran’s enrichment schedule. In May 2009, Iran had 4,290 centrifuges. In August 2010, that number had dropped to 3,772 thanks to Stuxnet.54
Stuxnet in Iran was the equivalent of drones in Pakistan or Yemen—a new and covert way for America to deal with world problems.55 Stuxnet was followed by a series of deadly attacks on nuclear scientists and administrators, believed to be either at the hands of the United States or Israel, or both. A massive bomb that exploded at a military base housing part of Iran’s missile program was assumed to be part of the same campaign. Iran also believed that Israel was fomenting ethnic trouble in Iran—working with Azerbaijan to stir up Azeri nationalism in the northwest and backing Jundullah, a vicious extremist group in Iran’s Baluchistan province that was spearheading a secessionist campaign of terror there.56
These brazen attacks, some argued, were pressuring Iran’s rulers and slowing the nuclear program. That some of them were happening openly in Iranian cities was a powerful signal of American and Israeli determination and its ability to stop Iran’s nuclear program. In Israel, a lively debate erupted as to whether sabotage was obviating the need for open war.57 A former head of the Mossad, Meir Dagan, broke with Prime Minister Netanyahu, arguing the case for covert war (later he was joined by several other military and intelligence chiefs). On the other side, former premier Ehud Barak thought that sabotage could do only so much and that Iran would soon devise ways to guard against further damage.58 Still, Russian and Chinese backing for UN sanctions (complemented by harsher financial restrictions Stuart Levy’s team had put in place), combined with intriguing cloak-and-dagger operations against Iran’s nuclear program, made for a good narrative going into an election year: the Iran problem was under control, Iran was under pressure and weakening, Obama had succeeded where Bush had failed.
In truth, Obama’s version of the dual-track policy was also not successful.59 It was not even “dual.” It relied instead on one track, and that was pressure.60 Its gains were short-lived and illusory. The United States had forgotten that the object of pressure was to jump-start diplomacy, which meant that doors had to be kept open even as the squeeze was applied.61 Not surprisingly, when Iran next met with the United States and its allies, in January 2011 in Istanbul, the talks quickly failed. Sanctions and sabotage remained the “dual-track” approach of choice.
This led Iran to step up its own dual-track policy of applying pressure to get America to negotiate in earnest. The difference was that Iran would periodically put options on the table, opening doors to diplomacy that the United States could walk through. The Tehran Declaration was one such door; another was Russian foreign minister Sergey Lavrov’s “step-by-step” plan. Lavrov informed his American counterparts of his plan during a visit to Washington in July 2011. He suggested that both Iran and the United States should agree to a road map according to which Iran would address every IAEA concern, but one at a time, and would receive a corresponding benefit (in the form of a particular sanction being lifted) for doing so. The plan called for a freeze on further sanctions while the process was working.62 Iran accepted the plan but the United States did not.63
With his reelection year approaching, Obama did not want to try anything new. Plus, there was the fear that step-by-step could stall. As sanctions were lifted, Iran might feel less compelled to provide further concessions. Such a piecemeal process might go only so far and then collapse under the weight of its own success.
Obama wanted to stay with the sanctions-only policy for now, but the happy narrative of successful pressuring and sabotage was just one headline away from crashing. The crash came on October 11, 2011, when Attorney General Eric Holder and FBI Director Robert Mueller made public a foiled, allegedly Iranian-backed, assassination attempt against Saudi Arabia’s ambassador to the United States, Adel al-Jubeir. The sensational plot involved Mexican drug cartels, DEA informants, and the audacious idea of blowing up a popular Washington restaurant (Café Milano in Georgetown) frequented by the ambassador. To many the plot looked too amateurish to be the work of the dreaded Iranian intelligence services.64 But it mattered little what skeptics thought. The administration believed the plot was real, and if real, the plot of course undercut the administration’s claim to have Iran under control. It was clear that far from being cowed, Iran was mounting its own pressure tactics to bend America’s will.
Then in November came a sensational new IAEA report that raised alarm about the military aims of Iran’s nuclear program. Skeptics argued that the report revealed little that was not known previously, but the Obama administration saw the report as a game changer and told the public of the grave danger that Iran’s nuclear program posed. The bugbear grew.
Israel, Saudi Arabia, the UAE, and Congress all concluded that the administration’s dual-track policy had failed. Israel (publicly) and the Persian Gulf states (privately) renewed their talk of the need for military action. Congress made its own Iran policy by passing stiff new sanctions, most notably targeting the country’s oil income by sanctioning its central bank. The Europeans followed suit by announcing that they would stop buying Iranian oil. Caught off guard, the administration tried to get back out in front by endorsing the new sanctions, escalating its own rhetoric, and announcing unilateral sanctions such as making it difficult for oil tankers carrying Iranian oil to get necessary insurance to do business—which led Iran to sell more of its oil through Iraq and Dubai.
Up to this point, sanctions had been harsh but mainly affected Iran’s trade (restricting what Iran could import). Now they were going after Iran’s income (limiting how much oil Iran could sell).65 With the United States and Europe pushing other oil producers to step up production, and those producers building new pumping infrastructure and signing long-term contracts with Iran’s former customers, Iran would find it hard to get back into the game even if it bowed to international pressure on its nuclear program.
But tightening the screws did not show a way out of the crisis. Sanctions had hurt Iran’s economy, and the new tougher sanctions cut to the bone. Both inflation and unemployment spiked, and shortages ravaged the economy. The government postponed an estimated $60 billion in infrastructure projects. Yet Iran still had ways to keep its head above water.
Iran had large gold reserves and since 2008 had been taking a larger share of its oil revenue in currencies other than the dollar. Iran keeps these currencies in their countries of origin and uses them to finance its international trade locally. That is costly, but it allows oil- and trade-related transactions to dodge financial restrictions. When Dubai turned the screws on Iranian financial institutions in 2011, Iran shifted its financial transactions to China, Pakistan, and Turkey. Dubai banks no longer support personal Iranian accounts and dig deep into activities of Iranian companies before clearing their transactions. Chinese, Pakistani, and Turkish banks do none of this. A dozen Pakistani banks keep open credit lines that allow Iranian merchants to buy goods in Pakistan and ship them across the border for sale in Iran.
Nor was the oil embargo’s impact as worrying to Iran as was commonly assumed. The global supply of oil is fairly tightly matched to demand. So if Europe, for instance, cuts off purchases of Iranian oil, Iran will still be able to find buyers in other parts of the world, at least for a while. And if Iran is cut out of the already tight oil markets altogether, that will impact oil prices and the prospects for global economic recovery.
By early 2012, China, Japan, South Korea, Sri Lanka, India, and Turkey had all cut some o
f their oil purchases from Iran but continued to buy Iranian oil. The Iranian analyst Bijan Khajehpour estimated that selling about 1.75 million barrels per day to these countries combined—along with sales of natural gas to Turkey—could earn Iran sums well in excess of what it needs to pay for its imports. Thirst for oil in all these countries is expected to grow as their economies continue to boom. Iran also sells oil through Iraq and Dubai—literally sending oil on trucks and boats to those destinations, which then reship it as local oil.
Iran is unhappy with the way in which it has to sell its oil but remains confident that global markets will continue to provide room for it. In the longer run, the surge in energy demand in China and India alone, Iran thinks, will make Iranian oil indispensable. What worries Iran is that due to its inability to secure investment and new technology to upgrade its oil industry its production capacity will not grow—and will likely decline—and so it will not be able to take full advantage of growing world demand.
The sudden tightening of sanctions, then, did not break Iran’s economy, but they did severely affect the daily lives of Iranians. So it was not a surprise that Iran reacted angrily to this sudden turn of events. It decided that Obama was adding pressure on Iran to placate his domestic critics because he still saw sanctions as a cheap, low-risk way to look tough on Iran. If Iran did nothing, it could only expect more pressure and perhaps even open conflict. It was better to deter the United States now and disabuse Washington of the belief that it could forever hide behind sanctions. Iran threatened confrontation, closing the Strait of Hormuz, through which a fifth of the world’s oil supply flows, carrying out terrorist attacks, and stopping the sale of oil to European countries well ahead of when the EU planned to stop buying Iranian oil—that would catch Europe (then in the thick of frantic efforts to save the euro) off guard and cause an energy crisis and higher oil prices. It now looked as if sanctions were no longer a substitute for war but could be a cause of it.
Lifting these crippling sanctions—and preventing more being added onto them—now became Iran’s goal. To get rid of sanctions, Khamenei calculated that it would be necessary to act tough in front of the West—to meet threat with threat and pressure with pressure—and to attain nuclear capability faster (because then Iran would have more leverage to negotiate sanction removal). Iran knew from Iraq’s experience that once sanctions are imposed, they tend to stay in place. Even if Iran conceded on the nuclear issue, the U.S. Congress would ask for concessions on terrorism, and then on other issues before sanctions were ever lifted. This is what worried Khamenei—“that the U.S. would not be satisfied until Iran gives up its religious beliefs, values, identity, independence.”66 The Europeans would not reverse their oil embargo either, not unless every European country voted to do so, which would be unlikely. And the tens of billions of dollars’ worth of arms sold to Saudi Arabia and the UAE to bolster their defenses against Iran would not vanish from those countries’ arsenals if and when Iran gave up its nuclear program.
By this reasoning Iran would get nothing for cooperating on the nuclear issue and would have a stronger bargaining position if it got past the point of no return. In yet another ironic twist, rather than halt Iran’s nuclear program, the new sanctions actually gave Iran ample incentive to forge ahead with it.
Iranian leaders also understood that giving up on the program at a time when sanctions were weakening the state and robbing it of the means to buy political support at home would doom the regime. Look at Libya, they would say. Gaddafi gave up his nuclear program, and then when his people rose up he had no way to keep the United States and NATO from intervening to topple him. Back in 2004 when Gaddafi gave up his nuclear program in exchange for normalizing relations with the West, Khamenei had told his National Security Council that the Libyan leader was “an idiot” and that this was the end of him. With memories of the 2009 Green Movement still fresh, Iran’s rulers felt they could expect a Libya scenario only if they relinquished their nuclear program and then their unhappy and hungry masses rose up in protest.
The Iranian state relies on an extensive patronage system to rule. The sanctions have raised doubts about the viability of patronage politics—there is not enough money to dole out to buy off the population. If support for the regime softens and dissident factions peel off, the door could open not only to compromise on the nuclear issue but to a transition to a more open regime. That would be a best-case scenario for the West.
The downside was steeper. Countries that have built nuclear weapons have all had to make a decision to do so. Iran has so far decided to gain nuclear capability, but by most intelligence accounts has not made the decision to build a bomb. Could pressure, meant to keep it from such a decision, instead backfire and end up driving it to that very end?
Obama still hoped that there was life in the dual-track policy. He hoped that punishing economic pressure would persuade Iran’s leaders that to survive they had to stop and not take that last fatal step across the red line that would trip a war with America. To give the status quo a chance, he moved the red line back to Iran attaining a nuclear weapon. Since 2009, Washington had indicated that it was willing to tolerate some enrichment activity in Iran, but it had never formally rolled back its red line from enrichment to weaponization—Obama did just that.67 But in doing so he also painted American foreign policy into a corner. If you draw a clear red line then you have to defend it or risk looking weak.
That provided an opening for the American Right, backed by Israeli prime minister Netanyahu, to force Obama’s back to the wall on Iran. The policy was a failure, Iran was closer to a bomb, and short of war there was no other way to stop it. That compelled Obama to put Iran policy at the forefront of his foreign policy agenda and to further increase pressure on Iran.
Publicly the president pushed back against war. He told a gathering of the pro-Israel group AIPAC that he would not countenance containment of a nuclear Iran—containment was not an option—and if it became clear that Iran was about to build nuclear weapons America would go to war to prevent that. But for now, the president was confident that pressure (and he was adding much more of it with his policy under criticism at home) combined with talks (which he now aggressively pursued with Iran) would work.
Khamenei welcomed Obama’s pushback against war, and it was then that he reissued his 1995 fatwa—in effect saying that Iran will not build a bomb, so Obama does not have to go to war. Khamenei also agreed to return to talks. This looked like a victory for dual-track—although the pressure was on the United States this time. Israeli goading and the American Right were opening the door for diplomacy.
But once again Obama was not willing to walk through the door. In Istanbul America suggested that if Iran suspended 20 percent enrichment of uranium and agreed to send out of the country its stockpile of 20 percent enriched uranium, and if it proved that Khamenei’s fatwa would hold, then America would discuss sanctions relief and include recognition of Iran’s right to enrichment (the key Iranian demand) in the discussion. Talks resumed in Baghdad and Moscow. In the Russian capital Iran offered to make the fatwa a UN document, but now the United States backed away from its Istanbul offer. Recognizing the right to enrichment and talk of sanctions relief were off the table. The United States was prepared to offer only aircraft spare parts (the Iranian aviation industry is in desperate need of parts for its aging aircraft) and a promise not to pursue further UN sanctions if Iran agreed to what was asked of it—that is, we would not consider relaxing or even temporarily suspending any international sanctions, nor consider a moratorium on unilateral U.S. financial sanctions. In a lower-level meeting of technical experts after the Moscow talks, Iran offered to set aside its demand for recognition of its right to enrichment (its key demand all along) and asked what it could expect in sanction relief (and Iran wanted substantial relief) if it complied with U.S. demands that it cap enrichment at 5 percent and give up its stockpile of 20 percent enriched uranium. The answer, again, was aircraft spare parts. The sum
total of three major rounds of diplomatic negotiations was that America would give some bits and bobs of old aircraft in exchange for Iran’s nuclear program.
Ironically, economic sanctions had done what they were supposed to do—bring Iran to the table. But now it took a deal to end the crisis, and the White House wavered. A deal would be difficult to sell at home or to Israel, whereas sanctions played well domestically. As one senior State Department official put it to me, “any deal that is acceptable to Iran is unacceptable to Israel, and any deal acceptable to Israel is unacceptable to Iran. It is hopeless, no point in trying.”
For the second time (the first was the Turkey-Brazil deal) the administration came to the edge of a diplomatic breakthrough and then walked away. Obama hoped that the status quo would hold until a new regime took over in Tehran. In effect, the United States now sought to resolve the nuclear issue not by taking away Iran’s nuclear program, but, as a number of administration officials told me, by changing the regime that would oversee it. It was something like the peaceful coexistence we had with the Soviet Union; we lived with them until they were gone. Iran would go nuclear, but hopefully it would not matter to the United States and Israel when it did.