Australia/Israel & Jewish Affairs Council

Nuclear Negotiations with Iran

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Update from AIJAC

October 7, 2009
Number 10/09 #09


As readers will probably be aware, late last week the much-awaited Geneva meeting between Iran and the P5+1 countries (the permanent members of the UN Security council plus Germany) took place - coming in the aftermath of the revelations about Iran's secret Qom nuclear site. This Update is devoted to that meeting and the general state of play on the Iranian nuclear file.

First up is Israeli academic and analyst Professor Barry Rubin who argues against those who see the Geneva meeting as any sort of diplomatic success. He points out that while there was no chair-throwing, this is hardly surprising because this is not in Iran's interests and that Iran's agreement to belated inspection of the Qom facility was something already conceded. Most importantly, he says that Iran's supposed offer to enrich some of its uranium abroad appears hollow - not only is there no detail, leaving scope to stretch out negotiations over months, any actual offer is being denied by other Iranian sources. For Rubin's full analysis of what this means for American Iran strategy, CLICK HERE. In addition to the Jackson Diehl piece cited by Rubin in his article, others basically offering a similar analysis are Con Coughlin of the  Telegraph and Bronwyn Maddox of the Times, and Iranian exile scholar Kaveh L. Afrasiabi. Meanwhile, Rubin has had a follow-up post pointing out that the Iranian themselves are saying that the uranium offer was a ploy to fool the West.

Next up, American Iran scholar Professor Abbas Milani argues that the most important announcement on Iran last week was not from Ahmedinejad but from the opposition. He points out that the opposition warned the West not to be fooled by the offer to enrich uranium abroad, and more importantly, made clear that their own approach on the nuclear issue is very different. He points out that this appears to debunk the oft-cited supposed Iranian national consensus on the nuclear issue, and make a strategy of supporting the reformist opposition as a solution to the nuclear conundrum much more plausible. For these important revelations from Professor Milani, CLICK HERE.

Finally, we include some new testimony to the US Congress by Stuart Levey, the US Under Secretary for Terrorism and Financial Intelligence, who is generally regarded as the architect of a number of successful existing US efforts to sanction Iran, especially through the financial sector. Levey, while careful to hew to the Obama Administration's line that unilateral US sanctions being considered by Congress are premature, outlines well what sanctions might be imposed and the vulnerabilities Iran has to sanctions. For his expert view of what sanctions on Iran might entail, CLICK HERE.  Also making the case for sanctions was recent visitor to Australia Clifford May, while the US administration says new sanctions may indeed be in the offing soon. Disputing that sanctions are a viable option is American security studies scholar Elliot Cohen.

Readers may also be interested in:


Iranian Regime’s Charm Plus Western Credulity Equals "Diplomatic Success" in Geneva

By Barry Rubin

Rubin Report,  October 2, 2009

The United States--along with Russia, China, France, Britain and Germany--met with Iran in Geneva and officials, media, and experts proclaim it a success. Was its nuclear program what Iran defused or merely Western pressure?

It is widely claimed that the meeting in Geneva obtained three great achievements toward ending the long-running Iran nuclear arms’ campaign.

The first point is that the talks were conducted in a polite and civil manner. The Iranian delegates did not shout slogans and throw shoes at the Americans.

This is absurd. With typically short memories, observers forget that Iran conducted years of serious talks with all the participants except the United States. But of course these talks were used to stall for time and divide the foreign opposition. Any commitments made were promptly broken.

What is amusing about this point is that it reveals how behind the screen of Political Correctness and respect for all peoples, it is considered a revelation if Iranians don’t act like stereotyped savages. In fact, Iran has a long and successful history of diplomacy imbued in its political culture.

And of course the regime has a strong vested interest in not engaging in furniture-throwing at the meeting. After all, in every other venue it can continue its ideological extremism, repression, sponsorship of terrorism, and so on merely in exchange for a few hours of making nice in Geneva.

The second claimed success is equally hollow. Iran agreed to allow inspections of its hitherto hidden enrichment facility. Again, memories are short. In fact, the Iranian government announced that it would do so before the meeting in the same statement where it admitted the facility existed.

Let’s take a step back and consider the situation. For four years, Iran built and kept hidden the Qom enrichment plant. This is in complete violation of Iran’s treaty commitments and is one more definitive proof—as if one was needed? Well apparently it is—that the Tehran regime is seeking nuclear weapons as fast as possible.

At last, though, Iran got caught. So it basically said: in exchange for keeping this facility and for no punishment for building it we will allow you to do inspections. This is a clever maneuver, not a huge concession. Indeed, it is a victory for Iran.

The third point is the most significant and interesting. Iran has agreed in principle—note that since this implies that once details are discussed the promises will either be less attractive or not implemented at all—to send much of its nuclear fuel from the Natanz enrichment plant—the one we’ve known about--to Russia where it will be further enriched and then sent to France to be converted into fuel, making it far less suitable for making into weapons.

But guess what? And this is so important I'm going to put it in bold: Iran's ambassador to Britain has denied that Iran agreed to turn over the nuclear fuel. And this has not even been reported in the Iranian media yet.

Get it? Iran is getting credit for a concession that it has not even made yet and probably doesn't intend to make!

And so when I say: The account we are getting of the meeting's significance is too good to be true there's a lot of evidence for that conclusion.
It’s hard to believe otherwise. After all, one must take into context the nature, history, ideology, policies, and leadership of the Tehran regime as well as its immediate need to consolidate power at home and defuse pressure from abroad. If ever there was a situation that seemed ripe for trickery this is it.

But here’s the best argument: To believe that Iran is ready to act sincerely in giving up its nuclear fuel which can be used to make atomic weapons, you have to conclude that the regime’s goal all along has just been to build nuclear energy power plants, not weapons of mass destruction.

From Tehran’s viewpoint, in just about seven hours of talks it made the threat of sanctions go away for months without taking any actual action of significance. Indeed, Iran and those it met with have a common interest: to make the public and confrontational aspects of the problem go away.

U.S. officials said that the issue of repression in Iran was raised at the meeting—probably very much in passing—but that sanctions were barely mentioned. Of course, the Iranians knew all about the sanctions already but the point here is that the tone of the meeting was to downplay pressure and to give the Iranian regime a chance to “go straight.”

The responses of President Barack Obama show clearly his strategy. He will support Iran doing reprocessing in exchange for the regime pursuing only a peaceful nuclear energy option. Remember that this is what Iran has insisted it has been doing all the time and will go on insisting until the day that nuclear weapons are obtained. In a sense, Obama—to use current jargon—is empowering the Iranian narrative.

But consider this. Let's say that the United States, the Europeans, and Iran agree that Tehran is just seeking peaceful nuclear energy and should get it. What happens when some time in 2010 it becomes clear the regime was lying and that it's made dramatic progress toward getting atomic bombs? Won't this make Obama look to be about the most fooled world leader since Neville Chamberlain waved that piece of paper saying Hitler only wanted western Czechoslovakia and should get it? How would the administration react in that event?

At any rate, what this may well amount to is a plea: Please fool us better. Do a more persuasive job of hiding your true intentions.

That’s not, of course, what Obama and other Western leaders intend. Here’s what Obama says: He created a framework for resolving the issue by affirming that all nations have the right to peaceful nuclear power as long as they stick by the rules of the Nuclear Non-Proliferation Treaty. By making clear his commitment for all countries in the world to get rid of nuclear weapons he united the international community behind him. That is what made possible the Geneva meeting.

Obama then presented three demands. First, Iran must allow inspections of the Qom facility, which it already has agreed to do. Second, it must build confidence that it is only seeking peaceful nuclear energy. This is to be done by the transfer of uranium to Russia for reprocessing.

He is thus giving Iran a face-saving way out: keep your program but don’t build nuclear weapons.

Meanwhile, sanctions are put off and Iran will be able to talk for months about the details of the Russia reprocessing deal. In a separate but related story, the Iranian automaker Khodro announced a deal with the French company Peugeot to make cars for export. Khodro also has such deals with Mercedes-Benz and the Japanese Suzuki company. It doesn’t sound like they are worried about being isolated internationally.

After the Geneva meeting, they don’t need to be.

Here's a good article by Jackson Diehl of the Washington Post who seems to be the best journalist in the mainstream media writing on U.S. Middle East policy. Most of what you are reading elsewhere in the mass media is nonsense. Diehl's appropriate headline: "The Coming Failure in Iran."

Barry Rubin is director of the Global Research in International Affairs (GLORIA) Center and editor of the Middle East Review of International Affairs (MERIA) Journal. His latest books are The Israel-Arab Reader (seventh edition), The Long War for Freedom: The Arab Struggle for Democracy in the Middle East (Wiley), and The Truth About Syria (Palgrave-Macmillan).


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Opposite Directions

The most important announcement from Iran this week did not come from Ahmadinejad.

Abbas Milani
   
 The New Republic, October 3, 2009
   
The Iranian regime has made headlines this week with its announcement that it will allow inspections into its recently discovered enrichment site in Qom, and its agreement, albeit ambiguously, to allow enrichment to be handled by Russia or France. Less covered, but actually more important, are recent statements from the Iranian opposition against the nuclear weapons program--warning Western leaders not to be fooled by Ahmdinejad’s latest concessions, and actually offering a viable alternative to solve the current nuclear standoff.

Iran’s leadership knows that every policy decision about Iran in the West, or even in Russia and China, is haunted by the specter of the Iranian democratic movement--a recognition that the regime is suffering from profound inner fissures and lack of legitimacy at home. Russian vacillation in its support of the current Iranian government has left Supreme Leader Ali Khamenei and President Mahmoud Ahmadinejad worried about losing their international support. Their foreign policy is founded on the assumption that Russia and China will support them against any serious UN sanctions. To ensure the continuation of this crucial support, the regime has had to offer some concessions on the nuclear issue. Moreover, Khamenei does not want to fight on two fronts: with Iranian democrats at home, and with the international community abroad.

While the regime is showing conciliatory signs to the West, at home they have tried to sell the latest agreement as a great victory for the regime. The world, their message is, has come around to accept Iran’s terms. For example, the commander of Iranian Revolutionary Guard Corps, talking to 300 Basiji supporters meeting in the still-occupied American embassy compound in Tehran on Friday, announced that the Khatami style of negotiation was tantamount to treason and the new empowered Iran is forcing its terms on the West. The often-implied and sometimes-explicit message is that the policy of confrontation pursued by Khamenei and Ahmadinejad--as opposed to the policy of negotiating with the West suggested by reformists--has allowed them to now negotiate from a position of strength. To reinforce that message, they also engaged in the provocative act of testing a new medium-range missile. Ahmadinejad’s suggestion that Iran’s next meeting with the group of 5+1 should be at the level of heads of state is rooted more in his need for a legitimizing photo-op than any substantive policy initiative.

Iranian democrats, on the other hand, have in recent days made a concentrated effort to tell the world that the regime is in fact negotiating from a position of weakness; that it does not intend to abide by any agreements they now make; and, most importantly, that the democrats are committed to approaching the nuclear issue differently than the current regime. It is these statements that deserve the most attention in the West.

In recent years, the regime in Tehran and its apologists in America have cultivated the myth that on the nuclear issue, there is a "national consensus" in Iran, and that nothing separates the regime from its democratic opponents. From this faulty premise, many policymakers draw the conclusion that the United States must make a deal with the current regime and not wait or worry about a more democratic Iran. Three statements in the last few days have proven this premise faulty. In reading these statements, we must bear in mind that the reformists are all trying to walk a fine line in demarcating their position from that of the regime, while not offering any opportunities for the regime to accuse them of selling out Iran’s sovereign rights.

First came an announcement early last week by Mohsen Makhmalbaff, a spokesperson for the Green Movement. In carefully calibrated language that would allow democratic leaders in Iran plausible deniability yet convince the reader that he was in fact speaking on their behalf, Makhmalbaff declared that Iranian democrats do not want a nuclear bomb, they understand the international community’s anxieties about the current regime’s nuclear program, and indeed share those same anxieties.

Iranian democrats know full well that a nuclear-empowered Khamenei is first and foremost a threat to their own safety. On the most basic level, if ever there is a Chernobyl-type accident at Bushehr, the site of Iran’s reactor, it is Iranians who will pay the consequence. This is not am unreasonable fear, give then parts for the reactor have been bought in the black-market, and rogue scientists have played a significant role in building the reactor--which happens to be in a particularly earthquake-prone part of Iran. More importantly, the regime, empowered with nuclear weapons, will feel impervious to outside pressure, nothing standing in its way to use any means necessary to roll back democratic progress in the country. Makhmalbaff’s statement clearly articulates their fear that the regime wants the bomb to consolidate its hold on power.

Within a couple of days, this statement was followed more boldly by another from an actual opposition leader, Mehdi Karubi, who repeated verbatim some of Makhmalbaff’s language. Karubi began his statement by suggesting that a regime that lies to its own people lies to the world--in other words, don’t believe anything the regime promises now, they will break their promises as they have broken their many covenants with the people of Iran. He declared definitively that Iranian democrats have no intention to pursue a nuclear bomb. And in perhaps the most significant pronouncement of the week, the generally cautious opposition leader Mir-Hossein Moussavi voiced these same sentiments in a statement this week, blaming the regime’s nuclear adventurism for bringing Iran to the precipice of disaster.

Though the leaders of the Green Movement have previously questioned the strategic wisdom and moral hazards of a nuclear bomb, these recent statements are the clearest and most fevered rejection of Iran’s pursuit of nuclear weapons. They know the current regime, besieged at home by tensions in its own ranks and a citizenry who continue to defy it, seems willing to make short-term nuclear concessions to the West in exchange for assurances that the West will not press human rights issues--a similar grand bargain made with Libya. But the Iranian opposition is warning that, unlike Libyan leader Muammar Qaddafi, Khamenei and Ahmedinejad have no intention of actually ending their pursuit--only buying enough time to ride out the current domestic crisis.

The United States and other Western countries would be well-served to listen to the warnings of Iranian democrats. For almost two decades, the West has been duped into playing a game the Islamic regime knows it will win. The West has been attacking Iran where its defenses are strongest while ignoring its weakest link. The regime has been winning the nuclear battle with the world and is losing--and came close to defeat--the war for democracy against the people of Iran. Instead of playing the losing game, the West should play the game it can win. When negotiations inevitably break down, neither military action nor partial sanctions will stop the regime’s drive for nuclear weapons. Only a democratic Iran can solve the current impasse.

Abbas Milani is the Hamid and Christina Moghadam Director of Iranian Studies at Stanford, where he is the co-director of the Iran Democracy Project. His latest book is Eminent Persian: The Men and Women who Made Modern Iran, 1941-1979 (Syracuse University Press).

 


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Iran Sanctions: US Policy Options


Z-word,  October 6, 2009

Below is testimony from US Under Secretary for Terrorism and Financial Intelligence Stuart Levey to the Senate Committee on Banking, Housing, and Urban Affairs, given today.

Chairman Dodd, Ranking Member Shelby and other distinguished members of the Committee, thank you for this opportunity to update you on our efforts involving Iran. I welcome the Committee’s ongoing focus on this important issue, and, more broadly, your continued support for our efforts to protect the integrity of the international financial system.

Less than a week ago, the five permanent members of the UN Security Council and Germany - the P5+1 - met with Iran in Geneva. As the President said, that meeting was a constructive beginning to our dialogue, but much work remains to be done. He was clear that, “[i]f Iran does not take steps in the near future to live up to its obligations, then the United States will not continue to negotiate indefinitely, and we are prepared to move towards increased pressure.” Deputy Secretary of State James Steinberg has outlined to the Committee our overall two-track strategy toward Iran, focused on both engagement and clear consequences if Iran declines to take concrete steps.

Even as the Administration focuses on diplomacy, we have also been working with our colleagues across the U.S. government to develop a strategy for imposing substantial costs on the government of Iran if the President determines that is what is needed to affect Iranian policies.

The plan we are developing is comprehensive. It takes into account that no single sanction is a “silver bullet” - we will need to impose measures simultaneously in many different forms in order to be effective. It also takes into account Iran’s potential vulnerabilities and those activities that have the greatest influence on Iran’s decisionmakers. As we consider various measures, we are particularly mindful of potential unintended consequences on the people of Iran, and the internal dynamic now playing out in that country.

Because financial measures are most effective when imposed as part of a broad-based effort with the support of the largest possible international coalition, we are working closely with our allies as we put together this strategy. We believe that by consulting with them closely and pursuing engagement genuinely we have a better chance to generate the coalition we will need if dialogue does not lead to demonstrated progress.

We should be realistic about the ability of sanctions to achieve our political and security objectives with Iran. If, however, we accurately target the key vulnerabilities and fissures in Iran and then implement our plan with a broad coalition of governments and key private sector actors, we can at least demonstrate to the Iranian government that there are serious costs to any continued refusal to cooperate with the international community. Although we cannot describe the particulars of our planning in an open hearing, I would like to explain some of our thinking.

Financial Measures

Beginning in 2006, we developed and implemented a strategy to target Iran’s illicit conduct. We took formal action against many of the specific banks, government entities, companies, and people involved in Iran’s support for terrorism and its proliferation activities. We did so using two powerful Executive Orders, E.O. 13382 and E.O. 13224, that allow us to designate proliferators of weapons of mass destruction, terrorists, and their supporters, freezing any assets they have under U.S. jurisdiction and preventing U.S. persons, wherever located, from doing business with them. We have designated more than 100 entities and individuals supporting Iran’s nuclear and missile enterprises, including the key organizations within Iran, scores of their front companies, Iran’s major banks that finance their conduct, and Iran’s major shipping line, the Islamic Republic of Iran Shipping Lines, that handles illicit shipments for these dangerous enterprises. We have also acted against the Islamic Revolutionary Guard Corps, or the IRGC, and several of its companies for proliferation, as well as the IRGC’s Qods Force for its role in supporting terrorist organizations.

As a result of the State Department’s intensive diplomatic efforts, the UN Security Council resolutions on Iran contain many of the same designations we have implemented here in the United States. The European Union and Australia have gone beyond implementing the Security Council’s list, joining us in other designations, such as that of Iran’s Bank Melli. These actions are particularly powerful in that they give us an opportunity to explain publicly our reasons for acting, thereby exposing the illicit conduct of those we have designated.

Importantly, we combined these government actions with unprecedented, high-level outreach to scores of banks, banking associations, and other private sector leaders around the world. We discussed the risks of doing business with Iran and shared information about Iran’s illicit and deceptive practices. As a result, the international private sector has amplified the impact of government actions, as banks and companies around the world have come to understand that, if they are dealing with Iran, it is nearly impossible to protect themselves against becoming entangled in that country’s illicit conduct.

We have seen firsthand that the financial measures applied by the United States and the international community on Iran since 2006 have had an impact. At this point, most of the world’s major banks have cut off or significantly scaled back their business with Iran because of the reputational risks involved. Iran is increasingly dependent on an ever-shrinking number of trade and finance facilitators. Many foreign companies have pulled back from business deals with Iran, including investment in Iran’s energy sector. Iranian businessmen face greater inefficiencies, higher operating costs, and increased difficulty finding business partners and banks to provide them with financing.

Iran’s foreign borrowing has sharply declined since 2006, a significant change from 2002 to 2005, when foreign credit growth to Iran outpaced that of the wider Middle East. External credit to Iran fell 18 percent between September 2006 and September 2008, in stark contrast to the 86 percent rise in external credit to the Middle East region during the same period. And, to the extent that Iranian firms have been able to replace lost credit with domestic credit, they are likely doing so at a much higher cost.

Iran’s Economic Vulnerabilities

The Iranian government’s mismanagement of the Iranian economy, its increasingly corrupt business practices, its ongoing threatening and deceptive conduct, and its handling of the recent elections have fostered dissatisfaction, divisions, and discord within Iran and have made Iran an even less attractive business partner.

Some experts estimate Iran’s unemployment rate to be well over 20 percent, with a lack of jobs disproportionately affecting the young - three out of four unemployed Iranians are under 30. Inflation remains high at about 13 percent. The banking sector is unhealthy and reliant on government support. Iran is ranked 137th out of 183 countries on the World Bank’s Doing Business report, in terms of ease of doing business, and 165th in terms of protecting investors. And, as a result of the Iranian government’s economic mismanagement and its self-isolating conduct, foreign investment in Iran has declined. All of this results in decreased opportunities for the people of Iran.

The Iranian government’s reliance on corruption and nepotism in business further limits opportunities for all Iranians. The Transparency International Corruption Perceptions Index of 2008 ranked Iran 141st out of the 180 countries. The Iranian government has increasingly awarded no-bid government contracts to companies associated with the IRGC - a group that counts Iranian President Ahmadinejad and many senior government officials as former members. These companies, some of which have been designated by the United States and the UN Security Council for their role in Iran’s illicit missile program, operate under names that obscure their IRGC affiliation, so many unwitting non-Iranians are in fact doing business with the IRGC.

In the name of “privatization,” the IRGC has taken over broad swaths of the Iranian economy. Former IRGC members in Iranian ministries have directed millions of dollars in government contracts to the IRGC for myriad projects, including developing the South Pars gas field, managing the Imam Khomeini International Airport in Tehran, and expanding Tehran’s metro system. Furthermore, the IRGC seeks to monopolize black-market trade of popular items, funneling the proceeds from these transactions through a patronage system and using them to help subsidize the government’s support for terrorist groups.

There is broad acknowledgment that the Iranian government engages in a range of deceptive financial and commercial conduct in order to obscure its development of nuclear and missile programs and facilitate its support for terrorism. International understanding of these practices - underscored by the UN Security Council resolutions on Iran and six warnings issued by the Financial Action Task Force about the risks Iran poses to the financial system - has been brought about in part by our efforts to share information about Iran’s deception with governments and the private sector around the world.

These deceptive practices taint all Iranian business because they make it difficult to determine whether any Iranian transaction is licit. Iranian banks request that their names be removed from transactions so that their involvement cannot be detected; the government uses front companies and intermediaries to engage in ostensibly innocent commercial business to obtain prohibited dual-use goods; and Iran’s shipping line, the Islamic Republic of Iran Shipping Lines, or IRISL, repeatedly manipulates bills of lading to shield prohibited cargo from scrutiny.

To a greater extent than ever, private companies across industries are now alert to these kinds of risks. Banks worldwide have been repeatedly warned by regulatory and standard-setting bodies to regard Iranian transactions with caution. Traders and shippers know that transactions with innocent-sounding Iranian counterparts can expose them to risk - both reputational and legal. Energy companies have put Iranian investments on indefinite hold, cautious of the political risk of investing too heavily in Iran. And exporters of sensitive and dual-use technologies know that supplying Iran can lead to severe sanctions and even prosecution. Across the board, then, transactions with Iran are already handled differently than transactions with any other country - except perhaps for North Korea - engendering either heightened suspicion or outright refusal to engage in them.

Finally, the vulnerabilities in Iran could be compounded by the internal fractures resulting from Iran’s elections of 2009. As Secretary of Defense Gates recently stated: “It’s clear in the aftermath of the election that there are some fairly deep fissures in Iranian society and politics and - and probably even in the leadership. . . . [T]his is one of the reasons why I think additional and especially severe economic sanctions could have some real impact . . . [W]e know that the sanctions that have already been placed on the country have had an impact.”

United Coalition Necessary to Exploit Iran’s Economic Vulnerabilities

This Administration has demonstrated that it is committed to a diplomatic resolution of the international community’s issues with Iran. The world is now united in looking to Iran for a response. If Iran does not live up to its obligations in this process, it alone will bear the responsibility for that outcome.

Under these circumstances, the United States would be obliged to turn to strengthened sanctions. We are intensifying work with our allies and other partners to ensure that, if we must go down this path, we will do so with as much international support as possible. For the less united we are in applying pressure, the greater the risk our measures will not have the impact we seek. This challenge will be difficult, but not impossible. Over the past three years, the U.N. Security Council has adopted three unanimous Chapter VII resolutions against Iran. Those resolutions now represent the baseline. If Iran chooses to defy the international community yet again, and not live up to its obligations, these resolutions as well as other steps taken to date have laid the groundwork for a concerted and meaningful international response.

Conclusion

The Administration remains committed to the dual-track strategy and views last week’s developments as a step forward. We will now wait to see whether Iran follows its constructive words with concrete action. If it does not, and if the President determines that additional measures are necessary, we will be ready to take action, ideally with our international partners.