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IDSA COMMENT

The Way to Engage Iran

February 12, 2007

In addition to the earlier run two pilot cascades of 164 centrifuges, Iran has set up two more cascades of 164 centrifuges each despite repeated calls from the UN Security Council to halt enrichment related work. Addressing a mass rally on February 11, 2007 in Tehran to commemorate the 28th anniversary of the Islamic Revolution, an unrelenting Iranian President boasted about continuing advancements in the country's nuclear programme and promised to announce a further surprising achievement by April 9, 2007.

Will Iran continue to act in defiance of the UNSC and IAEA resolutions? In such a scenario, the situation is likely to worsen for both Iran and the rest of the international community. Opportunities for future engagement lie in the limitations of the actors involved in crisis management. A step-by-step approach of engagement can provide scope for breaking the long-drawn stalemate over Iran's nuclear programme.

It is unclear as to how far the strategy of coercion would help in resolving challenges related to Iran's nuclear programme. UN Security council members expect Iran to respond positively and that suspension of continuing enrichment work should be the starting point for any future confidence-building process. On the other hand, Iran remains reluctant to discontinue with its nuclear activities. The IAEA has not been able to determine till date whether these nuclear activities are being in any way diverted for military purposes. At the same time, the UNSC has also been facing a dilemma in implementing the provisions of its resolution. The Security Council is already struggling to find ways out to bring nuclear North Korea back to the negotiating table. In the absence of effective enforcement mechanisms, Iran's continuing non-compliance is increasingly becoming an international challenge.

In an attempt to caution the international community against any precipitate action, the head of Iran's Atomic Energy Organisation stated: "In the past 27 years we had experienced many kinds of sanctions. But they should know that the artery of the world energy passes through the straits of Hormuz in the Persian Gulf." Such remarks are bound to further raise US concerns and military presence in the Gulf. However, it is unlikely that either the US or Iran would escalate military tensions in the region. The US is already caught up in the Iraq imbroglio and the Bush administration is well aware that a hostile Iran has the potential to pose difficulties for US policy in the region.

The Bush administration strongly believes that the Iranians are not only arming militias in West Asia and fuelling the Shia-Sunni divide in Iraq, but is also engaged in systematically covering up nuclear weapons development. But at the same time, there also seems to be hope in Washington that Iran might moderate its behaviour if provided with incentives. Media reports disclosed in March 2005 that, as part of the European offer of incentives to Iran, the US agreed to tone down its opposition to Iran's membership of the World Trade Organisation and to allow some spare parts for its civil aviation sector in exchange for an Iranian commitment to freeze its enrichment plan. But Iran considered any such approach to be useful only for improving bilateral relations and not as a quid pro quo for freezing its nuclear endeavours.

Iran cannot, however, continue to remain inflexible for its own long-term interests. No doubt, it holds powerful foreign policy levers of oil and gas, but leveraging these in future crises will be tricky. Any toughening of Iran's posture is likely to involve economic and political costs. It is estimated that oil revenue contributes about 80 per cent of its export earnings and nearly 40 to 50 per cent of the government's total revenue. Yet, Tehran is trying to send strong signals that the West cannot isolate it with sanctions. Iran's supreme leader Ali Khamenei has recently suggested to the Russians that since their two countries possess a major chunk of the world's natural gas resources, they should work together to form a gas cartel like that of OPEC to withstand Western political pressure. Ahmadinejad had also reportedly discussed a similar idea with President Putin in Shanghai in June 2006 about "fixing both gas prices and flows in the interest of global stability." However, there are questions about the efficacy of such a cartel. As a commentary in the Economist (February 5, 2007) points out, gas supply agreements are for considerably long spans of time and it would be difficult to tamper with production and thus control the price.

Conditions for Iran may actually worsen further if it continues to show reluctance in co-operating with the IAEA in accordance with UNSC resolution 1737. China and Russia have already approved UNSC resolutions that call on Iran to act responsibly. However, they have resisted attempts made by the US and European powers to adopt tougher measures. If it continues to be inflexible, Iran is likely to face even greater difficulties in utilizing its levers of oil and gas in its economic interactions with major international actors like Russia, China, Japan and European countries. It is thus unlikely that Tehran would raise its own politico-economic costs by losing the confidence of its sympathisers.

In the prevailing international environment, it is difficult to predict definitively as to how the situation would unfold. The actors involved in Iran's nuclear case are not, however, in favour of escalating the crisis further. While the possibility of an attack on Iran could be the last resort for the United States, Iran is also unlikely to act too provocatively and thus jeopardise its own political and economic stakes.

Scope for Forward Movement: A Phased Approach

In the prevailing mutually suspicious environment, there seems still some space left for the US and Iran to show diplomatic flexibility. The estimates of US official agencies indicate Iran to be still five to ten years away from making the bomb. There should thus no urgency for the US to address Iran's nuclear programme as an issue of immediate threat to international peace and security.

Even if Tehran accepts the UNSC demand for suspension of enrichment and reprocessing related activities, it is not going to be adversely affected in a substantive manner. Iran still needs to do a lot of work on the technology front to start industrial scale enrichment. Also, the construction and operation of a nuclear power plant in which the products of these facilities are to be used may take some more time. Meanwhile, it leaves scope and time for Iran and its European interlocutors to sort out the differences and possibly reach an amicable diplomatic solution.

With regard to the status of safeguards, the IAEA has not yet lost hope on Iran. Despite the recent row over Iran's disapproval of the entry of some inspectors into the country, the visits of a large number of IAEA inspectors to Iranian locations are still continuing. Surveillance cameras are still in place at the conversion plant of Isfahan. The IAEA has reportedly been also allowed to install some cameras over the last few days at new locations in the Natanz complex. These cameras are placed to watch the gas injection and storehouse parts of the complex. And Iran has also expressed its willingness to resolve outstanding issues through negotiations.

Against this background, one can hope that there still remains significant scope for engaging Iran to break the existing stalemate. The need of the hour is engaging Iran through diplomatic means to make it accept the provisions of the UNSC and IAEA resolutions. Can UNSC sanctions be rolled back if Iran shows flexibility in its posture? This could be a future possibility if a step-by-step approach of diplomatic engagement is followed.

A diplomatic process can be resumed to engage Iran with the public assurance by the US not to politically interfere in Iran's economic engagement with the outside world, including the possibility of discussing Iran's membership in the World Trade Organisation. Europeans can simultaneously renew talks on economic incentives and security guarantees for Iran. Towards this end, an assurance may be given by the Europeans on a possible review of all previous confidence-building offers made by the two sides, including the Russian proposal. Simultaneously, Iran may opt for a token halt, initially by stopping construction of the heavy water rector plant and suspending uranium conversion. Both sides would thus be partially fulfilling each other's demands.

In the next phase, Iran may provide additional inputs on the IAEA's queries, in return for an assurance that its case would be taken back to and handled at the IAEA level. Pending ratification, the possibility of Iran accepting the Additional Protocol of safeguards would be a major confidence-building step forward.

Moving further, in exchange for appropriate security guarantees and economic incentives, Iran may also agree to further suspensions by stopping production of rotors and desisting from adding additional cascade of centrifuges, without changing its future plans for enrichment under IAEA supervision. All these doable arrangements would pave the way for devising a long-term solution.