Several developments have promoted increasingly pragmatic, tolerant and thus cosmopolitan policies on the part of Iranian foreign-policy makers in recent years.1 First, the May 1997 landslide victory of Hojatolislam Mohammad Khatami, a moderate and reformist cleric within the context of Iranian politics, has foreshadowed new foreign-policy orientations. Second, the eighth meeting of the Organization of the Islamic Conference (OIC) in Tehran in December 1997, led by President Khatami, turned out to be an important step toward detente with many Muslim countries, including the Gulf Cooperation Council (GCC) states. Building trust and avoiding misunderstandings between Iran and the GCC states could prepare the ground for a regional collective-security system in the near future.2
Third, viewing the new regime in Iran as democratic and reformist, the European Union (EU) has resumed its meetings with Iranian diplomats. "Critical dialogue" had ceased in the wake of the 1997 Mykonos trial verdict [a German court judgment that Iranian officials had a hand in a political assassination in Berlin in 1991]. The new discussions between the EU and Iran will center largely on economic cooperation, technology, energy, drug control, environmental concerns and regional problems.3 The EU, however, continues to denounce the bounty on writer Salman Rushdie and human-rights abuses while seeking cooperation with Iran on other matters.4
Fourth, geography and economics have rendered Iran the most economical as well as the safest route to international markets for the oil and gas exports of the landlocked states of Central Asia and the Caucasus.5 Finally, in a new approach that reflects a change of policy, the Clinton administration has waived all sanctions against Total's oil contract with Iran and has promised that any other European firms that might invest in Iran will not be sanctioned.
The purpose of this essay is to explore the potential shift in Iran's foreign policy with a view toward explaining the country's new pragmatism. Of the many contributing factors, this essay is concerned primarily with the shifting postCold War alliances, especially the fluidity with which countries forge economic blocs, and the troubling consequences of unilateral U.S. efforts at containment in a new global economy where international markets have become intensely competitive and patently non-ideological. These developments point to one reality: the "dual containment" and sanctions policies of the United States need to be revisited.
Although it will still reflect regional and global politics, Iran's foreign policy in the twenty-first century could represent a major departure from the past. Domestic developments, such as economic and demographic changes, and the expansion of civil society have posed new challenges to Khatami's government, but there are also opportunities. The end of the Cold War allows the Iranian government new flexibility.
HEGEMONY OR DETENTE?
Since the war with Iraq, Iran has sought arms imports from China, North Korea, Russia and Ukraine. Iran's military objectives have raised serious concerns in the international community because its leaders have sought long-range missiles. Chinese officials have frequently stated that China has for many years barred transferring nuclear weapons or weapons technology to Iran. In his 1998 visit to the United States, Chinese President Jiang Zemin allegedly agreed to give a firm pledge to end nuclear cooperation with Iran. In exchange, the United States vowed to lift a 12-year-old ban on the sale of American nuclear power plants and power technology to China.6 While China has refrained from selling Iran missile systems that violate the Missile Technology Control Regime (MTCR), there are reports that Iran has acquired the long-range North Korean missile system generally known as a "Scud C."7 Although Iran, some experts remind us, has no capability to develop and deploy a missile as sophisticated as the Tomahawk (TLAM), it may be able to build a cruise missile about half the size of a small fighter aircraft by 2000-2005.8 On July 23, 1998, Iran successfully tested a medium-range missile known as Shihab-3 with an 800-mile range. While the Clinton administration has shown some concern, Israeli officials have said that they felt no immediate threat to their country from the testing.9
Furthermore, given the availability of dual-use technology, Iran could equip its shorter- and medium-range missiles with biological and chemical warheads.10 Current Iranian missile and air forces, according to one source, already have the capability to strike U.S. installations in the Persian Gulf and the Arab states on the southern shore.11 More recently, Israelis have accused the Russians of supplying advanced technology to Iran in a program to develop long-range missiles such as Shihab-3 and Shihab-4, with a range of up to and beyond 1,300 kilometers. Although both Israel and the United States believe that an Iranian missile program will be ready for production by the early 1999, they differ on how to deal with it. The Clinton administration has stressed the Russian priority, namely to work with Russia and seek their cooperation. For their part, Russians have denied any violation of the Missile Technology Control Regime. Israeli reaction has run the gamut from pushing this issue to the floor of the U.S. Congress to considering a military strike.
The military option is fraught with difficulties and risks for the United States and its Gulf allies in the highly congested Persian Gulf. Having deterred threats by Syrian Scud missiles for a long time, Israelis know that deterrence may be their only credible defense against a potential or real threat from Iran.12 Israeli Iran-bashing has in tum caused Iranians to place a high premium on deterrence. Mindful of what Israel did to halt the completion of the Osirak nuclear reactor in Iraq in June 1981, Iranians view their missile business, among other things, as a deterrent to such potential strikes.
REGIONAL THREATS: PERCEPTIONS VS. REALITIES
What does Iranian technology acquisition mean for the region? For one thing, Iran's nuclear war-fighting capabilities remain unpredictable. For another, it is unclear, some experts hold, whether Iran would choose a relatively stable model of deterrence or aggressively use its capabilities, and whether these would necessarily lead to war. What is clear is that Iran has a complex mix of political and economic objectives as well as strategic weaknesses and strengths.13
The Iranian threat to regional security has been greatly exaggerated. Iran's conventional military revitalization since the end of the Iran-Iraq War has posed no significant threat either to the region's stability or to Western strategic interests in the Persian Gulf. Iranian amphibious forces are inadequate to seize and defend objectives on the territory of the GCC states, and even the occupation of the three islands (Abu Musa, the Greater and Lesser Tunbs) could easily be reversed.14 Iranian reliance on Gulf shipping and the experience of war with Iraq indicate that Iran is "uninterested in indiscriminate measures such as mines against tankers."15
Much of Iran's military buildup is in response to the massive buildup in the 1990s by the six Arab GCC states. Iran's rearmament since the late 1980s has been modest compared both to its neighboring states and to the shah's regime. In 1996 Iran's defense budget was less than $3.4 billion compared to Saudi Arabia's $13.9 billion and Israel's $7 billion.16 Iran's military spending in the same year accounted for about 2 percent of gross domestic product, compared with 17 percent in the last days of the shah.17
In fact, military analysts have noted that the balance of conventional military forces has shifted in favor of the GCC states since the Iranian revolution, due largely to Iran's huge losses of military equipment during the Iraq-Iran and Persian Gulf wars. Evidence also suggests that Iran undertook a large reduction in military manpower and military expenditure after the Iraq-Iran War:
[Iran] spent less on defense in 1992 ($9.7 billion in 1990 prices) than in 1985 ($17.2 billion). In 1997, Iran's armed forces were estimated to number 342,000 men, equipped with 1870 tanks and 341 combat aircraft. In 1994, numbers of military personnel rose to 513,000, but the number of major items of military equipment in the Iranian arsenal was reduced to 1,245 tanks and 214 combat aircraft. In 1994, Iran, the second largest state in the region and the second most populous, also possessed the second largest army and had the second highest military expenditures, after Saudi Arabia.18
Many attempts, however, have been made to upgrade the capabilities of the Iranian military while reassuring other states of the region of its peaceful intentions. Iran’s preference for a strategy of reassurance seems more compelling than the adoption of a posture of deterrence against the United States.19 Armed conflict with the GCC states at any level is highly unlikely unless Iran acts to involve them in a military incident provoked by the United States.20 The fact remains that "Iranian air and naval forces will remain inferior to those of the GCC and the United States, severely constraining both their military and their political utility."21
LOOKING EAST FOR TECHNOLOGY TRANSFER
Technology transfers from Russia, China and North Korea are sought in order to enhance Iranian military capability in the region. Notwithstanding these transfers, Iranians lack the capacity to project significant operations across the Gulf. The military efficacy of Iran's three newly bought Soviet-era Kilo-class diesel powered submarines is questionable. Some experts have maintained that "the Persian Gulf is too shallow for submarines to operate effectively."22 Others have argued that Western arms
Still others raise concerns about a disunited southern Gulf, arguing that the GCC has made no significant strides as a military institution in the post-Gulf War period. Internal rivalries, unwise investments and failures in cooperation have run counter to a unified position among the military forces of the southern Gulf states. Furthermore, political divisions and feuds among these states have intensified.25
Iranians feel compelled to reassert their traditional rights to the Gulf in the wake of the American threat to punish Iran over the bomb attack at Al Khobar, Saudi Arabia, in which 19 American servicemen were killed. Despite efforts to link acts of political violence to directives from Tehran, one observer notes, no such evidence exists: "If monetary links make Tehran (or Riyadh) responsible for the actions of [groups such as Hamas or Hizballah], then the U.S. government bears responsibility for the victory of the fundamentalists in Afghanistan through its covert financing of mujahedeen rebels fighting Soviet forces in the 1980s.”26
As for the acquisition of nuclear weapons, opinions are divided and evidence inconclusive. As a signatory to the Nonproliferation Treaty (NPT), Iran is bound to observe international regulations and law. The power stations that Iran has bought from Russia and China are peaceful nuclear technology. President Yeltsin has assured Washington that Iran would not be able to make weapons-grade plutonium and that he has canceled the "military components" of two nuclear reactors bound for Iran.27 It should be noted that Russian policy toward Iran's arms acquisition has generally been ambivalent and clouded by sharp disagreements within the foreign-policy establishment.28 Under U.S. pressure, both Ukraine and China have made some adjustments. Ukraine, for example, has announced that it would not supply turbines for a Russian reactor project at Bushehr. Likewise, China has suspended the sale of a plant for the conversion of uranium hexafluoride, which is required for making fuel rods.29 Ironically, U.S. sanctions policy has thwarted Iran's development of non-nuclear alternative energy sources.30
As noted earlier, Iranian technology acquisition and mobilization of its military forces do not necessarily point to aggressive intentions. Iranian officials have frequently pointed to several measures that Iran has taken to alleviate the threats perceived by their neighbors. Iran is a party to the NPT, the 1972 Biological Weapons Convention (BWC), and the 1993 Chemical Weapons Convention (CWC). The International Atomic Energy Agency (IAEA) experts, who in 1993 visited and inspected 12 special sites in Iran, have declared that they have seen nothing incriminating.31 Relations with Kuwait, upgraded by an increase in trade, have improved noticeably since the 1990 Gulf crisis, and other Gulf states, with the exception of Bahrain (which has a Shiite majority), no longer see Iran as the "regional bogeyman."32
Iran has reduced its support for Islamic extremist movements within the southern Gulf in the post-Khomeini era and sought dialogue with all of the Gulf countries. As noted before, the major dispute in the Gulf region involves the claims of sovereignty by Iran and the United Arab Emirates (UAE) over Abu Musa and the Tunbs. There are limits to the strategic importance of these small islands:
... even Abu Musa is difficult to use as a survivable base for naval operations and siting anti-ship missiles in the face of attacks by US airpower. Further, while the three islands do have a strategic position near the main shipping channels in the lower Gulf, Iran has long had antiship missiles deployed in other positions near the straits, which could attack any large vessels moving in and out of the Gulf.33
Moreover, the Eighth Summit of the Organization of the Islamic Conference, held December 9-11, 1997 in Tehran, signified a new rapprochement between Iran and the Arab world in general and Iran and the GCC states in particular. The friendly atmosphere of the summit helped facilitate post-conference cooperation.34 Arguably, the most rewarding aspect of the summit was the enhanced prospect of holding bilateral talks between Arabs and Iranians in the future.35
LIMITS TO IRAN-RUSSIA TIES
Since the 1990s, Iran has pursued a policy of rapprochement. Russia, in Iranian eyes, is both a potential antiWestern bastion and a supplier of arms. For Russia, Iran provides an inroad into the Muslim world and is a valuable economic partner. Furthermore, Moscow is relatively unconcerned with the increasing Iranian influence in Central Asia. There are few signs that Tehran is stirring up pro-Islamic sentiments in these republics.36 More recently, Iran and Russia have negotiated a $1.5 bill ion joint venture to build a new port out of the village of Olya, which lies about 45 kilometers up the Volga River from the Caspian coast, to speed up trade and transport between the two countries. The first stage of the project is expected to be completed in 2000. Russia would own 51 percent of the port.37
Despite such economic ties, Russian officials expelled Iranians studying nuclear physics and missile science from Russian schools in late 1997.38 They have also halted all vocational training of Iranian students in fields that may have applications for nuclear weapons and missiles.39 These policies satisfied the U.S. government, which has long said that its biggest single concern over Russia's nuclear-power contract with Iran has been not the reactor Russia is building in Bushehr but the know-how and education that they would give Iranian students. Moreover, it is not clear that Iran and Russia are in tune on the Caspian Sea regime. Iran and Russia have agreed that all five states bordering the Caspian should have an equal voice in its development as well as equal rights to its resources. While Russian officials claim that they still recognize the validity of the 1921 and 1940 treaties with Iran concerning the Caspian Sea, a Russia Kazakhstan agreement suggests that Russia "is reverting back to its position prior to its agreement with Kazakhstan to divide the waters of the Caspian."40
POLITICAL STAKES IN S.W. ASIA
The recent tensions between Afghanistan and Iran began in late August 1998, when the Taliban rulers of Afghanistan (the four-year-old Sunni Muslim movement that follows a fanatic version of Islamic law and now effectively controls most of the country) admitted their militia forces had killed eight Iranian diplomats and one journalist after seizing the Iranian consulate in the Afghan city of Mazar-i-Sharif. This incident had intensified Iran's fear of regional turmoil. Iran's leaders for a long time have claimed that their national security is jeopardized by the instability of Taliban government. "For the past two years," writes Elaine Sciolino in The New York Times, "Iran has been trying to convince the rest of the world - with little success - to mount a vigorous mediation effort to stop the Taliban."41 After two months of saber rattling, several skirmishes erupted on the Iran-Afghanistan border in early October. Iranian public sentiment is against going to war with the Taliban, as Iran would most likely find itself in a quagmire similar to that in which Soviet forces were bogged down for eight years ( 1980- 1988).42
Regarding the nuclear tests by India and Pakistan in May 1998, Iranian officials have warned of a spiraling arms race that could draw in regional as well as non-regional countries such as China. At the same time, they have said that Pakistan's nuclear capability would counter Israel's atomic arsenal and provide deterrence for the region's Muslims.43 While denying allegations that Iran is seeking nuclear technology from Pakistan, Foreign Minister Kamal Kharrazi in a speech at the Geneva Disarmament Conference (June 1998) proposed that the South Asian region and the Middle East eventually be non-nuclear zones.44
OPPOSITION TO OSLO
Regarding the Middle East peace process, Iranian opposition has thus far had no destabilizing impact. Iran's major leverage here lies in its relationship with the Lebanese Shiite group Hizbollah and Palestinian Islamic Jihad, whose effectiveness in derailing the process is questionable. In what amounts to its first serious policy concession to the West, Foreign Minister Kharrazi has stated that Iran would not back attacks on Israel by Lebanese Hizbollah, should Israel withdraw its troops from southern Lebanon.45 This concession was made in the wake of Prime Minister Benjamin Netanyahu's decision to pull Israeli troops out of Israel's self-declared "security zone."
On balance, according to some experts, Iran's role in the peace process is negligible, its rhetoric far from lethal, and its actual activity and potential to disrupt any agreement minor.46 Some experts, however, insist that Iran's ties with Hizbollah and Islamic Jihad is "part of the revalidation of the Islamic legitimacy of the Iranian regime."47
From a different perspective, some observers have argued that the Syrian Iranian alliance has contributed to a moderation of Iranian policy toward the peace process. Iran, which is opposed to an inequitable peace, has placed its national interest in preserving the Syrian alliance ahead of ideology. To the extent that the alliance has proved a counterbalance to Israeli hegemony and has made Israel conscious of the risks of putting land above peace, it has contributed to regional stability and hence to the peace process.48 Moreover, the Syrian alliance obstructs the Israeli and American attempt to isolate Iran, making it an integral part of the balance of power in the region.49
Since Khatami's victory, Iran and the PLO closed the rift between them. ThenForeign Minister Ali Akbar Velayati met the PLO's Farug Qaddumi in Tunis in mid-July 1997, assuring him that the future of Jerusalem would be given top priority at the Islamic Conference Organization Summit meeting, Tehran in December 1997.50
Improved relations with Iraq took a new tum when on September 4, 1997, Iraq agreed to allow Iranian pilgrims to visit Shia holy sites inside Iraq. This marked a new beginning, as no pilgrims from Iran had been able to visit the shrines since the Iran-Iraq war broke out in 1980 and the border was sealed off.51 On Thursday April 2, 1998, Iraq returned 5,584 prisoners of war to Iran, and Iran sent home 319 Iraqi POWs.52
With the resignation of the Welfare party's Necmettin Erbakan, Turkey's prime minister 1996-97, and Masoud Yilmaz's ascendancy to the premiership, Iranian-Turkish relations took a downward tum. Iranian leaders showed concern over Turkey's military cooperation and joint naval exercises with Israel. The Khatami government remained calculatedly reserved about the fall, under heavy pressure from the military, of Erbakan's Islamic-Conservative coalition. At the same time, they refrained from blaming the Yilmaz government for its anti-Islamic education-law reforms of mid-August 1997.
Wary of a 20-year gas deal signed under the Erbakan government that was supposed to generate $23 billion for Iranians, Yilmaz announced that Turkey would not buy Iranian natural gas for the immediate future. In an attempt to diversify Turkey's suppliers, he turned the country's attention to Turkmenistani gas transported across Iran.53 Turkey's second thoughts about the Iranian gas deal lasted for only a brief period, when Foreign Minister Kharrazi, who later called for the normalization of relations between the two countries, said that the gas deal would become operative in 1998, resulting in annual transfers of 3 to 10 billion cubic meters of gas to Turkey until 2002.54
Iranian-Turkish competition for influence in the Middle East and in the Muslim states of the former Soviet Union is, to some extent, a vehicle for protecting their domestic political order against the ideological challenges of the other. While Turkish inroads in northern Iraq threaten Iran's regional interests, its nationalism in Azerbaijan threatens Iran's very existence.55 Because of the Azeris' threat of splitting off Iranian Azerbaijan, the Iranian government has supported the Armenians in the Nagorno-Karabakh conflict and attempted to curtail Turkey's influence in Baku. The latter has been supported by the Russians.56
One unintended consequence of the Turkish Israeli military alliance, which enjoys U.S. support, could be a backlash in the form of a regional detente. To counterbalance the new alliance, Iran, Iraq and Syria may seriously consider acting in concert. Although deep divisions remain between Iran and Iraq on the one hand, and Iraq and Syria on the other, tactical considerations could nudge these countries toward a new understanding.57 Some observers have noted that Syria and close ally Saudi Arabia, disenchanted with Israeli Prime Minister Netanyahu, are "even discreetly exploring the possibility of an Iraqi return to the Arab fold."58 Iranians have acted as mediators in recent strife between Syria and Turkey over the presence in Syria of rebel Turkish Kurds. The Turkish government has given Syria an ultimatum to expel them. President Khatami has contacted both Turkish President Suleymen Demirel and Syrian President Hafaz Asad with a view to diffusing this new regional tension. Having praised the brotherly ties between the two nations, President Khatami insists that "Turkey and Syria, as two civilizations, can settle their problems peacefully and there would be no need for military mobilization."59
Iran's relations with Saudi Arabia have improved, and the two countries have worked on the establishment of maritime and air links. Representatives of several private Saudi firms visited Tehran during the summer of 1997 to sign economic cooperation accords with Iranian companies. The government-backed Janbazan and Mustazafan Foundation and the privately-held international Saudi company Faezine signed accords in the area of transport, industry, agriculture and joint foreign investment. In addition to agreeing to start factories to produce food items, they will study a joint project for the maritime and air transport of commercial goods to Central Asia.60 The two countries have noticeably increased their cooperation within such groupings as OPEC and the OIC.61
Analysts are divided on the normalization of Iran-Saudi relations. Some in the Arab world argue that this is the beginning of a major shift that will forge a tacit alliance among Iran, Saudi Arabia, Iraq, Syria and the Palestinian Authority to confront a more hostile Israel. Others, however, have pointed to the evolution of each country's realistic interests in the region without any grand alliance in the offing. Reducing Iranian hostility, according to this view, is critical for the Saudis, who see the main threat emanating from Iraq. 62 Whatever the logic of rapprochement between the two countries, Iranians welcomed an interview published in a Kuwaiti daily on May 22, 1998, in which Saudi Interior Minister Prince Nayef ibn Abdel Aziz said the Khobar Towers bombing of June 25, 1996, "was executed by Saudi hands; no foreign party had any role in it."63 Previous allegations suggested that Iran had organized and funded a group of Saudi Shiites to carry out the deed.
EGYPT AND IRAN
Since the election of President Khatami, Egypt and Iran have improved their relationship and renewed economic ties. Diplomatic relations had been broken off after former Egyptian President Anwar Sadat welcomed the ousted Iranian shah to Egypt in 1980. Some reports indicate that Egyptian President Hosni Mubarak has noted that Iran is seeking closer military ties with Egypt to counter increasing Israeli-Turkish defense cooperation.64 Egyptian authorities, however, have denied the veracity of such reports, maintaining that Egypt has refused to join any regional organization.
ECONOMIC COORDINATION ORGANIZATION
The ECO consists of 10 member nations: Afghanistan, Azerbaijan, Iran, Kazakhstan, Kirgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan (300 million people). In 1995, Iran, Turkey and Pakistan agreed to contribute $714 million to set up a trade and development bank. The ECO provides Central Asian republics with a shorter access to the sea via Iran and Pakistan.65 Turkey, Iran, Pakistan, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan recently signed an agreement on railway cooperation linking Europe to Central Asia. This is the most economical and feasible transport route between the two regions.66 Azerbaijan has also mended fences with Iran. The State Oil Company of Azerbaijan (SOCAR), which holds 10 percent of the Azerbaijan project, has welcomed the idea of swapping oil with Iran. This will help the big Azerbaijan project to survive a difficult period.67
No incident in recent years has interrupted the European Union's relations with Iran like the Mykonos affair, the assassination on September 17, 1992, of four Iranian Kurdish dissidents in Berlin's Mykonos restaurant. On April 10, 1997, after a lengthy trial that included testimony by 166 witnesses, the Berlin court ruled that the 1992 murder of exiled Iranian opposition leader, Sadeq Sharifkandi, secretary-general of the Kurdish Democratic Party of Iran (KDPI), along with three aides, was ordered by the "highest levels" of the government in Tehran. The presiding judge, Frithjof Kubsch, said that the killing was orchestrated by a secret "Committee for Special Op rations" in Tehran whose members included Iran's supreme leader, president, foreign minister and high security officials.68
The Berlin court's decision to implicate Iranian leaders in this murder caused a disruption of Iran's diplomatic relations, not only with Germany but also with the European Union (EU). The breach is expected to heal; EU-Iran ties are built around a geoeconomic rationale (60 percent of Iran's oil production goes to Europe) and a "critical dialogue." In 1992, German Foreign Minister Klaus Kinkel, the principal architect of the critical dialogue, argued that it is essential to move Iran toward responsible cooperation with Europe and the rest of the international community through engaging it economically and diplomatically rather than isolating it.69 Beginning in 1993, Germany and other major creditors refinanced $11 billion of Iranian debt. Most EU countries extended credit on favorable terms to enable Iran to import their goods; some, including Germany, allowed entrepreneurs to do business in Iran. Together, these policies aided Iran's failing economy to sustain its course.70
In response to the Berlin court's decision, the EU foreign ministers agreed to punish Iran by halting bilateral ministerial visits with Iran, denying visas to Iranians with intelligence and security posts, expelling the Iranian intelligence personnel already in European Union countries, and by maintaining their ban on arms sales to Iran.71 They nevertheless resisted calls to entirely terminate their economic ties.72
The Mykonos affair showed that neither Iran nor the EU was prepared to jeopardize their economic interests. Germany, Iran's largest Western trading partner (in excess of $1.8 billion annually), chose the path of least resistance by underscoring the importance of the dialogue. Other European countries took a similar posture.73 The EU foreign ministers emphasized geostrategy, arguing that Iran is critical for peace and stability in the Persian Gulf region, Afghanistan and Lebanon, and that its influence in the Central Asian states has grown stronger. Furthermore, they said, the continuation of the critical dialogue would strengthen moderates in Iran.74 In the end, the EU ministers defused legal and political tensions as well as undermining human rights calls where commercial advantages were at stake. Given that commercial interests drive European policy, it is not surprising that both France and Germany have sought to renew their relations with Iran, now that a new president is in office.75 The visit to Iran, for example, in early June 1998 by the former French president and current member of Parliament, Valery Giscard d'Estaing, indicated that France's policy toward Iran remained unaffected by U.S. sanctions.76
Moreover, the controversial death sentence (fatwa) placed on Salman Rushdie by the Ayatollah Khomeni's religious edict in 1989 for his novel, The Satanic Verses, which ridiculed fundamental beliefs of Islam, has hardly posed a setback to trade between Europe and Iran. Rushdie, a Muslim born in Bombay, was accused of heresy and apostasy, offenses punishable by death under Sharia law. The initial, sharp deterioration in relations between Iran and the United Kingdom and other Western European countries lasted for a brief period. In recent years, Iranian officials have explicitly said that their government has no plans to track down Rushdie and carry out the execution. Today, few European countries consider this issue an obstacle in their relations with Iran. Although the fatwa remains in force and may not change for some time to come, it has no official backing.
In his visit to the United Nations in late September 1998, President Khatami distanced himself from the fatwa by declaring the case against Rushdie "completely finished."77 While many hardliners insist that the death sentence against Rushdie be carried out, President Khatami, who seeks improving ties with the West, appears determined to lay to rest the fatwa.
The Clinton administration is rethinking its "dual containment" policy, in effect since 1996. The Iranian half of dual containment was based on a "five part challenge" that Iran posed to the United States and the international community: support for "terrorism and assassination across the globe," opposition to the Arab-Israeli peace process, efforts to subvert pro-West governments, a military buildup aimed at dominating the Persian Gulf region, and a quest to acquire weapons of mass destruction.78 Increasingly, experts argue that dual containment offers no guidepost for dealing with change in the Persian Gulf region and that it links American policy with "an inherently unstable regional status quo."79 Although the United States has fundamental disagreements with Iran, the two "do have some parallel interests in avoiding a destabilization of the Gulf."80
President Khatami's policy of promoting dialogue among civilizations and expanding ties with countries not antagonistic to Iran compelled an American response. The United Sates thus unveiled a new Iran policy in which a road map to the normalization of relations between the two countries has taken center stage, despite the stumbling blocks posed by issues of terrorism, human rights and the spread of nuclear weapons.
Dual containment has driven a wedge into the U.S. foreign-policy consensus with Europe and Japan. To prevent further divisions with Europe, the United States waived all sanctions against the Total oil contract with Iran and vowed to waive sanctions against any other European firms that might invest in Iran. In return, Europe has agreed to new export controls that would block transfers of technology to Iran by electronic means such as e-mail. Europe also agreed to impose a much stricter standard before it would allow sales to Iran of goods that have both civilian and military (dual-use) applications.81
U.S. unilateral sanctions against Iran seem to have led to the isolation of U.S. foreign policy.82 President Clinton signed the Iran-Libya Sanctions Act (ILSA) in August 1996 to punish Iran and Libya for alleged state-sponsored terrorism. ILSA requires the U.S. president to impose sanctions against any company, foreign or domestic, that invests $40 million or more a year in oil and gas projects in either Iran or Libya. The law has been questioned by Canada, the EU, Australia and Japan, all U.S. allies, on the grounds that it violates international law. These countries do substantial business with Libya and Iran. In 1996, Libya imported close to $8 billion in goods and services from Europe, while Iran alone represented a $25 billion market for European and Japanese goods, including automobiles, aircraft, pharmaceuticals and a wide range of consumer items. Furthermore, Iran and Libya together account for almost 20 percent of Europe's oil, with Italy depending on the two for virtually half of its oil imports.83
U.S. sanctions aimed at preventing large investments in the oil industry of Iran and Libya have adversely affected Europe. Some former U.S. foreign-policy makers have warned that these sanctions have poured Iranian hard currency into Russian and Chinese markets.84 For instance, immediately after the U.S. ban on the sale of arms to Iran, the latter entered into a $4.6 billion military hardware deal with China.85
Iran owns so much gas and occupies such a crucial geopolitical space that the United States cannot isolate it. This explains why some of its neighbors such as Qatar, itself an emerging gas power, have initiated third-party diplomacy to reconcile Iran and the United States.86 Moreover, U.S. sanctions on Iran may prove detrimental to U.S. commercial interests in the Caspian Sea. Caspian countries are very likely to welcome Iran's future investment in their gas and oil resources. Such participation presents difficulties for the consistent application of U.S. sanctions, which under current policy tend to block U.S. participation in these deals.87
U.S. oil and gas investment in the Caspian Sea can be jeopardized in other ways. Russia, Iran and Turkmenistan are demanding that "all Caspian Sea production beyond an agreed coastal zone be treated as a 'condominium' for all five littoral countries, so that all would share in their revenues."88 If adopted, even in a modified form, it could disqualify U.S. companies from investment opportunities since this multinational condominium project would generate oil and gas revenue for Iran. Under the existing U.S. policy, sanctions apply to such projects, and U.S. companies are certain to lose their competitive edge.89 Meanwhile, the Clinton administration's favored route (the Baku Ceyhan Caspian pipeline) for moving the area's vast oil supplies to markets in Europe is not likely to win the oil companies' approval, largely because it is the longest and most expensive to build of al I proposed routes.
IRAN'S LOOK-EAST POLICY
The idea of an Asian Common Market, first embraced by the shah in 1976, lost its attraction in the disruption caused by the 1979 Islamic revolution and was relegated to a lower priority by the Islamic regime during the early years of revolution. Today, however, concepts such as "Asian identity" and an "Asian alternative" have gained widespread support in Iranian mass media, academic and policy-making circles. Further, Iran shares with its Asian partners a general discontent not only concerning a purely Western interpretation of human rights, but also about the Western countries' continued use of human rights as a means of pursuing hegemony and power politics.90
Moreover, the fluidity with which new trading blocs have formed and shifted during the post-Cold War era has revitalized regional trade identity. Since the mid-1990s, partly under the pressure of U.S. sanctions and partly because of the dramatic economic success of Southeast Asian countries, Iran has sought to forge trade links with Asia and gain diplomatic recognition as a power broker in the region. Former President Ali Akbar Hashemi Rafsanjani, during his visit to Bangladesh, vowed to build an oil refinery and a liquid-petroleum-gas plant in the country. The visit, which was part of a three-country Asian tour, improved Iran's links with Vietnam, the Philippines and Bangladesh.91
U.S. sanctions have forced Iran to shift its strategy by forging new economic alliances with Asian countries. This move reflects a drastic change from the past, in which Iran's foreign policy was chiefly focused on supporting pro-Iranian radicals to stir up Islamic revolution in neighboring countries.92 In recent years, Iran and China have built greater links in many areas. In 1995, China rejected U.S. pressures to deny Iran two 300-megawatt nuclear reactors worth of $800 million. The Chinese insisted that the two plants fell under International Atomic Energy Agency safeguards.93 Beijing has become the largest arms supplier to Iran after Russia. Tehran has obtained numerous Chinese-made weapons, including Houdong-class gunboats, F-7 fighter aircraft, HY-2 Silkworm anti-ship cruise missiles and C-802 anti-ship cruise missiles.94 The two sides have concluded a new oil deal boosting Iranian oil exports to China from 70,000 to 100,000 bpd over the next two years and have agreed to increase their economic and technical cooperation. Former President Rafsanjani described such cooperation as mutually beneficial: "the growing Sino-Iranian entente would serve to consolidate peace and stability in the region."95
While maintaining good commercial and economic relations with China, Iran is determined to strengthen its security and defense cooperation with India. Such cooperation substantially enhances Iran's air and naval power in the Gulf. Reaching out to Asian neighbors, Iranians called for "a new regional axis of China, India and Iran to combat Western hegemony."96 India, which has helped Iran modernize four Russian-built Kilo-Class submarines, vowed to develop Iran's naval power. The 1995 tripartite agreement signed by Iran, India and Turkmenistan gave India its long-sought route into Central Asia, bypassing both Pakistan and Afghanistan.97
India's need for oil and petroleum based products has far exceeded its domestic production capabilities in the 1990s. Given India's dependence on Persian Gulf resources, constructing pipelines to supply Iranian natural gas to India and allowing the latter to develop transit facilities in Iran for Indian products to reach Central Asia gained enormous political support. Ever since former President Rafsanjani visited India in April 1995 to sign an accord with Turkmenistan and India, Indian-Iranian relations have been on the upswing.98 The U.S. policy of isolating Iran increased the politico economic dependence on Russia of a number of its southern republics. The exclusion of a southern outlet through Iran left Russia as the only exit route for the region's energy resources. Efforts to promote Pakistan as an alternative southern outlet not only complicated the Afghan situation, but also pulled India further into Central Asian politics, contributing in the process to an Indo-Iranian rapprochement.99
It is not, therefore, surprising that Khatami's foreign-policy options include, among others, a tantalizing Asia policy. Its proponents have criticized Iran's increasing reliance on trade with Europe, arguing that equivalent trade with Asia will better serve Iran's purposes over time. An editorial in Tehran Times (July 12, 1997) pointed out that "our trade partners in Asia do not force us to intertwine trade with political and social issues.... We can procure some or similar goods in Africa and Asia without being forced to accept irrational terms."100
With an eye on greater Asia, a growing number of Iranian experts now advocate developing more business ties with ASEAN (the Association of Southeast Asian Nations, which consist of ten southeast Asian nations), and the economic cooperation between Bangladesh, India, Sri Lanka and Thailand (BIST-EC), which came into existence on June 6, 1997. The latter encompasses a population of 1.2 billion (India 950 million; Bangladesh 120 million; Thailand 60 million, and Sri Lanka 20 million), greater than the European Union.101 With Myanmar (formerly Burma) joining ASEAN, the Bengal Sea, the Andamen Sea and the Indian Ocean will constitute a single trade area, filling the chasm that existed between the Economic Cooperation Organization (Iran, Pakistan and Turkey) and ASEAN.102 The ties between Iran and BIST-EC will grow stronger, largely because Thailand, which is the main player within both ASEAN and BIST-EC, is currently Iran's biggest trading partner among the ASEAN countries.103
As Iran prepares for the twenty-first century, it grapples with new challenges and uncertainties. Iran's policy toward its southern Persian Gulf neighbors will serve as a gauge of Tehran's intentions. Since the end of the Iran-Iraq War, Iran's ideological goals have been steadily superseded by its economic and strategic interests. From the Persian Gulf countries' perspective, these are welcome trends, for they offer new opportunities for cooperation across the Gulf.
In the context of Persian Gulf security, Iran's military capability is far from overwhelming, and its overall foreign policy appears to be pragmatic and largely in tune with existing political and socioeconomic exigencies. Although it is difficult to assess whether Iran has a hegemonic grand plan in the Gulf region, it is easy to see that Iran's military buildup is aimed, at least partly, at preventing threats to regional stability. Experts maintain that Iran is unlikely to acquire nuclear weapons for eight or ten years.104
In other foreign-policy areas, there is a clear political trend toward pragmatism and moderation on Iran's part. An unpredictable Iraq, a fragile Afghanistan, and a nuclear-armed Pakistan make a relationship with Iran a sensible policy in the long run.105 Containment will not serve American long-range interests, and the effectiveness of sanctions to bring about a suitable change in Iran's foreign policy is increasingly questionable. As the U.S. interest in the development of Central Asia's energy resources becomes evident, so does the significance of Iran as a desirable transit route to transport Central Asia's oil and gas to Turkey and, ultimately, to Europe.
Understandably, U.S. sanctions have forced Iranians to consider alternate markets and partners. Victor Vachier, executive vice-president of France's oil service and equipment industry, best illustrates this point: "Sanctions will help build up competitors rather than clients." Furthermore, Vachier adds, "things will never be the same after the lifting of sanctions."106
An obvious lesson from the experience of U.S. sanctions is that Iran has been driven toward closer ties with Asia and, to a lesser extent, Europe. In the post-Cold War world, Europe and the United States lack a common enemy to bind them together, and the so-called "rogue" states do not necessarily constitute such a threat. Unilateralism cannot work in the new global economy, where international markets have become more competitive and less ideological. In the absence of an integrated and comprehensive "geopolitical rivalry," Europeans have let their commercial interests drive their policy toward Iran. The Asian drift in Iran's foreign policy is also non-ideological. It reflects similarities in culture and values with the Asian countries.
In the wake of Iran's new pragmatism, isolating Iran is not a prudent policy. Washington will have a greater positive impact on Tehran through engagement. In practical terms, this means significant strategic and economic gains for the United States. Both Washington and Tehran can initiate a system of mutual but limited concessions. Direct government to-government talks and formal alliance probably are not possible at this juncture given the ongoing political conflict between the hardliners and reformers in Iran and Republicans and Democrats in the United States.107 There are, however, many mutual interests that would generate specific economic and political agreements.
1 The initial research for this essay was conducted in Tehran during the summers of 1997 and 1998. The author gratefully acknowledges the generous assistance of Farghang Rajaee, Alireza Farahmand, Naser Hadian, Hadi Semati, Haj Hosseini and Hamid Reaz Jalaipour. The views expressed in this paper are those of the author alone.
2 For an illuminating analysis on Khatami's first year, see Ahmad Lavasani, "Detente: The Key to a Successful Foreign Policy," Jameah, May 3, 1998, p. 11.
3 Kayhan International, June 10, 1998, p. 1.
4 Iran Times, July 24, 1998, pp. 1-2.
5 Kayhan International, June 6, 1998, p. 2; see editorial comments by Ali Sabzevari under "Oil Strategy-Focus on Iran."
6 Iran Times, October 31, 1997, pp. 1-2.
7 Anthony H. Cordesman and Ahmed S. Hashim, Iran: Dilemmas of Dual Containment (Boulder, CO: Westview Press), 1997, pp. 283-285.
8 Ibid , p. 287.
9 The Wall Street Journal, July 24, 1998, p. A13.
10 Ibid., p. 290.
11 Eric Arnett, ed., Military Capacity and the Risk of War: China, India, Pakistan, and Iran (New York: Oxford University Press, 1997), p. 6.
12 The New York Times, October 2, 1997, p. A19.
13 Cordesman and Hashim, op. cit., pp. 307-312.
14 Arnett, op. cit., p. 19.
16 The Middle East, No. 268, June 1997, pp. 6-8; see p. 7.
17 The Economist, January 18, 1997, pp. 3-16; see p. 11.
18 Arnett, op. cit., p. 209.
19 Ibid., op. cit., p. 19.
20 Shahr am Chubin, "Arms Procurement in Iran: Ad hoc Decision Making and Ambivalent Decision Makers." in Eric Arnett, op. cit., pp. 223-242; see p. 235.
21 Ibid., p. 242.
22 The Middle East, June 1997, p. 8.
25 See "Symposium -The Challenge in the Gulf: Building A Bridge From Containment to Stability," Middle East Policy, Vol. 5, No. 2, May 1997, pp. 1-21; see p. 7.
26 Zachary Karabell, "Fundamental Misconception: Islamic Foreign Policy," Foreign Policy, No. 105, Winter 1996-97, pp. 77-90; see p. 90.
27 The Christian Science Monitor, July 30, 1997, p. 11.
28 Ian Anthony, "Arms Exports to Southern Asia: Policies of Technology Transfer and Denial in the Supplier Countries," in Eric Arnett, op. Cit., pp. 277-298; seep. 298.
30 See comments made by Gary Sick in "Symposium: U.S. Policy Toward Iran: From Containment to Relentless Pursuit?" Middle East Policy, Vol. 4, No. 1 and 2, September 1995, pp. 1-21; see p. 8.
31 Saideh Lotfian, "Threat Perception and Military Planning in Iran: Credible Scenarios of Conflict and Opportunities for Confidence Building," in Eric Arnett, op. cit., pp. 195-215; see pp. 210-212.
32 Middle East International, February 16, 1996, pp. 18-19.
33 Cordesman and Hashim, op. cit., p. 133.
34 R.K. Ramazani, "The Emerging Arab-Iranian Rapprochement: Towards An Integrated U.S. Policy in the Middle East?" Middle East Policy, Vol. VI, No. 1, June 1998, pp. 45-62; see p. 53.
35 Ibid., p. 55.
36 The New Republic, May 27, 1996, pp. 22-23.
37 Iran Times, August 22, 1997, p. 2.
38 Ibid., December 26, 1997, p. 1.
39 Ibid., July 3, 1998, p. 1.
40 Ibid., July 24, 1998, p. 1.
41 The New York Times, September 20, 1998, p. 3.
42 Iran Times, October 16, 1998, p. 1.
43 Ibid., June 2, 1998, p. 1 and 15.
44 Kayhan International, June 6, 1998, p. 1, and June 10, 1998, p. 1.
45 Iran Times, April 3, 1998, p. 1.
46 “Symposium: U.S. Policy Toward Iran: From Containment to Relentless Pursuit?” Middle East Policy, Vol 4, No. 1 and 2. September 1995, pp 1-21, see comments by Dr. Richard Cottam, p. 17.
47 Ibid., p. 19. See comments by Ellen Laipson.
48 Anoushiravan Ehteshami and Raymond A. Hinnebusch, Syria and Iran: Middle Powers in a Penetrated Regional System (New York: Routledge, 1997), p. 195.
49 Ibid., p. 202.
50 Middle East International, July 25, 1997, pp. 11-12.
51 Iran Times, August 29, 1997, p. 3.
52 Ibid., April 10, 1998, p. 1.
53 Ibid., September 5, 1997, p. 1.
54 Deutsche Presse-Agentur, Lexis-Nexis, September 15, 1997.
55 Malik Mufti, "Daring and Caution in Turkish Foreign Policy," in Middle East Journal, Vol. 52. No. I, Winter 1998, pp. 32-50; see p. 39.
57 The Christian Science Monitor, April 6, 1998, pp. 1 and 6.
58 See Helena Cobban's observations in The Christian Science Monitor, April 9, 1998, p. 19.
59 Iran Times, October 16, 1998, p. 4.
60 Tehran Times, July 10, 1997, p. 1.
61 Ibid., p 14.
62 Iran Times. August 22, 1997, p. 3.
63 Ibid., July 3, 1998, p. 1.
64 Iran News, July 26, 1997, p. 4.
65 Far Eastern Economic Review. March 30, 1995, pp. 66-67.
66 Tehran Times, July 19, 1997, pp. 1 and 14.
67 Journal of Commerce, September 26, 1997, p. 10A.
68 The New York Times. April 11, 1997, pp. A1 and A11.
69 Charles Lane, "Germany's New Ostpolitik," Foreign Affairs, Vol 74, No. 6, November/December 1995, pp 77-89; see p. 84.
70 Joshua Muravchik and Jeffrey Gedmin, "Why Iran is (Still) a Menace," Commentary, Vol. 104, No. 1, July 1997, pp. 39-44; see p. 42.
71 The New York Times, April 30, 1997, p. A5.
72 Iran Times, May 22, 1998, p 1.
73 The New York Times, April 14, 1997, p. A9.
74 Iran Times, May 2, 1997, pp. 1 and 3
75 The New York Times, August 27, 1997, p. A6.
76 Iran News, June 2, 1998, pp. 3 and 15.
77 Bahman Baktiari, "Testing the Seriousness of Iranian Reforms," The Christian Science Monitor, September 30, 1998, p. 11
78 F. Gregory Gause III, "The Illogic of Dual Containment," Foreign Affairs, Vol. 73, No. 2, March/April 1994, pp. 56-66; see p 58.
79 Ibid., p. 57.
80 Ibid., p. 66.
81 Iran Times, May 22, 1998, p. I.
82 M. Javad Zarif and Saeid Mirzaee, "US Unilateral Sanctions Against Iran," The Iranian Journal of International Affairs, Vol. IX. No. I, Spring 1997, pp. 1-20; see p. 17.
84 For more on this issue, see Zbigniew Brzezinski, Brent Scowcroft and Richard Murphy, "Differentiated Containment," Foreign Affairs, Vol. 76, No. 3, May/June 1997, pp. 20-30.
85 S. Frederick Starr, "Power Failure: American Policy in the Caspian," The National Interest, No. 47, Spring 1997, pp. 20-31; see p. 29.
86 The Oil and Gas Journal, February 24, 1997, p. 25.
87 Ibid., August 11, 1997, p. 21.
89 Ibid., pp. 21-22.
90 For an Asian perspective on human rights, see Beijing Review, February 17-March 3, 1997, pp. 11-14.
91 Far Eastern Economic Review, October 26, 1995, p. 74.
92 Ibid., June 15, 1995, p. 30.
93 Ibid., p. 32.
94 Middle East International, June 13, 1997, pp. 16-17. Also see Arnett, op. cit., p. 18.
95 Ibid., June 13, 1997, p. 17.
96 Far Eastern Economic Review, June 15, 1997, p. 32.
98 Roxane D. V. Sismanidis, "India: Foreign Relations," in James Heitzman and Robert L. Worden, India: A Country Study (Washington, DC: Department of the Army, 1996), pp. 507-560; see p. 540.
99 Shireen T. Hunter, "Forging Chains Across Eurasia," The World Today, Vol. 52, No. 12, December 1996, pp. 313-316; see p. 316.
100 Tehran Times, July 12, 1997, p. 2.
101 Iran News, July 8, 1997, p. 14.
104 The Christian Science Monitor, July 30, 1997, p. 11.
105 The Economist, June 27-July 3, 1998, pp. 27-28.
106 The Oil and Gas Journal, August 11, 1997, p. 20.
107 See James Rubin's remarks in Iran Times, July 10, 1998, p. 4.