Western efforts to negotiate an end to Iran's drive for nuclear weapons have produced unsatisfactory results. Tehran has made tactical concessions under international pressure to freeze its uranium enrich­ment operations and submit to increased inspections of its nuclear facilities by the International Atomic Energy Agency (IAEA), but it remains determined to develop a full nuclear fuel cycle that would eventually give it a nuclear weapons capability. The installation of a new hard-line government led by President Mah­moud Ahmadinejad, who has publicly criticized past Iranian concessions, has further undermined the prospects for diplomatic success.

Washington should back European efforts to pres­sure Iran diplomatically to give up its nuclear weap­ons ambitions. However, if Iran resumes uranium enrichment, the U.S. should mobilize an interna­tional coalition to isolate the Ahmadinejad regime, weaken it through targeted economic sanctions, con­tain Iran's military power, and encourage democratic regime change.

The Faltering Diplomatic Dialogue

Following exposure of the secret uranium enrich­ment plant at Natanz in 2002 and other suspicious activities, Iran agreed to suspend its nuclear enrich­ment program in October 2003 to avoid referral to the United Nations Security Council by the IAEA for violations of the Nuclear Non-Proliferation Treaty (NPT). Tehran feared that referral to the Security Council could result in diplomatic isolation, eco­nomic sanctions, or military attack. Undoubtedly, it was also motivated by the examples set by the rapid overthrow of both the Taliban regime in Afghani­stan in 2001 and Saddam Hussein's regime in Iraq in early 2003 by U.S.-led coalitions.

Tehran made enough tactical concessions to stave off international sanctions and engage the European Union in diplomatic negotiations led by Britain, France, and Germany (the EU-3), tempo­rarily defusing the crisis. Yet Tehran has increas­ingly chafed at the continued suspension of its nuclear enrichment program, which can produce fuel for civilian nuclear reactors or the fissile mate­rial for a nuclear weapon. It now apparently believes that it is in a much stronger negotiating position due to the continued need for U.S. mili­tary forces in Iraq and Afghanistan, greater bargain­ing leverage with oil importers because of higher oil prices, and its diplomatic cultivation of China and Russia, which can dilute or veto resolutions brought before the Security Council.

The EU-3 diplomatic approach is faltering and is unlikely to attain a sustainable ironclad agreement by Iran to forgo a nuclear weapons capacity. In August, Iran resumed operations at the Isfahan ura­nium conversion facility, converting yellowcake into uranium hexafluoride, a preliminary step to enrichment.

Despite this violation of Iran's understanding with the EU-3, however, and despite Tehran's fail­ure to explain adequately other activities that are inconsistent with its claim that it is merely devel­oping a civilian nuclear power industry, the IAEA has dragged its feet on referring Iran to the Secu­rity Council for possible sanctions. On September 24, the IAEA Board of Governors voted 22-1 (with many abstentions, including Russia and China) to declare Iran to be in noncompliance with its NPT safeguard obligations. Yet the IAEA Board failed to refer Iran's noncompliance to the U.N. Security Council as required by its own gov­erning statute.

The IAEA also failed to refer Iran to the Security Council at the November 24 meeting of the IAEA Board of Governors, choosing instead to wait for an Iranian response to a Russian proposal that would allow Iran to enrich uranium at facilities in Russia. This proposal, which would allow Iran to acquire all the elements of a nuclear fuel cycle short of enrichment, would be a major step backward for the U.S. and EU-3 positions on enrichment. Wash­ington should maintain its position that Iran must suspend and eventually dismantle its nuclear fuel cycle capacities because of its long history of cheat­ing on its NPT obligations.

The IAEA's sluggish response may encourage the assertive Ahmadinejad regime to advance its nuclear program by resuming uranium enrich­ment while going through the motions of allowing IAEA inspections to deflect Western attempts to refer Iran's NPT violations to the Security Council. Tehran has already used such tactics to escape any concrete penalties for restarting its uranium con­version activities. Iran's new president is firmly committed to Iran's nuclear program and has crit­icized the previous government for making too many concessions to the EU-3. Resuming ura­nium enrichment would be consistent with the increasingly confrontational tone of Iranian for­eign policy.[1]

Ahmadinejad's Defiant Foreign Policy

Mahmoud Ahmadinejad rose through the ranks of the Islamic Revolutionary Guard Corps, the praeto­rian guard dedicated to advancing and exporting the revolution that Ayatollah Ruhollah Khomeini inspired in Iran in 1978. Ahmadinejad was appointed mayor of Tehran before running for Iran's presidency in June on a platform calling for a return to revolutionary values after years of stagnation, cor­ruption, and half-hearted reforms. Ahmadinejad is a true believer in Khomeini's radical vision of Iran's role as the vanguard of a global Islamic revolution. He has lambasted the U.S. as "a failing power" and a threat to the Muslim world.[2]

In sharp contrast to his predecessor, former Pres­ident Mohammad Khatami, who advocated a con­ciliatory "dialogue of civilizations" but was blocked by the strong opposition of the ideological hard-liners, Ahmadinejad has returned to the fiery rhet­oric of the Khomeini era. In September, he deliv­ered a truculent speech at the United Nations, warning foreign governments against meddling in Iranian affairs. On October 26, he made a venom­ous speech attacking Israel in which he quoted Khomeini: "As the Imam said, Israel must be wiped off the map."[3]

Iranian Foreign Minister Manouchehr Mottaki subsequently shrugged off foreign criticism of the president's diatribe by insisting that it "was nothing but the strategy and policy of the Islamic Republic of Iran in the past 27 years." Under Ahmadinejad, Iran has stepped up its lionization of Palestinian suicide bombers, whom it has long financed through the Palestinian Islamic Jihad and Hamas terrorist groups. Tehran has reportedly also recruited and registered 25,000 "martyrdom-seek­ing" Iranian volunteers for possible suicide bomb­ings against Iran's enemies.[4]

Ahmadinejad's vehement return to Khomeini's radical line has been accompanied by a purge of pragmatists and reformers in the regime. Forty senior Iranian ambassadors have been recalled from overseas posts, including diplomats who were involved in the EU-3 negotiations in Britain, France, and Germany and at the United Nations in Geneva. Ahmadinejad has appointed many of his Revolutionary Guard cronies to key positions throughout the government, including the Supreme National Security Council, which for­mulates foreign and defense policy.

Iran has also been increasingly aggressive in stir­ring up trouble inside Iraq. In October, the British government charged that the Iranians had supplied sophisticated bombs with shaped charges capable of penetrating armor to clients in Iraq, who used them in a series of attacks on British forces in southern Iraq. Iran has also given discreet support to insurgents such as Moqtada al-Sadr, who has led two Shi'a uprisings against coalition forces and the Iraqi government.

Iranian hard-liners undoubtedly fear that a sta­ble democratic Iraq would present a dangerous alternative model of government that could undermine their own authority. They know that Grand Ayatollah Ali al-Sistani-Iraq's pre-emi­nent Shi'a religious leader, whose religious authority dwarfs that of any member of Iran's rul­ing clerical regime-rejects Khomeini's radical ideology and advocates traditional Shi'a religious doctrines. Although Iran continues to enjoy con­siderable influence with many Iraqi Shiites, par­ticularly with Iraq's Supreme Council for the Islamic Revolution in Iraq and the Dawa Party, Sistani's moderate influence dilutes their own rev­olutionary influence. Therefore, Tehran is playing a double game in Iraq, using the young firebrand al-Sadr to undermine Sistani and keep pressure on the U.S. military to withdraw while still main­taining good relations with Shi'a political parties who revere Sistani and need continued American support.

In addition to trying to destabilize Iraq, Iran continues to be the world's leading sponsor of ter­rorism. It has close ties to the Lebanon-based Hezballah terrorist group, which it organized and continues to finance, arm, and train. Tehran has supported a wide variety of Palestinian terrorist groups and Afghan extremists, such as Gulbuddin Hekmatyar. Iran was involved in the 1996 Khobar Towers bombing, which killed 19 American mili­tary personnel deployed in Saudi Arabia. More­over, Iran continues to give sanctuary to elements of al-Qaeda, including at least one son of Osama bin Laden.[5]

This long and deep involvement in terrorism, combined with repeated threats to destroy Israel, provides a strong warning against the dangers of allowing such a radical regime to develop nuclear weapons.

What If Iran Continues Its Nuclear Weapons Efforts?

Diplomatic efforts are unlikely to solve the Iran problem, partly because of the institutional weak­nesses of the IAEA and U.N. Security Council, where a lack of consensus often leads to paralysis. Nevertheless, the Bush Administration must reso­lutely press the diplomatic case to set the stage and improve the U.S. position in the push for possible economic sanctions or, as a last resort, military action. Another goal should be to ensure that the end result of the EU-3 dialogue with Iran clearly lays the responsibility of any failure on Iran, not the U.S.

By earlier pursuing a common policy with the EU-3 of mixing carrots and sticks, the Bush Admin­istration finds itself in a far stronger diplomatic position if the Iranians-as is likely-spurn all efforts to resolve the nuclear crisis that they have instigated.[6] Unlike the lead-up to the Iraq war, this political approach has the advantage of making Ira­nian action, not U.S. policies, the centerpiece of future diplomatic action, allowing for transatlantic agreement rather than discord. The EU-3 and the United States have jointly committed, if Iran con­tinues to pursuit a full nuclear fuel cycle, to com­mon measures designed to make the price of Tehran's actions far harder to bear than would be the case with only American opposition.

The requirements of full Iranian compliance can be spelled out with a great deal of specificity. Iran must agree to:

1. Terminate permanently its pursuit of a full nuclear fuel cycle,
2. Terminate permanently all programs to enrich uranium and produce uranium hexaflouride and its precursors,
3. Terminate permanently all programs to extract plutonium,
4. Terminate permanently its pursuit of a heavy water nuclear reactor, and
5. Allow an intrusive inspections regime (utiliz­ing real-time monitoring equipment) at the Bushehr reactor and associated spent-fuel stor­age pond and any other site that the U.S. and the EU-3 deem suspicious.

If Iran agrees to all of these steps, carrots in the form of diplomatic and trade concessions (e.g., a nonaggression pledge similar to the one posited for North Korea, diplomatic recognition, and the beginning of a trade opening) will jointly follow from the transatlantic partners. Ultimately, the onus remains firmly on the Iranians to decide to end the crisis.

If the Iranians continue to spurn international efforts to resolve the crisis and instead opt to move forward with their nuclear program, at least the transatlantic link need not be a casualty of Iranian adventurism. In addition to agreeing which carrots to offer if the Iranians forgo their nuclear program, the EU-3 and the United States will need to work out a series of sticks designed to impose a heavy price on Iran if it continues on its present course. These sticks should include:

1. U.S. and EU-3 support for referring the Ira­nian nuclear issue to the U.N. Security Council. Unlike during the Iraq crisis, the West will speak with one voice.
2. Targeted Economic Sanctions. If, as is likely, Russia and China thwart a Security Council res­olution against Iran and the process does not come to an end, the EU-3 should immediately adopt a policy-at the EU level if possible or as individual states if necessary-of targeted sanc­tions against the Islamic Republic. Given the relative economic weight of Germany, France, and Britain, and given Iran's desperate need for further European foreign and direct investment to deal with its population explosion, the potential effect of this economic stick should not be underestimated.
3. A Common Interdiction Policy. The EU-3 and the U.S. should agree to a common inter­diction policy to ensure that no prohibited nuclear material moves into or out of Iran. If necessary, they should also agree on a common blockade to enforce this policy.
4. A Joint Declaration on "Loose Nukes." The U.S. and the EU-3 should jointly make it clear to the Iranian leadership that Iran, not just the West, has a proliferation problem. That is, any proliferation of nuclear technology in the region that is suspected to involve Iran will trig­ger the harshest countermeasures against Iran. Common diplomacy must again make it clear that the onus of "loose nukes" falls squarely on Tehran.
5. A Military Option. Barring an agreement, the U.S. reserves the right to protect its vital national interests and protect Americans and their allies, including through the use of mil­itary force if necessary. If Tehran is caught red-handed sponsoring terrorism against the U.S., any agreement on the nuclear front should not be interpreted as giving it immu­nity from U.S. military reprisals or counter-terrorist attacks.

Such a flexible transatlantic diplomatic strategy suits the current crisis because it allows the U.S. maximum room for diplomatic maneuver while uniting the alliance and putting the onus for the crisis entirely on the Iranians. Whatever decision the mullahs ultimately make, such a carrot-and-stick approach marginally shifts the odds toward a peaceful solution while remaining clear-eyed about the likelihood that Iran will continue to pursue a full nuclear fuel cycle.

U.S. Policy and Iran's Nuclear Challenge

The international debate over Iran's nuclear weapons efforts is now coming to a head. The United States and the EU-3 have closed ranks to confront Iran, but time to defuse the crisis through negotiations is growing short, assuming that it is even possible. Proceeding from the policy frame­work outlined above, the Bush Administration should:

Recommendation #1: Push the IAEA to Refer Iran's Violations of Its Nuclear Safeguard Agreements to the U.N. Security Council at the IAEA Board of Governors' Next Meeting

Washington should demand that the IAEA stop procrastinating and fulfill the terms of its charter, which require it to report NPT violations to the Security Council. By repeatedly delaying the referral of Iran to the Security Council, the IAEA Board of Governors has given Tehran more lati­tude to continue its cat-and-mouse game with the international community. The U.S. and its allies should push for a fixed deadline for concrete actions by Iran to account for its suspicious nuclear activities and to halt uranium conversion before the next meeting of the IAEA Board. Tehran should no longer be allowed to avoid sanctions by making just enough promises to avoid referral to the Security Council while failing to deliver on its promises.

Recommendation #2: Forge a Coalition to Impose Targeted Economic Sanctions on Iran

Although Iran has benefited significantly from the recent spike in world oil and natural gas prices, its economic future is not promising. The mullahs have sabotaged economic growth by expanding state control of the economy, economic misman­agement, and corruption. Annual per capita income is only two-thirds of what it was at the time of the 1979 revolution. The situation is likely to worsen if President Ahmadinejad follows through on his populist campaign promises to increase sub­sidies and give Iran's poor a greater share of Iran's oil wealth.

Iranians have already begun to send their capi­tal out of the country because they fear the poten­tially disastrous policies of the new government. Shortly after Ahmadinejad gave his October 26 speech threatening Israel, Iran's stock market plunged to its lowest level in two years. Many Ira­nian businessmen understand, even if Ahmadine­jad does not, that Iran's economic future depends on access to world markets, foreign investment, and trade.

The U.S. should push for the strongest possible sanctions at the U.N. Security Council, but experi­ence has demonstrated that the U.S. cannot rely on the U.N. to halt the Iranian nuclear program. Rus­sia and China may veto or dilute any resolution. The U.S. should therefore make contingency plans to work with Britain, France, Germany, the EU, and Japan to impose sanctions outside the U.N. framework.

An international ban on the import of Iranian oil is a non-starter. It is unrealistic to expect oil importers to stop importing Iranian oil in a tight, high-priced oil market. Instead, the focus should be on denying Iran loans, foreign investment, and favorable trade deals. Washington should cooper­ate with other countries to deny Iran loans from international financial institutions such as the World Bank and to deny Iran loans for a proposed natural gas pipeline to India via Pakistan.

Although Iran is one of the world's leading oil exporters, it is also an importer of gasoline due to mismanagement and inadequate investment in its refinery infrastructure. Representatives Mark Kirk (R-IL) and Robert Andrews (D-NJ), the leaders of the House Iran Working Group, have proposed a ban on gasoline exports to Iran. International support for such sanctions, particularly if supported by the Arab states of the Persian Gulf, would drive up the prices of Iranian gasoline and underscore to the Iranian people the shortsightedness of Iran's ruling regime.

Recommendation #3: Rally International Support for Iran's Democratic Opposition

The Bush Administration has correctly aligned the U.S. with the Iranian people in their efforts to build a true democracy, but it has held back from a policy of regime change, partly in deference to the EU-3 negotiations with Iran. However, now that Iran has clearly reneged on its promises to the EU-3, Wash­ington should discreetly aid all Iranian groups that support democracy and reject terrorism, either through direct grants or indirectly through nongov­ernmental organizations. The Iran Freedom and Support Act of 2005 (H.R. 282 and S. 333), cur­rently under consideration in Congress, would authorize such aid and tighten U.S. economic sanc­tions on Iran.

Iran has a well-educated group of young reform­ers who are seeking to replace the country's cur­rent mullahcracy with a genuine democracy that is accountable to the Iranian people. They have been demoralized by former President Khatami's failure to live up to his promises of reform and by his lack of support for the student uprisings of 1999, but a brewing popular disenchantment with the policies of Ahmadinejad's hard-liners is likely to re-ener­gize them.

The U.S. and its allies should discreetly support all Iranian opposition groups that reject terrorism and advocate democracy by publicizing their activ­ities internationally and within Iran, giving them organizational training indirectly through Western NGOs, and inviting them to attend international conferences and workshops outside Iran, prefera­bly in Europe or other countries where Iranians can travel relatively freely with minimal fear of being penalized upon their return to Iran. Educational exchanges with Western students would be an important avenue for bolstering and opening up communication with Iran's restive students, who historically have played a leading role in Iran's reform movements. Women's groups could also play a key role in strengthening support for young Iranian women, a key element opposing the resto­ration of harsh social restrictions by Iran's resurgent Islamic ideologues.

The United States should also covertly subsidize opposition publications and organizing efforts, as it did to aid the anti-communist opposition during the Cold War in Europe and Asia. However, such programs should be strictly segregated from public outreach efforts by the U.S. and its allies in order to avoid putting Iranian participants in international forums at risk of arrest or persecution when they return home.

The United States should not try to play favorites among the various Iranian opposition groups, but should instead encourage them to cooperate under the umbrella of the broadest possible coalition. However, Washington should rule out support for the People's Mujahideen Organization (PMO or Mujahideen Khalq) and its front group, the National Council of Resistance.

The PMO is a non-democratic Marxist terrorist group that was part of the broad revolutionary coalition that overthrew the Shah but then was purged in 1981, after which it aligned itself with Saddam Hussein's dictatorship. While this cult-like group is one of the best-organized exile orga­nizations, it has little support inside Iran because of its alliance with archenemy Iraq during the Iran-Iraq War.

Moreover, the PMO resorted to terrorism against the Shah's regime and was responsible for the assas­sinations of at least four American military officers in Iran during the 1970s. It demonstrated in sup­port of the Soviet invasion of Afghanistan in 1979 and against the release of the American hostages in 1981. The U.S. cannot afford to support an organi­zation with such a long history of terrorism if it expects Tehran to halt its own terrorism.

Recommendation #4: Mount a Public Diplomacy Campaign to Explain to the Iranian People How the Regime's Hard-line Policies Hurt Their Economic and National Interests

Iran's clerical regime has tightened its grip on the media in recent years, closing more than 100 inde­pendent newspapers, jailing journalists, shutting down Web sites, and arresting bloggers. The U.S. and its allies should work to defeat the regime's suppression of independent media by increasing Farsi broadcasts by government-sponsored media, such as the Voice of America, Radio Free Europe, and other information sources.

The free flow of information is a prerequisite for the free flow of political ideas. The Iranian people need access to information about the activities of Iranian opposition groups, both within and outside Iran, and the plight of dissidents such as impris­oned journalist Akbar Ganji, an investigative jour­nalist who has been jailed for exposing the regime's crimes against its own people.

The Internet is a growing source of unfiltered information for many Iranians, particularly Iranian students. Farsi is reportedly the fourth most popu­lar language used on line, and there has been a pro­liferation of political blogs devoted to Iranian issues. The U.S. should consider ways to assist Ira­nians outside the country to establish politically oriented Web sites that could be accessed by activ­ists and other interested people inside Iran.

Recommendation #5: Mobilize Allies
to Contain and Deter Iran

The resurgence of Iran's hard-liners, Iran's con­tinued support for terrorism, and the prospective emergence of a nuclear Iran threaten many coun­tries. Ahmadinejad's belligerence gives Washington greater opportunity to mobilize other states, partic­ularly those in the growing shadow of Iranian power. The United States should maintain a strong naval and air presence in the Persian Gulf to deter Iran and strengthen military cooperation with the Gulf States, which are growing increasingly anx­ious about Iran's hard-line government.

The U.S. and its European allies should strengthen military, intelligence, and security coop­eration with threatened states, such as Iraq, Turkey, Israel, and the members of the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates), which was founded in 1981 to provide collective security for Arab states threatened by Iran. Such a coalition could help both to contain the expansion of Iranian power and to facilitate military action, if necessary, against Iran.

Washington could also offer to deploy or transfer anti-ballistic missile defense systems to threatened states, enhance joint military planning, and step up joint military exercises.

Recommendation #6: Prepare
for the Last Resort

The worst situation imaginable would occur if Iran posed an imminent threat to U.S. vital national interests and America lacked the capacity and will to respond. A strong U.S. military is essential both to dissuading and deterring Iran from fielding nuclear weapons and supporting terrorism and to responding decisively and effectively to Iranian threats.

Several military capabilities are particularly important to dealing with a nuclear or terrorist threat from Iran, including (1) expanding and strengthening the Proliferation Security Initiative (PSI); (2) theater missile defense; (3) robust special operations forces and human intelligence (HUMINT) assets; (4) assured access to bases and staging areas in theater for both special operations and conventional ground, air, and sea forces; and (5) a viable and effective U.S. nuclear deterrent.

Proliferation Security Initiative. The PSI is a multinational effort to track down and break up networks that proliferate chemical, biological, and nuclear weapons technologies and materials. The Administration should field more modern capabil­ities that can provide the right intelligence, recon­naissance, surveillance, and interdiction assets for the U.S. military. In particular, modernization of Coast Guard and naval forces to help prevent seaborne trafficking of weapons material is vital.

Theater Missile Defense. Theater missile defense is also essential. Missile defenses provide the means to intercept and destroy a ballistic mis­sile in flight before it can deliver a nuclear warhead to its target. The United States should work with its friends and allies to provide theater missile defense to countries in the region. The United States should continue to pursue a mix of air-based, land-based, and sea-based missile defense systems.

Special Operations Forces and HUMINT. These military and intelligence assets provide the capacity for focused operations against specific tar­gets. Today, these forces are overstretched, perform­ing many missions in the global war on terrorism. The Pentagon should stop using special operations forces to train foreign militaries and do other tasks that can be done by conventional military units. In addition, the Administration needs to bolster the ranks of the special forces and HUMINT assets that might be required to operate in Iran, ensuring that they have the right language skills, area knowledge, and detailed, actionable intelligence.

Theater Access. The United States needs to retain the means to deploy and sustain forces in theater. The Pentagon should work to secure a vari­ety of basing options for staging military opera­tions. In addition, the military must have robust means to ensure its ability to operate in the Gulf and defeat "anti-access" weapons, such as cruise missiles, naval mines, terrorist attacks, and biolog­ical and chemical weapons.

Nuclear Deterrent.America's nuclear forces are in danger of atrophying. The U.S. missile force and warhead inventory is aging. The United States should be developing next-generation nuclear weapons. The American nuclear deterrent has been an effective guarantor against nuclear conflict for more than half a century, and U.S. nuclear power has helped to dissuade other nations from acquir­ing these weapons. Failing to retain an effective and dependable nuclear deterrent will simply invite aggression, not only against United States, but against other free nations as well.

Conclusion

Iran remains a dangerous revolutionary power determined to acquire nuclear weapons. No policy short of war is guaranteed to halt the Iranian nuclear program. The U.S. can frustrate Iran's nuclear plans and drive up the economic, diplomatic, and political costs of obtaining nuclear weapons by working with other countries to impose targeted sanctions on Iran, contain it, and deter it from using or threatening to use nuclear weapons.

In the end, if Iran threatens U.S. vital national interests, the hard-line government in Tehran should have no doubt that the United States has the capacity and the will to use all the instruments of national power, including military force, to defeat that threat. The United States should be prepared both to preempt and to retaliate against any threats to its citizens and property or those of its allies.

James Phillips is Research Fellow in Middle East­ern Studies in the Douglas and Sarah Allison Center for Foreign Policy Studies, and John C. Hulsman, Ph.D., is Senior Research Fellow in European Affairs in the Mar­garet Thatcher Center for Freedom, divisions of the Kathryn and Shelby Cullom Davis Institute for Interna­tional Studies, at The Heritage Foundation. James Jay Carafano, Ph.D., is Senior Research Fellow for National Security and Homeland Security in the Allison Center.