Time for Temperance with Tehran?


By Stan Crock The ayatollahs of Iran normally wouldn't make it to the top of a new President's foreign-policy priority list. Truth is, the Bush team would much prefer to focus on such pressing matters as U.S.-China relations, Saddam Hussein, Russia's swoon, and missile defense.

But the new Administration won't have a choice. This spring, Iran will hold its own Presidential election that will show whether the moderates and reformers of Iran still have the vast majority of voters behind them. If they do, they'll have increased leverage to stand up to the more conservative clerics who wield enormous clout. Then, in August, the Iran-Libya Sanctions Act (ILSA) will expire. This confluence of events sets the stage for what's sure to be an intense debate over whether it's time to temper Washington's long-standing antagonistic policies toward Tehran.

TOOTHLESS MEASURES. If Dubya is smart, he'll jump at the chance for a fresh start. To be sure, Iran has done little to encourage a different approach. It still supports terrorism, opposes the Middle East peace process, and is building weapons of mass destruction. But that just shows how ineffective America's unilateral sanctions have been. Even worse, U.S. sanctions on foreign companies that try to do business in Iran have created needless friction with Washington's allies. Meanwhile, the curbs have allowed Iranians of all stripes to demonize Uncle Sam, putting America in a miserable position if the reformers ultimately prevail.

What's needed is a new approach, much like America's relations with China, which combine cooperation with competition. Such a strategy "will challenge the maturity of the next President," says Chas. W. Freeman Jr., president of the Middle East Peace Council. The U.S. will have to live with Iran's development of weapons of mass destruction. Iran needs them for any future conflict with Iraq, which used chemical weapons against Iran in their eight-year war.

Besides, Tehran's opposition to the peace process stems from a desire for the Persian country to burnish its credentials in its Arab-dominated neighborhood. "Iran will oppose the process but accept a treaty," predicts Ray Takeyh of the Washington Institute for Near East Policy. In essence, these issues should be seen as regional matters, rather than as strategic threats to the U.S.

OIL-PATCH DIPLOMACY. What should President-elect Bush do? For starters, he should move in an area he and Vice-President-elect Cheney know well: oil. It's a sign of how isolated the U.S. has become from its friends that not just France but even Japan is snubbing U.S. sanctions. In October, Tokyo won negotiating rights to develop Iran's huge Azadegan field. Japan doesn't have the expertise to handle the task once a deal is signed. That could provide an opportunity for American companies -- if they were permitted to take the business.

Bush should ease executive-branch trade restrictions, which effectively bar oil companies from any contact with Iran. Companies would still have to limit their financial commitment to under $20 million, as ILSA requires, until that law is off the books. But ample opportunity exists under that ceiling.

Next, the Bush team should overhaul the Clinton Administration's Caspian Sea oil policy. Its goal was to avoid shipping Caspian Sea oil through either Iran or Russia. The solution was support for a pipeline that would go from Baku, in Azerbaijan, to Jehan, in Turkey. Trouble is, that pipeline wouldn't be attractive unless the oil finds in the Caspian are much larger than currently expected, according to Lucian Pugliarsi, a Washington (D.C.) energy consultant.

The Iranian pipeline the Administration fears might not be any more viable unless the oil discoveries are substantial. The best option, according to some experts, is to let Iran keep the heavy sour crude derived from beneath the Caspian Sea and trade for Iranian light sweet crude, which would be exported through the Persian Gulf. Iran would have to build a refinery to handle the heavier Caspian oil for domestic consumption, but that might be less costly than building a pipeline. The U.S. would have to change its rules to permit American companies to help build the refinery, then buy the swapped oil.

POSITIONING FOR REFORM. The Bush Administration would have to endure some short-term political heat for such moves. The American public likes Iran about as much as the mullahs like Americans. But even Iran's critics admit that its democracy is vibrant, and its elections are both real and sharply contested. The pro-reform sentiment on the streets is clear, and if grassroots feelings in other repressive regimes can undo a Suharto and a Milosevic, it can upend the mullahs, too. Washington could capitalize on such long-term changes if it didn't give its enemies fodder for vilifying America all the time.

If the sources of friction were reduced, Washington and Tehran would find it easier to discuss their common interests: keeping Iraq and Afghanistan in line, preserving stability in the Gulf and central Asia, and fighting international drug trafficking and environmental degradation. This won't happen soon. The Europeans have had no more success trying to change Iran's ideologues through engagement than America's tougher line has had. "The stalemate in Iran may make reciprocity difficult," says Susan Maloney, an Iran specialist at the Brookings Institution.

But the political gridlock won't last forever, and I would put money on the forces of reform to win in the end. The Bush Administration needs to do what's in America's long-term national interest -- and position the U.S. to take advantage of that day in the future. Crock covers foreign affairs for Business Week in Washington. Follow his column, twice a month, only on BW Online


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