Tehran's agenda is ambitious. It's injecting money and manpower into Iraq to try to influence the direction of politics there. Iran's support for terrorist groups such as Hezbollah and Hamas is largely unfettered. Most worrisome, experts believe, is that the mullahs are plunging ahead with development of a nuclear bomb. And Iran's huge oil reserves -- which undermine its claim that it needs to develop commercial nuclear power -- mean Tehran has the rest of the world over a barrel (see BW Online, 8/7/04, "Iran: "A Tougher Nut" than N. Korea").
A SHIA ALLIANCE? Or at least Iran's leaders think they do. Europe, in particular, has no stomach for confrontational diplomacy just yet. Engaging in that manner would serve only to raise tensions and lead Iran further toward what Philip Gordon, a Brookings Institution Europe expert, describes as the North Korean model: "No trade, no dialogue, no evolution -- but there are nuclear weapons."
The question now is whether Iran will overplay its hand. And it's certainly possible. Consider relations between Iran and Iraq. These two nations have a longstanding rivalry and engaged in an eight-year war in the 1980s. Now various Iranian factions are helping different political groups in Iraq in the hope of forming a Shia alliance that would make the Sunni-dominated region shudder. But if the Iranians pick the wrong horse, the strategy could collapse.
Some current Iraqi officials, who could end up as leaders for the long haul, are already griping about Iranian interference. And if Tehran does achieve its goal, Sunni-led nations could unite in an effort to blunt any regional ambitions the Iranian-led coalition might have.
BUM DEALS. Iran could face trouble on the terrorism front as well. If the current foment in Palestinian ranks prompts real reform and alters the makeup of the Palestinian leadership, the U.S. may press for a new Middle East peace negotiation regardless of who wins the White House in November. The Europeans would like to see progress, too. If Iran proves a stumbling block because of its support for terrorism, European capitals could change their attitude toward Tehran and join Washington in pressuring Iran to toe the line.
Finally, Iran's assertion that it will continue to build centrifuges, which can be used to make weapons-grade uranium, could unite the U.S. and Europe -- and much of the international community -- on a new arms-control scheme. Many nations now believe that existing nuclear-arms-control pacts have a deep flaw. Such accords enable countries to start down the road toward commercial nuclear capability, yet the rules do little to stop any that decide to use the nuclear expertise they acquire to build weapons instead.
A global consensus is growing that weapons wannabes shouldn't be allowed to operate the entire nuclear-fuel cycle. Spent fuel, for example, should be exported to another country so that it can't be enriched for use in a bomb. Iran could be a test case for nuclear nonproliferation's new template.
The U.S. clearly is on board. Europe may be, too. After all, the Europeans had chosen to engage Iran and thought they had a deal that stopped its nuclear progress cold. Instead, Iran turns out to have had some secret facilities and programs. And now Tehran says it has a right to the nuclear cycle.
DEFT PLAY. Europe feels betrayed. The question is how forcefully it will respond -- and Iran may be surprised. The Europeans already have postponed a trade pact with Iran and backed a tough International Atomic Energy Agency (IAEA) condemnation of Tehran. And of course, the Israelis may feel so threatened that they take matters into their own hands and opt for a preemptive strike against the nuclear facilities they know about. After Iraq, Washington would be hard-pressed to argue against such unilateral action.
So far, though, Iran is playing its hand deftly. The prospect that anyone will come down hard on it for its support of terrorism, meddling in Iraq, or its nuclear program seems slim right now. And as long as Tehran thinks it can get away with all these things, it has little incentive to moderate its policies.
If the Bush Administration thought invading Iraq would have a salutary effect in Iran, it was sadly mistaken. And right now it looks as if only an Iranian miscue could change that. Crock covers national security and foreign affairs for BusinessWeek from Washington. Follow his views in Affairs of State twice a month, only on BusinessWeek Online