U.S. and Iranian Strategic Competition part 2 of 2

a report of the csis burke chair in strategy

U.S. and Iranian Strategic Competition: Part II Authors Anthony H. Cordesman Adam Mausner Aram Nerguizian

March 2012

The Arleigh A. Burke Chair in Strategy has prepared this book as part of a project supported by the Smith Richardson Foundation.

a report of the csis burke chair in strategy

The Outcome of Invasion: US and Iranian Strategic Competition in Iraq Authors Adam Mausner Sam Khazai Anthony H. Cordesman Peter Alsis Charles Loi

March 2012

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Executive Summary "Americans planted a tree in Iraq. They watered that tree, pruned it, and cared for it. Ask your American friends why they're leaving now before the tree bears fruit."

--Mahmoud Ahmadinejad.1 Iraq has become a key focus of the strategic competition between the United States and Iran. The history of this competition has been shaped by the Iran-Iraq War (1980-1988), the 1991 Gulf War, the US invasion of Iraq in 2003, and now by the withdrawal of US military forces. It is a competition increasingly shaped by Iraq’s turbulent domestic politics and power struggles, and where both the US and Iran compete to shape the structure of Iraq’s future politics, governance, economics, and security.

The US has gone to great lengths to counter Iranian influence in Iraq, including using its status as an occupying power and Iraq’s main source of aid, as well as through information operations and more traditional press statements highlighting Iranian meddling. However, containing Iranian influence, while important, is not America’s main goal in Iraq. It is rather to create a stable democratic Iraq that can defeat the remaining extremist and insurgent elements, defend against foreign threats, sustain an able civil society, and emerge as a stable power friendly to the US and its Gulf allies.

America’s ability to achieve this goal is highly uncertain. US and Iraqi forces scored impressive tactical victories against the insurgents in Iraq from 2005-2009. However, US forces have now left Iraq and the US has not been able to transform the Strategic Framework Agreement with Iraq into a strong, enduring relationship. US relations with Iraq are “good,” but scarcely exclude Iran, give the US the strategic posture it sought, or put it in a strong position to either help Iraq achieve political stability or exclude Iran.

Iran has developed a significant level of influence in Iraq while playing an important role in influencing Iraq’s politics. Iran has ties to many of Iraq’s Shi’ite political leaders and has built up a significant commercial and religious presence in Iraq. Iran’s Qods Force and other military advisors are active and have ties to both the Sadrist movement and some of Iraq’s Shi’ites militias.

So do elements of Iran’s Ministry of Intelligence and National Security of the Islamic Republic of Iran (MISIRI), its secret police and primary intelligence agency. These agents are embedded throughout Iranian embassies in Iraq and all over the world, as well as in Iranian commercial, education, NGO, and religious groups). (The MISIRI is more commonly referred to as the VEVAK (Vezarat-e Ettela'at va Amniyat-e Keshvar), VAJA, or MOIS (Ministry of Intelligence and Security) At the same time, many Iraqis remember the cost and sacrifices of the 1980-1988 Iran-Iraq War. Iraq’s Sunnis and Kurds have little reason to admire or trust Iran. Iranians and Iraqi Shi’ites do not always share the same views; particularly over Iran’s claim to have a Supreme Religious leader and efforts to increase its influence in Iraq’s Shi’ite holy cities. There are tensions over Iran’s exports to Iraq – which undercut Iraqi farmers – and some Iraqis feel Iran has profiteered from Iraq’s suffering.

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In short, it is far from clear whether the US or Iran can become the dominant competitor in Iraq, but it is all too clear that they are locked in an intense competition without a predictable end.

Iraqi political instability, its sectarian and ethnic divisions, its political power struggles at the top, and its growing security problems on the ground – and the risk of a new round of civil fighting – all contribute to both this uncertainty and each side’s efforts to find new ways to gain influence at the expense of the other.

Coming to Grips with the Post US Withdrawal Reality The US did not expect this level of competition or the problems that have arisen since the final withdrawal of US combat forces in December 2011. It planned for a massive continuing US diplomatic, advisory, military, and police training presence in Iraq. The same was true of US aid.

American reconstruction funding, though much reduced, was planned to continue to support Iraq.

President Obama expressed this kind of broad optimism during a press conference with Prime Minister Maliki on December 13, 2011. In doing so, he ignored the realities of Iraq’s political, military, and economic problems -- and its internal political divisions -- in ways that became brutally clear only days later:2 Iraq faces great challenges, but today reflects the impressive progress that Iraqis have made. Millions have cast their ballots -- some risking or giving their lives -- to vote in free elections. The Prime Minister leads Iraq’s most inclusive government yet. Iraqis are working to build institutions that are efficient and independent and transparent.

Economically, Iraqis continue to invest in their infrastructure and development. And I think it's worth considering some remarkable statistics. In the coming years, it’s estimated that Iraq’s economy will grow even faster than China's or India's. With oil production rising, Iraq is on track to once again be one of the region’s leading oil producers.

With respect to security, Iraqi forces have been in the lead for the better part of three years -- patrolling the streets, dismantling militias, conducting counterterrorism operations. Today, despite continued attacks by those who seek to derail Iraq’s progress, violence remains at record lows. And, Mr. Prime Minister, that’s a tribute to your leadership and to the skill and the sacrifices of Iraqi forces.

Across the region, Iraq is forging new ties of trade and commerce with its neighbors, and Iraq is assuming its rightful place among the community of nations. For the first time in two decades, Iraq is scheduled to host the next Arab League Summit, and what a powerful message that will send throughout the Arab world.

People throughout the region will see a new Iraq that’s determining its own destiny -- a country in which people from different religious sects and ethnicities can resolve their differences peacefully through the democratic process.

Mr. Prime Minister, as we end this war, and as Iraq faces its future, the Iraqi people must know that you will not stand alone. You have a strong and enduring partner in The United States of America. And so today, the Prime Minister and I are reaffirming our common vision of a long-term partnership between our nations. This is in keeping with our Strategic Framework Agreement, and it will be like the close relationships we have with other sovereign nations. Simply put, we are building a comprehensive partnership.

Mr. Prime Minister, you’ve said that Iraqis seek democracy, “a state of citizens and not sects.” So we’re partnering to strengthen the institutions upon which Iraq’s democracy depends – free elections, a vibrant press, a strong civil society, professional police and law enforcement that uphold the rule of law, an independent judiciary that delivers justice fairly, and transparent institutions that serve all Iraqis.

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We’re partnering to expand our trade and commerce. We’ll make it easier for our businesses to export and innovate together. We’ll share our experiences in agriculture and in health care. We’ll work together to develop Iraq’s energy sector even as the Iraqi economy diversifies, and we’ll deepen Iraq’s integration into the global economy.

We’re partnering to expand the ties between our citizens, especially our young people. Through efforts like the Fulbright program, we’re welcoming more Iraqi students and future leaders to America to study and form friendships that will bind our nations together for generations to come. And we’ll forge more collaborations in areas like science and technology.

We’ll partner for our shared security. Mr. Prime Minister, we discussed how the United States could help Iraq train and equip its forces -- not by stationing American troops there or with US bases in Iraq -- those days are over -- but rather, the kind of training and assistance we offer to other countries. Given the challenges we face together in a rapidly changing region, we also agreed to establish a new, formal channel of communication between our national security advisors.

And finally, we’re partnering for regional security. For just as Iraq has pledged not to interfere in other nations, other nations must not interfere in Iraq. Iraq’s sovereignty must be respected. And meanwhile, there should be no doubt, the drawdown in Iraq has allowed us to refocus our resources, achieve progress in Afghanistan, put al Qa’ida on the path to defeat, and to better prepare for the full range of challenges that lie ahead. So make no mistake, our strong presence in the Middle East endures, and the United States will never waver in defense of our allies, our partners, or our interests.

Iraq’s Critical Political, Military, Economic Challenges Reality began to set in only two days later and showed that US and Iranian competition in Iraq would play out in a steadily more uncertain environment, and one which affects Iraq’s relations with its Arab and other neighbors as much as the US and Iran. All of the rivalries and power struggles at the top of the Iraqi government suddenly reach the crisis point.

The background for this crisis had been laid much earlier. Iraq still did not have anything approaching a stable government – or a fully functioning democracy – some 20 months after Iraq’s most recent election on March 9, 2010. However, a new crisis, and Sunni-Shi’ite split, began on December 15, 2011 – just as the final element of US troops withdrew from Iraq. Prime Minister Maliki attempted to arrest Vice President Hashemi for ties to a Ba’athist threat to the government and unmarked armored vehicles were sent to intimidate members of the opposition Iraqiyya Party.

Iraqiyya, the main opposition party, charged that Maliki had taken control of the counter terrorism force and intelligence services, and is seeking to control the military by misusing his authority to make interim appoints at senior command levels. These charges are not without some merit, as Maliki has been moving to tighten his control over Iraq’s security and intelligence forces for some time now. Sunni tension is rising in Anbar and Diyala Provinces, and ArabKurdish tension is rising in Mosul and Kirkuk. Iraq’s economy remains weak, and its per capita income is so low that it ranks 158th in the world. Provincial and local governance is poor, and corruption is rampant. The US not only faces the challenge of Iran’s presence in Iraq, but the fact Iraq remains a fragile state with uncertain security and political and economic stability.

The deep internal ethnic tensions which flared up in the crisis among Iraq’s leadership beginning in October 2011 are a grim warning of the sectarian challenges Iraq faces as it moves past foreign invasion and occupation, and towards the creation of a national unity government. In that incident, tensions between Prime Minister Maliki’s Shi’a State of Law coalition and the Sunni Iraqiyya party boiled over with Maliki’s issuance of an arrest warrant for Vice President

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Tariq al-Hashemi. Rival political and sectarian factions throughout Iraq saw the drawdown of major US military presence in Iraq as an opportunity to revive the fight for power, territory, and control, as new lines of influence were being negotiated in the vacuum left by the US withdrawal.

The first months of 2012 which been filled with growing ethnic and sectarian tension, and hundreds have already been killed in political violence The Erbil Agreement that was negotiated by the Kurds in 2010 -- and led to the formation of a divided and unstable national unity government -- has all but dissolved, underscoring the instability of managing diverse ethnic and sectarian tensions. Vice President Tariq al-Hashemi, who was accused by Prime Minister Maliki of operating a sectarian death squad, has sought refuge in Iraq’s Kurdish region since December 2011.3 Ayad Allawi’s Sunni Iraqiyya party boycotted meetings of parliament and cabinet, threatening to turn a dysfunctional government into a non-functioning one. In response, Prime Minister Maliki then stripped the boycotting Ministers of their posts, drawing outrage and cries of accusations of authoritarianism. Iraqiyya was forced to end its boycotts without securing any political rewards.

In this vein, Maliki has continued an aggressive process of centralizing power in Baghdad under the banner of protecting weak local institutions, in direct opposition to provincial leaders who are pressing for greater autonomy and have explicitly sought regional status.4 The growing level of tension and uncertainty is reflected in local incidents as well as power struggles at the center. In January 2012, a Shiite governor threatened to blockade a strategic commercial route from Baghdad to northern Kurdish region if Kurdish officials did not hand over the indicted VP Hashemi who they were harboring.5 At the same time, Sunni political leaders have begun to talk about seeking some form of “federalism” or more independent status even in mixed provinces like Diyala, and Kurdish leaders are reassign the need to keep Kurdish security forces strong and independent from the rest of the Iraqi security forces.

A Weak Iraq Seeking a Balance Between the US and Iran Even if these political problems can be solved, Iraq is diplomatically and militarily weak, and must now constantly try to find a balance between conflicting pressures from the US and Iran.

Iraq has tried to walk the line between the two competitors, preventing a major rift with either nation. Iraq needs trade and cross-border support from Iran, just as it needs aid, diplomatic, and military support from the US. Iraq’s much-reduced military capabilities make it dependent on aid, military sales, and training from the United States, and Iraq still lacks the resources and cohesion to resist against Iranian coercion and to defend against Iranian aggression.

Moreover, Iraq’s economy remains crippled by a lack of local security in many areas, and a level of corruption that Transparency International ranked 175th out of 182 countries in 2011 – making it the seventh most corrupt country in the world.6 In spite of more than half a decade of faltering legislative efforts, Iraq has failed to pass effective investment, tax, and property laws to secure both domestic and foreign investment as well as to create effective security forces to protect its infrastructure and businesses.

A budget crisis that lasted from 2008 to 2010, and a political crisis that began long before the March 2010 election that produced a de facto stalemate in many aspects of governance, have added to these economic problems as well as sharply delayed critical qualitative improvements in every branch of Iraq’s national security forces. Iraq has not been able to absorb and support many of the aid projects funded during the US occupation, and its problems in national

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governance have been compounded by corruption, political infighting, and sectarian and ethnic struggles at the provincial and local levels.

Virtually all of Iraq’s disposable wealth comes from its petroleum sector, and related services, which the CIA describes as follows:7 Iraq's economy is dominated by the oil sector, which provides over 90% of government revenue and 80% of foreign exchange earnings. Since mid-2009, oil export earnings have returned to levels seen before Operation Iraqi Freedom and government revenues have rebounded, along with global oil prices. In 2011 Baghdad probably will increase oil exports above the current level of 1.9 million barrels per day (bbl/day) as a result of new contracts with international oil companies, but is likely to fall short of the 2.4 million bbl/day it is forecasting in its budget.

Iraq’s agricultural sector, which accounts for some 22% of its labor force, only accounts for 9.7% of its GDP even when it is measured in PPP terms, and Iraq’s farmers are so undercapitalized, limited by transport and food processing facilities and costs, and by growing problems in water that they cannot compete with Turkish and Iranian food imports. Roughly 25% of the population lives below the poverty line, its direct unemployment is at least 15% and its real direct and indirect unemployment probably is at least 25% -- heavily weighted toward youth unemployment in a nation experiencing massive demographic pressure and with nearly 40% of its population 14 years of age or younger. 8

Iraq’s Petroleum Challenges Iraq’s oil resources are critical to Iraq’s future and are an indirect area of competition between the US and Iran. Iraq has not been able to survey its oil and gas reserves, or invest efficiently in their development since the Iran-Iraq War began in 1980. The Energy Information Agency of the US Department of Energy notes that,9 Iraq’s proven oil reserves are 115 billion barrels10, although these statistics have not been revised since 2001 and are largely based on 2-D seismic data from nearly three decades ago. Geologists and consultants have estimated that relatively unexplored territory in the western and southern deserts may contain an estimated additional 45 to 100 billion barrels (bbls) of recoverable oil. Iraqi Oil Minister Hussain alShahristani said that Iraq is re-evaluating its estimate of proven oil reserves, and expects to revise them upwards.

A major challenge to Iraq’s development of the oil sector is that resources are not evenly divided across sectarian-demographic lines. Most known hydrocarbon resources are concentrated in the Shiite areas of the south and the ethnically Kurdish north, with few resources in control of the Sunni minority.

The majority of the known oil and gas reserves in Iraq form a belt that runs along the eastern edge of the country. Iraq has 9 fields that are considered super giants (over 5 billion bbls) as well as 22 known giant fields (over 1 billion bbls). According to independent consultants, the cluster of super-giant fields of southeastern Iraq forms the largest known concentration of such fields in the world and accounts for 70 to 80 percent of the country’s proven oil reserves. An estimated 20 percent of oil reserves are in the north of Iraq, near Kirkuk, Mosul and Khanaqin. Control over rights to reserves is a source of controversy between the ethnic Kurds and other groups in the area. …Iraq has begun an ambitious development program to develop its oil fields and to increase its oil production. Passage of the proposed Hydrocarbons Law, which would provide a legal framework for investment in the hydrocarbon sector, remains a main policy objective. Despite the absence of the Hydrocarbons Law, the Iraqi Ministry of Oil signed 12 long-term contracts between November 2008 and May 2010 with international oil companies to develop 14 oil fields. Under the first phase, companies bid to further develop 6 giant oil fields that were already producing with proven oil reserves of over 43 billion barrels. Phase two contracts were signed to develop oil fields that were already explored but not fully

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developed or producing commercially. Together, these contracts cover oil fields with proven reserves of over 60 billion barrels, or more than half of Iraq’s current proven oil reserves.

As a result of these contract awards, Iraq expects to boost production by 200,000 bbl/d by the end of 2010, and to increase production capacity by an additional 400,000 bbl/d by the end of 2011. When these fields are fully developed, they will increase total Iraqi production capacity to almost 12 million bbl/d, or 9.6 million bbl/d above current production levels. The contracts call for Iraq to reach this production target by 2017. …Iraq faces many challenges in meeting this timetable. One of the most significant is the lack of an outlet for significant increases in crude oil production. Both Iraqi refining and export infrastructure are currently bottlenecks, and need to be upgraded to process much more crude oil. Iraqi oil exports are currently running at near full capacity in the south, while export capacity in the north has been restricted by sabotage, and would need to be expanded in any case to export significantly higher volumes.

Production increases of the scale planned will also require substantial increases in natural gas and/or water injection to maintain oil reservoir pressure and boost oil production. Iraq has associated gas that could be used, but it is currently being flared. Another option is to use water for re-injection, and locally available water is currently being used in the south of Iraq. However, fresh water is an important commodity in the Middle East, and large amounts of seawater will likely have to be pumped in via pipelines that have yet to be built. ExxonMobil has coordinated initial studies at water injection plans for many of the fields under development. According to their estimate, 10 -15 million bbl/d of seawater could be necessary for Iraq’s expansion plans, at a cost of over $10 billion. …According to the Oil and Gas Journal, Iraq’s proven natural gas reserves are 112 trillion cubic feet (Tcf), the tenth largest in the world. An estimated 70 percent of these lie in Basra governorate (province) in the south of Iraq. Probable Iraqi reserves have been estimated at 275-300 Tcf, and work is currently underway by several IOCs and independents to accurately update hydrocarbon reserve numbers. Two-thirds of Iraq’s natural gas resources are associated with oil fields including, Kirkuk, as well as the southern Nahr (Bin) Umar, Majnoon, Halfaya, Nassiriya, the Rumaila fields, West Qurna, and Zubair. Just under 20 percent of known gas reserves are non-associated; around 10 percent is salt dome gas. The majority of non-associated reserves are concentrated in several fields in the North including: Ajil, Bai Hassan, Jambur, Chemchemal, Kor Mor, Khashem al-Ahmar, and al-Mansuriyah.

Iraqi natural gas production rose from to 81 billion cubic feet (Bcf) in 2003 to 522 Bcf in 2008. Some is used as fuel for power generation, and some is re-injected to enhance oil recovery. Over 40 percent of the production in 2008 was flared due to a lack of sufficient infrastructure to utilize it for consumption and export, although Royal Dutch Shell estimated that flaring losses were even greater at 1 Bcf per day. As a result, Iraq’s five natural gas processing plants, which can process over 773 billion cubic feet per year, sit mostly idle. …Furthermore, Iraq’s oil and gas industry is the largest industrial customer of electricity, with over 10 percent of total demand. Large-scale increases in oil production would also require large increases in power generation. However, Iraq has struggled to keep up with the demand for power, with shortages common across Iraq. Significant upgrades to the electricity sector would be needed to supply additional power.

Iraq faces further problems in developing its economy and get the funds it needs to help create internal stability because the Iraqi government has been much slower in establishing the laws necessary to secure investment, political support for outside investment, a solution to ArabKurdish power struggles over its reserves (that may soon be followed by Sunni-Shi’ite struggles), an effective oil police and security structure, and electricity and water capacity. It heavily subsidizes domestic petroleum prices in ways that reduce export capacity and increase domestic demand in inefficient ways, and is only slowly acquiring the refinery capacity to avoid having to make major imports of refined products. Both the US EIA and the International Energy Agency also estimate that Iraq’s future production will increase at a far slower rate than those claimed by Iraq’s oil ministry.

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The EIA International Energy Forecast for 2011 projects a far slower increase in Iraqi oil production than Iraq does. It estimates that Iraqi production will increase from 2.4 million barrels per day (MMBD) in 2009 to the follow levels under direct scenarios:11 

2.9 MMB in 2015, 4.5 MMBD in 2025, and 6.3 MMBD in 2035 in the high oil price case

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2.7 MMB in 2015, 3.2 MMBD in 2025, and 3.9 MMBD in 2035 in the high oil price case.

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3.2 MMB in 2015, 5.8 MMBD in 2025, and 8.9 MMBD in 2035 in the traditional low oil price case.

These production levels indicate Iraq will be very lucky to reach half of its goal of 12 MMBD in 2017. They also tend to favor Iran. A slow increase in Iraq production will keep Iran’s oil export prices higher. It also will increase the cost of sanctions to the US and other importing states.

This is particularly important because the US pays world oil prices for even its domestic oil production, and the Department of Energy estimates that any talk of US “independence” from petroleum imports remains a dishonest political myth.

The US Department of Energy Annual Energy Outlook for 2011 – which is based on optimistic estimates of alternative energy production and improvements in conservation and energy efficiency – estimates that the US will only reduce its dependence on petroleum imports from 52% in 2009 to 41% in 2035 in its reference case – and these estimates do not include indirect petroleum imports in the form of major imports of manufactured goods from regions like Asia – which are becoming far more dependence on petroleum imports from the Gulf.12 US imports of liquid fuels (including crude oil, petroleum liquids, and liquids derived from nonpetroleum sources), which grew steadily from the mid-1980s to 2005, have been declining since 2005. In the AEO2011 Reference and High Oil Price cases, imports of liquid fuels continue to decline from 2009 to 2035, although they provide a major part of total US liquids supply over the period. Tighter fuel efficiency standards and higher prices for liquid fuels moderate the growth in liquids demand, even as the combination of higher prices and renewable fuel mandates leads to increased domestic production of both oil and biofuels. Consequently, while consumption of liquid fuels increases steadily in the Reference case from 2009 to 2035, the growth in demand is met by domestic production.

The net import share of US liquid fuels consumption fell from 60 percent in 2005 to 52 percent in 2009.

The net import share continues to decline in the Reference case, to 42 percent in 2035…In the High Oil Price case, the net import share falls to an even lower 24 percent in 2035. Increased penetration of biofuels in the liquids market reduces the need for imports of crude oil and petroleum products in the High Oil Price case. In the Low Oil Price case, the net import share remains flat in the near term, then rises to 56 percent in 2035 as demand increases and imports become cheaper than crude oil produced domestically.

While the high price oil case does lead to a faster increase in the production of alternative liquids and in conservation and efficiency, it also means massive increases in the cost of energy throughout the US economy. It still leaves the US driven by international oil prices, dependent on indirect imports of petroleum in the form of manufactured goods, and as strategically dependent on the secure flow of global petroleum exports for a steadily more globalized US economy as if the percentage of direct US petroleum imports was the same as in the reference or high price oil case.

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The Uncertain State of US Policy and US Ability to Compete The US has not succeeded in getting Iraq to agree on the extension and strong implementation of the Strategic Framework Agreement first signed on November 17, 2008. Few Iraqis feel that the US occupation of Iraq created the benefits they had hoped for. Violence is much lower than in 2007, but is still a serious problem. Al Qa’ida and other Sunni extremist groups still operate, as do extremist Shi’ite militias.

These attitudes reflect the fact that US invasion did not bring political stability or a stable path towards economic development. Iraq now suffers from the fact that the US failed to effectively use the political, military, and economic resources needed. The US went to war for the wrong reasons – focusing on threats from weapons of mass destruction and Iraqi-government sponsored terrorism that did not exist. It had no meaningful plan for either stability operations or nation building. It let Iraq slide into a half decade of civil war, while it failed to build an effective democracy or base for economic development. Its tactical victories – if they last – did little more than put an end to a conflict it help create, and the US failed to establish anything like the strategic partnership it sought.

The US invasion did bring down a remarkably unpleasant dictatorship, but at cost of some eight years of turmoil and conflict, some 5,000 US and allied lives and 35,000 wounded, and over 100,000 Iraqi lives. The Congressional Research Service estimates that the dollar cost of the war to the US alone is over $823 billion through FY2012, and SIGIR estimates that the US and its allies will have spent some $75 billion on aid – much of it with little lasting benefit to Iraq.

As a result, the State Department took the lead from the Department of Defense at a time when the Iraqi government is too fractured to agree on a strategic relationship, and when US congressional and public support for funding such a relationship is both uncertain and declining.

The State Department assumed full responsibility of the US mission in Iraq in October 2011, and broadened diplomatic, advisory, training, and other development goals characterized under the Strategic Framework Agreement (SFA).

With the expiration of US-Iraq Security Agreement (SA) on December 31, 2011, the SFA, “which has no expiration date, became the primary pact governing the relationship between the two countries”.13 However, it quickly became clear that the US and Iraq had no agreement as to how it should be implemented or how seriously Iraq would take it in the future. The US was also left with no agreement to keep troops in Iraq and over its future advisory presence.

This began a process where the US has had to steadily adjusting its plans reflect growing budgetary restraints, security concerns, and the lack of political support both Iraq and the within the US. The January 2012 SIGIR report on FY 2012 appropriations warned that, “Actual funding for Iraq will likely be below the Administration’s request for $6.83 billion”.14 This forecast proved to be all too accurate.

The President’s request FY2013 request for the Statement in the FY2013 budget was for only $4,019 million – which compared with $4,802 million in FY2012. The request for the Department of Defense for FY2013 was for 2,855 million versus $9,604 million in FY2012 and $45,044 million in FY2011. It was clear even at the time this request was submitted that both the

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State Department and Defense Department requests for FY2013 were likely to have major further cuts as Congress acted on the request. 1 The State Department has found it impossible to maintain its past goal to keep some 16,000 personnel in country. In February 2012, US State Department officials asked each component of its massive diplomatic mission in Baghdad to “analyze how a 25 percent cut would affect operations”, in an attempt to reduce the size of the US embassy in Iraq.15 Deputy Secretary of State Thomas Nides announced in February 2012 that the State Department was looking at ways to reduce the budget, and create a “more normalized embassy presence” in Baghdad. This means significant cuts in the planned military, police, and civil advisory effort, and playing a less active role in trying to reduce Iraq’s sectarian strife. Underscoring the difficulty of this challenge, Thomas Nides added, “As much as I would love to continue to reduce numbers of people and cost, I will not sacrifice the security of our people”.16 In February 7, 2012, the New York Times reported that the US State Department was planning to reduce the size of its embassy in Iraq by as much as half. US embassy spokesman, Michael McClellan stated, “Over the last year and continuing this year the Department of State and the Embassy in Baghdad have been considering ways to appropriately reduce the size of the US mission in Iraq… ”17 Moreover, the security problems in Iraq meant that a large portion of the State Department’s remaining personnel had to be made up of support personnel who provide transportation, food, maintenance, and security to the embassy in Baghdad, and the consular outposts in Basra and Erbil. Many are private contractors, who support State Department staff as they travel around the country. While plans remain in flux, the State Department will also have to depend on private s contractors to for security, road movement, helicopter support, police training and other functions.

The presence of these contract security forces is particularly sensitive to Iraqis. Security contractors remain targets and certain groups will continue to fuel sectarian tensions, and it is unclear that Iraqi forces can take up the burden of either internal security or protecting the kind of US presence that is currently planned after 2011.Threats from both Sunni and Shi’ite hardline extremists – and their growing pattern of attacks on other targets in 2011 and early 2012 – make it clear that the US troop withdrawal has not put an end to violent attacks on either US or GOI targets. The difficulty of this challenge is captured in a statement by a contractor with experience in Iraq. Speaking anonymously, the contractor noted that Iraqi’s do not want Americans as mentors or advisors. He added that even if they did, “no Iraqi is going to go on record saying he wants something from America”.18 Yet, in spite of all these challenges, US success in Iraq still depends heavily on the success of future State Department-led political, economic, and security training efforts to bolster Iraq’s capacities and to counter Iranian influence. The quality of the US security assistance effort will be critical. At the same time, the US ability to help Iraq create the broader economic and political reforms, legal incentives necessary for economic development, and Iraqi government’s capacity in these areas, remains as important as military and police assistance and training. Measures that reduce ethnic and sectarian tensions, stem corruption and enforce rule-of-law will be necessary to give the Iraqi government legitimacy and build the foundation for both stability and security.

1

“Overseas Contingency” FISCAL YEAR 2013, Budget of the US Government , FY2023, OMB, February 2012

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Making Do With Too Few US Resources to Compete?

The politics surrounding the future foreign affairs budgets of both the State and Defense Departments are volatile, and there will almost certainly be further cuts to expenditures in Iraq.

US combat forces have now fully withdrawn, provincial reconstruction teams have ended, and the State Department has taken control of far more limited operations than the US originally sought under the SFA. State must now seek to influence Iraq broader diplomatic presence, development assistance, police development, and modernization of the Iraqi Security Forces.19 State must rely heavily on existing relationships characterized in the SFA, including important advisory roles that can be maintained without a large US troop presence.

The lack of any continued US troop presence, and the ongoing threat to US personnel in Iraq, will complicate many of State’s efforts. US forces in Iraq performed several key functions prior to State taking the lead, including training, equipping, advising and supporting the ISF, conducting partnered counterterrorism operations with Iraqi forces, and protecting civilian capacity building efforts.20 Not only will State take on oversight of many of these functions, but there will also be a heavier reliance on Iraqi forces to fill security voids.

It is far from clear how firmly and fully the US Congress and Administration as whole understand the challenges involved. In February 2012, the Washington Post reported that “Congress is pushing for a smaller embassy with an eye toward cutting some of its $6 billion budget.” One senior official told the Washington Post “I don’t want to say we miscalculated, but we initially built a plan based on two things that have not played out as well as we had hoped.

One was the politics [in Iraq], and the other was security”.21 Ultimately, US influence will depend on State Department-led political, economic, and military efforts to bolster Iraq’s capacities and to counter Iranian influence, and the efforts of the US military become partners in giving Iran the mix of counterinsurgency and conventional forces it needs. Here, aid in governance and economic policies that encourage outside and domestic investment may be as critical as security aid. Many of the broader initiatives that encourage measures that stem corruption and enforce rule-of-law are long overdue and might prove as important as military and police training.

Coping With Iraqi Violence Stability and security are critical problems. There is no way to predict how sectarian and ethnic internal violence will emerge out of the power struggles now going on in Iraq. However, the existing levels of violence are relatively high, Data from the US National Counter Terrorism Center (NCTC) show that Iraq had a consistently higher level of violence than Afghanistan during 2009-2011, with no consistent reduction in violence since mid-2009.

If there is a growing Shi’ite split with the Kurds and Sunnis, and Iraq becomes increasingly violent and the Shi’ite dominated Iraqi government looks for outside aid, this may push it towards dependence on Iran. If Iraq does move towards serious civil violence without US forces being present, or if the Iraqi Shi’ite government should fall apart, this might trigger more active Iranian intervention. Moreover, Iran may come to treat Iraq as a kind of hostage to any US intervention against Iran in the Gulf. This could present major problems for both Iraq and the US because the level of continued US security assistance is now uncertain, and because Iraq lost virtually all of its military capabilities to defend against Iran as a result of the 2003 invasion.

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The more likely scenario is one of lower levels of continued sectarian and ethnic rivalry struggle without going back to the civil war of 2005-2008. This could either force Iraq into a real national government or to turn back to the US. It is also possible that sheer popular “war fatigue” and several years of adjustment will create a political climate and mix of Iraqi security forces that will become steadily more competent on their own.

There is no one scenario that is probable but it is clear that the US and Iran will continue to compete for influence in Iraq, especially in aid, political development, military sales, and security training. This competition will not only have a major impact on Iraq, but the far broader range of US and Iranian competition in the Arab world – especially the Southern Gulf, in Turkey, and in dealing with Iran’s efforts to create an area of influence that includes Iraq, Syria, and Lebanon and which poses a major challenge to Israel.

There Will be No Competition without Adequate Resources The State Department’s role will be critical to US success. US forces have fully withdrawn, provincial reconstruction teams have ended, and the State Department has taken control of far more limited operations than the US originally sought under the SFA. State must now seek to influence Iraq’s broader diplomatic presence, development assistance, police development, and modernization of the Iraqi Security Forces.22 State must rely heavily on existing relationships characterized in the SFA, including important advisory roles that can be maintained without a large US troop presence.

State will need funds for traditional technical assistance to government ministries and provinces through agencies like USAID and the DOJ. It will also need funds for less familiar roles, such as the coordination of the largest Foreign Military Sales (FMS) and Foreign Military Financing (FMF) programs in the world Funding continuing US military, and police training presence in Iraq and. US arms transfers will be particularly critical. The size, composition, and ultimate success of the military training mission are particularly crucial and uncertain. It is not clear whether US aid programs can successfully be scaled back without compromising their intended goals. It remains uncertain how an influx of contractors will perform, and whether or not State can effectively manage them State will also need funds for a variety of permanent installations within Iraq,23 including consulates in Erbil and Basra and ten OSC-I sites.24 The lack of continued US troops will complicate many of State’s efforts and raise their cost. US forces in Iraq performed several key functions prior to State taking the lead, including training, equipping, advising and supporting the ISF, conducting partnered counterterrorism operations with Iraqi forces, and protecting civilian capacity building efforts.25 Not only will State take on oversight of many of these functions, but there will also be a heavier reliance on Iraqi forces to fill security voids.

This effort cannot be cheap– although it will probably cost substantially less even at the start than the original plan to spend $6.83 billion. Unfortunately, the politics surrounding the foreign affairs budget of both the State and Defense Departments are volatile, and there may be significant further cuts to expenditures in Iraq. It is far from clear how firmly and fully the US Congress and Administration as whole understand the challenges involved.

The US Role from Outside Iraq Much will also depend on what the US does outside of Iraq to deter and contain Iran.

Unfortunately, the US has so far done little to explain the new security posture it will establish in

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the Gulf, Jordan, and Egypt. On December 16th, Ben Rhodes, the deputy national security advisor for strategic communications, is reported to have said that the US could revert to a pre1990 posture in the Gulf, and there was no real need to either deal with Iran or change the US strategic and military posture in the region. He explained that, “the scaling back of the US military presence in the Gulf was part of the administration's strategy to "demilitarize" US foreign policy and shift to an approach that favored counter-terrorism tactics.” He also said the end of the war in Iraq -- and eventually the war in Afghanistan -- proved that large military deployments are not necessary to deny terrorists safe haven in foreign countries.” 26 "I don't think we're looking to reallocate our military footprint in any significant way from Iraq. They won't be reallocated to other countries in the region in any substantial numbers … The argument several years ago... was that you needed to have a very large US military footprint so that you could fight the terrorists ‘over there,' so they wouldn't come here. But we've demonstrated the opposite, that you don't need to have a large US military footprint in these countries, that you can shrink them and focus on al Qa’ida in a far more specific way... and still very much accomplish your national security goals….

"That allows us in many respects to demilitarize elements of our foreign policy and establish more normal relationships…That's our posture in the region and its far more in line with where we were before 1990. …President Obama has kept a core promise of his to the American people. He opposed the war in Iraq as a candidate for Senate in 2002, before it started. He put forward a plan to end the war as a senator and promised to end the war as a candidate. And now we can definitively say he has kept that promise as president…America is safer and stronger because of the way we ended the war in Iraq."

In fairness, it is clear that the Obama Administration did carry out extensive planning for a new approach to shaping the US force posture in the region in late 2011. The new strategy the Obama Administration advanced in January 2013 did take Iraq into account, it made the Gulf and Middle East equal to Asia as one of the two critical priorities for US strategy, and the Department of Defense carried out contingency planning and war games both examined the threat post by Iran in great detail and developed specific force plans and plans for improved cooperation with other Gulf states.

The fact remains, however, that the public stance of the Administration, the Congress, and opposition Presidential candidates is at best what might politely be called a bipartisan intellectual vacuum.

The Iranian Role in Competing in Iraq Iran has very different goals for Iraq than those of the US. Iran seeks to ensure that Iraq does not serve as a base for the US, serve US interests, or reemerge as a threat to Iran. Iran shares a long and porous border with Iraq, and seeks to create a stable and malleable ally, not a peer competitor. It seeks to rid the country of American influence – particularly of American military personnel – to the greatest extent possible. Iran has aggressively used its networks, patronage, economic ties, religious ties, aid money, and military support to various factions in Iraq to achieve these goals.

Moreover, Iran now sees Iraq as playing a critical role in its efforts to keep the Assad regime in power in Syria, preserve its alliance with Syria and its influence in Lebanon, and find ways to avoid the political upheaval in the Arab world from undermining Iran’s strategic interests and ambitions. The near civil war in Syria threatens to deprive Iran of its only important ally in the Arab world, and pressuring the Maliki government to support Assad, and seeking to limit Sunni arms transfers through Iraq to Sunni opposition movements in Syria, has become a significant

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Iranian objective – one which if fully successful would raise the specter of a real “Shi’ite crescent” that includes Iran, Iraq, Syria, and Lebanon.

The “bad news” is that Iran now enjoys deep ties to the ruling Shi’ite parties and factions in a country with which it once fought a fierce and bloody eight-year war. It plays an active role in mediating between Iraqi political leaders, it has ties to the Sadrists that are now the largest party in Iraq’s ruling collation, and the IRGC has significant influence over elements within the Iraqi security forces. During the past seven years, Iran has also deployed a large mix of cultural, military, and economic resources available to influence Iraq. Iran will leverage its resources to ensure Iraq prevails as an ally. Yet Iran’s role in Iraq is complex, and it will be no simple task to mold Iraq into the ally Iran wishes it to be.

The “good news” is that most of the Iraqi Shi’ite Iraqi is “quietist” and does not support Iran’s concepts of an Islamic revolution or a Religious Supreme Leader. Sunnis and Kurds do not support Iranian influence in Iraq, and polls show that both Sunni and Shi’ite Iraqi Arabs see themselves as having a very different cultural and national identity from Iranian Persians. Many of Iran’s actions and economic activities since 2003 have led to tensions with various factions in Iraq.

Preventing Iran’s Uncertain “Victory” This aspect of the competition between the US and Iran has reached a critical stage The advancement of Iranian ambitions following the US withdrawal depends on how successful US efforts are in building an enduring strategic partnership with Iraq. Much will depend on the level of continued US diplomatic, advisory, military, and police training presence in Iraq, and on Iran’s ability to exploit the diminished US presence.

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Table of Contents There Will be No Competition without Adequate Resources ........................................................................... 13 The US Role from Outside Iraq ....................................................................................................................................... 13 HISTORICAL BACKGROUND ................................................................................................................................................. 18 The Iran-Iraq War ................................................................................................................................................................ 18 The 1991 Gulf War ............................................................................................................................................................... 19 The 2003 Invasion of Iraq ................................................................................................................................................. 19 Figure VII.1: Iran and Iraq Military Balance in 2003 and 2010 ...................................................................... 21

The Aftermath of the Invasion ........................................................................................................................................ 22 US Moves Towards Withdrawal and Competition for Post-Withdrawal Influence ............................... 23 US-Iranian Competition and The Uncertain Future of the US-Iraqi Strategic Framework Agreement (SFA) ................................................................................................................................................................... 24 Figure VII.2: OSC-I Sites: Personnel and Functions .............................................................................................. 26

An Increasingly Uncertain Future Base for Competition ................................................................................... 27 Iraq’s Critical Political, Military, Economic Challenges ...................................................................................... 27 Iraq’s Petroleum Challenges ............................................................................................................................................ 28 The Regional Response to Developments in Iraq ................................................................................................... 31 POLITICAL COMPETITION .................................................................................................................................................... 32 The First Round of Iraqi Governments and Elections .......................................................................................... 32 The January 2009 Governorate Elections and March 2010 Parliamentary Elections ......................... 33 Post-US Withdrawal Political Tensions in Iraq ...................................................................................................... 38 Post-US Withdrawal Patterns of Violence................................................................................................................. 41 Figure VII.3: The Impact of Internal Conflict on Smaller Minority Groups 2003-2011 ...................... 43 Figure VII.4: The Continuing Pattern of Violence in Iraq ................................................................................... 44 Figure VII.5: Major Acts of Violence and Targeted Killings – Part One ....................................................... 45 Figure VII.5: Major Acts of Violence and Targeted Killings – Part Two ...................................................... 46 Figure VII.5: Major Acts of Violence and Targeted Killings – Part Three ................................................... 47 Figure VII.6: Attacks on Iraqi Security Forces and Sons of Iraq...................................................................... 48

The Continuing role of Violent Extremist Groups .................................................................................................. 49 Polls Show Growing Popular Fears and Dissatisfaction ..................................................................................... 50

Figure VII.7: Percentages of Iraqis Who Say They Are “Suffering” or “Thriving”................................... 51 COMPETITION FOR THE SHI’ITES ........................................................................................................................................ 52

Competition for Religious Influence............................................................................................................................. 52 Maliki’s Role in US and Iranian Competition ........................................................................................................... 54 The Sadrists and Iran .......................................................................................................................................................... 56 SCIRI/ISCI ................................................................................................................................................................................. 59 COMPETITION FOR THE KURDS .......................................................................................................................................... 60 COMPETITION FOR THE SUNNIS ......................................................................................................................................... 61 THE MUJAHEDIN-E KHALQ ORGANIZATION (MEK)....................................................................................................... 64 The Future US Role in Iraqi Security ........................................................................................................................... 68 The US Role in Shaping the Iraqi Army ...................................................................................................................... 69 Figure VII.8: Iraqi Security Forces as of October 10, 2011 ................................................................................ 71

The US Role in Shaping the Iraqi Air Force .............................................................................................................. 72 The US Role in shaping the Iraqi Navy ....................................................................................................................... 72 The US Role in Supporting the Iraqi Police force and Ministry of Interior ................................................ 73 THE IRANIAN ROLE IN IRAQI SECURITY ............................................................................................................................ 75 Iran’s Broader Role in Iraqi Security ........................................................................................................................... 75 The Role of the Iranian Revolutionary Guard, the Qods Force, the Ramazan Corps, and the Special Groups ........................................................................................................................................................................................ 76 Iranian Arms Smuggling ................................................................................................................................................... 78 THE IMPACT OF THE POWER VACUUM IN THE IRAN – IRAQ MILITARY BALANCE..................................................... 80

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ECONOMIC COMPETITION .................................................................................................................................................... 82 Iran’s Growing Economic Role in Iraq ........................................................................................................................ 83 The Declining Size of US Aid ............................................................................................................................................ 84 Figure VII.9: Funding for Iraqi Reconstruction and the Impact of US Aid: 2003-2011 ....................... 86 Figure VII.10: Status of US Aid Funds as of 9/30/2011 ...................................................................................... 87

Iraqi Funding of Iraq Development.............................................................................................................................. 88 Figure VII.11: Progress in the Iraqi Economy: 2004-2011 ............................................................................... 90 Figure VII.12: Oil revenues vs. the Iraqi Budget: 2004-2011........................................................................... 91

The Uncertain Quality of US Aid and the Need to Focus on Advice and US Private Investment ...... 92 Figure VII.13: New US Aid Projects in 2011 ............................................................................................................. 93

US and Iranian Competition in Iraq’s Petroleum Sector .................................................................................... 93 Figure VII.12: Results of the First Two Rounds of Bidding for Oil Development in Iraq .................... 94

COMPETITION IN DIPLOMACY AND FOR IRANIAN ABILITY TO CREATE AN “AXIS” OF INFLUENCE IN IRAQ, SYRIA, AND LEBANON ....................................................................................................................................................................... 95 Diplomatic Competition..................................................................................................................................................... 95 The Problem of Syria ........................................................................................................................................................... 95 IMPLICATIONS FOR US POLICY ........................................................................................................................................... 97 There Will be No Competition without Adequate Resources ........................................................................... 98 The US Role from Outside Iraq ....................................................................................................................................... 98 US Success Depends on Iraqi Success........................................................................................................................ 101

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Historical Background The competition between the United States and Iran for influence in Iraq became a key US foreign policy issue in 1979, when the revolution in Iran toppled the US-installed Shah. That same year, Saddam Hussein formally assumed power. These events brought to power two regimes that were hostile to the United States. That same year the new Iranian leadership took Americans hostage at the US embassy, and President Jimmy Carter placed Iraq on a list of states sponsoring terrorism.27 Iran and Iraq remained rivals as long as the Shah remained in power, but avoided large-scale conflict. The Shah’s support for revolts by Iraqi Kurds in the early to mid-1970s helped force Iraq to accept a border settlement favorable to Iran in return for the Shah ending aid to the Kurds.

The Iranian revolution, however, exploited tensions and provided the perceived instability that would lead to war between the two countries.

The new Iranian regime was actively hostile to Iraq both on religious grounds and because of the Iraqi government’s treatment of Khomeini after he had fled to Iraq due to his opposition to the Shah. Although Saddam Hussein initially supported the Iranian revolution, it soon became clear that Iran’s new leader sought to export his religious revolution to Iraq, and sent “guides” to Iraq in an effort to persuade Iraq’s Shi’ites to overthrow the Ba’ath regime. At the same time, Iran seemed divided and vulnerable, with uncertain loyalties among its military forces.

The Iran-Iraq War The end result was that Saddam Hussein prepared an invasion of Iran that he launched in 1980, initially claiming that this was to liberate the Arab population of southwestern Iran – the area that has most of Iran’s energy resources. This began the Iran-Iraq War, which lasted until the summer of 1988, and became one of the bloodiest wars in modern history.

The US opposed Iraq’s invasion of Iran and did not support its ambitions to acquire territory and influence in Iran in spite of its growing tension with Iran and the Iranian hostage crisis. This policy changed in 1982, after Iran was able to throw back Iraqi forces and went on the offensive in Iraq. Iraq had to turn to the West and the Southern Gulf states for aid, while the US feared an Iranian conquest of Iraq that could destabilize the Gulf.

President Reagan began tilting towards Saddam in an effort to check Iran’s efforts to invade Iraq.28 The Reagan Administration removed Iraq from its list of sponsors of terrorism and began providing money, weaponry, and intelligence to help Iraq in its war. This included “dual use” technology,29 and industrial goods for missile, chemical, biological and nuclear weapons programs and weapons.3031 A National Security Directive stated that the U.S would do "whatever was necessary and legal" to prevent Iraq from losing its war with Iran.

The US also became embroiled in the Iran-Contra scandal, which involved transferring arms to Iran in an effort to buy the freedom of hostages being held in Lebanon by Iranian-backed Hezbollah, even as it steadily became more active in supporting Iraq. In 1987 the US began reflagging Kuwaiti tankers to prevent Iranian attacks on tankers and other targets in the Gulf that supported Iraq. The US role in the “Tanker War” was an important factor in Iraq’s ability to keep fighting and eventually force Iran into a ceasefire.

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The 1991 Gulf War The Iran-Iraq War ended in a 1988 ceasefire, leaving Iraq the largest military power in the region, but crippled economically and with massive debt to Kuwait and Saudi Arabia. Saddam first sought payment from the Southern Gulf states for Iraq’s “defense” against Iran, and then invaded Kuwait in August 1990, seeking to annex Kuwait, seize its assets, and pressure the other Arab Gulf states into debt forgiveness and aid. He acted to avoid the repayment of Iraq’s war debt, end disputes over Kuwaiti oil production and gain control of its oil resources, and at least demonstrate to Saudi Arabia that Iraq had the potential to invade it as well.

Saddam’s invasion of Kuwait presented a major threat to US strategic interests. The US responded with Operation Desert Shield, an American mission to deter attacks against Saudi Arabia. It then launched Operation Desert Storm, a US and Saudi-led and UN-approved military campaign to drive Iraq out of Kuwait.32 In spite of a massive Coalition military victory that liberated Kuwait, Saddam Hussein’s regime survived – largely due to the US calculation to avoid the chaotic aftermath of Saddam’s removal and to maintain his utility as a counterweight to Iran. Saddam moved from a defensive posture to one that threatened Kuwait and succeeded in repressing internal uprisings and dissent. The US subsequently worked with its Gulf, British, and French allies to maintain “no-fly zones” to protect Iraq’s northern Kurds and southern Shi’ites, while UN Security Council sanctions on Iraq virtually halted its military modernization, though had a devastating effect on Iraqi society. This situation lasted until the American invasion of Iraq in March 2003.

The sanctions and no-fly zones also helped secure Iran from Iraq. There was little Iran could do in Iraq except sponsor weak exile movements until another US-led coalition destroyed Saddam’s regime and Iraq’s remaining military power in the spring of 2003.

The 2003 Invasion of Iraq As Figure VII.1 shows, the 2003 invasion weakened Iraq’s forces to the point where they ceased to be a key check on Iran’s influence in the region. Yet, the swift destruction of Saddam’s forces gave rise to Iranian fears that Iran would be next, and coupled with the invasion of Afghanistan, created a situation in which the US effectively occupied two of Iran’s neighbors. These led Iran to reshape its forces and military exercises out of fear that the US would invade Iran or otherwise intervene militarily. These fears were fueled by both official US warnings about military options to prevent Iran from acquiring nuclear weapons and a long series of speculative and inaccurate media reports about US invasion plans and preparations for such actions.33 After the US-led invasion, Iran initially took a wait-and-see approach to Iraq and made sure that it avoided confrontations with the Coalition.34 At the same time, the Coalition Provisional Authority sought to persuade Iran to play a constructive role vis-à-vis Iraqi Shi’ites, who make up between 60-65% of Iraqis.3536 Whether it was sincere or not, Iran initially offered to cooperate with the United States in Iraq, as it had in the invasion of Afghanistan.

When the US rebuffed the offer, Iran began to call for the withdrawal of US troops, challenge the legitimacy of the Coalition Provisional Authority, push actively for Iraqi self-governance, and call for elections that it knew would bring Iraqi Shi’ites into power.37 Iran pursued a strategy of backing pro-Iranian or sympathetic Iraqi Shi’ites, and to a lesser extent Iraqi Kurds, in order to

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promote a weak federal state susceptible to Iranian influence. This strategy had significant success, although the risk of a popular nationalist backlash against Iran was ever-present.

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Figure VII.1: Iran and Iraq Military Balance in 2003 and 201038

Source: The IISS Military Balance, various editions, and Jane’s Sentinel series.

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The Aftermath of the Invasion The US invasion of Iraq soon proved to have unleashed forces the US had not predicted, was almost totally unprepared for, and could not control. The US found it had gone to war for the wrong reasons – focusing on threats from weapons of mass destruction and Iraqi-government sponsored terrorism that did not exist. It had no meaningful plan for either stability operations or nation building. It let Iraq slide into a half decade of civil war, and failed to build an effective democracy and base for Iraq’s economic development. Its tactical victories – if they last – did little more than put an end to a conflict it help create, and the US failed to establish anything like the strategic partnership it sought.

The US invasion did bring down a remarkably unpleasant dictatorship, but at cost of some eight years of turmoil and conflict, some 5,000 US and allied lives, 35,000 wounded, and over 100,000 Iraqi lives. The Congressional Research Service estimates that the dollar cost of the war to the US alone is over $823 billion through FY2012, and SIGIR estimates that the US and its allies will have spent some $75 billion on aid – much of it with little lasting benefit to Iraq.

Iraqi politics rapidly became so complex and unstable that neither the US nor Iran has been able to exert dominant or consistent influence. Since 2003, the US position in Iraq has been undermined by US failures to plan for or execute effective stability operations following the overthrow of Saddam Hussein’s regime. The US rushed a poorly planned and underdeveloped nation-building effort that many Sunnis felt favored Shi’ites, while it also faced opposition from Shi’ite leaders like Muqtada al Sadr.39 The resulting rise of Iraqi Shi’ites and drift towards civil war opened the door to increased Iranian influence in Iraq.

The US made other significant missteps. For example, the head of the Coalition Provisional Authority, L. Paul Bremer, issued Order Number 2 on May 23, 2003 that formally dissolved the Iraqi army, leaving a Sunni-dominated officer corps and 400,000 soldiers unemployed.40 More broadly, however, the US was unprepared to carry out armed nation building in the critical period immediately after the fall of Saddam’s regime, which contributed to the release of deep divisions between Shi’ites and Sunnis as well as between Arabs and Kurds.

By late 2004, this mix of mistakes helped trigger a Sunni-dominated insurgency and a civil conflict where Sunni Islamists gradually replaced the supporters of Saddam Hussein, and the leading insurgent movements became tied to al Qaida. Iran, in turn, supported the Shi’ites and saw the developing conflict as an opportunity to limit US influence and power. Iran took advantage of the porous border, newfound freedom of communication and transportation between the two countries, and post-war chaos to develop unprecedented and broad-based influence in Iraq.

Iran also sought to extend its influence across a wider spectrum of liberal secularists, the Kurds, and Shi’ite Islamists.41 Reports by coalition forces show that Iran used money, weapons, training, and other forms of support to bolster both Shi’ite and non-Shi’ite allies inside Iraq, in order to disrupt US forces and ensure Iraq was too weak to pose a challenge to Iranian security and interests.

According to a State Department memo obtained by Wikileaks, Iran provided $100-200 million a year to its clients in Iraq.42 It also sought to prevent and discourage an American attack on Iran, create a buffer zone against invasions from its west, cultivate an Arab partner, and counteract Sunni religious extremism.43 According to some analysts, Iran also exploited the crisis in Iraq to

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help counter against criticisms of its nuclear program, offset international sanctions in response to its nuclear programs, weaken the American military by keeping it preoccupied in Iraq, and help suppress Iraqi-based Iranian dissidents like the Mujahedin-e Khalq Organization.44

US Moves Towards Withdrawal and Competition for Post-Withdrawal Influence By 2007, the US had changed its approach toward Iraq from one of trying to quickly transform the politics, governance, rule of law, and economy of Iraq to one of helping Iraqis build as unified a state as possible and security forces capable of defeating extremists and insurgents, as well as eventually becoming capable of deterring and defending against external threats.

The US also sought to create an Iraq that is not reliant on Iranian aid or vulnerable to Iranian influence, and which is tied to a strategic partnership with the US. It also set more practical goals for Iraq. On November 13, 2009, the US embassy in Baghdad laid out a much more modest approach in a memo that was among the US diplomatic cables made public by Wikileaks: Our objective in Iraq should be less about countering all-things Iranian, and more about developing viable alternatives and approaches that gradually alter the GOI's political, economic, and social worldview.

Development of viable international alternatives in Iraq is one of the most effective measures of countering Iranian ambitions and, ultimately, integrating Iraq as a constructive member of the international community. Specifically, our ongoing efforts to bolster the GOI through capacity building and assistance within the Strategic Framework Agreement (SFA) and to remove Iraq from Chapter VII remain our most valuable tools in this regard. Given the value placed on the SFA by the GOI and the Iraqi public, our ability to recognize, enhance, and exploit the value of the partnership will constitute an essential element of any effort to counter "malign" Iranian influence. 45

The US, however, had uncertain success. By the time US troops left Iraq in December 2011, few Iraqis felt that the US occupation of Iraq had provided them with anything like the benefits they hoped for. Violence was much lower than in 2007, but still a series problem. Al Qa’ida and other Sunni extremist groups still operated, as did extremist Shi’ite militias.

Iraq still did not have anything approaching a stable government – or fully functioning democracy – some 20 months after Iraq’s most recent election on March 9, 2010. A new crisis, and Sunni-Shi’ite split, began on December 15, 2011 – just as the final element of US troops withdrew from Iraq. Prime Minister Maliki attempted to arrest Vice President al Hashemi for ties to a Ba’athist threat to the government and unmarked armored vehicles were sent to intimidate members of the opposition Iraqiyya Party.

Iraqiyya, the main opposition party charged that Maliki had taken control of the counter terrorism force and intelligence services, and is seeking to control the military by misusing his authority to make interim appoints at senior command levels. These charges were not without some merit, as Maliki had been moving to tighten his control over Iraq’s security and intelligence forces for some time, but it was impossible to determine how much blame could be assigned to either side. .

What was clear within days of the formal departure of the last US combat forces was that Sunni tension with the central government was rising in Anbar and Diyala Provinces, and ArabKurdish tension remained serious rising in Mosul and Kirkuk. Iraq’s economy remained weak, and its per capita income was so low that it ranks 159 in the world. Provincial and local governance was poor, and corruption was rampant. The US not only faced the challenge of Iran’s

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presence in Iraq, but the fact that Iraq remained a fragile state with uncertain security and political and economic stability.46

US-Iranian Competition and The Uncertain Future of the US-Iraqi Strategic Framework Agreement (SFA) American efforts to create stable and inclusive governance have clashed with Iranian efforts to support Iraq’s Shi’ites, and have not succeeded in uniting Iraq’s Sunnis, Shi’ite, and Kurds. ProIranian forces actively pursue a multi-pronged approach of minimizing America’s presence and influence in Iraq, while strengthening their own economic, political, religious, and military ties to their Iraqi neighbor. Tehran’s aims of maintaining order in Iraq are driven by their own desire to exploit Iraq in order to project power throughout the Middle East, subvert Western interests, and benefit commercially through trade. Iran has no desire to see a military, culturally, or economically robust neighbor that may rise to compete for regional power.

The US and Iran have also competed for influence within the Iraqi Security Forces and for domination in the post-invasion security environment. In November 2008, the US and Iraq signed the Strategic Framework Agreement (SFA), outlining both countries mutual commitment to coordinate on a wide range of issues, from security and law enforcement, to trade and education. Despite US Vice President Biden and Iraqi PM Maliki reaffirming their commitment to the SFA in November 2011, negotiations surrounding the post-2011 US troop presence failed.

In a blow to America’s ability to deter Iranian influence in Iraq, the Obama administration and Maliki’s government failed to agree on size and composition of US forces left behind to complete training of Iraqi military and police units, and combat Iranian aggression. While both US and Iraqi officials sought to maintain a limited US troop presence in Iraq in order to curb Iranian influence, ultimately negotiations fell apart over the legal status remaining US forces.

This failure to negotiate a continuing US troop presence in Iraq after 2011 has significantly altered the pattern of US-Iranian competition. Other shifts occurred in 2008 with the end of the most serious fighting, the conclusion of most US military operations in June 2010, and the creation of a new Iraqi government in late 2010.The US side of this competition has been shaped by two major agreements signed in November of 2008: The Strategic Framework Agreement (SFA) and the “Security Agreement” (SA) often referred to as the Status of Forces Agreement (SOFA). These agreements provide the US avenues to influence and cooperate with Iraq, and ultimately, compete with Iran.

The SOFA established rules and procedures for US personnel operating in Iraq and the US military’s role in countering threats. It included a timeline for the withdrawal of US troops, beginning in 2009 from Iraqi cities and ending with the complete withdrawal from Iraq no later than December 31, 2011. All the other provisions under the SOFA expired three years after its signing, or November of 2011. Among these provisions was an agreement to strengthen Iraqi Security Forces, which included training, equipping, supporting, supplying, and addressing logistical systems, to include transportation, housing, and supplies.47 The rights to conduct military operations and assist Iraqi forces against terrorists, outlaw groups, and remnants of the former regime, were unique to the SOFA, and expired at the end of 2011.48

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Any presence of US troops beyond 2011 – and many aspects of the transfer of responsibility for the future role of the US to the State Department – required the renegotiation of the Security Framework Agreement, or in some cases through a memorandum of understanding.49 The SFA outlines broader bilateral relations between the two countries, including political, cultural, economic, and security interests. This includes programs that support cultural exchanges, democratic institutions, social welfare and human rights, rule of law, and aspects of bilateral trade. It does not stipulate specific US assistance levels.50 The SFA remains in force until either party gives one-year notice of its intent to terminate the agreement. Section III of the SFA briefly addresses “Defense and Security Cooperation”, but states “cooperation shall be undertaken pursuant to the (SOFA).”51 The practical meaning of the SFA, however, is uncertain to say the least. The US failed during 2011 to reach an agreement to keep deploying some US troops in Iraq. The US commander in Iraq initially sought to maintain some 30,000 troops. This goal was not approved in Washington and was cut to 9,000-11,000 during the spring and summer of 2011. In September 2011, the US acknowledged it was in negotiations with Iraqi officials to maintain a troop presence after the December 2011 withdrawal deadline.52 The Obama administration expressed a desire to keep a force of 3,000 to 5,000 troops to continue “training missions” for Iraqi forces.53 This was a much lower number than previously advocated for by US military and political leaders. In October 2011, Iraq’s political leaders agreed to keep US military trainers in Iraq, but failed to grant US troops immunity from Iraqi law. The US has said any such restriction would prevent a deal from moving forward54 and a deal on an extension was aborted.

At the same time, the State Department assumed responsibility in Iraq as planned in October 2011 and continued its ongoing mission of building Iraqi institutional capacity under the SFA. Although the work conducted under Provincial Reconstruction Teams (PRTs) ended, remaining reconstruction projects continued under the supervision of the Iraq Strategic Partnership Office (ISPO), with Embassy Baghdad’s Political Section responsible for provincial outreach. State is also to have consulates in Basra and Irbil, though plans for Embassy branch offices in Mosul and Kirkuk have been abandoned.

The US military advisory, training, and support effort is now under State in the form of an Office of Security Cooperation–Iraq. There are now some 10 (OSC-I) sites that will host a limited number of military personnel who report to the US Ambassador. The OSC will be responsible for coordinating weapons sale, providing long-term assistance to the Iraqi Security Forces, and other military and security-related tasks. As of November 2011, ten OSC sites were operational (Figure VII.2). State will also oversee the Bureau of International Narcotics and Law Enforcement Affairs (INL) in its downsized police-assistance program.

This framework does, however, present serious security issues now that all US troops are gone, and the future status of contract security forces is uncertain. State’s problems in moving through Iraq were compounded by “severe” kidnapping warnings that, as of December 2011, drastically limited the movement of US officials. US experts believe Shi’ite militant groups affiliated with Iran were the biggest threat, though Sunni extremists linked to al Qa’ida were responsible for most kidnappings in the early years of the war.55 In addition, hundreds of US contractors that support the US mission in Iraq have been detained due accusations they do not possess the proper documentation needed to operate within the country. These detentions can last weeks and are a major hindrance to the US mission.56

Chapter VII: US Strategic Competition with Iran: Competition in Iraq Figure VII.2: OSC-I Sites: Personnel and Functions

Sources: SIGIR, Quarterly Report, October 30, 2011, p 6

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An Increasingly Uncertain Future Base for Competition The US faces a steadily more uncertain base for both dealing with Iran and establishing a stable relationship with Iraq. The SFA commits the US to defending Iraq in the event of an attack, but the balance of influence is changing. Real world Iraqi support for a strategic relationship is uncertain to say the least.

Iran seeks to capitalize on the situation in Iraq through manipulating its patronage channels to Iraq’s Shi’ite political parties. Iran seeks to limit or eliminate US influence in Iraq, and benefit from future commercial opportunities with its regional neighbor.

Yet, Iran faces many problems as well. The history of the Iran-Iraq War – which lasted from 1980-1988 -- has left a legacy of anger and resentment that at least partially matches Iraqi anger and resentment of the US occupation. Many in the Iraqi security services – particularly in the military – see the JUS as a safer source of aid and see rebuilding Iraq’s conventional military forces and creating a capability to defend against Iran as a vital national interest.

Iraq is a largely Arab country, and this creates some tension with Iranian “Persians.” Most Iraq Shi’ite clerics are “quietists” that do not support the political activism of Iran’s clergy or support the idea of a Supreme Leader who speaks for the missing Imam – particularly one that is Iranian.

Sadr may be a partial exception, but his views have shifted over time and his ties to Iran seem highly opportunistic in character. Iraqi Arabs are conscious that most Gulf Arabs see Iraq’s current ties to Iran as a threat to Iraq’s Arab identity and status.

Iran’s ability to influence Iraqi politics remains complicated; however, as rival Shi’ite parties such Iraq’s Dawa Party or the Supreme Council for the Islamic Revolution in Iraq (SCIRI), remain divided on many issues, and are wary of being controlled by Iran, with whom many still harbor resentment over the bloody, eight year Iran-Iraq war. Iran did work with Iraqi Shi’ite political leaders to form a new government in 2010, but continued to bolster the political importance of Sadrists and support various Shi’ite militias. Iran has no support from Iraqi Sunnis and Iraqi Kurds are aware that Iran has been little more tolerant of Iran’s Kurds than Saddam Hussein was of Iraq’s Iran’s aid and greatly expanded commercial ties make Iran one of Iraq’s most important trade partners. Iraqi imports of Iranian goods may reach $10 billion by 2012, and Iraq is increasingly dependent on Iranian energy imports.57 Many Iraqis, however, feel Iran is exploiting Iraq’s current economic weakness, underselling Iraqi goods, buying up property cheaply, and severing its own interests.

Iraq’s Critical Political, Military, Economic Challenges Both the US and Iran also must deal with an Iraq that is currently unstable and still working out deep internal divisions and problems. Iraq is diplomatically and militarily weak. Iraq must now constantly try to find a balance between conflicting pressures from the US and Iran. Iraq has tried to walk the line between the two competitors, preventing a major rift with either nation. Iraq needs trade and cross-border support from Iran, just as it needs aid, diplomatic, and military support from the US. Iraq’s much-reduced military capabilities make it dependent on aid, military sales, and training from the US, and Iraq still lacks the resources and cohesion to resist against Iraqi coercion and an defend against Iranian aggression.

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Moreover, Iraq’s economy remains crippled by a lack of local security in many areas, and a level of corruption that Transparency International ranked 175th out of 182 countries in 2011 – making it the seventh most corrupt country in the world.58 In spite of more than half a decade of faltering legislative efforts, Iraq has failed to pass effective investment, tax, and property laws to secure both domestic and foreign investment as well as to create effective security forces to protect its infrastructure and businesses.

A budget crisis that lasted from 2008 to 2010, and a political crisis that began long before the March 2010 election that produced a de facto stalemate in many aspects of governance, have added to these economic problems as well as sharply delayed critical qualitative improvements in every branch of Iraq’s national security forces. Iraq has not been able to absorb and support many of the aid projects funded during the US occupation, and its problems in national governance have been compounded by corruption, political infighting, and sectarian and ethnic struggles at the provincial and local levels.

Virtually all of Iraq’s disposable wealth comes from its petroleum sector, and related services, which the CIA describes as follows:59 Iraq's economy is dominated by the oil sector, which provides over 90% of government revenue and 80% of foreign exchange earnings. Since mid-2009, oil export earnings have returned to levels seen before Operation Iraqi Freedom and government revenues have rebounded, along with global oil prices. In 2011 Baghdad probably will increase oil exports above the current level of 1.9 million barrels per day (bbl/day) as a result of new contracts with international oil companies, but is likely to fall short of the 2.4 million bbl/day it is forecasting in its budget.

Iraq’s agricultural sector, which accounts for some 22% of its labor force, only accounts for 9.7% of its GDP even when it is measure in PPP terms, and Iraq’s farmers are so under capitalized, limited by transport and food processing facilities and costs, and by growing problems in water that they cannot compete with Turkish and Iranian food imports. Roughly 25% of the population lives below the poverty line, its direct unemployment is at least 15% and its real direct and indirect unemployment probably is at least 25% -- heavily weighted toward youth unemployment in a nation experiencing massive demographic pressure and with nearly 40% of its population 14 years of age or younger. 60

Iraq’s Petroleum Challenges Iraq’s oil resources present a challenge to Iraq, Iran, and the US. Iraq has not been able to survey its oil and gas reserves, or invest efficiently in their development since the Iran-Iraq War began in 1980. The Energy Information Agency of the US Department of Energy notes that,61 Iraq’s proven oil reserves are 115 billion barrels62, although these statistics have not been revised since 2001 and are largely based on 2-D seismic data from nearly three decades ago. Geologists and consultants have estimated that relatively unexplored territory in the western and southern deserts may contain an estimated additional 45 to 100 billion barrels (bbls) of recoverable oil. Iraqi Oil Minister Hussain Shahristani said that Iraq is re-evaluating its estimate of proven oil reserves, and expects to revise them upwards.

A major challenge to Iraq’s development of the oil sector is that resources are not evenly divided across sectarian-demographic lines. Most known hydrocarbon resources are concentrated in the Shiite areas of the south and the ethnically Kurdish north, with few resources in control of the Sunni minority.

The majority of the known oil and gas reserves in Iraq form a belt that runs along the eastern edge of the country. Iraq has 9 fields that are considered super giants (over 5 billion bbls) as well as 22 known giant fields (over 1 billion bbls). According to independent consultants, the cluster of super-giant fields of southeastern Iraq forms the largest known concentration of such fields in the world and accounts for 70 to

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80 percent of the country’s proven oil reserves. An estimated 20 percent of oil reserves are in the north of Iraq, near Kirkuk, Mosul and Khanaqin. Control over rights to reserves is a source of controversy between the ethnic Kurds and other groups in the area. …Iraq has begun an ambitious development program to develop its oil fields and to increase its oil production. Passage of the proposed Hydrocarbons Law, which would provide a legal framework for investment in the hydrocarbon sector, remains a main policy objective. Despite the absence of the Hydrocarbons Law, the Iraqi Ministry of Oil signed 12 long-term contracts between November 2008 and May 2010 with international oil companies to develop 14 oil fields. Under the first phase, companies bid to further develop 6 giant oil fields that were already producing with proven oil reserves of over 43 billion barrels. Phase two contracts were signed to develop oil fields that were already explored but not fully developed or producing commercially. Together, these contracts cover oil fields with proven reserves of over 60 billion barrels, or more than half of Iraq’s current proven oil reserves.

As a result of these contract awards, Iraq expects to boost production by 200,000 bbl/d by the end of 2010, and to increase production capacity by an additional 400,000 bbl/d by the end of 2011. When these fields are fully developed, they will increase total Iraqi production capacity to almost 12 million bbl/d, or 9.6 million bbl/d above current production levels. The contracts call for Iraq to reach this production target by 2017. …Iraq faces many challenges in meeting this timetable. One of the most significant is the lack of an outlet for significant increases in crude oil production. Both Iraqi refining and export infrastructure are currently bottlenecks, and need to be upgraded to process much more crude oil. Iraqi oil exports are currently running at near full capacity in the south, while export capacity in the north has been restricted by sabotage, and would need to be expanded in any case to export significantly higher volumes.

Production increases of the scale planned will also require substantial increases in natural gas and/or water injection to maintain oil reservoir pressure and boost oil production. Iraq has associated gas that could be used, but it is currently being flared. Another option is to use water for re-injection, and locally available water is currently being used in the south of Iraq. However, fresh water is an important commodity in the Middle East, and large amounts of seawater will likely have to be pumped in via pipelines that have yet to be built. ExxonMobil has coordinated initial studies at water injection plans for many of the fields under development. According to their estimate, 10 -15 million bbl/d of seawater could be necessary for Iraq’s expansion plans, at a cost of over $10 billion. …According to the Oil and Gas Journal, Iraq’s proven natural gas reserves are 112 trillion cubic feet (Tcf), the tenth largest in the world. An estimated 70 percent of these lie in Basra governorate (province) in the south of Iraq. Probable Iraqi reserves have been estimated at 275-300 Tcf, and work is currently underway by several IOCs and independents to accurately update hydrocarbon reserve numbers. Two-thirds of Iraq’s natural gas resources are associated with oil fields including, Kirkuk, as well as the southern Nahr (Bin) Umar, Majnoon, Halfaya, Nassiriya, the Rumaila fields, West Qurna, and Zubair. Just under 20 percent of known gas reserves are non-associated; around 10 percent is salt dome gas. The majority of non-associated reserves are concentrated in several fields in the North including: Ajil, Bai Hassan, Jambur, Chemchemal, Kor Mor, Khashem Ahmar, and Mansuriyah.

Iraqi natural gas production rose from to 81 billion cubic feet (Bcf) in 2003 to 522 Bcf in 2008. Some is used as fuel for power generation, and some is re-injected to enhance oil recovery. Over 40 percent of the production in 2008 was flared due to a lack of sufficient infrastructure to utilize it for consumption and export, although Royal Dutch Shell estimated that flaring losses were even greater at 1 Bcf per day. As a result, Iraq’s five natural gas processing plants, which can process over 773 billion cubic feet per year, sit mostly idle. …Furthermore, Iraq’s oil and gas industry is the largest industrial customer of electricity, with over 10 percent of total demand. Large-scale increases in oil production would also require large increases in power generation. However, Iraq has struggled to keep up with the demand for power, with shortages common across Iraq. Significant upgrades to the electricity sector would be needed to supply additional power.

Iraq has further problems because it has been much slower in establishing the laws necessary to secure investment, political support for outside investment, a solution to Arab-Kurdish power

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struggles over its reserves (that may soon be followed by Sunni-Shi’ite struggles), an effective oil police and security structure, and electricity and water capacity. It heavily subsidizes domestic petroleum prices in ways that reduce export capacity and increase domestic demand in inefficient ways, and is only slowly acquiring the refinery capacity to avoid having to make major imports of refined products. Both the US EIA and the International Energy Agency also estimate that Iraq’s future production will increase at a far slower rate than those claimed by Iraq’s oil ministry.

The EIA International Energy Forecast for 2011 projects a far slower increase in Iraqi oil production than Iraq does. It estimates that Iraqi production will increase from 2.4 million barrels per day (MMBD) in 2009 to the follow levels under direct scenarios:63 

2.9 MMB in 2015, 4.5 MMBD in 2025, and 6.3 MMBD in 2035 in the high oil price case



2.7 MMB in 2015, 3.2 MMBD in 2025, and 3.9 MMBD in 2035 in the high oil price case.



3.2 MMB in 2015, 5.8 MMBD in 2025, and 8.9 MMBD in 2035 in the traditional low oil price case.

These production levels indicate Iraq will be very lucky to reach half of its goal of 12 MMBD in 2017. They also tend to favor Iran. A slow increase in Iraq production will keep Iran’s oil export prices higher. It also will increase the cost of sanctions to the US and other importing states.

This is particularly important because the US pays world oil prices for even its domestic oil production, and the Department of Energy estimates that any talk of US “independence” from petroleum imports remains a dishonest political myth.

The US Department of Energy Annual Energy Outlook for 2011 – which is based on optimistic estimates of alternative energy production and improvements in conservation and energy efficiency – estimates that the US will only reduce its dependence on petroleum imports from 52% in 2009 to 41% in 2035 in its reference case – and these estimates do not include indirect petroleum imports in the form of major imports of manufactured goods from regions like Asia – which are becoming far more dependence on petroleum imports from the Gulf.64 US imports of liquid fuels (including crude oil, petroleum liquids, and liquids derived from nonpetroleum sources), which grew steadily from the mid-1980s to 2005, have been declining since 2005. In the AEO2011 Reference and High Oil Price cases, imports of liquid fuels continue to decline from 2009 to 2035, although they provide a major part of total US liquids supply over the period. Tighter fuel efficiency standards and higher prices for liquid fuels moderate the growth in liquids demand, even as the combination of higher prices and renewable fuel mandates leads to increased domestic production of both oil and biofuels. Consequently, while consumption of liquid fuels increases steadily in the Reference case from 2009 to 2035, the growth in demand is met by domestic production.

The net import share of US liquid fuels consumption fell from 60 percent in 2005 to 52 percent in 2009.

The net import share continues to decline in the Reference case, to 42 percent in 2035…In the High Oil Price case, the net import share falls to an even lower 24 percent in 2035. Increased penetration of biofuels in the liquids market reduces the need for imports of crude oil and petroleum products in the High Oil Price case. In the Low Oil Price case, the net import share remains flat in the near term, then rises to 56 percent in 2035 as demand increases and imports become cheaper than crude oil produced domestically.

While the high price oil case does lead to a faster increase in the production of alternative liquids and in conservation and efficiency, it also means massive increases in the cost of energy throughout the US economy. It still leaves the US beholden to international oil prices, dependent on indirect imports of petroleum in the form of manufactured goods, and strategically dependent on the secure flow of global petroleum exports for a steadily more globalized US economy, as if

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the percentage of direct US petroleum imports was the same as in the reference or high price oil case.

The Regional Response to Developments in Iraq There are other outside pressures as well, particularly from Iraq’s Arab neighbors, and once again America’s Arab friends and allies play a critical role. Iran’s influence in Iraq, and the growing uncertainty over the future nature of the US role in Iraq, has led key regional actors, especially Saudi Arabia and Jordan, to express reservations and criticisms of Iran’s role. They worry about the development of “a Shi’ite crescent” of influence – from Hezbollah (the only active militia in Lebanon) and Syria (ruled by Shi’ite Alewites) to Iraq and Iran.65 Prior to the January 2005 elections, leaders in Iraq and in the region accused Iran of coaching candidates, pouring money into campaigns, and even rigging the election.66 Jordan’s King Abdullah II claimed that over a million Iranians went to Iraq to vote in the election and Iran was giving money to the unemployed in order to influence their vote.67 The Saudis, other Gulf Arabs and Jordanian have expressed growing concern over Iran’s role in Iraq and are worried about the spread of the Iranian model of Shi’ite governance, terrorists flowing from Iraq to Saudi Arabia, and the long-term oil issues in Iraq.68 In September 2005, Saudi Prince Saud al Faisal, Saudi Arabia’s Foreign Minister, said, “The Iranians now go in this pacified area that the American forces have pacified, and they go into every government of Iraq, pay money, install their own people, put their own – even establish police forces for them, arms and militias that are there and reinforce their presence in these areas.”69 That same year, a leaked State Department memo shows, Saudi Arabia’s King Abdullah privately expressed anger over the fact that, “whereas in the past the US, Saudi Arabia and Saddam Hussein had agreed on the need to contain Iran, US policy had now given Iraq to Iran as a ‘gift on a golden platter.’”70 Experts like Ellen Laipson, President and CEO of the Stimson Center, counter with the argument that Saudi Arabia and Iraq’s other Arab neighbors made few investments of political capital to counter Iranian influence despite their rhetoric and complaints to US diplomats.71 Whether this is their fault a lack of credible opportunities, or clearly defined US efforts to show Arab states that it supported such intervention, is a matter of debate.

These outside Arab concerns do, however, interact with Iraq’s internal political splits, and SunniShi’ite tensions, which are tending to polarize Iraq’s political system in ways that could benefit Iran. Prime Minister Maliki’s crackdowns on Sunni political leaders and some 600 suspected “Ba’athists” -- many from Saddam Hussein’s birthplace and former stronghold of Tikrit -- during October-December 2011 – alleged to result from a tip from the Libyan transitional government – have made this situation worse.

As part of Maliki’s increasingly centralized power scheme, his government pursued a nationwide round of de-Ba’athification, going so far as to disqualify candidates from elections on the grounds that they were too close to the now defunct Baath Party. Many of those arrested had no current ties to the Ba’athists or any element seeking to overthrow the government. Maliki’s actions were clearly more over a power grab than the result of legitimate fears of some form of coup or threat.

Moreover, the Maliki government failed to sustain its efforts to create jobs for the Sons of Iraq, the Sunni military force that did much to fight Al Qa’ida from 2007 onwards, and tensions

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increased steadily with both Sunnis in Provinces like Anbar and Diyala, and Kurds in the area around Kirkuk. 72 Maliki also split with key Sunni political leaders. On December 17, 20l1, Maliki asked the Council of the Republic for a vote of no-confidence vote against Saleh Mutlaq, a Sunni deputy prime minister, on the grounds that al Mutlaq lacked faith in the political process. This led Iraq’s Sunni Vice President Tariq al Hashemi to take his Shi’ite party out of the “unity” government.

On December 19, 2011 Maliki followed up a failed effort to arrest Iraq’s Sunni Vice President Tariq al Hashemi on suspected links to terrorism, the day after the final convoy of US troops left Iraq, by issuing a warrant for his arrest.

Major General Adel Daham, a spokesman for the Ministry of Interior, said the warrant was based on confessions by suspects identified as Hashemi's bodyguards, that tied the vice president to killings and attacks on Iraqi government and security officials: "An arrest warrant has been issued for Vice President Tariq al Hashemi according to Article 4 of the terrorism law and is signed by five judges... this warrant should be executed."

The MoI showed taped confessions on the state-run Iraqiyya television and other local media of men it claimed were 13 members of Hashemi's security detail who said they had been paid by al Hashemi’s office to carry out killings. At this point, al Hashemi, was reported to be in Kurdistan where he could not be arrested without the permission of the Kurdish authorities.73 These actions have pushed at least some Sunnis towards some form of separate political status or “federalism.” In June 2011, Speaker Nujeifi warned that Sunnis in Iraq might seek separation from the Shi’ite-run government, or demand more autonomy by pressing for the establishment of more independent regional status.74 Sectarian divisions are becoming more apparent as several predominantly Sunni provinces seek regional status. In October 2011, Salahuddin Province declared itself an “administrative and economic region in a united Iraq”. 75 While this move was unconstitutional (provinces can request regional status but cannot unilaterally declare themselves as such), and Salahuddin council eventually backed off, the move nonetheless demonstrates the growing discomfort of Sunnis to Maliki’s centralization of power.

Not surprisingly, the Gulf Cooperation Council (GCC) states severely criticized the Maliki regime during its meeting in December 2011, and senior Arab officials privately expressed their concern that he was making Iraq into a Shi’ite state and possible future threat.

Political Competition While the US may have occupied Iraq, Iran has heavily influenced Iraqi politics since the run up to Iraq’s first post-invasion election. It has backed all of the major Shi’ite parties to varying degrees, assuring that whichever party wins elections will be beholden to Tehran. Iran has also been heavily involved in most post-election coalition-building talks. However, Iranian influence is limited, and constantly risking a popular backlash. Iran’s backing of multiple Shi’ite parties has undermined Shi’ite unity, as has its support for various militias. Despite its influence, Iran has been unable to block the major US-Iraqi accords that cement their relationship, such as the Status of Forces and Strategic Framework Agreement.

The First Round of Iraqi Governments and Elections Iran has played a critical role in backing given candidates and parties, as well as brokering postelection political agreements to form the majority government in every one of Iraq’s elections

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since 2003. Ironically, American efforts to produce a representative government in Iraq did much to serve the Iranian goal of creating a Shi’ite-dominated government. This first became clear in June 2004, when the US Coalition Provisional Authority transitioned control to a sovereign Iraqi Interim Government with Iyad Allawi as its prime minister.

The creation of Allawi’s government was intended to provide another half year for the US to continue to shape Iraq’s governance before elections created a new and more lasting body. In practice, however, the lack of Iraqi Sunni participation in the elections on January 30, 2005, was a boon to Iran and a blow to the American goal of creating an inclusive political process that would bring stability to Iraq.

The elections were supposed to form a broadly based 275-member National Assembly that would write Iraq’s new constitution. However, the Sunni boycott was apparent in the results, as 240 of the 275 seats were won by three parties: the Shi’ite United Iraqi Alliance (UIA) won 140 seats, the Kurdistan Alliance won 75 seats, and the Iraqiyya List, led by Iyad Allawi, won 40 seats.76 Iran played an important role in bringing together the UIA coalition, which included most of Iraq’s Shi’ite political groups, most prominent of which were the Abdul Aziz al Hakim-led Islamic Supreme Council of Iraq (SCIRI) and Nouri al Maliki’s Dawa Party.77 The two major parties in the Kurdistan Alliance were the Kurdistan Democratic Party (KDP) and the Patriotic Union of Kurdistan (PUK). The PUK’s leader Jalal Talibani became President of Iraq and Massoud Barzani became President of the Kurdistan Regional Government. Ibrahim al Jaafari of the Dawa Party became Prime Minister.

A second round of elections on December 15, 2005, created a new 275-member Council of Representatives with a five-year term. The Shi’ite-dominated United Iraqi Alliance was again the largest bloc, winning 128 seats. This time, Muqtada al Sadr’s followers joined the bloc, and the end result put Islamic parties, with many leaders who had been exiled in Iran, in leading positions. The Kurds won 53 seats. The Sunni-Arab Tawafuq party, also known as the Iraq Accord Front, won the third most seats with 44. Allawi’s former coalition Iraqiyya List joined others to form the Iraqiyya National List, which won only 25 seats.

Iran was instrumental in assembling the United Iraqi Alliance, whose formation of the government that followed saw Nouri al Maliki of the Shi’ite Dawa Party replace Jaafari as Prime Minister, SCIRI gain several important ministerial posts, and five Sadrists take ministerial posts.78

The January 2009 Governorate Elections and March 2010 Parliamentary Elections More recent Iraqi elections have not clearly favored either the US or Iran, but their net effect has made it impossible for Iraq and the US to move forward in reaching viable plans to implement their Strategic Framework Agreement. The January 2009 provincial elections saw the fragmentation of the Iranian-backed coalition that had formed the United Iraqi Alliance. Maliki’s Dawa Party separated from ISCI (formerly SCIRI) and formed a new list called State of Law. The three major Iraqi Shi’ite parties were competing with each other, further reducing Iran’s influence.79 State of Law came in first in most Shi’ite governorates, while ISCI’s best performance in the South was in Najaf, where it tied with State of Law for seven seats each out of 28 in the governorate council. Sadr’s list performed even worse, failing to win any

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governorate outright.80 Although Iran’s attempt to revive the United Iraqi Alliance failed, postelection complications gave Iran a major role in forming the next Iraqi government.

The March 7, 2010 parliamentary elections resulted in a very different outcome than previous elections, and one that has virtually paralyzed many aspects of Iraq’s political, economic, and security development. Iyad Allawi’s Iraqiyya list won the most seats with 91, while Maliki and his allies – who split from the United Iraqi Alliance to form the State of Law list – won 89. The successor to the UIA, the Iraqi National Alliance, won 70 seats and the Kurds 57.81 These results initially seemed encouraging to the US, as the two candidates seen largely as more secular and less connected to militias fared the best, and the possibility for an inclusive government was promising. Iran had pushed for a unity Shi’ite alliance, though according to Reidar Visser, it wanted to allow Sunnis token power. Meanwhile, Allawi spoke often in Iraq and foreign cities of the danger of Iranian influence. Allawi initially had broad-based appeal,82 but was left without significant power. In one poll, 56% of Iraqis said they would not see the government as fully legitimate if Allawi was not part of it, while 31% said they would see it as “legitimate” or “somewhat legitimate.”83 Maliki, however, quickly create a coalition that gave him more votes in Parliament than Allawi.

He remained in office and effectively excluded Iraqiyya list and his main rivals from power. This effectively paralyzed key elements of the government and the role of Parliament in ways that not only allow Maliki to govern by gave him control over much of the budget and the ability to dominated Iraq’s security forces – including the ability to place loyalist in many key command positions by making “temporary” appointments, and tolerating the sale of other positions and profiteering with the security structure by those he considered loyalists.

It soon became clear, however, that the March 2010 election had produced near paralysis as two conflicting coalitions struggled for power without showing the ability to compromise. This gradually gave more power to the Sadrists – the largest victor on the Shi’ite side. The subsequent stalemate to form a majority coalition that could appoint a new prime minister lasted eight months, setting an international record for the longest period of time between elections and the seating of a government.

With Iranian encouragement, Shi’ites – including Sadr – came together and supported Maliki continuing as Prime Minister. While experts have different views of Iran’s role, some feel that Iran, with the strong support of Iranian Majlis Speaker Ali Larijani,84 worked hard to establish a Shi’ite led government. Iran played a role in the Independent High Electoral Commission’s decision to ban Sunni and secular candidates from the vote.85 Iran’s efforts to include the supporters of both Maliki and Sadr in the new government followed a long-standing strategy in which Iran has supported diverse Shi’ite factions in order to serve their interests regardless of the outcome. Iran was able to overcome the tensions between Maliki and Sadr to create an Iraqi government beholden to Iranian influence. Iran may also have provided $8 million a month to Muqtada al Sadr’s party for the 2010 election.86 Without Iranian backing, Sadr is left with a far less durable foundation, while Iran is far less influential in Iraq without Sadr.87 The 2010 political impasse may have had some indirect positive outcomes. The bureaucratic machinery in the Iraqi government has been forced to mature as it ran the country while Iraq’s politicians have struggled to form a new government. The judiciary was threatened but also

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partially empowered, first in declaring it unconstitutional for the Council of Representatives to not meet, therefore pushing the parties to come to a deal, and second, in declaring the powers of the presidency set out in bylaws to be unconstitutional.88 In any case, an awkward combination of US and Iranian political pressures, and Allawi’s and Iraqiyya’s inability to compete directly with Maliki, led Allawi’s Iraqiyya bloc and the Kurds to eventually agreed to participate in what was supposed to be a national government. In November 2010, the outlines of a new government took shape. Maliki remained as Prime Minister, Jalal Talibani remained as President, and the speakership of the Council of Representatives went to Osama al Nujeifi – a member of Iraqiyya with a tense relationship with the Kurds, especially regarding Kirkuk’s future.89 The US did play a major role in forming the new government, and in working with Kurdish leaders and both main Arab factions to create what came to be called the Erbil Agreement between Iraq’s rival leaders – a nineteen point agreement that was supposed to create a unified government and give the Sunnis and Allawi’s faction an important role.90 The agreement had the following broad terms: 91.

1- 1- Commitment to the Iraqi Constitution, with all of its articles without exception, and protection of Iraq’s federal, democratic system.2- A coalition government in which all major Iraqi components participate.3- Commitment to the principle of partnership and participation in decision-making through: a. Establishment of a Council on National Security, to be created through the passing of a special law at the same time as the government is formed. b. Drafting of bylaws for the Council of Ministers that would give it added legitimacy and institutionalization. Through joint decision-making, the Council would ensure that administrative and financial powers are shared between the Prime Minister and his deputies. c. Adherence to the principle of consensus.

4- Formation of a Federal Council within the first year of this Parliament. The President and his deputies have the right to veto legislation until this Council is formed.

5- Amendment of the current electoral law to guarantee that all Iraqis are represented fairly.

6- The census should be conducted on time in October 2010.

7- Review of the structures of the security and military forces to reflect a fair representation of all Iraqis in these forces.

8-Introduction of checks and balances in all Ministries and state Institutions.

9- Implementation of Article 140 of Iraq’s Constitution and allocation of the necessary budget within a period that does not exceed two years following the formation of the government.

10- Passage of a law for water resources within the first year of the government formation on the basis of the latest agreed-upon draft.

11- Passage of a law for oil and gas within the first year of the government formation on the basis of the latest agreed-upon draft.

12- Supplying the Peshmerga forces with arms, equipments, and funds as part of the Iraqi national defense system.

13. Support for the Kurdistan Region’s candidate for the post of President of the Republic.

14- Compensation for the victims of the former regime, including the victims of the Anfal campaign and chemical bombings of Halabja and other places.

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15- The Kurdistan Region’s blocs should have a fair representation within the sovereign ministries and other institutions based on national gains in the elections.

16- The Kurdistan Region should have the right to cross-examine candidates for the posts of minister of any sovereign ministries and those ministries that are relevant to the Region.

17- The Kurdistan Region’s negotiating team should elect a candidate for the post of the Secretary of the General Secretariat of the Council of Ministers.

18- In the event that the Kurdistan Region’s blocs withdraw from the government due to a clear breach of the Constitution, the Iraqi government would then be considered dissolved.

19- The Prime Minister’s bloc in both the Parliament and the Council of Ministers must make a commitment to the implementation of the above terms.

US officials applauded the government’s apparent inclusiveness when it was finally formed.

American officials pointed to the influence it had in pushing for the outcome, including the adoption of an American suggestion that Allawi head a new, “National Council for Security Policy”. However, that council’s powers were poorly defined and some critics argued that the power-sharing arrangement would sharply reduce the quality of governance.

The failure to implement many of the new arrangements remained fragile, and key portions remained in limbo and the failure to implement them effectively paralyzed the government’s ability to move forward effectively in many areas. Allawi had broad-based appeal,92 but was left without significant power. In one poll, 56% of Iraqis said they would not see the government as fully legitimate if Allawi was not part of it, while 31% said they would see it as “legitimate” or “somewhat legitimate.”93 It was never clear how the National Council for Security Policy could fit into the legal framework of Iraq, since it was not mentioned in the constitution. Moreover, Maliki and Allawi could never agree on a functional role for the Council. Moreover, serious Sunni and Shi’ite differences remain, and key sources of tension between Arabs and Kurds have not been resolved.

For example, the Kurds won Maliki’s tentative acceptance of the international oil deals it was making outside of the federal government’s authority, but it is still far from clear the extent of what this means in practice.

As a result, the creation of a new “unity” government actually resulted in a Shi’ite majority leadership in Iraq that benefitted Maliki, who continuously sought to increase and consolidate his hold over Iraqi politics, under the guise of protecting Iraq’s weak and fragmented institutions.

Ayad Allawi, the Shi’ite leader of Iraqiyya’s coalition, failed to achieve any political gains, and only served to further strengthen the Prime Minister’s hold on power.

As has been described earlier, this left a power structure that could do little to eliminate the remaining sectarian tensions between Sunni and Shi’ite, and ethnic tensions between Arabs and Kurds. It helped trigger the growing struggles between Maliki and Iraq’s Sunni politicians that began in October 2011, and which reached the crisis point when Maliki had the Ministry of Interior issue an arrest warrant for Iraq’s Sunni Arab Vice-President, Tariq Hashemi on December 19, 2011. Tensions reached the point where Massoud Barzani, the president of Iraq's autonomous Kurdish region, called for crisis talks to prevent the "collapse" of the government, warning that "the situation is headed towards deep crisis."94 The crisis started when Maliki began an October-December crackdown on some 600 rivals who he accused of being former Baath Party” members. This led to an open clash during an October 2011 cabinet meeting in which a key Sunni leader Vice President al Hashemi. Mutlaq called

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Maliki a dictator and threatened to stir dissent in the streets against the Prime Minister. Maliki responded by storming out of the meeting, but not before threatening to handle Mutlaq as he had Vice President al Hashemi. Maliki dismissed his deputy, enacted constitutional powers to remove cabinet ministers with the consent of Parliament., and presented three options to parliament in resolving the Mutlaq issue; (1) Mutlaq must resign his post; (2) Iraqiyya must fire Mutlaq and replace him with another politician from their ranks; or (3) Mutlaq must apologize to Maliki. To date, Mutlaq has not offered an apology.

In fact, in December 2011, Maliki moved to replace Iraqiyya ministers with those loyal to him.

While these attempts proved unsuccessful, Maliki’s attempts to alienate Iraqiyya members continues as the PM unilaterally suspended its ministerial capacities until the boycotting ministers ended their protest of government. In late January 2012, faced with increased isolation and political obsolescence, the Iraqiyya bloc decided to end its boycott and rejoin Maliki’s government.

In December 2011, Vice President al Hashemi who had recently expounded the virtues of federalism and the deficiencies of corrupt centralized government found himself accused of instigating federalist movements charged with running a death squad targeting PM Maliki and Iraqi parliament members, and seeking refuge in the Kurdish region, where he remained a defacto political exile.

Moreover, the issue of federalism emerged as a new form of Sunni-Shi’ite problem. The Iraqi Constitution has an Article 119, which establishes the process of forming federal regions, and allows provinces to obtain increased autonomy from the government in Baghdad. As provincial demands for increased autonomy and official “regional” status grew and threatened Maliki’s centralization concentration of power, Maliki moved to expand his grip on Iraqi politics.

SIGIR described the situation as follows at the end of 2011, 95 Iraq’s Region Formation Law (Regions Law) provides that any province or group of provinces may choose to form a semi-autonomous federal region via popular referendum. But, before such a vote may occur, one-third of the Provincial Council members (or one-tenth of the voters) in the relevant provinces must submit a request to hold a referendum. If a simple majority of voters approves the measure in the referendum, a region is formed.16 This quarter, several provinces revived the issue of region formation, potentially further complicating their relations with Baghdad: • Salah Al-Din. In late October, the Provincial Council issued a statement purporting to declare the overwhelmingly Sunni province to be an administrative and economic region. This move toward regionalism came as the GOI ordered the arrest of hundreds of prominent Sunnis in the province, accusing them of ties to the outlawed Ba’ath Party.

• Anbar. In late November, a Provincial Council member announced that about half of the members had agreed to move toward transforming the province into a region.

• Diyala. In December, the Provincial Council voted to declare the province a region unilaterally setting off demonstrations opposing such a step in many of the ethnically diverse province’s Shia areas.

Prime Minister al-Maliki believes that Iraq’s national structure is not ready for additional semiautonomous federal regions. Instead, he has been exploring various options to devolve some powers to the provincial governments. Previous regionalism movements arose in the Shia south. For example, in 2008, officials in the oil-rich province of Basrah made a serious push toward establishing a region. Their efforts failed, and subsequent attempts to transform Basrah into a region have also foundered. By the end of the quarter, efforts toward forming regions in other provinces appeared to have stalled, at least for the moment.17 Thus, as of mid-January, the Kurdistan Region (comprising

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Dahuk, Sulaymaniyah, and Erbil provinces) remains Iraq’s only federal region.

Post-US Withdrawal Political Tensions in Iraq The US was not prepared for the sheer scale of the Shi’ite-Sunni tensions that were emerging in late 2011 as the US completed its withdrawal from Iraq, or for the scale and success of Maliki’s maneuvering. The US still planned for a massive continuing US diplomatic, advisory, military, and police training presence in Iraq. The same was true of US aid. American reconstruction funding, though much reduced, was planned to continue to support Iraq.

President Obama expressed broad optimism during a press conference with Prime Minister Maliki on December 13, 2011. In doing so, he ignored the realities of Iraq’s political, military, and economic problems -- and its internal political divisions -- in ways that became brutally clear only days later:96 Iraq faces great challenges, but today reflects the impressive progress that Iraqis have made. Millions have cast their ballots -- some risking or giving their lives -- to vote in free elections. The Prime Minister leads Iraq’s most inclusive government yet. Iraqis are working to build institutions that are efficient and independent and transparent.

Economically, Iraqis continue to invest in their infrastructure and development. And I think it's worth considering some remarkable statistics. In the coming years, it’s estimated that Iraq’s economy will grow even faster than China's or India's. With oil production rising, Iraq is on track to once again be one of the region’s leading oil producers.

With respect to security, Iraqi forces have been in the lead for the better part of three years -- patrolling the streets, dismantling militias, conducting counterterrorism operations. Today, despite continued attacks by those who seek to derail Iraq’s progress, violence remains at record lows. And, Mr. Prime Minister, that’s a tribute to your leadership and to the skill and the sacrifices of Iraqi forces.

Across the region, Iraq is forging new ties of trade and commerce with its neighbors, and Iraq is assuming its rightful place among the community of nations. For the first time in two decades, Iraq is scheduled to host the next Arab League Summit, and what a powerful message that will send throughout the Arab world.

People throughout the region will see a new Iraq that’s determining its own destiny -- a country in which people from different religious sects and ethnicities can resolve their differences peacefully through the democratic process.

Mr. Prime Minister, as we end this war, and as Iraq faces its future, the Iraqi people must know that you will not stand alone. You have a strong and enduring partner in The United States of America. And so today, the Prime Minister and I are reaffirming our common vision of a long-term partnership between our nations. This is in keeping with our Strategic Framework Agreement, and it will be like the close relationships we have with other sovereign nations. Simply put, we are building a comprehensive partnership.

Mr. Prime Minister, you’ve said that Iraqis seek democracy, “a state of citizens and not sects.” So we’re partnering to strengthen the institutions upon which Iraq’s democracy depends – free elections, a vibrant press, a strong civil society, professional police and law enforcement that uphold the rule of law, an independent judiciary that delivers justice fairly, and transparent institutions that serve all Iraqis.

We’re partnering to expand our trade and commerce. We’ll make it easier for our businesses to export and innovate together. We’ll share our experiences in agriculture and in health care. We’ll work together to develop Iraq’s energy sector even as the Iraqi economy diversifies, and we’ll deepen Iraq’s integration into the global economy.

We’re partnering to expand the ties between our citizens, especially our young people. Through efforts like the Fulbright program, we’re welcoming more Iraqi students and future leaders to America to study and

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form friendships that will bind our nations together for generations to come. And we’ll forge more collaborations in areas like science and technology.

We’ll partner for our shared security. Mr. Prime Minister, we discussed how the United States could help Iraq train and equip its forces -- not by stationing American troops there or with US bases in Iraq -- those days are over -- but rather, the kind of training and assistance we offer to other countries. Given the challenges we face together in a rapidly changing region, we also agreed to establish a new, formal channel of communication between our national security advisors.

And finally, we’re partnering for regional security. For just as Iraq has pledged not to interfere in other nations, other nations must not interfere in Iraq. Iraq’s sovereignty must be respected. And meanwhile, there should be no doubt, the drawdown in Iraq has allowed us to refocus our resources, achieve progress in Afghanistan, put al Qa’ida on the path to defeat, and to better prepare for the full range of challenges that lie ahead. So make no mistake, our strong presence in the Middle East endures, and the United States will never waver in defense of our allies, our partners, or our interests.

As President Obama’s speech made all too clear, senior US officials were not prepared for the immediate aftermath of both Maliki’s visit to the US and the departure of the last US forces.

Maliki suddenly intensified a power struggle with his Sunni opponents that quickly became a major national crisis that helped trigger a new wave of terrorism – much of which was targeted at Shi’ites and designed to provide a new round of Sunni-Shi’ite conflict.

On December 15, the eve of the US withdrawal and hours after the end-of-mission ceremony, Prime Minister Maliki cracked down openly and violently on senior Sunni Arab politicians, deepening the divide in a growing sectarian-political crisis. Maliki had previously facilitated a sympathetic judiciary and interior to support his motives. In fact, Maliki was the de facto minister of the Interior, Defense and National Security due to political infighting.

On December 15, 2011, armored vehicles belonging to the Baghdad Brigade surrounded the residence of Vice President Tariq al Hashemi for allegedly running hit squads that targeted government officials. Hashemi was only the latest member of Iraqiyya to face similar accusations, though by far the highest ranking. He fled north and is under the protection of Kurdish authorities.

On January 8 2012, Iraqi’s Ministry of Interior demanded the Kurds hand al Hashemi over to Baghdad, which they refused to do. Several days later, a Shiite governor threatened to blockade a strategic commercial route from Baghdad to northern Kurdish region if Kurdish officials did not hand over the indicted VP Hashemi who they were harboring. Maliki repeatedly warned Kurdish authorities against harboring Hashemi. Maliki continued Sunni purges on January 1920, 2012, when security forces raided the homes of two Sunni politicians in Diyala province and arrested the Sunni vice chairman of the Baghdad provincial council.

The accusations against Hashemi were followed by an Iraqiyya boycott of parliament that paralyzed Iraq’s government. This increased the growing sectarian tensions with Iraqiyya and other party blocs at a time when sectarian-based attacks were already on the rise. Several political blocs called for the dissolution of parliament, including the Sadrists, and other alliances fractured, such as Iraqi National Accord leaving Iraqiyya. Maliki, in turn, threatened to form a new government controlled by Shi’ites with Kurdish support. However, the Kurds remain unlikely to trust any figure that seeks to consolidate under a strong centralized power given their history under Saddam.

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The Sadrists called for parliament to be dissolved and early elections to be held, in what became the first real challenge to Maliki’s power from within his Shi’ite coalition since early in the 2010 elections. The Iraqiyya coalition partly supported these initiatives. However, the Supreme Iraqi Islamic Council has rejected such calls97 and Maliki has welcomed the Iranian-sponsored Shiite militia group Asaib Ahl al Haq into the political process as, perhaps, a counter to any loss in support.

Several notable Sunni leaders spoken out against Maliki in the wake of these developments.

Iraq’s Sunni Deputy Prime Minister Saleh al Mutlaq called for Prime Minister Nouri al Maliki to step down and again referred to him as a dictator.98 Iraq’s Parliament speaker and Iraqiyya member, Osama al Nujaifi, warned, “The armed forces should not be a tool to repress people and the armed forces should not interfere in political matters,” referring to the situation with Hashemi, and citied “serious violations” of excessive force, detainee abuse, and faulty legal procedures.99 Iyad Allawi stated forces under Maliki’s control are “arresting, torturing and terrifying” political opponents and innocent citizen, and continued, “This is not the state that we fought for.”100 Maliki responded with considerable effectiveness. On December 30, 2011, Maliki advisors began circulating rumors that Finance Minister Rafe al Essawi, also from Iraqiyya, was supporting al Qa’ida in Mesopotamia.101 These suggestions are eerily similar to those that began prior to Hashemi fleeing to Kurdistan. Just two days after these statements were made a convoy carrying al Essawi survived a roadside bomb.102 . The investigations ended abruptly, however, suggesting Maliki’s acknowledgement that the arrest of Essawi would spark unrest in Anbar province at a time when Maliki was seeking to discourage Anbar provincial leaders from pressing for regional status under Article 119.

The Obama administration expressed concern over the political developments, though described them as, “upheaval as part of the usual rough and tumble of Iraqi politics.”103 The day after the last US troops left Iraq, one of President Obama's main advisors on Iraq, Colin Kahl, left the administration to join academia. In July 2008, Kahl co-authored an article in Foreign Affairs in which he wrote, “Now, the principal impediment to long-term stability in Iraq is the reluctance of Prime Minister Nouri al Maliki's central government to engage in genuine political accommodation." Kahl argued for "conditional engagement" and stated, "In the end, this approach may not work. If the Iraqis prove unwilling to move toward accommodation, then no number of US forces will be able to produce sustainable stability, and the strategic costs of maintaining a significant presence will outweigh the benefits.”104 There has been some progress in spite of these divisions. On January 5, Ambassador James Jeffrey stated that Maliki appeared to be allowing the judiciary to conduct a fair investigation of the charges against Vice President Hashemi. This might have been an indication that the US did not openly support the Sunni view that Hashemi’s arrest was purely a power grab by Maliki.105 The provisions of the 2010 Erbil agreement have also remained a potential framework for a future agreement. Ayad Allawi made this clear in a December 2011 op-ed in the New York Times, “How To Save Iraq From Civil War”. He wrote, “We…are ready to resolve our problems peacefully, using the Erbil agreement as a starting point”. In December 2011, Kurdish President Barzani had also called on all sides to convene a national conference. This initiative was immediately endorsed by the US and Turkey, but any action was delayed by the growing tension

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in Iraq and disagreements over where, when, who, what would be discussed continue to stall efforts to hold the conference.

In spite of these disputes, key members of Iraqiyya, the National Alliance, and the Kurdish Alliance met on February 6, 2012 in a preparatory meeting. Here, the parties agreed on four central principles: (1) All blocs shall obey the political process and reject terrorism; (2) the Constitution is basis for settling factional disputes; (3) All groups in Iraqi society be represented in the political process; and (4) the independence of the Iraqi judiciary. The President of the Kurdistan region, Massoud Barzani, expressed hope that Baghdad would implement the agreements made in Erbil that laid the groundwork for Maliki’s second government, and would “lift the country out of its current crisis.”

Iraq’s Sunnis also seem to realize that they must participate in the political process in spite of the limits they now face. On January 20, Iyad Allawi stated that Iraqiyya could end its month-long boycott of parliament if Maliki respects the power-sharing agreement between the major forces in the country.106 The announcement came without concessions from government and without many of the contentious issues being resolved.

The case against Hashemi was sidestepped by agreeing to leave it to the courts rather than the political arena. It was speculated that the announcement was a possible effort at closed-door reconciliation among Iraq’s factions to prevent a collapse of the government or civil war. In addition, President Talibani returned to Iraq after a medical procedure in Germany and began meeting with leaders to set the parameters for a national conference that could be held in the coming weeks. At the same time, Iraqi leaders began to try to create an image stability to allow Iraq to host a successful Arab Summit that the Arab League agreement had agreed to in February.107 On February 27, following Iraqiyya’s unsuccessful boycotts of Maliki’s government, former Iraqiyya member Zuhair Araji called the boycotts “unwise” and said the alliance had embarrassed itself.108 These sentiments have been echoed by others who feel that Iraqiyya failed in their move for increased autonomy, and returned to join Maliki’s government with even less power than before.

Outside observers feel however, that Maliki had so far been the clear winner. On February 15, Ramzy Mardini of the Institute for the Study of War wrote that “it is clear that Maliki has come out as the winner in the political crisis he helped provoke”. Indeed, recent developments in Iraq have fragmented both Maliki’s Shi’ite rivals and his Sunni opponents, and have established the Iraqi Prime Minister, who was once feared too weak to provide strong leadership over Iraq, as a new Arab dictator in the making.”109

Post-US Withdrawal Patterns of Violence There has also been growing violence and ethnic and sectarian polarization. At the December 15 ceremony marking the end of major US activity in Iraq, US Secretary of State Leon Panetta warned, “Iraq will be tested in the days ahead-by terrorism, by those who seek to divide it, economic and social issues, by the demands of democracy itself.” His stark and ominous prediction could not have proven truer. Recent violence, including attacks on infrastructure, targeted assassinations of Iraqi officials, and indiscriminate killing between rival ethnic groups plague Iraqi reconstruction efforts. Figures VII-3 to Figure VII.6 use SIGIR reports (October 30, 2011 and January 30, 2012) and NCTC estimates to illustrate these challenges.

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The struggle to create a new government also did nothing to halt the tensions that affect smaller minority groups. Figure VII.3 shows US estimates that nearly half of Iraq’s minorities have been driven out of Iraq since 2003. Moreover, as October 30, 2011 reporting by the Special Inspector General for Iraqi Reconstruction made clear, it has left a high level of violence inside Iraq, and a number of extremist groups that will continue to threaten Iraq in the future. This violence is show in Figure VII.4, and the October 30, 2011 SIGIR report to the US Congress makes it clear that there is a growing pattern of violence and assassinations directed at Iraqi security forces and officials.110 The report uses declassified US intelligence sources to describe the key sources shown in Figure VII.5. 111 GOI data show that 2,645 Iraqis were killed in 2011 alone, including 1,578 civilians, 609 police personnel, and 458 soldiers.112 Over 4,400 Iraqi’s were wounded in violence. And while December 2011 marked one of lowest monthly death tolls (155 killed) in Iraq since 2003, December 22, 2011 was the bloodiest day in Iraq in since 2009. That one day saw 31 incidents, including 21 IED attacks killing over 60 Iraqis, and a suicide attack against a government building in Baghdad that left 32 people dead.113 On February 16, Michael Knights of the Washington Institute for Near East Policy’s wrote in the National Interest that, “There has been a rapid and widespread deterioration of security in Iraq since the mid-December end of the U.S. military mission there”. 114 According to Knights, Iraq had also suffered 36 confirmed attempted mass-casualty attacks just in January 2012 alone.

Officially reported deaths in Iraq also continued to rise, with 340 civilian deaths in Iraq in January 2012, compared to 155 in December 2011.

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Figure VII.3: The Impact of Internal Conflict on Smaller Minority Groups 2003-2011

Sources: SIGIR, Quarterly Report, October 30, 2011, p 50

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Figure VII.4: The Continuing Pattern of Violence in Iraq

Sources: SIGIR, Quarterly Report, January 30, 2012, p 65

Total Victims in Iraq: 2005-2011 50000 45000

Victims by Number

40000 35000 30000 25000 20000 15000 10000 5000 0 Victims

2005

2006

2007

2008

2009

2010

2011

20043

38817

44014

19077

16869

15108

9342

Source: National Counterterrorism Center (NCTC) Worldwide Incident Tracking System (WITS) data, accessed January 18, 2012. Available at: https://wits.nctc.gov/FederalDiscoverWITS/index.do?N=0

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Figure VII.5: Major Acts of Violence and Targeted Killings – Part One

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Figure VII.5: Major Acts of Violence and Targeted Killings – Part Two

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Figure VII.5: Major Acts of Violence and Targeted Killings – Part Three

Sources: SIGIR, Quarterly Report, January 30, 2012, pp. 8, 18, 66-67

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Figure VII.6: Attacks on Iraqi Security Forces and Sons of Iraq

Sources: SIGIR, Quarterly Report, January 30, 2012, p. 68

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The Continuing role of Violent Extremist Groups Despite signs that certain insurgent groups may be ready to lay down their arms in exchange for becoming legitimate participants in the political process, the circumstances on the ground demonstrate that most groups remain committed to using violence to achieve their goals. These include the following rival ethnic and sectarian factions that account for most of Iraq’s devastating violence.115

.

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Al Qa’ida in Iraq: Since 2010, terrorist attacks have primarily targeted Iraqi security forces and government officials, but they have also been aimed at stirring ethnic tensions. AQI has been operating primarily in regions with majority Sunni Arab populations, particularly focusing its efforts in and around Baghdad and Ninewa, but appears unable to command territory or population centers. The degradation of AQI’s capacities is expected to continue under the pressure of an ISF now more capable of targeting, capturing, and detaining terrorists and disrupting their networks. However, according to DoS, AQI has adapted to the changing security conditions and remains capable of coordinated mass-casualty attacks and assassinations. AQI will likely attempt to exploit widening political rifts that occur along sectarian lines.



Other Sunni terrorist groups remain active as well. Ansar al-Islam, with both Kurd and Arab membership, operates in northern Iraq. The group has claimed responsibility for the second-largest number of Sunni terrorist attacks in Iraq (behind only AQI). Another group operating in northern and central Iraq, the Jayish Rijal al Tariq al-Naqshabandi, emphasizes what it claims to be the religious justifications for its attacks.

Shi’a extremist groups – backed by Iranian funding, training, and weapons – also present a threat to Iraqi and US military forces. DoS reported that attacks by these groups have decreased this year, but their Iranian-supported networks continued to operate throughout Iraq’s southern provinces.



Shi’a militias in Iraq Jayish al-Mahdi (JAM) and its successor, the Promised Day Brigade, are the militant am of the Sadrist movement led by cleric Muqtada al-Sadr. Since the militia’s inception in 2003, JAM has engaged in countless attacks on US forces, Iraqi forces, and Sunni civilians. The group was responsible for some of the most gruesome sectarian violence in Iraq. Early in 2007, at the beginning of the US military surge, al-Sadr ordered his followers to stand down, and shortly thereafter, he left for Iran.

Following the military campaign in Basra, Sadr City, and al Amarah in the spring of 2008, al-Sadr disbanded his militia. Several months later, he announced the transition of his movement into a non-violent organization called the Munahidoon, but he maintained a small group of Iranian-supported militants called the Promised Day Brigade.



Assaib Ahl al Haq (AAH, or League of the Righteous): Having emerged in 2006, AAH is led by Qais Khazali, who broke with al-Sadr and was officially named the leader of the Iranian backed AAH. Khazali’s fighters traveled to Iran for special training by the Revolutionary Guards and members of the Lebanese Hezbullah. They received four to six weeks of training in the camps in the use of mortars, rockets, sniper tactics, intelligence gathering, kidnapping operations, and explosively formed penetrators.

AAH conducted attacks on Coalition forces from as early as the summer of 2006 and continues intermittently, also engaging in kidnappings and sectarian attacks. In early 2012, Maliki allowed AAH into the political arena, stating they had renounced violence and were therefore welcome. AAH also serves as a potential counter weight to a loss in confidence of Maliki across the political spectrum.



Kata’ib Hezbullah (KH, or the Hezbullah Brigades) Active in Iraq since 2007, KH operates mainly in Shi’a areas of Baghdad, such as Sadr City, and throughout southern Iraq. Like AAH and the Promise Day Brigade, it is supported by Iran. KH is independent from Muqtada al-Sadr and has operated separately since its inception, albeit with some cooperation and operational overlap. Since 2007, KH members have conducted multiple attacks against US forces using rocket-propelled grenades and improvised rocketassisted mortars. Since the beginning of 2011, the majority of Iranian-backed attacks have occurred in southern Iraq, with sporadic incidents taking place in northern provinces and in Baghdad. Toward the end of the quarter, Iran-sponsored attacks in northern provinces appeared to be subsiding, although USF-I officials reported that these networks still possess the capacity to conduct operations

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Polls Show Growing Popular Fears and Dissatisfaction Moreover, Iraqis have less and less faith in their security and the future. The January 2012 Quarterly report of the Special Inspector General for Iraqi Reconstruction notes that, The results of two surveys, both taken in 2011 before the final drawdown of U.S. troops, portray a relatively high level of discontent among the people of Iraq. One survey found that 25% of the 1,000 Iraqis interviewed in September considered themselves to be “suffering” (as opposed to “thriving” or “struggling”), up from 14% less than a year earlier. According to Gallup, the percentage of Iraqis who rate their lives this poorly is among the highest in the Middle East and North Africa region. The percentage that said they were “thriving”—just 7%—is among the lowest in the region. The number of Iraqis who reported experiencing stress during much of the day preceding their survey doubled between June 2008 and September 2011, rising from 34% to 70%. The percentage experiencing anger increased from 38% to 60%over the same period.2 Earlier in the year, a more comprehensive survey of the 28,875 Iraqi households provided additional details on specific areas of concern. The Iraq Knowledge Network (IKN) survey is part of a socioeconomic monitoring system being developed by the Iraqi Ministry of Planning and Development Cooperation (MoPDC). Its aim is to provide reliable data for planning and improving government services. Partial results of the survey were released in December and included the following: 

Almost 8 out of 10 households rated electricity service as “bad” or “very bad,” and 6 out of 10 rated their sanitation facilities in one of those categories.



57% of adults (age 15 and older) said they were neither working nor looking for work.



More than half felt that corruption had become more prevalent in the previous two years. A different type of survey, this one conducted in 2011 by New York-based consulting firm Mercer, rated the quality of living and personal safety in 221 cities around the world. Baghdad ranked last in both categories. The survey weighed the political, social, and economic environment along with housing, schools, public services, health care, and climate in determining its calculation, describing the Iraqi capital as “the world’s least safe city.”

The trends involved are shown in Figure VII.7

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Figure VII.7: Percentages of Iraqis Who Say They Are “Suffering” or “Thriving”

Note: Survey was taken of Iraqi adults (age 15 and older).

Source: Stafford Nichols, Gallup, “‘Suffering’ in Iraq Highest Since 2008,” 1/9/2012, www.gallup.com/poll/151940/Suffering-Iraq-Highest-2008.aspx, accessed 1/12/2011

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Competition for the Shi’ites Iran and the US compete for Shi’ite support on many levels. Iran continues to provide both overt and covert support to various Shi’ite groups in Iraq, while many Iraqi Shi’ites have openly express their gratitude. In the initial period after the US invasion, Shi’ites in the Governing Council praised Iran’s role in Iraq, particularly for harboring the opposition prior to 2003.116 Sayyid Abd el-Aziz al-Hakim of SCIRI even suggested Iraq pay reparations to Iran for the IranIraq War.117 As sectarian violence, political infighting, and economic hardship have ebbed and flowed, Iran has maintain its influence through close ties to Iraqi Shi’ites.

The US, in turn, has sought to limit Iranian influence by focusing Shi’ite parties on security and governance, while persuading Iraq’s Shi’ites to move toward conciliation with its Sunnis and Kurds through a national and independent government.118 The US has had some success in meeting these goals, but the 2003 invasion reopened linkages between Iran and Iraq that Iraqi Shi’ites rely on at critical junctions. Previously, Ba’athist rule suppressed open cultural connections to Persian culture and Iran.119 Iraqi Shi’ites lost contact with relatives in Iran, and some Iraqis even received financial incentives to divorce their spouses if they were suspected of having Persian ancestry.120 Some urban Iraqi Arab Shi’ites stopped celebrating Nowruz, the Iranian New Year, though Kurds continued to celebrate it.121 This situation changed quickly in Iraq’s Shi’ite-dominated areas following the invasion, and movement across the Iran-Iraq border became easier. Iranian religious books in Arabic began to replace those from Lebanon and Egypt, and the Iranian government sponsored popular book fairs at Baghdad universities.122 At the same time, even independent Iraqi clerics like Grand Ayatollah Sistani benefitted from Iranian knowledge of media and the Internet, which expanded the distribution of their work.123 Moreover, Iranian and Iraqi ties built upon the fact that some senior commanders in the Iranian Revolutionary Guards Corps, members of the Iranian judiciary, and other Iranian leaders were born in Iraq, in addition to some Iraqi expatriate businessmen being based in Iran.124 Iran has been able to extend broad support to Shi’ite Islamic groups. In 2005, the London Times identified eight significant Islamic groups with Iranian ties: the Badr Brigades, the Dawa Party, the Mahdi Army, the Mujahedin for Islamic Revolution in Iraq, Thar Allah (Vengeance of God), the Jamaat al Fudalah (Group of the Virtuous), al Fadilah (Morality), and al Quawaid al Islamiya (Islamic Bases).125 One estimate placed the amount of Iranian aid per month to Shi’ite militias like the Mahdi Army at $3 million in 2009.126 In 2006, Iranian and Iraqi Shi’ite interests aligned to an even greater degree against Sunni resumption of power in Iraq. Clerics were mainly silent about Iran’s role in Iraq, while Iranians continued to visit Shi’ite holy sites in Najaf and Karbala, and trade boomed between the two countries.

Competition for Religious Influence Iran’s ability to compete with the US in Iraq is limited by the fact that tensions between Iranians and Iraqi Shi’ites continue to exist. Iraqis – including Iraqi Shi’ites – have not forgotten that the two countries fought an eight-year war that involved trench warfare, human wave attacks, mustard gas, over a million deaths, and millions more wounded and displaced. 127 Relations between Iraqi exile groups in Iran and the Iranian regime before the US invasion were fraught with tensions and resentments.

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Iran also had to contend with the power of Iraq’s Shi’ite leader Grand Ayatollah al Sistani, in spite of the fact he was born in Iran and is said to speak Arabic with a Persian accent. 128 Like many other Iraqi clerics, Sistani belongs to the “quietest” trend of Shi’ite Islam, tending to separate the religious from the political. However, he faces competition from other Shi’ite religious leaders who want to see closer integration between religion and politics, including Kazim al Haeri of Qom, who would be a leading replacement for Iraq’s Shi’ite community if anything were to happen to al Sistani.129 Sistani and most Iraqi Shi’ites do not accept the Iranian Ayatollah as a Supreme Leader of the world’s Shi’ites. Sistani rejects the religious legitimacy of a velayat-e faqih, or supreme religious leader, much less the religious authority of Iran’s Ayatollah Ali Khamenei. 130 One Shi’ite cleric, Sayyid Iyad Jamaluddin, who later joined Allawi’s list in the December 2005 elections, argued “The leadership of the jurist as in Iran is unique in the history of the Shi’a sect…Ayatollah Khomeini did not rely on specific religious texts to implement the doctrine of the rule of the jurist.”131 Most Shi’ite parties no longer even support the idea of a theocratic state, though there was some support from Shi’ite quarters for an Islamic state when Iraq’s leaders initially drafted its constitution.132 In 2004, Sistani criticized Iran’s strategy of what some call “managed chaos”:133134 “Iran’s policy in Iraq is 100 percent wrong. In trying to keep the Americans busy they have furthered the suffering or ordinary Iraqis…We are not asking them to help the Americans, but what they are doing is not in the interests of the Iraqi people; it is making things worse. We [Iranians] have lost the trust of the Iraqi people [Mardom-e Aragh az dast dadeem].”

Sistani has also often used his moral authority to reduce violence in Iraq and bridge Sunni-Shi’ite and Arab-Kurd tensions that Iran has at times sought to exploit against the US. In 2004, for example, he struck a deal to end a bloody three-week siege of Najaf’s Imam Ali shrine between Muqtada al Sadr and the Iyad Allawi’s government.135 Iraq’s Shi’ite religious leaders may have ties to their counterparts in Iran, but most remain their own masters. Sistani has always pursued his own agenda, sometimes to the benefit of US interests in Iraq and sometimes not. It was Sistani’s nod of approval that allowed the US to delay Iraq’s first elections with minimal unrest.136 According to a leaked State Department memo, Sistani’s “domineering authority and religious credibility” is Iran’s “greatest political roadblock.”137 These differences must be kept in perspective. The relationships between Iranian and Iraqi Shi’ites is far more complex than one where Sistani and the Najaf hierarchy are polar opposites to Iranian clerics, as some proponents of the Iraq War suggested they would be.138 Iran has also made headway with at least some Iraqi Shi’ite clerics that are not Sadrists. A State Department source claimed that Sistani prevents Iranian students from enrolling in the religious seminary, or the howzeh, to curb Iranian infiltration; however, according to State Department cables, other imams are “’in the pocket of the Iranians’, despite their proclaimed loyalties to Sistani.”139 Furthermore, Sistani has long supported Shi’ite unity and has opposed blocs that would cut across sectarian lines. Sistani allegedly opposed the United Iraqi Alliance’s plans to ally with Kurds and Sunnis in 2006.140 In February 2012, amidst the post-US withdrawal political crisis, Ahmed Safi, who often speaks for Grand Sistani, said that the cleric believed that Iraq’s leaders were taking the country “into the unknown,” and “politicians must work fast and make concessions to solve the crisis.”141

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Nevertheless, most Iraqi Arabs remain Iraqis first rather than Shi’ites or Sunnis. Polls since 2003 have repeatedly shown that most Iraqi Arabs – Sunni and Shi’ite – see themselves as Iraqi and Arab, although the situation with Shi’ite extremists is very different. In a poll conducted in 2008 by the Iraq Center for Research and Strategic Studies of Iraqis, 69.8% of respondents identified themselves as Iraqi before any other identity.142 Sistani has continued to call for national unity. In December 2011, following a series of major explosions throughout Baghdad that killed 60 and injured over 200 people, Sistani blamed Iraq’s top politicians for the ongoing crisis. Speaking through his representative, Ahmed al Safi, Iraq’s top Shi’a cleric said, “The prestige of the government must be preserved ... part of its prestige is punishing abusers. People can be patient with lack of electricity, or lack of services, but not blood. They cannot be patient over their blood. Why don't you exert your efforts to preserve the blood of these people?”143 In February 2012, after reports that Turkey would host a conference to promote confidence and dialogue between Iraq’s leaders, Grand Ayatollah Sistani agreed to send a representative to Turkey to head the Shi’a delegation.144

Maliki’s Role in US and Iranian Competition Prime Minister Nouri al-Maliki’s personal and political relationship with Iran has a long and complicated history, and one that illustrates the complex relationship between Iraq’s Shi’ite leaders and those of Iran. Maliki fled to Iran in 1979, where he and the Dawa Party were granted space for a rebel training camp.145 However, tensions between Dawa and the Iranian government culminated in Iran’s initiative in 1982 to organize the Shi’ite resistance in the form of the Supreme Council for Islamic Revolution in Iraq (SCIRI), peeling away members from Dawa and turning over Dawa’s training camp to SCIRI. As a senior member of Dawa in exile in Iran, Maliki cooperated with Iran to run missions against Saddam Hussein’s regime. However, Maliki chafed under his Iranian handlers and could never fully trust them. Many of those memories still rouse Maliki. On one occasion, he was told he needed to travel twelve hours to reach the one Iranian official who could grant him a travel permit he needed, only to have the official reject his request. 146 On another occasion, Maliki’s recalls his wife giving birth in Ahwaz as the city was under threat from a Saddam bombing, and no Iranians would help him evacuate his wife.147 Iran played an important role in bringing together the United Iraqi Alliance, which chose Maliki as their compromise candidate for Prime Minister in May 2006 following five months of negotiations. Iran thought, as Jeffrey White, a former Defense Intelligence Agency Middle East analyst, put it, "he was weak and pliable."148 149 At the same time, Maliki initially faced critics who saw him as America’s lackey and reportedly once told then-Ambassador Zalmay Khalilzad, "I'm a friend to the United States, but not America's man in Iraq.”150 Maliki also resisted early American requests to outlaw Shi’ite militias because he depended on their political support.151 Maliki also put distance between himself and the US by criticizing a US raid on Sadr City, condemning US forces and security contractors for civilian deaths, 152 and proposing amnesty and eventual political reconciliation for insurgents, even those who had killed Americans. 153 US displeasure with the amnesty proposal led to the sacking of the official in Maliki’s government who had leaked the proposal.154 Rumors began to circulate in late 2006 that the US was looking to replace the Maliki government for being weak on Shi’ite militias compared to efforts against Sunni insurgents, and its inability to rein in Shi’ite death squads within the Iraqi security forces that were feeding the sectarian civil war.155156

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More broadly, Maliki demonstrated that Iraqi political leaders would steadily assert their own identity. He gradually emerged as a much stronger politician than his critics (and supporters) initially assumed. He maintained close ties with both Iran and the US. He worked with ISCI and the US to combat Shi’ite militias. He battled the Sunni insurgency, convinced disenfranchised Sunnis to participate in the government, integrated militia groups into the government’s security forces through the Sons of Iraq program, and won important battles against Sadr’s Mahdi Army.

Maliki had to carefully balance Iraq’s relationship between the United States and Iran. He depended on American forces to bring stability to Iraq, but needed to maintain an image of independence from the US. Only close cooperation could create enough stability for American forces to leave. According to some sources, Maliki was frustrated by his impression that the US was not committing enough equipment and training to Iraqi security forces, while the US was frustrated that US weapons would fall into the hands of rogue Shi’ite soldiers because Maliki had not done enough to break ties with Shi’ite militias.157 Maliki maintained a relationship with Tehran while he fought against Iranian weapons smuggled into Iraq and increasingly committed forces to fight the Sadrist militias who were funded by Tehran.158 Appearing with Ahmadinejad in Tehran in August 2007, he called Iran’s role in Iraq’s security “positive and constructive.”159 In early 2008, he almost unilaterally shaped a major offensive against Sadr’s militias and other Iranian-backed Shi’ite militias in Basra. While the success of the offensive depended on the US rapidly deploying forces and aid, it played a critical role in expanding the central government’s control in Shi’ite areas and limiting Iranian influence.

By late 2008, this campaign and overall patterns in the fighting already had a major impact on the pattern of US and Iranian competition. It produced increased stability that served both Iraqi and American interests and began to create the conditions that made it possible for US forces to drawdown. This success impeded Iran’s strategy of supporting unrest in Iraq, but it did not necessarily reduce Iran’s political power. Iran continued to build up both its political and economic ties to a more stable Shi’ite south and its political leaders. Iran was strong enough to play a major role in shaping the creation of a compromise Iraqi government following the 2010 election, and it also played a major – if not fully understood – role in getting Sadr to throw his support behind Maliki after the 2010 elections.

The end result is an almost complete reversal of the initial judgments of Maliki. Once seen as weak, many Iraqis and international observers are concerned with Maliki’s recent consolidation of power and authority in recent years. Since late 2010, Maliki has served as both acting Minister of Defense and acting Minister of Interior. Protesters, rival politicians, and journalist who speak out against corruption, lack of services, or criticize the government, have been intimidated, beaten, and detained. When tens of thousands protested in February in solidarity with the Arab uprisings elsewhere, 19 were killed and thousands more arrested. Iyad Allawi remains outside of the political system and his party has referred to Maliki as “authoritarian and despotic.”160 As noted earlier, the signs of Maliki’s increased aggressiveness and determination to marginalize political rivals are also becoming steadily more evident. Maliki’s arrests of some 600 Sunnis and Ba’athists in October-December 2011 have reinforced this position, as did his calls for Sunni Deputy Prime Minister Mutlaq to be expelled from the Council of the Republic over a spat during a October 2011 cabinet meeting in Baghdad. Increasingly bold and belligerent, Maliki stormed out of that meeting threatening Multlaq, “We’re coming for you and all of your people”.161

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The key sign of Maliki’s authority, however, is Maliki’s treatment of Vice President al Hashemi, for whom Maliki issued an arrest warrant on charges of terrorism, causing al Hashemi to flee to the Kurdish region, where he remains in de-facto political exile. Experts disagree on how much this has been a power grab and how much it reflects Maliki’s feelings of insecurity, but it is clear that Maliki's unilateral actions have alienated Iraqi political opponents, increased tensions with the US over the failure to agree on a continued troop presence, and alienated other Arab leaders.

This situation most clearly benefits Iran, who can operate more freely without US and other Arab interference, and is hardly a formula for a more unified and stable Iraq.

The Sadrists and Iran The Sadrist faction has played a major role in the US and Iranian political competition over Iraq’s Shi’ites. The Sadr's have long been a prominent family in Iraq, both for religious scholarship and their resistance against Saddam. Mohammad Baqr Sadr, founder of the Dawa Party in the late 1950’s was hanged by Saddam Hussein in 1980. Baqr al Sadr was an ally of Ayatollah Khomeini during his years in exile in Najaf from 1964-1978.162 Saddam Hussein also ordered the execution of Muqtada al-Sadr’s father, Mohammed Sadiq al-Sadr, in 1999.163 Baqr al-Sadr’s cousin, Muqtada al-Sadr, emerged as a key voice of Shi’ite opposition to the US after the fall of Saddam Hussein, and whose followers began attacking coalition forces in Iraq.

Muqtada al-Sadr’s base of support is in Sadr City, a Shi’ite neighborhood in Baghdad, and encompasses mainly lower-class Iraqi Shi’ites.164 His Mahdi Army, 60,000-strong in 2003,165 relied on Iranian funding and arms through Iran’s Qods Force. Sadr used the Mahdi Army to challenge the US occupation and attack Sunnis between 2004 and 2008.

The Mahdi Army attacks on US troops were serious enough by 2004 to threaten postponement of the 2005 elections.166 This could have produced a level of instability and division between Shi’ite factions that did not serve either Iranian or US interests. Iran pressured Sadr into a ceasefire, and the elections proceeded in 2005 as scheduled, bringing to power an Iran-friendly coalition of the United Iraqi Alliance, the PUK, and the KDP.167 The end result helped both Iran and Sadr. The Sadrist Trend won 30 seats in the December 2005 elections, the largest group in the United Iraqi Alliance, which was the largest bloc with 128 seats.168 Sadr, in turn, maintained links to Iran, and Iran to Sadr and Iraq. In 2006, Sadr pledged to support Iran if it were attacked.169 At the same time, Sadr had problems in maintaining his political position, personal security, and controlling his militia and followers. The Mahdi Army’s killings of Sunnis increased, especially after the February 2006 bombing of the Al Askari Mosque;170 a Shi’ite mosque in Samarra built in 944 C.E. where Shi’ites believe the 12th Imam hid, marking the first time a religious site was targeted in Iraq after the invasion.171 Although Sadr was the formal leader of the Mahdi Army, he was not completely in control of violence committed by his loyalists. On October 27, 2006, his deputy denounced the dissidents as "people who violated and stood against the wise and honorable leadership.”172 In early 2007, Sadr fled to Iran,173 fearing arrest by the Iraqi government or Coalition forces, as well as various assassination threats. In Iran, he purportedly split his time between living in Tehran and studying at an Islamic seminary in Qom, where he would boost his clerical standing.174

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Shifts also took place in 2007 that limited both Sadr and Iran’s influence. Maliki had initially prevented the US from forcefully attacking Sadr’s Mahdi Army in order to maintain the Shi’ite political alliance that Iran had played a role in creating. 175 In 2007, that alliance broke down and the US launched a “surge” that targeted both Sunni and Shi’ite extremes.176 This was a major factor in Sadr’s declaration of a ceasefire in August 2007 and helped lower the level of violence in Iraq.177 Maliki, SCIRI, and government forces cooperated with the US to combat Sadr’s Mahdi Army, which was suffering backlash from Iraqi Shi’ites, especially after it took over Karbala’s religious sites.178 Another major turning point in the power struggle between Sadr and Maliki occurred in 2008, when Maliki retook Basra from the Sadrists using government forces, Badr fighters, and SCIRI loyalists in “Operation Charge of the Knights”.179180 During the Battle of Basra, Iraqi security forces recovered weapons from Sadrists marked “Made in Iran.”181 Iran played an integral role in the ceasefire reached between Sadr and government forces.182 Sadr’s defeat in the Battle of Basra helped bring stability, while it shifted the power balance among Iran’s allies. Iran took advantage of the subsequent fracturing of Muqtada al-Sadr’s Mahdi Army into Special Groups to increase its influence across these more independent Shi’ite groups.

Sadr’s faction failed to win outright control of any province in the 2009 provincial elections.

However, it gained several key appointments in southern Iraq through post-election deal making.

Sadr did, however, come to benefit from the broad perception on the part of Iraq’s Shi’ites and others that SCIRI and other more moderate Shi’ite parties failed to govern effectively, were often corrupt, and served their own interests.

The 2010 parliamentary elections took a striking anti-incumbent course, greatly diminishing the strength of other Shi’ite parties. The Sadrist Movement, as part of the Iraqi National Alliance, won 70 seats, compared to Iraqiyya’s 91 and State of the Law’s 89. After eight months of deadlock following the elections, Iran likely brokered the deal that brought Sadr and Maliki together to represent a majority bloc. However, the “Irbil Agreement” reached in November 2010, which preceded the formation of the Iraqi government, was pushed by US diplomats and did not give any concessions to Sadr.183 The Sadrist faction gained control over several ministries, although this my ultimately lead Iraqi voters to hold them responsible for some of Iraq’s on-going problems. This included appointments to several service-related ministries, including Housing and Construction, Labor and Social Affairs, and Water Resources, making it difficult for Sadr to indiscriminately blame outside actors for Iraq’s problems. 184As of November 2011, Sadrist also chaired the Integrity Committee, Public Works, and the key post of Minister of Planning and Development Coordination.

Sadr returned to Iraq in January 2011, after almost four years of self-imposed exile in Iran.

Many hailed his return as a sign of strength and a new era in Iraqi politics. However, threats to his safety again cropped up in 2011, this time from a Mahdi Army splinter group known as Asaib al Haq. Sadr returned to Iran just two weeks after his initial return to Iraq.185 In July 2011, the US accused Sadr’s militias for the elevated level of US troop deaths in June 2011. The officials also accused Iran of arming the militias with upgraded rocket-propelled munitions, possibly in an effort to ensure a full US withdrawal and to claim credit for forcing that withdrawal.186 Sadr remains adamant that US troops should withdraw by the December 2011 deadline and threatened to reinstate his Mahdi Army if this deadline was not met. 187 In May of 2011, Maliki

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called on Sadr to accept an extension of US troops in the country if it was backed by a solid majority of Iraqi political parties, the possible result of several high-level US visits with Iraqi leaders in 2011 urging Iraq to make such a request.188 Maliki stated a request might be made if there were a “consensus” among political blocs, which could be achieved without Sadr’s support.189 In a May 13, 2011 sermon, Sadr hinted that he might retract the withdrawal demand if a consensus was formed among Iraqi people that US troops should stay. Sadr stated, “The matter of the lifting of the freezing of the Mahdi Army is connected to the public and political agreement among Iraqis.”190 However, two week after this sermon, Sadr supporters held a massive march to demand US troops leave on scheduled,191 and on August 9, 2011, Sadr again threatened direct retaliation against any US troops remaining past the deadline,192 including those used to train Iraqi forces.193 In September 2011, Sadr suspended his attacks on the US and other targets, stating, “Out of my desire to complete Iraq’s independence and finish the withdrawal of the occupation forces from our holy lands, I am obliged to halt military operations of the honest resistance until the withdrawal of the occupation forces is complete,” but went on to state that, “if the withdrawal doesn’t happen…military operations will be resumed in a new and tougher way.” 194 How Sadr reacts to a limited US advisory presence is a critical aspect of future US-Iranian competition.

Sadr continues to be a major barrier to any meaningful implementation of the Strategic Framework Agreement. In February 2012, Sadr commented that the US had not sufficiently left Iraq following two episodes, one involving four armed Americans in Baghdad believed to be CIA operatives and another involving a US helicopter that made an emergency landing just outside of Baghdad. Sadr stated that the US has failed to ''disarm.'' He also posted a statement saying, ''I ask the competent authorities in Iraq to open an embassy in Washington, equivalent to the size of the U.S. Embassy in Iraq, in order to maintain the prestige of Iraq.''195 Sadr also remains a pivotal player in Iraqi politics, especially since his return to Iraq. Sadr’s relevance was demonstrated as recently as January 2012, when visiting Turkish Foreign Minister Ahmed Davutoglu met with him amidst accusations by Maliki of Turkish meddling and support of Sunni factions.196 As a supporter of Iraqi unity, Sadr is a critical component of Maliki’s legitimacy and further distancing between the two would undermine Maliki’s authority. Still, in December 2011, pro-Sadrist politicians supported dissolving the Parliament and holding new elections, and Sadr’s officially disbanded Mahdi Army occasionally threatens to rearm and remobilize .

Muqtada al-Sadr’s also called Maliki a dictator, suggesting that he now intended to distance himself from the Prime Minister, or at least oppose Maliki’s centralization of power. In February 2012, Sadr stated that “The dictator of the government is trying to make all the accomplishments as if they were his accomplishments…”197 Sadr’s influence also reaches beyond his own supporters. Members of Iraq’s al Ahrar bloc revealed in February 2012 that members of the Financial Committee in Parliament promised to include the demands of the Sadrists in the 2012 budget law draft.198 Sadr also has important options. He could attempt a Sadrist break with Maliki that attempted to bring Maliki’s government down; launch an attempt by the Sadr faction to position itself as a peacemaker and power broker; launch an attempt at increasing the Sadr factions power using its splinter organization, AAH, join the broader political sphere; or simply exploit populist opinion

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to build up his power while his rivals are tied down in power struggles over control of the government.

SCIRI/ISCI The Islamic Supreme Council of Iraq (ISCI), formerly known as the Supreme Council for Islamic Revolution in Iraq (SCIRI), has strong ties to Iran that began with SCIRI‘s refuge in Iran during the Saddam Hussein era. ISCI’s originally followed the vela yet-e faqih and the Iranian Ayatollah, while the Iranian Revolutionary Guard Corps trained and staffed its 15,000-member militia, now called the Badr Organization,199 during the Iran-Iraq War.200201 US intelligence officials claim that members of SCIRI were closely tied to Iranian intelligence during the period immediately after the invasion and that the group was heavily funded by Iran.202 ISCI also served to bolster Iran’s influence in Iraq through ISCI member Bayan Jabr’s tenure as Minister of Interior, when he inserted the Badr Brigade into the Iraqi Security Forces.203 The leadership of ISCI has, however, undergone many changes over the years and has been more independent of Iran than these initial US assessments indicate. Mohsen Hakim was the foremost Shi’ite leader in the world from 1955 to 1970204 and his sons Ayatollah Sayed Mohammed Baqir al-Hakim and Ayatollah Sayed Mohammed Baqir al-Sadr were among the founders of SCIRI.205 Sayed Baqir al-Hakim was his father’s representative and eventually worked with Sayed Baqir al-Sadr to establish the Islamic Movement, a political group opposed to the Ba’athists.206 Baqir al-Hakim was arrested and tortured in 1972, and re-arrested in 1977.207 He was eventually released in 1979, but in 1980 fled to Iran, shortly after his brother Baqir al-Sadr was assassinated

by Saddam’s regime.

Sayed Baqir al-Hakim played an important role in forming SCIRI in 1982 while in Iran during the Iran-Iraq War.208 The next year, Saddam’s regime arrested 125 members of his family;209 his brother Mahdi al-Hakim was assassinated in Sudan in 1988.210 In 1991, ISCI led a failed Shi’ite uprising against Saddam Hussein.211 Over the years, the Hakim family claims over 60 members of the family were killed by the Saddam regime.212 Sayed Baqir al-Hakim rose in the ranks of Iraqi Shi’ite leadership, and in 2003, he became a grand ayatollah and the leading Shi’ite cleric.213 In his speech after his return to post-invasion Iraq, he thanked Iran for its help and condemned the American occupation.214 However, he later participated in the new Coalitionsupported Iraqi government and claimed to support separation of church and state.215 In August 2003, Sayed Baqir al-Hakim and about 75 others died in a car bomb attack on the Imam Ali Mosque, Shi’ite Islam’s holiest mosque.216 Baqir Hakim’s brother, Abdel Aziz alHakim, took over the leadership of SCIRI. Despite Abdel Aziz Hakim’s connections to Iran, he reformed the organization and even built a relationship with President George W. Bush.217 He also changed the movement’s name from SCIRI to the Islamic Supreme Council of Iraq (ISCI), removing the word “Revolutionary,” which ISCI officials said was in reference to the Saddam Hussein regime.218 That same year, ISCI distanced itself from Iran by stating that it would place more importance on the leadership of Iraq’s Grand Ayatollah Ali Sistani.

Under Aziz al-Hakim’s leadership, ISCI pushed for greater decentralization and for a period advocated the creation of an autonomous region of nine Shi’ite-majority provinces, much like the Kurdistan Region.219 In 2008, al-Hakim collaborated with Maliki in getting the Iraqi Army and ISCI’s Badr Organization to cooperate in fighting against Muqtada al-Sadr’s Mahdi Army in Basra. The resulting victory strengthened Maliki’s hand in security and was a turning point in the civil war.220

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Since that time, the Hakim faction and SCIRI have lost a significant amount of their influence and power. In 2007, Abdel Aziz al-Hakim, formerly a heavy smoker, was diagnosed with lung cancer in Houston and went to Iran for treatment.221 He died in August 2009.222 Ammar alHakim followed in his father’s footsteps to take over the formal leadership of ISCI. This was followed by sharply diminished support for ISCI in the elections that followed. The provincial power law of 2008 enacted prior to the 2009 provincial elections favored the ISCI’s desire to decentralize power. However, splits among Shi’ite factions contributed to major losses for ISCI in the 2009 elections, including in Baghdad, Najaf, and Basra.223 ISCI joined with the Sadrists, the Iraqi National Congress, and other groups in the Iraqi National Alliance, to win 70 seats in the March 2010 elections. However, ISCI placed a disappointing third after Iraqiyya and State of Law. This may explain why Ammar al-Hakim traveled to Iran in April of 2010. ISCI agreed to accept Iraqiyya’s inclusion in the government. Iran simultaneously echoed this public support, which was considered as a possible calculation by Iran that its interests were best served through stability.224 The ISCI’s continued reluctance to support Maliki as prime minister contributed to the long impasse that followed. However, Ammar al-Hakim was among Iraq’s leaders that supported the Irbil Agreement that brokered the impasse with the help of US diplomats.225 In spite of its losses in the 2010 election, ISCI remains a powerful Shi’ite group in Iraq. It is also one that still seems to have strong ties to Iran, although such information is dated. According to a State Department memo released by Wikileaks in November 2009, Iran provides an estimated $70 million to ISCI each year.226 Ammar al-Hakim consistently rejected the idea of extending the US troop presence past the December 2011 deadline. In addition, ISCI has staunchly opposed the dissolution of parliament that has broader support following the post-withdrawal political tension.

Competition for the Kurds The Kurds are tied far more to the US than to Iran – which has ruthlessly repressed its own Kurds in the past. Under the Shah, Iran supported Iraqi Kurd’s fight against Saddam as a way of putting pressure on Saddam concerning Iran-Iraq border issues and control of the Shatt al-Arab.

The Khomeini government, however, ruthlessly suppressed Kurdish independence movements during the Iran-Iran War. Iran has maintained offices in Irbil and Sulaimaniya since the Kurdish security zone was established in 1992.227 At the beginning of the Iraq War in 2003, Iran maintained relatively good relations with the Patriotic Union of Kurdistan (PUK) and Kurdistan Democratic Party (KDP).228 However, Iran’s internal Kurdish problem has continued to complicate its relationship with Iraqi Kurds. Like Syria and Turkey, Iran does not want to see Kurdish independence and wants to limit Iraqi Kurdish influence. Meanwhile, President Jalal Talibani, a Kurd, has spoken out against Iran’s regional influence.229 A leaked State Department cable suggests that Iran may have tried to give indirect financial assistance to Gorran, a small Kurdish group that ran in the March 2010 elections, by funding the Jaff tribe, the largest Kurdish tribe in Iraq, some of whom are members of Gorran. 230 Stephen Zunes, who chairs the Middle Eastern studies program at the University of San Francisco, suggests that this may be because Iran saw Talibani as inching too close to the US.231

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As with Azeris and Baluchis, the United States has worked with Kurds to limit Iranian influence and help them resist Iranian pressure. Tensions exist between Iran and the Kurds namely because Iraqi Kurdistan gives sanctuary to the Kurdish resistance group Party for a Free Life in Kurdistan (PEJAK), which has carried out successful attacks on Iran.232 Iran also accused the United States of funding PEJAK.233 In retaliation, Iran has carried out limited operations against Kurdish opposition groups inside the Iraqi border.234 After a bombing in Iran killed 10 civilians in late 2010, Iran publicly announced that it had carried out an antiterrorist operation in Iraq that Kurdish leaders denied took place.235 In August 2011, Iran again shelled PJAK targets in northern Iraq, spawning Kurdish President Talabani’s request in front of the UN General Assembly in September that both Turkey and Iran stop bombing Iraqi territories in the Kurdistan region, saying it caused innocent civilian deaths.236 Arab-Kurd tensions in northern Iraq are still a major concern. Land disputes over the oil-rich area continue without proper attention from Baghdad. Tensions between Kurdish fighters and the Iraqi Army remain high despite US-led programs to encourage collaboration. In November 2011, a standoff occurred between the two sides as the Iraqi Army attempted to assume control over a US base in Kirkuk due to be transferred in the coming weeks. A compromise was negotiated, though details of the incident highlight the mistrust Kurds have for Baghdad and the measures Maliki may consider simply to showcase his control.237 Kurdish support for Vice President Hashemi further jeopardizes the tenuous relationship between the KRG and Baghdad. This is particularly the case since al Hashemi fled to the Kurdish region to escape accusations by Maliki of running a sectarian death squad. Tensions are further threatened by Maliki’s threats to withhold funds from the Kurdistan Regional Government, and to fire Babakir Zebari, the Kurdish chief of staff of the Iraqi Army, in response to Kurdish sheltering of al Hashemi.238

Competition for the Sunnis Like the Kurds, Iraqi Arab Sunnis now have strong incentives to support the US rather than Iran, and do so in spite of the tensions that followed the US invasion in 2003. Former Prime Minister Iyad Allawi, though a Shi’ite, has strong ties with Sunnis and has often criticized Iran for interfering in Iraq. When he rose to power in post-invasion Iraq, he was supported by Jordan, Egypt, the UAE, Qatar and Rafik Hariri in Lebanon.239 Ali A. Allawi, who served as an Iraqi political advisor, former Minister of Defense, and former Minister of Finance, has since argued in The Occupation of Iraq that the underlying objective of the Interim Government was to limit Iran’s influence in Iraq prior to the 2005 election, which would likely see increased Iranian influence and domination by Iraqi Shi’ites.240 As long as Allawi was the head of the Interim Government, the US and regional Arab states had an ally in place who would limit religious Shi’ite power in the government.241 The UAE and Qatar supported the Interim Government and voiced support for Allawi again when he ran in January 2005.242 As the 2005 elections approached, Allawi’s Minister of Defense, Hazem Sha’alan, denounced Iran by calling it “Iraq’s number one enemy” and accused Iran of seizing border posts, sending spies into Iraq, and infiltrating the Iraqi government.243 Iran’s support for Shi’ite militia groups who targeted Sunnis further deepened Sunni mistrust of Iran.

The low turnout of Sunnis brought the legitimacy of the January 2005 elections into question and sharply undercut the viability of American efforts in Iraq by giving Iran more influence in the

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government. This situation eased, however, as the December 2005 elections approached, which saw a rise in Sunni voter participation. Sunni leaders again criticized Iranian influence in the election, such as Interim President Ghazi al Yawer, and the possibility of a religious state working in Iraq.244 However, in both sets of 2005 elections Sunnis did not fare well.

A key turning point occurred in 2008 when Sunnis turned on al Qa’ida and other insurgents and cooperated with coalition forces in what became known as the Sunni Awakening. In the events that followed the US invasion many Sunnis were alienated by de-Ba’athification laws, the disbanding of the Iraqi military, and exclusion from the 2003 Governing Council, where Shi’ites and Kurds close to Iran gained power.245 As foreign fighters poured across Iraq’s western border, many Sunnis in Anbar province were enticed into insurgency by Qa’ida, who offered postinvasion security and a rationale that insurgency was their religious duty.246 However, Sunni attitudes towards al Qa’ida began to shift as they became familiar with al Qa’ida’s methods. al Qa’ida’s harsh intimidation tactics, including using suicide bombers, were largely unacceptable to Iraq’s Sunnis. Sunni tribes increasingly saw al Qa’ida as a foreign entity that posed a greater threat to their livelihood than Iranian or Shi’ite dominance. 247 US attitudes towards Iraq’s Sunnis also began to change around this time. The US began to openly acknowledge the importance of Sunni tribes in post-Saddam Iraq and quickly took advantage of growing anti-al Qa’ida sentiments. The 2007 US troop surge subsequently supported the Sons of Iraq program – a US initiative to transfer the success of the indigenous Sunni Awakening to other Sunni areas in Iraq. The Sunni Awakening had a considerable impact on the scale of al Qa’ida in Iraq from the end of 2006 through the fall of 2008.248 The relative absence of al Qa’ida intimidation contributed to Sunnis participating in large numbers in the January 2009 provincial elections and the March 2010 parliamentary elections.

Allawi’s Iraqiyya slate presented an appealing option for many Sunnis, though likely undercut the success of other Sunni parties, namely the Iraqi Accordance.249 Members of the Awakening also did not fare well as candidates.250 However, Allawi’s inability to form a majority coalition, and Sadr’s acceptance of Maliki as prime minister under Iranian influence, was a setback for Sunnis hoping to see Allawi as prime minister.251 The long-term acceptance of Allawi’s Iraqiyya bloc and Maliki’s willingness to ease his grasp on power and lead with an even hand, could dictate the level of acceptance Sunnis have for Iraqi government institutions.

The disqualification of nearly 500 Sunni candidates by the Justice and Accountability Commission (JAC) prior to the 2010 elections was also a major setback for Sunnis. The JAC was headed by Ali al Lami, a Shi’ite under US custody in 2005-2006 for assisting Iranian agents in Iraq.252 General Odierno described al Lami, and his predecessor Ahmed Chalabi, as “influenced by Iran” and working to undermine Iraqi elections.253 Chalabi was also a main contributor of pre-war intelligence and has been accused of giving US secrets to Iran. 254255 Many Sunnis who fought under the Awakening and Sons of Iraq program anticipated integration into the ISF, appointment to government posts, and payment for their sacrifice. All of these entitlements have been slow to occur and Sunnis have become increasingly frustrated with the Shi’ite-led government. The Awakening fighters have reported being harassed by both sides – by a reemerging al Qa’ida threat and Shi’ites who question their allegiances. These frustrations have contributing to many Sunnis rejoining al Qa’ida.256 In February of 2011, US Ambassador to Iraq James Jeffrey testified that Sunnis were experiencing no payment difficulties under Awakening

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agreements, and as of August 2011, the US reported more than half, or 50,000, had been integrated into the ISF or given civilian government jobs.257 As has been described earlier, Prime Minister Maliki’s continued consolidation of power, and further repression of various Sunni elements, has become an alarming trend since US troops withdrew. Sunnis have been denounced or arrested as “Ba’athists” even when it was unclear they had any ties to current Ba’athist movements, had ever been supporters of the Ba’ath, or had held more than low-level positions of the kind where party membership was necessary to have a job or career. His actions have alienated many Sunnis, particularly in Anbar and Mosul provinces.

Many Awakening members are former insurgents and Ba’ath Party members who fought in the Sunni uprising early in the war. As US troops withdraw, these groups remain heavily armed, outside of the Iraqi police force and army, and increasingly keen on establishing autonomy.

The October 2011 SIGIR report to Congress acknowledged the job placement of Sunnis promised under the Sons of Iraq program was stalled. The GOI was considering reforming the program to ensure that the SOI in heavily dominated Sunni provinces like Anbar receive equal compensation as their counterparts in Baghdad. As of November, 2011, the Sons of Iraq continued to operate in nine provinces and numbered approximately 48,000.258 However, within two weeks of the complete US withdrawal in December, reports suggested these units still remained outside the Iraqi police force and army, yet continued to operate independently while the GoI required their dismantling by the end of 2011.259 Signs of Sunni resistance to Maliki’s increasing centralization of power have increased since that time. In June 2011, Speak Nujeifi warned that Sunnis in Iraq may seek separation from the Shi’ite-run government, or demand more autonomy by pressing for the establishment of more independent regional status.260 Sectarian divisions are becoming more apparent as several predominantly Sunni provinces seek regional status. In October 2011, Salahuddin Province declared itself an “administrative and economic region in a united Iraq”. 261 While this move was unconstitutional (provinces can request regional status but cannot unilaterally declare themselves as such), and Salahuddin council eventually backed off, the move nonetheless demonstrates the growing discomfort of Sunnis to Maliki’s centralization of power.

US estimates of Al Qaida’s current threat have been mentioned earlier. Although al Qa’ida in Iraq is weaker than it was at the height of the Sunni insurgency, analysts suggest it is shifting its tactics and strategies to exploit gaps left by the withdrawal of US troops in an attempt to rekindle sectarian conflict. Instead of attempting to control territory and impose their ideology, it has gone underground and periodically conducts large-scale attacks. In November 2011, General Buchanan stated there were 800 to 1,000 members of al Qa’ida in Iraq. The military reported in July 2010 there were approximately 200 “hard core” fighters. 262 In addition, in February 2012, US Intelligence officials told Congress that al Qa’ida in Iraq was likely behind a series of bombings in Syria.263 Since October 2011, however, the Maliki government has acted on the basis that there are other major Sunni threats. Anonymous Iraqi officials reported intelligence provided by Libya which uncovered a planned Baathist coup- with the backing of Muammar Qaddafi-to be carried out after US troops withdrew from Iraq,; this claim is highly unlikely given the fact that the Libyan leader was in the process of being captured and killed during these dates. Nevertheless, Maliki responded by arresting over 600 alleged Ba’athist conspirators.264 An unidentified source within the Iraqi government later stated the intelligence tip never occurred. Though the scale of these

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arrests is unprecedented, similar actions had occurred before. The previous month, for example, 145 university employees in Tikrit were arrested for being Ba’athists.265 As recently as December 2011, Maliki sought to expel and arrest Sunni politicians, such as Deputy Prime Minister Saleh al Mutlaq and Vice-President Tariq al Hashemi.

The Sunni response has been symbolic calls for autonomy from Baghdad – which, have been met

by Maliki with a warning of "rivers of blood" if Sunnis seek an autonomous region. 266 In addition, several political blocs have boycotted parliament. These developments, combined with a resurgent al Qa’ida and Maliki’s authoritarian streak, are a troubling pattern of sectarian tensions following the US troop withdrawal. Indeed, the political crisis that occurred in the aftermath of the US withdrawal has only widened the gap between Sunnis and Shi’ites. A growing number of Sunnis see the government as exclusively Shi’a in power, while Sunni leaders face unfounded accusations, including terrorism.

Moreover, the number of attacks that are either linked to al Qa’ida or deemed looking “similar in nature as previous al Qa’ida attacks” has increased drastically. These attacks often involve suicide bombers, armed men dressed as police and military, and attacks on Shi’a religious sites.

The Islamic State of Iraq, which includes several terrorist groups including al Qa’ida, has claimed responsibility for several waves of deadly bombing since the US withdrawal, including a failed assassination attempt on Prime Minister Maliki.267 This increase in attacks might contribute to accusations against Sunni politicians and create a cycle that threatens long-term security. Anecdotal accounts by Sunnis suggest Iraq is again segregating along sectarian lines. 268 In February 2012, the US Department of the Treasury announced sanctions against the Iranian Ministry of Intelligence and Security (MOIS) stating, among other things, the ministry had helped al Qa’ida agents in Iran and provided them with identity cards and passports and had given money and weapons to al Qa’ida in Iraq.269

The Mujahedin-e Khalq Organization (MEK) The Mujahedin-e Khalq Organization (MEK), or the People's Mujahedin of Iran (PMOI), is a 5,000-10,000-member organization located in Camp Ashraf, Iraq claimed to be dedicated to toppling the Iranian regime.270 The group is a strange mix of a radical cult centered around its leaders – the Rajavis, and opposition to the Iranian regime. Under the Shah, it killed US and Iranian officers and officials, including the murder of Colonel Lewis Hawkins in front of his family.271 After the Shah’s fall, it carried out terrorist attacks against Iranian targets inside Iran.

When it lost its power struggle with Khomeini in the early 1980s, it moved to Iraq and got funding, arms, and training from Saddam Hussein.

During the Iran-Iraq War, the MEK was forced from their bases near the Iranian border and its leaders relocated to Paris in 1981. In 1986, the MEK relocated to Iraq with the support of the Iraqi government. After the US invasion in 2003, 3,400 members of the MEK were disarmed, isolated in Camp Ashraf, Iraq, and given protected status under the Geneva Convention.272 Iran has pressured Iraqi leaders to eliminate the MEK. The State Department designated the MEK as a terrorist organization, but this and the decision to disarm and protect the MEK did not satisfy Iran.273 Although the MEK has been weakened in recent years, its revelations of Iranian nuclear facilities in Natanz and Isfahan in 2002 lead to international concern over Iran’s nuclear program and altered their significance.274 The group also alleged in September 2010 that Iran has another nuclear site near Qazvin, 70 miles west of Tehran.275

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In recent years MEK supporters have lobbied Washington to end the group’s isolation at Camp Ashraf and to remove its name from the list of foreign terrorist organizations. Among its supporters, the MEK enlists several current and former high-level US diplomats, politician, and military leaders.276 The MEK tightly safeguards its funding, but has long devoted large amounts of money to lobbying Congress and attracting powerful figures to their cause. 277 In 2007, the State Department stated that the MEK still had the “capacity and will” to commit terrorist acts and also rejected any notion that the group was a viable opposition movement in Iran. 278 Several US think tanks, including RAND, have categorized the MEK as a cult.279 Iran has put increasing pressure on Iraq to deal with the MEK while attacking the US for its continued existence. In May of 2011, Iranian state media reported that the US was actively training the MEK at Tajil military base in Iraq. The report states that the US is training the MEK in bombing and other terrorist operations, and characterized the MEK as wishing to “break away” the oil-rich Iranian province of Khuzestan.280 The US withdrawal may still lead to targeted violence against the MEK. Both Shi’a and Kurdish groups believe the MEK was used by Saddam to quell uprisings in 1991, and Iran continues to push the Iraqi government to expel the MEK.281 In September 2011, ISCI leader Ammar alHakim stated that the MEK must leave Iraq for past terrorist acts and for betraying the Islamic Republic of Iran.282 In late-December 2011, a deal was announced where MEK members would leave Camp Ashraf and move to a former American military base near Baghdad’s international airport, with the UN eventually relocating the residents to other countries. However, the group has not yet agreed to the deal. Maliki gave the group a six-month extension in late December to come up with a solution.283 The MEK cannot be dismissed out of humanitarian concerns and they are a mild irritant to Iran.

The fact remains, however, they are now little more that the ineffective remnants of a cults whose history has strong anti-American elements, and has committed terrorist acts that involved killing US personnel. It is now little more than a pointless sideshow in US and Iranian competition.

Competition for Influence in Iraq’s Security Forces Ever since the 2003 invasion, the US and Iran have competed for influence over the Iraqi security forces. This competition has now reached a critical stage as the US and Iraq must decide the degree in which a strategic partnership is formed, including military, police, and security training and advising.

The Struggle to Create a Strategic Partnership and Extend the US Troop Presence The last active US combat forces left Iraq in August 2010, marking the end of Operation Iraqi Freedom and the beginning of Operation New Dawn.284 Some 49,000 advisory troops, four advisor assistance brigades, and a limited number of special operations forces (SOF) remained to train, advise, and assist Iraq’s security forces after that date, including the military, intelligence, and police.285 These US troops continued to serve a number of other important security functions: carrying out kinetic operations against Iranian-backed and other militant groups; providing training to the ISF; taking part in joint patrols along the borders of the Kurdish provinces and helping integrate ISF and Kurdish forces; and acting as a deterrent to Iraq’s neighbors – in particular Iran.286

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Both the US command in Iraq and many senior Iraqi officers and officials felt that US forces should continue to play such role after December 2011 as part of the Security Framework Agreement. Moreover, several US allies in the region, including Saudi Arabia and Israel, voiced concerns that withdrawing all US troops would leave Iraq open to Iranian influence.287 Nevertheless, implementing a meaningful Strategic Framework agreement and extending a US troop presence after December 2011 presented problems on both sides. In the US, public support for a strategic relationship with Iraq was uncertain, and budget pressures and war-weariness created a strong incentive to withdraw all US troops. Indeed, even the more modest plans for the State Department and USAID to take over much of the US effort in Iraq faced growing budget pressures, and leaving even a fairly small number of US troops in Iraq entailed a bigger price tag.

A slight rise in American combat deaths in Iraq in 2011 did not help matters. Neither did the perception that Iraqi security forces were not doing enough to go after the Shi’ite groups attacking Americans.288 Neither President Obama nor President Maliki was publicly backing plans to keep US troops in Iraq after 2011.

On the Iraqi side, Prime Minister Maliki had to deal with Sadr, Iranian pressure, and accusations that he was an American stooge, at the same time he had to t fend off accusations of being too close to Iran. Whatever his private views may have been, he ruled out extending the US troop presence in the past, stating, “The last American soldier will leave Iraq…this agreement is not subject to extension, not subject to alteration. It is sealed.”289 Any plan to extend the US troop presence would also have to be approved by the Iraqi Parliament, which would prove difficult.

Public opinion was another factor that influences all Iraqi politicians. Most Iraqis supported withdrawing US troops by the end of 2011. According to a 2009 ABC News poll, 46% of Iraqis felt that US troops should leave sooner than the end of 2011, with only 16% wanting them to stay longer, and 35% feeling that the withdrawal timetable was right. Sunnis were particularly opposed, with 61% in favor of a faster timetable and only 4% wanting troops to stay longer.290 These issues became steadily more critical to politicians and policymakers in both the US and Iraq as the deadline for removing US forces approached. In May 2001, Maliki had stated that a request for US troops might be considered if a 70% concurrence among Iraq’s political blocs were reached.291 On August 3, 2011, the major factions, excluding the Sadrists, gave Maliki their backing to negotiate,292 and in September, the US publically acknowledged negotiations were taking place.293 Both sides still continued to privately examine options for extending the presence of at least a small number of US troops. The senior US commander in Iraq, Gen. Lloyd J. Austin III, originally recommended some 14,000-18,000 troops, while other reports speculated leaving 10,000 troops. In September 2011, Secretary of Defense Leon Panetta endorsed keeping a smaller force of 3,000-4,000 as what one senior official called, “a small, temporary military presence,” as part of a plan to create a major American Embassy presence in five different parts of Iraq that would support security contractors in a police advisory effort. This plan also included a strong Office of Security Cooperation staffed by civilians and military personnel to support training and equipping Iraqi Security Forces.294 NATO agreed to keep a small force in Iraq for training purposes; as of September 2011, there were 160 NATO staff conducting training operations in Iraq, 12 of which were American. 295 Military and intelligence officials also pushed for greater CIA involvement following the withdrawal US troops to counter Iranian influence and thwart arms smuggling.296 In February

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2012, reports again suggested that the CIA would maintain a large clandestine presence in Iraq long after the withdrawal of US troops in order to monitor the activity of the Iraqi government, suppress al-Qaida’s affiliates, and counter the influence of Iran.297

By September, however, the total force was far smaller than the force desired by top US military officials and drew growing criticism from several US politicians. Iraqis across the sectarian spectrum also voiced their discomfort with such a small US force, while others still remain adamantly opposed to any presence. Many Iraqis remained conflicted over a desire for the US to withdrawal and feelings of mistrust and fear towards Iraqi institutions.298 In early October 2011, Iraq’s political leaders finally agreed to keep US military trainers in Iraq past the December deadline, but failed to agree US troops could operate with immunity from Iraqi law. The US had stated previously that any such restriction would prevent it from keeping US forces in Iraq. As a result, the Obama administration decided to withdraw all forces aside from a small office linked to the US Embassy.299 An announcement was made that the US would work with Kuwait to keep US forces stationed at Kuwaiti bases that could react to crisis scenarios in Iraq. The US had 23,000 in Kuwait as of January 2012, and had deployed at least a combat battalion in Kuwait – sometimes reaching a full combat brigade.. It also had propositioned supplies for a larger force if one had to be deployed to the region.300301 As of late-December 2011, there was reportedly a Brigade Combat Team from the US Army’s 1st Cavalry Division in Kuwait, in addition to a Marine Expeditionary Unit likely headed to Kuwait for the foreseeable future.302 In addition, there are approximately 7,500 US troops in Qatar, 5,000 in Bahrain, and 3,000 in the UAE, with very small numbers in Saudi Arabia and Oman. There are also forces deployed as part of two aircraft carrier task forces in or near the Gulf at any given time.303 In late-November, 2011, the US Commander in Iraq, General Lloyd Austin, summarized USIraqi relations moving forward: “As we leave, we can expect to see some turbulence in security initially, and that’s because you’ll see various elements try to increase their freedom of movement and freedom of action,” despite better conditions than at any other point, “there will probably be unfinished business for many, many years to come…Al Qa’ida will continue to do what it’s done in the past, and we expect that it’s possible they could even increase their capability…If the Iraqi security forces and the government of Iraq are able to counter that, it will be a good thing. If they can’t, they’ll continue to grow in capacity.” In addition, he warned against militias, such as Asaib Ahl al-Haq and the Promised Day Brigade, which could threaten the remaining US civilian presence. He stated, “These are elements that are really focused on creating a Lebanese Hezbollah kind of organization in this country…As we leave, if those elements are left unchecked, they will eventually turn on the government, and they should be concerned about that.” He did conclude that “there’s likely to be setbacks, some tough times in the days ahead…But I’m very hopeful we’ll stay on course…This is clearly not an endpoint…We really intend to remain engaged with Iraq, and we look forward to having Iraq as a great strategic partner in the future.” 304

The level and type of violence that has occurred since the US withdrawal might be explained as part of this initial turbulence. However, the current political tension threatens to be far more detrimental to the US relationship with Iraq and to the level of initial violence than was expected.

In addition, issues related to ineffective governance have already lead to additional hindrances in US support, including the detention of hundreds US contractors that support the US mission, due to Iraqi bureaucratic infighting and sovereignty concerns.305

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The Future US Role in Iraqi Security The US took the lead in the development of the Iraqi security forces from the Iraqi Ministry of Defense and Ministry of Interior after 2003. From 2003-2011, it trained, partly funded, armed and equipped Iraqi forces, and increasingly fought beside them. This US presence and role in creating post-invasion Iraq not only gave the US influence over the shape of Iraqi security forces, but also developed important relationships between the US and Iraqi security leaders. Western intelligence agencies developed close ties to the Interim Government’s Defense Minister, Hazem Sha’alan; Interior Minister, Falah al-Naqib; and the head of Iraq’s intelligence services, General Muhammed Shahwani, each of who warned of the influence of Iran.306 The future level of such US influence is uncertain. At the end of December 2011, the US military will be reduced to an advisory role and to providing arms transfers, intelligence, surveillance, and reconnaissance (IS&R) support. Funding for this role is also at risk as Congress contemplates funding cuts.

Moreover, no one can be certain how the decisions of the Iraqi government will affect a US strategic partnership after December 2011. In December, General Frank Helmick, Deputy Commander of US forces in Iraq, stated that Iraqi security forces were unable to maintain their capabilities and equipment, let alone meet new challenges. He also highlighted the fact that US training missions are exclusively for Iraqi police, and there are no training agreements for the Iraqi military post-withdrawal.307 Even before the US left, Maliki used temporary command appointments to put loyalist in key top positions ranging from combat unit comments to intelligence, take de facto control of the Iraqi Federal Police, special forces elements, and counterinsurgency forces. US estimate of the continued effectiveness and integrity of Iraqi forces proved to be grossly wrong.

American advisors soon found military commissions and positions were for sale in many units.

Loyalties often rapidly divided along sectarian and ethnic lines, and the military NCO system often reverted to roles where NCO (and often junior officers) were allowed little initiative and authority. Police corruption and ties to power brokers, as well as local ties to political leaders became a growing problem, as did the lack of effective links between police and the courts and the abuses of detention and confession based justice. Iraq nits also showed limited willingness to maintain the facilities transferred by the US. As in Vietnam and Afghanistan, the US did accomplish a great deal, but it also tried to do far too much too quickly with more emphasis on numbers than quality, and grossly exaggerated unit quality in many cases.

This scarcely means that many Iraqi forces are not effective, but it illustrates the fact that force building takes far longer than the US military is generally willing to admit, that the US needs to be much less ambitious in trying to change Iraq and far more willing to do things the Iraqi way, and that military force building efforts are inevitably tied to the political struggles in a country, and Western-style police building efforts can only succeed if the police are part of a functioning mix of the rest of a justice system and government that have the loyalty of its people.

Iraq is probably a decade away from creating the kind of conventional forces that can stand on their own against Iran, and must buy and absorb large numbers of conventional weapons in spite of its present problems. It is far from clear that the US will have the Iraqi political support it needs to carry out this mission, and it is unclear it will get US domestic political support as well.

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If the Obama Administration and the US Congress fund such a US effort, and the Iraqi government supports such US efforts, the Office of Security Cooperation - Iraq (OSC-I) will be the channel for all military ties between the US and Iraq in the coming years. The OSC-I will manage military sales, train the ISF on weapons systems, conduct joint military exercises, and lead additional trainings and exchange programs.308 Reporting at the end of 2011 showed that OSC-I had 157 personnel who provide security cooperation and assistance for approximately 64 Foreign Military Sales (FMS) cases valued at approximately $500 million. By January 2012, the OSC-I was expected to support no more than 763 Security Assistance Team (SAT) members at 10 sites in Iraq, and administer nearly 600 cases valued at approximately $9.9 billion.309 Figure VII.2 has shown the current OSC-I sites with personnel levels and assigned functions. In the July 2011 SIGIR Quarterly Report, plans for OSC-I were said to be “significantly behind schedule.”310 This is not enough US personnel to support a mix of Iraqi security forces that Figure VII.8 shows currently number over 900,000. Moreover, the US still provides intelligence, surveillance, reconnaissance, logistics, and air support to the ISF. According to USF-I, the ability of the ISF to integrate the effects of artillery, armor, and attack aviation with infantry against a conventional force is “really at the beginning stage, and will take some years to develop.”311 Money will also be an issue. The President’s request FY2013 request for the Statement in the FY2013 budget was for only $4,019 million – which compared with $4,802 million in FY2012.

The request for the Department of Defense for FY2013 was for 2,855 million versus $9,604 million in FY2012 and $45,044 million in FY2011. It was clear even at the time this request was submitted that both the State Department and Defense Department requests for FY2013 were likely to have major further cuts as Congress acts on the request. 2

The US Role in Shaping the Iraqi Army The Iraqi Army (IA) has made progress in its ability to defend Iraq’s borders, due in part to a concerted effort in 2011 by US military advisors towards more traditional defensive operations.312 However, it continues to lack logistical and intelligence capabilities – areas that OSC-I will focus on improving.313 Political interference in command positions, the sale of other positions at every level, corruption in other areas, a failure to maintain the facilities and systems transferred by the US, and a host of other issues also increase the challenge.

Many Iraqi security experts and military officers believe Iraq should depend on the United States to provide a counterbalance against Iran due to existing tensions between Iraq and Iran, particularly over the Shatt al-Arab314 and Iranian incursions into northern parts Iraq.

Much will depend on the nature and scale of future US arms transfers. Earlier plans for the US sale of some $4.2 billion in arms to Iraq included land force weapons, naval systems, reconnaissance equipment, and several air force weapons systems, but these plans are increasingly uncertain.315 The Iraqi Army is only beginning to build up units with modern heavy weapons. In the third quarter of 2010, Iraq received 11 US M1 Abrams tanks.316 By December 2011, 129 more will arrive, but this will produce a total strength of less than one light armored division’s worth of main battle tanks and the Iraqi Army will lack a balanced mix of other heavy arms. 317 2

“Overseas Contingency” FISCAL YEAR 2013, Budget of the US Government , FY2023, OMB, February 2012

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Figure VII.8: Iraqi Security Forces as of October 10, 2011 Total Security Forces

Comparative size of Active Military Forces

Note: Numbers affected by rounding. Assigned numbers illustrate payroll data; they do not reflect presentfor-duty totals.

Sources: GOI, MOI IG, information provided to SIGIR, 1/12/2012, SIGIR, Quarterly Report, January 30r 30, 2011, p 68; GlobalFirepower.com, “Active Military Manpower by Country,�, www.globalfirepower.com/activemilitary-manpower.asp, accessed, 12/12/2011; GOI, MOI IG, information provided to SIGIR, 10/10/2011

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The US Role in Shaping the Iraqi Air Force The basis for US-Iranian military competition in Iraq differs by service. Iraq’s undeveloped air force means that it will need to continue to depend on some outside power for its air defenses. As with many other issues, the late formation of Iraq’s government after the March 2010 elections made it difficult to clearly define the US’s role in improving the Iraqi Air Force after the 2011 US transition. However, progress developing Iraqi air capabilities has generally been slow.

The $4.2 billion security package mentioned earlier would include reconnaissance equipment, Raytheon AIM-9 Sidewinder air-to-air heat-seeking missiles, laser-guided bombs, and 36 Lockheed Martin F-16 strike jets,318 along with Sidewinder missiles to arm them.319 In June 2011, the US Army Corps of Engineers completed construction of the $5.38 million Ali Air Base in southern Iraq, with an air defense system that allows Iraq’s Air Force to secure its borders against air attack.320 In July 2011, Maliki expressed interest in the purchase 36 F16s, double the original number.321 Although Iraq had previously attributed the delay in F16 purchases to national protests that diverted funds to the national food ration program,322 eventually Iraq wants 96 of the F-16s, along with Sidewinder missiles to arm them.323 Deliveries from the US and other foreign sources from the third quarter of 2011 included: 8 Russian Helicopters, 36 Abram Tanks, 41 Howitzers, 31 Heavy Equipment trucks/trailers, and 16 Armored Security Vehicles.324 If the Iraqi Air Force continues to seek support from the US, much depends on US willingness to help Iraq train personnel, develop logistics, and strategize on the use of the Air Force. 325 The July 2011 SIGR report suggested that one of the main objectives of a continued US presence in Iraq should be to provide an air-defense umbrella for Iraq while the Iraqi Air Force develops its capacity to conduct independent operations.326 The US Iraqi pilot training program has trained more than 60 Iraqi pilots and 30 instructor pilots since its inception in 2008. Currently, 10 Iraqi pilots are being trained in the US to fly the first set of F-16s due to arrive by 2014.327 As of September 30, 2011, the Iraq Training and Advisory Mission-Air (ITAM-Air) had nearly 1,200 personnel directly engaged with Iraq’s air force personnel. Iraqi General Zibari emphasized that, “an army without an air force is exposed” and stated that Iraq will not be able to defend its own air space until 2020, at the earliest.328 On December 12, 2011, the Defense Security Cooperation Agency notified Congress of a possible Foreign Military Sale to Iraq for 18 F-16IQ aircraft and associated equipment, parts, weapons, training and logistical support for an estimated cost of $2.3 billion. The sale also includes requests for Sidewinder missile, various air-to-ground missiles, laser guided bomb units, and a variety of other equipment.329 The sale is widely seen as part of a US focus on increasing the capabilities of the Iraqi air force.

The US Role in shaping the Iraqi Navy The US role in shaping the Iraqi navy inevitably affects Iranian and US military competition. US support is critical to securing the flow of Iraqi commerce and deterring against external threats.

The Iranian threat to Gulf energy exports is a key reason the US often deploys two US aircraft carrier groups in the Gulf region.330 According to the Department of Defense, Iraq’s oil infrastructure is vulnerable to the Iranian Republican Guard Corps Navy (IRGCN) 331 and Iraq’s offshore oil loading points are vulnerable to attack.

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Recent naval incidents are a reminder that Iranian and Western relations in the Gulf remain tense. The IRGC captured 15 British soldiers in Iraqi waters in March 2007. On January 6, 2008, five armed Iranian speedboats maneuvered aggressively towards and issued radio threats against three American Navy warships in international waters while entering the Strait of Hormuz.332 According to Pentagon officials, the American commander was close to issuing an order to fire on one of the speedboats which came within 200 yards of the warship – and within range of one of the machine guns aimed at it – before it suddenly veered away.333 In 2007, Iraq had a 1200-man navy, 2 afloat squadrons, and 4 marine companies. It was also adding offshore support vessels, patrol ships and boats, and smaller vessels.334 In October 2010, the Iraqi navy inaugurated the first of 15 $20 million US-built Swift Class patrol boats.335 and two more in August 2011, to bring the total to 5 of 12 ordered. 336 Iraq will also receive two $70 million US-built offshore support vessels in 2011.337 In July 2011, SIGIR reported Iraq’s navy had grown to over 3,600 assigned personnel.338 One of OSC-I planned ten locations will be in Umm Qasr, the primary location of Iraq’s Navy.

As part of the transition to State Department lead in Iraq, the US Coast Guard Maritime Security Advisory Team (MSAT) began oversight of maritime training and reports to the US Embassy. In partnership with the Department of Homeland Security, OSC-I Basra, and INL, MSAT will develop Iraq’s capacity to secure, regulate, and manage its coastal water and rivers. This includes developing legislative and regulatory authorities and instructing courses on small-boat operations.339 Much is still undetermined regarding the future of US-Iraq security ties. Like its air force, Iraq’s navy remains underdeveloped and critically deficient compared to its neighbors. Budgetary issues are concerns for both the US and Iraq; however, the US willingness to deter Iran and secure the Gulf is constant.

The US Role in Supporting the Iraqi Police force and Ministry of Interior The US faces similar problems in supporting the Iraqi police force and Iraq’s Ministry of the Interior. On October 1, 2011, State’s Bureau of International Narcotics and Law Enforcement Affairs (INL) began its police-assistance program. This effort is downsized from its predecessor, from 350 to 115 advisors. FY2012 appropriations will dictate future numbers. Since 2003, the United States has spent approximately $8 billion to train, staff, and equip Iraq’s police forces and moving forward will focus on developing better lines of communication between the MOI and the Embassy.340 The October 2011 SIGIR reported State lacks a viable assessment of Iraqi police force capabilities, has not drafted a detailed plan providing specifics on what is to be accomplished, or outlined costs and performance outcomes. In addition, only 12% of current spending plans will directly assist the Iraqi police and State has yet to secure commitments from Iraq regarding its planned financial commitments to police programs.341 The Department of State launched the Police Development Program (PDP) on October 1, 2011, with over 100 senior trainers and advisors from various government and civilian agencies. The program includes working directly with senior Iraqi Interior Ministry and police officials to increase a variety of capabilities, ranging from forensics to explosive ordinance disposal.

However, establishing credible oversight, management, and transparency continues to be the

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broad, primary objective. These US advisors conducted baseline assessments of Iraqi capabilities as of December 2011. Dozens of reviews were submitted to experts for analysis that will lead to a final assessment report, which in turn will be used to refine and execute future assistance.342 State Department will continue bilateral relationships outlined under the Strategic Framework Agreement, though it lacks strict parameters, personnel requirements, or funding to be affective on its own. State’s mission will rely on consulates in Basra and Irbil, though embassy branch offices in Mosul and Kirkuk were cut due to budget constraints. In addition, the ten OSC-I sites will be responsible for most military-to-military cooperation.

State’s heavy reliance on private security contractors creates another set of issues and their use is a sensitive issue among Iraqis. The July 2011 SIGIR Report noted that a system for monitoring serious incidents involving private security contractors was still absent. SIGIR reported that this will likely remain unchanged through 2011 and the State Department would not provide SIGIR any information on how they would likely govern PSCs.343 Many of the broader economic and political incentives that can be expanded on from the SFA are as important as military and police training. Measures that stem corruption and enforce rule-oflaw give the Iraqi government legitimacy while building the foundation for security. Fraud, nepotism, intimidation, and corruption are rampant in Baghdad. Iraqi oversight bodies, like the Commission of Integrity, remain incapable of doing their job, while senior officials lack the incentives to correct their actions.

Additionally, recent developments further complicate US efforts to support and train Iraq’s police and military. First, the State Department is looking to reduce the size of its mission in Iraq by half. The US embassy in Baghdad, which has swelled to a size of 16,000 personnel and a budget of $6 billion, is facing significant cuts, according US Department of State officials as recently as February 2012. These cuts will significantly curtail the State Departments ability to continue to fund training and support of Iraqi police and military.

The failure of the Obama administration and the Maliki government to reach agreement on the size and scope of US troops in Iraq after December 31, 2011 dealt a considerable blow to America’s concurrent interests in the region. The aims include achieving stability in Iraq after eight years of war and massive investment of US blood and treasure, the potential to benefit from future commercial deals with Iraq, and the ability to deter Iranian aggression and expansion.

Having failed to agree to reach agreement on a limited, but continued, US troop presence in Iraq leaves Iraqi police and military without the training and support they need, and invites subversive elements to wait out the US withdrawal and resume destabilizing sectarian violence.

Finally, political interference, the role of power brokers, corruption, sale of positions and promotion, reversion to a confessions-based approach to policing, the lack of effective courts and adequate detention facilities, long-standing tension between the police and the courts, and sectarian and ethnic issues all present future challenges. The US and its allies had major problems will all of these issues before US withdrawal, and -- in general – contract advisors performed poorly at massive expense. It is unclear that the State Department can meet these challenges even if Iraq gives it the opportunity to try.

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The Iranian Role in Iraqi Security Iran is certain to exploit every cut and weakness in the post withdrawal US security effort, and every opportunity to gain influence through Iraq’s political leaders or a direct role in advising – and sometimes bribing – Iraqi personnel. Iran has played a significant spoiler role in Iraqi security, both in an effort to ensure Iraq does not reemerge as a threat or rival, and to eliminate US influence and the prospect of a strong US-Iraqi security relationship. Iran has supported insurgents and militias while also extending its influence through the infiltration of Iraq’s security forces and ministries.344 Iran’s support of Shi’ite groups in Iraq has sometimes meant that Iran’s ability to restrain those same groups has been decisive in reducing violence. As violence increased in 2006, Iran pushed Iraqi Shi’ites to not retaliate against Sunnis.345 This along with the Sunni Awakening and the US troop surge led to a decrease in violence over the second half of 2007. Iran has also been anything but helpful in the fight against al Qa’ida, refusing to bring to justice, identify, or transfer its al Qa’ida detainees.346 In 2010, leaked US intelligence reports outlined Iran’s support for Shi’ites militias between 2006 and 2009 that targeted both Americans and Iraqis. In July 2010, General Odierno stated that the IRGC was using the Hezbollah Brigade to train would-be US attackers in Iraq.347 This came five months after US and Iraqi forces raided various Hezbollah Brigade locations in Amarah, Iraq and Maysan province, areas known to be under the influence of Iran’s Qods Force.348 In 2011, the US again accused Iran of supplying militias with weapons and training which lead to a spike in US casualties in the summer of that year.349

Iran’s Broader Role in Iraqi Security Iranian and Iraqi security interests have coincided in some areas. Iran has given some funding to Iraq’s security forces. In 2005, for example, Iraq and Iran agreed to a billion dollar aid package, some of which went to the Ministry of Defense.350 However, Iraq had to assure the United States that Iran would not train Iraqi security forces. Some Iraqis also see Iran’s efforts to acquire nuclear weapons in the context of the Arab-Israeli conflict, and thus as a “Muslim bomb, and not as a threat to Iraq.”351 Iran has, however, focused on undercutting the security arrangements between the US and Iraq.

The Commander of the Multi-National Force-Iraq at the time, General Odierno, said in October 12, 2008, that Iran likely tried to bribe members of the Council of Representatives to vote against the Status of Forces agreement.352 Iran managed to convince the Iraqi government to include a December 2011 withdrawal date for US forces and a provision that Iraqi land, sea, and air not be used as a launching or transit point for attacks against other countries.353 Some Iraqi military and intelligence officials fear that Iran has significant influence over elements of the Iraqi Ministry of the Interior, and have accused Iran of providing shaped charges and artillery to Iraqi militants. Iran has also recruited thousands of Iraqis for intelligence gathering354 and has had intelligence agents in northern Iraq for at least 20 years.355 One estimate puts the number of Iranian intelligence officers in Iraq in 2007 at 150.356 While some Iranians see the rise of the Iraqi military as a threat, others have attempted to use Iraq’s military as a wedge to force the US out of Iraq. According to Iran’s Foreign Minister Ali

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Akbar Salehi, "Considering the fact that the Iraqi Army can provide security, their presence in the country is not justifiable."357 Iran has been adamant in pushing Iraq to reject any modifications to the US-Iraq security agreement that would allow US military forces to stay in Iraq after 2011. Not surprisingly, Iran sees the presence of US military forces in Iraq as a direct threat to its interests in the country, as well as a possible launching pad for attacks on Iran itself. A number of senior Iranian officials have expressed their opinions regarding the US and Iraq: "Occupiers of Iraq will be forced to escape the quagmire of Iraq sooner or later." - Ali Akbar Rafsanjani, current head of the Expediency Council, May 17, 2011.

"Based on the security agreement, the US forces should leave Iraq by the end of 2011 and Iraq insists on the issue too." - Ali Akbar Salehi, Iranian Foreign Minister, May 17, 2011.

"The United States does not do anything in the interest of the regional nations. Whatever they have done so far has been against the regional nations." - Ayatollah Khamenei, June 4, 2011.

"Iran has announced many times that the US should leave Iraq and leave administration of the country's affairs to its people." - Esmae'il Kosari, Vice-Chairman of the National Security and Foreign Policy Commission, July 13, 2011.

The Role of the Iranian Revolutionary Guard, the Qods Force, the Ramazan Corps, and the Special Groups Iran began to funnel aid to militias in Iraq via the Qods Force – a branch of the Islamic Revolutionary Guard Corps – immediately after the fall of Saddam in 2003.358 The Qods Force also provides or has provided funding, weapons, operatives, and training to groups in Palestine, Islamic militants in Bosnia, fighters in south Sudan, Hezbollah in Lebanon, and the Taliban in Afghanistan.359 360 The Qods Force provides training, funding, and weapons in Iraq, and much of Iranian policy affecting security towards Iraq is formulated and carried out by the Qods Force. Both of Iran’s post-2003 ambassadors, Hassan Kazemi-Qomi and Hassan Danaifar, served in the Qods Force.361 Mahan Abedin, director of research at the London-based Center for the Study of Terrorism, argues that Qods training largely focuses on gathering and utilizing intelligence, which is key to successful operations in a place as fluid and complex as Iraq. 362 One official estimate in 2007 puts the number of Qods and Iranian intelligence personnel in Iraq at 150, though some US commanders believe there was only one or two per Shi’ite province.363 The US was slow to grasp the full extent of Iran’s expanding role in Iraq. On July 19, 2005, the United States sent Iran a secret cable stating that a British soldier was killed by an explosive supplied by Iran.364 Iran denied any involvement, leading to more public confrontations over the issue beginning in December of that year.365 The then-Commander of the Multi-National ForceIraq, General Petraeus, stated in his September 2007 testimony to Congress that “none of us earlier this year appreciated the extent of Iranian involvement in Iraq, something about which we and Iraq’s leaders all now have greater concern.”366 The Qods Force has been a key Iranian tool in indirect attacks on the US military and disrupting American interests in Iraq. In 2007, General Petraeus stated, “There should be no question about the malign, lethal involvement and activities of the Qods Force in this country.”367 He went on to add that Iran was “responsible for providing the weapons, the training, the funding and in some

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cases the direction for operations that have indeed killed US soldiers.”368 American officials have typically avoided accusing the Qods Force of directly attacking Americans and have been careful to say that they do not know to what extent the top leadership of the Iranian government knows of or is involved in the Qods Force’s activities.369 On February 14, 2007, President Bush said that he was certain that explosively formed projectiles, rocket-propelled grenades, and mortars used in Iraq came from the Qods Force, but “what we don't know is whether or not the head leaders of Iran ordered the Qods Force to do what they did.”370 A message Qods Force leader Qassem Suleimani sent to General Petraeus in 2008 during the Battle of Basra is revealing. General Petraeus paraphrased the message as saying: 371 General Petraeus, you should know that I, Qassem Suleimani, control the policy for Iran with respect to Iraq, Lebanon, Gaza, and Afghanistan. And indeed, the ambassador in Baghdad is a Qods Force member.

The individual who’s going to replace him is a Qods Force member. Now, that makes diplomacy difficult if you think that you’re going to do the traditional means of diplomacy by dealing with another country’s Ministry of Foreign Affairs because in this case, it is not the ministry. It’s not Mottaki who controls the foreign policy, again, for these countries, at least. It is, again, a security apparatus, the Qods Force, which is also carrying out other activities.

A leaked November 2009 State Department memo indicates that the Qods Force has remained a central implementer of Iranian policy in Iraq and competitor with the US in trying to shape Iraqi security:372 Since at least 2003, Brigadier General Qassem Suleimani, the commander of the Islamic Revolutionary Guards Corps-Qods Force (IRGC-QF), has been the point man directing the formulation and implementation of the IRIG's Iraq policy, with authority second only to Supreme Leader Khamenei.

Through his IRGC-QF officers and Iraqi proxies in Iraq, notably Iranian Ambassador and IRGC-QF associate Hassan Kazemi-Qomi, Suleimani employs the full range of diplomatic, security, intelligence, and economic tools to influence Iraqi allies and detractors in order to shape a more pro-Iran regime in Baghdad and the provinces.

Suleimani enjoys long-standing close ties with several prominent GOI officials, including President Talibani, Vice-President Adel Abdal Mahdi (ISCI), Prime Minister Maliki (Dawa), former PM Jaafari, and more recently, Speaker Samarra'i (Septel [a separate telegram] reports Iranian Speaker Larijani's November 4-7 visit to Iraq at Samarra'i's invitation.). Khamenei, President Ahmadinejad, Speaker Larijani, and former president Rafsanjani consult regularly with visiting GOI officials as part of the IRIG's broader "strategic" council of advisers seeking to influence the GOI.

US intelligence reports leaked in 2010 also describe the extent of Iran’s hand in the 2006-2009 violence. The reports show that the IRGC often used Hezbollah to train militants in Iran prior to their crossing into Iraq. General Petraeus had publically corroborated Hezbollah’s role in a 2007 report to Congress.373 The reports draw on testimony from detainees, captured diaries, and weapons originating in Iran – including “explosively formed penetrators”, “sticky bombs”, and surface-to-air missiles.374 The reports conclude that Iran was behind the training and resourcing of specific attacks, including assassinations of Iraq ministry officials, mortar attacks on the Green Zone, and kidnappings of American soldiers.

Iran has also been implicated in using lethal force to shape politics in Iraq. For example, Gen. Petraeus implicated Iran in the 2007 car bomb assassinations of two southern Iraqi governors.375 Besides using Hezbollah to train terrorists, the reports point to both the Badr Corps and Mahdi Army as allies in Iranian efforts.376 According to The Long War Journal, which draws heavily on interviews with mid-level and senior military and intelligence officials, the Qods Force streamlined its operations in Iraq by

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creating the Ramazan Corps.377 The Corps, which the spokesman for the Multinational Forces Iraq said was responsible for most of Qods Forces operations in Iraq in 2007, is composed of the Nasr command in the north, Zafar command in central Iraq, and Fajr command in the south.378 The various recipients of Qods Force aid include the Mahdi Army, the Badr Brigades, the Qazali Network, and the Sheibani Network, among other groups. Their targets have included political rivals, the Iraqi Security Forces, and Coalition forces.379 When the Badr Brigades and SCIRI integrated into the government, other Iranian-backed groups began targeting them as well.380 Brigadier General Kevin Begner stated on July 2, 2007, that Iran supplied the Iraqi militias with $3 million per month.381 In 2011, the US again voiced concern over Iran’s covert involvement in Iraqi violence. The US claimed the rising number of American deaths over the summer of 2011 was due to Iran’s support for Iraqi militants. In June, 2011, Secretary of Defense Leon Panetta stated “We're very concerned about Iran and weapons they're providing to extremists here in Iraq…And the reality is that we've seen the results of that — in June, we lost a hell of a lot of Americans ... and we cannot just simply stand back and allow this to continue to happen."382 In July 2011, Admiral Mike Mullen stated, “Iran is very directly supporting extremist Shi’a groups which are killing our troops…and there's no reason…for me to believe that they're going to stop that as our numbers come down…There's no question they want to influence, and particularly in the south they are shipping hi-tech weapons in there….which are killing our people and…. the forensics prove that.”383 Admiral Mullen also accused Iran of supplying militias in Iraq in an attempt to take credit for American troops withdrawing at the end of the year.384

Iranian Arms Smuggling Iran has smuggling arms into Iraq to attack Americans and Iraqis alike. Abu Mustafa al-Sheibani, a former member of SCIRI and the head of the Sheibani Network, is one of many suspected of operating a smuggling network for Iran’s Qods Force. Suspected Iranian arms given to militants in Iraq have included 122-millimeter mortars fired at the Green Zone in Baghdad,385 improvised explosive devices (IEDs), explosively formed projectiles (EFPs), and missiles. Iranian 107 mm rockets can carry 100 pounds of explosives that turn them into “flying bombs” known as “Improvised Rocket Assisted Munitions.”386 EFPs have been particularly deadly. Militants use EFPs to penetrate the armor of Humvees and have been responsible for at least 200 American deaths in Iraq.387 According to a The Long War Journal interview with US military officials, the EFPs are manufactured in Iranian factories in Ahvaz and Mehran.388 Documents obtained by Wikileaks also demonstrate that officials in the US State Department believe the EFPs are from Iran.389 In 2005, Shi’ite militias in Iraq began to place the EFPs in foam blocks that resembled rocks. Lebanon’s Hezbollah, a close ally of Iran, began adopting the technique in 2006 against Israel.390 Leaked documents show that some officials in the State Department believe that Iran had indirectly supplied 50 82mm rockets with neuroparalytic agents to Iraqi militants in January 2006, although the rocket’s explosion might have rendered the chemical agents useless.391 Another Iranian plot, according to the leaked documents, was to combine poisonous chemicals with a car bomb meant to be detonated in the Green Zone, though bomb experts contend that the plot would have been impractical.392

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In 2006, the Bush Administration authorized killing Iranian security agents in Iraq. 393 From the winter of 2006 to the end 2007, the US performed high-profile raids that resulted in the arrests of several Iranian security officers. Since then, the US has killed several Qods Force members.394 Others captured have included a commander in the Ramazan Corps, Mahmud Farhadi; a senior member of Lebanese Hezbollah, Ali Mussa Daqduq; and Qais Khazali, a former Sadrist leader and head of Asa’ib Ahl al-Haq (AAH, or the League of the Righteous).395396 In 2007, the US also captured the deputy commander of Lebanese Hezbollah Department 2800, which assisted the Qods Force in Iraq.397 Additional Shi’ite militants and extremists have taken the form of Special Groups, many formed from former elements of the Mahdi Army. According to General Petraeus, Iran armed these groups as a “Hezbollah-like force to serve its interests and fight a proxy war against the Iraqi state and coalition forces.”398 Gen. Petraeus accused Asaib Ahl al-Haq of carrying out a January 2007 attack on Karbala’s provincial Joint Coordination Center, which killed five American soldiers.399 AHH leader Khazali was released in December 2009 in exchange for a British hostage 400 and as part of an American effort to reintegrate Shi’ite militias into Iraqi politics.401 Asaib Ahl al-Haq since reconciled with the Iraqi government, while the US designated Keta’ib Hezbollah as a Foreign Terrorist Organization.402 However, Khazali still leads AAH and it remains a magnet for Shi’ite militants, as well as a threat to target US personnel and destabilize Iraq after the US withdraw deadline.403 Despite the concerns voiced by the US, Maliki allowed AAH to join the political process in January 2012. Maliki’s spokesman stated, “We welcome those who want to join the political process and give up their weapons, no matter whether they are Sunni or Shiite.”404 Iran has consistently denied that it arms and supports militias inside Iraq. A number of senior Iranian officials have made statements denying that Iran’s military is meddling in Iraq: "Such claims are a blame-game on part of the US officials" - Ahmad Vahidi, Iran’s Minister of Defense, July 15, 2011.

"These comments are repetitious and display the United States' trouble in earning the attention of the Iraqi parliament and government for extending its presence in Iraq…These remarks are a lie and aim to put the blame on the other countries…Americans are seeking an excuse to implement their Iranophobia plans and stir doubt and anxiety among Iraqi politicians and statesmen. They want to pretend that Iraq would be threatened by Iran, if Americans leave Iraq" - Hassan Danayeefar, Iran's Envoy to Baghdad, July 13, 2011.

“The groups that wage terrorist attacks in Iraq today have all been created by the US." - Parviz Sorouri, member of the parliament's National Security and Foreign Policy Commission, July 12, 2011.

“The issues raised by the Americans and their allegations that the IRGC supplies weapons to different groups in Iraq and Afghanistan and stirs insecurity is a big lie."- Rahmin Mehman Parast, Foreign Ministry 405 spokesman. July 5, 2011.

“The Islamic Republic of Iran is prepared to expand its ties with the friendly and brotherly country of Iraq in different economic fields because it always considers Iraq's progress as its progress. Today there are cooperation fields in the oil, energy and reconstruction sectors that can be used for taking effective steps towards expansion of ties". - Vice President for International Affairs, Ali Saeedlou, February 19, 2012,

Iranian statements became less defensive as the US withdrawal neared, instead focusing on branding the withdrawal as a defeat for the US. Iranian press characterized the “victory” in terms of an Islamic awakening and, as Iranian Foreign Ministry Ramin Mehmanparast stated, a result of the resistance and opposition of the Iraqi people. In late-November 2011, IRGC Commander

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Major General Mohammad Ali Jafari stated, “America abandoned Iraq without any achievement,” and continued, “In Iraq only the Qods Force was involved…the Americans have implemented every measure but, in the end, they failed. These are great successes that were achieved despite all of the pressures.”406 In February 2012, the Commander of the Qods Force, General Soleimani when further, stating, “These regions (Iraq and Lebanon) are one way or another subject to the control of the Islamic Republic of Iran and its ideas.”407 The US has made a series of efforts to help Iraqi security forces deal with these threats, as well as other unilateral and multilateral approaches. The US pushed the UN Security Council to include a ban on arms exports by Iran in Resolution 1747 on March 24, 2007.408 On October 25, 2007, the United States named the Qods Force a Specially Designated Global Terrorist, along with naming four state-owned banks sponsors of terrorism, though it did not go as far as designating the IRGC itself as a terrorist organization.409410 The US also placed sanctions on the Qods Force and the banks serving it. In 2007 and 2008, the US built bases near the Iranian border to block the smuggling of Iranian weapons into Iraq. 411 On September 26, 2007, the US Senate approved a resolution urging President Bush to designate the IRGC as a sponsor of terrorism.412 On September 16, 2008, the United States froze the assets of a deputy commander of the Qods Force and a Mahdi Army leader, in addition to several others and a Syrian television station.413 However, the designations only escalated what were already strong sanctions on Iran that have been in place since 1979 and have shown to be mostly symbolic. 414 In February 2012, the US Department of the Treasury announced sanctions against the Iranian Ministry of Intelligence and Security (MOIS) stating, among other things, the ministry had helped al Qa’ida agents in Iran and provided them with identity cards and passports and had given money and weapons to al Qa’ida in Iraq.415

The Impact of the Power Vacuum in the Iran – Iraq Military Balance All of these developments must be considered in the light of the near power vacuum in the IranIraq military balance. As has been shown earlier, the US invasion and later disbanding of Saddam’s army eliminated Iraq as a major military competitor of Iran. While the Iraqi Army (IA) suffered readiness problems and equipment shortages after the first Gulf War in 1991, it maintained a rough parity or even superiority with Iran in most major military capabilities. The Iranian military is structured to face a multitude of threats, but up until 2003 had seen Iraq as one of its main opponents, and countering an Iraqi invasion had been a major preoccupation for Iranian military planners.

Some US analysts have hoped that Iraq can again play the role of military competitor of Iran in the future. Despite a number of former ISCI members joining the IA, and some pro-Iranian military leaders, many in the Iraqi Army do view Iran as a potential threat. While Iraq may someday be a realistic check on Iranian military power, the timelines involved are quite long. As the previous figures have shown, the Iraqi military now poses virtually no conventional threat to Iran, nor can it hope to successfully oppose an Iranian invasion. The IA will remain quite weak for many years to come.

This is not a matter of manpower numbers. The Iraqi military has grown impressively since 2003, and it is not far behind Iran in terms of sheer size: 200,00 men in the Army, 68,000 more in Army Training and Support Forces, 5,053 in the Air Force, and 3,650 in the Navy, as of the

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end of 2010.416 But these numbers hide some serious weaknesses. The Iraqi military was almost exclusively a COIN-focused force until 2010. Building up the IA into a conventional force is very complex, time-consuming, and an expensive task. Iraqi plans call for a phased transition into a more conventional force focused on external threats, but this transition will not be completed until 2020, even under very favorable conditions. The recent political deadlock and budget crises in Iraq do not bode well for this transition meeting a 2020 deadline.

Iraq’s military weaknesses vis-à-vis Iran are too numerous to examine in detail, but some of the most important problems can be summarized as follows: 

Air defenses: Iraq has no indigenous air defense capabilities. This is Iraq’s most glaring conventional military shortcoming. Iraq has no SAMs (not even MANPADs), no air defense radars, and only acquired its first modern jet fighters in late 2011. Iraq expressed interest in used French Mirage 2000s, is in the process 417 of acquiring a total of 36 US F16s, and was reported to be considering 24 Chinese J17s.

Air defense systems are extremely complex and expensive, and Iraq currently has no clear plans to acquire one in the near future. The Iranian air force may be obsolete by western standards, but it is decades ahead of Iraq.



Armor: Iraq has only 140 modern M1A1 Abrams tanks, and a small number of less-advanced Soviet tanks.

While Iraq has plans to purchase more, and to convert several infantry divisions to armored, further M1A1 purchases have been postponed due to budget shortfalls. Iraq’s insistence on buying modern, but very expensive, American tanks will result in it taking a decade or more before the IA has enough tanks to realistically resist an Iranian invasion.



Artillery: The IA has very little in the way of artillery, and what it does possess is mostly light and outdated. The IA has virtually no counter-battery capabilities. Iran, despite readiness and training problems, maintains a large number of artillery units.



Antitank Capabilities: Iraq’s only current real anti-tank capabilities are its small number of tanks, as well as a small number of ATGWs on its armored personnel carriers. The only anti-tank capability Iraqi infantry possess is short-ranged RPGs. Iraq has a light helicopter force, but no real anti-tank helicopter capability, 418 nor plans to procure one.

Anti-tank weapons, particularly man-portable systems, are cheaper and somewhat easier to operate than many of the other weapons systems that Iraq needs to acquire in order to oppose Iran. However, as of yet no clear plans to obtain a serious anti-tank capability have been announced by the IA.

Iraqi efforts to rebuild its forces and capabilities to deter and defend against Iran will now be shaped by Iraq’s politics, but Iraq does have significant security concerns. The two countries also technically remain at war, and incursions by the Iranian military are a constant threat. Their border is not clearly demarcated, particularly in the waterways in the south. Many border areas remain contested.

A minor clash at the Fakka Oil field on the Iran-Iraq border served to underline Iraqi fears of Iranian encroachment. The Fakka field is very close to the border, and while it has been in Iraqi hands since the Iran-Iraq war, its ownership is still in dispute.419 On December 18, 2009, a small number of Iranian troops backed by armor seized oil well number 4 in the Fakka field and set up defensive positions.420 Iraqi troops massed nearby and the Iranians quickly retreated back across the border. The incident avoided serious confrontation, with no shots fired by either side.

However, had Iran chose to reinforce its position and defend the well it seized, there would be limitations to what Iraq could do without US help. The incident galvanized Iraqi public opinion and has contributed to a nationalist backlash against Iranian meddling in Iraq.

The Fakka incursion was only one in a series of Iranian military incursions across Iraq’s border.

On average, Iran shells Kurdish rebel camps in northern Iraq twice per month. Incursions by Iranian unmanned aerial vehicles have occurred since the late 1990s. In June 2010, Iranian

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ground forces penetrated ten kilometers over the border near Penjwin to destroy rebel arms caches. Iranian helicopters have undertaken rocket attacks in northern Iraq and Iran has fired artillery against targets in Iraqi territory.421 In July 2011, Iranian troops crossed the border into Iraq to pursue Kurdish separatist forces; Roughly 5,000 IRGC personnel deployed along the border with Iraqi Kurdistan, with an unknown number having crossed the border. According to the IRGC, they inflicted a “heavy and historic defeat” on the Kurdish separatist group PJAK (Free Life Party of Kurdistan). The PJAK also claimed to have killed 53 Iranians in the fighting. 422 In August 2011, Iran again shelled PJAK targets in northern Iraq at the same time Turkey bombed PKK fighters. In September 2011 in front of the UN General Assembly, Kurdish President Talibani requested that both Turkey and Iran stop bombing Iraqi territories in the Kurdistan region, saying it was causing many innocent civilian victims.423

Economic Competition Iran is making economic progress in spite of its political and security problems, but largely because of high oil revenues and its per capita income remains on the lowest in the world. SIGIR reported in January 2012 that,424 Iraq’s gross domestic product (GDP) grew at a projected rate of 9.6% in 2011, nearly twice the average for oil-exporting nations in the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) region and well above the 0.8% growth rate Iraq registered in 2010. The rise came as foreign business activity picked up and multibillion-dollar infrastructure and housing projects began to supplement rising crude oil production as significant contributors to economic activity. The International Monetary Fund (IMF) expects Iraq’s GDP growth to exceed 12% in 2012—more than three times that projected for the region’s oilexporting nations as a group.

Crude oil continued to account for about 98% of Iraq’s export earnings and around 95% of all government income in 2011. This quarter, the GOI earned $19.35 billion in receipts from the sale of crude oil, a drop of $297 million over the previous quarter. But the combination of higher crude oil prices on global markets and increased export volume meant that Iraq’s crude oil earnings for the entire year were $75.42 billion, or 54% more than those registered for 2010.

Buoyed by higher than- expected crude oil prices through much of 2011, Iraq’s net foreign currency reserves rose from just under $45 billion to $58 billion during 2011. However, there was evidence this quarter that inadequate crude oil export infrastructure may have prevented the country’s earnings from being even higher than they were.

Year-on-year core inflation dropped in October to 6.9%, the second consecutive monthly decline and the first time since June 2011 that the figure fell below 7%. Regionally, Iraq’s 2011 inflation rate remained well below the average for other oil-exporting countries in the region and is forecast to remain that way through 2012 even if a tariff regime is implemented. … Iraq’s most recent official unemployment rate of 15.3% is from 2008 and was not updated in 2011, although unofficial estimates made during the course of the year and formal remarks by the Communications Minister in Istanbul in October placed the percentage of working-age jobless at closer to 30%.

The US-Iran competition for economic influence in Iraq has seen Iran take the lead through growing Iranian trade and investment. Trade between Iran and Iraq has steadily increased since the US invasion and Iran is now Iraq’s biggest trading partner.425 Legal trade now consists of building materials, chemicals, consumer goods, and foodstuffs, much of it via the border at Mehran and Mundhirriya/Qasr Shirin.426

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Iran has also implemented electricity deals with Iraq that were negotiated after the CPA era.427 According to the Iranian ambassador to Iraq, Iran supplied 750 megawatts of electricity to Iraq daily, in mid-2010.428 Two Iranian banks, Parsian and Karafarin, have been approved to open up branches in Iraq.429 As early as November 2003, President Talibani signed protocols on investment, oil, construction, and transportation with Iran.430

Iran’s Growing Economic Role in Iraq Many Iraqis, as well as some Arab states, resent Iraq’s post-invasion shift towards trade with Iran.431 Iran and Iraq compete industrially and commercially, and in terms of agricultural products, this creates tension because Iran has the upper hand for the time being. Moreover, its investments in real estate and businesses in Basra, Karbala, and Najaf have been seen as exploitative rather than winning gratitude from Iraqis.

However, there is evidence that Iran has economic influence in at least some local communities.

In 2005, for example, there were reports that finding a job in Basra required the sponsorship of an Iranian-backed group, and only those with leanings towards Iran filled teaching posts. Traders in parts of southern Iran increasingly speak Farsi432 and many accept Iranian currency. Many Iraqis also receive medical care in Iran. Iranian exports include electricity, refined oil products, and cars.

In October 2011, a growing trend in Basra was reported showing the basis for its connections to Tehran. Many Basrawis feel they have been unfairly treated by Baghdad, Washington, and its Kuwaiti neighbor, so have turned to Iran for its development needs. Basra is a potential economic hub and contains the majority of Iraq’s oil. At the core of Basra’s complaints towards Baghdad is revenue sharing. Basra sends $50 billion each year to Baghdad from oil and gas sales, or 75% of the Iraqi government’s total revenue, yet sees only $1 billion in return.433 They blame Kuwait for developing ports and using drilling methods that infringe on Basra’s economic livelihood. Washington has ignored Basra’s complaints, which has opened up an opportunity for Tehran.

However, Iran’s influence does not necessarily go beyond the pragmatic self-interest of given groups of Iraqis.. Najaf, the spiritual capital of Shi’a Islam, is an example of the limits to Iranian influence. Najaf is home of the leader of Iraq’s Shi’a community and quietist school of Shi’ism, Ayatollah Ali Sistani. In late 2011, when reports emerged that Iranian-linked Ayatollah Mahmoud Hashemi Shahroudi was moving to Najaf, potentially as a successor to Sistani, residents were outraged. They voiced anger over Iranian attempts at manipulation and reverberated a common sentiment that Iranian Shi’ites are Iranian first and believe they are superior to Arabs.434 Similarly, Iraqis in Basra take advantage of Iranian money, but are Arab Shi’ites that show little support for either Iran or the US. Iran-Iraq economic ties are strong, and have been encouraged to some degree by the impact of international sanctions on Iran in other markets. In August 2010, Iran’s ambassador said Iran would double its trade volume with Iraq.435 Iranian officials have indicated that they welcome a strong economic integration between the two nations: “Our message to Iraqi brothers in my visit is that Iran is fully ready to expand ties with Baghdad. We announced that Tehran is prepared to put its scientific, technical, engineering, economic and commercial potentials at the disposal of Iraq."436

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A leaked State Department memo from November 2009 noted that Iran’s geographic proximity and willingness to take business risks in the insecure environment help make it an important trading partner for Iraq: With annual bilateral trade estimated at USD 4 billion (up 30 percent since 2008) and comprised mostly of Iranian imports (approximately 48 percent of Iraq's imports are Iranian goods), the IRIG [Islamic Republic of Iran Government] continues to jockey for economic domination in Iraq through targeted development assistance, focused largely on refurbishment of Shi’a religious shrines, and trade deals and bilateral agreements aimed at fostering greater Iraqi economic dependency on Iran. This measure has been successful, largely because of Iran's geographic proximity and access to Iraqi markets that are otherwise financially or politically less appealing to other states, notably the United States, Europe, and other industrialized nations. Turkey, on the other hand, remains Iran's biggest economic competitor, particularly in the Kurdistan Regional Government (KRG).437

Mohsen Milani has different numbers for this trade, but they reflect the same trends and note the importance of Iran in providing electricity to Iraq: Iraq is Iran's second-largest importer of non-oil goods. In 2003, Iraq's non-oil imports from Iran totaled $184 million; by 2008, this figure was $7 billion and is expected to top $10 billion by 2012. Iraq is also largely dependent on energy imports from Iran. In 2009, it imported $1 billion in energy -- 40 percent of which was electricity and 30 percent refined petroleum products. Iran has also been involved in rebuilding Iraq's energy infrastructure. In 2007, for example, Tehran signed a $150 million contract to build a 300megawatt power plant in Baghdad, and in 2008 it agreed to build a 400-megawatt electricity line between Abadan, a port city in southwestern Iran, and Alharasa in southern Iraq. Iran is also heavily invested in Basra, a strategically important port and Iraq's second-largest city: Iran plans to develop a free-trade zone there and build crude oil and oil-product pipelines between the city and Abadan. Its commercial relations with Kurdistan have expanded as well; there are more than 100 Iranian companies operating there, and Kurdistan has been exporting its surplus oil to Iran in exchange for the import of Iranian electricity. 438

As Iraq struggles to build its electricity infrastructure, Iranian influence in this sector will continue to be vital to Iraq’s growth. Overall Iran provides about 5% of Iraq’s electricity, although in some border areas this figure is much higher.439 As power shortages persist across most of Iraq, still affecting about 80% of the population in late 2011,440 Iran might be relied on to a greater extent.

Iran’s economic ties to Iraq have come at a price to many Iraqis. Many Iraqi business owners complain of cheap Iranian goods and food that are subsidized by Tehran being dumped on the Iraqi market. This has retarded growth in Iraq’s light manufacturing and Agriculture sectors.441 At the same time, Iran might be leveraging its resources to effectively bolster Iraqi Ministers who align with Iran.

The Declining Size of US Aid Figure VII.9 shows that American aid has been an important source of US influence in competing with Iran in the past. SIGIR reported in January 2012 that, “The United States has appropriated or otherwise made available $61.83 billion through FY 2011 for reconstruction efforts in Iraq, including the building of physical infrastructure, establishment of political and societal institutions, reconstitution of security forces, and the purchase of products and services for the benefit of the people of Iraq. 442 Figure VII.10 shows only limited amounts of past US funding is still available. As of January 2012, the status of US aid in five major funds was as follows: 443 

Iraq Security Forces Fund (ISFF)—$20.54 billion appropriated, $18.62 billion obligated, $17.91 billion expended, and $1.31 billion available for obligation to new projects

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•Economic Support Fund (ESF)—$4.83 billion appropriated, $4.44 billion obligated, $3.95 billion expended, and $132 million available for obligation to new projects

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•International Narcotics Control and Law Enforcement (INCLE)—$1.18 billion appropriated, $979 million obligated, $815 million expended, and $204 million available for obligation to new projects

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Other funds no longer are available for obligation to new projects: 

Iraq Relief and Reconstruction Fund (IRRF)— $20.86 billion appropriated, $20.36 billion obligated, and $20.07 billion expended

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• Commander’s Emergency Response Program (CERP)—$3.96 billion appropriated, $3.73 billion obligated, and $3.73 billion expended

IRFF and CERP funds can no longer be used for new obligations. Nearly half of the unexpended obligations are within the ISFF. The Congress has also allocated $10.45 billion in smaller funding streams. 444 The Congress has already made cuts in the US aid requests and has shown increasing resistance to large amounts of future funding. On April 15, 2011, after several temporary extensions, a total of $3.7 billion was appropriated for FY2011 to Iraq versus a request of $5.05 billion. Just $2.3 million of that amount (one-tenth of 1%) was obligated from ISFF, ESF, and INCLE, while $42 million was obligated from the CERP, or 64% of its FY2011 appropriation.445 The FY2012 budget request totaled $6.83 billion. There was no request for ISFF funding in the FY2012 budget; instead requests were made for $1 billion each for Foreign Military Financing (FMF) and in INCLE to support ISF as part of “Overseas Contingency Operations”.446 Under the US Budget Control Act of 2011, Contingency Operations would not be constrained by discretionary caps.447 Congress has passed short-term funding for operations in Iraq on several occasions, including through November 18, 2011, while the FY2012 budget was being considered.

In February 2012, the US acknowledged it would be cutting the funding for the US Embassy in Baghdad by 10 percent in 2013, as part of the $4.8 billion spending plan the State Department is requesting for the mission for the 2013 fiscal year that begins October 1, 2012.448 Michael W. McClellan, the embassy spokesman, stated that to compensate for the cuts the embassy was planning to hire “Iraqi staff and sourcing more goods and services to the local economy,”449

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Figure VII.9: Funding for Iraqi Reconstruction and the Impact of US Aid: 2003-2011

Source: SIGIR, Quarterly Report, January 30, 2012, p. 21.

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Chapter VII: US Strategic Competition with Iran: Competition in Iraq Figure VII.10: Status of US Aid Funds as of 9/30/2011

Source: SIGIR, Quarterly Report, January 30, 2011, p. 19.

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Iraqi Funding of Iraq Development Figure VII.11 shows that the Iraqi economy is improving and that increased oil revenues have reduced Iraqi dependence on both Iran and the US. Iraq is now largely funding its own development with outside support from other organizations. Reporting by SIGIR notes that oil revenues have risen sharply and moved Iraq out of the major budget crisis it encountered during 2008-2009: As of September 30, 2011, the GOI had received $56.07 billion in oil receipts for the year, exceeding the amount received in all of 2010. Annual oil receipts to date are 57% more than the $35.60 billion received during the first nine months of last year and 22% more than the $45.95 billion projected through September 30, 2011 Overall, the 2011GOI budget estimated that 89% of annual revenue would come from oil exports…So far this year, price levels and export volumes are both higher than what they were in 2010. As of September 30, 2011, Iraq had received an average of $102.83 per barrel of oil exported – well above the average of $74.56 per barrel received in 2010. Oil export volumes averaged 2.1 million barrels per day (MBPD) during the first nine months of the year — 4% less than the projected rate of 2.2 MBPD, but more than last year’s average of 1.9 MBPD. Iraq had record-high annual oil receipts of $58.79 billion in 2008; at the current pace, the GOI will surpass that amount by mid-October.450

Maliki announced a National Development Plan in July 2010 estimated to cost $186 billion between 2010 and 2014, with over half of the funding from the government and the rest coming from the private sector. In February 2010, the IMF approved a two-year, $3.7 billion loan package for Iraq for the purpose of budget support, structural reforms, and macroeconomic stability.451 As Figure VII.12 shows, Iraq’s oil revenues are capable of funding larger budgets – a factor that makes Iraq less dependent on both Iran and the US, but critically dependent on both high oil revenues and an effective level of governance and political action that does not yet exist and may not exist for years to come. In February 2011, the GOI approved a budget of $82.62 billion, while projecting $69.18 billion in revenues – creating a deficit of $13.44 billion. The budget figures are dependent on oil production and prices. An estimated 89% of the budget was dependent on oil revenues. The GOI took in $20.11 billion in oil-export receipts the 3rd quarter of 2011, setting a post-2003 record.452 As of November 2011, Baghdad received $56.07 billion in oil revenues for the year, more than all of 2010 combined.453 As of November 2011, the GOI was debating a preliminary 2012 budget of more than $100 billion.454 The IMF projected Iraq’s real GDP growth rate for 2011 at 9.6%, up from less than 1% in 2010.

455 However, Iraq ranks 161st in the world in per capita income and has a population that has risen from 18.1 million in 1990, to 30.4 million in 2011, and will have a UN estimated 64 million in 2050.456 In late 2011, SIGIR reports that the Council of Ministers approved a draft budget of $100.1

billion, with a projected $14.7 billion deficit for 2012.457

The budget was predicated on crude oil not falling below $85 per barrel and the country’s ability to export an average of 2.625 MBPD during the year. As shown in Table 4.4, the draft represents a 21% rise in projected spending over the 2011 budget, and it follows substantial increases both last year and in 2010. In 2009, the budget was set at $58.61 billion.

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The CoM’s 2012 draft budget, which requires CoR approval to become law, calls for $31.8 billion of new capital spending—a 24% jump over 2011—which is likely to be put toward further rebuilding of the country’s obsolete and rundown infrastructure. Proposed operational spending of $68.3 billion for such recurrent items as government salaries, support for state-owned enterprises, and food subsidies is 20% higher than in 2011. The Ministries of Oil and Electricity have the largest capital budgets.

This can only fund the first steps toward recovery and development, and much depends on security and political stability, but it is a step forward.

Finally debt and reparations remain a problem. While estimates differ, SIGIR reports that, 458 The GOI established a committee this quarter to deal with Iraq’s public debt, most of which stems from the Saddam era. Estimated at between $130 billion and $140 billion in 2003, the government debt had fallen to $92 billion in 2010 according to the CBI. About $45 billion of this amount is eligible for debt-reduction negotiation under the same terms of the 2004 Paris Club agreement under which 19 nations, including the United States, wrote off 80% of outstanding debt. Among the remaining sovereign creditors, Arab neighbors—including Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates—are collectively still owed about $40 billion. Iraq owes Poland $850 million.

In addition to this debt, Iraq also owes war reparations stemming from Saddam’s invasion of Kuwait in 1990. At the end of 2011, Iraq owed just over $18 billion in reparations—mainly to Kuwait. Iraq uses 5% of its crude oil income to pay these reparations.

The US has long sought Saudi and Kuwait forgiveness of these debt burdens, and such action might do much to both improve Iraqi stability over time, and help tilt Iraq away from Iran.

Chapter VII: US Strategic Competition with Iran: Competition in Iraq Figure VII.11: Progress in the Iraqi Economy: 2004-2011

SIGIR, Quarterly Report, January 30, 2012, p. 83

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Chapter VII: US Strategic Competition with Iran: Competition in Iraq Figure VII.12: Oil revenues vs. the Iraqi Budget: 2004-2011

SIGIR, Quarterly Report, October 30, 2011, p. 28, and January 30, 2012, p. 87

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The Uncertain Quality of US Aid and the Need to Focus on Advice and US Private Investment Looking towards the future, the quality of US aid and the scale of US private investment will be the key factors in both competition with Iran and in meeting Iraq’s needs for economic development and stability. In spite of massive spending, past US aid has had an uncertain impact on America’s image in Iraq. According to the SIGIR’s October 2010 report, American reconstruction programs had too low a profile among Iraqi citizens.459 Safia al-Souhail, a member of the Council of Representatives and of Maliki’s State of Law coalition, told the SIGIR, “If you lived in a community and someone donated money to expand the water treatment plant in your neighborhood, it is unlikely the average household would know who donated the money.”460 The US is now focused on small programs to help Iraq build capacity in key areas, though these efforts are likely to have limited visibility and impact on Iraqis and US and Iranian competition.

USAID now has five such projects; two ongoing and three new. SIGIR reports that the ongoing projects include: The Iraq National and Provincial Administrative Reform Project (called Tarabot, or “linkages” in Arabic), with $151 million from the ESF. The new initiative follows the long-running National Capacity Development Program (called Tatweer, or “development,” in Arabic), which was concluded on July 31, 2011. Like Tatweer, Tarabot aims to support the GOI by strengthening federal, provincial, and subprovincial government entities while working to increase provincial control over public-policy decisionmaking and government resources. The project is scheduled to conclude in 2015.

The Governance Strengthening Project (GSP), a $131million ESF-funded effort that aims to continue the work of the Local Governance Program (LGP), which ended in September. The project will aim to develop Iraq’s provincial governments amid concerns raised in evaluations of the LGP about the ability of the central government to devolve power to the provinces. 461

The new US projects are shown in Figure VII.13, and it is clear that they are relatively small and narrowly focused. Major new funding will be needed to sustain these efforts – and US competition with Iran – in FY2013 and beyond.

While the US may be able to partially compensate for cuts in aid by focusing on the technical advice and expertise Iraq needs to use its own resources effectively, the levels involved and their visibility are very low. Congress significantly reduced aid to Iraq in FY2011 and FY2012, and may well do so again in FY2013 and beyond.

This makes the lag in American energy investment and commercial ties even more important. It is also unlikely that near- to mid-term US private investment will be able to replace American aid or compete with Iraq’s trade relationship with Iran. Some American companies have been increasing investment in Iraq, but many have been risk-averse.

US Ambassador Jim Jeffrey has actively encouraged American investment, but American businesses have been slow to jump into Iraq’s business environment, which ranks 166th out of 183 countries in a World Bank report.462 It also ranked as the tenth most difficult country to start a business, fifth most difficult for cross-border trade, and seventh most difficult to enforce a contract.463 Iraq made no business sector reforms in 2010.

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Figure VII.13: New US Aid Projects in 2011

Source: SIGIR, Quarterly Report, October 30, 2011, p. 45.

US and Iranian Competition in Iraq’s Petroleum Sector Figure VII.12 shows that non-US firms have dominated the bidding for Iraq’s efforts to rehabilitate and expand its oil and petroleum-related sector. Progress in the petroleum sector has been aided, however, by several American companies working in Basra, namely Halliburton, Baker Hughes, Schlumberger, and Weatherford,464 while Exxon circumvented Baghdad and signed deals with the Kurds in late 2011.465 Halliburton is working with Shell to develop the Majnoon oil field 37 miles from Basra.466 Majnoon is one of the world’s largest oil fields, named after the Arabic word for “crazy” because of the size of its oil reserve estimates of up to 25 billion barrels.467 However, the leading investor in Iraq’s oil industry is not the United States, but China.468 Moreover, oil cooperation between Iraq and Iran may also strengthen Iraq’s ties to Iran and increase Iranian ability to deal with sanctions. Construction of a proposed pipeline between Basra, Iraq and Abadan, Iran is still stalled at the doorstep of the Iraqi government, six years after both countries signed a Memorandum of Understanding.469 The pipeline would transport up to 150,000 barrels of crude a day from Iraq to Iran, and Iranian refined products would ship back to Basra.470 Iraq’s Kurdish region also exports oil through Iran, incentivizes Iraqi cooperation with Iran, and allows Iran to soften the impact of American-backed sanctions.471 The key problem this presents for Iran is that both Iran and Iraq have long competed to be the more important “oil power” – competition that has scarcely ended. When Iranian troops crossed

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the Iraqi border and took control of Well 4 of the Fauqa Field in 2009, crude oil futures increased by 2.2%.472 Energy competition led both states to suddenly raise their claims for oil reserves during the Iran-Iraq War – an experience they have recently repeated. In 2010, weeks after Iraq announced crude oil reserve estimates of 143.1 billion barrels, Iran announced a new estimate of 150.31 billion barrels.473 Both were significant increases that had little substantive evidence to support them: Iraq’s estimate was 25% higher than its previous estimate, while Iran’s was 9% higher.474 The timing of the announcements could indicate the intensity of oil competition between the two countries and Iran’s intention not to be outdone by its neighbor. A former oil minister who served under Saddam Hussein, however, said both estimates are politically motivated and unreliable.475 Iraq still has yet to rejoin OPEC’s production quota system.476 Figure VII.12: Results of the First Two Rounds of Bidding for Oil Development in Iraq

Source: EIA, Iraq, A Country Study, September 2010, http://www.eia.gov/countries/cab.cfm?fips=IZ

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Competition in Diplomacy and for Iranian Ability to Create an “Axis” of Influence in Iraq, Syria, and Lebanon Diplomatic efforts to encourage US-Iranian collaboration, rather than competition, in Iraq have failed, and this aspect of competition continues to expand. Following the December 2006 Iraq Study Group recommendation to include Iran in stabilization efforts in Iraq, the US and Iran took part in three regional conferences on Iraqi stability between March 2007 and April 2008.477 Bilateral talks between the US and Iran took place between May and August of 2007, but produced several impasses and did not continue.478 The US and Iran have since competed diplomatically to shape Iraq’s political system and each has intervened in Iraqi political deadlocks to broker agreements favorable to their interests.

Diplomatic Competition Iran sees diplomacy in Iraq as a key area to compete with the US, and one where it can win with little compromise or cooperation. This is illustrated by the role of the Qods Force over Iran’s diplomacy and in the background of Iranian ambassadors and other officials in Iraq. The current Iranian ambassador to Iraq, Hassan Danafar, and his predecessor, Hassan Kazemi-Qomi, were members of the Iranian Revolutionary Guard Corps (IRGC).479 In October 2007, General Petraeus claimed that Kazemi-Qomi was still a member of the Qods Force.480 Qomi had previously helped organized Hezbollah in Lebanon.481 Danafar was commander in the IRGC, deputy commander in its navy, and also a member of the Qods Force.482 Danafar is a native of Baghdad but was expelled by Saddam’s regime for ethnic ties to Iran.483 During the Iran-Iraq War, he was an IRGC ground forces operations commander and was responsible for the planning and operations division of Khatam-ol-Anbia (“The Last Prophet”), an Iranian company under IRGC control.484485 Khatam-ol-Anbia, which employs 40,000 people and has ties to Chinese oil companies, is responsible for projects in oil, industry, natural gas, transportation, and construction.486 Danafar was also Secretary of the Department of Iran-Iraq Economic Development and headed the Mobayen Center, a cultural center that Iran Focus News and Analysis accuses of training Iraqis to work with the Qods Force. The oppositionist National Council of Resistance of Iran also accuses the Qods Force of having its members pose as Iranian businessmen.487 Immediately before assuming the post of ambassador, Danafar headed the Center for Reconstruction of Holy Sites.488

The Problem of Syria Recent competition in diplomacy involving Iraq’s relations with Syria has made Iraq a regional issue. A violent crackdown by President Bashar al-Assad’s security forces against protesters in Syria led to widespread condemnation in much of the Arab and Western world, while Iran remained one of Syria’s few supporters in the Middle East.

However, key divisions have emerged within the Arab world. The predominantly Sunni Southern Gulf states have moved quickly not only to condemn the Assad regime, but also to offer rhetorical, financial and potentially armed support in the form of small arms smuggling to insurgents opposing Assad. Meanwhile, countries in the Arab League beyond the Gulf Cooperation Council have been far more reticent about further involvement in the Syria crisis.

In particular Iraq and Lebanon, hobbled by their own internal sectarian divisions, remain divided

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about how best to address the Syria crisis. While Lebanon has seen an escalation in SunniAlawite tension in northern Lebanon, Iraq’s Sunnis and Shiites are divided in their response to Syria; the former has shown a willingness to aid Syria’s mainly Sunni opposition forces, while the latter has sought tighter controls of the Syria-Iraq border and has avoided real condemnation of the Assad regime. 489 In May, Maliki publicly advocated reform in Syria, but under Assad's direction. By August, he urged protestors not to “sabotage” the Syrian state490 and mimicked the accusation from Damascus and Tehran that Israel, not Syria's own citizenry, was responsible for Assad's situation. Muqtada al-Sadr also stated in late August that he was against the calls for Assad's resignation "by the 'Leader of Evilness' Obama and others."491 In July and August, Iraq expanded its economic and political ties with Syria, including hosting high-level representatives and supplying Syria with urgently needed oil. The Iraqi government reportedly even agreed to renew hundreds of millions of dollars in Saddam-era contracts with Syria, in turn, lining the pockets of Assad's cronies. Additionally, unlike Turkey, Baghdad has closed its border to Syrians fleeing violence and dissidents looking to organize.492 On September 20, 2011 Iraq seemed to change its position and stated that Assad should transition power. An Iraqi government spokesman stated, “Our goals are the same as the United States has in changing the regime.”493 The spokesman noted that this was Iraq’s long-held view, but concern over a post-Assad sectarian conflict restrained a tougher stance. The growing international condemnation of Assad was never absent in Iraq. While many Iraqi leaders and citizens were skeptical of the Iraqi government’s initial pro-Assad stance, public anti-Assad sentiments came mostly from Sunni Arabs, but also privately among Kurdish leaders and members of the Iraqi cabinet.494 Efforts to forge a coherent Iraqi national policy on the Syria crisis have been complicated by pressure from Iran and the perception that Iran will be needed to fill coming voids after the US withdraws. US officials are also concerned that Iran will increase its involvement in Iraqi affairs to compensate for any loss of its Syrian ally. In late August, Iran increased attacks in Iraq’s Kurdish north, just as a major Iranian newspaper warned Syria could export "warfare" to its neighbors if they turned against Assad.495496 On September 8, 2011, President Ahmadinejad called for Assad to end the violent crackdown, likely a political attempt to repair Iran’s image in the Muslim world, given that Iran continued to broadly support Assad’s handling of the situation.497 Iraq took a more ambiguous stand. It opposed the Arab League’s November 2011 move to suspend Syria’s membership, but voted in January for the plan for a transition of power in Syria. Still, both Iraq and Iran are perceived as wanting his regime to remain in power.498 Iraq’s uncertainty on Assad is due to continued uncertainty about the actual nature and scale of the Syria crisis. The Syrian protests became steadily more violent in Sunni areas after late September 2011, and this has continued through March 2012, with some signs that Syria may be moving towards a serious civil war. Assad has continued to make growing use of violence as his key political tool, linking any resistance to external meddling. That the cycle of unrest in Syria has taken on a decidedly sectarian tone is also largely thanks to Assad’s continued reliance on fears of sectarianism. This has proven especially useful in mobilizing not only his minority Alawite support base, but also what remains of his Sunni support among the merchant class in Aleppo and Damascus, as well as Sunni members of the Syrian Baath Party. 499 There are also

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growing signs that Iraqi Sunni groups have become more active in supporting the mainly Sunni opposition. By mid-February 2012, there were indications that the Shiite-led government of Prime Minister Maliki had taken steps to tighten security along its porous 600 km border with Syria to interdict the flow of arms to its western neighbor amid reports that Sunni fighters were crossing.500

By March 2012, Iraq continued to appear divided against itself about its response to the Syria crisis. How Baghdad reacts in terms of facilitating or obstructing aid from Iran, trade with Syria, and accepting displaced Syrians and insurgents, will ultimately determine its intentions. The Arab Gulf states and the US can try to push Iraq towards reversing its position, but Tehran’s pressure on Iraq may be a defining moment in Iran-Iraq relations, as well as in Iraq’s relations with its other Arab neighbors. On the one hand, an Iraq that tilts too far toward Iran and Syria, could find it difficult to deal with its Arab neighbors in the future. However, that other Arab states – like Jordan and Lebanon – also find it difficult to shape a coherent policy on Syria is a testament to how concerned neighboring states are of negative spillover effects should Syria deteriorate further.

Iran’s support for Assad has affected Turkey’s willingness to counterbalance Iranian influence in the region, and Turkey has joined Iraq’s Southern Gulf neighbors and the rest of the Arab League in pressing for a stronger Iraqi stand on Syria. In September 2011, Turkey agreed to house the sophisticated X-Band, or AN/TPY-2, US radar system in Kurecik, Turkey, 435 miles from the Iranian border. The agreement came amid Turkey’s reservations over Iran’s evolving missile capabilities and concern over Iran’s support for Assad. 501 Turkey was adamant that the agreement not pinpoint Iran as the motive behind the agreement, but as part of a broader NATO/Turkish defense system. Turkey enjoys close economic ties to Iran and has criticized the US posture on Iran’s nuclear program. Iran has stated the deal will only escalate regional tensions.

The American radar will be part of a larger system that will include sharing intelligence with Israel – a major point of contention within Turkey. The deal, however, is still a milestone in improving US-Turkish relations. Turkey also permits US drones that monitor Kurdish rebels in Iraq’s north to be launched from their soil and has confirmed talks for their continued use after the US leaves Iraq. It is unclear whether armed drones or just surveillance drones would be considered.502

Implications for US Policy There are major uncertainties over the size, purpose, and funding of the future civil and military US effort in Iraq, and over Iran’s role in limiting US influence. There are reports that Iran played a major role in blocking US efforts to negotiate a strong Strategic Framework Agreement (SFA) with Iraq. A BBC report dated November 14, 2011 claimed that,503 Washington had lobbied hard, and publicly, for a new agreement that would allow the US to keep a contingent of several thousand soldiers in Iraq. After months of indecision, in October, the government in Baghdad said no - or at least not under conditions acceptable to the Pentagon.

Some detected the hand of Iran behind the decision. Adviser Sa'ad Youssef al-Mutalabi says that while the decision had been Iraq's, Iranian sensitivities had played their part. "It is taking Iran into consideration. We understand that there is a certain sensitivity. And we do not want an excuse for the Iranians to intervene in Iraq on the pretext that you have American troops."

That same BBC report noted, however, that Iran’s role was uncertain,

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Michael McClellan is the spokesman for the US embassy in Baghdad says: "We are not being pushed out and I don't think it's at the behest of Iran. Since 2003, our objective here has been to have an Iraq that is sovereign, stable and self-reliant…They are sovereign because they did make their own decision. We did not just come back at them and say: 'Sorry but we're going to keep our troops here anyway.'"

What does seem clear is that the full withdrawal of American troops has been a significant shortterm boost to Iranian ambitions, and that much now depends on how successful US efforts are in finding some way to build a meaningful and enduring strategic partnership with Iraq. Moreover, for all of the internal problems and uncertainties in Iraq, the US cannot afford to allow Iran to transform any short-term gains into lasting victory through default.

There Will be No Competition without Adequate Resources The State Department’s role will be critical to US success. US forces have fully withdrawn, provincial reconstruction teams have ended, and the State Department has taken control of far more limited operations than the US originally sought under the SFA. State must now seek to influence Iraq’s broader diplomatic presence, development assistance, police development, and modernization of the Iraqi Security Forces.504 State must rely heavily on existing relationships characterized in the SFA, including important advisory roles that can be maintained without a large US troop presence.

State will need funds for traditional technical assistance to government ministries and provinces through agencies like USAID and the DOJ. It will also need funds for less familiar roles, such as the coordination of the largest Foreign Military Sales (FMS) and Foreign Military Financing (FMF) programs in the world Funding continuing US military, and police training presence in Iraq and. US arms transfers will be particularly critical. The size, composition, and ultimate success of the military training mission are particularly crucial and uncertain. It is not clear whether US aid programs can successfully be scaled back without compromising their intended goals. It remains uncertain how an influx of contractors will perform, and whether or not State can effectively manage them State will also need funds for a variety of permanent installations within Iraq,505 including consulates in Erbil and Basra and ten OSC-I sites.506 The lack of continued US troops will complicate many of State’s efforts and raise their cost. US forces in Iraq performed several key functions prior to State taking the lead, including training, equipping, advising and supporting the ISF, conducting partnered counterterrorism operations with Iraqi forces, and protecting civilian capacity building efforts.507 Not only will State take on oversight of many of these functions, but there will also be a heavier reliance on Iraqi forces to fill security voids.

This effort cannot be cheap– although it will probably cost substantially less even at the start than the original plan to spend $6.83 billion. Unfortunately, the politics surrounding the foreign affairs budget of both the State and Defense Departments are volatile, and there may be significant further cuts to expenditures in Iraq. It is far from clear how firmly and fully the US Congress and Administration as whole understand the challenges involved.

The US Role from Outside Iraq Much will also depend on what the US does outside of Iraq to deter and contain Iran.

Unfortunately, the US has so far done little to explain the new security posture it will establish in the Gulf, Jordan, and Egypt. On December 16th, Ben Rhodes, the deputy national security advisor for strategic communications, is reported to have said that the US could revert to a pre-

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1990 posture in the Gulf, and there was no real need to either deal with Iran or change the US strategic and military posture in the region. He explained that, “the scaling back of the US military presence in the Gulf was part of the administration's strategy to "demilitarize" US foreign policy and shift to an approach that favored counter-terrorism tactics.” He also said the end of the war in Iraq -- and eventually the war in Afghanistan -- proved that large military deployments are not necessary to deny terrorists safe haven in foreign countries.” 508 "I don't think we're looking to reallocate our military footprint in any significant way from Iraq. They won't be reallocated to other countries in the region in any substantial numbers … The argument several years ago... was that you needed to have a very large US military footprint so that you could fight the terrorists ‘over there,' so they wouldn't come here. But we've demonstrated the opposite, that you don't need to have a large US military footprint in these countries, that you can shrink them and focus on al Qa’ida in a far more specific way... and still very much accomplish your national security goals….

"That allows us in many respects to demilitarize elements of our foreign policy and establish more normal relationships…That's our posture in the region and its far more in line with where we were before 1990. …President Obama has kept a core promise of his to the American people. He opposed the war in Iraq as a candidate for Senate in 2002, before it started. He put forward a plan to end the war as a senator and promised to end the war as a candidate. And now we can definitively say he has kept that promise as president…America is safer and stronger because of the way we ended the war in Iraq."

In fairness, it is clear that the Obama Administration did carry out extensive planning for a new approach to shaping the US force posture in the region in late 2011. The new strategy the Obama Administration advanced in January 2013 did take Iraq into account, it made the Gulf and Middle East equal to Asia as one of the two critical priorities for US strategy, and the Department of Defense carried out contingency planning and war games both examined the threat post by Iran in great detail and devel0ped specific force plans and plans for improved cooperation with other Gulf states.

The fact remains, however, that the public stance of the Administration, the Congress, and opposition Presidential candidates is at best what might politely be called a bipartisan intellectual vacuum.

The Iranian Role in Competing in Iraq Iran has very different goals for Iraq than those of the US. Iran seeks to ensure that Iraq does not serve as a base for the US, serve US interests, or reemerge as a threat to Iran.

Iran shares a long and porous border with Iraq, and seeks to create a stable and malleable ally, not a peer competitor. It seeks to rid the country of American influence – particularly of American military personnel – to the greatest extent possible. Iran has aggressively used its networks, patronage, economic ties, religious ties, aid money, and military support to various factions in Iraq to achieve these goals.

Moreover, Iran now sees Iraq as playing a critical role in its efforts to keep the Assad regime in power in Syria, preserve its alliance with Syria and its influence in Lebanon, and find ways to avoid the political upheaval in the Arab world from undermining Iran’s strategic interests and ambitions. The near civil war in Syria threatens to deprive Iran of its only important ally in the Arab world, and pressuring the Maliki government to support Assad, and seeking to limit Sunni arms transfers through Iraq to Sunni opposition movements in Syria, has become a significant Iranian objective – one which if fully

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successful would raise the specter of a real “Shi’ite crescent” that includes Iran, Iraq, Syria, and Lebanon.

The “bad news” is that Iran now enjoys deep ties to the ruling Shi’ite parties and factions in a country with which it once fought a fierce and bloody eight-year war. It plays an active role in mediating between Iraqi political leaders, it has ties to the Sadrists that are now the largest party in Iraq’s ruling collation, and the IRGC has significant influence over elements within the Iraqi security forces. During the past seven years, Iran has also deployed a large mix of cultural, military, and economic resources available to influence Iraq. Iran will leverage its resources to ensure Iraq prevails as an ally. Yet Iran’s role in Iraq is complex, and it will be no simple task to mold Iraq into the ally Iran wishes it to be.

The “good news” is that most of the Iraqi Shi’ite Iraqi is “quietist” and does not support Iran’s concepts of an Islamic revolution or a Religious Supreme Leader. Sunnis and Kurds do not support Iranian influence in Iraq, and polls show that both Sunni and Shi’ite Iraqi Arabs see themselves as having a very different cultural and national identity from Iranian Persians. Many of Iran’s actions and economic activities since 2003 have led to tensions with various factions in Iraq.

Preventing Iran’s Uncertain “Victory” This aspect of the competition between the US and Iran has reached a critical stage The advancement of Iranian ambitions following the US withdrawal depends on how successful US efforts are in building an enduring strategic partnership with Iraq. Much will depend on the level of continued US diplomatic, advisory, military, and police training presence in Iraq, and on Iran’s ability to exploit the diminished US presence.

The Iraqi government will have to grapple with lack of government capacity, the loss of foreign aid, the smoldering remnants of the insurgency and foreign fighters, broken infrastructure, basic insufficiencies in public services due in part to corruption, ineffective institutions, authoritarian tendencies, internal calls for autonomy, and ethnic and religious tensions. As the US departs, Iraq may increasingly look to Iran for support.

Iran is actively attempting to exploit the situation in Iraq through relationships with Shi’a political parties, factions. Iran seeks to stem US influence in Iraq, and benefit from future commercial opportunities with its regional neighbor. Iran’s attempts to influence politics and practice in Iraq remain complicated; however, as Iraq’s many Shi’a parties remain divided on many issues, and wary of being controlled by Tehran.509 Some argue that these trends mean that Iran may be the de facto winner of the US invasion of Iraq. Iran now enjoys deep ties in a neighboring country with which it once fought a fierce and bloody eight-year war. Iran has a great deal of cultural, military, and economic resources available to influence Iraq. Moreover, Prime Minister Maliki may have alienated enough Sunnis, and caused enough Kurdish fears to make him and other Shi’ite steadily more dependent on Iran.

Yet Iran’s success in Iraq remains uncertain at best. In spite of the growth of its influence in Iraq and ties to much of Iraq’s current Shi’ite political leadership, Iran is anything but popular with many Iraqis, including many Shi’ites. As noted earlier, most Iraqi Shi’ite religious leaders are “Quietists” who show little support for Iran’s concept of a Supreme (Iranian) military leader, or

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for Iranian efforts to increase its religious presence in Iraqi Shi’ite shrines like Najaf. It will be no simple task to mold Iraq into the ally Iran wishes it to be.

Iran’s efforts to win influence in Iraq have produced widespread Arab anger and resistance, particularly from the Southern Gulf states and Jordan. Iran’s pressure on Iraq to support Syria in spite of Assad’s attacks on his own people have anger many Iraqi Sunnis and some Iraqi Shi’ite as well. They have led some Sunni factions in Iraq top provide arms to Sunnis and other antiAssad elements in Syria, and to still further Arab pressure on the Iraqi government to distance itself from Iran.

Iran faces also faces historical problems and tensions over areas along the Iranian-Iraqi border.

One problem is Iraqi memory of the bloody course of the Iran-Iraq War that lasted from 1980 to 1988. Another is public resentment over Iran’s current political and economic influence. Iran’s incursion in the Fakka oil fields sparked widespread protests across Iraq and continued attacks in the Kurdish north are creating growing resentment. Iran’s strongest Iraqi allies did not perform well in recent polls, but Sadr’s followers remain pivotal.

US Success Depends on Iraqi Success Much, however, will also depend on how hard the US continues to compete for influence, especially in aid, military sales, and security training. If the US does not compete skillfully and consistently, Iraq’s insecurity and ties to Iran may tether Iraq closer and closer to Tehran and further from the US. Iran’s relative influence in Iraq may rise even if Iraqi nationalism chafes against Iranian interference. If there is any certainty at all, it is that the US unleashed forces during 2003-2011 that it must now deal with consistently over what may well be the next decade, or risk seeing Iran as the real winner of the war in Iraq.

At the same time, the US faces the problem that it can only aid Iraq to the level Iraq permits. US success will be dependent on far more than US political support and funding. It will ultimately depend on whether Iraq’s leaders can become unified enough to move the nation forward or drag it down into new ethnic and sectarian tensions and the status of a failed state.

Iraq’s leaders face critical choices regarding internal violence, deficiencies in government oversight and corruption, regional and international politics, and how to reshape and modernize their governance, economy, and security forces. They have so far consistently acted to seek or preserve power, rather than to serve the nation, but this tends to make Iraq’s Shi’ite leaders more dependent on Iran.

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Milani, Mohsen M. “Meet Me in Baghdad.” Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad?page=show 2

Gmail - 12/12, WH: POTUS Remarks w/ Iraqi PM al-Maliki (https://mail.google.com/mail/?ui=2&ik=30f86d1605&view=pt...1 of 10 12/13/11 7:30 AM. 3

“The State of Iraq”, The Carnegie Papers, Marina Ottaway and Danial Kaysi February 2012.

4

“Quarterly Report and Semiannual Report to the US Congress”, Special Inspector General for Iraq Reconstruction (SIGIR), January 30, 2012.

5

“Rising Strife Threatens Tenuous Iraqi Stability”, Michael Schmidt, The New York Times, January 22, 2012.

6

http://cpi.transparency.org/cpi2011/results/.

7

CIA, World Factbook 2011, https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html, accessed December 20,2011, 8

CIA, World Factbook 2011, https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html, accessed December 20,2011, 9

DOE/ EIA, Iraq, Country Report, http://www.eia.gov/countries/cab.cfm?fips=IZ.

10

A January 24, 2012, CRS Report to Congress stated the number of proven reserves was 143 billion barrels of oil.

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” CRS Report to Congress, January 24, 2012, 24. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 11 12

EIA, International Energy Outlook 2011. Department of Energy, September 2011, pp. 229-245.

EIA, Annual Energy Outlook 2011. Department of Energy, April 2011, pp. 2, 83.

13

“Quarterly Report and Semiannual Report to the US Congress”, Special Inspector General for Iraq Reconstruction (SIGIR), January 30, 2012 14

“Quarterly Report and Semiannual Report to the US Congress”, Special Inspector General for Iraq Reconstruction (SIGIR), January 30, 2012 15

“State Department Seeks Smaller Embassy Presence in Baghdad”, Karen DeYoung, Washington Post, February 8, 2012. Available at: http://www.washingtonpost.com/world/national-security/state-department-seeks-smallerembassy-presence-in-baghdad/2012/02/08/gIQAQMX2zQ_story.html 16

“State Department Seeks Smaller Embassy Presence in Baghdad”, Karen DeYoung, Washington Post, February 8, 2012. Available at: http://www.washingtonpost.com/world/national-security/state-department-seeks-smallerembassy-presence-in-baghdad/2012/02/08/gIQAQMX2zQ_story.html 17

“US Planning To Slash Iraq Embassy Staff By As Much As Half”, Tim Arango, New York Times, February 7, 2012. Available at: http://www.nytimes.com/2012/02/08/world/middleeast/united-states-planning-to-slash-iraqembassy-staff-by-half.html 18

“State Department Seeks Smaller Embassy Presence in Baghdad”, Karen DeYoung, Washington Post, February 8, 2012. Available at: http://www.washingtonpost.com/world/national-security/state-department-seeks-smallerembassy-presence-in-baghdad/2012/02/08/gIQAQMX2zQ_story.html.

19

Sean Kane and William Taylor, “The United States in Iraq: Options for 2012,” USIP, May 16, 2011, 2.

http://www.usip.org/files/resources/The_United_States_in_Iraq.pdf 20

Sean Kane and William Taylor, “The United States in Iraq: Options for 2012,” USIP, May 16, 2011, 3.

http://www.usip.org/files/resources/The_United_States_in_Iraq.pdf

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21

“State Department Seeks Smaller Embassy Presence in Baghdad”, Karen DeYoung, Washington Post, February 8, 2012. Available at: http://www.washingtonpost.com/world/national-security/state-department-seeks-smallerembassy-presence-in-baghdad/2012/02/08/gIQAQMX2zQ_story.html 22

Sean Kane and William Taylor, “The United States in Iraq: Options for 2012,” USIP, May 16, 2011, 2.

http://www.usip.org/files/resources/The_United_States_in_Iraq.pdf 23

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, July30, 2011, 38.

24

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, July30, 2011, 38.

25

Sean Kane and William Taylor, “The United States in Iraq: Options for 2012,” USIP, May 16, 2011, 3.

http://www.usip.org/files/resources/The_United_States_in_Iraq.pdf 26

thecable@foreignpolicy.com White House: We are returning to a pre-1990 military stance in the Gulf Posted: 16 Dec 2011 10:09 AM PST 27

Chip Gagnon, "Our History with Iraq," Speech given at Cornell University, October 22, 2002.

http://www.ithaca.edu/gagnon/talks/us-iraq.htm 28

Chip Gagnon, "Our History with Iraq," Speech given at Cornell University, October 22, 2002.

http://www.ithaca.edu/gagnon/talks/us-iraq.htm 29

Bob Woodward, “CIA Aiding Iraq in Persian Gulf War,” Washington Post, December 15, 1986.

30

Russ W. Baker, “Iraqgate,” Columbia Journalism Review, March/April 1993.

31

Murray S. Waas and Craig Unger, “In the Loop: Bush's Secret Mission,” The New Yorker Magazine, November 2, 1992. http://www.newyorker.com/archive/1992/11/02/1992_11_02_064_TNY_CARDS_000359993 Also see: Michael Dobbs, “US Had Key Role in Iraq Buildup: Trade in Chemical Arms Despite Their Use on Iranians, Kurds,” Washington Post, December 30, 2002.

Geoffrey Wheatcraft, “An Uncertain Ally in Iraq,” New York Times, August 29, 2002. http://www.nytimes.com/2002/08/29/opinion/an-uncertain-ally-on-iraq.html Donald W. Riegle, Jr. and Alfonse M. D'Amato, “Housing and Urban Affairs with Respect to Export Administration,” United States Senate, 103d Congress, 2d Session, May 25, 1994.

32

US Department of Defense, The Operation Desert Shield/Desert Storm Timeline, August 8, 2000.

http://web.archive.org/web/20080526135240rn_1/www.defenselink.mil/news/newsarticle.aspx?id=45404 33

For more, see Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 34

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007. 303.

35

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 303.

36

CIA. The World Factbook. Updated January 12, 2011.

https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html 37

Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad

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Adapted by Anthony H. Cordesman from IISS, The Military Balance, various editions; Jane’s sentinel series

39

Anthony Cordesman and Emma R. Davies, Iraq’s Insurgency and the Road to Civil Conflict, Westport, Connecticut: Praeger Security International, 6.

40

Jane Arraf, "US dissolves Iraqi army, Defense and Information ministries," CNN, May 23, 2003, http://www.cnn.com/2003/WORLD/meast/05/23/sprj.nitop.army.dissolve/ 41

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 306.

42

State Department memo, "US embassy cables: Iran attempts to manipulate Iraq elections," The Guardian, December 4, 2010. http://www.guardian.co.uk/world/us-embassy-cables-documents/234583 43

Anthony Cordesman, Iraq and the United States: Creating a Strategic Partnership, Washington, DC: Center for Strategic and International Studies, June 2010, 122.

44

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, pp. http://www.fas.org/sgp/crs/mideast/RS22323.pdf

i., 2.

45

State Department memo. "US embassy cables: Iran attempts to manipulate Iraq elections," The Guardian, December 4, 2010. http://www.guardian.co.uk/world/us-embassy-cables-documents/234583 46

ABC News, December 19, 2011, 8:20 AM; Jack Healy and Michael R. Gordon, Iraqi Parliament Boycott Threatens Coalition, New York Times, 19 December 2011; Jack Healy, Falluja Is Left Wounded by War, New York Times, 14 December 2011; Jack Healy, Tim Arango, and Michael S. Schmidt, Arrests in Iraq Raise Concerns About Maliki, New York Times, 14 December 2011.; US Forces Quiet Iraq, Khaleej Times; 18 December, 2011; Andre Quinn, As soldiers leave, US diplomats face huge Iraq challenge, Reuters, 18 December, 2011; Rania El Gamal, Iraq Sunni bloc suspends parliament participation, Washington Post, D18 December 2011.

47

“Agreement Between the United States of America and the Republic of Iraq On the Withdrawal of United States Forces from Iraq and the Organization of Their Activities during Their Temporary Presence in Iraq,” November 17, 2008. http://www.state.gov/documents/organization/122074.pdf 48

R. Chuck Mason, “US-Iraq Withdrawal/Status of Forces Agreement: Issues for Congressional Oversight,” CRS, July 13, 2009. http://www.fas.org/sgp/crs/natsec/R40011.pdf 49

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, i. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 50

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 25. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 51

Strategic Framework Agreement for a Relationship of Friendship and Cooperation between the United States of America and the Republic of Iraq,” November 17, 2008. http://www.state.gov/documents/organization/122076.pdf 52

Kirit Radia “US Now Says It Is in “Negotiations” With Iraq Over Troops Post-2011,” ABC News, September 7, 2011. http://abcnews.go.com/blogs/politics/2011/09/us-now-says-it-is-in-negotiations-with-iraq-over-troops-post-2011/ 53

Gregg Jaffe and Annie Gown, “Obama wants to keep 3,000-5,000 US troops in Iraq into 2012,” The Washington Post, September 7, 2011. http://www.washingtonpost.com/world/national-security/obama-wants-to-keep-3000-5000-us-troops-in-iraq-into2012/2011/09/07 54

Tim Arango and Michael Schmidt, “Iraq Denies Legal Immunity to US Troops After 201,” New York Times, October 4, 2011.

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http://www.nytimes.com/2011/10/05/world/middleeast/iraqis-say-no-to-immunity-for-remaining-americantroops.html?_r=1&ref=middleeast 55

Liz Sly, “ Iraq kidnapping threat threatens US civilian effort,” Washington Post, December 5, 2011.

http://www.washingtonpost.com/world/middle_east/iraq-kidnapping-threat-threatens-us-civilianeffort/2011/12/05/gIQAOT1bXO_story.html?tid=wp_ipad 56

Michael Schmidt and Eric Schmitt, “Flexing Muscle, Baghdad Detains US Contractors,” New York Times, January 15, 2012.

57

Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 58

http://cpi.transparency.org/cpi2011/results/.

59

CIA, World Factbook 2011, https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html, accessed December 20,2011, 60

CIA, World Factbook 2011, https://www.cia.gov/library/publications/the-world-factbook/geos/iz.html, accessed December 20,2011, 61

DOE/ EIA, Iraq, Country Report, http://www.eia.gov/countries/cab.cfm?fips=IZ.

63

EIA, International Energy Outlook 2011. Department of Energy, September 2011, pp. 229-245.

64

EIA, Annual Energy Outlook 2011. Department of Energy, April 2011, pp. 2, 83.

65

Anthony Cordesman and Emma R. Davies, Iraq’s Insurgency and the Road to Civil Conflict, Westport, Connecticut: Praeger Security International, 133.

66

Robin Wright and Peter Baker, "Iraq, Jordan See Threat To Election From Iran," The Washington Post, December 8, 2004. http://www.washingtonpost.com/wp-dyn/articles/A43980-2004Dec7.html 67

Robin Wright and Peter Baker, "Iraq, Jordan See Threat To Election From Iran," The Washington Post, December 8, 200. http://www.washingtonpost.com/wp-dyn/articles/A43980-2004Dec7.html 69

Prince Saud al-Faisal, in remarks to the Council on Foreign Relations, September 23, 2005. As quoted in Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, 298.

70

State Department memo. "Around the World, Distress Over Iran," The New York Times, November 28, 2010. http://www.nytimes.com/2010/11/29/world/middleeast/29iran.html?pagewanted=all 71

Ellen Laipson, “Iraq and America… and Iran: A Policy Conundrum,” in Iraq and America: Choices and Consequences, edited by Ellen Laipson and Maureen S. Steinbruner, Washington, DC: The Henry L. Stimson Center, 133.

72

Reuters, Iraq issues warrant for Vice President, US edition, December 19, 2011, ABC News, December 19, 2011, 8:20 AM; Jack Healy and Michael R. Gordon, Iraqi Parliament Boycott Threatens Coalition, New York Times, 19 December 2011; Jack Healy, Falluja Is Left Wounded by War, New York Times, 14 December 2011; Jack Healy, Tim Arango, and Michael S. Schmidt, Arrests in Iraq Raise Concerns About Maliki, New York Times, 14 December 2011.; US Forces Quiet Iraq, Khaleej Times; 18 December, 2011; Andre Quinn, As soldiers leave, US diplomats face huge Iraq challenge, Reuters, 18 December, 2011; Rania El Gamal, Iraq Sunni bloc suspends parliament participation, Washington Post, D18 December 2011.

73

BBC, Arrest warrant for Iraq Vice-President Tariq al-Hashem, 19 December 2011 14:12 ET; Iraq issues warrant for Vice President Hashemi, Al Arabiya, December 19, 2011, Reuters, Iraq issues warrant for Vice President, US edition, December 19, 2011, ABC News, December 19, 2011, 8:20 AM; Jack Healy and Michael R. Gordon, Iraqi Parliament Boycott Threatens Coalition, New York Times, 19 December 2011

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“The State of Iraq”, The Carnegie Papers, Marina Ottaway and Danial Kaysi February 2012

75

“The State of Iraq”, The Carnegie Papers, Marina Ottaway and Danial Kaysi February 2012

106

76

"Population Estimates and Voter Turnout for Iraq's 18 Provinces," the ACE Electoral Knowledge Network, February 25, 2005. http://aceproject.org/ero-en/topics/electoral-participation/turnout/updatedelectionresults.pdf 77

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 1.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 78

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 1.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 79

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 7.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 80

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 7.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 81

"Iraqi CoR Election Results," the Independent High Electoral Commission. http://ihec-iq.com/en/results.html

82

Leila Fadel, "Fears grow that Allawi won't be included," The Washington Post, December 6, 2010.

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/05/AR2010120504165.html 83

Leila Fadel, “Without Allawi, US The Washington Post, December 10, 2010.

officials

Iraq

government

could

be

seen

as

illegitimate,”

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/05/AR2010120503223.html 84

Michael Eisenstadt, “Iran and Iraq” Iran Primer, USIP. http://iranprimer.usip.org/resource/iran-and-iraq

85

Anthony Cordesman, Iraq and the United States: Creating a Strategic Partnership, Washington, DC: Center for Strategic and International Studies, June 2010, 122.

86

Michal Hariri, "Status Update: Shi'a Militias in Iraq," Institute for the Study of War, August 16, 2010. http://www.understandingwar.org/files/Backgrounder_Shi’aMilitias.pdf 87

For an excellent analysis of how these events have shaped current Iraqi politics, see Ramzy Mardini, “Iraq’s Recurring Political Crisis”, Institute for the Study of War, February 15, 2012. Available at: http://www.understandingwar.org/backgrounder/iraqs-recurring-political-crisis.

88

Reidar Visser, "The Supreme Court Rules against Power-Sharing in the Iraqi Legislature," Iraq and Gulf Analysis, December 5, 2010. http://gulfanalysis.wordpress.com/2010/12/05/the-supreme-court-rules-against-power-sharing-in-the-iraqilegislature/ 89

Marina Ottaway and Daniel Kaysi, "Iraq’s Parliament Elects a Controversial Speaker," the Carnegie Endowment for International Peace, November 30, 2010. http://carnegieendowment.org/publications/index.cfm?fa=view&id=42037 90

Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 91

Michael R. Gordon and Anthony Shadid, "US Urges Iraqis to Try New Plan to Share Power," The New York Times, September 9, 2010. http://www.nytimes.com/2010/09/10/world/middleeast/10policy.html 92

Leila Fadel, "Fears grow that Allawi won't be included," The Washington Post, December 6, 2010.

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http://www.washingtonpost.com/wp-dyn/content/article/2010/12/05/AR2010120504165.html 93

Leila Fadel, “Without Allawi, US The Washington Post, December 10, 2010.

officials

Iraq

government

could

be

seen

as

illegitimate,”

http://www.washingtonpost.com/wp-dyn/content/article/2010/12/05/AR2010120503223.html 94

BBC, Arrest warrant for Iraq Vice-President Tariq al-Hashem, 19 December 2011 14:12 ET; Iraq issues warrant for Vice President Hashemi, Al Arabiya, December 19, 2011, Reuters, Iraq issues warrant for Vice President, US edition, December 19, 2011, ABC News, December 19, 2011, 8:20 AM; Jack Healy and Michael R. Gordon, Iraqi Parliament Boycott Threatens Coalition, New York Times, 19 December 2011.

95

SIGIR, Quarterly Report, January 2012, p. 5.

96

Gmail - 12/12, WH: POTUS Remarks w/ Iraqi PM al-Maliki (https://mail.google.com/mail/?ui=2&ik=30f86d1605&view=pt...1 of 10 12/13/11 7:30 AM. 97

Michael Schmidt and Jack Healy, “In Blow to Government, Sadr Followers Call for New Elections,” New York Times, December 26, 2011.

98

The Associated Press, “AP Interview: Deputy PM calls for Iraqi leader al-Maliki’s removal,” Associated Press, January 12, 2012.

99

Associated Press, “Iraq’s parliament speaker warns against using security forces as political battle heats up,” Associated Press, January 2, 2012.

100

“Allawi: Maliki risks splitting Iraq,” Washington Post, January 18, 2012.

101

Jack Healy and Miachael R. Gordon, “A Moderate Official at Risk in a Fracturing Iraq,” December 30, 2011.

102

Dan Morse and Aziz Alwan, “Leading Sunni official in Iraq hit by roadside bomb” Washington Post, January 2, 2012.

103

Dan Morse and Karen DeYoung, “Maliki demands return of Iraqi VP Hashemi, threatens to replace opponents,” Washington Post, December 21, 2011.

104

Josh Rogin, “Obama’s Iraq guy leaves government; says Iraq political situation still being sorted out,” The Cable, December 20, 2011 105

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” CRS Report to Congress, January 24, 2012., 23. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 106

http://www.aljazeera.com/video/middleeast/2012/01/2012119102012886604.html

107

Tim Arango, “Iraq’s Political Crisis Eases as Sunni Ministers Rejoin the Government,” New York Times, February 7, 201. http://www.nytimes.com/2012/02/08/world/middleeast/crisis-in-iraq-lulls-as-sunni-ministers-return-to-cabinet.html 108

“Iraq’s Prime Minister Gains More Power After Political Crisis”, Tim Arango, The New York Times, February 27, 2012. Available at: http://www.nytimes.com/2012/02/28/world/middleeast/maliki-wields-more-power-in-iraqafter-crisis.html?_r=1&ref=timarango 109

“Iraq’s Recurring Political Crisis”, Ramzy Mardini, Institute for the Study of War, February 15, 2012. Available at: http://www.understandingwar.org/backgrounder/iraqs-recurring-political-crisis 110

SIGIR, Quarterly Report, October 30, 2011, 60-61.

111

SIGIR, Quarterly Report, October 30, 2011, 41, 56-57.

112

It is worth noting that according the January 30, 2012 SIGIR report, the 2011 Iraqi death toll of 2,645 marks a decrease of approximately 1,000 from the preceding year.

113

“Quarterly Report and Semiannual Report to the US Congress”, Special Inspector General for Iraq Reconstruction (SIGIR), January 30, 2012.

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114

“A Violent New Year in Iraq”, Michael Knights, The National Interest, February 16, 2012. Available at: http://nationalinterest.org/commentary/violent-new-year-iraq-6517 115 116

Sources: SIGIR, Quarterly Report, October 30, 2011, p41, 56-57.

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 304.

117

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 304.

118

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 304.

119

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 309.

120

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 309.

121

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 309.

122

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 310.

123

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 311.

124

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press,

2007, 313.

125

Richard Beeston, “Two Years On, Iran Is the Only Clear Winner in the War on Saddam,” Times (London),

September 23, 2005.

126

Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 127

"Iran-Iraq War (1980-1988)," GlobalSecurity.org, April 27, 2005.

http://www.globalsecurity.org/military/world/war/iran-iraq.htm 128

Robin Wright and Peter Baker, "Iraq, Jordan See Threat To Election From Iran," The Washington Post, December 8, 2004. http://www.washingtonpost.com/wp-dyn/articles/A43980-2004Dec7.html 129

Robert Lowe and Claire Spencer, “Iran, Its Neighbours and the Regional Crises,” The Royal Institute of International Affairs, 2006.

130

Anthony Cordesman and Emma R. Davies, Iraq’s Insurgency and the Road to Civil Conflict, Westport, Connecticut: Praeger Security International, 214.

131

Ali Allawi, “The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 308.

132

Anthony Cordesman and Emma R. Davies, Iraq’s Insurgency and the Road to Civil Conflict, Westport, Connecticut: Praeger Security International, 214.

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133

Lionel Beehner and Greg Bruno, "Iran's Involvement in Iraq," the Council on Foreign Relations, March 3, 2008. http://www.cfr.org/publication/12521/irans_involvement_in_iraq.html 134

Translation of the Al Fayhaa TV interview by The Middle East Media Research Institute, Special Dispatch Series, No. 849, January 19, 2005.

135

"Sistani ends the siege," The Economist, August 30, 2004.

http://www.economist.com/node/3146701?story_id=3146701 136

Nadim Ladki, "Sistani Hints at Allowing Election Delay in Iraq," The Washington Post, February 20, 2004. http://www.washingtonpost.com/wp-dyn/articles/A57182-2004Feb20.html 137

State Department memo, "US embassy cables: Iran attempts to manipulate Iraq elections," The Guardian, December 4, 2010. http://www.guardian.co.uk/world/us-embassy-cables-documents/234583 138

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 311.

139

State Department memo, "US embassy cables: Iraqi Shi’a Muslims resist Iranian influence," The Guardian, November 28, 2010. http://www.guardian.co.uk/world/us-embassy-cables-documents/239665 140

Qassim Abdul-Zahra, " Shi’ites: Cleric Won't Support Coalition," AP, December 23, 2006.

http://www.washingtonpost.com/wp-dyn/content/article/2006/12/23/AR2006122300272_pf.html 141

Associated Press, “Top Shiite cleric urges Iraqi politicians to make concessions to solve crisis,” The Washington Post, February 3, 2012. http://www.washingtonpost.com/world/middle-east/top-shiite-cleric-urges-iraqi-politicians-to-make-concessions-tosolve-crisis/2012/02/03/gIQAjpBamQ_story.html 142

Joel Wing, "Iraq Center for Research & Strategic Studies’ Survey Of Iraqis," Musings on Iraq, October 26, 2008. http://musingsoniraq.blogspot.com/2008/10/iraq-center-for-research-strategic.html 143

“Clerics Blame Iraq Politicians for Bombings”, Associated Press, December 23, 2011.

144

“Iraq’s Post-Withdrawal Crisis, Update 7”, Ramzy Mardini, Institute for the Study of War, February 3, 2012.

145

Larry Kaplow, "Iraq Steps Out of Iran’s Shadow," Newsweek, June 6, 2009.

http://www.newsweek.com/2009/06/05/iraq-steps-out-of-iran-s-shadow.html 146

Larry Kaplow, "Iraq Steps Out of Iran’s Shadow," Newsweek, June 6, 2009.

http://www.newsweek.com/2009/06/05/iraq-steps-out-of-iran-s-shadow.html 147

Larry Kaplow, "Iraq Steps Out of Iran’s Shadow," Newsweek, June 6, 2009.

http://www.newsweek.com/2009/06/05/iraq-steps-out-of-iran-s-shadow.html 148

"Iraq's new PM Maliki sees security handover starting in June," Forbes, May 22, 2006.

http://www.forbes.com/feeds/afx/2006/05/22/afx2762765.html 149

"Analysis: Some question whether al-Maliki strong enough," USA Today, November 28, 2006.

http://www.usatoday.com/news/world/iraq/2006-11-28-almaliki-analysis_x.htm 150

Borzou Daragahi, "In private, al-Maliki criticizes US policy," Los Angeles Times, October 28, 2006.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/10/28/MNGV3M1SB51.DTL 151

"Analysis: Some question whether al-Maliki strong enough," USA Today, November 28, 2006.

http://www.usatoday.com/news/world/iraq/2006-11-28-almaliki-analysis_x.htm

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152

Sabrina Tavernise, "Maliki Alleges 7 Cases When Blackwater Killed Iraqis," The New York Times, September 20, 2007. http://www.nytimes.com/2007/09/20/world/middleeast/20iraq.html 153

Lionel Beehner, "The Debate Over Granting Amnesty to Iraqi Insurgents," the Council on Foreign Relations, June 22, 2006. http://www.cfr.org/publication/10965/debate_over_granting_amnesty_to_iraqi_insurgents.html 154

Lionel Beehner, "The Debate Over Granting Amnesty to Iraqi Insurgents," the Council on Foreign Relations, June 22, 2006. http://www.cfr.org/publication/10965/debate_over_granting_amnesty_to_iraqi_insurgents.html 155

Borzou Daragahi, "In private, al-Maliki criticizes US policy," Los Angeles Times, October 28, 2006.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/10/28/MNGV3M1SB51.DTL 156

"Analysis: Some question whether al-Maliki strong enough," USA Today, November 28, 2006.

http://www.usatoday.com/news/world/iraq/2006-11-28-almaliki-analysis_x.htm 157

"Maliki hits out at lack of US backing," The Guardian, January 18, 2007.

www.guardian.co.uk/world/2007/jan/18/iraq.usa 158

Alexandra Zavis, "Maliki announces agreement with Iran," Los Angeles Times, September 30, 2007.

http://www.boston.com/news/world/middleeast/articles/2007/09/30/maliki_announces_agreement_with_iran/ 159

Paul Richter, "Listen up, Bush tells Maliki: Iran is a danger to the Middle East," Sydney Morning Herald, August 11, 2007. http://www.smh.com.au/news/world/listen-up-bush-tells-maliki-iran-is-a-danger-to-the-middleeast/2007/08/10/1186530618698.html 160

Yochi J. Dreazen, “Strong Man,” National Journal, October 13, 2011.

http://www.nationaljournal.com/magazine/nuri-kamal-al-maliki-strong-man-20111013 161

“Iraq’s Recurring Political Crisis”, Ramzy Mardini, Institute for the Study of War, February 15, 2012. Available at: http://www.understandingwar.org/backgrounder/iraqs-recurring-political-crisis 162

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 1.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 163

"Iraqi National Alliance," the Carnegie Endowment for International Peace, accessed December 2010.

http://www.carnegieendowment.org/publications/special/misc/iraqielections2010/index.cfm?fa=ina#isci 164

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 1.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 165

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 1.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 166

Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 167

Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 168

"Iraqi National Alliance," the Carnegie Endowment for International Peace, accessed December 2010.

http://www.carnegieendowment.org/publications/special/misc/iraqielections2010/index.cfm?fa=ina#isci 169

"Iraqi Shi’ite Cleric Pledges to Defend Iran," The Washington Post, January 24, 2006.

http://www.washingtonpost.com/wp-dyn/content/article/2006/01/23/AR2006012301701.html

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Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 2.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 171

Sam Knight, "Al-Askariya shrine: 'Not just a major cathedral,'" The Sunday Times, February 22, 2006.

http://www.timesonline.co.uk/tol/news/world/iraq/article733713.ece 172

Borzou Daragahi, "In private, al-Maliki criticizes US policy," Los Angeles Times, October 28, 2006.

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2006/10/28/MNGV3M1SB51.DTL 173

"Al-Sadr Flees to Iran," Drudge Report, February 13, 2007.

http://www.drudge.com/archive/90480/al-sadr-flees-iran 174

Kay Biouki and Colin Freeman, "Moqtada al-Sadr in seminary in Iran's Qom," The Telegraph, March 30, 2008.

http://www.telegraph.co.uk/news/worldnews/1583330/Moqtada-al-Sadr-in-seminary-in-Irans-Qom.html 175

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 3.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 176

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 3.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 177 178

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"Iraqi National Alliance," the Carnegie Endowment for International Peace, accessed December 2010. http://www.carnegieendowment.org/publications/special/misc/iraqielections2010/index.cfm?fa=ina 180

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010, 3.

http://www.fas.org/sgp/crs/mideast/RS22323.pdf 181

"Iraqi National Alliance," the Carnegie Endowment for International Peace, accessed December 2010. http://www.carnegieendowment.org/publications/special/misc/iraqielections2010/index.cfm?fa=ina 182

Mohammed Tawfeeq and Jonathan Wald, "Sources: Iran helped prod al-Sadr cease-fire," CNN, March 31, 2008.

http://articles.cnn.com/2008-03-31/world/iraq.main_1_al-sadr-sadrist-dawa-party?_s=PM:WORLD 183

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 13. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 184

Iraq Business News, “Full List of Iraq’s New Cabinet,” Iraq Business news, December 22, 2010.

http://www.iraq-businessnews.com/2010/12/22/full-list-of-iraqs-new-cabinet/ 185

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186

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McEvers, Kelly. “Iraqi Leader Reconsiders US Troop Withdrawal.” NPR, May 29, 2011.

http://www.npr.org/2011/05/29/136730559/iraqi-leader-reconsiders-u-s-troop-withdrawal 188

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 26. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 189

Aaron Davis, “Maliki Seeking Consensus on Troops,” Washington Post, May 12, 2011.

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190

Aaron Davis, “In Iraq, an Internal Shi’ite Battle May be Key to US Troop Extension.” Washington Post. http://www.washingtonpost.com/world/war-zones/in-iraq-an-internal-Shi’ite-battle-may-be-key-to-us-troopextension/2011/05/13/AFQ4wm2G_story.htm 191

Mohammed Tawfeeq and Carter, Chelsea J. “Iraqis protest to demand US honors troops' withdrawal deal,” CNN, May 26, 2011. http://articles.cnn.com/2011-05-26/world/iraq.us.troops_1_al-sadr-iraqis-protest-sadr-city?_s=PM:WORLD 192

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 19. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 193

Aseel Kami, US military trainers could be targets: Iraq's Sadr, Reuters, August 7, 2011.

http://www.reuters.com/article/2011/08/07/us-iraq-sadr-idUSTRE7760ZD20110807 194

Sameer N. Yacoub, Muqtada al-Sadr, Iraq Cleric to followers: Stop attacking US troops,” Associated Press, September 12, 2011. http://www.csmonitor.com/World/Latest-News-Wires/2011/0912/Muqtada-al-Sadr-Iraq-Cleric-to-followers-Stop attacking-US-troops 195

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197

“Iraq’s Sadr Attacks PM Maliki as a ‘dictator’”, Naharet Newsdesk, February 25, 2012. Available at: http://www.naharnet.com/stories/en/31290 198

“Araji Confirms Including Sadr’s demands in 2012 Budget Law”, All-Iraqi News, February 22, 2012. Available at: http://www.alliraqnews.com/en/index.php?option=com_content&view=article&id=4677:araji-confirmsincluding-sadrs-demands-in-2012-budget-law&catid=35:political&Itemid=2 199

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200

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http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 201

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"Iraqi Shi’ite with ties to Iran gains top billing," World Security Network, December 16, 2004, originally published in the International Herald Tribune. http://www.worldsecuritynetwork.com/showArticle3.cfm?article_id=10679&topicID=26 203

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http://www.globalsecurity.org/military/world/iraq/baqir-hakim.htm 206

"Ayatollah Sayed Mohamad Baqir Al-Hakim," Global Security, May 22, 2005.

http://www.globalsecurity.org/military/world/iraq/baqir-hakim.htm 207

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http://www.globalsecurity.org/military/world/iraq/baqir-hakim.htm 208

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http://www.globalsecurity.org/military/world/iraq/baqir-hakim.htm 209

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http://www.globalsecurity.org/military/world/iraq/baqir-hakim.htm 210

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"Ayatollah Sayed Mohamad Baqir Al-Hakim," Global Security, May 22, 2005.

http://www.globalsecurity.org/military/world/iraq/baqir-hakim.htm 216

"Ayatollah Sayed Mohamad Baqir Al-Hakim," Global Security, May 22, 2005.

http://www.globalsecurity.org/military/world/iraq/baqir-hakim.htm 217

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http://www.google.com/hostednews/afp/article/ALeqM5hzq1rH_a3dgN360UFqdWOrW6VgOQ 218

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"Iraqi National Alliance," the Carnegie Endowment for International Peace, accessed December 2010.

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http://www.google.com/hostednews/afp/article/ALeqM5hzq1rH_a3dgN360UFqdWOrW6VgOQ 223

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http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 229

Kim Murphy, “Kurds, Sunni Arabs Clash in North – a Small Echo of Larger Dispute.” Los Angeles Times, September 26, 2006.

230

Hawar Abdul-Razaq, "Wikileaks Revelations Endanger US International Relations," Rudaw, December 14, 2010. http://www.rudaw.net/english/world/3360.html 231

Hawar Abdul-Razaq, "Wikileaks Revelations Endanger US International Relations," Rudaw, December 14, 2010. http://www.rudaw.net/english/world/3360.html 232

"PJAK / PEJAK," GlobalSecurity.org, December 11, 2007.

http://www.globalsecurity.org/military/world/para/pjak.htm 233

"PJAK / PEJAK," GlobalSecurity.org, December 11, 2007.

http://www.globalsecurity.org/military/world/para/pjak.htm 234

Department of Defense, Measuring Stability and Security in Iraq, Report to Congress, December 2009, 32-33.

235

William Yong and Alan Cowell, "Bomb kills 10 in Iran on Iraq war anniversary," the San Francisco Chronicle, originally published in the New York Times, September 23, 2010. http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/09/22/MNHO1FI3KC.DTL#ixzz11VOjnBNZ 235

"'Anti-terrorist' operation took place in Iraq - Iran MP," editing by Ralph Boulton, Reuters, October 1, 2010. http://af.reuters.com/article/worldNews/idAFTRE69050B20101001 236

Jalal Talabani, Statements at the General Debate of the 66th Session of the United Nations General Assembly, September 23, 2011. http://gadebate.un.org/66/iraq 237

Sam Dagher, “Standoff at US Airbase in Iraq,” Wall Street Journal, November 18, 2011.

http://online.wsj.com/article/SB10001424052970204517204577044441272427070.html 238

“The State of Iraq”, The Carnegie Papers, Marina Ottaway and Danial Kaysi February 2012

239

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 296.

240

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 299.

241

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 299.

242

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 299.

243

Hazem Sha’alan , interview in Sharq al-Awsat (London), July 27, 2004. As quoted in Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 304-5.

244

Robin Wright and Peter Baker, "Iraq, Jordan See Threat To Election From Iran," The Washington Post, December 8, 2004. http://www.washingtonpost.com/wp-dyn/articles/A43980-2004Dec7.html

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245

Najim Abed Al-Jabouri and Sterling Jensen, “The Iraqi and AQI Roles in the Sunni Awakening,” Prism 2 No. 1, National Defense University, 9. www.ndu.edu/press/lib/images/prism2.../Prism_3-18_Al-Jabouri_Jensen.pdf 246

Najim Abed Al-Jabouri and Sterling Jensen, “The Iraqi and AQI Roles in the Sunni Awakening,” Prism 2 No. 1, National Defense University, 8.

247

Najim Abed Al-Jabouri and Sterling Jensen, “The Iraqi and AQI Roles in the Sunni Awakening,” Prism 2 No. 1, National Defense University, 8-11. www.ndu.edu/press/lib/images/prism2.../Prism_3-18_Al-Jabouri_Jensen.pdf 248

Anthony H. Cordesman, “The Iraq War: Progress in the Fighting and Security,” CSIS, February 18, 2009, 4, 50, 55-56, 58. http://csis.org/files/media/csis/pubs/090218_iraq_war_progress.pdf 249

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 9. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 250

Tim Arango, “ Iraqi Sunnis Frustrated as Awakening Loses Clout,” New York Times, May 3, 2010.

http://www.nytimes.com/2010/05/04/world/middleeast/04awakening.html 251

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, ii. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 252

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 10. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 253

Thom Shanker, “General Says 2 Iraq Politicians have Ties to Iran,” New York Times, February 16, 2010.

254

Julian Borger, “US intelligence fears Iran duped hawks into Iraq war,” The Guardian, May 24, 2004.

http://www.guardian.co.uk/world/2004/may/25/usa.iraq10 255

James Risen and David Johnston, “Chalabi Reportedly Told Iran That US Had Code,” The New York Times, June 2, 2004. http://www.nytimes.com/2004/06/02/world/the-reach-of-war-the-offense-chalabi-reportedly-told-iran-that-us-hadcode.html?pagewanted=all&src=pm 256

Timothy William and Duraid Adnan, “Sunnis in Iraq Allied With US Rejoin Rebels’” New York Times, October 16, 2010. http://www.nytimes.com/2010/10/17/world/middleeast/17awakening.html 257

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 15. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 258

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 9. http://www.sigir.mil/publications/quarterlyreports/index.html 259

Andrew E. Kramer, US Leaving Iraqi Comrades-in-Arms in Limbo,” New York Times, December 13, 2011

260

“The State of Iraq”, The Carnegie Papers, Marina Ottaway and Danial Kaysi February 2012

261

“The State of Iraq”, The Carnegie Papers, Marina Ottaway and Danial Kaysi February 2012

262

Michael S. Schmidt and Eric Schmitt, “Leaving Iraq, US fears new surge of Qa’ida Terror,” New York Times, November 5, 2011. http://www.nytimes.com/2011/11/06/world/middleeast/leaving-iraq-us-fears-new-surge-of-Qa’ida-terror.html 263

Associated Press, “US intelligence officials tie al-Qa’ida to Syrian bombings,” Associated Press, February 16, 2012. http://www.washingtonpost.com/politics/us-officials-iran-could-hit-us-forces-block-shipping-but-is-unlikelyto-strike-first/2012/02/16/gIQA9zOnHR_story.html 264

Andrew E. Kramer, “Iraq Arrests More in Wake of Tip About Coup,” New York Times, October 31, 2011.

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http://www.nytimes.com/2011/11/01/world/middleeast/iraq-arrests-more-in-wake-of-libyan-tip-about-coup.html 265

Andrew E. Kramer, “Iraq Arrests More in Wake of Tip About Coup,” New York Times, October 31, 2011.

http://www.nytimes.com/2011/11/01/world/middleeast/iraq-arrests-more-in-wake-of-libyan-tip-about-coup.html 266

Bradley Klapper, “Analysis: Iraq's plight imperils US goals,” Associated Press, January 9, 2012.

267

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” CRS Report to Congress, January 24, 2012, 23. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 268

Rebecca Santana, “Fearful, Iraq's Sunnis leave mixed neighborhoods,” Associated Press, January 2, 2012.

269

http://www.cbsnews.com/8301-202_162-57379540/u.s-slaps-terrorist-sanctions-on-irans-spies/

270

Kenneth Katzman, “Iran-Iraq Relations,” Congressional Research Service, August 13, 2010. 8. http://www.fas.org/sgp/crs/mideast/RS22323.pdf 271

A Google search gives numerous reports on this aspect of the MEK. An FBI report on MEK activities dated November 289, 2004 and entitled Mujahideen-e Khalq (MEK) Criminal Investigation, is available on the web at ttp://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&ved=0CC0QFjAA&url=http%3A%2F%2F www.american.com%2Farchive%2F2011%2FFBI%2520%2520REPORT.pdf&ei=BN3HTqiLNqLh0QHkvNjpDw&usg=AFQjCNFdVPi4IjU5Ct_w0AO7-cSZDZ3Xsw 272

Holly Fletcher, “Mujahideen-e-Khalq,” Council on Foreign Relations: Backgrounder, CFR, April 18, 2008. http://www.cfr.org/iran/mujahadeen-e-khalq-mek-aka-peoples-mujahedin-iran-pmoi/p9158 273

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 304.

274

Jay Solomon, “Iran Dissidents Pinpoint Alleged Nuclear Site,” The Wall Street Journal, September 10, 2010. http://online.wsj.com/article/SB10001424052748703960004575482202660590436.html 275

Mark Hosenball, “Is There Really Another Secret Iranian Uranium-Enrichment Facility?,” Newsweek, September 13, 2010. http://www.newsweek.com/blogs/declassified/2010/09/13/another-secret-iranian-uranium-enrichment-facility.html 276

Josh Rogin, “MEK rally planned for Friday at State Department,” Foreign Policy, The Cable, August 25, 2011.

http://thecable.foreignpolicy.com/posts/2011/08/25/mek_rally_planned_for_friday_at_state_department 277

Christina Wilikie, “Mujahideen-e Khalq: Former US Officials Make Millions Advocating For Terrorist Organization,” The Huffington Post, August 8, 2011. http://www.huffingtonpost.com/2011/08/08/mek-lobbying_n_913233.html 278

Omid Memarian, “The Muhahedeen-e Khalq Controversy,” PBS, Frontline, February 23, 2011.

http://www.pbs.org/wgbh/pages/frontline/tehranbureau/2011/02/the-mujahedeen-e-khalq-controversy.html 279

Jeremiah Goulka, Lydia Hansell, Elizabeth Wilke, Judith Larson, “The Mujahedin-e Khalq in Iraq,

A Policy Conundrum,” 2009. http://www.rand.org/pubs/monographs/MG871.html 280

Press TV, “US Training Iran Separatists in Iraq,” Press TV, May 12, 2011.

http://www.presstv.ir/detail/179600.html 281

US Department of State, Office of the Coordinator for Counterterrorism, “Country Reports on Terrorism 2010, Chapter 6: Foreign Terrorist Organizations,” August 18, 2010. http://www.state.gov/s/ct/rls/crt/2010/170264.htm 282

Press TV, “MKO terrorist must leave Iraq,” Press TV, September 16, 2011.

http://www.presstv.ir/detail/199516.html

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283

Michael Schmidt and Jack Healy, “In Blow to Government, Sadr Followers Call for New Elections,” New York Times, December 26, 2011.

284

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2010, 2.

http://www.sigir.mil/files/quarterlyreports/October2010/Report_-_October_2010.pdf 285

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2010, 2.

http://www.sigir.mil/files/quarterlyreports/October2010/Report_-_October_2010.pdf 286

Adam Entous and Julian E. Barnes, “Iraq Troop Talks Falter.” The Wall Street Journal,” April 22, 2011. http://online.wsj.com/article/SB10001424052748704889404576277240145258616.html?mod=WSJ_hp_LEFTTopS tories 287

Adam Entous and Julian E. Barnes. “Iraq Troop Talks Falter.” The Wall Street Journal,” April 22, 2011. http://online.wsj.com/article/SB10001424052748704889404576277240145258616.html?mod=WSJ_hp_LEFTTopS tories 288

Arango, Tim. “In Shadow of Death, Iraq and US Tiptoe Around a Deadline,” New York Times. July 14, 2011. https://www.nytimes.com/2011/07/15/world/middleeast/15iraq.html 289

Dagher, Sam. “Iraq Wants the US Out,” Wall Street Journal, December 28, 2010.

http://online.wsj.com/article/SB10001424052970204685004576045700275218580.html 290

Langer, Gary. “Dramatic Advances Sweep Iraq, Boosting Support for Democracy,” ABC News, March 16, 2009. http://abcnews.go.com/images/PollingUnit/1087a1IraqWhereThingsStand.pdf 291

Aaron Davis, “Maliki Seeking Consensus on Troops,” Washington Post, May 12, 2011. This decision took place Following a series of high-level US visits, 292

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” Congressional Research Service, August 9, 2011, 27. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 293

Kirit Radia “US Now Says It Is in “Negotiations” With Iraq Over Troops Post-2011,” ABC News, September 7, 2011. http://abcnews.go.com/blogs/politics/2011/09/us-now-says-it-is-in-negotiations-with-iraq-over-troops-post-2011/ 294

Eric Schmitt and Stephen Lee Myers, “Plan Would Keep Small Force in Iraq Past Deadline,” New York Times, September 6, 2011. http://www.nytimes.com/2011/09/07/world/middleeast/07military.html?_r=1&pagewanted=print.

295

Serena Chaudhry, “NATO to Continue Iraq Training Mission To End: 2013,” Reuters, September 12, 2011. http://www.reuters.com/article/2011/09/12/us-iraq-nato-idUSTRE78B5XU20110912 296

Julian E. Barnes and Siobhan Gorman, “US Eyes Covert Plan to Counter Iran in Iraq,” The Wall Street Journal, September 6, 2011.

297

Greg Miller, “CIA digs in as Americans withdraw from Iraq, Afghanistan,” Washington Post

February 7, 2012.

298

Michael S. Schmidt, Many Iraqis Have Second Thoughts as US Exit Nears, New York Times, September 10, 2011. http://www.nytimes.com/2011/09/11/world/middleeast/11iraq.html 299

Gregg Jaffe and Annie Gown, “Obama wants to keep 3,000-5,000 US troops in Iraq into 2012,” The Washington Post, September 7, 2011. http://www.washingtonpost.com/world/national-security/obama-wants-to-keep-3000-5000-us-troops-in-iraq-into2012/2011/09/07/ 300

Thom Shanker and Steven Lee Myers, “US Planning Troop Buildup in Gulf After Exit From Iraq,” New York Times, October 29, 2011.

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http://www.nytimes.com/2011/10/30/world/middleeast/united-states-plans-post-iraq-troop-increase-in-persiangulf.html 301

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” CRS Report to Congress, January 24, 2012, 34. http://www.fas.org/sgp/crs/mideast/RS21968.pdf 302

Scott Stewart, “US Diplomatic Security in Iraq After the Withdrawal,” STRATFOR, December 22, 2011.

303

Kenneth Katzman, “Iraq: Politics, Governance, and Human Rights,” CRS Report to Congress, January 24, 2012, 34. http://www.fas.org/sgp/crs/mideast/RS21968.pd 304

Liz Sly, “US commander, Gen. Lloyd J. Austin III, predicts turbulence in Iraq,” The Washington Post, November 22, 2011. http://www.washingtonpost.com/world/middle_east/us-commander-predicts-turbulence-ahead-iniraq/2011/11/21/gIQAPVE4hN_story.html 305

Michael Schmidt and Eric Schmitt, “Flexing Muscle, Baghdad Detains US Contractors,” New York Times, January 15, 2012.

306

Ali Allawi, The Occupation of Iraq: Winning the War, Losing the Peace, New Haven: Yale University Press, 2007, 308-9.

307

Kimberly Kagan and Frederick W. Kagan, “A new mirage in the Iraqi desert,” Washington Post, December 11, 2011. http://www.washingtonpost.com/opinions/a-new-mirage-in-the-iraqi-desert/2011/12/09/gIQACBUEoO_story.html 308

Sean Kane and William Taylor, “The United States in Iraq: Options for 2012,” USIP, May 16, 2011, 2.

http://www.usip.org/files/resources/The_United_States_in_Iraq.pdf 309

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 57.

http://www.sigir.mil/publications/quarterlyreports/index.html 310

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, July30, 2011, 3.

311

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 54.

http://www.sigir.mil/publications/quarterlyreports/index.html 312

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 9.

http://www.sigir.mil/publications/quarterlyreports/index.html 313

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 9.

http://www.sigir.mil/publications/quarterlyreports/index.html 314

Mohsen Milani, "Meet Me in Baghdad," Foreign Affairs, September 20, 2010.

http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 315

"US plans $4.2 billion arms sale to Iraq," UPI, October 1, 2010.

www.upi.com/Business_News/Security-Industry/2010/10/01/US-plans-42-billion-arms-sale-to-Iraq/UPI31991285953914/ 316

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2010, 8.

http://www.sigir.mil/files/quarterlyreports/October2010/Report_-_October_2010.pdf 317

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2010, 8.

http://www.sigir.mil/files/quarterlyreports/October2010/Report_-_October_2010.pdf 318

"US plans $4.2 billion arms sale to Iraq," UPI, October 1, 2010.

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www.upi.com/Business_News/Security-Industry/2010/10/01/US-plans-42-billion-arms-sale-to-Iraq/UPI31991285953914/ 319

"US plans $4.2 billion arms sale to Iraq," UPI, October 1, 2010.

www.upi.com/Business_News/Security-Industry/2010/10/01/US-plans-42-billion-arms-sale-to-Iraq/UPI31991285953914/ 320

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, July30, 2011, 2.

321

Agence France-Presse, “US Air Force Secretary Holds Iraq Talks,” Agence France-Presse, September 6, 2011.

http://www.google.com/hostednews/afp/article/ALeqM5jh0C9Y524y5LhbtDoRR3FCBPv2dA?docId=CNG.f82080 c3f0dd39bfae34fb9650892342.931 322

Jim Loney, “US And Iraq talking But No F-16 Deal Yet,” Reuters, August 31, 2011.

http://www.reuters.com/article/2011/08/31/us-iraq-fighters-idUSTRE77U4JA20110831 323

"US plans $4.2 billion arms sale to Iraq," UPI, October 1, 2010.

www.upi.com/Business_News/Security-Industry/2010/10/01/US-plans-42-billion-arms-sale-to-Iraq/UPI31991285953914/ 324

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, July30, 2011, 76.

325

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2010, 8. http://www.sigir.mil/files/quarterlyreports/October2010/Report_-_October_2010.pdf 326

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, July30, 2011, 76.

327

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 54. http://www.sigir.mil/publications/quarterlyreports/index.html 328

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 5. http://www.sigir.mil/publications/quarterlyreports/index.html 329

US Department of Defense Defense Security Cooperation Agency News Release, “Iraq F-16 Aircraft” US Department of Defense Transmittal No. 11-46, December 12, 2011.

330

Julian E. Barnes, “Air Force Role In Iraq Could Grow,” Los Angeles Times, January 31, 2007.

331

Department of Defense, Measuring Stability and Security in Iraq Report to Congress, December 2009, 32.

332

Thom Shanker and Brian Knowlton, "US Describes Confrontation With Iranian Boats,” The New York Times, January 8, 2008. http://www.nytimes.com/2008/01/08/washington/08military.html?_r=2&ref=georgewbush 333

Thom Shanker and Brian Knowlton, "US Describes Confrontation With Iranian Boats,” The New York Times, January 8, 2008. http://www.nytimes.com/2008/01/08/washington/08military.html?_r=2&ref=georgewbush 334 335

Department of Defense, Measuring Stability and Security in Iraq, Report to Congress, December 2009, 80.

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2010, 8.

http://www.sigir.mil/files/quarterlyreports/October2010/Report_-_October_2010.pdf 336

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 54.

http://www.sigir.mil/publications/quarterlyreports/index.html 337

"US plans $4.2 billion arms sale to Iraq," UPI, October 1, 2010.

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Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, July30, 2011, 75.

339

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 54-55.

120

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Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 2.

http://www.sigir.mil/publications/quarterlyreports/index.html 341

Special Inspector General for Iraq Reconstruction, Quarterly Report To Congress, October 30, 2011, 2, 3.

http://www.sigir.mil/publications/quarterlyreports/index.html 342

Testimony of M. Brooke Darby, Deputy Assistant Secretary, Bureau of International Narcotics and Law Enforcement Affairs, “US Department of State: Preserving Progress in Iraq, Part III: Iraq's Police Development Program,” Statement before the Subcommittee on the Middle East and South Asia of the House Foreign Affairs Committee, November 30, 2011.

343

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344

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345

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http://www.foreignaffairs.com/articles/66750/mohsen-m-milani/meet-me-in-baghdad 346

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347

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Bill Roggio, “Iranian-backed Shi’a terror group remains a threat in Iraq: General Odierno,” The Long War Journal, July 13, 2010. http://www.longwarjournal.org/archives/2010/07/iranianbacked_Shi’a_t_1.php 349

Semira N. Nikou, The Iran Primer: Controversy Flares over Iran Arms to Iraq, USIP, July 12, 2011.

http://iranprimer.usip.org/blog?page=5 350

Anthony Cordesman and Emma R. Davies, Iraq’s Insurgency and the Road to Civil Conflict, Westport, Connecticut: Praeger Security International, 214.

351

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352

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355

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"Considering the fact that the Iraqi Army can provide security, their presence in the country is not justifiable."

Ali Akbar Salehi, Iranian Foreign Minister, May 17, 2011, Marine Corps University.

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a report of the csis burke chair in strategy

U.S. and Iranian Strategic Competition: The Proxy Cold War in the Levant, Egypt and Jordan Author Aram Nerguizian

March 2012

Iran VIII: Proxy Cold War in the Levant, Egypt and Jordan

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Executive Summary Iran’s efforts to expand its influence in the Levant, Egypt, and Jordan are a key aspect of its strategic competition with the US. Nearly twenty years after Israel’s invasion of Lebanon in 1982, and five years after the 2006 Israeli-Hezbollah War, the US and its allies continue to struggle with the realities of Iran’s growing influence in the region and its use of proxy and asymmetric warfare. The Islamic Republic has developed strong ties with Syria and non-state actors in the region, including the Lebanese Shi’a group Hezbollah and the Palestinian Islamist movement Hamas in what Iranian and Syrian leaders have dubbed the “Resistance Axis.” Iran continues to exploit Arab-Israeli tensions in ways that make it an active barrier to a lasting Arab-Israeli peace, while the US must deal with Arab hostility to its strategic partnership with Israel.

At the same time, both the US and Iran face an unprecedented level of policy instability in the Levant, and the rest of the Middle East and North Africa, that affects every aspect of their regional competition. At present, no one can predict the outcome in any given case. Even the short-term impact of changes in regimes is not predictable, nor is how those changes will affect the underlying drivers of regional tensions. It is particularly dangerous to ignore the risk of replacing one form of failed governance with another one, and the prospect of years of further political instability or upheavals.

Syria While Syria has been a challenge for US policy-makers for decades, the current round of instability is unprecedented and the situation in Syria is not predictable enough for the US to be able to develop a sustainable strategy in the short term. Accordingly, unless the opposition becomes far more cohesive and its character is far more clear, and unless far more Syrian forces defect, the US should consider the following options. 

The increasing use of violence by elements within the opposition is likely to lead to incrementally harsher military and security responses from the regime on the basis that it is fighting a foreignbacked insurgency as opposed to peaceful democratic activists. There is no clear US response to this increasingly dangerous phase of instability in Syria. Providing material support to opposition forces will likely justify a harsher crackdown and the forces buttressing the regime will continue to close ranks. US or western covert and overt assistance could also trigger a negative response from Russia, China and other members of the UN Security Council who do not want to see a repeat of steps taken in Libya.



The US cannot ignore the regional spillover effects should Syria destabilize further and it needs to adopt a strategy based on containing Syrian instability. How events do and do not play out in Syria will have deep and unforeseen consequences on the precarious sectarian balance in Lebanon, the security of Israel along its northern and eastern flanks, the stability of Jordan at a time of increased internal unrest, and pressure along Turkey’s southern flank as Ankara tries to contain increasingly assertive Syrian and Iraqi Kurdish groups. A collapse in Syria – controlled or otherwise – may hold the promise of breaking Iran’s umbilical cord to Levant, but it also promises to expose both budding and strategic US allies to waves of uncertainty for years to come. The US must work with these states to minimize these pressures should Syria deteriorate further.



While the US may have reasons to support opposition forces that are democratic or more representative of popular forces in Syria, that may not translate into a more stable Syria at peace with its neighbors in either the short or long term. There is no real world basis on which to make the argument that a post-Asad Syria will make peace with Israel, renounce claims to the Golan

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Heights or stop providing assistance to Palestinian elements operating in and outside the Occupied Palestinian Territories. 

The Russian and Chinese double veto is a message that the US cannot ignore and if it hopes to garner broader support in the international community, it must take into account the interests and priorities of other leading and emerging powers. It must work closely with its allies to reassure the so-called BRIC countries that Syria is not another Libya and that military intervention at heart of the Arab-Israeli conflict is not being considered.



Some analysts have proposed prying Syria’s security establishment and the Alawite community away from the Asad regime. While the approach is sound in principle, the US may need to accept that the chances of doing so are slim. The passage of time and the level of bloodshed have made it more difficult to conceive of a post-Asad Syria devoid of retaliatory measures against the Alawite community. While many Alawites may not like or support Asad, the potential loss of their political and economic autonomy is a key barrier to defections. Even in a scenario where a dominant opposition proved magnanimous in victory, there is little sign that Asad’s base – and the other minorities that support the regime – is betting on such a favorable outcome.



While events in Syria are challenging to the US and the West, they also complicate Iran’s foreign policy and, as a result, how the US and Iran will compete in Syria in the future. Iran continues to support the Asad regime’s efforts to crush popular dissent. However, it has increasingly done so with the acceptance that returning to the status quo ante in Syria is a fleeting hope rather than a likely outcome. As such, Iran’s position is in flux in the Levant and could as easily lead to progress or confrontation with the US and the West in Syria, as well as Iraq, Lebanon and with the Palestinians.



There now is only limited support in the US, Europe, and the Arab world for direct intervention in Syria. There are also reasons why the US might directly (or indirectly) take the lead in such efforts. The withdrawal of US troops from Iraq has left many questions about the future role and influence of the US, especially in the context of strategic competition with Iran. Instability in Syria presents Washington with the opportunity to undermine Iran’s regional posture, weaken or change the leadership of one of its key regional allies and potentially downgrade the Islamic Republic’s role in the Arab-Israeli conflict through Hezbollah.



Syria is not Libya. Syria has a population that is more than three times larger than Libya’s, has almost 30 times the latter’s population density and a much larger and far more capable military overall. Syria also enjoys strong political, financial and military support from Iran and Russia.

These factors complicate any calculus on military intervention in Syria, whether in terms of the level of potential military opposition, or with regards to the risk of high civilian casualties.

Opposition forces in Syria do not control regime-critical territory, and most attacks, while potentially coordinated, seem to have limited tactical or strategic depth and have yet to present a serious challenge to units loyal to the regime.



At best, the Assad regime would be replaced by a democratic Sunni-dominated leadership that is more favorable to the foreign policies of the United States and the Gulf states led by Saudi Arabia.

This could include a degradation of ties to Iran with effects on the flow of Iranian weapons and support to Hezbollah. At worst, Syria would remain unstable and could deteriorate into a deeper sectarian civil war, a conflict that could in turn draw its neighbors—especially Saudi Arabia and Iran—into a cycle of regional proxy warfare. What is certain, however, is that in any scenario, Syria’s regional role has been severely weakened by a year of unrest.

The exception to such restraint is the possibility that Syria’s repression will become so violent that some form of humanitarian military intervention will be absolutely necessary.

The US is planning for this option, but the risks are high, it could take weeks to make fully effective, and it might be seen as intervention from Israel’s closest ally and as interference in support of Israel – an association that could discredit the Syrian opposition.

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If at all possible, any intervention should be led by Arab states and Turkey, with US support. The goal is to legitimize an Arab and native Syrian approach to political change, not outside intervention.

Even with Arab and Turkish support, any US-led intervention would play out less in terms of humanitarian relief and more in terms of US and Gulf Arab efforts to compete with Iran and Syria and to bring stability to a region that is liable to remain unstable for years. Taking stock of the scale of Sunni-Shi’ite regional polarization and the level of acrimony between the Southern Gulf states and Iran is critical to determining the benefits and potentials costs of deeper US involvement in the Levant.

Lebanon While Lebanon has been relatively stable during the current period of upheaval, there are real risks of instability as well as opportunities to manage security politics in the Levant that the US should not ignore. 

While it is easy to get caught up in ideological pursuits in Lebanon, US policy should remain focused on a policy based on the fact that Lebanon will remain the problem child of US foreign policy. This entails a pragmatic policy that seeks to minimize Lebanon’s geopolitical profile and contain the risks posed by Hezbollah and other forces hostile to US interests in the Levant. The US must continue to capitalize on the fact that Iran’s relationship is with Hezbollah while its own relationships can be with a broader range of Lebanese institutions and political forces.



The collapse of the March 14-led government of Saad Hariri in January 2011 has raised concerns in Washington of a Hezbollah-led constitutional coup and the growing strength of forces hostile to the US and close to Iran and Syria. The cycle of regional instability and prolonged unrest in Syria have done much to dampen the effects of these changes in Beirut. The US should not miss the current opportunity to build bridges with forces that, while enjoying ties to Syria and the Asad regime, are viewed with growing distrust by Hezbollah. Prime Minister Najib Mikati was never Hezbollah’s choice for the post he now occupies. Meanwhile, his government continues to honor Lebanese international commitments and seems keen to nurture ties with the US to try and insulate Lebanon from the prospect of further Sunni-Shi’a sectarian escalation. The US does not need further instability in Lebanon and must work with existing allies and potential new ones to contain and manage Lebanese instability.



The US should continue to support UNFIL and the LAF based on their real world impact on security politics along the Blue Line. This means accepting first that the UN force’s role as a regional punching bag for both the Israelis and the Lebanese is conducive to stability along Israel’s northern flank. It also means accepting that while the LAF is not the non-sectarian military force that many in the US hoped it would be, it remains critical to keeping a lid on Lebanese instability.



Unlike the US with the LAF, Iran has had 25 years to build up Hezbollah. Given the weaknesses of Lebanese political allies and the limits of US policy in Lebanon, long term military diplomacy remains crucial to maintaining US influence in Lebanon and sustaining the US’s place in security politics in the Levant. The US Congress should consider lifting a hold on the limited lethal military aid the LAF has requested. The State Department, with the support of Congress, should also release some $100 million in approved FY2011 FMF for Lebanon to avoid the real prospect that US security assistance and cooperation programs will run out of unallocated funds before the end of 2011.



The US should seek to support the UN Special Tribunal for Lebanon in ways that will not reinforce negative perceptions of the US as well. Given the depth of divisions in Lebanon, the US will not score points in its competition with Iran if the Tribunal cannot eject perceptions that it is a Western political tool meant solely to undermine Syria and Iran in the Levant.

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Israel As this report shows, Israel is a key arena for US-Iranian competition and the recent cycle of instability will remain critical to how both countries develop their bilateral relationship and security ties. 

A ring of instability now exists around Israel. However, the long term implications remain uncertain. The US will continue to provide Israel with both political and military security guarantees to bolster the strategic partnership. Both countries will also continue to coordinate their efforts to minimize and curtail Iranian influence in the broader Levant.



The current cycle of regional unrest has accelerated the US need to bring Israeli-Palestinian negotiations on a two-state solution to fruition. Given the level of popular sentiment across the Arab world, US preferences and the need for a lasting peace, and given the recent Palestinian UN bid for statehood, the US, Israel and the Palestinians must seize the initiative. Much mistrust remains between Israel and the Palestinians and there is no certainty that any process will succeed.

However, not to work that much harder will serve to strengthen Iran’s efforts to spoil peace efforts, undermine the US role in a changing the Arab world and to further radicalize the Palestinians at a time when rational minds should prevail.

The Palestinians The place and role of the Palestinians in US policy and competition with Iran are part and parcel of competition over Israel. 

Suspending aid to the Palestinians can do little to strengthen the US position in the Levant in general and in the Arab-Israeli conflict in particular. The UN bid for statehood did upset many in Washington. In the end, any alliance is only as strong as the sum of its parts, and the Palestinian bid provided a much needed boost to the ailing presidency of Mahmoud Abbas, a key regional ally. Censuring the Palestinian Authority will strengthen the hand of pro-Syrian and pro-Iranian Palestinian factions and undermine perceptions of the US in the Levant. The US should continue to nurture its relationship with the PA and make good on its aid commitments.



As with Israel, the US needs to work hard to bring the PA back to negotiations on a two-state solution. The PA’s UN bid has done much to buoy the position of President Abbas, however, this effect will degrade with time unless parties to negotiations can capitalize on it. The Quartet, led by the US, must push ahead with peace efforts. The alternative is a degeneration of the Palestinian position to a point that strengthens Palestinian opponents of the West and invigorates Iran’s spoiler role in the Arab-Israeli conflict.



The Palestinian Islamist wildcard has proven crucial to projecting Iranian influence in the Levant as a means of impacting the Arab-Israeli conflict. Relying on groups like Hamas was also an important means of shoring up much needed Sunni support for Iran in the region. A very public break between Syria and Hamas is a setback for Iran, but the Islamic Republic continues to cultivate ties with Palestinian Islamist groups. So far, Tehran has also rejected a deeper isolation of Hamas for siding against the Asad regime, going so far as to invite Prime Minister Haniya to Tehran in early February 2012 for consultations.1



The US should work to capitalize on rifts between Syria and Hamas. US engagement with the Egyptian Muslim Brotherhood was relatively; in contrast, it will prove far more difficult for the US to build brides with an Islamist group the US government considers to be a terrorist organization. Meanwhile, given Iran’s unwavering support for the minority-led Asad regime in Syria, it is unclear how and for how long Iran can sustain its policy of supporting such groups.

What is certain is that unlike the US, the Islamic Republic has shown it is flexible enough to at least try and recalibrate to shifts on the Palestinian political scene.

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Egypt and Jordan Lastly, US policy towards Egypt and Jordan are driven by a number of common factors that have impacted whether or not these two key US allies become exposed to Iranian influence and interference. 

President Mubarak’s exit from power means that Egypt will go through a prolonged cycle of instability as it reconciles itself with the role of the military in and out of politics, the role of the Muslim Brotherhood and other Islamist political forces and the other political and reform movements working to shape post-Mubarak Egypt. The US government and Congress must both remain flexible as it tries to sustain ties with the “new” Egypt – a move that is crucial to ensuring stability across the Levant and the broader Middle East and North Africa



Military aid from the US, and financial assistance from the Gulf states, are crucial to stabilizing post-Mubarak Egypt. The US must continue to nurture its military-to-military relationship while recognizing that Egypt’s economic needs must also be addressed. While funding from the Gulf can help sustain investment and macroeconomic indicators, only the US and other Western democracies can provide the sort of socio-economic aid that can bolster governance and state accountability in the long term.



Uncertainty about bilateral ties with Israel is likely to increase as the Egyptian military comes to terms with the country’s Islamic political forces. The threat of suspending military aid to Egypt is no more effective than proposed cuts to Lebanon and the Palestinians. If nothing else, the implications could be far more damaging to regional stability and Israeli security. That being said, the US must balance aid with Egypt’s continued adherence to Egyptian-Israeli peace and more efforts to stabilize an increasingly unmanaged Sinai Peninsula.



While Egypt will face challenges in the years ahead, a post-Mubarak Egypt has an opportunity to re-capture much of the authenticity and prestige it lost over the course of the past three decades.

While this could lead to an Egypt that is less sensitive to US and Israeli national security and foreign policy prerogatives, it is also clear that a more important role for Egypt in Arab politics could come at the expense of Shi’a Iran.



The ratcheting up of sectarian tensions between Egyptian Muslims and Coptic Christians presents a serious risk. The continued deterioration of communal ties will likely have an increasingly negative effect on the country’s internal stability. While accounting for 10% of the Egyptian populations, at some 10 million strong the Copts remains the largest Christian community in the Levant. With the rise of sectarian tensions in Syria, continued sectarian recrimination in Lebanon, and the depletion of Christians in Iraq and the Palestinian Territories, the US and Egypt must both do more to prevent the communal and primordial politics from becoming yet another source of instability in a region in a deep state of flux.



As with Egypt, Jordan is too important to the US and its Gulf allies not to make every effort to help it avoid prolonged or even limited instability. Here too, the US needs to continue to support security and economic assistance programs to the Hashemite Kingdom, while supporting peaceful democratic reforms as well. It should also continue to support Gulf efforts to integrate Jordan into the Gulf Cooperation Council as one measure to limit regional instability and bolster the Kingdom’s security.

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Contents INTRODUCTION ................................................................................................................... 11 U.S.-IRANIAN INTERESTS IN THE LEVANT, EGYPT, AND JORDAN ............................................ 14 U.S. INTERESTS ......................................................................................................................... 14 The US-Israeli Strategic Relationship and Iran...................................................................... 14 Protecting Energy Security & Regional Infrastructure .......................................................... 15 Countering the Threat for Non-State Armed Groups ............................................................ 19 The Impact of US Military Assistance to Egypt, Israel Jordan and Lebanon ......................... 19 Competition and US Support of the Arab-Israeli Peace Process ........................................... 29 The Broader Quest for Favorable Regional Stability ............................................................. 29 IRANIAN INTERESTS IN THE LEVANT AND EGYPT ..................................................................... 31 The Broader Quest for Geopolitical Advantage .................................................................... 31 Israel, Iran, and the Arab-Israeli Conflict .............................................................................. 31 Iran’s “Partnership” with Syria ............................................................................................. 32 Hezbollah and Lebanon’s Shi’a Community .......................................................................... 35 THE CONVENTIONAL MILITARY BALANCE IN THE LEVANT ...................................................... 36 GROUND FORCES........................................................................................................................... 36 AIR FORCES ............................................................................................................................... 40 NAVAL FORCES ......................................................................................................................... 43 IRAN, THE ASYMMETRIC BALANCE & REGIONAL WILD CARDS ............................................... 48 ORIGINS OF THE ASYMMETRIC BALANCE ................................................................................. 48 LOW-LEVEL AND IRREGULAR WARFARE.................................................................................. 49 ROCKETS AND MISSILES ........................................................................................................... 49 PROXY WARFARE ...................................................................................................................... 56 Weapons of Mass Destruction and the Nuclear Arms Race ................................................. 57 THE SOCIO-ECONOMICS OF U.S.-IRANIAN COMPETITION ...................................................... 60 TRADE RELATIONS WITH THE LEVANT ..................................................................................... 60 ASSESSING DEVELOPMENT ASSISTANCE .................................................................................. 63 THE US ECONOMIC RESPONSE TO ARAB PROTESTS ................................................................. 64 KEY AREAS OF COMPETITION BY COUNTRY ........................................................................... 68 COMPETITION OVER SYRIA ....................................................................................................... 68 The Economic Dimension of Popular Unrest ......................................................................... 68 US Policy Towards Syria & Iran’s Response .......................................................................... 77 The Military Dimension ......................................................................................................... 80 Implications of Syrian Protests & Instability for the US & Iran ............................................. 84 COMPETITION OVER LEBANON ................................................................................................. 86 US Policy Towards Lebanon & Iran’s Response .................................................................... 86 New Patterns in US Military Aid to Lebanon ........................................................................ 87 Paradoxes of Building Lebanese Military Capabilities .......................................................... 89 Lessons from Iran’s Military Support for Hezbollah .............................................................. 96 The Special Tribunal for Lebanon .......................................................................................... 97 Potential Spillover Effects of Instability in Syria.................................................................... 98 COMPETITION OVER ISRAEL ................................................................................................... 100 US Policy Towards Israel and Iran’s Response .................................................................... 100 The US-Israeli Military & Security Partnership.................................................................... 102

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Regional Arab Protests &Potential Consequences for Israel .............................................. 104 COMPETITION OVER THE WEST BANK & GAZA STRIP ........................................................... 106 US Security Assistance to the Palestinians .......................................................................... 106 Implications of Potential Fatah-Hamas Reconciliation....................................................... 111 Iran & The Palestinian Islamist Wildcard ............................................................................ 111 The US, Iran & the Palestinian bid for Statehood ............................................................... 113 COMPETITION OVER EGYPT .................................................................................................... 115 US Policy Towards Egypt ..................................................................................................... 115 Iran’s Response ................................................................................................................... 116 Seeking to Preserve the Uncertain US-Egyptian Military & Security Partnership............... 117 Managing the Impact of Instability in Egypt ...................................................................... 118 COMPETITION OVER JORDAN .................................................................................................. 121 US Policy Towards Jordan ................................................................................................... 121 Iran’s Response ................................................................................................................... 122 The US-Jordanian Military & Security Partnership ............................................................. 122 Managing Instability ........................................................................................................... 123 PERSISTENT & EMERGING CHALLENGES .............................................................................. 126 THE TEETERING BALANCE ALONG THE BLUE LINE................................................................ 126 ENERGY SECURITY & THE RISK OF WAR ................................................................................ 127 WILDCARDS OF SYRIAN INSTABILITY ................................................................................................ 131 IMPLICATIONS FOR US POLICY............................................................................................ 134

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Figures and Maps FIGURE VIII.1: THE SUEZ CANAL, THE SUMED PIPELINE AND THE VULNERABILITY OF MEDITERRANEAN ENERGY INFRASTRUCTURE ...................................................................................................................18 FIGURE VIII.2: ACTUAL AND PROJECTED US MILITARY ASSISTANCE TO ......................................................23 ARAB-ISRAELI STATES FROM 2000 TO 2013 ..................................................................................................23 FIGURE VIII.3: SELECT U.S. FOREIGN MILITARY SALES CONGRESSIONAL NOTIFICATIONS FOR EGYPT, JORDAN AND ISRAEL 2005-2011 ...........................................................................................................24 FIGURE VIII.4: ARAB-ISRAELI ARMS ORDERS BY SUPPLIER COUNTRY: 1999-2010 ......................................28 FIGURE VIII.5: ARAB-ISRAELI ARMORED FORCES IN 2011 ............................................................................38 FIGURE VIII.6: ISRAEL VERSUS EGYPT, JORDAN, LEBANON AND SYRIA: TANKS BY TYPE 2011 ....................39 FIGURE VIII.7: HIGH-QUALITY OPERATIONAL ARAB-ISRAELI COMBAT AIRCRAFT IN 2011..........................41 FIGURE VIII.8: OPERATIONAL ARAB-ISRAELI ATTACK AND ARMED HELICOPTERS IN 2011..........................42 FIGURE VIII.9 U.S. MILITARY PRESENCE IN THE LEVANT: COMMAND AND CONTROL STRUCTURE OF THE U.S. NAVY’S 6TH FLEET ........................................................................................................................44 FIGURE VIII.10: THE IRANIAN NAVY IN 2011 ..........................................ERROR! BOOKMARK NOT DEFINED. FIGURE VIII.11: ARAB-ISRAELI MAJOR COMBAT SHIPS BY CATEGORY IN 2011............................................47 FIGURE VIII.12: MAP OF APPROXIMATE ROCKET & MISSILE RANGES FROM GAZA ......................................52 FIGURE VIII.13: MAP OF APPROXIMATE ROCKET AND MISSILE RANGES FROM LEBANON ............................53 FIGURE VIII,14: ARAB-ISRAELI SURFACE-TO-SURFACE MISSILES IN 2011 ....................................................54 FIGURE VIII.15: THE ECONOMICS OF U.S. AND IRANIAN COMPETITION IN THE LEVANT: COMPARATIVE TRADE LEVELS IN 2010 ........................................................................................................................62 FIGURE VIII.16: U.S. ECONOMIC SUPPORT FOR THE MIDDLE EAST & AFRICA ..............................................64 FIGURE VIII.17: SYRIAN TOTAL, URBAN & RURAL POPULATION, 1980-2009 ...............................................73 FIGURE VIII. 18: SYRIAN ECONOMIC PRODUCTIVITY AND REGIONAL TRENDS..............................................74 FIGURE VIII.19: SYRIAN CONSUMER PRICE AND MIGRATION DATA .............................................................75 FIGURE VIII.20: PATTERNS OF SYRIAN OIL PRODUCTION, CONSUMPTION & EXPORTS .................................76 FIGURE VIII.21: SYRIAN-ISRAELI ARMS AGREEMENTS AND DELIVERIES: 1995-2010 ...................................83 FIGURE VIII.22: THE IMPACT OF U.S. MILITARY ASSISTANCE TO LEBANON 2004 TO 2013 ..........................92 FIGURE VIII.23: BREAKING DOWN “SECTION 1206” ASSISTANCE TO THE LAF 2006-2010 ..........................93 FIGURE VIII.24: LAF PERSONNEL RECEIVING U.S. TRAINING 1998-2011 ....................................................94 FIGURE VIII.25: LAF GROUND FORCE DEPLOYMENT IN MARCH 2012 ..........................................................95 FIGURE VIII.26: HISTORICAL DATA ON U.S. MILITARY AND ECONOMIC AID TO ISRAEL ............................101 FIGURE VIII.27: SELECT U.S. FMS CONGRESSIONAL NOTIFICATIONS FOR ISRAEL 2005-2011...................103 FIGURE VIII.28: ACTUAL & PROPOSED U.S. BILATERAL ASSISTANCE TO THE PALESTINIANS.....................107 FIGURE VIII.29: WEST BANK PALESTINIAN SECURITY FORCES ORGANIZATIONAL CHART IN 2011 ............109 FIGURE VIII.30: GAZA PALESTINIAN SECURITY FORCES ORGANIZATIONAL CHART IN 2011 ......................110 FIGURE VIII.31: ISRAEL’S GROWING NATURAL GAS SECTOR......................................................................128 FIGURE VIII.32: THE ISRAELI-LEBANESE MARITIME FRONTIER: A CONFLICT IN THE MAKING? ..................129

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FIGURE VIII.33: U.S. GEOLOGICAL SURVEY IN THE LEVANT BASIN PROVINCE, 2010 .................................130

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Introduction Iran’s efforts to expand its regional influence are a key aspect of its strategic competition with the US. Nearly twenty years after Israel’s invasion of Lebanon in 1982, and five years after the 2006 Israeli-Hezbollah War, the US and its allies continue to struggle with the realities of Iran’s growing influence in the region and its use of proxy and asymmetric warfare. The Islamic Republic has developed strong ties with Syria and non-state actors in the region, including the Lebanese Shi’a group Hezbollah and the Palestinian Hamas Islamist movement in what Iranian and Syrian leaders have dubbed the “Resistance Axis.” Iran continues to exploit Arab-Israeli tensions in ways that make it an active barrier to a lasting Arab-Israeli peace, while the US must deal with Arab hostility to its strategic partnership with Israel. At the same time, both the US and Iran face new uncertainties in dealing with Egypt, Syria, and the wave of unrest in the Arab world.

US-Iranian competition in the Levant has evolved significantly over the more than 30 years since Iran’s 1979 Islamic revolution, and the collapse of the US-Iranian partnership that began in the post-World War II (WWII) period. Post-war US policy towards the Middle East was largely defined by the need to secure a reliable global energy supply, coupled with the broader US hegemonic contest with the Soviet Union. The Eisenhower Doctrine authorized the US to cooperate with and support economically and militarily any state in the Middle East in an effort to curtail the spread of communism.2 In addition to Israel and Saudi Arabia, the US sought the support of Turkey and Iran as regional bulwarks against Soviet efforts to make inroads in the Middle East.

Equally important was Iran’s expected role as counterweight to states that adopted confrontational foreign policies, or were politically unstable. In the case of the Levant, Syria underwent coup after counter-coup and remained unstable for the better part of the 1950s and 1960s.3 Egypt under Gamal Abdel Nasser – initially considered a prospective US ally – fought two wars with Israel in 1967 and 1973,4 and Egypt’s Pan-Arab narrative was perceived by the West and Nasser’s regional opponents as a possible route to communist inroads in the region and new wars with Israel.5 Lebanon’s post-independence sectarian political system was inequitable and parochial and quickly became a source of internal discord, regional instability and open conflict. With the collapse of the Iraqi monarchy and keen to contain potential regional spillover effects, the US elected to intervene militarily in Lebanon’s short-lived civil war in 1958.6 As result, the collapse of the pro-Western government of Shah Mohammad Reza Pahlavi in 1979, and the rise of the conservative Iranian clerical establishment under Grand Ayatollah Ruhollah Khomeini, soon had impacts far beyond the Gulf. The US lost a critical regional ally. The Shah had been a supporter of US interests in the region, guaranteed access to Iranian energy resources, garnered close ties to regional Arab monarchies and maintained friendly ties with Israel by minimizing its role in the ArabIsraeli conflict. In stark contrast, the new Islamic Republic of Iran was hostile to US hegemonic interests in the region, was hostile to Arab states it saw as US clients, sought to forge an alliance with Asad’s Syria, opposed the state of Israel and became a fervent supporter of the Palestinian cause.7 In the decades that have followed – particularly since the end of the Iran-Iraq War in 1988 – Iran’s competition with the US has had a growing impact on the regional

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geopolitical and military balance. Iran had one of the most capable and technologically advanced militaries at the time it was a Western ally. Much of that capability deteriorated after Western advisors left and the US imposed an arms embargo, resulting in turmoil within Iran’s forces, losses during the Iran-Iraq War, and Iran’s inability to modernize its conventional forces since the end of that conflict. Iran has, however, become a missile power, is seeking at least the capability to make nuclear weapons, has built up a major asymmetric force in the Gulf, and has created special units like the Al Quds force to build up friendly and proxy forces like Hezbollah and those of the Moqtada Al Sadr. As a result, Iran increasingly threatens the security of Saudi Arabia, Israel, and other proWestern regional actors and plays a major role in Iraq, Syria, Lebanon, and Gaza. Iran could selectively use its energy resources and continued membership of OPEC as a source of leverage and influence against the West.

The end result is that both countries continue to struggle in what has largely become a proxy cold war over the Levant. This struggle takes place in the larger context of a struggle to shape the balance of power in the broader Middle East and one whose outcome is extremely uncertain because of the broad pattern of instability in the Middle East. Amid unprecedented popular unrest starting in 2011, dynamics in the Levant have become all the more complex thanks to changes in leadership, political contestation, the fragmentation of decaying state and security structure and socio-economic challenges driven by long-term popular discontent. Key regional states – including Egypt, Syria, Lebanon and possibly Jordan – have been affected by this trend with the potential for knock-on effects on how the US and Iran compete in the Levant.

It is still too early to know how much influence Iran can gain in Iraq and gain or retain in Syria – particularly if Asad does not survive. It is unclear whether Iran can exploit political change in Egypt and in dealing with the Palestinians. Iran faces a considerable Arab backlash over its own steadily growing internal repression, and must deal with growing tensions between Sunnis and Shi’ites, as well as Arab fears that it seeks regional domination or influence at the expense of Arab states. Iran must also now factor If popular unrest and political instability in Syria continue to make Asad’s survival at least partly dependent on Iranian support, this will be a growing factor in US and Iranian strategic competition. Iran does have good relations with Syria’s Alawites; but this is far more a matter of politics than any real similarity between Shi’ite and Alawite religious beliefs. Iran has had to divert increasingly scarce national resources to shore up its beleaguered ally.

Meanwhile, the US and key regional allies have steadily sought to increase international pressure against Syria, not the least of which to weaken Tehran’s sole Arab state ally.

Iran’s regional ambitions have become increasingly dependent upon Syria’s future; if Asad and the Alawites fall, Syria might become far more closely tied to other Sunni regional powers, alienated from Iran, and willing to work with the US. Iran has scored gains in Lebanon; although much again depends on how the overall pattern of unrest in the Middle East plays out over time. Once Iran came under Khomeini’s control, it sent Iranian Revolutionary Guard troops to Lebanon to create new ties to the Lebanese Shi’a community. Iran found willing and able allies in an increasingly reactionary and radical Shi’a community angered by the presence of

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overbearing Palestine Liberation Operation (PLO) commandos followed by a no-less abrasive Israeli military occupation of South Lebanon.

Israel’s mishandling of the occupation shifted Lebanese Shi’ite attitudes from one of initial support to one of organized hostility, and Iran took advantage of this situation to create an Iranian sponsored militant group that first began as the “Islamic Amal,” an ideological splinter group of Nabih Berri’s Shi’a Amal militia, and then emerged as the Hezbollah after the Israeli invasion.8 As later sections will show, the group was very much a Lebanese entity; however, its emergence and consolidation as a leading player in regional security and national sectarian politics would not have been possible without Iranian support.

Syrian unrest could have effects on how the US and Iran compete in Lebanon. The potential loss or destabilization of the Asad regime could weaken Iran’s ability to project influence and support to Hezbollah. So far, neither the US nor Iran have opted to sharply deepen the contest for Lebanon. Competing Lebanese factions aligned with and against Syria have grown increasingly sensitive to events in Syria and sectarian tensions between Sunnis and Shi’ites and Sunnis and Alawites in Lebanon have heightened to the point that both limited violence and broader escalation are possible.

Events in Syria also have potential indirect effects on other regional actors. Jordan’s Hashemite monarchy, a key US regional ally, is coming under growing pressure from Islamist opposition groups to do more to intercede in Syria. Syrian unrest has forced Palestinian Hamas to choose between its regional credentials as a Sunni Islamist movement and its long-time regional partners Iran and Syria. Meanwhile, Israel has few viable options as siding with opposition forces in Syria could help Iran and its allies link regional developments to accusations of so-called US and Israeli plots to reshape regional politics, Given deep socio-economic, political and sectarian cleavages, the pervasiveness of the Arab-Israeli conflict and more recently a cycle of popular protests, the Levant continues to challenge how the US could or should project power in its regional struggle with Iran.

This chapter addresses core US and Iranian interests in the Levant, Egypt, and Jordan. It then analyzes the conventional and asymmetric military dimensions of US-Iranian competition, and the socio-economic levers that the US and Iran use to advance their respective national interests and harden their linkages in the region.

It examines five core theaters in the US-Iranian contest: Syria, Lebanon, Israel, the Occupied Palestinian Territories, Egypt and Jordan and how the US and Iran seek to advance their interests in each theater. It concludes by considering some of the enduring and emerging regional challenges and wild cards that are likely to shape and influence US-Iranian interests and competition in the Levant – potentially for years to come.

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U.S.-Iranian Interests in the Levant, Egypt, and Jordan The US and Iran have different geostrategic interests and their reasons for engagement with the region are not easy to compare. The US is a global superpower that has worked hard to shape regional trade, security, socio-economic and political dynamics in the Levant at least since the end of WWII. In contrast, Iran’s levels of engagement and its objectives are far more limited; this is due largely to the realities of geography and the real world limitations of Iran’s ability to project influence and shape events beyond its immediate Gulf sphere of influence.

U.S. Interests While US efforts to support democratic development are not unimportant, US interests remain largely centered on traditional hard power interests. These include energy security, sustaining strategic partnerships with key regional allies and supporting favorable stability in a region that has experiences deep instability in the post-WWII period. The Arab-Israeli peace process has increasingly become a core US strategic interest in the region, in no small part as a result of recent US military involvement in the region and a desire to reshape Arab and Muslim perceptions of the US in the broader Arab and Muslim Middle East.

The US has also grown increasingly concerned with the role played by armed non-state Islamist movements – including Palestinian Hamas and Hezbollah in Lebanon – in regional security politics. In short, US interests are predicated on supporting geopolitical forces that favor long term stability and the protection of US interests in the Levant.

The US-Israeli Strategic Relationship and Iran Much of the current pattern of US and Iranian competition is affected by the fact that Israel is one of the US’s most important Middle East allies. Few countries have faced as many “existential” military crises in modern times as Israel. This has led to a continuing arms race where Israel has developed and maintained a decisive qualitative military edge (QME) over its Arab neighbors with continued US support. The US has also made it clear to regional states that American support for Arab-Israeli peace efforts rests on the preservation of Israel’s security and US commitments to guard Israel against an Iranian nuclear threat remain robust.

In the Levant, Israel and the US have both sought to secure a political order that favors Israel’s security. The US also has a strong preference for Israel to have truly favorable bilateral relations with regional states – not the “cold peace” that currently exists between Israel and the two Arab countries it has peace deals with, namely Egypt and Jordan.

Both Israel and the US have sought to support – in different ways and sometimes at cross purposes – the Palestinian Authority under Fatah’s leadership as a bulwark against Palestinian groups aligned with Iran and Syria, including Hamas and Palestinian Islamic Jihad. In the wake of Syria’s military exit from Lebanon in 2005, Israel has also been favorable to the emergence of political forces in Beirut with close ties to the US and the West in the hope that threat posed by Iran’s leading ally in Lebanon, the Shi’a group Hezbollah, could be degraded; thus undermining Iran’s asymmetric edge in the Levant.

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Lastly, both Israel and the US share an interest in seeing the emergence of a Syria – under the current leadership or otherwise – that takes serious stakes to downgrade its ties to Iran, Hezbollah and Hamas as well its role as a confrontation state against Israel.

US and Israeli perceptions of Iran do differ in detail, and in assessing the scope and scale of the regional threat posed by Iran. While recent upheaval in the Arab world is likely to present a clear and present challenge to US policy in the Levant, it does little to diminish the perception in Israel that Iran’s development of a nuclear capability presents the most important strategic threat to Israel today. According to one Israeli assessment, Iran already has the means to make a nuclear weapon system, however it still lacks a viable delivery method.9 The US remains concerned with the risk Iran poses to Israel, but the US view of the threat the Islamic Republic poses is focused more broadly on the threat Iran poses to the Gulf and the world’s energy exports, and on the threat posed to stability and security across the Levant by Iran’s regional allies Syria, Hezbollah and Hamas. At the level of the broader Middle East, the US has sought to contain Iranian influence and hegemonic aspirations rather than confront Tehran directly through preemptive action.10

Protecting Energy Security & Regional Infrastructure The US has broader strategic interests in the Levant, although the impact of US and Iranian competition on these interests has so far been limited. These interests include the security of regional trade and energy infrastructure and the preservation of bilateral and multilateral energy ties in the region. Egypt has been exporting natural gas to Lebanon, Jordan and Syria via the Arab Gas Pipeline (AGP) since the mid-2000s. Egypt also began supplying natural gas to Israel in 2009 – a move many Egyptians appeared to disapprove of and that remains highly unpopular.11 The Suez Canal – which accounts for the passage of some 8 percent of global seaborne trade – and the adjacent Suez-Mediterranean (SUMED) pipeline are an important part of Mediterranean energy infrastructure. 12 The Canal has sufficient capacity to accommodate the movement of some 2.2 million barrels per day (bpd) of oil, while the SUMED pipeline can support a volume of 2.3 million bpd of oil for a combined total capacity of 4.5 million bpd. While the volume of oil passing through both has been far below maximum capacity in recent years – in part due to Organization of Petroleum Exporting Countries (OPEC) cuts in production – the security of the Suez Canal and guaranteeing the free flow of trade through its waters remains critical to stability in global energy and commodities markets.

Figure VIII.1 shows the route of the Suez Canal and the SUMED pipeline. The US Energy Information Administration (EIA) provides additional background data on the Suez Canal and risks associated to its potential closure or disruption:13 Suez Canal The Suez Canal is located in Egypt and connects the Red Sea and Gulf of Suez with the Mediterranean Sea, spanning 120 miles. Year-to-date through November of 2010, petroleum (both crude oil and refined products) as well as liquefied natural gas (LNG) accounted for 13 and 11 percent of Suez cargos, measured by cargo tonnage, respectively. Total petroleum transit volume was close to 2 million bbl/d 14, or just below five percent of seaborne oil trade in 2010.

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Almost 16,500 ships transited the Suez Canal from January through November of 2010, of which about 20 percent were petroleum tankers and 5 percent were LNG tankers. With only 1,000 feet at its narrowest point, the Canal is unable to handle the VLCC (Very Large Crude Carriers) and ULCC (Ultra Large Crude Carriers) class crude oil tankers. The Suez Canal Authority is continuing enhancement and enlargement projects on the canal, and extended the depth to 66 ft in 2010 to allow over 60 percent of all tankers to use the Canal.

Closure of the Suez Canal and the SUMED Pipeline would divert oil tankers around the southern tip of Africa, the Cape of Good Hope, adding approximately 6,000 miles to transit, increasing both costs and shipping time. According to a report released by the International Energy Agency (IEA), shipping around Africa would add 15 days of transit to Europe and 8-10 days to the United States.

SUMED Pipeline The 200-mile long SUMED Pipeline, or Suez-Mediterranean Pipeline provides an alternative to the Suez Canal for those cargos too large to transit the Canal (laden VLCCs and larger). The pipeline has a capacity of 2.3 million bbl/d and flows north from Ain Sukhna, on the Red Sea coast to Sidi Kerir on the Mediterranean. The SUMED is owned by Arab Petroleum Pipeline Co., a joint venture between the Egyptian General Petroleum Corporation (EGPC), Saudi Aramco, Abu Dhabis National Oil Company (ADNOC), and Kuwaiti companies.

Crude Oil The majority of crude oil flows transiting the Canal travel northbound, towards markets in the Mediterranean and North America. Northbound canal flows averaged approximately 428,000 bbl/d in 2010. The SUMED pipeline accounted for 1.15 million bbl/d of crude oil flows along the route over the same period. Combined, these two transit points were responsible for over 1.5 million bbl/d of crude oil flows into the Mediterranean, with an additional 307,000 bbl/d travelling southbound through the Canal. Northbound crude transit represented a decline from 2008 when 940,000 bbl/d of oil transited northbound through the Canal and an additional 2.1 million travelled through the SUMED to the Mediterranean.

Total Oil and Products Total oil flows from the Suez Canal declined from 2008 levels of over 2.4 million bbl/d in 2008 to just under 2 million bbl/d on average in 2010. Flows through the SUMED experienced a much steeper drop from approximately 2.1 million bbl/d to 1.1 million bbl/d over the same period. The year-on-year difference reflects the collapse in world oil market demand that began in the fourth quarter of 2008 which was then followed by OPEC production cuts (primarily from the Persian Gulf) causing a sharp fall in regional oil trade starting in January 2009. Drops in transit also illustrate the changing dynamics of international oil markets where Asian demand is increasing at a higher rate than European and American markets, while West African crude production is meeting a greater share of the latters demand. At the same time, piracy and security concerns around the Horn of Africa have led some exporters to travel the extra distance around South Africa to reach western markets.

Liquefied Natural Gas (LNG) Unlike oil, LNG transit through the Suez Canal has been on the rise since 2008, with the number of tankers increasing from approximately 430 to 760, and volumes of LNG traveling northbound (laden tankers) increasing more than four-fold. Southbound LNG transit originates in Algeria and Egypt, destined for Asian markets while northbound transit is mostly from Qatar and Oman, destined for European and North American markets. The rapid growth in LNG flows over the period represents the startup of five LNG trains in Qatar in 2009-2010. The only alternate route for LNG tankers would be around Africa as there is no pipeline infrastructure to offset any Suez Canal disruptions. Countries such as the United Kingdom and Italy received more than half of their total LNG imports via the Suez Canal in 2009 while over 90 percent of Belgium’s LNG imports transited through the canal.

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Iran only has an indirect effect on the security of these routes. Its sponsorship of Palestinians militants and Hamas, and tacit if not explicit support of attacks on the US and Israel, may have had some impact on the stability of the Sinai – although this is uncertain. In 2011, lax security in the Sinai Peninsula contributed at least in part to an escalation of attacks to energy infrastructure in Egypt, causing severe disruptions to the flow of natural of natural gas supplies to Israel and Jordan.

There is no evidence – anecdotal or otherwise – that Iran was involved in these attacks.

However, changes in internal Egyptian politics, the risk that Egypt may indefinitely suspend energy exports to Israel, regional instability near the Suez, a tenuous IsraeliEgyptian border and changing bilateral energy trade dynamics are all to the disadvantage of a regional order the US has spent decades nurturing. Iran and other regional opponents of the US stand to gain from any regional instability by default.

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Figure VIII.1: The Suez Canal, the SUMED Pipeline and the Vulnerability of Mediterranean Energy Infrastructure

Source: Adapted by Aram Nerguizian from “World Oil Transit Checkpoints,� February 2011, the Energy Information Administration, available at http://www.eia.gov/cabs/world_oil_transit_chokepoints/Full.html, other EIA data & Congressional Research Services cartographic data.

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Countering the Threat for Non-State Armed Groups Iran has played a far more serious role in its dealings with Hezbollah and Hamas, and in cooperating with Syria. The threat from non-state or subnational actors is not a new one.

The Palestine Liberation Organization (PLO) played a destabilizing political and security role in Jordan and Lebanon. US military forces witnessed firsthand what non-state armed groups can do in the wake of the 1993 Marine barracks bombing in Beirut by elements that would later go on to become Hezbollah.

Hamas and other Palestinian groups do not have the resources or the levels of external aid from Iran and Syria to pose a critical threat to Israel, especially given US-backed Israeli efforts to create effective countermeasures to militant rocket fire. However, Hezbollah is a growing threat. It has the support of the majority of Lebanon’s most populous community, the Shi’a, and enjoys quasi-autonomy in its area of operations in South Lebanon. It has rocket and missile capabilities (discussed later) that can rival most Arab military forces and the organizational wherewithal and training to present a far more decisive organized threat, not only to Israel but US regional hegemonic aspirations.

This threat must be kept in proportion. Hezbollah’s boasts of defeating Israel in a future conflict are fantasy, not reality. Israel, the US and key regional allies are not facing truly existential threats from armed groups that ultimately rely on open-ended conflict as a means of legitimizing their roles and continued existence. They do, however, pose a risk to US preferences on regional stability and the development of the Arab-Israeli peace track, which in turn informs US concerns about their future development and roles in regional security politics.

The Impact of US Military Assistance to Egypt, Israel Jordan and Lebanon The US has sought to make military aid and arms transfers an important component of how the US competes with Iran so as to build up and sustain influence over the Arab states in the Levant. The US has used military aid to shore up support in key Arab capitals, such as Cairo and Jordan, while working to build support in regional “battleground” states and arenas, including Lebanon and the Palestinian Territories. US military aid to the Levant over the 1971-2001 period alone has totaled some $82.5 billion, with aid to Israel and Egypt accounting for 61.2% and 33.4% of total loans and grants.15 Iran has not and cannot compete with the US directly in building up such military partnerships in the region. US military ties with Egypt, Jordan and Israel are central to denying Iranian influence, and the Islamic Republic has had to resort to supporting armed Palestinian and Lebanese factions as a means of harassing US allies in the Levant.

Figure VIII.2 shows the overall pattern of US foreign military assistance to Egypt, Israel Jordan and Lebanon. Figure VIII.3 shows major US FMF-funded Congressional arms sales notifications for Egypt, Israel and Jordan over the 2005 to 2013 period. It is important to remember that such notifications only offer an approximate and potential picture of future arms sales 3-10 years on the horizon.

The US has also used foreign military aid to bolster Arab-Israeli ties, as in the cases of Egypt and Jordan, while also seeking to strengthen US ties with other states in the region

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that policymakers consider moderate and sources of influence serving to discourage uncontrolled regional arms races.16 Building up strong military partnerships and aid ties are also a tool to ensure that other international and regional players hostile to the US are denied the opportunity to undermine US interests or the stability of US regional allies.

It is difficult to measure the future impact of US military aid on the furthering of US strategic interests in the region. Military aid is also not without its critics. Regional observers highlight the view that US aid to Israel could be indirectly contributing to Palestinian fatalities in ongoing clashes between the IDF and Palestinians. Other critics point to the impact of foreign military aid in bolstering conservative authoritarian regimes or undermining democracy and human rights in the region. A broad consensus exists, however, that US military aid significantly boosted Israeli security, ensured Egyptian stability and consolidated ties of friendship between America and Jordan. The promise of Foreign Military Financing (FMF) dollars helped move Egypt and Jordan to sign peace deals with Israel.17 Egypt, Israel and Jordan have been allies of the US and had access to priority delivery of US excess defense articles (EDA), the ability to purchase depleted uranium (DU) antitank shells, are eligible for no-cost loans of materials in support of cooperative research and development programs with the US, and other benefits.18 Syria is the only regional country that does not have security or military aid ties with the US. Transfers and Aid to Israel Israel has been the top recipient of US military aid since 1976 and the largest cumulative recipient since WWII.19 Israel also has access to a number of other benefits that other countries in the region do not have access to, such as the ability to use US military aid dollars for research and development in the US or use 26.3% of annual aid funds towards military purchases from Israeli industry. The US also delivers all assistance earmarked for Israel in the first 30 days of a given fiscal year, unlike other countries that receive staggered installments of aid at varying times.20 Israel is heavily dependent on US FMF, which represents 21 to 22 percent of Israeli defense spending. In 2007, the Bush Administration announced that US military aid to Israel would increase by $6 billion over the coming decade, reaching an annual aid level of $3.1 billion by FY2018. In addition to offsetting the end of US economic support funds in FY2007, it is expected that increased levels of FMF will allow Israel to fund sophisticated US purchases, such as a possible sale of F-35 Joint Strike Fighter (JSF) aircraft.21 Transfers and Aid to Egypt Egypt has been second only to Israel in terms of both annual aid and arms sales patterns since 1979. The promise of US military (and economic) aid was critical to bringing postNasr Egypt closer to the US and helped the ruling establishment under President Hosni Mubarak consolidate peace deal with Israel. Egyptian military aid has settled into a relatively consistent pattern, with FY2013 requests for $1.3 billion in FMF holding at similar levels of funds provided or estimated for Egypt in FY2011 and FY2012.

US military aid under FMF has consisted mainly of acquisitions of new systems, upgrades for existing military systems and follow-on support and maintenance. Egypt

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generally hopes to allocate 30% of annual FMF to new systems acquisition in order to gradually replace what remain of aging Soviet holdings with US equipment. In addition to receiving systems “as is where is” worth hundreds of millions of dollars through the excess defense articles (EDA) program, the Egyptian military also participates in US international military education and training (IMET) programs. In recent years Egypt has lobbied the US to increase US FMF dollars in a bid to offset the rising costs associated with contract support and maintenance.22 So far, US military aid has not been significantly disrupted by the recent upheavals in Egypt and the ousting of long-time US ally President Hosni Mubarak. One anecdotal indicator that the military-to-military relationship between the US and Egypt continues to be robust is a July 5, 2011 notification to Congress for the potential sale and coproduction of 125 M1A1 Abrams tank kits, supporting weapons systems, equipment and maintenance worth some $1.3 billion.23 Transfers and Aid to Jordan Jordan, another key regional ally, has been a recipient of US military aid since 1951. US aid dollars are in recognition of Jordan’s position as a key moderate ally and to help sustain almost two decades of formal peace with Israel. As with Egypt, US FMF allocations to Jordan increased significantly in the wake of the 1994 peace agreement, jumping from $7.3 million in FY1995 to $200 million FY1996, with elevated levels since then.

US aid has helped Jordan modernize its air forces through recent purchases and upgrades of F-16 fighters, air-to-air missile systems and radar equipment. FMF also allowed Jordan to modernize its logistics and transport helicopter fleet. This facilitates Jordanian border management operations and supports Jordanian contributions to UN peacekeeping operations.24 While patterns of aid are generally stable, Figure VIII.2 shows that aid levels have gradually increased over the 2006 to 2013 period.

Transfers and Aid to Lebanon Lebanon received some $268 million in FMF over the 1946 to 2005 period. While the bulk of those funds were allocated in 1983 at a time of heightened US interest in Lebanon, this was followed by only very limited aid patterns over the 1985 to 2005 period driven mainly by IMET. By contrast, the US has provided significantly higher levels to Lebanon in the wake of Syria’s withdrawal from the country in 2005, with the country receiving in excess of $775 million in US military assistance over the FY2006 to FY2011 period, driven by FMF and “Section 1206” counter-terrorism funds.25 This is a significant increase given Lebanon’s tenuous regional position, the presence of Hezbollah and a continued technical state of war between Lebanon and Israel. Unlike Egypt, Israel and Jordan, Lebanon has yet to enter into a stable pattern of assistance from the US and aid levels were reduced to some $75 million in FMF for FY2011, FY2012 and potentially FY2013. The challenges to long-term military assistance to Lebanon will be discussed in greater detail later in this chapter.

Security Aid to the Palestinians Figure VIII. 2 does not show US security assistance to the Palestinians, as aid dollars are not provided from FMF funds. Security aid to the Palestinian Authority (PA) is driven by

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funds from the International Narcotics Control and Law Enforcement (INCLE) account, which has earmarked some $545.4 million to the PA over the FY2007 to FY2011 period with an addition $113 million requested for FY2012. INCLE funding, training and equipment were intended to assist security forces loyal to President Abbas (mainly in the West Bank) in their efforts to counter militants belonging to groups the US labels as terrorist organizations, such as Hamas and Palestinian Islamic Jihad.

Security assistance to the PA was also intended to strengthen rule of law and the criminal justice sector for a future Palestinian state.26 The US effort to train and equip Palestinian security forces has not been an easy task and has been hobbled by the inherent challenges of building up domestic legitimacy, the perception of the US and Israel as sponsors of the PA, and the disconnect between US aid prerogatives and local security realities.27 This too will be touched upon in greater detail later in this chapter.

Figure VIII.4 shows the patterns of military orders in the Levant by country of origin over the 1999 to 2010 period. The US remains the most important source of military sales to the region, with Israel and Egypt as its top clients. Military sales to Jordan and Lebanon are similarly dominated by imports from the US. Syria, which continues to have a mutually confrontational relationship with the US, has traditionally relied on Russia for its arms acquisition and modernization needs. China has also played a growing role when it comes to Syrian arms imports.

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Figure VIII.2: Actual and Projected US Military Assistance to Arab-Israeli States from 2000 to 2013 (In thousands of current US dollars)

3,500,000 3,000,000 2,500,000 2,000,000 1,500,000 1,000,000 500,000 0 2000 2001

2000 Lebanon 582

2001 546

2002 2003

2002 560

2004 2005 2006 2007 2008 2009 2010 2011 2012*2013**

2003 700

2004 700

Israel Egypt Jordan Lebanon

2005 2006 2007 2008 2009 2010 2011 2012* 2013** 0 15,097 256,30 23,540 210,83 283,30 77,326 77,375 77,250

Jordan

226,39 76,535 102,01 606,40 208,01 307,41 210,92 255,82 351,20 338,10 353,80 303,16 303,70 303,80

Egypt

1,326, 1,298, 1,301, 1,292, 1,293, 1,290, 1,288, 1,301, 1,290, 1,301, 1,295, 1,298, 1,301, 1,301,

Israel

3,120, 1,975, 2,040, 3,086, 2,147, 2,202, 2,257, 2,340, 2,380, 2,550, 2,775, 2,994, 3,075, 3,100,

* Data for 2012 reflect estimated amounts. ** Data for 2013 reflect requested amounts.

Note: Includes supplemental funding and FMF/IMET funds tied to the Wye River Agreement. Data shown include FMF, IMET and Department of Defense Section 1206 funding for Lebanon. “FMF” is Foreign Military Financing, “IMET” is International Military Education and Training and Section 1206 is “Title 10” funding.

Source: Adapted by Aram Nerguizian from Congressional Budget Justification for Foreign Operations, various fiscal years.

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Figure VIII.3: Select U.S. Foreign Military Sales Congressional Notifications for Egypt, Jordan and Israel 2005-2011 (In current US dollars)

Country Recipient

Date

Weapon System/ Equipment

Cost

Egypt

July 29, 2005

200 M109A5 155 mm SP howitzers with equipment and services

$181 million

Egypt

June 27. 2005

25 AVENGER Fire equipment and services

with

$126 million

Egypt

June 27, 2005

50 CH-47D, T55-GA-714A turbine engines for CHINOOK Helicopters with equipment and services

$73 million

Israel

April 29, 2005

100 GBU-28 services

$30 million

Israel

July 14, 2006

JP-8 aviation fuel

$210 million

Jordan

July 28, 2006

M113A1 to M113A2 APC upgrade and sustainment with equipment and services

$156 million

Jordan

September 26, 2006

C4ISR System with equipment and services

$450 million

Jordan

September 28, 2006

UH-60L Black Hawk helicopters with equipment and services

$60 million

Israel

August 3, 2007

JDAM, PAVEWAY II tail kits, MK-83 bombs, MK-84 bombs, GBU-28, BLU109, components, equipment and services

$465 million

Israel

August 24, 2007

200 AIM-120C-7 AMRAAM air-to-air missiles with equipment and services

$171 million

Israel

August 24, 2007

30 RGM-84 BkII HARPOON SSMs, 500 AIM-9M SIDEWINDER air-to-air

$163 million

with

Units

equipment

and

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missiles with equipment and services

Egypt

September 18, 2007

125 M1A1 Abrams tank kits with equipment and services

Egypt

October 4, 2007

Egypt

September 28, 2007

Egypt

October 19, 2007

2 E-2C AEW C2 equipment and services

with

$75 million

Israel

October 29, 2007

TOW-IIA, AGM-114 MSLs, PATRIOT GEM+ , HEDP, HE rounds, various munitions with equipment and services

$1.329 billion

Egypt

October 29, 2007

2,000 TOW-IIA ATGMs

Israel

June 9, 2008

25 T-6A Texan aircraft, equipment and services

$190 million

Israel

July 15, 2008

4 Littoral Combat Ships (LCS-I), weapons, systems equipment and services

$1.9 billion

Israel

July 15, 2008

JP-8 aviation fuel

$1.3 billion

Israel

July 30, 2008

9 C-130J-30, engines, equipment and services

Israel

Israel

164 STINGER Bk1 equipment and services

missiles

$899 million

with

$83 million

139 RIM-116B Bk1A Rolling Air Frame with equipment and services

$125 million

aircraft

$99 million

systems,

$1.9 billion

September 9, 2008

1,000 GBU-39, mounting carriages, simulators, trainers, systems, equipment and services

$77 million

September 9, 2008

28,000 M72A& LAAW, 68,000 training rockets, equipment and services

$89 million

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Israel

September 9, 2008

3 PATRIOT System Configuration 3 fire unit upgrades, equipment and services

$164 million

Jordan

September 9, 2008

Increment 2 Requirements for Border Security Program, equipment and services

$390 million

Egypt

September 9, 2008

6,900 TOW-IIA ATGMs

$319 million

Egypt

September 9, 2008

15,500 120 mm HE-T rounds, other systems, equipment and services

$69 million

Egypt

September 9, 2008

4 UH-60M BLACK HAWK helicopters, engines, parts, systems, equipment and services

$176 million

Israel

September 29, 2008

25 F-35 CTOL JSF, 50 F-35 CTOL, engines, C4/CNI, other systems, equipment with services

$15.2 billion

Egypt

May 26, 2009

12 AH-64D Bk II APACHE Longbow helicopters, engines, systems, equipment with services

$820 million

Jordan

August 3, 2009

85 AIM-120C-7 AMRAAM air-to-air missiles, equipment and services

$131 million

Egypt

August 6, 2009

6 CH-47D CHINOOK helicopters, engines, systems, equipment and services

$308 million

Jordan

September 9, 2009

12 M142 High Mobility Artillery Rocket Systems, systems, equipment and services

$220 million

Jordan

November 30, 2009

1,808 JAVELIN ATGMs, equipment and services

$388 million

Jordan

December 8, 2009

systems,

61 F100-PW-220E engines equipment and services

with

$75 million

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Egypt

December 14, 2009

450 AGM-114K3A HELLFIRE II missiles with equipment and services

$51 million

Egypt

December 18, 2009

156 F-110-GE-100 engine modification and upgrade kits with equipment and services

$750 million

Egypt

December 18, 2009

4 Fast Missile Craft (FMC) with systems, equipment and services

$240 million

Egypt

December 18, 2009

20 RGM-84L/3 HARPOON Bk II SSMs with equipment and services

$145 million

Egypt

July 2, 2010

40 Skyguard AMOUN Solid-State Transmitters for upgrade of SkyguardSPARROW Launcher/Illuminator with equipment, training and services

$77 million

Egypt

July 5, 2011

125 M1A1 Abrams Tank kits for coproduction, 125 M256 Armament Systems and other military equipment, training and services

$1.3 billion

Note: Costs are letter of offer and acceptance (LOA) estimates that are subject to change and re-costing.

Source: Adapted by Anthony H. Cordesman and Aram Nerguizian from DSCA data on 36(b) Congressional arms sales notifications.

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Figure VIII.4: Arab-Israeli Arms Orders by Supplier Country: 1999-2010 (Arms Agreements in $U.S. Current Millions) 10,000

Syria

Lebanon

Jordan

Egypt

Israel

1999-2003-20072002 2006 2010

1999-2003-20072002 2006 2010

1999-2003-20072002 2006 2010

1999-2003-20072002 2006 2010

1999-2003-20072002 2006 2010

9,000

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0 All Others Other Europe

200 400 300 0

Major W. Europe 100 China Russia US

0

0

300

100

0

0

0

0

0

0

0

100

0

0

0

0

0

0

100 500 200

0

0

0

0

0

0

300

0

0

100

0 1,500 0

0

0

0

0

100

0

500 400 400

0

0

0

0

200

0

0

0

300

300 300 0

0

400 200

0

100

200 2,1004,700 0

0

300 800 1,500

0

0

400 400 200 6,5004,5007,800

0

0

0

0

300

0

6,7001,6003,000

Note: 0 = less than $50 million or nil, and all data rounded to the nearest $100 million.

Source: Adapted by Anthony H. Cordesman and Aram Nerguizian from Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.

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Competition and US Support of the Arab-Israeli Peace Process Barring a major shift in regime, Iran will continue to use the Palestinian question as a means of foiling US regional interests so long as the Arab-Israeli conflict remains unresolved. It will promote Iran’s role as a leading defender of the Palestinians – chiefly through groups like Hamas and Hezbollah. This, and the recent instability and popular protests in the Arab world, give the US even more of an interest in removing the IsraeliPalestinian (if not the broader Arab-Israeli) conflict as an arena of competition between the US and Iran.

Successive US administrations have held the position that a lasting Arab-Israeli peace would be in the best interest of the US and the broader Middle East.28 Views have differed over time as to whether the peace process was a US policy “want” rather than a “need.” What is clear is that despite regional protests in 2011 across the Arab and Muslim world, the lack of Palestinian statehood remains a core issue for people across the region and an enduring lens through which US intentions and resolve are perceived.29 A number of interest groups have a stake in shaping how the US deals with the ArabIsraeli peace process, but the US military’s position and views on the issue have become critical to the debate. This is in no small part thanks to the military’s experience in Iraq dealing with the local and regional factors that drive and sustain conflict instability.

Many senior US military officers have made it clear that they considered US interests in the Middle East to be at risk so long as there is no lasting Middle East peace. 30 In January, 2010, General David Petraeus – then head of USCENTCOM – reportedly underscored in a report to the Chairman of the Joint Chiefs of Staff Admiral Michael Mullen the military’s concern that Israeli “foot-dragging” on peace efforts was detrimental to the US. It went on to underscore that the conflict was a core source of regional instability, that lack of movement on the peace track was harming US standing in the Arab and Muslim worlds, and that lasting Arab-Israeli peace was a critical American national security and strategic interest.31 Such criticism should be kept in perspective. American officers and officials fully understand that that Israel alone is not responsible for the lack of successes in the peace process. Other regional state and non-state actors, including the Palestinian Authority, Syria, Hezbollah and Hamas have contributed at least as much to these failures over the years. What should also be obvious, however, is that the roadblocks to peace have been exploited and aggravated by Iran for close to three decades.

The Broader Quest for Favorable Regional Stability US foreign policy in the Middle East is predicated on promoting and supporting regional stability in ways that are favorable to US interests. The Levant has proven to be the repeated epicenter of regional instability. This is due in large part to multiple Arab-Israeli wars, continued paralysis on the Israeli-Palestinian track, the repeated mobilization of political ideologies (including pan-Arab nationalism and Islamist politics), and continued crises of legitimacy and governance in fragile often-contested post-Ottoman states in the region.

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Cold War great power competition led the US to shore up pro-Western governments, such as Israel, Lebanon and Jordan while opposing or containing states with strong ties to the Soviet Union, such as Egypt and Syria. Beyond Cold War decision-making, the US has also repeatedly interceded in the Levant in the post-WWII period to preserve stability or minimize uncertainty, albeit with significant caution and reluctance. In 1956, the US supported a resolution to the Suez War that favored Egyptian and broader Arab concerns over those of Israel, the United Kingdom and France. The US also authorized troop deployments to Lebanon in 1958 during the country’s short-lived civil war, and again in 1982-1984.32 As was discussed earlier, US military assistance is seen as a critical foreign policy tool in building strong ties with regional states and preserving stability. Economic aid has also been crucial to such efforts. While the US provided only limited aid during the 19501971 period, economic assistance to the Levant during 1971-2001 totaled some $62.4 billion, with aid to Israel and Egypt accounting for 45.4% and 40.2% of total loans and grants.33 However, economic aid levels to the Levant underwent significant reductions over the 2002 to 2011 period. Economic support funding levels for the period total some $13.3 billion with annual aid to Egypt, Israel, Lebanon and Jordan declining from some $2.2 billion in 2002 to $696.5 million by 2011. In a departure from previous patterns Jordan was also a major aid recipient in addition to Egypt and Israel; the three country recipients accounted for 35.2%, 37% and 22.2%.34 The wave of popular unrest in the Middle East & North Africa starting in early 2011 presents a complex challenge to US preferences for socio-economic and political stability in the Levant. The Mubarak regime in Egypt was overthrown and the transition from authoritarian and military rule to civilian rule is anything but certain and the Egyptian economy has seen significant setbacks in the wake of popular unrest. The Alawitedominated Ba’thist government of President Bashar Al-Asad has also experienced mounting pressure and unrest as largely peaceful protests movements seeking reforms have metastasized into an insurgency calling for the downfall of the Asad regime.

Neighboring states such as Jordan, Lebanon and Iraq are experiencing growing internal socio-economic and political pressures as a result of unrest in Syria. Syrian instability also presents significant challenges to non-Arab states in the region such as Israel and Turkey as they seek to mitigate negative spillover effects. This shifting environment has presented real challenges to crafting a longer term US policy response, especially in the case of Syria. Given the country’s centrality and pivotal role to both Arab-Israeli and inter-Arab regional politics, there are no simple solutions that can both guarantee stability and promote strategic shifts that favor the US and not Iran.

As the US comes to terms with the reality that the “Arab Spring” is more of an Arab decade of popular discontent, it continues to weigh the benefits and potential costs of pursuing as-yet uncertain reform-driven policy responses to events in the Levant against a long-term US interest in regional stability.

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Iranian Interests in the Levant and Egypt Post-revolutionary Iran has gone from being a status quo player to one actively seeking to expand its influence. The Iranian regime has contested the legitimacy of some of the region’s Arab states, enhanced the Islamic Republic’s geopolitical position and gained access to arenas that were closed to Iran under the Shah. 35 While the ideological dimension is significant given Iran’s support for Shi’a groups in Lebanon and Iraq, ideology may ultimately be subordinated to more traditional or pragmatic state interests.36

The Broader Quest for Geopolitical Advantage Iran has sought to deepen its alliance with Syria while building on the increasing politicization of Lebanon’s Shi’a community. Exploiting the Arab-Israeli conflict serves as a means for Tehran to gain greater traction in the Arab Middle East. This first meant exploiting the Israeli-Syrian standoff in Lebanon during the 1980s, and second, focusing on Arab and Palestinian grievances against Israel.

Both have served to distance Tehran from the legacy of a robust Israeli-Iranian alliance under the Shah while deepening Iranian links with regional Islamist groups – either Shi’a or Sunni; this was done, however, with an eye on avoiding the alienation of Asad’s Syria, Iran’s sole Arab ally in the post-revolutionary period.37 Some 30 years after the Islamic Revolution, Iran has consolidated its ties to Syria, Lebanon’s Shi’a community and its support for Palestinian Islamist group and is likely to continue to leverage its regional spoiler role so long as that continues to secure Tehran’s efforts to grow its regional geopolitical advantage.

Israel, Iran, and the Arab-Israeli Conflict As was mentioned earlier, pre-revolutionary Iran and Israel enjoyed strong positive ties for decades. Ties between the Shah’s Iran and Israel were driven by shared interests and shared threats, including a mutually beneficial trade partnership driven in part by Israel’s need for non-Arab energy resources and mutual enmity with Iraq and Egypt during the 1960s and 1970s. Both countries were also stalwart supporters of the US and the West.38 Iranian policy towards Israel reversed drastically after the 1979 Iranian revolution. For some, Iranian policy towards Israel was predicated more on ideological dogma rather than pragmatic state interests.39 This view holds that Iran’s approach to Israel remains rooted in a revolutionary narrative whereby Iran’s leadership role of the anti-Israel regional camp could serve to advance the Islamic Republic’s credentials as a major regional and Islamic power. Iran’s support for Palestinian Islamist militants, key among them Hamas, and other regional forces opposed to Israel, including Hezbollah, remains a testament to the enduring regional utility of Iran’s anti-Israel regional position.

The utility of Iran’s anti-Israel policy has limitations. Iran and its regional allies have little to no real-world ability to change realities on the ground with regards to Israel’s existence and the plight of the Palestinians. As David Menashri observed, “some Iranians doubted the advisability of being more Palestinian than the Palestinians.”40 Iran’s views concerning Israel seemed to soften during the Khatami presidency, with officials indicating publicly that Iran may need to come to terms with Palestinian aspirations for peace with Israel.41

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Since the days of Khatami’s presidency, however, President Ahmadinejad has refocused Iran’s foreign policy on a clearly anti-Israeli narrative, defining Iran’s role in the ArabIsraeli conflict in terms of a broader confrontation with the West. Iran’s continued pursuit of a nuclear capability – peaceful or otherwise – has also served to deepen the perception that Iran’s struggle with Israel and opposition to Israeli interests remains deeply entrenched.42 How much of Iran’s policy represents real opposition to Israel’s existence versus a means to serving its regional ambitions by winning popular Arab support and deflecting opposition by Arab regimes is a matter of debate. What is clear is that Iran has made good use of its contest with Israel to bolster its position. The mainly Sunni Arab Middle East remains broadly opposed to Israel, no thanks to the lack of momentum on the peace process and the perception that the US cannot be a neutral arbiter of the conflict. Iranian support for Hamas and Hezbollah, especially the latter in the context of the group’s “nondefeat” in an open military contest with the IDF in 2006, has been a source of legitimacy and influence.

What is less clear is how much Iran can exploit the situation in the future, especially during a period of upheaval in the Arab world. The possible resurgence of “dormant” or “absent” Arab regional forces with strong national credentials and regional legitimacy, such as Egypt, could downgrade Iran’s ability to leverage its antagonistic policy towards Israel. This also applies to any headway Turkey may make in its regional role, and if there is any true international and Israeli-Palestinian movement towards a lasting resolution of regional Arab-Israeli grievances.

Iran’s “Partnership” with Syria Iran’s current ties to Syria go back to the early days of the revolution. Syria met the US embassy in Tehran’s takeover by Khomeini loyalists with a declaration of support for the move, which went on to call for greater Arab support for the new Iran. 43 Then Syrian Foreign Minister Abdul Halim Khaddim went on to add that “the Iranian revolution gave appreciable help to the Palestinian cause” and that it was “normal that [Iran] should be backed by the [Arab states].”44 Today, the Syrian-Iranian axis remains a key part of Iran’s regional efforts to thwart US, Western and Israeli interests in the Levant.

Shaping the Relationship The Syrian-Iranian axis was initially shaped by both countries’ regional isolation and common interests. One of the pillars of the early alliance was the common threat posed

by Saddam Hussein’s Iraq. This led to significant intelligence cooperation and the execution of covert operations by both countries in Iraq in an effort to destabilize the Hussein regime.45 In addition to their mutual hatred of Iraq, Syria also sought to strengthen its ties with Iran in order to play a larger role in Gulf Arab security politics, given the poor state of Iran-Gulf relations during the 1980s. Syria also remained keen to scuttle any Saudi-led effort to promote a settlement in the Arab-Israeli conflict based on UN Security Council Resolutions 242 and 338 – a settlement that would have been at the expense of Damascus’s position and interests.46 The Al-Asad regime considered a strong Syria-Iran axis as a means of exerting leverage in its dealings with Iraq, Saudi Arabia and Israel from positions of relative strength. The

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partnership in Syria in turn provided Iran with the geographic and political means through which to increase its influence in the Levant and its role in the Arab-Israeli conflict.

The relationship has not been without its obstacles, chiefly rooted in both players’ efforts to exploit the strategic partnership to their own advantage. The 1985 to 1988 period proved the most challenging to the Iran-Syria relationship, largely due to increasingly divergent foreign policy interests and priorities. Syria and Iran had effectively curtailed US and Israeli efforts to relocate Lebanon into the pro-Western camp by spring 1985.

However, both countries were pursuing broadly conflicting foreign policy goals. Syria wanted to stabilize Lebanon by bringing into its own uncontested sphere of influence and to pursue a more prominent role in regional Arab politics. Meanwhile, by virtue of its own role in thwarting US and Israeli ambitions in the Levant, Iran had hoped not only to spread its revolutionary model, but also to provide it with the ability to harass and strike at Israel in the name of Palestine.47 Eventually, competing Lebanese Shia factions, Amal loyal to Syria and the then-newly formed pro-Iranian Hezbollah, came to blows.48 In the mid-1980s both the Soviet Union and the Arab states that Syria hoped to mend ties with encouraged Syria to distance itself from Iran. While the prospects of remaining part of the Arab political mainstream, reducing the risk of confrontation with Israel, and greater access to economic and financial resources help promise, the Syria-Iran relationship proved far more resilient. This was due to both countries’ shared long-term strategic interests grounded in security politics, distinct yet complimentary ideological worldviews and a desire to abide by foreign policy orientations that did not rely upon (or was subject to) great power politics.49 A Current Climate of Uncertainty Today, the strategic partnership between Iran and Syria remains a cornerstone of Iran’s policy in the Levant, and Tehran is keen to preserve the alliance even at significant cost.

Most recently in 2011, Iranian Revolutionary Guards were reported to be supporting the security forces of President Bashar Al-Asad in suppressing a months-long cycle of popular protests and civil disobedience.50 The loss of Syria as a strategic partner and asset in the Levant could signal a significant downgrading of Iranian interests and strategic posture in the broader Levant.

Accordingly, Iranian support for the Al-Asad regime is only likely to increase as Tehran tries to stabilize its ailing ally. Assessing the true pattern of Iranian support to Syria is difficult and inaccurate under any circumstances. However, sufficient open source data exists to extrapolate at least fragments of what Iran is doing politically, economically and militarily to shore up its only major regional ally in the Middle East. The following chronology is based at least in part on relevant data compiled by the American Enterprise Institute’s Iran Tracker program.

Any analysis of the events covered below is uncertain, but a chronology of recent events does provide a useful perspective: March 15, 2011 – The Israeli Navy captured a ship carrying weapons including shore-to-ship Chinese-made C-704 missiles. Reports speculated that the missiles were intended for Palestinian

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militants. However, Israeli Prime Minister Benjamin Netanyahu commented that the weapons came from Iran and were meant to be delivered, at least in part, to Syria. 51 

March 23, 2011 – Turkey seized an Iranian cargo meant for Syria. While details remained limited, it was reported that the shipment included 60 AK-47 assault rifles, 14 BKC/Bixi machine guns, 8,000 rounds of 7.62 mm ammunition, 560 60 mm mortar shells and 1,288 120 mm mortar shells.

If the shipment’s intended destination was the Asad regime and its security forces, that would constitute a violation of UN sanctions banning Iranian arms exports. 52



June 23, 2011 – Members of the UN Security Council’s Panel of Exports monitoring sanctions against Iran showed concern that Iran was violating arms embargoes with three new examples of illegal arms transfers that included Syria.53 It was not immediately clear what the exact violations were, or whether or not Syria was a benefactor of actual arms transfers from Iran.



July 15, 2011 – Iran’s Supreme Leader Ayatollah Khamenei was reported to support a proposed transfer of $5.8 billion in aid to Syria. Reuters reported that the funds were meant to bolster Syria’s economy and that the aid package included $1.5 billion in immediate cash assistance. It was also reported that Iran could have provided Syria with as much as 290,000 barrels of oil per day to Syria during the month of August. Neither report could be decisively verified. 54



July 25, 2011 – Iran, Iraq and Syria signed a natural gas agreement worth an estimated $10 billion.

The deal would see the three countries building a pipeline from Iran’s natural gas fields to Syria and potentially terminating on the Mediterranean via Lebanon. According to the deal, Iraq would initially receive 20 million cubic meters of gas per day, and Syria would receive 20 to 25 million cubic meters of gas per day.55



August 2, 2011 – Iranian Foreign Ministry spokesman Ramin Mehmanparast cautioned Western states not to interfere in Syria’s domestic affairs, adding that “the West [should] learn [its] lesson from its previous mistakes and interference in different countries and not to enter new issues to complicate the problems in the region.” 56



August 12, 2011 – Iran agreed to provide Syria with $23 million to build a military facility at the Mediterranean coastal city of Latakia. The agreement was the result of a June 2011 meeting between Syria Deputy Vic-President Muhammad Nasif Kheirbek and Islamic Revolutionary Guard Corps Qods Force commander Qassem Suleimani in Tehran. The base is intended to be built by the end of 2012 and is reportedly intended to house IRGC officers and personnel to coordinate weapons transfers from Iran to Syria. Given increasing difficulty in transferring Iranian arms to Syria via Turkey, the construction of the new facility would reportedly provide Latakia with more of the infrastructure necessary to receive larger volumes of arms and equipment by air.57



September 9, 2011 – Iranian President Mahmoud Ahmadinejad proposed to host a meeting of Islamic states to help Syria to resolve its political crisis. While the Islamic Republic continued to provide both material and rhetorical support to its ally, it was reported that the Iranian president called on Syria to find a “solution” with opposition forces “through dialogue and not violence.” 58



January 26, 2012 – Arab media and opposition sources reported the capture of members of the Iranian Revolutionary Guards.59 Iran has repeatedly denied reports that it is covertly sending troops and military aid to Syria.60 However, reports citing Iranian government sources claim that while Iran has yet to interfere directly in Syria, the Islamic Republic was ready provide aid should its ally come under external attack or military intervention. 61 Despite these reports, there is little reliable open source data on the quality and scope of Iranian support to the Asad regime.



February 6, 2012 – The Syrian National Council, a mainly expatriate-led Syrian opposition umbrella group reported that General Qassem Suleimani, the commander of the Iranian Revolutionary Guard’s Quds Force, was in Syria to provide the Asad regime with aid and support

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in suppressing popular unrest and a growing insurgency. 62 There is little reliable data or confirmation with regards to the role and scope of Suleimani’s presence in Syria.

Hezbollah and Lebanon’s Shi’a Community Iran benefited from the fact that the continued marginalization of the Shi’a by MaroniteSunni coalitions in post-independence Lebanon served to entrench sectarian identities and a Shi’ite lack of confidence in state structures. This also left the Shi’ite community – the largest single faction in the Lebanese population – searching for political, sectarian, and security vehicles that could advance Shi’a communal interests – even if these platforms were ideological, if not radical, in nature.63 Iran had maintained close relations with Lebanon’s Shi’a community even during the reign of the Shah. The new Islamic Republic of Iran, however, saw a war-torn Lebanon and the country’s increasingly radicalized Shi’a community as ideal terrain for exporting the revolution. Israel’s 1982 invasion of South Lebanon then facilitated a more prominent Iranian role in Lebanon, and broadened Tehran’s influence among the country’s Shi’a.

The invasion and de facto occupation of the south that followed created growing hostility towards Israel and the Maronite-dominated government. It also gave Iran added leverage over Syria and helped reverse the damaging effects of Iraq’s invasion of Iran and the strengthening position of Damascus vis-à-vis Tehran.64 While Syria had reservations about turning a blind eye to Iranian operations and ties to Shi’ite groups in the Bekaa, Syria’s defeats at the hands of the IDF left Damascus with little alternative but to allow Tehran to gain greater influence. With Syria’s tacit consent, Iran maintained some 1,500 Revolutionary Guards in the Bekaa Valley in 1982. The force worked closely with local Shi’a groups, including Hussein al-Musawi’s Islamic Amal and Hezbollah, led at the time by Abbas al-Musawi and Sheikh Subhi al-Tufayli.65 In addition to moral and ideological support, Iran provided Hezbollah with political, economic and military support as a means of maintaining a foothold on Israel’s northern flank and to maintain its role in Levantine security politics. Hezbollah’s arsenal (described in greater detail in a section describing the regional asymmetric balance) is in large part the byproduct of more than 25 years of consistent and unyielding support to the group. The closest regional analogy to Iranian “security assistance” to Hezbollah is US military support for Israel: no other two players in the region have received such consistent support over so long a period.

Hezbollah has since grown and evolved into one of if not the most formidable political and military forces in the country. Despite Hezbollah’s political orientation and stated ideological narrative of support for the Iranian political model, there has been no overt effort to establish theocratic rule in Lebanon. This is in no small part thanks to the fact that Lebanon’s Shi’a community has more to gain by systematically mobilizing sectarian politics than trying to steer Lebanon away from an overtly sectarian power structure.66 It is important to note, however, that Hezbollah’s decision to pursue politics within the current system of Lebanese politics limits Iran’s influence at the national level. Iran must increasingly rely on Hezbollah as a means of impacting the region. Meanwhile, Hezbollah is far less of a proxy of Iran or Syria, far more autonomous in Lebanon and far

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more rooted in its local Lebanese environment than many expected or seem to realize.67 This complicates both Iran and Syria’s ability to deploy the Shi’a community in their efforts to influence regional security politics.

Iran’s ability to rely on Hezbollah as a source of regional prestige and support is increasingly uncertain due to other factors. The Persian-Arab and the Sunni-Shi’a divides are increasingly relevant and deterministic in a region rocked by instability. The aura of Hezbollah’s military prowess during the 2006 war, while still significant, has done little to entrench a long-term pattern of Sunni Arab support.68 Furthermore, Hezbollah’s willingness to support popular protests and regime change in Arab states with close ties to the US – such as Tunisia, Egypt and Bahrain – while continuing to support the Asad regime’s minority-led crackdown on Syria’s predominantly Sunni population has served to further erode how the group is perceived by the Middle East’s largely Sunni population; a population that has grown increasingly hostile towards Shi’ite Iran over time.69 That being said, Iran has invested too much and has seen a great deal in return from Hezbollah, and Tehran’s support for the group is liable to remain a core foreign policy interest so long as such efforts are sustainable.

The Conventional Military Balance in the Levant The US and Iran actively compete in virtually every aspect of the military balance in the Levant and in a range of capabilities from low-level terrorism through asymmetric and conventional warfare to missile warfare. The US has an interest in preserving the qualitative edge and the support of its regional allies, including Egypt and Jordan but especially Israel. While Iran is not a physical part of the Levant – nor does it have the resources to project forces to the region – it has continued to try and find means to erode Israel’s supremacy in any and all aspects of the conventional military balance.

While the Levant is part of CENTCOM’s area of responsibility (AOR), the US maintains few ground forces in regional countries, with the exception of Incirlik Air Force Base in Turkey and current troop deployments to Iraq. In contrast to Army and Air Force deployments, US naval forces account for the bulk of American forces in the broader Levant. In addition, the US must rely on regional alliances and partnership with states, such as Israel and Egypt, to maintain stability in the region and deny Iran even a hypothetical foothold in terms of conventional forces.

In contrast, Iran has few regional allies and none that can project conventional power and deter the US and Israel on its behalf. As such, any discussion of Iran’s place in the Levantine conventional balance is predicated on the military capabilities of its regional ally Syria. While Iran is not a direct arms supplier to Syria, it has provided its allies with funds and resources to develop its military capabilities.

Ground Forces The US does not deploy forces in the Levant, and neither does Iran. Instead, US aid and Israel military industries – along with Israel’s military professionalism – ensure Israel is superior to any regional threat. In contrast, Iran cannot help Syria to present a meaningful conventional ground forces threat to either Israel or US interests in the region.

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Israel's active manpower strength has not changed radically over time, but has fluctuated according to fiscal and security pressures. The data also show just how dependent Israel is on reserve versus active manpower. Israel has a small active force, but it has now halted a recent trend toward force cuts and is rebuilding the training and readiness of both its active manpower and reserves. If its high-quality reserves are added to its total actives, its force strength is far more competitive with its Arab neighbors. Syria maintained extremely high manpower levels after its 1982 war with Israel, but cut back in the late 1990s, partly because of their cost and partly because it could not properly equip, train, and support such forces.

As for the Israeli-Syrian balance – which is a key indicator of the strength of Iran’s main ally – numbers tell only part of the story. Human factors are at least as important as manpower numbers. Training, experience, and personnel management and development are critical "intangibles" that are hard to compare, virtually impossible to quantify, and which again can differ radically between countries and units.

Israel has set much higher training standards than Syria, although it did reduce many aspects of its training activity between 2003 and 2005. The Israeli-Hezbollah War of 2006 made the Israeli Defense Force (IDF) aware of the need to rebuild its manpower quality as soon as possible, to carry out large-scale exercises of its conscripts and reserves, and to expand and improve the training of its experienced, combat-ready cadres.

Differences in the quality of each country’s full-time active manpower are compounded by more serious quality gaps in the case of most reserve forces. Israel does have modern and relatively well-trained reserves, many of which have had extensive practical experience in asymmetric warfare since 2000. In general, Syria’s reserve military forces are little more than "paper" forces with no real refresher or modern training, poor equipment and readiness support, and little or no experience in mobility and sustainability. These forces are often given low-grade or failed officers and NCOs. They do little more than pointlessly consume military resources that would be better spent on active forces.

Figure VIII.5 compares the armored forces of each nation. It shows that Israel has emphasized main battle tanks (MBTs) and armored personnel carriers (APCs) – many of which it has armed with light weapons. Syria has supported its tanks with large numbers of other armored fighting vehicles (OAFVs) from the former Soviet Bloc, but has much less overall armored mobility and far fewer armored personnel carriers. Syria’s forces seem to be deliberately tank heavy in an effort to provide enough tank numbers to try to compensate for the IDF’s superior tactics, training, leadership, and equipment Figure VIII.6 shows regional main battle tank (MBT) trends. This includes both modern high quality armor and aging systems. Israel has a distinct lead in tank quality. The export versions of the T-72s in Syria have competent armor and drive trains, but poor ergonomics and inferior fire control, targeting, and night-vision systems. The armor, night-fighting and long-range engagement capabilities of export versions of the T-72 proved to be significantly more limited than many unclassified estimates had predicted.

Israel also dominates Syria in terms of anti-tank guided missile (ATGM) holdings, the quality of its artillery, both fixed and mobile, and its ability to deal with battle damage in the field.

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Figure VIII.5: Arab-Israeli Armored Forces in 2011 (Numbers of major combat weapons)

Lebanon

Egypt

Jordan

Syria

Israel

0 MBTs AIFVs APCs/OAFVs

2000

4000

6000 Jordan 1044

8000

10000 Egypt 2383

12000

Israel 3501

Syria 4950

Lebanon 326

0

2450

303

390

0

10484

1500

1391

4160

1240

Note: Does not include old half-tracks and some combat engineering and support equipment.

Source: Adapted from the IISS, The Military Balance, various editions. Other data based upon discussions with US experts.

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Figure VIII.6: Israel versus Egypt, Jordan, Lebanon and Syria: Tanks by Type 2011 6000

5000

4000

3000

2000

1000

0 Merkava MkI-IV

Israel

Jordan

Egypt

Lebanon

260

233

1525

T-62

1000

T-72 T-54/55

Syria

1700 126

2250

Challenger 1/Al Hussein

390

Chieftain/Khalid

274

M-1

973

M-60A1/A3

711

M-48A5

561

88

1150 93

Note: Numbers do not include equipment in storage. Some equipment categorizations include modified versions (e.g.

Egypt Ramses II is modified T-54/55) Source: Adapted from the IISS, The Military Balance 2011, various editions. Some data adjusted or estimated by the author. Data differ significantly from estimated by US experts.

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Air Forces US aid to Israel decisively shapes the air aspects of the balance in ways that Iran can do nothing to directly counter – although Iranian and Syrian transfers of longer range rockets and missiles to Hezbollah have had an important indirect impact. While Syria maintains a large number of combat aircraft, it does not present a viable air threat to Israel. If one looks only at the total aircraft numbers, Syrian forces would have a lead in aircraft. This is driven in part by the large number of obsolete and obsolescent aircraft in the Syrian forces. Syria is also trying to train for, maintain, arm, and sustain far too many different types of aircraft. This puts a major – and costly – burden on the air force and dilutes manpower quality, and does so with little, if any, actual benefit.

Figure VIII.7 shows the number of high-quality aircraft in the region. While the number of total combat aircraft is not irrelevant, in war-fighting terms, high quality air assets are the ones that really count. Figure VIII.7 shows that Israel maintains major air superiority over Syria, whose export versions of the MiG-29s and Su-24s now have obsolescent avionics and cannot compete with Israeli types on a one-on-one basis.

Given past rates of delivery and modernization, this Israeli lead will grow in the near term. Israel has much better real-world access to aircraft improvement programs, and to next-generation aircraft such as the F-35, than Syria. Israel has access to many nextgeneration upgrades in US systems with “stealth,” “supercruise,” advanced avionics, and advanced guidance packages.

Figure VIII.8 shows the total strength each air force and army has in rotary-wing combat aircraft, less naval assets. Israel has truly advanced attack helicopters such as the AH-64 Apache, and it is also now in the process of taking delivery of 18 AH-64D Apache Longbow helicopters with extremely advanced avionics and “fire and forget” capabilities that do not require the aircraft to wait and track the missile to its target. Syrian attack helicopter units are elite units, but Syria has not been able to modernize its rotary-wing combat forces, and its training and tactics have not been fully updated over the last decade.

It is more difficult to make comparisons of air-to-air and air-to-ground munitions, but the disparity is increased by the fact that Israel can modify imports and has a wide range of its own systems, some of which are classified. It is clear, however, that Israel has extensive stocks of state of the art systems and ready access to US weapons and technology.

Syria’s stocks are often badly dated, and Syria faces particularly serious limits in terms of comparative precision strike, and long-range air-to-air missiles that have high terminal energy of maneuver and effective counter-countermeasures. The IAF also has a significant advantage in the ability to add specialized external fuel tanks, add on pods with special electronic warfare and precision strike capability, the ability to modify and develop external jammers, and adapt wing loading to new munitions needs.

Israel maintains modern, high performance land-based air defenses that include Arrow and Arrow II batteries, Hawks and Patriot missile systems. Syria maintains largely aging systems and does not have access to the latest weapons and technologies. At present, neither Israel nor Syria has a fully modern, integrated mix of sensors and battle-

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management systems to tie together its surface-to-air defenses, but Israel does have a significant capability to perform such operations.

Figure VIII.7: High-Quality Operational Arab-Israeli Combat Aircraft in 2011 (Does not include stored, unarmed electronic warfare or combat-capable RECCE and trainer aircraft) 500 450 400 350 300 250 200 150 100 50 0

Israel

Syria

J-6/J-7

Egypt

Jordan

118

F-4E

29

F-15A/B

34

F-15C/D

28

F-15I

25

F-16A/B

106

38

36

F-16C/D

101

119

11

F-16I

101

Su-22

50

Su-24

20

Mig-21

179

Mig-23

146

Mig-25

32

Mig-29

40

Mirage 2000

Lebanon

21

Source: Adapted by Aram Nerguizian from the IISS, The Military Balance, and discussions with U.S. and regional experts.

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Figure VIII.8: Operational Arab-Israeli Attack and Armed Helicopters in 2011 (Does not include antisubmarine warfare or antiship helicopters) 120

100

80

60

40

20

0

Israel

Syria

Egypt

EC-635 MRH

Lebanon

13

SA-324K/L

35

AH-64A

30

AH-64D

18

Mi-25 AH-1E/F

Jordan

70

8

35 36

33

25

Source: Adapted by Aram Nerguizian from the IISS, The Military Balance, and discussions with U.S. and regional experts.

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Naval Forces Iran cannot compete with the US or Israel in any meaningful way in determining the balance of conventional sea power in the Mediterranean – although it can create new asymmetric threats through the transfer of systems like anti-ship missiles and mines.

With more than 7,000 vessels in the Mediterranean at any given time and risk factors linked to choke points at Gibraltar to the West and the Suez Canal to the East, maritime security in the region is critical to US national security interests. In addition to a need to secure merchant shipping routes, more than 4 million barrels a day of crude oil (4.5% of global production) are shipped through the canal or the adjacent SUMED pipeline.70 The US has maintained a naval presence in the Mediterranean since WWII. Today, under the overall command of the Commander in Chief, US Naval Forces, Europe (CINCUSNAVEUR), the US Navy’s 6th Fleet is responsible for planning and conducting contingency, overwatch, civilian evacuation operations, as well as protecting US interests and generally providing a strong US naval military presence in the Mediterranean.

The 6th Fleet’s offensive and defensive posture are centered on the Fleet’s carrier battle groups, supported by modern surface combatants, nuclear attack submarines, modern fighter and fighter-attack aircraft. Additionally, the Fleet can count on ELINT, C4I and ASW aircraft, US Marine aboard amphibious landing and logistic support ship. The combined force posture in the Mediterranean includes some 40 ships, more than 175 aircraft and 21,000 military and support personnel.71 Figure VIII.9 shows one representation of the 6th Fleet’s nominal command structure.

The US has adapted as a result of the evolving threats and challenges that have emerged since September 11, 2001. NATO member states, along with the alliance’s Mediterranean Dialogue and Partnership for Peace (PfP) continue to contribute forces and intelligence capabilities to Operation ‘Active Endeavour’ (OAE). Intended to deter terrorist groups and contribute to stability in the Mediterranean region, OAE’s Maritime Component Command (CC-Mar) is headquartered in Naples, Italy. OAE’s role is also critical to the security of regional energy infrastructure and liquid petroleum gas-type carrier vessels.72

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Figure VIII.9 U.S. Military Presence in the Levant: Command and Control structure of the U.S. Navy’s 6th Fleet

Note: The diagram above is not intended to represent an accurate or current picture of the 6th Fleet’s command and control in 2011.

Source: GlobalSecurity.org

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While the Horn of Africa, the Gulf of Aden and the choke point at Bab al-Mandeb have become increasingly less secure due to instability and increasing piracy, 80% of all contingencies that the US has had to respond to since the end of the Cold War have taken place in the 6th fleet’s area of responsibility (AOR).73 While Iranian incursions in the Mediterranean are rare, they continue to remain a cause for concern, especially in the first half of 2011 during a period of regional instability and popular upheaval in Arab states across the Mediterranean perimeter. The crossing of the Suez Canal by two Iranian warships on route to Syria in February of 2011 was perceived by the US and its regional allies – especially Israel – as only the latest of a long line of regional provocations. The crossing also raised questions about the long-term implications of a change in leadership in Egypt – a long-standing pillar of US policy in the Middle East, not the least of which in the confrontation with Iran.

Figure VIII.10 shows Iran’s naval holdings in 2011. Iran’s mix of older surface combatants poses little real threat to US interests in the Mediterranean, and the Islamic Republic does not have the resources to sustain even a skeletal force deployment in what is at best a remote show of force in blue waters dominated by regional opponents. As such, Iranian excursions to the Mediterranean could be interpreted as a largely symbolic threat to Israel. In 2009 the Israeli Navy’s (IN) deployment of Dolphin (Type 800) attack submarines to the Red Sea, potentially en route to the Gulf, was similarly interpreted by Iran as a direct provocation.74 The Israeli Navy is a US partner in security operations in the Mediterranean and the Red Sea. Israel has relatively modern and effective submarines and surface forces, backed by effective airpower. It also has effective anti-ship missiles, as well as superior systems and targeting/electronic warfare capabilities.

Its three Sa’ar 5-class corvettes are modern ships with considerable long-range capability by local mission capability standards. Israel’s eight Sa’ar 4.5-class missile patrol boats, commissioned during 1994-2002, have been regularly modernized. All of these Sa’arclass vessels are armed with updated versions of the Harpoon anti-ship missile and have modern radars and electronic warfare suites. Israel’s three Dolphin-class submarines are also modern vessels commissioned during 1999-2000.

Iran cannot project conventional maritime power in the Levant without regional allies and the Islamic Republic’s chief ally in the region is Syria. However, Syria’s navy is largely obsolete, ineffective, and dependent on aging anti-ship missiles. Syria has two Petyaclass frigates armed with guns and torpedoes, but they spend little meaningful time at sea.

Its three Romeo-class submarines never performed meaningful combat roles and have been withdrawn from service. In short, it is unlikely that Iran can do much to disrupt the conventional US naval posture in the Levant. At best, Iran is little more a maritime irritant to the US and its allies.

Figure VIII.11 shows Arab-Israeli naval holdings by category in 2011. Only Egypt has naval assets that can be considered capable while Syria maintains a navy with only limited attack and interception capability that poses no threat to the Israeli Navy’s modern naval combat systems.

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Figure VIII.10: The Iranian Navy in 2011 Regular Forces

IRGC Forces

Manpower (18,000/20,000+)

18,000

20,000+ (incl. 5,000 Marines)

Submarines (23/0)

3 Kilo-class SSK 12 SSW/“midget” submarine (11 Qadirclass; 1 Nahang-class) 8 SDV (5 Al Sabehat-class for SOF insertion/mine-laying; 3 other)

Corvettes (6/0)

1 Janaran (UK Vosper MK 5) with CSS-N4 Sardine ASGM, SM-1 SAM (1 under construction, expected 2013) 3 Alvand (UK Vosper Mk 5) with CSS-N-4 Sardine ASGM 1 Bayandor (US PF-103) with C-802 ASGM 1 Bayandor (US PF-103)

SSM-Capable Patrol Craft (17/40)

13 Kana (FRA Combattante II) with CSSN-4 Sardine ASGM 4 Mk 13 with Kosar ASGM

5 China Cat with FL-10/C-701 ASGM 10 Thondor (PRC Houdong) with C-802/CSS-N-8 Saccade ASGM 25 Peykaap II (IPS-16 mod) with C-701 Kosar ASGM

Other Patrol Craft (77/55)

21 fast patrol craft (3 semi-submersible; 18 other) 56 patrol boats (4 China Cat; 3 Parvin; 49 other)

15 Peykaap I (IPS-16) 10 Tir (IPS 018) 10 Pashe (MIG-G-1900) 20 Ghaem

Mine Warfare (5/0)

2 Type-292 coastal minesweepers 1 Shakrokh (in Caspian Seas as a training ship) 2 Riazi (US Cape) inshore minesweepers

Amphibious (23/4)

3 Farsi (ROK) LSM (9 tanks; 140 troops) 4 Hengam LST (1 helicopter; 9 tanks; 225 troops) 6 Fouque LSL 2 LCT 1 Liyan 110 LCU 7 UCAC (6 Wellington; 1 Iran)

Logistics (26/0)

26 support craft

2 Hejaz (mine-laying capability) 2 MIG-S-5000

Source: Adapted by Aram Nerguizian from the IISS, The Military Balance, various editions.

46

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Figure VIII.11: Arab-Israeli Major Combat Ships by Category in 2011 120

100

80

60

40

20

0 Submarines

Israel 3

Total Arab 4

Destroyers

0

Frigates

10

Syria

Jordan

2

Corvettes

3

2

Missile Patrol

10

54

22

Other Patrol

44

42

8

Egypt 4

Lebanon

8 2 32 7

16

11

Note: Israeli other patrol craft are SSM-capable. Lebanese holdings do not show craft in storage or in disrepair.

Source: Adapted by Anthony H. Cordesman and Aram Nerguizian from the IISS, The Military Balance, and Jane’s Fighting Ships, various editions.

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Iran, the Asymmetric Balance & Regional Wild Cards Iran has found other ways to compete. In contrast to the conventional balance, the evolving asymmetric balance is far more fluid and contingent upon the pursuit of short and medium term objectives by regional players with limited resources and comparative disadvantages in the overall conventional balance. This aspect of the balance is a growing feature of the Israeli-Syrian-Iranian-Hezbollah balance, and any discussion of Iranian military capabilities would be incomplete without recognizing that Syria’s struggle with Israel hinges on asymmetric and proxy warfare and the role that Iran’s ties to Syria play in this aspect of US and Iranian competition.

Origins of the Asymmetric Balance During the June 6, 1982 Israeli invasion of Lebanon, it became painfully clear to Syria’s political and military leadership that their conventional forces could not compete successfully with Israel in conventional warfare. While offering stiff resistance and maintaining unit morale and force cohesion, they were outmatched by IDF military tactics and capabilities. Syria lost 400 tanks, 90 combat aircraft, 100 artillery/missile batteries, 70 armored vehicles and some 1,900 troops in the first three days of the invasion alone.75 Iran promptly took advantage of this situation. On June 17, 1982, an Iranian delegation to Damascus headed by Iran’s foreign and defense ministers offered to send 40,000 regular troops supported by heavy armor and an additional 10,000 lightly-armed Revolutionary Guards and volunteers to fight in Lebanon under Syrian command. While Iranian and Syrian military and political objectives presented one major obstacle to an Iranian force commitment to Lebanon, the principal reasons Asad refused the offer was the expectation that Iranian forces could do little to tip the scales in Syria’s favor.76 Neither Iran nor Syria, however, had or have the means to impact the regional conventional military balance. A new approach was needed and it came in the form of Asad’s “sword and shield” strategy; the former would require the use Syria’s allies in Lebanon, including Shi’ites loyal to Syria and Iran, as part of an asymmetric warfare campaign of terrorism and guerilla warfare against Israel and its allies in Lebanon. The latter required the Soviet Union to replenish Syria, its sole major ally in the region, in order to achieve “strategic parity” with Israel and build up meaningful long term deterrence.77 While this “sword and shield” approach has been diminished by the loss of the Soviet Union as a reliable source of advanced defensive military equipment, Syria in the postCold War era has been able to compensate by strengthening its linkages and coordination with Iran, increasing its support for (and arms transfers to) Hezbollah, and by relying on Palestinian groups in Lebanon, Syria and Occupied Territories. Meanwhile, Iran continued to develop its ballistic missile capabilities to present an increasing deterrent and threat to Israel’s regional posture. The combined Syrian and Iranian approaches serve to deepen the costs of the regional asymmetric balance to Israel and its regional and international allies.

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Low-Level and Irregular Warfare Israel may dominate the balance in terms of modern conventional systems, recapitalization and foreign military support, but asymmetric and unconventional strategies have come to provide Syria and Iran with the means to harass, if not yet undermine, Israeli security and strategic interests in the region. The 2006 IsraeliHezbollah war was the best proof that Syria could use these efforts to put significant pressure on Israel.

Syria and Iran’s relationship with armed sub-national organizations with an anti-Israel agenda, especially Hezbollah in Lebanon and Hamas in the Gaza Strip, is now a pillar of the asymmetric balance. While proxy warfare is not new to the region, the development of increasingly sophisticated non-state conventional military capacity represents an evolutionary step in Syria’s long-term policy of “passive” confrontation with Israel.

“Active” non-state allies confront Israel in South Lebanon and the occupied Palestinian territories, rather than on the Golan Heights.78 It is clear that Hezbollah would never have emerged as a major force in Lebanon and the region without Syrian and Iranian arms transfers, training and financial support. While the Shi’a group’s unrivaled autonomy in Lebanon has relied on its links to its patron states, there is little indication that Hezbollah has acted, or will, as a Syrian or Iranian proxy unless its leaders feel this is to the group’s direct advantage. In practice, all three seem to have used each other for their own goals and interests.

While the Lebanese and Palestinian “fronts” allow Syria to harass Israel, Damascus’ proxies lack the kind of effective conventional war-fighting capability necessary to defeat the IDF. Hezbollah demonstrated the limits of its war-fighting capabilities in 2006, as well as some of its strengths. It can play a limited, largely defensive role in conventional warfare and wage spoiler attacks and wars of defensive attrition, but is not a serious direct threat to Israel’s ability to maneuver, defend its territory, or exercise air and missile supremacy.

Nonetheless, Hezbollah allows Syria and Iran to project power in ways that Israel could not directly counter and without conditions that would prompt Israel to use decisive force against Hezbollah’s sponsors. This form of power projection has allowed Syria to push Israel into a low-level war of attrition without involving Syria, while transforming Hezbollah into a serious threat over time.

Rockets and Missiles Iran and Syria have helped non-state actors such as Hamas and Hezbollah to develop capabilities that allow them to strike Israel from increasing distances. Iran is a critical supplier of rocket and missile systems and technological know-how to these groups.

Transfers of Rockets and Missiles Hamas has steadily developed its holdings of short-range rockets. However Israeli security measures, including the separation barrier between Israel and the West Bank have complicated Hamas’ and other Palestinian groups’ efforts to confront Israel. A 2010 report noted that Hamas’ longer range rockets could include dozens of 122-mm “Grad” or similar rockets, 230-mm “Oghabs,” and as many as 50 modified 240-mm “Fajr-3

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rockets that have the potential to strike Tel Aviv or Israeli nuclear facilities in the Negev.79 Figure VIII.12 shows a high approximate estimate of rocket strike ranges for Hamas’s alleged rocket and missile holdings. Figure VIII.13 shows an estimate of Hezbollah rocket ranges.

Various reports indicate that Iranian and Syrian transfers that build the Hezbollah’s growing holdings of guided and unguided short range and tactical missiles are becoming a steadily more important aspect of the asymmetric balance, and one where Iranian competition with the US and Israel has an important impact. 

Some reports indicate that Hezbollah’s largest rocket system is the 610 mm “Zelzal 2.” Weighing some 3,400 kg and capable of delivering a 600 kg warhead in excess of 200 km, the system’s lethality and utility are limited by its lack of electronic guidance systems. While the Shi’a militant group did not use its “Zelzal” rockets during the 2006 war, it is widely believed to have vastly expanded its holdings of both short and medium range unguided rockets to deter future conflict or to inflict psychological costs on the Israeli population in any future war.



Hezbollah also hopes to expand its holdings of guided rocket systems. The “Fatah” A-110, a guided version of the “Zelzal 2,” or the Syrian made M600, a “Fatah” A-110 clone, would present more of a threat to Israel’s interior. Equipped with inertial guidance systems and able to deliver a 500 kg payload to a range of 250 km within a circular error probability (CEP) of 100 m, these systems would allow Hezbollah to threaten as far south as Tel Aviv from the Northern Bekaa.

While there are competing and unconfirmed reports surrounding whether or not Hezbollah has them in inventory, the group is generally believed to have limited holdings of both systems.



Reports surfaced in early 2010 that Syria may have transferred Russian R-17 “Scud-B” ballistic missiles to Hezbollah. 11.25 m long and weighting some 5,900 kg, the guided liquid fuel rocket is able to deliver a 985 kg warhead over a range of 300 km.

While the “Scud B” has superior range to Hezbollah’s existing holdings of unguided medium range rockets, its much larger CEP of 450 m is significantly inferior to the Fatah A-110’s CEP of 100 m. In July 2011, reports surfaced that Syria transferred some ten “Scud-Ds” to Hezbollah.80 Scud-type missiles are unwieldy systems for an organization that emphasizes stealth, mobility and rapid deployments for multiple fires. They cannot be taken apart for easy or inconspicuous transportation. Furthermore, the complexity and volatility of the missile’s propulsion system would require dedicated facilities in addition to highly trained personnel.

There is continued skepticism surrounding the transfer of “Scud-Bs” or “Scud-Ds” to Hezbollah and to date, there has been no release of aerial observation of any “Scud” transfers across the Lebanese-Syrian border. Unlike solid-propellant rockets like the Zelzal 2, even a modified/stealthy “Scud” transporter/erector/launcher (TEL) would present a clear target for overhead reconnaissance.81 US defense sources also have indicated that while a transfer has not been ruled out, there are increasing indications that Hezbollah personnel trained on “Scud” type systems in Syria rather than in the wake of a transfer to Lebanon.

Ultimately, Scud-type liquid fueled rockets might be more of a liability than an asset to Hezbollah’s overall missile capability. Furthermore, given Hezbollah’s existing inventory of guided and unguided systems, the potential acquisition of “Scud-Bs” or “Scud-Ds” has a popular psychological impact in Israel, rather than actually impacting the overall regional balance.



While Hezbollah has continued to consolidate its arsenal of short range 107 mm and 122 mm rockets meant to harass IDF ground forces in any future war, it may also have developed a use for systems otherwise considered irrelevant in the asymmetric balance. These include using multiple teams using large numbers of 106 mm recoilless rifle rounds to swarm and overwhelm the IDF’s Trophy active protection system currently equipped on Israeli Merkava MBTs. Jane’s went on to report that if assisted by sighting guns, this low-tech AT solution could successfully hit Israeli

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armor out to a range of 1,000 m. 82 Such tactics would be part of Hezbollah’s own lessons learned as it tries to build an edge in the asymmetric balance with Israel.

These growing missile capabilities do not threaten Israeli security in anything approaching existential terms, nor do they seriously weaken its “edge” in military technology, given the challenges of targeting largely unguided missile systems. However, they have increased Israel’s efforts to field newer defensive counter-fire systems, such as the Trophy active protection system (APS) for Israeli armor, the low altitude Iron Dome defensive systems and high altitude Arrow II counter-ballistic missile system, and to defeat short and medium range rocket and missile threats. It has also prompted the IDF to further decentralize its supply and logistics infrastructure to protect ammunition and equipment in event of a future war.

There are also reports that Hezbollah has expanded its holdings of advanced longer-range anti-ship systems, while personnel may have also trained on the SA-2 and SA-3 major SAM systems. In the post-2006 era, Israel operates under the assumption that any system in Iran or Syria’s arsenal could be made available to Hezbollah, with logistics posing the main challenge to inventory development and consolidation.83 The Israeli Reaction In a bid to erode the risks posed by Palestinian and Hezbollah rockets and missiles, Israel has taken costly steps to develop countermeasures that have the ability to defeat incoming short, medium and long range target and untargeted fire. In a bid to support such efforts, in March 2010 the Obama Administration announced that it would provide Israel with $205 million in defense aid for the purchase of up to 10 Iron Dome anti-rocket batteries.

The US Congress and successive administrations have supported joint-US Israeli missile defense projects, including ongoing work on David’s Sling, which is designed to counter medium-range (40km to 300 km) threats, and the longer-range high altitude systems, such as the Arrow III. 84

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Figure VIII.12: Map of Approximate Rocket & Missile Ranges from Gaza

Note: All data presented is approximate.

Source: Adapted from Congressional Research Service; Jane’s Missiles and Rockets; Ian Spierco, “Shield of David: The Promise of Israeli National Missile Defense,” Middle East Policy, Vol. 17, No. 2, Summer 2010.

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Figure VIII.13: Map of Approximate Rocket and Missile Ranges from Lebanon

Note: ranges based on launch sites in southern Lebanon.

Source: Adapted from Bilal Y. Saab & Nicholas Blanford, “The Next War: How Another Conflict Between Hizballah and Israel Could Look and How Both Sides are Preparing for It,� Analysis Paper, No. 24, The Brookings Institution, August 2011, p. 8.

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Figure VIII.14 shows the major missile and rocket holdings in the region.

Figure VIII,14: Arab-Israeli Surface-to-Surface Missiles in 2011

Country

Med/Long Range SSM

Short Range SSMs

MRLs

Egypt

9 Scud-B

9 FROG-7

96 BM-11 122 mm

24 Sakr-80

60 BM-21 122 mm 50 Sakr-10 122 mm 50 Sakr-18 122 mm 100 Sakr-36 122 mm 36 Kooryong 133 mm 32 BM-14 140 mm 26 MLRS 277 mm 48 BM-24 240 mm (in store)

Israel

+/-100 Jericho 1 SRBM/ Jericho 2 IRBM

None

58 BM-21 122 mm 50 LAR-160 160 mm

7 MGM-52 Lance (in store)

60 LRS 227 mm 36 BM-24 240 mm 20 LAR-290 mm

Jordan

None

None

None

Lebanon

None

None

22 BM-21 122 mm

Syria

94+ SSM

18 FROG-7

+/- 200 Type 63 107 mm

18 Scud B/Scud C/Scud D

18+ SS-21 (Scarab)

30 look-a-like

Tochka

+/- 300 BM-21 12 mm

SS-C-3 Styx

Note: Medium range SSMs have a range in excess of 70km and includes SRBMs and IRBMs.

Source: Adapted by Anthony H. Cordesman and Aram Nerguizian from the IISS, The Military Balance, various editions. Some data adjusted or estimated by the authors

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While Hezbollah’s weapons arsenal is of concern to Israel, is important to note that it is scarcely the only player in the regional balance with short and medium range rocket and missile capability, and that Iranian cooperation with Syria could have a significant impact if Syria became involved in a missile conflict. Egypt has a large inventory of short range unguided missiles. It also maintains older SSMs and some ‘Scud-Bs’. Syria has relatively large holdings of medium and short range ballistic missiles with large holdings of MRLs. As is discussed later, Syria’s larger systems such as its “Scud” holdings, while lacking accuracy and ease of deployment, could potentially play a role in the asymmetric balance were they to be used as chemical or biological delivery systems. Israel has modern short and intermediate range ballistic missiles. Its Jericho I and Jericho II SSMs are capable of delivering conventional, chemical, biological or nuclear payloads up to a range of 500 km and 1,500 km respectively. Israel also has large holdings of short range MRLs. Lebanon’s MRL holdings are negligible while Jordan has no SSM holdings.

Iranian and Syrian Transfers of Guided Weapons Hezbollah has significantly developed its holdings of guided and unguided anti-tank systems in the wake of the IDF’s withdrawal from South Lebanon in 2000 with Iranian and Syrian support. As is the case of reported rocket and ballistic missile transfers, it is hard to determine what systems have actually been transferred. However, a number of reports raise important questions about the level of increased sophistication in Hezbollah holdings: 

Tehran is reported to have provided Hezbollah with the “Nader” and the “Toophan,” Iranian versions of the Russian RPG-7 and possibly the American TOW missile. The Shi’a group is also reported to be in possession of the “Towsan” and the “Raad,” which are based on the AT-5 “Spandrel” and the AT-3 “Sagger” ATGM systems. The improved “Raad-T” is reported to be armed with tandem warheads designed to defeat reactive armor systems. 85



According to some reports, the bulk of Hezbollah’s ATGM capabilities expansion in the post2000 period was provided by Damascus. This is noteworthy given that prior to the presidency of Bashar al-Asad, Syria had allowed arms transfers but was not a direct supplier. Systems reported to have been provided include the AT-13 “Metis-M” equipped with a tandem warhead and able to hit targets at 1.5 km and the AT-14 “Kornet-E.” The “Kornet-E,” which has a range of 5.5 km and utilizes a semi-automatic command-to-line of sight laser beam-riding targeting system, is one of the most sophisticated anti-armor systems currently available. It could significantly raise the level of threat to Israeli forces in any future conflict. Unguided RPG systems provided by Syria are reported to include the RPG-29 (a tandem warhead variant of the RPG-7) and the disposable single-shot RPG-18.86

Air Defense Weapons Iran can alter the balance of any proxy or asymmetric conflict in other ways. In addition to Hezbollah’s expansion of its surface-to-surface missile and rocket holdings, future SAM capabilities could become another dimension of the asymmetric balance. In addition to holdings of older SA-7 “Grail” MANPADs, the Shi’a group has been widely reported to be in possession of the more sophisticated SA-14 “Gremlin” and SA-18 “Igla” MANPADs. Jane’s reported that Hezbollah was receiving training in Syria on the SA-8 “Gecko” mobile radar guided light SAM system in 2009.87 There is no indication that Hezbollah received SA-8s which could potentially pose a threat to Israeli helicopters.

Neither the SA-8 nor the Igla present a meaningful threat to Israeli F-15Is and F-16Is. Meanwhile, Israeli defense sources reported in March 2010 that Syria had provided the

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group with the SA-24 “Grinch,” a far more advanced shoulder-fired anti-aircraft missile system.88 As was stated earlier, the IDF’s Teffen 2012 plan was conceived largely as a result of these realities and the perceived shortfalls of the 2006 war. One of the core lessons was Israel’s need to address manpower quality and training to confront the shifting realities of asymmetric urban warfighting. The IDF has since taken steps to drastically expand the number of urban warfare training centers in Israel. The IDF’s Combat Engineering Corps, which plays an increasingly relevant counter-IED and armored demolition role, has also been adapting to the realities of future asymmetric warfighting. Teffen 2012 further emphasized the development of a comprehensive multitier Israeli anti-rocket and antiballistic missile defense umbrella.

Proxy Warfare Every year since the 2006 war, some have predicted that another Israeli-Hezbollah war would herald the next major proxy contest between the US and Iran. The risk of conflict through regional surrogates and allies continues to present a clear and present danger to regional stability. The US would have to rely on its key regional ally Israel in any future conflict, while Iran would call upon its allies Hezbollah, Syria and Palestinian militant groups in Gaza.

While proxy warfare is an important component in Iran and Syria’s regional asymmetric strategy, its current posture would not have been possible without regional alliances.

Russia, which has yet to completely support the rejuvenation of Syria’s armed forces, has only limited impact on Syria’s asymmetric regional capabilities. It is Iran, not Russia, the Palestinians or Hezbollah, that may be the most important source of support in the asymmetric balance with Israel.

The Israeli-Hezbollah War of 2006 showed that Iran and Syria could work together in proxy warfare. It also showed that Syrian and Iranian transfers of advanced weapons like modern antitank-guided weapons, light surface-to-air missiles, and a range of short- to long-range rockets and missiles could inflict casualties on the IDF and limit its military freedom of action.

On the other hand, Hezbollah’s core constituency and base of support, Lebanon’s Shi’a community, suffered as a result of the 2006 conflict. The militant group did its best to lay the blame and the costs associated to the conflict on Israel and the US. Irrespective of where the blame on deaths and loss of property may lie, what is clear is that the country’s Shi’a would be hard pressed to accept another large scale confrontation, especially one where Hezbollah is perceived – if only in part – to have started the conflict.89 Whether this will moderate Hezbollah’s future behavior is unclear. There is at least anecdotal evidence that Hezbollah will seek to play up its role as a reactive deterrence force in Lebanon, rather than a proactive force for direct confrontation with Israel – a point the group loosely articulated in its 2009 political manifesto. 90 Meanwhile Israel has balanced strong language of a military response to any Hezbollah threat with the reality that it prefers managed security politics along the UN Blue Line of demarcation between Israel and Lebanon.91

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What is clear is that both Israel and Hezbollah have taken steps to both build up their capability to deter the other, and to prepare for the prospects of war. Since the end of the 2006 war, Hezbollah has undertaken new efforts to recruit and train new members, acquire longer-range rockets witted with guidance systems, build up its air defenses and tried to further advance its signals intelligence capabilities. In the event of war, the potential exists for Hezbollah to undertake both ground and seaborne commando operations within Israel. Combined with the group’s growing missile capabilities, the battle space – both in Lebanon and Israel – is expected to be far larger than during the 2006 war.92 Israel in turn has bolstered the logistical autonomy of its combat units, strengthened its ground forces, and deepened its ability to carry out combined air, land and sea operations.

The IDF has also taken steps to upgrade its urban war-fighting capabilities, anti-rocket defense systems, and the defense capabilities of its armored systems against guided missile attacks. If enacted, the 2008 “Dahiyah Doctrine” – which would see Israel targeting civilian infrastructure – could cause mass civilian casualties and infrastructure damage in Lebanon and similarly damaging retaliatory strikes against Israeli civilian targets.93 Again, every year since the 2006 war has been the year predicted to usher in the next major US-Iranian proxy war in the Levant. While public statements on either side of the Blue Line favoring continued calm are all too rare, neither side can afford another depleting conflict without a clear political and security outcomes. Whether that and the factors described above are reason enough to avoid another round of proxy warfare may ultimately continue to be tested on an annual basis.

Weapons of Mass Destruction and the Nuclear Arms Race The region is already involved in a de facto nuclear and missile arms race, has at least some stocks of chemical weapons, and may be involved in a race for biological weapons as well. While the most important component is the Iranian-Israeli nuclear and missile arm race, Iran’s ties to Syria – and Syria’s efforts – play an important role as well.

Nuclear Weapons As Chapter IV has analyzed in detail, Iran’s nuclear and other WMD programs interact with those of Syria, and give it the ability to target Israel and the other major powers in the Middle East. At the same time, Israel sees nuclear weapons in the hands of any potential enemy as an “existential threat.” On September 6, 2007, the Israeli Air Force targeted and destroyed the Al Kibar facility in Dair Alzour on grounds the remote installation may have housed a nuclear reactor.94 While weapons of mass destruct (WMD) are not often associated with US-Iran strategic competition in the Levant, they cannot be discounted as a source of potential instability and a means of shifting the regional balance of power in Iran’s favor.

Israel is the only country widely reported to have nuclear weapons and advanced ballistic missiles. Israel has a significant, if undeclared, inventory of nuclear weapons. There are reports they have been manufactured at the Negev Nuclear Research Center, outside the town of Dimona. Based on estimates of the plutonium production capacity of the Dimona

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reactor, Israel has approximately 100-200 advanced nuclear explosive devices —but such estimates are based on nominal production figures and very uncertain estimates of the material required for a given number of nuclear weapons. They do not address yield, design, or the mix of fission, boosted, and thermonuclear weapons, and Global Security estimates that the total could be as high as 375 to 500 weapons. Egypt explored such developments in the past, and Syria was actively developing a reactor suitable for nuclear weapons production before it was struck and destroyed by Israel.

There are no reliable unclassified figures on Israel’s holdings of nuclear weapons or the mix of delivery systems it has available. Israel did obtain substantial amounts of nuclear weapons design and test data from France before 1968, and probably has a stock of both tactical and thermonuclear weapons. Its inventory is sometimes stated to be 200 weapons, but there is no meaningful source for such data. It is clear that Israel has developed missile booster technology and systems that could deliver nuclear weapons that could strike at any target in Iran. Israel has at least two types of long-range ballistic missiles – sometimes called the Jericho, and has almost certainly deployed either an improved version of the second or a third type of system.

Israel’s Ballistic Missile and Missile Defense Forces There are no reliable unclassified reports on Israel’s ballistic missile holdings, but unclassified sources speculate that Israel has the following capabilities: 

Jericho I: 13.4 meters (44 ft) long, 0.8 m (2 ft 7 in) in diameter, weighing 6.5 tons (14,000 lb). It had a range of 500 km (310 mi) and a nominal CEP of 1,000 m (3,300 ft), with a payload of 400 kilograms (880 lb). It was intended to carry a nuclear warhead. It seems to be close or identical to the Dassault MD-620, which was test fired in 1965. According to a report in Wikipedia, IAI produced such missiles at its Beit Zachariah facility. It also reports that that around 100 missiles of this type were produced, although there were some problems with its guidance systems. It also reports that The Jericho I is now considered obsolete and was taken out of service during the 1990s.



Jericho II: a solid fuel, two-stage medium-range ballistic missile system tested in launches into the Mediterranean from 1987 to 1992. Wikipedia reports that the longest was around 1,300 km, and fired from the facility at Palmachim, south of Tel Aviv. Jane's reports that a test launch of 1,400 km is believed to have taken place from South Africa's Overberg Test Range in June 1989, but other sources indicate that this was part of a series of launches of a system using a larger booster. It is reported to be 14.0 m long and 1.56 m wide, with a reported launch weight of 26,000 kg (although an alternative launch weight of 21,935 kg has been suggested). Wikipedia reports that it has a 1,000 kg payload, capable of carrying a considerable amount of high explosives or a 1 MT yield nuclear warhead. It uses a two-stage solid propellant engine with a separating warhead. It also reports that the missile can be launched from a silo, a railroad flat truck, or a mobile vehicle. This gives it the ability to be hidden, moved quickly, or kept in a hardened silo, ensuring survival against any attack. It may have maximum range of about 7,800 km with a 500 kg payload.



Jericho III: Estimates of the Jericho III differ sharply. It may have entered service in the late 1990s, but some put it in the late 2006-2008 period. It is reported to be a three-stage solid propellant and a payload of 1,000 to 1,300 kg. Wikipedia reports it may have a single 750 kg nuclear warhead or two or three low yield MIRV warheads, an estimated launch weight of 30,000 kg, and a length of 15.5 m and a width of 1.56 m. Some reports indicate that Jericho 3 has a radar guided, terminal homing warhead in addition to inertial guidance, and is silo-based with road and rail mobility. No reliable estimate of its range exists. It may be able to hit any target in the Middle East and targets as far away as Pakistan and Russia.

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Israel has practiced air weapons deliveries that fit nuclear bomb delivery profiles, it may well have nuclear-armed air-to-surface missiles that can strike from outside the range of most surface-to-air missile defenses, and it may be developing nuclear armed cruise missiles for surface ship and submarine launch. Israel may have missile warheads with terminal guidance, but this is unclear. If it does not, it would have to use its ballistic missiles to strike at large area targets like cities, although it could use its strike fighters to launch nuclear strikes on point targets. Commercial satellite photos have been published of earlier Israeli missile sites, including missile silos. Current sites are unknown.

Israel’s 17 batteries of improved Patriot MIM-23B surface-to-air missiles have a point defense capability against ballistic missiles. It has deployed three Arrow 2 theater ballistic missile systems and 20-24 active launchers, supported by a Green Pine radar system, and Citrus Tree command and control system. There are known sites at Hadera and Palmachin.

The Impact of Iran’s Nuclear and Missile Programs Although Iran does not yet have nuclear weapons, and has only a nominal capability to attack Israel with ballistic missiles – that currently seem limited to inaccurate guidance systems and unitary conventional warheads – Israel is already making significant improvements in its missile defenses. It also seems likely that Israel is improving its capabilities to strike at Iran with fission and fusion nuclear weapons. Iran almost certainly has developed both nuclear bomb and missile warhead designs, but its progress and their nature remain unclear.

Chemical and Biological Weapons Egypt and Syria may have chemical warheads for their “Scud” missiles, and it is possible they could have covert biological designs. All of the Arab-Israeli countries do, however, have a growing technology base to manufacture first and second generation biological weapons, but no reliable data exist to prove they are doing so.

All of the Arab-Israeli countries, except Lebanon, have the technology base for manufacturing chemical weapons. Iran is a self-declared chemical weapons power, but has never declared its inventory. Syria is known to have large stocks of a variety of chemical weapons, including bombs and chemical warheads for its missiles. Israeli experts believe that Syria has modern cluster munition warheads for its missiles and rockets, including ones armed with nerve gas.

Both Egypt and Israel have been caught smuggling key components for chemical weapons in the past, including components for the manufacture of nerve gas. Egypt used chemical weapons in Yemen in the 1960s, and there are strong indications that Israel and Egypt believed the other side had chemical weapons during the 1973 conflict. However, no data exist on either Egyptian or Israeli inventories of such weapons.

There are some indicators that Syria and Iran have at least explored the production of biological weapons. Iran, Israel, and Egypt have almost certainly at least explored the technology for both offensive biological weapons and biological defenses (the two technologies cannot be separated from each other). States in the region are acquiring the technology and production base to develop and manufacture advanced genetically-

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engineered biological weapons. There are no meaningful controls on such technology and equipment, and no existing credible inspection options.

It is unclear, however, whether countries other than Israel have advanced beyond unitary or relatively simple cluster warhead designs, although this seems likely in the case of Syria. Both Egypt and Syria countries have aircraft, and a potential capability to create drones or UCAVs for delivering chemical or biological weapons. 

Syria has extensive holdings of “Scud-B” missiles with a nominal range of 300 meters, a 985 kilogram payload, and operational accuracies of 1,500-2,000 meters. Reports of CEPs as low as 450 meters seem more theoretical than real. Syria also has up to 150 “Scud-C” missiles with 18-26 launchers. These are North Korean modifications of Russian designs – probably variants of the Hwasong 5 although some elements of Rodon 1 technology are possible -- and have accuracies that range from 1,500-4,000 meters – although theoretical CEPs as low as 500 meters are reported in some sources. Reports that Syria has a more accurate “Scud-D,” with a CEP of only 50 meters, do not seem accurate. The “Scud C” has a nominal range of 500 kilometers, but a small warhead could extend the range.



Egypt has an unknown number of “Scud-Bs,” and at least 9-12 mobile TEL launchers. There are a number of reports that it has operational “Scud-Cs” that it produced using technology it obtained from North Korea. Reports indicate that the CIA detected Egyptian imports of “Scud-C” production technology in 1996.

It is not known if any country in the Levant has developed advanced designs for the covert use of such weapons, line source dissemination, the use of unconventional systems like UCAVs, or advanced cluster munitions and non-destructive sub-munitions delivery.

There have been several reports of developments like a Syrian missile warhead with cluster munitions carrying nerve gas. Egypt, Iran, Israel, and possibly Syria all have the technology and manufacturing base to create such weapons, have developed or produced some form of cluster munitions, and could manufacture systems munitions and warheads covertly.

The Socio-Economics of U.S.-Iranian Competition While the conventional and asymmetric balances dominate US and Iranian security competition in the Levant, socio-economic competition is important as well. This includes trade patterns with the region as well as economic aid. This section offers only a broad overview as later sections focus on US and Iranian interaction with specific economies. The discussion on aid also focuses mainly on US efforts as no equivalent transparent Iranian aid data exists for the purpose of comparison.

Trade Relations with the Levant The first table in Figure VIII.15 shows the trade dynamics between the US, Iran and countries in the Levant for 2010.95 When comparing specific US versus Iranian trade with the region, it is clear that the US is the dominant player in all countries except Syria.

Meanwhile, Iran maintained important trade relations with Turkey in 2010. However, how deep that bilateral relationship has become is yet uncertain: exports from Iran, driven mainly by natural gas transfers, accounted for 80% of bilateral trade.96 The EU is also a major trade partner in the region. This is illustrated in the second table of Figure VIII.15. With the exception of Jordan, which saw Saudi Arabia as its top trade partner in 2010, The EU was the leading trading partner of Israel, Lebanon, Syria and

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Turkey. The EU’s role was especially important for Israel and Turkey, where trade with the Eurozone accounted for 30.6% and 42% of all trade respectively. Even Iran counted the trading block as its largest trading partner in 2010.

While the EU is the leader in the Levant in terms of trade, the US is a far more important trader than Iran. US industries have built deepening trade partnerships with countries such as Israel and Turkey, and the US has worked hard to build up bilateral trade with Jordan, a key regional ally that continues to maintain peaceful relations with Israel.

Iran does remain important to the Turkish economy and has done well in developing trade ties with Ankara. Iran also plays an important role in the Syrian economy, but not as significant as its rhetoric sometimes implies. Iranian trade levels were overshadowed by EU, Saudi, Turkish and Russian trade with Syria – a pattern that Tehran has not managed to shift thus far. As for Lebanon, a key battleground for US-Iranian regional competition, both players have limited trade ties with the country relative to Lebanon’s place in their respective foreign policy calculus.

Iran’s own economic failures have probably done far more to limit Iran’s role than sanctions. Despite Iran’s leading role as the world’s fourth-largest crude oil exporter and a large young population, the post-revolutionary economy has been severely mismanaged with too many challenges at home that need to be addressed before it can take on a more robust regional role.97 The fact that Iran relied on oil exports for 80% of its total revenue and 40-50% of government revenue in 2008 made Iran deeply susceptible to collapses in oil prices. In 2008-2009, shortfalls in revenue from energy exports left a $30 billion budget deficit in addition to $28 billion in foreign debts, forcing Tehran to rely on now-severely reduced foreign currency reserves.98 An inability to reform effectively, coupled with challenges in managing public spending further complicate Iran’s ability to utilize its economic resources to their full advantage.

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Figure VIII.15: The Economics of U.S. and Iranian Competition in the Levant: Comparative Trade Levels in 2010 U.S. versus Iran Trade Levels in the Levant (In millions of current Euros) 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 United States

Israel

Jordan

Lebanon

Syria

Turkey

Iran

19,902.0

1,381.4

1,591.0

728.3

12,248.6

238.3

10.8

115.2

788.3

8,090.7

Iran

U.S., Iran and other Major Levant Trade Partners (In millions of current Euros) 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 United States

Israel

Jordan

Lebanon

Syria

Turkey

Iran

19,902.0

1,381.4

1,591.0

728.3

12,248.6

238.3

10.8

115.2

788.3

8,090.7

2,551.9

5,161.8

6,784.5

94,394.1

23,808.9

2,656.5

700.9

2,704.4

3,530.5

918.8

Iran E.U.

26,774.8

Saudi Arabia Turkey

2,498.8

480.7

670.5

1,995.4

Russia

1,149.9

189.1

122.4

917.5

7,794.2 19,790.5

3,043.5

Source: Adapted by Aram Nerguizian from International Monetary Fund (IMF) and the European Union Directorate General for Trade.

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Assessing Development Assistance While US military aid plays a major role in building and maintaining strategic partnerships in the Middle East, economic and development assistance are also important tools in US and Iranian competition, and ones where the US has had a near historical monopoly.

It is unclear how this aspect of competition will play out in the future given US resource constraints and the uncertain political future of Egypt, but US aid to the Levant is likely to take on greater significance in light of regional popular upheaval, which have been driven by broad grievances on income inequality, corruption, crony capitalism, the lack of opportunity and unrepresentative government. Any US failure to help address these persistent and emerging challenges could provide Iran with political ammunition in its regional contest with the US. The US allocated $1.67 billion in Economic Support Funds (ESF) for FY2010 and FY2011 respectively. This represents some 34-36% of the value of FMF and 23-24% of total aid to the Middle East for FY2010 and FY2011. It is important to note, however, that economic aid levels are down when compared to previous fiscal years and are expected to decline to an estimated $1.4 billion in FY2013.99 US economic aid to Egypt has gradually decreased over the past ten to fifteen years. This is largely due to Egypt and Israel reaching a deal with the US in the late 1990s known as the “Glide Path Agreement,” whereby economic aid is reduced over a 10-year period.

However, unlike Israel, Egypt did not see an increase in military assistance. It remains to be seen what economic aid levels to Egypt will look like in the wake of recent protests and given the dire economic challenges the country is likely to face in the future.

The US also provides Jordan with economic assistance in the form of cash transfers and USAID programs in-country. The cash transfers help Jordan to service its foreign debt, and 45% of Jordan’s annual ESF is in the form of cash transfers. USAID programs in the country focus principally on democracy assistance, water preservation and education reform. Water management is an especially important area for US economic assistance given Jordan’s status as one of the region’s most water-scarce countries.100 The Palestinian Authority has been a major recipient of US economic aid since the 1993 Oslo Accords with aid worth some $2.3 billion over the FY2004 to FY2010 period. US assistance to the Palestinians has averaged some $388 million a year and are geared principally towards economic development, democratic reform, water management, infrastructure, health management, education reform and professional development projects in both the West Bank and Gaza, but principally the former in the wake of the Hamas take-over of the Strip in 2007.101 In addition to ESF and other conventional aid programs, the US is the largest single bilateral donor to the United Nations Relief and Works Agency (UNRWAR) with only the EU as a larger overall contributor. US funding to UNRWA is not classified as bilateral economic assistance and funds provided by the US account for 20-25% of the UNRWA budget. While UNRWA funding continues to be a divisive issue in the US and is often associated with the risk of US funds reaching groups that the US considers terrorists, such as Hamas, US funding towards UNRWA remains critical for the operation

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of Palestinian refugee relief services in the West Bank, Gaza Strip, Jordan, Syria and Lebanon.102 The US faces growing fiscal and political challenges in maintaining such efforts. It now must deal with a major economic and long-term budget crisis. US assistance is also subject to a presidential waiver to Congress that cites aid to the Palestinians as vital to the interests of national security. In the event that Hamas in Gaza were to join a national unity government with ruling Fatah in the West Bank, a provision exists to ensure that aid is not disrupted provided the US President certifies that such a government acknowledges Israel’s right to exist and commits to previous international agreements between Israelis and Palestinians.103 Lastly Lebanon has also received increased levels of economic aid via ESF from the US. Given US commitments to support Lebanon in the wake of Syria’s withdrawal in 2005, US economic aid (in addition to military aid) was significantly boosted over the FY2006FY2011 period. US economic aid focuses principally on USAID-managed democracy support and development programs and efforts to reduce corruption.

ESF and other programs have focused on promoting education reform and scholarships for students in Lebanon. US ESF to Lebanon spiked at some $334 million in FY2007 to help in Lebanon’s post-war recovery in the wake of the 2006 Israeli-Hezbollah conflict.

While there were indication that ESF to Lebanon had stabilized at around $109 million for FY 2010, cuts to global aid programs saw aid levels decline to $84.7 million in FY2011 with a similar amount estimated for FY2012 and a possible further reduction to $70 million in FY2013.104 Whether this is indicative of a future trend in terms of aid levels remains uncertain: there is continued apprehension in Washington in 2011 about a new government in Beirut that is perceived to be more sympathetic to Syria and accommodating of Hezbollah. 105 US aid to Egypt will also be dependent on Egypt’s political future, its adherence to the Camp David accords, its relations with Iran, and its willingness to carry out real democratic reforms.

The US Economic Response to Arab Protests The current cycle of popular unrest in the Middle East is in large part a byproduct of decades of economic neglect by regional states undergoing deep internal changes. The US is now caught between trying to massively cut federal expenditures and the fact it cannot afford to give Iran a free “win” by failing to address the economic ramifications of regional upheaval. The recent protests across the Arab world have prompted the Obama Administration to assure the Middle East that the US will be a partner in the long term effort to manage the economic costs of social upheaval in the region. Figure VIII.16 illustrates just how important these issues are to the US, as is reflected in the full transcript of President Obama’s May 19, 2011 address. It should be noted that US policy has since been much stronger on rhetoric than actual action and funding, and there is strong US political resistance to supporting such aid: Figure VIII.16: U.S. Economic Support for the Middle East & Africa The revolutions in the Middle East and North Africa (MENA) provide an historic opportunity to meet the aspirations of a people long denied political freedom and economic opportunity.

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Economic modernization is key to building a stronger foundation for prosperity and showing people the fruits of democratic change. The people of the region will choose their own paths to democracy and prosperity, with policies and programs that suit their circumstances. That process may take years, as was the case in the transitions of Central and Eastern Europe. From the beginning of this process and along the way, the United States will offer its support for economic modernization and development to those making the transition to democracy.

The countries of the Middle East and North Africa are diverse societies with diverse characteristics and economies. The region of over 400 million people contains a group of countries that export 18 million barrels a day of oil as well as a group that is dependent on oil imports from their neighbors. Saudi Arabia’s $440 billion economy is more than 14 times that of Yemen. What these countries share is untapped potential, that if unlocked could provide broader economic opportunities for their people.

Oil and gas revenues have enriched several countries and enabled them to fund ambitious infrastructure programs. Some of the non-oil exporters attracted more foreign direct investment and achieved an acceleration of economic growth. The pace of economic reform in the region, however, has been uneven and corruption has been a widespread challenge. Despite an abundance of natural resources and impressive potential human capital, economic growth in the region has not been as rapid as in the fast-growing emerging market world, nor have its benefits been widely distributed.

With the majority of the population under the age of 30, and more than 4 million people entering the labor force annually, the demographics of the Middle East and North Africa pose challenges.

Unemployment rates are high across the region, particularly among the burgeoning youth population. In Egypt, youth unemployment is estimated at over 30 percent. The ability to address the growing demand for jobs – which was one of the drivers behind the revolution – will require significant structural changes and economic reform.

From the beginning of the transitions, representatives of the U.S. government have consulted with the people of the region to better understand the significant challenges they are facing. Given the nature of change in the region – the nature of our support is also evolving. The President outlined a new economic vision to support nations that commit to transition to democracy, and announced a series of initiatives that are geared toward supporting a broadening of economic opportunity.

These initiatives are designed to meet short term economic stabilization requirements as well as longer term economic modernization needs. These two objectives are not mutually exclusive – The U.S. will direct support now to help meet the needs of future generations. Our approach is based around four key pillars – support for better economic management, support for economic stability, support for economic modernization, and the development of a framework for trade integration and investment.

Support for better economic management We will offer concrete support to foster improved economic policy formulation and management. We will do so alongside our democratization efforts. We will focus not only on promoting economic fundamentals, but also transparency and the prevention of corruption. We will use our bilateral programs to support economic reform preparations, including outreach and technical assistance from our governments, universities, and think tanks to regional governments that have embraced reform, individuals, and NGOs. We will mobilize the knowledge and expertise of international financial institutions to support home grown reforms that increase accountability.

Support for economic stability Egypt and Tunisia have begun their transitions. Their economic outlooks were positive before recent events, but they are now facing a series of economic dislocations. Growth forecasts have been revised downward to 1 percent or less. International reserves have decreased and budget deficits are widening. The tourism sector, which is an important employer and source of revenue, has been idled and foreign direct investment will significantly decrease this year. Egypt is

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projecting a fiscal gap of 10 percent of GDP over the next 12 months, and Tunisia is projecting a deficit of 5 percent of GDP. If we implement the right initiatives to offer stabilization support, the long term outlook for these countries can be positive. Absent action, we run the risk of allowing economic instability to undermine the political transition.

The United States has designed initiatives to support the stabilization process and to lay the foundation for longer term prosperity. We are galvanizing financial support from international financial institutions and Egypt and Tunisia’s neighbors to help meet near term financial needs. We strongly welcome Egypt and Tunisia’s engagement with the IMF and are looking forward to seeing the joint action plan that multilateral development banks are working on for the G8 summit.

We will also help bilaterally. In response to numerous requests from the Egyptian government and the Egyptian people, the United States will relieve Egypt of up to $1 billion in debt by designing a debt swap arrangement, and swap it in a way that allows Egypt to invest these resources in creating jobs and fostering entrepreneurship. As another part of our effort to help Egypt invest in its people and regain access to global capital markets, we will lend or guarantee up to $1 billion in borrowing needed to finance infrastructure and support job creation. We will do this via our Overseas Private Investment Corporation (OPIC).

Support for economic modernization We realize that the modernization of the MENA economies will require a stronger private sector. To address that, we are committed to working with our international counterparts to support a reorientation of the European Bank for Reconstruction and Development to support countries in the region. That Bank played a crucial role in the democratization and economic transition in Central and Eastern Europe and can make a great contribution in MENA as well. The International Financial Corporation will scale up its investments to strengthen the private sector in transition countries. We also seek to establish Egyptian-American and Tunisian-American Enterprise Funds to stimulate private sector investment, to promote projects and procedures that support competitive markets, and to encourage public/private partnerships. And as Secretary Clinton announced in Cairo, the Overseas Private Investment Corporation will provide up to $2 billion dollars in financial support for private sectors throughout the MENA region.

Develop a framework for trade integration and investment If you take out oil exports, the MENA region of nearly 400 million people exports about the same amount of goods as does Switzerland, with less than 8 million people. Moreover, regional trade structures are poorly integrated, as MENA sourced just 13 percent of their imports from other countries in the region. Developing Asian countries, in contrast, sourced over 25 percent of their imports from regional partners. The United States will launch a comprehensive Trade and Investment Partnership Initiative in the Middle East and North Africa. We will work with the European Union as we launch step-by-step initiatives that will facilitate more robust trade within the region, build on existing agreements to promote greater integration with U.S. and European markets, and open the door for those countries who adopt high standards of reform and trade liberalization to construct a regional trade arrangement.

Background: The Economic Situation in Egypt and Tunisia Egypt’s economy grew by more than 5 percent on average over the last 15 years. However, these gains did not translate into improved opportunity for the Egyptian people. Egypt is a lower middle income country, with per capita GDP at about $2,800. Inflation levels are well above regional averages, and Egypt is plagued by chronic structural problems, including high levels of youth unemployment (34 percent) and long-term unemployment for first time job-seekers.

Egypt is now facing a series of economic dislocations associated with the transition, which has raised its financial vulnerability. Before recent unrest, GDP growth was projected at 5.5 percent and the fiscal deficit was estimated at 8.4 percent. Due to a slump in tourism, which accounts for over 5 percent of GDP and employs more than 10 percent of the labor force, as well as a decline in foreign direct investment, growth forecasts have been revised downward to about 1percent and the

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deficit is expected to widen to over 10 percent of GDP. Decreased tourism revenues and foreign direct investment will also have an adverse impact on employment.

Tunisia, which is wealthier than Egypt on a per capita basis ($4400), also had a positive economic outlook before the revolution. However, the revolution is expected to put pressure on the economy in the short term. GDP growth will be close to zero this year, and reserves have declined by about a billion since unrest broke out. After running relatively small fiscal deficits the past few years, Tunisia’s fiscal position is expected to widen this year to about 5 percent of GDP (up from 3 percent in 2010). Much like in Egypt, tourism revenues and foreign direct investment, coupled with labor protests and increased social spending, are adversely impacting the near-term economic outlook. A failure to help stabilize these economies could undermine democratization efforts.

Source: “Factsheet: Economic Support for the Middle East and North Africa,” Office of the Press Secretary, the White House, May 18, 2011.

The key problem shaping this aspect of US and Iranian competition is that the President’s May 2011 statement provides little detail about the steps Washington can or will take interms of economic aid in the wake of Arab protests. On the one hand, it is clear from the economic impact of the protests on countries such as Egypt and Tunisia that the long standing pressures on the economies of the nations caught up in unrest will be sharply downgraded by their dependence on depleted revenues from tourism and outside investment and trade. If the US hopes to ensure a stable regional environment and mitigate both regional and economic risk, it will have to play an important role in ensuring that the economic drivers that led to protests do not lead to a cycle of regional violence and further instability. On the other hand, the US will have to do this at a time of economic crisis and a striking lack of domestic support for foreign aid.

Iran has little to offer a region in flux short of rhetoric. It has neither the national resources, nor the economic health, to play a leading role in steering the outcome of Arab protests. However, Iran has shown time and again its ability to co-opt regional militant groups and to capitalize on instability, and misery. In the end, this Arab world in flux is the US’s to lose.

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Key Areas of Competition by Country While the previous sections discuss how the US and Iran compete politically, militarily and economically across the Levant, there is a need for additional focus on key arenas of competition, namely Syria, Lebanon, Israel, the Occupied Palestinian Territories, Egypt and Jordan.

Competition Over Syria Syria has been a key player in US-Iranian competition in the Levant, and has been Iran’s most important strategic partner over the past 30 years. Since Syria’s 2005 military withdrawal from Lebanon, the regional partnership between Syria and Iran has become increasingly skewed in favor of the latter. However, Syria remains critical to Iran’s efforts to shape a favorable security situation in Lebanon and along Israel’s northern frontier. This helps explain why the US has repeatedly sought to reorient or downgrade Syria’s long-held role as Iran’s gateway to the Levant.

After more than a year of popular unrest starting in early 2011, Syria’s internal stability and its role in regional security politics have both become far more uncertain. As the regime continues its crackdown on dissent, international pressure on Syria has also steadily increased. The US, EU and some members of the Arab League have bolstered unilateral and multilateral sanctions the regime, turned to the UN to deepen international pressure and have openly called for President Bashar Al-Asad to step aside. Turkey, until recently one of the regime’s closest allies, has been one of Syria’s most vocal critics.

Lastly, the conservative Gulf monarchies, which continue to have reservations about regional popular unrest, have nonetheless pushed ahead with Arab League efforts to further isolate Syria.

On the one hand, local and expatriate Syrian forces opposed to the regime are backed by the West, and key Arab and Sunni states such as Saudi Arabia and Turkey. On the other hand, the Al-Asad regime enjoys the support of its key regional ally Iran, support from Hezbollah in Lebanon, and strong international backing from Russia and China – countries that could play counter-revolutionary roles during what is increasingly looking like a “long winter of Arab discontent.”106

The Economic Dimension of Popular Unrest Analyzing the economic dimension of popular unrest is necessary to know what is needed to move Syria forward in ways that aid the US and limit Iran’s ability to consolidate its role in the Levant. While it is hopeful to think that the recent protests in Syria are solely a reflection of the Syrian people’s aspiration for democratic government, the core drivers of unrest are far more basic, remaining largely centered on a broader sense of socio-economic inequity, poor governance and the widespread perception of systemic corruption and injustice.

In the latter years of the 1960s, the Ba’th Party initiated reforms meant to degrade the power and autonomy of Syria’s traditional notable families, while earning the support of the country’s peasants and workers. In short, the Party sought the support of the broader Syrian populace – the intended beneficiaries of the party’s aggressive policy of economic

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redistribution – in exchange for greater access to resources and the promise of state-led socio-economic mobility.107 While the state maintained monopolies on most sectors of the economy, the Ba’th regime under president Hafez al-Asad encouraged the emergence and consolidation of new social, economic and political alliances. Fostering a mixed economic system saw the return of at least part of the old Damascene middle merchant establishment; however, their interests were now linked to those of the ruling Ba’th order.108 The new power structure met its most significant test during the early 1980s when the Asad regime faced an armed insurgency led by the Muslim Brotherhood. A key pillar of dissent against the regime was centered on the merchant establishment of Aleppo, which threatened a nationwide strike. In sharp contrast, the Damascus merchants did not participate, choosing instead to cooperate with the Asad regime – a decision that, according to some, assured the survival of the Ba’th order.109 Maintaining the support of the traditional Sunni “industrial bourgeoisie” became a key policy of the Alawi-led regime. So did supporting the emergence of a new group of crony capitalist middle-men tied to elements in the ruling establishment.110 Unlike the traditional business community, which engaged in mainly productive economic activities, this new group – often called the awlad al-sultah (“children of authority”) – engaged in mainly unproductive rent-seeking and short term profiteering.111 In the years to come, the contradictions of this new hollow business-regime elite structure would inform at least some of the socio-economic grievances of anti-regime protesters in 2011.

It is also important to consider the metrics that are shaping socio-economic disaffection and alienation in Syria are critical to understanding the variables that will shape Syria’s future – regardless of who is in charge in Damascus and irrespective of the form of government – and the extent to which both internal Syrian efforts and US aid might counter Iran. 

Figure VIII.17 shows trends in population development in Syria over the 1980 to 2009 period.

While population growth has been generally linear with the urban population accounting for a majority of Syrians, the country’s growth rate in terms of rural areas, while slightly lower, has largely kept up with growth in urban centers. Whereas 47% of Syrians were urban against 53% rural in 1980, 55% of Syrians were urban against 45% urban in 2009: an all but net reversal over a 30-year period, but with very little real numerical variation.



Given these rates, equal attention and welfare for the Syrian urban and rural populations is critical for any government in Damascus. Given that protests in Syria began in Der’a in the south-west of the country, away from the country’s major urban population centers, part of any post-protest period would have to address core grievances at the level of the Syrian periphery – not just the country’s urban rick and well-to-do. It is important to bear in mind, however, that the definition of “urban” is not defined. Many Syrians, pushed out of their villages due to lack of economic opportunity, live in very difficult conditions in suburban poor housing districts just beyond the boundaries of major metropolitan cities in Syria.112



Figure VIII.18 shows data on Syrian economic productivity and regional trends. The first table shows that while per capita gross domestic product (GDP) and gross national income (GNI) have increased steadily over the 1986 to 2009 period, so too has household consumption, and at a much higher rate over the 2003 to 2009 period. Meanwhile, the second table shows that unlike the majority of countries in the region, Syria has seen largely negative growth in terms of GDP per person employed.

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

Figure VIII.19 presents Syrian consumer price and migration data. The first table shows that Syrian consumer prices have risen steadily over the 1980-2009 period with steep increases over the 2002 to 2009 period. The second table in Figure VIII.19 shows that Syrian migration has significantly increased over the 2005-2010 period. No clear correlation exists between a sharper rise in consumer prices and increased efforts to migrate in search of economic opportunity outside of Syria. However, that both indicators seem to be increasingly at higher rates shows a Syrian economy that is increasingly under strain and unable to retain an increasingly large portion of a labor pool with shrinking economic prospects.

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Lastly, Figure VIII.20 shows patterns in Syrian oil production, consumption and exports. While domestic consumption of oil has steadily increased over the 1980 to 2010 period, Syrian oil production plateaued in the mid-1990s and has been in steady decline. The second table shows the other side of falling Syrian oil production. Crude oil exports have dropped significantly over the 1993-2007 period. Not only does this make it significantly harder for Syria to manage growing demand at home, it also robs the government in Damascus of much needed rents from energy exports. Syria’s decreasing oil rents will continue to negatively impact the country’s foreign currency reserves, making it that much more dependent on external rents and other sources of revenue. It will also make it that much more difficult for any government to mobilize national resources in support of desperately needed structural, economic and social reform programs.

In 2010, the World Bank described the Syrian socio-economic landscape in ways that warn that reforming the trends in these figures will not be easy – particularly after a year of political unrest, violent repression, and sanctions have made the situation far worse:113 “Syria is a lower middle-income country with a per capita GNI estimated at US$ 2,090 (2008), a population of 18.7 million – plus 1.2 million Iraqi refugees and migrants - growing at about 2.5 percent per annum and a labor force growing at the rapid rate of about 3 to 4 percent per annum.

Syria’s growth performance has strengthened in recent years, reflecting the country’s own reform efforts towards a social market economy as well as the hitherto favorable external environment for oil-producing countries. However, Syria’s macroeconomic performance has been affected by ongoing external and domestic shocks, particularly the impact of the global financial crisis and a prolonged drought that has been affecting agricultural output. Inflation was 2.5% in 2009 but is expected to increase over the next years as commodity prices recover, fuel prices rise and a VAT is introduced. Year-on-year inflation reached 3.7 percent in April 2010.

Foreign assets remain high, but their coverage of imports is declining. Although public debt remains moderate at 22 percent of GDP, the recourse to debt to finance the budget deficit is likely to increase with the progressive decline in oil revenues. Despite the decrease in oil production, real GDP growth averaged 5.1 percent in 2004-2008. This is due to the expansion in private investments, stimulated by the recent economic reforms and to inflows from oil rich countries.

Real economic growth had previously averaged 3.4 percent per annum between 1999 and 2003, only one percentage point over the current population growth. While growth slowed by more than 1 percentage point in 2009 compared to 2008, and unemployment increased to 11%, the Syrian economy did continue to grow at a rate of 4% in the midst of the global crisis. This in part reflects countercyclical fiscal measures aimed at reducing the impact of the crisis, including increases in public investments and the wage bill.

Syria’s GDP remains dependent on the oil and agriculture sectors, both subject to uncertainties due to changes in oil prices and rain dependency respectively. The oil sector provides approximately 20 percent of the government’s revenues and about 40 percent of its export receipts. The agriculture sector contributes to about 20 percent of GDP and 20 percent of employment. Oil exports, exports of services and foreign transfers of income and remittances are the main sources of foreign earnings. Oil reserves, however, are expected to continue decreasing in the coming years and Syria has already become a net oil importer. A current account deficit of 2.4 percent of GDP is projected for 2010.

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Over the medium term, Syria faces the dual challenges of: (i) keeping strong growth and developing non-oil sectors to cope with still important demographic pressures and with the decline in oil production and, (ii) maintaining fiscal sustainability.

To sustain growth, Syria will need to further develop the non-oil sector and diversify its economy, away from the oil sector, improve private sector development, and exports. Much has been done, including the opening of banking and finance to private investors, the unification of the exchange rate and the removal of many barriers to trade. However, further structural reforms are needed, to help sustain export diversification and institutional reform. More precisely, developing the business environment needed for the development of a diversified, competitive and export oriented private sector remains crucial in face of the negative impact of the decline in oil exports on external and fiscal accounts. In addition, Syria will need to increase its productivity by raising the skills of its labor force and improving its overall technological base.

To maintain fiscal sustainability, Syria needs to continue on the path of fiscal consolidation. The current budget still relies on oil revenues, and, in the recent years, increases in oil prices have led to increases in public spending. The depletion of oil reserves renders the sustainability of the current fiscal policy difficult. In recent years, Syria has started to strengthen its fiscal policy stance through conservative budgeting and by reducing the fuel subsidies and broadening the tax base for the consumption tax. Fiscal consolidation towards an adjustment of non-oil budget deficit requires a continuation of this reform process.

Other challenges include an education system which is not fully prepared to provide quality education and economically relevant skills to the young labor force. Syrian workers appear uncompetitive by regional standards. Major upgrading of the quality of the human resource base is required to take up the challenges of opening up the economy. This includes upgrading the quality of education in schools, professors at universities, vocational training systems, and civil servants to manage the transition.

Like many Middle East and North Africa countries, Syria faces major challenges in terms of environmental and natural resources sustainability. Most water basins are under stress and water deficits are expected to worsen, due to large and unsustainable water usage in agriculture, and expected rapid increase in urban water demand. Climate change is resulting in a decrease in agriculture production and is adversely affecting the food security target of the Government.”

Political upheaval starting in 2011 means that Syria’s economic outlook has suffered significantly since the World Bank’s 2010 assessment. It is difficult to measure the impact of lost tourism revenue and the potentially long-term disruption of trade between Syria and its leading economic partners. As was discussed earlier, the latest round of US unilateral sanctions will make it that much more difficult for the Syrian regime to counter-balance growing internal and regional pressures. No matter the outcomes of recent protests, it is also likely that the influence of countries that can continue to interact with Syria – such as Iran and perhaps Russia and China – are liable to increase in the short term as Damascus works desperately to counter-balance growing international pressure.

There is little that Iran can do to significantly dampen the economic impact of protests beyond infusing the Syrian economy with foreign currency in exchange for oil sales. This is in part due to the continued fall in energy prices and the general decrease of foreign currency reserves in support of Iranian regional initiatives. Meanwhile, while the US could potentially play a stabilizing role in the Syrian economy, it is difficult to extrapolate a clear and present scenario that allows Washington to take decisive action before the Syrian economy is further undermined.

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Arguably, the US is waiting to see how the country’s merchant and business community in Aleppo and Damascus will react to the increasing isolation of Syria from the broader global economy. Even in a scenario where the merchant class put their weight against the Asad regime, there is still no clear end state either on where Syria is going, or which players can and will be at the helm.

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Figure VIII.17: Syrian Total, Urban & Rural Population, 1980-2009 Syrian Population (Actual) Total Population

Urban Population

Rural Population

Urban Population

Rural Population

25000000 20000000 15000000 10000000 5000000 0

Syrian Population (Percentage Growth) Total Population 4.5 4 3.5 3 2.5 2 1.5 1

Source: Adapted by Aram Nerguizian from World Bank data.

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Figure VIII. 18: Syrian Economic Productivity and Regional Trends Syrian per Capita GDP, GNI & Household Consumption 1980-2009 (Constant 2000 US Dollars) GNI

Household Final Consumption

GDP

1400 1300 1200 1100 1000 900 800 700 600 500

Regional GDP per Person Employed 1980-2008 (Constant 1999 PPP Dollars) Israel

Turkey

Egypt

Jordan

Syria

50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0

Note: “GDP” is gross domestic product. “GNI” is gross national income. “PPP” Is purchasing power parity. Household consumption refers to final consumption is calculated using private consumption in constant 2000 prices and World Bank population estimates. Household final consumption expenditure is the market value of all goods and services, including durable products It excludes purchases of dwellings but includes imputed rent for owner-occupied dwellings.

It also includes payments and fees to governments to obtain permits and licenses. No per person GDP World Bank data is currently available for Lebanon.

Source: Adapted by Aram Nerguizian from World Bank data.

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Figure VIII.19: Syrian Consumer Price and Migration Data Syrian CPI 1980-2009 (Base of 100 for 2005) 160 140 120 100 80 60 40 20 0

Syrian Migration 1980-2010 (Actual) 900000 800000 700000 600000 500000 400000 300000 200000 100000 0

Note: “CPI� is consumer price index. Migration data are estimates and show updates at five year intervals. Actual levels might vary and could be higher.

Source: Adapted by Aram Nerguizian from World Bank data.

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Figure VIII.20: Patterns of Syrian Oil Production, Consumption & Exports Syria Oil Production & Consumption, 1980-2010 (Thousand barrels per day) Oil Production

Oil Consumption

700 600 500 400 300 200 100 0

Syrian Oil Exports, 1986-2007 (Thousand barrels per day)

Oil Exports 70 60 50 40 30 20 10 0

Source: Adapted by Aram Nerguizian from Energy Information Administration data.

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US Policy Towards Syria & Iran’s Response While the current turmoil in Syria has led to major changes in US policy that affect US competition with Iran, it is still useful to consider the evolution of US policy over the past three decades.

Shaping Past Policy US policy towards Syria during the Reagan Administration was defined largely by Cold War realism: the risk of uncontrolled conflict in the Levant during the 1980s as a source of growing instability and a precursor for increasingly complicated Soviet and US involvement in regional affairs.114 While Syria had been on the US State Department list of state-sponsors of terrorism since 1979, the Administration could not afford to ignore Syria. This was even in spite of the increasing frequency of Syrian-terrorist attacks against US interests in the region. The country was considered too geopolitically too important and US engagement with the Al-Asad regime only deepened.115 Even in a post-Cold War context, US policy under the George H. Bush and the Clinton Administrations followed a similar approach toward Syria. For the George H. Bush Administration, this was due to the view that Syria was critical to maintaining the regional balance of power and the need to include Syria in any US-Arab coalition against Saddam Hussein’s Iraq in 1991.116 During the Clinton years, the pursuit of Arab-Israeli peace predicated engagement with Syria in order to achieve a lasting regional settlement. While many doubts rightfully remained as to whether Syria would play a positive role in the negotiations, the Clinton Administration, not unlike its predecessors, thought to overlook Syria’s illicit behavior and authoritarian politics in an effort to satisfy US national interests.117 The George W. Bush Administration changed this approach. The neoconservative ideals that defined the Administration’s approach to Syria called for “evil regimes” to be opposed through isolation rather than engagement with regime change as the ultimate goal for Syria.118 Towards the end of the Bush presidency, however, signs of a return to more traditional approaches to Syria resurfaced. They were driven by concerns that regime change as a policy goal was a dangerous departure for the Bush Administration’s “freedom agenda” and that greater engagement with Syria was needed; Israel also stressed its concerns that regime change towards an unknown end state where the Muslim Brotherhood may come to dominate Syria was far too unpalatable.119 The George W. Bush Administration’s approach did push Syria toward Iran and helped galvanize Syrian opposition to US interests in Iraq and Lebanon.120 Syria sought to strengthen its relationships with Iran, as well as Turkey and the EU. It adopted policies predicated on “classical balancing, asymmetric balancing and balking” to counter US threats.121 While the neoconservative approach was effective at temporarily isolating Syria, neoconservative adherents concede that it led to few tangible geopolitical gains for the US in terms of changing Syria’s behavior or policies.122 The Obama Approach The Obama Administration initially took a different approach, including the sending of envoys from the White House, the State Department and visits by senior lawmakers to

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Syria in 2009 signaled a return to a more realist and pragmatic approach to Syria.123 This was later followed in early 2011 by the appointment of Robert Ford as Ambassador to Syria – a post that had been vacant since 2005.124 The US did react cautiously. That the first set of new sanctions came some three months after protests began were indicative of how challenging it was from a policy standpoint to respond to popular protests in Syria. However, regional and European partners have taken their own steps to apply pressure on Syria. EU oil sanctions against Syria are especially critical as imports from Germany, Italy, France, the Netherlands, Austria and Spain accounted for 95% of Syrian oil exports in 2010.125 By the spring of 2011, however, the rise of mass protests and unrest in Syria led the US to take a different path. On balance, the Obama Administration has balanced denouncing the al-Asad regime’s brutal crackdown with the need to shape and consolidate an international consensus on the next steps towards the Syrian government.126 On August 17, 2011, the US and several major allies, including the United Kingdom, France Germany, called for President Bashar Al-Asad to step aside.127 US pressure in terms of rhetoric, sanctions and coordination with Western and Arab allies has continued to increase steadily through early 2012. Below is a list of steps taken by the Obama Administration in reaction of the popular upheaval in Syria, including measures against Iranian individuals and organizations for their roles in supporting the crackdown as well as wavers designed to allow limited transactions between the US and Syria: 

April 29, 2011 – President Obama issues Executive Order (EO) 13572, blocking the property and interests of five high-ranking Syrian officials and organizations. These include President Asad’s brother Maher Al-Asad; Ali Mamluk, Directof the Syrian General Intelligence Directorate (GID); Atif Najib, the former head of the Syrian Political Security Directorate for Dar’a province; the General Intelligence Directorate; Iran’s Islamic Revolutionary Guard Corps – Quds Force.128

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May 18, 2011 – President Obama issues EO 13573, which sanctioned President Bashar Al-Asad along with six other high-ranking Syrian officials, including: Vice-President Farouk al Shara; Prime Minister Adel Safar; Minister of the Interior Mohammad Ibrahim al Shaar; Minister of Defense Ali Habib Mahmoud; head of Syrian military intelligence, Abdul Fatah Qudsiya; Director of Political Security Directorate Mohammed Dib Zaitoun. 129

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June 29, 2011 – The US Treasury Department added Syrian Head of Air Force Intelligence Jamil Hassan, and the Syrian Political Security Directorate (PSD) to the Office of Foreign Assets Control’s (OFAC) specially designated nationals list (SDN), blocking their assets and prohibiting US persons from dealing with them. 130



August 4, 2011 – The US Treasury Department added Muhammad Hamsho and his company to the Office of Foreign Assets Control’s (OFAC) specially designated nationals list (SDN), blocking their assets and prohibiting US persons from dealing with them. 131

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August 10, 2011 – The US Treasury Department added the Commercial Bank of Syria, its Lebanon-based subsidiary Syrian Lebanese Commercial Bank and the country main mobile phone operator Syriatel to the Office of Foreign Assets Control’s (OFAC) specially designated nationals list (SDN), blocking their assets and prohibiting US persons from dealing with them. 132



August 18, 2011 – President Obama issued EO 13582 directing the US Treasury Department too freeze Syrian assets in the US and banning the import of petroleum products produced in Syria.

EO 13582 also prohibits people in the US from operating or investing in Syria. 133 The US Treasury Department also added Syria’s General Petroleum Corporation, Syrian Company for Oil

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Transport, the Syrian Gas Company, Syrian Petroleum Company and Sytrol to the Office of Foreign Assets Control’s (OFAC) specially designated nationals list (SDN), blocking their assets and prohibiting US persons from dealing with them. 134 

August 30, 2011 - The US Treasury Department added Syrian Foreign Minister Walid Mouallem, Syrian Ambassador to Lebanon Ali Abdul Karim Ali, and Syrian Advisor Bouthaina Shaaban to the Office of Foreign Assets Control’s (OFAC) specially designated nationals list (SDN), blocking their assets and prohibiting US persons from dealing with them. 135



September 9, 2011 – The US Treasury Department’s OFAC issued four general licenses to Syria to authorize “wind down” transactions, select official activities related to international organizations and incidental transactions related to US persons residing in Syria.136

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September 27, 2011 – The US Treasury Department’s OFAC issued a general license to authorize third-country diplomats and consular funding transfers and to permit certain services to support nongovernment organizations operating in Syria. 137



October 3, 2011 - The US Treasury Department’s OFAC issued two general licenses to authorize payments linked to over-flights and emergency landing and transactions with regards to telecommunications in Syria.138

Trying to Shape an Uncertain Future While it is tempting to draw conclusions about the Obama Administration’s approach to popular unrest in Syria, the challenges and regional reverberations associated with deepening instability from within Syria have been a source of great division in Washington policy circles as well as within the US government.

Calls for the US to either intervene militarily or to provide military aid in support of Syrian opposition groups have escalated steadily in late 2011 with Libya often invoked as the template for a response to events in Syria. Moral and humanitarian grounds for shaping a US policy response are often cited. However, whether or not the US is willing to deepen its involvement in Syria and engage in protracted proxy warfare with Iran is the true geopolitical question.

US experiences in Iraq from 2003 to the present and Lebanon in 1982-1984 may be more useful than comparing Syria to Libya. Both countries, like Syria, have sectarian and other internal divisions and are close to the epicenters of regional Arab-Israeli and inter-Arab politics. Both countries also served as regional arenas for competition between the US and its regional allies on the one hand and Iran on the other. Like Iraq, instability and change in Syria will have significant consequences not only for US-Iranian competition, but also on the regional balance of power in the Levant and the stability of states like Iraq, Israel, Jordan, Lebanon and Turkey.

The US department of Defense has been especially cautious with regards to events in Syria with indications that at least parts of DoD were uneasy with official US calls for Asad’s ouster given signs the Asad regime continued to enjoy the support of key minority groups, a resilient and loyal security apparatus and acquiescence from the country’s Sunni business community and Ba’th Party membership.139 US military planners are deeply concerned about the sheer scale of Syria’s military forces, the lack of unity and military capability in the opposition, its uncertain ideology and the risk of religious extremist and sectarian conflict. They are worried that what

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might start as a limited humanitarian intervention could become a major conflict with significant casualties and collateral damage, as well as trigger civil conflict along sectarian lines. Both US military and State Department planners are deeply concerned about inserting secular US forces into an Arab internal conflict in an area where US ties to Israel are far more important than was the case in Libya, doing so without Arab nations being in the lead, and doing so without the support of the UN and NATO. They fear that unless the US followed an Arab lead, US action could be portrayed as supporting Israel and used to discredit the Syrian opposition – particularly the more moderate and secular elements.

In early 2012, there is still no tangible consensus in the US on what should be the official response after a year of unrest and thousands of Syrian civilian casualties. Congressional testimony on March 7, 2012 by Secretary of Defense Leon Panetta and Chairman of the Joint Chiefs of Staff General Martin Dempsey on the risks of intervening in Syria seem to indicate that, at least for now, the US hopes to avoid getting embroiled in yet another unstable and divided Middle Eastern state in the throes of what could be a decade of socio-economic and political unrest.140 What is also certain, however, is that Iran will continue to shore up the Asad regime, its sole regional ally other than Hezbollah in Lebanon and Hamas in Gaza. It is also likely that the longer Syria lingers in a state of decay and political uncertainty, the more likely it will be that the country will emerge as the latest regional arena for proxy competition.

The US would then face increasing difficulty in both staying out of and competing with Iran in Syria.

The Military Dimension The US is not – and currently cannot – use arms sales and military aid to Syria to compete with Iran. This could only occur if Asad fell and a suitably favorable new regime emerged in Syria. Figure VIII.21 shows Syrian arms agreements over the 1995 to 2010 period. These are contrasted to consistently higher delivery patterns in Israel. As was discussed earlier, Israel’s security is a key interest for the US in the Levant, as are maintaining Israel’s military edge vis-à-vis Syria and its regional allies.

Given their antagonistic relationship the US does not maintain military to military or defense aid ties with Syria. While Iran does not generally play a major role in Syria’s efforts to recapitalize its forces, it was reported by Jane’s in 2009 that Iran was partially financing Syria’s acquisition of 50 96k6 Pantsir S1 self-propelled short range gun/surface-to-air missile air defense systems. It was also reported that Iran would acquire 10 of the 50 systems. The deal, which was reached in 2007, was worth some $730 million and deliveries were reported to be underway in 2009.141 Iranian support for Syrian arms acquisition is not implausible. Iran has a vested interest in ensuring that its core regional ally has at least some modern systems to offset the substantial qualitative edge of the IDF and to ensure that the bulk of the burden of confronting or defending against Israel is not solely on the shoulders of Hezbollah. Syria for its part benefits from its alliance with Iran as a means of allocating external resources to bolster its balancing approach in the region.

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Syria’s relations with Russia, however, have been the key to Syrian progress. Syria, used to rely on substantial levels of Soviet assistance during the Cold War, but saw arms deliveries decrease from $2.6 billion in 1987 to $52 million in 1994 as a result of the collapse of the Soviet Union. By 2005 Syria also owed some $13.4 billion in debt to the Russian Federation, compounding efforts to continue force recapitalization.

Syria responded by attempting to cement its relationship with Iran while continuing efforts to obtain Russian assistance at or near Cold War levels. In 2005, Russia agreed to write off 73% of Syria’s debt, opening the prospect of renewed arms sales. Russia has been keen to reassert its influence in the region, committing to provide Syria with some $300 million in aid over a three year period starting in 2008.

Iran has also been reported to have financed part of a $730 million deal for Syria to purchase 50 Russian Pantsyr-S1E mobile short-range air defense systems. While the capability of this system is uncertain, unclassified sources report that it is a short to medium range ground based air defense system, with automatic anti-aircraft guns and surface-to-air-missiles which have radar or optical target-tracking and radio-command guidance. It is used to provide protection for civil and military point and area targets, for motorized or mechanized troops up to regimental size and as part of a layered air defense systems providing close in defense for longer range systems like the S-300PMU-2/ SA10 “Grumble” or the S-400/SA-21 “Growler.”142 The Pantsyr-S1E is claimed to be able to hit targets with at least a radar cross-section of 2 cm2 to 3 cm2 and with speeds up to a maximum of 1300 meters/second within a maximum range of 20,000 meters and heights up to 15,000 meters. The system is claimed to able to defend against stealth aircraft, cruise missiles, and precision guided weapons, but some of these claims seem more hype than real.

It is increasingly unclear whether or not Moscow will emerge as a reliable source of funds, equipment and training for a politically unstable and cash-strapped Damascus.

Russia has yet to disrupt the regional balance by providing either Syria or its ally Iran with the sophisticated long range SAM systems, such as the S-300PMU-2/ SA-10 “Grumble” or the S-400/SA-21 “Growler” that would make a major difference in the air balance, and seriously erode Israel’s “edge” and US capability to intervene.

Given the fact that the bulk of agreements with Russia were made in 2007, it remains to be seen whether Syria has found a reliable arms supplier in the longer term. Even with renewed Russian support, it is doubtful that external support for Syrian expenditures will reach pre-1992-levels.

A year of unrest in Syria has prompted much debate and discussion of a military option to end the Asad regime’s security crackdown against an increasingly militarized protest movement. At the international level, Russia has signaled that intervention in Syria is a foreign policy red line. There are multiple reports that Russia has provided Syria with its sophisticated and lethal long range “Bastion” coastal defense system which is based on the SS-N-26 “Yakhont” supersonic anti-ship cruise missile (ASCM).

Multiple sources report that Russia delivered unspecified numbers of “Yakhont” ASCMs to Syria in December 2011 to fulfill the $300 million deal.143 The “Yakhont” is capable of reaching a maximum speed of Mach 2-2.5, and can deliver a 200 kg warhead out to a

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range of 300 km with a “hi-lo” high altitude trajectory and a range of 120 km on a “lo-lo” sea-skimming trajectory. Unlike most other ASMs, the “Yakhont” relies on passive homing for the majority of its flightpath and only resorts to active tracking in the final stages of flight. Coupled with its speed and low altitude approach, the “Yakhont” significantly reduces warning time, thereby increasing the vulnerability of ships offshore to attack.144 Delivery of the “Bastion” serves to bolster deterrence against deeper intervention in Syria and to signal Russia’s support for its regional ally. This is a significant statement from Moscow with ramifications for the regional military balance. Should Russia decide to provide Syria with much-delayed major SAM systems, such as the S-300 or the S-400, this would constitute yet another signal that further intervention in Syria is a red line.

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Figure VIII.21: Syrian-Israeli Arms Agreements and Deliveries: 1995-2010 ($U.S. Current Millions)

New Agreements: 1995-2010:

6,000 5,000 4,000 3,000 2,000 1,000 0

5,400

5,200 4,300

3,600

3,500

300

700

1,300

Israel

Syria

1995-1998

4,300

300

1999-2002

5,200

700

2003-2006

3,600

1,300

2007-2010

3,500

5,400

New Deliveries: 1995-2010:

6,000 5,000 4,000 3,000 2,000 1,000 0

5,400 4,300

4,900

2,900 1,700 400

800

400

Israel

Syria

1995-1998

2,900

400

1999-2002

4,300

400

2003-2006

5,400

800

2007-2010

4,900

1,700

Source: Richard F. Grimmett, Conventional Arms Transfers to the Developing Nations, Congressional Research Service, various editions.

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Implications of Syrian Protests & Instability for the US & Iran The political upheaval and a nascent insurgency in Syria is having a critical impact on US and Iranian competition in the Levant. Syria has not experienced organized mass unrest on a national scale since Hafez Al-Asad crushed protests in the early 1980s, which were driven by a coalition principally backed by the banned Muslim Brotherhood and elements of the old merchant elite. The government of Bashar Al-Asad, having lost much international support and legitimacy, is likely to be buffeted by international and internal pressures with no clear indicators as to how long or how deep instability will go, let alone what a post-Asad structure could look like.

For the US, the latest round of protests in Syria and the potential for an end to Ba’th rule may hold the promise of achieving the core foreign policy outcomes that all of the competing schools of US policy towards Syria aspire to achieve: breaking the three decade-old Iranian-Syrian axis and denying Tehran the means to project power and influence in the Levant. However, protests and instability with no clear end-state in Syria do little to satisfy US efforts to safeguard Israel’s security and regional stability.

Given the increasingly sectarian nature of the confrontation between the regime, supported by the country’s ruling Alawite community and other minority groups, and the mainly Sunni protesters and political organizations, it is critical that the spillover effects of Syrian instability be contained. So far, it remains unclear as to whether the Obama Administration has a policy that can support the protests, identify future centers of power (new or otherwise), and chart a course that does not further undermine an already shaky regional order.

For Iran, the risks of Syrian instability include at least a partial loss of its ability to influence the Arab-Israeli conflict, militant Palestinians and its Shi’a allies in Lebanon, chief among them Hezbollah. As with the Muslim Brotherhood-led uprising of the early 1980s, Iran is allegedly providing assistance to the regime of Bashar Al-Asad as it tries to suppress the latest rounds of pro-democracy protests. This is reported to include providing crowd suppression equipment, monitoring and blocking protestors’ use of the internet, as well as surveillance of cellphones and text messages.145 There is only so much Iran can do to influence the course of events in Syria. So far, it has provided political support, military advisors, and evidently arms and some funds.

However, as the risk of losing its geopolitical bridge to the Levant increases, Iran may seek to foment instability in the Arabian Peninsula in countries with important Shi’a populations, including Bahrain, Yemen and Saudi Arabia. It is unclear how successful such a strategy would be. Saudi Arabia’s recent intervention in Bahrain signaled that instability in the Arabian Peninsula was a regional red line for Riyadh. The Gulf Cooperation Council (GCC)’s recent moves to induct Jordan and Morocco only serve to further entrench the Council’s unofficial status as a Sunni monarchies club.

In short, both the US and Iran face an uncertain future in dealing with instability in Syria.

The US position that Al-Asad must step down, while significant, may have limited real world impact. Although the lack of US direct levers of influence in Syria is one factor, others include divisions at the regional and international levels above an appropriate response a fractured UN Security Council, fragmented Syrian opposition forces and the

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risks of growing radicalization and instability in the internal and regional battles for Syria.

The West, led in part by the US, has been supportive of further international sanctions against the al-Asad regime. However, the so-called “BRICS”146 countries, led by Russia and China, have been critical of what they perceive to be the possibility of yet another Libya-style international intervention in the Arab world.147 The US has stated on background that it is carrying out planning for possible humanitarian military intervention, but as of March 2012, US experts saw no signs of serious divisions in the Syrian military and security forces and a growing willingness to escalate to using more artillery and armor to repress a divided opposition with few Syrian Army defectors and little military capability.

US military planners examined the possibility of using airpower to create secure zones for Syrian civilians and safe transit corridors, but this potentially involves a serious air war and suppression of Syria’s land based air defenses. It required access to land bases since carrier and cruise missile forces might not be sufficient, and Israel could not be used as a base for political reasons. Such a campaign would take weeks to prepare and Arab and/or Turkish bases, and could trigger even more violence from Asad’s forces against Syrian civilians on the ground, as well as even more displacement of Alawites, Sunnis, Christians and Kurds along sectarian and ethnic lines.

This did not mean there was no military option, but no one could safely predict the level of escalation that would result, or the political reaction of the Syrian military and Syrian civilians, or the behavior of the opposition to Asad. It was clear, however, that the situation would be different if the Syrian military forces did divide. Defections from Asad’s security forces did take place, and there were much clearer lines of division between opposition controlled areas and those still loyal to Asad.

The US could not rule out having to intervene if Syria lapsed into a civil war involving far more massive civilian casualties, and the US was reported to have consulted informally with its Arab allies, turkey, and Israel. It was clear that if the US did have to intervene that it would be better to do so with Arab and Turkish support, and with some group of Arab states taking the political lead.

Meanwhile Iran finds itself in a mainly Sunni Arab Middle East that has fewer and fewer reasons to emulate the Islamic Republic. This is further compounded by the very real risk that Iran might have to adapt to either a post-Asad Syria, or a Syria that will be principally pre-occupied with consolidating a political, social, economic and security landscape scarred by months of violence and instability.

Even with Arab and Turkish support, any US-led intervention would play out less in terms of humanitarian relief and more in terms of US and Gulf Arab efforts to compete with Iran and Syria and to bring stability to a region that is liable to remain unstable for years. Taking stock of the scale of Sunni-Shi’ite regional polarization and the level of acrimony between the Southern Gulf states and Iran is critical to determining the benefits and potentials costs of deeper US involvement in the Levant.

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Competition Over Lebanon Lebanon has been the chronic problem child in US foreign policy in the Levant since the Eisenhower Administration. However, given the country’s centrality to regional security politics and Iran’s support for the Shi’a militant group Hezbollah, the US cannot avoid looking at Lebanon as yet another arena of competition with Iran in the broader Levant.

US Policy Towards Lebanon & Iran’s Response While Lebanon’s warring factions may think that the US and Iran have their core interests at heart, it is important to remember that US-Iranian strategic competition is not driven by the internal politics of regional states. How the US crafts its foreign policy towards Lebanon continues to be informed by a number of age- old constraints. These include domestic political considerations, regional dynamics and international conflict.

In the post-Iraq invasion period, US policy was principally a function of denying US regional opponents, such as Syria and Iran, the means to undermine US strategic interests in the region. As was mentioned throughout this report, these include preserving a regional order that favored broader US interests in the region and second that safeguarded Israel’s national security.

Sensing an opportunity to reshape the regional balance of power in the Levant in 2003, the US began to call for Syria’s exit from Lebanon. In the wake of the popular upheaval of 2005 following the assassination of former Prime Minister Rafik Hariri, Syria withdrew its forces from Lebanon and the balance of power within the country began to tip in favor of the West and the US. Since 2005, the US has sought to consolidate its gains by trying to ensure that Lebanon in the wake of Syria’s exit does not become an arena for proxy competition yet again.

With Syria on the defensive in 2005, Iran began to play a more proactive role in Lebanon.

While Iran has always had a vested interest in defending Shi’a interests across the Middle East, there is little indication that Iranian foreign policy-making is that different from the US in terms of a desired end state. Iran’s ambitions in Lebanon are simply to secure its regional hegemonic interests and to continue to act on the Arab-Israeli stage as means of shoring up its broader regional position in a mainly Sunni Arab Middle East. Having a role to play in Lebanon also meant that Iran could use the small country as a means of foiling US strategic and political interests in the broader Levant.

This aspect of US-Iranian competition in Lebanon led to the emergence of two crossconfessional political forces with one aligned with the US and the West and the other aligned with Syria and Iran. The US supported so-called the pro-US and pro-Western “March 14 Alliance,” a cross-sectarian grouping of Lebanese political actors that included much of the country’s Maronite Christian community, most of the country’s Sunni representatives and, at one time, the Druze led by Walid Jumblatt. The Alliance did not include any truly representative Shi’a political forces.

Iran supported Lebanon’s leading Shi’a political-sectarian forces, which were Hezbollah and Nabih Berri’s Amal movement. These, along with a large segment of the country’s Maronite community led by former Lebanese Armed Forces (LAF) commander General Michel Aoun and other smaller forces, formed the so-called “March 8 Alliance.” In

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contrast to March 14, this grouping did not include any truly representative Sunni political forces.

While both the US and Iranian-backed groups were cross-confessional – and included members from all of the country’s leading communities – neither was viewed as truly representative by the other. This in turn impacted the pace and scale of US-Iranian proxy competition in Lebanon: neither group commanded an overwhelming majority in power.

Who could win in Lebanon would be determined by a two level game that includes a domestic contest for power backed by the support and resources of external actors championing either alliance.

It is unclear who will win this struggle within Lebanon and in terms of US and Iranian influence. Alliances in Lebanon are ever-changing as sub-national sectarian groups jockey for political position. Meanwhile, it is difficult to predict the impact of continued instability in Syria. It is all too easy to assume that a collapse in the Asad regime will lead to a stable pro-Western Lebanon. It could mean the downgrading of Iran’s ability to influence both Lebanese and Palestinians elements in its contests with the US and Iran.

What is less likely, however, is that it will resolve Lebanon’s fundamental Sunni-Shi’a dividing lines. These have been further aggravated by indictments of Hezbollah members by the UN Special Tribunal for Lebanon (STL) in connection to the assassination of former Prime Minister Rafik Hariri. A post-Asad Syria could see Lebanon’s Sunni community grow far more assertive if not aggressive in its dealings with the country’s leading Shi’a forces. Given the degree of sectarian polarization in Lebanon, this could make the risk of internal conflict that much more significant.

New Patterns in US Military Aid to Lebanon It is not easy to draw lessons from the achievements and limitations of the US security assistance and cooperation programs in Lebanon, or to tie it to US competition with Iran – and Syria and the Hezbollah. What is clear is that from a US perspective, military aid to Lebanon was expected to help reduce the country’s footprint in regional instability and its role as a regional confrontation state against Israel. In short, military assistance to Lebanon became the latest addition to US-Iranian proxy warfare in the Levant.

Much of this analysis is based on field research in Lebanon and conversations with US and Lebanese political and military personnel involved in the broader effort to build up the LAF. It is significantly abridged and is not intended to give a more detailed window into the patterns of systems deliveries, qualitative development and other data collected in Lebanon by the author over the past four years. It also does not consider US efforts to build up Lebanese police and internal security units.

As the previous section attempted to articulate, US policy towards Lebanon is a function of far broader US strategic imperatives in the Middle East, including the regional contest with Iran. How the US goes about providing security assistance to its Lebanese allies is also dependent on, and held back by, this overarching top-down approach to security politics in the Levant.

In the wake of Syria’s withdrawal from Lebanon in 2005 and spurned on by the Lebanese Armed Forces’ (LAF) counter-terrorist efforts against the Al-Qaida inspired Fatah ElIslam terrorist group, the US decided to support its allies in Lebanon, principally the

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March 14 Alliance, by providing security assistance to build up Lebanon’s national military. At the level of the US government, it was hoped that the LAF, which was popular across the country’s sectarian divisions, could gradually take on an increasingly important national security role, largely at the expense of Iran’s main non-state regional ally Hezbollah. Many in the US Congress supported US efforts to build up the LAF based on the hope that the military could one day confront Hezbollah and serve as a bulwark against Iranian influence along Israel’s northern flank.

The patterns involved may be summarized as follows: •

There is a general consensus both within the LAF and among US security assistance personnel familiar with Lebanese civil-military dynamics in post-Ta’if Lebanon that US military aid to Lebanon did not realistically translate into military support for the March 14 Alliance. A great deal of the LAF’s popularity does not come from its self-styled narrative as a national institutional above the sectarianism that defines modern Lebanon.

•

The LAF’s legitimacy and popularity is principally a byproduct first of the LAF’s cross-sectarian character, and second its aversion to undermining the interests and core prerogatives of the country’s leading sectarian groups and communities – especially the Shi’a, the Sunni and the Maronites.

•

It is also clear, however, that many in the US security assistance community were very much aware that such a dynamic was at work. The Lebanese often forget that most alliances to control and shape Lebanon are short-lived. Ultimately, US support for Lebanon through the LAF rather than one or another sectarian faction is a more pragmatic approach to projecting US influence.

However, how the current US approach can strengthen weak Lebanese state-society and civilmilitary dynamics in the future is unclear.

•

Figure VIII.22 shows funding levels allocated towards Lebanese military development, in particular over the 2006 to 2013 period. The US has provided Lebanon with more than $775 million in FMF, IMET and “Section 1206” counter-terrorism funding over the FY2006 to FY2011 period.

•

Figure VIII.23 shows a breakdown of how US counter-terrorism funding has been allocated to Lebanon. Funding sources such as the Section 1206 grant authority were crucial in building up the LAF’s special operations forces (SOF) quickly in the wake of costly battle with Sunni militants at the Nahr El-Bared refugee camp in 2007. The bulk of US assistance obligated between 2006 and 2010 has focused principally on the most urgent needs of the LAF, which tend to be the basics of mobility, command & control, communication, personnel equipment, light weapons for infantry and other forms of equipment with limited lethality. 148 While all of these systems were urgently needed, their impact on positive perceptions of LAF development in Lebanon remained limited.

•

While this aid has been helpful in building up the LAF, six years of significantly increased military aid to Lebanon have so far had limited impact on the balance of force between the LAF and Hezbollah, the US-Iranian contest in the country or in shaping positive local perceptions of the US effort in Lebanon. It is still too soon to extrapolate a long-term future pattern of US assistance, or assess how future aid efforts may affect future US interests and the contest with Iran.

•

Lebanon is too internally divided and too prone to complicating the foreign policy priorities of regional and international powers such as the US. The recent collapse of the March 14-led government of Saad Hariri is also a cause for concern, principally due to the fact that from some US congressional standpoints, a government not led by March 14 th should not be privy to US military or economic support. The US interagency, however, remains largely confident that the US can support and sustain future levels of assistance, and US confidence continues to grow in Prime Minister Najib Mikati’s ability to chart a path for Lebanon that does not lead to a major break with the international community. However, whether aid will remain at current levels is up for debate in no small part thanks to proposed congressional cuts in foreign assistance programs.

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•

Figure VIII.24 shows the number of LAF troops trained by the US over the 1998 to 2011 period.

Despite challenges in shaping how US aid to the LAF could play a role in the contest with Iran, US aid has positively impacted security politics along the UN Blue Line separating Lebanon and Israel.



Figure VIII.25 shows the LAF’s broader force deployment in early 2012. Prior to US security assistance programs and the expansion of the United Nations Interim Force in Lebanon’s (UNIFIL) mandate and force structure, the LAF did not maintain significant forces in South Lebanon or areas controlled by Hezbollah. In 2011 and at least since late 2009, the LAF has deployed some 8 mechanized infantry brigades south of an imaginary “Beirut parallel.” This constitutes the bulks of the LAF’s conventional heavy units, with a deployment of some 14,000 troops south of the “Beirut Parallel,” including 6,000 to 8,000 troops south of the Litani River.

•

Figure VIII.25 also shows the general disposition of LAF forces in UNIFIL’s area of responsibility in early 2012. While the LAF’s southern deployment is an important milestone in and of itself, US assistance has yet to meaningfully compensate for the fact that LAF units in the south are still little more than an expeditionary force in their own country. The LAF lacks infrastructure in the south with few barracks, training facilities and well-defended command and control posts.

•

The experience of UNIFIL over the past three decades is critical and should inform US thinking about future aid patterns: LAF units and positions, like those of UNIFIL, should gradually become increasingly entrenched in the socio-economic tapestry of South Lebanon. Such an effort is unlikely to be rejected by the region’s mainly Shi’a population, who – while supportive of Hezbollah – continue to maintain positive views of the LAF and remain keen to see it play a more muscular national defense role.

Paradoxes of Building Lebanese Military Capabilities While the US-LAF relationship has been characterized as generally positive for both players, a number of obstacles remain on both the US and the Lebanese sides of the security assistance equation, and they have severely limited US ability to compete with Iran and Syria in Lebanon, as well as efforts to strengthen Lebanon’s moderates and its democracy.

Some of these problems are the result of US policies and expectations. First, the US continues to feel the need to have the LAF present it with a clearly defined national defense strategy which in turn not only identifies the threats the LAF faces, but also characterizes why certain systems and not others are needed to sustain future Lebanese security needs. Given the polarized nature of Lebanese politics and the general absence of post-Ta’if (let alone post-independence) civil-military coordination, it will be difficult for the LAF to produce such a strategy in the short term.

Second, the US continues to struggle with the reality that it cannot significantly modify Lebanese civil-military dynamics, given the primacy of sectarian politics in the wake of Syria’s withdrawal in 2005. US difficulty in accepting Lebanese internal dynamics for what they are, and then failing to extract the outcome most favorable to Washington’s interests, is not new to how the US deals with Lebanon. There is something to be said about making the same hopeful choices with little to show for it.

Third, the quality of US assistance will continue to be determined by pre-existing core US interests. Chief among them is the US commitment to maintaining Israel’s qualitative edge. What this means in the real-world is that US security assistance professionals understand that the only way they can “stand up” the LAF is by turning it into a force that

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the Shi’a can respect and that can dissuade Israel from future military confrontations.

They also understand, however, that such an effort would create an untenable policy paradox as far as US regional interests are concerned.

Lastly, the US Congress is playing a growing role. Administration arguments in favor of continued support to the LAF are increasingly falling on deaf ears. This reflects a deepening domestic political polarization in the lead-up to the 2012 presidential elections and the frustration of a congressional body with a country that continues to be a source of difficulty for US policy in the Levant. The fact that aid to Lebanon has done little to shift the balance of forces in favor of the US against Iran in the Levant is another core driver.

However, how the US can suspend military aid to Lebanon without handing over the country to Syria and Iran remains unclear.

The Lebanese and the LAF also present challenges in maximizing their bilateral military relationship with the US. •

First, there is often a disconnect in how the LAF and the US interpret the military’s mission priorities. While the US has often considered demarcating the Lebanese-Syrian border a unilateral Lebanese issue, the LAF has traditionally consider it a Lebanese-Syrian bilateral issue. While keen to be the dominant security actor in Lebanon, the LAF cannot easily meet congressional expectations that it should do more to confront Hezbollah without risking sectarian divisions and all-out civil strife. Instead, the LAF, which considers Hezbollah a legitimate political-sectarian actor in Lebanese politics, focuses more on dealing a decisive blow to Sunni Lebanese and Palestinian militants – a position that is palatable to the country’s Shi’a community and many Christians – while it tries to build up its capabilities and insulate itself from sectarian politics. As for the matter of the LAF’s national defense role, the US considers only Syria to be a threat to Lebanon. In contrast, the LAF finds that in the absence of meaningful Israeli-Lebanese and IsraeliSyrian peace efforts, the LAF should be ready to address potential security risks from both Israel and Syria.

•

Second, the LAF skirts key failures in Lebanon’s dysfunctional civil-military effort and choses to focus more on its own frustration with US demands for a clearly articulated national defense strategy. The LAF expected that US security assistance would be far more accommodating of Lebanon’s civil-military paralysis and lead to far more coordinated military-to-military mentorship.149

•

Lastly, the LAF and the Lebanese, while cognizant of the US commitments to Israel’s QME and comfort with friendly ruling alliances like the March 14 Alliance, expect the US effort to benefit the country as a whole. In light of a change in the political balance of power in early 2011, this would include working vigorously with the Lebanese government under Prime Minister Mikati to ensure that Lebanon does not become yet another source of regional instability – potentially to the benefit of Iran and its regional allies.

•

In the wake of continued instability in Syria, the risk of escalation along the Blue Line has only intensified. In mid-2011, Hezbollah assured the LAF that it would send minders to prevent Palestinian protests commemorating the Nakba (“catastrophe”) and the Naksa (“the setback”) from reaching the Blue Line of demarcation between Israel and Lebanon. However, given the absence of Hezbollah minders during the May 2011 Nakba protests, LAF troops in South Lebanon were instrumental in containing Palestinian protestors trying to enter Israel, averting a major crossborder incident. Given that some 11 Palestinians were killed during the May 2011 incident, the LAF, supported by UNIFIL, would go on to declare the area along the Blue Line a closed military zone, preventing any Naksa protesters from approaching Israel at all. While some in the LAF reported that the move upset Hezbollah, there was little the group could ultimately do, and the military seemed keen to minimize spillover effects that could impact security politics along the

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Blue Line.150 With continued tension in Syria and an Iran hard pressed to reshape regional events in its favor, the LAF may still have an important role to play as a regional stabilizer.

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Figure VIII.22: The Impact of U.S. Military Assistance to Lebanon 2004 to 2013 (In thousands of current U.S. Dollars) 300,000

250,000

200,000

150,000

100,000

50,000

0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

700

0

752

905

1,477

2,130

2,500

2,476

2,375

2,250

Section 1206

0

0

10,500

30,600

15,120

49,300

23,000

FMF

0

0

3,713

224,800

6,943

159,700

100,000

74,850

75,000

75,000

IMET

Note: 2012 numbers are U.S. Government programmed estimates and 2013 numbers are projected U.S. Government estimates. Both 2012 and 2013 numbers are subject to change.

Source: Adapted by Aram Nerguizian from Congressional Budget Justification for Foreign Operations, various fiscal years, the DSCA Historical Facts Book 2007, Nina M. Sorafino, “Section 1206 of the National Defense Authorization Act for FY 2006,� CRS Report for Congress, RS22855, May 15, 2008 and discussions with U.S. government Experts.

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Figure VIII.23: Breaking Down “Section 1206” Assistance to the LAF 2006-2010 (In millions of current U.S. Dollars)

60

50

40

30

20

10

0

2006

2007

2008

2009

Cessna Caravan

27.8

Urban Soldier Equipment

21.5

Secure Comms for SOF

7.9

SOF T&E

7.2

Military Assistance to LAF

10.5

2010

23.0

30.6

Note: 2011 numbers are U.S. Government programmed estimates and 2012 numbers are projected U.S. Government estimates. Both 2011 and 2012 numbers are subject to change.

Source: Adapted by Aram Nerguizian from Congressional Budget Justification for Foreign Operations, various fiscal years, the DSCA Historical Facts Book 2007, Nina M. Sorafino, “Section 1206 of the National Defense Authorization Act for FY 2006,” CRS Report for Congress, RS22855, May 15, 2008 and discussions with U.S. government Experts.

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Figure VIII.24: LAF Personnel Receiving U.S. Training 1998-2011 250

Officers Trained

200

150

100

50

0

1998

1999

2000

2001

2002

2003

2004*

2005

2006

2007

2008

2009

2010

2011

Other DoS/DoD

0

35

0

60

0

0

30

0

23

23

0

0

0

0

CTFP

0

0

0

0

0

0

0

91

70

13

13

18

8

26

FMS

0

0

0

0

0

0

0

0

7

80

46

48

23

71

IMET

63

163

178

93

212

201

136

135

106

129

97

71

99

99

* FY2004 includes INL maritime law training for 30 members of the Lebanese Navy. 2010 numbers are U.S. Government programmed estimates and 2011 numbers are projected U.S. Government estimates. Both 2010 and 2011 numbers are subject to change.

Note: All activities are listed by the fiscal year (FY) in which the training occurred, not by the FY in which the funding for the training was provided. Data does not include 287 LAF personnel trained in demining under DoD Non-Security Assistance Combatant Command funding for FY2005.

Source: Adapted by Aram Nerguizian from “Foreign Military Training and DOD Engagement Activities of Interest,� various editions, U.S. Department of State, Bureau of Political-Military Affairs and interviews with U.S. Government experts.

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Figure VIII.25: LAF Ground Force Deployment in March 2012

Relatively High Risk; High Difficulty to Control Moderate Risk; Moderate Difficulty to Control Limited Risk; Limited Difficulty to Control

Source: Adapted by Aram Nerguizian from discussions with Lebanese Armed Forces and U.S. government Experts.

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Lessons from Iran’s Military Support for Hezbollah The previous sections in this report have summarized depth and breadth of Hezbollah’s importance to Iranian geopolitical aspirations in the Levant. However, the Iranian model of “security assistance” also bears important lessons for any future US engagement with Lebanon – particularly in the context of the problems in US efforts to build up the LAF: •

First, the US is invested in Lebanon as part of a broader multifaceted effort to shape stability and outcomes from the Mediterranean to Afghanistan. Meanwhile, Iran looks at Lebanon and Hezbollah as central to its prerogatives, not only in the Levant but also the broader Arab Muslim Middle East. Prior strategic commitments and policy choices make it difficult for the US to bring its tremendous national resources to bear effectively. The US is concerned with maintaining Israel’s military edge and ensuring that no regional player poses an imminent threat to its regional ally. Iranian policy towards Lebanon is not burdened by competing geopolitical priorities, which means unlike the US, it can provide its allies with as much assistance as they need.

•

Second, despite its revolutionary rhetoric, Iran recognizes that Lebanon’s sectarian system is to Hezbollah’s advantage, given the group’s level of organization, its unique military capabilities and unrivaled intelligence gathering capabilities. Iran does not need to “capture the state” or build a “state within a state” in Lebanon in order to further its interests. The same goes for Hezbollah as well, which has increasingly accepted the benefits of the autonomy granted by eschewing the fragile and hollow post-war Lebanese state structure.

•

In contrast, the US continues to focus on trying to rehabilitate Lebanese state institutions that, by virtue of the primacy of sectarian politics in the post-Syria period, are very resistant to change or reform. The US also continues to face difficulties in dealing with sectarian and feudal rather than true reform-minded national leaders. Pursuing US policies predicated on dealing with Lebanon for what it is will allow the US to recalibrate its reform agenda to find more meaningful avenues for future reform.

•

Lastly, time is a critical factor in building up truly capable regional allies. Iran has spent the past 25 years building up Hezbollah and it has done so without any qualitative reservations and without the burden of a transparent bureaucratic interagency process. The US has been conducting security assistance to the LAF for 6 years under the watchful eye of an often cumbersome and ill-directed interagency effort. The US, as was mentioned above, is largely unable or unwilling to provide the LAF with capabilities and training that could change the balance of force between it and Hezbollah.

Is it unclear how and how many of these lessons can be integrated in future US efforts in Lebanon or elsewhere to build up and support local allies. What is clear is that the Iranian approach has been successful while the US effort has been defined more by good intentions than measurable geopolitical outcomes.

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The Special Tribunal for Lebanon The Special Tribunal for Lebanon (STL) investigating the assassination of former Prime Minister Rafik Hariri has also become a key arena for US-Iranian competition in Lebanon. Established in 2007 with the expectation that Damascus would be found culpable in the assassination, the US and France hoped that the Tribunal would undermine Syria’s regional role and strengthen the position of Lebanese allies in Beirut.151 On June 30, 2011, the STL issued indictments against four members of Hezbollah in connection to the assassination.152 The prospect that members of Lebanon’s leading Shi’a political force had a potential hand in the killing of Lebanon’s leading Sunni political figure served to further aggravate Sunni-Shi’a tensions that have been growing in intensity since the 2006 Israeli-Hezbollah war.

It is difficult to rely on Lebanese public opinion polling, let alone polling in the broader Levant. Sectarian politics can heavily color results, while ambiguities and obstacles in polling methodology can also serve to complicate an already challenging political landscape. That some 60% of Lebanese were claimed to support the STL in one 2010 poll,153 versus another claiming the exact opposite months later154 is reason enough to be wary of any polling data on the STL – or anything else in Lebanon.

What is clear is that one prevailing pattern continues to hold: most Sunnis support the STL while most Shi’a and many Christians oppose or distrust it.155 The US has been a strong proponent of the STL, going so far as linking future bilateral ties (at least in part) to whether current and future Lebanese government chose to honor financial commitments to the UN-backed court. By contrast, Iran has publicly criticized the STL as a political tool of the US and its allies in an effort to defend Hezbollah.

It is unclear how far the US can go in using the STL as a means of winning ground in the US-Iranian competition in Lebanon. First, the US has pushed ahead with its support for the Tribunal at a time when it has become increasingly difficult to disentangle discrete Lebanese Shi’a interests in post-war Lebanon from the interests of those supporting Hezbollah in the wake of Syria’s 2005 withdrawal. Consequently, the US position on the Tribunal will continue to make it difficult to “win over” Lebanon’s Shi’a – the country’s best organized and, by some estimates, most numerous community.

Another challenge to the STL’s utility in competing with Iran is the intersection of politics and untested judicial processes. Local and regional opponents of the STL have repeatedly criticized it as politicized in favor the US and its regional allies, a message that has hurt the Tribunal’s credibility at home and abroad.156 Meanwhile, the Tribunal’s unique character – predicated on prosecuting one politically motivated assassination in Lebanon and not others – has been another source of contention by critics and supporters alike.157 A third obstacle is that turmoil in Syria and across the Middle East has taken much of the US policy focus away from Lebanon and the STL. This is not to say that the STL is no longer important to US policy in the long-term, and should the al-Asad regime destabilize further in a way that does undermine regional stability, the Tribunal‘s future role could still be important. However, the prospects of civil strife in Syria and security spillover

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effects in Lebanon continue to dominate much of the focus and concern of US policy planners.

Iran’s allies and legal counsel have privately welcomed the opportunity to discredit the Tribunal, either in the media or through future court proceedings.158 However, Iran also faces challenges in how it and its ally Hezbollah handle the STL. Conversely to the US, Iran also cannot “win over” a majority of Lebanon’s Sunni community. Iran’s approach to the STL can be further aggravated by declining perceptions of Iran. Tehran has been losing support in a largely Sunni Arab Middle East during a period of unrest where Iran is increasingly linked to Shi’a unrest in Bahrain and the repression of Sunnis in Syria.

Potential Spillover Effects of Instability in Syria All of the factors discussed earlier are easily exacerbated by regional instability. After a year of political unrest, there were signs in late 2011 that Syrian instability were having negative spillover effects on an already divided Lebanon. In early 2012 it remained far from clear how power and politics would evolve in Syria, let alone whether or not the Asad regime would find the means to survive. That has not stopped pro and anti-Syrian forces from maneuvering in a bid to shape the internal Lebanese balance of power.

The anti-Syrian March 14 forces – pushed to the margins in early 2011 with the collapse of the government of Prime Minister Saad Hariri – have shown increasing willingness to capitalize on Syrian instability. There were indications in 2011 that the predominantly Sunni Future Movement was keen to streamline its foreign policy orientation in line with the broader Sunni Arab regional order centered on Saudi Arabia and Qatar in the expectation that the Asad regime will fall.

Meanwhile, members of pro-Syrian March 8 alliance, led Hezbollah, have largely remained strong supporters of the Asad regime. While there are concerns that the Asad regime might not survive the current cycle of unrest, there are many more that believe that the Alawite-led regime – aided by Iran at the regional level and Russia and China at the international level – will weather the storm and rebuff both internal and external challengers to its autonomy and ability to rule Syria.

While divisions along pro and anti-Syrian as well as pro and anti-Western lines in Lebanon are nothing new, the scale of unrest in Syria poses real questions about the future stability of Lebanon. This in turn could have real consequences for the US and Iran as they weigh how best to respond. The country has also experience a resurgence of Sunni-Alawite violent confrontation in the northern city of Tripoli. Sunnis in northern Lebanon have grown increasingly sympathetic to the cause of predominantly Sunni Syrian opposition forces. Lebanese support ranging from medical aid and housing for Syrian refugees to growing support for Syrian insurgents to use northern Lebanese border towns as opposition staging grounds.

Another critical risk is tied to Hezbollah and continued Sunni-Shi’ite tension in Lebanon.

The assumption that Asad’s rule may be finite has led to growing calls for Hezbollah’s disarmament: a de facto call for shifting the internal political and security balance of power in Lebanon. However, even if the Asad regime were to fall, Hezbollah would still remain nothing short of Lebanon’s Sparta. It is – and is likely to remain – Lebanon’s best organized and most disciplined political force. The logic that Hezbollah is weakened

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because Syria is unstable is largely incorrect and should the group’s opponents seek to confront its armed status unilaterally, there is a clear precedent for Hezbollah to undertake possibly violent preemptive action: in May 2008, Hezbollah responded to the government of Prime Minister Fouad Saniora’s efforts to close down the group’s private communications and fiber-optic network by engaging in running battles in predominantly Sunni West Beirut with Lebanese Sunni fighters. Fighting quickly spread to the Chouf Mountain – the traditional bastion of the Druze community – and to Tripoli in the North.

There is every reason to assume that another May 2008-type event is likely should Hezbollah perceive an imminent threat from its local opponents in Lebanon. Given the Levant has grown far more polarized along Sunni-Shi’ite and pro and anti-Iranian lines, it is also difficult to predict the scale of any internal conflict, the ability or regional states to broker successful de-escalation, or any guarantee that the conflict will remain largely localized and not spread into all-out civil war.

Given local political forces have yet to succeed and win outright in successive struggles to for power in Lebanon, any scenario where either pro or anti-western forces miscalculate is likely to have negative effects on both US and Iranian interests.

Competing in Lebanon at this level, or more realistically trying to contain a Lebanese civil war, is a problematic prospect that neither player can benefit from. As Syria’s crisis lingers, it is far more likely that both the US and Iran will support their allies short of reaching a tipping point that leads to open confrontation. However, whether Lebanese actors can act and behave along these lines is anything but certain.

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Competition Over Israel Israel is particularly important in US-Iranian competition because it plays a key role in shaping every aspect of opinion in the Arab and Muslim worlds.

US Policy Towards Israel and Iran’s Response Ever since the Arab-Israeli conflict of 1967, the US has seen Israel as an ally and Israel has had the support of successive US administrations and national public opinion.

Relations with the Arab world have suffered as a result, but the US has seen the benefits as outweighing the costs. However, the US has also continued to support broader ArabIsraeli peace efforts and the position that Arab states would have more to gain over time from normalization with Israel; a position strengthened by the threat of further Soviet encroachment in the Middle East.159 Israel has grown into a key US ally and regional superpower buttressed by the strongest regional economy and national security and military establishment. The US and Israel also share a number of core foreign policy prerogatives in the Levant, which include limiting Iranian influence in the Levant through Syria, Lebanese Hezbollah and Palestinian Hamas.

While Israel remains a key strategic partner of the US and is important to the broader strategic contest with Iran, America’s ties to Israel remain grounded primarily on moral and ethical rather than strategic grounds. At the best of times, an Israeli government provides some intelligence, some advances in military technology and at times a source of regional stability to Jordan and other Arab states. However, Israeli military intervention in Arab and Islamic affairs has proven over time to be as destabilizing as beneficial with the real risk of Israel unnecessarily making itself a US strategic liability when it should remain an asset.160 This is especially true with regards to US efforts in seeking a lasting peace between Israelis and Palestinians.

Figure VIII. 26 shows broad patterns of US military and economic support over the 1980 to 2011 period. While the US no longer provides Israel with economic support funds, this has been largely offset by a net increase in security assistance dollars and the highest levels of US military aid to the broader Levant.

For its part Iran sees Israel as one of its primary regional hegemonic competitors. It would be difficult for Iran to garner the level of support it appears to enjoy in the Arab world were it not for the growing pessimism that surrounds the Palestinian question. Iran has been successful at turning the lack of momentum on the Palestinian statehood issue to its advantage both regionally and in the context of US-Iranian completion in the Levant.

Iran cannot begin to compete with the US in Israel. Israel and Iran are the region’s main strategic competitors and Iran’s core interest is to undermine the hegemonic aspirations of both the US and Israel. To that end, Iran continues to foil efforts to advance ArabIsraeli peace efforts, and it continues to back Palestinian militant groups, such as Hamas and Islamic Jihad, as a means of harassing Israel and undermining US interests in favorable regional stability.

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Figure VIII.26: Historical Data on U.S. Military and Economic Aid to Israel (In millions of current US dollars)

FMF, FMS & ESF, 1980-2011 FMF

FMS

ESF

4,500.0 4,000.0 3,500.0 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 0.0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010

FMF, ESF & Total, 1980-2011 FMF

ESF

Total

4,500.0 4,000.0 3,500.0 3,000.0 2,500.0 2,000.0 1,500.0 1,000.0 500.0 0.0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Note: “FMF” is Foreign Military Financing. “FMS” is Foreign Military Sales. “ESF” is Economic Support Fund. 2011 FMF figures are requested values.

Source: Adapted by Aram Nerguizian from the Defense Security Cooperation Agency Fiscal Year Series, updated on September 30, 2009, and Congressional Budget Justification for Foreign Operations, various fiscal years.

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The US-Israeli Military & Security Partnership The US has provided Israel with enough military assistance to preserve Israel’s military superiority over its neighbors. Figure VIII.27 offers a snapshot of major US arms deals with Israel over the 2005 to 2011 period, totaling more than $25 billion.

Israel does, however, face a growing asymmetric threat that is further amplified by the continued risk of conflict if not war between Israel and the Lebanese Shi’a movement Hezbollah. Backed by Iran and Syria, the group fought Israel on numerous occasions since its founding in the 1980s.

The most recent round in the ongoing Israeli-Hezbollah conflict took place in 2006. The 33-day war left Israel with an inconclusive military outcome and Hezbollah’s command and control structure largely intact and able to coordinate missile strikes in northern Israel until the end of hostilities. The US granted access to its stockpiles of military equipment in Israel during the 2006 conflict. The stockpiles included missiles, armored vehicles and artillery munitions. Put into practice in the early 1980s as an effort to boost bilateral collaboration, the value of these stockpiles stood at some $800 million in 2010.161 This led to even more of a joint emphasis on boosting Israeli missile defense capabilities as part of the US effort to boost Israel’s deterrence capability and in support of US objectives of denying Iran an effective asymmetric strategy. US-Israeli missile defense cooperation includes co-development of a number of systems designed to counter threats from short-range missiles and rockets used by Hamas and Hezbollah as well as solutions for medium to long-range ballistic systems currently in Syrian and Iranian arsenals.162 This is discussed in greater depth in a separate section on the asymmetric military balance in the Levant.

US military aid to Israel is a critical lever of influence as American policy evolves to meet the challenges of a region in flux. However, given strong congressional support for arms transfers and aid to Israel, successive administrations have faced significant challenges in using the sustainment or the withholding of military aid as an effective means of getting Israeli decision-makers to satisfy regional US policy goals.

There is some risk that US budgetary and fiscal austerity measures could have a negative impact on US foreign assistance programs with possible ramifications for future US aid levels. It is important to bear in mind, however, that US military aid to Israel indirectly supports US defense firms, given that the bulk of FMF funds must be spent in the US. However, increased scrutiny of foreign aid funds is real, and if Washington cannot address economic woes at home, Israel’s $3 billion annual economic and defense aid package may become increasingly difficult to justify – in part given Israel’s recently higher levels of economic growth when compared to the US.163 While Iran is not a direct threat to Israel in the conventional military sense, Iran’s attempts to develop increasingly capable ballistic missile systems and its support for both state and non-state actors in the Levant that are opposed to Israel have deepened the perception in Israel that Iran poses a critical asymmetric threat. The official US position in 2011 is to leave all options on the table, while the impetus remains on building an international consensus behind sanctions and diplomatic pressure, followed by internationally-backed military options should diplomacy fail. Israel, on the other hand,

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sees Iran as an existential threat. A single nuclear, chemical or biological strike on Tel Aviv and/or Haifa would raise major questions about Israel's future existence.

Figure VIII.27: Select U.S. FMS Congressional Notifications for Israel 2005-2011 (In current US dollars)

Date April 29, 2005

July 14, 2006

August 3, 2007

August 24, 2007

Weapon System/ Equipment 100 GBU-28 with equipment and services

JP-8 aviation fuel

JDAM, PAVEWAY II tail kits, MK-83 bombs, MK-84 bombs, GBU-28, BLU-109, components, equipment and services

200 AIM-120C-7 AMRAAM air-to-air missiles with equipment and services

Cost $30 million

$210 million

$465 million

$171 million

August 24, 2007

30 RGM-84 BkII HARPOON SSMs, 500 AIM-9M SIDEWINDER air-to-air missiles with equipment and services

$163 million

October 29, 2007

TOW-IIA, AGM-114 MSLs, PATRIOT GEM+ , HEDP, HE rounds, various munitions with equipment and services

$1.329 billion

June 9, 2008

July 15, 2008

July 15, 2008

July 30, 2008

25 T-6A Texan aircraft, equipment and services

4 Littoral Combat Ships (LCS-I), weapons, systems equipment and services

JP-8 aviation fuel

9 C-130J-30, engines, systems, equipment and services

$190 million

$1.9 billion

$1.3 billion

$1.9 billion

September 9, 2008

1,000 GBU-39, mounting carriages, simulators, trainers, systems, equipment and services

$77 million

September 9, 2008

28,000 M72A& LAAW, 68,000 training rockets, equipment and services

$89 million

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September 9, 2008

3 PATRIOT System Configuration 3 fire unit upgrades, equipment and services

$164 million

September 29, 2008

25 F-35 CTOL JSF, 50 F-35 CTOL, engines, C4/CNI, other systems, equipment with services

$15.2 billion

August 5, 2010

60 million gallons of unleaded gasoline, 284 million gallons of JP-8 aviation jet fuel & 100 million gallons of diesel fuel

$2 billion

Note: “FMS” is Foreign Military Sales. Costs are letter of offer and acceptance (LOA) estimates that are subject to change and re-costing.

Source: Adapted by Anthony H. Cordesman and Aram Nerguizian from DSCA data on 36(b) Congressional arms sales notifications.

Regional Arab Protests &Potential Consequences for Israel It is far too soon to predict the long term consequences of the current period of popular upheaval in the Arab world. What is clear, however, is that any deterioration or instability in countries surrounding Israel could undermine its security– a situation that could benefit Iran and that the Islamic Republic could seek to exploit.

In 2007, the IDF launched its first five year military plan in the wake of the 2006 war with Hezbollah. Known as Teffen 2012, the 2008-2012 plan made a number of assumptions concerning the kinds of threats Israel would face. These included the likelihood of continued conflict with the Palestinians, the potential for war with Syria or Hezbollah and the emergence of a nuclear-capable Iran. Teffen 2012 also took into account the possibility of “dramatic” change in regimes in countries Israel considered moderate, including Egypt and Jordan. This “ring of fire” scenario was viewed as “worst case” when it emerged in 2007.164 Some four years later: •

Egypt has seen the ouster of President Mubarak, mounting instability in the Sinai, continued insecurity along the Egypt-Israel border, the potential rise of Sunni and Salafi political forces in Cairo and the real risk that bilateral relations with Egypt could deteriorate further. Jordan has seen unprecedented protests with unheard-of criticism of the Monarchy from across the spectrum of the Jordanian political opposition.

•

Syria, Israel’s long-time regional opponent, saw instability along its border with the Golan Heights for the first time since the 1973 Arab-Israeli conflict, along with the strongest opposition so far to Bashar Al-Asad’s rule, with thousands dead and no clear end-state in sight for Damascus.

•

The Palestinians, thanks to Egyptian mediation, have taken steps towards Fatah-Hamas reconciliation, and frustration with a beleaguered peace process have led to a Palestinian bid for

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UN recognition in late September 2011. Turkey, a long time non-Arab ally, is now estranged from Israel, in part as a means of bolstering its own credibility in a changing Sunni Arab world.

•

Lebanon remains largely stable despite the change in government in early 2011, but tensions have mounted thanks to the hot-button issue of potential Israeli-Lebanese energy reserves in the Mediterranean.

It is difficult for Israel to examine these developments and not see growing uncertainty and risk. From one perspective, developments in the region benefit Iran at Israel’s and the US’s expense. Long-time regional allies are gone and long-nurtured strategic partnerships are now in a state of flux. Iran could add to this tenuous scenario by fomenting instability – something it already seems to be doing through fringe Palestinian militant groups in Gaza.

From another point of view, recent events may not be benefiting Israel and the US in the short-term, however Iran could be a significant loser regardless. The potential loss of Syria could severely undercut Iran’s ability to project its foreign policy clout to the Levant in support of its regional allies. Another challenge could be the emergence of a far more authentic Egypt in tune with many of the regional aspirations of the Arab people.

As the most populous Sunni Arab state, Egypt could severely undermine Shi’a Iran’s role in inter-Arab affairs. However, whether this can and will happen is uncertain, as is whether it can be done without sacrificing peace with Israel on the altar of Arab public opinion.

Ironically, these developments give both Israel and the Palestinians even stronger incentives to reach a comprehensive peace deal. A final Israeli-Palestinian peace deal could serve to defuse much of the regional discontent with Israel while also eliminating Iran’s bully pulpit as a regional confrontation state. By the same token, there is no worse time for peace between Israel and the Palestinians. Both Palestinian and Israeli political dynamics are shifting increasingly to the right with decreasing room to maneuver. Israelis also fear suing for peace at a time when doing might be perceived as a sign of fear and insecurity.

While some Israeli leaders have tried to show some optimism amid regional change – Israeli Defense Minister Ehud Barak called the potential departure of Syria’s Asad a “blessing” for the region and a “blow to the Iran-Hezbollah axis”165 – there are far more that remain uncertain and wary of what change will entail; some have gone so far as to call recent events an “Arab nightmare” rather than an “Arab Spring.”

The US will continue to support Israel during this period of regional change and will remain a key guarantor of Israeli security. The US also has an interest to promote its own positive role as regional states struggle with their transitions. Failing to do so could only harm the US to the benefit of its regional opponents, including Iran. The Palestinians’ bid at the UN in late September may not show it, and Israelis may doubt it, but the US has never needed a diplomatic success on the Palestinian-Israeli track as it does today.

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Competition Over the West Bank & Gaza Strip The US and Iran also compete for influence over the Palestinians in both the West Bank and Gaza. US policy towards the West Bank and the Gaza Strip focused on the largely geographic factional split between the Fatah-led Palestinian Authority (PA) in the West Bank and Hamas in Gaza.

In the wake of the 2007 Hamas takeover of the Gaza Strip, the US has continued to support President Mahmoud Abbas and his “caretaker” government in Ramallah. Days after Abbas tasked Salam Fayyad, an independent technocrat, with organizing the interim government as Prime Minister, the US lifted economic and political embargos on the PA. The Bush Administration and the US Congress were hopeful that boosting aid levels would foster economic and security gains that would then in turn be conducive to peaceful coexistence between a future Palestinian state and Israel.166

US Security Assistance to the Palestinians US security assistance is a key tool in moving towards an Arab-Israel peace and countering Iran, but one that has only mixed success. US aid to the Palestinian Authority is meant to train and equip PA civil security forces in the West Bank loyal to President Abbas so that they could counter Hamas, Palestinian Islamic Jihad and other militant groups in order to promote the rule of law in anticipation of a future Palestinian state. As was previously mentioned, significant assistance has come through the International Narcotics Control and Law Enforcement (INCLE) account, through which some $545.4 million was appropriated since 2007 for programs in the West Bank.167 •

Figure VIII.28 shows overall US bilateral assistance to the Palestinian Authority over the FY2005 to FY2012 period, including INCLE funding. Figure VIII. 28 also shows a breakdown of planned spending for FY2012. Both tables show that while security funding has increased considerably since 2007, Economic Support Funds (ESF) continue to constitute the bulk of direct US assistance to the PA.

•

Figure VIII.29 and Figure VIII.30 show the structures of both the Fatah-led PA’s security forces and those of the Hamas-led government in the Gaza Strip. While forces in the West Bank are larger and better funded thanks to US and EU aid funds, Hamas’ security forces were reported to be both more professional and more capable on the ground. Furthermore, this was reported in spite of the absence of any substantial external support to Hamas’ security forces. 168

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Figure VIII.28: Actual & Proposed U.S. Bilateral Assistance to the Palestinians (In current US$ millions)

Levels of Aid, FY2005-2012 Account

FY2005

FY2006

FY2007

FY2008

FY2009

FY2010

FY2011

FY2012*

ESF

224.4

148.5

50.0

389.5

776.0

400.4

400.4

400.4

6.0

4.4

19.488

-

20.715

-

-

-

INCLE

-

-

0

25.0

184.0

100.0

100.0

113.0

Total

230.4

153.243

69.488

414.5

980.715

502.9

550.4

513.4

P.L. 480 Title II (Food Aid)

Proposed Spending Plan for FY2012 Amount

Purpose

Economic Support Fund ($400.4 million total) $200 million

$200.4 million

Direct budgetary assistance to the Palestinian Authority in the West Bank

Assistance for the West Bank and Gaza through USAID    

$20.0 million – governance, rule of law, civil society $79.7 million – health, education, social services $53.2 million – economic development $47.5 million – humanitarian assistance

International Narcotics Control and Law Enforcement (INCLE) ($113 million total) $77 million

Training, non-lethal equipment, and garrisoning assistance to PA security forces in the West Bank, supporting efforts by the US Security Coordinator

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Assistance for PA Ministry of Interior and for the justice sector (prosecutors and criminal investigators) to improve performance, efficiency, and inter-institutional cooperation, rule-of-law infrastructure, including courthouses, police stations and prisons

Note: All amounts are approximate; “bilateral assistance” does not include U.S. contributions to UNRWA or other international organizations from the Migration and Refugee Assistance (MRA or Emergency Refugee and Migration Assistance (ERMA) accounts. Amounts for FY2012 have been requested but not yet appropriated.

Source: Adapted by Aram Nerguizian from U.S. State Department and USAID data, Congressional Budget Justification for Foreign Operations, various fiscal years, Jim Zanotti, “U.S. Foreign Aid to the Palestinians,” CRS Report for Congress, RS22967, May 31, 2011.

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Figure VIII.29: West Bank Palestinian Security Forces Organizational Chart in 2011

* The PA President is designated Commander-in-Chief under the revised Basic Law of 2003 with authority over all PASF branches. Under the Law for the Palestinian Security Services of 2005 he delegates responsibility for internal security to the Council of Ministers

**The two agencies may have additional informers.

Source: Yezid Sayigh, “Policing the People, Building the State: Authoritarian Transformation in the West Bank and Gaza,� The Carnegie Papers, February 2011, p. 6.

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Figure VIII.30: Gaza Palestinian Security Forces Organizational Chart in 2011

***The agency may have additional informers.

Source: Yezid Sayigh, “Policing the People, Building the State: Authoritarian Transformation in the West Bank and Gaza,� The Carnegie Papers, February 2011, p. 6.

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Implications of Potential Fatah-Hamas Reconciliation Iran is having problems of its own in dealing with the Palestinians, although not necessarily in ways that will benefit the US. On April 27, 2011, Fatah and Hamas announced a surprise unification deal. Built upon secret talks mediated by Egypt’s new interim government, representatives from both sides were optimistic that this latest round of negotiations would succeed where others failed. The sudden move came on the heels of changes in the regional balance of power and changes to Palestinian strategies meant to secure statehood.

Popular uprisings in Egypt and Syria have meant that the two Palestinian groups needed cooperate in order to compensate the weakening of both players’ relative bargaining power.

Egypt, newly reconciled with its own Islamists, also was in a far better position to bring Hamas back to talks with Fatah. Meanwhile, Syria continued to face the real risk that Bashar Al-Asad’s regime could collapse, thus threatening to downgrade much needed support for Hamas. By moving quickly on the path to reconciliation and not waiting for events to unfold in Syria, Hamas appeared to have secured its place at the negotiating table with Fatah as an equal. Meanwhile, Fatah, reeling from failed peace talks between the Fatah-led PA and Israel, sought to secure recognition of Palestinian statehood at the UN General Assembly in September of 2011.169 Washington had hoped that it could broker a deal between the Fatah-Led PA and Israel, and was arguably disappointed at the collapse of talks. There is also a great deal of apprehension at the prospect of “losing” Fatah to a unity government with Hamas. The latter is considered a terrorist organization by the US and other Western states, and a real risk exists that a Palestinian unity government that included Hamas risked losing considerable foreign assistance from the West.170 A great deal of uncertainty remains. Fatah and Hamas leaders President Mahmoud Abbas and Khaled Mishal signed the reconciliation deal in Cairo on May 4, 2011.171 By July there were already signs that the Hamas-Fatah deal was coming apart at the seams in no small part thanks to Fatah and Hamas intelligence and security cadres opposed to the move and lack of unity over who should hold the post of interim prime minister. To add to an already difficult Palestinian political environment, Israel seized Palestinian tax revenues while the US threatened to end financial support for the PA.172 While the US has reason to be concerned about any Fatah-Hamas reconciliation effort, it is important to bear in mind the changes taking place in Iran’s position in interPalestinian dynamics. While initially supportive of the Hamas-Fatah deal, Iran has grown disenchanted with the agreement as it failed to produce much sought after Iranian rapprochement with Egypt.173 Continued instability in Syria may have also contributed to increased apprehension on the part of Tehran in a bid to restore the core pieces of its “resistance axis.”

Iran & The Palestinian Islamist Wildcard Iran has continued to try and bolster its position and that of Syria. One tool Iran has had at its disposal was the mobilization of Palestinian Islamist groups in support of Syria.

However, Hamas has so far refused to provide its backing behind the regime.

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While Hezbollah has backed the Asad regime, Hamas has not. One possible explanation for this policy divergence is Sunni Hamas’s desire not to alienate the mainly Sunni Syrian opposition, given the militant group’s own view that the Asad regime is not likely to survive the latest round of instability. A strong pro-Asad position would likely weaken Hamas’s position in the mainly Sunni Arab Middle East. As such the group may not be able to afford overtly backing Syria’s crackdown. Shi’a Hezbollah, on the other hand has other calculations to take into account, including its own tenuous position in Lebanon’s deeply divided sectarian landscape, and its need to balance against domestic pressures by consolidating its relationship with Tehran.

Iran has reacted by turning to other Palestinian factions. Iran has been frustrated by Hamas’ overtures to Fatah and weary of its refusal to pledge its support for Syrian president Bashar Al-Asad. Jane’s reported that in early August 2011, Iran directed proIranian Palestinian Islamic Jihad (PIJ) to launch rocket attacks on Israel as part of a broader pressure tactic against Hamas. Jane’s added that Iran would not direct PIJ to halt firing missiles until Hamas declares its support for Asad, potentially provoking a strong Israeli military response against the Gaza Strip in the meantime.174 On August 9, 2011, Jane’s reported that the IDF had authorized the deployment of an Iron Dome anti-rocket battery in response to PIJ rocket fire from the Gaza Strip.175 Later on August 18, 2011, Palestinian militants fired two Grad rockets at Ashqelon in Israel’s Southern district. The attack resulted in no casualties with one of the rockets landing in an open area while the second was intercepted by the Iron Dome system.176 The Popular Resistance Committee (PRC) took credit, as well as acknowledging a separate roadside bombing and shootout the same day near the Jordanian border. The Israeli military retaliated with airstrikes against both PRC and Hamas offices in the strip. Hamas vehemently denied any involvement in the attacks.177 There is some circumstantial evidence that indicated the latest round of Palestinian violence was driven by Iranian efforts to balance external threats against its core regional ally Syria. It may also represent an Iranian effort to coax Hamas into a pro-Asad position – a move the group is loath to pursue. Pressured to action by Iran and increasingly unsettled in Syria, Hamas was reported to be looking to move its external political bureau from Damascus to another regional capital. However, the initial response to Hamas was lukewarm at best with no major countries offering to host the group.178 In January 2012, Khaled Meshal and other top Hamas officials decided to leave their headquarters in Damascus.179 While the report cited security concerns in the wake of Syria’s protracted cycle of popular unrest, it is more likely that this reflects a strategic shift on the part of the Islamist group. This could be driven by the reality that Syria’s crisis is likely to be protracted and Hamas’s desire to recalibrate its position to allow it to continue to garner the support of the region’s Sunni Arab majority.

While it is still uncertain where Hamas will relocate its leadership, it is clear that the group has espoused the region’s popular protests, if only at the rhetorical level. In a break with years of ties with the Asad regime, Hamas’s Prime Minister in Gaza, Ismail Haniya, declared the group’s support for protesters aspirations for political change in Syria in late February 2012.180 That the statement was issued from the Al Azhar mosque in Cairo

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Egypt only was at least equally symbolic; Egypt under President Hosni Mubarak was hostile to Hamas, an offshoot of the then-banned Muslim Brotherhood.

The Palestinian Islamist wildcard has proven crucial to projecting Iranian influence in the Levant as a means of impacting the Arab-Israeli conflict. Relying on groups like Hamas was also an important means of shoring up much needed Sunni support for Iran in the region. A very public break between Syria and Hamas is a setback for Iran, but the Islamic Republic continues to cultivate ties with Palestinian Islamist groups. So far, Tehran has also rejected a deeper isolation of Hamas for siding against the Asad regime, going so far as to invite Prime Minister Haniya to Tehran in early February 2012 for consultations.181 There is little the US can do to capitalize on rifts between Syria and Hamas. US engagement with the Egyptian Muslim Brotherhood was relatively; in contrast, it will prove far more difficult for the US to build brides with an Islamist group the US government considers to be a terrorist organization. Meanwhile, given Iran’s unwavering support for the minority-led Asad regime in Syria, it is unclear how and for how long Iran can sustain its policy of supporting such groups. What is certain is that unlike the US, the Islamic Republic has shown it is flexible enough to at least try and recalibrate to shifts on the Palestinian political scene.

The US, Iran & the Palestinian bid for Statehood On September 23, 2011, Palestinian President Mahmoud Abbas formally asked the United Nations to recognize a Palestinian State.182 While the move defied US pressure to abandon the effort in favor of resuming negotiations, it did much to re-energize Mahmoud Abbas’s waning presidency, bolstering his popularity and undermining the perception that the Palestinian leader was weak.183 The Palestinian move presented a significant challenge to US policy at a time of increasing popular upheaval across the Arab world. While the Obama Administration supported the establishment of a Palestinian state based on the 1967 lines with mutually agreed land swaps,184 the US nevertheless declared its opposition to Palestinian efforts to secure statehood through the UN Security Council.185 While the position is part and parcel of the US’s strong bilateral ties to Israel, it does go against the tone of regional democratic aspirations and US efforts to play a leading role in support of positive transformation across the Middle East.

While the nuances of US policy both inform and limit Washington’s approach on the Palestinian push for statehood, Iran’s position on the bid is no less challenging. On October 1, 2011, Iran’s supreme leader, Ayatollah Ali Khamenei, rejected the Palestinians’ bid for statehood at the UN, commenting that a deal that accepted Israel would threaten the security of the Middle East and leave a “cancerous tumor” unchecked in the region.186 Similar to the US position, the Iranian stance on the Palestinians’ UN bid is also fraught with danger. Through its bid to support Palestinian factions opposed to normalization, as well as its efforts to support regional allies Syria and Hezbollah, Iran risks further degrading its shrinking popularity in a mainly Sunni Arab Middle East.

The Palestinian UN bid is important to US-Iranian competition in part given that it remains unclear what the future holds and which player will seize the initiative first. It is

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uncertain as to whether the US can maneuver Israel and the Palestinians to a political position that can allow the US to decisively endorse a move to Palestinian statehood. It also remains to be seen how effectively Iran can move to foil US and other states’ peace efforts at a time when Iran faces a more cohesive Gulf Arab position and continued instability in Syria.

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Competition Over Egypt The 1979 Islamic Revolution in Iran cost the US one of its core regional allies but it was also in 1979 that Egypt and Israel signed a US-brokered peace deal ending years of conflict. In the three decades since then, Egypt has grown into one of America’s core regional allies along with Israel, Jordan, Saudi Arabia and Turkey.

Egypt is the Arab world’s most populist nation and one of the Middle East’s most important regional actors. While the days of Egypt as the epicenter of Pan-Arabism have long since passed, the country continued to envision itself as the champion of Arab nationalism. 187 Egypt and Iran have also been rivals throughout much of the 20th century.

Over the last 30 years, the Egyptian-Iranian regional rivalry persisted and increased markedly in the wake of the US invasion of Iraq and the expansion of Iranian and Shi’a influence in the Middle East. Today, Iran continues to be viewed largely as a Persian Shi’a regional foil.188 Some Egyptians felt that Egypt’s foreign policy re-alignment in 1979, came at the expense of the country’s leadership in both regional and Arab politics.189 Nevertheless, Egypt under Mubarak remained deeply concerned with Iranian support for Palestinian militant and Islamist groups such as Hamas, clandestine operations in Egypt by Iranianbacked groups such as Hezbollah, Iran’s role in Iraq and the ongoing development of Tehran’s nuclear program.

Egypt under Mubarak also seemed to be a source of stability, predictability and relative moderation as far as US interests were concerned. However, there are now deep questions about what role a post-Mubarak Egypt will play both in the context of USIranian strategic competition, and more broadly in the realm of inter-Arab and regional politics.

US Policy Towards Egypt US policy towards Egypt over the past three decades has been predicated upon maintaining regional stability, promoting strong bilateral relations, deepening military cooperation and promoting strong bilateral adherence to the 1979 Egyptian-Israeli peace treaty. Egypt is traditionally considered by the US as a moderating influence in the Middle East with regards to Arab-Israeli peace efforts and supporting US efforts against Iranian hegemonic interests.

However, strong support for the Mubarak government was mixed with repeated calls for Egypt to take increasing steps towards reform. US policymakers also found it increasingly difficult to maintain the US-Egyptian strategic partnership while simultaneously promoting human rights and representative government. These tensions were further aggravated by growing calls by Egyptian opposition figures to address issues of state corruption, economic inequality and the question of leadership succession. The Mubarak government resisted all US calls for reform, dismissing them as American intervention in Egyptian internal affairs.

The US relied heavily on Egypt to mediate between warring Palestinian factions, chiefly Fatah and Hamas. While Egypt repeatedly delivered on cease-fire arrangements, the Mubarak regime’s contentious relations with Islamist movements – such as the Egyptian

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Muslim Brotherhood or Palestinian Hamas – meant that there were inherent limits to how far Egyptian good offices could go when it came to promoting Palestinian reconciliation and a resumption of Palestinian-Israeli peace talks.

What is not clear is whether the US can achieve the same security relations with a new Egypt. On December 29, 2011, Egyptian police raided the offices of US-based international non-government organizations working on democratic reforms, including the International Republican Institute (IRI) and the National Democratic Institute (NDI) under the auspices of a criminal investigation into foreign funding of NGOs in Egypt.190 While Egyptian officials signaled on February 29, 2012 that it would lift a travel ban barring seven Americans affiliated with US democracy groups, the experience served to further sour US-Egyptian relations, raising the prospect that US economic and military aid to Egypt could come under review.191 Regardless of what is sure to be years of uncertainty in a difficult transition in Egypt, the US will certainly seek to actively promote and reinforce its past strategic partnership with Cairo, support military aid funding and seek to strengthen Egyptian-Israeli peace. The US must also reconsider civil and economic aid programs that have been diminishing over time, both in quantity and real world impact on the ground as the US faces serious economic problems of its own.

Iran’s Response While the US still counts Egypt as a regional ally in its strategic contest with Iran, the Islamic Republic perceives Egypt as both an obstacle to its regional ambitions and as a possible future opportunity – even if this means an Egypt that distances itself from the US without growing closer to Iran. Iran’s approach to relations with Egypt has always been difficult in the wake of the Islamic Revolution and the Camp David Peace Accords.

The two countries severed diplomatic relations in 1980 in no small part thanks to Iran’s opposition to Egypt’s peace with Israel, but also as a result of Cairo’s decision to host the deposed Shah and support for Iraq during the Iran-Iraq war from 1980 to 1988. This hostility, though varying in scope and scale, would carry over to the post-Cold War era and the first decade of the twentieth century.

There was a bilateral attempt to thaw stalled Egyptian-Iranian relations between 2007 and 2008, Egypt had hoped such an initiative would illicit attention in Washington and bolster US support for Cairo. Iran in turn hoped that its push to smooth relations would allow it to bolster greater support among Sunni Arab states and downplay fears of Iranian regional ambitions. The effort ultimately failed with neither player willing to take meaningful steps to reconcile their decades-old differences.192 In 2009, relations between Iran and Egypt deteriorated further as Egypt sought to check Iran’s increasing role in the region and what Egypt considered Iranian meddling in Arab affairs. In April 2009, Egyptian authorities accused the Lebanese militant group Hezbollah of operating a 49-member military cell in the country. Egyptian officials reported at the time that the cell was monitoring sea traffic at the Suez Canal in addition to planning attacks against Sinai tourist resorts, especially those favored by Israelis. The Mubarak government also accused the militant group of smuggling weapons to Hamas along the Egypt-Gaza border and of proselytizing Shi’a Islam and ideology in the country. The Egyptian police arrested 25 suspects and charged 13 of them with espionage

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and illegals arms possession. Hezbollah’s Secretary General Sayyed Hassan Nassrallah later acknowledged that the group had personnel in Egypt, reportedly conducting “reconnaissance” for the group.193 It is unclear whether the political upheavals in Egypt will change this situation in substance, although they may change it in tone. There have always been limits to how much influence Iran could garner in Egypt. Beyond geographic distance, Egypt is ultimately a Sunni power in the Middle East and Shi’a Iran’s political-religious ideology has limited clout or credibility. Furthermore, Iran has little to offer Egypt, either as a political model, or as an example of socio-economic success in the Middle East. Even in a post-Mubarak Egypt, it is highly unlikely that Iran can influence the course of Egyptian foreign policy. Most cases where Iranian and Egyptian policies have the potential to converge – for example on supporting or building up ties with Hamas or taking stronger stands in favor of the Palestinians in general – are more a reflection of foreign policy assertiveness in Cairo meant to cater to Egyptian public opinion, and less an indicator of Tehran’s influence.

Seeking to Preserve the Uncertain US-Egyptian Military & Security Partnership Egypt and Iran do not have military ties or security cooperation, given the antagonistic dynamic between the two countries. In contrast, military aid is a pillar of US policy towards Egypt and levels of FMF worth some $1.3 billion a year are essential to ensuring that Egypt remains firmly planted within the US and pro-Western camp in the Middle East. FMF aid to Egypt is generally divided along three lines: acquisition, upgrades to existing systems and follow-on support/maintenance contracts.

In recent years, US military aid was also intended to foster a stronger Egyptian response to Hamas’ and other Palestinian militant groups’ smuggling efforts in Sinai and along the Egypt-Israel border. In late 2007, the Bush Administration put aside $23 million of Egypt’s FY2009 FMF toward procuring advanced detection equipment including sensors, surveillance gear and the means to identify and process seismic-acoustic data.194 The US Congress also provided Egypt with $50 million in Nonproliferation, Antiterrorism, Demining, and Related Programs (NADR) funds to help better secure the Rafah border crossing.

While some in the US and abroad have questioned the resilience of the US-Egyptian military partnership in a post-Mubarak Egypt (especially in the wake of Egyptian authorities’ targeting US democracy-focused NGOs), it is likely that it would have been far more difficult for the US to gain insight into events as they unfolded were it not for the US’s ability to reach out to the Egyptian military at multiple levels.

The use of both formal and informal channels of communications proved crucial as the US sought to recalibrate its policy to changing realities on the ground. In a sign that the US-Egyptian military partnership has yet to be affected by the exit of Mubarak, the protests or US concerns over Islamists in Egyptian politics, the US DSCA notified Congress on July 5, 2011 of a potential sale of military equipment worth $1.3 billion to Egypt. The sale supports M1A1 Abrams co-production: a pillar of the US-Egyptian military partnership.195

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Managing the Impact of Instability in Egypt Popular protests in Egypt starting in late January, 2011 caught both the US government and the US public policy community by surprise. By February 11, 2011, Egypt’s longtime leader, Hosni Mubarak, resigned from his office as President of Egypt. A Supreme Council of the Egyptian Armed Forces (SCAF) – a 20-member council of senior officers – has stepped in to fill the political and leadership vacuum left by Mubarak’s exit. The SCAF now rules largely by decree in consultation with Egypt dominant political forces, and the Council has indicated that it has no intention of retaining power indefinitely and that it will take the steps Egyptians expect to carry out elections.196 Instability in Egypt, the Arab world’s most populous nation and an integral component of existing Arab-Israeli peace efforts – has already had deeply destabilizing effects across the region. It could also undermine Washington’s regional standing and access in the future, while presenting Iran with further opportunities to consolidate its own interests in the context of US-Iranian strategic competition. For these reasons as well as many others, the focusing of US policy on managing Egypt’s transition is central to the future of US and Iranian competition as well as central to US regional policy.

The US Response Between February and May of 2011, the core of the US policy impetus in managing change in Egypt was concerned with bolstering ties to leading and emerging postMubarak political forces in Egypt. This has included working closely with the SCAF to press the US position that the military is the only force with the resources and structure to safeguard a political and security space conducive to emerging political parties. On the other hand, the US is also keen to eventually see the Egyptian military relinquish political power.197 The Egyptian military was crucial to eliminating or managing much of the uncertainty of a post-Mubarak Egyptian landscape, and it is likely that currently and future administrations will continue to seek close ties with the military. It is also likely, however, that the US will try to foster greater civilian control over the military, should the opportunity present itself to do so.

There are other security challenges to US and Egyptian interests. Egyptian gas pipelines have been repeatedly attacked since the start of protests, undermining energy exports to Jordan and Israel. Security in the Sinai has eroded considerably since the start of protests, with Sinai Bedouins and Palestinian militants from Gaza emboldened by the Egyptian military’s focus on security elsewhere in the country.

On August 18, 2011, while chasing suspected members of the Palestinian Popular Resistance Committee (PRC) militants into the Sinai, Israeli security forces killed five Egyptian police officers.198 The incident inflamed Egyptian public opinion, which remains both strongly anti-Israel and hostile to what some saw as a fruitless exercise under Mubarak of over-accommodating Israel at the Palestinians’ expense. On September 9, 2011, thousands of Egyptian protesters besieged the Israeli embassy in Cairo, prompting the airlifting of the Israeli ambassador back to Israel.199 The incident was a test of the Egyptian-Israeli peace deal that both countries continue to support. It also

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presented a challenge to the US policy by association, and presented the real risk that further instability in Egypt-Israel relations could not be ruled out.

The Iranian Response While the US response to change in Egypt was proactive and marked by a sense of urgency, Iran’s response was both less direct and less tangible. As mass protests in Egypt approached critical mass in early 2011, Iran was presented with the prospect that the regional balance of power may tip in its favor.

The destabilization of Egypt’s position as a pillar of US policy in the Middle East came at a time when Turkish-Israeli relations appeared to reach a new low and the US’s key allies in the Southern Gulf were pre-occupied with protests in Bahrain, the need to ensure stability in Oman and to contain spillover effects of instability from Yemen. Iran worked hard in the early days of the Egyptian protest to portray the uprising as a repeat of its own 1979 Islamic Revolution,200 with official Iranian Foreign Ministry statements citing Egypt as evidence of an “Islamic renaissance” in the Middle East.201 However, Iranian government support for the Egyptian opposition had its limits and drawbacks. In February 2011, Iran’s State Prosecutor, Gholam Hossien Mohseni Ejehi, warned the Iranian opposition not to stage an independent rally in support of the Egyptian protests against the Mubarak regime. He added that those who wanted to show solidarity for Egyptian uprising should take part in government-led protests instead.202 It is very difficult – and potentially reckless from a regime security standpoint – for a country that crushes dissent and political opposition at home and supports a crackdown in Syria to actively promote political change abroad.

Moving Towards an Unpredictable Future Whatever happens in Egypt, it will remain critical to US-Iranian strategic competition. A more politically representative Egypt translates into increased national authenticity at home and greater credibility in inter-Arab politics. The first indicator of this is Egypt’s ability to bring Hamas and Fatah together in mid-2011. The move angered some in Washington; however it remains significant that a more authentic Egyptian role in the region, coupled with continued strong bilateral ties with the US, is to the detriment of Iran. However, an Egypt where radical political forces play a more prominent role – Islamist, Salafist or otherwise – could be detrimental to players on either side of the USIranian contest.

Whether Egypt emerges from its difficult transition period with a viable and legitimate political system, a stable socio-economic landscape, and continued positive relations with the US and Israel remains uncertain. While Iran cannot interfere in Egypt without further galvanizing already growing anti-Iranian Arab sentiment, Egypt ultimately remains the West’s to lose – a risk that is compounded by a period of increasing austerity in US public finances with potential ramifications for how the US can support allies such as Egypt.

While the US’s response to stabilizing Egypt economically has been somewhat limited, US allies in the Southern Gulf, as well as key international financial institutions have and are likely to continue playing a crucial role in cushioning the impact of instability in Egypt’s transition. In June 2011, the IMF indicated that it would provide Egypt with a $3

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billion 12-month standby arrangement. Meanwhile, the World Bank pledged up to $1 billion a year in aid in 2012 and 2013 if the government in Cairo can meet key economic reform targets. The Bank was also reported to have provided $2.5 billion in development loans. Saudi Arabia deposited $1 billion in the Egyptian Central Bank, going on pledge a further $ 3 billion in future funding. Qatar for its part promised to inject $5-10 billion into the Egyptian economy. Lastly, the G8 countries assured Egypt that it would be provided with $5 billion in loans through 2013.203 There is currently no Iranian aid equivalent to US, Western and Southern Gulf aid to Egypt.

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Competition Over Jordan The Hashemite Kingdom of Jordan shares borders with Iraq, Israel, the occupied Palestinian Territories, Saudi Arabia, and Syria. This alone ensures that the country remains critical to regional stability. It also informs, at least in part, where the Kingdom fits in the broader context of US-Iranian strategic competition.

Jordan’s choices in engaging the US, Iran and other countries are driven largely by domestic factors and the pressures they pose to national decision-making.204 One of the most critical ones is Jordan’s plural society and the societal divisions therein. In the wake of the 1948 and 1967 Arab-Israeli wars, the Hashemite Kingdom absorbed hundreds of thousands of Palestinians. What had been a country dominated by East Bank Jordanians205 soon saw the emergence of a Palestinian majority.206 Economics have been another core determinant of Jordanian regional behavior: the country’s limited natural resources and status as a land-locked state in a troubled region have made the Kingdom’s national security dependent upon good ties with neighboring states. This has led to some difficult choices for Jordan over time, including with Egypt under Nasr, Syria during the 1970s and Saddam Hussein’s Iraq during the 1980s and 1990s.207 These domestic pressures have remained persistent sources of instability. Countries such as Egypt and Syria have, in the past, sought to exploit these cleavages to shape events in Jordan, and there is no guarantee that these divisions will not be a source of instability in the future.

In response, the Kingdom espoused foreign policy options that did not antagonize Palestinian public opinion. Meanwhile, East Bankers received patronage from the Monarchy in exchange for their loyalty and continue to be over-represented within state and security institutions as a reliable source of stability and a counterweight to potential domestic pressures. International and regional alliances, especially with the US and the Gulf states, serve as a check on regional sources of instability, most recently from continued instability in Iraq, the impact of Arab protests in the broader region, and the continued strategic contest between the US and its allies on the one hand and Iran and its allies on the other.208

US Policy Towards Jordan Jordan has been a key regional ally of the US for decades, and successive US administrations have had an interest in maintaining Jordan’s stability as a means of limiting any negative spillover effects of Iranian influence in Iraq, Lebanon, Syria and the Palestinian Territories. This includes supporting Jordan’s economy through trade and economic support, building up the Jordanian military – especially its growing SOF capabilities and fostering strong ties between the US and the Kingdom on regional counterterrorism efforts. US political, economic, and military support are also linked to Jordan’s adherence to peace with Israel despite continued popular resentment of Israel at home.209 The US-Jordanian partnership was further strengthened after the terror attacks of September 11, 2001. The Kingdom backed Coalition efforts in Afghanistan, providing

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troops to participate in peacekeeping operations. Jordan also played a key role in helping the US foil Al-Qa’eda and affiliated groups’ efforts to destabilize the region, with reports that Jordanian intelligence even uncovered plots to assassinate members of the Jordanian royal family.210 In response to Jordan’s continued support, the US Congress doubled military and economic assistance levels to the Kingdom and approved the creation of the US-Jordanian Free Trade Agreement – the first of its kind between the US and an Arab state.211 Jordan’s strong support of the US has not left it immune to continued pressure from the aftermath of the Iraq invasion and the Arab-Israeli conflict. High numbers of Iraqi refugees in Jordan are a byproduct of instability in Iraq and fears of a unilateral Israeli mass expulsion of Palestinians from the West Bank across the Jordan River continue to be a source of great concern for Jordanian officials.

Iran’s Response Jordan and Iran maintained friendly relations under the rule of the Shah. However, with the advent of the Islamic Revolution in Iran, bilateral ties quickly deteriorated with an official severing of ties between the two countries in 1981. With a predominantly Sunni population, Jordan has been hostile to the spread of Iranian revolutionary politics and Shi’a influence in the Middle East. King Hussein supported Saddam Hussein during the 1980-1989 Iran-Iraq War, providing economic and military support in addition to granting Baghdad access to the strategic Red Sea port of Aqaba.212 After the war, the two countries resumed diplomatic ties in 1991, but there has been only limited improvement in bilateral ties. Iran’s influence was on the ascendant in the wake of the 2003 invasion of Iraq, and Jordan became a key Sunni ally of US efforts to confront or contain Iranian hegemonic interests. It was Jordan’s King Abdullah II that warned against dangers of a “Shi’a Crescent” in 2004, further staining bilateral relations.

In 2006, Jordan’s speaker of parliament, Abdel Hadi Majali, accused Iran of undermining Jordanian security and seeking to destabilize the Kingdom, in part through smuggling and stockpiling of weapons by the Palestinian militant group Hamas. Reports went on to add that some 20 Hamas members were rounded up amid concerns the group was planning to target Jordanian officials and key installations.213

The US-Jordanian Military & Security Partnership The US has been providing military aid to Jordan since 1957. Supporting the Jordanian military – the main bulwark of support of the Monarchy – enables the US to enhance the Kingdom’s stability. While reducing instability and gaining influence with the regime have traditionally informed US policy towards Jordan, military aid has taken on increased urgency, given Jordan’s increased counter-terrorism partnership with the US, its role as a key ally in limiting and countering the spread of Iranian influence in the Levant and, more recently, the need to minimize the impact of recent popular unrest.

US assistance to Jordan has been largely stable since the country signed peace with Israel in 1994 and has increased in the wake of continued US-Jordanian counter-terrorism cooperation. In September, 2008, the US and Jordan agreed on a memorandum of understanding that would see the Kingdom receive annual aid worth $660 million over

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the FY2010-FY2014 period. Of this annual amount, approximately $300 million is allocated to FMF and security assistance.214 This boost in the US “peace dividend” will be essential to Jordan’s national recapitalization efforts, with FMF worth $385 million for FY2009 and $350 million for FY2010 representing the spending equivalent of 16.5% and 13.8% respectively of the Jordanian defense budget. US FMF is expected to remain focused on upgrading Jordan’s air force, supporting purchases and upgrades to US-made F-16 fighter aircraft, and to allow Jordan to acquire Blackhawk helicopters in support of border management and counter-terrorism operations.215 Beyond conventional security assistance, Jordan has been instrumental to US efforts to train Palestinian security forces loyal to Fatah. The initiative is driven largely by the hope that more capable official Palestinian security institution could be a bulwark against Palestinian militants allied to Syria and Iran.

Since 2007, 1,000 Presidential Guards and 3,700 National Security Forces (NSF) troops loyal to the Fatah-led Palestinian Authority have been trained at the International Policy Training Center near Amman, Jordan. The US Security Coordinator (USSC) for Israel and the Palestinian Authority planned to organize and train some 6,000 troops, including 10 500-man NSF battalions, and this effort would be far more difficult were it not for Jordan’s continued support and cooperation.216

Managing Instability Protests across the Arab world are driven by legitimate grievances, however, instability in Jordan, a key US regional ally, could allow Iran to recalibrate and balance against continued instability in its main regional ally Syria.

2011 saw unprecedented criticism of King Abdullah II, Queen Rania and the core pillars of the monarchy. Opposition from youth groups and Islamist movements was not surprising given Jordan’s high level of youth unemployment, high underemployment, the growing perception of institutionalized corruption and limited avenues for socioeconomic advancement. What is significant is that elements within the kingdom’s core of support, including rural East Bank tribesmen and military veterans, have also been critical. This was driven by shrinking government patronage in rural areas and concerns in some quarters that the monarchy – especially the Queen – was advancing the interests of Jordanian Palestinians over East Bankers.217 Despite these pressures, King Abdullah II continued to maintain broad control of both security and political life in Jordan in 2011. This is in no small part thanks to the continued support of the country’s military and security forces, which remain overwhelmingly dominated by personnel from East Bank tribes loyal to the Hashemite dynasty. The monarchy has taken steps to appease the grievances of its citizens, including the establishment of a Royal Committee on Constitutional Review which has proposed some 42 constitutional amendments.218 Parts of the Jordanian opposition have dismissed planned reforms as falling short of popular expectations with few moves to curb the King’s power. The political challenge is further hampered by the impact on public financing of appeasing popular unrest. These measures include the granting of 100 Jordanian Dinars219 (JD) to all active and former

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civil and military employees during the Islamic holy month of Ramadan and the allocation of additional funding to the Jordanian public school system. Subsidization continue to pose a lasting challenge, including subsidies on bread worth JD 350 million and JD 700 million-worth in fuel subsidies annually.220 As is the case with Egypt, this presents major challenges to the US. Iran has little influence in the kingdom, but Jordan is too vital to the US and its Gulf allies to allow these socio-economic pressures to trigger critical instability. In May 2011, the GCC announced that Jordan was welcomed to apply for membership to the Council,221 while a month later, Saudi Arabia provided Jordan with a cash grant of $400 million to stabilize public finances. The country’s Finance Minister reported in August that grants for the year had reached JD 1 billion.222 Meanwhile the US continued to provide wheat grants to alleviate the impact of local subsidies. Disruptions in energy supplies from Egypt continue to be a cause for concern in Amman; however Iraq and Jordan signed an agreement in June 2011 for the kingdom to receive 15,000 barrels of oil per day at a discount of $18 per barrel.223 The path to political and economic reform in Jordan remains uncertain and will continue to be complicated by the lingering Arab-Israeli conflict and may yet develop into a source of instability that Iran could potentially exploit. Israeli-Jordanian relations have come under increasing criticism in 2011, with reports of pressure on Jordanian businesses that interact with Israel and suggestions that there has been a 25 to 30 percent reduction in agricultural exports to Israel since the beginning of the year.224 On September 15, 2011, some 200 protesters demanded the expulsion of Israel’s ambassador to Jordan.225 In the wake of the storming of the Israeli mission to Cairo, the Israeli government recalled its Ambassador and staff from Amman the previous day as a precautionary measure.226 Ultimately, the protests were small in size and countered by robust Jordanian security measures. However, questions remain about how anti-Israel sentiment will be managed in the future. The abrogation of the 1994 Israeli-Jordanian peace treaty is a long-standing demand of Jordan opposition groups. Meanwhile, allegations made by the whistleblower Wikileaks that US and Israeli officials mulled promoting the status of Palestinians in Jordan may have been a driver for the midSeptember protest.227 Syria’s mainly Sunni opposition to the Alawite-dominated regime of President Bashar Al-Asad has emerged as the latest platform for Jordanian Islamist opposition forces in their bid to mobilize greater pressure for reform on the Hashemite Monarchy. On February 12, 2012, Jordan’s Muslim Brotherhood called for “jihad” against the Asad regime and articulated strong support for the armed insurgency in Syria. The group also called on Jordan to recognize the opposition Syrian National Council as a representative of the Syrian people.228 While calls for greater Jordanian involvement in Syria go against the monarchy’s desire to keep Jordan as far as possible from its neighbor’s potential spillover effects, Jordan can do little to ignore the growing push from Islamist political forces. Islamist parties and movements have either seized power, done well in elections or are contesting long-held centers of power across the Middle East and North Africa. In addition to openly

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discussing options for political reform, the Hashemite Kingdom has also sought to strengthen ties with Palestinian Hamas, an offshoot of the Muslim Brotherhood.229 Societal and economic cleavages, corruption, growing opposition from Islamist forces, tensions over the fate of Palestinians in Jordan and the continued insecurity of Jordan’s East Banker population mean that the path to political economic reform in Jordan will remain uncertain. Today, Iran has no direct influence in Jordan in the context of strategic competition with US. However, it is clear that a destabilized Jordan could present Iran and its allies with opportunities to foil the interests of the US and its allies in the region.

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Persistent & Emerging Challenges In a year marked by upheaval and regional uncertainly, there are many other questions that remain about what direction US-Iranian competition in the Levant will take. The future will be shaped by both persistent and emerging challenges alike. Some do not directly affect US and Iranian competition, but would have important indirect effects.

Others, like those involving Syria, could play a critical and more direct role.

The Teetering Balance Along the Blue Line Almost any deterioration along the UN Blue Line of demarcation between Lebanon and Israel could benefit Iran: given regional public opinion, it would be easy for conflict between the IDF, Hezbollah or the LAF to help justify Hezbollah’s continued armed status. More importantly, however, there is no guarantee that instability could not escalate into a war involving Israel, Syria and their respective regional allies.

Iran (and Syria) can potentially exploit the continued risk of conflict between Israel and Hezbollah. Both have learned important lessons from the last round of open confrontation in 2006 and there are few changes of an internationally backed consortium, like the now defunct Israel Lebanon Monitoring group, in no small part because key players such as Syria are increasingly unstable. Even if Syria were not mired by protests, there is little appetite in Washington or Tel Aviv to resurrect the old monitoring structure.

Both Israel and Hezbollah have continued to upgrade their tactics and capabilities over the course of the past 5 years, and both sides are confident that their strategy in a future war will succeed, and both sides feel confident they can predict the operational, tactical and strategic choices of the other in a future conflict. However, despite this high level of confidence, there is strong evidence to suggest that neither side wants to start a war, and both sides continues to rely on the other to sustain the militarization of both Jews and Shi’a across the UN Blue Line.

One might argue in favor of stability based on the prediction that both Israel and Hezbollah are fundamentally rational and have too much to lose and too little to gain from another round of conflict. However, asymmetric balances, let alone other forms of brinksmanship where few channels of communication exist, are inherently unstable. One major example of this includes a confrontation between the IDF and the LAF in August, 2010 that could have degenerated in a major conflict. More recently, Palestinian and Lebanese protestors’ efforts to cross the Blue Line in May and June 2011 could have also escalated into a major cross-border incident.

If Hezbollah (and Iran and/or Syria) do not actively exploit this issue, an important tool has emerged as a critical component in management the risks associated with an uncertain asymmetric balance since 2006: regular meetings between the LAF and the IDF as part of a tripartite framework under the auspices of UNIFIL at its Naqoura headquarters just north of the Blue Line of demarcation between Israel and Lebanon. The “Naqoura framework” is not in and of itself decisive. What does give it an ability to manage security politics along the Blue Line is that Hezbollah and other leading political forces have given the LAF their tacit support in the framework. In short, the LAF has the support of all the country’s major communities when it comes to ensuring that stability reigns in the South. The IDF was also reported to favor the framework.230

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The Naqoura Framework bolsters the role of the LAF in Lebanese security politics and is an important source of stability and predictability for a US that is increasingly focusing on managing expectations rather than shaping outcomes in the Middle East. In contrast it is at least partially detrimental to Iran’s aspirations to inflame Blue Line security politics in support of its regional prerogatives.

Energy Security & the Risk of War While potential energy reserves in the Levant remain an unknown quantity, they have already become a source of tension and conflict between Israel and Lebanon – as well as with the Palestinians where another set of offshore gas resources has not been developed because of Israeli and Palestinian tensions over Gaza.

Recent Israeli tenders for offshore exploration have led to heightening rhetoric on managing access to potential regional energy reserves. Both Israel and Lebanon have submitted competing maritime borders to the UN and the issue has the potential to become the “new Sheb’a Farms” insofar as it will drive and justify the militarization of society and politics on both sides of the Blue Line.

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Figure VIII.31 shows recently discovered Israeli natural gas fields – Tamar, Dalit and Leviathan – which are projected to begin development at the end of 2012 with extraction and transmission infrastructure to be operational by the end of the decade. 231 Both Israel and Hezbollah have made their positions clear: each considers it its right to protect potential offshore resources and to use lethal force should the need arise.

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Figure VIII.32, meanwhile, shows a Lebanese map of the maritime border between Israel and Lebanon wherein the countries differ about where the maritime frontier is or should be.

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To the north-east of the Nile Delta, preliminary USGS findings seem to indicate similarly significant energy reserves in the Levant Basin. Covering a smaller area of some 83,000 square kilometers, the Levant Basin is expected to have a mean volume of 1,MMBO, with a range spanning from 483 MMBO to 3759 MMBO depending on the confidence intervals. With regards to LNG, the Basin is expected to have a mean volume of 122,378 bcf of gas with a range from 50,087 to 227,430 bcf of gas. 232

•

Figure VIII.33 shows a map of the Levant Basin survey area and details of the resource assessment.

It is possible that energy insecurity could lead to conflict in the Levant. Arguably, Iran would benefit from yet another arena wherein it can antagonize or harass Israeli interests, be it through Hezbollah or other regional players. Energy reserves do not have to automatically lead to conflict. Managing the maritime border region and trying to find a compromise is a valid alternative.

If pragmatists are given the opportunity, there is no reason why Israel and Lebanon cannot have their cakes and eat them too. How Israel and Lebanon manage the maritime issue could be an important confidence building measure and regional stabilizer. The opposite, defined crisis and open military confrontation, is no less of a plausible outcome.

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Figure VIII.31: Israel’s Growing Natural Gas Sector

Note: Depicts regional geologic basins.

Source: Adapted from Michael Ratner, “Israel’s Offshore Natural Gas Discoveries Enhance Its Economic and Energy Outlook,” Congressional Research Service, RL41617, January 31, 2011, p. 2, Library of Congress Cartography.

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Figure VIII.32: The Israeli-Lebanese Maritime Frontier: A conflict in the Making?

: Area of contention between Lebanon and Israel

Source: Adapted by Aram Nerguizian from Wissam Zahabi, “Hydrocarbon Exploration Offshore Lebanon: Current Status and Way Forward,� presented at the Levant Energy Form 2011, June 23, 2011, available at: http://www.thegulfintelligence.com/uploads/Oil%20and%20gas%20presentation%20Lebanon.pdf

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Figure VIII.33: U.S. Geological Survey in the Levant Basin Province, 2010 Location of Four Assessment Units in the Nile Delta Province

Levant Basin Province Results

Source: The United States Geological Survey.

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Wildcards of Syrian Instability The most critical wildcard affecting US-Iranian competition is undoubtedly Syria’s yearlong crackdown against public protests and opposition forces. This has led a number of countries – including US NATO allies such as France and Turkey – increasingly entertain the prospect of creating a “humanitarian corridor” in Syria, potentially along the border with Turkey, to provide relief to both the Syrian population and dissident groups opposed to the Asad regime. These calls are echoed by Syrian opposition forces both in and outside Syria, including the so-called Free Syrian Army (FSA) and the Istanbul-based Syrian National Council (SNC).

These calls do not address the real world challenges of creating such a “humanitarian corridor”: joint and combined military operations to suppress Syria’s air defense network, the need to neutralize the country’s air force, and eliminating Syria’s asymmetric deterrence by containing unconventional threats from long range missiles (potentially armed with chemical or biological agents) and instability along the Golan Heights. They also do not address the risk of eventually having to engage loyal Syrian ground forces (including large concentrations of Alawites) that see few prospects in a post-Asad Syria.

As has been discussed earlier, any Western or regional military intervention in Syria must deal with Syria’s air defenses, tackle the country’s air force and contain risks from unconventional and asymmetric threats. The US was indispensable to any NATO or UNled military effort in Libya and the same applies to Syria. Only the US has the mix of capabilities and capacity to support and sustain such a military effort should it every come to pass.

Syria is not Libya However, Syria is not Libya. Libya is geographically far larger and mostly empty with a smaller population and very limited military capacity overall. In contrast, Syria’s population is more than three times larger than Libya’s, has almost 30 times the latter’s population density and a much larger and far more capable military overall. Libya has persistent tribal and ethnic divisions. However, Syria’s sectarian and ethnic divisions run far deeper and resonate far more with regional tension along Sunni and Shi’a lines.

Unlike in Libya, Syrian opposition forces do not control strategic territory, nor do they currently have military resources at their disposal to mount more than hit-and-run attacks.

The Asad regime enjoys a far greater degree of control over the country than did the Gadhafi regime. While Syria’s state structure is not robust by any measure and has shown signs of deep stagnation and decay for decades, 40 years under Gadhafi utterly decimated Libya’s state structure and any semblance of state-society relations.

Meanwhile, the Asad regime has shown it can rely far more on praetorian military units and a significant cross-segment of the Syrian population, including most minority groups (either out of fear or by choice) to either defend its interests or not to undermine the regime further. The bulk of the security forces remain largely loyal in no small part thanks to decades of over-recruiting from the mainly rural Alawite community, which has resulted in a strong corporatist military culture.

While Libya’s opposition forces were divided, Syria’s are far more so, with little unity or agreement on the use of violence as a means to an end, and discord about the potential

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role of foreign intervention. Unlike Libya, Syria complicates the calculus of external actors by virtue of its sectarian and ethnic divisions. By some estimates, Syria’s population includes 74 percent Sunni Muslims, 10 percent various Christian groups, and the Alawite community and the Druze account for the remaining 16 percent. Meanwhile, Arabs account for some 90.3 percent of the population while Kurds, Armenians and other minorities account for the remaining 9.7 percent.233 The Risk of Destabilization & Civil War External military intervention of any kind could accelerate what many fear has already become an escalating path to civil war in Syria. The hardening of sectarian rhetoric and the increase in tit-for-tat sectarian violence across the country also mean that any largescale internal conflict is likely to be sectarian.

There is little doubt that the regime did its utmost to ensure the re-emergence of sectarian fault lines, chiefly between the country’s Sunnis on the one hand and the ruling Alawite minority and other Christians and the Druze on the other. By waving the prospect of destabilization and sectarian strife in Syria, the Asad regime hoped it could get its local, regional and international opponents to back down.

Ultimately, the law of unintended consequences is such that the Asad regime may have gotten far more than it bargained for. There is little to no certainty that sectarian tensions that have been under the surface for years can be reversed or undone even under the best of circumstances. In an effort to secure its own future, the Asad regime is risking a far broader sectarian civil war in Syria.

Assumptions that any civil war in Syria will be short-lived ignore the reality that wars are rarely expected to last longer or cost more than a fraction of what they actually do. They also ignore local and regional factors, including the disposition of the population, the scale of armed opposition, the corporatist nature of loyal military units, and the scale of external support on either side of any conflict. Given the many factors listed above, including internal communal divisions, the praetorian nature of elite units and the risk of internal displacement, external intervention is far more likely to further divide Syria – potentially geographically or along ethno-religious lines – than to avert a crisis.

Iran With the exception of Syria’s fighting political forces, Iran has the most to lose should its key regional ally suffer further destabilization. Military intervention even on the most limited scale would be particularly troubling. Whenever Damascus has faced wholesale international pressure in the past, Iran has traditionally responded with high-stakes foreign policy choices that often complicated matters further rather than helped to secure and stabilize Syria’s regional position.234 Iran has already signaled (unsuccessfully) its Palestinian allies, including Hamas, to escalate instability in Israel, while Hezbollah remains largely held in reserve (though the group is also constrained by growing Sunni-Shi’a tension in Lebanon). Iran also appears to have provided support to the Asad regime as it confronts both peaceful protesters and armed insurgents.

In the event of more direct international intervention, there is no reason to assume that Iran will not seek to support the Asad regime by deepening its own role in the country.

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This could include mobilizing elements of the Iranian Revolutionary Guard Corp (IRGC)’s Quds Force to play a more heavy-handed role, turning to Shi’a allies in Iraq, and bolster clandestine operations and asymmetric competition with the US, the EU and their key (mainly Sunni) regional allies including Saudi Arabia and Turkey. Should the Asad regime truly destabilize, Syria will likely supplement if not outright replace Iraq as a key arena for regional competition between Iran on the one hand and the US and its allies on the other.

Hezbollah For Hezbollah itself, the potential loss of Syria – a key lifeline of support from its patron Iran – could prove critical to the group’s long term local and regional posture. Hezbollah has worked hard to minimize its regional footprint, not the least of which in the wake of growing anti-Shi’a sentiment across the region. The group’s relative quietism could be put to a serious test, however, should Iran and Syria require Hezbollah to escalate along the UN Blue Line as a response to intervention in Syria. This could also raise questions about proliferation risks should Damascus decide to transfer additional sensitive military hardware, such as advanced SSMs, major SAMs or ASCMs to the Shi’a group.

The Southern Gulf States A key factor affecting US and Iranian responses to instability in Syria are the Southern Gulf states, led by Saudi Arabia and more recently Qatar.

In the first half of 2011, most states in the Arab League feared spillover effects from instability and protests in Tunisia, Egypt, and Bahrain. The richer and more stable oil monarchies of the Gulf Cooperation Council (GCC) moved quickly to insulate themselves from the effects of regional unrest. This has included greater investment in job creation, more subsidization, and more energy focused on addressing some of their lingering socioeconomic grievances. In the latter half of 2011, the GCC states—led from the front by Qatar and, more critically, from the rear by Saudi Arabia—have grown increasingly critical of Syria as the cycle of violence went on unabated.

At the rhetorical level, the Gulf states (with a majority Sunni population) have grown increasingly critical of Assad’s crackdown on his mainly Sunni political opponents. This comes at a time of growing negative public opinion toward Shi’a Iran. At the geopolitical level, Iran underestimated just how concerned the Gulf states are about the implications of unchecked Iranian hegemonic aspirations in the wake of the U.S. withdrawal from Iraq. Growing pressure on Syria from the Arab League, led by the GCC, is meant in part to influence the regional balance against Iran and to shape inter-Arab politics by seizing a rare opportunity to shape the internal balance of power in Syria.

Spillover Effects In the event of Syrian responses to international pressure, further deteriorates or if some form of military intervention takes place, it is highly unlikely that the regional spillover effects can be contained. Lebanon’s Sunni-Shi’a tensions could escalate leading to miscalculation and potentially deeper communal violence. Israel, which has struggled to insulate itself from Syria, will face a broadening of instability in the Levant. Jordan, though largely stable now, will also have difficulty insulating itself and faces pressure from its own internal Islamist political forces. While Lebanon has already seen an

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escalation in Sunni-Alawite tension in northern Lebanon, Iraq’s Sunnis and Shiites are divided in their response to Syria; the former has shown a willingness to aid Syria’s mainly Sunni opposition forces, while the latter has sought tighter controls of the SyriaIraq border and has avoided real condemnation of the Assad regime. 235 All four countries could also face difficulties in managing their large Palestinian refugee populations should Syria deteriorate further. Turkey’s core focus remains the Kurdish question, which is likely to escalate both in Turkey and along the frontier with Syria should Damascus destabilize further. While sensitive to US and Saudi foreign policy concerns, Iraq remains a mainly Shi’a country on the border of a mainly Sunni Syria.

Growing Sunni-Shi’a regional acrimony could inform how Iraq reacts to further instability in Syria.

Implications for US Policy The US faces a sustained level of instability in the Levant, and the rest of the Middle East and North Africa, that affects every aspect of its competition with Iran. At present, no one can predict the outcome in any given case. Even the short term impact of changes in regimes is not predictable, nor is how those changes will affect the underlying drivers of regional tensions. It is particularly dangerous to ignore the risk of replacing one form of failed governance with another one, and the prospect of years of further political instability or upheavals.

Syria While Syria has been a challenge for US policy-makers for decades, the current round of instability is unprecedented and the situation in Syria is not predictable enough for the US to be able to develop a sustainable strategy in the short term. Accordingly, unless the opposition becomes far more cohesive and its character is far more clear, and unless far more Syrian forces defect, the US should consider the following options. 

The increasing use of violence by elements within the opposition is likely to lead to incrementally harsher military and security responses from the regime on the basis that it is fighting a foreignbacked insurgency as opposed to peaceful democratic activists. There is no clear US response to this increasingly dangerous phase of instability in Syria. Providing material support to opposition forces will likely justify a harsher crackdown and the forces buttressing the regime will continue to close ranks. US or western covert and overt assistance could also trigger a negative response from Russia, China and other members of the UN Security Council who do not want to see a repeat of steps taken in Libya.



The US cannot ignore the regional spillover effects should Syria destabilize further and it needs to adopt a strategy based on containing Syrian instability. How events do and do not play out in Syria will have deep and unforeseen consequences on the precarious sectarian balance in Lebanon, the security of Israel along its northern and eastern flanks, the stability of Jordan at a time of increased internal unrest, and pressure along Turkey’s southern flank as Ankara tries to contain increasingly assertive Syrian and Iraqi Kurdish groups. A collapse in Syria – controlled or otherwise – may hold the promise of breaking Iran’s umbilical cord to Levant, but it also promises to expose both budding and strategic US allies to waves of uncertainty for years to come. The US must work with these states to minimize these pressures should Syria deteriorate further.



While the US may have reasons to support opposition forces that are democratic or more representative of popular forces in Syria, that may not translate into a more stable Syria at peace with its neighbors in either the short or long term. There is no real world basis on which to make the argument that a post-Asad Syria will make peace with Israel, renounce claims to the Golan

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Heights or stop providing assistance to Palestinian elements operating in and outside the Occupied Palestinian Territories. 

The Russian and Chinese double veto is a message that the US cannot ignore and if it hopes to garner broader support in the international community, it must take into account the interests and priorities of other leading and emerging powers. It must work closely with its allies to reassure the so-called BRIC countries that Syria is not another Libya and that military intervention at heart of the Arab-Israeli conflict is not being considered.



Some analysts have proposed prying Syria’s security establishment and the Alawite community away from the Asad regime. While the approach is sound in principle, the US may need to accept that the chances of doing so are slim. The passage of time and the level of bloodshed have made it more difficult to conceive of a post-Asad Syria devoid of retaliatory measures against the Alawite community. While many Alawites may not like or support Asad, the potential loss of their political and economic autonomy is a key barrier to defections. Even in a scenario where a dominant opposition proved magnanimous in victory, there is little sign that Asad’s base – and the other minorities that support the regime – is betting on such a favorable outcome.



While events in Syria are challenging to the US and the West, they also complicate Iran’s foreign policy and, as a result, how the US and Iran will compete in Syria in the future. Iran continues to support the Asad regime’s efforts to crush popular dissent. However, it has increasingly done so with the acceptance that returning to the status quo ante in Syria is a fleeting hope rather than a likely outcome. As such, Iran’s position is in flux in the Levant and could as easily lead to progress or confrontation with the US and the West in Syria, as well as Iraq, Lebanon and with the Palestinians.



There now is only limited support in the US, Europe, and the Arab world for direct intervention in Syria. There are also reasons why the US might directly (or indirectly) take the lead in such efforts. The withdrawal of US troops from Iraq has left many questions about the future role and influence of the US, especially in the context of strategic competition with Iran. Instability in Syria presents Washington with the opportunity to undermine Iran’s regional posture, weaken or change the leadership of one of its key regional allies and potentially downgrade the Islamic Republic’s role in the Arab-Israeli conflict through Hezbollah.



Syria is not Libya. Syria has a population that is more than three times larger than Libya’s, has almost 30 times the latter’s population density and a much larger and far more capable military overall. Syria also enjoys strong political, financial and military support from Iran and Russia.

These factors complicate any calculus on military intervention in Syria, whether in terms of the level of potential military opposition, or with regards to the risk of high civilian casualties.

Opposition forces in Syria do not control regime-critical territory, and most attacks, while potentially coordinated, seem to have limited tactical or strategic depth and have yet to present a serious challenge to units loyal to the regime.



At best, the Assad regime would be replaced by a democratic Sunni-dominated leadership that is more favorable to the foreign policies of the United States and the Gulf states led by Saudi Arabia.

This could include a degradation of ties to Iran with effects on the flow of Iranian weapons and support to Hezbollah. At worst, Syria would remain unstable and could deteriorate into a deeper sectarian civil war, a conflict that could in turn draw its neighbors—especially Saudi Arabia and Iran—into a cycle of regional proxy warfare. What is certain, however, is that in any scenario, Syria’s regional role has been severely weakened by a year of unrest.

The exception to such restraint is the possibility that Syria’s repression will become so violent that some form of humanitarian military intervention will be absolutely necessary.

The US is planning for this option, but the risks are high, it could take weeks to make fully effective, and it might be seen as intervention from Israel’s closest ally and as in support of Israel – an association that could discredit the Syrian opposition.

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If at all possible, such an effort should be led by Arab states and Turkey, with US support. The goal is to legitimize an Arab and native Syrian approach to political change, not outside intervention.

Even with Arab and Turkish support, however, any US-led intervention would play out less in terms of humanitarian relief and more in terms of US and Gulf Arab efforts to compete with Iran and Syria and to bring stability to a region that is liable to remain unstable for years. Taking stock of the scale of Sunni-Shi’ite regional polarization and the level of acrimony between the Southern Gulf states and Iran is critical to determining the benefits and potentials costs of deeper US involvement in the Levant.

Lebanon While Lebanon has been relatively stable during the current period of upheaval, there are real risks of instability as well as opportunities to manage security politics in the Levant that the US should not ignore. 

While it is easy to get caught up in ideological pursuits in Lebanon, US policy should remain focused on a policy based on the fact that Lebanon will remain the problem child of US foreign policy. This entails a pragmatic policy that seeks to minimize Lebanon’s geopolitical profile and contain the risks posed by Hezbollah and other forces hostile to US interests in the Levant. The US must continue to capitalize on the fact that Iran’s relationship is with Hezbollah while its own relationships can be with a broader range of Lebanese institutions and political forces.



The collapse of the March 14-led government of Saad Hariri in January 2011 has raised concerns in Washington of a Hezbollah-led constitutional coup and the growing strength of forces hostile to the US and close to Iran and Syria. The cycle of regional instability and prolonged unrest in Syria have done much to dampen the effects of these changes in Beirut. The US should not miss the current opportunity to build bridges with forces that, while enjoying ties to Syria and the Asad regime, are viewed with growing distrust by Hezbollah. Prime Minister Najib Mikati was never Hezbollah’s choice for the post he now occupies. Meanwhile, his government continues to honor Lebanese international commitments and seems keen to nurture ties with the US to try and insulate Lebanon from the prospect of further Sunni-Shi’a sectarian escalation. The US does not need further instability in Lebanon and must work with existing allies and potential new ones to contain and manage Lebanese instability.



The US should continue to support UNFIL and the LAF based on their real world impact on security politics along the Blue Line. This means accepting first that the UN force’s role as a regional punching bag for both the Israelis and the Lebanese is conducive to stability along Israel’s northern flank. It also means accepting that while the LAF is not the non-sectarian military force that many in the US hoped it would be, it remains critical to keeping a lid on Lebanese instability.



Unlike the US with the LAF, Iran has had 25 years to build up Hezbollah. Given the weaknesses of Lebanese political allies and the limits of US policy in Lebanon, long term military diplomacy remains crucial to maintaining US influence in Lebanon and sustaining the US’s place in security politics in the Levant. The US Congress should consider lifting a hold on the limited lethal military aid the LAF has requested. The State Department, with the support of Congress, should also release some $100 million in approved FY2011 FMF for Lebanon to avoid the real prospect that US security assistance and cooperation programs will run out of unallocated funds before the end of 2011.



The US should seek to support the UN Special Tribunal for Lebanon in ways that will not reinforce negative perceptions of the US as well. Given the depth of divisions in Lebanon, the US will not score points in its competition with Iran if the Tribunal cannot eject perceptions that it is a Western political tool meant solely to undermine Syria and Iran in the Levant.

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Israel As this report shows, Israel is a key arena for US-Iranian competition and the recent cycle of instability will remain critical to how both countries develop their bilateral relationship and security ties. 

A ring of instability now exists around Israel. However, the long term implications remain uncertain. The US will continue to provide Israel with both political and military security guarantees to bolster the strategic partnership. Both countries will also continue to coordinate their efforts to minimize and curtail Iranian influence in the broader Levant.



The current cycle of regional unrest has accelerated the US need to bring Israeli-Palestinian negotiations on a two-state solution to fruition. Given the level of popular sentiment across the Arab world, US preferences and the need for a lasting peace, and given the recent Palestinian UN bid for statehood, the US, Israel and the Palestinians must seize the initiative. Much mistrust remains between Israel and the Palestinians and there is no certainty that any process will succeed.

However, not to work that much harder will serve to strengthen Iran’s efforts to spoil peace efforts, undermine the US role in a changing the Arab world and to further radicalize the Palestinians at a time when rational minds should prevail.

The Palestinians The place and role of the Palestinians in US policy and competition with Iran are part and parcel of competition over Israel. 

Suspending aid to the Palestinians can do little to strengthen the US position in the Levant in general and in the Arab-Israeli conflict in particular. The UN bid for statehood did upset many in Washington. In the end, any alliance is only as strong as the sum of its parts, and the Palestinian bid provided a much needed boost to the ailing presidency of Mahmoud Abbas, a key regional ally. Censuring the Palestinian Authority will strengthen the hand of pro-Syrian and pro-Iranian Palestinian factions and undermine perceptions of the US in the Levant. The US should continue to nurture its relationship with the PA and make good on its aid commitments.



As with Israel, the US needs to work hard to bring the PA back to negotiations on a two-state solution. The PA’s UN bid has done much to buoy the position of President Abbas, however, this effect will degrade with time unless parties to negotiations can capitalize on it. The Quartet, led by the US, must push ahead with peace efforts. The alternative is a degeneration of the Palestinian position to a point that strengthens Palestinian opponents of the West and invigorates Iran’s spoiler role in the Arab-Israeli conflict.



The Palestinian Islamist wildcard has proven crucial to projecting Iranian influence in the Levant as a means of impacting the Arab-Israeli conflict. Relying on groups like Hamas was also an important means of shoring up much needed Sunni support for Iran in the region. A very public break between Syria and Hamas is a setback for Iran, but the Islamic Republic continues to cultivate ties with Palestinian Islamist groups. So far, Tehran has also rejected a deeper isolation of Hamas for siding against the Asad regime, going so far as to invite Prime Minister Haniya to Tehran in early February 2012 for consultations.236



The US should work to capitalize on rifts between Syria and Hamas. US engagement with the Egyptian Muslim Brotherhood was relatively; in contrast, it will prove far more difficult for the US to build brides with an Islamist group the US government considers to be a terrorist organization. Meanwhile, given Iran’s unwavering support for the minority-led Asad regime in Syria, it is unclear how and for how long Iran can sustain its policy of supporting such groups.

What is certain is that unlike the US, the Islamic Republic has shown it is flexible enough to at least try and recalibrate to shifts on the Palestinian political scene.

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Egypt and Jordan Lastly, US policy towards Egypt and Jordan are driven by a number of common factors that have impacted whether or not these two key US allies become exposed to Iranian influence and interference. 

President Mubarak’s exit from power means that Egypt will go through a prolonged cycle of instability as it reconciles itself with the role of the military in and out of politics, the role of the Muslim Brotherhood and other Islamist political forces and the other political and reform movements working to shape post-Mubarak Egypt. The US government and Congress must both remain flexible as it tries to sustain ties with the “new” Egypt – a move that is crucial to ensuring stability across the Levant and the broader Middle East and North Africa



Military aid from the US, and financial assistance from the Gulf states, are crucial to stabilizing post-Mubarak Egypt. The US must continue to nurture its military-to-military relationship while recognizing that Egypt’s economic needs must also be addressed. While funding from the Gulf can help sustain investment and macroeconomic indicators, only the US and other Western democracies can provide the sort of socio-economic aid that can bolster governance and state accountability in the long term.



Uncertainty about bilateral ties with Israel is likely to increase as the Egyptian military comes to terms with the country’s Islamic political forces. The threat of suspending military aid to Egypt is no more effective than proposed cuts to Lebanon and the Palestinians. If nothing else, the implications could be far more damaging to regional stability and Israeli security. That being said, the US must balance aid with Egypt’s continued adherence to Egyptian-Israeli peace and more efforts to stabilize an increasingly unmanaged Sinai Peninsula.



While Egypt will face challenges in the years ahead, a post-Mubarak Egypt has an opportunity to re-capture much of the authenticity and prestige it lost over the course of the past three decades.

While this could lead to an Egypt that is less sensitive to US and Israeli national security and foreign policy prerogatives, it is also clear that a more important role for Egypt in Arab politics could come at the expense of Shi’a Iran.



The ratcheting up of sectarian tensions between Egyptian Muslims and Coptic Christians presents a serious risk. The continued deterioration of communal ties will likely have an increasingly negative effect on the country’s internal stability. While accounting for 10% of the Egyptian populations, at some 10 million strong the Copts remains the largest Christian community in the Levant. With the rise of sectarian tensions in Syria, continued sectarian recrimination in Lebanon, and the depletion of Christians in Iraq and the Palestinian Territories, the US and Egypt must both do more to prevent the communal and primordial politics from becoming yet another source of instability in a region in a deep state of flux.



As with Egypt, Jordan is too important to the US and its Gulf allies not to make every effort to help it avoid prolonged or even limited instability. Here too, the US needs to continue to support security and economic assistance programs to the Hashemite Kingdom, while supporting peaceful democratic reforms as well. It should also continue to support Gulf efforts to integrate Jordan into the Gulf Cooperation Council as one measure to limit regional instability and bolster the Kingdom’s security.

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Fares Akram & Isabel Kershner, “Hamas Premier Visits Iran in Sign of Strong Relations,” New York Times, February 10, 2012.

2 Dwight D. Eisenhower, Waging Peace, New York: Doubleday, 1963, p. 177-178; Eisenhower to Congress, January 5, 1977.

3 Radwan Ziadeh, Power and Policy in Syria: Intelligence Services, Foreign Relations and Democracy in the Modern Middle East, I.B.Tauris, New York, p. 1-35.

4 In the immediate post-World War II period, Egypt and other Arab states, including Jordan, Lebanon and Syria fought the first Arab-Israeli war in 1948.

5 William L. Cleveland, A History of the Modern Middle East, 2nd ed, Westview Press: Boulder, 2000, p.

233-313.

6 Edward E. Azar & Kate Shnayerson, “Untied States-Lebanese Relations: A Pocketful of Paradoxes,” in Edward E. Azar ed, The Emergence of a New Lebanon: Fantasy or Reality? Praeger: New York, 1984, p.

237-244.

7 Trita Parsi, Treacherous Alliance: The Secret Dealings of Israel Iran and the U.S., Yale University Press: New Haven, 2007, p. 82, 89-91.

8 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, I.B.Tauris, 2009, p. 76-77.

9 Jonathan Lis, “Outgoing Intel Chief: Iran Can Already Produce Nuclear Bomb,” Haaretz, November 3, 2010.

10 Haim Malka, Crossroads: The Future of the U.S.-Israel Strategic Partnership, Washington DC: The Center for Strategic & International Studies, 2011, p. 58-60; Zbigniew Brzezinski & William Odom, “A Sensible Path on Iran,” Washington Post, May 27, 2008.

11 See Jeremy M. Sharp, “Egypt in Transition,” Congressional Research Service, RL33003, June 17, 2011; Jeremy M. Sharp, “Egypt: Background and U.S. Relations,” Congressional Research Service, RL33003, September 2, 2009.

12 Marianne Stigset & Gelu Sulugiuc, “Suez Canal, Carrying 8% of Trade, Open Amid Unrest,” Bloomberg, January 31, 2011, available at http://www.bloomberg.com.

13 “World Oil Transit Checkpoints,” February 2011, the Energy Information Administration, available at http://www.eia.gov/cabs/world_oil_transit_chokepoints/Full.html, 14 “bbl/d” means billions of barrels per day and is interchangeable with “bbpd”.

15 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 25.

16 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 1.

17 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 2.

18 See the Foreign Assistance Act of 1961 (FAA), the Arms Export Control Act (AECA) and the Foreign Operations Appropriations Act (S/FOAA).

19 While Israel is the top recipient of aid in the region, Saudi Arabia remains the top cumulative purchaser of US military systems and equipment in the Middle East.

20 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 3.

21 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 3.

22 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 6.

23 “Egypt – Co-Production of M1A1 Abrams Tank,” News Release, The Defense Security Cooperation Agency, July 5, 2011, available at http://www.dsca.mil/PressReleases/36-b/2011/Egypt_10-67.pdf.

24 Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011, p. 22, 28.

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Casey L. Addis, “Lebanon: Background and U.S. Relations,” Congressional Research Service, R40054, February 1, 2011.

26 Jim Zanotti, “U.S. Foreign Aid to the Palestinians,” Congressional Research Service, RS22967, May 31, 2011.

27 Ian Cobain, “CIA working with Palestinian security agents,” The Guardian, December 17, 2009; Yezid Sayigh, “’Fixing Broken Windows’: Security Sector Reform in Palestine, Lebanon and Yemen,” Carnegie Endowment for International Peace, October 2009, available at http://www.carnegieendowment.org/files/security_sector_reform.pdf.

28 See Carol Migdalovitz, “Israeli-Arab Negotiations: Background, Conflicts, and U.S. Policy,” Congressional Research Service, RL33530, January 29, 2010; Jim Zanotti, “Israel and the Palestinians: Prospects for a Two-State Solution,” Congressional Research Service, R40092, January 8, 2010.

29 Daniel Levy, “Obama’s Arab-Israeli Options,” The New York Times, May 18, 2011.

30 Mark Perry, “The Petraeus briefing: Biden’s embarrassment is not the whole story,” Foreign Policy, March 13, 2010.

31 “Special Reports: U.S. generals push for Arab-Israeli Peace,” UPI, March 23, 2010.

32 Fred Halliday, The Middle East in International Relations: Power, Politics and Ideology, New York: Cambridge University Press, 2010, p. 175-177.

33 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 23-25.

34 U.S. Agency for International Development (USAID), Overseas Loans and Grants, Obligations and Loan Authorization, available at http://gbk.eads.usaidallnet.gov/index.html; Congressional Budget Justification for Foreign Operations, various fiscal years.

35 Anoushiravan Ehteshami & Raymond A. Hinnebusch, Syria and Iran: Middle Powers in a Penetrated Regional System, New York: Routledge, 1997, p. 41-42.

36 Iran often eschewed opportunities to spread its ideological Shi’a narrative in favor of pursuing traditionally defined state interests. Cases include Iranian non-intervention in Iraq’s Shi’a community in the wake of the 1991 Gulf War, Iran’s desire to avoid a confrontation with the Soviet Union in Afghanistan, Iran’s relations with Arab regimes with close ties to Turkey, the US and Israel, and Iranian support for mainly Orthodox Christian Armenia over mainly Shi’a Muslim Azerbaijan. See David Menashri, “Iran’s Regional Policy: Between Radicalism and Pragmatism,” Journal of International Affairs, Spring 2007, Vol. 60, No. 2, p. 154-157; Ayatollah Ali Khamenei, Islamic Republic News Agency, March 18, 1991; Zalmay Khalilzad, “Iranian Policy Toward Afghanistan Since its Revolution,” in David Menashri ed, The Iranian Revolution and the Muslim World, Boulder CO: Westview Press, 1990, p. 235-241; Onder Ozar, “Iran’s Foreign Policy in the Post-Revolutionary Era,” Turkish Review of Middle East Studies, No. 15, 2004, p. 267-328.

37 Hussein J. Agha & Ahmad S. Khalidi, Syria and Iran: Rivaly and Cooperation, London: Pinter, 1995, p.

18; Anoushiravan Ehteshami & Raymond A. Hinnebusch, Syria and Iran: Middle Powers in a Penetrated Regional System, New York: Routledge, 1997, p. 42-43; 38 See Trita Parsi, Treacherous Alliance: The Secret Dealings of Israel, Iran and the United States, New Haven CO: Yale University Press, 2007.

39 David Menashri, Post-Revolutionary Politics in Iran: Religion, Society and Power, London: Frank Cass, 2000, p. 236-237.

40 David Menashri, “Iran’s Regional Policy: Between Radicalism and Pragmatism,” Journal of International Affairs, Spring 2007, Vol. 60, No. 2, p. 158.

41 Abdollah Nuri, Showkaran-e Eslah, Tehran: Tarh-e Now, 1999, p. 144-151; Faslnameh-ye Khavarmiyaneh, 1, No. 1, Summer 1994, p. 11, 24, 31-35.

42 David Menashri, “Iran’s Regional Policy: Between Radicalism and Pragmatism,” Journal of International Affairs, Spring 2007, Vol. 60, No. 2, p. 158; Iranian Students News Agency, October 26, 2005.

43 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 25.

44 The Washington Post, November 17, 1979.

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The Daily Telegraph, March 3, 1980.

Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 31.

47 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 143-144.

48 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 133.

49 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 134-135.

50 James Kirkup, “Foreign Office confirms Iranian support for Syria,” The Telegraph, June 6, 2011; Simon Tisdall, “Iran helping Syrian regime crack down on protesters, say diplomats,” The Guardian, May 9, 2011.

51 Richard Boudreaux, “Israel Seizes Ship Carrying Arms,” The Wall Street Journal, March 15, 2011.

52 “Turkey to UN: We seized illegal Iran arms shipment en route to Syria,” Haaretz, March 31, 2011.

53 “Security council Committee on Iran Sanctions Reports New Violations as Members Urge Diplomatic Solution,” UN Security Council 6563rd Meeting, June 23, 2011.

54 “Tehran read to give Syria $5.8 billion: report,” Reuters, July 15, 2011.

55 Farhad Pouladi, “Iran inks gas pipeline deal with Iraq and Syria,” AFP, July 25, 2011.

56 “Iran warns West not to enter into new issues in Syria,” Iranian Students’ News Agency, August 2, 2011.

57 Con Coughlin, “Iran agrees to fund Syrian military base,” The Telegraph, August 12, 2011.

58 “Iran says it is ready to host Syria crisis meeting; protesters call for foreign help,” AFP, September 9, 2011.

59 Rania Abouzeid, “Syria: Are Captured Iranians Military Men or Engineers?” Time, January 27, 2012.

60 “Iran denies Revolutionary Guard helping Syria suppress protests,” Haaretz, August 29, 2011; “Iran rejects French charge it is sending arms to Syria,” The Telegraph, January 17, 2012.

61 “Quds Force would aid Syria in foreign intervention,” Jerusalem Post, January 16, 2012.

62 Zvi Bar’el. “Report: Top Iran military official aiding Assad’s crackdown on Syria opposition,” Haaretz, February 6, 2012.

63 See Yusri Hazran, “The Rise of Politicized Shi’ite Religiosity and the Territorial State in Iraq and Lebanon,” Middle East Journal Vol. 64, No. 4, Autumm 2010.

64 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 87.

65 Yosef Olmert, “Iranian-Syrian Relations: Between Islam and Realpolitik,” in David Menashri (ed), The Iranian Revolution and the Muslim World, Boulder CO: Westview Press, 1990, p. 180-181; R. Avi-Ran, Syrian Involvement in Lebanon since 1975, Boulder CO: Westview Press, 1991, p. 171-173.

66 See Falet Jabar, “The Worldly roots of Religiosity in Post-Saddam Iraq,” Middle East Report, Vol. 227, Summer 2007, p. 12-18; Yusri Hazran, “The Rise of Politicized Shi’ite Religiosity and the Territorial State in Iraq and Lebanon,” Middle East Journal Vol. 64, No. 4, Autumm 2010, p. 523.

67 See Hassan A. Barai & Hani A. M. Akho-Rashida, “The Pragmatic and the Radical: Syria and Iran and War by Proxy,” in Clive Jones & Sergio Catignani ed, Israel and Hizbollah: An Asymmetric Conflict in Historical and Comparative Perspective, New York: Routledge, 2010.

68 Charles Wolf, Jerrold D. Green & Frederic Wehrey, Understanding Iran, RAND Publishing, 2009, p. 3436; Ali Rahigh-Aghsan & Peter Viggo Jakobsen, “The Rise of Iran: How Durable, How Dangerous?”

Middle East Journal, Vol. 64, No. 4, Autumn 2010, p. 564.

69 Craig Charney, “Understanding the “Arab Spring”: Public Opinion in the Arab World,” January 26, 2012, available at http://www.charneyresearch.com/pdf/2012Feb2_PRS_CSIS_Arab_Spring_v3_Charney.pdf.

70 Abdel Latif Wahna, “Suez Canal Traffic Normal amid Unrest, Operator Says,” Bloomberg, January 30, 2011, available at http://www.bloomberg.com; Denise Hammick, “Navies endeavor to police the Mediterranean Sea,” Jane’s Navy International, June 21, 2007, available at http://www.janes.com.

71 “Sixth Fleet: Naval Striking and Support Forces, Southern Europe (STRIKFORSOUTH),” GlobalSecurity.org, available at http://www.globalsecurity.org/military/agency/navy/c6f.htm.

46

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Denise Hammick, “Navies endeavor to police the Mediterranean Sea,” Jane’s Navy International, June 21, 2007, available at http://www.janes.com.

73 “Sixth Fleet: Naval Striking and Support Forces, Southern Europe (STRIKFORSOUTH),” GlobalSecurity.org, available at http://www.globalsecurity.org/military/agency/navy/c6f.htm.

74 Alon Ben-David, “Iran threat steers Israeli navigation of Red Sea,” Jane’s Defense Weekly, July 2009, available at http://jdw.janes.com.

75 Efraim Karsh, The Soviet Union and Syria: the Asad Years, London: Routledge, 1988, p. 67; R. Avi-Ran, Syrian Involvement in Lebanon since 1975, Boulder CO: Westview Press, 1991, p. 138.

76 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 64-65.

77 Jubin M. Goodarzi, Syria and Iran: Diplomatic Alliance and Power Politics in the Middle East, London: I.B.Tauris, 2009, p. 75.

78 See Eyal Zisser, The Mouse and the Lion: Syria – Between Passive and Active Resistance to Israel, Strategic Assessment, Vol. 12 No. 1 (June 2009).

79 See Ian Spierco, “Shield of David: The Promise of Israeli National Missile Defense,” Middle East Policy, Vol. 17, No. 2, Summer 2010.

80 Richard Beeston, Nicholas Blanford & Sheera Frenkel, “Embattled Syrian Regime Still Sending Missiles to Lebanese Militants,” Times (UK), July 15, 2011.

81 Doug Richardson, “Reports of Hizbullah ‘Scuds’ still unconfirmed,” Jane’s Missile & Rockets, April 28, 2010, available at http://www.janes.com.

82 Nicholas Blanford, Return to arms – Hizbullah and Israel’s preparations for war, Jane’s Intelligence Review, January 14, 2010, available at http//jir.janes.com.

83 Author’s interview with Nicholas Blanford, June 2010.

84 Casey L. Addis, “Israel: Background and U.S. Relations,” Congressional Research Service, RL33476, February 14, 2011, p. 30-31.

85 Author’s interview with Nicholas Blanford, June 2010.

86 Author’s interview with Nicholas Blanford, June 2010.

87 Author’s interview with Nicholas Blanford, June 2010.

88 Bilal Y. Saab & Nicholas Blanford, “The Next War: How Another Conflict Between Hizballah and Israel Could Look and How Both Sides are Preparing for It,” Analysis Paper, No. 24, The Brookings Institution, August 2011, p. 9.

89 Author’s interview with Lebanese senior military personnel, names withheld, January 2011; See Bilal Y. Saab & Nicholas Blanford, “The Next War: How Another Conflict Between Hizballah and Israel Could Look and How Both Sides are Preparing for It,” Analysis Paper, No. 24, The Brookings Institution, August 2011.

90 See Hezbollah’s 2009 political manifesto, available at http://www.english.moqawama.org/essaydetails.php?eid=9632&cid=214.

91 Author’s interview with senior UN officials in Lebanon, names withheld, 2009, 2010, 2011.

92 See Bilal Y. Saab & Nicholas Blanford, “The Next War: How Another Conflict Between Hizballah and Israel Could Look and How Both Sides are Preparing for It,” Analysis Paper, No. 24, The Brookings Institution, August 2011, p. 10-12.

93 See Bilal Y. Saab & Nicholas Blanford, “The Next War: How Another Conflict Between Hizballah and Israel Could Look and How Both Sides are Preparing for It,” Analysis Paper, No. 24, The Brookings Institution, August 2011, p. 14-17.

94 Glen Kessler & Robin Wright, “Israel. U.S. Shared Data on Suspected Nuclear Site,” The Washington Post, September 21, 2007.

95 The Levant here includes Israel, Jordan, Lebanon, Syria and Turkey and does not include data on Egypt or the Palestinian Territories.

96 Joe Parkinson, “Turkey Aims to Triple Iran Trade, Despite International Sanctions,” The Wall Street Journal, September 17, 2010.

97 Patrick Clawson, “The Islamic Republic’s economic Failure,” The Middle East Quarterly, Vol. 15, No. 4, Fall 2008, p. 15-26.

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“Country Profile Iran,” Economic Intelligence Unit, 2008, p. 21; Rooz Online, January 2009, available at http://www.roozonline.com/archives/2009/01/post_11183.php; Shahram Chubin, “Iran’s Power in Context,” Survival, Vol. 51, No. 1, February/March, 2009, p. 178; Hadi Nili, “Tehran Begins to Feel the Pain of Financial Cirisis,” The Washington Times, November 5, 2008; “Regional economic Outlook: Middle East and Central Asia,” International Monetary Fund, 2008, p. 30.

99 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 4; See “Executive Budget Summary: Function 150 & Other International Programs,” Fiscal year 2013, United States Department of State, available at http://www.state.gov/documents/organization/183755.pdf.

100 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 22.

101 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 10-11.

102 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 10-11.

103 See P.L. 111-117, The Department of State, Foreign Operations, and Related Programs Appropriations Act, 2010, Limitation on Assistance for the Palestinian Authority, sec. 7040(b); See Section 7040 (f) of P.L. 111-117. This section would prohibit U.S. assistance to Hamas, but, according to Section 7040 (f) (2), “Notwithstanding the limitation of subsection (1), assistance may be provided to a power-sharing government only if the President certifies and reports to the Committees on Appropriations that such government, including all of its ministers or such equivalent, has publicly accepted and is complying with the principles contained in section 620K(b)(1)(A) and (B) of the Foreign Assistance Act of 1961, as amended.”

104 See “Executive Budget Summary: Function 150 & Other International Programs,” Fiscal year 2013, United States Department of State, available at http://www.state.gov/documents/organization/183755.pdf.

105 Jeremy M. Sharp, “U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2011 Request,” Congressional Research Service, RL32260, June 15, 2010, p. 12.

106 Term first articulated by F. Gregory Gause III, June 20, 2011.

107 See Raymond Hinnebusch, Authoritarian Power and State Formation in Ba’thist Syria, Boulder CO, 1990.

108 See Volker Perthes, The Political Economy of Syria under Asad, London, 1995.

109 Salwa Ismail, “Changing Social Structure, Shifting Alliances and Authoritarianism in Syria,” in Fred H. Lawson ed, Demystifying Syria, SAQI Books, London, 2009, p. 16-17.

110 Volker Perthes, “The Bourgeoisie and the Ba’ath,” Middle East Report, No. 170, 1991, p. 31-37.

111 Salwa Ismail, “Changing Social Structure, Shifting Alliances and Authoritarianism in Syria,” in Fred H. Lawson ed, Demystifying Syria, SAQI Books, London, 2009, p. 18.

112 See “Popular Protest in North Africa and the Middle East (VI): The Syrian People’s Slow Motion Revolution,” Middle East/North Africa Report, International Crisis Group, No. 108, July 6, 2011, p. 8-16.

113 “Syria Country Brief,” The World Bank, September 2010, available at: http://siteresources.worldbank.org/INTSYRIANARAB/Resources/Syria_Web_brief.pdf 114 See Marc Genest, Conflict and Cooperation: Evolving Theories of International Relations, 2nd ed., Belmont CA: Thomson/Wadsworth, 2004; Flynt Leverett, Inheriting Syria: Bashar’s Trial by Fire, Brookings Institution Press, 2005, p. 54.

115 Holly Fletcher, “State Sponsor: Syria,” Council on Foreign Relations, February, 2008; Jeffrey Fields, Adversaries and Statecraft: Explaining U.S. Foreign Policy toward Rogue States, PhD dissertation, University of Southern California, 2007, p. 243, 249.

116 Jeffrey Fields, Adversaries and Statecraft: Explaining U.S. Foreign Policy toward Rogue States, PhD dissertation, University of Southern California, 2007, p. 262-263, 266-269; Robert G. Rabil, Syria, the United States, and the War on Terror in the Middle East, Wesport: Praeger Security International, 2006, p.

88.

117 Paticia Owens, “Beyond Strauss, Lies and War in Iraq,” Review of International Studies, Vol. 33, No. 2, April 2007, p. 266, 271.

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Stephen Zunes, “U.S. Policy toward Syria and the Triumph of Neoconservatism,” Middle East Policy, Vol. 11, No. 1, Spring 2004, p 52-69; Paticia Owens, “Beyond Strauss, Lies and War in Iraq,” Review of International Studies, Vol. 33, No. 2, April 2007, p. 266; Aaron Rapport, “Unexpected Affinities?

Neoconservatism’s Place in IR Theory,” Security Studies, Vol. 7, No. 2, April 2008, p. 289; Charles Krauthammer, “The Neoconservative Convergence,” Commentary, Vol. 120, No. 1, July/August, 2005, p.

25.

119 Eric S. Edelman & Mara E. Karlin, “Fool Me Twice: How the United States Lost Lebanon – Again,” World Affairs, May/June 2011, p. 37-38.

120 Theodore Kattouf, Martha Neff Kessler, Hisham Melhem & Murhaf Jouejati, “When We Meet with Syria, What Should We Say? What Should we Hope to Feat?” Middle East Policy, Vol. 14, No. 2, Summer 2007, p. 6.

121 Bassel F. Salloukh, “Demystifying Syrian Foreign Policy under Bashar al-Asad,” in Fred H. Lawson ed, “Demystifying Syria,” London: Saqi Books, 2009, p. 180.

122 Michel Petrou, “Edging in from the Cold,” MacLeans (Canada), Vol. 122, No. 13, April 13, 2009.

123 Mark Landler, “U.S. will send envoys to engage Syria,” New York Times, September 3, 2009; 124 “Obama Nominates Envoy, Robert Ford, For Syria, Reuters, February 17, 2010.

125 “Syria: Country Analysis Briefs,” The US Energy Information Administration, August 2011, available at http://www.eia.doe.gov.

126 Jeremy M. Sharp,”Unrest in Syria and U.S. Sanctions Against the Asad Regime,” Congressional Research Service, RL33487, August 9, 2011, p. 10-11.

127 Steven Lee Myers, “U.S. and Allies Say Syria Leader Must Step Down,”New York Times, August 18, 2011.

128 Available at http://www.treasury.gov/resource-center/sanctions/Programs/Documents/13572.pdf 129 Available at http://www.gpo.gov/fdsys/pkg/FR-2011-05-20/pdf/2011-12645.pdf.

130 Available at http://www.treasury.gov/resource-center/sanctions/OFACEnforcement/Pages/20110629.aspx 131 Jeremy M. Sharp,”Unrest in Syria and U.S. Sanctions Against the Asad Regime,” Congressional Research Service, RL33487, August 9, 2011, p. 12.

132 Available at http://www.treasury.gov/resource-center/sanctions/OFACEnforcement/Pages/20110810.aspx 133 Available at http://www.treasury.gov/resourcecenter/sanctions/Programs/Documents/syria_eo_08182011.pdf.

134 Available at http://www.treasury.gov/resource-center/sanctions/OFACEnforcement/Pages/20110818.aspx 135 Available at http://www.treasury.gov/resource-center/sanctions/OFACEnforcement/Pages/20110830.aspx 136 Jeremy M. Sharp, “Unrest in Syria and U.S. Sanctions Against the Asad Regime,” Congressional Research Services, RL33487, November 9, 2011, p. 7.

137 Jeremy M. Sharp, “Unrest in Syria and U.S. Sanctions Against the Asad Regime,” Congressional Research Services, RL33487, November 9, 2011, p. 7.

138 Jeremy M. Sharp, “Unrest in Syria and U.S. Sanctions Against the Asad Regime,” Congressional Research Services, RL33487, November 9, 2011, p. 7.

139 Author’s interview with US Department of Defense personnel, February 2012.

140 For the full committee hearings, see “Violence and Political Unrest in Syria,” C-SPAN Video Library, March 7, 2012, available at http://www.c-spanvideo.org/program/304769-1.

141 Lauren Gelfand, “Syrian deliveries of Pantsir SAM begin,” Jane’s Defense Weekly, August 25, 2009, available at http://jdw.janes.com; Lauren Gelfand, “Russia targets revival of defense deals with Syria,” Jane’s Defense Weekly, May 20, 2010, available at http://jdw.janes.com.

142 This unclassified description is adapted from Wikipedia, “Pantsir S1,” http://en.wikipedia.org/wiki/Pantsir-S1. Syria took delivery on a later model of the system with upgraded radars and missiles.

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“Russia sends ship-killer missiles to Syria” UPI, December 5, 2011; “Russia Delivers Missiles to Syria: Report,” Defense News, December 1, 2011; Doug Richardson, “Russia to supply Yakhont anti-ship missiles to Syria,” Jane’s Missiles & Rockets, October 5, 2010, available at http://www.janes.com.

144 Richard Scott, “Russia’s anti-ship arsenal targets export markets,” Jane’s Navy International, October 1, 2003, available at http://www.janes.com; Doug Richardson, “Russia to supply Yakhont anti-ship missiles to Syria,” Jane’s Missiles & Rockets, October 5, 2010, available at http://www.janes.com.

145 Adam Entous & Matthew Rosenberg, “U.S. Says Iran Helps Crackdown in Syria,” Wall Street Journal, April 14, 2011.

146 Short for Brazil, Russia, India, China and South Africa.

147 Neil MacFarquhar, “With Rare Double U.N. Veto on Syria, Russia and China Try to Shield Friend,” The New York Times, October 5, 2011.

148 Author’s interview with US security assistance officer, name withheld, June 2010; Author’s interview with LAF procurement officer, name withheld, 2009, 2010.

149 As one senior officer put it, “when it comes to procurement and planning, we expected the US to teach us how to fish; not ask us to build a fishing rod.” Author’s interview with senior LAF officer, July 2010.

150 Author’s interview with LAF senior officers, names withheld, September 2011.

151 “Trial By Fire: The Politics of the Special Tribunal for Lebanon,” Middle East Report, No. 100, December 2010, International Crisis Group, p.4.

152 “STL indicts 4 Hezbollah members, seeks arrests,” The Daily Star, June 30, 2011.

153 “Palestine, Israel and Lebanon: Politics and Peace Prospects,” International Peace Institute with Charney Research, December 8, 2010.

154 “Lebanese: Hariri Tribunal Untruthful,” Information International, August 23, 2010, available at http://information-international.com/info/index.php/component/content/article/42-rokstories/570-lebanesehariri-tribunal-untruthful-.

155 David Pollock, “Case Closed,” ForeignPolicy.com, January 20, 2011.

156 See “Trial By Fire: The Politics of the Special Tribunal for Lebanon,” Middle East Report, No. 100, December 2010, International Crisis Group.

157 Author’s interview with former UN Hariri Commission representative, September 2011.

158 Author’s interview with senior legal advisor and counsel to Hezbollah, 2010, 2011.

159 Michael C. Hudson, “To Play the Hegemon: Fifty Years of US Policy toward the Middle East,” Middle East Journal, Vol. 50, No. 3, summer, 1996, pp. 334; John C. Campbell, Defense of the Middle East, New York: Harper and Row, 1958, p. 4-5, 351-352.

160 Anthony H. Cordesman, “Israel as a Strategic Liability?” Center for Strategic and International Studies, June 2, 2010, available at http://csis.org/publication/israel-strategic-liability; Jonathan Lis, “Mossad chief: Israel gradually becoming burden on U.S.,” Haaretz, June 1, 2010; Zeev Maoz, Defending the Holy Land: A Critical Analysis of Israel’s Security & Foreign Policy, Ann Arbor: University of Michigan Press, p.

361-385.

161 “U.S.-Israel Strategic Link: Both Sides Take Stock,” New York Times, October 2, 1981; Jeremy M. Sharp, “U.S. Foreign Aid to Israel,” Congressional Research Service, RL33222, September 16, 2010, p.

12.

162 Jeremy M. Sharp, “U.S. Foreign Aid to Israel,” Congressional Research Service, RL33222, September 16, 2010, p. 8.

163 Haim Malka, Crossroads: The Future of the U.S.-Israel Strategic Partnership, Washington DC: The Center for Strategic & International Studies, 2011, p. 52.

164 See Anthony H. Cordesman, Aram Nerguizian & Ionut C. Popescu, Israel and Syria: The Military Balance and the Prospects of War, London: Praeger Security International, 2008, p. 90-91.

165 Yoni Dayan, “Barak: Fall of Assad would be a ‘blessing for ME,” Jerusalem Post, November 12, 2011.

166 Jim Zanotti, U.S. Foreign Aid to the Palestinians,” Congressional Research Service, RS22967, May 31, 2011, p. 3.

167 Jim Zanotti, U.S. Foreign Aid to the Palestinians,” Congressional Research Service, RS22967, May 31, 2011, p. 9.

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Yezid Sayigh, “Policing the People, Building the State Authoritarian Transformation in the West bank and Gaza, Carnegie Papers, February 2011, p. 10-11.

169 Patrick Worsnip, “U.N. council Considers Palestinian membership bid,” Reuters, September 26, 2011; “Palestinian unity deal heralds abrupt shift in regional dynamics,” Jane’s Intelligence Weekly, April 28, 2011, available at https://jiw.janes.com.

170 “Palestinian unity deal heralds abrupt shift in regional dynamics,” Jane’s Intelligence Weekly, April 28, 2011, available at https://jiw.janes.com.

171 “Palestinians sign reconciliation agreement,” Jane’s Intelligence Weekly, May 5, 2011, available at https://jiw.janes.com.

172 “Palestinian reconciliation agreement in danger of collapse,” Jane’s Intelligence Weekly, July 15, 2011, available at https://jiw.janes.com.

173 “Palestinian reconciliation agreement in danger of collapse,” Jane’s Intelligence Weekly, July 15, 2011, available at https://jiw.janes.com.

174 Mohammed Najib, “Iran ‘using PIJ rocket attacks on Israel to force hamas support for Assad,” Jane’s Defense Weekly, August 5, 2011, available at https://jdw.janes.com.

175 Doug Richardson, “Iron Dome deployed for further action,” Jane’sMissiles & Rockets, August 9, 2011, available at https://www.janes.com.

176 “Palestinian militants in Gaza Strip fire two Grad rockets into Israel’s Southern district,” Jane’s Terrorism Watch Report, August 19, 2011, available at https://www.janes.com.

177 “Israeli aircraft strike Gaza after day of terrorist attacks,” Jane’s Intelligence Weekly, August 19, 2011, available at https://www.janes.com.; “Hamas Official Denies involvement in Israel attacks,” Jane’s Terrorism Watch Report, August 19, 2011, available at https://www.janes.com.

178 David Hartwell & Mohammed Najib, “Syrian unrest unnerves Hamas,” Jane’s Islamic Affairs Analyst, August 18, 2011.

179 Fares Akram, “Hamas Leader Abandons Longtime Base in Damascus,” New York Times, January 27, 2012.

180 Fares Akram, “In Break, Hamas Supports Syrian Opposition,” New York Times, February 24, 2012.

181 Fares Akram & Isabel Kershner, “Hamas Premier Visits Iran in Sign of Strong Relations,” New York Times, February 10, 2012.

182 Chris McGreal, “Abbas defies US with formal call for Palestinian recognition by UN,” The Guardian, September 23, 2011.

183 Joel Greenberg, “Palestinian statehood bid stokes tensions in West Bank,” The Washington Post, September 28, 2011.

184 Mark Landler & Steven Lee Myers, “Obama Sees ’67 Borders as Starting Point for Peace Deal,” The New York Times, May 19, 2011.

185 Helene Cooper, “Obama Says Palestinians Are Using Wrong Forum,” The New York Times, September 21, 2011.

186 “Iran ‘totally rejects’ Palestine U.N. statehood bid,” Al Arabiya, October 1, 2011; 187 Ali E. Hillal Dessouki, “Regional Leadership: Balancing off Costs and Dividends in the Foreign Policy of Egypt,” in Bahgat E. Korany & Ali E. Hillal Dessouki Ed, The Foreign Policy of Arab States: The Challenges of Globalization, New Revised Edition, New York NY: The American University of Cairo Press, 2008, p. 169.

188 Jeremy M. Sharp, “Egypt: Background and U.S. Relations,” Congressional Research Service, RL33003, September 2, 2009, p. 11.

189 Ali E. Hillal Dessouki, “Regional Leadership: Balancing off Costs and Dividends in the Foreign Policy of Egypt,” in Bahgat E. Korany & Ali E. Hillal Dessouki Ed, The Foreign Policy of Arab States: The Challenges of Globalization, New Revised Edition, New York NY: The American University of Cairo Press, 2008, p. 169.

190 David D. Kirkpatrick & Steven Lee Myers, “Egypt Raids Offices of Nonprofits, 3 Backed by U.S.,” New York Times, December 29, 2011.

191 David D. Kirkpatrick & Steven Lee Myers, “Egypt Says it Will Lift Travel Ban, Allowing American Defendants to Leave,” New York Times, February 29, 2012.

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Jeremy M. Sharp, “Egypt: Background and U.S. Relations,” Congressional Research Service, RL33003, September 2, 2009, p. 12-13.

193 Liam Stack & Nicholas Blanford, The Christian Science Monitor, April 15, 2009; Michael Slackman, “Egypt Accuses Hezbollah of Plotting Attacks and Arms Smuggling to Gaza,” The New York Times, April 13, 2009.

194 “Egypt to Bolster Gaza Border,” Washington Post, January 7, 2008.

195 Author’s interview with US government officials, names withheld, January, 15, 2010; “Three Decades of Weapons, Training for Egypt Keep U.S. in Loop, Bloomberg, February 2, 2011.

196 Jeremy M. Sharp, “Egypt in Transition,” Congressional Research Service, RL33003, June 17, 2011, p.

1-4.

197 Jeremy M. Sharp, “Egypt in Transition,” Congressional Research Service, RL33003, June 17, 2011, p.

6.

198 Maggie Michael, “Official: 5 Egypt police killed on Israeli Border,” The Guardian, August 19, 2011.

199 Michael Birnbaum & Ingy Hassieh,” The Washington Post, September 10, 2011.

200 Molly Hennessy-Fiske, “Iran: Officials praise Egyptian uprising, stifle domestic protests,” The Los Angeles Times, February 11, 2011.

201 “Iran: Egypt protests are sign of ‘Islamic Renaissance’,” Reuters & Haaretz Service, February 3, 2011.

202 “Iran warns opposition against supporting Egypt protests,” The Associated Press, February 9, 2011.

203 Jeremy M. Sharp, “Egypt in Transition,” Congressional Research Service, RL 33003, August 23, 3011, p. 12.

204 See Bassel F. Salloukh, “State Strength, Permeability and Foreign Policy Behavior: Jordan in Theoretical Perspective,” Arab Studies Quarterly, Vol. 18 No. 2, 1996; Ali E. Hillal Dessouki & Karen Abdul Kheir, “Foreign Policy as a Strategic National Asset: The Case of Jordan,” in Bahgat E. Korany & Ali E. Hillal Dessouki Ed, The Foreign Policy of Arab States: The Challenges of Globalization, New Revised Edition, New York NY: The American University of Cairo Press, 2008.

205 East Bank Jordanians or “East Bankers” are terms often used to describe tribal, Bedouin, Hijazi and other groups living on the east bank of the Jordan river. This distinguishes from the population of Palestinians from the west bank of the Jordan River.

206 Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011, p. 7.

207 See Laurie A. Brand, “In Search of Budget Security: Jordanian Foreign Policy,” in L. Carl Brown ed, Diplomacy in the Middle East: The International Relations of Regional and Outside Powers, New York NY: I. B. Tauris, p. 139-158.

208 See Bassel F. Salloukh, “State Strength, Permeability and Foreign Policy Behavior: Jordan in Theoretical Perspective,” Arab Studies Quarterly, Vol. 18 No. 2, 1996; See Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011.

209 See Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011.

210 Jordan Times, October 8, 2001.

211 Curtis R. Ryan, “Jordan First”: Jordan’s Inter-Arab Relations and Foreign Policy Under King Abdullah II,” Arab Studies Quarterly, Vol. 26 No. 3, Summer 2004, p. 54.

212 See “Country Studies – Jordan: Jordan in the 1980s,” Library of Congress, available at http://lcweb2.loc.gov/frd/cs/jotoc.html; Will Fulton, Ariel Farrar-Wellman & Robert Frasco, “Jordan-Iran Foreign Relations,” Iran Tracker, American Enterprise Institute, August 11, 2011, available at http://www.irantracker.org/foreign-relations/jordan-iran-foreign-relations.

213 “Jordan speaker: Iran a threat to stability,” UPI, May 25, 2006.

214 Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011, p.21.

215 Based on data from the Congressional Budget Justification for Foreign Operations, various fiscal years and the IISS Military Balance, various editions.

216 Jim Zanotti, “U.S. Foreign Aid to the Palestinians,” Congressional Research Service, RS22967, May 31, 2011, p. 9.

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“The Revolt of Jordan’s Military Veterans,” ForeignPolicy.com, June 16, 2010; “Tribesmen in Jordan Issue Urgent Call for Political Reform,” New York Times, February 7, 2011; Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011, p. 2-4.

218 Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011, p. 12; “Jordan,” Country Report, Economist Intelligence Unit, September 2011, p. 3-5, 10, 14.

219 Approximately 140 US Dollars in late 2011.

220 “Jordan,” Country Report, Economist Intelligence Unit, September 2011, p. 13.

221 The development is significant given Jordan’s application for membership to the GCC was rejected first during the 1980s and then again in 1996. See Jeremy M. Sharp, “Jordan: Background and U.S. Relations,” Congressional Research Service, RL33546, June 21, 2011, p.2.

222 “Jordan,” Country Report, Economist Intelligence Unit, September 2011, p. 12-14.

223 “Jordan,” Country Report, Economist Intelligence Unit, September 2011, p. 12-14.

224 Herb Keinon, “Anti-normalization forces gaining strength in Jordan,” The Jerusalem Post, August 9, 2011.

225 Joel Greenberg, “In Jordan, low turnout for anti-Israel march,” The Washington Post, September 15, 2011.

226 “Israeli ambassador returns to embassy in Amman,” The Jerusalem Post, September 16, 2011.

227 Joel Greenberg, “In Jordan, low turnout for anti-Israel march,” The Washington Post, September 15, 2011.

228 “Jordanian Islamists urge “jihad” against Syrian regime,” NOW Lebanon, February 12, 2012.

229 Tobias Buck, “Jordan’s king meets political leader of Hamas,” Financial Times, January 29, 2012.

230 Author’s interview with UNFIL civil and military personnel, names withheld, August 10, 2010; Author’s interview with senior LAF officer, name withheld, July 7, 2011.

231 See Michael Ratner, “Israel’s Offshore Natural Gas Discoveries Enhance Its Economic and Energy Outlook,” Congressional Research Service, R41618, January 31, 2011.

232 “Assessment of Undiscovered Oil and Gas Resources of the Levant Basin Province, Eastern Mediterranean,” World Petroleum Resources Project, US Geological Survey, March 2010, available at http://pubs.usgs.gov/fs/2010/3014/pdf/FS10-3014.pdf.

233 “Syria,” The World Factbook, Central Intelligence Agency, updated November 29, 2011.

234 See Fred H. Lawson, “Syria’s Relations with Iran: Managing the Dilemmas of Alliance,” Middle East Journal, Vol. 61, No. 1, 2007.

235 Aram Nerguizian, “The Crisis in Syria,” CSIS, February 8, 2012, http://csis.org/publication/crisis-syria; Tim Arango and Duraid Adnan, “For Iraqis, Aid to Rebels in Syria Repays a Debt,” New York Times, February 12, 2012; Tim Arango, “Syria’s Sectarian Fears Keep Region on Edge,” New York Times, February 28, 2012.

236 Fares Akram & Isabel Kershner, “Hamas Premier Visits Iran in Sign of Strong Relations,” New York Times, February 10, 2012.

a report of the csis burke chair in strategy

The United States and Iran: Competition involving Turkey and the South Caucasus Authors Varun Vira Erin Fitzgerald Brandon Fite

March 2012

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Executive Summary US and Iranian efforts to bolster their strategic ties to Turkey and the Caucasus are becoming a steadily more significant aspect of their confrontation. The region holds both immense attractions in both geopolitical and economic terms for the United States and Iran, but also complex challenges.

Turkey’s primary political, economic, and security ties are with the West, although the ruling Justice and Development Party (AKP) has also sought to strengthen relations with its Middle Eastern and Central Asian neighbors. There is growing competition for influence in Ankara between the United States and Iran as it “looks East” in reaction to de facto rejection by the EU, wrestles with tensions with the US since invasion of Iraq, and deals with the Islamist versus secular struggle in Turkish politics.

These trends have had a mixed impact on Turkey’s relations with the US and Iran. They create growing challenges for the US in maintaining military and strategic relations with Turkey. Due to having previously fought a protracted war against PKK insurgents and to continuing fears of Kurdish separatism, Turkey opposed the US intervention in Iraq, thinking that it would cause instability along its southern flank. As a result, during pre-deployment for Operation Iraqi Freedom in 2003, Turkey denied US troops the permission to transit or stage operations from its territory.

At the same time, conflicting regional ambitions make Turkey a natural regional competitor with Iran – one that largely shares the United States’ strategic goal in making sure that the Middle East remains outside Iranian control. From Iran’s perspective, their relationship is clouded by Turkey’s military ties to the US, as well as by strong political, religious and historical differences. Turkey, after all, remains a secular Sunni state that has little affinity for many aspects of Iran’s Islamic Revolution. Yet, Iran is still likely to attempt to exploit the new tensions in the US-Turkish relationship to increase its influence in Ankara, to evade American sanctions, and to use Turkey as a key corridor for its energy exports.

Turkey has pursued a “zero-problems” policy under the AKP government, reorienting Turkish relations with all neighboring countries, including Iran, primarily through economic engagement.

Since then, although Turkey remains a committed member of the Western security bloc, it has attempted to act as a mediator for hot button foreign policy issues in Central Asia and the Caucasus, Iran among them. While this has caused some apprehension in US policy circles, Turkey nonetheless it remains a reliable, if complex, ally. As such, the US must realize that it needs to rely on dialogue, rather than assume Turkey should share its approach and policies.

While Turkey is of critical interest to both competitors, the Caucasus are in many ways a strategic sideshow for the US, but of direct strategic interest to Iran. Armenia and Azerbaijan’s importance in US and Iranian competition lies largely in whether they can help the US limit Iran’s influence in the Black Sea area, as well as in their impact on energy export routes.

The US faces many of the same issues in dealing with Azerbaijan in terms of Iran that it does in dealing with Turkey. Its location on Iran’s periphery and access to Caspian and Middle Eastern energy reserves are assets that both Iran and the US value. Azerbaijan maintains close ties with the US, serving as an extremely significant part of the US logistical effort to sustain operations in Afghanistan. However, Iran remains a significant power in the region, and Baku can afford to neither provoke nor ignore it.

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In Armenia, meanwhile, Iran plays a significant economic role and has bolstered its influence by playing on a mutual wariness of Azerbaijan and Turkey. Armenian relations with Iran are focused on trade and are of critical importance, since Armenian borders with Turkey and Azerbaijan are closed due to historic tensions with Turkey and the unresolved Nagorno Karabakh conflict with Azerbaijan. Desperately needing a regional ally, Armenia has welcomed Iranian support. While the United States has been a strategic partner of Armenia without taking sides against Azerbaijan, it is clear that here Iran is the closer ally. Once again, the challenge for the US will be to focus on incentives and good relations while quietly applying pressure and avoiding any open confrontation.

At present, US and Iranian competition does not have a clear, substantive impact on the other Black Sea states. Georgia is not central to US-Iranian strategic competition, given its close alignment with the United States. While Georgia and Iran share a vibrant trade relationship, the Georgian foreign policy preoccupation of limiting Russian meddling in its internal affairs takes precedence and it is Washington which provides the strongest countervailing weight against Russian influence. Policymakers in Tbilisi are likely to continue to see ties with the United States as the best hedge against Russian aggression, making it unlikely that they will support Iran in any major security disputes with Washington.

In sum, strategic competition is not the primary consideration for US and Iranian policy in this region. Both countries have specific evolving interests that are likely to shift in the hierarchy of each country’s grand strategic objectives in the post-Iraq and post-Afghan era. The manner of US withdrawal from the region, and the nature of broader US-Iranian competition will likely affect the manner and scale of each country’s engagement with Turkey and the South Caucasus, although the region is likely to remain of interest due its economic importance and energy wealth.

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Contents Turkey ......................................................................................................................................... 5 Turkish Relations with the US ................................................................................................ 6 The Impact of Turkish-Israeli Relations and Problems in US-Turkish Relations .................. 9 Figure 8.1: Turkey as an East-West Energy Corridor................................... 12 Turkish Relations with Iran .................................................................................................. 12 Differences in the US and Turkish Approach to Iran’s Nuclear Program ............................ 15 Implications for US Policy.................................................................................................... 16 The Black Sea and the South Caucasus .................................................................................... 18 Figure 8.2: US Foreign Aid to South Caucasus States, 1991-2010 and FY 2012 Request ................................................................................................. 19 Azerbaijan ................................................................................................................................. 19 US Cooperation with Azerbaijan .......................................................................................... 19 US-Azeri Tensions That Might Give Iran Added Influence ................................................. 21 Iranian-Azerbaijani Relations ............................................................................................... 21 Other Issues and Future Relations ........................................................................................ 22 Implications for US Policy.................................................................................................... 24 Armenia..................................................................................................................................... 24 Armenia and Iran .................................................................................................................. 25 Impact on US-Iranian Competition....................................................................................... 26 Implications for US Policy.................................................................................................... 27 Georgia ...................................................................................................................................... 27 US Relations with Georgia ................................................................................................... 27 Iranian Relations with Georgia ............................................................................................. 28 Implications for US Policy.................................................................................................... 29

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United States and Iranian efforts to bolster their strategic ties to Turkey and the Caucasus are becoming a steadily more significant aspect of US and Iranian competition, and one with a direct impact on which power has the most influence in Iraq.

Turkey: 

The competition for influence in Ankara is growing as Turkey “looks East” in reaction to de facto rejection by EU, tensions with the United States stemming from the invasion of Iraq, and secular compromises with Islamist factions in Turkish politics. This is creating growing challenges for the US in maintaining military and strategic relations with Turkey. Having previously fought a protracted war against PKK insurgents, Turkey is particularly cautious about an independent Kurdish state arising from a destabilized Iraq.

At the same time, due to recent tensions, Turkey relations with Israel may be cooling. In order to weaken Turkish ties to the US and Israel, Iran will seek to exploit these issues, to increase its influence in Turkey at the expense of the United States, and to use Turkey as a means of evading American sanctions and as a key corridor for its energy exports.

Armenia and Azerbaijan 

In many ways, Armenia and Azerbaijan are strategic sideshows for the US, but of direct strategic interest to Iran. Their importance in US and Iranian competition lies largely in whether they can help the US limit Iran’s influence in the Black Sea area, as well as in their impact on energy export routes.

The Other Black Sea States 

At present, US and Iranian competition does not have a clear, substantive impact on the other Black Sea states.

Turkey US and Iranian competition is particularly important in the case of Turkey. Turkey's primary political, economic, and security ties are still with the West, although the ruling Justice and Development Party (AKP) government has sought to strengthen relations with Iran as well as its other its Middle Eastern and Central Asian neighbors. Some analysts believe this shift will come at the expense of the US, and be affected by the deterioration of Israeli-Turkish relations, but this is still uncertain.

Turkey has a key strategic position. It controls the Bosporus Straits leading from the Black Sea to the Aegean and shares a border with Syria, Iraq, and Iran. Turkey entered NATO in 1952 and NATO’s Air Component Command Headquarters is located in Izmir and NATO’s Rapid Deployable Corps-Turkey is headquartered in Istanbul. Furthermore, it is an important commercial power in the region and could be central to US efforts to economically isolate Iran through sanctions.

Turkey is also becoming a major energy-transit nation that links Caspian, Middle Eastern and Central Asian suppliers with their European consumers, and an alternative east-west route to those monopolized by Russia. Turkey has been a major transit point for seaborne traded oil and is becoming more important for pipeline-traded oil and natural gas, with significant volumes transported to westward to Europe. Growing volumes of Russian and Caspian oil are being sent

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by tanker via the Bosporus Straits to Western markets while a terminal on Turkey's Mediterranean coast at Ceyhan allows the country to export oil from northern Iraq and Caspian suppliers, notably Azerbaijan.1 These trends have had a mixed impact on Turkey’s relations with the US and Iran. Competing regional ambitions, a complicated historical relationship, and religious and political differences make Turkey a natural regional competitor with Iran – one that largely shares the United States’ strategic goal in making sure that the Middle East remains outside Iranian control. Yet, despite this broad array of shared interests, the US and Turkey have entered a new era in their relationship, marked by both conflict and collaboration, and one that Iran is likely to attempt to exploit. Furthermore, although Turkey remains a committed member of the Western security bloc, it has attempted to act as a mediator in hot button foreign policy issues in Central Asia and the Caucasus that directly affect Iran.

Turkey has undergone considerable change since the collapse of the Soviet Union. Reforms began under the government of Turgut Ozal in the early 1990s, but it was an EU decision to make Turkey a candidate for membership in 1999 that “catalyzed an era of revolutionary change.” As a result, between 1999 and 2002, a broad left-right coalition oversaw remarkable reforms in Turkey: the rewriting of one-third of the Turkish constitution, the enactment of international human rights legislation, measures to discourage torture, and new laws curtailing restrictions on freedom of expression, civil society, and the media. Some difficult and expensive reforms have slowed since 2007, however, when French Prime Minister Sarkozy and German Chancellor Merkel expressed their opposition to Turkish accession to the EU. Turkey is also witnessing some erosion in its strong secular tradition as the moderate Islamist AKP government of Prime Minister Erdogan has gained in influence. The Turkish military was “persuaded” to relinquish some of its authority, accept more transparent defense budgets, and curb its influence in the judicial system.2 Prime Minister Erdogan and the AKP have steadily grown in popularity and influence as Turkey has experienced years of economic growth and effective civil governance. Another election victory in 2011 further weakened the political powers of the military, forcing the resignation of virtually the entire Turkish high command in late July 2011.

Turkish Relations with the US Turkey has been a crucial partner for the United States and plays an important role in US strategy. In his first major overseas trip in 2009, President Obama spoke in front of the Turkish parliament and described the country as a “critical ally” and an “important part of Europe.”

During the Cold War, the United States granted Turkey extensive aid that today totals more than $12.5 billion in economic aid and more than $14 billion in military assistance.3 This flow has slowed considerably since the Gulf War, with US foreign assistance amounting to about $15 million in 2009 and $8 million in 2010. The US and Turkey are, in general terms, not major trading partners, with Turkey ranking 28th among countries to which the US exports merchandise

1

http://205.254.135.24/countries/cab.cfm?fips=TU

2

http://www.crisisgroup.org/en/regions/europe/turkey-cyprus/turkey/Pope-Turkey-Pax-Ottamana.aspx

3

http://www.state.gov/r/pa/ei/bgn/3432.htm#relations

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and 48th among countries from which it imports goods.4 However, the US is Turkey’s most important arms supplier, and US entities may be involved in as much as 80 percent of Turkey’s defense-industrial activities.5 Turkey remains a close security partner of the US, and has cooperated with the US on many regional issues. The US and Turkey also cooperate in areas like sharing intelligence in Turkey’s fight against ethnic Kurdish insurgents, helping to ensure the smooth withdrawal of US troops from Iraq and Afghanistan, cooperating against al-Qaeda factions, and partnering in various regional mediations, including between the Israelis and the Syrians, and the Israelis and the Palestinians, and between Palestinian factions.

In spite of such cooperation, there are serious tensions in the relationship. The rise of the Justice and Development Party (AKP) in Turkey since 2002, and of its charismatic leader, Recep Tayyip Erdogan, has created a significant division between Islamist and secular forces in Turkish politics. Some analysts have suggested that under the stewardship of Erdogan and Turkish Foreign Minister Ahmed Davutoglu, Turkey has begun to pursue a policy that “Looks East,” in reaction to de facto rejection by EU, and has moved towards regional engagement to compensate.

US Embassy cables released by “Wikileaks” highlight growing concerns amongst US officials over the long-term trajectory of Turkish policy. These include worries over growing Islamism and anti-Americanism inside Turkey, as well as uncertainty over the country’s newer foreign policy alignments.6 This uncertainty is exacerbated by President Erdogan’s regular criticisms of US foreign policy at various international forums.

Tensions between the two countries stem from some of the United States’ policies in the region.

Turkey cooperated extensively with the US during the 1991 Gulf War, but failed to elicit the regional payoff it had hoped for. Instead, the US-led economic blockade of Iraq during the 1990s forced Turkey to close its eastern border, costing billions of dollars in trade and increasing poverty in its southeastern provinces.7 As a result of this and of continuing fears of Kurdish separatism, Turkey opposed the US intervention in Iraq, thinking that it would the potential for instability along its southern flank, from Sunni-Shiite conflict and Kurdish irredentism.

As a result, during pre-deployment for Operation Iraqi Freedom in 2003, Turkey denied US troops the ability to transit or stage operations from its territory. Turks also remember the “Hood Event” in July 2003, following the US invasion, when Turkish Special Forces soldiers operating in Northern Iraq were briefly arrested, hooded, and interrogated by US military personnel. This further inflamed tensions, and reinforced anti-American sentiment in Turkey.

Since that time, however, Turkey has generally supported US efforts in Iraq to prevent any crossborder violence from Kurdish separatists and terrorists such as the PKK, but also to gain influence in oil-rich Iraqi Kurdistan. Turkey has continued to permit the use of Incirlik Air Base for the transport of non-lethal cargo in support of US operations. Furthermore, once US troops Carol Migdalovitz, “Turkey: Selected Foreign Policy Issues and US Views,” Congressional Research Service, November 28, 2010. Available at http://www.fas.org/sgp/crs/mideast/RL34642.pdf 4

5

http://www.silkroadstudies.org/new/inside/turkey/2011/110530B.html

6

http://www.ibtimes.com/articles/86488/20101129/turkey-us-wikileaks-cable-iran-ankara.htm

7

Steven Kinzer, “Reset: Iran, Turkey and America’s Future,” (NY: Henry Holt Publishing, 2010), pg. 131.

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had committed to Iraq, Turkey was one of the first countries to offer troops – as many as 10,000 – in support of the US mission.8 The deployment was later cancelled due to fierce Iraqi opposition. In 2008, Turkish troops mounted a brief incursion into Iraq against the PKK, utilizing about 10,000 soldiers backed by armor and air assets. The incident attracted a great deal of media attention, but there are indications that even before the incursion, some Turkish troops were forward deployed inside Iraq with the consent of the Kurdish peshmerga, and presumably with the knowledge of US forces.9 These examples of Turkish assistance help explain why many analysts and senior US officials, including Defense Secretary Robert Gates, have urged a measure of understanding for Turkey’s positions. In June 2010, he said, "I personally think that if there is anything to the notion that Turkey is, if you will, moving eastward, it is, in my view, in no small part because it was pushed, and pushed by some in Europe refusing to give Turkey the kind of organic link to the West that Turkey sought."10 Moreover, Turkey has every reason to share the US goal of creating a stable Iraq and acts as Iran’s primary competitor for influence in the country. In a historic policy shift, Turkey has worked to normalize relations with the Kurds of northern Iraq – in part to gain access to huge gasfields of Iraqi Kurdistan – and has invested heavily in Iraq with bilateral trade reaching $6 billion in 2010. Trade is now more than double that of 2008,11 the year when Turkish Prime Minister Erdogan became the first Turkish head of state to visit Baghdad in nearly two decades.12 Iraqi politicians have often turned to Turkey for help with internal political issues. In October 2010, Iraqi Prime Minister Nour al-Maliki, who has himself in the past had tense relations with the Turks, travelled to Ankara for talks on resolving stalled efforts to form a government in the aftermath of the 2010 Iraqi parliamentary elections.13 The Turkish government has also been critical of Iran’s actions in Iraq. It openly rebuked the Iranian government for its efforts to influence the 2010 elections, and has criticized Iran for actions that increase the sectarian divide within Islam. Turkish firms also compete with Iranian ones for reconstruction contracts across the country. Recently, a Turkish consortium outbid an Iranian group for a $11 billion contract to renovate Sadr city, Baghdad’s largest Shiite neighborhood, and a presumed center of Iranian power inside Iraq.14 Turkey has supported the fighting in Afghanistan in its capacity as a member of NATO and has made military, training and development contributions to the ISAF effort. Turkey has commanded ISAF four times (2002, 2005, 2009-2010, and 2010-2011), currently commands Regional Command Capital, and has set up two Provincial Reconstruction Teams in Wardak and

8

http://news.bbc.co.uk/2/hi/europe/3172228.stm

9

http://www.telegraph.co.uk/news/worldnews/1567458/The-Turkish-troops-inside-Iraq.html

10

http://www.bbc.co.uk/news/10275379

11

http://www.nytimes.com/2011/01/05/world/middleeast/05turkey.html

12

http://uk.reuters.com/article/2008/07/10/uk-iraq-idUKL1039555320080710

http://www.todayszaman.com/news-225053-102-maliki-visits-turkey-for-talks-on-government-crisis-iniraq.html 13

14

http://www.npr.org/2010/12/31/132475910/turkey-flexes-economic-political-muscle-in-iraq

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Jowzjan Provinces, with approximately 1700 troops stationed in Afghanistan. 15 In these regions, Turkey has chosen to focus on three Afghan challenges: Wahhabism and Pashtun nationalism; the chronic antagonism between Afghanistan and Pakistan; and the country’s security forces deficit.

The Impact of Turkish-Israeli Relations and Problems in US-Turkish Relations Turkish relations with Israel have chilled in recent years and Tel Aviv has claimed that Ankara is strengthening “its identification and cooperation with Iran.” However, the outgrowth of tensions between the two countries is largely independent of Iran. The 2008-09 War in Gaza, was launched during Turkish-mediated talks between Israel and Syria over the Golan Heights, which greatly angered the AKP government. Prime Minister Erdogan criticized Israeli President Shimon Peres at the World Economic Forum over Gaza, publicly calling him a “liar” and a “killer” in front of other delegates. By mid-2010, polling showed that 78 percent of Israelis considered Turkey as an “enemy.”16 The Mavi Marmara incident in end-May 2010, in which Israeli commandos raided a Turkish flotilla headed for Gaza and killed eight Turkish citizens, further inflamed tensions, which remain high more than a year later. In the aftermath of the raid, Turkey recalled its ambassador and has downgraded diplomatic relations, with a charge d’affaires now the highest representative at the embassy in Tel Aviv. In July 2011, Turkey reiterated its demand for an apology from Israel and has threatened to further downgrade relations.17 A rapid recovery in Turkish-Israeli relations does not appear likely, especially not while the current governments are in power, and perhaps for much longer. However, it is important to note that bad as the relationship may be, it nowhere near approaches the hostility between Tehran and Israel. Erdogan’s three conditions for ending the crisis – “an apology, compensation to the victims and the lifting of the Gaza siege” – are considered rather lenient by Tehran, which would like to see the conditions widened to encompass the return of Arab lands, including the Golan Heights.18 This worsening relationship with Israel has affected American domestic politics and relations with Turkey. In mid-2010, President Obama warned that Congressional suspicion of Turkish motives and declining confidence in Turkey as a dependable long-term ally could affect US and Turkish relations, and warned of its potential impact on bilateral relations, particularly on military supply.19 There have been other tensions in US-Turkish relations. These include a controversy over the sale of unmanned drone aircraft to combat PKK separatists, and in March 2011, it was reported that the planned Turkish procurement of 100 F-35 Lightning II multirole fighters had been ISAF, “Turkey: Troop Numbers and Contributions,” NATO (2011). Available at: http://www.isaf.nato.int/troop-numbers-and-contributions/turkey/index.php 15

“78 pct of Israelis view Turkey as enemy: poll,” Agence France Presse, June 10, 2010. Available at http://www.google.com/hostednews/afp/article/ALeqM5h-VvhgxjVcleA21QBUCJULnxU0gg 16

Alexandra Hudson, “Turkish PM demands Israeli apology for flotilla dead,” Reuters, July 23, 2011. Available at http://www.reuters.com/article/2011/07/23/us-turkey-palestinians-idUSTRE76M1DV20110723 17

18

http://www.atimes.com/atimes/Middle_East/MG26Ak01.html

19

http://www.defensenews.com/story.php?i=4747524

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stalled over a US refusal to share key pieces of technology, including the “source code.”20 Turkey also opposed the deployment of a US ballistic missile defense system on Turkish soil, for fear of damaging relations with Russia.21 Despite these reported tensions, other arms sales have continued. In June 2011, Turkey partnered with US company Sikorsky in a $3.5 billion deal to provide Turkey’s next generation of utility helicopters.22 At the 2010 Lisbon NATO summit, Turkey also supported the development of an anti-missile system to protect members from medium-range threats, though at the time it demanded that language labeling Iran as a source of those threats be excluded from the proposal.23 In September 2011, as tensions between Tehran and Ankara were escalating in the wake of the ongoing Syrian crisis, the Turkish government committed to host an early warning radar system for the NATO missile defense shield. Though the foreign ministry said the system would strengthen NATO and Turkey’s security, the official statement announcing the agreement made no mention of Iran.24 The Turkish Role in European Economic and Energy Security Turkey is the largest economy in the region and increasingly important to the energy security of Western Europe. Despite much ado regarding Turkish engagement with the “East,” trade figures show that it remains firmly tethered to the West.

The EU27, cumulatively, is Turkey’s largest trade partner, accounting for a resounding 42 percent share in Turkish trade, including 39.3 percent of all imports and 46.3 percent of all exports, bounds ahead of any other partnership. By comparison, Russia and China are Turkey’s second and third-largest trade partners, and account for a mere 8.8 percent and 5.5 percent export share respectively. Iran and Iraq, the two largest Middle Eastern partners account for 3.6 and 2.5 percent respectively. 25 In 2008, the EU27 also accounted for 75% of Turkish FDI inflows.

There have, however, been attempts to diversify this dependence, as macroeconomic figures show. 2008 marked the first year where the E.U.’s export share fell below 50%, departing starkly from their traditional average of 56-58%. These are, in part, a reflection of the vastly expanded Turkish economy, with trade having boomed from $116.5bn in 2003 to $334bn in 2008. BRIC and Middle Eastern countries have been the primary beneficiaries of this diversification, and collectively in 2010, Middle Eastern and North African countries (including Israel) accounted for 15.4 percent of all Turkish trade.26

http://www.upi.com/Business_News/Security-Industry/2011/03/25/US-Turkey-F-35-deal-stalled/UPI33521301049204/ 20

21

http://www.jamestown.org/programs/edm/single/?tx_ttnews[tt_news]=37061&cHash=2c22c84892

http://www.hurriyetdailynews.com/n.php?n=turkey-chooses-us-helicopters-for-3.5-billion-deal-2011-0421 22

23

http://mideast.foreignpolicy.com/posts/2012/02/28/turkey_and_iran_a_fraying_relationship_or_business_a s_usual 24

http://www.guardian.co.uk/world/2011/sep/02/turkey-missile-warning-radar-nato

25

http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113456.pdf

26

Ibid.

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Turkey is also growing in importance as a transit country for oil supplies from Russia, the Caspian region, and the Middle East to Western European end-users, as can be seen in Figure 8.1. Growing volumes of tanker-borne Russian and Caspian oil now pass through the Bosporus Straits to Western markets. Approximately 2.9 million bbl/d flowed through Bosporus in 2009, 2.5 million bbl/d of which was crude oil. Oil shipments through the Turkish Straits decreased from over 3.4 million bbl/d at its peak in 2004 to 2.6 million bbl/d in 2006 as Russia shifted crude oil exports toward the Baltic ports. Traffic through the Straits has increased again as Azerbaijan and Kazakhstan crude production and exports rose.27 Congestion in the Straits has also been a major incentive to create overland routes, as well as other “Bosporus bypass” options, some of which would also transit Turkey. The Ceyhan terminal on Turkey’s Mediterranean coast is the most important of these projects to date, and marks a Turkish attempt to establish itself as a regional energy hub. Already the terminal serves as an important outlet for northern Iraqi oil through the Kirkuk-Ceyhan pipeline, and for Caspian energy exports through the Baku-Tbilisi-Ceyhan pipeline which transports light Azeri crude. The Turkish government is also constructing the Samsun-Ceyhan pipeline that could reduce traffic in the Bosporus by almost 50 percent and would transport oil from the Black Sea overland to Ceyhan on the Mediterranean.28 The Nabucco pipeline, when operationalized will further increase Turkish importance for Western European consumers, linking them to additional gas supplies from the Caspian region, as well as the Middle East.

However, for Turkey to function as a transit state, it will require additional energy-sector investment to upgrade infrastructure and capacity. Domestic Turkish demand continues to increase with an expanding economy, cutting into capacity available for re-export. By some estimates, all surplus capacity could be exhausted within the next decade, without additional investment.

Security concerns may also have an impact on the Turkish transit route. In July 2011, a blast in Iran’s Western Azerbaijan province disrupted Iranian gas supplies to Turkey, following a previous attack in August 2010 that was blamed on Kurdish separatists.29

27

http://205.254.135.24/countries/cab.cfm?fips=TU

28

http://205.254.135.24/countries/cab.cfm?fips=TU

29

http://www.naharnet.com/stories/en/11486-blast-hits-iran-turkey-gas-pipeline-cutting-supplies

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Figure 8.1: Turkey as an East-West Energy Corridor

Source: IEA Turkish Relations with Iran Turkish relations with Iran are characterized by both conflict and collaboration.49 From Iran’s perspective, their relationship is clouded by Turkey’s military ties to the US, and by strong political, religious and historical differences. Turkey remains a secular Sunni state that has little affinity for many aspects of Iran’s Islamic Revolution, and both nations have historically competed for regional influence, long before even the creation of the Ottoman Empire. Bilateral relations suffered in the 1980s and 1990s due to disagreements over the PKK, which is alleged to have used Iranian territory to launch attacks into Turkey, and Turkey has also protested what it perceives as Iranian support for Turkish Islamists.

Turkey has pursued a “zero-problems” policy under the AKP government where Turkey has sought to reorient Turkish relations with all regional countries, including Iran, primarily through economic engagement. Bilateral trade has expanded substantially, and Iran is now Turkey’s largest Middle Eastern trade partner, accounting for 3.6 percent of Turkish trade, behind only the EU27, Russia, China and the US.30 Trade reached $10.6 billion in 2010 -- a 97 percent improvement over 2009 – with expectations it would surpass $15 billion in 2011 under the terms of a preferential trade agreement.

As a result of sanctions, and an unfavorable investment climate in traditional trade centers such as Dubai, Iranian companies have also increasingly turned to Turkey. By 2010, the number of Iranian firms in Turkey had risen to 1,470, up from 319 in 2002, and with a record 284 companies registered in 2010 alone.31 There have been numerous high profile political 30

http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113456.pdf

31

http://www.payvand.com/news/11/apr/1202.html

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exchanges between the country, including mutual visits by their respective heads of state, a matter that has raised eyebrows in the region and in the West.

Energy cooperation has been an important component of the Iranian-Turkish relationship. As Turkey’s energy needs have increased – it imports 70 percent of all the energy it consumes – they have coincided with an Iran that has been actively seeking new markets. Turkey now imports about 10 billion cubic meters a year of gas from Iran, about 30 percent of its needs, and plans to invest $12 billion in developing Iran’s South Pars gas field.32 In Q1 2011, it was reported that Iran had grown to become Turkey’s largest energy supplier, supplying 1.8 million tons of crude oil between January and March 2011, which amounted to about 30 percent of Turkey’s total crude imports.33 Ankara and Tehran have also discussed cooperating in the Nabucco project to build a pipeline to deliver Iranian oil across Turkey to Italy, thus greatly expanding the scope of Iran’s oil markets in Western Europe.34 In July 2010, a Turkish firm signed a $1.3 billion deal with Iran to “build a gas pipeline from Iran to Turkey that would supply gas to Europe.”35 This presents major problems fort Turkey, and for the US and EU in managing sanctions . In the face of the EU backed embargo of Iranian oil announced at the beginning of 2012, Turkey declared that it would continue to trade with the IRI unless the United Nations officially endorses the ban – a highly unlikely scenario considering the veto power of permanent Security Council member China and Russia.36 Western powers had hoped to convince the Davutoglu government to reduce imports from Iran and replace them with an increased supply from Saudi Arabia, but after sending a delegation to Riyadh in February 2012, Turkish leaders opted to maintain the status quo. An Anakara-based oil industry official explained that Turpas, Turkey’s sole refiner, gets a good deal from Iran and at this point has little incentive to change its strategy.37 Elements of the Turkish business class have, however, begun to complain that a lack of stability and transparency on the part of Iran has hurt potential joint ventures, with promised projects disappearing with little or no explanation. In late February 2012 Eurasianet quoted the head of a large Turkish trade organization saying, “There's no transparency or accountability in Iran.

Turkish companies have had a very hard time penetrating the Iranian market...Recent developments…will only make it harder.”38

Schleifer, Yigal "Caught in the fray: Turkey enters debate on Iran's nuclear program". CS Monitor (2 February 2006). http://www.csmonitor.com/2006/0202/p05s01-woeu.html 32

http://www.upi.com/Business_News/Energy-Resources/2011/05/31/Iran-now-Turkeys-premier-oilsupplier/UPI-57601306871753/ 33

“Pipeline Construction Scoreboard: Projects Planned and Under Construction,” Pipeline and Gas Journal (September 2008).

34

Joe Parkinson, “Iran Sets Turkish Pipeline Project,” Wall Street Journal (July 24, 2010) http://online.wsj.com/article/SB10001424052748704249004575385330536199748.html 35

36

http://english.al-akhbar.com/content/turkey-ignore-western-sanctions-iran

37

http://af.reuters.com/article/energyOilNews/idAFL5E8DE3E420120214

38

http://www.eurasianet.org/node/65040

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Economic cooperation has facilitated some security cooperation, particularly in areas of mutual concern. Turkish and Iranian bilateral relations suffered in the 1980s and 1990s due to disagreements over the PKK, which used the Turkey-Iran border to launch attacks into Turkey, but these tensions largely dissipated when Iran began courting Turkey as a new partner in 2002. As Turkey and Iran have pursued better bilateral relations, the two have also agreed to cooperate against terrorism in the region; this included a move by Tehran to classify the PKK as a terrorist organization.39 In December 2009, Iranian and Turkish military forces coordinated to fight guerrilla separatists of the PKK along the Turkish border with Iran and Iraq. 40 In June-July 2011, Iran launched major operations against Kurdish separatists in its mountainous border region near Turkey and Iraq, complemented by more limited Turkish action on the other side of the border.41 Despite these areas of common interest, Turkey and Iran have very different conceptions of regional security and the regional balance of power. During unrest in Syria, with tenacious opposition protests against the regime of Bashar al-Assad, and the flight of many Syrian refugees into Turkey, Tehran and Ankara have found themselves pitted against each other. Iran has expressed unconditional solidarity with Assad, offering diplomatic and military support, whereas Turkish Prime Minister Erdogan has attacked the unrest as “savagery,” urged Assad to fire his powerful brother Maher, and demanded Syria implement comprehensive reforms.42 As a result, Iran is believed to have warned Turkey against maintaining this stance, reinforced in a stern editorial published by the magazine Sobh’eh Sadegh, an IRGC-run publication.43 In early 2012, Turkish Deputy Prime Minister Bulent Arinc intensified this increasingly combative rhetoric by labeling Iran’s support of the al-Assad regime as anti-Islamic. At a February 5th AKP meeting Arinc said, “I am addressing the Islamic Republic of Iran: I do not know if you are worthy of being called Islamic…Have you said a single thing about what is happening in Syria?”44 Days after Deputy Prime Minister Arinc’s comments, the Tehran Times reported that Turkey’s ambassador to Iran, Umit Yardim, defended ongoing, uninhibited bilateral trade relations in the face of mounting Western sanctions. The Iranian new source states that Yadim condemned the U.S. and EU oil sanctions against Iran as “unjustifiable”.45 Laciner, Sadat, “Mistrust Problem In Turkey-Iran Relations,” Journal of Turkish Weekly (February 21, 2008).

39

“Iran, Turkey Fight PKK Militants,” UPI (11 December 2009) http://www.upi.com/Top_News/Special/2009/12/11/Iran-Turkey-fight-PKK-militants/UPI85211260549997/ 40

“Turkey, Iran ramp up anti-terror fights,” Hurriyet Daily News, July 26, 2011. Available at http://www.hurriyetdailynews.com/n.php?n=turkey-iran-ramp-up-anti-terror-fights-2011-07-26 41

Ian Black, “Turkey tells Bashar al-Assad to cease Syria repression,” The Guardian, June 23, 2011. Available at http://www.guardian.co.uk/world/2011/jun/23/syria-bashar-al-assad-turkey-refugees 42

Reza Kahlili, “Iran warns Turkey to butt out of Syria,” FOX News, July 25, 2011. Available at http://www.foxnews.com/opinion/2011/07/25/iran-warns-turkey-to-butt-out-syria/ 43

44

http://www.eurasianet.org/node/65040

http://tehrantimes.com/economy-and-business/95960-turkish-envoy-us-eu-sanction-wont-impact-iranturkey-ties 45

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Differences in the US and Turkish Approach to Iran’s Nuclear Program Turkey has opposed coercive measures to pressure an end to the Iranian nuclear program, including sanctions and the use of military force. It has argued that such threats only increase Iranian intransigence and its rationale for a nuclear deterrent. Turkey appears to be as concerned as any other regional country about the prospect for any nuclear proliferation in the Middle East, but it has also expressed a belief that such objectives can be achieved only through persuasion, and not force. Turkey has voiced support for a diplomatic solution and offered to assist in mediating proximity talks and some form of peaceful settlement between the US and Iran.46 Turkey also opposes the use of military force against Iran. Ankara believes that military force will only delay Tehran’s effort toward nuclearization, further convince Iran that a nuclear deterrent is the only way to achieve security, and have collateral impacts on Turkey. Likewise, the Turkish government contends that imposing more sanctions on Iran will unite Iranians behind the regime and harm the opposition, in addition to exposing Turkey to negative economic repercussions. Since the nuclear program enjoys broad support in Iran, Ankara argues, the only sensible policy is to engage the government and persuade the Iranian polity that nuclear weapons are unnecessary for their country’s safety. The Turkish government remains profoundly opposed to nuclear proliferation in the Middle East, but it believes that proliferation is only likely to be prevented through persuasion, not threats.

Turkey has announced its support for Iran’s right to possess nuclear energy for peaceful purposes, although it has also stated that this should occur in compliance with the IAEA. Yet, in late November 2009, Turkey abstained from an IAEA resolution that overwhelmingly rebuked Iran for building a second secret enrichment plant and called for the cessation of construction of the Fordo facility.47 The abstention – of which Turkey was one of three out of twenty eight -was seen as a political blow to US attempts to convince Iran of economic and political isolation should its nuclear program continue. In 2009, Turkey joined Brazil, and broke from US objectives to broker a nuclear fuel swap with Tehran, which would have allowed Iran to enrich uranium at a considerably high level of purity, but the consensus dissipated upon strong objections from the United States and Europe.48 Turkey has a number of reasons to take this stand and these are likely to have a lasting impact on US and Iranian competition. Turkey is an important commercial power in the region, but its economy is export-oriented, heightening its need for regional markets to facilitate trade and growth. This has conditioned Turkish compliance with US and European-led sanctions, which seek to economically isolate Iran. The current Turkish government has also framed its opposition to sanctions as a matter of principle. In September 2010, Turkish President Abdullah Gul claimed they would only create “hatred and hostility amongst the [Iranian] people.”49 46

“Iran President Holds Turkey Talks,” BBC News, August 14, 2008.

“Russia, China Back U.S. on Iran Resolution” United Press International (27 November 2009) http://www.upi.com/Top_News/International/2009/11/27/IAEA-resolution-rebukes-Iran-overfacility/UPI-71161259324813/ 47

Joe Klein, “Dealing with Tehran: The Return of Diplomacy,” Time, (May 20, 2010) http://www.time.com/time/politics/article/0,8599,1990549,00.html 48

Gordon Fairclough and Rebecca Blumenstein, “Turkey President questions Iran sanctions, seeks Israel apology,” Wall Street Journal, September 20, 2010. Available at http://online.wsj.com/article 49

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Despite this stated opposition, Turkey has publicly announced its intention to abide by UN sanctions, and taken action under UN mandates in ways that benefit the interests of the US. In March 2011 for example, Turkey intercepted Iranian cargo bound for Syria that included light weapons such as automatic rifles, mortars and rocket launchers.50 Turkey has, however, opposed any unilateral US or EU sanctions. This distinction has complicated Western attempts to isolate Iran, as the scope of UN sanctions is narrower. UN Resolution 1929 for example, only designates only two Iranian banks as supporting proliferation activity, whereas the US Treasury lists over seventeen.51 As a result, the US has made increased efforts to persuade Turkey to cooperate with its unilateral sanctions measures against Iran. In late February 2010, US Deputy Secretary of State James Steinberg commented on Ankara’s reluctance saying, “Turkey has as much reason to be concerned about the prospect of a nuclear Iran as anybody…We need them to work with us to make sure that Iran doesn’t become nuclear weapons-capable.”52 The US has warned Turkey that Iran may attempt to exploit legitimate trade ties between Ankara and Tehran to facilitate its proliferation activities,53 but to limited avail. Despite repeated attempts to halt international investment in Iran’s energy sector, Turkey has stated that US and EU sanctions will not prevent its cooperation with Iran in supplying growing Turkish energy needs.54 So far, Turkey has not changed its policies. In early 2011, for example, Turkey ruled that charges leveled against the Jafari network, which was designated by the US Treasury under E.O. 13382 for providing assistance to Iran’s ballistic missiles program, were not binding in Turkey, and that key individuals would not be questioned or charged.55 Another example of tension with US officials has been the continued operation of several Iranian banks – particularly Bank Mellat, which operates in three Turkish cities -- despite US and EU sanctions. Turkish Foreign Minister Davutoglu has previously reacted angrily to any suggestions that Iranian banks in Turkey were facilitating the nuclear program, terming these reports “baseless, entirely provocative and biased.”56 Implications for US Policy The long-term trajectory of Turkish foreign policy remains uncertain, but it is clear that increased Turkish cooperation with Iran could prove to be a major impediment to efforts to “Turkey seizes cargo of Iranian plane”, Fox News, March 23, 2011. http://www.foxnews.com/world/2011/03/23/turkey-seizes-cargo-iranian-plane/ 50

51

http://www.reuters.com/article/2011/04/27/us-turkey-usa-iran-idUSTRE73Q6YA20110427

Daniel Dombey, “US Turns Screw on Ankara Over Sanctions,” Financial Times (February 24, 2010). http://www.ft.com/cms/s/0/b3dd6bb8-20e4-11df-b920-00144feab49a.html?nclick_check=1 52

http://www.haaretz.com/news/international/u-s-to-turkey-don-t-let-iran-exploit-your-growing-tradeties-1.358474 53

54

“Turkish Daily Says UN Fails in Anti-Gas Deal Attempts,” IRNA (September 28, 2007).

“Turkey: No action planned in US-Iran export case”, The Washington Post, February 8, 2011. Available at http://www.washingtonpost.com/wp-dyn/content/article/2011/02/08/AR2011020801541.html 55

“Gul: Turkey is not undermining U.S. policy,” United Press International, September 22, 2010. Available at http://www.upi.com/Top_News/US/2010/09/22/Gul-Turkey-is-not-undermining-US-policy/UPI35141285201479/ 56

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pressure Iran. This requires a cautious US response and one that focuses on the fact that Turkey is an important US ally rather than the divisions between the two countries and Turkish tensions with Israel. The US needs to be more sensitive to Turkish concerns and interests, and remember that the US and Israel often do not have the same strategic and policy priorities. Turkey is an emerging major power in the Middle East, and will play a critical role in Iraq and any effort to contain Iran. This scarcely means the US should accept every aspect of Turkish policy, but it does mean that the US cannot expect Turkey to share every aspect of US policy, and continued diplomatic and military dialogue on the basis of equals will be the best tool available to the US. So will policies that make it clear that the US will remain a key strategic partner in the region in spite of its fiscal issues, and withdrawal from Iraq and Afghanistan.

The US-Turkish relationship has evolved extensively since the days of the Cold War. Turkey now has a much broader array of regional interests that are sometimes at odds with US foreign policy in the region, but nonetheless it remains a reliable, if complex, ally. As such, the US must realize that it needs to rely on dialogue, rather than assume Turkey should share its approach and policies. The US should strive to keep relations from becoming zero-sum and demonstrate an appreciation for Turkey’s own interests and challenges that may occasionally limit cooperation on specific issues.

Turkey has strong reasons to not confront Iran, not least of which the fact that Turkey is an important commercial power in the region with an export-oriented economy, in whose core interest it is to engage and integrate with other regional economies. As such it is unlikely to enthusiastically cooperate with the US. Neither can Ankara, with its growing Muslim identity, ignore the wishes of its people, many, if most of whom, actively detest Israeli policies in the region, and instinctively associate with the Palestinian plight.

However, the US and Turkey retain a broad array of shared interests, which the US should seek to leverage in ways that serve US interests in ways that serve Turkey’s interests as well, and deepen the US-Turkish relationship. Both countries remain interested in stability in Iraq, in Afghanistan and in the wider Middle East in ways that promote democratic institutions and economic growth, as well as mitigate Iranian attempts to move towards regional hegemony. By all accounts, Turkey is deeply concerned with the Iranian nuclear program and seeks to prevent its growth, although its placatory approach diverges sharply from the policies advanced by Washington.

Turkey is attempting to maneuver in ways that require a careful balancing of relations between the West and Iran. For the foreseeable future, this will continue to cause tensions between Washington and Ankara. Already there have been some tradeoffs in relations with the West, but in net terms, Turkey remains engaged principally with the West. Similarly, the AKP government has often been maligned for its attempts to ease the secular Kemalist tradition and advance some Islamist tenets, but it has also been one of the most vigorous Turkish governments in history to pursue integration with the EU and implement major political reforms, such as the rebalancing of civil-military relations.

As a result, Turkish relations with Iran remain relatively limited and with an uncertain future.

Turkey and Iran are natural competitors for regional influence, and both have grown increasingly assertive in their attempts to achieve regional hegemony. The “Arab Spring” has highlighted to Turkey the many differences in strategic vision between Tehran and Ankara, not least the moral and political costs of business with autocratic Middle Eastern regimes out of touch with their

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peoples. Turkish business interests in Qaddafi’s Libya have been embarrassing, opened Ankara to allegations of hypocrisy, and complicated its future relationship with the Benghazi rebel government. Similarly, Turkey’s considerable effort in engaging with the Assad regime appears to have been for naught, as the regime continues to struggle for survival, and its defiant (Iraniansupported) policies negatively impact on Turkish national security.

An overall net assessment of Turkish relations shows that Turkey has far more interests in common with the United States, than with Iran. If Washington can look past the newfound assertiveness and independence with which Ankara conducts its foreign policy, and accept that on some issues, including Israel, they will not see eye to eye, then the US and Turkey can continue a positive and durable relationship. Such an outcome would do much to constrain Iranian influence and provide a regional counterweight to its ambitions, one that is far more attuned to core American ideals, such as the promotion of democracy and economic prosperity.

Furthermore, Turkey’s outreach and its success in reconciling Islam and modernity gives it a unique influence among regional actors in ways that the US and NATO cannot match, and gives Turkey a unique influence in the region. The US and the West need friends and allies within the Islamic world that seek progress, development, and a focus on the most progressive core values of Islam. No one can win if the US and the West are seen are confronting Islamic rather than working with Islamic states to meet the challenge of extremists and terrorism.

The Black Sea and the South Caucasus The Caucasus is located on the peripheries of Iran, Turkey, and Russia, and has been an arena for political, military, religious, and cultural rivalries and expansionism for centuries. The area is not a major area of competition between the United States and Iran, but it is geopolitically significant due to proximity to countries and regions important to the US strategic interest. The South Caucasus fall primarily within the European sphere of influence, and developments in the South Caucasus only have a moderate impact on US strategic interests.

The US has fostered close ties with all three South Caucasian armed forces – Armenia, Azerbaijan and Georgia – and troops from all three countries have participated in US-led stabilization efforts in Iraq and Afghanistan, and granted transit privileges for US materiel into the Afghan theater. The South Caucasus offers the US other benefits including the potential for the region to play a role as an east-west trade and security corridor linking the Black Sea and Caspian Sea regions, contain crime, smuggling and terrorism in the region, support democratization and increase the scope of the “Northern Distribution Network” bringing supplies into Afghanistan.57 US aid to the three states has been significant as seen in Figure 8.2 but the region remains beset by civil and ethnic problems with few easy solutions, and is influenced by other regional powers including Russia, Turkey and Iran.

The Caucasus region has extensive mineral deposits and energy resources, and limiting Iran’s ability to exploit these resources has been a key goal of American policy in the region. However, Iranian influence has flowed through the region for centuries, as has Russian and Turkish influence, and the small South Caucasian countries can ill-afford to antagonize these powerful actors. Moreover, Iran has attempted to boost its influence in the South Caucasus in recent years, 57

http://assets.opencrs.com/rpts/RL33453_20110415.pdf

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including in Azerbaijan -- with whom it has strained relations, but historical legacies, and ethnic and civil issues similarly limit its outreach ability.

Figure 8.2: US Foreign Aid to South Caucasus States, 1991-2010 and FY 2012 Request

Source: Congressional Research Service

Azerbaijan The dissolution of the Soviet Union in December 1991 brought an end to the Cold War and produced a number of successor states, including Azerbaijan, which immediately underwent major political and economic transformation. Azerbaijan has significant offshore oil reserves in the Caspian Sea including 7 billion barrels of proven crude oil reserves, and roughly 30 trillion cubic feet of proven natural gas reserves.58 Azerbaijan also has crucial energy transit routes to Europe, such as the Baku-Tbilisi-Ceyhan (BTC) pipeline, that bypass Russia.

Azerbaijan is the only Shia-majority Muslim neighbor of Iran, yet is closer to the US than to Iran. Out of the three South Caucasus states, visible US-Iranian competition is most apparent in Azerbaijan, because of the ethnic component and because of the Iranian fear of potential impact on its security and territorial integrity from a US presence on its direct periphery. However, Iran and Azerbaijan have many tensions of their own, including conflicting claims on maritime and seabed boundaries in the Caspian Sea, and Iran’s support for Armenia during the NagornoKarabakh conflict.

US Cooperation with Azerbaijan The United States opened an Embassy in Azerbaijan’s capital, Baku, in March 1992. The US State Department describes the US as “committed to aiding a transition to democracy in Azerbaijan and its formation of an open market economy… a more democratic environment by promoting media freedom, supporting electoral reforms, bolstering government checks and

58

http://205.254.135.24/countries/cab.cfm?fips=AJ

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balances, increasing public participation in government and oversight, and combating domestic and transnational criminal activities.”59 Today, the US and Azerbaijan are close strategic allies, and the country is a significant component of the US logistical effort to sustain military operations in Afghanistan. It offers one of the main overflight, refueling and landing routes for US and coalition troops bound for Afghanistan, and a major land route for military fuel, food and construction supplies. The Azeri route is part of the “Northern Distribution Network,” to alleviate the US reliance on Pakistan.60 The US has also been engaged in efforts to help Azerbaijan find a peaceful solution to the conflict with Armenia over Nagorno-Karabakh.

In October 1992, the US initiated the Freedom Support Act (FSA), which continues today. In FY 2010, the US provided approximately $22 million in humanitarian, democracy, and economic reform assistance to Azerbaijan through the FSA. The US is also engaged in efforts to mediate the Nagorno-Karabakh conflict, and since 1992 has played a leading role in the Minsk Group of the OSCE, co-chairing the group with Russia and France. Despite a ceasefire, intensified negotiations since 2004, and some progress towards a settlement, so far the conflict is yet to be resolved, and sporadic violent incidents continue.61 Azerbaijan’s oil wealth is a potential focal point in the contest between the US and Iranian interests in the Caucasus. Since independence, Azerbaijan, with access to the most readily retrievable oil reserves in the Caspian Sea, was an attractive destination for Western corporations. There remain some obstacles obstructing access, including outstanding legal issues on the division of the Caspian as per the Soviet-Iranian treaty of 1942, a Russian insistence on maintaining rights over the Caspian, and apprehension over exploitation and investment in a region not known for its stability with uncertain reserves, and no obvious route to market.

Despite this, Western companies have invested heavily in the country – BP for example has $31 billion of interests in Azerbaijan – but firms have indicated a growing worry of Iranian influence in Azerbaijan, and it’s potentially destabilizing impacts.62 The US and Azerbaijan have signed a bilateral trade agreement, which entered into force in April 1995 and confers upon Azerbaijan the status of most favored nation. US companies are involved in offshore oil development projects with Azerbaijan and have been exploring the emerging investment opportunities.63 Bilateral trade amounted to about $2.3 billion in 2010.64 In July 1992, Azerbaijan ratified the Treaty on Conventional Armed Forces in Europe (CFE), which establishes comprehensive limits on key categories of conventional military equipment and provides for the destruction of weaponry in excess of those limits. Although Azerbaijan did not provide all data required by the treaty on its conventional forces at that time, it has accepted on-site inspections of forces on its territory. Azerbaijan approved the CFE flank agreement in 59

http://m.state.gov/md2909.htm

60

http://assets.opencrs.com/rpts/RL33453_20110415.pdf, pg. 5

61

http://www.state.gov/r/pa/ei/bgn/2909.htm

http://www.bloomberg.com/news/2011-03-30/iran-influence-in-azerbaijan-may-unsettle-bp-s-oilinvestments.html 62

63

http://www.state.gov/r/pa/ei/bgn/2909.htm

64

http://www.census.gov/foreign-trade/balance/c4632.html

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May 1997. It also has acceded to the nuclear Non-Proliferation Treaty as a non-nuclear weapons state. Azerbaijan participates in the North Atlantic Treaty Organization’s (NATO) Partnership for Peace, and maintains a 90-troop presence in Afghanistan. Azerbaijan also maintained a peacekeeping deployment in Iraq until November 2008.65 US-Azeri Tensions That Might Give Iran Added Influence There are some indications of Azeri frustration with the US, although these remain limited and are unlikely to constitute a watershed in their strategic partnership. In April 2011, Azerbaijan indefinitely postponed military exercises with the US – perhaps as a result of growing TurkishArmenian rapprochement, of growing street protests against the Aliyev administration, and growing frustration at tepid US support for the Azeri position on Nagorno-Karabakh. The Azeri Defense Ministry, however, noted that it intends “to continue military cooperation with the US.”66 Released embassy cables from “Wikileaks” also complicated matters, particularly in comparing President Ilham Aliyev to the impetuous and hotheaded Sonny Corleone from the Godfather movies.67 The slow US process of about 10 months to name a new US ambassador to Azerbaijan was further perceived by some in Azerbaijan as a reflection of growing US indifference to the country.68 There are also growing – but limited – worries that the US support for the Aliyev administration and entrenched patronage networks inside the country may lead to growing antiAmericanism inside the country. To date these issues do not appear to have detracted from expanded security and economic cooperation.69 Iranian-Azerbaijani Relations Iranian relations with Azerbaijan are strained in spite of the fact that Azerbaijan is the only other Shia-majority country in the region. A major proportion of the world’s ethnic Azeris (estimates range from 6-12 million) reside in Iran, constituting the country’s largest ethnic minority at between a third and a quarter of Iran’s population. Iran’s Azeri minority is also amongst the richest groups in Iran, is represented in senior positions inside the Iranian government, and is heavily connected to the crucial bazaari trade.70 Iranian goods are readily available inside Azerbaijan, and Iranian media organizations such as the Sahar TV channel are broadcasted across the country.71 Iran was one of the first countries to establish full diplomatic relations with Azerbaijan, its independence on 18 October 1991. Soon after, in early December 1991, Iranian Foreign 65

http://www.state.gov/r/pa/ei/bgn/2909.htm#relations

66

http://www.eurasianet.org/node/63360

67

http://www.freerepublic.com/focus/f-news/2637585/posts

http://www.hurriyetdailynews.com/n.php?n=8220usazerbaijan-relations-in-the-obama-presidency82212010-07-02 68

69

http://www.spiegel.de/international/world/0,1518,734307,00.html

70

http://www.google.com/hostednews/afp/article/ALeqM5jRWYA1KIUxP6wFDdTnFRsnugkFgg?docId=CNG.3 63298fc7347ba63c4b288eb7bbce000.5b1 71

Ibid

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Minister Ali Akbar Velayati visited Baku, where he signed a number of agreements on political, economic, and cultural cooperation and pledged to support Azerbaijan’s membership in the Organization of the Islamic Conference. Within the few days of the visit, Iran recognized Azerbaijan, upgraded its consulate in Baku to an embassy, and established full diplomatic relations.

Relations deteriorated, particularly after the June 1992 election that catapulted the Popular Front of Azerbaijan and President Abulfaz Elchibey to power. Elchibey was secularly oriented and vehemently anti-Iranian, resulting in a government in Baku diametrically opposed to Tehran’s desires. Elchibey endorsed autonomy for the Iranian Azeris as well as the unification of the populations of his country and Iranian Azerbaijan, a stance that alienated the Iranian government.72 At the same time, officials in Azerbaijan alleged that elements in Iran fostered Islamic fundamentalism among the Shia population or sponsored terrorism.73 When Elchibey was overthrown by a coup 1993, there were allegations of Iranian involvement. Some Azeris also suspect Iran of encouraging ethnic unrest among Azerbaijan’s Talysh minority, which lives near the Iranian border.

The Nagorno-Karabakh War in 1992-1994 and continued hostilities between Armenia and Azerbaijan also helped frame Azeri relations with Iran. The war is alleged to have resulted in about 20 percent of Azeri territory lost to Armenian control and during the war, Iran is perceived to have supported Christian Armenia over Shia Azerbaijan, as a result of its strained relationship with the Elchibey administration. Iran also feared the destabilizing impact of Azeri refugees pushed over the border as a result of combat operations, as well as the potential for such military activity to increase ethno-nationalist fervor amongst its own Southern Azeri population.74 Movement in 2009 toward rapprochement between Armenia and Turkey may have contributed to moves by Azerbaijan to improve relations with Iran, although Turkey has reassured Azerbaijan that such rapprochement will not make headway until Armenian forces withdraw from areas around the disputed Nagorno-Karabakh region.

Furthermore, the conflicting claims over the maritime and seabed boundaries of the Caspian Sea between Azerbaijan and Iran also provide continued uncertainty, with Iran insisting on an even one-fifth allocation and challenging Azerbaijan's hydrocarbon exploration in disputed waters.75 Other Issues and Future Relations There are important differences between Iran and Azerbaijan despite their ethnic solidarity.

Azerbaijan is a strongly secular country, in contrast with Iran’s Shiite theocracy, and has often acted firmly against the Islamization of the political, religious and social spheres. Iran, on the other hand, fears that as an independent country, Azerbaijan stirs the aspirations of ethnic cohorts in Iran for greater rights or even secession. This fear may have grown with the rise of the Iranian

Glenn E. Curtis, (ed). Azerbaijan: A Country Study. Washington: GPO for the Library of Congress, 1995.

Available at: http://countrystudies.us/azerbaijan/36.htm 72

73

Brenda Shaffer, Borders and Brethren: Iran and the Challenge of Azerbaijani Identity. Cambridge, MA: MIT Press (2002).

74

http://traxturfans.blogsky.com/1389/07/05/post-279/ - cite real report

75

http://205.254.135.24/countries/cab.cfm?fips=AJ

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opposition “Green Movement” and its rhetoric in support of ethnic minorities, particularly given that Mir Hossein Mousavi, the opposition leader, is himself Azeri-Iranian.

Iran has some trans-Azeri contacts to discourage the spread of ethnic consciousness among its “Southern Azerbaijanis,” and has criticized politicians in Azerbaijan who advocate separatism in Iran. Azeri officials similarly suspect that Iran supports extremist Islamist groups inside Azerbaijan, including “radical Islamic groups and Hezbollah terrorists,” according to Azeri President Ilham Aliyev.76 In 2005-2006 under the Aliyev administration, Iran and Azerbaijan made some improvements to their relationship, and cooperated in a variety of different areas, including trade, security, and in particular the energy sector. On 20 December 2005, President Aliev and Iranian President Ahmadinejad attended the inauguration ceremony of a new gas pipeline from Iran to Azerbaijan’s landlocked Nakhchivan Autonomous Region, which is separated from the mainland of Azerbaijan by a strip of Armenian territory. The new pipeline will supply the region with Iranian natural gas. However, it is worth noting that the Nakhchivan pipeline is not the only one Iran has opened in the past five years. On 19 March 2007, President Ahmadinejad joined President Robert Kocharyan of Armenia to inaugurate a gas pipeline to pump Iranian natural gas to Armenia,77 and in January 2011, Iran and Azerbaijan agreed on a five-year deal to supply about a billion cubic feet of Azeri gas to Iran annually.78 Yet, political relations became increasingly strained through 2010 and 2011. A warming Iranian relationship with Armenia and expanded trade ties with the country rankles inside Azerbaijan, while warming relations between Azerbaijan and Israel worried Tehran.79 Iranian media has seized upon reports of expanded Israeli-Azeri security cooperation and accused Azerbaijan of being a major base for Israeli and US intelligence officials to spy on Iran. 80 Furthermore, in the aftermath of the “Arab Spring,” and protest demonstrations in Baku – some by banned Iraniansupported opposition parties – senior Azeri officials have publicly accused Iran of interfering in the country’s internal affairs to increase its influence. No firm evidence has yet emerged to prove tangible Iranian support, but given its perceived close ties with conservative Azeris, many Azeri officials have taken this support as a given.81 Friction also continues over Caspian Sea territorial issues, and narcotics. The export of narcotics from Iran into Azerbaijan continues to skyrocket. Seizures of heroin that originates from Iran in Azerbaijan nearly quadrupled during the first quarter of 2009 (59,000 kg), compared to the first quarter of 2008 (15,000 kg).82 http://latimesblogs.latimes.com/babylonbeyond/2010/12/iran-azerbaijan-armenia-georgia-russiaintelligence-weapons-wikileaks.html 76

“Iranian, Armenian President Inaugrate New Gas Line,” Radio Free Europe (19 March 2007). http://www.rferl.org/content/article/1075351.html 77

78

http://www.arabianoilandgas.com/article-8297-azerbaijan-to-pump-gas-to-iran-under-5-year-plan/

79

http://www.washingtoninstitute.org/templateC05.php?CID=2287

http://www.crethiplethi.com/irans-media-steps-up-criticism-of-azerbaijan/islamic-countries/iranislamic-countries/2011/ 80

81

http://www.eurasianet.org/node/62889

82

Central Asian Regional Information and Coordination Center (CARICC), Tashkent (2009).

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Implications for US Policy The US faces many of the same issues in dealing with Azerbaijan in terms of Iran that it does in dealing with Turkey. Azerbaijan continues to maintain close ties with the US and maintains close economic, political and military cooperation, including serving as an extremely significant part of the US logistical effort to sustain operations in Afghanistan. Such ties will continue to weigh on Iranian perceptions, and limit Tehran’s influence in the country.

However, Iran remains a significant power in the region, and Baku can afford to neither provoke nor ignore it. President Aliyev has stated that he does not support a United States attack against Iran and in May 2005 Baku and Tehran signed a non-aggression pact barring third countries from using their territories for offensive operations against each other. Yet, President Aliyev has stated his support for sanctions and economic isolation, and believes it could be effective if enforced by a broad coalition.83 Despite this public rhetoric, Azerbaijan did not sign UNSCR 1929,84 and its trade ties with Iran of about a billion dollars annually complicate its willingness to enforce sanctions. The US has not given Azerbaijan a specific list of companies that violate the sanctions and US embassy spokesman Keith Bean noted that only one Iranian company – many suspect Iran’s Bank Melli -was formally banned.85 Iran is not one of Azerbaijan’s top five trade partners, and some believe that increased Azeri enforcement of Iranian trade will not seriously impact on the economy.86 Azerbaijan is not a critical component of US-Iranian strategic competition, and its impact on US policy will decline as the US withdraws its forces from Afghanistan. However, it is still an important part of US interests in the region. Its location on Iran’s periphery and access to Caspian and Middle Eastern energy reserves are assets that both Iran and the US value, although Azerbaijan, by virtue of its size and relative influence, is unlikely to want to be perceived as a pivot for regional competition. Much will depend on US dialogue with Azerbaijan, US aid, and Azeri confidence that the US will remain a key player in the region.

In net terms, while Azerbaijan has made some countervailing moves towards Iran, Iranian-Azeri relations remain limited and prone to significant tensions, whereas US-Azeri relations remain strong, barring relatively minor disagreements. The key to US-Iranian competition, therefore, is to maintain as close relations as possible, and to continue aid and support, without confronting Azerbaijan over the differences in its policies towards Iran. As is the case with many other such countries, a policy of “carrots” (incentives) is likely to accomplish far more than a policy of “sticks” (pressure).

Armenia The United States has been a strategic partner of Armenia without taking sides against Azerbaijan. It recognized the independence of Armenia on 25 December 1991, and opened an “Iran unilaterally lifts visa regime for Azerbaijani citizens,” APA (11 November 2009). http://en.apa.az/news.php?id=110792 83

84

http://www.eurasianet.org/node/62363

85

http://www.eurasianet.org/node/62363

86

Ibid.

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Embassy in Yerevan in February 1992. Washington has made a concerted effort to help Armenia during their transition from totalitarianism and a command economy to democracy and open markets, and is influenced by a strong and vibrant Armenian diaspora in the US. In 1992 Armenia signed three agreements, including a bilateral investment treaty, with the United States. Yet, the cornerstone of the US partnership with Armenia has been assistance provided through the Freedom for Russia and Emerging Eurasian Democracies and Open Markets (FREEDOM) Support Act, enacted in October 1992. Under this and other programs, the US to date has provided Armenia with nearly two billion US dollars’ worth of humanitarian and development assistance.87 Armenia and Iran Iran plays a significant economic role in Armenia, and has influence through a mutual wariness of Azerbaijan and Turkey. Armenian relations with Iran are focused on trade and are of extreme importance, since Armenian borders with Turkey and Azerbaijan are closed due to historic tensions with Turkey and the unresolved Nagorno Karabakh conflict. In a somewhat unusual outcome, Iran has been a benefactor of Christian Armenia, as a result of tensions between Iran and Azerbaijan. Desperately needing a regional ally, Armenia welcomed Iranian support, while is believed to have included the supply of weapons despite Iran’s public professions of neutrality in the conflict.

In reality, however, Iranian support for Armenia seems to have fallen short of any military involvement; rather, Iran supplied Armenia with necessary goods and energy, counteracting the Turkish-Azerbaijani embargo on the country and considerably weakening Azerbaijan’s main bargaining chip against Armenia. Tehran’s posture is further complicated by Shiite fundamentalists in Iran who have urged it to forego its policy of neutrality to embrace solidarity with Shiites in Azerbaijan.

Energy relations bind the Armenian-Iranian relationship. Iran exports natural gas to Armenia to offset its blockade by Turkey and Azerbaijan, and imports power supplies to benefit from Armenia’s electricity surplus. Energy security has been a growing Armenian concern, since it has been dependent on gas shipments from Russia through a pipeline that transits Georgia, which have sometimes been jeopardized by Russia’s fractious relations with Georgia, incentivizing a turn towards Iran as a natural gas supplier.

Expanded energy cooperation took place in late 2008 with the agreement that a natural gas pipeline to connect the two countries, and in February 2011, senior Iranian oil officials stated that Iran would export 400,000 gallons of diesel and gasoline each to Armenia daily after 2014 when a 220-mile pipeline from Tabriz towards the Armenian border completed construction.88 Other joint projects have included two 130 MW hydroelectric power stations along the border in a project worth $233 million,89 a fuel pipeline, high voltage transmission lines to connect their power grids,90 and a 460 kilometer railway network that allows landlocked Armenia direct access 87

http://www.state.gov/r/pa/ei/bgn/5275.htm

88

http://www.iranenergyproject.org/2953/iran-to-supply-armenia-with-gasoline-diesel-oil

89

http://www.rferl.org/content/Armenia_Iran_To_Build_Power_Plant_Amid_Increased_Ties_/2160885.html

90

http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=36910

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to the Persian Gulf.91 In late May 2011, Armenia and Iran signed a MoU to boost cooperation in the energy sector. It was reported that the countries had agreed to build a 500-800MW power line to interlink their electricity grids.92 Iran has other important economic relations Armenia. Official trade statistics pegged trade at about $285 million in 2010, 93 including the export of raw materials and foods, and imports of fuel, fertilizer and chemical products. Furthermore, since the Russian invasion of Georgia in 2008 – and with a continuing blockade by Turkey and Azerbaijan – Iran has become the most viable and reliable option for resupply to approximately 4,000 Russian troops stationed in Armenia.94 Their presence in Armenia was extended until 2044.

Impact on US-Iranian Competition These Armenian ties to Iran have caused Yerevan problems in dealings with the United States, despite signing a Cooperative Threat Reduction Agreement with the US Department of Defense.

Armenia has shied away from criticizing the Iranian nuclear program underscoring the importance it attaches to its relationship with Iran, and in June 2010, Armenian President Serzh Sarkisian publicly stated that the Iranian crisis could not be resolved until the West addressed “Iran’s sense of being in danger.”95 These actions have been met with a tough US response. An embassy cable released by “Wikileaks” written by then Deputy Secretary of State John Negroponte to the Armenian President expressed “deep concerns about Armenia’s transfer of arms to Iran, which resulted in the death and injury of US soldiers in Iraq,” and threatened sanctions and a cutoff in aid should transfers continue. The arms in question – Bulgarian rockets and machine guns -- were transferred to Iran in 2003 and used by Shiite militias in attacks in 2007 that killed a US soldier, and injured six others.96 Any Armenian support is believed to have since ceased.

Still, Armenia has generally been a dependable partner for the United States in military matters.

The Armenian Parliament ratified the Conventional Armed Forces in Europe (CFE) Treaty in July 1992. The treaty establishes comprehensive limits on key categories of military equipment, such as tanks, artillery, armored combat vehicles, combat aircraft, and combat helicopters, and provides for the destruction of weaponry in excess of those limits. Armenian officials have consistently expressed determination to comply with its provisions in spite of concerns they have about Azerbaijan exceeding that country’s treaty limits. Armenia has provided data on armaments as required under the CFE Treaty and is receptive to CFE inspections.

There are indications that Armenia is trying to establish mechanisms to ensure fulfillment of its arms control obligations. Armenia is not a significant exporter of conventional weapons, but it 91

http://hamsayeh.net/world/780-iran-and-armenia-to-join-railway-systems.html

http://www.upi.com/Business_News/Energy-Resources/2011/05/31/Armenia-Iran-deepen-energyrelations/UPI-47941306877124/ 92

93

http://armstat.am/en/?nid=380

http://www.hurriyetdailynews.com/n.php?n=armenia-looks-at-military-transit-alternatives-to-georgia2011-04-29 94

95

http://www.rferl.org/content/Armenia_Iran_To_Build_Power_Plant_Amid_Increased_Ties_/2160885.html

96

http://www.guardian.co.uk/world/us-embassy-cables-documents/184879

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has provided substantial support, including materiel, to ethnic Armenian separatists in the disputed and predominantly ethnic Armenian enclave of Nagorno-Karabakh located within Azerbaijan’s borders. Armenia acceded to the nuclear Non-Proliferation Treaty as a non-nuclear weapons state in July 1993. The US and other Western governments continue to discuss efforts and initiatives to establish effective nuclear export control systems with Armenia.97 Implications for US Policy The US faces many of the same issues in dealing with Armenia that it does in dealing with Azerbaijan and Turkey. Once again, much will depend on US dialogue with Azerbaijan, US aid, and Armenian confidence that the US will remain a key player in the region. The US also retrains considerable leverage and has shown a willingness to employ diplomacy to try to curtail Iranian influence. Moreover, although Armenia has historically been a close ally of Iran, it cannot easily afford increased US pressure, and hedges its security by continuing to build its bilateral relationship with the United States, in optics, if not in substance. Once again, the challenge for the US will be focus on incentives and good relations while quietly applying pressure and avoiding any open confrontation.

Georgia Georgia’s location between the Black Sea, Russia, Armenia, Azerbaijan, and Turkey gives it strategic importance as a transit corridor, and it has the potential to become a gateway from the Black Sea to the Caucasus and the Caspian basin. Current Georgian perceptions are shaped by the aftermath of the 2008 Russian military incursion that seized and declared independent the regions of Abkhazia and South Ossetia. As a result, of these and other tensions with Moscow, such as its ban on Georgian imports, Georgia has increasingly turned to other neighbors and to the West for security, and to diversify its export markets. In August 2008, its Parliament voted unanimously to withdraw from the Commonwealth of Independent States (CIS).

US Relations with Georgia The US pursued a close relationship with Georgia after the government of Eduard Shevardnadze took power in early 1992, and has provided over $3 billion in assistance to Georgia since 1991. 98 US relations with Georgia today are intricately linked to the 2008 Russian military incursion, and since then, the US has made several attempts to increase cooperation with Tbilisi, including providing over a billion dollars for post-conflict reconstruction. The US has also assisted in longer-term development priorities to transition Georgia to a market-oriented democracy anchored in the Euro-Atlantic community. Georgia has explicitly expressed its desire to join the European Union and NATO, and has made such efforts central to its long-term strategy.

Since the 2008 War, the US has attempted to re-emphasize its commitment to Georgia, while balancing its “reset” in relations with Russia, which is perceived by many in Georgia as coming at its expense. In 2009 and 2010, senior US officials including Vice President Biden and

97

http://www.state.gov/r/pa/ei/bgn/5275.htm

98

http://www.state.gov/r/pa/ei/bgn/5253.htm

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Secretary of State Clinton have visited Tbilisi and in January 2009, the two countries signed the US-Georgia Charter on Strategic Partnership.

The Charter outlined the importance of the relationship as strategic partners, reiterated US support for Georgia’s territorial integrity and sovereignty, pledged to expand defense, security and energy cooperation, as well as to build Georgia’s capabilities and “strengthen Georgia’s candidacy for NATO membership.” However, as stressed by Deputy Assistant Secretary Matthew Bryza, the charter did not provide security guarantees to Georgia.99 The 2008 War has, however, has reshaped Georgian perceptions of Washington’s reliability as a security provider, and Georgia is concerned that the US has slowed, perhaps even halted, arms sales to the country for fear of antagonizing Russia, or instigating a new round of hostilities.100 Embassy cables released by “Wikileaks” appear to concur with this assessment,101 and even US Defense Secretary Robert Gates has admitted that the US was “careful” in its security assistance to Georgia.102 The US reluctance to supply lethal equipment to Georgia has been criticized by some in the US legislature, including Senator John McCain, and senior Georgian officials have repeatedly requested US military equipment including early-warning radars, anti-air and antitank equipment.103 Nevertheless, US-Georgian cooperation continues in several spheres. The US has emphasized large-scale energy infrastructure projects, including rehabilitation of the East-West natural gas pipeline and reconstruction of the high-voltage Senaki power line, which will help to enhance Georgia’s energy security. 104 Furthermore, as of January 2011, Georgia was the second-largest non-NATO troop contributor to the ISAF mission in Afghanistan with nearly a thousand soldiers. A Georgian infantry battalion also deployed with no caveats to Helmand Province in April 2010.105 Iranian Relations with Georgia Official diplomatic relations between Iran and Georgia were established in May 1992. 106 Iran considers Georgia to historically and culturally be part of Greater Iran, and Georgia cooperates with its Iranian neighbor in many fields including energy, transport, trade, education, and science. Iran is one of Georgia’s most important trading partners and an Intergovernmental Joint Economic Commission is functioning between the two countries. The primary Iranian strategic interest in Georgia is to limit US and Turkish influence in the country, deepen economic and trade ties, and ensure stability in a way that does not impact Iranian security.

99

http://assets.opencrs.com/rpts/RL33453_20110415.pdf

100

http://www.eurasianet.org/node/61934

101

http://wikileaks.foreignpolicy.com/posts/2010/12/07/wikileaked_us_ambassador_to_russia_we_cant_arm_g eorgia_due_to_the_reset 102

http://www.eurasianet.org/node/61934

103

http://assets.opencrs.com/rpts/RL33453_20110415.pdf

104

http://www.state.gov/r/pa/ei/bgn/5253.htm

105

http://www.state.gov/r/pa/ei/bgn/5253.htm

106

Ministry of Foreign Affairs, Georgia

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The beginning of 2010 saw increasing cooperation between the two countries. Representatives from Iran's foreign ministry visited Tbilisi in May 2010 to discuss Iranian investment in the construction of a hydroelectric plant as well as Iran’s intentions to import electricity from the country.107 The meeting led President Saakashvili to invite his Iranian counterpart Mahmoud Ahmadinejad to Tbilisi. In late May 2010 Iranian ambassador Majid Samadzade Saber announced that Iran and Georgia intend to lift visa restrictions for travel between their countries.108 Iran has opened a new consulate in the Georgian city of Batumi and then Iranian Foreign Minister Manouchehr Mottaki underlined support for the sovereignty and territorial integrity of Georgia, instead of recognizing Russian-held Abkhazia and South Ossetia.109 President Saakashvili was among the first countries to welcome the Turkish and Brazilian fuel swap proposal to broker a settlement to the Iranian nuclear crisis, describing it as a “diplomatic victory.”110 Implications for US Policy Georgia is not central to US-Iranian strategic competition, but Tbilisi has increasingly looked to Iran diversify its relations and safeguard its security. In net terms, Georgia is still oriented towards the United States, primarily to provide a countervailing weight against Russian influence. While Georgia and Iran share a vibrant trade relationship, the Georgian foreign policy preoccupation to limit Russian meddling in its internal affairs takes precedence.

Policymakers in Tbilisi are likely to continue to see ties with the United States as the best hedge against Russian aggression, making it unlikely that they will support Iran in any major security disputes with Washington. Many Georgian foreign-policy initiatives such as troop deployments to Iraq and Afghanistan are designed to elicit this cooperation, and Georgian officials themselves have explicitly said as much. In November 2010, Deputy Foreign Minister Nino Kalandadze stated, “We largely ... depend on the United States for political support. Therefore, it is absolutely groundless to suggest that we are somehow questioning this strategic cooperation. We have no under-the-table relations with anyone, especially Iran.”111 However, the impact of Georgia’s war with Russia war should not be understated. Georgia remains tied to the West, but the lack of any decisive US and NATO response to the Russian invasion in 2008 has not been forgotten. It will color the extent to which Georgians believe they can rely on the US for their security, and offering Iran an opening to expand its influence.

107

Helena Bedwell, “Iran Plans Georgian Hydro Plant, Seeks to Import Electricity,” Business Week (21 May 2010). http://www.businessweek.com/news/2010-05-21/iran-plans-georgian-hydro-plant-seeks-to-import-electricity.html “Iran, Georgia to lift via regime,” Panorama (21 May 2010) http://www.panorama.am/en/politics/2010/05/21/iran-georgia/ 108

109

http://www.economist.com/blogs/easternapproaches/2010/11/georgia_geopolitics_and_iran

110

http://www.civil.ge/eng/article.php?id=22308

http://latimesblogs.latimes.com/babylonbeyond/2010/11/iran-georgia-washington-wary-of-warmingties-between-tehran-and-us-ally.html 111

a report of the csis burke chair in strategy

Competition in Afghanistan, Central Asia, and Pakistan Authors Brandon Fite Varun Vira Erin Fitzgerald

March 2012

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Executive Summary US-Iranian strategic competition is limited in Afghanistan, Pakistan and Central Asia, although all are of interest for both Washington and Tehran. The segmented nature of the region means that neither country has a holistic strategy for the region, and instead pursue an independent foreign policy to account for their specific interests within each country.

Afghanistan, Pakistan and Central Asia do offer complex challenges for both the US and Iran, with many ethnic divisions, historical tensions, and a shared pattern of economic underdevelopment with the potential for large-scale unrest. The expected withdrawal of US forces in 2014 will have a major impact on regional policies. It is expected that Iran will attempt to expand its influence, while the US deliberates on what extent of material commitment is appropriate for its post-Afghan regional interests.

The US has many hard decisions to make, which will be driven by various issues including the war in Afghanistan, the growing instability in Pakistan, and whether the US should actively pursue strategic interest in Central Asia in the face of Russian and Chinese pressures and advantages.

Iran is a player in the equation. Many countries in the region are on its direct periphery, and the forces of instability, violence and criminality transcend regional borders. So far, in net terms, Iranian influence in the region has been positive, but growing US-Iranian competition can lead to negative competition predicated on emotion, rather than rational strategic interest. In Afghanistan, Iran has contributed to stabilization efforts in Western Afghanistan, but has also supported some attacks against US forces, and controls the main logistics route for the UN food effort. Iran is expanding its role in Afghanistan and will seek enhanced protection for Shiite minorities inside Afghanistan, and increased economic and political influence inside the country, not just in Western Afghanistan, but also with the government in Kabul.

Iran is pursuing a warmer relationship with Pakistan to augment efforts to tighten border security and prevent instability along its eastern flank. Such a thaw in relations faces many problems, including the Sunni-Shia schism between the two countries, the impact of Iranian-Saudi regional competition, trans-border criminal syndicates and suspected Pakistani sanctuaries for Baloch separatist groups complicit in terrorist violence inside Iran. Both countries, however, have grown increasingly dissatisfied with the US military presence in the region, and neither is keen on a long-term US presence in the region, opening a window for potential cooperation.

As for Central Asia, it is not clear that Iran is capable of being a dominant player in a region when China, Russia, and Turkey are major actors and each Central Asian state is playing as many outside and local powers off against each other as possible. A declining US need for the region as a logistical hub for military supplies to Afghanistan is likely to impact on the US relationship with each country, and will likely result in reduced US attention and commitment.

However, extensive hydrocarbon deposits in some countries such as Kazakhstan and Turkmenistan, are important considerations, and will likely be areas of increased competition.

In total, strategic competition is not the primary consideration for US and Iranian policy in this region. Both countries have evolving interests that are likely to change in terms of hierarchy in each country’s grand strategic objectives in the post-Afghan era. The manner of US withdrawal from the region, and the nature of broader US-Iranian competition will likely affect the manner and scale of engagement, and determine whether the region becomes central or peripheral to broader trends of competition.

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Contents INTRODUCTION ............................................................................................................................................. 4 AFGHANISTAN .............................................................................................................................................. 4 Iran’s Relations with Afghanistan ........................................................................................................ 5 Competition for Iranian Influence in a Post-US Withdrawal Afghanistan............................................ 7 Implications for US Policy ..................................................................................................................... 9 PAKISTAN................................................................................................................................................... 10 The Impact of Growing US-Pakistani Tension .................................................................................... 10 Iranian-Pakistani Relations ................................................................................................................ 11 The Baloch and Other Regional Issues ............................................................................................... 13 Sunni-Shi’ite Issues ............................................................................................................................. 14 Nuclear Issues ..................................................................................................................................... 14 Implications for US Policy ................................................................................................................... 15 INDIAN AND PAKISTANI ENERGY IMPORTS ....................................................................................................... 16 CENTRAL ASIA ............................................................................................................................................ 17 Figure X.1: The Northern Distribution Network .................................................................................... 19

KAZAKHSTAN .............................................................................................................................................. 19 US and Kazakh Relations .................................................................................................................... 20 Iranian and Kazakh Relations ............................................................................................................. 21 Implications for US Policy ................................................................................................................... 23 KYRGYZSTAN .............................................................................................................................................. 24 US and Kyrgyzstan Relations and Tensions ........................................................................................ 24 Iran and Kyrgyzstan Relations and Tensions ...................................................................................... 25 Implications for US Policy ................................................................................................................... 26 TAJIKISTAN ................................................................................................................................................. 26 US Relations with Tajikistan ............................................................................................................... 27 Iranian Relations with Tajikistan ........................................................................................................ 27 Implications for US Policy ................................................................................................................... 30 TURKMENISTAN .......................................................................................................................................... 30 US Relations with Turkmenistan ........................................................................................................ 30 Iranian Relations with Turkmenistan ................................................................................................. 31 Implications for US Policy ................................................................................................................... 33 UZBEKISTAN ............................................................................................................................................... 34 US Relations with Uzbekistan ............................................................................................................. 34 Figure X.2: Pakistan, Central Asia, and Access Routes to Afghanistan .................................................. 36

Iranian Relations with Uzbekistan ...................................................................................................... 36 Implications for US Policy ................................................................................................................... 37

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Introduction The US has many hard decisions to make in shaping its policies toward Central and South Asia – driven primarily by the war in Afghanistan, the growing instability in Pakistan, and whether the US should actively pursue strategic interests in Central Asia in the face of Russian and Chinese pressures and advantages. These decisions are compounded, but not determined by strategic competition with Iran.

Iran is a player in the equation. So far, its efforts in Afghanistan may have done as much to stabilize Western Afghanistan as to jeopardize US interests, but Iran controls the main logistics route for the UN food effort and is expanding its role in Afghanistan. It also faces growing problems with Pakistan because of instability in the Baluchi areas in both Pakistan and Iran.

As for Central Asia, it is not clear that Iran is capable of being a dominant player in a region when China, Russia, and Turkey are major actors and each Central Asian state is playing as many outside and local powers off against each other as possible. Iran is, however, seeking to expand its role and this has had a tangible impact on US and Iranian competition.

Afghanistan: 

Iran has built up major influence in northwestern Afghanistan and with the Hazara Shi’ite minority in other parts of the country. There are some indications that Tehran has been involved in arms transfers and deployed Al Quds advisors to the region, but these remain uncertain. There have not been any overt challenges to the United States. Iran is more concerned with Taliban and Sunni extremist threats than with US influence, and the US is more focused on those threats as well.

Pakistan: 

US relations with Pakistan are the key factor affecting US interests, and Iran has accused Islamabad of supporting Baluchi separatists in Iran and views the rise in Wahhabi-Deobandi fundamentalism and anti-Shia violence in Pakistan with alarm. Iran may, however, see Pakistan as a route to stepping up its competition with the US and has made it clear that it does not support any increase in the US role in Pakistan, even if it helps to fight violent Sunni extremists.

Central Asia 

Iran is an observer at the Shanghai Cooperation Organization, and is seeking to expand its trade and regional influence in Central Asia. While this is not a major area of competition, the US is concerned with Iranian overtures to the former Soviet republics, and the impact of Iranian and Chinese cooperation as well as Iran’s individual efforts.

Afghanistan The United States has been heavily committed to the stabilization and reconstruction of Afghanistan for almost a decade. About 94,000 US troops (including 33,000 “surge” troops due to be withdrawn at the end of 2012) are stationed in the country to fight the Taliban and other insurgent, along with substantial numbers of US civilians, and the forces of various coalition allies and civilian counterparts. The US has provided extensive resources and expertise to Afghanistan in a variety of areas, including humanitarian relief and assistance, capacity-building, security needs, counter-narcotic programs, and infrastructure projects. The US is likely to continue to be significantly involved in Afghanistan well beyond the anticipated transition of power and withdrawal of US combat forces in 2014.

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During his December 2009 speech at West Point, President Barack Obama laid down the core of US goals in Afghanistan, which are to disrupt, dismantle, and defeat al-Qaeda and its safe havens in Pakistan, while preventing their return to Afghanistan.1 While the US combat mission in Afghanistan is not open-ended, the United States plans to remain politically, diplomatically, and economically engaged in Afghanistan for the long term. Washington is encouraging the Government of the Islamic Republic of Afghanistan (GIRoA) to take action to combat corruption and improve governance, and to provide better services for the people of Afghanistan, while expanding the democratic reforms that have been made since 2001 and improving relations with regional partners.

Iran’s Relations with Afghanistan Afghanistan is primarily important to Iran as a means to secure its eastern flank, and prevent the flow of illicit weapons, halt narcotics and migrants across its borders, open up trade routes to Central Asia, and compete with the US presence in South and Central Asia. Iran maintains close relationships with Afghanistan’s Hazara and Tajik Shias – about 20 percent of the Afghan population – and houses a large Afghan refugee population, estimated at 1.07 million in 2010 by the UNHCR.2 Although the US and Iran share a common interest in defeating the Taliban and its associates, and long-term stability of Afghanistan, they do compete for influence both in Afghanistan and the region, and their mutual antagonism prevents more than limited cooperation.

The Iranian-Afghan border is significantly less volatile than the Iranian-Pakistani one, but several challenges persist. Iranian relations with Afghanistan continue to improve, but various sources of tension remain. By some accounts, about 10 percent of Iran’s conscripted armed forces remain deployed along the Afghan border.3 Afghanistan’s relations with Iran have fluctuated over the years, punctuated by periodic disputes over the water rights of the Helmand River. Iran opposed the 1979 Soviet invasion and supported the Afghan resistance, providing financial and military assistance to rebel leaders who pledged loyalty to the Iranian vision of Islamic revolution. Foremost among these was Ahmed Shah Massoud, leader of the Northern Alliance.

Following the emergence of the Taliban and their harsh treatment of Afghanistan’s Hazara Shi’a minority – among whom Iran had built up major influence – Tehran stepped up its assistance to the Northern Alliance in terms of money, weapons, and humanitarian aid.4 The Northern Alliance’s arms deals with Iran led many US diplomats to view Massoud as a tainted force.5 For Tehran, relations with the Taliban deteriorated further in 1998 after Taliban forces seized the Iranian consulate in Mazar-e-Sharif, executed eleven Iranian diplomats, and massacred thousands of Shias. The subsequent fallout led Iran to mass as many as 300,000 troops along the border, and threaten war. Ultimately Iranian commanders decided against the intervention.

1

Barak Obama, West Point Speech (1 December 2009)

2

http://www.unhcr.org/4dfa11499.html

Amir Bagherpour and Asad Farhad, “The Iranian Influence in Afghanistan,” PBS Tehran Bureau, August 9, 2010.

3

Steve Coll, Ghost Wars: The Secret History of the CIA, Afghanistan and Bin Laden, New York: Penguin (2005), p. 345 4

5

Coll, p. 431

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After 11 September 2001, the United States launched a war against the Taliban regime that had sheltered Osama bin Laden. Supreme Leader Khatami persuaded conservatives in the establishment that assisting the coalition war in Afghanistan would be in Iran’s best interest: it would remove the hated Taliban, strike a blow against one of Pakistan’s proxies, and extend Iran’s regional reach.

As the result of an arrangement negotiated by British Foreign Secretary Jack Straw, Iran provided additional assistance to the Northern Alliance and played a constructive role at the postwar negotiations in Bonn.6 In December 2002, Iran signed a “Good Neighbor” Declaration, in which it pledged to respect Afghanistan's independence and territorial integrity. At the time, US action in Afghanistan furthered Iran’s interests. Since then, US reluctance to deal with Iran, and Iran’s concern that it is now surrounded by US bases and allies, not only in Afghanistan but also in Central Asia, has led to steadily rising tensions between the two countries.7 Iran has played a growing role in Afghanistan since the fall of the Taliban. It has been active in Afghan reconstruction efforts, particularly in the western portion of the country in the provinces of Herat, Farah and Nimruz. Tehran is primarily focused on supporting Shia political parties, mobilizing Shia mullahs, and influencing the Afghan media. According to the Afghan Chamber of Commerce, an estimated 2,000 private Iranian firms are active inside Afghanistan, 8 and the Iranian government has funded several transportation and energy infrastructure projects, including building roads and railway links, building schools and funding scholarships at universities, as well as building infrastructure such as Herat’s electricity grid. 9 The Iranian Revolutionary Guards are also believed to train some units of the Afghan security forces.10 Iranian government officials routinely encourage Parliament to support anti-coalition policies and to raise anti-American talking points during debates. They have sought to increase criticism of civilian casualty incidents caused by coalition forces, convince the Afghan Parliament to “legalize” foreign forces, and promote Shia rights (including a separate judicial system). To this end, the Iranian Embassy has cultivated relations with members of opposition groups (such as the United Front), Tajik Sayeds, Hazara MPs, and MPs from Herat and other western provinces.

Iran has also used its fuel shipments as a source of leverage over Afghanistan. It temporarily blocked shipments of fuel in early 2011, causing significant shortages and price spikes inside Afghanistan, reportedly instigated by worries that Iranian supply was being diverted for use by US military forces inside the country.11 Despite this, some analysts, including the authors of a study conducted by RAND, conclude that the net effect of Iranian influence in western Afghanistan has been largely positive has helped establish stability and prosperity in the area, and has facilitated the transfer of control to Afghan security forces.12 6

Ansari, p. 182

7

Keddie, p. 330

8

http://www.rand.org/content/dam/rand/pubs/occasional_papers/2011/RAND_OP322.pdf

9

http://articles.latimes.com/2010/nov/13/world/la-fg-afghanistan-iran-20101114

Amir Bagherpour and Asad Farhad, “The Iranian Influence in Afghanistan,” PBS Tehran Bureau, August 9, 2010.

10

11

http://www.economist.com/node/18014604

12

http://www.rand.org/content/dam/rand/pubs/occasional_papers/2011/RAND_OP322.pdf, pg. 8

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According to some sources, including senior US and coalition military officials, Tehran also provides some material support to the Taliban, in spite of decades of Iranian antipathy for the Taliban. General David Petraeus, then commander of US troops in Afghanistan, testified to the Senate Armed Services Committee in March 2011 that Iran had provided some support for Taliban insurgents through the Qods Force, including an intercepted shipment of 122mm rockets.

Petraeus further stated that Iran “without question” provides “weapons, training and funding,” to the Taliban but insisted that such cooperation comes in “measured amounts” – enough “to make life difficult for us, but not enough to actually succeed.”13 Iran has also made expanded attempts to ensure its influence in any post-American Afghanistan beyond the Shiite belt. Iranian officials are reported to have made cash payments to senior Afghan officials, including senior advisors to President Karzai, in efforts to expand their influence.14 Diplomatic relations between Kabul and Tehran have also been growing. President Ahmadinejad visited Kabul in March 2010, a gesture reciprocated by President Karzai who traveled to Tehran in August 2010.15 Several other Iranian officials have visited Afghanistan in 2010, including Qods Force commander General Qassem Soleimani. In mid-June 2011, Iranian Defense Minister Ahmad Vahidi made a landmark trip to Afghanistan to meet his Afghan counterpart, the first such visit in 92 years.16 Competition for Iranian Influence in a Post-US Withdrawal Afghanistan Iran has cooperated with several other regional countries, notably India and Russia, to gain influence in any post-American Afghanistan. During the Afghan civil war in the post-Soviet period, the three countries constituted the bloc that supported the Northern Alliance in opposition to the Pakistani and Saudi-supported Taliban forces.

Iran and India have sought to counter Pakistani dominance of Afghan trade routes through the construction of a 220-kilometer road from Delaram in Nimroz to Zaranj in Iran, which will connect to Iran’s Chabahar port along the Indian Ocean. The road, which is entirely financed by India, will provide an alternate route to Pakistan for overland trade upon completion.17 Iran and India have also engaged Afghanistan in trilateral initiatives to discuss its future, in an effort to recover the influence they lose by being shut out of other discussions due to US and Pakistani sensitivities.18 However, Indo-Iranian cooperation in Afghanistan has been restrained by US pressure on India, and damaged by Indian support for US sanctions on Iran, growing Indo-US rapprochement, and continued delays to the proposed Iran-Pakistan-India pipeline.19 Despite working at cross purposes during the Afghan civil war, Iran and Pakistan have some common interests in trying to shape the future of Afghanistan after U.S. troop withdrawal, and 13

http://www.wired.com/dangerroom/2011/03/petraeus-doesnt-sweat-irans-rockets-in-afghanistan/

http://www.bloomberg.com/news/2010-10-24/iran-must-not-meddle-in-afghanistan-u-s-says-after-bagof-cash-reported.html 14

15

http://www.insideiran.org/media-analysis/iran-uses-karzai-visit-to-show-regional-support/

16

http://www.reuters.com/article/2011/06/18/us-iran-afghanistan-visit-idUSTRE75H1FN20110618

17

http://www.acus.org/new_atlanticist/india-iran-afghanistan-corridor

18

http://www.indianexpress.com/news/now-an-indiairanafghanistan-trisummit/684954/

19

http://blogs.reuters.com/pakistan/2010/07/06/in-scramble-for-afghanistan-india-looks-to-iran/

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have begun to meet with the government in Kabul to discuss expanding relations, economic ties, and regional stability. Pakistani President Asif Ali Zardari, Iranian President Mahmoud Ahmadinejad and Afghan President Hamid Karzai met at a in Islamabad in February 2012 in what was the third trilateral summit held by the countries since 2009. Ahmadinejad used the summit to criticize Western pressure on Iran and influence in the region more broadly. “All problems are coming from outside…In order to promote their goals and ambitions… they don’t want to allow our nations to develop... we should deny others the opportunity to interfere in our affairs.”20 As part of its efforts to isolate Iran, the US has opposed the construction of an oil pipeline connecting Iran and Pakistan. Speaking alongside Ahmadinejad, Pakistani President Zardari publically rebuffed critics of the joint venture and said that Islamabad’s relations with Tehran could not be “undermined” by international pressure.21 As US-Pakistani relations remain troubled and the security situation in Afghanistan remains unstable, Tehran has carefully worked to exploit US weaknesses to influence a strategic outcome in the region which most benefits itself. Though the extent of Iran’s capability to influence any potential negotiations with the Taliban is unknown, it is clear that the IRI intends to stress the detrimental effects of “foreign interference” in the region to delegitimize and undermine the American role.

US and Iranian competition, however, is scarcely the dominant factor shaping Iran’s behavior in dealing with Pakistan. The porous Afghan-Iranian border affects Iranian security stability through trafficking in narcotics and weapons, as well as flows of refugees and illegal migrants.

By many accounts, Iran has the world’s worst heroin problem – and a growing HIV/AIDS problem as a result.22 As much as 60 percent of Iranian heroin is sourced from Afghan poppy fields, according to the UNODC.23 The rise in drug use has strained Iranian police and prison capacity and caused serious societal problems. In response, Iran and Afghanistan have increased counter-narcotics cooperation. Iran is also a transit and destination country for many trafficked Afghan peoples, including young children sold for commercial sexual exploitation.24 Afghan refugees in Iran already number about a million and are an intense strain on the Iranian economy, particularly given the pressure of American and international sanctions. Since 2005, Iranian President Ahmadinejad has stepped up the forcible repatriation of Afghan refugees, often with little advance coordination. Afghan officials report that Iran returned as many as 160,000 Afghan refugees between March 2010 and February 2011.25 These returns have caused tensions, as Afghan officials are ill equipped to deal with the humanitarian burden, and sometimes accuse Iran of using refugees as a destabilizing tool.26 The treatment of Afghan refugees in Iran has 20

http://www.sananews.net/english/2012/02/pakistan-iran-pledge-support-to-afghanistan/

http://tribune.com.pk/story/337834/resumption-of-nato-supplies-will-benefit-both-afghanistanpakistan-karzai/ 21

22

http://www.cfr.org/iran/afghanistans-role-irans-drug-problem/p11457

23

http://www.unodc.org/unodc/en/world_drug_report.html

24

http://www.unhcr.org/refworld/country,,USDOS,,IRN,,4c1883eb32,0.html

25

http://www.pajhwok.com/en/2011/02/07/iran-expels-thousands-afghan-refugees

26

http://www.aei.org/docLib/2010-11-MEO-g.pdf

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often caused anti-Iranian protests in Afghanistan, including five in a fortnight in May 2010, one of which took place outside the Iranian embassy in Jalalabad.27 Implications for US Policy Although Afghanistan looks to Iran to cultivate cooperative economic, business, and cultural relations, and to hedge against instability following the withdrawal of US and allied combat troops by the end of 2014, Kabul still sees the United States as its most critical long-term partner.

Despite recent crises, the Afghan government is likely to support enough US policies to maintain US support through 2014 and beyond in spite of the withdrawal of most US forces and cuts in aid. The Afghan government also has reason to be cautious about Iranian actions that could divide the Hazara or win influence over Afghan Turcomans and Tajiks.

The situation is, however, extremely unstable. No one can predict the outcome of the peace talks that have begun in 2012, the future of the afghan government is uncertain and 2014 is an election year, the ability of Afghanistan’s still developing force to hold the country after US and allied withdrawal is uncertain, and Pakistan continues to offer Afghan insurgents de facto sanctuaries.

The Afghan government lacks capacity and has high levels of corruption, and faces major problems in dealing with the loss of outside military spending and aid levels that now are equal to the entire Afghan GDP. There are some positive signs, ISAF has achieved tactical successes in the south, clearing and holding much of the former Taliban heartland – and they are unlikely to lose this territory in the near term. By 2014 it is probable that much of the country outside of Kabul will still have nonexistent, inefficient, or corrupt governance – but a number of good programs are in place working on this, and progress is being made. The Afghan economy, while deeply troubled, is also making progress. Perhaps for reasons such as this, the Afghan government decided to reject a Memorandum of Understanding on military cooperation proposed by Iran However, the US and its ISAF allies are in a race against time, resources, and the enemy – that they may not win. Aid funding will probably peak in FY2012, and will decline substantially thereafter. Military and civilian personnel will begin to withdraw this year, and will continue to do so through 2014. Key institutions such as the Afghan National Security Forces operate on a budget that is larger than formal government revenues, and without continued US financial support, are unlikely to survive.

More broadly, even if the Afghan government does survive, it is uncertain that the forces and capabilities the US will leave in Afghanistan will help stabilize the region. It is equally unclear that the US can maintain a level of strategic influence in Central Asia and South Asia as a whole that justifies pursuing the war in Afghanistan, particularly if the US and its allies are not willing to make the necessary sustained commitment of resources through and beyond 2014.

Given these facts, the US needs to be cautious about the way it handles this aspect of competition with Iran. The US may need to seek a compromise where it does not oppose Kabul developing more intimate ties with Tehran, if this does not lead to activities that might further disrupt the changes of maintaining the current central government in Afghanistan. Iran can provide a valuable diplomatic interlocutor and a viable trading partner for the fledging Afghan state.

27

http://news.bbc.co.uk/2/hi/south_asia/8679336.stm

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It is unclear that anything approaching the kind of cooperation that took place early in the Afghan War is possible, but Tehran has an interest in working with the US towards some common goals in Afghanistan: promoting stability and combating the drug trade, among them. It has an interest in regional stability, and it does not want Afghanistan to come back under Taliban or Sunni extremist control, or to see Pakistan emerge a dominant enough to recreate the relationship it has with the Taliban before 9/11.

Some form of tacit compromise may be possible, but it is then likely to be unstable, and nothing about the US position in Afghanistan and Central Asia – much less US relations with Iran in dealing with Afghanistan – is currently predictable. The US lacks any credible plan for “transition” in Afghanistan during 2012-2014 and beyond, its relations with Pakistan have sharply deteriorated, and it has no clear policy towards a future role in Central Asia. If the US is to compete effectively with Iran in this region, it must deal with each of these issues far more effectively than it has to date.

Pakistan Pakistan, is not a key area of direct US and Iranian competition, but still figures into each country’s calculus. Pakistan currently has a critical impact on US strategic interests, including Afghan stabilization efforts, and efforts to reduce the risk of violent conflict in the region.

However, the US has increasingly found that its influence in Pakistan is limited and deteriorating, in spite of a near decade of aid and attention, including $4.34 billion in 2010.28 Anti-Americanism is rife across Pakistan, and senior military and government officials strongly resent unilateral US military activity within Pakistan, particularly the US raid to kill Osama Bin Laden on May 2, 2011, and the kind of border operations that led to the death of Pakistani soldiers in later November 2011.

Iran’s primary strategic interests and concerns on its eastern periphery are focused on security and stability in protecting its flank, competing religiously with Sunni powers such as Saudi Arabia, and ensuring its influence in any post-American Afghanistan. Because Iran remains concerned over the threats posed by Sunni Taliban and by Pakistan’s agitated Balochs, it is likely to remain an interested party so that instability does not spill over into its territory. At the same time, energy ties between the countries constitute one of the most important components of their relationship.

The Impact of Growing US-Pakistani Tension The key factor shaping US and Iranian competition may be the growing tension between the US and Pakistan – tension built on the entire history of Pakistani and US relations. The US and Pakistan established diplomatic relations in 1947. Washington agreed to provide economic and military assistance to Pakistan, but subsequently suspended the military aid during the 1965 Indo-Pakistan war, a decision that generated a widespread feeling in Pakistan that the United States was not a reliable ally.29 Gradually, relations improved and arms sales were renewed in 1975.

28

K. Alan Kronstadt, “Direct Overt US Aid and Military Reimbursements to Pakistan FY2002-FY2011,” Congressional Research Service, January 4, 2011. Available at http://www.fas.org/sgp/crs/row/pakaid.pdf 29

State Department

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After the Soviet invasion of Afghanistan in 1979, Pakistan became a pillar of US diplomacy in Central Asia and served as the primary logistical conduit for the Afghan resistance. In 1981, Pakistan and the United States agreed on a $3.2 billion military and economic assistance program aimed at helping Pakistan deal with the heightened security threat in the region and its economic development needs. With US assistance, Pakistan armed and supplied anti-Soviet fighters in Afghanistan in the largest covert operation in history, eventually defeating the Soviets, who withdrew in 1988.30 In March 1986, the US provided Pakistan with a $4 billion economic development and security assistance program, allocating about 40 percent of the assistance package to non-reimbursable credits for military purchases – the third-largest program behind Israel and Egypt.31 Once more however, concerns over the Pakistani nuclear program intruded, and by October 1990, the United States suspended all military assistance and new economic aid to Pakistan under the Pressler Amendment. This amendment eventually led to a decade of sanctions, which were tightened following Pakistan's nuclear tests in response to India's May 1998 tests and the military coup of 1999.

Pakistan initially developed close ties to the Taliban regime in Afghanistan and extended official recognition in 1997. However, after 9/11, Pakistan shifted its position under intense US pressure.

Pakistani cooperation was seen as vital to dealing with the cross-border sanctuaries Taliban and affiliated militants had in Pakistan, in assisting the US in intelligence gathering, and in providing a crucial logistical transit route for US and NATO materiel. As a result, Pakistan was declared a major non-NATO ally by President Bush in 2004, and received extensive US support and attention. It got almost $20 billion in US assistance between 2002 and the end of 2010, of which it got $13.3 billion military assistance.32 The US became a key arms supplier tor the Pakistani Armed Forces, particularly through the Foreign Military Financing program, and amongst other pieces of heavy equipment, is due to supply Pakistan with as many as 100 F-16 aircraft.

A decade into the war, however, it has become increasingly apparent that Pakistan has a fundamentally different set of strategic priorities from the US, a fact that US experts have privately recognized. Pakistan continues to focus on the Indian threat, does not trust the US, and sees it as a temporary actor that will again abandon the region in 2014 – if not before. As a result, Pakistan continues to maneuver to secure its interests in a post-American Afghanistan.

Moreover, tensions between the US and Pakistan over a host of different incidents have created serious tensions between the US and the Pakistani government and military, and made the US as unpopular as India in Pakistani public opinion. Both the US and Pakistan need and use each other for different objectives, and may do so through 2014, but their cooperation is often more a facade than real.

Iranian-Pakistani Relations Iranian-Pakistani relations have been uncertain and evolving since the 1979 Iranian Revolution that brought a Shiite theocracy to power in Iran. Prior to the revolution, relations had been warm.

30

State Department

31

State Department

K. Alan Kronstadt, “Direct Overt US Aid and Military Reimbursements to Pakistan FY2002-FY2011,” Congressional Research Service, January 4, 2011. Available at http://www.fas.org/sgp/crs/row/pakaid.pdf 32

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Iran was the first country to recognize Pakistan in 1947, and alongside Turkey, the three countries were the main US allies in the region during the early Cold War.33 The two countries also collaborated on suppressing Baloch nationalism, which both Tehran and Islamabad perceived to be a threat to regional stability and territorial integrity. 34 This was particularly true during the reign of the Shah, when Iran sent Cobra attack helicopters to help Pakistan put down Baloch dissent.

The 1979 Iranian Revolution changed the dynamics of the relationship. Now increasingly interested in pan-Shiite solidarity, Iran’s theocracy resented the state-sponsored sectarian persecution of Pakistani Shias during and after the Zia era. It viewed with alarm the Saudi penetration of Pakistan’s Sunni madrassa sector, the growing strength of Wahhabi-influenced (and financed) Deobandi Islam, and the growth in extremist Sunni groups sponsored by the Pakistani intelligence agencies, including many focused on anti-Shia sectarian violence. Saudi money financed, and continues to finance, large segments of the Deobandi and Ahle-Hadith infrastructure in Pakistan to hedge against both the Sufi Barelvis and the Shias.

Since the Revolution, many Pakistani Shias have looked to Iran for spiritual and political guidance. In 1979, almost immediately after the Iranian Revolution, the Islamia Students Organization (ISO), a large Shia organization, publicly supported Ayatollah Khomeini as marjae-taqlid (source of emulation), a significant shift from historical spiritual guidance from Iraq.

Pakistani Shia students also increasingly traveled to Iran for education, helping erode the traditional control of the Shia clergy in Pakistan.35 As Sunni attacks against Shias grew during the 1980s and 90s, Shias established their own militant groups financed in large part by Tehran, such as the Sipah-e-Mohammad. Iranian support grew, particularly after December 1990, when militants assassinated the Iranian Consul General in Lahore. Despite this support, Shiite militants in Pakistan have had limited impact and are outnumbered and outclassed by their Sunni counterparts.

In neighboring Afghanistan, during the Soviet jihad, both Tehran and Islamabad cultivated separate anti-Soviet forces, and there were serious differences between their Afghan policies after the Soviets left Afghanistan. Iran desired Afghanistan’s Shiite minority to be represented in any post-war power-sharing arrangement and desired influence in northern and western Afghanistan. Pakistan soon threw its full support behind the Sunni Pashtuns, particularly the Taliban, who virulently persecuted Afghanistan’s Hazara Shias. As a result, Iran lent military and diplomatic support to the Tajik and Uzbek-dominated Northern Alliance forces that battled the Taliban through much of the 1990s. The relationship reached its lowest ebb in 1998, after the Taliban took Mazar-e-Sharif, massacred the Hazara Shia populace, and executed nine Iranian diplomats – a matter for which Iran blamed Pakistan for.36 The incident resulted in a large-scale Shah Alam, “Iran-Pakistan Relations: Political and Strategic Dimensions,” Strategic Analysis, December 2004. Available at http://www.idsa.in/system/files/strategicanalysis_salam_1204.pdf 33

Chris Zambelis, “Violence and Rebellion in Iranian Balochistan,” Jamestown Foundation, June 29, 2006.

Available at http://www.jamestown.org/programs/gta/single/?tx_ttnews[tt_news]=821&tx_ttnews[backPid]=181&no_c ache=1 34

35

Hassan Abbas, “Shiism and Sectarian Conflict in Pakistan,” CTC Center at West Point, September 22, 2010. Available at http://www.ctc.usma.edu/wp-content/uploads/2011/05/CTC-OP-Abbas-21-September.pdf 36

“Iran holds Taliban responsible for 9 Diplomat’s Deaths,” New York Times, September 11, 1998. Available at http://www.nytimes.com/1998/09/11/world/iran-holds-taliban-responsible-for-9-diplomats-deaths.html

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mobilization of Iranian military forces along the border, although the threatened invasion never materialized, at least in part.37 Iranian and Pakistani relations warmed after the US-led invasion of Afghanistan. Iran perceived Pakistan to have ended its support for the Taliban. At a joint press conference in December 2001, the Iranian and Pakistani Foreign Ministers announced a “new era of cooperation,” which was soon followed by a landmark three-day visit to Pakistan by Iranian President Khatami in December 2002. During the visit, both countries pledged to improve border security and to cultivate better economic cooperation, especially in the energy and natural gas sectors.38 In Afghanistan, both Iran and Pakistan pledged support for the Bonn Process, and the two countries stepped up their defense cooperation, including the joint production of the Al-Khalid main battle tank.39 Iran and Pakistan have made several steps to improve relations in 2010 and 2011, as US relations with Pakistan have deteriorated. Since 2008, when President Ahmadinejad made his first state visit to Pakistan, there have increased high-profile diplomatic contacts between Tehran and Islamabad, including two visits by President Zardari to Tehran in the space of a month in JuneJuly 2011 to discuss economic and energy relations, as well as issues of terrorism, narcotics and the Afghan future.40 The Baloch and Other Regional Issues Various other obstacles continue to impede closer Iranian-Pakistani cooperation. Iran remains concerned at the potential for a spillover of violence, stemming from Sunni fundamentalists and Baloch separatists. Baloch areas in both Iran and Pakistan are some of the most underdeveloped and impoverished areas in both countries, and violence in these regions is complicated by rising militancy on both sides of the border, as well as an unregulated flow of narcotics, weapons, and migrants. In particular, Iran’s Sistan-Baluchistan province has witnessed increased disturbances by the rabidly anti-Shia terrorist group Jundullah, which is believed to operate in part out of Pakistan and to be responsible for several high-profile attacks against Iranian military targets.

President Ahmadinejad has publicly accused “certain officials in Pakistan” of involvement in the attacks and demanded the extradition of key Jundullah leaders.41 Pakistani officials denied any involvement in the attacks. In response, Iran briefly closed its border with Pakistan in December

37

“Iran holds Taliban responsible for 9 Diplomat’s Deaths,” New York Times, September 11, 1998. Available at http://www.nytimes.com/1998/09/11/world/iran-holds-taliban-responsible-for-9-diplomats-deaths.html 38

Editorial, Dawn, December 27, 2002 Available at http://ipripak.org/factfiles/ff88.pdf

“Pak-Iran Relations Since Islamic Revolution,” Embassy of Islamic Republic of Iran. Available at http://www.iranembassy.pk/fa/political-section/pak-iran/592-pak-iran-relations-since-islamic-revolutiongenisis-of-cooperatio-and-competition.html, accessed April 23, 2011.

39

40

http://online.wsj.com/article/SB10001424052702303627104576409983223152852.html?mod=googlenew s_wsj.

“Tensions Rise Between Pakistan and Iran,” CBS News (October 19, 2009) http://www.cbsnews.com/stories/2009/10/19/world/main5395154.shtml 41

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2009, but reopened it in March 2010, upon receiving assurances from Islamabad that authorities would take measures to improve security in the area.42 Pakistan and Iran have also found themselves at odds over their visions for a future Afghanistan.

Iran, still fearful of the rise of Sunni fundamentalism on its borders, has made some efforts to revive the old Iranian-Indian-Russian axis of support for the Tajik-Uzbek Northern Alliance factions in Afghanistan to hedge against Pakistani influence over Sunni Pashtuns. In particular, Iran has cooperated with Pakistan’s arch-enemy India, to build alternative trade and transit routes that reduce Afghanistan’s dependence on Pakistan. This has been an irritant in Pakistani-Iranian relations Sunni-Shi’ite Issues The “Arab Spring” and political unrest in the Gulf have also raised tensions between the two countries, particularly over Bahrain. Pakistan plays a key role in the Bahraini security apparatus – contributing a total of 40,000 soldiers across all branches of the Bahraini security services.

This has raised tensions with Iran, which has declared solidarity with Shia protesters in the country.43 Tehran has reportedly expressed concern over accounts that Pakistan has started to recruit thousands more troops, including retired army officers, to deploy to Bahrain. 44 Nuclear Issues Despite these tensions in the relationship, in June 2009, the Pakistani government officially congratulated Iranian President Mahmoud Ahmadinejad on his re-election.45 Moreover, as a nuclear state that is not a signatory to the Nuclear Non-Proliferation Treaty, Pakistan has publicly defended Iran’s right to nuclear technology and has increasingly called for peaceful reconciliation on the international nuclear standoff.46 In a February 2010 meeting with her Iranian counterpart, Pakistani National Assembly Speaker Fahmida Mirza said that “Pakistan is against any kinds of sanctions against Iran and believes that Iran's nuclear disputes should be resolved peacefully and through dialogue.”47 Pakistani support through the AQ Khan network has reportedly played a role in the development of the Iranian nuclear program. Khan, whose syndicate many US officials believe operated with the support of at least some elements of the Pakistani military and intelligence services, is reported to have proliferated several pieces of technology including parts and technology for

“Iran Reopens Pakistan Border for Trade After Blast,” Radio Free Europe/Radio Liberty (1 March 2010) http://www.rferl.org/content/Iran_Reopens_Pakistan_Border_For_Trade_After_Blast/1971517.html 42

Qaiser Butt, “Middle East Protests: Pakistan tries to pacify Iran over Bahrain aid,” Express Tribune, April 23, 2011. Available at http://tribune.com.pk/story/154915/middle-east-protests-pakistan-tries-to-pacify-iranover-bahrain-aid/ 43

44

http://www.presstv.ir/detail/175074.html

"Iranian election complicates U.S. diplomacy," MSNBC (15 June 2009) http://www.msnbc.msn.com/id/31356186/ns/world_news-mideastn_africa 45

“Afghanistan, Iran, Pakistan Agree on Border Cooperation,” Voice of the Islamic Republic of Iran in BBC Monitoring, (June 25, 2008).

46

"Pakistan opposes sanctions on Iran: speaker," Xinhua (4 February, 2010) http://news.xinhuanet.com/english2010/world/2010-02/04/c_13163962.htm 47

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both basic and advanced centrifuges. The transfers, which stopped in 1999, were acknowledged

by Khan himself in 2004.48 Implications for US Policy The US has done its best to improve relations with Pakistan and make it a strategic partner, but the differences in US and Pakistani views of their relative strategic interests may be impossible to overcome. This may give Iran a window of opportunity, but Iran has many tensions of its own with Pakistan, and the US remain Pakistan’s most generous beneficiary (by far) in material terms. Its support, while sometimes resented, is crucial for Pakistani stability and not easily dispensed with. Relations between Tehran and Islamabad too are recovering from a long period of hostility, and a shared dislike of US influence in the region is only one of several issues that will guide their future relations. Other issues not directly linked to the US will continue to limit the extent of Pakistani-Iranian strategic cooperation.

Iran’s strategic interests in Afghanistan and the region also differ from those of Pakistan. Despite the US and Iranian competition, various common interests persist, including a desire to combat Sunni extremists, and establish some form of order that prevents prevent cross-border flows of narcotics, weapons and refugees. The net result of Iranian influence in western Afghanistan has also largely been positive, with Iranian cultural, economic and political investments that have constrained violence and helped transition control to Afghan security forces. In contrast, the US and Pakistan have radically different interpretations of what the post-war regional structure should look like, and there remains considerable suspicion among US officials and analysts of active covert Pakistani support for Afghan Taliban insurgent forces.

Tehran and Islamabad do, however, share a mutual dislike of the US presence in South Asia, and Tehran has shown a willingness to engage with the Taliban in a limited fashion. 49 Tehran is also likely to favor an Afghan settlement that is more on Afghan, than US, terms, and will likely require expanded accommodation with Pakistan to secure its interests.

There is no easy way to deal with these uncertainties, but the US may not face serious problems in dealing with the end result. Strategic cooperation between Tehran and Islamabad that goes beyond joint efforts on counter-narcotics and border security is prone to many difficulties.

Pakistan’s close relations with Saudi Arabia, and Riyadh’s large investments in Pakistan’s religious sector continue to complicate relations. In fact when assessing Pakistan, the SaudiIranian rivalry may be just as, if not more, important to Tehran than US-Iranian competition.

Expanded Iranian influence in Pakistan is not necessarily a bad thing, providing another tool to coerce the government and security forces to take a more hardline stance against Sunni fundamentalists active in sectarian violence.

The US may well find it convenient to live with a future where Iran is one more competitor in a region where every local and outside power seeks to use all the others to its own advantage – albeit under the cloak of rhetoric about good intentions and regional cooperation. The manner of the US drawdown from the region in 2014 will affect the extent of US influence in Pakistan over the longer-term, but it appears likely that such influence will diminish with reduced US attention as it has done historically. The US is likely to continue to view stability in Pakistan as an 48

http://www.irantracker.org/nuclear-program/technology-sources-irans-nuclear-program#pakistan

49

http://www.wired.com/dangerroom/2011/03/petraeus-doesnt-sweat-irans-rockets-in-afghanistan/

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important national interest given the potential for nuclear proliferation and regional wars, and as such Iranian influence that assists in this goal should not necessarily be discouraged. The US must, however, also prepare for the possibility that worsening relations with Islamabad increase the possibility for negative Iranian-Pakistani cooperation predicated more on emotion than rational interest.

Indian and Pakistani Energy Imports Pakistan and India both play a role in the “sanctions game.” Pakistan and Iran have had growing trade ties, particularly in the energy sector. Cooperation regarding energy has increased since the 1990s and has helped provide the foundation for a bilateral trade network between Iran and Pakistan. In 2009, Pakistan increased its non-oil exports to Iran by 80 percent, reaching $279 million. Similarly, Iranian non-oil exports to Pakistan increased by 11 percent, totaling $278 million for the year.50 In May 2009, Iran and Pakistan signed a purchase agreement stipulating that Iran would initially transfer 30 million cubic meters of gas to Pakistan per day, with the volume eventually increasing to 60 million.51 The deal was concluded over the objections of US Special Representative for Pakistan and Afghanistan Richard Holbrooke, who cautioned that although the “US understands that Pakistan faces [a] major energy crisis... new sanctions on Iran can impact Pakistan.”52 In 2011, Iran has also offered to sell 1,100 MW of subsidized electricity to Pakistan, and reported that 1,000 of the 1,100 km of the IPI pipeline on Iranian soil had now been completed.53 Iranian-US competition has impacted on these growing energy ties. In particular, the US has opposed the proposed construction of a 2,600-kilometer, $7.5 billion Iran-Pakistan-India gas pipeline (IPI) that would pump gas from Iran’s South Pars field to Pakistan and India.54 Tentative talks on the pipeline began in 1994; however, tense political relations between India and Pakistan – as well as significant US pressure – have frustrated realization of the project to date. The US favors the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline instead, although instability in Afghanistan and tensions between India and Pakistan continue to be crucial obstacles.

Pakistan and India’s dependence on Iranian oil has led both countries to reject Western calls to reduce consumption of Iranian oil in response to Tehran’s possible pursuit of nuclear weapons.

In response to passage of increased sanctions on the Iranian Central Bank (ICB) and an embargo on oil by the EU, Tehran increased deliveries to buyers like Pakistan and India and has adopted flexible payment methods to incentivize customers and help dodge sanctions. According to Reuters, Iran and Pakistan have agreed to barter wheat for oil. Pakistan will supply Iran with 1 50

“Iran, Pakistan to Support Peace, Stability in Afghanistan,” IRNA (May 2010).

Fazl-e-Haider, Syed, “Pakistan, Iran Sign Gas Pipeline Deal,” Asia Times (May 27, 2009) http://www.atimes.com/atimes/South_Asia/KE27Df03.html 51

“U.S. Envoy Takes U-Turn on Pakistan-Iran Gas Pipeline,” Xinhua (June 20, 2010) http://news.xinhuanet.com/english2010/world/2010-06/20/c_13359531.htm 52

http://tribune.com.pk/story/192456/fighting-against-terrorism-pakistan-to-attend-iran-moot-despitesaudi-disapproval/ 53

“Iran Looks for Allies Through Asian and Latin American Partnerships,” Power and Interest News Report (November 27, 2007) 54

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million tons of wheat – to offset potential food shortages brought on by sanctions – in exchange for 80,000 b/pd on a three-month deferred payment plan.55 Although India is publically critical of a nuclear-armed Iran—supporting four IAEA resolutions since 2005 aimed at halting suspect Iranian nuclear activities—it has refused to participate in sanctions against the Iranian energy sector and has taken up the slack in demand caused by the EU embargo and China’s decision replace some of its Iranian energy imports with Saudi oil.

According to the Wall Street Journal, India was the biggest buyer of Iranian crude as of February 2012, and Iran’s total oil exports were broadly unchanged in January despite the imposition of new sanctions.56 As a growing power with regional ambitions and a major purchaser of Iranian oil, India has been reticent to potentially hinder growth by disrupting existing contracts with the IRI. Explaining India’s decision not to cut back on imports, India’s finance minister Pranab Mukherjee told reporters in Chicago, “It is not possible for India to take any decision to reduce the import from Iran drastically because, after all, the countries which can provide the requirement of the emerging economy, Iran is an important country amongst them.”57 India does, however, face the pressure of both US and EU sanctions. Although India has said it does not intend to participate in energy sanctions outside of those mandated by the UN, trade with Iran has been made increasingly difficult by the US-led sanctions regime and Indian imports may well be sharply reduced as a result. Reuters reported in early March 2012 that India’s largest oil buyer, State-run Mangalore Refinery and Petrochemicals Ltd, or MRPL, could reduce imports from 150,000 bpd to as little as 80,000 bpd for the fiscal year starting on April 1.58

Central Asia Central Asia is another area where Tehran is seeking to expand its regional influence, while Washington is seeking to block Iranian overtures to the former Soviet republics. Central Asia is one of the least integrated regions in the world; however, US-Iranian competition is shaped as much by their individual relations with each of the republics as by regional considerations.

Iran has long historical links with Central Asia, and shares territorial and maritime borders with Turkmenistan and Kazakhstan. Iranian geography is such that it functionally controls Central Asian access to the Persian Gulf and the high seas. This configuration offers many Central Asian republics a means of breaking their dependence on routes through Russian territory.59 Furthermore, many Central Asian republics also fear spillover from Afghanistan and are interested in maintaining regional stability in ways that more closely resemble Tehran’s vision for a post-American Afghanistan than Washington’s. There is, however, an important religious distinction. The Central Asian republics are largely Sunni, which is usually a complicating factor when the staunchly Shia Iran attempts to cultivate bilateral relationships with Muslim countries.

55

http://uk.reuters.com/article/2012/03/07/us-iran-oil-sanctions-idUKTRE8250UG20120307

56

http://online.wsj.com/article/BT-CO-20120208-711628.html

http://www.foxnews.com/world/2012/01/30/india-defies-sanctions-wont-cut-iran-oil-imports424131556/ 57

58

http://www.reuters.com/article/2012/03/05/us-mrpl-iran-idUSTRE82400920120305

59

http://belfercenter.ksg.harvard.edu/files/iranandcentralasia.pdf

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Iran is seeking to expand its trade and regional influence and holds observer status at the Shanghai Cooperation Organization (SCO), which is dominated by Russia and China, but also includes Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan. Iranian leaders, including President Ahmadinejad, have urged the SCO to orient its policies in a more anti-American direction,60 but the impact of such rhetoric has thus far been difficult to measure.

Much like Iran, the United States’ influence varies by country – it is stronger in some, such as Uzbekistan, and weaker in others, such as Turkmenistan. Nonetheless, successive American administrations have viewed the promotion of US oil interests in Central Asia as an important economic priority. Recently, Washington has expanded its focus to garnering support for the Afghan War. By virtue of geography, and a worsening US-Pakistani relationship, Central Asia has emerged as an increasingly important transit corridor for US and NATO materiel.

Collectively called the “Northern Distribution Network,” this route is shown in Figure X.1.

In the post-Afghan period, it must be considered that Central Asia may not be particularly vital to the US strategic interest. A more nuanced approach, examining the potential merits and drawbacks from engagement with each country in this complex and ethnically divided region will be important, and can help the US avoid the pitfall where every foreign issue becomes “critical” to the US security interest, and leads to an inefficient setting of priorities and allocation of resources.

http://www.voanews.com/english/news/middle-east/iran/Irans-Ahmadinejad-Urges-Central-Asia-toEnd-Domination-of-Enslavers-and-Colonizers-123920024.html 60

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Figure X.1: The Northern Distribution Network

Source: National Geospatial Intelligence Agency; Washington Post

Kazakhstan Kazakhstan has been ruled by President Nursultan Nazarbayev, former leader of the Kazakh Communist Party ever since its independence in 1991. By virtue of its size and strategic position, Kazakhstan pursues a multi-vector foreign policy, balancing relations with Russia, China, the US and the EU. Historical, cultural and political links mean Russian influence is unparalleled in Kazakhstan, but US-Kazakh relations have expanded and deepened. The US was the first countries to recognize Kazakhstan, and opened its embassy there in January 1992. In the years since, the two countries developed a strong bilateral relationship that has expanded significantly in the aftermath of 9/11, particularly in the realms of counterterrorism, energy extraction, and logistical cooperation for the Afghan War.

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Kazakhstan is the region’s economic powerhouse, with an economy larger than all the other Central Asian countries combined.61 This is in part due to the country’s significant hydrocarbon wealth – both oil and natural gas -- full development of which could make the country one of the top five oil producers in the next decade. Proven reserves include about 85 trillion cubic feet of natural gas and 30 billion barrels of oil, concentrated in the massive Tengiz, Kashagan and Karachaganak fields.62 Production is already at 1.54 million barrels per day in 2009, and up to a third of GDP is generated by the oil and gas sector. Further sector development is expected to double productivity by 2019.63 Despite this resource wealth, by some estimates about 20 percent of the population continues to subsist below the poverty line.64 Kazakhstan also lacks access to a major seaport and is reliant on overland pipelines, leaving exports vulnerable to regional geopolitics.

US and Kazakh Relations Despite indications of autocratic rule, including restrictive elections laws, curbs on press freedom, and pervasive corruption, US rhetoric towards Kazakhstan has generally been positive.

In a 2006 meeting between Presidents Bush and Nazarbayev, the US president described Kazakhstan as a “free nation” with a “commitment to institutions that will enable liberty to flourish.” The Obama Administration has stated the US strategic objective in Kazakhstan to be to help the country develop into a stable and democratic country that is a respected regional leader, engaged in free market competition and demonstrating respect for the rule of law.65 Between 1992 and 2008, Kazakhstan received $1.67 in cumulative US aid.66 In January 2011, however, after Nazarbayev attempted to call a referendum that would extend his term to 2020, the US joined with domestic opposition and the international community in condemning the regime As a result, Nazarbayev scrapped the plan and instead called for presidential elections to be held nearly two years ahead of schedule. While these repressive measures are cause for concern, it is worth noting that Kazakhstan is slightly more open than its central Asian neighbors, is one of the most vibrant Central Asian economies, and is one of the great non-proliferation success stories since the end of the Cold War. The US has been heavily involved in helping secure Kazakhstan’s nuclear materials. Kazakhstan renounced nuclear weapons in 1993, but was a major Soviet nuclear testing and storage site, particularly at Seminpalatinsk, where over 500 nuclear bombs were detonated.67 This area was regarded as one of the least secure nuclear sites in the world and the US feared that terrorists would be able to access its radioactive materials. As a result, under the Cooperative Threat Reduction program, the United States has spent $240 million to assist Kazakhstan in eliminating weapons of mass destruction and related infrastructure,68 including transporting tons of nuclear 61

http://richardbrenneman.wordpress.com/2011/01/09/wikicable-kazakhstan-as-a-pentagon-satellite/

62

http://205.254.135.24/countries/cab.cfm?fips=KZ

63

http://205.254.135.24/countries/cab.cfm?fips=KZ

64

http://www.fas.org/sgp/crs/row/97-1058.pdf

65

http://www.fas.org/sgp/crs/row/97-1058.pdf

66

Ibid.

67

http://www.spiegel.de/international/world/0,1518,741679,00.html

68

http://www.state.gov/r/pa/ei/bgn/5487.htm

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materials – enriched uranium and plutonium – to more secure storage sites,69 destroying underground tunnels formerly used for testing and storage, and improving the surveillance and physical security in these areas.70 The Kazakh military has participated in the United States’ International Military Education and Training program, obtained US Foreign Military Financing, and joined NATO’s Partnership for Peace program. In 2005, US Central Command conducted approximately 45 bilateral, military cooperation events with the Ministry of Defense of Kazakhstan and other agencies, an increase of more than 100 percent since 2002.71 In August 2010, American, British, and Kazakh peacekeeping and air-mobile troops conducted joint exercises in the eighth annual ‘Steppe Eagle’ exercises.72 With the ‘War on Terror’ and operations in Afghanistan, the United States and Kazakhstan have increased cooperation in combating illegal narcotics, improving border security, and preventing money laundering and trafficking in persons.

Kazakhstan has been an important logistical node in support of the US-led war effort in Afghanistan. Much like other Central Asian republics, Kazakhstan’s primary worry in Afghanistan is that of spillover from militant Islam. Initially, Kazakhstan had held out on participating in the Northern Distribution Network (NDN) – the US attempt to reduce its dependence on Pakistani transit routes – but since 2010 it has become an integral and increasingly important component of the supply chain. In January 2010, the Kazakh government permitted the overland transit of non-lethal material across its territory,73 and a further agreement in November 2010 permitted the use of Kazakh airspace.74 Some analysts have suggested that the US has not adequately recognized Kazakhstan’s contributions, particularly given the tensions such rapprochement has created with Russia, creating a future risk point in the relationship.75 The United States also serves as an important economic partner for Kazakhstan. Bilateral trade in 2010 was valued at roughly $2.6 billion, an increase of over 400 percent since 2001. 76 The State Department reported that US Foreign Direct Investment (FDI) accounted for about 25 percent of the country’s total FDI, and that American companies have invested about $14.3 billion in Kazakhstan since 1993, mostly in the oil and gas sector. Between 1992 and 2005, the US provided roughly $1.205 billion in technical assistance and investment support.77 Iranian and Kazakh Relations Kazakh policy towards Iran is generally dictated by its alignment with Russia. Moscow has been both cooperative and competitive with Tehran. Thus, Kazakhstan’s orientation towards its 69

http://www.mcclatchydc.com/2010/11/16/103831/us-kazakhstan-complete-secret.html

70

http://www.spiegel.de/international/world/0,1518,741679,00.html

71

http://www.state.gov/r/pa/ei/bgn/5487.htm

72

http://www.eurasianet.org/node/61750

73

http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=36080

http://zeenews.india.com/news/world/us-kazakhstan-sign-air-transit-agreement-forafghanistan_667817.html 74

75

http://www.theglobalist.com/storyid.aspx?StoryId=8621

76

http://www.state.gov/r/pa/ei/bgn/5487.htm

77

http://www.state.gov/r/pa/ei/bgn/5487.htm

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Persian neighbor is grounded in the Russian drive to establish trade and transport links to the Persian Gulf, to coordinate oil and gas export policies, and to counter US influence in the Middle East. Russia also wants to limit Turkey’s role in the region, which it views as a proxy of US interests.

Kazakhstan and Iran do not have extensive bilateral political and military ties, but both participate in a multitude of international and regional organizations, including the Shanghai Cooperation Organization. During an April 2009 meeting between the Iranian President Mahmoud Ahmadinejad and Kazakh President Nursultan Nazarbayev, Ahmadinejad noted that “although Iran's ties with Kazakhstan are not longstanding, they are rooted in culture and national interests.”78 Kazakhstan takes a similar view towards the Iranian nuclear program as many of its Central Asian neighbors. During his visit to Tehran in June 2006, Kazak Foreign Minister KasymZhomart Tokayev stated that Kazakhstan opposes the use of nuclear enrichment for military purposes, but supports the peaceful resolution of the dispute over Iran’s nuclear program.79 During a June 2009 press conference with Israeli President Shimon Peres, Kazakh President Nursultan Nazarbayev affirmed that “no nuclear material will reach Iran” from Kazakhstan and that “the leak of nuclear materials is a critical issue for us.”80 Still, in a joint declaration made in 2007, five Caspian states, including Iran and Kazakhstan, agreed that they “under no circumstances will allow the use of their territories by other states for an aggression or other military actions against any of the parties.”81 Kazakhstan and Iran do have growing economic links. Bilateral trade between the two countries increased fivefold from $400 million in 2003 to more than $2 billion in 2009. In April 2007, Iran, Turkmenistan, and Kazakhstan also agreed to cooperate in the construction of a north-south rail line, linking the three countries and providing Central Asia with a direct connection to the Persian Gulf. By July 2010, the parties had completed roughly 300 kilometers of the project. The railway will eventually have the capacity to transport 10 to 20 million tons of freight annually. 82 As a result of expanded trade from these rail routes, Iranian officials have suggested that bilateral trade could rise to $13 billion, although given current trade trends, this appears optimistic.83 Kazakhstan is a net exporter of refined oil products to Iran, which does not have the capacity to refine a sufficient quantity of oil for domestic use despite its vast crude reserves.84 The two 78

“Ahmadinejad Sees Brighter Future for Iran-Kazakh Ties,” IRNA (April 6, 2009)

Marat Yermukanov, “Kazakhstan Seeks Iran’s Reconciliation With The West,” Eurasia Daily Monitor, Vol 3: 117 (June 16, 2006) 79

Haviv Rettig Gur, ‘“We Won’t Give Iran Any Nuke Material,’” Jerusalem Post (June 30, 2009) http://www.jpost.com/servlet/Satellite?cid=1246296535221&pagename=JPost%2FJPArticle%2FShowFull 80

“Caspian Nations Hold Exclusive Rights To Caspian Resources,” Central Asia And Caucasus Business Weekly (October 23, 2007).

81

Iran-Kazakhstan-Turkmenistan Railway Ready in 2011,” Fars News Agency (July 5, 2010) http://english.farsnews.com/newstext.php?nn=8904141436 82

83

http://en.trend.az/news/politics/1892789.html

“Caspian Nations Hold Exclusive Rights To Caspian Resources,” Central Asia And Caucasus Business Weekly (October 23, 2007) 84

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countries are now partners in joint oil and gas projects including construction of a pipeline connecting Kazakhstan, Turkmenistan, and Iran, which will give Astana access to the Asian markets.

There is tension, however, between the two states on the issue of the status of the Caspian Sea. Both have a share of the seabed’s resources and both profit from the vast oil reserves there.

During the early 1990s, Iran and Russia – and by extension Kazakhstan – used the issue of the status of the Caspian Sea to hinder Western oil development efforts. With Russia’s adoption of a more conciliatory stance regarding Caspian seabed development, Iran became isolated in its calls for the Sea to be held in common or for each of the littoral states to control 20 percent of the Sea.85 Iran opposes a settlement of the legal status of the Caspian Sea to prevent the construction of trans-Caspian oil and gas pipelines from Kazakhstan and Turkmenistan to Azerbaijan that would not transit Iranian territory. Kazakh President Nursultan Nazarbayav has urged Iran to agree to a median-line delineation of Caspian Sea borders rather than demand territorial concessions (Kazakhstan claims the largest area of seabed), and dangles prospects for energy pipelines through Iran and enhanced trade as incentives to an agreement.86 Implications for US Policy Kazakhstan lies outside the Iranian strategic orbit and has developed closer ties with the US in recent years. Much, however, will depend on US policy towards Central Asia, and the flow of aid, as the US withdraws its combat forces from Afghanistan. The US needs to understand that its success in Kazakhstan – like its success in dealing with most Central Asia countries – will be determined principally by two factors: the advantages Kazakhstan gets out of its relations with the US relative to the advantages it gets from its relations with Iran, and the extent Kazakhstan sees the US as a useful counterweight in any tensions with Iran. No amount of US rhetoric or regional diplomacy is likely the have much impact on a largely pragmatic Kazakh regime which will pursue its own view of its own interests with a largely rentier mentality.

The US should aim to continue building a positive relationship with Astana that reflects the two countries shared interests in developing the Kazakh energy sector, building regional stability and cooperating on issues related to terrorism, narcotics and smuggling. The US can also assist in the professionalization of the Kazakh armed forces, which is still a 70 percent conscript force.87 As a result of these relations, Iranian influence, particularly pertaining to competition will remain extremely limited inside Kazakhstan. Astana has expressed a willingness to cooperate with US sanctions and does not support the Iranian nuclear program; however, Iran and Kazakhstan coexist in the same regional neighborhood, and such have growing economic and energy links.

The US has the potential to play a positive role in Kazakhstan, helping the country transition to more democratic and representative rule, and towards a more prosperous economic future. The US has the potential to be a major stakeholder and partner in the development of the Kazakh energy sector, and already major US oil companies such as ConoccoPhillips, ExxonMobil, and Chevron have significant ownership stakes in Kazakh oil projects. However, the US should not 85

http://www.hsdl.org/?view&doc=114316&coll=limited

86

http://www.hsdl.org/?view&doc=114316&coll=limited

87

http://richardbrenneman.wordpress.com/2011/01/09/wikicable-kazakhstan-as-a-pentagon-satellite/

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allow energy interests to prevent it from pushing Kazakhstan to improve its halting moves towards democracy, and improve its human-rights record. The US can also deepen economic cooperation, and help the Kazakh government distribute oil wealth better.

Kyrgyzstan Kyrgyzstan is a former Soviet Republic, and Russia is the focal point its foreign policy and the power with which it maintains closest relations. Still, the United States provides humanitarian assistance, non-lethal military assistance, and assistance to support economic and political reforms. Washington also helped the Kyrgyz Republic accede to the WTO in December 1998.

US and Kyrgyzstan Relations and Tensions While Washington has provided Kyrgyzstan with substantial assistance, amounting to $953 million dollars in aid between 1992 and 2008,88 the relationship is not unidirectional. In order to diversify supply routes to Afghanistan to meet immediate military needs, US military planners have adopted the Northern Distribution Network (NDN), a commercially based logistical corridor connecting Baltic and Black Sea ports with Afghanistan, Central Asia, and the Caucasus. From December 2001, the Kyrgyz Republic hosted the Manas Transit Center, an important logistical hub for the coalition effort in Afghanistan. The base also provided an opportunity for the United States to help facilitate intraregional trade.

Manas has been a source of tensions in US-Kyrgyz relations, and is perceived as a symbol of US support for Kyrgyz dictators, including former Presidents Bakiyev and Akayev, both of whom were overthrown in popular uprisings. Current President Rosa Otunbayeva, who came to power following President Kurmanbek Bakiyev in mid-2010, told the Washington Post: “You [the US] came to us to help us build democracy. And then just one day you put your hands over your mouth just to have a base.”89 Even before the 2010 uprising, the US faced challenges in keeping the base open. In February 2009, the Kyrgyz Parliament voted to close the base after the two governments failed to agree on a higher rent for the property.90 American and Kyrgyz officials continued negotiations after the announcement and agreed that the United States would pay $60 million for continued use of the facilities, three times the previous rent. Additionally, Kyrgyz forces now handle security in the surrounding areas while American forces continue to provide security for the facility itself. The site is now called a “transit center” instead of an “air base.”91 US Secretary of State Hillary Clinton has stated that the base will likely be closed when the Afghan mission ends.92 At one point, the United States and Kyrgyzstan held discussions about building a second $10 million US military training base in the city of Osh, which would have included a secure garrison

88

http://www.fas.org/sgp/crs/row/97-690.pdf

89

http://www.rferl.org/content/arab_spring_kyrgyzstan_reaping_what_we_sow/24228472.html

Pronina, Lyubov "Kyrgyzstan to Close U.S. Air Base Used for Afghan War". Bloomberg (3 February 2009). http://www.bloomberg.com/apps/news?pid=20601103&sid=a45p.N1wLfyo 90

Michael Schwirtz. "In Reversal, Kyrgyzstan Won’t Close a U.S. Base". New York Times (23 Jun 2009). http://www.nytimes.com/2009/06/24/world/asia/24base.htm 91

92

Ibid.

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as well as various range facilities.93 The US is believed to have continued pushing for the facility with President Otunbayeva after Bakiyev was ousted,94 although these attempts were unsuccessful.95 However, in March 2011, President Otunbayeva revived plans for a US-funded anti-terrorism center in the city of Batken, which would also help train Kyrgyz counter-terrorist and border security forces.96 Continued allegations of corruption in the contracts to supply the Manas base with fuel are believed to be one of the most important sources of anti-Americanism in Kyrgyzstan.97 It is alleged that some of the firms that secured the lucrative contracts had links to the family of former President Bakiyev.98 Nevertheless, Washington has worked diligently to build relations with President Otunbayeva.

The US pledged diplomatic and financial support to assist the administrative transition, including $60 million in various forms of economic and aid assistance.99 In March 2011, the US State Department also awarded President Otunbayeva their prestigious ‘Women of Courage’ award and Secretary of State Clinton praised her “tremendous courage, leadership and tenacity,” as well as her work to transform the authoritarian state into a parliamentary democracy.100 The practical issue for both countries, however, is what will happen as the US phases its force out of Afghanistan, and reshapes its policies toward Central Asia. The US will then have very limited reason to be concerned with the future of Kyrgyzstan, and Kyrgyzstan will have far more interest in seeking its own advantage by playing off all of its neighbors to see what it can get.

Iran and Kyrgyzstan Relations and Tensions Kyrgyzstan takes positions on Iran that are very similar to those of Moscow. It has close economic ties to Russia, and China has so far shown only limited interest in building up major economic links.

The Kyrgyz Republic and Iran have conducted relations on many fronts, but have few military ties. Like Russia, they share common problems with narcotics. Kyrgyzstan suffers significant spillover from the Afghan narcotics trade. The UN Office for Drug Control (UNODC) has identified Kyrgyzstan as an important source of precursor materials for processing Afghan opium,101 and views the drug trade and the attendant organized crime networks as “undermining

93

http://www.washingtonpost.com/wp-dyn/content/article/2010/08/06/AR2010080606148.html

94

http://www.jamestown.org/programs/edm/single/?tx_ttnews[tt_news]=36855&tx_ttnews[backPid]=27&cH ash=340e59e20d 95

http://www.eurasianet.org/node/61809

http://www.telegraph.co.uk/news/worldnews/asia/kyrgyzstan/8368506/Kyrgyz-President-calls-for-USfunded-anti-terror-base.html 96

97

http://www.rferl.org/content/arab_spring_kyrgyzstan_reaping_what_we_sow/24228472.html

98

http://www.tnr.com/article/politics/82258/Kyrgyzstan-crisis-US

99

http://www.whitehouse.gov/the-press-office/2010/09/24/fact-sheet-us-assistance-kyrgyzstan

100

http://www.bbc.co.uk/news/world-asia-pacific-12677394

101

http://www.unodc.org/unodc/en/data-and-analysis/WDR-2011.html

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stability, development and the rule of law, and jeopardizing the political reform process.”102 There are also growing signs that fundamentalism, facilitated by the war in Afghanistan, is resurgent in the Ferghana Valley, which spreads across Kyrgyzstan, Uzbekistan and Tajikistan.

In the economic realm, the two countries have signed agreements on cooperation in the spheres of transport, customs, trade and economic relations and have expressed hopes to increase their annual trade turnover to $100 million. Moreover, in 2008, Iran pledged 200 million euros to support economic projects in Kyrgyzstan. Iran has also voiced its support for Kyrgyzstan’s first parliamentary elections.103 From Washington’s perspective, the most worrisome incident in recent years occurred in late 2007, when Uzbek officials intercepted a cargo of radioactive materials en route from Kyrgyzstan to Iran.104 Embassy cables released by Wikileaks speculate that the cargo was mostly likely cesium or uranium.

Nevertheless, neither the United States nor Iran has extensive economic interests in Kyrgyzstan.

For the US, the country is important primarily as a staging area and transit route to support the Afghan War, and as fledgling democracy in Central Asia. As the republic is neither politically crucial nor rich in energy deposits, Kyrgyzstan is not a critical area of competition in the USIranian struggle for regional preponderance.

Implications for US Policy The US must now reevaluate its entire policy towards Central Asia, and Kyrgyzstan will be part of this evaluation. If the US wants to keep its basing rights and influence, it will have to pay accordingly. If it feels that Central Asia is at best peripheral to US strategic interests – and the Russian, Chinese, Turkish, and Iran competition in the new great game will ensure any indirect threats to the US are limited – it can shift to limited aid and conventional diplomacy. In balance, the best way to win the new great game may well be for the US to largely stand aside and let those who have to play it, play it.

Tajikistan Both the United States and Iran established bilateral ties with Tajikistan after the collapse of the Soviet bloc. Washington recognized Tajikistan on December 25, 1991, the day the Soviet Union dissolved, and opened a temporary embassy in the capital of Dushanbe in March 1992. Iran, meanwhile, has close cultural ties to Tajikistan and has extended financial patronage to the country, but religious and political differences persist. EurasiaNet, a prominent blog on Central Asian geopolitics, commented on the relationship that, “It has long been clear that Iranian money is welcome in Dushanbe but the Islamic Republic’s politics are not.”105

102

http://www.rferl.org/content/un_sees_decline_in_afghan_opium_production_but_predicts_rise/24245253.ht ml 103

http://www.presstv.ir/detail/149758.html

104

http://www.eurasianet.org/node/62810

105

http://www.hurriyetdailynews.com/n.php?n=tajikistan-distancing-itself-politically-from-iran-2011-03-

08

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US Relations with Tajikistan US-Tajik relations have developed considerably since September 11, 2001. The two countries now have a broad-based relationship, cooperating in such areas as counter-narcotics, counterterrorism, and non-proliferation. Tajikistan has been a strong supporter of US efforts to counter terrorism and to promote peace and stability in Afghanistan. With the fall of the former Taliban government, Tajikistan now has much friendlier relations with its neighbor to the south.

For instance, a US-funded $36 million bridge over the Pyanzh River connecting Sher Khan, Afghanistan with Nizhniy Pyanzh, Tajikistan opened for commercial traffic in October 2007.

Since then, trade volume has more than tripled. In February 2010, the US and Tajikistan launched an annual bilateral consultation process to enhance cooperation on a broad range of issues.106 The United States presently assists Tajikistan with its economic and political development, as Tajikistan recovers from the legacy of its mid-90s civil war. US assistance also supports health and education, as well as democracy, media, and local governance. Washington leads an international donor effort to prevent the transit of narcotics, stop the spread of technology related to weapons of mass destruction (WMD), and support a stable, peaceful Tajikistan in order to prevent the spread of influence and activities of radical groups and terrorists. Rampant illicit trafficking of Afghan opium and heroin through Tajikistan remains a serious long-term threat to Tajikistan’s stability and development, fostering corruption, crime, and economic distortions.107 The US has some military-to-military cooperation with Tajikistan that may have expanded as a result of Russian-Tajik tensions. In 2005, Tajikistan expelled Russian border guards and advisors, allegedly for plotting a coup against the Tajik president.108 Since then, senior Tajik defense officials have made attempts to increase cooperation with their US counterparts, an initiative highlighted in US embassy cables released by Wikileaks. 109 Many officials in Washington have been receptive to these attempts, as Tajikistan has often been touted by analysts as the most viable alternative to Kyrgyzstan if the Manas transit center were to close. 110 In June 2010, construction began on a US-funded National Training Center to help build the counterterrorist and counternarcotics capabilities of Tajik security forces. CENTCOM has also helped sponsor the construction of border outposts to build Tajik capacity to combat the narcotics trade from Afghanistan, as well as assisted in building Tajikistan’s peacekeeping and de-mining capacity.111 Iranian Relations with Tajikistan Iran was one of the first countries to extend diplomatic recognition to the newly independent Tajikistan in 1991 and the first nation to establish an embassy in Dushanbe. In the immediate aftermath of Tajik independence, Iran also provided diplomatic assistance and built new 106

http://www.state.gov/r/pa/ei/bgn/5775.htm#relations

107

http://www.state.gov/r/pa/ei/bgn/5775.htm#relations

108

http://www.guardian.co.uk/world/us-embassy-cables-documents/46612

109

http://www.guardian.co.uk/world/us-embassy-cables-documents/73307

110

http://www.eurasianet.org/node/62570

111

http://www.centcom.mil/press-releases/centcom-tajikistan-expand-security-partnership

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mosques across the country. Due to the resurgence of Iranian culture within Tajikistan, Iran encourages cultural exchange through conferences, media, and film festivals, which have become increasingly common in Tajikistan. Iranian President Mahmoud Ahmadinejad in 2006 described the relationship as akin to “one soul in two bodies,”112 a strong phrase but one that he has used to describe Iranian relations with various other nations, including Iraq and Pakistan.

During a visit to Iran in 2005, Rajabmad Amirov, the Tajik minister of culture, stated that his country shares cultural and historical roots with Iran which “create favorable grounds for developing bilateral relations.”113 In order to expand these bonds, Tajikistan and Iran announced in June 2009 that they are working to create a joint Academy of Sciences, Arts and Literature.

However, these strong cultural ties do not transcend important differences. There remain salient distinctions in the two countries’ systems of government – Tajikistan’s is secular, whilst Iran’s is Islamic – and religious demographics – Tajikistan is predominantly Sunni, whereas Iran is primarily Shia.

Iran is the second largest investor in Tajikistan, after China. The two countries have cooperated in a number of development and industrial projects and enjoy a reasonably strong level of economic cooperation. Bilateral trade between the two has risen from $40 million in 2000 to $140 million in 2007, making Iran one of Tajikistan’s top five trade partners.114 Iran is reported to have invested as much as $600 million in Tajikistan in 2010,115 and in February 2011, it announced plans to invest $500 million to construct a cement production plant in Tajikistan’s Khatlon province.116 Iran has struggled to navigate the complex dynamics of Uzbek-Tajik rivalry. Tajikistan (along with Kyrgyzstan) controls much of the water resources in Central Asia but is dependent on Uzbekistan for as much as 95 percent of its energy supplies.117 Iran has closer cultural ties with Persian-speaking Tajikistan, but significantly larger trade ties with Uzbekistan. Iran’s heavy investment in hydroelectric power in Tajikistan has caused tension with Uzbekistan, which fears that such projects will have negative impacts on its agricultural sector and magnify its water scarcity. As a result Uzbekistan has sometimes blocked Tajik rail transit – including Iranian railcars bound for Tajikistan with components for construction of the Sangtuda-2, a 220 MW hydropower plant being built with $180 million of Iranian assistance on the Vaksh River. In retaliation Iran has threatened to block Uzbek railcars transiting its territory, and has since decided to fly in the key equipment to avoid land transit altogether.118 Iran and Tajikistan have worked to establish ties in the realm of defense and regional security.

During a March 2009 meeting in Afghanistan, Iran and Tajikistan affirmed their commitment to “Ahmadinejad sees no limit to expansion of ties with Tajikistan”, Mehr News Agency , http://www.mehrnews.com/en/NewsDetail.aspx?NewsID=279296, 2006/01/17 112

113

“Tajikistan, Iran Strike Cultural Cooperation Deal,” BBC Monitoring International Reports, March 6, 2005”

114

International Monetary Fund, Department of Trade Statistics, www.imfstatistics.org/dots

115

http://www.jamestown.org/single/?no_cache=1&tx_ttnews[tt_news]=36799

116

http://english.farsnews.com/newstext.php?nn=8911231179

http://www.isn.ethz.ch/isn/Current-Affairs/ISNInsights/Detail?lng=en&id=127172&contextid734=127172&contextid735=127166&tabid=127166127172 117

118

http://www.rferl.org/content/iran_hydropower_tajikistan/2263247.html

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working together to restore peace and security to that country. 119 Tajikistan has close cultural links with the Tajiks of northeastern Afghanistan and, much like Iran, has a strong antipathy towards any resurgent Talibanization of Afghanistan.120 Violence from the war has spilt over into the Rasht Valley, which has witnessed militant attacks, suicide bombings, and jailbreaks.121 These have primarily been the work of the Islamic Movement of Uzbekistan (IMU), a transnational terrorist group allied with the Afghan Taliban.

In a meeting with Ayatollah Khamenei and the Presidents of Afghanistan, Iran, and Tajikistan, Khamenei claimed that, “their [the United States’] presence in Afghanistan has brought the Afghan people nothing but trouble, sedition, corruption and decay,” and called for the resumption of a regional alliance, in reference to the Iranian-Indo-Russian cooperation with the Northern Alliance during the Afghan civil war of the 1990s.122 Yet, although Iran and Tajikistan have held discussions on increasing their military cooperation, Tajikistan is currently bound by military agreements with Russia, which prevent it from pursuing greater cooperation with Iran.123 In addition, Dushanbe fears the rise of any Islamic religious radicalism, and although the Shia population in Tajikistan is small, the government is wary that returned Iranian seminary graduates could incite violence and anti-state activity. In 2010, the Tajik government ordered home 200 students studying in Tehran and pulled 90 Tajik students out of a school run by the Iranian embassy in Dushanbe.124 The Tajiks have tended to side with Iran over the issue of nuclear energy. Tajikistan’s first deputy secretary-general of the People’s Democratic Party, Ali Dolatzadeh, has stated that the international community must respect Iran’s right to use nuclear energy for peaceful purposes. In August 2008, Dolatzadeh said that “the claims that Iran is developing atomic weapons should be proved at the first hand” before the international community can take measures against Iran.125 Tajik Foreign Minister Khamrokhon Zarifi has voiced skepticism over the use of sanctions against Iran, stating that he “does not think that the Security Council resolutions would be a useful means to resolve global issues but instead it will make them more complicated.”126 Following the contested June 2009 presidential elections in Iran, Tajikistan’s president, Emomali Rahmon, voiced his support for the regime by congratulating President Ahmadinejad on his reelection: “your landslide victory in free and transparent elections is evidence that Iranian people supports your policy.”127 Yet, areas of tension are growing. Several high-profile diplomatic 119

“Iran, Tajik Ministers Pledge Efforts To Restore Peace In Afghanistan”, Ariana TV (March 20, 2009)

120

http://www.understandingwar.org/themenode/tajikistan-and-afghanistan

121

http://www.longwarjournal.org/archives/2010/09/suicide_bomber_strik_5.php

http://www.opendemocracy.net/ehsan-azari-stanizai/iran-reinvigorates-strategy-for-regionaldominance 122

123

Tajik Pundits Say Military Cooperation With Iran Not Expedient”, Nigoh (November 20, 2008)

124

http://www.hurriyetdailynews.com/n.php?n=tajikistan-distancing-itself-politically-from-iran-2011-03-

08 125

“Tajik Official Urges World To Respect Iran's N. Rights”, Fars News Agency (August 28, 2008)

Tajikistan Urges Dialogue to Resolve Iran's N. Issue,” Fars News Agency (June 25, 2010) http://english.farsnews.com/newstext.php?nn=8904040315 126

“Rahmon Congratulates Ahmadinejad On Landslide Victory In Iran’s Presidential Election”, Asia-Plus (June 6, 2009) http://www.asiaplus.tj/en/news/16/53077.html 127

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visits between the two countries have been cancelled in early 2011, and Tajikistan rebuffed an Iranian proposal to end visa restrictions between the two countries.128 Implications for US Policy Tajikistan is not a major sphere of US-Iranian strategic competition. The US has limited influence and interests in Tajikistan, and Iranian relations, while strong due to cultural affinity, face obstacles to any further deepening of ties. Once again, The US must reevaluate its entire policy towards Central Asia as a result of its withdrawal from Afghanistan and the central issue will be whether the US feels that Central Asia has become peripheral to US strategic interests.

Policy calculations must, however, include the fact that of the Central Asian Republics, Tajikistan is one of the most susceptible to instability emanating from a post-US Afghanistan, and violence in the country could imperil US investments across the region.

Turkmenistan Turkmenistan gained its independence from the Soviet Union in 1991. The Turkmen government operates as a single-party system and was led by President for Life Saparmurat Niyazov (called "Türkmenbaşy" — "leader of the Turkmens") until his sudden death on 21 December 2006.

Gurbanguly Berdymukhammedov was elected the new president on 11 February 2007. In 1995, the Government of Turkmenistan made a declaration of “permanent neutrality,” which was subsequently recognized by the United Nations. It is not closely involved with either the United States or Iran, but has the potential to become an area where competition will increase.

US Relations with Turkmenistan Despite its official neutrality, the Government of Turkmenistan currently engages with the United States in many areas, including cooperation on border and regional security programs.

Turkmenistan declined to participate in the Northern Distribution Network and has refused to allow US supply routes to pass through its territory. Nevertheless, Turkmenistan allows overflights to support the US war effort in Afghanistan and has made high-profile purchases of military equipment from the United States, including Boeing aircraft. However, Turkmenistan is a troubling partner for Washington, due to its poor human rights record and authoritarian political system. The government has taken some steps forward in human rights reform, such as lifting its exit visa requirement and allowing the registration of some religious minority groups; however, its overall record remains poor.

Unlike the Bush Administration, which neglected Turkmenistan in favor of military and strategic cooperation with Kyrgyzstan and Uzbekistan, the Obama Administration has made limited steps towards rapprochement. Many analysts believe energy cooperation to be the cornerstone of the relationship.129 Data on Turkmenistan is limited but the IEA has estimated that the country has

128

http://www.hurriyetdailynews.com/n.php?n=tajikistan-distancing-itself-politically-from-iran-2011-03-

08 129

http://www.worldpoliticsreview.com/trend-lines/8961/global-insider-u-s-turkmenistan-relations

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the world’s fourth largest natural gas reserves,130 including the South Yolatan gas field, which was assessed as among the biggest in the world.131 The American energy giant ExxonMobil Corp. reopened its office in Turkmenistan in 2010, and several other US companies, including Chevron, ConocoPhillips and TXOil Ltd, bid for oil blocks in the Caspian Sea.132 In June, US special envoy Richard Morningstar met with President Berhymukhamedov and praised the country’s energy policies.133 Morningstar also testified before the US Foreign Relations Committee in June that Turkmenistan was investing in infrastructure to export gas to the West.134 Then, in May 2011, the US appointed its first ambassador to Turkmenistan in five years, after having allowed the position to lie vacant since mid-2006.

Relations between the United States and Turkmenistan have also been hurt by the Wikileaks incident. Leaked embassy cables described President Berdymukhamedov as “not a very bright guy,” and “vain, suspicious, guarded, strict, very conservative, a practiced liar, a good actor, and “vindictive.” The cable also noted that Berdymukhamedov was not fond of either the US or Iran, but preferred China, probably because he believed that Beijing could do more for Turkmenistan.135 Iranian Relations with Turkmenistan Iran shares a 1,200-mile border with Turkmenistan, and was the first nation to recognize Turkmenistan as an independent nation in 1991. Since then, the two countries have enjoyed strong and diverse trade relations. In 2009, Iran was Turkmenistan’s second largest trade partner, with bilateral trade totaling $3.5 billion.136 In contrast, US bilateral trade in 2010 totaled about $88.1 million according to figures provided by the US census bureau.137 As Turkmenistan has extensive hydrocarbon reserves, energy factors extensively into both bilateral economic interaction and US-Iranian strategic competition. Indeed, Iran’s ties with Turkmenistan are growing in the area of petroleum exports. Turkmenistan’s first pipeline from Central Asia to the world beyond Russia was a 125-mile gas link to Iran. In 2006, Turkmenistan provided 282.5 bcf of gas to Iran, and in July 2009 Ashgabat and Tehran agreed to expand Turkmenistan’s annual volume of gas exports to Iran to roughly 1.4bcfd from a previous

130

http://www.iea.org/country/n_country.asp?country_code=tm

http://www.upi.com/Business_News/Energy-Resources/2011/06/14/US-energy-envoy-meets-Turkmenpresident/UPI-69281308053472/ 131

http://www.reuters.com/article/2011/05/16/us-turkmenistan-us-ambassadoridUSTRE74F30320110516 132

http://www.upi.com/Business_News/Energy-Resources/2011/06/14/US-energy-envoy-meets-Turkmenpresident/UPI-69281308053472/ 133

134

http://in.reuters.com/article/2011/06/02/idINIndia-57465720110602

135

http://www.guardian.co.uk/world/us-embassy-cables-documents/240618

“Iranian Radio Says Turkmenistan Second Major Trade Partner,” Voice of the Islamic Republic of Iran (April 23, 2010).

136

137

http://www.census.gov/foreign-trade/Press-Release/2010pr/final_revisions/10final.pdf

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contractual volume of 800 MMcfd.138 The increase will be transported via a new pipeline from the Davletabad field to Iran, though the field had previously been reserved exclusively for deliveries to Russia.139 The neighbors inaugurated the Davletabad–Sarakhs–Khangiran pipeline in 2010.

In addition, the two countries are partners in the construction of the Korpeje-Kurt Kui gas pipeline in western Turkmenistan and are possible future participants in the Nabucco pipeline project, which would transport gas from the region to European markets.140 The Oil and Gas Journal expects Iranian dependence on Turkmen energy to increase in 2010-2015, as virtually all its domestic projects in the South Pars field have been delayed due to international sanctions.141 Iranian-Turkmen energy relations have had problems. At the end of 2007, Turkmenistan suddenly suspended gas shipments, causing hardship in northern Iran. The primary reason for the cut-off was Turkmen demands for higher payments. Gas shipments resumed in late April 2008 after Iran agreed to a price boost.142 In December 2008, the Islamic Republic agreed to work with Turkmenistan in developing some of the country’s large gas fields, including the large Yolotan gas field.143 In June 2011, the two countries announced joint exploitation of the Gonbadli sweet gas field in northeast Iran.144 The Caspian Sea is another area where Turkmen and Iranian interests coincide. The five states of Central Asia wrestle with sharing limited water resources and with mitigating environmental degradation caused by the shrinking of the Aral Sea. Multilaterally accepted Caspian Sea seabed and maritime boundaries have not yet been established. Iran insists on dividing the Caspian Sea into five equal sectors, with each of the littoral states controlling 20 percent of the sea, while Azerbaijan, Kazakhstan, and Russia have generally agreed upon equidistant seabed boundaries.

Unlike other Caspian states, Turkmenistan agrees with Iran that rights to the Caspian Sea’s resources should be redistributed into five equal parts between the littoral states.145 Turkmenistan takes a similar approach to Iran’s nuclear program to that of the other Caspian states. In July 2008, the Turkmen foreign minister, Rasit Meredow, said that his country supports Iran’s peaceful nuclear research.146 Furthermore, during a conference in 2007, the five http://www.ogj.com/index/article-display.articles.oil-gas-journal.volume-108.issue15.technology.development-constraints.html 138

Alexander Vershinin, “Turkmenistan Plans Gas Pipeline To Supply Iran From Field Previously Reserved For Russia,” Associated Press (July 12, 2009).

139

"Second Pipeline Will Boost Gas Exports By 12 bcm a Year," Hamsayeh (January 5, 2010) http://www.hamsayeh.net/hamsayehnet_iran-international%20news740.htm 140

http://www.ogj.com/index/article-display.articles.oil-gas-journal.volume-108.issue15.technology.development-constraints.html 141

“Iran May Sue Turkmenistan For Cuts In Gas Supplies In Jan 08 – Minister,” Press TV Online (March 5, 2009) 142

143

“Iran Ready to Develop Cultural Cooperation with Turkmenistan,” IRNA (February 3, 2009)

144

http://www.azadnegar.com/article/iran-turkmenistan-start-gas-exploitation-operation-joint-field

Ariel Cohen, “Iran’s Claim Over Caspian Sea Resources Threaten Energy Security,” Backgrounder, 1582, The Heritage Foundation (September 5, 2002).

145

“Turkmenistan Supports Iran's Nuclear Programme - Iranian radio,” Voice of the Islamic Republic of Iran (July 30, 2008).

146

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states bordering the Caspian Sea —Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan — declared that they would all support one another’s rights to peaceful nuclear programs: “the parties confirm the inalienable right of all state-signatories to the treaty on the nonproliferation of nuclear weapons to develop research and the production and utilization of nuclear energy for peaceful purposes without discrimination and within the framework of the provisions spelt out in this treaty, as well as those of the International Atomic Energy Agency mechanism.”147 The only area where there is great scope for disagreement is in the area of religion. The leaders of Turkmenistan display hostility toward Islamic fundamentalism. Most of the people in Turkmenistan are Sunni Muslims. This religious divergence, coupled with the fact that Iran has an Islamic theocracy and Turkmenistan has a secular dictatorship, has also prevented the two countries from developing an even closer friendship.

Implications for US Policy Turkmenistan is a country where competition between the United States and Iran has the potential to increase, given the overtures the Obama administration has been making to Ashgabat and each adversary’s desire to access Turkmenistan’s extensive hydrocarbon reserves. Iran has a head start in building its bilateral energy relationship with Turkmenistan. The two countries are stakeholders in several shared pipelines and have agreed to jointly exploit Turkmenistan’s Yolotan gas field and Iran’s Gonbadli gas field. Yet, Iranian-Turkmen energy relations have had problems, including suspensions of shipments and price disputes. Given these tensions, even though the United States does not have as deep an energy partnership with Turkmenistan, it can position itself as an alternative investor, now that it has re-established relations with Ashgabat.

The Obama administration will, however, have to build this relationship from a weak base, and deal with the impact of Russia and China as well as Iran. The previous administration chose to focus on military and strategic cooperation with Kyrgyzstan and Uzbekistan and Turkmenistan declined to participate in the Northern Distribution Network and refused to allow US supply routes to pass through its territory, due to its official policy of neutrality.

Turkmenistan does allow over-flights to support the US war effort in Afghanistan and has made high-profile purchases of military equipment from the United States, including Boeing aircraft.

However, the US is scarcely its sole source of such equipment. Turkmenistan also has significant commercial relationships with Turkey, Russia, China, and – notably – Iran. It is also far from clear how much the US will pursue such activities as it phases out of Afghanistan and its strategic interest in Turkmenistan declines.

The United States is going to have to make a considered choice about how much it wishes to engage with Turkmenistan, given its poor human rights record and its single-party system of government, which does not even meet the even basic standards of democracy. A lack of engagement with Turkmenistan has not isolated Turkmenistan or served to encourage positive change. In order to prevent Turkmenistan from leaning towards the Iranian camp, the Washington should seek to bolster its relations with Ashgabat, but this must not be done at the expense of human rights. As they build US-Turkmen energy relations, US policymakers should also seek to incentivize change in the Turkmen regime.

147

“Did Caspian Summit Share the Sea or Iran’s Oil Resources?,” Oil And Gas Journal (January 28, 2008)

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Uzbekistan Uzbekistan had Central Asia’s largest population, and borders all other Central Asian states. Its growth invariably affects issues such as energy, water, and trade. As such, it has some importance to US interests in ensuring stability and security in the region. Uzbekistan and Iran have more limited cooperation, although the two countries have deep cultural and historical ties.

US Relations with Uzbekistan The United States recognized the independence of Uzbekistan on 25 December 1991 and opened an Embassy in Tashkent in March 1992. Cooperation between the two countries was initially close following the 11 September terrorist attacks and the start of the war in Afghanistan.

However, relations eventually cooled due to Uzbekistan’s poor human rights record, particularly after violence in Andijan in May 2005, when security forces killed several hundred protestors.

Since mid-2007, the United States and Uzbekistan have begun to rebuild cooperation on issues of mutual concern, including security and economic relations, as well as political and civil society issues. Uzbekistan now plays an important role in the Northern Distribution Network (NDN), a logistical route for NATO supplies to Afghanistan.

US-Uzbek trade relations are regulated by a bilateral trade agreement, which extends mostfavored-nation status to each partner. A Bilateral Investment Treaty was signed in 1994, but it is unlikely that it will to enter into force until Uzbekistan embarks on economic reform. Since 1993, USAID has provided over $330 million in assistance to Uzbekistan to mitigate potential instability while providing a basis for economic growth. In cables released by Wikileaks, US embassy officials detailed a culture of rampant corruption and close symbiosis between the state and organized crime in Uzbekistan,148 as well as accounts of how President Karimov’s eldest daughter forced out US investment company Telecom Inc. in order to take control over its business.149 In July 1994 Uzbekistan joined the NATO Partnership for Peace program and in March 2002 it signed the US-Uzbek Declaration on the Strategic Partnership and Cooperation Framework. The Strategic Framework Agreement provides for military, diplomatic, and economic cooperation between the two countries.150 However, in 2004, the US Congress forbade the State Department to dispense military aid to Uzbekistan as a result of continued human rights abuses. According to some analysts, despite these restrictions, the Department of Defense has sustained as much military cooperation as possible.151 Uzbekistan possesses the largest military forces in the Central Asian region, with around 65,000 troops. The military inherited its force structure from the Soviet armed forces, although it is restructuring with a focus on light and Special Forces. The Uzbek Armed Forces’ equipment is outdated and training is inadequate for its new mission of territorial security. The government has accepted the arms control obligations of the former Soviet Union, acceded to the Nuclear 148

http://www.guardian.co.uk/world/us-embassy-cables-documents/62979

149

http://www.itnews.com.au/News/241785,cablegate-uzbek-first-daughter-ran-us-telco-out-of-town.aspx

United States – Uzbekistan Declaration On The Strategic Partnership And Cooperation Framework, United States Department Of State: Office Of The Spokesperson (March 12, 2002), http://www.fas.org/terrorism/at/docs/2002/US-Uzbek_Declaration.htm 150

151

http://the-diplomat.com/2010/11/14/the-us-and-its-friendly-dictator/2/

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Non-Proliferation Treaty as a non-nuclear state, and has supported an active program by the US Defense Threat Reduction Agency (DTRA) to demilitarize and clean up former weapons of mass destruction-related facilities in western Uzbekistan (Nukus and Vozrozhdeniye Island).

Beginning in the late 1990s until 2004, the government received US Foreign Military Financing (FMF), International Military Education and Training (IMET), and other security assistance funds. New FMF and IMET assistance to Uzbekistan was stopped in 2004, as the State Department was unable to certify that Uzbekistan was making progress in meeting its commitments, including respect for human rights and economic reform. President Karimov, Uzbekistan's first and only post-independence president, routinely stifles political dissent in Uzbekistan, banning opposition groups and jailing dissidents. His administration has routinely been cited as being complicit in torture. Uzbekistan faced international condemnation in 2005 after security forces in the city of Andijan killed hundreds of unarmed protesters.

In 2005, in response to US criticism of the events at Andijan, Uzbekistan shut down a US airbase on its territory. Uzbekistan had approved US Central Command’s request for access to a vital military air base in the south following 9/11, but asked the US to leave after the criticism. All US forces departed this facility by November 2005.

The base remains closed, but relations has improved. General David Petraeus made a highprofile visit to the country in 2009 to discuss a possible Uzbek role in the US-led war in Afghanistan. As tensions with and instability inside Pakistan increase, the utility of the alternative transit route shown in Figure X.2 -- the Northern Distribution Network -- has grown in importance. Uzbekistan is has some of the best developed road-and-rail networks between Afghanistan and Central Asia, particularly from Termez to Mazar-i-Sharif.152 In April of 2009, the two countries signed a deal to allow supplies for the NATO effort to travel through Uzbekistan. In November 2010, CENTCOM commander General James Mattis visited Uzbekistan to sign a security cooperation pact which included provisions for military training.

The administration has continued to push Uzbekistan to improve its human rights record, but the country’s territory – and proximity to the war in Afghanistan – is viewed as too valuable for it to be cut off altogether.

152

http://oilandglory.foreignpolicy.com/posts/2011/01/18/why_the_us_should_speak_up_on_uzbekistan

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Figure X.2: Pakistan, Central Asia, and Access Routes to Afghanistan

Source: US House of Representatives, Warlord, Inc. (June 2010), p. 8.

Iranian Relations with Uzbekistan Iran-Uzbekistan relations have roots in the cultural and historical ties between the two countries.

Iran has been especially been active in pursuing economic projects and social, cultural, and diplomatic initiatives in Uzbekistan. Nevertheless, Uzbekistan’s political and military cooperation with Iran has been limited, partly due to the difference in political systems – Uzbekistan is a secular dictatorship, while Iran is an Islamic theocracy – and partly due to the former’s history of positive relations with the United States.

Uzbekistan is a member of the Shanghai Cooperation Organization, where Iran is an observer; this mutual membership serves as the basis for a great deal of the economic dealings between the two countries. During an April 2010 meeting with Uzbekistan’s ambassador to Iran, Ilham Akramov, Iranian First Vice President Mohammad Reza Rahimi encouraged the expansion of Iran-Uzbekistan ties. According to the Uzbek government, the Iranian-Uzbek trade turnover exceeded $700 million in 2008. Trade amounted to $609 million in 2010, according to a senior Iranian diplomat, who noted that a proposed transportation corridor between the two countries could boost trade by 60 percent to about $1 billion.153 Trade reached $125 million in the first quarter of 2011.154

http://centralasianewswire.com/Uzbekistan/Proposed-Uzbek-Iranian-corridornbspcould-boost-trade60-says-Iran/viewstory.aspx?id=3222 153

154

http://www.zawya.com//story.cfm/sidZAWYA20110515052442/Irans_Trade_With_Uzbekistan_at_125m

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During May 2010, Iranian Defense Minister Ahmad Vahidi expressed Tehran’s willingness to help mediate to ease tensions between Uzbekistan and Tajikistan.155 Tajikistan and Uzbekistan have been in continuous conflict over the former’s Roghun hydroelectric project, which Uzbekistan — a major exporter of cotton — claims diverts needed water from the country. For several months prior to the offer of mediation, Uzbekistan had been delaying the passage of Iranian cargo to Tajikistan that would have assisted in the construction of the Sangtuda-2 dam.156 Tashkent fears that the project will reduce the water flow of the Vaksh River, on which the Uzbek agricultural sector is dependent. 157 The offer was not accepted and Iran was forced to take alternate action the following month: in June 2010, the Iranian state railroad threatened to halt all Turkmen rail freight transiting the Islamic Republic en route to Uzbekistan, unless Tashkent allowed rail cars bound for Tajikistan to pass through its territory without delay.158 Uzbekistan has largely held back from the public debate over Iranian nuclear enrichment, although in May 2006, Uzbek President Islam Karimov argued against military strikes targeting Iran’s nuclear facilities and supported diplomatic methods to resolve the conflict.159 Implications for US Policy The United States now has important interests in Uzbekistan, given the crucial role it plays in the Northern Distribution Network, but relations have often been fraught with tensions. Iran has robust cultural ties with Uzbekistan, but has nothing approaching the strategic and diplomatic relations with it that Washington does. Uzbekistan can thus be classed as an uneasy ally of the United States.

Uzbekistan does have a place in US and Iranian competition because of its geographic position.

As part of the Northern Distribution Network, Uzbekistan is a military transit and supply hub for American operations in Afghanistan. This is not to say, however, that US-Uzbek relations are smooth or can be decoupled from US payments and aid that are directly linked to US combat operations in Afghanistan. US policymakers hope that that payments made within the framework of the NDN will function as an engine for development and will bolster their relations with Uzbekistan. However, incidents such as the closure of the K2 base indicate that the Uzbek government is willing to take steps – even ones that potentially sacrifice those payments – to preserve its autonomy.

The NDN transit and service agreements do currently serve US interests. If the Obama administration wants to make sure base-related payments and contracts promote sustained economic growth and democratization, it should make sure that funds dispersed by the Pentagon for base rents, supplies and transport infrastructure actually end up in proper entities that pay “Iran Offers to Mediate Between Tajikistan, Uzbekistan,” Radio Free Europe/Radio Liberty (May 13, 2010) http://www.rferl.org/content/Iran_Offers_To_Mediate_Between_Tajikistan_Uzbekistan/2041410.html 155

“Iran Threatens Uzbekistan Over Tajik Rail Problems,” Radio Free Europe/Radio Liberty (June 17, 2010) http://www.rferl.org/content/Iran_Threatens_Uzbekistan_Over_Tajik_Rail_Problems/2074185.html 156

http://www.asianews.it/news-en/Iran-sends-equipment-by-air-to-complete-Sangtuda-2-dam20447.html 157

158

“Uzbekistan Holds Up Tajik Freight Wagons Despite Warning from Iran,” Asia-Plus Online, June 22, 2010

“Uzbek President Warns Of Dangers Of Possible ‘Nuclear’ Strike Against Iran,” Eurasianet (May 10, 2006) http://www.eurasianet.org/resource/uzbekistan/hypermail/200605/0004.shtml 159

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their taxes and thus benefit official state institutions rather than in informal patronage networks operating in the shadows of state structures. The administration should also continue to push Uzbekistan to improve its human rights record, even if it must do so gently due to the country’s invaluable proximity to the war in Afghanistan.

More generally, however, the US must again assess its post-Afghan role in Central Asia. It is unclear that competition with Iran, or any other factor, will then require the US to play an active role or provide major payments and aid. Again, the best way to win the new great game may be to let others play it.

a report of the csis burke chair in strategy

U.S. and Iranian Strategic Competition: The Impact of China and Russia Authors Brandon Fite

March 2012

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2

Contents Executive Summary ........................................................................................................................ 3 China ........................................................................................................................................... 5 Evolving US-PRC Relations ................................................................................................... 5 Evolving Iran-PRC Relations ................................................................................................. 7 A Mutually Enabling Political Relationship ....................................................................... 7 The PRC-IRI Economic Relationship: Weapons for Energy ............................................... 10 US-Chinese Dependence on Gulf Oil ..................................................................................... 5 Chinese Military Assistance to Iran and US Opposition ...................................................... 13 Figure 10.1: Chronology of Recent Reports of PRC-Iranian Arms Cooperation ................................................................................................... 15 US Frustration with China’s Role in Iranian Sanctions ........................................................ 16 China’s Role in the Iranian Nuclear Program ....................................................................... 19 Implications for US Policy.................................................................................................... 20 Russia ........................................................................................................................................ 21 Evolving US-Russia Relations .............................................................................................. 21 Security-Based Political Relations .................................................................................... 22 Economic Relations .......................................................................................................... 24 Evolving Iran-Russia Relations ............................................................................................ 25 Degrading Political Relations: From Cooperation to Tolerance ....................................... 26 The Russo-Iranian Economic Relationship: Arms, Energy, Technology ......................... 28 Table 10.2: Russian Trade with Iran: 1995-2008 ......................................... 29 Sanctions and Russo-Iranian Energy Cooperation ............................................................... 29 Russian Military Assistance to Iran ...................................................................................... 31 Figure 10.3: Chronology of Recent Russo-Iranian Arms Cooperation ........ 32 Russia’s Participation in Iranian Nuclear Efforts ................................................................. 33 Figure 10.4: Chronology of Russo-Iranian Nuclear Cooperation ................. 34 Russia’s Strategic Independence: Missile Sales to Iran and Syria ....................................... 35 Implications for US Policy.................................................................................................... 37

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EXECUTIVE SUMMARY China and Russia stand at the pivot of US-Iranian strategic competition. As major world powers and permanent members of the UN Security Council, China and Russia can play a critical role in shaping sanctions and other aspects of international action. The formal position of both China and Russia is that they will impose only those sanctions required by applicable UN Security Council resolutions and not enact sanctions beyond those specifically mandated.1 At the same time, both countries seek maximize the benefits they can gain from the ongoing competition by refusing to commit to either player. Both nations have an interest in preventing or at least forestalling open hostility as conflict will upset their balancing act. China and Russia work to leverage support to advance their own positions while at the same minimizing the diplomatic costs of double-dealing. In the recent past, China has carefully tilted toward Iran, and Russia towards the West. But China has recently been more cautious in dealing with Iran, while Russia has tended to game the issue as part of a broader hardening in its relations with the US. The US and Iran stress the value of their relationship and the costs of partnership with the other in competing efforts to win Chinese and Russian support. The US works to integrate China into the present international order, while Iran rejects the status quo and urges China, as a fellow nonWestern power, to create a new system apart from the West. Competition plays out over issues of proliferation and sanctions, trade and energy investments, and arms sales. Importantly, Iran seeks to win Chinese support by billing itself as a secure and dedicated source of energy resources for a century of Chinese growth.

China has been able to maintain positive if somewhat strained relations with both the US and Iran by selectively supporting each side. China is willing to use US competition with Iran as an opportunity to grow its influence and test the boundaries of the US-led international order. Its moves are calculated to reap the benefits of US-Iranian conflict while deemphasizing the costs associated with supporting both sides.

Unlike China whose overriding interest in Iran is energy security, Russia has a multiplicity of interests, none of which are predominant. As a result, Russia‘s approach to Iran is both broader and more flexible than the PRC‘s and the US and Iran compete for Russian support on an issueby-issue basis. The primary areas of competition are proliferation and sanctions, trade and energy deals, nuclear technology and infrastructure sales, arms sales, and influence in the Gulf and greater Middle East.

Russia has historically been an important contributor to Iran‘s nuclear infrastructure and conventional arms capacity, but relations between the two states have been impacted by intensifying Iranian competition with the West and warming Russian relations with the US in the wake of the Obama administration‘s ―reset‖ policy. Russia has cooperated with the US in meaningful ways, but Moscow‘s moves away from Tehran should not be interpreted as a wholesale shift in Russian policy. Russia remains vocal in its condemnation of a military solution to the conflict and has been unwilling to support increased sanctions beyond UNSCR 1924 issued in June, 2010. Russia‘s role in the competition is affected by pressure put on Moscow by a changing political landscape in the Middle East, specifically the uncertain future of 1

Kenneth Katzman, ―Iran Sanctions,‖ CRS, June 22, 2011.

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its Syrian ally President Bashar al-Assad, and domestic political concerns surrounding alleged Western influence in the upcoming Russian presidential election.

Russia‘s strategy to maintain coeval relations with the US and Iran has been to portray itself as an intermediary power. By cooperating on a limited basis with the West while advocating for a softer approach to Iran, Russia reaps the benefits of selective cooperation without incurring the costs of full allegiance.

The ties that China and Russia have with Iran are based primarily on each country's opportunistic assessment of the costs and benefits of a given relationship relative to the risk that the IRI will proliferate, threaten the flow of world oil supplies, and upset their relations with the US and other countries that oppose Iran. Both China and Russia work to gain politically and economically from the ongoing competition between the US and Iran, but do so with the knowledge that Iran can only offer a limited range of incentives compared to China and Russia’s broader strategic interests.

Leaders in Moscow and Beijing focus on the security and prosperity of their respective nations, and pursue international relationships from that standpoint. At the present, external pressure from the US and its allies is not yet significant enough to make either China or Russia give up all ties to Iran, and they manipulate such ties to Iran as a bargaining chip in dealing with the US, European, and the Arab Gulf states. If the US is to be more successful in isolating Iran, it will need to convince both countries that Iran poses a greater threat to their interests than they now perceive, seek the help of the Arab Gulf states and other powers to influence China and Russia, and develop a more powerful mix of incentives and penalties to encourage Chinese and Russian cooperation.

China: China plays a critical role in determining the success of US attempts to isolate Iran, and is a critical player in US-Iranian competition. The struggle to capture Chinese support plays out over issues like proliferation and sanctions, trade and energy investments, and arms sales. Despite continued US diplomatic pressure, Iran seeks to win Chinese support by billing itself as a secure and dedicated source of energy resources.

Iran has also aggressively sought to deepen its diplomatic relationship with China in order to cement its bond with the PRC. China has been able to maintain positive, if somewhat strained, relations with both the US and Iran by supporting nuclear/arms sanctions on Iran diplomatically and by flouting them covertly in practice.

Russia: The US and Iran compete for Russian support on an issue by issue basis. Russia does not consider Iran a security threat and it is not dependent upon Iran‘s energy resources; rather it is a competitor. Instead of having one overriding interest in Iran like the PRC, Russia has a multiplicity of interests, none of which are predominant, and all of which are negotiable to some degree. The US and Iran compete over issues of proliferation and sanctions, trade and energy deals, nuclear technology and infrastructure sales, arms sales, and influence in the Gulf and Middle East. Russia, in turn, has repeatedly tried to portray itself as an intermediary power to best position itself within the ongoing US-Iranian competition, all the while working to reap the benefits of selective cooperation with both sides.

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China China is an active, intimate player—as both a supporter and spoiler—in the ongoing struggle between the US and Iran. China exploits its dual-role as Iranian benefactor and permanent member of the Security Council, and serves as a de facto gatekeeper to meaningful international sanctions of Iranian nuclear ambitions. The US is obliged to leverage the strength of its bilateral partnership with China to influence China’s position and to carefully apply concerted, external diplomatic pressure.

Iran works to maintain China’s patronage by highlighting the fruits of economic cooperation, particularly in the energy sector, by stressing the need for mutual opposition to American dominance, and by encouraging China to take a leading role in shaping the future of the global system. China values its relations with the US too much to risk a meaningful breach, but it is clearly willing to use US competition with Iran as an opportunity to improve its global strategic position.

Evolving US-PRC Relations The rapid pace of China’s economic and military growth, along with the deepening of transPacific trade relations make the Sino-American relationship one of the principal focal points of the twenty-first century. China’s expansion as a global power brings with it new responsibilities to monitor and strengthen the peripheries of its sphere of influence and to ensure the protected flow of goods to back to its urban core. China’s increasing economic international presence is likely to result in the PRC seeing the United States—the country with the largest global footprint—as both a critical economic partner and a key strategic rival. The two countries already cooperate and compete on several global issues.2 US policy toward China has been largely consistent since the Nixon Presidency. After the normalization of diplomatic relations in 1979, and especially in the past decade, the US has struggled to bring the PRC closer into the international order it dominates. The US encourages China’s participation as a ―responsible stakeholder‖ in the global system: privileging stability and communication over dramatic change.

The US and China share membership in numerous multilateral institutions and since September 11th both nations have publically committed to addressing the global security threat posed by terrorism. Beginning in 2009, to strengthen bilateral relations officials from the US Treasury and State Department have met with their Chinese counterparts at the U.S.-China Strategic and Economic Dialogue. The Dialogue serves as the highest-level forum for both nations to address a broad range of bilateral, regional, and global issues.3 Though relatively stable, the Sino-American political relationship demands flexibility of both parties. This year President Hu Jintao and two-thirds of China’s leading political figures will be

2

Anthony H. Cordesman, Martin Kleiber, ―Chinese Military Modernization and Force Development.‖ Center for Strategic and International Studies. 7 September 2006. http://csis.org/files/media/csis/pubs/060907_chinesemilitary.pdf.

3

Charles Freeman and Bonnie S. Glaser, ―The U.S.-China Strategic and Economic Dialogue.‖ Center for Strategic and International Studies. 9 May 2011. http://csis.org/publication/us-china-strategic-and-economic-dialogue-0.

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replaced by new members.4 The coming ascension of the Politburo’s ―fifth generation‖ leaders presents new challenges and opportunities for US-China relations.

The US-Chinese economic relationship is intertwined with the political relationship and is a critical component of both countries’ grand strategy. The relationship has important impacts on the overall health and stability of the global economy, and the secure flow of every aspect of global economic development and trade. The Congressional Research Service (CRS) reports that China holds $1.16 trillion or 26.1 percent of US federal debt and is the United States’ second largest trade partner.5 In 2010, China exported some $1.5 trillion worth of goods, over 20% of which went to the United States, according to statistics provided by the CIA. 6 This volume of exports equaled 26% of China’s GDP and the volume of exports to the US alone was equal to 5.2%.7 US-Chinese trade figures will change steadily over time as China’s economy increases in size, sophistication, and internal demand, but it seems unlikely that the US and China will cease to be major trading partners at any point in the foreseeable future. It is certain that both will remain dependent in large part on the overall health of the global economy. Terrorism, piracy, insurgency all pose a common threat to trade and economic growth, particularly if terrorism escalates to insurgency, attacks critical economic targets, or involves the use of weapons of mass destruction.8 US-Chinese security cooperation is improving, but significant obstacles remain to a further warming of the relationship. The United States’ relationship with Taiwan has long been the core irritant. In January 2010, China suspended military dialogue with the US and threatened to impose sanctions on US defense contractors after the Obama administration confirmed a $6.4 billion arms deal with Taipei.9 Just as China’s competition with the US over Taiwan and other claims in the eastern Pacific remain intense, PRC arms sales with Iran, who in turn provides weapons to terrorist groups like Hamas and Hezbollah, places further strain on Sino-American relations.

A significant increase in Chinese military capabilities has also raised tensions in the relationship.

The transformation of China’s military from a regional, land-based defense force into a more mobile body capable of trans-regional action impacts the American strategic approach to East

4

Cheng Li, ―New Challenges in Predicting China‘s Upcoming Political Succession.‖ China Business Review.

November-December 2010. https://www.chinabusinessreview.com/public/1011/commentary.html.

5

Justin Murray and Marc Labonte, ―Foreign Holdings of Federal Debt.‖ Congressional Research Service. 25 March 2011. http://assets.opencrs.com/rpts/RS22331_20110325.pdf.

6

CIA, World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html, June 25, 2011.

7

CIA, World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html, June 25, 2011.

8

Anthony H. Cordesman and D. Brandon Fite, ―US and Chinese Cooperation in Counterterrorism in the Middle East and Central Asia: Finding Ways to Move Forward.‖ Center for Strategic and International Studies. 27 June 2011.

9

―China Suspends U.S. Military Talks,‖ The Associated Press. 31 January 2010. http://www.pittsburghlive.com/x/pittsburghtrib/news/nation-world/s_664954.html?source=rss&feed=7.

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Asia.10 China’s territorial claims in the South and East China Seas are bolstered by the PLA’s continued development of advanced Anti-Access/Area Denial capabilities.11 As the PLA continues to grow and transform, the US is intent on pursuing an active relationship with Chinese commanders in order to build trust and prevent miscommunication. On a visit to Beijing in January 2011, US Secretary of Defense Robert Gates commented on the relationship saying, "We are in strong agreement that in order to reduce the chances of miscommunication, misunderstanding or miscalculation, it is important that our military-to-military ties are solid, consistent and not subject to shifting political winds."12 As China’s regional and international interests expand and grow more complex, the PLA’s international engagement will expand, especially in the areas of peace operations, HA/DR, and joint exercises. In addition to furthering PLA modernization, the focus of these engagements will likely remain on building China’s political ties, assuaging fears about China’s rise, and building China’s international influence, particularly in Asia.

Evolving Iran-PRC Relations The PRC established relations with Iran in 1971. Since that time both countries have developed a relationship which is strategically beneficial to both parties. Sino-Iranian security cooperation revolves around China’s desire for resource security. Iran provides China with a secure source for oil, a market for arms, a strategic foothold in the Middle East, and a means by which to indirectly challenge American supremacy.

In return, Iran’s need of a great power patron is satisfied by China who provides economic partnership, an important arms nexus, and perhaps most importantly diplomatic cover. The SinoIranian bond is strengthened by a mutual distrust of America’s global reach and both nations frequently criticize the US policy of liberal interventionism as ―imperialist‖ and ―hegemonic.‖ Over the past forty years, China has frequently played the role of enabler in its bilateral relations with Iran.

A Mutually Enabling Political Relationship In the past decade Iran has sought to frame the Sino-Iranian partnership as a model alternative to what it views as the declining Western system. By supporting China, Iran works to hasten an international climate less dominated by states in opposition to its regime.

Relations between China and Iran began during the rule of Shah Reza Pahlavi and arose out of China’s growing tensions with the USSR. China’s initial strong support for the Shah led to strained relations when the Revolutionary government took power, but relations soon improved.

10

Anthony H. Cordesman and Martin Kleiber, ―Chinese Military Modernization and Force Development.‖ Center for Strategic and International Studies. 7 September 2006. http://csis.org/files/media/csis/pubs/060907_chinesemilitary.pdf.

11 12

Ibid.

David S. Cloud, ―U.S., China Pledge to Improve Military Cooperation.‖ The Los Angeles Times. 11 January 2011. http://articles.latimes.com/2011/jan/11/world/la-fg-gates-china-20110111.

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By the sixth year of the Iran-Iraq War (1980-1988) China had become Iran’s largest supplier of arms.13 That same year, China provided Iran with HY-2 Silkworm anti-ship missiles, which allowed it to strike Iraqi and later Iraqi-supporting non-combatant shipping in the Gulf, beginning the so-called ―tanker war‖. In April 1988, the sinking of an American frigate by an Iranian mine led to Operation Praying Mantis, the largest U.S. naval engagement since WWII. Fears over the possibility of full U.S. involvement in the war coupled with Iraq’s use of chemical weapons pushed an isolated Iran closer to the negotiating table. China remained an ally of Iran, criticizing US military involvement, but it encouraged Tehran to accept a negotiated settlement.

In July of 1988, while China chaired the UN Security Council, Iran accepted UN Resolution 598, enacting a cease-fire and effectively putting an end to its hostilities with Iraq.14 Since the Iran-Iraq War and China’s modern economic resurgence, the PRC has deepened its relations with Iran—through continued arms sales and diplomatic engagement—and expanded its presence in the Middle East at large. In 1998, China‘s trade with the Middle East was valued at $7.4 billion; by 2007, it had increased more than twelvefold to $93.7 billion.15 Much of the increase has been driven by China‘s ever-growing hunger for oil imports. As of 2009, China imported more than 50 percent of the oil it consumes.16 China‘s greater need for resources and desire for unhindered growth have solidified its presence in the Middle East and complicated US attempts to break its ties to Iran.

Over the past ten years, the PRC has maintained and even increased its political association with the IRI despite international pressure. According to John Garver of the Sam Nunn School of International Affairs, ―there were six high level Chinese and Iranian official exchanges in 2003, eleven in 2004, fourteen in 2005, ten in 2006, seventeen in 2007, twelve in 2008, and ten in 2009.‖17 At these meetings the delegates discussed topics including: transportation, agriculture, environmental protection, ship building, training of diplomats, information technology, labor and social security, internal security, military industry, and the nuclear issue.18 Iran’s leadership stresses that a strong Sino-Iranian partnership is critical to the rise of a new world order. Speaking to China’s new ambassador to Tehran in March of 2011, President Mahmoud Ahmadinejad said, ―The order and the system dominating the world at present is worn-out and rotten and its unfair nature has been unveiled to all…Under the present conditions, 13

Richard Harwood and Don Oberdorfer, ―China Reportedly Now Iran's Largest Arms Supplier Despite U.S. Objections.‖ The Washington Post. http://articles.latimes.com/1986/aug/26.

14

Willem van Kemenade, ―Iran‘s Relations with China and the West: Cooperation and Confrontation in Asia.‖ Netherlands Institute for International Relations. November 2009.

15

Michael Mazza, ―China-Iran Ties: Assessment and Implications for U.S. Policy.‖ American Enterprise Institute.

21 April 2011. http://www.irantracker.org/analysis/michael-mazza-china-iran-ties-assessment-and-implications-uspolicy-april-21-2011 16

Michael J. Economides, ―China‘s Oil Imports Continued Upward Climb in ‘09.‖ Energy Tribune, http://www.energytribune.com/articles.cfm/2982/Chinas-Oil-Imports-Continued-Upward-Climb-in-09.

17

John W. Garver, ―China‘s Iran Policies.‖ Testimony Before the U.S.-China Economic and Security Review Commission on ―China‘s Current and Emerging Foreign Policy Priorities.‖ 13 April 2011, 7.

18

John W. Garver, ―China‘s Iran Policies.‖ Testimony Before the U.S.-China Economic and Security Review Commission on ―China‘s Current and Emerging Foreign Policy Priorities.‖ 13 April 2011, 7.

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the world needs a humane and fair new order and Iran and China can have fruitful cooperation in the interest of humanity to define and establish this order."19 This view is at once critical of present American leadership and suggestive that Iran and China are integral to a needed transition. According to the Iranian Fars News Agency, Foreign Minister Ali Akbar Salehi ―underlined Beijing's important role in international equations, and called on the Chinese officials to double their efforts to play a greater role in the new world order.‖ 20 Iran is not a passive beneficiary of China’s economic and diplomatic relations; it is an active booster of China’s ascent. The Iranian leadership believes that as Chinese influence expands Western pressure will decrease and the Iran will have greater space to pursue its national ambitions.

Iranian officials stress that an expanded international role in the Sino-Iranian relationship is necessary to secure regional ―peace and security‖ and to advance the mutual interests of Beijing and Tehran. In March 2011, Hossein Sobhaninia, a senior Iranian MP stated, "With regard to the recent developments in the Middle-East and North Africa, parliamentary cooperation between Iran and China plays a key role in restoring peace and stability in the region and serving the interests of the two nations."21 Sobhaninia is a member of the Iranian parliament's Presiding Board and was speaking with Chen Zhili, vice chairperson of the Standing Committee of the National People's Congress of China.

Iran has had some success advancing its worldview. In 2005, Iran was granted Observer status in the Shanghai Cooperation Organization (SCO). The Organization, which is dominated by China and Russia, often espouses views which challenge US leadership in the global system. Iran’s position in the SCO places the Sino-Iranian relationship in a multilateral framework and seriously undermines US-led attempts to politically isolate Iran for its suspected pursuit of nuclear weapons. At the 2009 summit, Chinese President Hu Jintao stated that ―Tehran and Beijing should help each other to manage global developments in favor of their nations otherwise the same people who are the factors of current international problems will again rule the world.‖22 Iranian President Mahmoud Ahmadinejad uses the multi-national forum to criticize the West far more overtly. At the 2011 summit in Astana, Ahmadinejad stated ―All opinion polls show that the US is the worst country in the world. People everywhere regard this country as their own enemy.‖23 He also claimed the international order was led by ―slavers and colonizers.‖24

19

―Ahmadinejad Stresses Iran, China's Role in Establishing New World Order.‖ Fars News Agency. 1 March 2011. http://english.farsnews.com/newstext.php?nn=8912100952.

20

―Iran Urges China to Play More Significant Role in New World Order.‖ Fars News Agency. 26 May 2011. http://english.farsnews.com/newstext.php?nn=9003056137.

21

―MP Underscores Iran, China's Key Role in Restoring Peace in Region.‖ Fars News Agency. 19 April 2011. http://english.farsnews.com/newstext.php?nn=9001300420 22

―Iran, China Calls For A Long-term Strategy To Expand Bilateral Ties.‖ Iranian Students News Agency. 17 June 2009. http://www.isna.ir/ISNA/NewsView.aspx?ID=News-1357500&Lang=E. 23

Fred Weir, ―SCO security summit: Are China and Russia losing patience with Ahmadinejad?‖ Christian Science Monitor. 15 June 2011. http://www.csmonitor.com/World/Global-News/2011/0615/SCO-security-summit-AreChina-and-Russia-losing-patience-with-Ahmadinejad.

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While the SCO frequently takes positions contrary to those of the US, the Chinese leadership pushed back against some of Ahmadinejad’s more inflammatory rhetoric. According to Fred Weir of the Christian Science Monitor, ―In a sideline meeting with Ahmadinejad, [Chinese President] Hu called upon Iran to 'take substantial steps in respect of establishing trust‘ and ‗speed up the process of dialogue,‘ in international efforts to curb Iran's nuclear program.‖25 China‘s leaders have not changed their stance of support for Iran, but they are conscious of its possible political costs. An unnecessarily belligerent Iran threatens China‘s credibility, but if China can show itself to be a force of moderation it can justify its continued relationship with Iran.

The PRC-IRI Economic Relationship: Weapons for Energy China’s growing thirst for securely flowing oil and the West’s sanction-induced withdrawal from Iran’s energy sector have had a major impact on Sino-Iranian economic relations. Both factors have combined to produce an environment in which China and Iran may draw closer together for mutual economic and strategic benefit.

Differences between China and Iran over diplomatic language at the 2011 meeting of the SCO were largely masked by the importance President Hu Jintao placed on both countries’ strong economic relationship. Along with reaffirming his country’s support for Iran’s pursuit of peaceful nuclear power, President Hu stated that Iran was the PRC‘s second largest trade partner in West Asia.26 That relationship is only set to strengthen as China continues to invest in an Iran steadily drained of Western investment.

Iran is currently the fourth-largest recipient of Chinese non-bond investment, trailing only Australia, the U.S., and energy-rich Kazakhstan.27 Iran produces 3.7 million barrels of crude per day, making it OPEC‘s second-largest oil exporter. According to Oil Minister Masoud Mirkazemi the country has "oil reserves of around 155 billion barrels and 33 trillion cubic meters of gas reserves." He also said that, by 2015, Iran would invest "$150 billion (104 billion euros) in upstream and $50 billion in downstream" projects to develop its energy sector.28 The future of the Iranian oil sector, is unmistakably impressive according to Dorraj and Currier of the Middle East Policy Council, and presents an obvious draw for a nation seeking a longterm source of oil like China. According to Oil and Gas Journal, Iran has the third-largest

24

Fred Weir, ―SCO security summit: Are China and Russia losing patience with Ahmadinejad?‖ Christian Science Monitor. 15 June 2011. http://www.csmonitor.com/World/Global-News/2011/0615/SCO-security-summit-AreChina-and-Russia-losing-patience-with-Ahmadinejad.

25

Ibid.

26

―Iran is China‘s second largest trade partner in West Asia.‖ Turkish Weekly. 17 June 2011. http://www.turkishweekly.net/news/116441/iran-is-china%E2%80%99s-second-largest-trade-partner-in-westasia.html.

27

Derek Scissors, ―China Global Investment Tracker: 2010.‖ Heritage Foundation, White Paper. 7 July 2010. http://www.heritage.org/research/reports/2010/02/china-global-investment-tracker-2010.

28

―Chinese Firms Dominate Iran Oil Exhibition.‖ AFP. 15 April 2011. http://www.google.com/hostednews/afp/article/ALeqM5jIaR0aF5otNEnn7hmxynIxUjU3MA?docId=CNG.237368a 6f7fb528b5d54540410303906.81.

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proven reserves of oil with 132.5 billion barrels of oil – roughly 10 percent of the world's total supply – and ranks behind Saudi Arabia (266.8 bbl) and Canada (178.8 bbl).11 If both oil and gas reserves are included and natural-gas reserves are converted into barrels of oil equivalent (boe), Saudi Arabia has 302.5 boe, and Iran has 301.7. Russia's hydrocarbon reserves, the world's third-largest, are 198.3 boe.12 This means Iran's hydrocarbon resources are almost equal to those of Saudi Arabia and greater than those of Russia.

What makes Iran's future energy potential even more impressive is the fact that, Iran's extraction rate is relatively low compared with its vast reserves. Given the proper amount of investment and technology, Iran would have the capacity to boost its production substantially and become an even larger provider of energy for China.29 This helps explain why China is providing important technical benefits to develop the Iranian energy sector. In the past, development of Iran‘s energy sector has been handicapped by constitutional limitations on foreign ownership and investor concerns over the country‘s political and economic stability. Iran‘s oil production levels remain below pre-Revolution levels and substantial offshore gas reserves have yet to be exploited. High levels of domestic energy consumption have also made Iran reliant upon gasoline exports. Iran also lacks the technology needed to liquefy natural gas and sanctions have hindered its acquisition.

China’s current commitment to Iranian energy resources, despite sanctions, is a saving grace for Iran’s underdeveloped energy industry.30 By refusing to implement its own set of unilateral sanctions, China has positioned itself to fill the void left by Western firms and increase its market share. At an Iranian oil exhibition in April 2011 the number of Chinese companies in attendance jumped from 100 in 2010 to 166.31 Nevertheless, China has refused to rush headlong into binding contracts with Iran. The leaders of China’s national oil companies (NOCs) are wary of overreaching in an unstable economic environment and of unnecessarily offending Washington in the process. 32 Writing in Foreign Affairs, Downs and Moloney describe China’s investment strategy as follows: Their strategy is to negotiate agreements but delay major spending in the hope of securing access to Iran's resources over the long term while minimizing the immediate risks of taking on legal and financial commitments in an unpredictable environment…Commitments to Iran largely take the form of non-binding memoranda of understanding (MOUs). Such MOUs total nearly $80 billion, but only a fraction will likely be realized if Chinese companies fear that these investments could

29

Manochehr Dorraj and Carrie l. Currier, ―Lubricated with Oil: Iran-China Relations in a Changing World.‖ Middle East Policy Council. http://www.mepc.org.

30

Erica Downs and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs. 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. 21 June 2011.

31

―Chinese Firms Dominate Iran Oil Exhibition.‖ AFP. 15 April 2011. http://www.google.com/hostednews/afp/article/ALeqM5jIaR0aF5otNEnn7hmxynIxUjU3MA?docId=CNG.237368a 6f7fb528b5d54540410303906.81.

32

Erica Downs and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. Web. 21 June 2011.

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provoke sanctions under U.S. law or if the companies are forced to choose between energy projects in Iran and energy projects in the U.S.33

China is sensitive to external pressure concerning its investments in Iran, but it is determined to extract the highest benefit from US-Iranian competition by walking the line between opportunism and overt obstructionism. China’s significant export of gasoline to Iran serves as a perfect example of this. There was a 75 percent drop in total sales of refined gasoline to Iran in 2010 due to US and EU sanctions.34 China moved in to fill the gap and sold Iran half of its gasoline imports for the month of July 2010, amounting to roughly 45,000 barrels per day. 35 In return, Iran reportedly bought Chinese gasoline at a 25 percent premium above the market rate.36 Despite their close economic relationship, however, Iran and China have issues. Many in the Iranian merchant-class have grown resentful of China’s growing influence in Iran’s domestic markets. Down and Moloney report, ―The Iranian media regularly complain that China is price gouging, that its materials are inferior, and that cheap Chinese imports are driving Iran's small industries out of business.‖37 Tehran has taken steps to block products that are ―beneath the dignity of the Iranian consumer‖ by banning 170 ―low quality‖ products, nearly all of which are Chinese.38 US-Chinese Dependence on Gulf Oil The US and China are both critically dependent on the flow of energy from the Middle East, North Africa, and Central Asia. The CIA World Factbook estimates that China consumed 8.2 million barrels of oil per day (MMBD) in 2010, and that China imported some 4.3 MMBD or 52% of this total.39 It also estimates that the US consumed 18.7 MMBD, and imported some 11.3 MMBD or 60% of this total.40 Iran is an important military power in the Gulf region and has made efforts to expand its control over these key energy routes.

The International Energy Agency (IEA) and the Energy Information Agency (EIA) of the US Department of Energy both estimate that the US, China, and the global economy will remain critically dependent on the secure flow of oil and gas exports through 2035 – as far as either Agency makes estimates into the future. China and the rest of the developing world are estimated to steadily increase this dependence on energy imports, highlighting the critical importance of

33

Erica Downs and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. Web. 21 June 2011.

34

Kenneth Katzman, ―Iran Sanctions.‖ Congressional Research Service. 25 May 2011. www.crs.gov. 1 July 2011.

35

―Iran buys July gasoline from Turkey, Chinese sellers.‖ Reuters. http://af.reuters.com/article/energyOilNews/idAFLDE6671KD20100708.

36

Erica Downs and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. 21 June 2011.

37

Ibid.

38

Ibid.

39

CIA, World Factbook. June 25, 2011. https://www.cia.gov/library/publications/the-world-factbook/geos/ch.html.

40

Ibid.

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growing and secure flows of oil and gas exports to the world economy through 2035. The US, Europe, and Japan are not estimated to make any significant reductions.

Both the US and China are predicted to make major increases in their energy consumption, but China has far more reason to be concerned about the growth in its dependence on foreign sources. The US will only increase its consumption of oil from 18.6 MMBD to 21.9 MMBD, but China will increase its consumption from 8.32 MMBD in 2009 to 19.1 MMBD in 2035. The US will produce 12.8 MMBD of conventional and unconventional liquids in 2035, leaving 9.1 MMBD in imports (42%). China will produce 4.2 MMBD of conventional and unconventional liquids in 2035, leaving 14.2 MMBD in imports (74%).

These figures understate the true level of US import dependence on Gulf and other energy exports, however, because the US imports massive amounts of oil and gas indirectly through its imports of manufactured goods – a large percentage of which come from China, Europe, and other Asian states that are heavily dependent on imports from the Middle East and North Africa.41 US gas imports may drop because of new technology and much of US gas imports will come from Canada. Like the IEA, the EIA estimates China will massively increase its energy imports of gas – massively in the case of gas, particularly if the crisis in Japan slows China’s expansion of nuclear power.

These data highlight the vital importance secure energy sources play in the strategic considerations of the US and China. The lure of Iranian oil is a powerful motivator for China to maintain positive relations. Likewise, if the U.S. hopes to decrease the PRC’s commitment to Iran, it must do so in ways which do not jeopardize Chinese energy security.

Chinese Military Assistance to Iran and US Opposition China has historically been an important arms supplier for Iran. In the years following the IranIraq war China steadily ramped up its weapons sales to Iran. The IRI purchased $400 million worth of weapons from the PRC between 1993 and 1996, and $600 million during the 1997-2000 period.42 In addition to small arms, Beijing supplied Tehran with artillery pieces, anti-ship cruise missiles, surface-to-air missiles, fighter jets, tanks, armored personnel carriers, and fast-attack patrol vessels. Contemporary Chinese supplies to Iran have included: large-caliber sniper rifles, armor-piercing rounds, C-802 ―Silkworm‖ anti-ship cruise missiles, shoulder-fired HN-5 antiaircraft missiles, 107mm rockets, 60mm and 82mm mortars, rocket-propelled grenades, antiaircraft guns, landmines, and components for roadside bombs.43 According to Richard Grimmett at the Congressional Research Service, the value of arms transfers decreased in first decade of the 2000s. Between 2002 to 2005 arms sales were valued at 41

Energy Information Agency. Annual Energy Outlook. 2011, April 2011, pp. 154-155. http://205.254.135.24/forecasts/aeo/.

42

Richard F. Grimmett, Conventional Arms Transfers to Developing Nations, 1993-2000 (Washington, DC: Congressional Research Service, August 2001), 28; Testimony, September 14, 2006, U.S.-China Economic and Security Review Commission, Hearing on China‘s Proliferation to North Korea and Iran, and its Role in Addressing the Nuclear and Missile Situations in Both Nations, http://www.uscc.gov/hearings/2006hearings/written_testimonies/06_09_14wrts/06_09_14_berman_statement.php.

43

John J. Tkacik Jr., ―The Arsenal of the Iraq Insurgency: It‘s made in China.‖ The Weekly Standard. 13 August 2007. Vol. 12, No. 45. http://www.weeklystandard.com/Content/Public/Articles/000/000/013/956wspet.asp.

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approximately $100 million and then dropped below $50 million in the period of 2007 to 2010.44 Despite the decrease in volume from the previous decade, Sino-Iranian arms sales have had a marked effect on the stability of the region through Iran’s support of proxy militant forces.

The US has vigorously opposed Chinese assistance to Iran’s military sector. Speaking with CNN in 2007, Under Secretary of State for Political Affairs Nicolas Burns pointedly stated that the US has ―irrefutable evidence‖ that the Iranians are transferring arms to militants in ―Lebanon, in Gaza, in Afghanistan, and in Iraq‖ in direct contravention of UN Security Council Resolution 1747.45 Some of these arms are believed to originate from the PRC, a signatory to UN Resolution 1747 banning Iran’s export of arms. John McConnell, the former Director of National Intelligence, testified to Congress that the PRC’s arms sales in the Middle East were ―destabilizing‖ and ―a threat‖ to US forces.46 In 2009, former Defense Secretary Robert Gates delivered a report to Congress giving a brief summation of the US position on the Sino-Iranian arms trade: Beijing conducts arms sales and training both to enhance foreign relationships and to generate revenue to support its domestic defense industry. China‘s arms sales range from small arms and ammunition to joint development or transfer of advanced weapons systems. Chinese companies sell primarily to developing countries where China‘s low-cost weapons sales serve both commercial and strategic purposes…China supported UN Security Council Resolutions 1737, 1747, 1803, and 1835. However, concerns remain regarding China‘s enforcement of existing laws regarding arms sales to Iran. A number of transfers to Iran have resulted in U.S. trade penalties and sanctions against entities in China. Some weapons that PRC entities supplied to Iran were found to have been transferred to terrorist organizations in Iraq and Afghanistan. This is a serious issue that the United States continues to monitor.47

China has denied its complicity in illicit arms transfers and according to David Albright, president of the Institute for Science and International Security, part of the problem has been due deficient enforcement mechanisms in the PRC. Chinese companies may be violating UN sanctions against Iran without the knowledge of the Chinese government because the PRC lacks the proper law-enforcement and export control networks to intercept dual-use technology. At a forum in January 2011, Albright said that while the US and Europe have developed means to detect Iranian front companies, in China ―a large amount‖ of illicit equipment and material reaches Iranian buyers.48

44

Richard F. Grimmett, ―Conventional Arms Transfers to Developing Nations, 1998-2005.‖ Congressional Research Service. October 2006, 66. Richard F. Grimmett, ―Conventional Arms Transfers to Developing Nations, 2003-2010.‖ Congressional Research Service. September 22, 2011, 44.

45

―Iran arming Taliban, U.S. claims.‖ CNN.com. 13 June 2007. http://edition.cnn.com/2007/WORLD/asiapcf/06/13/iran.taliban/index.html 46

Shirley Kan, CRS Report for Congress ―US-China Counter-Terrorism Cooperation: Issues for US Policy‖ 15 July 2010, 36.

47 48

Secretary of Defense Robert Gates, ―Military Power of the People‘s Republic of China, 2009,‖ March 25, 2009.

Indira A.R. Lakshmanan, ―U.S. Concerned Chinese Companies May Be Aiding Iran Nuclear Weapon Effort.‖ Bloomberg. 10 March 2011. http://www.bloomberg.com/news/2011-03-10/u-s-concerned-chinese-companies-maybe-aiding-iran-nuclear-weapon-effort.html.

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A chronology highlighting key moments in the Sino-Iranian arms relationship and the US pressure to disrupt it is shown below in Figure 10.1: Figure 10.1: Chronology of Recent Reports of PRC-Iranian Arms Cooperation 

4 June 2000: China is reported to be assisting Iran in an advanced surface-to-surface ballistic missile development project. The transfer of guidance systems, missile engines, and solid fuels could help Iran construct factories for missile manufacturing. In addition, Chinese assistance with the production of these materials is essential for Iranian development of long-range missiles.49



18 July 2000: In reference to reports of China's assistance to Iran's missile program, Zhu Bangzao, the Chinese Foreign Ministry spokesman, brushed aside allegations saying, "This report is baseless," and "We hope the Middle East and the Gulf will maintain peace and stability." 50



26 January 2001: The Washington Times reports China is continuing to sell missile related technologies to Iran. According to an anonymous source, China supplied Iran with specialty metals and chemicals used in missile production. China North Industries Co. was identified as the seller. The Iranian buyer was Shahid Bakeri Industrial Group.51



19 July 2002: U.S. State Department imposes economic sanctions on eight Chinese companies involving "three cases of sales of advanced conventional arms and chemical and biological weapons components to Iran." The sales were made between September 2000 and October 2001 and violated the Iran-Iraq Nonproliferation Act of 1992.52



23 May 2003: The U.S. government imposed sanctions on China North Industries Group (Norinco) for allegedly supplying missile technology to Iran. The sanctions barred all exports to the U.S. by Norinco or its subsidiaries, and forbade any contracts between the company and U.S. government agencies. In 2002, Norinco exported an estimated $100 million worth of products to the U.S. 53



16 June 2004: Testifying on behalf of the U.S.-China Economic and Security Review Commission, Carolyn Bartholomew said, ―Chinese entities continue to assist Iran with dual-use missile-related items, raw materials and chemical weapons-related production equipment and technology.‖ The Commission‘s annual report states, "China has sought energy cooperation with countries of concern to the United States, including Iran . . . Some analysts have voiced suspicions that China may have offered WMD-related transfers as a component of some of its energy deals.‖ Chinese companies are accused of having sold CSS-

49

Ze'ev Schiff, "China Aids Iran, Syrian 'Advanced' Ballistic Missile Projects, Israeli Sources." Nuclear Threat Initiative. 4 June 2000. www.nti.org/db/china/miranchr.htm.

50

―FM Spokesman Denies China Helped Iran Develop Missile Technology," Hong Kong AFP. 18 July 2000. http://www.nti.org/e_research/profiles/Iran/Missile/chronology_2000.html.

51

Bill Gertz, "Beijing Using Front Companies to Grab U.S. Arms Technology," The Washington Times, 26 January 2001, p. 1. http://www.nti.org/e_research/profiles/Iran/Missile/chronology_2000.html.

52

Bill Gertz, "U.S. Penalizes 8 Chinese Firms," Washington Times, 19 July 2002, pg. 1. http://www.nti.org/e_research/profiles/Iran/Missile/chronology_2000.html.

53

Guy Dinmore, "US Imposes New Sanctions on China," Financial Times, 22 May 2003. http://www.nti.org/e_research/profiles/Iran/Missile/chronology_2000.html.

X. THE IMPACT OF CHINA AND RUSSIA

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8 and DF-15 ballistic missiles to Iran, along with cruise missiles identified as HY-1, HY-2 Silkworm, C201, C-601, C-801 and C-802.54 

23 November 2004: The CIA‘s six-month assessment of WMD trends for July-December 2003 acknowledged limited improvements in Chinese nonproliferation efforts but raised concern about continued assistance to Iran. ―Although Beijing continues to take some steps to educate firms and individuals on the new missile-related export regulations - offering an export control seminar in September 2003 for officials and companies from China and other countries - Chinese entities continued to work with Pakistan and Iran on ballistic missile-related projects during the second half of 2003. . . . Chinese-entity ballistic missilerelated assistance helped Iran move toward its goal of becoming self-sufficient in the production of ballistic missiles.‖55



28 March 2007: Speaking before the House of Representatives Foreign Affairs subcommittee on Asia, deputy assistant secretary of state for East Asian affairs Thomas Christensen criticized Chinese investments in the Iranian energy sector. He said, "We have made clear to Beijing that these types of investments, along with continued arms sales, send the wrong signal to the Iranian regime and raise serious concerns under US law."56



February 2008: The US State Department launched a ―major diplomatic offensive‖ to put pressure on Beijing to cease possible weapons trades with Iran. The US shred intelligence with eight ―key allies‖ to ―persuade China to enforce its export control laws more effectively‖ and to ―aggressively implement‖ UNSC resolutions on the sale of arms and contraband materials. 57

US Frustration with China’s Role in Iranian Sanctions The US along with its international allies have made robust efforts to sanction Iran and pressure it to end to its nuclear program. China has been both a partner and a spoiler in the US-led effort.

The PRC has participated in UN resolutions punishing Iran for its undisclosed nuclear ambitions, but China has also maintained strong economic ties with Iran and actively undercuts the aggressive sanctions programs initiated by the US and its partners.

UN Security Council Resolution 1929, issued in June 2010, imposed sanctions on Iran’s nuclear program and military activities. The Resolution expanded previous sanctions by restricting arms sales, providing states with the ability to search vessels suspected of carrying contraband cargo,

54

―2004 Report to Congress of the U.S.-China Economic and Security Review Commission,‖ June 2004, http://www.uscc.gov ; Bill Gertz, ―China Breaks Vow on Halting Arms Transfer,‖ Washington Times, 23 August 2004, pg. 1. http://www.nti.org/e_research/profiles/Iran/Missile/chronology_2000.html.

55

―Unclassified Report to Congress on the Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions: 1 July Through 31 December 2003.‖ Central Intelligence Agency, November 23, 2004. http://www.nti.org/e_research/profiles/Iran/Missile/chronology_2000.html.

56

―US Warns China on Iran arms sales.‖ Al Jazeera. 28 March 2007. http://english.aljazeera.net/news/americas/2007/03/2008525115719959251.html.

57

Gordon Rayner, ―WikiLeaks: Chinese weapons fall into hands of insurgents.‖ The Telegraph.

3 February 2011. http://www.telegraph.co.uk/news/worldnews/wikileaks/8299388/WikiLeaksChinese-weapons-fall-into-hands-of-insurgents.html

X. THE IMPACT OF CHINA AND RUSSIA

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and by targeting Iranian firms linked with the IRI’s nuclear development capability. 58China actively worked to block any barriers Resolution 1929 might place on normal commercial transactions, especially in the energy sector. The PRC ultimately voted in favor of the Resolution, but according to John Garver, it did so only after delaying the measure’s passage for the benefit of Iran: In mid-December 2009 the Obama Administration began pushing for a fourth round of Security Council sanctions after concluding that Tehran would not respond adequately to Washington’s overtures over the previous ten months. China did not agree to begin discussing this matter until the end of March 2010, about three and a half months after the U.S. proposal. It then took another nine weeks to reach agreement on what became Resolution 1929. China’s lethargic approach helped delay Security Council action by several perhaps six months. All together Beijing’s delaying tactics probably gained several years of time for Tehran. This occurred in a situation in which Washington was urging that time was running out for a peaceful settlement and as Tehran pushed forward vigorously with its nuclear efforts. This occurred in a situation in which Washington was urging that time was running out for a peaceful settlement and as Tehran pushed forward vigorously with its nuclear efforts.59

The US has undertaken unilateral sanctions, notably the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010 (CISADA). CISADA expands sanctions by making US business endeavors in Iran financially untenable and targets Iran’s energy and banking sectors, along with business activities which directly or indirectly benefit the Islamic Republican Guard Corps (IRGC).60 US officials have cautioned that the effectiveness of such sanctions is predicated on the degree to which all parties adhere to their proscriptions. A defection or obstruction by a major power such as China dramatically reduces the effectiveness of sanctions.

Two months after using its vote as a permanent member of the Security Council to censure Iran, Chinese officials reiterated their nation’s political and economic commitments to the IRI. According to the Iran’s state-run Mehr News Agency, Chinese vice premier Li Keqiang and Iranian oil minister Masoud Mir-Kazemi jointly expressed their interest in expanding ties, specifically in the oil and gas sectors. Speaking directly to Chinese interests, Mir-Kazemi said, ―…[Iran] is prepared to deliver secure energy to the region, especially to the People's Republic of China, and this matter will lead to stable and strong relation between the two countries.‖ 61 Vice premier Keqiang reciprocated the commitment, stating: China is willing to work hard with Iran, continue to push mutual political trust [sic], and maintain communication, dialogue and coordination on important international issues, to maintain regional and global peace, stability and prosperity…The key point is to solidly push forward existing

58

―Security Council Imposes Additional Sanctions on Iran, Voting 12 in Favour to 2 Against, with 1 Abstention.‖ United Nations Department of Public Information. 9 June 2010. http://www.un.org/News/Press/docs/2010/sc9948.doc.htm.

59

John W. Garver, ―China‘s Iran Policies.‖ Testimony Before the U.S.-China Economic and Security Review Commission on ―China‘s Current and Emerging Foreign Policy Priorities.‖ 13 April 2011.

60

"Remarks by the President at Signing of the Iran Sanctions Act." The White House East Room, Washington, D.C. 1 July 2010. Address, http://www.whitehouse.gov/the-press-office/remarks-president-signing-iran-sanctions-act.

61

―Iran, China Set To Expand Ties in Oil, Gas Sector.‖ Tehran Times. 8 August 2010.

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cooperative projects, to ensure they are put into effect smoothly, to deepen bilateral pragmatic cooperation and promote the continued development of bilateral ties.62

Both Chinese and Iranian officials have signaled that their relationship will not be damaged by UNSCR 1929. China did so by denouncing the additional sanctions placed on Iran by the US and its allies. At a July 6, 2010 press briefing Chinese Foreign Ministry spokesman Qin Gang said, ―The Security Council not long ago adopted the 1929 Resolution on the Iranian issue. China believes that the resolution should be earnestly, accurately and fully implemented, instead of being arbitrarily interpreted and expanded.‖63 The PRC has maintained its balancing act in the face of intensified efforts by Western powers to increase sanctions on Iran in late 2011 and early 2012. Chinese leaders condemned non-UN punitive measures and are pushing for renewed negotiations, but they have also cautioned Tehran against rash action that may further polarize the international community and they have recently strengthened ties to alternative energy producers Saudi Arabia and Qatar.

In January 2012, the US Government sanctioned Chinese oil-importer, Zhuhai Zhenrong, for transacting with Iran. Even though the sanctions were essentially symbolic because the company has no ongoing activity with the US covered by sanctions, PRC Foreign Ministry spokesman Lie Weimin used the incident to critique extra-UN sanctions. He said, ―Imposing sanctions on a Chinese company based on a domestic (U.S.) law is totally unreasonable and does not conform to the spirit or content of the UN Security Council resolutions about the Iran nuclear issue.‖64 Though China still formally opposes the current round of US and European sanctions on Iran, Chinese officials have also taken a stronger rhetorical stance on the issue of Iran’s possession of nuclear weapons and the prospect of the IRI interrupting shipping in the Gulf by ―closing‖ the Strait of Hormuz. Speaking in Doha on a six-day tour of the Middle East, Chinese Premier Wen Jiabao stated that the PRC ―adamantly opposes Iran developing and possessing nuclear weapons‖ and that closing the Straits would be regarded as aggression.65 At present China has shown it is committed to maintaining its relations with the Islamic Republic and is sometimes willing to exploit the sanctions-created absence of Western companies. Thus far, China has been able to play its double role with relative impunity. Despite China’s continued frustration of American efforts to pressure Iran, the Obama administration has declined to seriously enforce a 1996 measure penalizing third-country companies that invest in Iran's energy sector and do business in the US. China has been able to successfully navigate the passage between support for Iran and alienation of the United States.66 Through Iran, Beijing is able to 62

―China to Maintain Trade Projects with Iran,‖ Reuters. 6 August 2010. http://af.reuters.com/article/energyOilNews/idAFTOE67507B20100806 63

―Foreign Ministry Spokesperson Qin Gang‘s Regular Press Conference on July 6, 2010.‖ Ministry of Foreign Affairs of the People‘s Republic of China. 6 July 2010. http://www.mfa.gov.cn/eng/xwfw/s2510/2511/t714568.htm.

64

―International Sanctions on Iran Put Pressure on Chinese Diplomacy.‖ China Briefing. 24 January 2012. http://www.china-briefing.com/news/2012/01/24/international-sanctions-on-iran-put-pressure-on-chinesediplomacy.html.

65

―China Leader Warns Iran Not to Make Nuclear Arms.‖ Michael Wines. 20 January 2012. http://www.nytimes.com/2012/01/21/world/asia/chinese-leader-wen-criticizes-iran-on-nuclear-program.html?_r=1.

66

Downs, Erica, and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. 21 June 2011.

X. THE IMPACT OF CHINA AND RUSSIA

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challenge the US by proxy. Its support is just limited enough to avoid overt confrontation with the West, but substantial enough to earn the good faith of Tehran and the lucrative energy contracts such a relationship brings.

China’s Role in the Iranian Nuclear Program China has been adamant that its support of Iranian nuclear programs has been limited exclusively to Iran’s pursuit of peaceful nuclear technology, but many in the West believe these claims to be spurious. The Nuclear Threat Initiative reports that in the mid-1980s ―China began training Iranian nuclear technicians in China under a secret nuclear cooperation agreement, assisted in the construction of Iran's primary research facility, located at Isfahan, and also agreed to supply Iran with subcritical or zero yield nuclear reactors--all under IAEA safeguards.‖67 Throughout the 1990’s the US and PRC clashed over the latter’s nuclear cooperation with Iran.

After proposing then cancelling the sale of several nuclear reactors to Iran, the Chinese leadership in 1997 provided then Secretary of State Madeline Albright with a confidential agreement promising to halt support for Iran’s nuclear programs. In an October 1997 press briefing, US national security advisor Sandy Berger stated: "We have received assurances from the Chinese that they will not engage in any new nuclear cooperation with Iran and that the existing cooperation--there are two projects in particular--will end. That is the assurance we have received."68 Despite this commitment, Iran continued to receive assistance from entities within China in the twenty-first century. According to information collected by the American Enterprise Institute’s (AEI) Iran Tracker Project, Iran continued to receive critical equipment and technologies necessary for the production of nuclear weapons: Notwithstanding the Chinese government‘s official position, Chinese firms continue trading with Iran in technology related to ballistic missile, chemical and nuclear weapon programs. Between 2001 and 2007, the U.S. imposed sanctions in fifty-two instances against Chinese parties under the Iran Nonproliferation Act (INA) and the Iran and Syria Nonproliferation Act (ISNA)…In the summer of 2007, Chinese shipments to Iran containing ‗sensitive‘ military technologies, including dual-use items on international control lists, apparently increased. As recently as January 2009, Iran reportedly attempted to acquire missile-related, dual-use resources from China…‖69

As international sanctions have toughened against Iran, it has become more difficult to determine the complicity of the Chinese government in technology transfers. According to the Washington Post, however, the Obama administration believes that ―…companies are violating U.N. sanctions, but that China did not authorize their activities.70 The ―privatization‖ of Sino-Iranian 67

―China‘s Nuclear Exports and Assistance to Iran.‖ Nuclear Threat Initiative. http://www.nti.org/db/China/niranpos.htm.

68

The White House, Office of the Press Secretary, "Press Briefing by Secretary of State Madeleine Albright and National Security Advisor Sandy Berger," 29 October 1997.

69

Maseh Zarif, ―Technology Sources for Iran‘s Nuclear Program,‖ American Enterprise Institute. 24 July 2009. http://www.irantracker.org/nuclear-program/technology-sources-irans-nuclear-program.

70

John Pomfret, ―Chinese firms bypass sanctions on Iran, U.S. says.‖ The Washington Post. 18 October 2010 http://www.washingtonpost.com/wp-dyn/content/article/2010/10/17/AR2010101703723.html.

X. THE IMPACT OF CHINA AND RUSSIA

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nuclear cooperation has made both detection and blame harder for those attempting to interdict the supply of nuclear equipment to Iran.

Implications for US Policy The effectiveness of US tactics in dissuading Iran from pursuing a path of belligerence has been severely impaired by China‘s diplomatic and economic relationship with Iran. If the US is to be successful in weakening the ties that bind China and the Islamic Republic, US policymakers must recognize that the cornerstone of Beijing‘s relationship with Tehran is energy security.

If the US-led efforts to isolate Iran can persuade China that Iranian oil is too costly politically and provide viable, secure alternatives, Beijing may be more willing to control its illicit arms and technology exports and cooperate with the US-led sanctions regime. To decrease Iran‘s attractiveness as an energy provider and increase the likelihood of PRC cooperation with the US, Washington should consider four broad and interrelated guidelines: 

Promote energy alternatives and stress the cost of cooperation. In an ideal world, Beijing would like to develop Iran as a national gas station. With its massive amounts of reserve resource potential Iran could be a long-term and eventually high-output producer of the resources China needs to sustain and increase its economic and military growth. To inhibit this outcome the US should leverage its relationships with other oil producers to wean China away from Iranian oil and thus diplomatic support. This tactic has already achieved marked success during the US push to garner China‘s support for Resolution 1929. According to Downs and Moloney, Chinese crude imports from Iran dropped by 35 percent during the first half of 2010.71 Though Chinese traders attributed the decline to pricing issues, the drop coincided with US pressuring of the Saudi government to guarantee oil supplies to China. 72 Through tough enforcement of legislation like CISADA, the US government should also continue to force Chinese NOCs to choose between investing in either the US or Iran.



Countermand Iran’s “New World Order” narrative by further integrating China. In addition to the lure of secure energy, Iran hopes to draw China away from the West and closer toward itself by disparaging the current international order. Without pandering or sacrificing vital interests, the US should continue to explore every means available to fully integrate China into the present global system. If the PRC‘s stock in the status quo increases, outlier nations like Iran will become increasingly less desirable partners.



Prevent Iran from reaching its true hydrocarbon production capability. Taking into account oil and natural gas reserves, Iran is second to only Saudi Arabia in hydrocarbon resources, although its production capacity remains critically underdeveloped. If though internal or external investment, Iran were allowed to increase its output capacity to its true potential, Iran could potentially become an irresistible partner for the PRC. While Iranian production remains defunct, the US should take steps through sanctions or otherwise to prevent the maturation of the Iranian energy sector.



Accentuate existing cleavages between the IRI and PRC. At the same time Ahmadinejad praises SinoIranian cooperation and the necessity for Beijing‘s strong leadership in the transitioning international order, the Iranian media denounces Chinese products as ―beneath the dignity‖ of Iranian consumers. Beijing has proven itself not easily affected by rhetoric, but all means should be taken to exploit instances of public incivility and growing divisions on the domestic level.73

71

Erica Downs and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. Web. 21 June 2011.

72

Erica Downs and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. Web. 21 June 2011.

73

Erica Downs and Suzanne Moloney. "Getting China to Sanction Iran." Foreign Affairs 90.2 (2011): 15-21.

Academic Search Premier. EBSCO. Web. 21 June 2011.

X. THE IMPACT OF CHINA AND RUSSIA

21

If the US is successful in drawing China away from Iran, it should not expect a fundamental change in China‘s strategic approach, but rather a gradual shift towards the West and away from Tehran. If political pressure or energy alternatives prove unsatisfactory, Beijing has very little incentive to continue support for the US. China has proven itself responsive to external pressure, but it has also demonstrated a firm commitment to calculated opportunism. While the leaders in Washington and Tehran attempt to elicit China‘s cooperation on the basis of commitment to the global status quo or a new world order, Beijing‘s leaders appear far more concerned with the security and prosperity of China, and they will pursue international relationships from that standpoint.

Russia Russia’s relations with Iran have been both cooperative and competitive. Russia has not been as closely linked to Iran as China, but it also has not consistently supported the US and Europe in dealing with Iran. Russian calculations are decidedly realist and its policies towards each side fluctuate according to the relative risks and benefits of association.74 Russo-Iranian relations are driven by Russia’s goals to establish trade and transport links to the Gulf, to coordinate oil and gas export policies, and to counter US influence in the Middle East.

The US and Iran compete for Russian support on an issue by issue basis. Unlike China whose overriding interest in Iran is energy security, Russia has a multiplicity of interests, none of which are predominant. As a result, Russia‘s approach to Iran is both broader and more flexible than the PRC‘s. Russia is free to deemphasize one area of cooperation while highlighting another. To best position itself within the ongoing US-Iranian competition, Russia has repeatedly tried to portray itself as an intermediary power, all the while working to reap the benefits of selective cooperation with both sides.

Evolving US-Russia Relations The relationship between United States and Russia has gone through cycles of tense and improving relations. After the dissolution of the Soviet Union, the emergent Russian Federation took steps to integrate itself into the post-Cold War order, but maintained both its uniquely nonWestern identity as well as its interests in the states formerly under its suzerainty. Russia deeply values its influence in its neighbor states, and is wary of an expansion of NATO that would include former members of the Warsaw Pact.

Russia continues to distance itself from, and sometimes oppose, the US in a number of areas.

Toward the end of the 2000s, Russia and the US began to clash diplomatically over number of issues including: gas cutoffs to Ukraine, a cyber-attack on Estonia, anti-Western rhetoric from then President Putin, and the placement of missile systems. 75 In 2008, after Russia supported the

74

Andrew Kutchins, ―Reset Expectation: Russian Assessments of U.S. Power.‖ 114. http://csis.org/files/publication/110613_kuchins_CapacityResolve_Web.pdf 75

Jorge Benitez, ―U.S.-Russia Relations Under the Obama Administration.‖ Atlantic Council, NATO Source. 18 June 2010. http://www.acus.org/natosource/us-russia-relations-under-obama-administration.

X. THE IMPACT OF CHINA AND RUSSIA

22

breakaway regions of Abkhazia and South Ossetia in the Georgia War, Russo-American relations reached their lowest point since the end of the Cold War.76 The election of President Barak Obama provided an opportunity for both countries to ―reset‖ their relationship and refocus on issues of mutual interest. At a bilateral summit in July of 2009, Presidents Obama and Medvedev were able to reach agreements on nuclear security, cooperation on Afghanistan, military-to-military cooperation, a joint commission on POW/MIAs, and the formation of the Bilateral Presidential Commission. Cooperation has been furthered by the successful enactment of a new START treaty in February 2011.77 The improvement of relations at the official level appeared to have a trickle-down effect to the Russian public as well. The Russian-based Public Opinion Foundation reports that between February and July of 2010 the percentage of Russians who believe US-Russian relations are improving rose from 31% to 41%.78 Additionally, one-third of Russians hope for further improvements in relations—a rise from one-fourth six month earlier.79 Since that time, however, relations have become more tense. This partly is a result of the fact that Putin is attempting to use Russian nationalism as a tool in his coming campaign to be President, and partly because of growing Russia and US competition in the region. Russia opposes regime change in both Iran and Syria, and seems to increasingly see Iran as a way of limiting US influence in the region.

Security-Based Political Relations The United States’ approach to Russia parallels some aspects of its policy towards the PRC. The US welcomes Russia to take an active, supporting role on the world stage but is critical when Russia works contrary to the US-led international status quo. To bring about greater cohesion of Russian and American interests the Obama administration has implemented a strategy of engagement built on joint participation in bilateral agreements, revolving mainly around issues of global security.

As the world’s largest nuclear powers, both the US and Russia have interests in maintaining constructive relations and working to promote nonproliferation. That being said, Russian fears of Western encroachment and Western fears of Russian expansionism have historically led to conflict. Leaders in both countries have had to frequently redirect political focus onto issues of mutual interest to achieve cooperation.

Bilateral military activities were suspended in August 2008 as a result of the hostilities in Georgia, but they have since been restored. On July 6, 2009 Chairman of the Joint Chiefs of Staff Admiral Mullen and General Makarov, Chief of Defense for the Russian Federation, renewed military-to-military engagement between the US and Russia. The framework of the new 76

―Background Note: Russia.‖ U.S. Department of State. 16 March 2011. http://www.state.gov/r/pa/ei/bgn/3183.htm.

77

Ibid.

78

―Russians increasingly positive about relations with US – poll.‖ Pravda. 9 July 2010. http://engforum.pravda.ru/index.php?/topic/212437-russians-increasingly-positive-about-relations-with-us-poll/.

79

Ibid.

X. THE IMPACT OF CHINA AND RUSSIA

23

relationship aims to promote operational cooperation, inter-officer dialogue, and a more open exchange of strategic goals. The White House Fact Sheet describes renewed military relations as follows: The Armed Forces of the United States and Russian Federation have agreed in their work plan for 2009 to conduct nearly 20 exchanges and operational events before the end of the year, including a strategic discussion between the U.S. Joint Staff and the Russian General Staff, orientation for Russian military cadets at the U.S. Military Academy at West Point, planning for a joint exercise to respond to a hijacked aircraft in national and international airspace, visit of the faculty of the Russian Combined Arms Academy to the U.S. Army Combined Arms Center at Ft. Leavenworth, and a naval war game conducted by the Kuznetsov Naval Academy and the U.S. Naval War College. In addition, the U.S. European Command and the Russian Ministry of Defense have agreed to meet to plan a robust and more ambitious work plan for 2010.80

Security cooperation has been significantly enhanced by Russia’s 2009 agreement to permit US troops and non-lethal materiel bound for Afghanistan transit through Russian territory and airspace—a move which directly conflicts with Iran’s hope that Russia would help limit the US presence on its eastern flank. According to the Wall Street Journal, ―Supplying Afghanistan from the north is 90% cheaper than airlifting in supplies, and less hazardous than transporting them by truck through Pakistan.‖81 Speaking to the Russian Duma, Foreign Minister Sergei Ryabkov explained that – in accordance with the agreement – there had been 780 U.S. flights over Russia carrying 115,000 U.S. troops and more than 19,000 metric tons of cargo since September 2009.82 By Russian accounts, the air route accounted for 16 percent of all U.S. military shipments to and from Afghanistan. 83 The Russian supply routes have played a key role in maintaining the sustained flow of materiel to ISAF forces after Pakistan closed its borders to NATO traffic following the friendly fire incident that left 24 Pakistani soldiers dead in November 2011.

Another step in the US engagement strategy that affects Iran, and one of the principal fruits of the diplomatic reset in 2009, is the Bilateral Presidential Commission. The State Department describes the Commission’s purpose as follows: [The Commission] is dedicated to identifying areas of cooperation and pursuing joint projects and actions that strengthen strategic stability, international security, economic well-being, and the development of ties between the Russian and American people. It is intended to serve as a regular and structured mechanism to advance the highest-priority bilateral objectives through 18 working groups chaired by senior government officials from a variety of agencies and ministries. Working groups have been formed on the following topics: policy steering; agriculture; arms control; business development and economic relations; civil society; counterterrorism; counter-narcotics; education, culture, sports, and mass media; science and technology; energy; environment;

80

―Fact Sheet: United States-Russia Military to Military Relations.‖ The White House, Office of the Press Secretary. 6 July 2009. http://online.wsj.com/article/SB10001424052748703688704575620882049694928.html 81

Ibid.

82

―Russian Duma ratifies U.S. Afghan transit deal.‖ The Associated Press. 25 Feb 2011. http://www.armytimes.com/news/2011/02/ap-russia-us_transit-afghanistn-022511/ 83

Ibid.

X. THE IMPACT OF CHINA AND RUSSIA

24

emergency situations; health; military to military; nuclear energy and nuclear security; space cooperation; intelligence; and defense relations.84

As a result of the Commission’s efforts, the US and Russia have held over 100 meetings with over 60 government agencies and non-governmental partners. The meetings have promoted cross-national investment and produced a counter proliferation deal to dispose of enough weapons-grade plutonium for 17,000 warheads.85 Additional positive developments occurred in the second-half of 2010. At NATO’s 24th summit in November 2010 a meeting of the NATO-Russia Council produced several agreements, notably including an effort to pursue cooperation on missile defense. Along with the passage of the new START treaty, the Senate also ratified the U.S.-Russia 123 Agreement on civilian nuclear cooperation.86 Russia’s participation in bilateral initiatives and its support of UN sanctions against Iran signal a desire on the part of Russia’s leadership to mend breaches with the US in the face of more immediate rivals like China. However, although cooperation has deepened in some respects, Russia’s unwillingness to participate in further sanctions and its increasingly vocal warnings against Western-led military action against Iran delineate the limits of Russia’s move toward the West. There remain significant sources of tension in Russo-American relationship, and gains are costly and fragile.

Economic Relations Although Russian trade with the US is limited compared to trade with partners like China or EU nations, increased economic relations have helped to improve US-Russia relations from their 2008 lows. In 2010, trade between the US and Russia climbed to $31.7 billion, a 35% increase from the previous year. U.S. imports from Russia grew 41% to $25.7 billion, but exports to Russia only increased 13% to $6.0 billion.87 The State Department attributes the rapid growth in US imports from 2009 to 2010 to ―the low base year and nascent economic recovery in the United States, but also to the rising price of oil and other commodities.‖88 Such dramatic increases are an important indicator of an upward trend of integration, but are probably not sustainable in their own right.

Trade is comprised mainly of inter-industry exchanges. According to the State Department Country Report: Oil and oil products represent over two-thirds of the value of all U.S. imports from Russia. Russia is currently the 32nd-largest export market for U.S. goods. Russian exports to the U.S. were fuel 84

―Fact Sheet: United States-Russia Military to Military Relations.‖ The White House, Office of the Press Secretary. 6 July 2009. http://online.wsj.com/article/SB10001424052748703688704575620882049694928.html.

85

Jorge Benitez, ―U.S.-Russia Relations Under the Obama Administration.‖ Atlantic Council, NATO Source. 18 June 2010. http://www.acus.org/natosource/us-russia-relations-under-obama-administration.

86

Andrew Kutchins, ―Reset Expectation: Russian Assessments of U.S. Power.‖ 114, 121. http://csis.org/files/publication/110613_kuchins_CapacityResolve_Web.pdf.

87

―Fact Sheet: United States-Russia Military to Military Relations.‖ The White House, Office of the Press Secretary. 6 July 2009. http://online.wsj.com/article/SB10001424052748703688704575620882049694928.html.

88

Ibid.

X. THE IMPACT OF CHINA AND RUSSIA

25

oil, inorganic chemicals, aluminum, and precious stones. U.S. exports to Russia were machinery, vehicles, meat (mostly poultry), aircraft, electrical equipment, and high-tech products.89

Foreign direct investment remains low in comparison with other BRIC countries. According to a Deutsche Bank Research report: Russia ranked below Brazil and China, slightly below India and above Turkey on average from 2000-2008. Looking at US FDI as a percentage of GDP, Brazil leads with 4.4%, while the levels in India, China and Turkey are all close to 1% and hence on par with Russia. In per capita terms, Brazil received most US FDI followed by Russia and Turkey, which both obtained significantly more FDI per capita than China and India.90

Deutsche notes, ―Russia accounted for only 0.3% (USD 6 bn) of the US FDI stock abroad on average from 2000 to 2008.91 During 2000-2008, the two major sectors of US FDI in Russia were mining (53%) and manufacturing (16%). These sectors represent 6% and 3% of worldwide US FDI stock, respectively.92 All of Russia‘s other investment sectors were close to or below 1% of worldwide US FDI.93 Evolving Iran-Russia Relations Russo-Iranian relations are mixed, and both nations clearly seek their own advantage while leveraging their relationship in dealings with the US. Russia supports Iran’s competition with the US when it perceives it can control or predict Iranian behavior. Tehran lauds Russo-Iranian cooperation, but it also refuses to be controlled by Russian interests and is not afraid to rebuff what it perceives as Russian overreaching. The US tries to take advantage of breaches when they occur, and all three states are forced to recalculate. Since 2009, Russia has drifted closer to the West but leaders in Tehran and Moscow recognize the mutual utility of positive relations and they continue to pursue partnership to varying degrees.

Russia’s cooperation with Iran is motivated by it goals of enhancing trade connections to the Gulf, using its oil and gas export policies to counter US influence in the Middle East, and seeking to maintain sway over former Soviet states in the Caspian region. Iran has historically valued Russia as a significant supplier of arms and nuclear technology, a source of diplomatic cover at the UN, and as a powerful member of non-aligned states that Iran hopes can counterbalance Western power.

Russia and Iran do, however, have divergent regional perceptions and policies, including competing interests over the resources in the Caspian Sea. Russia’s concern over the prospect of regional instability caused by the nuclear issue, the strains its ties with Tehran places on its 89

―Fact Sheet: United States-Russia Military to Military Relations.‖ The White House, Office of the Press Secretary. 6 July 2009. http://online.wsj.com/article/SB10001424052748703688704575620882049694928.html.

90

Deutsche Bank Report, ―US-Russia economic relations.‖ 6 July, 2009. 4. http://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000243816.PDF. 91

Deutsche Bank Report, ―US-Russia economic relations.‖ 6 July, 2009. 3. http://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000243816.PDF. 92

Deutsche Bank Report, ―US-Russia economic relations.‖ 6 July, 2009. 4. http://www.dbresearch.de/PROD/DBR_INTERNET_DE-PROD/PROD0000000000243816.PDF. 93

Ibid.

X. THE IMPACT OF CHINA AND RUSSIA

26

connections (particularly commercial) to the West, and Iran’s unwillingness to follow through with Russian offers to mediate the dispute, have been a source of continuing tension..

Russo-Iranian relations have had a turbulent history marked by periods of cooperation and competition, which are influenced by domestic as well as external factors. After the fall of the Shah in 1979, Iran’s Supreme Leader Ayatollah Ruhollah Khomeini made known that Iran would not be aligned with either Cold War superpower. He denounced the Soviet Union as ―the Lesser Satan‖ for its policy of atheism, its support of Iran’s communist party, its incursion into Afghanistan, and its provision of arms to Iran’s regional rival Iraq.

After the death of Khomeini and the formation of the Russian Federation, tension gave way to a period of intensive cooperation. Russia provided Iran with arms and nuclear assistance while Iran politically backed Russian efforts to subdue Muslim Chechen separatists.94 Even so, relations remain uncertain. Initially, commitments intensified under the new leadership of Russian President Vladimir Putin, but an incident involving Iran’s interruption of oil exploration off the coast of Azerbaijan led to a souring of relations.95 Iranian interference caused Azerbaijan to look to the US for support—a turn of events contrary to Russian interests for regional superiority of the Caspian. Moscow has tried unsuccessfully to mitigate international tensions over Iran’s nuclear program. Putin’s offer to enrich uranium in Russia instead of Iran was rebuffed by Ahmadinejad, and the West has grown increasingly concerned. Since the mid-2000s, Russia with China, has worked to dilute Western-led efforts to sanction Iran. Unlike China, Russia has been willing to reduce its support to Iran at times when it suits Russian interests.96 Degrading Political Relations: From Cooperation to Tolerance Russia was initially an important facilitator of Iran’s nuclear capacity, providing technical assistance with the construction of the Bushehr-nuclear reactor, but since then relations have been impacted by intensifying Iranian competition with the West and warming relations with the US in the wake of the Obama Administration’s ―reset‖ policy. As a result, Russia has moved towards a more neutral position: occasionally appeasing Washington with diplomatic support for international sanctions, yet continuing trade with Iran. In response, Iranian officials have criticized Russia’s collaboration with the West, yet praised those elements of Russo-Iranian cooperation that remain.

Russia and Iran have sometimes come together over issues like trade and regional security. To promote regional cooperation and their shared interest in limiting Western influence in the Caspian Sea, Iran and Russia participate in the Caspian Sea states summits. In 2007 the members, which include Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan, issued a joint statement declaring that they ―under no circumstances will allow the use of their territories by other states for an aggression or other military actions against any of the parties.‖ 97 Iran and 94

Mark N. Katz, ―Iran and Russia.‖ United States Institute of Peace, The Iran Primer. http://iranprimer.usip.org/resource/iran-and-russia.

95

Ibid.

96

Ibid.

97

―Caspian Nations Hold Exclusive Rights To Caspian Resources,‖ Central Asia And Caucasus Business Weekly.

23 October 2007.

X. THE IMPACT OF CHINA AND RUSSIA

27

Russia also maintain multilateral ties through their participation in the Shanghai Cooperation Organization (SCO).

Bilateral relations have, however, become increasingly complicated in the wake of the US/Russian diplomatic reset, and are mixture of cooperation and tension. In 2009, Russian leaders voiced their support for the re-election of Mahmoud Ahmadinejad and became the first country to formally recognize the results of the contested race. 98 Speaking at the SCO summit in Russia, Russian Deputy Foreign Minister Sergei Ryabkov said, ―We welcome the newly elected president of Iran on Russian soil...It’s extremely symbolic that his first foreign visit after his reelection was made to Russia.‖99 Referencing both countries’ strong preference for unhindered national sovereignty, he further remarked that the contested election was an ―internal affair of the Iranian people.‖100 According to the Russian news service RIA Novosti, the Russian public has a highly negative view of Iran. In November 2009, polling reveled that that 93.5 percent of Iranians have a negative opinion of Russia.101 A common opposition chant heard in the aftermath of the disputed elections was ―Marg bar Russia‖ (Death to Russia) in contrast with the more common antiAmerican refrains.102 Russo-Iranian cooperation declined after 2008. Russia’s delayed delivery of the S-300 airdefense system, its growing relationship with Israel, and the revelation of Iran’s secret uranium enrichment facility at Qom on September 25, 2009 led to a significant cooling of relations. In December 2009, President Ahmadinejad began demanding compensation from the former Allied powers, including Russia, for their occupation of Iran during WWII. Announcing his intention to form a committee to ―calculate the damages‖, Ahmadinejad said, "You inflicted lots of damages to the Iranian nation, put your weight on the shoulders [of the Iranian people] and became victors in the World War II. You didn't even share the war profits with Iran…If I say today that we will take full compensation ... know that we will stand to the end and will take it."103 In early March 2010, Transportation Minister Hamid Behbahani announced that by executive order all Russian commercial pilots working in Iran would be required to leave the country within 60 days. He justified the policy claiming, ―…our country itself possesses plenty of professional and specialist pilots, there is no need to bring in pilots from abroad.‖104

98

Mark N. Katz, ―Iran and Russia.‖ United States Institute of Peace, The Iran Primer. http://iranprimer.usip.org/resource/iran-and-russia.

99

Lucian Kim and Lyubov Pronina, ―Medvedev Hosts Ahmadinejad as Demonstrations Continue in Iran.‖ Bloomberg. 16 June 2009. http://www.bloomberg.com/apps/news?pid=newsarchive&sid=agX7duQv0rEQ. 100

Ibid.

101

Mark N. Katz, ―Iran and Russia.‖ United States Institute of Peace, The Iran Primer. http://iranprimer.usip.org/resource/iran-and-russia.

102

― Death to Russia instead of Israel - ‫رو س یه ب ر مرگ‬- 27 ‫ شهری ىر‬1388.‖ 18 September 2009. http://www.youtube.com/watch?v=2JKDAAQPnJg. 103

―Ahmadinejad Demands WWII Reparations From Allied Powers.‖ The Associated Press. 1 September 2010. http://www.haaretz.com/news/ahmadinejad-demands-wwii-reparations-from-allied-powers-1.265628.

104 ―Tehran Gives Russian Pilots 2 Months to Leave.‖ The Washington Times. 11 March 2010. http://www.washingtontimes.com/news/2010/mar/11/tehran-gives-russian-pilots-2-months-to-leave/

X. THE IMPACT OF CHINA AND RUSSIA

28

In September 2010, the delay preventing Iran’s acquisition of the Russian S-300 system transformed into Russia’s full cancellation of the contract in lieu of UN sanctions. While refraining from specifics, Ahmadinejad excoriated ―some people‖ (Russia) for breaking their contractual obligation and for submitting to the influence of the US. He said: Some people are influenced by Satan. They thought the Iranian nation will be harmed if they unilaterally and illegally stop or cancel defense contracts they signed with us… The contract is valid. They must implement it. If they don't, the Iranian nation will obtain its rights, including compensation and penalties.105

Despite Tehran’s loss of the S-300 missile system and their criticism of Russia’s move toward the West, Iranian officials have remained positive about other areas of Russo-Iranian cooperation, particularly the completion of the Russian-built Bushehr nuclear power plant.

Speaking by phone to President Medvedev in February 2011, Ahmadinejad said, ―There are abundant grounds for cooperation between Iran and Russia. In the same ground, launching the Bushehr nuclear power plant in due time serves the interests of both states."106 The Fars News Agency reports that Ahmadinejad and Medvedev are hopeful for future cooperation: Iran welcomes further development of cooperation between the two countries in different fields.

Medvedev, for his part, stressed his country's eagerness to further consolidate relations and boost cooperation with Iran, and said Moscow is making serious efforts to launch the Bushehr nuclear power plant according to the specified timeline.107

Actions like expelling Russian pilots and demanding WWII compensation evince Tehran’s apparent willingness to openly demonstrate its displeasure with some Russian policies. But at the same time Tehran continues to stress the importance of its relationship with Moscow, especially over issues like Bushehr. The Russians, for their part, continue to pursue a strategy of pragmatism in their relationship with Iran. Iran remains a lucrative market for Russian arms and technology; cooperation, though curtailed, remains profitable. Neither Russia nor Iran is willing to sacrifice meaningful political capital on behalf of the other, but until outside pressure forces a change, the opportunistic partnership remains.

The Russo-Iranian Economic Relationship: Arms, Energy, Technology Iran and Russia are economically linked—in competition and cooperation—by their mutual dominance of the world’s reserves and production of hydrocarbons. Russia is the largest producer of natural gas, holding 23 percent of the world’s gas and 6.3 percent of the world’s oil.108 Iran, with the second biggest gas reserves, controls 16 percent of the world’s gas and 11

105

Ali Akbar Dareini, ―Iran: Russia gives in to 'Satan' with missile ban.‖ The Associated Press. 3 November 2010. http://www.washingtonpost.com/wp-dyn/content/article/2010/11/03/AR2010110301907.html.

106

―Iranian, Russian Presidents Underline Launch of Bushehr N. Power Plant.‖ Fars News Agency. 15 March 2011. http://english.farsnews.com/newstext.php?nn=8912240571.

107 108

Ibid.

―Factbox - Russia's relations with Iran.‖ Reuters. 26 May 2010. http://www.reuters.com/article/2010/05/26/irannuclear-ahmadinejad-idUSLDE64P10N20100526.

X. THE IMPACT OF CHINA AND RUSSIA

29

percent of its oil.109 Along with Qatar, the three nations form the ―gas troika‖ which controls 40 percent of global reserves.

In addition to hydrocarbons, Russo-Iranian trade notably includes agricultural products, telecommunications, aviation, nuclear technology and equipment, and weapons. Iran is Russia’s most significant trading partner in the Middle East with bilateral trade hovering around $3 billion in 2009 (a significant drop from a record setting $3.7 billion in 2008).110 Table 10, 2 shows that Russian exports to Iran and Iranian exports to Russia have both grown steadily according to the Russian Federal State Statistics Service:111

1995 2000 2005 2008

Table 10.2: Russian Trade with Iran: 1995-2008 RUSSIAN EXPORTS TO IRAN IRANIAN EXPORTS TO RUSSIA $249 million 1995 $27 million $633 million 2000 $57.6 million $1.9 billion 2005 $125 million $3.3 billion 2008 $401 million

Sanctions and Russo-Iranian Energy Cooperation Russia and Iran‘s status as world energy suppliers and their proximity to the oil rich Caspian Sea has led to energy-centric cooperation between the two powers, but cooperation has diminished in many respects as sanctions intensify and Iran looks to challenge Russia‘s dominance of energy transport to the EU. According to Reuters, ―Iran has said it wants to supply the Nabucco pipeline, a long delayed project that is backed by the European Union as a way to curb dependency on Russia by pumping gas from the Caspian and the Middle East...that would undermine the efforts of Russia's leaders, who have spent a decade garnering support for rival pipelines such as South Stream and Nord Stream.‖112 As a brief chronology demonstrates, sanctions and a generally more hostile business environment have led Russian companies to pull back from Iran in recent years: 

109

Ibid.

110

Ibid.

March 24, 2010: LUKoil, Russia‘s second largest oil company, announced its withdrawal from the Anaran project in Iran ―due to the impossibility of carrying out further work at the field because of the economic sanctions imposed by the U.S. government." The project is comprised of four oil structures designed to exploit reserves estimated at 2 billion barrels of oil.113

111

Mark N. Katz, ―Iran and Russia.‖ United States Institute of Peace, The Iran Primer. http://iranprimer.usip.org/resource/iran-and-russia.

112

―Factbox - Russia's relations with Iran.‖ Reuters. 26 May 2010. http://www.reuters.com/article/2010/05/26/irannuclear-ahmadinejad-idUSLDE64P10N20100526.

113

―LUKoil Withdraws From Iran Project, Citing 'U.S. Sanctions'.‖ Radio Free Europe, Radio Liberty. 2 August, 2011. http://www.rferl.org/content/Lukoil_Withdraws_From_Iran_Project_Citing_US_Sanctions/1992471.html.

X. THE IMPACT OF CHINA AND RUSSIA

30



April 7, 2010: Industry sources report that LUKoil will cease its gasoline exports to Iran in expectation of international sanctions. LUKoil had supplied some 250,000 to 500,000 barrels of gasoline to Iran every other month, traders said.114



June 1, 2010: Caspian Sea producers suspend oil swaps with Iran after Tehran steeply raised fees on operations to avoid an oil glut following lower sales of its own crude. Producers said Iran had made the market deliberately uneconomic.115

Nevertheless, Russian commercial cooperation with Iran and condemnation of sanctions imposed outside of the Security Council framework continues. Despite US pressure, the Russian government and Russia‘s most significant oil major, Gazprom Neft, have publically announced their intention to remain active partners in Iran‘s energy and petrochemical sectors. However the nature of the continued partnership remains confined mainly to generalities.116 In December 2010, Iranian PressTV reported the head of the oil arm of Gazprom, Alexander Dyukov said that his company plans to carry on working with the Iranian government despite the impact of international sanctions. Russian website OilExp quoted him as saying: "The Company continues holding negotiations over two Iranian oil fields, but so far, the parties have not reached any agreements."117 Several weeks after the US and its partners issued supplemental sanctions to UN Resolution 1929, Russian energy minister, Sergei I. Shmatko, met in Moscow with his Iranian counterpart, Massoud Mir-Kazemi, and issued a joint statement praising ―active cooperation between Russian and Iranian companies in the oil, gas and petrochemical sectors, which are developing and widening in their joint work.‖118 In late 2011, Russian officials strongly criticized increased sanctions on Iran‘s energy sector by the US, EU, and Japan. They labeled further punitive measures as not only unnecessary but counter-productive to the easing of tensions heightened by recurring assassinations of Iranian nuclear scientists and the release of a November 8 IAEA report which strongly alleges a weapons-oriented component to Iran‘s nuclear program.

Speaking to Iran's official news agency IRNA in late December 2011, Russian Foreign Ministry spokesman Alexander Lukashevich said that ―Russia is opposed to any anti-Iran action by the international community and believes that they will be useless... We are now witnessing that the previous sanctions against Iran were all futile‖119 114

―Russia's Lukoil to halt gasoline sales to Iran.‖ 7 April 2010. Reuters. http://www.ynetnews.com/articles/0,7340,L-3872694,00.html 115

―Russia's Lukoil to Halt Gasoline Sales To Iran.‖ Reuters. 4 July 2010. http://af.reuters.com/article/energyoilnews/idaflde65i04o20100619.

116

―Iran, Gazprom 'to continue cooperation'.‖ PressTV. 14 December 2010. http://www.presstv.ir/detail/155462.html.

117

Ibid.

118

Andrew E. Kramer, ―Russia Plan to Help Iran Challenges Sanctions.‖ 14 July 2010. The New York Times.

Http://Www.Nytimes.Com/2010/07/15/World/Europe/15russia.Html?_R=1&Scp=4&Sq=Iran&St=Cse. 119

―Nuclear sanctions won't affect Iran economy, Russia official says.‖ Haaretz. 12 December 2012. http://www.haaretz.com/news/middle-east/nuclear-sanctions-won-t-affect-iran-economy-russia-official-says1.402984.

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Russian Foreign Minister Sergey Lavrov stated on January 18, 2012, that the new sanctions had, ―…nothing to do with a desire to strengthen the nuclear non-proliferation…It's aimed at stifling the Iranian economy and the population in an apparent hope to provoke discontent." He also warned that the situation risked leading to attacks on Iran in which...―The consequences will be extremely grave. It‘s not going to be an easy walk. It will trigger a chain reaction and I don‘t know where it will stop.‖120 On January 23rd, 2012 the EU Foreign Ministers agreed to freeze the assets of the Iranian Central Bank and impose a boycott on Iranian oil while honoring existing contracts until July 1, 2012.

Iranian media sources rapidly decried the EU move as ―illogical and unjustifiable‖ and Ali Ashghar Kaji, deputy foreign minister for European and American affairs, claimed that, ―Certain powers within the European Union have been seeking to create tension in relations with the Islamic Republic of Iran by pursuing the U.S. policies and adopting a hostile approach,‖121 The Russian Foreign Ministry’s response to the embargo expressed both ―regret and alarm‖ with the decision.122 Russia is pushing for a resumption of P5+1 negotiations with Iran and claims that the European tack toward a tougher line with Iran ―…is a deeply mistaken approach.‖ 123 In its official statement the Ministry made clear that Western attempts at modifying Iran’s behavior through punitive action would be unsuccessful and unsupported by Russia: ―It is obvious that what is happening here is open pressure and diktat, an attempt to 'punish' Iran for its intractable behavior…Under such pressure Iran will not agree to any concessions or any changes in its policy."124 Russian Military Assistance to Iran Security-based cooperation between Russia and Iran has historically focused on arms sales. The beginning of significant arms trading between Russia and Iran occurred after the death of Ayatollah Ruhollah Khomeini in 1989. The then Soviet Union provided the IRI with weapons, scientific-technical cooperation, and a commitment of mutual non-interference in domestic matters.

Since 1992, Russia has sold Iran major weapons systems, including twenty T-72 tanks, air-to-air missiles, Tor-M1 short-range antiaircraft missiles, submarines, armored vehicles, and combat

120

Associated Press, ―Russia warns attack on Iran could unleash ‗chain reaction,‘ criticizes further sanctions,‖ Updated: Wednesday, January 18, 7:58 AM; CBS News, January 18, 2012. http://www.cbsnews.com/8301202_162-57360784/russia-warns-against-more-iran-sanctions/.

121

―EU will be responsible for consequences of Iran oil embargo.‖ Tehran Times. 24 January 2012. http://www.tehrantimes.com/politics/94773-eu-will-be-responsible-for-consequences-of-iran-oil-embargo.

122

―Iran slams EU oil embargo, warns could hit U.S.‖ 23 January 2012. Reuters. http://www.reuters.com/article/2012/01/23/us-iran-eu-deal-idUSTRE80M0IU20120123.

123 124

Ibid.

―Iran slams EU oil embargo, warns could hit U.S.‖ 23 January 2012. Reuters. http://www.reuters.com/article/2012/01/23/us-iran-russia-idUSTRE80M20820120123.

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aircraft like the MiG-29.125 In the past ten years, Iran has purchased more than $5 billion in Russian weaponry.126 According to Richard Grimmett at the Congressional Research Service, during the first decade of the 2000s the value of Russo-Iranian arms deliveries was significantly lower than the value of arms agreements. While the value of arms deliveries slightly increased, climbing from $300 million in 2003-2006 to $400 million during 2007-2010, the value of agreements during those same periods plunged from $2.1 billion to $300 million.127 The decrease in agreements overtime and the large gap between the value of promised agreements and actual deliveries reflect an aspect of Russia’s response to international pressure on Iran’s nuclear program.

The chronology in Figure 10.3 below highlights some of the major exchanges in the RussoIranian arms trade: Figure 10.3: Chronology of Recent Russo-Iranian Arms Cooperation 

1989 to 1991: The Soviet Union signed a series of deals supplying Iran with MIG-29 and SU-24 fighter aircraft, aircraft missiles, S-200 air defense complexes, three diesel submarines, and hundreds of tanks and armored vehicles, as well as various munitions. The arrangement included licensed manufacturing of tanks and armored vehicles and a 10-year period for parts and supplies. The contracts were to stay in effect until 1999- 2001. With the exception of tank and armored vehicle exports that fell short of expected quotas, the bulk of the weapons were shipped to Iran in 1992-1996.128



2001: A bilateral agreement on military and technical cooperation was signed, leading to widespread anticipation of future multi-billion dollar contracts. Few deals were ultimately concluded, however, and these were relatively modest: a $150 million helicopter contract and an order for 300 armored vehicles that was suspended a few years later. Some enterprises received smaller orders for repairing Russian-made equipment.129



December 2005: A contentious $700-900 million air defense systems contract was announced. Russia delivered 29 Tor-M1 missile systems.130



2007: Russian and Iran sign a deal to supply five batteries of long-range S-300 air-defense missiles, which are similar to the US Patriot system, worth almost $1 billion. 131 However, it is unclear whether Russia

125

Lionel Beehner, ―Russia-Iran Arms Trade.‖ Council on Foreign Relations: Backgrounder. 1 November 2006. http://www.cfr.org/iran/russia-iran-arms-trade/p11869.

126

Fred Weir, ―Why Russia is cutting off major arms sales to Iran.‖ Christian Science Monitor. 23 September 2010. http://www.csmonitor.com/World/Europe/2010/0923/Why-Russia-is-cutting-off-major-arms-sales-to-Iran.

127

Richard F. Grimmett, ―Conventional Arms Transfers to Developing Nations, 1998-2005.‖ Congressional Research Service. October 2006, 66. Richard F. Grimmett, ―Conventional Arms Transfers to Developing Nations, 2003-2010.‖ Congressional Research Service. September 22, 2011.

128

Alla Kassianova, ―Russian Weapons Sales to Iran: Why They are Unlikely to Stop.‖ PONARS Policy Memo No. 427. Tomsk State University. December 2006. http://www.gwu.edu/~ieresgwu/assets/docs/ponars/pm_0427.pdf.

129

Ibid.

130

Tony Halpin and Alexi Mostrous, ―Russia ratchets up US Tensions with Arms Sales to Iran and Venezuela.‖ The Times. 19 September 2008. http://www.timesonline.co.uk/tol/news/world/europe/article4781027.ece.

131

Fred Weir, ―Why Russia is cutting off major arms sales to Iran.‖ Christian Science Monitor. 23 September 2010. http://www.csmonitor.com/World/Europe/2010/0923/Why-Russia-is-cutting-off-major-arms-sales-to-Iran.

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actually intends to sell Iran the systems or that it merely wants to send a message to the international community, namely the US, that it can sell Iran the systems. 132 In the end, they were never delivered. 

December 2008: The Deputy Director of the Russian Federal Organization for Military and Technical Cooperation Alexander Foumin said that his country intended to increase joint military cooperation with Iran, a change that he said would bring greater stability to the region. 133



2010: The Kremlin orders a halt to all sales of sophisticated Russian weaponry to the Islamic Republic. A decree signed by President Dmitry Medvedev bans the supply of battle tanks, armored vehicles, largecaliber artillery systems, warplanes, military helicopters, ships, and missiles – including S-300 air defense systems – to Iran as part of measures to bring Russia into compliance with tough sanctions agreed by the UN Security Council Resolution 1929. Russian Deputy Foreign Minister Sergei Ryabkov said unspecified defense cooperation with Iran would continue, despite the end of major arms sales. 134 However, Anatoly Isaikin, the head of the state arms trader Rosoboronexport, said no international agreements bar Russia from selling weapons to Teheran, meaning Moscow is not eliminating the possibility of future sales to Iran.135



August 2011: Citing Russia‘s failure to deliver the S-300 air defense system, Iran filed suit against the Russian Federation with the International Court of Arbitration, hoping to either force Moscow to sell the military hardware to Tehran after all or pay reparations. 136

It is important to note that while arms sales generate revenue in the hundreds of millions of dollars, Russia’s agreements with other consumers such as China and India by far outweigh those with Iran, and the importance of the relationship should not be overestimated.137 Russia’s Participation in Iranian Nuclear Efforts Russia’s continuing support for Iran’s nuclear efforts, particularly its construction of Iran’s Bushehr power plant, frustrates US aims to block Iran’s access to some technologies which may be used to create nuclear weapons. In addition to receiving over $1 billion for the 15 year-old contract, Russia leverages its nuclear cooperation with Iran as a political counterweight in the ongoing tripartite competition.

Russia was able to mitigate the damage done to its relationship with Iran after its cancellation of the S-300 deal by promising Tehran that it would see the Bushehr project through to completion.

The Iranian‘s criticized Russia‘s move to the West, but they refrained from taking any action capable of placing the completion of Bushehr in jeopardy. The US is similarly restrained from taking action against Russia‘s participation in Iran‘s nuclear program because it values 132

Ariel Farrar-Wellman, ―Russia-Iran Foreign Relations.‖ American Enterprise Institute, Iran Tracker. 2 August 2010. http://www.irantracker.org/foreign-relations/russia-iran-foreign-relations.

133

―Minister: Iran, Russia to boost military cooperation.‖ China View News. 16 February 2009 http://news.xinhuanet.com/english/2009-02/16/content_10824531.htm.

134

Fred Weir, ―Why Russia is cutting off major arms sales to Iran.‖ Christian Science Monitor. 23 September 2010. http://www.csmonitor.com/World/Europe/2010/0923/Why-Russia-is-cutting-off-major-arms-sales-to-Iran.

135

―'No obstacles over Iran arms deals'.‖ Associated Press. 28 January 2010. http://www.jpost.com/IranianThreat/News/Article.aspx?id=167120.

136 137

http://atlanticsentinel.com/2011/08/iran-sues-russia-for-canceled-arms-sale/

Lionel Beehner, ―Russia-Iran Arms Trade.‖ Council on Foreign Relations: Backgrounder. 1 November 2006. http://www.cfr.org/iran/russia-iran-arms-trade/p11869.

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Moscow‘s decision to support UN sanctions. By extending and retracting support proportionally, the Russian leadership has managed to balance its relationship with both the US and IRI, albeit with an increasing tilt toward the West.

Mikhail Margelov, head of the security committee of the Federation Council, Russia's upper house of parliament, articulated Russia‘s strategy saying: "That is why, if we cooperate with Iran in the field of nuclear energy, as we do by completing Bushehr, we do so because this is the only legal mechanism to keep them cooperating with the international institutions."138 Figure 10.4 provides a detailed chronology of Russia‘s participation in Iran‘s burgeoning nuclear program. Unless otherwise noted, all data comes from the National Threat Initiative‘s Iran Profile: Figure 10.4: Chronology of Russo-Iranian Nuclear Cooperation139 

1987: Russian nuclear cooperation with Iran begins, according to a 1999 article written by Viktor Mikhaylov, then chairman of the Russian Ministry of Atomic Energy's Scientific Council.



1992: Russia and Iran signed a 15-year bilateral nuclear cooperation agreement.



1993: The Iranian parliament ratifies nuclear cooperation agreements with Russia and China. Iran will buy two VVER-440s [440MW reactors] from Russia and two 300MWe pressurized water reactors similar to those at Qinshan from China.



1995: Russia announced that it would complete Bushehr's construction and agreed to build three additional reactors. Russia agreed to complete construction of the Bushehr-1 nuclear power plant and also secretly offered to supply Iran with a large research reactor, a fuel fabrication facility, and a gas centrifuge plant.



Feb 2005: Russia and Iran signed an agreement for Moscow to supply fuel to Iran's new nuclear reactor in Bushehr. Under the deal Iran has to return spent nuclear fuel rods from the reactor, which was designed and built by Russia. The clause was a safeguard meant to banish fears that Iran might misuse the rods to build nuclear weapons, a concern of the US, Israel and others. 140



Jan 1996: The Russian and Iranian contract on the Bushehr power plant went into effect. Russia is under a contractual obligation to complete and render operational the Bushehr nuclear power plant within 55 months.



March 1996: Representatives from China, India, Iran, and Russia signed a protocol in Moscow establishing the Asian Fusion Research Foundation to cooperate in the study of nuclear fusion.



1997: Iran and Russia signed a memorandum of understanding (MOU) on export controls, emphasizing their commitment to the nonproliferation of nuclear weapons and their means of delivery.



1998: Russia will build two more nuclear reactors in Iran in addition to Russia's $850 million deal to build a 1,000MW nuclear power plant at Bushehr. Kaurov says Russia "agreed in principle" with Iran on the

138

Fred Weir, ―Why Russia is cutting off major arms sales to Iran.‖ Christian Science Monitor. 23 September 2010. http://www.csmonitor.com/World/Europe/2010/0923/Why-Russia-is-cutting-off-major-arms-sales-to-Iran.

139

―Nuclear Overview.‖ Iran Profile, Nuclear Threat Initiative. February 2011. http://www.nti.org/e_research/profiles/Iran/Nuclear/.

140

―Russia-Iran nuclear deal signed.‖ BBC News. 27 February 2005. http://news.bbc.co.uk/2/hi/middle_east/4301889.stm.

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construction of two more reactors at Bushehr. Construction was not expected to begin for five years. This new deal was not a signed contract, but was rather a verbal agreement. 

2000: Russian President Vladimir Putin instituted changes to the 1992 presidential decree "On Controlling the Export of Nuclear Materials, Equipment and Technologies from the Russian Federation" that permit Russia to supply nuclear technologies and materials to countries whose nuclear programs are not fully monitored by the International Atomic Energy Agency (IAEA). This was reportedly Moscow's response to the US Congress's passage of the Iran Nonproliferation Act, which imposes sanctions against Russian companies suspected of supplying Iran with prohibited technologies and materials. A spokesperson for the Ministry of Atomic Energy stated that Russia's ability to export nuclear materials and technologies has been "broadened considerably." It was believed that Putin revised his predecessor's decree in order to expedite the implementation of a contract with Teheran in the near future.



2007: Russia delivered the first fuel shipment to the power plant in Bushehr, in southern Iran. Russian officials claim that the fuel will be under the control of the International Atomic Energy Agency while its inspectors are in Iran, and that Tehran has given its pledge that the fuel will only be used for the power plant.



2009: Iran performed tests at its Bushehr nuclear power plant using "dummy" fuel rods, which are loaded with lead rather than enriched uranium.



Jan 2012: Iranian officials claim the Bushehr plant is weeks away from operating at its full capacity.

Russia’s Strategic Independence: Missile Sales to Iran and Syria Russian support for US-led international sanctions has been mixed. As seen above, Russia has been an important facilitator of the Iranian nuclear program, but has since moderated its stance.

In 2007, Iran announced that it had brokered a deal to purchase the S-300 air-defense system from Russia. The missile system, which is designed to track and destroy ballistic missiles, cruise missiles, and low-flying aircraft, is comparable to the US MIM-104 Patriot system, according to Russia’s RIA Novosti news service.141 As above-mentioned, the S-300 system was added to a list of weapons banned for sale to Iran by UNSCR 1929 in June 2010.

After some hesitation, the Russian government decided to formally cancel its contract with Iran in September of 2010. The change in policy represented a marked show of support for the Western-led effort to put greater pressure on Iran. Announcing the decision, General Nicolai Makarov remarked that the sale was halted because the missiles ―definitely fall under sanctions.‖142 Predictably, Iranian Defense Minister Gen. Ahmad Vahidi denounced Russia‘s decision as a slavish gesture to the West. Speaking on Iranian state-run TV he said, ―We think Russia should show it has an independent stance in choosing its relations with other countries as well as on international issues…They have not done it so far."143 141

―U.S. to beef-up Gulf air defense force to keep Iran, Israel in check - Guardian.‖ RIA Novosti. 1 February 2010. http://en.rian.ru/world/20100201/157737724.html; ―S-300P (SA-10 Grumble).‖ Missilethreat.com, Project of the Claremont Institute. http://www.missilethreat.com/missiledefensesystems/id.50/system_detail.asp.

142

―Russia holds off on Iran arms deal.‖ Irish Times. 22 September 2010. http://www.irishtimes.com/newspaper/breaking/2010/0922/breaking32.html 143

Fred Weir, ―Why Russia is cutting off major arms sales to Iran.‖ Christian Science Monitor. 23 September 2010. http://www.csmonitor.com/World/Europe/2010/0923/Why-Russia-is-cutting-off-major-arms-sales-to-Iran.

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The Russian leadership demonstrated its independence soon after, though not for Iran’s benefit.

Days after their announcement cancelling the sale of anti-air missiles to Iran, Russian officials confirmed a sale of anti-ship missiles to Syria. Dismissing US and Israeli fears that Russianmade arms could fall into the hands of terrorists, Defense Minister Anatoly Serdyukov stated on September 17th, 2010 that Russia would fulfill a contract to provide Syria with P-800 Yakhont anti-ship cruise missiles.144 The supersonic P-800 Yakhont missiles have a range of 300km (186 miles), carry a 200kg (440lb) warhead, and are able to fly at an altitude of only 5-15m (16-50ft), making it difficult to detect and intercept them.145 As evidenced by their different approaches to the Iran and Syria deals, the Russians refuse to tow a party line (other than their own); they are not afraid of upsetting the US and its allies, but are at the same time risk-aware. Taking into account the intense international pressure on Iran and the growing benefits of trade with Israel, the Russian leadership deemed the benefits from the sale of the S-300s too high, whereas the diplomatic costs of the sale to Syria were considered acceptable. The cancellation of the S-300 system for example, yielded Russia several coveted Israeli UAVs.146 Despite Russia’s cooperation with the sanctions regime, Russian officials are vocal in their belief that Iranian nuclear weapons do not pose a strategic threat to Russia or the West which cannot be handled diplomatically. On June 13, 2011 Russian Deputy Defense Minister Anatoly Antonov told Ekho Moskvy radio: Who is threatening Europe today? You mentioned Iran. Why should Iran launch a missile upon Berlin or Rome? Iran's policy, as far as how it is declared by the Iranian leadership, is development of relations with European countries. I cannot say that Iran is a threat…This issue needs to be discussed and resolved. There are two ways to eliminate the threat, namely militarytechnical, through the creation of a missile shield, and diplomatic, which Russia proposes...147

What Russian leaders are concerned about is regional instability produced by the escalating conflict. In January 2012, Dmitry Rogozin, Moscow‘s newly appointed deputy prime minster overseeing the defense sector, told reporters in Brussels, "Iran is our neighbor…and if Iran is involved in any military action, it's a direct threat to our security."148 While Russian officials may not share the West‘s perception of Iran as a clear and emerging danger, their position is not one of apathy. Russia has a large stake in shaping regional power dynamics to promote its interests and an upset in the current balance produced by open conflict is not likely to be ignored by Moscow.

144

―Russia to sell Syria anti-ship cruise missiles.‖ BBC News. 17 September 2010. http://www.bbc.co.uk/news/world-middle-east-11347495.

145

Ibid.

146

―Israel and Russia in UAV Deal.‖ Defense Industry Daily. 20 May 2011. http://www.defenseindustrydaily.com/Israel-and-Russia-in-UAV-Deal-05459.

147

―Europe Faces No Iranian Missile Danger: Russian Official.‖ Nuclear Threat Initiative, Global Security Newswire. 13 June 2011. http://www.globalsecuritynewswire.org/gsn/nw_20110613_9100.php.

148

―Russia says would be threatened by Iran military action.‖ 13 January 2012. Reuters. http://www.reuters.com/article/2012/01/13/iran-russia-nato-idUSL6E8CD2XU20120113.

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Implications for US Policy The US has a strong interest in continuing to draw Russia away from Iran and toward its Western coalition. Without Russian support, Iran loses not only a diplomatic sponsor, but also access to arms and technical support for its existing nuclear infrastructure. The Russo-Iranian relationship is built upon mutual opportunism. The US should continue to stress the material and diplomatic benefits of partnership with the West, while at the same time working to enhance the costs of partnership with Iran. 

Encourage Russia’s growing ties with Israel. While Russia‘s growing trade with Israel has not halted Russia‘s supply of missile technology to Syria, it did play a factor in the cancellation of the S-300 deal.

Israel has begun to sell Russia UAVs, a high priority technology for maintaining pipeline security in Russia. As Russo-Israeli trade increases, the Russians may become more hesitant about alienating a valued trade partner by providing its enemies with advanced weapons technologies. Bilateral pressure will certainly not lead to a cessation of arms sales to Iran, but it may have a strong dampening effect— decreasing the quantity and quality of future deals.



Isolate Iran by further integrating Russia. Iran would prefer Russia view the world as a duality between Western and non-Western states. To isolate Iran and better integrate Russia into the existing order, the US should continue to support the bilateral agreements and institutions it put in place after the 2009 diplomatic reset.



Leverage Russo-Iranian Energy Competition. Iran and Russia compete to supply Europe with energy and to control the lucrative resources of the Caspian Sea. The US and Europe should take advantage of this competition by offering to favor Russian providers in return for their assistance to isolate Iran.

Russia has its own agenda and increased competition with the West should not be interpreted as a general shift in the Russian worldview. That being said, Russia has its own reasons to oppose a nuclear Iran and one that threatens the stability of the flow of Gulf oil and the world economy.

Unlike China, Russia has less need of Iran as a direct supplier of energy export. This creates opportunities for further Russian cooperation and integration with the West.

a report of the csis burke chair in strategy

U.S. and Iranian Strategic Competition: Competition Involving the EU, EU3, and non-EU European States

Authors Brandon Fite

March 2012

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EXECUTIVE SUMMARY The various states that comprise the EU and non-EU Europe play a critical role in the competition between the US and Iran. Iran’s progress towards a nuclear weapons threshold capability, and evidence that it may be seeking to deploy nuclear armed missiles has led to enhanced policy coordination between leaders in the US and Europe. In the face of a growing Iranian threat, Western governments have stepped up their efforts, including strong economic sanctions, to pressure Iran to fully comply with its obligations under the Nuclear NonProliferation Treaty.

The EU, and particularly the EU3 (Britain, France, and Germany), are America’s most consistent allies in seeking to roll back Iran’s nuclear efforts. Although the approach given EU and European states have taken sometime differ from that of the US, disagreements with the US have focused more over tactics and timing than over the need to take strong steps to halt Iran’s progress towards nuclear weapons.

Britain and France also provide military support to the US and the Arab Gulf states. Their force projection capabilities are limited and slowly dropping under the strain of budget reductions, but British and French forces still play an important role in the Gulf and Red Sea, and their military advisors remain an influential factor in the competition between the US and Iran.

There are, however, important differences in approach and perspective. Many European nations are far more reluctant to risk the use of military forces than the US. Iran’s oil exports are important to several European states, in part because of easier credit terms and pricing.

Additionally, most European states are less sympathetic to Israel than the US. Iran has attempted to exploit these potential fault lines between the US and Europe. The Iranian leadership, and particularly President Mahmoud Ahmadinejad, frequently state that Iran seeks partnership with Europe and tries to encourage Europe to pursue energy and trade deals that would separate it from the US. Nevertheless, the US and EU approach to Iran has steadily converged since 2002, following the discovery of the Iran’s clandestine nuclear facilities at Natanz and Arak. In the years that have followed, the EU—under the leadership of EU3—began a series of negotiations to persuade Iran to halt uranium enrichment and provide greater transparency as to the purpose of its nuclear program. After several years of failed bargains, EU negotiators gradually began to take a harder line toward Tehran till the rhetoric and polices of European governments closely resembled those of the US. The EU has unilaterally implemented punitive measures against the IRI’s defense and energy sectors. Working in partnership with the US as part of the P5+1 (comprised of the US, Britain, China, France, Russia, and Germany), the EU3 have supported UN sanctions and lobbied both non-Western members of the Security Council to approve of UN resolutions targeted at Iran’s nuclear program.

European countries outside the EU play a smaller role in US-Iranian competition. Their presence can be felt most strongly when they work to broker compromise between both parties, when they broadly track with the EU and by extension the US, or when they pursue opportunistic policies in opposition to the established order.

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The EU and the other European states that share its strategic views, remain committed to a dual track approach to Iran consisting of sanctions and incentives, but they have also largely sided with the US and resigned from mediating between the US and Iran. Experience has shown that US-EU unity presents a formidable challenge to Iran, while division provides the Islamic Republic space to advance its interests.

The new sanctions on Iranian oil imports that the EU agreed to in early 2012 have reinforced Europe’s status as an invaluable partner of the US. The EU states have both adapted to reflect US positions when they have proved valid, and played a role in persuading the US to see the merits of incentives and flexibility in dealing with Iran’s legitimate needs.

It is important to note, however, that US and European cooperation is centered around pursuing diplomatic options and sanctions. There is no unclassified indication that any discussions have taken place between the US and EU over preventive military options if diplomacy and sanctions fail, or what level of discussion may have taken place at a more restrictive level between the US and key allies like Britain and France. Many European states may not support, or may actively oppose, any shift to the use of force. Europe and NATO have actively begun to plan for missile defenses, but there has been little public discussion concerning the trade-offs involved in containing Iran, deterring a nuclear Iran, and options like “extended deterrence.”

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Contents EUROPEAN UNION ........................................................................................................................................ 5 Evolving US-EU Relations ..................................................................................................................... 6 Political Cooperation Based on Mutual Interests .............................................................................................................. 6 Interdependent Economic Relations ................................................................................................................................. 7 NATO and the EU Security Apparatus ............................................................................................................................... 8 The Impact of European Arms Sales ................................................................................................................................. 9 Figure 12.1: European Arms Transfer Agreements with Iran and the GCC, 2007-2010 ....................... 10 Figure 12.2: European Arms Deliveries to Iran and the GCC, 2007-2010 ............................................ 10

Evolving IRI-EU Relations.................................................................................................................... 11 IRI-EU Political Relations since 2000: A Decade of Decline ............................................................................................. 12 IRI-EU Economic Relations .............................................................................................................................................. 15 Figure 12.3 European Union Trade in Goods with Iran ......................................................................................... 17 Figure 12.4: European Union Foreign Direct Investment in Iran ......................................................................... 17 Figure 12.5: Chronology of EU & US Approaches to Iran ..................................................................................... 19 COOPERATION IN BALLISTIC MISSILE DEFENSE.................................................................................................. 20 Figure 12.6: Cancelled European Land-based System ............................................................................................ 21 THE EU3: BRITAIN, FRANCE, AND GERMANY ................................................................................................... 23

Britain and the Broader Role of Britain, France, and Germany in “The Six” ...................................... 23 Britain and Power Projection in the Gulf ............................................................................................ 24 France and “The Six” .......................................................................................................................... 26 France and Power Projection in the Gulf ............................................................................................ 26 Germany and “The Six” ...................................................................................................................... 27 Germany and Power Projection in the Gulf ........................................................................................ 28 NON-EU EUROPE........................................................................................................................................ 28 Switzerland ......................................................................................................................................... 28 Belarus ................................................................................................................................................ 30 IMPLICATIONS FOR US POLICY ....................................................................................................................... 32

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European views towards Iran, and towards the security of the Gulf and competition between the US and Iran, differ significantly by country. There are, however, five different groups within Europe that broadly shape the role Europe plays. These include: the EU as a bloc; Britain, France, and Germany as individual states; and European countries outside the Union. Britain, France and Germany (the EU 3) all play a major individual role as well as make up three of the nations in the P5+1 group that negotiates with Iran (the five permanent members of the UN Security Council plus Germany. As the brief summary below notes, the non-EU European states play a lesser role and have more divided positions.

European Union: 

Iran values EU investment in petroleum and industry and has historically attempted to use EU states to deflect a more hardline US approach toward its nuclear program. The US seeks EU support for sanctions, its efforts to prevent Iranian proliferation, and to block arms and dual-use technology transfers. The US also draws upon British and French support in power projection in the Gulf. Missile defense has become an area of competition, although Russian pressure to block US programs has had far more impact. The EU states also play an important role in limiting Iran’s ability to portray the West as being tied too closely to Israel, and in diplomacy with the Palestinian Authority and Arab states.

Britain: 

Britain is one of three European powers that are part of the six nations (US, Britain, France, Germany China, Russia) that lead the negotiating effort with Iran and that are critical to the success of UN efforts to use negotiations and sanctions to persuade Iran to give up its nuclear weapons efforts. Like France and Germany, it has played a major role in using negotiations and sanctions to try to halt Iran’s nuclear weapons efforts. Britain also remains the leading European power with the military capability to intervene in the Gulf, and plays a strong role in Oman and in arms transfers to the GCC states.

France: 

Like Britain, France plays a key role in the effort to halt Iran’s nuclear weapons programs, and is the only other European power with the ability to deploy meaningful military forces to the Gulf. France has important military facilities in Djibouti and basing rights in the UAE. It also retains significant influence in Lebanon, and plays a role in limiting the role of the Hezbollah and Iranian influence.

Germany: 

Germany has played a steadily growing role in seeking to limit Iran’s nuclear efforts, and is an important member of the six.

Non-EU Europe 

Countries outside of the European Union generally fall into two categories: those who side with the EU and US coalition sanctioning Iran and those who participate with Iran opportunistically in a manner resembling Russia’s strategic approach to the Islamic Republic.

European Union The European Union has come to play a critical role in US-Iranian competition. The EU is supportive of the United States in its competition with Iran, but in the past, member states have attempted to moderate US actions against Iran: opting for negotiation and diplomacy over punitive sanctions, and pressing for incentives for good Iranian behavior as well as sanctions to push Iran to give up nuclear weapons.

The EU states have not sought to weaken US-led initiatives, as have Russia and China, but they have encouraged the US to take a slower and at times softer approach to Iran than it would have 5

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otherwise. As the details of Iran’s nuclear program have become clearer, however, the EU has shifted its position further in line with that of the US by supporting US initiatives and enacting substantive unilateral sanctions.

Europe and the United States do have somewhat different interests and goals in competing with Iran. Iran is on Europe’s periphery and the EU has historically had a stronger economic relationship with the Islamic Republic and is less bound to Israel than the United States; as such, they have been more reluctant to isolate Iran and more willing to coax cooperation through economic incentives. A prosperous and integrated Iran, capable of competing with Russia to supply Europe’s energy needs, is more of a potential strategic asset to Europe. Conversely, however, an openly hostile Iran, armed with nuclear weapons is more of a risk to Europe and any major war in the Middle East poses a threat that is closer to home.

Iran has tried unsuccessfully to exploit potential gaps between the US and the EU member states.

Although representatives of the EU are openly critical of Iran’s behavior both in terms of its nuclear programs and increasingly authoritarian politics, Iran’s leaders still seek ways to use the European states to reduce US influence and support for efforts to alter Iran’s nuclear, missile and military efforts.

Evolving US-EU Relations The US and the EU states have a long history of shared strategic interests and multi-level cooperation that paves the way for partnership in competition with Iran. During the Cold War, successive American administrations guaranteed the independence of Western Europe by rhetorically intertwining European and American interests. After the collapse of the Soviet Union, the connection persisted as the lasting US presence in Europe came to symbolize the formation of a new, transatlantic international order.

The US and the EU often have different perspectives on how to achieve specific goals, but the sets of goals both entities pursue are often very similar. Both are deeply invested in one another and in the international status quo. European interests may diverge from American interests over individual issues—the Iraq War, for example—but fundamental ties built on mutual security, economic interdependence, and shared political values consistently self-right the relationship.

The overarching similarity of Euro-American interests and Europe’s high-degree of investment in the present international order make the EU nations the United States’ closest allies in its competition with Iran, and difficult targets for Iran to influence.

Political Cooperation Based on Mutual Interests The EU has become both a major organization in its own right and to some extent a symbol of US relations with Europe. Diplomatic ties between the US and EU were established in 1953. In November 1990, as Europe was in the midst of reshaping itself, leaders drafted the Transatlantic Declaration (TD), an agreement which formalized the relationship between the US and the increasingly integrated European member states. The US and EU (then the European Community) pledged to, “inform and consult each other on important matters of common interest, both political and economic, with a view to bringing their positions as close as possible, without prejudice to their respective independence.”1 Commitments of cooperation laid out in the 1

“Transatlatic Decalration on EU-US Realtions.” European External Action Service. Website. 1990. http://www.eeas.europa.eu/us/docs/trans_declaration_90_en.pdf.

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TD were given a practical foundation by the New Transatlantic Agenda (NTA) established in December 1995.2 Dialogue between the US and EU is extensive and takes place on numerous diplomatic levels at both the organizational and national levels. In addition to the scores of expert-level meetings, the Presidents of the European Commission and the European Council and the President of the United States meet at annual summits to discuss a wide range of mutually relevant issues. The EU Delegation in Washington regularly communicates with US agencies, such as the Departments of Homeland Security, State, Justice and Treasury, as well as relevant Congressional committees. 3 As the EU continues to evolve and take on more responsibilities as a representative body of its member states, its cooperative relationship with the US continues to intensify. Currently, the US and EU pursue active cooperation on issues such as justice and home affairs, energy and energy security, environmental affairs, science and technology, education and training, and civilian and military crisis management and conflict prevention.4 Responding to the common threats of international crime and terrorism, the EU and US have committed to extensive law enforcement and judicial cooperation geared towards enhancing trade and transport security, locating and eliminating sources of terrorist funding, and streamlining the process of trans-Atlantic extradition.5 US relations with individual member states, particularly Great Britain, Germany, and France (the EU3) are complex and varied but as a whole reflect the dominant motifs of the greater US-EU relationship.

Interdependent Economic Relations Although the Islamic Republic is an important trade partner with the EU, due largely to petroleum exports, Iran’s commercial interaction with Europe is dwarfed by the United States in value and substance. The deep interdependence of the US and EU economies limits Iran’s leverage and capability to drive a wedge between America and Europe though economic means.

The combined economies of the US and EU represented almost 60 percent of global GDP, 42 percent of global trade in services, and 33 percent of global trade in goods in 2006.6 According to research conducted by the Congressional Research Service (CRS), transatlantic trade, though affected by the global recession, remains vigorous and growth trends demonstrate increasing economic interdependence: 2

“Foreign Policy.” European External Action Service. website. 13 July 2010. http://www.eurunion.org/eu/ForeignPolicy/Foreign-Policy.html.

3

“Counterterrorism/Justice, Freedom & Security.“ European External Action Service. website. 23 February 2011 http://www.eurunion.org/eu/Counterterrorism/Counterterrorism/Justice-Freedom-Security.html 4

“Foreign Policy.” European External Action Service. website. 13 July 2010. http://www.eurunion.org/eu/ForeignPolicy/Foreign-Policy.html.

5

“Counterterrorism/Justice, Freedom & Security.“ European External Action Service. Website. 23 February 2011 http://www.eurunion.org/eu/Counterterrorism/Counterterrorism/Justice-Freedom-Security.html.

6

“Trade.” European External Action Service. Website. 12 April 2010. http://www.eurunion.org/eu/Trade/Trade.html.

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In 2009, $1,252.0 billion flowed between the United States and the EU on the current account, the most comprehensive measure of U.S. trade flows. The EU as a unit is the largest merchandise trading partner of the United States. In 2009, the EU accounted for $220.6 billion of total U.S. exports (or 20.8%) and for $281.8 billion of total U.S. imports (or 18.1%) for a U.S. trade deficit of $73.2 billion. The EU is also the largest U.S. trade partner when trade in services is added to trade in merchandise, accounting for $173.5 billion (or 34.5% of the total in U.S. services exports) and $134.8 billion (or 36.4% of total U.S. services imports) in 2009. In addition, in 2009, a net $114.1 billion flowed from U.S. residents to EU countries into direct investments, while a net $82.7 billion flowed from EU residents to direct investments in the United States.7

This deepening economic relationship has a profound effect upon the lives of a sizeable and growing number of European and American citizens. The European Union’s Delegation to the United States reports that, “the overall ‘transatlantic workforce’ is estimated at 12 to 14 million people, of which roughly half are Americans who owe their jobs directly or indirectly to EU companies.”8 Moreover, trade disputes between the US and EU, though often highly publicized, impact only 2 percent of total bilateral trade.9 This growing interdependence has had a powerful impact on US and European cooperation in dealing with international problems like Iranian proliferation. In April 2007, leaders from the US and EU met and committed their countries to a future of increased economic integration.

European Commission President Barroso, German Chancellor Merkel and US President Bush signed the “Framework for Advancing Transatlantic Economic Integration between the USA and the EU.” The framework established the Transatlantic Economic Council (TEC), which, “oversees, guides and accelerates the implementation of work designed to integrate the EU and US economies more closely.”10 NATO and the EU Security Apparatus The depth of US-EU economic ties is matched by the closeness of their security partnership.

Through the North Atlantic Treaty Organization (NATO) the United States still plays a major role in European security. As of April 2011, the US had approximately 80,000 troops stationed in bases throughout Europe.11 Military coordination with Europe is fostered both through US partnership in NATO, and through NATO’s ties to the EU security apparatus. Formal relations between NATO and the European Union were initiated in 2001. As of 2007, both organizations shared 21 member countries in common. NATO’s new Strategic Concept, adopted at the Lisbon Summit in November 2010, committed the Alliance to a close working relationship with the United Nations and the European Union.12 7

William H. Cooper, “EU-U.S. Economic Ties: Framework, Scope, and Magnitude.” Congressional Research Service. 27 January 2011. http://www.fas.org/sgp/crs/row/RL30608.pdf.

8

Ibid.

9

“Trade.” European External Action Service. Website. 12 April 2010. http://www.eurunion.org/eu/Trade/Trade.html.

10

Ibid.

11

Daniel Dombay, “Obama to recall US troops from Europe.” Financial Times. Website. 9 April 2011. http://www.ft.com/cms/s/0/23852314-6236-11e0-8ee4-00144feab49a.html#axzz1U4SvsHtH. 12

“NATO-EU: a strategic partnership.” North Atlantic Treaty Organization. Website. 13 April 2011. http://www.nato.int/cps/en/natolive/topics_49217.htm.

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Because the EU is a supranational organization whose members retain national sovereignty in matters of foreign policy and defense, it is not always appropriate to think of EU foreign policy as synonymous with that of its members. Efforts have been made though to better coordinate member states’ security and diplomatic policies. The EU’s mechanism of organization is the Common Foreign and Security Policy (CFSP). Under the CFSP, EU security is bound to NATO (and thus US interests and assets) in a relationship that is described as “separable but not separate.” The “Berlin Plus arrangements” grant the EU access to NATO planning, NATO European command options, and the use of NATO assets and capabilities.13 The CFSP also lays out the framework for the coordinated imposition of sanctions and restrictive measures.14 It is important to note, however, that the politics and rhetoric of such cooperation does not mean that either the EU or NATO Europe have major power projection capabilities in the Middle East or the Gulf. European forces are steadily shrinking in terms of funding, size, and power projection capability. Britain and France are now the only European states with meaningful power projection capabilities in the Gulf region, except for Turkey – which is analyzed in a separate chapter. Both Britain and France, however, are making important force cuts and have uncertain future plans for military development and modernization.

The Impact of European Arms Sales European arms sales continue to play a major role in building up the deterrent and defensive capabilities of the Arab Gulf states. Similarly, European limits on sales and technology transfers to Iran play a critical role in limiting the IRI’s ability to sustain and modernize its conventional forces. There are, however, serious questions as to whether even Britain and France will maintain more than token power projection capabilities in the region for the next decade. The uncertainty of European involvement reinforces the fact that US competition with Iran is becoming steadily more dependent on US alliances and ties to Turkey, the Arab Gulf states and Egypt, and the ongoing competition with Iran for influence in Iraq.

According to information provided by the US government and Richard Grimmett at the Congressional Research Service (CRS), total European arms trade with the Near East highly favors the six nations of the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates) over Iran—their chief regional competitor. The major EU powers solidly support the GCC states in their arms agreements and deliveries, and have severely restricted transactions with the IRI. The weapons that do flow to the Islamic Republic from Europe come from peripheral European states like non-aligned Belarus. As evidenced by the disparity between arms agreements and transfers in the tables below, contracts do not always mature into actual exchanges.

13

“EU-NATO: The Framework For Permanent Relations And Berlin Plus.” European External Action Service.

Website. http://www.consilium.europa.eu/uedocs/cmsUpload/03-1111%20Berlin%20Plus%20press%20note%20BL.pdf 14

“Sanctions or Restrictive Measures.” European External Action Service. Website. http://eeas.europa.eu/cfsp/sanctions/index_en.htm

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Figure 12.1 and Figure 12.2 show European trade (both EU and non-EU) to Iran and the GCC states over the period of 2007-2010.

Figure 12.1: European Arms Transfer Agreements with Iran and the GCC, 2007-2010 15 (Totals in millions of current U.S. dollars) Recipient Country

Major West European*

All Other European

0

300

Bahrain

0

0

0

Kuwait

0

0

0

Oman

1,300

0

1,300

Qatar Saudi Arabia U.A.E.

700 13,800 3,400

0 1,100 1,100

700 14,900 4,500

19,200

2,200

21,400

Iran

Total 300

GCC

Figure 12.2: European Arms Deliveries to Iran and the GCC, 2007-2010 16 (Totals in millions of current U.S. dollars) Recipient Country Iran

Major West European*

All Other European

0

100

100

0 0 500

0 0 0

0 0 500

100 2,200 400

0 400 200

100 2,600 600

3,200

600

3,800

Total

GCC Bahrain Kuwait Oman Qatar Saudi Arabia U.A.E.

Source: U.S. Government Notes: 0=data less than $50 million or nil. All data are rounded to the nearest $100 million. * Major West European category included France, United Kingdom, Germany, and Italy totals as an aggregate figure.

15

Richard F. Grimmett, “Conventional Arms Transfers to Developing Nations, 1998-2005.” Congressional Research Service. October 2006, 66. Richard F. Grimmett, “Conventional Arms Transfers to Developing Nations, 2003-2010.” Congressional Research Service. September 22, 2011. http://www.fas.org/sgp/crs/weapons/R42017.pdf.

16

Ibid.

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UN and unilateral sanctions against Iran have largely halted EU arms sales to Iran, but the IRI has at times been able to use third party nations like Switzerland, and front businesses and trading groups to evade other restrictions imposed by sanctions. In January 2011, the Swiss Federal Council tightened its sanctions on Iran to conform to those implemented by the US and EU. The State Secretariat for Economic Affairs issued a statement explaining that, “due to the differing legal situation, Switzerland could have been used to evade sanctions on trade in goods and services. Today’s decision by the Federal Council prevents this and at the same time increases the level of legal certainty for Swiss firms operating internationally.”17 It is not clear how many such cases exist, how many “fronts” and business covers Iran has set up, in what countries transfers took place, or how much impact they have had on Iranian capabilities to build up its nuclear, missile, conventional, and asymmetric warfare capabilities. It is clear that Iran has relied primarily on Russia, China, North Korea, Pakistan, and other suppliers outside Europe. At the same time, it is clear that Iran has sought critical technologies and materials, and spare parts and upgrades for its European and US-supplied military systems, from Europe.

Most of the public information available on illicit transfers to Iran refers to Switzerland as a possible third-party leak point, but does not give any significant details on weapons or nuclear materials that have been transferred. It is known, however, that Iran has extensive buying operations and front organizations, many of which have their routes in major smuggling efforts that began in the early 1980s as a result of the Iran-Iraq War. Iran also has active intelligence operations both inside and outside its embassies.

Evolving IRI-EU Relations The EU—led in practice by Britain, France, and Germany—is a strong supporter of US efforts to curtail Iran’s nuclear and regional ambitions, but it has also pursued a more moderate approach to the Islamic Republic reflecting Europe’s significant interests in Iran’s market, geostrategic position, and energy-based potential. European relations with Iran have been characterized by sporadic periods of warming and cooling all within the context of US-Iranian competition and the close bond between US and European interests.

At various points European leaders have stretched closer to Iran than the US would like in order to tap the benefits of cooperation that Iran promises. Tehran welcomes divergence when it occurs, but political shifts within Iran from reform to greater conservatism have had a considerable shaping effect upon its external relations with Europe: encouraging the convergence of US and EU policies that exists today.

Europeans have been more willing than their American counterparts to try to encourage, develop, and exploit reforms in Iran’s political system, but the EU and European states have altered their approaches over time. During the period from the Revolution to the death of Ayatollah Khomeini, relations between what was then the European Community and Iran were cooled by external pressure from the US to isolate Iran and by the inflammatory rhetoric and actions of the new Revolutionary regime.

17

“Iran: Federal Council Takes Steps to Improve Legal Certainty And Prevent Possible Evasion.” State Secretariat for Economic Affairs. 19 January 2011. Web. http://www.seco.admin.ch/aktuell/00277/01164/01980/index.html?lang=en&msg-id=37283

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After the fall of the Soviet Union and the ascension of centrist Akbar Rafsanjani to the Iranian presidency, Iran tempered its revolutionary fervor and looked for partnerships in the West. This change was welcomed by the European Community, while the US diplomatic approach was more cautious; EC members began to actively explore the possibly of enhanced relations. Iran viewed Europe as a source of badly needed credit and investment, while Europe saw Iran— newly free of Soviet influence and still isolated by the US—as an open source for trade and energy resources.18 Throughout the 1990s, the US continued a regimen of sanctions against Iran while the EU began a series of efforts to promote reform through engagement. The limited economic reforms enacted

by Rafsanjani and his successor Sayyid Khatami seemed to give credence to the European approach, but Iran’s internal political transformation from moderation to heightened conservatism coupled with the discovery that Iran had undisclosed nuclear facilities at Natanz and Arak challenged and eventually undercut the European strategy.

Strained relations and strong sanctions have now led to the suspension of the majority of the EU’s cooperative connections with Iran, but Europe remains committed to influencing Iranian reform through institutional engagement. Before sanctions took effect, the EU pursued cooperation with Iran in a number of areas including: educational exchange, drug control, development and humanitarian aid, and the settlement of Afghan refugees in Iran.19 IRI-EU Political Relations since 2000: A Decade of Decline The 2000s witnessed a diplomatic tug-of-war between the EU and US over Iran. The US pushed for strong measures to censure Iran and critically damage its suspected pursuit of weaponized nuclear material. The EU viewed the American approach as overly aggressive and limiting. The EU agreed that action needed to be taken, but they still held positive engagement to be the best chance for success.

These differences became less important, however, as Iran’s internal politics become more hardline and repressive. Iranian officials met with European delegates on many occasions and either openly rejected agreements they felt too constrictive, or agreed to limited deals and later broke those commitments in a stutter-step march toward further enrichment. Ultimately, the EU formally endorsed UN sanctions on Iran and, like the US, began to implement its own set of unilateral sanctions. By exploiting the years of uncoordinated US and EU approaches to its nuclear program, Iran achieved a considerable strategic victory: buying itself both diplomatic cover and time in order to advance its interests.

Euro-Iranian relations experienced their most precipitous decline in the wake of the contested reelection of President Mahmoud Ahmadinejad in 2009, and the Iranian regime’s violent suppression opposition members and popular dissent. The EU Presidency, then held by the

18

Ziba Moshavaer, “Revolution, Theocratic Leadership and Iran’s Foreign Policy: Implications for Iran–EU Relations.” The Review of International Affairs, Vol.3, No.2, Winter 2003, pp.283 – 305. http://sharif.edu/~maleki/article/Revolution,%20Theocratic%20Leadership%20and%20Foreign%20Policy.pdf.

19

“EU and Iran Cooperation.” European External Action Service. Web. http://eeas.europa.eu/iran/cooperation_en.htm.

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Czech Republic, openly condemned both the lack of transparency in the voting process and the government crackdown on protesting members of the opposition.20 Tensions increased further when the Iranian government detained nine British staffers working at the UK embassy in Tehran.21 After hardline cleric Ayatollah Ahmad Jannati promised parishioners that the staffers would be put on trial, President Sarkozy of France expressed solidarity with the British decision to initiate sanctions in response to Iran’s actions. He said sanctions were necessary “…so that Iranian leaders will really understand that the path that they have chosen will be a dead end.”22 Relations worsened further in late November 2011 when Iranian students overran and ransacked the offices of the British embassy in Tehran. Though the Iranian government issued a statement expressing “regret” over the incident, many have speculated about the regime’s passive or active involvement in the fracas. British Prime Minister David Cameron denounced the attack as “outrageous and indefensible.” Supporting the British position, German Foreign Minister Guido Westerwelle called the disturbance “a violation of international law.” French Foreign Minister Alain Juppe said, “the Iranian regime has shown what little consideration it has for international law”.23 As a result of the violence and escalating tensions, as of early 2012, the British embassy in Tehran remains closed.

These developments, along with Iran’s steady progression towards a nuclear break out capability, led to new French and British sanctions in late 2011. These culminated in an agreement by the EU at the end of January 2012 to implement a full import embargo on Iranian crude oil and petrochemicals. The press release issued by the EU Council on January 23, 2012 summarized the ban as follows: The Council banned imports of Iranian crude oil and petroleum products. The prohibition concerns import, purchase and transport of such products as well as related finance and insurance. Already concluded contracts can still be executed until 1 July 2012. A review of the measures relating to oil and petroleum products will take place before 1 May 2012.

In addition, the Council outlawed imports of petrochemical products from Iran into the EU as well as the export of key equipment and technology for this sector to Iran. The Council also froze the assets of the Iranian central bank within the EU, while ensuring that legitimate trade can continue under strict conditions.24

Before implementing the embargo, there was hesitation by some governments that centered on ensuring there would be sufficient excess supply—mainly from Saudi Arabia—to prevent a

20

“Czech EU presidency concerned about presidential polls in Iran,” The Prague Daily Monitor, June 15, 2009,http://praguemonitor.com/2009/06/15/czech-eu-presidency-concerned-about-presidential-polls-iran.

21

Jeanne Whalen, “Arrests in Iran Raise Ire of U.K.” 29 June 2009. Web. http://online.wsj.com/article/SB124623156402166201.html?mod=googlenews_wsj.

22

“European leaders warn Iran regime over British arrests.” The Times. Web. 3 July 2009. http://www.timesonline.co.uk/tol/news/world/europe/article6631875.ece.

23

“Iran protesters storm UK embassy in Tehran.” BBC. Web. 29 November 2011. http://www.bbc.co.uk/news/world-middle-east-15936213.

24

“Iran: New EU sanctions target sources of finance for nuclear Programme.” Council of the European Union. Press Release. 23 January 2012. http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/127444.pdf

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major supply shock. Saudi Arabia, however, stated it would seek to make up the difference, which triggered more decisive European action.25 The Europeans acted in spite of threats by Iran’s Vice President Mohammed Reza Rahimi and Iranian officers to shut off the flow of oil from the Gulf. They also acted after Mohammad Ali Khatibi, Iran’s OPEC governor said, on January 17, 2012 that, “Applying the scenario of sanctions on Iran’s oil exports to EU members would be economic suicide for the member countries…Regarding the economic crisis in the Eurozone, imposing any sanction on Iran’s oil will push European countries into a deeper crisis.” These threats were so exaggerated that they would have rung hollow under any circumstances, but they were particularly hollow because Saudi Arabia’s oil minister, Ali Al-Naimi, stated on January 16th that, “We are prepared to meet the increase in global demand as a result of any circumstances.”26 As of 2012, the EU position on Iran has begun to closely resemble that of the US. Despite this convergence, however, Iranian officials continued to reach out to Europe in order to emphasize divisions between the US and EU on the basis of Iran’s geographic proximity and the mutual benefits of economic cooperation. The Tehran Times reported that in August 2011 President Mahmoud Ahmadinejad stated: I believe that the relationship between Iran and Europe should not be affected by the American influence.

In the Second World War, damage was incurred on the European people. They paid the price for the damages of the Second World War, but the Americans made profit out of the war. We are neighbors of Europe. We want to have friendly ties with Europe…We can have very good economic ties. We can also have very good political ties.27

Iran attempted to repair its relations with Europe not only by creating division between the US and EU, but also by pursuing positive relations with peripheral EU members. In July 2011, Iran opened its first embassy in Slovenia and Iranian foreign minister Ali-Akbar Salehi met with Slovenian representatives to discusses future areas of economic and political partnership. Salehi stressed the potential for Iran and Slovenia to cooperate in industry, shipping and transport, refining, and electronic manufacturing. The minister also suggested that Iran would be a major energy provider for Slovenia.28 Nevertheless, the European Union position reflects a commitment to isolating Iran as long as it continues to pursue its nuclear aims in defiance of UN Resolutions and the inspection requirements of the NPT:

Anthony H. Cordesman and Bradley Bosserman, “US – Iranian Strategic Competition in Sanctions, Energy, Arms Control, and Arms Transfers”. Center for Strategic and International Studies. 24 January 2012. http://csis.org/files/publication/120124_Iran_Sanctions.pdf 25

26

Associated Press, Iran warns EU oil embargo would be ‘economic suicide’ for Europe, January 17, 2012. Anthony H. Cordesman and Bradley Bosserman, “US – Iranian Strategic Competition in Sanctions, Energy, Arms Control, and Arms Transfers”. Center for Strategic and International Studies. 24 January 2012. http://csis.org/files/publication/120124_Iran_Sanctions.pdf 27

“Ahmadinejad advises Europe not to be influenced by U.S.” Tehran Times. Web. 6 August 2011. http://old.tehrantimes.com/Index_view.asp?code=245589.

28

“Iran determined to improve ties with Europe: FM.” Xinhua News. Web. 15 July 2011. http://news.xinhuanet.com/english2010/world/2011-07/15/c_13988020.htm.

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There is great potential for deeper relations between Iran and the EU. Whilst practical cooperation between the EU and Iran already exists, the scope is currently well below potential. The limits of our cooperation reflect ongoing concerns in the EU and international community, chiefly connected to Iran’s nuclear program. The EU is also following the situation of human rights closely. The European Commission has no Delegation in the Islamic Republic of Iran (IRI) but is nevertheless working in close collaboration with the EU member states embassies in Tehran.29

The EU remains committed to seeking diplomatic solutions to its disputes with Iran, but EuroIranian relations have been seriously damaged by Iran’s stalling tactics, Iran’s growing political repression and human rights violations, and the general inability of both parties to reach a compromise on the nuclear issue. EU policy toward Iran has increasingly resembled that of the US, but Iranian leaders do not see the US and EU as a fully cohesive unit. Though they may not have a receptive audience, Tehran continues to entice European cooperation apart from the US. IRI-EU Economic Relations Iran’s energy exports, and the imports its export revenues make possible, are the foundation of the EU-Iranian economic relationship. Like other energy exporters, Iran also offers Europe a way to partially reduce its dependence on Russian hydrocarbons. Iran’s value as a lucrative and strategically significant market for European goods is also Iran’s key asset in its efforts to draw Europe away from the US. At the same time, Iran is a limited market and only one of many energy exporters. Only a few states like Greece, Italy and Spain get Iranian oil under terms that act as an incentive to import.

Pressures from the Eurozone economic crisis and the reduction in supply of oil from Libya following the 2011 regime change have caused those three countries to be more reliant on the IRI for their energy needs. At the height of Greece’s debt crisis, when lenders and major oil traders refused to do business with Athens fearing default, Greece looked to Iran for between onequarter to half of its oil imports, figures comparable to Spain’s dependence.30 Tensions have been eased somewhat for Greece by the passage of a second bailout program in late February 2012 worth over $174 billion. And according to Reuters, European traders have also stepped up negotiations with Greek oil refiner, Hellenic Petroleum, to help it replace Iranian crude soon to be blocked by the embargo.31 As long as Iran exports oil and gas to any consumer, or nations like Saudi Arabia increase their production, the world supply and oil prices will stay at levels that limit the cost of energy imports to Europe. As a result, the EU and European states have been willing to join the US in efforts to censure and sanction Iran’s nuclear ambitions – although the latest EU sanctions have been timed to go into force over a six month period in order to allow members to minimize the problems in ending imports from Iran.

European partnership with the US in seeking to end Iran’s nuclear efforts has had its costs.

During the period of Euro-Iranian rapprochement in the 1990s, European countries began to invest heavily in a variety of projects throughout Iran. As a result, the EU became Iran’s largest 29

“Iran.” European External Action Service. Web. http://eeas.europa.eu/iran/index_en.htm.

30

“Traders work on deals to replace Iranian oil.” Ekathimerini.com. Web. 27 February 2012.

http://www.ekathimerini.com/4dcgi/_w_articles_wsite2_1_24/02/2012_429817.

31

“Iran says has not refused oil to Greece: ISNA.” Reuters. Web. 26 February 2012. http://www.reuters.com/article/2012/02/26/us-iran-greece-oil-idUSTRE81P0D920120226.

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trading partner by 1995. Notably, France entered into several contracts to develop Iranian infrastructure to aid the transit of French goods to Central Asia, and Germany and other European nations increased their demand for Iranian energy resources – receiving 75 percent of Iran’s total petroleum exports.32 According to data taken from the European Commission’s official website, the EU is Iran’s most important trading partner and accounts for almost a third of the IRI’s exports.33 Ninety percent of EU imports from Iran are energy related and Iran is the 6th largest supplier of hydrocarbons to Europe.34 By contrast, Iran is ranked 25th on a list of major EU trade partners and captures only 0.9 percent of EU trade.35 In addition to the newly imposed embargo on Iranian oil – which will take full effect in July 2012, when existing delivery deals will be canceled – the EU and its member states have reduced or eliminated many other forms of investment. Plans started in 2002 during the Khatami presidency to establish an EU-IRI Trade Cooperation Agreement (TCA) have been on hold since August 2005 when negotiations failed to halt Iran’s nuclear pursuits.36 Many European firms who increased their presence in Iran during the 1990s have been deterred from future investment by increased international pressure.

Figure 12.3 and Figure 12.4 are taken from data developed by the European Commission’s Eurostat service, and show that Europe’s constant need for energy resources kept imports relatively stable until the imposition of the recent embargo, but foreign direct investment was seriously diminished in the late 2000s during the period of increased UN and US sanctions:37

32

Ziba Moshavaer, “Revolution, Theocratic Leadership and Iran’s Foreign Policy: Implications for Iran–EU Relations.” The Review of International Affairs, Vol.3, No.2, Winter 2003, pp.283 – 305. http://sharif.edu/~maleki/article/Revolution,%20Theocratic%20Leadership%20and%20Foreign%20Policy.pdf.

33

“Countries: Iran.” European Commission Trade. Web. 3 September 2010. http://ec.europa.eu/trade/creatingopportunities/bilateral-relations/countries/iran/index_en.htm .

34

Ibid.

35

Ibid.

36

Ibid.

37

“Countries: Iran.” European Commission Trade. Web. 3 September 2010. http://ec.europa.eu/trade/creatingopportunities/bilateral-relations/countries/iran/index_en.htm.

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Figure 12.3 European Union Trade in Goods with Iran38

Figure 12.4: European Union Foreign Direct Investment in Iran39

38

“EU Bilateral Trade and Trade with the World.” European External Action Service. Web. 8 June 11. http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113392.pdf.

39

Ibid.

17

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Iranian officials continue to try to make European states reverse their position by highlighting the long-term costs Europe will face if it continues to isolate the IRI. In response to the EU oil embargo, the Iranian government preemptively halted oil exports to Britain and France and discussed plans to initiated further cuts to Europe before the July deadline. Iranian lawmaker Mohammad Zabeti said such a proposal would pass because “[the] Iranian people have always been in favor of dialogue and friendship, but unfortunately the Europeans, following the U.S. steps, in the past years have always behaved in an arrogant manner.”40 President Ahmadinejad warned EU states that their actions were closing off Iran as a key market for Europe and that they would soon find themselves replaced by more amenable Asian competitors. He said: The moves made by the European Union on the whole show that the EU is not dominated by a realistic and pragmatic approach and clear-cut wisdom…while Europe still has the same share in Iran's oil exports, Asian countries, Iran's neighboring countries in particular, have already overtaken Germany and Italy in non-oil imports from Iran.41

It is clear, however, that Ahmadinejad and other members of Iran’s ruling regime will be hardpressed to compel European engagement by focusing on non-oil imports. Once again, Iran is only one of many markets and energy exporters, and the Arab Gulf states are of far more import to Europe as markets and areas of investment, as well as energy exporters and suppliers. They too fear Iran and this creates a much stronger material incentive to Europe than Iran can hope to offer.

The EU has joined the US in largely suspending economic activity with Iran. No limited players in globally traded exports bought from a wide variety of sources at market prices can pose a credible threat of the kind Iran would like to make.

The US and Europe’s Divergent Approach to Sanctions and Negotiation (1992-2006) The factors shaping the flow of European and US cooperation in seeking to halt Iran’s nuclear efforts become clearer when the history of their different efforts in negotiation and sanctions is examined in more detail. Over the past three decades the US and EU have both sought to halt Iran’s nuclear efforts, limit its missile and other military efforts, persuade it to play a peaceful role in the region, and encourage serious democratic and human rights reforms.

For much of that time the European and American strategies have been similar, but the EU pursued a policy of engagement that sometimes differed from that of the US from the period of Khomeini’s death to the imposition of UN sanctions on Iran in 2006. EU officials attempted to play the role of middleman, but negotiations consistently broke down over the EU demand that Iran permanently cease its uranium enrichment program—a non-negotiable condition for US support.42

“Iran calls on EU states to review decisions on oil embargo, vows not to retreat.” Xinhuanet. Web. 4 February 2012. http://news.xinhuanet.com/english/world/2012-02/04/c_122656618.htm.

40

41

“Ahmadinejad: US, EU Firms Bypassing Sanctions against Iran.” Fars News Agency. Web. 6 March 2011. http://english.farsnews.com/newstext.php?nn=8912151331.

42

“Europe’s Iran Diplomacy.” European Union Center of North Carolina. EU Briefings. Web. March 2008. http://www.unc.edu/depts/europe/business_media/mediabriefs/Brief7-0803-iran.pdf.

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Since that time, the EU and its member states have largely adopted a dual track approach that entails offering financial and technological incentives if Iran agrees to cooperate, and employing sanctions as long as Iran refuses. At the same time, the US has become more flexible in offering Iran incentives to change its behavior and more flexible in dealing with Iran’s legitimate demands for a peaceful nuclear power program. The Obama Administration and EU both support this dual track approach.

As noted earlier, there have been three major catalysts driving this shift. One is Iran’s threatening nuclear efforts. The other two are Iran’s politics. EU and US cooperation has been reinforced by the Iranian regime’s steadily increasing limits to democratic elements within Iran. Western governments have been critical of the regime’s hand in virtually eliminating meaningful opposition candidates from elections in the Iranian Majlis, its possible participation in voting irregularities during the Iranian presidential election in 2009, and its role in the subsequent crackdown and continuing human rights violations.

Euro-American cooperation has been further reinforced by the anti-Semitism and extremism of the Iranian regime in dealing with Israel, by Iran’s state sponsorship of terrorism and support of the Hezbollah and Syrian intervention in Lebanon, and more recently by Iran’s support of the Assad regime’s ruthless violence against the Syrian people. The US does differ from most EU states in its support of Israel relative to the Palestinians, but both seek the same kind of peace settlement, and oppose Iranian arms smuggling to Hamas and support of terrorism and violence.

Figure 12.5 provides a detailed chronology of the different approaches taken by the US and EU toward Iran and its burgeoning nuclear program. Unless otherwise noted, all data come from the European Union Center of North Carolina’s EU Briefing on Iran: Figure 12.5: Chronology of EU & US Approaches to Iran43 

1992: Sensing a greater tendency toward openness in Iran after the death of Khomeini, the EU sought to mend past rifts through engaging in a ‘critical dialogue.’ The ‘critical dialogue’ attempted to change Iranian behavior and strengthen moderate forces in Iran by promoting communication on topics of human rights, regional stability, state-sponsored terrorism.44



1995: The Clinton administration did not share the European perspective on Iran and passed the D’Amato bill (ILSA) initiating economic sanctions. Europe rejected the imposition of sanctions.



1998-2002: In the wake of the Presidential election of noted moderate Mohammad Khatami Iran and the EU decided to begin negotiations for a Trade and Cooperation Agreement (TCA) linked to a Political Dialogue Agreement (PDA).



2002: Warming EU-IRI relations were critically damaged after it was revealed that Iran was operating two undisclosed nuclear sites at Natanz and Arak. The United States argued that Iran should face censure from the UN Security Council, but the EU3 dissented, arguing that the situation required dialogue instead of sanctions.

43

“Europe’s Iran Diplomacy.” European Union Center of North Carolina. EU Briefings. Web. March 2008. http://www.unc.edu/depts/europe/business_media/mediabriefs/Brief7-0803-iran.pdf.

44

M. V. Struwe, “The policy of ‘critical dialogue’: an analysis of European human rights policy towards Iran from 1992 to 1997.', Working Paper. University of Durham, Centre for Middle Eastern and Islamic Studies, 1998.

Durham. http://dro.dur.ac.uk/95/.

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

October 2003: The EU3 negotiated the “Tehran Agreement” and Iran agreed to suspend uranium enrichment and sign an additional protocol to the Nuclear Proliferation Treaty (NPT) that permitted IAEA inspections of its facilities.



September 2004: Iran flouted the terms of its agreement and resumed enriching uranium. The US again pressed for the Security Council to take action, while the EU3 continued to pursue a diplomatic approach.

Responding to negotiation with the EU, Iran agreed to suspend its enrichment program again by accepting European assistance in building a light water reactor. EU-IRI trade and investment talks were also resumed.



August 2005: In another attempt to resolve the continuing crisis, the EU3 introduced the “Framework for a Long-term Agreement” under which the US would, among other things, lift sanctions blocking Iranian entry to the WTO. Iran for its part was required to permanently cease its enrichment of uranium. Under the new leadership of President Mahmoud Ahmadinejad, Iran soundly rejected the offer claiming that attempts to halt Iran’s enrichment capabilities amounted to an infringement of Iran’s national sovereignty.



January 2006: After continued deadlock in negotiations, Iran resumed enrichment. In response, the EU3 agreed for the first time to refer the Iranian case to the Security Council. Iran suspended its voluntary cooperation with the IAEA and accelerated its enrichment efforts.



June – December 2006: The EU3, with the support of Russia, China, and the US (EU3+3), proposed a last ditch package of incentives. When Iran rejected the effort, the UNSC drafted a resolution promising sanctions if Iran’s enrichment program was not halted by August. When the deadline passed without a change in Iranian behavior, the Security Council initiated UNSCR 1737 on December 23rd, its first round of economic sanctions. Over a decade of attempts on behalf of the EU to avoid sanctioning Iran ended in failure.



June 2009: The Czech-held EU Presidency criticizes both the lack of openness in the reelection of President Ahmadinejad and the government crackdown following the vote.



December 2009 - July 2010: In the wake of the contested Presidential elections and the persisting diplomatic logjam, EU officials gathered support among member countries and introduced a regime of unilateral sanctions which targeted Iran’s energy and financial sectors in order to pressure Tehran to back down from its nuclear program.



July 2010: After being asked to restart negotiations by Saeed Jalili, Iran’s Secretary of the Supreme National Security Council, EU foreign policy chief Catherine Ashton stated that the EU would welcome continued diplomacy with Iran, but that the resolution of nuclear issue would remain the focus of future dialogue.

Cooperation in Ballistic Missile Defense The US and EU states also cooperate in seeking ways to defend European territory and Europebased US assets against potential threats from Iran. As noted earlier, the impact of such cooperation is limited by the decline in meaningful European power projection capability.

Partnership has taken a more tangible form in the area of missile defense, but has been complicated by debates over what level of defense is needed and by Russian objections.

During the Bush administration, the US signed agreements with the governments of Poland and the Czech Republic to install a missile defense system to protect European allies from long-range ballistic missile threats originating from Iran and North Korea. The deal proposed the placement of ground-based anti-ballistic missiles (ABM) at the Redzikowo air base in Poland and the construction of a radar system to detect enemy missiles at Brdy in Czechoslovakia.

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Though the US stated the system was intended as a defensive measure against “rogue states”, the Russian government denounced criticized the plans as an unnecessary provocation and claimed the ballistic missile defense (BMD) system could be used for offensive purposes. Russian President Dmitry Medvedev warned that “we will not be hysterical about this, but we will think of retaliatory steps.”45 Russian objections to US-EU missile defense architecture appear to be self-interested rather than part of a larger effort to strategically aid Iran. Unfortunately for BMD proponents in the US and EU, it is difficult to convince Russia that missiles based in Central Europe that are intended for protection against Iran, cannot be made to serve another purpose.

Figure 12.6 below illustrates the now defunct Europe-based missile defense system and the maximum range of Iran’s Shahab-3 missile.

Figure 12.6: Cancelled European Land-based System 46

45

“Q&A: US Missile Defense.” BBC News. Web. 20 September 2009 http://news.bbc.co.uk/2/hi/europe/6720153.stm.

46

“Q&A: US Missile Defense.” BBC News. Web. 20 September 2009. http://news.bbc.co.uk/2/hi/europe/6720153.stm.

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When President Obama came into office in 2009 he ordered a review of the ABM proposal and ultimately cancelled the plans. The administration stated that Iran’s missile capabilities posed a greater risk at the short-to-medium ranges and did not immediately require the fixed-base system proposed by the previous administration. In place of the Bush plan, Obama introduced the European Phased Adaptive Approach (EPAA) whereby, in the short-term, ship-based and mobile land-based defenses like the Aegis and Standard-3 missile systems could be used to defend Europe.47 By compromising with Russian concerns over the European missile system, the Obama Administration boosted its policy of diplomatic reset for Russo-American relations but frustrated European host countries who stood to gain financially and strategically from US BMD systems.

The Czech Republic reacted negatively to the new plan and in July 2011 officially withdrew from the project. Instead of hosting a $100 million radar system, the Pentagon proposed to house a $2 million early warning system in Czech territory as a consolation.48 Czech Defense Minister Alexander Vondra explained his country’s rejection of the offer saying, “In a moment when we aren't so sure that this project has a chance to develop, it wouldn't be prudent to invest in it and create exaggerated expectations, which could in the end lead to unnecessary frustration in mutual relations.”49 Despite the decision not to participate in the first phases of the EPAA, the Czech government has repeatedly stated its support for the overarching goal of European missile defense. Responding to a flurry of articles describing the Czech move as evidence of a souring of US-Czech relations, Deputy Foreign Minister Jiri Schneider said: Against the backdrop of a mutual understanding, we [the Czechs and Americans] were both surprised at the interpretation that this was the end of cooperation…We are very open to the NATO concept of missile defense and exploring the opportunities for the Czech Republic, to find a place for the country in the new architecture.50

By pursuing a more flexible BMD design the US aimed to provide space to improve its relations with Russia without abandoning US interests in European missile defense. So far, however, it has had little success. Putin has made European missile defense into a major political issue, claiming that it can somehow limit Russia’s nuclear deterrent – although the current plan lacks anything approaching such a capability. The end result has been to sharply limit any progress and to do so at a time when both the US and Europe have fewer and fewer resources to fund an effective system.

47

“Q&A: US Missile Defense.” BBC News. Web. 20 September 2009. http://news.bbc.co.uk/2/hi/europe/6720153.stm.

48

Andre de Nesnera, “US Missile Defense Plan Goes Ahead without Czech Support.” Voice of America. 5 July 2011. http://www.voanews.com/english/news/europe/US-Missile-Defense-Plan-Goes-Ahead-Without-CzechSupport-125028864.html.

49

Jeremy Druker, “Understanding US-Czech Relations on Missile Defense.” Swiss Federal Institute of Technology Zurich: International Relations and Security Network. 13 July 2011. http://www.isn.ethz.ch/isn/Current-Affairs/ISNInsights/Detail?lng=en&id=131039&contextid734=131039&contextid735=131038&tabid=131038&dynrel=4888ca a0-b3db-1461-98b9-e20e7b9c13d4,0c54e3b3-1e9c-be1e-2c24-a6a8c7060233.

50

Ibid.

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The EU3: Britain, France, and Germany As has been noted earlier, three European states play critical individual roles in the competition with Iran: these include Britain, France, and Germany. Turkey – which is analyzed in a different chapter – plays a critical role as both a European state and a regional power. Each country takes a somewhat different approach to key issues, and is worth examining in more detail, within the broader context of US and EU relations.

Britain, France, and Germany—the EU3—most directly influence US-Iranian strategic competition through their support of sanctions through the P5+1—comprised of the five permanent UN Security Council members and Germany (aka “The Six”)—and through their varied capacity to project military power in the Gulf.

Britain and the Broader Role of Britain, France, and Germany in “The Six” Great Britain has led the EU as one of the strongest supporters of tough sanctions on Iran and its foreign policy approach most closely parallels that of the US. The UK serves as an important strategic partner for the US by mediating US and European interactions and by pushing for US sponsored goals within the EU framework.

In the lead up to UNSCR 1929 in 2010, British officials including former Prime Minister Gordon Brown reached out to French President Nicolas Sarkozy and German Chancellor Angel Markel on several occasions to build broad based European support for a tougher sanctions regime. 51 Britain has also been a strong lobbying partner in the effort to persuade both Russia and China to support sanctions through their votes on the Security Council.

Britain’s criticism of Iran’s human rights record and British efforts to halt Iran’s nuclear ambitions have led to several notable diplomatic incidents which have strained Iran’s wider relationship with Europe, but have also illustrated divisions among the leading European powers.

After the turmoil following Iran’s contested 2009 presidential elections, the regime accused Britain and its embassy officials in Tehran of inciting public unrest. Nine British staffers were detained by Iranian police and one, Hossein Rassam, was arrested and charged with “acting against national security.”52 In August 2009, President Ahmadinejad said, “you (the United Kingdom) supported any voice against Iran and now you have openly interfered in the Iranian nation’s affairs.”53 According to Iran’s Mehr News, Ahmadinejad warned Britain that if it continues to interfere “the Iranian nation will react firmly.”54 In response to the detentions the British and Czech governments urged their fellow members of the European Union to temporarily withdraw their diplomatic missions from Iran. This initiative was blocked by Chancellor Merkel. Merkel urged a less aggressive show of protest—predicated 51

“Merkel, Brown back new sanctions against Iran.” Fox News. Web. 1 April, 2010. http://www.foxnews.com/world/2010/04/01/merkel-brown-new-sanctions-iran/.

52

Robert Tait, Julian Borger and Ian Traynor, “Iran Brings Formal Charges Against UK Embassy Official.” The Guardian. 3 July 2009. Web. http://www.guardian.co.uk/world/2009/jul/03/iran-embassy-employee-trial.

53

“Iran warns Britain to stop meddling or else.” Mehr News. 16 August 2010. Web. http://www.mehrnews.com/en/NewsDetail.aspx?NewsID=930858.

54

Ibid.

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on sending a “strong signal” to Iran—but maintaining the ability to openly negotiate. 55 Sweden, who held the EU Presidency in July 2009, sided with Berlin and urged a “step by step” approach to the situation in Tehran.56 When Tehran claimed it would commence with the trial of Rassam, EU members uniformly summoned Iranian ambassadors to capitals around Europe to formally protest the Iran’s decision.57 While summoning was not as strong a move as the British plan to withdraw all EU ambassadors from Tehran, persistent Iranian pressure led to a unified stand by the EU3, rather than continued division.

Britain and Power Projection in the Gulf Great Britain maintains the capability to project military power in the Gulf region and has important military relationships with Arab Gulf states like Oman. As a result of the global recession and subsequent budgetary tightening, Britain’s already limited military reach is decreasing, but it is still a factor in any calculation of force balance and the UK remains the United States’ most dependable European ally.

In October 2010 the British government completed the Strategic Defense and Security Review (SDSR) outlining Britain’s strategic goals for the future and the restraints placed on those goals by its national fiscal crisis. According to the Conservative government, the defense budget represented an over-commitment of approximately $60.7 billion USD. British Ambassador to the US, Nigel Sheinwald, reports that cuts to the British fighting force will target “older, heavier equipment”: …we'll have 40 percent fewer tanks and 35 percent less heavy artillery. We will decommission the aircraft carrier HMS Ark Royal and drop four destroyers and frigates from current forces; we will reduce the number of fighter jet types we maintain; and we will plan to withdraw our forces from Germany by 2020.

And it is true that there will be a temporary gap in our capability to operate aircraft from the sea before the F-35 Joint Strike Fighters come online. 58

Despite these cuts, Britain’s Foreign Secretary William Hague has reiterated Britain’s intent to remain a “highly deployable” military power and Secretary of State for Defense Liam Fox wrote in the Times that “[the United Kingdom] will continue to be a big contributor to NATO and our interests will be more secure."59 Both comments were made in 2010 in response to fears on the part of US officials that Britain’s military spending would drop beneath 2 percent GDP—the NATO defense spending target. The SDSR kept military expenditures above the NATO target,

55

“British calls for diplomatic walkout from Iran.” http://www.timesonline.co.uk/tol/news/world/europe/article6626649.ece 56

David Charter, “British Calls for Diplomatic Walkout from Iran Are Rejected By EU Partners.” The Times. Web. 3 July 2009. http://www.timesonline.co.uk/tol/news/world/europe/article6626649.ece.

57

Robert Tait, Julian Borger and Ian Traynor, “Iran Brings Formal Charges Against UK Embassy Official.” The Guardian. 3 July 2009. Web. http://www.guardian.co.uk/world/2009/jul/03/iran-embassy-employee-trial.

58

“A leaner meaner British Military.” Foreign Commonwealth Office. Web. 22 October 2010. http://www.fco.gov.uk/en/news/latest-news/?view=News&id=23074623.

59

“Britain will remain military power of ‘first rank’, says William Hague.” The Telegraph. Web. 15 October 2010. http://www.telegraph.co.uk/news/uknews/defence/8066161/Britain-will-remain-military-power-of-first-rank-saysWilliam-Hague.html.

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but it initiated reductions averaging 19 percent across almost all departments.60 This included the elimination of 17,000 military employees and 25,000 civilians employed by the armed forces. 61 The 2011 NATO action in Libya demonstrated some of the tactical drawbacks of Britain’s cuts.

Admiral Sir Mark Stanhope, First Sea Lord of the Royal Navy, faulted the retirement of the HMS Ark Royal and her compliment of Harriers for delaying NATO response times. And according to Jonathan Laurence and P.W. Signer of the Armed Forces Journal, Britain may lack a sea-strike power for as long as a decade.62 The Sea Lord also confirmed that the Royal Navy “had been forced to ask the US to resupply Tomahawk cruise missiles used by submarines targeting Libya.”63 The difficulties of the Libya operation notwithstanding, Ambassador Sheinwald argues that cuts will allow the military to create a more effective and focused security posture. He writes: Our new planning assumptions see us capable of deploying a modernized all-arms force into the field up to 30,000 strong for a single major operation. And we will retain an ability to sustain in long-term stabilization operations a brigade-sized force in theater at levels not too far below those currently deployed in southern Afghanistan.64

In addition to Britain’s air, land, and sea forces, Britain makes contributions to Gulf security through arms transfers. According to CRS, from the period of 2003 to 2010 the United Kingdom participated in 16.09% of all arms agreements in the Middle East, totaling approximately $20.8 billion.65 British connections with Oman—a useful ally because of its steady relations with Iran and its strategically valuable location at the mouth of the Gulf—are also an asset to projecting power in the Middle East and containing Iran. According to the British Embassy in Muscat, nearly 100 British military personnel are on loan to the Omani Armed Forces and both nations are actively engaged in joint training in both the UK and Oman.66 Britain remains committed to maintaining a global reach that could positively affect the US position in its competition with Iran, but for the next several years—especially until the completion of Britain’s new aircraft carrier—Whitehall’s rhetoric of active and engaged partnership with the US through NATO will be severally tested by the scale and distance of potential conflicts.

60

Jonathan Laurence and P.W. Singer, “Tough Times.” Armed Forces Journal. Web. http://www.armedforcesjournal.com/2010/12/5062276.

61

Ibid.

62

Ibid.

63

James Kirkup, “Navy Chief: Britain Cannot Keep Up Its Role In Libya Air War Due To Cuts.” The Telegraph.

Web. 13 June 2011. http://www.telegraph.co.uk/news/worldnews/africaandindianocean/libya/8573849/Navy-chiefBritain-cannot-keep-up-its-role-in-Libya-air-war-due-to-cuts.html.

64

“A leaner meaner British Military.” Foreign Commonwealth Office. Web. 22 October 2010. http://www.fco.gov.uk/en/news/latest-news/?view=News&id=23074623.

65

Richard F. Grimmett, “Conventional Arms Transfers to Developing Nations, 2002-2009.” Congressional Research Service. 10 September 2010. http://www.fas.org/sgp/crs/weapons/R41403.pdf.

66

“UK in Oman: our relationship.” British Embassy Muscat. Web. http://ukinoman.fco.gov.uk/en/about-us/workingwith-oman/uk-in-oman/uk-oman.

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France and “The Six” After partnering with Britain and Germany in several failed bids to diplomatically dissuade Iran from pursuing its suspect nuclear program, France has become a strong supporter of both UN and EU sanctions.

Under the leadership of President Sarkozy, Paris has rejected the “constructive dialogue” approach of the past in favor of stronger measures parallel to those proposed by Washington. At times Sarkozy has adopted a harder line than President Obama and criticized the administration for its early engagement with Iran. Sarkozy said in September 2009, “We supported President Obama's extended hand to Iran's leaders, but this hand cannot remain extended indefinitely with leaders who do not respond…the centrifuges keep on turning.”67 Sarkozy’s penchant for attention-getting rhetoric and French domestic politics may have provided some of the fuel for France’s new approach toward Iran, but the shift has provided Washington with an ally where once France was a diplomatic impediment.

In the run-up to the fourth round of UN sanctions issued in June 2010, French officials stated that if the Security Council did not approve Resolution 1929 the French government would push for unilateral measures through the EU instead.68 After the imposition of UNSCR 1929, France supported tougher supplementary sanctions, including the 2012 oil embargo, and it continues to criticize Iran’s nuclear program and its harsh treatment of political dissidents. Like Britain, France, has moved away from the EU’s older model of incentives and engagement with Iran and closer to sanctions-oriented approach favored by the US. France and Power Projection in the Gulf France has limited power projection capability in the Gulf as compared with the US, but it possesses Europe’s only operational aircraft carrier, and has a base in Djibouti, security partnerships with regional powers like Saudi Arabia and the UAE, and joint training and basing rights in the Gulf. Since the election of President Sarkozy, France has pursued a much more muscular foreign policy which has created more opportunities for Franco-American cooperation in opposing Iran.

In May 2009, France strengthened its strategic reach in the Middle East by opening its first military base abroad in fifty years in Abu Dhabi. The installation will host 467 French soldiers, sailors, and airmen and solidifies France’s stake as an ally of the UAE and a player in the broader strategic contest with Iran. French officials have stated that France is “deliberately putting itself into a position of dissuasion…if Iran was to attack, (France) would now in effect also be under attack.”69 President Sarkozy, who participated in the base’s inauguration, explained that by establishing a French military presence in the UAE, “France is showing that it

67

Edward Cody, “France's Approach to Iran Toughens Under Sarkozy.” Washington Post Foreign Service. Web. 1 October 2009. http://www.washingtonpost.com/wp-dyn/content/article/2009/09/30/AR2009093004757.html.

68

Luke Baker, “U.N. Iran sanctions may take until June: Kouchner.” Reuters. 14 march 2010. Web. http://www.reuters.com/article/2010/03/14/us-eu-iran-sanctions-idUSTRE62D0OK20100314.

69

John Lichfield, “France Opens UAE Base to Protect Region from Iranian Threat.” Huffington Post. 26 June 2009. http://www.huffingtonpost.com/2009/05/26/france-opens-uae-base-to-_n_207505.html.

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is ready to assume its responsibilities in guaranteeing the stability of a region vital to the entire world.”70 France also engages in joint military exercises with Saudi Arabia and maintains a military presence in Lebanon through the United Nations Interim Force in Lebanon (UNIFIL).71 France works to limit the influence of Hezbollah—Iran’s proxy—in partnership with the US. Despite France’s renewed desire to utilize and increase its military capabilities in the Gulf, the conflict in Libya has demonstrated the tangible limits to France’s power projection. Though France and Britain took a leading role in effort to support the Libyan opposition, their ability to operate successfully was predicated on US support. French fighter sorties over Libyan skies would have been impossible without the US-led destruction of Muammar Gadhafi’s air defense and command and control networks. Paris’ reengagement with NATO and its support of sanctions has made France a closer diplomatic partner for the US if not a stronger military ally.

Germany and “The Six” Germany is an active participant in the EU’s current round of sanctions on Iran, but has been more reluctant in the past than the UK, France, and US in sanctioning Iran. Over the past decade German leaders have openly criticized Iran’s questionable nuclear aims and its tainted human rights record, but they have been reluctant to drive Iranians away from the negotiating table and have advocated policies that preserve some form of dialogue.

Part of Germany’s past resistance to sanctions has been influenced by its trading relationship with Iran and the fear that sanctions would not be equally enforced. The German government pushed back against calls for sanctions on Iran by French and American officials in 2007 claiming that both nations were hypocritically violating their own embargos. According to the German Foreign Ministry, French and American companies had not reduced their business dealings with Iran, despite the imposition of sanctions. The ministry claimed that while German exports to Iran have declined, French automobile manufactures and US companies like Microsoft and Caterpillar were still very present in the Islamic Republic.72 In mid 2009, as the Obama administration was seeking support for a new round of sanctions on Iran, Germany indicated that it would not support additional sanctions if the proposal did not have full support of the EU. Though Britain and France were in favor of sanctions, Germany claimed it would wait till consensus was reached amongst the 27 EU member states.73 Despite these differences, Germany has been a much more supportive partner for the US than other P5+1 powers, Russia and China. After the IAEA issued a report in November 2011 in which it stated a belief that Iran was pursuing nuclear weapons the German government moved in line with its Western allies, backing increased sanctions that became the January 2012 70

Ibid.

71

“Political Relations: France and Lebanon.” French Ministry of Foreign and European Affairs. Web. 18 February 2011.http://www.diplomatie.gouv.fr/en/country-files_156/lebanon_294/france-and-lebanon_3270/politicalrelations_6061/index.html 72

“Berlin Says US and France Guilty of Hypocrisy.” Spiegel Online. Web. 24 September 2007. http://www.spiegel.de/international/world/0,1518,507443,00.html.

73

Massimo Calabresi, “Will Germany back Obama’s Iran-Sanctions Coalition?” Time. Web. 21 September 2009. http://www.time.com/time/world/article/0,8599,1924846,00.html.

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embargo. Germany’s past reluctance was fueled by its intent to preserve business interests in Iran, its emphasis that diplomacy and continued dialogue are key to any solution to the nuclear issue, and its desire to maintain a foreign policy independent of the US and more in tune with that of greater Europe.

Germany and Power Projection in the Gulf Despite cooperation in the US led sanctions regime, Germany’s abstention from the UN Security Council vote on a no-fly zone in Libya and its refusal to participate in subsequent NATO operations suggests the country’s reticence to project its military power in the Greater Middle East.

That said, Germany does see regional stability as a national interest and contributes support to status quo powers like Saudi Arabia through significant arms sales. In July 2011, the German government approved a $2.5 billion deal to deliver 200 Leopard armored tanks to the Saudis.

Facing domestic criticism, government officials defended the trade saying the regime is “pillar of stability” in the Middle East.74 Germany also sold 36 Leopard 2 tanks to Qatar in 2009.75

Non-EU Europe The European states outside of the European Union play a minor role in US-Iranian competition.

Their presence can be felt most strongly when they either broadly track with the EU and by extension the US, or pursue opportunistic policies in opposition to the established order. The nations of Switzerland and Belarus serve as suitable proxies for both camps.

Switzerland Though Switzerland maintains its long-held neutrality, it is a de facto member of the Western-led international order and pursues foreign policy options that often closely reflect that of its EU neighbors. Though the Swiss have a significantly more robust relationship with the US, Iran continues to seek partnership along diplomatic and economic lines. Tehran voices its disappointment over Swiss decisions that work contrary to its interests, but like its strategy with the EU states, it refrains from viewing Switzerland and the US as a wholly unified coalition.

Switzerland played a significant role in the contest between the US and Iran when the Swiss ambassador to Iran attempted to broker a deal between Washington and Tehran in 2003. The failed negotiations, sometimes referred to as the “Grand Bargain” were initiated by Ambassador Tim Guldimann who presented the US State Department with a document detailing several US and Iranian goals for potential negotiations including: Iran’s support for anti-Israel proxies, counterterrorism efforts within Iran, and the recognition of Israel as a state. Guildmann claimed that the document had originated from the highest levels of the Iranian leadership and that they were willing to negotiate.76

74

Julio Godoy, “Germany Arms Saudis Against Iran.” Inter Press Service. Web. 25 July, 2011. http://ipsnews.net/news.asp?idnews=56617.

75

Ibid.

76

Glen Kessler, “2003 Memo Says Iranian Leaders Backed Talks.” Washington Post. Web. 14 February 2007. http://www.washingtonpost.com/wp-dyn/content/article/2007/02/13/AR2007021301363.html

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Ultimately, a bargain was never struck and controversy still surrounds the episode. Critics of the Bush Administration claim that a key opportunity was missed because “important power centers in the administration… were opposed to this kind of diplomatic effort with Iran.”77 Supporters of the administration’s decision not to negotiate claim that the credibility of the letter and of Guildmann as a source were questionable from the beginning and not in line with available intelligence on Iranian intentions.78 Switzerland now participates in the US competition with Iran in two key areas: facilitating USIranian dialogue and participating in the US-led sanctions regime targeting Iran’s nuclear efforts.

Switzerland maintains an American interests office at its Embassy in Tehran and has served as the principal facilitator of US-Iranian communication since the severing of US-Iranian diplomatic relations in 1980. The Swiss Embassy is crucial for providing an avenue of communication during periods of heightened US-Iranian tension. For example, Swiss diplomats represented the US when three American hikers were detained in Iran and accused of espionage in 2009.

Beyond playing the role of mediator, in 2011 the Swiss joined the US and EU by enacting economic sanctions on Iran in addition to those mandated by the UN Security Council.

Switzerland’s major banks have terminated their financial interactions with Iran and the Swiss government has worked to freeze bank accounts linked to entities involved in Iran’s nuclear program. Bern values its intermediary role, but introduced sanctions to prevent Swiss complicity in Iran’s nuclear program and to clarify the situation for Swiss businesses that had temporarily paused investments with Iranian partners.79 Bilateral economic cooperation between Iran and Switzerland has been significantly impacted by the UN and unilateral sanctions, and by the United States’ willingness to penalize Swiss companies that operate in the US but violate sanctions by trading contraband goods with the IRI. In December 2009, the Treasury Department announced that Credit Suisse would pay a $536 million settlement to the United States for illicitly processing Iranian transactions with US banks.

The Swiss banking firm pledged to cease doing business with Iran.80 In 2010 Switzerland exported goods worth just under $900 million to Iran and imported goods valued at just over $50 million.81 Trade volume was down $83 million from the previous year.82 As a result of international pressure, Swiss commodities traders Glencore International AG and Vitol ceased selling gasoline to Iran.83 According to the Wall Street Journal, a key factor in the 77

“The ‘Grand Bargain’ Fax: A missed Opportunity?” PBS: Frontline. Web. 23 October, 2007. http://www.pbs.org/wgbh/pages/frontline/showdown/themes/grandbargain.html.

78

Ibid.

79

Julia Slater and Luca Beti, “Swiss-Iranian relations take a new track.” Swissinfo.ch. 21 January 2011. http://www.swissinfo.ch/eng/politics/Swiss-Iranian_relations_take_a_new_track.html?cid=29306360.

80

Kenneth Katzman, “Iran Sanctions.” Congressional Research Service. 4 April 2011. http://fpc.state.gov/documents/organization/161339.pdf 81

Ibid.

82

Ibid.

83

Spencer Swartz, “Swiss Firm Halts its Sales of Gas to Iran.” 9 January 2010. http://online.wsj.com/article/SB126300336665822669.html

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decisions was the passage of US legislation that “bars any company that does more than $20 million in oil and gas business with Iran from doing business in the U.S.”84 In a similar response to EU sanctions, Iranian officials met the news of Swiss sanctions with reserved criticism. Hossein Mohammadi, first secretary at the Iranian embassy in Bern, told Swiss news service Swissinfo.ch, “Mediation and peaceful settlement of conflicts has been a main pillar of Swiss foreign policy…Imposition of sanctions as a hostile act is not a solution to the world problems and has never worked effectively.”85 Switzerland is a key diplomatic bridge for an Iran that is rapidly becoming ever more isolated. Tehran recognizes that creating a crisis with Bern over the imposition of sanctions would only drive the Swiss further away from aiding Iran against more potent adversaries like the United States and the EU3.

As of early 2012, the Swiss government has refrained from mirroring the latest round of sanctions implemented by the US and EU on Iran’s energy and banking sectors. Switzerland is not an importer of Iranian crude, but its large oil trading companies like Gunvor and Vitol play a measurable role in Iran’s ability to export globally.86 The brief chronology below highlights a few of the critical periods of Swiss participation in USIranian competition since the Iranian Revolution. All data are provided by Swissinfo.ch.87 

1979: Islamic revolution in Iran; students hold staff of US embassy hostage for 444 days. US breaks off diplomatic relations.



1980: Switzerland starts representing Washington’s interests in Iran, and providing consular assistance to US citizens in Iran.



2008: Swiss Foreign Minister Micheline Calmy-Rey goes to Iran to attend signing of gas agreement, sparking widespread criticism at home and abroad.



August, 2010: Switzerland adopts UN-imposed sanctions against Iran after it refuses to suspend its nuclear program.



January, 2011: Switzerland agrees to step up sanctions in line with those imposed by the US, the EU and some other countries.

Belarus Iran and Belarus maintain a supportive relationship built upon energy and arms trade and mutual opposition to the Western-led international order. In contrast to the EU’s political and economic retreat from Iran over the past decade, Belarus—led by self-avowed authoritarian President Alexander Lukashenko—has deepened bilateral relations.88 The Belarusian government, like the 84

Ibid.

85

Julia Slater and Luca Beti, “Swiss-Iranian relations take a new track.” Swissinfo.ch. 21 January 2011. http://www.swissinfo.ch/eng/politics/Swiss-Iranian_relations_take_a_new_track.html?cid=29306360.

86

http://www.jpost.com/IranianThreat/News/Article.aspx?id=254993

87

Julia Slater and Luca Beti, “Swiss-Iranian relations take a new track.” Swissinfo.ch. 21 January 2011. http://www.swissinfo.ch/eng/politics/Swiss-Iranian_relations_take_a_new_track.html?cid=29306360.

88

“Profile: Alexander Lukashenko.” BBC News. 9 January 2007. http://news.bbc.co.uk/2/hi/europe/3882843.stm

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Iranian government, is frequently criticized by the US and EU for its corruption and human rights violations. Iran, exploiting those tensions, seeks to cultivate Belarus as one of several farflung allies united in opposition to Western interference.

At a joint news conference in 2007, Iranian President Ahmadinejad standing with President Lukashenko said, “We oppose the development of a unipolar world and the use of double standards directed against us. We have agreed that we will act jointly internationally to offer each other support...we see Belarus’ success as our own. We believe that Belarus has similar attitudes towards Iran.”89 The partnership is based on complimentary worldviews shared by both states, and cemented by diplomatic support and growing economic exchange.

The official website of the Republic of Belarus describes economic and diplomatic cooperation with Iran as follows: At present in Belarus there are six Belarusian-Iranian joint ventures, 18 Iran-owned companies and two banks with Iranian capital. In 2009 Belarus-Iran trade totaled $71.6 million, with Belarus’ export as large as $63.2 million, import - $8.4 million. Belarus’ major exports to Iran are synthetic fibers and synthetic cords, metal products, trucks, tractors, potash fertilizers. Belarus mainly imports Iranian cars and parts, fruits.

Belarus and Iran have set up a commission for economic cooperation as well as a committee for cooperation in industry and mining. Belarus and Iran have signed 35 interstate and interagency treaties, including a package of basic economic treaties.90

In 2007, Iran agreed to allow Belarus to develop its Jofeir oil and gas field in what Lukashenko dubbed a “strategic partnership.”91 The project at Jofeir is particularly important because it helps Belarus lessen its dependence on neighboring Russia’s energy supplies and marks the country’s first foreign energy project.92 In June 2010, Russia halted 60 percent of its gas deliveries to Belarus until Minsk agreed to pay a debt of $200 million. President Lukashenko, speaking to a special cabinet session after the crisis, stressed the need for Belarus to strengthen its relationships with alternative energy markets like Iran.93

89

“Iran, Belarus to stand together against critics.” Reuters. 22 May 2007. http://www.reuters.com/article/2007/05/22/us-iran-belarus-idUSL2254505920070522.

90

“Belarus, Iran to accelerate joint investment projects.” Official Website of the Republic of Belarus. 6 May 2010. http://www.belarus.by/en/press-center/news/belarus-iran-to-accelerate-joint-investmentprojects_i_0000001054.html.

91

“Iran, Belarus to stand together against critics.” Reuters. 22 May 2007. Web. http://www.reuters.com/article/2007/05/22/us-iran-belarus-idUSL2254505920070522.

92

“Belarus, Iran leaders happy with outcome of Minsk visit.” RIA Novosti. 22 May 2007. Web. http://en.rian.ru/world/20070522/65909833.html 93

“Belarus after expanded Iran energy ties.” PressTV. 29 June 2010. Web. http://edition.presstv.ir/detail/132491.html

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With partial funding from the Central Bank of Iran, Belarus’ state-run energy firm Belarusneft began exploration at the Jofeir site despite increasing pressure from the West.94 In April 2011, the US Department of State imposed sanctions on Belarusneft for its activities in Jofeir under the Iran Sanctions Act of 1996 which restricts economic investment in Iran’s energy sector above $500 million. Belarusneft is barred from access to US markets and ineligible to receive US government contracts.95 Cooperation between Iran and Belarus also extends to the realm of arms trading. According to Iranian new service PressTV, Belarus has entered agreements to sell short-range Iskander-M missile systems to Iran. The Russian made platform “is equipped with two solid-propellant single-stage 9M723K1 guided missiles with ‘quasi-ballistic’ capability with a range of approximately 310 miles.”96 US sanctions on Belarusneft have not dampened Lukashenko’s efforts to continue cooperating with Iran. The partnership is principally built on energy security and mutual disdain for the perceived imperiousness of Western governments: two elements the US and EU cannot or will not address in order to draw Belarus away from the IRI. In a June 2011 phone conversation reported by PressTV, Lukashenko said that the “Acceleration of completion of the mutual plans [between Iran and Belarus] will help promote welfare and progress of the two nations.”97 Iranian President Ahmadinejad similarly affirmed the future of positive relations saying, “Iran will always stand by Belarus…enhancement of the level of consultation between the two states on regional and international issues is in favor of global peace and security.”98 Belarus plays a limited role in US-Iranian strategic cooperation, but the key factors of its relationship with Iran—energy security and opposition to the US-led international system—are avenues which Iran hopes to exploit across the globe and must be targeted if the US hopes to break apart the small coalition of Non-Aligned states Iran is cultivating as allies.

Implications for US Policy The European Union and the non-EU states that track with it are currently pursuing a sanctionsbased containment strategy that closely parallels the US approach to Iran. Though Europe stands to lose more economically from cutting itself off from Iran than the US, European leaders reject Iranian overtures, strongly support diplomatic efforts to halt Iran’s threatening nuclear program, and take strong stands on Iran’s human rights abuses and open threats toward Israel.

Growing US-EU unity presents a formidable challenge to Iran, while division provides the Islamic Republic space to advance its interests. The United States should labor to maintain the present state of Euro-American strategic convergence by stressing the benefits of cooperation, 94

“Iranian central bank helps fund Belarusneft oil exploration.” MEED. 21 May 2009. Web. http://www.meed.com/sectors/oil-and-gas/iranian-central-bank-helps-fund-belarusneft-oilexploration/2031055.article 95

“US Sanctions Belarusneft over Iran contract.” New Europe. 3 April 2011. Web. http://www.neurope.eu/articles/US-sanctions-Belarusneft-over-Iran-contract/105722.php 96

“Belarus ‘selling Iran Iskander-M missiles.” PressTV. 25 August 2011. Web. http://edition.presstv.ir/detail/93244.html.

97

“Iran, Belarus call for enhanced ties.” PressTV. 10 June 2011. Web. http://www.presstv.ir/detail/183992.html.

98

Ibid.

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leveraging transatlantic economic interdependence, and further weakening Iran’s limited connections to Europe. 

Continue comprehensive engagement and coordinate responses to Iran. The unparalleled extent of EuroAmerican cooperation in matters diplomatic, economic, and cultural presents a serious challenge to powers intent on creating a transatlantic rift. The US should avoid engaging in unilateral activities which jeopardize the US-EU relationship and instead effectively communicate its policies to its European allies in hopes of achieving greater coordination. Coordination should not come at a cost of national interests, but a united Euro-American front forces Iran to risk alienating its chief export market.



Promote energy alternatives to sustain a cohesive European response to Iran. As the EU oil embargo comes into full effect in July 2012 the US should leverage its relationships with the Arab Gulf states and other oil producers to ensure a steady flow of hydrocarbons to Europe. Countries weakened by the ongoing fiscal crisis in the Eurozone may be disproportionately affected by an interruption in supply. To prevent defection from the embargo or worse, disintegration of the EU, the US should be prepared to mobilize its diplomatic and economic resources.

The European Union and particularly Britain, France, and Germany are the closest and most significant partners of the US in its competition with Iran. All now have similar perceptions of the threat Iran poses to international stability and are willing to implement aggressive sanctions to dissuade it from obtaining nuclear weapons. In a game where so many players are ambiguous in their allegiance, the EU states—led by the EU3— are invaluable partners of the US, and ones which have both adapted to reflect US positions when they have proved valid, and played a role in persuading the US to see the merits of incentives and flexibility in dealing with Iran’s legitimate needs.

The caution in preserving this unity is that the United States must be seen in Europe as being sincere in its willingness to replace sanctions with negotiations and incentives if Iran is willing to give up its threatening nuclear efforts. The US must be willing to accept regime evolution, rather than regime change, if Iran’s ruling elite will make the necessary democratic and human rights reforms. The US must be seen as pragmatic, rather than acting out of ideological hostility to Iran.

Finally, any US use of force must either be a last resort when Iran is unambiguously on the edge of acquiring nuclear weapons and carried out only after serious consultation with its key European allies, or an act forced by Iran’s aggression against a Gulf state or an attack on shipping and oil exports in the Gulf. As is the case with the Arab Gulf states and other regional powers, the US must act as a partner and not simply expect even its closest European allies to follow blindly. These are positions the US has clearly taken in theory, but the recent history of its actions in Iraq illustrate just how important it is for the US to now take these positions in actual practice.

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a report of the csis burke chair in strategy

U.S. and Iranian Strategic Competition: Peripheral Competition Involving Latin America and Africa

Authors Brandon Fite

March 2012

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EXECUTIVE SUMMARY Iran pursues cooperation with states on the geographic and strategic periphery of the competition between the US and Iran in order to create a network of diplomatic and economic relationships or “partners” who can lessen the blow of international sanctions and generally oppose Western attempts to constrict its ambitions. These peripheral “partners” located mainly in Africa and Latin America, also serve as alternative markets for Iranian oil, provide diplomatic cover for Iran’s nuclear efforts, and aid Iran’s acquisition of goods proscribed by international sanctions.

Tehran’s strategy pragmatically subordinates concerns for ideological and religious homogeneity to the goal of creating a coalition of non- or anti-Western states capable of influencing its competition with the United States. The states involved are drawn to Iran by both promises of economic help—particularly in the energy sector—and by Iranian appeals to commonly oppose the Western international system.

The Islamic Republic also portrays its present isolation by the US and Europe as a continuation of Western imperialism, and draws on its credentials as a member of the Non-Aligned Movement to elicit support from the disparate states throughout Africa and the Americas that have preexisting grievances with the Western order and its leading states.

According to Iranian leaders, the IRI’s competition with the US and its allies is not a just a contest between states, but a clash of worldviews. The US represents an exploitative status quo, and Iran offers the promise of an alternative order geared toward promoting the sovereignty and interests of developing nations. Speaking to an audience in Nigeria in 2010, Iranian President Mahmoud Ahmadinejad called for a decisive break with the present Western-dominated system: We have to develop a proper cooperation among the developing nations in order to wriggle ourselves from the domination of the western powers. And this effort is going on among the independent developing nations today. We have to establish a collective effort with a view to create a new international independent economic system that should be on the basis of justice.1

Though many of the countries Iran seeks to cooperate with are militarily and economically weak, Tehran casts a wide net in trying to build an array of partners to counterbalance what it sees as Western dominance of the global order. Iran seeks to be the hub of a non-Western bloc, and intends to frustrate American influence over Iran and throughout the developing world.

US ability to push back against Iran’s attempts to widen its network of such countries is strongest in states that benefit from US aid, trade, or that lack a significant basis for ideological disagreement with US practices. While Iran’s overtures to peripheral states have the potential to weaken US attempts to contain and isolate Iran, Tehran’s web is fragile and possibly illusory.

It remains to be seen if Tehran can make good on the development commitments it has made to potential partners or if its bonds with peripheral states can be institutionalized beyond a personal relationship between heads of state. Iran’s plan to restructure the international system in opposition to the Western-led model remains the vision of a few fringe governments and does not appear likely to spread.

1

Nuruddeen M. Abdallah and Aliyu S. Machika, “Why Nigeria needs nuclear energy now –President Ahmadinejad.” Sunday Trust, 11 July 2010, http://sunday.dailytrust.com/index.php?option=com_content&view=article&id=4186:why-nigerianeedsnuclear-energy-now-president-ahmadinejad&catid=57:cover&Itemid=126.

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Contents Introduction ................................................................................................................................. 4 Latin America ............................................................................................................................. 4 Figure 13.1 Chronology of Iran-Latin America Leadership Meetings ........... 5 Venezuela’s Approach to Sanctions: Diplomatic and Practical Rejection ........................... 11 Ecuador ..................................................................................................................................... 12 Bolivia ....................................................................................................................................... 13 Nicaragua .................................................................................................................................. 15 Argentina................................................................................................................................... 16 Africa and Other Peripheral States ........................................................................................... 18 Figure 13.2 Map of Iran in Africa ................................................................. 20 Shared Isolation as a Common Interest ................................................................................ 26 Zimbabwe’s Potential Role in Iran’s Nuclear Programs ...................................................... 26 Implications for U.S. Policy...................................................................................................... 28

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Introduction Iran has found it can make some gains in competition with the US by aligning itself with a wide range of peripheral states. It is unclear how many gains Iran can make, but this does help it defuse UN pressure and sanctions, diversify its economic outreach in response to sanctions, and find allies to work with in the UN and other international forums. o Venezuela: Venezuela’s is Iran’s most vocal and supportive peripheral “partner.” Both countries have engaged in a broad spectrum of commitments ranging from mutual diplomatic support to joint commercial ventures to military exchange. Venezuelan President Hugo Chavez has advocated for Iran’s nuclear program at the IAEA and for Iran’s vision of an anti-Western coalition of developing states. o Ecuador, Bolivia & Nicaragua: Iran seeks to work with Latin American countries lacking the resources of larger states like Venezuela or Brazil in order to build a network upon which it can rely to diffuse diplomatic and economic pressure and, potentially, to base Iranian assets in the Western hemisphere. o Argentina: Iran has reached out to Argentina in order to diversify its Latin American connections, but while both countries have increased bilateral trade, relations remain complicated by international pressure and Iran’s possible involvement in terrorist attacks against Argentine Jews in the 1990s. o Brazil: Brazil under President Dilma Rousseff appears poised to pursue a middle path that remains independent of the U.S. or Iran and its anti-American Latin allies. The leadership of Brazil will first and foremost protect its economic interests and its aspirations for prominence in a multi-polar world. o Senegal and Gambia: Since the early 2000s Iran has looked to countries in West Africa as potential sources of economic and diplomatic support, but severe political missteps and unfulfilled promises have undercut Tehran’s decade of gains. o Morocco: US-Iranian competition for influence in Morocco focuses on Morocco’s different political and commercial interests. The monarchy is a strong political ally of the US government, but depends upon Iran for much of its energy needs. The Sunni-Shi’a divide also complicates Iran’s attempts to improve relations. o South Africa: South Africa has an ambivalent relationship with the IRI. Ties between both nations are strengthened by growing economic cooperation, expressed mainly through energy sales, and due to Iranian regime’s condemnation of the apartheid era leadership. The relationship is strained by Iran’s record of human rights violations, its ambiguous nuclear ambitions, and political pressure from the West. o Zimbabwe: Iran has a Chavez-style ally in Zimbabwe’s Robert Mugabe, but internal political division within Zimbabwe along with U.S. pressure impede full cooperation.

Latin America In Latin America, Iran mobilizes historically rooted anti-American sentiment in combination with economic incentives to draw states into its “post-Western” camp. Economically impoverished countries are drawn to Iran as a source of desperately needed investment and mutual antipathy towards the US provides rhetorical packaging for bilateral agreements.

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In the past decade Iran has dramatically increased its diplomatic missions to states critical of the US like Venezuela, Bolivia, Nicaragua and Ecuador, but also to non-aligned states like Argentina and Brazil. Iran has built 17 cultural centers in Latin America and it currently maintains ten embassies, up from six in 2005.2 The Islamic Republic’s diplomatic missions have resulted in lively rhetoric and impressive promises of cooperation, but they have not yet yielded strategic results that have a significant effect on greater US-Iranian competition.

The chronology in Figure 13.1 below highlights some of the key diplomatic exchanges between the leadership of Iran and various Latin American countries: Figure 13.1 Chronology of Iran-Latin America Leadership Meetings   

2000 o 2001 o 2006 o o



2007 o

September - October: Iranian President Khatami visits Cuba and Venezuela May 18-21: Venezuela’s President Hugo Chavez visits Iran July 31: Venezuela’s Chavez visits Teheran September 11-16: Ahmadinejad visits Castro in Cuba -- Fourteenth Non-Aligned Movement Summit Jan. 13: Ahmadinejad visits Venezuela to talk about strengthening economic ties3

o

Jan. 14: Ahmadinejad visits President Daniel Ortega in Nicaragua to discuss opening new embassies in each other’s capitals.4

o

Jan. 15: Ahmadinejad attends the inauguration ceremony of Ecuadorian President Raphael Correa.5

o

June 10: Nicaraguan president Daniel Ortega met Grand Ayatollah Ali Khamenei

o

Sept. 27: Ahmadinejad visits Bolivian President Evo Morales and pledges $1 billion in aid.6

2

Donna Cassata, “SOUTHCOM boss: Iran makes Latin America inroads.” Associated Press. 5 April 2011. http://www.navytimes.com/news/2011/04/ap-military-southcom-iran-makes-latin-america-inroads-040511/.

3

“Iranian President Visits Venezuela to Strengthen Ties,” by Simon Romero, The New York Times, Jan.14, 2007 (http://www.nytimes.com/2007/01/14/world/americas/14iran.html.

4

“Iran Leader Courts Latin America Allies,” by Traci Carl, The Associated Press, Jan.14, 2007, http://www.washingtonpost.com/wp-dyn/content/article/2007/01/14/AR2007011400354.html.

5

“Argentina Pursues Iran In ’94 Blast As Neighbors Court Ahmadinejad,” by Monte Reel, The Washington Post, Jan.14, 2007, http://www.washingtonpost.com/wp-dyn/content/article/2007/01/13/AR2007011301253.html.

6

(“Iran Leader Visits Venezuela, Bolivia,” USA Today, Sept. 28, 2007, http://www.usatoday.com/news/world/2007-09-27-iransouth-america_N.htm.

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o 



2009 o

March 12, 2012

Sept. 27: Ahmadinejad visits Venezuelan President Hugo Chavez in Caracas to talk about rolling back the influence of Washington in the region.7 Feb. 3: An Iranian delegation visits Paraguay to discuss import and investment opportunities.8

o

Feb. 27: Iranian Deputy Foreign Minister Ali Reza Salari leads an Iranian delegation to Mexico City to discuss trade relations.9

o

Sep 6: In Iran Venezuela’s President Hugo Chavez sealed an agreement to export 20,000 barrels per day of gasoline to Iran. The deal would give Tehran a cushion if the West carries out threats of fuel sanctions over Iran's nuclear program. The two countries also agreed to set up a bank together to help finance joint projects.

o

Nov. 23: Ahmadinejad visits Brazilian President Luiz Inácio Lula da Silva to discuss strengthening economic ties.10

o

Nov. 24: Ahmadinejad visits Bolivian President Evo Morales in La Paz to discuss mutual cooperation.11

o

Nov. 25: Ahmadinejad visits Venezuelan President Hugo Chavez.12

2010 o

February 20: Ecuador's inclusion on an international list of nations accused of lagging in the fight against money laundering is a hypocritical punishment for its relations with Iran, said Ecuador's president.13

o

April 26: Celso Amorim, Brazil’s foreign minister, visits Tehran, meeting with his Iranian counterpart Manuchehr Mottaki, Iran's nuclear negotiator Said Jalili, and the president of the Iranian parliament, Ali Larijani. At the meeting, Amorim asks for assurances that Iran’s nuclear program is meant for only peaceful ends.

o

May 16: Brazil’s president Lula meets Ahmadinejad in Tehran, in what has been framed as possibly a last, best chance for a negotiated solution.

7

“Iran Leader Visits Venezuela, Bolivia,” USA Today, Sept. 28, 2007, http://www.usatoday.com/news/world/2007-09-27-iransouth-america_N.htm.

8

“Iran eyes enhanced cooperation in trade, technology with Paraguay,” Feb. 4, 2009, China View, http://news.xinhuanet.com/english/2009-02/04/content_10760997.htm.

9

Alexandra Olson, “Iran eyes Mexico in deepening Latin America ties.” Associated Press, Newsvine 26 February 2009, http://www.newsvine.com/_news/2009/02/26/2482481-iran-eyes-mexico-in-deepening-latin-america-ties.

10

Arthur Brice, “Iranian leader continues South American trip with Bolivia stop.” CNN, 24 November 2009, CNN, http://www.cnn.com/2009/WORLD/americas/11/24/iran.bolivia.visit/index.html.

11

Ibid.

12

Ibid.

13

6

Andrew Cawthorne, “Ecuador Says Iran Ties Landed It on Laundering List.” Reuters, 20 February 2010, http://www.reuters.com/article/2010/02/20/us-ecuador-money-idUSTRE61J2H220100220.

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o



2011 o

March 12, 2012

7

August 11: Relations between Argentina and Iran begin to thaw as Argentine President Cristina Fernandez openly welcomed Brazil’s efforts to resolve the dispute over Iran’s nuclear program and believes the Tehran declaration helps promote peace and dialogue.14 January 25: The relationship between Brazil and the U.S. had suffered during the past year as a result of Luiz Inacio Lula da Silva’s attempts to seek close ties with the Iranian government and efforts to mediate a solution in the international standoff over Iran’s nuclear program. However Brazil’s current president Rousseff has quickly distanced herself from Lula’s Iran policy and has done more than Lula to address human rights abuses in Iran and elsewhere.15

Venezuela Iran’s closest relationship is with Venezuela. Although both countries have very different guiding ideologies and political structures, they are bound by a common rejection of US leadership in the international system and by their significant petroleum exports, signified by their dual membership in OPEC. In the past decade Tehran and Caracas have engaged in a broad spectrum of commitments ranging from mutual diplomatic support to military exchange.

Venezuelan President Hugo Chavez has shown himself to be committed to Iranian sovereignty— supporting Iran’s nuclear program at the IAEA—and to Iran’s vision of an anti-Western coalition of developing states.

As long as Venezuelan President Hugo Chavez—or some successor with a similar ideology and hostility to the US—continues to define his role as one of opposition to the US, Washington has little hope of bettering its political position with Caracas or diminishing Iran’s close affiliation.

That being said, US-Venezuelan commercial ties are strong and provide links between both countries which help maintain an undercurrent of stability in the relationship. At present, the US need not be too concerned about this Iran-Venezuelan relationship, despite the threatening language used by both presidents. Mutual US-Venezuelan energy dependence mitigates the possibility of a more serious breach in relations.

Evolving US-Venezuela Relations Relations between the US and the Venezuela have been consistently strained ever since the ascendance of Hugo Chavez to the presidency in 1998. Chavez’s “Bolivarian Revolution” consists of nationalist and populist policies infused with a rejection of American “imperialism” in Latin America and the world at large. Like Iran, Venezuela has attempted to leverage its oil wealth in order to gain allies in opposition to US leadership in the hemisphere. Caracas promotes its PetroCaribe and PetroSur petroleum initiatives in order to encourage regional integration guided by the principles espoused by Chavez.16 Since Venezuela’s economic decline in 2009, this tactic has met with limited success.

14

M. Soroush, “Iran-Argentina Relations begin to thaw.” Tehran Times, 11 August 2010. http://www.tehrantimes.com/index_View.asp?code=224606.

15

“Obama to visit Brazil in sign of warmer ties.” Reuters, 25 January, 2011. http://www.reuters.com/article/2011/01/25/obamabrazil-idusn2523622520110125.

16

“Background Note: Venezuela,” U.S. State Department. 2 September 2011, http://www.state.gov/r/pa/ei/bgn/35766.htm.

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In 2010, a regional poll conducted by Latinobarometro, a Chilean nonprofit policy analysis group, showed that Chavez’s impact in Latin American states has precipitously declined during the last decade. Among leaders in the Americas he was rated second to last.17 Even in Bolivia and Argentina, traditional supporters of Chavez’s regime, the Venezuelan President received less than a 35 percent approval rating.18 Many of Chavez’s more grandiose projects for South America—including a pipeline to Argentina, a joint Venezuela-Iran development bank, and a continental investment fund—have been shelved since 2009. The Venezuelan government has not issued official statements regarding why the projects have been called off, but the reduced ambitions have coincided with the country’s present economic woes.19 During the Bush Administration US-Venezuela animosity was widely publicized and government officials viewed Chavez as a credible threat to regional stability in Latin America. In September 2008, President Chavez ordered the expulsion of the US Ambassador in Caracas and the US Government ordered the reciprocal expulsion of the Venezuela’s Ambassador to Washington.20 Tensions seemed to ease somewhat with the election of Barak Obama, and at the 2009 Summit of the Americas both nations agreed to pursue a relationship based on mutual interests. Political friction soon returned and culminated in the governments’ joint removal of their ambassadors in 2010. In recent years, with the decline of Venezuela’s energy-export dependent economy, Chavez’s stature as a pan-South American leader—and a potential threat to US interests—has been considerably undermined.

These sharp political disagreements between the US and Venezuela do, however, mask significant economic exchanges. According to Bancoex, the Venezuelan Bank of Commerce, the United States is Venezuela's most important trading partner and Venezuela is the US’s fifth largest export market in Latin America.21 US goods account for about 25% of Venezuelan imports and approximately 50% of Venezuelan exports go to the United States.22 Venezuela is the fourth largest supplier of foreign oil to United States and supplies about 11 percent of US crude oil imports. Petroleos de Venezuela, S.A. (PDVSA), Venezuela’s stateowned petroleum company, and its US subsidiary, CITGO, either wholly own or are part-owners of nine oil refineries throughout the United States.23 The US Energy Information Administration reports that in 2009 Venezuela supplied approximately 1.5 million barrels of crude oil and refined petroleum products to the US per day.24 17

Juan Forero, “Chavez’s Influence Wanes in Latin America.” Washington Post, 17 May 2011, http://www.washingtonpost.com/world/americas/chavezs-influence-wanes-in-latin-america/2011/05/13/AF2x785G_story.html.

18

Ibid.

19

Ibid.

20

“Background Note: Venezuela,” U.S. State Department. 2 September 2011, http://www.state.gov/r/pa/ei/bgn/35766.htm.

21

Ibid.

22

Ibid.

23

Cesar J. Alvarez and Stephanie Hanson, “Backgrounder: Venezuela's Oil-Based Economy.” Council on Foreign Relations, 9 February 2009, http://www.cfr.org/economics/venezuelas-oil-based-economy/p12089#p7.

24

Ibid.

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Despite the importance of the US-Venezuelan commercial and energy-based relationship, President Chavez has on occasion shown himself willing to jeopardize economic relations in order to advance his political agenda. In several cases Venezuelan companies have defied UN and US unilateral sanctions on Iran by continuing trade in proscribed goods and Chavez has also worked through OPEC, in solidarity with Iran, to keep oil prices artificially high.25 Evolving IRI-Venezuela Relations Iran’s relationship with Venezuela goes back to their role in founding OPEC in 1960. Though culturally and geographically distinct, both nations were drawn together by “petro-politics” and membership in an organization noticeably absent Western powers. Bilateral relations were significantly altered by the Islamic Revolution—the Venezuelan Government had a close relationship with the deposed Shah—and remained largely dormant until September 2000.26 In that year Iran’s President Khatami made the first visit by an Iranian head-of-state to Caracas since the 1979 Revolution. That official visit initiated the current close relationship between Iran and Venezuela. As illustrated by the chronology above, since that first meeting executive-level diplomatic exchange has become routine between the Islamic Republic and Venezuela.

As a result of the election of hardliner Mahmoud Ahmadinejad in 2005, Iran’s relationship with Venezuela intensified and became even more focused on resisting American international leadership. Employing their common rhetorical style, Presidents Ahmadinejad and Chavez have jointly criticized the United States for a myriad of abuses across the globe while praising their relations as a model for the new world order. On an official visit to the Islamic Republic, Chavez told a news conference that his country and Iran “will united defeat the imperialism of North America.”27 Ahmadinejad, visiting Venezuela in 2009, labeled Chavez “A brother who is resisting like a mountain the intentions of imperialism and colonialism.”28 The relationship remains significant and according to Air Force Gen. Douglas Fraser, the head of US Southern Command, it is based on “shared interests, such as access to military and petroleum technologies and avoiding international isolation.”29 Venezuela, and more specifically President Chavez, serves as the main nexus for Iran’s political engagement with Latin America. That nexus is institutionalized in the Bolivarian Alliance of the Americas (ALBA), of which Iran is an observer.

In addition to serving as a regional political hub for Iran, Venezuela may also serve as a transit point for arms and other technologies restricted under UN sanctions. Between 2005 and 2010 Venezuela acquired approximately $12 billion to $15 billion worth of weapons from Russia and 25

Anna Mahjar-Barducci “Venezuela Freezes Relations with U.S.; Triggers Oil Price Hike.” Hudson New York, 15 February 2011, http://www.hudson-ny.org/2199/venezuela-freezes-relations-with-us.

26

“Venezuelastan: Iran’s Latin American Ambitions.” Hudson Institute, 15 April 2010, http://www.hudson.org/files/publications/41510%20Venezuelistan%20Event%20Transcript.pdf.

27

Parisa Hafezi, “Iran, Venezuela in "Axis of Unity" Against U.S.” Reuters, 2 July 2007, http://www.reuters.com/article/2007/07/02/us-iran-venezuela-idUSDAH23660020070702.

28

“Chavez Welcomes Ahmadinejad in Venezuela.” CNN, 25 November 2009. http://articles.cnn.com/2009-1125/world/iran.ahmadinejad.venezuala_1_iranian-president-mahmoud-ahmadinejad-venezuelan-president-hugo-chavez-mrahmadinejad?_s=PM:WORLD. 29

Donna Cassata, “SOUTHCOM boss: Iran makes Latin America inroads.” Associated Press. 5 April 2011. http://www.navytimes.com/news/2011/04/ap-military-southcom-iran-makes-latin-america-inroads-040511/.

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China.30 While both permanent Security Council members have promised to halt arms sales to the Islamic Republic, US officials fear that Venezuela provides sellers a convenient third party to avoid sanctions.31 Iran and Venezuela have made energy sector cooperation the centerpiece of their economic relationship, but they actively pursue cooperation on many fronts. The two OPEC states established a joint petrochemical plant in 2007 and an oil company, Beniroug, in 2009. Iran has constructed an ammunition factory, a car assembly plant, a cement factory, and other fixed investments in Venezuela.32 Despite both countries deep political and economic commitments, Venezuela is only Iran’s fifth largest trade partner in Latin America, trailing behind less friendly powers like Argentina and Brazil.33 Iran and Venezuela also enjoy significant military cooperation. Since 2006, Iran has embedded its officers in the Venezuelan military and provides close support and training. Iran has also influenced Venezuelan military doctrine and strategic planning. According to David Myers, professor of political science at Pennsylvania State University, due to Iranian influence Venezuela has restructured its military along asymmetric lines—a fighting model more suited to combating a conventionally superior enemy like the United States.34 According to the US Department of the Treasury, Venezuela also indirectly supports Iran’s Lebanon-based proxy, Hezbollah. In 2008, Adam J. Szubin, Director of the Office of Foreign Assets Control, accused the Government of Venezuela of “employing and providing safe harbor to Hizballah facilitators and fundraisers.”35 The military relationship is further strengthened by numerous official commitments to solidarity in the face of possible Western aggression. On a visit to Caracas in 2009 Iranian Defense Minister Mostafa Mohammed-Najjar promised “full support to promote the Venezuelan military's defense capabilities in the framework of mutual defensive agreements.”36 As mentioned above, much of the force behind the Venezuela-Iranian relationship is driven by the personalities of Chavez and Ahmadinejad. The personal connection of both leaders has led to a strong bond between both nations, but it is also a vulnerability to the longevity of the alliance.

Without a substantial institutional framework to support continued exchange, the IranVenezuelan partnership is only as strong as its principal advocates. In light of Hugo Chavez’s

30

Anna Mahjar-Barducci, “Iran’s Ties with Venezuela: US Concerned, and Should Be.” Hudson New York. 13 April 2011. http://www.hudson-ny.org/2035/iran-ties-with-venezuela.

31

Ibid.

32

“Iran, Venezuela to launch joint oil company: report.” People’s daily online, 29 October 2009, http://english.peopledaily.com.cn/90001/90777/90854/6797976.html.

33

Jaime Daremblum, “Risky Business in Buenos Aires.” The Weekly Standard, 24 August 2011. http://www.weeklystandard.com/blogs/risky-business-buenos-aires_591324.html 34

Danielle Kurtzleben, “Iran-Venezuela ties worry US.” Asia Times Online, 12 August 2009. http://www.atimes.com/atimes/Middle_East/KH12Ak02.html.

35

“Treasury Targets Hizballah in Venezuela” U.S. Department of the Treasury Press Center, 18 June 2008, http://www.treasury.gov/press-center/press-releases/Pages/hp1036.aspx.

36

Danielle Kurtzleben, “Iran-Venezuela ties worry US.” Asia Times Online, 12 August 2009. http://www.atimes.com/atimes/Middle_East/KH12Ak02.html.

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ongoing battle with cancer, the future of Iran’s connection to Venezuela, and thus to Latin America in general, may be in doubt.

Venezuela’s Approach to Sanctions: Diplomatic and Practical Rejection The Venezuelan Government rejects the UN and unilateral sanctions placed on Iran’s nuclear program and works both diplomatically and covertly to undermine their effectiveness. After the passage of UNSCR 1929, which imposed the toughest round of UN sanctions on Iran to date, Venezuela issued a communiqué condemning the resolution for “attacking again the dignity [of Iran].”37 The document states that Venezuela promises “unrestricted support for the legitimate aspirations” of Iran for the use of nuclear energy for peaceful purposes.38 Several months later, in October 2010, President Chavez promised that his nation “will back Iran under any circumstances and without conditions.”39 Chavez’ rhetoric is matched by the business practices of PDVSA, Venezuela’s state-run oil company. Reuters reports that in the face of UN sanctions barring the sale of gasoline to Iran “PDVSA delivered at least two cargoes of reformate, a gasoline blending component, to Iran between December 2010 and March 2011 worth about $50 million.”40 The US responded in May 2011 by barring PDVSA from access to US export financing and government contracts, but because the sanctions do not affect the activities of CITGO, the company’s US subsidiary, the measures are seen as largely symbolic.41 Just as the severity of US sanctions placed on Caracas was constrained by America’s need for Venezuelan oil, Venezuela, dependent on the US market, was limited to verbal criticism of the US for initiating sanctions.

Venting his anger with the US to followers of his Twitter account, Hugo Chavez wrote, “Sanctions against the Fatherland of Bolivia? Imposed by the Gringo imperialist? Well, welcome Mr. Obama, don't forget we are the children of Bolivar!”42 Despite the President’s public anger, Venezuelan Oil Minister Rafael Ramirez said in a nation-wide broadcast that PDVSA guaranteed oil shipments to its U.S. subsidiaries.43 In addition to Venezuela’s flouting of UN sanctions, the US is also concerned about the cargo and passengers that transit between Iran, Venezuela, and Syria aboard Venezuela’s Conviasa Airlines. Though the weekly flight between Caracas, Tehran, and Damascus is listed as a commercial route, Fox News reports that passengers are specially vetted by the Venezuelan and Iranian governments and the procedure for booking a flight is different than all other Conviasa flights.44 37

“Background Note: Venezuela,” U.S. State Department. 2 September 2011, http://www.state.gov/r/pa/ei/bgn/35766.htm.

38

Ibid.

39

Ibid.

40

Andrew Quinn and Frank Jack Daniel, “U.S. sanctions Venezuela oil giant for Iran trade.” Reuters, 24 May 2011. http://www.reuters.com/article/2011/05/24/us-iran-usa-sanctions-idUSTRE74N47R20110524.

41

Ibid.

42

Ibid.

43

Andrew Quinn and Frank Jack Daniel, “U.S. sanctions Venezuela oil giant for Iran trade.” Reuters, 24 May 2011. http://www.reuters.com/article/2011/05/24/us-iran-usa-sanctions-idUSTRE74N47R20110524.

44

Ed Barnes, “Exclusive: Venezuela Cancels Round-Trip 'Terror Flight' to Syria and Iran” Fox News, 14 September 2010. http://www.foxnews.com/us/2010/09/14/terror-flight-venezuela-iran-illicit-arms-hezbollah-hamas-protest/.

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There are serious uncertainties surrounding the nature of such flights as passengers are not subject to immigration and customs controls and cargo manifests are not made public.

Intelligence agencies of the US and other states such as Brazil believe the Conviasa flight may be used to ferry Iranian sponsored terrorists and military materiel between the three capitals. It was reported that Abdul Kadir, the Guyanese national who attempted to explode fuel tanks at JFK International Airport in New York, had planned to board a Conviasa flight to Iran from Venezuela before he was arrested in Trinidad.45 Undocumented travel may also affect Iran’s capacity to produce a nuclear weapon because Venezuela is estimated to possess approximately 50,000 tons of reserve uranium ore. In the past, Iran has actively helped to extract Venezuela’s fissile material which it needs to supplement its own limited domestic supply.46 While the verbal battles of Venezuela and Iran with the US continue—and are likely to do so as long as Venezuela has any leader like Chavez—economic realities, and the fragility of leaderbased political ties temper the real strategic threat of the Venezuela-Iranian alliance to the US. Venezuela is far more annoying in other ways, and the other aspects of US and Iranian competition are far more serious.

Other ALBA States: Ecuador, Bolivia, and Nicaragua Like Iran’s relationship with Venezuela, its relations with other ALBA states like Ecuador, Bolivia, and Nicaragua are built on a mutual ideological rejection of the current international order in general, and American leadership in particular. Unlike Venezuela, however, Ecuador, Bolivia, and Nicaragua lack Venezuela’s critical resources and regional influence. From these poorer countries Iran aims to build a Latin American network upon which it can rely to diffuse diplomatic and economic pressure and, potentially, to base Iranian intelligence and paramilitary assets in the Western hemisphere.

So far Iran’s many “memorandums of understanding” with these nations have translated into few actual projects. Such limited success brings into question whether the Islamic Republic is advancing its strategic ends by supporting impoverished states on the opposite side of the world.

Bolivia, Ecuador, and Nicaragua are not the only Latin American states that fit this mold, but they serve as useful proxies for the IRI approach to ideologically receptive, yet resource deficient peripheral partners.

Ecuador In addition to both countries’ participation in OPEC, the partnership between Iran and Ecuador is largely based on the personal relationship of Ecuadorian President Rafael Correa and Ahmadinejad shepherded by Venezuela’s Hugo Chavez.47 President Correa signed 25 bilateral agreements with the government of Iran in 2008 in order to secure financing agreements to ease trade and fund badly needed civil works projects. In late 45

Jose Cardenas, “Sanctioning Venezuela’s Aero-Terror.” Foreign Policy, 23 June 2011. http://shadow.foreignpolicy.com/posts/2011/06/23/sanctioning_venezuela_s_aero_terror.

46

Richard Javad Heydarian, “Iran’s Adventures in Latin America.” FPIF, 18 November 2010. http://www.fpif.org/articles/irans_adventures_in_latin_america.

47

Roni Sofer, “Israel: Ties to South America aiding Iran's nuclear program.” Ynet News, 25 May 2009, http://www.ynetnews.com/articles/0,7340,L-3721335,00.html.

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2009 Ecuador was forced to start rationing power and turned to Iran for a loan to construct hydroelectric power plants to remedy the shortages.48 The US has been able to reduce some of the financial connections made between Iran and Ecuador by threatening sanctions and the seizure of money held abroad.49 Ecuador uses the US dollar as its currency and like many Latin American states it is much more dependent on its existing economic relationships than the promises of the IRI. That being said, Iran’s trade with Ecuador increased from $6 million to $168 million between 2007 and 2008, according to the American Enterprise Institute (AEI). Correa remains determined to increase broad-based support for Iran. According to the news service of the Presidency of Iran, in September 2010, Ecuador’s foreign minister Ricardo Patino told President Ahmadinejad that his country “shows special reverence for Iran and calls for the increase of co-operations for the two countries at all levels.”50 An element of potential Iran-Ecuadorian cooperation of particular interest to the US government is narco-terrorism, particularly the possibility of some form of a drug nexus between Iran, Hezbollah, and Ecuador. In March 2010, the DEA released a statement linking Hezbollah to drug trafficking in the Americas.51 With the potential support of friendly governments in South America, the Iran-backed terrorist organization may be able to more effectively amass operational funding from the sale of drugs to the West.

While there are serious impediments to strategically significant cooperation between Iran and Ecuador, it appears that as long as Correa—or someone with a similar populist, anti-Western ideology—is in power, bilateral relations will continue to strengthen. The danger to the US may remain superficial, but as is the cases with all of Iran’s other efforts to expand its influence at the periphery, it is a relationship the US should closely monitor.

Bolivia Like Ecuador, Bolivia is an open supporter of Iran’s nuclear program. It seeks to develop enhanced economic ties, and criticizes Western “imperialism.” Also like Ecuador, however, the bonds between La Paz and Tehran remain largely symbolic. Iran has made concrete investments in Bolivia, but its promises of aid far outstrip its delivered benefits. The Bolivian leadership, under pressure because of the country’s widespread poverty, wants to maintain Iran as a benefactor, but elements of the government have pushed back because of Iran’s checked human rights record.

The relationship between Bolivian President Evo Morales and Iran’s Ahmadinejad has been guided by Venezuelan President Hugo Chavez. Chavez helped facilitate the meeting of the two leaders and perpetuates cooperation through the Bolivarian Alliance of the Americas.52 In 2008, 48

“Ayatollahs in the Backyard.” The Economist, 26 November 2009, http://www.economist.com/node/14969124.

49

Ibid.

50

Jose Cardenas, “The Chávez Model Threatens Ecuador.” AEI Outlook Series. March 2011. http://www.aei.org/outlook/101037.

51

Anthony P. Placido, “Transnational Drug Enterprises (part ii): Threats to global Stability and U.S. Policy responses.” DEA Public Affairs, 3 March 2010. http://www.justice.gov/dea/pubs/cngrtest/ct030310.pdf 52

Rudi Guraziu, “Exchange.” International Business and Diplomatic Exchange. December 2010. http://www.ibde.org/attachments/EXCHANGE%20Issue%202%20December%202010.pdf.

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Iran opened an embassy in La Paz and Bolivia reciprocated by moving its diplomatic mission from Cairo to Tehran in 2010.

Despite its hydrocarbon and mineral deposits, Bolivia is South America’s poorest country and welcomes Iranian investment in exchange for political support.53 In 2008, Evo Morales granted visa-free travel to Iranian citizens in exchange for a $1.1 billion investment over five years in Bolivian natural gas facilities, agriculture and humanitarian affairs.54 Like the IRI’s deal with Venezuela’s Conviasa Airlines, the relaxed travel restrictions make it much easier for Iran to use the country as a potential forward base for covert operations.

According to AEI, Iran has funded the construction of several small to mid-scale projects in Bolivia’s industrial, agricultural, and healthcare sectors including: two cement factories, six milk-processing plants, and three health clinics.55 In partnership with Venezuela, Iran has also established an Iranian television network in Bolivia to enhance its cultural footprint in the country.56 The level of progress in actually making the bulk of Iran’s promised $1.1 billion investment is largely unknown. In July 2009 Iran’s top representative to Bolivia announced that Tehran had approved a $280 million loan to develop Bolivia’s energy sector, but how or if the balance of the promised funds will be spent remains a mystery. 57 According to research done by the CSIS Americas Program, the only public records of how money has been spent are presidential announcements of programs.

Bolivia’s potential mineral wealth may have implications for Iran’s nuclear program. Bolivia is thought to possess moderate uranium deposits and exploratory programs have been launched to determine the feasibility of extraction. The Morales government has denied that Iran is a partner in the process, but Tehran has officially offered to provide technical assistance for the future construction of a Bolivian nuclear power plant.58 Iran-Bolivian military cooperation takes the form of arms sales and investment. Iran reportedly helped finance the creation of a multinational military training center located in the Bolivian town of Warnes. The training center is a Venezuelan initiative though ALBA to counter the influence of US training programs in Latin America. The day before the facility opened in December 2010, President Morales remarked: Until recently, the only ones that created training schools for defense and security were the North Americans and they did so where they wished and without asking anyone’s permission. A clear example of this is the School of the Americas, whose object was to implant a mental framework, 53

“Bolivia.” CIA World Factbook. 21 October 2011. https://www.cia.gov/library/publications/the-world-factbook/geos/bl.html.

54

John Kiriakou, “Iran’s Latin America Push.” The Los Angeles Times, 8 November 2008. http://www.latimes.com/news/opinion/la-oe-kiriakou8-2008nov08,0,878526.story 55

Ariel Farrar-Wellman, Robert Frasco, “Bolivia-Iran Foreign Relations.” AEI Iran Tracker, 4 August 2010, http://www.irantracker.org/foreign-relations/bolivia-iran-foreign-relations#_ftn8.

56

Bolivia Overview,” The American Foreign Policy Council’s World Almanac of Islamism, 14 July 2011. http://almanac.afpc.org/Bolivia.

57

“Iran loans Bolivia 280 million USD to develop industry and energy sector.” Merco Press, 31 July 2009. http://en.mercopress.com/2009/07/30/iran-loans-bolivia-280-million-usd-to-develop-industry-and-energy-sector.

58

“Bolivia to Buy Warplanes, Helicopters from Iran.” Latin American Herald Tribune. 2 November 2010, http://www.laht.com/article.asp?ArticleId=374965&CategoryId=14919.

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to indoctrinate our Armed Forces to defend imperial interests, besides serving to divide soldiers and their people.59

Maria Alejandro Prado, Bolivia’s opposition congressional deputy, described the training facility as a location for militant political groups to exchange information, while Defense Minister Cecilia Chacon countered saying that it will supply informal education to rural and indigenous people.60 The similarities in the worldviews of Ahmadinejad and Morales provided a footing for bilateral relations, but they do not necessarily guarantee stability. The Bolivian government chiefly values its partnership with Iran because it presents an opportunity for economic development outside of a framework dictated by the United States. But if Iranian aid diminishes, it is not clear that Morales will continue to give preferential treatment to Iran purely on ideological grounds, especially if the US makes cooperation economically and politically unpalatable.

Nicaragua Nicaragua and Iran have a shared revolutionary past, and their present cooperation is built on old partnerships and promises of mutual development akin to those made by Iran to Ecuador and Bolivia.

Both the Islamic Revolution in Iran and the Sandinista’s seizure of power in Nicaragua occurred in 1979, and participants in those revolutions then expressed solidarity in overturning the establishment. Both revolutionary governments maintained cordial relations until the Sandinistas were removed from power as a result of free elections in 1990. In 2007, Daniel Ortega, President of Nicaragua during the Sandinista regime, returned to power. The attendance of Mahmoud Ahmadinejad at the Ortega’s inauguration signaled the return to normalized relations between Nicaragua and Iran.

Throughout 2007, officials from both countries began to put together a series of agreements to promote economic exchange and Nicaraguan development. In return for access to Nicaraguan commodities, Iran promised to finance projects including: hydroelectric plants, a tractor factory, a health clinic, low-income housing, and renovations to the western port of Corinto.61 Bilateral economic cooperation is not without friction, however, because of Nicaragua’s debts to Iran and its need to maintain trade relations with the US. The Iran Independent News Service reports that Iran is owed some $164 million for oil it exported to Nicaragua in 1986.62 The Ortega government has not taken obvious steps to pay off the debt and Iranian critics of the Latin American partnership question its political and economic value.63 59

“Se inaugura en Bolivia Escuela de Defensa de países “bolivarianos.” ABC Digital, 1 June 2011, http://www.abc.com.py/nota/se-inaugura-en-bolivia-escuela-de-defensa-de-paises-bolivarianos/.

60

“Bolivia introdujo en la región a un socio muy peligroso, Irán.” ABC Digital, 10 February 2011, http://www.abc.com.py/nota/bolivia-introdujo-en-la-region-a-un-socio-muy-peligroso-iran/.

61

“Iran to build $230 million hydroelectric dam in Nicaragua.” The Star Online, 14 March 2008. http://thestar.com.my/news/story.asp?file=/2008/3/14/apworld/20080314082154&sec=apworld.

62

“Nicaraguan debt to Iran becomes 25 years old, report.” Iran Independent News Service, 11 June 2011, http://www.iranwpd.com/index.php?option=com_k2&view=item&id=1725:nicaraguan-debt-to-iran-becomes-25-years-oldreport&Itemid=66.

63

Meir Javedanfar “Iran’s Failed Latin American Outreach,” The Atlantic, 22 July 2011, http://www.theatlantic.com/international/archive/2011/07/irans-failed-latin-america-outreach/242331/.

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Increased sanctions on the Export Development Bank of Iran (EDBI) have also threatened to undermine relations. Nicaragua supported Iran’s nuclear efforts in 2007 by openly opposing UN Security Council sanctions, but it was careful not to jeopardize its trade relations with the US. Since the EDBI has been linked to the Iranian defense sector, the Ortega government may be forced to limit partnership with Tehran. The uncertainty of the Islamic Republic’s ability and will to fulfill its commitments of aid to Nicaragua also undermine the relationship’s sustainability.

In the past, the US has overestimated the strength of the Iran-Nicaragua alliance. In the late 2000s, US officials feared that Iran had setup a massive embassy in Managua staffed with “more than 100 Iranian agents.”64 Though Iran had mentioned its intention to create such a station, presently Iran maintains a humble diplomatic mission in Nicaragua, especially compared with the massive US complex in Managua.65 Nicaragua and Iran have historical bonds and a similar negative outlook of the US and Western international leadership, but Nicaragua’s poverty and military insignificance place it on the periphery of Iran’s peripheral allies. Notably, the revamped relationship between the IRI and Nicaragua coincided with the return of the Sandinistas and Daniel Ortega to power, as with the cases of Iran’s other Latin American partners, leader-to-leader relations are an essential and vulnerable component of the alliance.

Argentina Argentina, like Brazil, illustrates the present limitations of Iran’s reach into Latin America.

Moderate countries are willing to pursue economic cooperation with the IRI, but are not willing to provide lasting political support that may jeopardize their relationship with status quo powers.

Iran has reached out to Argentina in order to diversify its Latin American connections with limited effect. While both countries have increased bilateral trade, relations remain complicated by international pressure and Iran’s possible involvement in terrorist attacks against Argentine Jews in the 1990s. Argentina is not a member of Chavez’s ALBA and its foreign and domestic policies lack the overtly anti-American sentiments that serve to help Tehran reach out to other states in the Americas.

Argentina is Iran’s second largest trading partner in Latin America and commercial activity has significantly increased within the last five years. From 2007 to 2008, bilateral trade jumped from $30 million to around $1.2 billion—a 97% percent increase. The relationship heavily favors Argentina: in 2009 Argentina exported $855.4 million, while it imported just $9.4 million from Iran. The lopsided balance of trade signals Iran’s motives for increasing economic activity most likely extend beyond pure commercial interests.66 Cooperation between Argentina and Iran outside of the economic sphere is impaired by unresolved questions surrounding the bombings of the Israeli embassy in Buenos Aires in 1992 and a Jewish community center in 1994. The Iranian sponsored terrorist group Hezbollah was 64

“Venezuelastan: Iran’s Latin American Ambitions.” Hudson Institute, 15 April 2010, http://www.hudson.org/files/publications/41510%20Venezuelistan%20Event%20Transcript.pdf.

65

Anne-Marie O'Connor and Mary Beth Sheridan, “Iran's Rumored Nicaraguan 'Mega-Embassy' Set Off Alarms in U.S.” The Washington Post, 13 July 2009, http://www.washingtonpost.com/wp-dyn/content/article/2009/07/12/AR2009071202337.html.

66

UN Comtrade Statistics 2009

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implicated as the culprit behind both bombings and the Argentine government formally accused Iranian officials, including then President Akbar Rafsanjani, of masterminding the attacks.

Iran denies participation in the bombings and in 2004 President Khatami refused to meet with Argentine President Nestor Kirchner at a G15 summit unless Argentina officially apologized for accusing Iran of collaboration.67 As recently as July 2011, Iran’s Foreign Ministry issued a statement condemning the attacks while refusing to acknowledge responsibility: The Islamic Republic of Iran, as one of the major victims of terrorism, condemns all acts of terror, including the 1994 AMIA bombing and, offers sympathy with the families of the victims of the explosion…Iran’s Foreign ministry expresses regret that 17 years on from the occurrence of this crime, the truth behind it has not been reveled yet and the identities of its real perpetrators are still shrouded in mystery.68

The diplomatic breach created by the bombings has had regional consequences. In 2007, President Kirchner refused to attend the inauguration of Ecuadorian President Rafael Correa because Iranian President Ahmadinejad had been invited. Similarly, the Argentine government lodged a complaint with the Bolivarian Foreign Ministry when it was learned that Iranian Defense Minister Ahmad Vahidi, one of the IRI officials implicated in the bomb plots, had been invited to participate in the opening of the ALBA military school there. Argentine Foreign Minister Hector Timerman successfully persuaded the Bolivian government to ask Vahidi to leave. Later, Bolivia’s Foreign Minister David Choquehuanca and President Evo Morales both apologized to Argentina for having made the invitation.69 For the time being, a meaningful political relationship between Iran and Argentina remains blocked by this issue.

Argentina is not likely to risk political capital to support Iran’s regional or nuclear ambitions, but it does appear determined to maintain a growing commercial relationship, as long as sanctions do not require a choice between partnership with Iran and access to other more lucrative markets.

The Argentine-Iranian political relationship will most likely remain inhibited—and strategically benign to the US—as long as Iran continues to rebuff Argentine investigations of the 1990s bombings.

Brazil Brazil lacks the nascent anti-Americanism that serves as a foundation for so many of Iran’s partnerships throughout the region. Nevertheless, Iran hopes to form bonds with Brazil based on commercial exchange, both countries’ common status as developing regional powers, and Brazil’s desire for global influence as a non-aligned state. The United States works to deemphasize Iran’s influence on Brazil by encouraging Brazilian participation in the international status quo and by portraying Iran as increasingly self-isolating.

The most notable example of Brazil’s role in US-Iranian competition came in 2010 during the run-up to the new round of UN sanctions that would become UNSCR 1929. Brazil, along with Turkey—a state similar to Brazil in its aspirations for regional preeminence and global 67

Injustice breeds terrorism, says Khatami.” Dawn Internet Edition (Reuters), 29 February 2004, http://archives.dawn.com/2004/03/01/int8.htm.

68 69

“Iran regrets AMIA probe distortion.” PressTV, 21 July 2011, http://www.presstv.ir/detail/190162.html.

“Bolivia tells Iranian Defence minister to leave and apologizes to Argentina.” Merco Press, 1 June 2011, http://en.mercopress.com/2011/06/01/bolivia-tells-iranian-defence-minister-to-leave-and-apologizes-to-argentina.

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importance—organized an alternative bargain with Iran whereby the IRI would exchange 1,200 kilograms of low enriched uranium for 120 kilograms of fuel rods it could use in a medical research reactor.70 The deal would have left Iran with the potential “breakout capacity” to obtain enough fissile material needed to produce nuclear weapons, and was rejected by the US and its partners pushing for sanctions at the UN. The alternative deal fell through and Brazil voted against UNSCR 1929 when proposed before the Security Council, but at the same time Brazil agreed to abide by the sanctions once they were passed by the permanent members. Brazil’s break with the status quo was symbolic rather than substantive. The Brazilian government intended to make known its political independence from the West, but at the same time independence did not translate into wholehearted support for Iran or a costly rejection of valuable economic partners.

Brazil is Iran’s largest trade partner in Latin America and past governments have actively pushed for enhanced economic relations. In 2007, the Brazilian government under President Da Silva vowed it would pursue policies to increase bilateral trade with Iran by as much as $10 billion in the coming years.71 In November 2010, bilateral trade stood at $1.3 billion.

That said, Brazil’s state-controlled oil major Petrobras, a critical player in the economic linkages between Brazil and Iran, announced in 2010 that it would suspend investment in the IRI. While the company claimed the move was based purely on “technical evaluations”, it is reasonable to assume that the increased pressure of widespread intentional sanctions in addition to the absence of significant oil deposits contributed to the turn around.72 A changed political stance under the new presidency of Dilma Rousseff may also dampen Iran’s hopes for sustained growth of the political and economic partnership. While Rousseff has not shown herself to be an enthusiastic supporter of the West, she is openly critical of Iran’s human rights abuses and has created greater distance between Brasilia and Tehran than her predecessor.73 Brazil under Rousseff appears poised to pursue a middle path which remains independent of the U.S. or Iran and its anti-American Latin allies. The leadership of Brazil will first and foremost protect its economic interests and its aspirations for prominence in a multipolar world.74

Africa and Other Peripheral States Driven by the same strategic principles that underpin its missions in Latin America, Iran seeks to spread its influence to other peripheral states, particularly in sub-Saharan Africa. Whereas historically rooted anti-American sentiment provides the main point of connection for Tehran with Latin American countries, the situation is different in Africa. The IRI generally stresses religious commonality and offers cheap oil as an incentive for stronger relations.

70

“Bad nuclear deal with Brazil and Turkey hands Iran a diplomatic coup.” The Washington Post, 18 May 2010, http://www.washingtonpost.com/wp-dyn/content/article/2010/05/17/AR2010051703455.html.

71

Richard Javad Heydarian, “Iran’s Adventures in Latin America.” FPIF, 18 November 2010. http://www.fpif.org/articles/irans_adventures_in_latin_america.

72

Brian Ellsworth and Denise Luna, “Brazil's Petrobras sees few prospects for Iran oil.” Reuters, 3 July 2009, http://www.reuters.com/article/2009/07/03/petrobras-international-idUSN0317110720090703.

73

Alexcander Ragir, “Rousseff like Lula on Mideast Keeps Brazil-U.S. Ties Chilled.” Bloomberg, 21 September 2011, http://www.bloomberg.com/news/2011-09-21/rousseff-like-lula-on-mideast-keeps-brazil-u-s-ties- chilled.html.

74

Ibid.

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U.S. aid to many African nations creates strong barriers to countries courted by Tehran. As such, Iran’s African presence is at this point largely superficial: an impressive number of diplomatic missions, the construction of small commercial enterprises, and promises of greater cooperation.

Notably, Iran’s diplomatic progress has also been hindered by discoveries that it may be using African nations as transshipment points for arms exchanges with or without the knowledge of host governments.

Iranian ventures into Africa are also spurred by the country’s need for a source of uranium to fuel its nuclear program. According to Real Clear World’s Ilan Berman: Iran's aging uranium stockpile, which the Islamic Republic acquired from South Africa in the 1970s, is mostly depleted. According to a confidential intelligence summary from an unnamed International Atomic Energy Agency (IAEA) member state this past February [2011], the Islamic Republic has focused on Africa, home to a number of key uranium producers including Zimbabwe, Senegal, Nigeria and the Democratic Republic of Congo.75

In order to achieve its interests in Africa, Iran is forced to compete not just with the United States, but also with Israel. Israel has a long history of diplomatic, economic and security-based relations with Africa and its continent-wide diplomatic efforts hinder Iranian expansion.76 But Iran has made recent gains in Africa at Israel’s expense.

In March 2010, Iran drew closer to Mauritania—one of only three Arab states with formal diplomatic relations with Israel—when the West African nation severed its ties with Jerusalem over Israel’s invasion of Gaza.77 In September 2011, President Ahmadinejad met with Mauritanian President Mohamed Ould Abdel Aziz and discussed the need for multilateral cooperation through the Organization of Islamic Cooperation and the Non-Aligned Movement.78 Aziz proclaimed his support for Iran’s “right to access peaceful nuclear energy” and Ahmadinejad vowed to pursue responsible resource based economic cooperation with Mauritania in contrast to the “exploitative” practices of “Western countries.”79 Though Iran uses Muslim solidarity as a key point of its strategic outreach, African Muslims are overwhelmingly Sunni and sectarian differences with Iran’s Shi’as complicate relations.

According to the Economist, Iran conducted 20 ministerial or grander visits to Africa in 2009.

Figure 13.2 depicts the African nations with which Iran has been strengthening its relations, as well as countries visited by Israel’s foreign minister:

75

Ilan Berman, “Iran’s Bid for Uranium.” Real Clear World, 24 May 2011. http://www.realclearworld.com/articles/2011/05/24/irans_bid_for_africas_uranium_99532.html.

76

Chris Zambelis, “Iran Deals itself into African Game.” Asia Times, 17 January 2011, http://atimes.com/atimes/Middle_East/MA13Ak04.html.

77

Ibid.

78

“Iran, Mauritania call for enhanced ties.” PressTV. 26 September 2011, http://www.presstv.ir/detail/201175.html.

79

Ibid.

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Figure 13.2 Map of Iran in Africa80

Iran’s dealings with the countries highlighted in Figure 12.2 vary in intensity. This report does not list every potential Iranian partner but rather presents several cases of Iranian expansion in order to depict an overarching Iranian strategy in Africa and how that strategy has fared to this point.

In September 2010, Tehran hosted a two-day Iran-Africa summit designed to promote broad based engagement. In attendance were heads of state and diplomats, as well as business and cultural leaders from over 50 African nations.81 Appealing to the Non-Aligned sentiments of many African leaders, President Ahmadinejad used the occasion to praise the potential for greater cooperation and the possibility that Iran and African states might create a world order based on “respect for nations’ rights and dignity.”82 Despite Iran’s stepped up engagement in Africa, its reach is limited by several factors. First, Iran does not have the resources to match the economic, diplomatic, and humanitarian footprint left by other major powers interested in Africa, namely the U.S. and China. Second, though many African states welcome Iranian offers of enhanced economic relations, it is unlikely that they will forge a bond with Tehran if such support seriously jeopardizes preexisting relationships with wealthier, more stable powers. Third, Iran’s covert arms business and its complex relationship with proxy militant forces complicate its regional relationships. Finally, Iran’s economic 80

“A Search for Allies in a Hostile World.” The Economist, 4 February 2010, http://www.economist.com/node/15453225.

81

Chris Zambelis, “Iran Deals itself into African Game.” Asia Times, 17 January 2011, http://atimes.com/atimes/Middle_East/MA13Ak04.html.

82

Ibid.

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ambitions for Africa are constrained by internal economic disorganization and external pressure from sanctions. Tehran’s inability to deliver on promised projects further damages its standing.

As previously mentioned, Iran’s strategic approach to Africa is broadly designed to diffuse the diplomatic and economic pressure of competition with the West and to craft a set of long-term allies opposed to the present international order. Although this competition plays out differently in every country involved, several countries serve as instructive models of how the U.S. and Iran compete in the African periphery. 

In Senegal and Gambia Iran sought to cultivate new allies, but for myriad reasons has seen its influence recede.



Morocco has positioned itself in opposition to Iran and has drawn closer to the Saudi-led GCC, which competes with Iran for regional influence in the Gulf. Iran maintains a tenuous relationship with South Africa strengthened by historical and economic ties, but weakened by Iranian human rights abuses and by international pressure over the nuclear issue.



Finally, Iran has a Chavez-style ally in Zimbabwe’s Robert Mugabe, but internal political division within Zimbabwe along with U.S. pressure impede full cooperation.

Senegal and Gambia Since the early 2000s Iran has looked to countries in West Africa as potential sources of economic and diplomatic support, but severe political missteps and unfulfilled promises have undercut Tehran’s decade of gains. Tehran has employed a mix of economic incentives, calls to Muslim solidarity, and anti-Western rhetoric to increase its presence in Senegal and Gambia. In 2009 Iranian President Ahmadinejad declared that “countries like Iran, Brazil, Venezuela, Bolivia, Gambia and Senegal have the ability to establish a new world order.”83 Senegal, once a country aggressively pursued by the IRI for greater economic cooperation and diplomatic support, severed diplomatic relations with Tehran in early 2011. It did so upon learning that the Islamic Republic probably supplied separatists in its Casamance region with arms used to kill three Senegalese soldiers.84 A report delivered to Senegalese President Abdoulaye Wade by the army chief of staff detailed that the Casamance Movement of Democratic Forces (MDDC) were using sophisticated weapons and ammunition forensically traced to Iran.85 Wade issued a statement saying “Senegal is outraged to see that Iranian bullets caused the death of three Senegalese soldiers.”86 The revelation fits into a pattern of

83

Simon Maro, “Senegal - Iran: From friendship to diplomatic war.” Afrik News, 25 February 2011, http://www.afriknews.com/article19020.html.

84

“Senegal severs ties with Iran.” Al Jazeera, 23 February 2011. http://english.aljazeera.net/news/africa/2011/02/201122392022223897.html.

85

“Senegal ends relations; says Iran arms rebels.” International Iran Times, 3 March 2011, http://www.irantimes.com/english/index.php?option=com_content&view=article&id=1407:senegal-ends-relations-says-iranarms-rebels&catid=98:whats-left&Itemid=425.

86

“Senegal severs ties with Iran.” Al Jazeera, 23 February 2011. http://english.aljazeera.net/news/africa/2011/02/201122392022223897.html.

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controversial arms shipments emanating from Iran to customers throughout the African continent.87 In October 2010, Nigerian officials intercepted thirteen shipping containers of weapons including 107mm artillery rockets, rifle rounds, and various small arms. The cargo had been labeled “Building Materials” and according to the Nigerian investigation that followed, the consignment originated from Iran and was intended for Gambia. In response to the discovery, in November 2010 the Gambian government cut diplomatic ties with Iran and expelled Iranian diplomats from the country.

In February 2011, Iran admitted it had shipped the containers and claimed the cargo was part of secret agreement made between Tehran and Banjul, but it denied that it broke UN sanctions prohibiting arms sales because the deal had been contracted in 2008, two years before the imposition of restrictions.88 Before the rapid collapse of relations, both Senegal and Gambia had been promising peripheral relationships for Iran. Senegal especially was one of Iran’s most active African partners.

President Wade and other Senegalese officials visited Tehran and received Iranian delegates on numerous occasions and in 2007-2008 both countries took significant steps to increase economic and specifically energy-related cooperation. During the summer of 2007 Tehran and Dakar reached agreements to open an Iranian-backed oil refinery, a chemical plant, and an $80 million car assembly plant, Seniran Auto, in the city of Thies.89 Iran also pledged to sell Senegal oil for a year on preferential credit terms and purchase a 34% stake in Senegal’s oil refinery.90 Reciprocating Iran’s moves toward a closer partnership, Wade publically endorsed Iran’s nuclear program in 2007. Gambia, which also supported Iran’s right to develop peaceful nuclear capabilities, enjoyed positive relations with Iran built largely on a shared feeling of Western abuse and increasing bilateral exchange.91 The motivation behind Iran’s supply of Senegalese rebels remains unclear and some question the conclusions drawn by Senegal’s forensic teams. Despite the unknown veracity of the findings, Iran’s meddling has led to a significant backslide in its attempts to gain a foothold in West Africa.

In addition to Iran’s possible role as a source of regional instability, African leaders may also be pulling back from Iran over questions concerning the capability of the IRI to deliver on its promises of enhanced economic partnership. According to the news agency Afrik, the $80 million Seniran Auto plant in Senegal has failed to meet production expectations. As of February 2011, “The company has, since its inception, sold about fifty cars to individuals. And by virtue 87

“Senegal severs ties with Iran.” Al Jazeera, 23 February 2011. http://english.aljazeera.net/news/africa/2011/02/201122392022223897.html.

88

Anna Mahjar-Barducci, “Iran’s charm offensive in Africa.” Hudson New York, 18 March 2011, http://www.hudsonny.org/1974/iran-charm-offensive-africa.

89

“Iran to build oil refinery and chemical plant in Senegal.” Gulfnews.com (Reuters), 3 August 2011. http://gulfnews.com/business/oil-gas/iran-to-build-oil-refinery-and-chemical-plant-in-senegal-1.194031.

90

“Iran to Expand Senegal Refinery.” Arabian Business.com (Reuters), 28 August 2007, http://m.arabianbusiness.com/iranexpand-senegal-refinery-56937.html.

91

Anna Mahjar-Barducci, “Iran’s charm offensive in Africa.” Hudson New York, 18 march 2011, http://www.hudsonny.org/1974/iran-charm-offensive-africa.

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of a taxi renewal operation launched by the government, the car company was able to sell 1000 cars.”92

Morocco US-Iranian competition for influence in Morocco centers around a struggle between political and commercial interests. Morocco is a strong political ally of the US and its government has openly turned its back on Iran by cutting diplomatic ties in 2009. But despite Rabat’s distance from Tehran diplomatically, both countries’ production of critical resources—Iran’s crude oil and Morocco’s phosphates (potentially used a secondary source for uranium)—signal that commercial engagement is unlikely to lessen.93 The United States’ relationship with Morocco is strong and rooted in historical friendship which dates back to the Treaty of Peace and Friendship of 1787. The relationship has been maintained through sustained high-level dialogue between the Kings of Morocco—most recently King Hassan II and now his son King Mohammed VI—and successive US administrations. According to the US State Department, Morocco is considered “a major non-NATO ally” through its contribution to “UN-led multilateral peacekeeping operations… and major bilateral exercises on the African continent.”94 The US-Moroccan relationship is further cemented by the provision of foreign assistance. The State Department reports: “The U.S. Agency for International Development (USAID) and its predecessor agencies have managed an active and effective assistance program in Morocco since 1953 exceeding $2 billion over its lifetime. The amount of USAID assistance to Morocco in FY 2009 was $18 million, with an estimated $24.5 million allotted for FY 2010.”95 The close ties between the US and Morocco are mirrored by growing political distance between the Arab Kingdom and the Islamic Republic of Iran. The physical distance between Morocco and Iran gives it more rhetorical freedom than similarly sized Gulf states when dealing with issues surrounding the Shi’a-Sunni divide. In the spring of 2011, the government of Morocco openly supported the Gulf Cooperation Council (GCC) intervention led by Saudi Arabia to quell unrest among Bahrain’s Shi’a majority. Morocco’s Foreign Minister Taieb Fassi Fihri said “Nobody can say ‘no’ to the intervention” and based Moroccan support on the claim that unrest was the product of “Iranian interference in the Gulf.” 96 The Los Angeles Times reports that according to a leaked U.S. diplomatic cable, “In exchange for active Moroccan support, Saudi Arabia allegedly promised to ensure the flow of subsidized oil and compensate for the loss in direct foreign investment in Morocco resulting from the global

92

Simon Maro, “Senegal - Iran: From friendship to diplomatic war.” Afrik News, 25 February 2011, http://www.afriknews.com/article19020.html.

93

“Oil Continues To Grease Morocco-Iran Relations, But Friction Remains.” Cablegate Search (Consulate Casablanca), 19 February 2010, http://www.cablegatesearch.net/cable.php?id=10CASABLANCA24.

94

“Background Note: Morocco,” U.S. State Department. 20 April 2011. http://www.state.gov/r/pa/ei/bgn/5431.htm.

95

Ibid.

96

“Morocco FM defends Gulf deployment in Bahrain.” Ahram Online, 15 May 2011, http://english.ahram.org.eg/~/NewsContent/2/8/12151/World/Region/Morocco-FM-defends-Gulf-deployment-in-Bahrain.aspx.

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financial crisis.” Notably, Moroccan support also coincided with its invitation to join the GCC, the political and economic alliance of Arab states headed by Saudi Arabia.97 In response to Morocco’s defense of the intervention Iran summoned Rabat’s envoy to Tehran and issued a critique in language the Moroccan government deemed “unacceptable”. 98 Rabat broke ties with Tehran in March 2009 and initiated a domestic crackdown on its small Shi’a minority.

The Iranian government criticized the move appealing to a need for Muslim solidarity—a tactic it has frequently employed to appeal to potential African partners. According to Iran’s Fars news service the Iranian Foreign Ministry issued a statement saying, “The Islamic Republic of Iran believes that at the present juncture when the unity and solidarity of Islamic countries is necessary for supporting the Palestinian people, this act of Morocco harms unity of the Muslim world.”99 Despite the rupture of diplomatic relations, Iran and Morocco’s commercial relationship remains intact. Following the cessation of diplomatic contact, the director of Morocco's Oil Refinery (SAMIR), Jamal Mohammed Ba Amer, issued a press statement stating “Morocco will continue to import crude oil from Iran.”100 And during 2009 Iran supplied Morocco with more than a quarter of its crude oil imports.101 Morocco’s economic value to Iran is chiefly centered on the country’s possession of significant phosphate deposits (three-quarters of the world's reserve) which are used extensively in the Iranian agricultural sector. Morocco exports about 12 percent of its phosphoric acid and about 5 percent of its rock phosphate to Iran, making Tehran one of Morocco's largest phosphate customers.102 Phosphate could be used as a source of natural uranium, but the process of extraction is unduly expensive compared to other methods. Moroccan officials have stated that they do not believe “Iran is extracting or planning to extract uranium from Moroccan phosphate imports.”103 Iran is pursuing other possibilities for commercial cooperation mainly through its Khodro automobile manufacturer.

Despite their mutually beneficial trade relationship, Morocco and Iran remain divided by political and sectarian differences. The monarchy remains suspicious of foreign-promoted Shi’a activism and is very aware of Iran’s oil-based geo-political strategy. According to leaked State Department cables, the Moroccan leadership is starting to look towards Iraq as an alternative for

97

“Morocco: For cheap Saudi oil, Rabat broke ties with Iran, cracked down on Shiites, leaked cable says.” Los Angeles Times, 6 December 2010, http://latimesblogs.latimes.com/babylonbeyond/2010/12/morocco-iran-saudi-arabia-shiite-sunni.html.

98

“Iran says Morocco's move to cut ties harms unity.” CNN World, 7 March 2009, http://articles.cnn.com/2009-0307/world/morocco.iran_1_bahrain-islamic-republic-fars-news-agency?_s=PM:WORLD. 99

“Iran Dismisses Morocco's Claims as Baseless.” Fars News Agency, 7 March 2009, http://english.farsnews.com/newstext.php?nn=8712171151.

100

“Oil Continues To Grease Morocco-Iran Relations, But Friction Remains.” Cablegate Search (Consulate Casablanca), 19 February 2010, http://www.cablegatesearch.net/cable.php?id=10CASABLANCA24.

101

Ibid.

102

Ibid.

103

Ibid.

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its crude oil needs but it is hindered by technical challenges required to handle Iraq’s different type of crude.104

South Africa South Africa has an ambivalent relationship with the IRI. Ties between both nations are strengthened by growing economic cooperation, expressed mainly through energy sales, and by Iran’s past support of Nelson Mandela’s now-ruling African National Congress during the apartheid era. However, the relationship is strained by Iran’s record of human rights violations and by its ambiguous nuclear ambitions. Describing his country’s position on Iran, Deputy Minister in the Department of International Relations and Cooperation (DIRCO) Ebrahim Ismail Ebrahim acknowledged, “We haven’t sorted this out yet.”105 In the past, Iran’s history of support for the ANC has led South Africa to play a moderating role in the polarized competition between the IRI and the West. While South Africa is by no means a committed ally of Iran, South African officials have criticized the American approach to the nuclear issue as hypocritical (because of its tacit support for Israel’s nuclear activities) and called on all sides to seek resolution through diplomatic engagement.106 South Africa has dealt with the escalating sanctions against the Iranian nuclear program by repeatedly stating that Non-Proliferation Treaty members should be able to pursue nuclear energy peacefully, but that Iran’s possession of a nuclear weapon is not in South Africa’s interests. Responding to international pressure, South African companies with investments in Iran like Sasol, the world’s top producer of motor fuel from coal, have ceased expansion in Iran and are reviewing current projects.107 Iran is currently South Africa’s primary supplier of crude oil—providing upwards of 40% of crude imports in 2006. That dependency has moderated South Africa’s response to unsavory Iranian practices.108 The competing pressures of economic interest and human rights concerns have produced diplomatic outcomes like South Africa’s abstaining vote at the UN General Assembly on the issue of Iran’s human rights violations. The move to abstain upset both the Government of Iran hoping for support and Western governments hoping for condemnation.

According to leaked US State Department cables, Ahmadinejad has also been able to successfully exploit South Africa’s Non-Alignment position as a means of countering Western influence. DIRCO Chief Director of Human Rights and Humanitarian Affairs Pitso Montwedi claims “Ahmadinejad has managed to equate investigating human rights violations in Iran with ‘jumping on the bandwagon with the West.’”109 104

“Oil Continues To Grease Morocco-Iran Relations, But Friction Remains.” Cablegate Search (Consulate Casablanca), 19 February 2010, http://www.cablegatesearch.net/cable.php?id=10CASABLANCA24.

105

“South Africa Divided Internally On Iran.” Cablegate Search (Embassy Pretoria), 25 February 2010, http://www.cablegatesearch.net/cable.php?id=10PRETORIA383.

106

“South Africa supports Iran’s nuclear rights: SA parliament speaker.” Tehran Times, 24 January 2010, http://old.tehrantimes.com/index_View.asp?code=212850.

107

“Sanction threat prompts Sasol to review Iran operations.” Mail & Guardian Online, 12 October 2011, http://mg.co.za/article/2011-10-12-sasol-reviewing-iran-operations/.

108 109

“Iran, South Africa Open Joint Cooperation Commission,” IRNA, August 21, 2006.

“South Africa Divided Internally On Iran.” Cablegate Search (Embassy Pretoria), 25 February 2010, http://www.cablegatesearch.net/cable.php?id=10PRETORIA383.

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South Africa remains hesitant to join the Western push to isolate Iran because of its innate desire for political independence from the Western bloc and its need to maintain a flow of energy from Iran. Iranian intransigence has generated distance between Tehran and Cape Town, but limited cooperation persists.

Zimbabwe Like the leadership in Iran, the ruling elite in Zimbabwe has been ostracized by the West for its persistent manipulation of elections and government-sponsored human rights abuses. In response to Western criticism, Zimbabwean President Robert Mugabe has started to pursue a “Look East” policy in order to find less critical allies and open markets in the Middle East and Asia. Not surprisingly, Iranian President Ahmadinejad has positioned Iran as a close supporter of Zimbabwe’s breakaway from the West.

Shared Isolation as a Common Interest In a meeting of both Presidents in 2006, Mugabe stated that, “Iran and Zimbabwe think alike.” 110 Echoing the worldviews of Ahmadinejad and Chavez, he later claimed that the sovereignty of developing nations is under threat and must be persevered through collective action. Mugabe said, “We have a fight to put up against these evil men and their evil systems…countries who think alike must come together and work out mechanisms to defend ourselves.”111 Iran and Zimbabwe have increased cooperation through enhanced trade, humanitarian assistance, and political support. In January 2010, Zimbabwean Minister of State, Sylvester Nguni, praised Iran for its provision of aid to regions of the country affected by natural disasters.112 Nguni also commended the IRI for its committed diplomatic support of Zimbabwe at the United Nations.113 According to Iran’s deputy ambassador to Zimbabwe, Javad Dehghan, Iran is involved in numerous commercial and aid-based projects throughout the south African nation including: the mechanization of the agricultural sector, equipping the national broadcaster, the Zimbabwe Broadcasting Holdings, and investing in the tourism sector.114 Zimbabwe’s Potential Role in Iran’s Nuclear Programs Zimbabwe’s potential to supply Iran with the fissile material it needs to advance its nuclear designs could be critical to the effectiveness of UN and US/EU sanctions. According to the Sunday Telegraph in April 2010, “Iran struck a secret deal with Zimbabwe to mine its untapped uranium reserves.”115 The paper’s Zanu-PF source explained, “In return for supplying oil, which Zimbabwe desperately needs to keep its faltering economy moving, Iran has been promised 110

“Zimbabwe, Iran Think Alike, Says President Mugabe.” Fox News (Associated Press), 21 November 2006, http://www.foxnews.com/story/0,2933,231021,00.html.

111

Ibid.

112

“Zimbabwe: 'Iran will stand by Zimbabwe'.” allafrica.com, the herald (published by the government of Zimbabwe), 1 January 2010, http://allafrica.com/stories/201001040024.html.

113

Ibid

114

Ibid

115

Itai Mushekwe and Harriet Alexander, “Iran strikes secret nuclear mining deal with Zimbabwe's Mugabe regime.” The Telegraph, 24 April 2010, http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/7628750/Iran-strikessecret-nuclear-mining-deal-with-Zimbabwes-Mugabe-regime.html.

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access to potentially huge deposits of uranium ore – which can be converted into the basic fuel for nuclear power or enriched to make a nuclear bomb.”116 Under the terms of the deal Iran would have access to an estimated 455,000 tons of raw uranium that could produce 20,000 tons of enrichable uranium over the next five years.117 The government source added: “The uranium deal is the culmination of a lot of work dating back to 2007, when Mr. Mugabe visited Tehran in search of fuel. Now Iran is beginning to reap the benefits…Iranian geologists have been conducting feasibility studies of the mineral for over a year now and we expect them to go ahead with mining once they are ready.”118 As of October 2011, the deal—which is officially called the Bilateral Investment Promotion and Protection Agreement (BIPPA) with Iran—has yet to receive official approval from the Zimbabwean Parliament and international pressure may be affecting its slow passage. 119 The Zimbabwe Reporter notes that division exists amongst Zimbabwe’s two primary political parties: Mugagbe’s Zanu-PF, who want to see the agreement passed, and the opposition MDC, who are opposed to aiding Iran’s nuclear pursuits.120 The Zimbabwean news source reports: MDC MP Simon Hove immediately raised objections. ‘What is it that Zimbabwe expects to get from Iran and what is it that Iran intends to protect which is in Zimbabwe?’ Hove asked. ‘I want to know the type of investment Iran is having with this country and why we need this kind of investment promotion protection in light of other means that we have. So I find it very difficult to proceed when I have not been informed of what is it that is contained in the agreement and what is it that we are trading with Iran.’121

The United States has responded by issuing clear warnings to the Zimbabwean government that cooperation with Iran in defiance of international sanctions will produce negative consequences.

Former U.S. State Department spokesman P.J. Crowley said in March 2011 that, “There are ramifications for countries that decline to observe their international obligations.” 122 Though Mugabe remains a staunch supporter of the Iranian regime, it remains to be seen if the countries’ past political partnership will trump the increasing threat of economic repercussions for violating international sanctions.123

116

Itai Mushekwe and Harriet Alexander, “Iran strikes secret nuclear mining deal with Zimbabwe's Mugabe regime.” The Telegraph, 24 April 2010, http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/7628750/Iran-strikessecret-nuclear-mining-deal-with-Zimbabwes-Mugabe-regime.html.

117

George Jahn, “Iran’s secret hunt for uranium in zimbabwe.” The Daily Caller, 24 February 2011, http://dailycaller.com/2011/02/24/ap-exclusive-iran-hunts-for-uranium/.

118

Itai Mushekwe and Harriet Alexander, “Iran strikes secret nuclear mining deal with Zimbabwe's Mugabe regime.” The Telegraph, 24 April 2010, http://www.telegraph.co.uk/news/worldnews/africaandindianocean/zimbabwe/7628750/Iran-strikessecret-nuclear-mining-deal-with-Zimbabwes-Mugabe-regime.html.

119

“MDC MPs refuse to ratify Iran BIPPA.” Zimbabwe Reporter, 8 October 2011, http://zimbabwereporter.com/politics/3872.html.

120

Ibid.

121

Ibid.

122

“MDC MPs refuse to ratify Iran BIPPA.” Zimbabwe Reporter, 8 October 2011, http://zimbabwereporter.com/politics/3872.html.

123

Anna Mahjar-Barducci, “Iran Scooping Up African Uranium.” Hudson New York, 7 October 2011, http://www.hudsonny.org/2478/iran-africa-uranium#.TqTg9KBlR4s.gmail.

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Implications for U.S. Policy Iran’s forays into Latin America, Africa, and elsewhere are the product of an aggressive diplomacy geared towards alleviating the pressure of Western-led sanctions and more generally combating the present international order, which Tehran views as hostile to its interests. At present, Iran’s relationships with individual peripheral powers are not strong enough to achieve its goals, and thus not of critical concern to the US. The present weakness of Iran’s alliance network is brought about by divisions within Iran and its targeted partners, but also by sustained engagement and pressure from the US. To prevent Iran from strengthening its bonds with peripheral powers policymakers in Washington should consider the following three broad strategies: 

Engage with peripheral countries, but do not mettle. Some analysts have criticized the US for ignoring the periphery (especially Latin America) and thus allowing Iran to gain a foothold. As Iran’s ambitious and geographically unbounded strategy in seeking partners and “allies” demonstrates, the US cannot afford to completely ignore any region of the globe. That being said, in countries of limited strategic interest it is beneficial to engage without overreaching, especially when considering that Iranian commitments have a tendency to eventually collapse under their own weight (e.g. Senegal’s Seniran Auto). US aid and commercial interests provide strong incentives for peripheral nations to hesitate from full cooperation with the IRI.



Maintain US aid and support. The US should maintain its current aid programs at both the civil and security levels. These programs are far less costly than the expansion of Iranian influence, and serve as critical ways of counterbalancing Iranian efforts and showing US concern. They are key ways of separating US influence from the attitudes of current leaders and building a broader base of popular support. The US should also work with key Gulf allies like Saudi Arabia to minimize Iran’s ability to use energy exports as tools in strengthening relations with Latin American and African states.



Portray Iran as self-isolated and belligerent. The peripheral powers with the greatest potential to affect completion are aspiring regional powers like Brazil and South Africa. The US and its allies should consistently stress that despite Iran’s promise of temporary economic gain, it is a political risk due to its tainted human rights record and its potential instability.



Make a convincing case that Iran is seeking to obtain nuclear weapons and could be a threat to the global economy. Don’t simply keep up diplomatic pressure. Continue to work with the IAEA and key allies like Britain, France, and Germany to show the dangers in Iran’s actions and make the threat it poses fully convincing. Explain how a crisis in the Gulf could threaten all countries – including the developing countries outside the region. Make the case through effective strategic communications and as objectively as possible.



Seek the support of Arab allies and other developing states. Make it clear that the US and its key allies are not some neo-colonial bloc, but have strong support from the states around Iran. Work with Saudi Arabia, Jordan, and the other Arab Gulf states to show Latin American and African countries that sanctions and opposition to Iran’s nuclear problems have broad global support.



Make it clear that the US and its allies offer Iran incentives to halt, and explain sanctions continuously.

Show other countries that the US and the 5+1 offer Iran real incentives to halt nuclear weapons related activities, and explain and justify sanctions in terms that nations in other regions can fully understand.



Stress harsh penalties for supplying Iran with fissile material. The US, in concert with its allies, should continue to preemptively warn nations contemplating supplying Iran with nuclear material of the harsh economic penalties they will face. The US stance on Zimbabwe appears to have had a positive effect and it should be replicated with other potential suppliers.



Avoid US actions that appear to threaten the sovereignty of Latin American and African states. The US must be acutely sensitive to the anger with which Latin American and African states react to American pressure and sanctions that is not the product of careful and persuasive diplomacy. It must rely on its embassy teams to create a nuanced and careful approach that deal with each country in ways that fully take

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into account its concerns and sensitivities. A one size fits all, or legislated set of general “sticks’ and penalties will do more harm than good.

The US should neither overestimate Iran’s capabilities in the periphery, nor treat peripheral theaters of competition as critical ones; it should monitor Iranian advances with an eye toward discerning Iran’s overarching strategy to evade Western pressure and expand its regional interests. By all accounts Iran is far from achieving a global alliance of counter-Western states, but Iran’s distance from that goal is in part provided for by the engagement and vigilance of status quo powers. To secure the periphery engagement and vigilance should continue.

a report of the csis burke chair in strategy

U.S. and Iranian Strategic Competition: Policy Implications Authors Anthony Cordesman Adam Mausner Aram Nerguizian

March 2012

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XIV: POLICY IMPLICATIONS The US and Iran have been political and sometimes military competitors since 1979 – a period that is now well over three decades long. There are few present prospects that relations will improve in the near to mid-term. In fact, this analysis has made it all too clear that events in the past few years have sharply intensified the level of competition and hostility between the US and Iranian governments, and made the military competition between Iran and the US and many of its neighbors far more dangerous.

The previous chapters has shown that US policy must be tailored to each major area of competition, and to deal with a series of complex problems that may center around Iran’s nuclear programs and threats to the Gulf, but affect competition in many other regions, in areas like energy, and interact with US relations with many other countries.

The US must accept the complexity of these challenges. It cannot win by treating its competition with Iran in simplistic terms as a two-person, zero sum game. There are, however, broad themes that have emerged through this analysis.

There is Potential for Successful Negotiations and Arms Control Agreements to Deal with Iran’s Nuclear Programs The key challenge now is not to find some form of “grand bargain,” but to ease tensions, reduce the risk of a serious conflict, and hopefully to persuade Iran to negotiate an end to the threatening aspects of its nuclear and missile programs. As of early 2012, the major powers had resumed negotiations with Iran. At the same time, successful negotiations over Iran’s nuclear program, and some kind of stable modus vivendi still seems unlikely.

As all of the previous chapters have shown, the US must be prepared to compete with Iran on a broad level, in many different areas, and to do so indefinitely into the future.

The previous chapters have also shown that the conditions for a lasting accommodation do exist. The US has no national or strategic interest in dominating the Gulf or Iran. It would be far less costly and dangerous to work with a friendly Iran and its Arab Gulf allies to reduce the level of military forces in the Gulf, to concentrate on the development of local economies and the creation of stable global energy exports, and to seek regional stability and an Arab-Israel peace. A much more limited and largely advisory US military presence, and over-the-horizon power projection capability, would be far cheaper for the US and serve the interests of every peaceful regional state.

But Iran’s Nuclear and Asymmetric Warfare Programs Do Represent a Major Threat The fact remains, however, that this Iranian regime is seeking to expand its own power and influence in ways that threaten its neighbors and the stability of the flow of a critical part of global energy exports. It is triggering a regional nuclear arms race, building up a massive capability for asymmetric warfare, seeking to expand its influence throughout the region in ways that threaten the stability of the Arab Gulf states and other Arab states, calling for the destruction of Israel, and demonizing the US. At the same time, it is steadily becoming more repressive, undermining moderate and democratic elements

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within Iran, and focusing on a military buildup at the expense of Iran’s economy and the needs of its people.

Direct Efforts at Regime Change are Not a Credible Answer It is all too easy to seek a solution by calling for regime change. Moreover, there is always the possibility of sudden political upheavals that will produce a friendlier Iran that focuses on its own internal needs and priorities. As political upheavals have made clear in many other parts of the Middle East and Central Asia, regime change can come suddenly and with little warning. There are few indicators, however, that such changes are a near term probability.

What is extremely unlikely, however, is that US efforts to back direct action by a mix of weak exile movements and internal extremists can trigger such change. Iran’s history has created strong popular resistance to outside interference, and Iran’s regime has had decades in which to build up fear of US conspiracies and threats. US and other outside efforts to directly support Iran’s internal opposition and cause regime change are likely to become all too public, and could do far more to discredit legitimate internal opposition than alter the present regime.

Tehran’s ability to politically manipulate perceived external threats has proven critical in shoring up support for the ruling establishment over the past three decade. Examples include the Iran-Iraq War, the portrayal of a “surrounded” Iran in the wake of US operations in Iraq and Afghanistan, and the “denial” of Iran’s right to possess nuclear energy. Indeed, the current regime has staked so much of its credibility on fighting the “Great Satan” that any deal with the US could be construed as a humiliating defeat, endangering the legitimacy of the regime itself.

The US instead should take a “soft” approach to regime change. The US can certainly help the Iranian opposition outside of Iran to use international media to criticize and challenge the regime. It can show Iranians that the US and other nations offer Iran real friendship. It can make it unambiguously clear that the US will lift sanctions immediately if Iran changes its behavior, abandons its nuclear programs, and refrains from threatening its neighbors. The US can work with other allies to create tangible, well-defined incentives that would help Iran to help its economy.

The US should openly work through means like giving Iranian moderates and reformers the ability to communicate with the Iranian people, by strong public support of Iranian and international efforts to report on human rights abuses and change the regime’s behavior on human rights. The US should join with other nations and Iranians in demanding legitimate elections, and it should highlight and document the regime’s abuses and the threat it poses to other states.

The real key to eventual regime change, however, will be the actions of Iranians inside Iran. Change must either come from within Iran’s ruling elite or through the actions of the Iranian people. They must want change and be able to accomplish it. If this occurs, it will be the result of broad Iranian desires for more freedom, better and more honest governance, more economic opportunity, and fewer social restrictions. It will only come when the present ruling elite cannot sustain its ability to use repression and enough popular support to keep it in power.

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A “soft” approach is likely to be a slow and evolutionary process. It also means putting trust in Iran’s people to determine their own fate rather than in outside intervention. It is, however, the form of regime change that is both most likely to succeed and to do so in a way that actually benefits the Iranian people.

Using Sanctions and Seeking to Negotiate Changes to the Regime’s Threatening Behavior is the Near-Term Priority The US should concentrate on its vital security interests and those of its allies. The US should try to change the behavior of the current regime through negotiation and a mix of incentives and disincentives – while it encourages broader popular change. Again, it is important to note that a rapid end to sanctions, investment and trade incentives, and cultural and educational incentives need to be far better defined and made far more attractive. In simple terms, the carrot should be at least as important as the stick, and the Iranian people and Iranian moderates and reformer should have no doubt that these benefits will come if Iran puts an end to its threatening nuclear programs.

This approach is scarcely without risks. Sanctions and negotiations may fail to persuade Iran’s regime to halt its movement towards a nuclear weapons capability and lead to serious clashes or conflict. Most opposition leaders, and the majority of the Iran people, still seem to be supporters of Iran’s nuclear program. Time is critical and it is not clear whether or not this approach will have time to work before Iran has gained at least the capability to quickly manufacture a nuclear weapon, if not outright possession of working warheads.

Pursing a “soft” approach to regime change may produce a violent reaction from an Iranian regime that becomes increasingly isolated under the weight of external pressure and weakening internal socio-economic indicators. Simply changing the regime might not put an end to Iran’s nuclear ambitions.

Nevertheless, the combination of sanctions, negotiations, and a “soft” approach to regime change is currently the least bad of a range of bad options. It minimizes the risk of war, it gives time for sanction to work, it allows negotiations and sanctions to have an impact, and provide time for the Iranian regime to change its position.

The US Must Maintain Its Military Strength in the Gulf and the Region, Work Closely with its Regional Allies and Improve Its Options for Containment and Preventive Strikes This does not, however, mean that the US should not pursue the military steps necessary to contain Iran or even carry out preventive strikes if there proves to be no alternative.US strategy in competing with Iran must be based on maintaining a continuing US strategic role in the Gulf, working closely with our Gulf and regional allies, and on close cooperation with Britain and France.

The US must also have no illusion that this a role it can ignore, under resource, or somehow abdicate to other nations. As the previous chapters have shown, the US is increasingly dependent on a global economy that is increasingly dependent on Gulf energy exports and on the regional stability that makes such exports possible. The

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continued stability of the Gulf is a vital US strategic interest, and the need to compete with Iran is a byproduct of Iran’s negative implications for regional stability.

The US Must Compete with Iran in Every Other Area Where Iran Poses a Challenge Until major changes take place in the character and behavior of Iran’s regime, the US must continue to compete on a complex level throughout the rest of the region and the world. The US must pursue a strategy that assumes Iran’s behavior will remain hostile and that Iran may seek to expand its power and influence in every area it can. The US must compete directly with Iran in seeking the support of other states, and it must work with its friends and allies to contain and deter Iran in every way possible. The US must make it clear to Iran that it will not falter in such efforts, and that Iran faces unacceptable risks if it pushes this competition too far.

This requires a US strategy that takes full account of the views of our allies and of other states. The US must recognize that there are no good military options for using force against Iran. It must recognize that even if it does use limited amounts of force to deal with given clashes or incidents, it will still have to pursue a military and diplomatic containment strategy until – and if – Iran’s internal political dynamics fundamentally change its goals in the region and policies in dealing with the United States.

It also requires consistency of US effort that has been lacking in the past. Ever since the Shah’s fall in 1979, the US has tended to deal with Iran on a crisis-by-crisis, and issueby-issue, basis. The US has swung from extremes like efforts at regime overthrow to efforts at dialog and grand bargains. It has swung from efforts to find solutions that would suddenly and decisively change Iranian behavior to acceptance of Iran’s actions, and it has sometimes treated the issues involved as if the US could play a two person, zero sum game where the role of outside powers and allies was given secondary attention or largely ignored.

The US must engage diplomatically, and with military aid and assistance, on a broad regional level. The US must be ready to deal with a decade or more of political and diplomatic competition in dealing with the rest of the Middle East and the Levant, key regional allies like Turkey, and with states in Central and South Asia. It must be ready to compete in the Gulf of Oman, Indian Ocean, and Red Sea areas.

The US must be ready to deal with constant political and diplomatic challenges coupled to Iran’s use of state terrorism and proxies like Hezbollah, and its expanding capabilities for asymmetric warfare. It must be ready to create a combination of arms control efforts, new defenses, and extended regional deterrence that can deal with Iran’s possession of chemical weapons and long-range missiles and its search for nuclear weapons.

The US cannot hope to prevent Iraq from being heavily influenced by Iran. Nor can it create any lasting structure of security in the Gulf and for the world’s energy exports unless it maintains a major military presence in the region. This means that the US must reshape its security posture in the region now that it has withdrawn its forces from Iraq.

America must also continue to try to create a meaningful strategic partnership with Iraq,

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and to prevent Iran from dominating. The US must treat Egypt, Jordan, Turkey, and Syria as key players in competition with Iran, as well as friendly Gulf states.

The US must be prepared to deal with both the growing threat to Israel and the threat the wrong kinds of Israeli actions could pose to the United States. The US should continue to do what it can to discourage any form of Israeli preventive strike. Any such Israeli action seems likely to make negotiations impossible, to have limited and temporary military success at best, and the create major problems for the US in dealing with every friendly Arab state. It may also end up giving Iran an excuse to openly seek nuclear weapons and catalyze a far more intensive Iranian race for the bomb.

The US Must Put Diplomacy First, and Make the Use of Force a Last Resort Any American use of military power should be a last resort, forced on the US by Iranian actions. The US can demonstrate through its military behavior and rules of engagement that it will do everything possible to avoid clashes or conflicts in the Gulf, and the escalation of any incidents or clashes if they do occur. The US should work with its allies and the P5+1 to use diplomacy and sanctions as long as there is any credible chance of success. It should carefully consider deterrence and containment as an option as well as US preventive military strikes – and only carry out such strikes if it is absolutely clear that this option is better than the alternatives.

Above all, the US can only succeed if it deals with the complex patterns of Iranian competition described in this assessment. The US must think and act in grand strategic terms, and pursues policies that can have a consistent and coherent effect over time. In the end, one cannot win a game of three-dimensional chess by playing checkers.