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America’s Iran Policy and the Undermining of International Order

July 13, 2013 • CRITICAL ANALYSIS, Columns, International Relations, In-depth, Americas, Leverett on International Relations, Middle East & Africa, Unprotected Post

By Flynt Leverett & Hillary Mann Leverett

Strategic competition between America and Iran will shape not only the Middle East’s balance of power, but also the dynamics of international order through much of the 21st century. Determination to compel Iran’s subordination is driving Washington and a coterie of European states to violate basic principles of rules-based regimes governing key dimensions of international security and commerce. This renders productive negotiation with Tehran virtually impossible, and makes U.S. foreign policy the world’s biggest source of political risk. It also prompts backlash from rising non-Western powers that could undermine the functioning of rules-based regimes for nuclear nonproliferation, trade, and other vital issues.

Ongoing strategic competition between the United States and the Islamic Republic of Iran will affect the balance of power in one of the world’s most vital regions for many years to come. Beyond the Middle East, how America deals with Iran will also shape the dynamics of international order through much of the 21st century.

More particularly, how Washington deals with Tehran will show whether America is open to sharing the prerogatives of global governance with rising powers in the global South. Such openness would greatly enhance prospects for conflict resolution with Iran; as the balance of economic and political power shifts from West to East, it would also enhance prospects for more effective global governance by aligning responsibility and capacity more accurately. Furthermore, it would help sustain America’s influence even as its relative power declines.

But Washington and a coterie of European states remain focused on forcing the Islamic Republic to abandon its nuclear program, accept open-ended American and Israeli military dominance, and acquiesce in its (Western-sponsored) secular liberal transformation. Determination to compel Iran’s surrender prompts ever more assiduous efforts by America and its partners to coerce other states into helping them press Tehran. In the process, Western powers violate basic principles of the rules-based regimes governing key dimensions of international security and global commerce.

This dynamic makes negotiating plausible solutions with Tehran, on the nuclear issue and other challenges, virtually impossible. It also makes U.S. foreign policy the biggest source of political risk in the global economy. More broadly, hegemonic assertions by America and a few European partners are increasingly at odds with the realities of relative clout in world affairs. If continued, these assertions will provoke backlash from rising non-Western powers that will undermine the functioning of rules-based regimes for nuclear nonproliferation, trade, and other vital issues, and damage America’s long-term position in international affairs.

How Washington deals with Tehran will show whether America is open to sharing the prerogatives of global governance with rising powers in the global South.

The Real Threat to the NPT

Consider Washington’s approach to the Iranian nuclear issue, especially regarding Iran’s development of uranium enrichment and other fuel-cycle capabilities. Fuel cycle hardware and know-how epitomise ‘dual use’ technology—for the same material that fuels power, medical, and research reactors can, at higher levels of fissile isotope concentration, be used in nuclear bombs. But America’s insistence that Iran stop developing fuel-cycle capabilities is at odds with—and risks undermining—the Nuclear Non-Proliferation Treaty (NPT).

Over 43 years, the NPT has been one of history’s most successful multilateral treaties, limiting the number of nuclear-weapons states and facilitating the dismantling of nuclear arsenals or weapons programs in several countries. Of the dozens of countries that joined it as non-weapons states, only one—North Korea—withdrew to test nuclear weapons. Of the four countries that have never joined—India, Israel, Pakistan, and South Sudan—75 percent acquired nuclear weapons.

Since the Iranian Revolution, Iranian leaders have, on strategic and religious grounds, rejected nuclear weapons in their national security strategy.

The NPT’s effectiveness flows from its integration of three bargains:

• Non-weapons states — like Iran — commit not to obtain nuclear weapons.
Countries recognised as weapons states (America, Russia, Britain, France, and China) commit to nuclear disarmament.
All agree that signatories have an ‘inalienable right’ to develop and use nuclear technology for peaceful purposes ‘without discrimination’—and an obligation to facilitate the exercise of that right by others, especially non-weapons states.

The NPT’s negotiating history and subsequent state practice—with at least a dozen non-weapons states establishing fuel-cycle infrastructures potentially able to support weapons programs—show that the right to peaceful use encompasses indigenous development of fuel-cycle capabilities under international safeguards. During drafting of the NPT, U.S. officials testified to Congress that the treaty would permit non-weapons states to pursue the fuel cycle.

Since the Cold War’s end, legal reality has been assaulted by America’s determination — supported by Britain, France, and Israel — to constrain distribution of fuel-cycle capabilities to non-Western states.

Since the Cold War’s end, though, legal reality has been assaulted by America’s determination—supported by Britain, France, and Israel (effectively no one else)—to constrain distribution of fuel-cycle capabilities to non-Western states. These four countries have sought, in effect, to rewrite the NPT (of which Israel isn’t even a signatory). They argue that non-weapons’ states commitment to eschew nuclear weapons trumps those by weapons states to disarm and by all to the acquisition and peaceful use of nuclear technology. They claim—against history, law, and state practice—that there is no treaty-based right to pursue fuel-cycle capabilities, and that weapons states and their allies with nuclear industries should decide (under U.S. leadership) which non-weapons states can have fuel-cycle technologies.

Non-weapons states have long resented weapons states’ poor compliance with their disarmament commitment. But non-Western states are even more concerned about Western efforts to constrain diffusion of fuel-cycle capabilities, which they consider a bigger threat to the NPT’s integrity than Iran’s nuclear activities. Among rising powers, Brazil and South Africa—both nonproliferation exemplars for joining the NPT as non-weapons states after forsaking weapons programs during democratisation (including, in South Africa, six fully fabricated nuclear bombs that Israel helped the apartheid regime assemble)—have been especially adamant in defending non-weapons-states’ right to the fuel cycle.

The primary motive for trying to constrain non-Western states’ fuel-cycle capabilities has been to maximise America’s freedom of unilateral military initiative and, in the Middle East, that of Israel. Over the last decade, this campaign has focused with ever-greater intensity on Iran’s nuclear activities.

One of the more inflammatory pieces of Western conventional wisdom about the Islamic Republic is that it is working to develop nuclear weapons. U.S. and Israeli intelligence services have claimed since the early 1990s that Iran is three to five years away from acquiring nuclear weapons; at times, Israel has offered more alarmist projections. But twenty years into this constantly resetting forecast, no one has come close to producing hard evidence that Iran is trying to fabricate nuclear weapons; U.S. and Israeli intelligence now admit Tehran has not decided to do so. Mohamed ElBaradei–the Nobel laureate under whose leadership the International Atomic Energy Agency correctly assessed Iraq’s lack of WMD when every intelligence agency got it wrong–has said on multiple occasions that there is no evidence the Islamic Republic is trying to build nuclear weapons.

Since the Iranian Revolution, Iranian leaders have, on strategic and religious grounds, rejected nuclear weapons in their national security strategy. The Islamic Republic’s founders stopped the weapons-related aspects of the nuclear program they inherited from the last Shah—but proceeded with its civil aspects, which now include indigenous enrichment of uranium.

Western intelligence services claim Iran has done at least theoretical work on aspects of the design and construction of nuclear weapons. None of the claims, though, are substantiated by hard evidence, or contradict the IAEA’s continuing affirmation of Iran’s non-diversion of nuclear material. Even if some or all of the claims were accurate, the NPT does not prohibit the research Iran has been accused of conducting; Baradei has said that developing nuclear weapons capability—not weapons, but competencies needed to make them—is ‘kosher’ under the NPT.

Given these realities, the outlines of a nuclear deal between the P5+1 and Iran have long been obvious: Western recognition of Iran’s nuclear rights—especially to enrich under safeguards—for more intrusive monitoring and verification of its nuclear activities. But the Obama administration, like the Bush administration before it, is unwilling to countenance this.

American and Israeli leaders are not focused on Iranian enrichment from fear of a nuclear holocaust. Critical masses of Israeli as well as U.S. national security professionals judge that, even if the Islamic Republic were to obtain nuclear weapons, it would not use them against Israel, much less America. As former Israeli Defense Minister Ehud Barak said publicly last year, ‘I don’t think the Iranians, even if they got the bomb, [would] drop it in the neighborhood. They fully understand what might follow’.

Western intelligence services claim Iran has done at least theoretical work on aspects of the design and construction of nuclear weapons. None of the claims are substantiated by hard evidence, or contradict the IAEA’s affirmation of Iran’s non-diversion of nuclear material.

In American and Israeli calculations, perceptions that the Islamic Republic had achieved even just a ‘breakout’ capability—not nuclear weapons, but sufficient mastery of the competencies needed to build them that it might be able to do so in a relatively short timeframe—are problematic because they could begin constraining U.S. and Israeli freedom of unilateral military initiative. In other words, U.S. or Israeli decision-makers might have to think twice about initiating armed conflict in the Middle East. As Barak put it,

‘Imagine if we enter another military confrontation with Hezbollah…A nuclear Iran announced that an attack on Hezbollah is tantamount to an attack on Iran. We would not necessarily give up on it, but it would definitely restrict our range of operations’.

That’s what Washington’s insistence on Iran’s abandonment of the fuel cycle is really about: preserving a hegemonic option for America—or Israel—to initiate military action in the Middle East.

The ‘BRICS’ and the Non-Aligned Movement (representing nearly two-thirds of the UN) have unequivocally recognised Iran’s right to safeguarded fuel cycle capabilities.

In a quixotic quest to preserve this option, the Bush and Obama administrations pressed the UN Security Council to adopt seven resolutions telling Tehran to suspend uranium enrichment, even though it is part of Iran’s ‘inalienable right’ to peaceful nuclear technology. The first, from 2006—on which all subsequent resolutions on Iran’s nuclear activities are based—reflects an assessment of Tehran’s intent to build nuclear weapons that America’s intelligence community repudiated in 2007. Notwithstanding this repudiation, which effectively nullifies the legal basis for the subsequent resolutions, Washington and its European partners continue demanding that Iran adhere to these ‘international obligations’.

Non-Western states have supported Iranian resistance to U.S. demands, and seek to steer Washington in a more constructive direction. The ‘BRICS’ (Brazil, Russia, India, China, South Africa) and the Non-Aligned Movement (representing nearly two-thirds of the UN)—have unequivocally recognised Iran’s right to safeguarded fuel cycle capabilities. Brazil and Turkey brokered the Tehran Declaration in May 2010, whereby Iran accepted U.S. terms to swap most of its then stockpile of enriched uranium for new research reactor fuel. Brazil, though, made sure the Declaration explicitly highlighted Iran’s right to enrich; for this reason, the Obama administration rejected it. While China and Russia, the Security Council’s non-Western permanent members, acquiesced to resolutions directing Iran to suspend enrichment, they also note regularly there will be no diplomatic solution that excludes Western recognition of Iran’s nuclear rights.

But it is unclear whether U.S. policy on the nuclear issue is, in fact, correctible. Barring a sea-change in America’s position, there will be no positive outcome in the P5+1 talks with Iran. Washington will intensify pressure on other states to tow its line on Iranian enrichment, deepening non-Western resentment at American high-handedness and bringing Western and non-Western states closer to a crisis point for global governance. To understand how this will happen, it is revealing to examine America’s Iran-related sanctions policy.

 

The Unraveling of America’s Iran Sanctions


Notwithstanding Washington’s drive to enact ever more sanctions against Tehran, the edifice of U.S. sanctions policy is collapsing. In June, Britain’s supreme court ordered the Treasury to lift sanctions imposed by Her Majesty’s Government on the Iranian Bank Mellat. Earlier this year, Europe’s General Court overturned European sanctions against Bank Mellat and another Iranian bank. More banks and other pillars of Iran’s economy, like the National Iranian Oil Company, are now contesting their sanctioned status in European courts. These cases directly challenge European sanctions against Iran (whether imposed nationally or by the EU). They also threaten the whole web of U.S.-instigated sanctions that has expanded dramatically since Obama’s accession in 2009.

America has, for three decades, put unilateral sanctions on the Islamic Republic—over its alleged pursuit of WMD, support for groups that Washington labels terrorist organisations, and its domestic governance. Six of the seven Security Council resolutions on the nuclear issue authorize multilateral sanctions against Iran. But neither unilateral nor UN measures have had decisive impact on Iran’s economy or decision-making: even a superpower’s unilateral sanctions don’t work if other countries won’t replicate them, and China and Russia ensure that UN sanctions don’t impinge on their most important interests with Iran.

Besides unilateral and multilateral measures, America has, since 1996, threatened to impose ‘secondary’ sanctions on third-country entities doing business with Iran. Secondary sanctions now cover most commercial activities, including investment in and provision of services to Iran’s hydrocarbon and shipping sectors, buying Iranian crude oil, and virtually all financial transactions. The penalties that can be levied now include being cut off from the U.S. financial system.

America’s increasing reliance on secondary sanctions in its Iran policy is ultimately self-defeating in at least three significant ways.

First, secondary sanctions are a legal house of cards. The UK and EU sanctions challenged by targeted Iranian entities reflect American policy parameters. By extension, court decisions invalidating some of these sanctions highlight a major legal defect in U.S. secondary sanctions: they cannot survive scrutiny as focused measures targeting entities directly involved in alleged nefarious activities. They are broad-brush instruments meant to shut down as much Iranian economic activity—and inflict as much hardship on Iranians—as possible. Besides its inhumanity, such an approach is bound to impinge on increasingly important interests of more and more states, setting the stage for backlash.

Moreover, secondary sanctions violate U.S. commitments under the World Trade Organisation, which allows members to cut trade with states they deem national security threats but not to sanction other members over business conducted in third countries. If challenged on this in the WTO’s Dispute Resolution Mechanism, Washington would surely lose. Meanwhile, America’s accelerating resort to the threatened application of secondary sanctions boosts non-Western cynicism not just about the real objectives of U.S. Iran policy, but also about the universal applicability of WTO rules and norms, thereby eroding confidence in the existing trade regime.

Neither unilateral nor UN measures have had decisive impact on Iran’s economy: even a superpower’s unilateral sanctions don’t work if other countries won’t replicate them, and China and Russia ensure that UN sanctions don’t impinge on their most important interests with Iran.

Second, secondary sanctions are a political house of cards. American officials are well aware of their presumptive illegality. Successive U.S. administrations have been reluctant to impose them on non-U.S. entities transacting with Iran, precisely to avoid formal challenges at the WTO. U.S. secondary sanctions are, in effect, an enormous bluff, leveraging the specter of legal and reputational risk in America to bully companies and banks in third countries to stop transacting with Iran, but without pulling the trigger on the threat to punish those that continue doing business in Iran.

The UK and European sanctions now facing legal challenges are a product of this bullying campaign. For over a decade, the EU has condemned America’s threatened ‘extraterritorial’ application of national trade law, warning it would go to the WTO if Washington ever sanctioned European companies over Iran-related business. Over the last several years, though, enough British and European businesses stopped transacting with Iran that the EU was no longer under pressure to defend European commercial interests and could begin subordinating its Iran policy to American preferences. By last year, it has imposed a nearly comprehensive economic embargo against the Islamic Republic.

While Europe has surrendered on having an independent Iran policy, the U.S. bluff on secondary sanctions will soon be called, most likely by China. To be sure, Beijing does not seek confrontation with America over Iran, and has sought to accommodate Washington in many ways—e.g., by not developing trade and investment positions in the Islamic Republic as rapidly as it might have, and by shifting some Iran-related transactional flows into renminbi to help the Obama administration avoid sanctioning Chinese banks. While China’s imports of Iranian oil appear, in the aggregate, to be growing, Beijing reduces them when the administration is deciding about six-month sanctions waivers for countries buying Iranian crude.

The Obama administration, for its part, continues giving China sanctions waivers; the one Chinese bank barred from America for Iran-related transactions is a Chinese energy company subsidiary with no U.S. business. But as Congress legislates more secondary sanctions, Obama’s room to maneuver is shrinking.

Obama will soon be in the position of demanding that China cut Iranian oil imports in ways that would harm its economy, and that Chinese banks stop virtually all Iran-related transactions. Beijing will not be able to accommodate such radical demands; it will have to say ‘no’, putting Obama in a classic lose-lose situation.

If America wants a nuclear deal grounded in the NPT, Hassan Rohani is an ideal interlocutor. But this would require Washington to bring its own policy in line with the NPT.

Obama could retreat. But then the world will know that secondary sanctions are a bluff, undercutting their deterrent effect. Alternatively, he could sanction major Chinese firms and banks. But that will force Beijing to respond—at least by taking America to the WTO (where China will win), perhaps by retaliating against U.S. companies. At this point, Beijing has more ways to impose costs on America for violations of international economic law impinging on Chinese interests than Washington has levers to coerce Chinese compliance with U.S. policy preferences. America and its partners will not come out ahead in this scenario.

Third, U.S. secondary sanctions accelerate the shift of economic power from West to East. As non-Western economies surpass more Western countries in their relative importance to the global economy, America has a strong interest in keeping non-Western states tied to established, U.S.-dominated mechanisms for conducting, financing, and settling international transactions. Secondary sanctions, though, push in the opposite direction, incentivizing emerging powers to speed up development of non-Western alternatives to existing transactional platforms.

Strategic recovery will also entail reversing Washington’s reliance on secondary sanctions—not because of Iranian surrender (which won’t be forthcoming), but because they delegitimize America’s claim to continuing leadership in international economic affairs.

This trend will diminish Western influence in myriad ways—e.g., reducing the dollar’s role as a transactional currency, lowering the share of cross-border commodity trades on New York and London exchanges, and shrinking the global near-monopoly of Western-based reinsurance companies and P&I clubs. Add the cost of a U.S.-instigated trade dust-up with China, and the self-damaging quality of America’s dysfunctional Iran policy becomes even clearer.

 

Finding a New Approach

Putting America on a better strategic trajectory will take thoroughgoing revision of its Iran policy. In this regard, the election of Hassan Rohani—who ran the Islamic Republic’s Supreme National Security Council for sixteen years, was its chief nuclear negotiator during 2003-2005, and holds advanced degrees in Islamic law and civil law—as Iran’s next president is an opportunity. If America wants a nuclear deal grounded in the NPT, Rohani is an ideal interlocutor. But this would require Washington to bring its own policy in line with the NPT—first of all, by acknowledging Iran’s right to safeguarded enrichment.

Strategic recovery will also entail reversing Washington’s reliance on secondary sanctions—not because of Iranian surrender (which won’t be forthcoming), but because they delegitimize America’s claim to continuing leadership in international economic affairs. This, however, is even more difficult than revising the U.S. position on Iranian enrichment—for Congress has legislated conditions for lifting sanctions that stipulate Iran’s abandonment of all alleged WMD activities, cutting all ties to those Washington deems terrorists, and political transformation. Overcoming this will require Obama to do what President Nixon did to enable America’s historic breakthrough with China—going to Tehran, strategically if not physically, to accept a previously demonised political order as a legitimate entity representing legitimate national interests.

None of this is particularly likely. But if America doesn’t do these things, it condemns itself to a future as an increasingly failing, and flailing, superpower—and as an obstacle, rather than a facilitator, of rules-based international order.

About the Authors

Flynt Leverett and Hillary Mann Leverett are authors of Going to Tehran: Why the United States Must Come to Terms with the Islamic Republic of Iran(New York: Metropolitan, 2013). They had distinguished careers in the U.S. government before leaving their positions on the National Security Council in March 2003, in disagreement with Middle East policy and the conduct of the war on terror. They teach international relations, he at Penn State, she at American University.

“There is a whole slew of highly dubious assumptions and narratives about Iran and the US’s relationship to it that are rarely challenged in any meaningful way in standard media circles. The Leveretts and Going to Tehran are vital to thinking critically about these claims…. Both because of their expertise and their long immersion in these issues, they (and their data-filled book) deserve a prominent voice in all serious debates about Iran.” — Glenn Greenwald, The Guardian

 

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