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With the December 6 news that it plans to build twenty new uranium enrichment facilities, Iran has dealt a serious blow to hopes of peacefully resolving its nuclear standoff with the West. After months of courtship by the international community, Iran’s announcement appears to be both a rejection of the West’s advances and a signal of its intent to step up its pursuit of a nuclear program. With the US running out of cards to play, many fear that the two countries are on a collision course to military confrontation.

Much like North Korea, the consequences of an Iranian possession of nuclear bomb are dire. The Obama administration has sought to right the wrong of American Cold War policy, when the US provided its then-ally Iran with nuclear reactors in an attempt to curry favor. Preventing proliferation is a priority for the Obama administration and confirmation that Iran has a nuclear bomb would trigger an arms race in the Middle East, with heavyweights such as Egypt and Saudi Arabia seeking to counter Iranian domination in the region. An Iranian nuclear bomb would also bring Israel and Iran closer to war. Iran’s anti-Semitic leader Mahmoud Ahmadinejad has publicised his hatred of Israel so often that Israeli leaders deem a nuclear-armed Iran an existential threat. Just last year an Israeli strike on Iranian nuclear sites was narrowly averted after George W. Bush refused to give Ehud Olmert the green light. The Obama administration has since tried to convince the Israelis of the virtues of diplomacy with Iran, but the latest setback means that hawks in Israel and the US will be circling Iran with greater intensity.

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It is becoming clear that Iran will not escape the growing global economic crisis unscathed. The LA Times reported on Friday that the Iranian government is seriously considering a $300 million bail-out to help companies that are suffering from the recent drops in oil and commodity prices. The Times reports:

According to a report Tuesday in the daily Kargozaaran, the chief of the Tehran Stock Exchange is pressing the government to put up cash to stop the collapse of the stock market, which has dropped to a five-year low since oil prices began plummeting this fall.

Iran is also struggling with rampant inflation. According to a report by Iran’s Central Bank inflation has risen 25% in the last twelve months and the cost of food and drinks rose 35% in September alone. This rise in the cost of living, combined with wide-spread unemployment, is particularly tough on Iran’s young people. A government report recently found that “a young college graduate had to work and save 40 years in order to be able to afford to buy a first home.”

Economic anxiety among Iranian citizens could play a major role in the upcoming Presidential election. Current President Mahmood Ahmadinejahd has been criticized for his handling of the economy, particularly since up until recently he claimed that Iran would not be affected by the global economic downturn. According to Mohammad Atrianfar, a senior adviser to former President Akbar Hashemi Rafsanjani, Ahmadinejahd has consistently lied about Iran’s problems with exports, inflation, and employment. Anger over economic mismanagement could definitely hurt Ahmadinejahd at the polls.

Meanwhile, American and European officials are hoping that Iran’s economic troubles will force the regime to take the threat of economic sanctions more seriously. The threat of sanctions, however, is severely undermined by Russia’s opposition to sanctions and its position as a permanent member of the U.N. Security Council. Without Russia’s support, it is almost certain that the Security Council will not be able to approve new sanctions against Iran. An op-ed in yesterday’s New York Times by Oded Eran, Giora Eiland, and Emily Landau offers an interesting solution: a three-way deal between the United States, Russia, and Iran. They propose that the United States should offer to drop its plans for a missile defense system in Eastern Europe and increased scrutiny for Eastern European NATO candidates, in exchange for Russia support of stricter sanctions and its promise to stop providing Iran with conventional weapons. This deal would give the United States increased leverage that it need to negotiate with Iran and convince the regime to suspend its nuclear enrichment program. Iran would therefore be able to save itself from painful sanctions and rejoin the international community in exchange for putting its nuclear dreams on hold.

This is an interesting proposal but it fails to take in to account how wildly popular Iran’s nuclear program is among Iranians, who believe that they have a right to nuclear energy. If Ahmadinejahd, or indeed any politician, were to agree to such a deal, this could severely hurt their chances in the June election. Rather than asking Iran to completely stop its nuclear program , international pressure would be more effective if it held Iran accountable to the standards of the International Atomic Energy Agency which has demanded more transparency to determine Iran’s nuclear motives.

As Iranian officials are wondering how to stabilize their faltering economy and American and European officials are wondering if the time is right for renewed economic pressure, one thing is clear: the ramifications of the economic downturn are being felt around the globe and Iran is no exception.

On January 20th, 2009 President Obama and his administration will be taking the reins of foreign policy, including the United States’ relationship with the Islamic Republic of Iran.  Recent appointments and statements by Obama and his transition team offer some clues as to what to expect from the next administration.

The first significant development is President-elect Obama’s announcement of his foreign policy and national security team on Monday, December 1st.  His selection of Hillary Clinton as Secretary of State is certainly interesting. During the the primary season, Senator Clinton tried to portray herself as being tougher on Iran than Obama.  She even went so far as to suggest that if Iran should “foolishly consider launching an attack on Israel”, the U.S. “would be able to totally obliterate them”.  Senator Clinton was also criticized by some Congressional Democrats for her support for a resolution labeling Iran’s Revolutionary Guard as a terrorist organization. She has also, however, expressed support for diplomatic options, stating in 2007 that if elected President she would open a “diplomatic track” to discern “what levers of power in their society we might be able to pull and push”.

Overall, Senator Clinton’s stance toward Iran is characterized by the belief that the U.S. must “use every tool at our disposal, including diplomatic and economic in addition to the threat and use of military force”.  While I am pleased to see that our new Secretary of State is ready to use a variety of methods, including diplomacy, in dealing with Iran, it worries me that she considers the threat of violence to be an equally effective foreign policy tool.  Of course the United States must be prepared to use force to protect itself and its allies, but the militaristic threats and gesturing that have characterized the Bush administration’s approach to relations with Iran have gotten us nowhere.  I hope that as Secretary of State Hillary Clinton will be ready to tone down the rhetoric and use diplomatic and economic tools before resorting to threats and violence.

President-elect Obama himself has also spoken about the strategies that his administration will pursue with Iran.  Today while appearing on Meet the Press Obama articulated a carrot and stick approach that will include diplomatic engagement and the possibility of economic sanctions.  For more on Obama’s plan and the thoughts of other analysts, continue reading. Read the rest of this entry »

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