Andrew Bilzin Spring 1997- Term Paper U.S. Foreign Policy Toward Iran On June 25, 1998, the anniversary of the Khobar Towers bombing that left nineteen U.S. servicemen dead, the President of the United States will order a surgical airstrike against known terrorist headquarters within Iran, including those that are buried within civilian residences. The decision to take such action is best described by Prospect Theory, as will be explained at the conclusion of this paper. I. Iran as a Rogue ÒRogue RegimesÓ defines a rogue state as a country that has a large conventional military, sponsors or practices international terrorism, and is developing or acquiring weapons of mass destruction (WMD)1. The ÒRogue DoctrineÓ, Ò the characterization of hostile ( or seemingly hostile) Third World states with large military forces and nascent WMD capabilities bent on sabotaging the prevailing world orderÓ, grew out of the U.S. government need to identify its new enemies after the end of the cold war2. Iran is one such state to have been identified with the Òrogue doctrineÓ. For almost twenty years, Iran has been considered a threat to United States interests. In 1979, the Carter Administration imposed Executive Order 12170, which put the U.S. at a state of national emergency with respect to Iran, and it has been so ever since. Executive Order 12170 has been the basis upon which U.S. Presidents since Carter have drawn authority to pass further legislation against Iran3. There is ample evidence to support IranÕs rogue status. The U.S. State Department claims that Iran is the premier sponsor of international terrorism and is deeply involved in the planning and execution of terrorist acts both by its own agents and by other groups. The American-Israel Public Affairs Committee (AIPAC) reports that Tehran has been linked to numerous anti-west and anti- Israel terrorist attacks ranging from taking hostages and hijacking airlines to carrying out assassinations and bombings. The Iranian government has been blamed for the bombings of the U.S. Embassy and the French-U.S. Marine barracks in Beirut in 1983 and the Buenos Aires terrorist attacks on the Israeli Embassy in 1992 and on the Argentine Jewish communal building in 1994. In addition, AIPAC claims that Iran is the major financial and military supporter of Hamas and Islamic Jihad, two radical Islamic groups trying to stop the Middle East peace process. These two groups have been linked to terrorist attacks in Jerusalem and Tel-Aviv. AIPAC reports that Iran has funded Hamas with over thirty million dollars over the past two years and allowed Hamas to establish an embassy in Tehran. Also, AIPAC reports that Iran is a major supporter of Hezbollah, the notorious terrorist organization responsible for the bombing of Israeli settlements.4 Furthermore, Iran has recently become a major supporter and ally of SudanÕs National Islamic Front5. Clearly, the support Iran has given to terrorist organizations has helped maintain instability in the Middle East . Another major reason why Iran has been characterized as a rogue is because of its perceived quest for weapons of mass destruction, most notably nuclear arms. In a February 1987 address to IranÕs Atomic Energy Organization, former President Ali KhameneÕi made IranÕs nuclear intentions quite clear: Ò Regarding atomic energy, we need it now. Our nation has always been threatened from outside. The least we can do to face this danger is to let our enemies know that we can defend ourselves.Ó6 IranÕs nuclear history started with the Shah in the 1960Õs. He created the Atomic Energy Organization of Iran in 1974, and quickly began his search for nuclear reactors. Ironically, many of IranÕs early nuclear purchases were from the United States. In 1979, when the Islamic revolutionaries seized power, the ShahÕs nuclear program was discontinued. However, in 1985, it was started up once again. Tehran has emphatically denied that it is working to produce nuclear weapons, but nuclear experts refute this claim7. Instead, Iran is reported to have undertaken a series of self-incriminating activities, such as constructing underground facilities for nuclear research. Some experts believe that Iran will begin producing nuclear weapons early next century8. Acting Assistant Secretary for Near Eastern Affairs David Welch stated before Congress; Ò We are particularly concerned by IranÕs continued pursuit of nuclear technologies. IranÕs acquisition of ever more sophisticated missile technology from North Korea and China presents an increasing threat to our friends and our military presence in the Gulf.Ó9 Welch further went on to state, Ò Iran poses one of the greatest proliferation threats.Ó Any evaluation of IranÕs rogue status would be incomplete without considering the magnification by which author Michael Klare and Professor Raymond Tanter claim the U.S. operates concerning rogue states such as Iran. While the two experts disagree as to the level of threat Iran presents to the U.S., both concur that the threat is to some extent magnified by the Pentagon in order to maintain a certain level of military spending.10 It is important to recognize this notion of ÒmagnificationÓ as an omnipotent factor behind the U.S. sticking to its sanctions, even though most of the world is against them. The sanctions are a tangible sign that the U.S. government views Iran with the utmost seriousness. II. The Sanctions Thus, Iran, considered a major threat by the U.S., has been the target of American punishment. The Iran Oil Sanctions Act of 1995 and the ensuing Iran-Libya Sanctions Act of 1996 are prime examples of AmericaÕs response to Iranian behavior. On September 8, 1995 Senator Alfonse DÕAmato introduced S. 1228, The Iran Foreign Oil Sanctions Act of 1995, a bill aimed at foreign companies that help Iran develop its oil and gas resources. It set forth a series of compulsory and discretionary sanctions that the President would impose on any U.S company that assists Iran to increase its revenues by extracting petroleum or natural gas. The bill provides a series of sanctions that the President of the United States shall choose from and place upon any person who invests $40,000,000 or more that Òsignificantly and materially contributesÓ to the development of oil revenues in Iran11. The sanctions of which the President may choose to place on violating persons or companies are; 1. Denial of Export-Import Bank assistance; 2. Denial of export licenses for exports to the violating company; 3. Prohibition on loans or credits from U.S. financial institutions of over $10 million in any 12-month period; 4. Prohibition on designation as a primary dealer for U.S. government debt instruments; 5. Prohibition on serving as an agent of the United States or as a repository for U.S. government funds; 6. Denial of U.S. government procurement opportunities ( consistent with WTO obligations); and 7. A ban on all or some imports of the violating company.12 The Iran Libya Sanctions Act of 1996 is quite similar to the 1995 act. The difference is that the 1996 legislation calls for the sanctions to be put on foreign companies investing in IranÕs petroleum industry. Essentially, it is a secondary boycott. The Sanctions Act of 1996 was a good example of the Prospect Theory in action. In this case, effort justification can be cited as the reason why the 1996 sanctions were passed. The administration had already passed the 1995 act, which was not having a great enough effect, and now reasoned that the 1996 act was just a slightly more intense version of the same bill. The sacrifice that the U.S. had already made by passing the 1995 act warranted the small increase in sacrifice required by the 1996 act. The objective of these two pieces of legislation is to slow IranÕs development of its oil and gas resources and its access to revenues to fund behavior harmful to the international community. Undersecretary of State Peter Turnoff stated, Ò a straight line links IranÕs oil income and its ability to sponser terrorism and build weapons of mass destruction.Ó13 The Iran Foreign Oil Sanctions Act is written to hinder IranÕs ability to fund these dangerous activities by decreasing IranÕs most important funding source: the hard currency it collects from its petroleum industry. AIPAC reports that, currently, Iran derives more than 90% of its hard currency from this sector.14 In addition, AIPAC reports that IranÕs long-neglected oil fields are aging, thus affecting efficient production. The oil fields require Òhuge foreign investmentÓ in development projects just to maintain current levels of exports. Without such investment, their production capability will decrease greatly, and ÒIran is in danger of becoming an oil-importing country in less than 15 years without substantial foreign investment.Ó15 The sanctions are only meant to last until Iran shows significant improvement in its conduct. Section 8 of the 1995 Act provides for termination of the sanctions if the President determines that Iran has ceased its efforts to design, develop, manufacture, or acquire nuclear and biological weapons and has been removed from the list of state sponsors of international terrorism.16 The effects of the sanctions on the Iranian economy are debatable. Under Secretary Peter Turnoff testified that the sanctions have affected Iran in three major ways. First, The Rial lost one-third of its value following President ClintonÕs announcement of the trade and investment embargo against Iran. In response to the falling Rial, Tehran had to place tight currency controls that will lead to Ò slower growth and inflationÓ17The weakness of the Rial led to an inflation rate of a whopping 50% in 1995/96, compared with about 20% a year throughout the eighties and early nineties.18 The central bank was able to curb inflation to 25% in 1996/97, but it was at the expense of economic growth. Second, the sanctions forced a decrease in IranÕs income from crude oil sales. Around 400,000 barrels per day that had been sold to American companies now need new buyers, and Iran has had difficulty finding them. Oil not sold is hard currency not flowing into the Iranian economy or government. Third, the cash shortage created by the sanctions has made it tremendously difficult for the Iranian government to pay its external expenses, including its fairly large national debt. However, now there is evidence that refutes the claim that the U.S. embargo and secondary sanctions have had a truly meaningful effect on Iran. And even more importantly, however great the effects have been, they are only short-term and will be solved a few years down the road. According to CIA Deputy Director for Intelligence, John Gannon, Iran will continue to sell an enormous amount of oil because it uses Òsophisticated marketing tacticsÓ and because Òits crude oil is of good quality.Ó In addition he believes that the sanctions will not stop major new development projects, such as some of its deals with South Africa, or prevent maintenance and repairs. Also, Gannon reported that Iran, sensing that its trade with the United States was coming to an end in the early eighties, cultivated other suppliers to replace U.S. equipment and has Òestablished ties with hundreds of foreign companies.Ó19 What is clear is that the sanctions have not received the amount of support from the international community that the U.S government had hoped for. In fact, Gannon reported that Israel, El Salvador, and the Ivory Coast are basically the only countries that support the embargo.20 Unilateral sanctions are not nearly as effective as those that are multilateral, especially when, as is the case here, countries such as Germany and Japan are still willing to do business with the targeted country. In fact, the countries of the European Union buy 20% of their oil from Iran and Libya, and EU oil companies have major investments there.21 Instead of falling, IranÕs economic growth rate showed a modest increase in 1994/95 and rose to 3.5% in 1995/96. Furthermore, the IMF predicts a 4% rate for 1996/97, and similar growth into 1998.22The bottom line is that the long-term effect of unilateral sanctions will be minimal. The United States must convince the other major industrialized countries to join her in effort to economically strangle Iran. On the other hand, Tarnoff claims that Ò It would be a mistake for us to exaggerate the gap between our policy and that of most other industrialized nations toward Iran.Ó He claims that the other G-7 nations share U.S. concerns, as shown by their refusal to engage in any nuclear cooperation with Iran.23 I question the wisdom of TarnoffÕs argument. I hardly think that the refusal of other industrialized countries to help Iran attain a nuclear arsenal signifies that they are as concerned about Iran as the U.S. is. That is equivalent to saying the U.S is concerned about Jamaica just because it doesnÕt aid her in developing nuclear weapons. Ultimately, the U.S. has not only expressed its idealistic beliefs in words, but has put her money where her mouth is. Unfortunately, almost no other country has followed AmericaÕs lead in self-sacrifice, and they donÕt appear to be changing their minds. I feel as though this realization has brought some degree of embarrassment on the United States. In addition, IranÕs ÒoutlawÓ behavior continues on unabated. III. The strike: Explained by Prospect Theory In 1998, certain Òsmoking gunÓ evidence will be presented to the United States implicating Iranian sponsored terrorists as the group responsible for the Khobar Towers bombing. The nineteen American casualties resulting from that bombing have weighed heavily on the U.S. consciousness, and President Clinton will need to make some sort of retaliatory response. Presently, the U.S. military is in the midst of preparing for an air strike against Iran, if so ordered by the President.24 In addition, Iran will continue to disrupt the Arab-Israeli Peace Process by maintaining its support for such terrorist outfits as Hezbollah and Hamas, prompting Israel and AmericaÕs Jewish Community to be extremely vocal in favor of retaliatory measures against Iran. Basically, President Clinton will be operating in a domain of losses. The sanctions he had passed have failed to deter Iranian terrorism, the American public is fed up with the notion that this third world country could cause the U.S so much hardship, and the international community has probably lost some amount of respect for the U.S due to its inability to compel them to join in the sanctions. President Clinton will first go through an editing phase, which involves an analysis of the choice problem.25 His advisors will present his possible options. These options probably would include 1. further sanctions against Iran; 2. a large scale military strike against Iran; 3. A surgical air strike against Iran with specific targets. The first option, placing further trade and economic barriers on Iran, would have little effect unless they were multilateral. Considering the lack of international support for the current sanctions, it is hard to imagine that any new sanctions will receive any more support. Rather, they might only serve to further increase tensions between the U.S. and its trading partners. In addition, the U.S. has already lost some prestige because the other major industrialized countries havenÕt followed along in the sanctions, and I donÕt think the President will want to lose any more with the failure of further sanctions. The time for sanctions is over. It, the President will conclude, is time to act militarily. However, the second choice, to launch a major military attack against Iran, will also not be chosen by the President because it would be unnecessary, and American military casualties would be a risk. The third option, a surgical airstrike aimed at known terrorist headquarters, is the most viable option. Such an action would be supported by the American people, especially considering the extremely low, if any, expected casualty rate. The international community, most notably the U.N., would probably oppose such action, but President Clinton will disregard such opposition and risk upsetting the rest of the world. His risk acceptance is again explained by the fact that he is operating in the domain of losses. The effort justification effect further describes why Clinton will order an attack on Iran. Effort justification describes the trend of leaders to increase their efforts to a commitment, even if they have been unsuccessful. They reason that the large amount of effort already put into a situation justifies an incremental increase in effort. The escalation of American troops in the Vietnam war serves as an excellent illustration of effort justification. President Clinton will reason that all of the effort and sacrifice that has gone to passing and maintaining the 1995 and 1996 sanctions would justify the air strike. 1 Tanter, Raymond. Rogue Regimes. Text of Iran Chapter. St. Martins Press. New York, N.Y. 1997 forthcoming 2 Klare, Michael. Rogue States and Nuclear Outlaws. N.Y., New York: Hill and Wang, 1995. p. 23 3 Elmi, Salman. PS 472-- Term Paper. 1996 p. 2 4 Ò The Iranian ThreatÓ Published by AIPAC. Available: WWW URL: http://www.aipac.org/iran/iranq.htm 5 Jacobs, Jonathan. PS472- Term Paper 1996 p. 1 6 Timmerman, Kenneth. ÒIranÕs Nuclear Program: Myth and RealityÓ. The Middle East Data Project, Inc. 7 Klare, 1995, p.144 8 Klare, 1995, p.144 9 Welch, David. FDCH Congressional Testimony, April 17, 1997 10Klare, Michael. 1995 p.23 Tanter, Raymond. Iran Chapter in Rogue Regimes. 11Report 104-187. Iran Oil Sanctions Act of 1995. 104TH Congress 1st Session p. 4 12 White House Fact Sheet: The Iran And Libya Sanctions Act of 1996. 13Under Secretary of State Peter Turnoff. Testimony before the Senate Banking Committee. October 11, 1995 14AIPAC. Iran Foreign Oil Sanctions Act: Questions and Answers. http://www.aipac.org/iran/iranqa.htm 15AIPAC. Iran Foreign Oil Sanctions Act: Questions and Answers. 16Report 104-187. Iran Oil Sanctions Act of 1995. 104TH Congress 1st Session p. 8 17Under Secretary of State Peter Turnoff. Testimony before the Senate Banking Committee. October 11, 1995 18Petrossian, Vahe. Special Report: Iran; Ò Pretty Good for a Country Under SeigeÓ. MEED Middle East Economic Digest. February 14, 1997. 19CIA Deputy Director for Intelligence John Gannon. Testimony before the Senate Banking Committee. October 11, 1995. 20Gannon, John. October 11, 1995 21Jacobs, Jonathan. Term Paper Fall 1996 22 Petrossian, Vahe. February 14, 1997. p.6 23Tarnoff, Peter. October 11, 1995 24Tanter, Raymond. Confer i 90 25Levy, Jack. Avoiding Losses/Taking Risks. Chapter 2 Edited by Barbara Farnham. (The University of Michigan Press) Ann Arbor 1997. p. 15