The Duck of Minerva

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Reputation and Economic Interests: Why Getting a Resolution on Iran will be Difficult

January 16, 2006

[Updated at 2:09pm]
One of the biggest stories of late is the escalating nuclear standoff between Iran and the West. There is great speculation that many of the most important parties (e.g. Russia and the EU3) are now ready to refer the matter to the UN Security Council (UNSC). Other parties, such as China, may not be ready to sign on to sanctions but are becoming increasingly aware that this problem is not going away. The five permanent members of the UNSC are meeting today to try and hammer out a consesus on the issue. What are the odds that Iran will be reported to the UNSC and have economic sanctions imposed on it? It’s hard to estimate, but I do know that the two key obstacles to any collective action on this issue are the damaged reputation of US intelligence and Europe/Russia/China’s economic interests.

The first problem in building a consensus on Iran is the blow dealt to US intelligence credibility as a result of the Iraq War. It becomes quite difficult to convince other leaders to back US action on issues related to WMDs when we got it so wrong in the Iraq case. Even if these leaders didn’t disincentives to act (as in the case of economic interests which will be discussed below), it becomes harder for them to sign up for a campaign of coercive diplomacy/sanctions when it is quite possible that our intelligence is unreliable. In the case of leaders who lack the incentive to take action in the first place (see China, Russia for example), the decrease in our intelligence’s perceived credibility gives them diplomatic/political cover–both domestically and internationally–to stall and otherwise undermine UNSC action on the issue. When the messenger’s credibility is in question, pressure to take action is significanlty diminished.

The second problem, alluded to above, involves the economic disincentives many of the actors face. Russia, of course, has billions tied up in nuclear technology contracts with Iran while the oil-hungry Chinese are concerned about the impact of approving economic sanctions on the possible flow of oil from Iran to their country. Even though Iran is the world’s fourth-largest oil exporter it must import up to 40% of needed gasoline given their dilapedated refining capacity. UN sanctions would most likely target areas such as gasoline imports to coerce Iran. However, countries such as China worry that Iran would retaliate by shutting off–or at least limiting–their own oil exports, leading to possible sharp increases in global oil prices (an implicit threat of just such a scenario was alluded to by Iran yesterday). Now, the likelihood that Tehran would limit their national cash cow is questionable, but it is hard not to be concerned. Besides the increase in price, China would be furthered concerned with decrease in supply for supply’s sake given its growing need for fuel. Additionally, the sanctions would likely target the capital and technology necessary for Iran to upgrade its energy sector and its economy as a whole. This move would of course threaten companies of European, Chinese, and Russian origin (as well as Japan as it apparently struck a deal to develop Iran’s Azadegan oil field).

The economic disincentives faced by many key players is only exacerbated by recent US intelligence failures in the area of WMD. For those that do not have the will to act, US credibilty-issues provide fresh cover. If all the key parties can stand united on the issue it may be possible to get Iran to capitulate (as they are just as rational as any other actor, regardless of how radical we may percieve their religous and political ideology to be–to assume otherwise would be to offer them an advantage). But constructing this consensus will be difficult. If a consensus is reached I fear that it, like any other consensus, might be sufficiently gutted to allow Iran to ride out any threats or actions levelled against it. If this happens, and Iran is able to continue enrichment research, the attractiveness of surgical air-strikes (and the pressure to use them) will increase. Bottom line is unless the US and EU 3 can offer large enough carrots to Russia and China I don’t see this ending peacefully in the long term.

UPDATE: The “Big 5” emerged from their London meeting today agreed that Iran must fully suspend its nuclear program. While this is encouraging it is only a small step. What really matters now will be the negotiations over what actions to take/threaten, what precisely will be demanded of Iran, mechanisms for action, etc. None of this has apparently been decided today (or at least, not made public). There will apparenlty be an emergency meeting of the IAEA’s board of directors on Feb. 2-3 to discuss what actions to take.

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Petti is Associate Director of Insights and Analytics at Alexion . Previously, he served as Lead Data Scientist in the Decision Sciences group at Maritz Motivation and a Global Data Strategist and Subject Matter Expert for Gallup.