Persian Gulf Stability Hinges on U.S.-Iran DialogueBy Hooshang Amirahmadi

T he Persian Gulf will remain unstableand conflict-prone until Iran is in-corporated into the region's eco-

nomic and security arrangements. Iran pos-sesses over 750 miles of shoreline on thePersian Gulf and the Gulf of Oman, is theGulf's most populous country, overlooksthe Strait of Hormuz and, by regional stan-dards, has a diversified economy. It also isthe only state that has played a major rolein the region for centuries.

Considering the positive developmentsin Iran's foreign and domestic policy, thecountry can be included in regional group-ings and this will, in fact, benefit the statesin the region and beyond. This perspectiveunderscores the necessity of a dialogue be-tween Iran and the United States. Unfortu-nately, however, current U.S. policy towardIran is misguided and counterproductive.

As a very frequent visitor to Iran, I havehad numerous talks on the subject both with The late Ayatollah .Ruho//'Iranian officials and with dissident leaders leader of the IslamIc Repuin the country, as well as several years of involvement with U.S.-Iran relations and Gulf affairs.

Since 1980, the Gulf has witnessed the costliest and bloodiestwars of the second half of this century. These wars have cost theregion over a million lives and over $1 trillion in destroyed wealth.In the same period, the countries surrounding the Gulf have spentover $300 billion on importing and maintaining weapons sys-tems-and this is a conservative estimate. It is reported that thePentagon spends some $50 billion a year on its deployments in theregion.

The legacy of this staggering economic waste hits at a time whenGulf states are experiencing dwindling oil revenues. In 1981,OPEC members enjoyed a per capita oil income of about $800. By1994, this figure had declined to a mere $290.

Meanwhile, the global demand for Persian Gulf oil is growingrapidly, a fact that necessitates major investment in the region's oilsector. According to Dr. Subroto, OPEC's former secretary-gen-eral, the organization's members will need to invest $100 billionin their respective oil sectors if OPEC production is to reach thenecessary 35 million barrels a day by the turn of the century. Eco-nomic mismanagement and declining oil revenues have combinedto make the need for foreign investment greater than ever before.

The political costs of economic problems are even more press-ing. Thus far, the legitimacy of the region's states has rested on theirinvestment capacity and the generous subsidies they have paid totheir citizens. But these practices are no longer affordable. EvenSaudi Arabia faces troubling budget deficits and foreign debt. As a

Hooshang Amirahmadi is professor of urban planlling and the directorof the Middle Eastern Studies program at Rutgers University.

THE WASHINGTON REPORT ON MIDDLE EAST AFFAIRS 75APRIL 1996

consequence, the internal stability of thePersian Gulf states has eroded significantly.

Simultaneously, the Persian Gulf suffersfrom bilateral and multilateral antagonism.Five years after Desert Storm, the Gulfstates are more divided than they haveever been. Border and territorial disputes,manifest or latent, are a major source ofthis interstate conflict. Meanwhile, thegeopolitics of oil is changing as Asia'sgrowing economies and populous coun-tries look to the Gulf for their rapidly ex-panding energy needs.

While Iran and Iraq adhere to the U.N.-brokered cease-fire agreement, they haveyet to sign a comprehensive peace treaty.Even though Iran's adventurism abroad hassubsided, the Gulf monarchies still feelthreatened by the specter of Islamic funda-mentalism permeating their shores. Iran'sdispute with the United Arab Emirates over

ah.Khomeini.founder and the Tunbs and Abu Musa has expanded tobllc of Iran. a dispute with the GCC and the Arab

League, including Syria, traditionally Iran's leading Arab ally.Therefore, to Iran, Iraq and Saudi Arabia, the main regional

powers, lasting peace and regional cooperation seem unattainable.Complicating the tense situation is the spiraling conflict betweenthe United States and Iran, a conflict that threatens to escalatebeyond redemption.

The instability and potential volatility of the Gulf is not a sub-ject of dispute. What is in dispute are the causes of this instabilityand what should be done about it. Iran and Iraq are blamed by theUnited States and its allies. They argue that Iraq's militarism ledto two wars in the Gulf and has the potential to do so again. TheIraqi leadership also is condemned for trying to develop weaponsof mass destruction and for its oppression of the country's Kurdishand Shi'i populations. Iran is viewed as the world's leading spon-sor of terrorism and as aiming to subvert pro-Western regimes inthe region. The Islamic Republic, the U.S. and its allies believe, isseeking to acquire a nuclear weapons capability in an attempt todominate the region. Iran also is held responsible for opposing theArab-Israeli peace process.

The U.S. solution is isolating and containing both Iraq and Iranthrough economic sanctions, U.S. military involvement in the regionand ever-deepening strategic ties to the Gulf monarchies. Whilemultilateral sanctions are in place against Iraq, the United States isattempting unilaterally to impose similar sanctions against Iran.

For their part, Iran and Iraq see U.S. "imperialism" as the culprit.They believe that, in the post-Cold War era, the U.S. needs enemiesto rationalize its military presence in the Gulf, and to justify sell-ing billions in expensive weapons systems to the Gulf's monarchs.

Naturally, Tehran and Baghdad advocate a region free of the cur-rent U.S. domination, where regional problems can be met with

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Gulf Stability...Continued from page 75,

regional solutions. Tehran also has advo-cated regional cooperation and a securitysystem that includes all of the states in thePersian Gulf region.

The war of words, it seems to me, has ob-scured a realistic appraisal of the causes ofregional instability. Iran and Iraq have un-doubtedly pursued destructive policies.Saddam Hussain and his clan have startedtwo wars in th~ region and their humanrights record is abysmal. Iranian clericsbegan their reign by taking hostages. Sincethen, they have attempted to export Islamicrevolution, supported militant Islamicmovements, and opposed Arab-Israeli rec-onciliation.

But for helping Saddam Hussain buildhis military machine in the 1980s, theUnited States and the Gulf monarchies areworthy of blame as well. Gary Sick, whowas at the National SecQrity Council underPresidents Ford, Carter and Reagan, is oneof many experts who believe that Wash-ington yearns for an all-purpose enemywho provides a focus for U.S. strategicplanning and justifies multi-billion-dollararms sales in the region and defense spend-ing at a time of major spending cuts. I amin agreement with him here, especiallywhen you consider the impact of Israel andits deep ties to the United States.

If long-term stability is the goal, the so-lution must focus on including all parties ina regional dialogue, with the United Statesas a mediator. Here, the most promisingfirst step is dialogue between the UnitedStates and Iran.

United States' Iran Policy is MisguidedUnfortunately, current American policy

toward Iran disallows such a dialogue. Thispolicy functions on four distinct levels.First, it downgrades Iran's strategic andeconomic significance, suggesting that theU.S. can avoid reconciling with Iran at nogreat loss to its own strategic and economicinterests.

Second, this policy suggests that even ifworking relations with Iran would benefitthe United States, attempts at U.S.-Iran rec-onciliation would be futile given the mes-sianic, destabilizing and anti-American am-bitions of the ruling clerics in Tehran.

Third, despite their claim that Iran is in-significant, current American policy makersdon't leave Iran alone. On the contrary, theyargue that, given its capabilities and inten-tions, Iran is dangerous to U.S. interests inthe region and therefore must be preventedfrom gaining strength. Finally, they pre-

scribe "dual containment" to stop Iran frombecoming more menacing.

Inherent in these arguments is the beliefthat a weak, bankrupt Iran is better for re-gional stability, and that Iran can, in fact, beisolated. Proponents of a hard line tow~dIran assume that the current "stick and nocarrots" policy will in due course positivelyalter the behavior of the Islamic Republic,or even force it out of power.

Many foreign policy thinkers in theUnited States, however, believe Washing-ton's current policy toward Iran will onlymake the region more unstable. They hopeto see a positive change after the Americanpresidential elections this year. Iran's par-liamentary and presidential elections offerhope for dialogue as well.

Unlike Iraq, Iran cannot be isolated. Ge-ography alone makes this difficult, if notimpossible. U.S. sanctions against Iranhave met with little approval among the in-dustrialized nations or Russia, China andIndia. Indeed, after the United States pre-vented American oil companies frombuying Iranian crude, the National IranianOil Company was able to find alternativebuyers in a surprisingly short period. EastAsia's new thirst for oil provides Iran withnew options.

The history of the region for the past cen-tury demonstrates that a strong Iran hasnever initiated any significant hostilitytoward any of its neighbors. On the con-trary, when Iran has been unstable or weak,its neighbors have acted aggressivelyagainst it; and the ripple effect of these ag-gressions has expanded beyond the region.

I believe that if the Shah of Iran had stillbeen in power in 1980, and had Iran's mil-itary not been in disarray, Saddam Hussainwould not have dared to invade Iran. Andif that war had not happened, Saddamwould have not plunged Iraq into the eco-nomic chaos that led him later to invadeKuwait. This dual containment aimed atweakening the Iranian economy makes aserious mistake in assuming that a weakerIran is a desirable outcome.

A strong, economically vibrant, and re-liable Iran, effectively integrated into thecommunity of nations, would exert atremendous stabilizing influence onAfghanistan, Central Asia, the Caucasus,Eastern Turkey, Iraq, and, most important,the Persian Gulf. In this regard, Iran's po-tential dwarfs that of any other regionalpower and cooperation with the UnitedStates strengthens Iran's positive role.

I am no apologist for the ruling clerics inTehran. Much of their behavior over thepast 16 years has been unsettling. They stillowe the United States an explanation forthe hostage crisis, which was arguably their

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Gulf StabjliiV...Continued from page 86

Recent elections in the Russian Federationmake it abundantly clear that communistsand nationalists will play an increasinglydominant role in that country. Iran is ide-ally situated to offer logistical and strategicsupport to former Soviet republics wishingto maximize their autonomy from Russia.If Iran is forced into a corner, however, itcan side with Russia. The next few yearswill be crucial in this regard, as both Iranand Russia are conducting presidentialelections whose outcomes have beenlargely unpredictable. At a conference Iheld in Washington last April, AmbassadorRichard Murphy of the U.S. Council onForeign Relations warned:

"If we assume the continuation of theAmerican effort to isolate Tehran andBaghdad, we must assume their readinessto develop common interest with a pariahin Moscow. In that case the question of whowill wield influence over the world oil mapcould look very different than it does today.Such a world would be far less hospitableto consumers, and less favorable to pro-ducers, subject to pressure from a belt of oilproducers stretching from the Arctic to thePersian Gulf."

Third on the list of issues that accord Iranstrategic significance is the uncertain futureof Iraq. Saddam Hussain's ouster will fun-damentally alter Iraq's inner dynamics andforeign posture. Iran possesses influenceamong Iraq's Shi'i population which it coulduse to a constructive end. In addition, Iran isfar less burdened with Kurdish insurgencythan are either Iraq or Turkey. Indeed, Iranhas in the past been able to use this asset toinfluence Iraq's domestic policies.

Iran Has Great Economic PotentialIran's position in the world energy

market is particularly important. It was thefirst oil producer in the region and is nowthe fourth largest producer after SaudiArabia, the U.S. and Russia. It owns 10 per-cent of the world's oil and, as a foundingmember of OPEC and its second largestproducer, Iran continues to playa majorrole in balancing its policies and decisions.However, to playa positive role, Iran needsforeign assistance to develop its oil fields.

The world will gradually move into thenatural gas era. Here again Iran occupies animportant place. It owns 15 percent of theworld's natural gas, second only to Russia.Considering that Iran's current share inworld gas production is only 1.3 percent,such huge reserves indicate Iran's immensepotential as a major exporter of gas in thefuture. To compare, Russia holds 34 per-cent of the world's proven gas reserves, butits share in current production is as high as27 percent.

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feudal, power structures in Iran.The good news is that the United States

and its regional allies can support the moremoderate factions in Iran. True, this policyled to the Iran-Contra fiasco under U.S. Pres-ident Ronald Reagan. But the grip of thehard-line elements in power is far less firmnow than it was in the 1980s. The Iranianclergy is not a monolith, and current U.S.policy is unrealistic for treating it as such.

But the United States sends conflictingmessages, too. U.S. Speaker of the HouseNewt Gingrich has asked for funds in-tended to destabilize the Iranian govern-ment, calling Iran "the most dangerouscountry in the world." Yet, President Clin-ton recently told the Sharq al-Awsat news-paper that the U.S. is prepared for a dia-logue with Iran. Given Iran's strategicsignificance and economic potential, dia-logue with Iran will better serve U.S. inter-ests than will continued hostility.

Iran Has Immense Strategic SignificanceThe first element in Iran's strategic sig-

nificance is political Islam, which currentlyrepresents the most formidable revolution-ary force in the Middle East and beyond. Itseethes in Algeria, Egypt, the occupied ter-ritories, and even Turkey. Its influence inthe Persian Gulf is by no means negligible.Islamic movements have mounted a seriouschallenge to pro-Western regimes in theregion and the momentum of these move-ments shows no signs of abating.

A forward U.S. military presence will notstem this tide. On the contrary, direct U.S.intervention in the region will only incitethe most militant Islamic movements tounite more vigorously under an anti-Amer-ican banner. Political Islam cannot be over-turned; it can only be accommodated and,hopefully, tamed.

As the only living example of politicalIslam in action, the Iranian revolution of1979 offers valuable lessons. More effec-tively than any extant ideology, Islam em-boldens revolutionaries to unite and under-mine existing hierarchies. But Islam is notwell suited to the demands of modern state-craft. Indeed, even some senior Iranian cler-ics are realizing the necessity of separatingreligion from politics.

If Iran is integrated effectively into theregion's economic and security arrange-ments, its experience in and connections toIslamic movements can be utilized to mod-erate the disruptive effects of militancy.

The second element of Iran's strategicsignificance is Russia's uncertain future.

90 THE WASHINGTON REPORT ON MIDDLE EAST AFFAIRS APRIL 1996

Gull Stability...Continued from page 90

vices.Iran's sizable debt of $25 billion to $30

billion also is cited by those who argueagainst the country's economic signifi-cance. Since 1994, however, the govern-ment has paid parts of the debt, rescheduledothers, and restricted imports to build re-serves of some $6 billion to $7 billion atpresent. Iran's second economic plan hasearmarked some 20 to 25 percent of oilincome for repayment of the debt.

Current U.S. policy on Iran is unpopularamong the vast majority of policy experts inWashington, who believe that a policy of en-gagement is the most plausible course forchanging Iran's disruptive behavior. With theexception of Israel, the "stick with no carrot"policy has no real support among U.S. allieseither. Iran needs to be given incentives fordialogue and modifying its behavior. Unfor-tunlltely, Washington's current policy leavesno room for such incentives or dialogue.

I have listened to tens of top Iranian of-ficials complain that their overtures for di-alogue with the United States have been re-buffed by Washington. The Iranian foreignand petroleum ministries tell me that Iran'soffer to Conoco and its attempt at joiningthe consortium in Azerbaijan chiefly weredesigned to provide Iran with a forum ofmutual interest with the United States,upon which further reconciliation could bebuilt. President Rafsanjani's interviewswith ABC and CNN have underscoredIran's readiness for dialogue. This wouldhave been unimaginable a few years ago.

The main problem with the current U.S.approach to Iran is that it sacrifices thelong-term interest of the United States instability throughout the Persian Gulf as awhole to the demands of short-term politi-cal expediency. Iran's incorporation into theregion and into international capital mar-kets makes business and strategic sense.

Its isolation, on the other hand, will resultin exorbitant political and economic costswhich harm all parties concerned. Most im-portant, if Iran is engaged, its transitiontoward democracy will gain further mo-mentum.

and newspaper reporter. "It's an uncertainpath and problems are bound to arise atfirst. But technology and education arechanging people so fast in Iran that therehave to be political changes to match. Iranis at a turning point."

Intellectuals still are not allowed to chal-lenge Iran's system of Islamic government,but they have begun to debate its nature.Students talk about democratic reform anddiscuss Karl Popper's theories of the opensociety. Abdolkarim Soroush, a liberal Is-lamic university lecturer, tentatively sug-gests that mosque and state should be sep-arated. Politicians within the ruling elitecriticize the executive power of thesupreme religious leader. "The wholeperiod has been a turning point for Iran,"said one long-time foreign resident. "Theintellectuals have left no subject un-touched."

Indeed, Iran's youth-half of the popu-lation is under 20-may well be having adecisive impact on this year's polls.

Revolutionary rhetoric means little topeople who are too young to remember thelast Shah's regime. Instead, young Iraniansare flocking to study English or computerskills at the scores of private institutes open-ing in the major cities. "Iranians are start-ing to demand a modem society," explainedBegum, a young school teacher from Tabrizin northern Iran. "They want better con-sumer goods and more contact with the out-side world. They want to live in a civilizedcountry."

In the long term, the present regime willalso be challenged by dropping oil earn-ings: productivity is low, domestic con-sumption is high and oil prices are flat.However, development of non-oil exportsis hindered by the bazaaris, powerful mo-nopolistic traders, who offer vital supportto the Islamic regime. Iranian analysts be-lieve that the development of a modem, di-versified exporting economy would entailbreaking their hold. That in turn could upsetthe present system.

The authorities are uncertain how toreact to these new currents. They fear thatan established or effective opposition, evenone within the system, would be too muchof a threat. No one is expecting the mul-lahs to disappear from politics overnight-Nateq Nouri is still considered one of thefront-runners for the 1997 presidential bat-tle-but the openness of the debate is asign of gradual evolution within the Is-lamic Republic. "The growth of the tech-nocrats is an irreversible trend in Iran," saidthe European ambassador. "There's defi-nitely a feeling among the Iranians thatthey have to run the country better if theywant it to survive."

Iranian Elections...Continued from page 76

pected to provide 80 percent of the initialinvestment, and will in return receive nat-ural gas from Turkmenistan. The pipelinewould connect Europe to one-fourth of theworld's natural gas reserves. Iran is by farthe most economically feasible route fortransporting Central Asian gas.

Iran is actively searching for contractswith Azerbaijan to transport the latter's oilto Europe. The Azeri consortium's turningto Russia or Georgia and Turkey as trans-port routes makes no economic sensewhatsoever. Economists agree that choos-ing Iran would yield noticeably lowertransaction costs. While Azerbaijan bowedto U.S. pressure in denying Iran a stake inthe giant consortium, it is nonetheless in-terested in cooperating with the IslamicRepublic in developing other fields and inswap deals. Swap arrangements have muchpotential, as Iran has access to large portsin the Persian Gulf. This is another advan-tage Iran possesses over Russia as a trans-port route. It seems to me that a routethrough Iran would make strategic sensetoo.

Currently Iran is engaged in a feasibilitystudy for developing a gas pipeline to Indiaand Pakistan. Plans also exist for export ofIranian gas to Europe and the Far East.Thus Iran and Pakistan are busy planning a1600-km pipeline which will take Iran's gasto that country. Iran also has agreed tosupply India with natural gas through theextension of the proposed pipeline.

Some argue that Iran is not a lucrativemarket. To substantiate their claim, they pointto Iran's economic problems and the lowvolume of Iran's recent imports, which haveaveraged a mere $15 billion for the past threeyears. True, this is a small figure even by thedeveloping world's standards. But usingIran's recent import figures as a way ofjudg-ing the country's economic potential is faultyfor two reasons. First, Iran's economy is onlyat the incipient stages of structural change,away from oil and toward transport and man-ufacturing. Per capita oil income is now$200, down from $1300 in 1976.

Second, Iran's true economic potentiallies in becoming a site for joint venturesin oil, manufacturing and regional trans-port networks. These joint ventures couldsupply the growing Iranian population (ofsome 64 million at present) and also grow-ing markets around Iran. Thus, focusingsolely on current levels of imports or eco-nomic difficulties is short-sighted. Overthe next five years, Iran plans to importsome $100 billion worth of goods and ser-

or against the Islamic Republic," said a Eu-ropean ambassador. "They'll be voting fornuances and personalities within the pres-ent system."

Nonetheless, progressive Iranians wereencouraged by the debate itself. "There isa growing trend toward liberalization now,"said Said Leylaz, a prominent television

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