Iran and the United States: An Update

Behnam Ben Taleblu is a senior fellow at Foundation For The Defence of Democracies (FDD) where he focuses on Iranian security and political issues. Behnam previously served as a research fellow and senior Iran analyst at FDD. Prior to his time at FDD, Behnam worked on non-proliferation issues at an arms control think-tank in Washington. On Thursday 12 September 2019, Behnam Ben Taleblu addressed The Sydney Institute to update listeners in relations between Iran and the United States. Behnam Ben’s visit to Australia was sponsored by the Australia/Israel and Jewish Affairs Council.

IRAN AND THE UNITED STATES: AN UPDATE

BEHNAM BEN TALEBLU

Thank you very much for that kind introduction and thanks to everyone for coming out this evening and seeing what I hope is not just about the best of American neckwear in Australia, and also to The Sydney Institute for hosting.

My topic begs the question – what is there to update? When so much of what’s going on, in many ways, is simply more of the same. Or, to extend the metaphor, to use a phrase the founding father of the Islamic Republic Ayatollah Khomeini used in the late 1970s, early 1980s, “What business is there between the wolf and the sheep?” In this regard, Khomeini would jab at those who would discuss talking with America. Forty years later, here we are in the month of September, and a couple of days from here there will be discussion in the United Nations General Assembly of talk between the US and Iran. So, depending on your perspective, who you think is the wolf and who you think is the sheep since we are still talking about discussions, allegedly between the wolf and the sheep.

Part of what brings us here is what is popularly called the “max pressure campaign” or the “maximum pressure campaign”. That’s basically a bumper sticker, if you will, used to define America’s Iran policy since 8 May 2018 to present. And while it is America’s Iran policy, it’s derived from the use of the primary foreign policy tools designed to deal with the North Korean nuclear and missile challenge from 2017 under the Trump administration. “Max pressure” was first coined with respect to North Korean nuclear and missile tests. Think back to 2017, the days of “fire and fury”, and you will understand how this pressure policy came about. The pressure policy with respect to North Korea has been – or was starting to in 2017 – based on primarily multilateral sanctions driven by the engine of US coercive diplomacy.

With respect to the other nuclear rogue – the Islamic Republic of Iran – the max pressure campaign has relied on the same tool: punitive and coercive economic measures. That’s a fancy way to say sanctions. But unilateral sanctions as it lacked that international support, that international consensus – what UN sanctions had with respect to the North Korean target. So max pressure starts on 8 May 2018.

On 8 May 2018, the US left the agreement called the JCPOA, known as the Joint Comprehensive Plan of Action.  Now, I’m a critic of the Joint Comprehensive Plan of Action. The C in the JCPOA – comprehensive – in my view didn’t belong there. It wasn’t a comprehensive agreement. It really only deals with one of the many vectors that has made Iran an international pariah for the last 40 years. If you think about the history of enmity between Khomeini and his successor Khamenei and the United States, the nuclear issue is really only the latest issue that has entered the fold of the conversation of why these two countries can’t get along.

Harking back to 1979 there was, of course, the hostage crisis. There was also the Iran-Iraq war from 1980 to 1988. Then came the reconstruction, or reconfiguration, of Iran’s economic, domestic, and foreign policy and political scene throughout the 1990s. Following this was the rise and fall of the reform movement, the rise and fall of new conservative movements in Iran. Then came the Ahmadinejad era, the era where Iran thought it would be wise to send a Holocaust denier wearing a polyester windbreaker to the United Nations General Assembly and have him represent that great country.

So max pressure is clearly built on a historical trajectory. And a trajectory that has been based on this enmity, this 40 years of enmity. It’s also based on an assumption that is born out by evidence on how Iran has changed – if at all – its foreign security policy. The reason I caveat that change, if at all, is because in Washington when you study “cool” or interesting foreign policy problems, you’re often studying change. You’re often looking for the delta between the current threat and the future threat. Or something new from this administration to that administration. Or the next country that you want to be talking about. It’s always a story of change. For those of you who have been looking at the Islamic Republic of Iran in different iterations and different times, it’s not about change. The challenge is a challenge of continuity. Continuity of mission for Iran’s revolutionary elites, continuity of repression for the Iranian population within the country.

Between 1979 and 1980 is when the Islamic Republic itself was formed, or came about. It came about through some distinct historical political forces in that country. And even as there was a referendum in 1979 for an Islamic Republic there have also been concurrent protests against an Islamic Republic. So as much as we know about Iran’s domestic scene affecting Iran’s domestic politics, it’s also become part of the foreign policy challenge with respect to that country. Because its domestic politics have been on quite a public display.

All this is to say, of course, that the max pressure campaign commenced when the US left the nuclear deal. Cognisant of this historical legacy, cognisant of those domestic challenges, and cognisant of the continuity of Iranian threats despite different Iranian presidential administrations.

The primary foreign policy tool – economic sanctions – features heavily in the max pressure campaign. And every single sanction that had existed in US law, every single penalty, every single Iranian actor – be they a bank, a business, an individual, a procurement network, a proliferation network – that had been hit, had been sanctioned from 2006 when the nuclear saga commenced and Iran’s nuclear file went to the UN security council. All the way up until 2013. Which is when diplomacy began in earnest between the US and Iran through the P5+1 – the five permanent members of the security council plus Germany. All these entities that were waived starting 2015 and 2016 with that JCPOA nuclear deal, all of them, pursuant to the max pressure campaign, were relisted. Re-sanctioned. Many under the same authority and many under different authorities. Different tools, different laws, different vectors that the US had to put pressure on Iran. Different capabilities that Washington had to pressure Iran on the nuclear and non-nuclear files. To paraphrase, the Treasury department in Washington, which has been responsible for coordinating this sanction strategy has called it the “largest single-day designation in its history”.

So, when you’re looking at things that have made history, this max pressure campaign has made history. But it’s also made history inside Iran. So, how did we get here? Why is Iran doing everything it’s doing now? 8 May 2019 was the one-year anniversary of the US leaving this deal. At present, you can’t open a newspaper or turn on the television and not hear about some sort of new Iranian escalation. Whether it’s the Persian Gulf, whether it’s doing things incrementally, the nuclear deal, whether it’s cracking skulls at home, whether it’s aggression abroad, whether it’s things even in cyberspace that are reported later on in different newspapers and different countries. How did this happen?

It happened because initially Iran’s strategy in response to the max pressure campaign – this large single day relisting of every single sanction, basically in Iran and US history – was actually not to run towards the problem. It was to wait out the problem. In that first year, largely but not exclusively, Iran’s policy was one that you could call “strategic patience”. If you’re familiar with Iran’s political system, there’s a national security body called the Supreme National Security Council. Its secretary is actually Iran’s highest-ranking Arab and his name is Ali Shamkhani. That body can also give advice to the supreme leader. The supreme leader’s name is Ali Khamenei. One can imagine this body made up of military men, political men and of course religious men, holy men. And it will convene and draw on this Islamic injunction which is “إِنَّ اللّهَ مَعَ الصَّابِرِينَ” – meaning “verily, the god is with the patient”.

The Iranians thought time was on their side, that they could outlast the Trump administration and through this new source of information – the European Union – that the max pressure campaign, given how new it was and given it was rooted in an entirely different foreign policy target – North Korea – that they could outlast the Trump administration.

They thought that the president would be a one-term president and, more importantly, remembered that differentiation between North Korean and Iranian sanctions as emanating one from the US or the other emanating from the UN. The sanctions against Iran did not have a shared international consensus in their defence nor the primary body of strategic literature on non-kinetic tools of coercion which is a fancy way to say “a non-military way to pressure someone”. In other words, you should have as much international support for any non-military way to pressure someone as possible. And, lo and behold, the Trump administration did not have such support in May.

If you straw polled most Washington audiences, non-official audiences, non-government audiences, there were many in favor of staying in the nuclear deal. I myself, who am a vociferous critic of the nuclear missile military-economic merits of the deal was not for leaving the deal on 8 May. I thought that you could work with the European Union, our transatlantic partners, to fix the deal. To first establish a framework to unite the West so that Iran’s President Rouhani – who’s spoken at length about keeping the transatlantic community divided – could not accomplish this again. But the sanctions went forward, unilaterally. They are designed in two batches. In August 2018, the first batch, in November of 2018, the next batch. By 2019, looking at the Iranian economy, something very interesting was emerging. The macro-economic indicators used to assess the health of an economy had begun to shift rapidly into the red. Rapidly into the negative. This was something people thought could not happen if only one country was sanctioning one country.

A majority of countries were on the sidelines, indifferent or against the sanctioning. So how did the US achieve this? One reason is market forces or US economic clout and the strength of the US dollar. We all share an international banking and business system that in some way touches New York and some way relies on the strength of the greenback, the dollar, that ends up touching a US entity or a US person. There’s some touchpoint between transactions all around the world today that are international and also linked to the US financial system. A broad definition of transactions that involve the US financial system and a broad definition of what involves a US entity, and a broad definition of what involves a US person was used.

Cleverly, this is likely the first time in human history that market forces have become the force multiplier for foreign policy success. This is an impressive feat of US unilateral sanctions that has not been accomplished on another target. Not even on North Korea, where there is much more consensus. In many countries that are considered friends, partners, allies of Washington, you would look at the policy of the national government – the policy of London, the policy of Berlin, the policy in Paris – towards Iran. And it was doggedly attached to the JCPOA nuclear deal, finding ways to keep it alive. But banks, large businesses and financial institutions ended up, somewhat reluctantly but nonetheless, siding with Washington for the sake of their commercial economic interest rather than siding with the national capital where their bank or business was housed and headquartered.

This impressive use of banknotes over bullets came to define the new way the Trump administration was going to deal with not only the Iranian nuclear saga, which is only the latest iteration of threat and challenge in the continuous series of threats and challenges the Islamic republic has posed to US and international security. It is also the most interesting because the Iranian strategy began to change in response to the successes. If you fast forward to April 2019, you can see macroeconomic indicators of contraction continuing to go into the red. In April 2019 there were some historic moments.

The Islamic Revolutionary Guard Corps is the tip of the revolutionary spear of the Islamic Republic – formally 125,000 strong. Iran has two militaries with the Revolutionary Guard Corps somewhat smaller in terms of personnel. But not in terms of resources, in terms of a more coherent ideology, in terms of service to the state and the state’s revolutionary ideals and in terms of ownership or control of Iran’s most sensitive military portfolios: Drones, ballistic missiles, cruise missiles and yes, of course, the nuclear program.

This is the entity in charge and for the first time, pursuant to state department authorities, was added to a list that has no state actor in it. Washington had been debating internally with itself, from 2007, whether or not to formally list the Islamic Revolutionary Guard Corps as a foreign terrorist organisation. The Trump administration ended that decade-ish long debate and added the Islamic Revolutionary Guard Corps to the Foreign Terrorist Organisation list. In the same kind of clever and interesting way that the US had used economic power to press Iran, this action meant the US was looking to use legal power. The step brought in a legal definition as to who did or did not provide material support through transactions with a bank, business or person owned or controlled by this entity – the Islamic Revolutionary Guard Corps. While the IRGC is 125,000 strong formally, they have an informal network. This is the myriad veterans of the IRGC, men who fought and bled in the 8-year Iran-Iraq war, went into national politics and went into large corporations in Iran in the 1990s. They also benefited from the false privatisation schemes from the late 1990s all the way into the Ahmadinejad administration, and even into the early Rouhani administration. In this process of privatisation, such men earned significant dividends. And they were able to keep Iran on its revolutionary track. Think of continuity, not change in foreign security and domestic policy.

So, the first thing that happened in April was that the IRGC was designated. The second move was to drive at the Islamic Republic’s major financial artery. Oil.

Even in November 2018 with the second phase of those two-part sanctions, the Trump administration did not decide to drive Iran’s oil exports to zero. Market forces and different conditions risked the fact that American adversaries, as well as America’s allies and partners, were still reliant on Iranian oil, which all impacted the calculation. The US extended eight waivers to these countries. But, in April 2019, the US revoked the waivers. While today Iran is still not at zero and, technically, oil transactions with Iran are sanctionable, Iran has anywhere from 100,000 to 200,000 illicit transactions or barrels per day. Never before have Iran’s oil exports fallen this low. Except perhaps with the small caveat of different periods of the Iran-Iraq war, when oil and shipping were targeted by both belligerents. These two moves have kicked the US max pressure campaign into high gear.

Getting us closer and closer to today, I venture to tell you the reason you are hearing so often in the press, on TV, in newspapers, from speakers much more qualified than I about Iran’s escalation. About Iran’s activities. Starting in April-May 2019 there was a shift at the highest levels in Iran over how to respond to this max pressure success. In one year, the US had been able to enact the same, if not greater, kind of pain on the Iranian economy that took over a decade at the multilateral level across the Bush, Obama and early Trump administrations. Continuity on the Iranian side, change on the American side. 

So Iran’s strategy has shifted, from strategic patience – wait this out – to a policy I call incremental or graduated escalation. That’s just a fancy way to say “You want to play chicken, we’re game”. In this regard, Iran became more risk-tolerant as opposed to risk-averse. How did it do this? Well, that’s the update.

Iran calculated the areas where it would be escalating. While we may agree that they’re zealots, while they may call themselves “revolutionaries”, they are not fools. You don’t get to have a system of government in Tehran continually subject to different levels of foreign, political, economic and military pressure and be fundamentally opposed to the prevailing norms, politics, values, ideals, interests of the international system and still see a 40th anniversary. Something’s got to give.

What the regime has done is to find areas that the US, the Western alliance and much of the international community cared about, where it could inflame and then commence the process of inflaming them. I have another fancy term for this – “cross-domain escalation”. Think about the theatres of conflict that exist in the Middle East, the domains, the areas where we could easily slip into an accidental war with Iran. The areas where we can move from the known quickly into the unknown. Through indirect contact, through proxy forces, through a bit of muscle and creativity and the proliferation of some key systems, Iran commenced this policy of cross-domain escalation.

I have been able to detect five domains. The first is the Persian Gulf with the oil tankers. The second, moving from sea onto land, the regional theatres. Places where Iran or Iran-backed forces, or politicians friendly to Iran are ascendant. Places like Iraq, Syria, Yemen, Lebanon, possibly Bahrain. The third, of course, is the cyber domain. This is one of these covert domains where Iranian capabilities are growing. After that, at number four, is missiles – missile testing, missile transfers. One of my fundamental qualms with the JCPOA nuclear deal is that it didn’t address ballistic missiles sufficiently. It didn’t really address the issue at all. It’s addressed insufficiently in the UN security council resolution that codifies and enshrines the JCPOA. Why do I care about ballistic missiles? Because Iran cares about ballistic missiles. More importantly, multiple American directors of national intelligence for over a decade under both Republican and Democratic presidents have said that Iran has the biggest ballistic missile arsenal in the Middle East.

Through open-source analysis, we can also say that Iran’s ballistic missile inventory is actually quite diverse. Solid fuel systems. Liquid fuel systems. Short-range systems. Medium-range systems. Satellite launch vehicles. And then you can move out from ballistic to other types of weapons, cruise missiles, anti-ship cruise missiles, land-attack cruise missiles. And then a whole host of rockets which don’t have a guidance system but are solid fuel, that are easy to proliferate, cheaper to produce but are less effective on the battlefield. This whole arsenal is not dealt with by the JCPOA. The same directors of national intelligence have also put forward that if Iran were ever to develop and use a nuclear weapon, the delivery vehicle for the nuclear weapon would not be some suitcase bomb but rather a ballistic missile. That would be the way they would be able to threaten, coerce, punish and deter their adversaries in the region. And if there is no range limitation, it could be anywhere outside of the region.

There’s one final domain as number five. This is the most sensitive domain and the most central. The fifth domain is nuclear. The whole matter that caused the crisis. The reason for leaving the deal. Which is more slated in Iran’s interest than America’s interest. When the US left the deal on 8 May 2018, many thought the rationale for it was over a series of Iranian violations that the president couldn’t stand or that the president had some innate issue with the deal.

The way the US left the deal wasn’t legalistic, it was political. It wasn’t a violation necessitating a response. It was fundamentally about politics and policy. The sanctions the treasury department put back were all handicapped during the period of the deal. What the US had given up was the non-kinetic tool of punishment and coercion and it was fundamentally not worth what any gain the deal offered the US – a couple of limits on Iran’s nuclear program. There were limits with different degrees of efficacy on different parts of Iran’s nuclear program, but these limits were time-sensitive. In other words, the handicap was permanent, the limits were timed or had a sunset. With Iran getting richer over time, it was seen by the Trump administration as a bad deal and so it left the deal.

Iran has been cognisant of the Trump administration’s attempt to not just focus on the nuclear issue but focus on this broader array of things that Iran does, the regional issue, the terrorism issue, human rights, even perhaps hostages that are in Iran. It is quite prescient today that we talk about hostages in Iran. There are now a number of Australian hostages in Iran. With the Trump administration’s quest for a bigger, broader, better deal, the Iranian’s have an incentive to escalate gradually and force the Trump administration to accept not a bigger, broader, better deal, but perhaps a slightly modified rewritten paraphrased JCPOA.

That’s why the fifth domain, out of all the five domains of cross-domain escalation by Iran, matters so much. It is why Iran can be a little more risk-tolerant in the other four domains where they can do things that are more dangerous. Examples include having the Houthis fire a land-attack cruise missile at a civilian airport or fire drones as dumb cruise missiles at civilian targets. They could have tankers targeted by mines as if we were reliving history. Iran threatened freedom of navigation quite effectively during the Iran-Iraq war. And, it’s reverted to doing that again. To spook oil prices, to spook insurers, to spook regional countries that also are against Iran, that also might want to be in support of the max pressure campaign. To get them to blink. To get them to swerve. To get them not to be supportive of the max pressure campaign. Iran is trying to rope in every single country, including Australia, and peel them away from the max pressure campaign. Right now, Australian hostages are designed to erode Australian resolve.

Unlike many of America’s transatlantic partners, Australia at least reconsidered its support for the nuclear deal. The European Union did not even do that. Australia is now part of Operational Sentinel, the American lead maritime coalition to ensure freedom of navigation between the Persian Gulf, Hormuz and the Gulf of Oman. An area of the world where over a fifth of the world’s global oil supply traded on sea passes on a daily basis.

Iran commenced this graduated escalation strategy in May. In May there was the multiple tanker attacks. On 8 May, Iran’s President Rouhan laid out timetables for escalation. Rather than Iran egregiously leaving the nuclear deal, it would incrementally leave the nuclear deal. And, as it did so, it would take cover behind legalistic arguments of “well we’re just responding in kind to American sanctions”. Recreating the dynamic that, “as you sanction us, we’ll grow our program”. A dynamic that existed in the International community from 2006 to 2013.

From 8 May to early July, Iran transgressed stockpile limits that existed on its program in the deal. In the deal, the two main limits were first a stockpile limit on how much heavy water Iran could have inside the country. Heavy water serves as a moderator in Iran’s heavy water reactor. The second was how much low enriched uranium Iran could have in the country. Low Enriched Uranium is basically fissile material that would constitute the stuff that makes a nuclear warhead fissionable. It basically is the weapons part of a ballistic missile armed with a nuclear warhead. If you enrich LEU all the way up to HEU, to 93 per cent, you have sufficient uranium necessary for a weapon. Iran was going to breach the amount of LEU that they were going to keep in the country.

On 7 July, the next 60 day period arrived and Iran decided to move the purity level up – from 3.67 per cent, which is what the deal permitted, to just under 5 per cent. As you enrich uranium the harder part is earlier on. Zero to 5 and 5 to 20 are the key jumps. If you master those jumps, which Iran has mastered, you have basically mastered the technology. It becomes more a matter of time, of consistency, of arraying the centrifuges. It becomes more of a political decision than a technical decision.

So Iran breached the purity cap in the JCPOA. On 6 September, Iran breached the centrifuge research and development – RandD caps – that had existed in the nuclear deal in Iran. These were also quite vague to begin with, but means Iran can now phase in more advanced machines. Machines that can do more with fewer machines. You don’t need a thousand, you can have just a couple.

So now there have been three Iranian incremental violations of the nuclear deal. This with a cross-domain escalation and a fairly consistent response by the Trump administration which is more sanctions, more sanctions, growing the legal authorities, growing the political authorities, growing the economic authorities, to use that same tool – coercive, punitive, economic measures – to bring Iran to the table. Not just for a photo op but for a bigger, broader, better deal. And Iran is trying to disincentivise this one tool from working as well as it’s done in the past.

The four things move Iran is planning with respect to sanctions is, firstly, to slow the pace of the sanctions. As an update here, something worth knowing is that the Treasury department has been on fire. Two weeks ago, in Washington, the Treasury put out some five or six press releases. Each press release involved a whole new series of entities. A whole new series of persons under a whole different series of authorities have been hit. The Treasury department is driving the engine of this sanctions policy. So, the whole point of Iranian escalation is to slow the pace of these new sanctions.

The second point of this escalation is to erode the political will to enforce these sanctions. Once you’ve eroded the political will then you put your request up. And your request is to waive certain sanctions. To grow the risks officially to America, while making moderate requests. Let me just sell a little bit of oil. The Iranians have come out with a figure. They want to sell 700,000 barrels. Clearly, there’s a calculation in Iran’s larger deliberations, of how much oil they need to sell, which is tied to a certain dollar amount which they believe they can use to outlast Trump. By doing so, they outlast the max pressure campaign.

If the Iranians get these three ducks in a row, and if they get a photo op, and if they get paid for coming to the table, they would have done it through the risk-tolerant graduated incremental escalation policy. Then they would be in line to get the fourth and final thing. Which is rather than just the slowing of pace of sanctions, rather than just not enforcing sanctions, rather than waiving sanctions, they would have the US in line to lift the very same sanctions that brought them about in the first place.

We’ve talked about continuity, we’ve talked about change, but now we’re talking about deja vu. The ultimate goal of Iran is to replicate the conditions that existed in 2013. In 2013, Iran’s supreme leader used a phrase in Persian. When I heard it, I fell out of my chair it sounded so interesting. Many in Washington did not fully appreciate it. The phrase was “نرمش قهرمانانه ” which translates essentially to “heroic flexibility”. Khamenei, Iran’s supreme leader, likened nuclear diplomacy with America to Iran’s national sport which is wrestling. Grappling with your adversary. Not being afraid to meet your adversary, to touch your adversary, to hold your adversary. Giving a little to get a lot. Being a little flexible tactically for a strategic win. To show a little bit of flexibility to have a takedown.

The JCPOA was something that Iranians coveted. They were able to crystallise through escalation on the nuclear file, in 2013, a paradigm. The paradigm was that the West needed a deal for political reasons. More than Iran needed a deal for economic reasons. If this paradigm were to have crystallised, the Iranians would have outlasted max pressure already. Events would have resurrected the same conditions allowing Iran to win at the negotiating table what they haven’t necessarily won on the battlefield. All that is an update of the business between the wolf and the sheep.