Foreign Investment and Iran’s Future

The 2007 National Intelligence Estimate (NIE) on Iran, released this November, concludes with “moderate-to-high confidence” that “Tehran at a minimum is keeping open the option to develop nuclear weapons,” and says that the intelligence community has “high confidence” that Iran halted its nuclear weapons program in the fall of 2003 (emphasis added). The NIE assesses that “international pressures” were a key factor behind Iran’s decision to halt the program, and this exposes that the nation’s strategy for developing nuclear capability is ruled by “cost-benefit” calculations rather than a “rush to a weapon irrespective of the political, economic, and military costs.” In other words, the intelligence community believes that Ahmadinejad’s quest for nuclear weapons is fueled by calculated political strategy rather than ideology. However, the NIE report also concludes with “moderate confidence” that “only an Iranian political decision to abandon a nuclear weapons objective would plausibly keep Iran from eventually producing nuclear weapons—and such a decision is inherently reversible.”

Arguably, the NIE report is conducive to “spin” because it dissects different aspects about Iran’s nuclear progress (or lack thereof), making it easier for policymakers to cherry-pick those results which confirm their original assessment. According to TIME Magazine writer Tony Karon, the Bush Administration, Washington hawks, realists, and international leaders have all “spun” the NIE report to their own advantage, in order to reinforce their original foreign policy-strategies toward Iran. “The [Bush] Administration will likely continue to push for harsher sanctions” arguing that “easing the pressure at this moment would be a tragic mistake,” Karon predicts in his article “Spinning the NIE Iran Report.” Karon considers this strategy more difficult now because “the threat of U.S. military action can’t be used to spur the Europeans to back harsher sanctions as a lesser evil.”

Since the NIE report was designed to assess “Iran’s current and projected ability to develop nuclear weapons,” among other variables, it is also useful to consider the influence that international investment practices will have on Iran’s foreign-policy decisions and future capabilities. “In Iran, there are some projections that by 2015 Iran will have so little oil that it will stop exporting, not because they’re running out of oil underground, but because their policies are not allowing for foreign investment,” said Dr. Ariel Cohen, Senior Research Fellow at the Heritage Foundation. Dr. Gal Luft, the Executive Director for the Institute for the Analysis of Global Security also explained at the November Heritage event that Iran’s oil production is heavily dependent on foreign investment and Iran’s increasing foreign belligerence and pursuit of nuclear technology has made the business climate nervous. “Companies don’t like to go to places where there is high risk, particularly energy companies where you need skilled labor that could be kidnapped and killed or maimed, when it involves extremely expensive equipment that could go to other places—like Libya, for example, where the risk is lower,” Luft said.

Jim Phillips, a Research Fellow in Middle Eastern Studies at the Heritage Foundation also said that the audience needs to remember that “oil is a double-edged weapon, because the world ultimately can get on better without Iranian oil than the Iranian government can get on without its own oil exports.” Because 80% of Iran’s export revenue is derived from oil exports, Phillips argues that geographic restrictions on Iranian exports in time of war would hinder the Iranian economy, and “the government would quickly be unable to sustain its present spending habits in the event of a war.”

The time needed for Iran to create enough highly-enriched uranium for a nuclear bomb suspiciously parallels these economic predictions. The NIE report concludes with “moderate confidence” that Iran would be capable of producing enough HEU for a bomb in late 2009, but considers such a possibility “very unlikely.” Rather, the NIE report has “moderate confidence” that Iran could produce enough HEU for a bomb between 2010 and 2015, but “all agencies recognize” that “this capability may not be attained until after 2015” (emphasis original).

Some policy experts believe that economic crisis in Iran could displace the Mullah leadership. Cohen argues that the current Iranian regime maintains its hold on the country through a combination of repression, manipulated elections, and heavy subsidies. “The Mullah regime in Iran, we have all the empirical indications that it’s not popular…In order to keep their popularity not only do they need to beat the drums of nationalism, they also need to subsidize the economy very heavily,” said Cohen. The current declining rate of foreign investment has made such financial policies unsustainable, and he argues that this could destabilize the regime. If Iran becomes impoverished, he argues, “that regime may face its bitter end, through a revolution, most probably.” If the Mullahs were to be overthrown before Iran developed a nuclear weapon, this could dramatically change the way Iran engages the world.

However, with the NIE assessing that Iran actually halted its nuclear weapons program in 2003, European support for sanctions against Iran might waver, creating a more hospitable business environment in that country. “Unfortunately, the Europeans are unlikely to use this kind of leverage. They argue that if they do, Russia and China will step in and replace them. And I think, unfortunately, this makes a military clash with Iran all the more possible in the future,” said Phillips.

Bethany Stotts is a Staff Writer at Accuracy in Academia.