In July 2007, President Mahmoud Ahmadinejad ordered the dissolution of the
Management and Planning Organization of Iran, a 60-year-old, largely independent
government body that had been responsible for much of the country’s economic
The MPO used to prepare the national budget, draw up longterm
development plans and oversee their implementation.
It worked on a
province-byprovince basis and was, according to expert accounts, a highly
competent system of national economic management.
Ahmadinejad tore it
down the better to directly control his country’s economy. He set up his own
budgetary planning body and centralized additional economic powers under his
The result has been dismal – Neanderthal management, as it was
summed up to me by one of several experts with whom I’ve spoken in recent
While Ahmadinejad is still emphatically secondary to Iran’s supreme
spiritual leader Ayatollah Ali Khamenei in terms of overall power, he is
undoubtedly a key economic player, and his policies are lousy.
insistence on maintaining an overvalued rial, apparently for reasons of national
prestige, is harming exports.
His low interest rate policies have caused
heavy damage to the nation’s banking system.
Unemployment is officially
hovering in the 13 percent range and inflation at about 10%, though unofficial
estimates suggest the true figures in both cases may be twice as bad.
Unsustainably high subsidies mean, for instance, that Iran is among the cheapest
places on earth to fill up your car with gas – just five or six dollars a tank.
And because those levels of subsidy simply cannot be maintained, the president
is replacing them with cash handouts, which in turn are proving ever-more
expensive and hard to sustain.
All this is unfolding in a climate of
intensifying, though far from hermetic, international sanctions. No Western oil
companies are active in Iran, there is inadequate technical assistance to
maintain extraction, and oil and gas production are down. Financial sanctions
have sent the cost of doing business soaring, and exports are being
What is striking about Ahmadinejad’s economic leadership, according
to the various experts with whom I’ve spoken, is that he is not strategically
confronting those sanctions, not managing the resources at his disposal to most
effectively minimize their impact.
US Defense Secretary Robert Gates made
headlines 10 days ago when, in a direct riposte to Prime Minister Binyamin
Netanyahu’s demands for a “credible threat of military action” to back up the
sanctions effort, he argued that military strikes could only offer a “short-term
solution” that would merely render Iran’s nuclear drive “deeper and more
Less noticed here was Gates’s assessment that the sanctions have
“bitten much harder” than the Iranian leadership had anticipated and his
striking revelation that “We even have some evidence that Khamenei now is
beginning to wonder if Ahmadinejad is lying to him about the impact of the
sanctions on the economy, and whether he is getting the straight scoop in terms
of how much trouble the economy really is in.”
The experts I’ve spoken to
all agree that the sanctions are indeed starting to hurt. Recent measures are
said to have significantly affected the Iranian Revolutionary Guards Corps
(IRGC), the all-powerful military conglomerate which, via its various tentacles,
reportedly controls as much as a third of the Iranian economy. As well as
overseeing the nuclear program, missile defense and national security, the IRGC
is also responsible for building the oil industry’s infrastructure, for mining
activities vital to the nuclear program, telecommunications, even farming,
employing a vast work force.
And its room for economic and commercial
maneuver is said to be increasingly constrained.
Israel is understood to
have been impressed by the extent of EU sanctions enforcement.
decision not to go through with the sale of S-300 missile defense systems is
also recognized as a significant shift.
When a regime that uses cash to
grease the wheels and stay in power is facing dwindling financial reserves and
is presiding over an inefficient, mismanaged economy, the consequences are
clear. It has to rely increasingly on coercion. And it is losing
As yet, however, the international squeeze is far from
universal and the sanctions are not devastating.
There is concern at
China’s capacity to fill any vacuum and meet any need created by other
countries’ suspension of commercial partnerships. There is dismay that India is
still providing a highly significant proportion of Iran’s refined oil
And there is widespread agreement, uniting Israel and the
other key international players pushing the sanctions effort, that for all the
economic distress, there is absolutely no sign at present of Iran changing
To the central question, Will Iran abandon its nuclear weapons
drive as a result of sanctions?, the answer for now is an emphatic no. To the
subordinate question, Will Iran slow or suspend its nuclear weapons drive as a
result of sanctions?, the answer for now is sadly no as well.
Netanyahu told the Jewish Federations’ General Assembly in New Orleans, “We have
yet to see any signs that the tyrants of Teheran are reconsidering their pursuit
of nuclear weapons.”
IT GETS worse.
Fiendish computer viruses
might be wreaking all kinds of havoc within the Iranian nuclear program.
Centrifuge operations might be stalling intermittently. Bizarre accidents might
continue to occur.
Nevertheless, should the Iranians choose to do so, the
experts believe that, within six months, they could “break out” and become a
member of the nuclear club. That is not to say that, within six months, they
could definitely weaponize – fashion a nuclear warhead and fit it to an
effective delivery system.
Rather, they could enrich their stocks of
low-enriched uranium to create a nuclear device and test it – a test that would
be immediately picked up by international monitors and hailed by Iran as proof
that it had now gone beyond the point of no return.
Will Iran choose to
do so? Nobody claims to have a definitive answer to that question.
there is widespread dismay at Iran’s apparent sense of emboldenment, and I
encountered no little criticism of the role of the United States – under both
president George W. Bush and President Barack Obama – in encouraging that
Time and again, I was told that the Iranian regime is
pragmatic. That it is not suicidal.
That among the prime motivations for
its nuclear quest is the desire to ensure that it will not be vulnerable to what
happened in Iraq – to its speedy demise at the hands of outside interventionist
forces. That when it truly feared the US was heading its way, between 2003 and
2005, it froze its nuclear program.
But Iran has watched trifling North
Korea – throwing its weight around again this week – ignore warnings of
international hellfire and expose the US as a paper tiger. And it delighted in
the fact that Obama recognized Ahmadinejad’s election victory 17 months ago,
essentially legitimizing a regime that the US hadn’t recognized for the previous
three decades, and doing so precisely when the Iranian people were staging their
most determined effort to date to break free of it.
The bottom line: Two
years ago, the Iranians were wondering whether the US and/or Israel might seek
to intervene militarily to stop them. Now, they believe that the US is out of
Israel thinks so too. The view here is that opposition in
the US to a military strike at Iran extends far beyond the Democratic
administration and deep into Republican ranks as well. The US doesn’t want to
attack, I was told, and that includes much of the political Right. Gates’s
thinking – that military intervention would only unify the Iranian people behind
their currently unpopular government and its nuclear quest, and that it could
not cause a long-term collapse of the program – is supplement by the wider
regional argument that it will bring Shi’ite and Sunni Muslims closer together
in opposition to the West, legitimize Iran’s claims that the West cannot be
trusted and must be confronted, and spark much-intensified nuclear weapons
programs throughout the Middle East.
The US wants to build deterrence, I
was told. The US wants to replicate the conditions of mutual assured destruction
that kept America and the Soviet Union just the right side of sanity during the
Cold War. The trouble is, this is not the Cold War, and the Islamists are not
SO WHERE does that leave Israel? The short answer is
ambivalent. The slightly longer answer is extraordinarily worried, and
Israel mistrusts the Iranians more than the Americans do,
maybe because it understands them better. It still believes in the potential for
sanctions to force at least a suspension of the nuclear program if the regime
feels its hold on power is disintegrating. But it knows that, as things stand,
Iran is closing in on the bomb faster than the sanctions are forcing a
Israel regards a nuclear Iran, under this regime, as a
monumental threat, a catastrophe, a devastating change. An Iran unbound would be
an extreme danger to us, to the region, to the world. Iran regards itself as one
of the world’s great nations, and certainly as the rightful leader of the
Islamic world, and a nuclear capacity would give the regime far greater capacity
to advance its ambitions.
With its own oil reserves depleting, it would
also be more capable of imposing itself on weaker oil-producing neighbors; its
evident interest in muscling-in on Bahrain is a mild harbinger of what might
Netanyahu has placed Israel at the forefront of the international
chorus of alarm, in contrast to Ariel Sharon, who preferred to work
behind-the-scenes in alerting the international community to the scale of the
Netanyahu has drawn parallels between the ayatollahs and the
Nazis, and rightly notes that we did not gather the majority of the Jewish
nation to this historic sliver of land after the horrors of the Holocaust only
to be rendered vulnerable again, 70 years later, to another regime’s genocidal
And yet there are many highly influential voices in Israel
that urge a return to the lower profile. Let’s put ourselves in the background
again, they say. Don’t lead the global struggle, or we’ll turn ourselves into
the first target.
Some of these men of influence claim, like Gates, to
detect cracks in the regime, including between Khamenei and
They see the first faint signs that Iranian public thinking
on the nuclear issue is becoming more nuanced as the economy sinks. There is
still overwhelming support for Iran’s right to nuclear energy, but not
necessarily, if this is the economic cost, for its need for nuclear
These Israeli voices argue that, since the regime seeks the
bomb primarily to ensure its survival rather than primarily to destroy Israel,
then – however implausible this sounds – the challenge for the international
community, in the upside down world of diplomacy, is to construct a framework in
which the regime would feel that by backing down on nukes it would be “enhancing
As things stand, to get into regime’s head, it
regards defying international will as giving it more power and leverage, while
capitulating to pressure would likely presage more demands, more concessions and
ultimately its demise. This echoes the Gates approach: “The only long-term
solution to avoiding an Iranian nuclear-weapons capability is for the Iranians
to decide it’s not in their interest.”
FOR NOW, the widely (though not
universally) held assessment here is that the regime would likely not fire at
Israel if it got the bomb, and would not supply a non-state actor either, for
fear of bringing the entire international community violently down upon its
head. And while the preparation of all necessary potential military measures is
deemed essential, Israeli military intervention is not currently regarded as
The Washington-based Politico website reported on Wednesday,
indeed, that “Some Israeli officials say the country’s fingers are off the
hair-trigger that would launch a strike on the Iranian nuclear program” and
referred to “the apparent willingness of the Israelis to postpone a demand for
confrontation by months – at least.”
Echoing former US defense secretary
Donald Rumsfeld’s somewhat incoherent talk of things we know, things we don’t
know, things we know we don’t know, and things we don’t know we don’t know,
Israel thinks it doesn’t know where a not-insignificant proportion of the
Iranian nuclear program is located. And Israel worries that there are other
facilities that it doesn’t know it doesn’t know about.
In a best-case
scenario, if Israel destroyed the majority of the Iranian nuclear program – the
part it knows it knows about – Iran has the expertise and the capacity to
rebuild, and would be back where it is today in three to five
Politico quoted Yossi Kuperwasser, the deputy director-general of
Moshe Ya’alon’s Ministry of Strategic Affairs, to underline the contention that
Israeli fingers are off the hair-trigger for now: “Everybody understands that
you have to give some time for the sanctions to bear their full
Indeed Ya’alon himself, along with fellow septet ministers Dan
Meridor and Ehud Barak, not to mention Netanyahu, have all publicly indicated
that they support giving sanctions more time, while The Jerusalem Post reported
last month that Avigdor Lieberman’s Foreign Ministry is even preparing policy
options for the “day after” Iran passes the nuclear threshold, in a “first
admission that the government is giving serious thought to adjusting to a
reality where Israel is no longer, according to foreign sources, the sole
nuclear power in the region.”
For his part, the current chief of staff,
Lt.- Gen. Gabi Ashkenazi, it is believed, cautions against military intervention
as things stand.
Whatever their thinking, it is a safe bet that the
entire Israeli leadership would be mightily relieved if they were spared the
fateful decision. If, that is, the sanctions regime were ratcheted up further
and more widely imposed, if the Iranian economy nosedived further, and if the
Iranian regime – or a desperate Iranian public – concluded that the country was
being devastated by its pursuit of nuclear weapons.