Iran's Foreign Policy: A Shifting Strategic Landscape

Unlike Mohammad Khatami's liberal-pragmatic vision or Mahmoud Ahmadinejad's ideological-populist stance, newly elected Iranian president Hassan Rouhani is bent on pursuing a centrist-pragmatic agenda. His campaign platform reflected such a vision: Iran should engage in serious negotiations with the Western world, reduce regional conflict, and prioritize its economic recovery and the general well-being of its people above its nuclear program. Will Rouhani be able to implement this vision, considering the structural, institutional and strategic barriers to his success? If his tenure in office is to be more successful than his predecessors', his administration will have to tackle many problems, while providing the perspective and political flexibility necessary to break away from the futile approach of the past.

Although it is difficult to foretell the nature of any radical strategic policy shift on Iran's part, it is clear that maintaining the status quo in U.S.-Iran relations, which also reinforces Iran's international isolation, has lost its traction. The positive signals and overtures from Iran toward the United States in the early months of Rouhani's presidency have given reason for tempered optimism, demonstrating a rare willingness on the part of Iranian leaders to reach out to Washington. Presidents Rouhani and Obama exchanged letters expressing their desire to improve diplomatic relations, which have been frozen since 1979. Rouhani and his ministers struck a remarkably candid and conciliatory tone in an op-ed in The Washington Post¹ and granted an interview to NBC News in which Rouhani said that he was empowered by Supreme Leader Ayatollah Ali Khamenei to enter into direct negotiations with the West on the nuclear issue.² In a stark contrast with former president Ahmadinejad, and in an effort to set a new tone in foreign policy, President Rouhani sent Rosh Hashanah greetings to the world's Jewish communities over Twitter and released many political prisoners, the most prominent of whom was Nasrin Sotoudeh.³ In an interview with CNN's Christiane Amanpour, Rouhani also condemned the "crime" of mass killings of Jews by the Nazis.⁴

A successful end to the nuclear standoff also hinges on the ability of President Obama to convince Congress and those opposed to a U.S.-Iran rapprochement that an ever-escalating sanctions regime and threats of military force will not lead to a peaceful resolution. Indeed, Iran and the United States have a mutual interest in preserving stability in both Iraq and Afghanistan, while working together to curb the influence of al-Qaeda and the Taliban. We argue that Rouhani's presidency presents a window of opportunity for a shift in Iran's foreign policy and U.S. policy toward Iran.

SANCTIONS AND IRAN'S ECONOMY

The most serious structural impediment constraining the Iranian president's powers is his constitutional subordination to the supreme leader. The balance of power rarely, if ever, favors the president. In addition, the tension between the elected and unelected institutions of governance, the governmental and quasi-governmental entities that dominate the economy, and the multiple centers of power all induce political dysfunction in the executive branch. Perhaps in part due to deep popular frustration, the 2013 presidential election results demonstrated a groundswell of support for change.

In the past it would have been inconceivable to think that a president would be able to persuade ruling clerics and the Revolutionary Guards — who remain firmly in control of Iran's nuclear program and have a significant voice in setting the foreign-policy agenda — to yield to a conciliatory political course. Rouhani, however, has proven this conventional wisdom wrong.⁵ Because Iran's domestic political landscape has shifted, so has the calculus of its elite. Supreme Leader Khamenei now praises the virtue of "heroic flexibility" in dealing with the West and in resolving the nuclear standoff, in particular.⁶ A close scrunity of social developments in Iran over the last 34 years suggests that the power of the supreme leader is not absolute after all. He can be subverted by the forces of civil society and the social dynamics that his policies unleash.

Khamenei has more often reacted to events than led them. Rouhani's election was not Khamenei's preference. Having invested his political capital in reinstating Ahmadinejad for a second term in 2009 despite popular protest, and facing a restive population demanding improvement in their lives, Khamenei had to bow before the popular will. Rouhani is perhaps Khamenei's best hope for restoring the diminishing legitimacy of the Islamic Republic. Rouhani not only has a popular mandate to become the agent of change he promised to be during his campaign; he also enjoys the conditional blessing of power brokers at the highest levels to restore the credibility of the regime.

Never in the last 34 years has a candidate had such a mandate from both below and above. Never before has a candidate occupied the political center effectively enough to command respect from both left and right. And never before has an acute sense of social crisis been so palpable for the elite and the masses alike.

For all these reasons, Rouhani's presidency represents a moment of opportunity. This, however, does not mean that Rouhani will be able to completely transform the Iranian political system. Unelected officials and opaque institutions still dominate, and multiple loci of power make decision making and policy implementation exceedingly difficult. Nor, during his short term in office, can he wholly cure the negative effects of sanctions or reverse the endemic corruption and inefficiencies that plague the rentier economy. As a political insider, however, he knows the trappings of the power structure, the personalities, the institutional framework, and the nature of the political game and how it is played effectively. These are the assets he brings to the table that offer hope for new possibilities.

The public discontent that culminated in Rouhani's victory is mainly rooted in Iran's ailing economy and the government's inability to manage it effectively. There has been a staggering rise in the cost of food and basic goods, with an inflation rate hovering around 42 percent and an unemployment rate of 18 percent.⁷ The value of the Iranian rial has plunged by 80 percent in the past two years,⁸ and the country's oil exports fell to 1.5 million barrels per day in April-May 2013, from 2.5 million at the end of 2011.⁹ According to some sources, Iran's crude shipments dropped to 700,000 barrels per day in June 2013, a third of its oil exports before the current round of sanctions.¹⁰

The graph below shows that in 2012 oil exports dropped to their lowest level since 1986, due to the fourth set of Western sanctions, which affected Iran's energy sector and banking system. Iran posted an oil income of $95 billion in 2011. In 2012, by contrast, oil income was only $69 billion. Since petroleum is responsible for 80 percent of Iran's total exports and 50-60 percent of government revenues, the sharp decline has put serious constraints on the government's ability to provide goods and services, just as it has hampered economic growth.¹¹

It remains unclear where public resentment will be channeled. There is no consensus among experts on the political effectiveness of the sanctions, which hurt ordinary people and the poor, in particular, far more than the political leadership. To make matters even worse, under President Ahmadinejad's subsidy-reform plan, which went into effect in December 2010, the government has removed subsidies on food staples, electricity, water and gas, raising prices and further challenging household budgets.¹²

The International Atomic Energy Agency (IAEA) has estimated that Iran lost more than $40 billion in export revenue in 2012, nearly $2.4 billion a month. Moreover, with payments for oil exports impeded, Tehran has begun to barter with the major importers, trading oil for goods. China and India, the two largest importers, pay for their oil in yuan and rupees, which are deposited in their banks and with which Iran can buy back consumer goods. The Islamic Republic, once the second-ranking oil producer behind Saudi Arabia in the Organization of Petroleum Exporting Countries (OPEC), has reportedly been forced to store millions of barrels of oil in supertankers anchored in the Persian Gulf, due to financial impediments resulting from the sanctions.¹³

The most critical impact of sanctions is on health care and the availability of medicines. Iran manufactures 97 percent of the drugs it needs domestically, and those pharmaceuticals are heavily subsidized. The weakness of the Iranian currency, resulting largely from the sanctions, means that raw materials imported for drug production are now far too costly. Perhaps more significant, such raw materials cannot even be paid for because of the banking sanctions. The Society for Worldwide Interbank Financial Telecommunication (SWIFT), in compliance with the EU sanctions, has halted its electronic communication services for Iranian financial institutions and other transactions. This has effectively blocked the availability of even domestically produced drugs. Manufacturers and pharmacies have faced widespread closures and bankruptcies. The most advanced life-saving drugs — for heart disease, lung problems, kidney disease and dialysis, multiple sclerosis and many forms of cancer — can no longer be produced in generic form in Iran.¹⁴ The leadership is, therefore, desperate to escape the ban on the SWIFT system. The Islamic Republic can live without oil sales, as analysts have noted, but not without the ability to transfer money.¹⁵

New U.S. sanctions instituted since Rouhani won the presidential election went into effect on July 1, 2013, expanding the number of industries effectively prohibited from doing business with Iran as well as imposing rules that could ultimately halt all its gold and currency trade. These sanctions also penalize Iran's automotive industry — dramatically increasing the price of automobiles — and any foreign bank that conducts "significant transactions" in the Iranian currency.¹⁶

Yet, as in the past, despite acknowledging the socioeconomic costs of these sanctions, the regime insists on its narrative of "resistance" and non-negotiation under threat. Likewise, the Iranian business community, both private and quasi-governmental sectors, is solely concerned with improving its own operational and investment climate rather than lobbying for a change in Iran's nuclear strategy. As a result, Khamenei's narrative of resistance so far has remained unchallenged, at least by those close to the core of the power structure and by key stakeholders.¹⁷

For Rouhani to have any chance of political success, he has to deliver on the promise of bringing sanctions relief to the Iranian people. Thus, resolving the nuclear standoff with the United States and its allies looms large on his foreign-policy agenda. The moderate policies of former president Khatami, which included cooperation with the United States in Afghanistan against Al-Qaeda, only earned Iran the designation as a member of the "Axis of Evil" by the George W. Bush administration in 2002. After inviting Khatami to an interfaith dialogue in New York the year before, the Bush adminstration had decided that this was the wrong time and Iran the wrong country with which to seek rapprochement. So Khatami had nothing to show for his moderation. Thus, the political pendulum moved to the right and Ahmadinejad won the election. Will political moderation on the part of Rouhani lead to a more productive result?

THE NUCLEAR STANDOFF

A former national-security adviser and the chief nuclear negotiator under Khatami, Rouhani has demonstrated that he is keen to alter Iran's nuclear posture. Although he has been a supporter of the nuclear program, synonymous with Iran's right to sovereignty and national pride, his top priority is the survival of Islamic Republic. To that end, he is willing to compromise and set a new course in Iran's foreign policy toward the West. Should the "P5+1" (the permanent members of the UN Security Council plus Germany) negotiations provide some positive inducement — for example, removing some sanctions in return for some Iranian concessions — Rouhani's leverage vis-à-vis the hard-liners would grow and he would be even better positioned to deliver politically.

The peaceful resolution of the standoff, however, requires President Obama to win over Congress and to marginalize the neoconservatives and their confrontational political agenda, to convince the Iranian leadership that concessions could be reciprocated. Imposing tougher sanctions is likely to diminish the potential for a positive outcome. The Iranian leadership wants to avoid being seen as making concessions under the pressure of intimidation.¹⁸

Confidence-building measures, such as the historic telephone conversation between Obama and Rouhani on September 27, 2013, as well as the direct meeting between U.S. Secretary of State John Kerry and his Iranian counterpart, Mohammad Javad Zarif, on September 26, 2013, are constructive steps that must be followed by additional substantive dialogues. Such measures are likely to reassure Iran that the United States is committed to providing sanctions relief or to ruling out military force. In negotiating with the P5+1 group, Rouhani's team must adopt a different approach, one that is based on incremental steps and reciprocity. For example, Iran could agree to limit its 20-percent enrichment program or promise not to add significantly to its current stockpile of 180 kilograms of nuclear fuel. Such a temporary suspension of its uranium-enrichment program in return for partial lifting of the sanctions could then be followed by additional reciprocal steps.

Past negotiations have failed in large part due to mutual distrust between the P5+1 group and Iran.¹⁹ In order to lay to rest suspicions that Iran intends to develop a bomb, Tehran has capped its enrichment at 20 percent. To develop a weapon, uranium must be enriched to 90 percent. Iran's current stockpile of 180 kilograms also falls short of the necessary 240 kilograms of 90-percent-enriched uranium. These are clearly acts of self-restraint. The IAEA, in its onsite inspections of Iranian nuclear facilities, has so far not found any evidence of a weapons program.²⁰

Previous U.S. approaches toward Iran, based more on stick than carrot, exacerbated tensions and proved self-defeating. Some scholars, such as Suzanne Maloney, have argued that, with the imposition of the 2012 sanctions, the Obama administration abandoned the two basic principles of "pressure and persuasion" and has begun to slide toward a policy of regime change.²¹ When all that remains is endlessly escalating punitive sanctions, coercion produces diminishing returns. The party at the receiving end no longer has any incentive to compromise, realizing its adversary is not genuinely interested in peaceful conflict resolution but only in ratcheting up pressure, hoping for an implosion of the regime. History reveals that coercive diplomacy is most effective when combined with positive inducements and the granting of concessions, so that the opponent can see the benefits of compromise.

The two rounds of P5+1 negotiations in 2013 in Almaty, Kazakhstan, failed to resolve key issues. Rouhani appears acutely aware that making concessions is imperative to breaking the stalemate. This means Iran should give all necessary assurances to the IAEA, including granting intrusive inspections that ensure its nuclear program will not be diverted toward weaponization. In exchange, the P5+1 should agree on a threshold of uranium enrichment acceptable to all parties and initiate a plan for a corresponding easing of sanctions, with the ultimate goal of removing them completely in exchange for full Iranian transparency and cooperation. Many Western diplomats who believe there is no military solution to the nuclear standoff, argue that the most effective way to ensure Tehran does not go nuclear is by confining its enrichment activities and maximizing inspection and transparency to implement them. This approach, according to Trita Parsi, is likely to offer the diplomatic pathway that moderates in Tehran have long sought.²² To that end, the White House has increasingly gravitated toward the notion that the "zero-enrichment policy" is untenable. In a recent meeting of the P5+1 in Geneva (October 15-16, 2013), Iran and the group of six world powers noted that they had engaged in "substantive" and "forward-looking" discussions and that Western officials had found Iranian negotiators to be candid, forthcoming and detailed in their approach.²³

In the latest P5+1 negotiations held November 7-9, 2013, in Geneva, six world powers reportedly demanded that Iran suspend 20 percent enrichment and dilute its stockpile of highly enriched uranium for six months, while refraining from installing any new centrifuges or building fuel assemblies at the Arak reactor. Moreover, they asked that Iran subject its facilities to more vigorous inspections by the IAEA. In return, Iran would receive some sanctions relief in the automobile, gold and petrochemical industries. Sanctions relief would be gradual and its amounts ($6 billion at this point) subject to further negotiations. Iran would also gain access to approximately $3 billion in hard-currency assets frozen in banks abroad. While no final agreement was reached, Iranian diplomats pledged to come back to the negotiating table by November 20, 2013, after having shared the details of this offer with the country's parliament and supreme leader.

In the meantime, as a broader sign of pushing for a diplomatic settlement of the nuclear crisis, Iran agreed on November 11, 2013, to give UN officials greater access to some of its nuclear facilities. Iran also signed a "framework for cooperation" with the IAEA that provided "managed access" to a uranium mine and the heavy-water production plant at Arak. Additionally, Iranian officials promised timely notification to the IAEA of any plans to build new nuclear reactors. The IAEA's reports also indicate that, as a gesture of good will, since August 2013 Iran has added only four centrifuges to its main uranium-enrichment plant in Natanz. This stands in sharp contrast to the previous reporting period (May-August) in which Iran had installed 1,800 new centrifuges. All these efforts are a testament to the fact that Iranians are slowing down their nuclear program considerably so as not to provoke the U.S. Congress to ramp up further sanctions and that they are serious about seeking a deal in the next round of negotiations. To many political observers in the West, these acts do signify a new openness and flexibility on the part of Iranian diplomats, whose actions since August 2013 speak louder than words, indicating their commitment to a peaceful resolution of the nuclear standoff with the West.

It is disingenuous to deny Iran any nuclear technology whatsoever for civilian use or to prevent it from having any peaceful nuclear capability, as some within the Bush administration advocated — on the premise that once Iran acquired the basic technology, it would be easy to use it for a military capability. Rouhani has publicly made the case that Iran has a legitimate, peaceful justification for its nuclear program. His task is to come up with a strategic breakthrough in the face of competing pressures. Therein lies an important trade-off, should his gesture be reciprocated by the lifting of some of the sanctions. After over 30 years of diplomatic impasse in which blunders and missed opportunities abound, sober diplomacy requires not "a single roll of the dice,"²⁴ but a sustained and patient effort based on a new understanding and flexibility. Any P5+1 offer that ignores Iran's right to uranium enrichment in order to maintain a nuclear-energy program as a member of the Nuclear Non-Proliferation Treaty (NNPT), or calling for any additional restrictions on Iran from which other nations with similar nuclear programs are exempted, would be perceived by Tehran as a demand for political capitulation.

In the twentieth century alone, Iran has had four revolutions and uprisings (1905-11, 1951-53, 1963, 1978-79) that at their core were demands for self-determination and national independence. No matter what government resides in Tehran, it cannot afford to appear as selling out "national integrity." Washington and its allies now have a chance to rectify the worst fears of Iranian leaders: that, since Iran does not possess nuclear bombs, this issue is a smokescreen and the real U.S. goals are economic strangulation and regime change. The Iranian government, in turn, needs to put to rest the myth, often actively perpetuated during the Ahmadinejad regime, that it is hell-bent on building nuclear weapons with the aim of dropping them on Israel and the United States — despite the certainty of national suicide. More transparency and cooperative behavior toward the IAEA would help to debunk this myth and further discredit its advocates.

We should applaud the letters sent by 29 former policy makers, analysts and experts, and 131 members of the U.S. House of Representatives, in July 2013 to President Obama, encouraging him to use the window of opportunity provided by Rouhani's election to reinvigorate negotiations with Iran. However, we should be equally mindful of constituencies in the U.S. Congress that have continued to oppose rapprochement with Iran. On July 31, 2013, Congress voted overwhelmingly and in a bipartisan fashion to impose new sanctions on Iran. Representative Ed Royce (R-CA), chairman of the House Foreign Affairs Committee, made the following remarks on the passage of the bill: "Iran may have a new president, but its march toward a nuclear program continues. The economic and political pressure on Tehran must be ratcheted up. Today the House took a critical step toward crippling this regime to prevent a nuclear Iran and the dire security consequences."²⁵

This initiative was followed by a letter to President Obama on August 5, 2013, from 76 senators from both sides of the aisle, asking him to "Renew Urgency on [the] Iranian Nuclear Program." The senators asked Obama to endorse the policy of tougher sanctions and a credible military threat to accompany "dialogue" with Iran. A bloc of Democrats — including the top members of both the Senate and House foreign-affairs committees — strongly opposes lifting sanctions on Iran unless Tehran offers concessions that far exceed anything Foreign Minister Zarif had talked about in Geneva (October 15-16, 2013). Likewise, the American Israel Public Affairs Committee (AIPAC), one of the most powerful lobbies in Washington, has promised to do everything it could to keep punitive sanctions in place.²⁶ While Iran and the international community are ready for genuine bargaining in the next series of meetings with the P5+1, the question remains whether the Obama administration has the political will to resist the pro-Israel lobby to muster the necessary political capital to lift sanctions.²⁷ The standoff can no longer be comprehended through a rational calculus of U.S. foreign-policy interests, but rather is best understood through the lens of American domestic politics.

Should these sanctions win Senate approval and be enacted, they would practically reduce Iranian oil exports to zero. This is tantamount to economic warfare and a clear attempt at regime change. More helpful would be a policy that delays any further sanctions, to give negotiations a chance to succeed.²⁸ In the face of Rouhani's conciliatory remarks at the United Nations, any further sanctions would also be perceived in Tehran as a defiant response to Iran's call for diplomatic engagement. It would undermine Rouhani and strengthen the hard-liners. Tehran would be likely to perceive U.S. strategy as an attempt to ensure the failure of diplomacy. It would be regarded by Tehran as a demand for capitulation. Hence, given the pervasive campaign of misinformation and hype surrounding Iran's nuclear program in the last three decades, any rapprochement between the United States and Iran and the resolution of other outstanding issues of conflict would be contingent on resolving the nuclear imbroglio.

In order for gestures of goodwill (such as those represented in one-on-one meeting between Kerry and Zarif, as well as the historic call from Obama to Rouhani as he left New York for Iran) to translate into actual policy change, a bolder, broader U.S. initiative is needed. Major challenges remain, such as whether Rouhani can convince Iran's divided leadership to dismantle parts of the country's atomic infrastructure in exchange for a cutback in sanctions. Will Obama be able to reciprocate accordingly? Without drastic reversals on sanctions, the Iranians will be reluctant to forgo their nuclear advances, and vice versa.²⁹

SHIFTING STRATEGIC DYNAMICS

President Rouhani is facing a far more complex and fluid situation than did his predecessors. The Middle East and North Africa have experienced unprecedented uprisings, and Syria — Iran's sole Arab ally — is embroiled in a bloody civil war. Upheavals have been a mixed blessing for Iran. On the one hand, they have presented a setback for the Iranian model of change and governance. The victory of nonviolence — spearheaded by young people professing secular ideas of liberty, social justice and economic security — demonstrated a triumph over grand ideological narratives such as pan-Islamism. On the other hand, the electoral victories of the Muslim reformist al-Nahda party in Tunisia and the Muslim Brotherhood in Egypt were seen as a real opportunity. Iran's conservative ruling elites interpreted this victory in terms of an Islamic rather than an Arab awakening. The July 3, 2013, Egyptian army coup against President Mohammed Morsi failed initially to evoke a drastic reaction from the Islamic Republic. Following the dramatic rise in street violence, however, Iran's deputy foreign minister, Amir-Abdollahian, rejected any foreign interference in Egypt's internal affairs, noting that it runs counter to the goals of peaceful democratic change. He also called on Egypt's religious scholars as well as political and state-run institutions to help end the violence.³⁰

The regional ripple effects and the larger impact of the political emasculation of the Muslim Brotherhood and the Morsi administration by the Egyptian army merit particular attention. This coup, which was carried out with popular support, has sent a message to other Islamists in the region: the cause of political Islam could collapse.³¹

Following the coup, the Saudi, Kuwaiti and UAE governments offered a $12 billion aid package to the Egyptian army, fueling further speculation about the willingness of the Arab Gulf monarchies to prevent Islamists' rise to power. Similarly, the Obama administration's reluctance to call this dramatic turn of events a "coup" — which would have made the Egyptian army ineligible to receive $1.5 billion annually in U.S. military aid — illustrated the strong U.S. preference for a secular government backed by the army and incorporating the Muslim Brotherhood as a minor player in the power structure.

Meanwhile, the assassination of Mohamed Brahmi, one of the leaders of the secular Popular Front Coalition in Tunisia, embroiled that country in political turmoil. This assassination, the second to target a major secular opposition leader in the last eight months, will likely have a divisive impact on Tunisian politics and society.

Taken together, these events, which have manifested an apparent resentment toward the poor performance of Islamists in office, are bound to raise questions about their ability to govern effectively. The rise of post-uprising regimes in the Arab world that have displayed a more nationalist predisposition has already diminished the appeal of Tehran's anti-Israeli political stand in the "Arab street." The uprisings also revealed how vulnerable authoritarian regimes are to mass action and how fragile their hold on power becomes once their political legitimacy erodes. These lessons are not lost on the wielders of power in Tehran and are certain to further compel the Islamic Republic to turn to pragmatic politics throughout the region.

DÉTENTE WITH SAUDI ARABIA

Improving relations with Saudi Arabia holds significant implications for Iraq, Bahrain, Lebanon, Yemen and Syria. Realizing this, Rouhani underscored the importance of improving relations with Saudi Arabia as a "neighbor and brother" in his first news conference following the election. He took pride in having been the signatory of the Islamic Republic's first security agreement with Saudi Arabia in 1998.³² Historically, these two countries have been at odds over many regional issues, including energy politics, the revolution in Iran, the U.S. presence in the region, and external meddling in its fractious politics.

The roots of conflict between Iran and Saudi Arabia go back to the early days of the Iranian revolution. During the Iraq-Iran War (1980-88), relations deteriorated as the Saudis supported the Saddam Hussein regime. The relationship improved under the presidencies of Rafsanjani and Khatami, when the Iranian government pursued a more moderate political course and took initiatives to mend relations with the kingdom. President Rafsanjani's state visit to Riyadh in 1996 was followed by Crown Prince Abdullah's visit to Tehran in 1997, and then by President Khatami's visit to Riyadh in 1999.

Trade relations between the two countries expanded during this period. Iran was motivated to show its neighbors that it no longer sought to export its revolution, hoping this would enhance the possibility of rapprochement with the region and the West. The Saudis, having witnessed Saddam's invasion of Kuwait in 1991, came to realize that the real threat to their national-security came from Baghdad, not Tehran. They also realized that Iran was the only other country in the region that could contain Saddam's regional ambitions.

However, even at this juncture, distrust and sectarian and ideological competition lurked not far below the political surface. An enduring reason for the deterioration of relations between Iran and Saudi Arabia is their continued perception of "mutual threat." Iranian leaders view the Saudi government as responsible for facilitating the U.S. presence in the region and being complicit in the imposition of economic sanctions on Iran.

Saudi Arabia remains resolutely opposed to any deal between Tehran and Washington, in part because the Saudis are worried that any improvements in U.S.-Iran relations may lead to Iran's playing a larger role in regional affairs. More important, however, the Saudis' hardline position toward the Assad regime and their backing for a military solution in Syria — a position that has fallen out of favor with Washington — lies at the heart of their opposition to any rapprochement between Iran and the United States. Some reports have even indicated that France's new military contracts with Saudi Arabia were among its geopolitical motivations for scuttling the nuclear deal with Iran during the P5+1 negotiations of November 7-9, 2013.

U.S.-Saudi cooperation has been a continuing obstacle to Iran-Saudi relations, especially when it comes to the Saudis' replacing Iran's oil exports in the international market and weakening its regional power.³³

As noted above, this relationship has witnessed periods of détente dictated by political expediency. The latest example was when King Abdullah invited former president Ahmadinejad to the annual GCC summit in Doha, Qatar, in December 2007 — the first for an Iranian president — despite repeated exhortations by the Bush administration to the Saudis to join U.S. efforts to isolate Iran. However, when the Saudis intervened militarily to crush the Huti (Shiite) uprising in Yemen in 2009 and accused the Iranian government of fomenting it, relations between the two countries cooled considerably. Iran, in turn, accused Saudi Arabia of covertly funding the Sunni Baluch insurgency inside Iran along the Pakistan border.

Syria is the latest and most dangerous arena of conflict between the two countries, with Iran supporting the Assad regime and the Shia Hezbollah against Saudi-backed Sunni Muslim insurgents.³⁴ Saudi Arabia regards involvement in Iraq and Syria within the context of Iran's hegemonic intentions in the region. Saudi and Iranian involvement in these states is motivated not just by ambition, but by the structure of regional-international relations. For either state to withdraw is to risk ceding Syria and Iraq to its rival and placing itself at a perilous disadvantage.³⁵ However, as the political dynamics and the balance of forces shift, domestically and internationally, both sides are likely to change their positions.³⁶ The lingering structural impediments notwithstanding, both Iran and Saudi Arabia have much to gain from ratcheting down the intense sectarian nature of their competition, which undermines the long-term interests of both countries and the broader region.³⁷

Just as the Soviet leadership came to realize that to safeguard the "Socialist Mothernland" they had to sacrifice the export of socialist revolution and abandon some allies, the Iranian leadership may eventually conclude that protecting national security trumps its commitment to its Shia ally in Syria. Tehran may conclude that the Assad regime's hold on power is tenuous and that Iran needs to turn its attention to internal affairs, mending its ailing economy and settling the nuclear issue in order to guarantee its survival. The Rouhani administration would be more likely to display flexibility in its support for the Assad regime, should a U.S.-Iranian rapprochement on the nuclear issue and beyond materialize.

In fact, the two countries have been in communication about the Syrian crisis. Visits to Iran in late August 2013 by Oman's Sultan Qaboos (a liaison between Washington and Tehran), and by Jeffrey Feltman, formerly assistant U.S. secretary of state and currently UN undersecretary for political affairs, fueled speculation that Tehran and Washingon have exchanged messages regarding Syria. Both French Foreign Minister Laurent Fabius and British Foreign Secretary William Hague have said that Iran, as an ally of the Assad regime, should be included in peace negotiations in Geneva.³⁸ Washington is becoming increasingly cognizant that a political settlement to the Syrian crisis may not be sustainable without Iran's presence at the table. Rouhani's support for the U.S.-Russian deal to destroy Syrian chemical weapons in exchange for an end to U.S. threats of air strikes could be another step toward rapprochement. Rouhani has also said that his government is prepared to accept any elected Syrian ruler, indicating that Iran is not fully committed to Assad's continued rule and could assent to transitional arrangements agreed at the Geneva conference.³⁹

By the same token, the only way to prevent Iraq from falling into yet another cycle of civil war is to use the capabilities of Saudi Arabia, Iran and other regional powers. In the aftermath of the departure of U.S. forces, the path to stability in Iraq lies in recognizing the positive role Iran and Saudi Arabia can play in ushering in political stability, given the limits of U.S. military power. Washington must come to grips with the forces of history, tradition and geography that have shaped the regional order in the Persian Gulf, a traditional triangle formed by Iran, Iraq and Saudi Arabia.⁴⁰

Several dramatic developments in recent years, however, have bolstered Iraq's confidence vis-à-vis Iran. The contentious 2009 presidential elections in Iran intensified factional politics and threw Tehran's Iraq policy into disarray. The 2010 elections in Iraq were also an important turning point. Allawi's Iraqi coalition won 91 seats to 89 for al-Maliki's State of Law bloc. The Iraqi National Alliance, a Shiite religious group dominated by al-Sadr's followers, received nearly 70 seats, and Kurdish parties won 51 seats.⁴¹ It became clear that Iraq's politics now revolved more around intra-Shia rivalries among pro-Allawi factions, pro-Sadrists and pro-Maliki forces and personalities, and the primacy of local interests than loyalty to a single religious identity.⁴² These elections further weakened Iranian political influence by renewing a sense of Iraqi nationalism. This development led to increased Shia fragmentation and empowered political parties with nationalist rather than sectarian agendas.⁴³

Most important, Iran's policy toward Syria clearly reveals this split and has notably contributed to deep divisions between Iran's ruling elites (who back the Assad regime for its logistical support for Hezbollah in the conflict with Israel) and the Maliki administration in Iraq, which opposes Syria's current leadership for its brutal handling of civil unrest. What distanced Maliki from Iran's ruling elite were the historical changes that have swept across the region with the "Arab spring." By standing with Iran, Maliki realized that Iraq could miss out on a major historical opportunity to be a political catalyst and even lead the Arab world's move toward establishing "new democracies."⁴⁴ Increasingly, a rise in anti-American sentiment in Iraq, as well as in the newly emerging Arab political order, will be matched by hostility toward Iran, widely viewed by Arabs, including many Shia Iraqis, as a regional hegemonic force.⁴⁵ These new political developments leave Rouhani with fewer options in regard to his policy toward Iraq. He is likely to come to terms with Iran's diminished influence there and adjust to the new realities.

Similarly, Bahrain has become contentious turf over which Iran and Saudi Arabia have flexed their muscles. While it is true that both Tehran and Riyadh are reluctant to pursue a proxy war in Bahrain, reverberations from the Egyptian and Tunisian uprisings sparked pro-reform protests in Pearl Square. They were met with a violent response. Iranian involvement in Bahrain's uprisings has been exaggerated; Bahrainis are not taking their cues from Tehran. Their unrest is rooted in pent-up frustration with a political system that excludes them from power and has left them impoverished. The mainstream opposition party, al-Wefaq, looks to Arab (Iraqi) Shia religious leaders (marja-e taqlids) rather than to Iranians. This is evident in the Bahrainis' slogans, such as "This nation is not for sale," and "Brothers, Sunni and Shia."⁴⁶

A month after the uprisings began in Manama, the Saudis intervened.⁴⁷ The deployment of forces from Saudi Arabia and the United Arab Emirates to help stabilize the country has further radicalized the more religious segments within the Shia majority. Absent local reforms, such tensions are certain to have broader regional implications, intensifying the existing Shia-Sunni divide. The United States and the United Kingdom have supported Bahrain's ruling family, who have allowed the United States to operate naval bases there.⁴⁸ In light of his stated goal to improve relations with the West and Saudi Arabia, President Rouhani is unlikely to change the Islamic Republic's hands-off policy toward Bahrain.

Rouhani, however, could reduce tensions between Iran and Saudi Arabia by focusing on mutual interests, emphasizing cooperation on security matters, cooperating within OPEC on energy policy, and working together to combat terrorism and extremism. Pursuing common regional interests may be an effective first step in expanding regional cooperation on such issues as finding a mutually acceptable solution to the Syrian crisis.⁴⁹ Rouhani also hopes that improvement of relations with one of the key regional U.S. allies would have a positive impact on a possible Iran-U.S. rapprochement.

OUTLOOK

Iran's vulnerable and mismanaged economy, as well as the infighting among political elites, has weakened its position in the region. Most important, the U.S.-led coalition against Iran and the resultant sanctions have contributed to changing a regional balance of power that once favored Tehran. The mutual interests of Iran and the United States in stabilizing both Iraq and Afghanistan and in diminishing the influence of al-Qaeda and the Taliban in the larger region indicate that major regional conflicts cannot be settled without some level of U.S.-Iranian cooperation.

The history of reformists' victories in Iranian presidential elections has taught us to temper the optimism that typically follows them. The coming months and years will be decisive in determining whether the election of Rouhani will translate into a new foreign-policy approach toward the West, ushering in a fresh regional political dynamic. Ultimately, however, the fortune of Rouhani's presidency hinges on its ability to come to grips with challenges such as Iran's strategic isolation in the region, especially in the post-Arab Spring era, and managing its relations with the West over the nuclear standoff.

In much of what happens in the region, U.S.-Iran relations remain central. Adding more sanctions and ultimatums, especially when there is new hope for a diplomatic breakthrough, will diminish rather than promote the possibility of negotiating a nuclear deal.⁵⁰ Abandoning the campaign of mutual demonization of the last 34 years in favor of mutual respect and goodwill would be a good start.⁵¹

Sanctions have increasingly become a bludgeon, rather than a catalyst to modify political behavior. This confuses their strategic purpose and threatens to make Iran a sequel to Iraq.⁵² Reconciliation would avoid yet another conflict in the Persian Gulf and would facilitate Iran's return to the international fold. If such rapprochement materializes, Tehran is likely to play a more constructive role in the region and beyond, and maintain some form of prudent cooperation with Washington. These possibilities can be realized only if both sides deliberately choose the path of peaceful coexistence.⁵³