Iran’s foreign policy has displayed a new aggressiveness in recent years, causing great concern in Washington and European capitals and among many of Iran’s neighbors. The biggest concern has focused on Iran’s nuclear program, which is widely believed to be aimed at producing nuclear weapons. Iran’s actions in Iraq also have produced growing concern, not only for the United States and Britain, who accuse Iran of supporting attacks against their armed forces, but also for Saudi Arabia and other nearby countries, who fear Shia dominance and deeper sectarian violence in Iraq. Together with Iran’s longstanding support for Hezbollah in Lebanon and radical Palestinian factions, these actions have led many to believe that Iran is seeking regional hegemony.

Concern about Iran’s newly aggressive foreign policy has sharply increased regional tensions. U.S. officials have implicitly threatened to use force to destroy Iran’s nuclear program, and in late 2006 and early 2007 they arrested several Iranian officials in Iraq and moved a second aircraft-carrier battle group into the Persian Gulf. Israel also has threatened to attack Iran. Officials in Jordan, Saudi Arabia and other Arab countries have warned of an emerging “Shia crescent” stretching from Iran through Iraq into Lebanon and have issued veiled threats that they might support Sunnis against Shia in Iraq if Iran does not back down. Some observers have speculated about the possibility of an alliance between moderate Arab states and Israel, Turkey and the United States against Iran.

Indeed, many now believe that a military confrontation between the United States and Iran is likely, perhaps even inevitable.

This paper evaluates the new aggressiveness in Iran’s foreign policy, examining how extensive it has been and why it has occurred. It concludes with a discussion of the possible consequences of this new aggressiveness and appropriate U.S. responses.

IRAN’S NEW AGGRESSIVENESS

Concern that Iran’s foreign policy was becoming more aggressive began to emerge after the terrorist attacks of September 11, 2001, which vastly increased U.S. and West- ern wariness toward the Middle East. A key turning point came in January 2002, when Israeli commandos seized the freighter Karine A, which apparently was transporting a large shipment of arms and explosives from Iran to the Palestinian Authority. Palestinians were carrying out terrorist attacks against Israel at the time, and this incident seemed to provide conclusive evidence that Iran was supporting terrorism and destabilizing the region.  Several weeks later, President George W. Bush denounced Iran, together with Iraq and North Korea, as members of an “axis of evil” that was promoting terrorism and seeking weapons of mass destruction. During this same period, reports emerged that Iran was sheltering hundreds of al-Qaeda members, including top leaders who allegedly had directed terrorist attacks from their refuge in Iran.

In August 2002, evidence emerged that Iran was secretly building a large uranium- enrichment plant, violating its obligations under the Nuclear Non-Proliferation Treaty to declare such activities publicly. During the next few years, additional evidence emerged that Iran had been trying to enrich uranium and had acquired technology and plans to build nuclear weapons. These revelations produced a growing confrontation between Iran and the European Union, backed by the United States, which ultimately led the UN Security Council to impose limited economic sanctions on Iran. In April 2006, Iran announced that it had produced a small amount of enriched uranium and would continue to expand its enrichment program in defiance of EU and U.S. warnings. Iran also began to deploy intermediate-range missiles capable of hitting targets within a 1,200-kilometer range, including Israel and Saudi Arabia.  These missiles are not very accurate and cannot carry a heavy payload, making them suitable mainly for delivering nuclear or chemical warheads rather than conventional ones. Although the United States and Israel almost certainly can deter an Iranian first strike, a nuclear-armed Iran would pose serious proliferation concerns and would itself have a powerful deterrent capability, enabling Iran to act aggressively in the region with near impunity.

After the United States invaded Iraq in March 2003, Iran seems to have encouraged its longstanding Iraqi Shia and Kurdish allies to cooperate with U.S. forces. However, it also apparently began to flood Iraq with intelligence operatives who could influence events there and, if directed, organize attacks on U.S. and allied forces.  In addition, Iran began to provide support to the firebrand Iraqi Shia cleric Moqtada al-Sadr and his Mahdi Army, which fought two major battles with U.S. forces in 2004, opposed the U.S.-backed constitution adopted by Iraq in October 2005, and increasingly attacked Iraqi Sunnis and U.S. forces in 2006 and early 2007. U.S. officials repeatedly denounced Iran for supporting the Mahdi Army and other insurgent groups, claiming that Iran was giving them sophisticated explosives and other assistance for attacks on U.S. forces. The British government similarly charged that Iran was supporting attacks against its forces in southern Iraq.  Even the Iraqi government, whose leaders have longstanding ties with Iran, acknowledged that Iran was fomenting instability in their country.

Finally, Iran worked closely with Syria throughout this period to strengthen Hezbollah, whose forces controlled much of southern Lebanon. Hezbollah had refrained almost entirely from attacking Israel after its withdrawal from Lebanon in 2000, despite repeated Israeli incursions back into Lebanon and its continuing occupation of the Shebaa Farms area. However, Iran and Syria provided Hezbollah with a large arsenal of missiles and other support. In July 2006, Hezbollah guerrillas brazenly crossed the border into Israel and kidnapped two Israeli soldiers, killing three others in the process. This sparked a month-long war in which Israeli forces carried out brutal attacks throughout southern Lebanon and Hezbollah fired thousands of missiles into Israel, leaving at least 1,500 Lebanese and 163 Israelis dead. Israel and the United States charged that Iran had been deeply involved in the confrontation. Although Iran had supplied most of Hezbollah’s missiles and other arms, no evidence emerged that it had encouraged or participated in the confrontation. After the fighting ended, Hezbollah began to push for a larger role in Lebanese politics, organizing a series of demonstrations to intimidate its largely Sunni opponents. U.S. officials described these activities as an attempted coup d’état and claimed that Iran was involved, though again no evidence emerged.

Most observers attribute this new aggressiveness in Iran’s foreign policy to recent changes inside Iran and in its foreign-policy environment. The reformist movement led by former president Mohammad Khatami, which helped moderate Iran’s foreign policy in the late 1990s, collapsed in the early 2000s. In its place has emerged a new hardline faction led by the current president, Mahmoud Ahmadinejad, who has championed Iran’s nuclear program and harshly criticized the United States and Israel. Ahmadinejad’s emergence suggests to many that Iran is lurching back toward the radicalism of the 1980s, when it sought to export its revolution and combat Western influence in the region.  World oil prices have risen dramatically in recent years, increasing the financial resources available to Iran’s leaders, reducing domestic pressure for moderation, and increasing Iran’s ability to disrupt world oil markets. Two of Iran’s main enemies — the Taliban in Afghanistan and Saddam Hussein in Iraq — have been overthrown recently, eliminating important constraints on its regional activities and leaving allies of Iran in powerful positions in both countries. Finally, U.S. military forces have become deeply bogged down in Iraq, making a U.S. attack on Iran much more difficult and giving Iran easy targets for retaliation.

ELEMENTS OF CONTINUITY

These aggressive actions differ from the general trends in Iranian foreign policy that played out during the 1990s. By the late 1980s, Iran’s war with Iraq and the chaotic aftermath of its 1979 revolution had severely weakened its economy and created growing popular discontent. Accordingly, President Ali Akbar Hashemi Rafsanjani used his 1989 landslide electoral victory as a mandate to carry out a broad range of moderate initiatives. These included important foreign-policy initiatives aimed at reducing Iran’s international isolation and improving its foreign economic ties, such as efforts to gain the release of Western hostages in Lebanon, end disruptions of the Hajj pilgrimage in Saudi Arabia, and negotiate deals with foreign oil companies. However, despite these moderate initiatives, Iran also secretly continued to pursue various radical activities in this period, including support for Hezbollah and other radical Islamist forces in the region, assassinations of Iranian exiles, a nuclear-development program, and apparently involvement in terrorist attacks in Argentina in 1992 and 1994 and at the Khobar Towers complex in Saudi Arabia in 1996, where 19 U.S. military personnel were killed.

In late 1996 and early 1997, Saudi Arabia obtained evidence of Iran’s role in the Khobar Towers bombing, and a German court implicated top Iranian officials in the 1992 assassination of four Iranian exiles in Berlin. The United States, Saudi Arabia, and the EU then put great pressure on Iran to end its radical foreign activities. Apparently as a result of this pressure, the assassinations of Iranian exiles and terrorist attacks linked to Iran both abruptly ended.

Just as these changes were occurring, Mohammad Khatami won a landslide victory in Iran’s May 1997 presidential election. Khatami’s victory demonstrated that popular discontent was widespread in Iran. It also brought to power new leaders who were determined to steer Iran in a more moderate direction. During his campaign, Khatami had called for a “dialogue of civilizations” and better relations with the West.  He quickly began to pursue these objectives once in office, negotiating agreements that very much improved Iran’s relations with the EU countries and with Saudi Arabia and other moderate Arab states. He also made important overtures toward the United States. The Clinton administration eventually reciprocated, but by then Iran’s supreme leader, Ali Khamenei, had expressed strong opposition, preventing Khatami from taking further steps toward rapprochement.

Khatami and his reformist allies faced growing opposition from their conservative opponents.  Ironically, this seems to have improved the chances for rapprochement with the United States, perhaps because Khamenei realized this was a popular idea and was becoming less concerned that the reformists would benefit from it. The improved prospects for U.S.-Iran rapprochement became apparent after the terrorist attacks of September 11, 2001, when Iran undertook a series of actions that very much facilitated the U.S.- led effort to overthrow the Taliban and install a moderate government in Afghanistan.

The Karine A. affair and President Bush’s “axis of evil” speech then produced severe tension between the two countries. Nevertheless, Iran continued to make overtures toward the United States, culminating in an extraordinary letter sent to Washington soon after the March 2003 U.S. invasion of Iraq calling for negotiations to resolve all outstanding differences, including all major issues of concern to the United States. The Bush administration never responded to this letter.

Despite these various steps toward moderation, Iran continued to pursue activities throughout this period that threatened the interests of the United States and its allies. The most important of these were its continued uranium-enrichment and intermediate-range- missile programs, which pose obvious potential threats to U.S. allies and U.S. forces in the region. It also continued to support Hezbollah and radical Palestinian factions, which have caused extensive bloodshed and chaos over the years. Consequently, while Iran’s foreign policy became considerably more moderate in the late 1990s, it still contained elements that threatened Western interests.

Seen in this light, there has been more continuity than change in Iran’s foreign policy in the last few years. Iran’s nuclear and missile programs have been advancing steadily over time. Iran is pursuing them more defiantly now, and they have recently achieved important milestones, but these programs are not new initiatives. Similarly, while Iran recently provided a large missile arsenal to Hezbollah, it has been supporting Hezbollah for many years.  Moreover, Iran has withdrawn most or all of its Revolutionary Guard advisors to Hezbollah recently, and Hezbollah had become considerably more moderate before its war with Israel in July 2006. Iran’s support for radical Palestinian factions also has been going on for many years, and these factions declared a ceasefire and ended most of their terrorist attacks against Israel in mid-2004. The assassinations of Iranian exiles and terrorist attacks linked to Iran that ended in 1996 have not resumed. There have been no reports that Iran is instigating unrest among the Shia populations of Kuwait, Saudi Arabia and Bahrain, as it did in the 1980s, or in the various unstable countries to its north and east. Most notably, Iran has not worked to undermine U.S. forces or the U.S.- backed government in Afghanistan, though it maintains a substantial presence there. And no credible evidence exists that Iran is supporting al-Qaeda or the various kindred movements that have emerged in recent years.

The one venue in which Iran has become much more aggressive recently is Iraq. It is not clear now whether Iran is deliberately encouraging attacks on U.S. and British forces in Iraq and, if so, to what extent it is doing this. It is also not clear whether Iran is sup- porting some of the radical Sunni factions that are responsible for most of these attacks, in addition to its Shia and Kurdish allies.  Nevertheless, Iran seems to have developed a large presence in Iraq and the capability to instigate extensive attacks on U.S. and British forces there. This represents a sharp departure from Iran’s previous posture toward the Western military presence in the region.

Consequently, while Iran’s foreign policy has been more aggressive in recent years, this new aggressiveness has been limited in scope, mainly involving Iraq and a more defiant posture on the nuclear dispute. Iran is pursuing various activities that pose real or potential threats to the United States and its allies, but it does not seem to be making a broad effort to destabilize the region or achieve hegemony, as it did in the 1980s.

CONSTRAINTS ON FOREIGN POLICY

Iran’s new aggressiveness is limited in scope because the main conditions that led it to become more moderate in the 1990s still exist, placing important constraints on its foreign policy. Most important, popular discontent remains widespread in Iran, due mainly to adverse economic conditions and the resentment many Iranians feel toward the cultural restrictions and international isolation they face. Supreme Leader Khamenei and most other Iranian leaders are concerned about this discontent and make considerable efforts to defuse it. This has led them to seek better foreign economic ties and generally to avoid actions that would increase Iran’s isolation, especially from other Islamic countries and from Europe. They also have tried to avoid actions that might lead to military confrontation — which would be extremely unpopular — reducing Iran’s hostility toward the United States during the 1990s, backing away from a war with the Taliban in 1998, and avoiding conflict with U.S. forces in Afghanistan and Iraq.

Popular discontent has continued to constrain Iran’s foreign policy during the Ahmadinejad era. Apparently fearing that Ahmadinejad would mishandle the nuclear dispute, Khamenei named his 2005 electoral rival, Ali Larijani, rather than his foreign minister, Manouchehr Mottaki, to oversee the nuclear negotiations. Khamenei also created a new council led by Khatami’s foreign minister, Kamal Kharrazi, to oversee foreign policy. As Ahmadinejad made a series of inflammatory statements about the nuclear dispute, the Holocaust, and other matters during 2006, he faced growing criticism in the press and from politicians, including not only reformists and centrists but even some fellow hardliners. Many candidates backed by Ahmadinejad were defeated in the December 2006 elections for municipal councils and the Assembly of Experts, in what was widely interpreted as a popular repudiation of his radical foreign-policy views and ineffective economic policies. After the UN Security Council voted to impose sanctions on Iran in late December, Ahmadinejad was sharply criticized for inflaming the issue, not only by his reformist and centrist opponents but also by conservatives. These criticisms have led Ahmadinejad to exercise more restraint in early 2007. Clearly Iran is not lurching back toward the radicalism of the 1980s.

Economic conditions also continue to constrain Iran’s foreign policy. Despite moderate economic growth during the past decade, unemployment remains high and living standards remain somewhat lower than at their pre-revolutionary peak some 30 years ago, fueling popular discontent. The current oil boom has produced a sharp increase in Iran’s export revenue during the past few years, but much of this has been spent on higher imports, foreign borrowing and consumer-goods subsidies. During his 2005 presidential campaign, Ahmadinejad made unrealistic promises to raise living standards, creating high expectations that have not been met. His populist policies have failed to address the country’s deeply rooted economic problems and are producing higher inflation. Moreover, declining oil production and rapidly increasing domestic energy consumption are likely to produce a steep drop in Iran’s oil and gas exports in the coming years, sharply reducing its export revenue.  Therefore, while the oil boom has strengthened Iran and contributed to its new aggressiveness, its effects have been limited and will likely dissipate in the coming years.  Iran’s leaders still face strong pressure to pursue moderate foreign policies that will help raise living standards and revitalize the economy.

Finally, Iran’s foreign policy is constrained by the limited capabilities of its armed forces. Although Iran has relatively large ground forces, its armored units, air force and navy are weak and antiquated, giving it little ability to carry out conventional military operations beyond its borders. Formidable mountains and deserts protect its borders, and its major cities are well inland, so Iran cannot easily be conquered. However, its oil industry is very vulnerable. And while the recent wars in Afghanistan and Iraq have eliminated two of Iran’s main enemies and left U.S. ground forces deeply bogged down, they also have left Iran almost completely encircled by U.S. air and naval forces, which remain extremely powerful. Iran’s air-defense capabilities are limited, so U.S. warplanes and missiles can strike almost any target inside Iran easily and repeatedly.  Israel can carry out limited air strikes inside Iran as well. Moreover, financial limitations and a Western arms embargo will prevent Iran from improving its conventional military capabilities substantially in the foreseeable future. These various limitations mean that Iran does not pose much of a conventional military threat to its neighbors as long as a significant U.S. military presence remains in the region. This very much constrains Iran’s ability to expand its regional influence.

Iran’s vulnerability to U.S. and Israeli air attacks has led it to develop asymmetric deterrence capabilities to counter these threats. In the 1990s, this consisted mainly of capabilities to disrupt Persian Gulf shipping and carry out terrorist attacks and other forms of unconventional warfare against U.S. and Israeli targets, perhaps in coordination with Hezbollah and radical Palestinian factions. Iran then expanded its asymmetric deterrence capabilities by providing a large missile arsenal to Hezbollah and developing its own intermediate-range missiles, sharply increasing its ability to attack targets in Israel and other nearby countries. Ironically, Hezbollah’s missiles proved to be quite ineffective during the 2006 war.

Most recently, Iran’s quest for asymmetric deterrence has led it to develop extensive capabilities to attack U.S. forces in Iraq and take important steps toward acquiring nuclear weapons, in defiance of Western pressure. Although enhancing its deterrence capability is a primary motive for Iran’s recent actions in Iraq, it has other security- oriented motives as well, including a desire to protect its Iraqi Shia and Kurdish allies, keep at least the eastern part of the country in friendly hands, and drive U.S. and British forces out of Iraq, where they pose an obvious threat to its security. In addition, during the past few years, Iran has charged repeatedly that the United States, Britain and Israel are instigating terrorist attacks inside its borders by various opposition factions. Iran may be facilitating operations against U.S. and British forces in Iraq to retaliate for these attacks.

WHITHER IRAN’S FOREIGN POLICY?

These constraints on Iran’s foreign policy suggest that the new aggressiveness it has demonstrated in recent years will remain limited. Iran’s recent actions in Iraq, its nuclear and intermediate-range missile programs, and its support for Hezbollah and radical Palestinian factions are motivated primarily by its security needs, especially its desire to deter attacks by the United States and Israel.  Consequently, Iran’s leaders are not likely to end these activities or reduce them substantially as long as its security remains seriously threatened.

Iran’s foreign policy in other venues, however, is likely to remain restrained. Iran will probably not carry out direct, unprovoked attacks on U.S. or Israeli targets, actions that would almost certainly incite military retaliation, which could inflame popular discontent. Iran probably will continue to support Hezbollah and radical Palestinians, but it has strong incentives not to encourage violence, as this also could produce harsh U.S. or Israeli retaliation. Iran seems very unlikely to attack European targets or Iranian exiles in Europe. This would jeopardize important commercial relations and drive Europe closer to the hostile U.S. position on Iran. Any effort by Iran to assist subversive elements in the Gulf Arab states or in moderate Arab countries like Egypt or Jordan could lead these countries to retaliate by supporting subversives inside Iran, working against Iran’s allies in Iraq or Lebanon, or driving down oil prices, which could prove extremely damaging.

Finally, Iranian efforts to foment subversion in the various countries to its north and east would greatly anger Russia, Pakistan and perhaps China, which could retaliate harshly against Iran.

Iran’s aggressive actions in Iraq, its nuclear and missile programs, and its support for Hezbollah and radical Palestinians clearly pose serious threats to its neighbors and to the West. This, in turn, has led the United States and its allies to become more hostile toward Iran, increasing the threats to its security that motivate these aggressive activities. This escalatory process is a textbook example of the “security dilemma.”

In light of Iran’s security dilemma, U.S. efforts to influence its behavior should take its security concerns fully into account.  Iran is not likely to end its aggressive activities in Iraq, its nuclear and missile programs, or its support for Hezbollah and radical Palestinians unless threats to its security decline substantially, especially the threat of U.S. and Israeli air attack. Consequently, hostile U.S. actions aimed at stopping Iran’s aggressive activities are likely to fail, since these activities are crucial to Iran’s deterrence capability. And a U.S. or Israeli attack on Iran or support for subversion within its borders would likely trigger the retaliatory capabilities these activities make possible.  Conversely, U.S. efforts to ease Iran’s security concerns would reduce its need to pursue these activities and make it easier for Iran to reduce or abandon them.  In the short term, declarations that the United States and Israel will respect Iran’s legitimate security interests and will not attack it without provocation or try to change its regime would help ease Iran’s insecurity. In the longer term, the withdrawal of U.S. forces from Iraq, a reduction of U.S. forces in the Persian Gulf and elsewhere in the region, and efforts to forge a regional security frame- work that strengthens both Iran’s security and that of its neighbors would reduce Iran’s need for deterrence and therefore its need to pursue these aggressive activities.

More broadly, the constraints on Iran’s foreign policy discussed above suggest a number of positive and negative incentives U.S. officials could employ to influence Iran’s behavior without increasing its need for deterrence or triggering retaliation. Iran’s leaders clearly would welcome a reduction of U.S. economic sanctions, an end to U.S. efforts to encourage popular discontent in Iran through media broadcasts and other means, and cooperation on border control, naval maneuvers and other routine security matters. The harsh domestic reaction to Ahmadinejad’s foreign policy in recent months indicates that Iran responds to sticks as well as carrots, including efforts to increase unilateral and multilateral economic sanctions, criticism of its actions by European and regional leaders, and even low-level confrontation, such as the recent arrests of Iranian officials in Iraq.

Finally, direct negotiations between U.S. and Iranian officials could be very helpful, allowing both sides to establish “red lines” delineating unacceptable behavior, seek opportunities for cooperation, and reduce the intense mutual distrust that now colors their relationship.