Iran in Transition:

Uncertain Hostility, Uncertain Threat

Anthony H. Cordesman
Senior Fellow and Co-Director, CSIS Middle East Studies Program

Testimony to the Foreign Relations Committee

May 6, 1998

Patience is not one of Americaís greatest virtues. We want instant solutions and we want them now! We also have limited tolerance for complexity and uncertainty. We want instant judgments, and clear divisions between black and white. We also like morality plays, and clear simplistic differences between good and evil and friend and foeóand few Americans can forget events in Lebanon or that militant students held 52 Americans hostage for 444 days after the Islamic revolution in 1979 with the blessing of Iranian officials.

Our cultural bias has its advantages. We are a nation that acts, and often with great success and decisiveness. At the same time, when we deal with very complex problems in foreign relations we tend to either sanctify a given regime or demonize it. We also can rush to judgment and oversimplify, and end up seeking the kind of answers that have become a joke within the U.S. national security community: "We have the same solution to every problem, simple, quick, and wrong."

Any such rush to judgment is particularly dangerous in the case of Iran. Neither nation will quickly forget the past, or the present level of tensions. It is far too soon to make judgments about how moderate Iran will become and remain, about changes in its national security policy, its attitude towards proliferation, and its support of revolutionary warfare and terrorism.

Many internal political developments are quite positive, as are many of Iranís diplomatic actions. At the same time, there is an obvious power struggle between conservative and moderate. There have been few visible changes in Iranís national security policy and force posture, and it may be several years before we can firmly understand what Iranís new government can make by way of changes in Iranís conventional forces and programs to acquire weapons of mass destruction.

Iranís Strategic Interests

We will need tolerance as well as patience. At best, moderation is not going to mean Iranian agreement with the United States. Iran has different strategic interests, and its present fears and hostility cannot be attributed simply to revolutionary rhetoric, internal politics, hostility, or paranoia. Iran is a nation with good historical reason to fear its neighbors and outside intervention.

Many of Iranís present attitudes were shaped by an eight year long war with Iraq. Iranís aggressive efforts to export its revolution, extremism, and the U.S. Embassy hostage crisis created many of its problems. Nevertheless, the Iran-Iraq War was a conflict where Iran was first invaded and was then the victim of massive chemical and missile attacks. Outside powers armed Iraq against Iran, while they denied Iran resupply and new arms, and Iran fought a "tanker war" against the U.S. and Britain in 1987-1988. Iran ended the Iran-Iraq War in near isolation, having lost a series of massive battles that cost it some 40-60% of its major land force weapons.

Iraq has since been greatly weakened by the Gulf War, but it remains a stronger military power than Iran. Iran has roughly 380,000-400,000 men under arms versus 345,000 men in both Iranís regular forces and the Revolutionary Guards. Iraq has 2,700 main battle tanks compared to less than 1,400 for Iran. Iraq has about 3,800 other armored vehicles compared to around 1,100. The only category of major land weapons where Iran is superior is artillery, and this superiority exists largely in obsolete towed artillery weapons that have defensive value, but which are extremely difficult to use effectively in maneuver warfare. Regardless of the recent improvement in their relations, both Iran and Iraq still harbor armed opposition movements which are targeted against the other state. Neither nation can ignore the risk of another Iran-Iraq War, nor both Iran and Iraq deploy the majority of their armored forces along their mutual border.

Iraq is also a reason that is unlikely that Iranís efforts to acquire long-range missiles and weapons of mass destruction are regime-dependent, or will vanish if Iranís moderates come to full power, although the rate and intensity of Iranís efforts to acquire weapons of mass destruction may vary sharply according to the regime and the political climate in the Gulf. The Gulf War has exposed the truly massive character of Iraqís efforts to proliferate, and the risk that Iran might eventually have been the target of massive attacks with biological and chemical weapons. Iran is keenly aware of Israelís long-range strike capabilities, and that India and Pakistan are major proliferators.

Iran will take time to forget that the U.S. has sought to isolate Iran both militarily and economically. It is unlikely to forget that American military power now dominates the Gulf. Iran is aware that it has little hope of eroding U.S. conventional superiority except by proliferating and the use of asymmetric warfare, and that the U.S. is the worldís leading nuclear power. It is also keenly conscious of the fact that Southern Gulf nations like Saudi Arabia are importing something on the order of fifteen times more arms than Iran.

This is not a peaceful or friendly region. Every nation plays other regional nations off against each other. Even in the Southern Gulf, virtually every regime is in some ways the rival of its neighbors, and no Southern Gulf nation has a firm identity of strategic interests with the United States.

Regardless of Iranís regime, it can be expected to compete in the complex game of power in the region. Iran may never seek hegemony in the literal sense of the word, but it will always seek regional power and influence. In the Gulf, that means trying to advance Iranian interests against those of Iraq, Saudi Arabia, and the United States. It means seeking influence over the smaller Gulf states, and trying to assert Iranís role as a Gulf and Indian Ocean power. Virtually any Iranian regime is likely to see the kind of naval power that Iran has built up along its Gulf coast as both a way of ensure that its own oil shipments are not threatened and as a way of intimidating its neighbors

Iran will seek to assert its interests in the Caspian, Afghanistan, and Central Asia, and complex and sometimes troubled relations with Turkey and Pakistan. Iran can never ignore Russia, anymore than it can ignore the US. At present, it is likely to try to use Russia as a counterbalance to the U.S. and seek to limit Russian ties to Iraq, just as it will seek to use all other interested outside powers to advance its interests in the region.

Iran can be expected to support Shiíite causes in nations like Afghanistan, Bahrain, Lebanon, and Saudi Arabia, although the way in which it does so may vary sharply with a given Iranian regime and leader. It will also continue to have some problems with its Azeris and Kurds, although they are unlikely to lead to the kind of tensions that exits in Iraq and Turkey.

Any Iran that cannot match U.S. and Iraqi conventional strength is unlikely to abandon unconventional or asymmetric warfare, and this will sometimes include the use of what we call "terrorism." Iran is also unlikely to ever openly acknowledge that the U.S. has a legitimate role to play in the Gulf, and contributes to regional stability. Iran has scarcely ignored the fact that it benefited from the US-led attacks on Iraq during the Gulf War, and the eight years in which Iraq has been denied arms imports and the ability to proliferate. At the same time, Iran sees the U.S. as an oppressor under the Shah, a key cause of its defeat in the Iran-Iraq War, and as an ally of Saudi Arabia and Israel. Future Iranian regimes are likely to entirely forget the past, and most are far more likely to want to lead a Gulf security structure than accept a U.S. presence.

Iran has nothing to gain from violent attacks on its legitimate opposition, and some aspects of its terrorist activities already seem to be sharply reduced in scope. While Iran does continue to support the Hezbollah and some extremist movements like the Palestinian Islamic Jihad, it seems to have less interest in operations in the Southern Gulf and the rest of the Arab world. At the same time, no Iranian regime is likely to remain passive when it is under violent attack by its extreme opposition.

This is particularly true in the case of the Peopleís Mujahideen, which is itself a terrorist group. Before we call any member of the Peopleís Mujahideen a victim of terrorism, we should remember that it lost a bloody civil war in Iran in the early 1980s, in which it made widespread use of bombings and assassination. It killed Americans long before the fall of the Shah, and supported the student seizure of the U.S. embassy and hostages. The Peopleís Mujahideen has since maintained an Iraqi-supported military force near Iranís border, and gone on with its terrorist attacks inside Iran. Similarly, Iran is unlikely to tolerate the Kurdish groups that supported a Kurdish uprising in Iran in 1980-1983, and which also has elements that threaten to attack Iran. Violence in Iranian politics is almost certain to be met with violence, and "terrorism with terrorism."

Israel is a long way away from Iran, and there is little prospect of real conflict between the two countries. At present, however, Israel makes a convenient political whipping boy for Iran and one where the whip is sometimes wielded out of real conviction. Until the peace process is revived, and receives broad Arab and Islamic support, Iran will probably continue to attack Israelís legitimacy and support Arab hard-liners. This may not involve the support of terrorist and extremist groups, or cooperation with Syria, but ideological differences are likely to combine with strategic interest, and the most the U.S. may be able to hope for is an Iran that softens its rhetoric and which does not actively support violence.

In short, even if the "moderates" in Iran do come fully to power, and gain full control over the national security apparatus and security structure, we should not expect Iran to agree with the US, to cease all of its rivalries with its neighbors, and to abandon all of the military efforts we do not like. We should not expect Iran to halt proliferation, give up its efforts to strengthen its naval power in the Gulf, and abandon the use of violence against the violent elements of its opposition.

Iran in Transition

Iran is not; however, a nation where the "moderates" are firmly in power, or where we yet know what Iranís more moderate leaders feel about national security policy or how they would behave if they did not face serious internal opposition. We are dealing with a complex regime that is in the midst of an uncertain transition and Iranís internal political divisions make it extremely difficult to determine whether a given speech attacking the U.S. or the West is really directed at its target, or Iranís internal politics.

Virtually every day, we see new signs that the Iranian government is divided between "hard-liners" and "moderates," and this struggle makes it very difficult to know how moderate Iranís moderates really are. Since 1980, Iranís revolutionary ideology and political rhetoric have been intensely anti-American. No one in Iranian politics can now ignore this fact.

It is scarcely surprising, therefore, that Iranís present rhetoric is divided between initiatives that promise better relations and dialogue and repetitions of past hostility. Moderates must talk like hard-liners to survive, and this helps explain why one dayís new moderate initiative may be followed by the next dayís hard-line speech.

The Impact of President Khatami

No one in the US, however, can afford to ignore President Khatamiís election, and the words of moderation that have followed. Some 91% of Iranians voted on May 23, 1997, a total of 29.7 million votes out of some 32 million eligible voters. This vote contrasts with only 55% in 1993, when Rafsanjani was the only real candidate. These voters included all citizens of age 15 and over. Nearly half were women, and more than half of population was under 18.

President Khatami received 69% of votes (20.7 million). He won in spite of the fact his main conservative opponent, Nateq Nouri had massive funding, a near monopoly of the media until shortly before election, the tacit support of Khamenei, and the support of the Basiíij and the force for the Elimination of Vice and Propagation of Virtue. Some 200 members of Majlis had endorsed Nateq Nouri before the election while only 70 had endorsed Khatami. Nevertheless, Nateq Nouri got only 7.2 million (25%) votes, and a hard-line ex-intelligence chief got less than 1 million.

It is true that the Council of Guardians only allowed four 4 out 238 prospective candidates to run. No foreign policy issues were debated, and all the candidates had to pay at least lip service to "hard-line" and anti-U.S.positions. Yet, it is seems clear that Iranian voters did vote against the more extreme conservatives, Islamic extremism, corruption, mismanagement of economy, and interference in their day-to-day lives. They were voting for privacy, and some unquestionably voted for an end to revolutionary adventures and confrontation with Iranís neighbors and the West.

It has become clear in the year that has followed the election that President Khatami does want to make fundamental changes in Iranís foreign relations as well as liberalize its revolution. Khatami has spoken repeatedly about his belief that there should be no clash of cultures and that Islam and other cultures had much to teach each other. Iran has made efforts to improve its relations with the Arab Gulf states and the Arab world, it has begun a dialog with Iraq at the Ministerial level, improved its relations with Turkey, and has taken new steps to improve its relations with the European Union.

Khatamiís interview on CNN has already received widespread attention, but his speeches to his neighbors are of equal importance. Perhaps the most important such speech is the one he gave on December 9, 1998, at the meeting of the Organization of Islamic Countries in Tehran. President Mohammad Khatami gave a speech that stated that Islamic civil society and its Western counterpart were "not necessarily in conflict and contradiction in all their manifestations and consequences...This is why we should never be oblivious to judicious acquisition of the positive accomplishments of the Western civil society."

Khatami condemned terrorism, and called for peaceful relations between all Islamic states, including Iran and the Southern Gulf states. He stated that, "Living in peace and security can be realized only when one fully understands not only the culture and thinking but also the concerns as well as the ways and manners of others....In our view, a new order based on pluralism is taking shape in the world that, God willing, will not be the monopoly of any single power...(Islam and the West) are not necessarily in conflict and contradiction in all their manifestations and consequences. This is exactly why we should never be oblivious to judicious acquisition of the positive accomplishments of Western civil society."

Khatami clearly emphasized his emphasis on tolerance and democracy, "In the civil society that we espouse, although centered around the axis of Islamic thinking and culture...personal or group dictatorship or even the tyranny of the majority and the elimination of the minority has no place." He urged all Islamic nations to "strengthen confidence, reduce security concerns and...render ineffective the wrong inculcation by the enemies of Islam."

Khatami has repeatedly criticized the U.S. and its role in the Gulf, but his criticism has not involved extremism or threats of violence. Khatamiís words indicate that the U.S. and Iran have a long way to go before they can have friendly relations, but they also indicate that a modus vivendi based on mutual compromise may well be possible:

"Today we do not need to have the United States at our side. We can go ahead without the help of the United States...Those who put coercive pressure on others and resort to force, and world powers that try to make oppressive pressure the basis of their relations with other nations... they cannot expect anything from the Iranian nation ...We have suffered the greatest harm from the unjust policies of America... Before the revolution, as you know, after the revolution, and even today, American politicians behave like the masters of the world. They impose sanctions on any place that does not bow to their interests and want to impose their sanctions by force on the world, not just on us...(The United States feels it can talk to Iran "in whatever form it likes, and do whatever it feels like...It not only puts pressure on Iran, it puts pressure on Europe, Asia, Japan, saying, for example, 'If you want to invest in Iran more than such an amount, we will impose sanctions on you'. It tries to impose its own domestic laws on the world. That is its domineering way. The fruit of our revolution is that we have freed ourselves from the yoke of our masters, and we will never submit to any new one. Today we are building our country ourselves, if we have shortcomings, they belong to U.S. and we can remove them."
A Divided Regime and National Security Structure

At the same time, it is clear that President Khatami faces constant opposition from various hard-liners, and does not yet control Iranís security apparatus. Iranís religious leader, the Ayatollah Ali Khamenei, gave an opening address to the OIC conference in which he stated that, "Western materialistic civilization is directing everyone towards materialism while money, gluttony and carnal desires are made the greatest aspirations. Sincerity, truthfulness, altruism and self-sacrifice have been replaced in many parts of the world by deception, conspiracy, avarice, jealousy and other indecent features....Most nations are deprived of scientific progress while a group have used their science and knowledge as a means to mete out oppression on others...Western liberalism, communism, socialism and all other - Ďismsí have gone through their tests and proved their debility. As in the past, so today, Islam is the only remedial, curative and savior angel....The Zionists, the notorious global Zionist media and the agents of arrogance, in particular the Americansónamely those who have sustained the greatest losses due to the (Iranian) revolutionóhave been and are most active and vocal" in slandering the Islamic republic." 1

The Ayatollah Ali Hoseini Khamenei, and not Iranís new president, is the formal commander of the armed forces and has ultimate authority over Iranís intelligence and security services. This includes the Supreme Council for National Security, whose members include the President, the speaker of the Majlis, head of the judiciary, Chief of the General Staff, Minister of Foreign Affairs, Minister of Intelligence and Security, Minister of the Interior, and the head of the Plan and Budget Organization. Khamenei and his hard-line supporters seem to dominate bodies like the Special Operations (Coordinating) Committee, which includes the President, Supreme Leaderís representative, Chief of the General Staff, Minister of Foreign Affairs, Minister of Intelligence and Security, head of the IRGC, and others and which some experts feel manages Iranís overseas operations and support of extremist groups.

Khamenei has an effective veto over the actions of the other branches of Iranís government, and Iranís government other centers of power, a number of which are still under conservative control. The Majlis remains under the leadership of Khatamiís rival, Ali Akbar Nateq Nouri, and about two-thirds of its members seem to be "conservative" in most of their votes. A largely religious Council of Guardians can veto the actions of the President and Majlis, and arbitrate many types of issues. Khatamiís predecessor, Ali Akbar Hashemi Rafsanjani, now heads a much strengthened Expediency Council, which is generally more liberal that the Council of Guardians and serves as a rival body of review. The Iranian Revolutionary Guards Council (IRGC) represents conservative military force that is closely linked to the Leader of the Islamic Revolution, and conservative clerics still have de facto control of key popular security forces like the Basij.

Iranís military leadership has changed for the better, but it is still anything but moderate. On September 15, 1997, Khatami called for the depolitisation of Iranís armed forces, and urged them to stay out of Iranís politics. "The armed forces have to abstain from factional politics and do their utmost to serve ...(the) pillars of the revolution." 2

Some of Khatamiís key national security appointments offer hope of increased moderation. Rear Admiral Ali Shamkani left the navy and became the new Minister of Defense. Shamkani had long been regarded as a close associate of the Ayatollah Ali Hoseini Khamenei, and the Ministry of Defense remained closely tied to the Leader of the Islamic Revolution. At the time, Shamkani had never been regarded as revolutionary fanatic or hard-liner and was viewed as one of the most apolitical and professional of Iranís senior officers. He had been a leader in Iranís military modernization and the development of its military industriesóseeking to strengthen its forces and capabilities, rather than engage in military adventures.

Some observers felt it was significant that Khatami did not appoint a direct replacement for Shamkani, who had commanded both the regular navy and the naval branch of the Iranian Revolutionary Guards Corps (IRGC). Instead, Rear Admiral Abbas Mohtaj became commander of the regular navy, and Brigadier General Ali Akbar Ahmadian became commander of the and the naval branch of the Iranian Revolutionary Guards Corps (IRGC). This led to speculation that Khatami had divided the command to prevent any member of the military from having too much power, although other analysts felt that Khamenei might have intervened to insure the independence of the IRGC.

Khatami fired Ali Fallahiyan from his position as the Minister of the Ministry of Intelligence (information) and Security (MOIS). Fallahiyan had strongly opposed Khatami during the election and had become something of an embarrassment to Iran after the Mykonos trial of Iranian assassins in Germany. Qorbaníail Dorri Najafabadi became the new Minister. Najafabadi is a relatively obscure figure with limited intelligence background. Although Najafabadi had backed Khatami during the election, it seems likely that Khatami would have preferred to appoint a closer associate like Mohammad Musavi Koíeiniha, and that Najafabadiís appointment was a concession to Khamenei and the hard-line clerics. Najafabadi, however, was regarded as part of the more moderate wing of the conservative faction and as less likely to engage in terrorism and aggressive efforts to export the revolution than his predecessor, Ali Fallahiyan.

Khatami may be altering the course of Iranís nuclear efforts and proliferation. He has replaced Reza Amrollahi, the head of the Atomic Energy Organization of Iran, with Gholamreza Aghazadeh, Iranís former oil minister. The reasons for this appointment are not clear. Some sources argued that it represented an effort to improve the administration of Iranís nuclear programs (Amrollahi had developed a reputation as an awful administrator and manager). Some feel it might be part of an effort to make Iranís nuclear power program more efficient, while others saw it as part of an effort to review whether such a program was cost-effective at all. A few feel it may represent a down-playing of Iranís nuclear weapons program.

There is no way to predict Iranís future intentions regarding nuclear weapons. Aghazadeh did, however, reaffirm Iranís commitment to a massive nuclear power program on October 3, 1997. At a meeting with Hans Blix, the head of the International Atomic Energy Agency (IAEA), Aghazadeh indicated that Iran planned to add a second 1,000 megawatt generating unit to its existing efforts to build a 1,000 megawatt unit in Bushehr, and eventually produce 20% of Iranís electric power needs from nuclear units. He indicated that Iran had approached Russia to buy two more 440 megawatt reactors and was seeking an eventual total of six, and that it was still seeking two 300 megawatt nuclear reactors from China. 3

One change is particularly important. On September 9, 1997, Khamenei replaced Major General Mohsen Rezaei (Rezai) the head of the Iranian Revolutionary Guards (IRGC), with his former deputy, Major General Yahya Rahim Safavi. Rezaei was then the longest-serving senior military official in Iran, and had been commander for 16 years. Rezaei had previously threatened to turn the Gulf into a "slaughterhouse" if the U.S. attacked Iran in June 1997. He had supported Nateq-Nouri and had openly criticized Khatami during the election campaign. He had had called for a Syrian-Iranian alliance against Israel and the West just days before the change in command óa sharp contrast with Khatamiís continuing calls for dialogue. 4

This change in command was greeted in Iran as a sign of moderation, and even led to rumors that Rezaeiís family had fled Iran and/or that Rezaei was being set aside for his failure to get the IRGC and Basij to support Nateq-Nouri in the election. 5 Rezaei, however, made a point of declaring in an interview on September 12, that the while the Revolutionary Guards needed a strong ideological motivation, they "had to maintain a neutral stance in matters related to the existing factions in the country." 6 At the same time, Khamenei made Rezaei the deputy head of the Expediency Council, potentially one of the most powerful political bodies in Iran, Rezaeiís appointment also gave Khamenei a potential hard-line balance to ex-President Rafsanjani, the more "moderate" head of the Council. 7

Recent Military Rhetoric and Exercises

Even nations with united regimes rarely make rapid massive changes in their military force posture, exercise activities, defense spending, arms imports, or military activities. Long lead-times are involved in making such changes and high costs. Furthermore, Iran has already made major cuts in its military expenditures and arms imports and it is unlikely it will make massive additional cuts in the future. It is hardly surprising, therefore, that no dramatic changes have taken place in Iranís military behavior since Khatamiís election that provide a clear indication of its future intentions, or the extent to which it is and is not "moderating."

Iranís military rhetoric is often less hard-line and provocative, but it has not changed its goals and principles. Iran has not changed its attitude towards the U.S. presence in the Gulf. On September 22, 1997, the 17th anniversary of the beginning of the Iran-Iraq War, Khatami gave a speech calling for strong Iranian forces that virtually echoed the kind that Rafsanjani had given during the years he was president. He referred to foreign navies in the Gulf (U.S. and British) as a major threat, and singled out US-Israeli-Turkish joint naval exercises in the Mediterranean as a threat to Iran. 8

At the conference of the Organization of Islamic Countries, President Khatami stated that there should be a pact to enable Gulf nations to defend themselves without relying on "foreign forces." "Iran...considers the conclusion of collective defense-security arrangements in the Persian Gulf an assured step towards the establishment of lasting security in the region...In the sensitive and strategic region of the Persian Gulf, the regional states themselves should undertake to preserve security and peace...The presence of foreign forces and armada...serves not only as a source of tension and insecurity but also of tragic environmental consequences."

The Ayatollah Khamenei has used harsher language, "Right now, the presence of foreign warships and more importantly the U.S. military muscle flexing in the Persian Gulf, which is an Islamic sea and an important source of energy for the entire world, is faced with insecurity. Khamenei referred to the "poisonous breath" of the US, and called on the OIC to "force the aliens to dispense with this intervention and on the other hand eliminate the pretexts for this improper presence." 9

Although Secretary of Defense William Cohen made a point of stating that the sudden deployment the carrier Nimitz to the Gulf in late September, 1997, was a reaction to Iraqi flights in the "no fly zone," and that the "deployment order only cited Iraq and did not mention Iran," Iran reacted with a new flood of rhetoric. 10 Key Iranian military officers like Rear Admiral Abbas Mohtaj, the new commander of Iranís navy, issued statements like, 11

"The aim of the U.S. presence in the Gulf is to create a crisis and to sell billions and billions of dollars worth of weapons to the Arab countries in the region...The presence of foreign countries, including the USA, in the Gulf is illegitimate and contrary to the security of the region."
Defense Minister Shamkani has also picked up familiar themes. He has stated that that the U.S. is seeking to pursue a strategy of "distinctive control" in dealing with the Gulf states, and defending Iranís right to attack Peopleís Mujahideen bases in Iraq even if this meant flying through the UN no fly zones. 12 Admiral Mohammed Razi Hadayeq, the commander of Iranís missile forces has stated that Iran was the regionís "strongest missile power." 13

Iran has not reduced its shipments to the Hezbollah. Mohammed Sadr, Iranís new Deputy Foreign Minister, visited Damascus on September 9, 1997 to discuss the security situation in Lebanon and pledge continued military aid to the Hezbollah. Iran supplied the Hezbollah with new, longer-range rockets, although these seem to have been shipped before the election. 14

Iran continues to seek new technology and supplies to produce chemical and nuclear weapons, long-range missiles, and advanced conventional weapons. Iran has continued its intelligence surveillance of U.S. facilities in Saudi Arabia. 15 It bombed the bases of the Peopleís Mujahideen, a violent opposition group based in Iraq, on September 29, 1997. 16

Iran held massive military exercises in September 1997 to commemorate the start of the Iran-Iraq War. Khamenei attended the final week of the exercises, which Iran claimed involved 200,000 men, air units, and several heavy divisions operating in an 1,800 square kilometer area north of Qom. As usual, the exercises were rationalized as defensive, but taught just as many lessons in offensive warfare. 17

Iraq held naval war games in mid-October, which it claimed involved 100 ships operating over a 15,000 square mile area. These exercises began almost at the same time the Nimitz entered the Gulf. Iran issued claims that it had sent a new, small "stealth" remotely piloted reconnaissance system to spy on the U.S. task force. Somewhat ironically, it then accused a U.S. destroyer and reconnaissance plane of spying on its maneuvers. The U.S. destroyer it named, the USS Kinkaid, was sitting in port in Bahrain at the time Iran claimed it was doing the spying. 18

At the same time, President Khatami denied Iran had any expansionist ambitions during his April 18, 1998 speech on Armed Forces Day. "Our army is strong and sovereign; our armed forces are strong and powerful, but neither our revolution nor our nation or armed forces are expansionist....We want a sovereign country and nation that seeks independence and honor and could act as a model for all the nations and countries of the region....And we are prepared to defendówith all our beingóour revolution, country, homeland and nation against the malice of ill-wishers and the plots of conspirators...Today, the most spiritually powerful armed forces are the Iranian armed forces....All the martyrs and the war-disabled are signs of the invincibility of our nation and the enemy's disappointment with aggression against this country."

The main focus of the parade was to remember the casualties of Iran's war with Iraq, which Iran referred to as "the imposed war" and "the sacred defense." It was also to celebrate the recent repatriation of Iranís POWs under the supervision of the International Committee of the Red Cross. The exchange included 5,584 Iraqis and 316 Iranians, most of which. had been held captive for more than 15 years. Some of the freed Iranian POWs watched the parade and were honored by Khatami who hung laurels about their necks. The equipment used in the parade included a flypast of MiG-27 and Sukhoi 24 fighters, but it also included twenty-five year old F-4 Phantom fighters. It also included British Chieftain and Scorpion tanks and U.S. Hawk surface-to-air missiles which were acquired before the 1979 Islamic revolution that toppled the pro-Western shah and. If there was any ominous element it was the march of nuclear, biological and chemical warfare decontamination units, but these were displayed to recall the deaths of many Iranians from Iraqi chemical weapons and no reference was made to any present Iranian capability.

Iran held more exercises following Armed Forces Day. They involved some 15,000 naval and air force personnel and all three of Iran's Russian-built Kilo-class diesel submarines. They produced the usual rhetoric about Iranís strength, and served as a tangible demonstration of the threat it could post to shipping through the Strait of Hormuz and the Gulf. At the same time, the rhetoric was less strident and the exercises did not involve any offensive operations. Like all previous Iranian exercises, not attempt was made to practice extensive amphibious operations involving significant movements of armor or over-the-beach operations.

If there is any irony in Iranís military rhetoric, it lies in the fact that Iran's Majlis has continued to indulge in the same kind of hostile posturing as the U.S. Congress. On January 25, 1998, it approved a fund for countering U.S. "plots" against the Islamic republic for the third consecutive year. Deputies voted to allocate half of the fund to the Intelligence (internal security) Ministry and to give President Mohammad Khatami control over the rest of the budget which is to be used to "uncover and neutralize the American government's plots and interference in Islamic Iran's internal affairs." The amount set aside for the fund was not announced, but a parliamentary debate broadcast on the radio indicated it would be about the same as the current year's 25 billion Rials ($14.3 million).

One deputy claimed that 10 billion Rials had already been used to set up Iran's satellite television channel which was launched last month and covers Europe and parts of Asia and the Middle East. "If today our dear president talks to the American people for one hour on CNN, with this budget we can launch a network through which we could address the Americans every day and bring them the message of the Islamic revolution and tell them about our just stands." The debate also indicated that some of the money would be used to bring suits against Washington at international bodies and to fight a "U.S. cultural invasion" and that some of the money would also go to the Islamic Propagation Organization, a state-affiliated body which sends Shi'ite Moslem clerics to other countries.

Iranian Foreign Minister Kamal Kharrazi followed up with a speech on April 22, 1998 that condemned the U.S. plan to beam radio broadcasts to Iran by stating that, "A wall of mistrust still stands between Tehran and Washington... America's policies prove that, as in the past, one cannot trust what American officials say." He stated that the U.S. plans to set up a Persian-language radio aimed to wage a "psychological war" against Iran and constituted United States interference in the internal affairs of the country. A war of words, however, is not a war of weapons. Furthermore, the Majlis only began this effort after U.S. media reports that the U.S. Congress had been set up a similar fund for covert action against Tehran.

Recent Increases in Military Expenditures

Actions are generally more important than words, and money is the key to action. By this standard, there has been no sign of a major Iranian military build-up since the end of the Gulf War. U.S. government estimates indicate that Iranís military expenditures peaked in 1986, at a cost of $14.8 billion when measured in constant 1995 dollars. They dropped from $10.9 billion to $8.9 billion immediately after the cease-fire in the Iran-Iraq War, and then dropped from $8.6 billion to $5.4 billion after the UN Coalition destroyed much of Iraqís military capability in the Gulf War. They then dropped to $4.2 billion in 1995, the most recent year for which ACDA has released unclassified figures. 19

To put such spending levels in context, ACDA estimates that Egyptís total spending during 1990-1995 averaged around $1.7 to $2.7 billion. Iraqís expenditures averaged around $10 billion during 1988-1991, but no firm recent figures are available. Kuwaitís spending reached peaks of $15 billion a year during 1990-1992, but dropped to $3.2 to 3.6 billion from 1993-1995. Turkey has recently spent between $6 billion and $7 billion. The UAE spends around $1.8 to 2.2 billion annually, and Saudi Arabia spends $17.2 to $20 billion. 20

Unfortunately, the data the Iranian government reports on military spending have little reliability, and there is no way to draw a meaningful correlation between Iranian and U.S. estimates. For example, Iran reported total military expenditures of only $1.8 billion in 1992 and $1.2 billion in 1993, while it estimated its GNP at $71 billion for 1992. Such estimates are far too low to reflect the true cost of military forces as large as those of Iran, and what is known about the size of Iranian arms imports. 21

Iran spending claims may, however, be valuable as an indication of the trends in spending. Rafsanjaniís military spending request for the 1996-1997 budget totaled 5.9 billion Rials (roughly $3.9 billion in January, 1996 $US). This request seems to have been funded. To the extent it was a real increase in spending, rather than a reflection of the impact of inflation, it marked a significant increase over Iranís 1994-1995 budget ($2.3 billion) and a 31% increase over its 1995-1996 budget request ($2.46 billion). Further, Rafsanjani made his request in the context of a civil budget that called for new sacrifices for Iranís future, speeches which condemned American "aggressiveness" in the Gulf, and estimates of oil revenues that only totaled 51.5% of Iranís revenuesóthe lowest percentage in recent history.

Rafsanjani proposed another increase in military spending for 1997-1998. In a speech to the Majlis on November 24, 1996, Rafsanjani noted that Iran had received a major increase in export revenues due to high oil prices, and could afford to increase its budget and still keep it balanced. He called for a 35% increase in the total budget over the previous yearís budget and for a 44% increase in the defense budget. However, it is again impossible to distinguish how much of the increase was intended to pay for inflation and how much was an increase in constant Rials, and whether the increase reflected any shift in the governmentís overall policy or simply the fact Iran was receiving higher oil revenues. 22

The level of confusion involved is indicated by the fact President Mohammad Khatami said the total defense allocations he was seeking for 1998-1999 amounted to 10.1 trillion Rials when he presented the draft national budget in November, 1997. This would have been a 22 percent rise in Rials over the current year's total military budget, and it was not clear if additional sums were set aside for defense purposes in other parts of the budget. On January 18, 1998, however, the Majlis allocated 2.89 trillion Rials to the Ministry of Defense in the budget for the 1998-1999 budget year. These expenditures could scarcely Iranís total military budget. The dollar value of such allocation could range from $1.65 billion, if calculated at the official exchange rate used for essential state accounts, to $963 million at Iran's other official rate which the government has increasingly been using. 23

In practice, Iranís future oil revenues and its success in economic reform may be much more important in determining the actual shape of its military capabilities than its military plans and strategy. If oil prices are high, and exports remain high, Iran may spend more. If prices and revenues drop, it may cut its spending.

Low Levels of Arms Imports

Iran took two major sets of decisions that sharply limited the size of its arms imports long before Khatami came to office. The first occurred in 1989, when Iran did not react to its massive defeats and equipment losses in the Iran-Iraq War by making massive new imports of arms. The second occurred in 1991, when Iraq reacted to the UN destruction of much of Iraqís military capability by making further major cuts in its arms imports. It is impossible to tell how much of these cuts were the result of a strategic decision not to try to build-up massive forces, how much was forced on Iran by its economic problems, and how much was the result of U.S. pressure on supplier countries not to sell.

U.S. government reporting indicates, however, that Iran took delivery on $10.2 billion worth of arms during the four year period between 1987-1990 óthe time between the final years of the Iran-Iraq War and the Gulf War. These imports were generally of low quality. Iran did not receive any significant military imports from the U.S. and only received $500 million from its major Western European suppliers. In contrast, Iran received $1.1 billion in deliveries from Russia, $2.5 billion from China, $1.9 billion from other European states (mostly Eastern Europe), and $1.8 billion from other countries (mostly North Korea). Virtually all of these deliveries were the product of agreements that had been signed during the first four years of the Iran-Iraq War.

The volume of arms deliveries to Iran dropped sharply during the four year period from 1991-1994, and Iran took delivery on only $3.9 billion worth of arms. 24 Despite some reports of a massive Iranian military build-up during the 1990s, the total volume of arms deliveries during 1991-1994 was only worth one quarter of the values of the deliveries that received during the previous four years, even measured in current dollars. Iran still could not obtain any military imports from the U.S. and only received $100 million worth from Western Europe.

Iran only received $2.3 billion worth of arms imports during 1993-1996, a period that reflects deliveries of orders placed after the Gulf War. These deliveries included $1,100 million from Russia, $800 million from China, $100 million from other European states (mostly Eastern Europe), and $200 million from other countries (mostly North Korea). Iran received no deliveries from the U.S. and $100 million worth from Western Europe. This meant it had had no major replacements or modernization of most of its western supplied weapons for nearly two decades. Even in current dollars, Iranís deliveries were worth only about one-ninth of the value of the arms it had imported during similar period in the Iran-Iraq War. They were only worth about one-fifth or Iranís imports during the four year period before the Gulf War. 25

It is new arms agreements, however, which shape future capabilities, and Iran made much sharper cuts in its new agreements than it did in deliveries:

Iranís level of new orders has been low that it is virtually certain to rise in the future, probably to levels of at least $1 billion a year. Iran has underinvested in its overall force structure for so long that it must either sharply increase its level of spending or make major cuts in the size and quality of its forces. It is also reaching the point where some of its Western-supplied equipment is so old that it much be replaced.

New Arms for Old: Focused Poverty

Given these spending levels, it is not surprising that Iran has made carefully focused efforts to improve its land warfare capabilities against Iraq, develop a carefully focused capability to threaten shipping in the Gulf. This capability includes the purchase of three Russian submarines with minelaying capabilities, advanced naval mines, deployment of a wide range of anti-ship missiles on small craft and in land bases near the main shipping channels through the Gulf, and the creation of a large force of Revolutionary Guards equipped for anti-ship and amphibious warfare. Iran has also focused its resources on obtaining long-range missiles and weapons of mass destruction, and ability to fight unconventional warfare.

This kind of "focused poverty" allows Iran to get the maximum of amount of regional influence and intimidation per Rial, although it has scarcely given Iran much war fighting capability against any regional Coalition that involves the US. The key arms imports and production plans that shape this pattern of "focused poverty" include:


AIR/AIR DEFENSE LAND-BASED AIR DEFENSE SEA MISSILES CBW This list of Iranís imports and production efforts, however, includes few items of modern equipment. Most of the "production" efforts listed are limited to prototypes or low rate production. Iran doesnít have anything like the naval strength necessary to close the Gulf for more than a very limited period, and its efforts to acquire weapons of mass destruction do not approach those of Iraq before the Gulf War. Iranís proliferation is "creeping" where Iraqís was galloping.

Iranís efforts also have major strategic limitations. It has enough naval capability along the Gulf coast, in the Strait of Hormuz, and deployable in the Gulf of Oman to harass shipping and require a major U.S. response if Iran should take offensive action. At the same time, Iran is steadily more dependent on oil revenues and has no way to export any significant volume of oil except through the Gulf. It cannot defend any of its oil facilities against U.S. missile and stealth attacks, and its naval and anti-ship missile forces cannot survive for more than a few days to two weeks in the face of U.S. military action. Iranís mine warfare capabilities pose more of a threat in terms of long-term harassment, but they cannot block the Gulf, and Iran lacks modern land-based air defenses, has very limited modern fighter strength, has only about 30 modern attack aircraft (the Su-24), and has no modern airborne sensors and command and control assets. Its military forces and bases are open to U.S. retaliation.

No one can ignore the threat of unconventional warfare and terrorism, and the kind of threat posed by the attack on the Al Khobar Towers. At the same time, no other Gulf country will tolerate any Iranian support for such activity that it can detect and prevent, and Iran cannot move openly across the Gulf without having its forces destroyed by the US. Equally significant, Iranís amphibious activities at best lend themselves to small raids. There have been no exercises involving the large scale movement of heavy equipment and weapons, and Iran has only token "over-the-beach" capability.

Iranís land forces are a "dogís breakfast" of difference equipment types with poor interoperability, and little sustainability except in defense maneuvers. Iran has no land bridge to attack any Gulf state other than Iraq, and its heavy armor is largely obsolete. Its strongest branch, artillery, relies largely on towed weapons and relatively crude massed-fire tactics; it has little mobility and offensive maneuver capabilities. Neither outside observers or observers inside Iran are particularly impressed with the quality of training, and there is a broad consensus that Iran lacks effective combined arms and joint warfare capabilities.

Unplanned and Growing Obsolescence

Iranís carefully focused arms imports and production efforts also cannot compensate for the fact that much of Iran military inventory is worn and obsolete. The bulk of Iranís main weapons inventory either consists of low grade Asian-supplied weapons or U.S. and British weapons imported while the Shah was still in power, and which have not been properly modernized in two decades. The following list of obsolete or obsolescent Western weapons is as important in shaping Iranís military capabilities as the previous list of imports and production efforts:
Table Two
Key Aspects of Iraqi Proliferation that Still Are Unaccounted For
Military Service
  Type Number  
Land Forces      
  Chieftain tank 240-260 Worn, under-armored, underarmed, and underpowered. Fire control and sighting system now obsolete. Cooling problems.
  M-47/M-48  150-260  Worn, under-armored, underarmed, and underpowered. Fire control and sighting system now obsolete.
  M-60A1  150-160  Worn, under-armored, underarmed, and underpowered. Fire control and sighting system now obsolete. 
  Scorpion AFV  70-80 Worn, light armor, underarmed, and underpowered.
  M-114s  70-80  Worn, light armor, and underarmed, and underpowered
  M-109 155 mm SP  150-160 Worn, Fire control system now obsolete. Growing reliability problems due to lack of updates and parts.
  M-107 175 mm SP  20-30 Worn, Fire control system now obsolete. Growing reliability problems due to lack of parts.
  M-110 203 mm SP  25-35 Worn, Fire control system now obsolete. Growing reliability problems due to lack of parts.
  AH-1J Attack heli.  100  Worn, avionics and weapons suite now obsolete. Growing reliability problems due to lack of updates and parts.
  CH-47 Trans. heli. 35-45  Worn, avionics now obsolete. Growing reliability problems due to lack of updates and parts.
  Bell, Hughes, Boeing, Agusta, Sikorsky helicopters 350-445 Worn, Growing reliability problems due to lack of updates and parts.
Air Force      
  F-4D/E FGA 55-60 Worn, avionics now obsolete. Critical problems due to lack of updates and parts.
  60 F-5E/FII FGA 60 Worn, avionics now obsolete. Serious problems due to lack of updates and parts.
  F-5A/B 10 Worn, avionics now obsolete. Serious problems due to lack of updates and parts.
  RF-4E 8 Worn, avionics now obsolete. Serious problems due to lack of updates and parts.
  RF-5E 5-10 Worn, avionics now obsolete. Serious problems due to lack of updates and parts. (May be in storage)
  F-14 AWX 60 Worn, avionics now obsolete. Critical problems due to lack of updates and parts. Cannot operate some radars at long ranges. Phoenix missile capability cannot be used.
  P-3F MPA 5 Worn, avionics and sensors now obsolete. Many sensors and weapons cannot be used. Critical problems due to lack of updates and parts. 
  Key PGMs
Remaining Mavericks, Aim-7s, Aim-9s, Aim-54s are all long past rated shelf life. Many or most are unreliable or inoperable.
  I-Hawk SAM 150-175 Worn, electronics, software, and some aspects of sensors now obsolete. Critical problems due to lack of updates and parts.
  Rapier SAM 30 Worn, electronics, software, and some aspects of sensors now obsolete. Critical problems due to lack of updates and parts.
  Babr DE 1 Worn, weapons and electronics suite obsolete, many systems inoperable or partly dysfunctional due to Critical problems due to lack of updates and parts.
  Samavand DDG 5 Worn, weapons and electronics suite obsolete, many systems inoperable or partly dysfunctional due to Critical problems due to lack of updates and parts.
  Alvand FFG 3 Worn, weapons and electronics suite obsolete, many systems inoperable or partly dysfunctional due to Critical problems due to lack of updates and parts.
  Bayandor FF 2 Obsolete. Critical problems due to lack of updates and parts.
  Hengeman LST 4 Worn. needs full scale refit.


It would take years and tens of billions of dollars to fully modernize Iranís forces. It also would take relatively free access to the most modern Western-supplied or Russian weapons, and Iran would have to rebuild its stockpiles of munitions, modernize its sensors and command and control systems, and provide suitable training, infrastructure, sustainability and maintenance.

Terrorism and Unconventional Warfare

The latest U.S. government report on Global Terrorism does not really cover the period since President Khatami has taken office, and Iran has repeatedly denied that it is involved in terrorism. Both President Khatami and Foreign Minister Kamal Kharrazi have made numerous statements to this effect, and Iranian Foreign Ministry spokesman Mahmoud Mohammadi repeated the theme on April 20, 1998: "Despite the developments in the international community, the U.S. looks at Iran with a mentality belonging to the Cold War era...Iran is against extortion, violence and terrorism in international relations." Mohammadi then went on to accuse the United States of adopting double standards in the Middle East and said Washington should react instead to "Israeli-sponsored state terrorism."

Iran claims it only gives humanitarian aid to Hizbollah, which it sees as defending legitimate Lebanese rights against Israeli occupation of a strip in south Lebanon. While it condemns the Palestinian-Israeli peace accords as a sell-out, it denies aiding Moslem fundamentalist groups opposed to it.

It seems fairly clear that some of these statements are ingenuous. Iran does continue to arm the Hezbollah and has ties to the Palestinian Islamic Jihad and lesser ties to Hamas. Elements of the Islamic Revolutionary Guards Corps continue to train extremists in Lebanon, Iran, and possibly other countries. It is possible that Iran sees its actions in Lebanon as supporting fellow Shiíites in a defensive operation against an Israeli occupation, and that much of the support for terrorist movements comes from Iranian hard-liners without the support of "moderates." It is possible, but there is still no evidence to prove it. Iran is also clearly allied with Syria in many of these activities. This is an Iranian activity that comes into a clear conflict with vital U.S. strategic interests.

The U.S. needs to be far more careful, however, in some of its other criticisms of Iranian "terrorism." It is far from clear that Iran has ever played a significant role in the Islamic extremism in Algeria and Egypt or has recently played a high profile role in the Sudan. Iran certainly has threatened Gulf states like Bahrain and Saudi Arabia in the past, and its role in the Al Khobar bombing remains unresolved. There is comparatively little recent evidence of Iranian support for violence, however, and Iran has at least moderated its efforts to use the Haj to attack the US. There is still good reason to be concerned, but there are at least indications of moderation.

The U.S. also needs to be extremely careful about confusing terrorist attacks on Iranís peaceful opposition and figures like Rushdie with the low level war Iran is fighting with violent opposition groups like the Peopleís Mujahideen and various extremist Kurdish groups. The latest State Department report on terrorism, for example, refers to Iran as the "most active state sponsor of terrorism in 1997." Its main reason for doing so is that Iran sponsored some 13 assassinations in 1997, "the majority of which were carried out in Northern Iraq." It is important to point out that most of those killed were members of the Kurdish Democratic Party of Iran and the Mujahedin-e Khalq (MEK), which have been at war with the Iranian regime since 1980-1982. We are in an awkward position to condemn such actions when we grant Israel the right to conduct covert counter-terrorism operations against its violent terrorists, and Turkey the right to kill over 500 members of the PKK on Iraqi soil.

It is particularly unfortunate that many members of Congress become the unwitting supporters of terrorism by supporting the various front groups of the MEK. Here, for once, the U.S. State Department report on terrorism seems to be totally correct:

"Mujahedin-e Khalq Organization (MEK or MKO)* a.k.a. The National Liberation Army of Iran (NLA, the militant wing of the MEK), the Peopleís Mujahedin of Iran (PMOI), Muslim Iranian Studentís Society (front organization used to garner financial support)

"Formed in the 1960s by the college-educated children of Iranian merchants, the MEK sought to counter what is perceived as excessive Western influence in the Shahís regime. In the 1970s, the MEK concluded that violence was the only way to bring about change in Iran. Since then, the MEKófollowing a philosophy that mixes Marxism and Islamóhas developed into the largest and most active armed Iranian dissident group. Its history is studded with anti-Western activity and, most recently, attacks on the interests of the clerical regime in Iran and abroad.

"The MEK directs a worldwide campaign against the Iranian Government that stresses propaganda and occasionally uses terrorist violence. During the 1970s, the MEK staged terrorist attacks inside Iran to destabilize and embarrass the Shahís regime; the group killed several U.S. military personnel and civilians working on defense projects in Tehran. The group also supported the takeover in 1979 of the U.S. Embassy in Tehran. In April 1992 the MEK carried out attacks on Iranian embassies in 13 different countries, demonstrating the groupís ability to mount large-scale operations overseas.

"Several thousand fighters based in Iraq with an extensive overseas support structure. Most of the fighters are organized in the MEKís National Liberation Army (NLA).

In the 1980s the MEKís leaders were forced by Iranian security forces to flee to France. Most resettled in Iraq by 1987. Since the mid-1980s, the MEK has not mounted terrorist operations in Iran at a level similar to its activities in the 1970s. Aside from the National Liberation Armyís attacks into Iran toward the end of the Iran-Iraq war, and occasional NLA cross-border incursions since, the MEKís attacks on Iran have amounted to little more than harassment. The MEK has had more success in confronting Iranian representatives overseas through propaganda and street demonstrations.

"Beyond support from Iraq, the MEK uses front organizations to solicit contributions from expatriate Iranian communities."

Weapons of Mass Destruction

The most serious threat Iran may eventually pose is the development of a long range missile force, and an extensive inventory of weapons of mass destruction. Once again, the exact nature of Iranís programs is highly uncertain, Iran has denied any such activity, and a great many more charges have been made than can be validated. In summary, however, Iran seems to have the following programs and activities:

Delivery Systems

Chemical Weapons Biological Weapons Nuclear Weapons There are some experts who feel that Iran is only seeking a contingency capability and will not deploy large numbers of missiles or advanced weapons of mass destruction. There are also experts who question Iranís ability to develop an effective nuclear weapon which is sufficiently small for missile, and some who believe that Iran is in the process of canceling its reactor programs and nuclear weapons effort. These are possibilities, but it is far too soon to call them probabilities.

The U.S. also needs to recognize that Iran is unlikely to abandon its programs as long as it fears Iraq, seeks to compete for regional prestige and influence, and sees the U.S. and Israel as competitors and potential threats. The good news is that Iran is not likely to pursue Iraqís grandiose efforts, or exhibit Saddam Husseinís megalomania. The bad news is that Iran is keenly conscious of its conventional weakness, the fact Iraq is virtually certain to resume proliferation the moment sanctions are lifted, and U.S. military superiority. Barring major new successes in regional arms control, the U.S. may have to learn to live with Iranís proliferation, hoping that time and moderation will eventually limit its scope and the willingness of any Iranian regime to try to exploit Iranís capabilities in ways which threaten the region or explode into the actual use of such weapons.

"Demonization" versus "Sanctification"

There is no way to predict the ultimate balance of power between Iranís moderates and conservatives. It is equally impossible to predict whether Iran will make major reductions in its efforts to proliferate, build-up its forces for unconventional warfare, its support of terrorism, or its efforts to develop naval-air-missile capabilities to threaten shipping activity in the Gulf.

It is certainly too soon to predict whether the U.S. and Iran can develop a modus vivendi where Iran can come to accept the U.S. presence in the Gulf, improve its relations with the Southern Gulf states, change its behavior in dealing with the Hezbollah and Israel, and halt "terrorist" attacks on its opposition.

At this moment in the Iranian revolution, Iran does seems likely to become more "moderate" and "pragmatic." However, a "moderate" and "pragmatic" Iranian regime is unlikely mean an Iran that feels its strategic interests coincide with those of the US, its Southern Gulf neighbors, or any other state in the region. Actions that a "moderate" and "pragmatic" Iran regards as defensive and as serving its vital national interests may sometimes be seen as threatening by some of its neighbors, Israel, and the West.

As a result, it is equally dangerous for the U.S. to either "demonize" or "sanctify" Iran. Instead, we need patience. It may be half a decade before we really know how Iranís military capabilities are evolving, what will happen to its support of extremist movements, and how it will deal with proliferation. What we can do in the interim is seek the kind of military containment that will limit potential threats without blocking Iranís development or affecting its security. If we cannot halt proliferation, we can delay it and sharply limit it in scope. The same is true of large, destabilizing deliveries of advanced conventional weapons.

At the same time, the U.S. and Iran do need to enter into the kind of a dialogue where both sides can explore the extent they can resolve their differences. In the process, the U.S. will almost certainly have to compromise as well as Iran, and there may be areas where both sides will have to agree to disagree. This seems far more positive, however, than open hostility, Iranian treatment of the U.S. as the "great Satan," and failed U.S. efforts to sanction Iranís economy and energy exports.

1 Associated Press, December 9, 1998, 0614.

2 Iran Focus, October, 1997, p. 7; Middle East Economic Digest, October 3, 1997, p. 10.

3 Middle East Economic Digest, October 17, 1997, p. 10.

4 The Estimate, September 12, 1997, p. 4; Policywatch, October 1, 1997, Number 269; Jane's Defense Weekly, November 12, 1998, p. 30.

5 Iran Focus, October, 1997, p. 7, 9.

6 Iran Focus, October, 1997, p. 7, 9.

7 Reuters, September 10, 1997, 1250: Washington Times, September 10, 1997, p. A-13.

8 Middle East Economic Digest, October 3, 1997, p. 10.

9 Associated Press, December 9, 1997, O741.

10 Reuters, October 7, 1997, 0639.

11 USA Today, October 6, 1997, p. 10A; The Estimate, October 10, 1997, p. 1.

12 Reuters, October 7, 1997, 0639.

13 Associated Press, NY, October 18, 1997, 1731 EDT.

14 Reuters, September 9, 1997, Damascus; Washington Times, August 22, 1997.

15 Los Angeles Times, October 15, 1997, p. A-1.

16 Jane's Defense Weekly, October 8, 1997, p. 4; Philadelphia Inquirer, September 20, 1997, p. A-17.

17 Reuters, September 28, 1997, 0417; Washington Post, October 13, 1997, p. A-24.

18 Washington Post, October 13, 1997, p. A-24; Washington Times, October 11, 1997, p. A-6, October 16, 1997, p. A-11; Associated Press, October 14, 1997, 1113, October 16, 1997, 0624; Jane's Defense Weekly, October 22, 1997, p. 3.

19 Table One, Arms Control and Disarmament Agency (ACDA), World Military Expenditures and Arms Transfers, 1996, Washington, GPO, 1997.

20 Table One, ACDA, World Military Expenditures and Arms Transfers, 1993-1994, Washington, GPO, 1995; Table One, ACDA, World Military Expenditures and Arms Transfers, 1995, Washington, GPO, 1996; and Table One, Arms Control and Disarmament Agency (ACDA), World Military Expenditures and Arms Transfers, 1996, Washington, GPO, 1997.

21 Author's guesstimate. Iran claimed on February 1992 that it was spending only 1.3% of its GNP on defense. Washington Times, February 20, 1992, p. A-9.

22 Middle East Economic Digest, December 6, 1996, p. 17.

23 Reuters, January 19, 1998, 1923. ($1- 1,750 Rials was then the official rate used for essential state budget accounts such as oil and major national projects. 1 - 3,000 Rials was the official rate used in other cases)

24 Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1987-1995, Washington, Congressional Research Service, CRS-95-862F, August 4, 1995, pp. 57-58, 67-69.

25 Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1986-1993, Washington, Congressional Research Service, CRS-94-612F, July 29, 1994, p. 57, and Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1988-1995, Washington, Congressional Research Service, CRS-96-667F, August 15, 1996. 0 = data less than $50 million or nil. All data are rounded to the nearest $100 million. Major West European includes Britain, France, Germany, and Italy.

26 Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1986-1993, Washington, Congressional Research Service, CRS-94-612F, July 29, 1994, p. 57, and Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1987-1995, Washington, Congressional Research Service, CRS-95-862F, August 4, 1995, pp. 57-58, 67-69.

27 Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1987-1995, Washington, Congressional Research Service, CRS-95-862F, August 4, 1995, pp. 57-58, 67-69.

28 Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1986-1993, Washington, Congressional Research Service, CRS-94-612F, July 29, 1994, p. 57, and Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1987-1995, Washington, Congressional Research Service, CRS-95-862F, August 4, 1995, pp. 57-58, 67-69.

29 Richard F. Grimmett, Conventional Arms Transfers to the Third World, 1983-1990, Washington, Congressional Research Service, CRS-9 1-578F, August 2, 1991, Conventional Arms Transfers to the Third World, 1984-1991, Washington, Congressional Research Service, CRS-92-577F, July 20, 1991, Conventional Arms Transfers to the Third World, 1987-1994, Washington, Congressional Research Service, CRS-95-862F, August 4, 1995; Conventional Arms Transfers to the Third World, 1988-1956, Washington, Congressional Research Service, CRS-96-667F, August 15, 1996; and , Conventional Arms Transfers to the Third World, 1989-1996, Washington, Congressional Research Service, CRS-97-778F, August 13, 1997. 0 = data less than $50 million or nil. All data are rounded to the nearest $100 million. Major West European includes Britain, France, Germany, and Italy.

30 Jane's Defense Weekly, June 5, 1996, p. 15.