Henry Sokolski is a fellow at the National Institute for Public Policy and the author of a forthcoming book on weapons proliferation, In Armageddon’s Shadow. Previously, he was the Defense Department’s deputy for nonproliferation policy and a military legislative aide in the U.S. Senate.

Iranian officials have publicly announced their desire to become the leading power in the Persian Gulf region and are buying everything from tanks to nuclear technology to reach that goal. Failing this, the government in Tehran appears intent on importing the military means at least to keep the United States and its allies from dominating Iran’s region, including the Persian Gulf and the Central Asian republics.

But the Iranians face real political, diplomatic, and economic difficulties in building up the conventional strength of their military. They lack the technology; they find it hard to buy what they need abroad; and they don’t have enough money. Nuclear arms are another story. Going nuclear is achievable for Iran at far lower costs. Indeed, it appears likely that Tehran will compensate for its conventional shortfalls by developing nuclear weapons.

If the U.S. government and its allies are serious about preventing Iran from taking this course, and from creating the next major crisis in the Persian Gulf, they will have to adopt a much tougher stance against nuclear activities in the Persian Gulf region than they have in the past.

TEHRAN’S MILITARY AIMS

An outsider can only infer Iran’s general foreign policy aims from the public statements of its key officials, who have argued for Iran’s need to minimize the influence of the United States, Israel, Iraq, Russia, Turkey, and Egypt in its own affairs. They also talk of gaining greater leverage over Saudi behavior with regard to oil and Islamic issues; and of becoming a stabilizing force in the Persian Gulf.

Iranian leaders portray their goals as mimimal and unthreatening. As Tehran’s envoy to the United Nations explained in 1992, Iran’s military build-up results from its “defensive strategy and the need of a balance of power in the region.” At the same time, Iranians make clear that the balance will be on Iranian terms. President `Ali Akbar Hashemi-Rafsanjani explained: “We will never allow any other power, whether from this area or from outside, especially America, to become the gendarme of the oil-rich and prosperous region of the world.”

Iranian interest in promoting cooperation with the six members of the Gulf Cooperation Council (GCC)--Saudi Arabia, Kuwait, Bahrain, Qatar, the United Arab Emirates, and Oman--has an only slightly disguised aggressive quality. “One of the strategic reasons why the Islamic republic emphasizes cooperation with the GCC members,” Foreign Minister `Ali Akbar Velayati revealed in late 199l, “is to weaken the grounds for any foreign presence.” Rafsanjani has been quite blunt in denying that the governments of Saudi Arabia and Kuwait enjoy legitimacy, saying that they do not “really rely on their people” for their positions of power.

TEHRAN’S MILITARY BUILD-UP

When examined closely, then, the Iranian aim of establishing a regional military balance sufficient to eliminate the need for “bringing countries from outside to make security” is not so minimal as Tehran would have us believe. Indeed, if it is serious about being the arbiter of Gulf security, Tehran must acquire the military capability to fend off potential air threats against it by Iraq, the GCC members, or the United States, and deny these same states, individually or in concert, naval control of the Persian Gulf. Finally, to insure a free hand in employing these conventional denial capabilities and, more generally, to be taken seriously by outside powers, Tehran must acquire the capability to neutralize the effects of possible U.S., Russian, Iraqi, or Israeli nuclear threats.

Fulfilling Iran’s military requirements is no small order. Iran today has only one-third to one-half the arsenal it had in 1978, which translates to an increase of two to three times its current level. Looked at in comparison to its neighbors, Iran’s forces look meager. Its soldiers may be as many as Iraq’s, but they are equipped with less than one-third the tanks and with far less modern equipment than even the forces of Iraq, much less Saudi Arabia. Iran’s air force is half the size of Iraq’s and has less than half the number of high-quality combat aircraft as Saudi Arabia’s force. Finally, the one area in which Iran arguably is quantitatively competitive in the region--its number of large surface ships--is largely irrelevant because the number and quality of American and allied naval forces that could be dispatched to the Gulf is far greater than anything Iran could muster.

In short, Iran has a long way to go just to catch up with its past, much less create a future in which it could militarily dominate it neighbors. In fact, Middle East arms experts have estimated that Iran would have to buy $25 billion in weapons simply to attain the forces levels it enjoyed before the revolution --and even then it would still face an Iraq superior in armor and a Saudi airforce that would be difficult to defeat.

Tehran apparently understands that it can’t simply buy more weapons of the sort it used against Iraq in the 1980s to meet its minimal air war, naval, and nuclear deterrence requirements. Rather than try to rebuild to prerevolutionary force levels, Iran has selectively focused its military modernization on acquiring high-leverage systems--long-range missiles, air defenses, and antishipping capabilities--that can help it achieve the more limited missions of commanding the air over Iran and denying access or control of the Persian Gulf to outside powers.

With regard to air capabilities, Tehran has secured North Korean, Russian, Ukrainian, and Chinese help to maintain both its old Western and its new Chinese and Russian aircraft; the same states are helping design and build surface-to-surface missiles. It has also contracted to buy from Russia and China over 150 advanced aircraft, including 12 long-range Backfire bombers and 2 Russian advanced Mainstay warning radar aircraft. Finally, Iran is upgrading its air defense and command, control, and communications systems by buying Russian air defenses, including the equivalent of a Patriot system, as well as advanced civilian air control and fiber optics communications systems.

The Iranians have been no less aggressive in their antiship capabilities. Most important, they bought three Kilo-class attack submarines for the stated purpose of controlling access to the Strait of Hormuz. They also purchased ten new Chinese patrol boats, are extending the range of their ground-based Silkworm antiship missiles, and are trying to buy new supersonic Sunburst systems from Ukraine.

OBSTACLES TO MILITARY MODERNIZATION

Despite these efforts, some important obstacles--pertaining to domestic politics, finances, and technical expertise--stand in the way of a substantial increase in Iran’s conventional weapons.

Domestic political obstacles. Iranian conservatives and radicals may agree that Iran should be the dominate power in the region, but the popularity of the ruling moderates, who are the driving force behind the current military modernization effort, depends on how well they deliver on their political promise to restore Iranian per capita income to prerevolutionary levels. Although Iran’s real gross domestic product is nearly the same as it was in l978, its population has grown from 37.⁷ million to approximately 54 million, leading to a reduction in per capita income of more than 50 percent. If paying for the military build-up comes at the cost of delivering on this promise, political support for substantial military modernization could very well unravel.

Financial obstacles. Tehran plans not only to spend $10 billion in hard currency for weapons imports from l989 to 1994, but another $120 billion to rebuild its industrial, transportation, agricultural, and social infrastructure.

It’s not clear where money for all these purposes will come from, unless it is from foreign borrowing, since most of it needs to be in foreign exchange. In part, the Iranians have tried to pay for foreign purchases with oil rather than hard currency; the five-year economic plan calls for $10 billion worth of oil and gas to be bartered to buy foreign goods. Much of this oil money is being bartered for arms with North Korea, Ukraine, and Russia. Such bartering, though, is unlikely to raise anything more than a fraction of the hard currency required by Iran’s ecnonomic plan. Most of these requirements--65 percent--are supposed to be met from export sales of oil and gas. Iran, however, has been unable to pump enough oil or sell its oil at high enough prices to meet these government targets. This shortfall in expected oil export revenues--nearly $2 billion in 1992 alone--has created a severe constraint on the availability of hard currency.

Clearest evidence of this difficulty is found in Iranian efforts to collaborate with Syria to print and launder $12 billion a year in counterfeit U.S. currency in an attempt to erase its existing foreign currency debt. In an effort to get around its financial problems, Tehran has resorted to borrowing more foreign capital by selling future oil production in exchange for high-interest loans. This, in turn, is locking Iran into a debt cycle that is reducing its creditworthiness to the point that it is now unable to repay its short- and medium-term loans. Already $2 billion in arrears to Germany, about $700 million to Japan, and $150 million to France, Iran has seen imports and financing from these countries fall significantly since February 1993. Thus, in 1993, French and German agencies that insure foreign trade stopped honoring new letters of credit issued by key Iranian banks, and in late 1993, the Germans felt compelled to reschedule Iran’s existing debt.

These economic trends are likely to have a major impact on Iran’s continued military build-up. Although it is difficult to know precisely what Iran spends on defense, the Central Intelligence Agency’s estimate of $13 billion in 1991 --or approximately 15 percent of Iran’s gross national product--is plausible. Given Iran’s current economic problems, continued spending of this sort cannot be sustained without significant outside financial assistance. The results of Iran’s financial problems may already be seen: arms purchases from abroad declined from $2-3 billion per year in 1989-92 to a mere $800 million in 1993.

Technical obstacles. To modernize its military, Iran must import and integrate a significant number of foreign military systems into its current forces. Yet it lacks the necessary expertise to operate, produce, and maintain even the new Chinese and former Warsaw Pact systems it is buying. While Tehran touts having over 240 major state-owned and 12,000 privately owned military production facilities, these facilities altogether employ only 45,000 personnel--fewer than four people per facility--and these personnel numbers are projected to grow only to approximately 60,000 by the year 2000. This organizational nightmare raises the question of how effective Iran will ever be in supplying its new modern military infrastructure.

LIMITS ON IRANIAN POWER

Tehran’s reach remains limited, despite all the arms already acquired. It is far from able to close the Strait of Hormuz or control its own airspace. Analyses funded by the U.S. Department of Defense indicate that Iran still has no defense against low-flying cruise missiles or stealth aircraft, and after years of effort, it can’t make its own SCUD missiles without outside assistance. Also, less than half of the advanced aircraft it has bought, and none of the long-range bombers or advanced warning aircraft, have yet been delivered to Tehran. Some analysts doubt that Iran has enough cash to assure those deliveries will ever be made.

Nor are Iran’s sea control efforts much better. It is unclear if Tehran has secured the advanced antishipping missiles it seeks; and even with longer range Silkworms, it will have difficulty posing a credible, sustainable threat against shipping. As for its newly acquired Kilo submarines, Iran will only be able to keep one out of the planned fleet of three boats on station, and the effectiveness of this single submarine depends heavily on acquiring sufficiently advanced training, torpedoes, mines, and command and control systems.

No quick conventional arms fix can propel Iran into a position of military predominance in the Gulf. Air warfare requires intelligence (C3I) capabilities, air defense systems, and missile production capabilities that Iran still lacks. Sea denial is no easier to accomplish. Not only will the Iranians have to acquire or produce larger numbers of advanced antishipping missiles and mines, it will need a dedicated C3I system and a submarine infrastructure far more developed than what they currently have. All of this requires foreign purchases and an expenditure of tens of billions of dollars in hard currency, which Iran currently lacks.

Further, such a military build-up could spark a competition with the GCC countries and the United States that could end up placing Iran at a greater disadvantage than if it did nothing. Also, to the extent that Tehran truly wishes to be perceived as the region’s most responsible and stabilizing force, a crash build-up in conventional arms works against its interests.

DEVELOPING A NUCLEAR OPTION

In contrast, a nuclear option developed under the guise of a peaceful power generation program runs none of these risks. First, it costs less. Although Iraq’s flush nuclear program is estimated to have cost on the order of $5-10 billion, a more focused effort, like that executed in Pakistan or South Africa, could be completed for some $1-2 billion.

Secondly, this effort can be executed without an overt weapons program that might provoke military reaction by Iran’s neighbors. The Iranians could, as the Iraqis did, keep a dedicated, covert weapons program from the not-so-prying eyes of International Atomic Energy Agency (IAEA) inspectors. It is also possible to get all one needs to build a large arsenal’s worth of nuclear weapons material and key weapons test facilities without violating IAEA restrictions until the last moment. The Nuclear Nonproliferation treaty (NPT), after all, encourages countries to gain access to all forms of peaceful nuclear energy technology, including plutonium reprocessing and uranium enrichment, so long as it is “safeguarded.”

The Iranians have long understood these subtleties. Shah Mohammed Reza Pahlavi, the father of Iran’s nuclear program, ordered six large nuclear plants (two of which the West Germans nearly completed before the revolution), invested heavily in a French uranium enrichment program, and secured European offers to build a large reprocessing plant. All the while the shah kept Iran in good standing as a NPT country.

What the shah began the Khomeinists, after an initial pause, continued at a much reduced pace. Iran’s deputy president, Reza Amirollahi, served as the president of the Iranian Atomic Energy Organization (IAEO) and oversaw the nuclear program. The Tehran Research Center, which operates a small 5-megawatt (thermal) U.S.-supplied research reactor safeguarded by the IAEA, continued to train nuclear specialists without interruption. Although work on two nearly complete German-built nuclear reactors at Buitir had stopped, the revolutionaries opened a new nuclear research center at Isfahan in l987. In l988, they signed uranium fuel deals with Argentina and South Africa.

These low-budget research reactor-related deals indicated less about Iranian intentions than the rhetoric they inspired. In a February l987 speech before the IAEO, Sayyed `Ali Khamene’i, then Iran’s president, reportedly told an audience of Iranian nuclear technicians:

A year later, Rafsanjani, then speaker of Iran’s Parliament and commander-in-chief of its military, was yet more explicit. In a speech before an audience of Iranian soldiers, he noted:

In 1991, Deputy President Ayatollah Mohajerani declared that “If Israel should be allowed to have nuclear facilities, then Muslim states too should be allowed to have the same.” These statements have fueled Western concerns that Iran is developing nuclear weapons.

Yet there are few public indications of Iran’s having a dedicated covert nuclear weapons program--only some discredited claims that Tehran bought several tactical nuclear weapons from Russia. In fact, Tehran seems to be proceeding in a measured manner. It is developing an overt “peaceful” nuclear program that will afford it the infrastructure that nuclear weapons production requires, while attempting on the side to buy and develop covert, dedicated nuclear weapons production facilities. This may explain the growth of investment in civilian nuclear activity. In the early l980s, this program reportedly received no more than $80 million per year; since then, Iran’s nuclear budget is said to have increased to $200 million in 199l and $800 million in 1992.

Tehran has also increased its participation in the IAEA in a manner that serves its weapons aims. For example, it recently requested to have Iranian nuclear inspectors gain free access to all of Japan’s nuclear reprocessing facilities--the same facilities that the Iranians are suspected of trying to build on their own soil to produce weapons plutonium. It also has taken full advantage of IAEA scholarship funding to help train Iranian technicians in sensitive nuclear fuel cycle technology. Because of its good standing with the IAEA, Iran has managed to get the agency to plead Iran’s case to Germany to finish the two nearly complete pressurized water reactors.

The most important benefit of Iran’s participation in the IAEA, though, has been the legitimacy it has lent to Iran’s nuclear activities. The clearest demonstration of this came with the IAEA’s February 1992 visit to Iran’s nuclear facilities, in which Iran actively cooperated with the agency. The visit revealed no weapons research activities. In fact, Jon Jennekens, head of the IAEA’s safeguards department, publicly announced that at the sites he visited, the agency inspectors were “able to conclude that the activities being carried out there were entirely in accord with the declared purpose of the facilities.” Jennekens went further at a later news conference:

This testimony explains IAEA director Hans Blix’s conclusion: “We have not seen any reason to ask for special inspections in Iran,” a point that IAEA spokesman David Kyd reiterated after IAEA inspectors made a subsequent visit late in 1993.

Others, however, are not so sure. The IAEA inspectors asked their Iranian hosts to visit an underground experimental nuclear site at Moallem Kalayah, north of Tehran, and an uranium enrichment facility a Karaj; apparently, the Iranians took them to different sites bearing the same names.

The many reports of Iranian attempts to purchase nuclear equipment and facilities make sense only if Tehran seeks to produce nuclear weapons materials. Why else would they have purchased from Argentina in 1992 an unsafeguarded shipment of turnkey facilities for natural uranium fuel fabrication and the conversion of uranium yellowcake into uranium dioxide suitable for fuel fabrication? (It did not go through: at the request of the U.S. government, the Argentine authorities blocked the shipment.) And why did they try secretly to buy a 20-to-30-megawatt thermal heavy-water production reactor from China (again unsuccessfully) and European reprocessing hot-cell equipment? These facilities are thought to have been sought to produce an unsafeguarded supply of fuel for an unsafeguarded reactor, which would have provided the Iranians with all they needed to make at least one bomb a year.

Nor has Tehran given up. It is still trying to buy reactor equipment from China and Russia. So far, it has only been able to secure deals for large, expensive, safeguarded pressurized water reactors. Even these, according to German intelligence, “can be used as an alibi for nuclear technical activities that in reality serve military purposes,” such as building up Iran’s small cadre of nuclear experts. According to news reports, this cadre currently consists of only two thousand people, of which only two hundred are trained scientists. By way of contrast, Iraq’s program at its height employed over twenty thousand personnel, seven thousand of whom were scientists. Tehran has tried to increase its meager ranks by releasing nuclear scientists jailed during Khomeini’s rule and by trying to get Iranian scientists abroad to return, so far with only marginal results. The best proof of Iran’s nuclear brain-gap, though, is its latest five-year plan, which includes the training of at least 450 additional specialists “for the nuclear industry.” Although Iran is ahead of schedule in this training effort (having already trained 220 “high-level” experts), it is still well below the levels it needs for a serious weapons production effort.

U.S. POLICY

Iran is not yet an Iraq or North Korea. Keeping it from becoming one, however, requires more than just a Western strategy of financial and technological denial; it requires diplomatic resolve and innovation. Tehran’s apparent strategy of developing a nuclear option by continuing its civilian nuclear program and later building a small nuclear arsenal is difficult for the U.S. and allied governments to prevent because, unlike a conventional arms build-up, it can be pursued even in an economically weakened condition. Developing a nuclear option does not provoke Iran’s GCC neighbors or the West, and yet would provide Iran with immense military and diplomatic clout.

How other states respond to Iran’s nuclear development activities--whether with suspicion or not--then, is of no small moment. The West has traditionally relied on the NPT and its inspectorate, the IAEA, to address the danger that civilian nuclear energy activities could be diverted to military purposes; and this approach has so far determined Washington’s public policy toward Iran’s nuclear activities. Iran, Washington officials insist, must remain true to its pledge not to acquire nuclear weapons, and all of its nuclear activities must remain under IAEA safeguards. Privately, however, the U.S. government has long recognized the inadequacy of the IAEA inspections and has tried to block completion of the two nearly finished German power reactors in Iran, even though Iran has agreed to place these and any other reactors under IAEA safeguards. Washington has also objected to other countries’ proposed IAEA-safeguarded nuclear sales to Iran, arguing that Iran cannot be trusted to live up to its NPT pledges.

Those who would sell Iran nuclear equipment, including Peking and Moscow, understandably do not agree with the U.S. assessment. All that is keeping them from making significant nuclear power reactor sales now is a lack of immediate financing, which may become available if Western countries decide to adopt a financially appeasing approach towards Iran.

When seen in the context of the NPT and IAEA failure to prevent Iraqi and North Korean development of nuclear options, the Iranian case suggests the need for a new policy toward nuclear development programs in the Persian Gulf, one based on two premises. First, a civilian nuclear power program, even a safeguarded one, helps develop much of the expertise and infrastructure needed for nuclear weapons materials. Secondly, nuclear power is a poor investment for any Persian Gulf country for the foreseeable future, given the region’s abundance of oil and natural gas. Accordingly, the U.S. government should take two steps. First, to slow Iran’s conventional and nuclear build-ups, it must do more to tighten Iran’s access both to Western money and technology. In principle, the Clinton administration favors such a tightening, and the United States has been doing a good job in applying pressure on key NATO members and the Japanese to forego granting credits to Iran.

But Washington has done a poor job of curbing U.S. trade with Iran. Geoffrey Kemp points out that U.S. exports, including militarily useful dual-use items, are increasing and may have reached $1 billion in 1993. U.S. oil companies pay Iran between $3.5 and $4 billion a year in hard currency for oil, which these firms resell on the world market. If they must get this oil, they should barter for it with nonthreatening commodities, such as wheat.

The U.S. government also should do more to block technology and equipment relevant to Iran’s achieving its air command and sea denial goals. This includes submersible technology, antishipping missiles, advanced mines and torpedoes, command, control, and communications equipment and their related platforms, air defense radars and missiles, long-range bombers, and surface-to-surface missiles. Agreement to such restrictions should be part of current negotiations to create a successor to CoCom (the organization which controlled exports of sensitive military items and dual-use commodities to the Warsaw Pact members during the cold war). American officials have indicated a desire to have this successor organization curtail the export of a wide variety of militarily useful items, especially to Iran, Iraq, North Korea, and Libya. Negotiators should maintian these objectives but be willing to shorten the list of proscribed exports to the four trouble states to the list of critical items noted above.

Secondly, U.S. leadership is needed in the nuclear arena. Washington should encourage the Persian Gulf states to propose a moratorium on all nuclear developments in their region. The states most threatened by nuclear development in Iraq and Iran should publicly promote the two premises noted above; announce their own willingness to forego nuclear programs in their own countries; invite other Persian Gulf states to join in this moratorium; and request all nuclear supplier nations to support the moratorium by embargoing exports to states in the region. To make this proposal attractive to Saudi Arabia, the U.S. government should separately encourage Israel to cease production of nuclear materials from its aging reactor at Dimona.

Encouraging the moratorium would be a new departure for U.S. nonproliferation policy, which has never publicly criticized “safeguarded” nuclear development. It would stand a greater chance of success than the current policy of depending on other states’ willingness to share America’s assessment of Iran’s nuclear intent. Instead, the moratorium would be based on premises far less open to debate. It would embarrass nuclear suppliers and governments, such as those of Iran and Iraq, that refused to participate. If violated, it would set off alarms far clearer than IAEA safeguards.

These measures together would go a long way to prevent Iran from militarily becoming another Iraq. Indeed, by frustrating Iran’s military build-up, they measures could help channel the regime to more moderate pursuits. This, in turn, would enhance the entire region’s security.