THOUGHTS ON IRAN - THE LION AND THE CAGE

S E C R E T SECTION 01 OF 05 ABU DHABI 003777
E.O. 12958: DECL: OADR
TAGS: PREL PGOV PINR ETRD EFIN PTER KPRP IR
SUBJECT: THOUGHTS ON IRAN - THE LION AND THE CAGE

REF: STATE 15528


1. (U) CLASSIFIED BY: DAVID D. PEARCE, CONSUL GENERAL.


2. (S) SUMMARY
THIS CABLE EXAMINES SOME OF THE VARIABLES AFFECTING
IRANIAN GOVERNMENT DECISIONMAKING -- ESPECIALLY REGARDING
POLICIES WE OPPOSE -- FROM THE PERSPECTIVE OF THE WIDE
VARIETY OF IRANIAN CONTACTS WE INTERVIEW IN DUBAI. WE HAVE
CONCLUDED THAT THE REGIME VIEWS SOME ISSUES, INCLUDING ITS
EFFORTS TO ACQUIRE WEAPONS OF MASS DESTRUCTION AND THE
ASSASSINATION OF POLITICAL OPPONENTS, AS SURVIVAL ISSUES.
ON THESE, IT IS UNLIKELY TO NEGOTIATE MEANINGFULLY, AT
LEAST IN THE SHORT TERM. OTHER POLICIES OF CONCERN,
INCLUDING SUPPORT FOR VIOLENT OPPOSITION TO THE PEACE
PROCESS, ARE RESPECT ISSUES. THESE STEM FROM AN IMPULSE
TO DEMONSTRATE IRANIAN INDEPENDENCE, ESPECIALLY VIS-A-VIS
THE U.S. BUT UNLIKE SURVIVAL ISSUES, RESPECT ISSUES ARE
SUSCEPTIBLE TO CHANGE IN THE RIGHT CIRCUMSTANCES.


3. (S) OUR IRANIAN CONTACTS BELIEVE THE REGIME MAY BE OPEN
TO SUCH CHANGE, BUT WITHOUT APPEARING SO. THAT MEANS ANY
TURNAROUND ON KEY ISSUES WILL BE INCREMENTAL, AND POSSIBLY
ACCOMPANIED BY A FEINT IN THE OPPOSITE DIRECTION. ON THE
BIGGEST ISSUE OF ALL FOR IRAN -- RELATIONS WITH THE U.S. -
- REGIME LEADERS REALIZE THAT DIALOGUE AND RENEWAL OF TIES
ARE INEVITABLE, BUT THEY REMAIN DEEPLY DIVIDED OVER HOW
AND WHEN THIS SHOULD OCCUR. THE IRANIANS WE HAVE SPOKEN
WITH AFFIRM THAT IRAN HAS INDEED FELT THE EFFECTS OF U.S.
PRESSURE BUT THAT THE IRANIAN GOVERNMENT ALSO WILL PROVE
HIGHLY RESISTANT TO MAKING POLICY CHANGES IN THE FACE OF
THAT PRESSURE. SOME ACTIONS, NOTABLY HIGH-LEVEL PUBLIC
STATEMENTS, CAN ACTUALLY LENGTHEN THE ODDS AGAINST CHANGE.
EVEN WHERE WE HAVE HAD MOST EFFECT, E.G. LIMITING ACCESS
TO FOREIGN INVESTMENT IN IRAN'S OIL SECTOR, SOME OF OUR
CONTACTS WARN THE EFFECTIVENESS OF PRESSURE WILL DIMINISH
OVER TIME AS IRAN'S ABILITY TO COPE IMPROVES. AT THE SAME
TIME, THE REGIME HAS REAL VULNERABILITIES, AND IF
SANCTIONS ALONE DO NOT A POLICY MAKE, SANCTIONS CAN AND
SHOULD BE A USEFUL ADJUNCT OF POLICY, ASSUMING WE WORK
WITH ALLIES TO FASHION A COMMON POLITICAL UNDERPINNING FOR
JOINT ACTION. END SUMMARY.


4. (U) INTRODUCTION
THIS MESSAGE WAS DRAFTED BY THE CONSUL GENERAL IN DUBAI,
DRAWING ON THE OBSERVATIONS AND EXPERIENCE OF ALL IRAN
REPORTERS AT THE CONSULATE GENERAL. THE DRAFT WAS
COORDINATED CLOSELY WITH EMBASSY ABU DHABI.


5. (S) SURVIVAL AND RESPECT
THE U.S. HAS SOUGHT TO USE SANCTIONS AND PRESSURE TO
CONTAIN IRAN. UNDERSTANDING THE MOTIVES BEHIND IRAN'S
POLICIES IS THE FIRST STEP TOWARD EVALUATING THE
EFFECTIVENESS OF OUR POLICY TOWARD IRAN. FROM OUR
DISCUSSIONS WITH A WIDE VARIETY OF IRANIAN BUSINESSMEN,
GOVERNMENT AND TECHNOCRATS, PROFESSIONALS AND ACADEMICS,
THE PRIORITIES OF THE CLERICAL REGIME APPEAR TO BE
CHANNELED THROUGH TWO MAIN FILTERS: 1) SURVIVAL, AND 2)
RESPECT. ISSUES THE REGIME BELIEVES AFFECT ITS SURVIVAL
ARE NOT NEGOTIABLE, AT LEAST IN THE SHORT TERM. BY
CONTRAST, ISSUES CONCERNING RESPECT FOR IRAN'S
INDEPENDENCE OF ACTION CAN CHANGE IN THE RIGHT
CIRCUMSTANCES.


6. (S) IRAN-E ZAMIN, THE LAND OF IRAN
IT IS CLEAR FROM MANY CONVERSATIONS THAT IRANIANS HAVE A
VERY DISTINCT NOTION IN THEIR MIND'S EYE OF WHAT THE
COUNTRY'S SPHERE OF INFLUENCE SHOULD BE. IT EVEN HAS A
NAME: IRAN-E ZAMIN, THE LAND OF IRAN. IRAN-E ZAMIN GOES
BEYOND THE ACCEPTED CURRENT BORDERS OF IRAN, AND IS
ROUGHLY DEFINED BY THE EXTENT OF IRAN'S TRADITIONAL
CULTURAL INFLUENCE. TO THE EAST, THIS AREA INCLUDES
WESTERN AFGHANISTAN, TO THE NORTH IT INCLUDES CONTIGUOUS
AREAS OF CENTRAL ASIA, AZERBAIJAN, AND ARMENIA, AND TO THE
WEST AND SOUTH IT INCLUDES KURDISH AREAS, EASTERN IRAQ,
AND THE ENTIRE ARAB LITTORAL OF THE PERSIAN GULF. IRAN-E
ZAMIN IS A GEO-STRATEGIC CONCEPT. THE ARAB-ISRAELI PEACE
PROCESS FALLS OUTSIDE THE ENVELOPE; THE DISPUTE WITH THE
UAE OVER THREE SMALL ISLANDS FALLS WITHIN. IRAN-E ZAMIN
IS ALSO DISTINCT FROM THE RULING CLERICS' RELIGIOUS
AFFINITY FOR SHIA COMMUNITIES, E.G. IN SOUTH LEBANON,
WHICH -- ALTHOUGH PERHAPS GENUINELY FELT BY SOME IRANIAN
SHIA -- IS FAR LESS DEEPLY ROOTED.


7. (S) NEGOTIABLE AND NON-NEGOTIABLE
THIS REGIME HAS SHOWN THAT, IF ITS SURVIVAL IS PERCEIVED
TO BE IN PLAY, IT WILL EMPLOY ANY AVAILABLE MEANS, WHETHER
TERRORISM ABROAD OR INTERNAL REPRESSION AT HOME, TO COMBAT
THE SUPPOSED THREAT. THIS IS THE INGREDIENT THAT MAKES
THE DIFFERENCE BETWEEN RHETORICAL ATTACKS AND SUICIDE
ATTACKS, BETWEEN CLOSING DOWN NEWSPAPERS AND ASSASSINATING
OPPONENTS. WHETHER EXTERNAL OR INTERNAL, THE REGIME DOES
NOT CONSIDER SURVIVAL ISSUES NEGOTIABLE. "THEY LEARNED
FROM THE SHAH'S MISTAKES," AN IRANIAN BUSINESS CONTACT
EXPLAINED. "IF FOUR PEOPLE GATHER, THEY BREAK IT UP.
THEY WON'T LET THE SAME HAPPEN TO THEM AS HAPPENED TO THE
SHAH. AND IF NECESSARY, THEY WILL KILL."


8. (S) WMD -- NO QUICK TURNAROUND
ONE SUCH ISSUE IS WEAPONS OF MASS DESTRUCTION. AS WITH
INDIA AND PAKISTAN, THE PROBLEM WITH IRAN IS LIKELY TO BE
BOTH DIFFICULT AND LONG-TERM, AND REQUIRE CAREFUL
MONITORING. IRAQ USED CHEMICAL WEAPONS AGAINST IRAN AND
CAME CLOSE TO DEVELOPING A NUCLEAR BOMB. RUSSIA,
PAKISTAN, AND INDIA ALL HAVE NUCLEAR WEAPONS. THE
IRANIANS CONSIDER ISRAEL A NUCLEAR THREAT, AND A HOSTILE
U.S. HAS NUCLEAR-CAPABLE FORCES PRESUMED TO BE RANGED
ALONG THE IRANIAN COASTLINE IN THE GULF. IN THIS
SITUATION, ANY REGIME IN IRAN IS LIKELY TO PURSUE EFFORTS
TO GET THE BOMB AS A TOP NATIONAL SECURITY PRIORITY,
WHATEVER THE PROTESTATIONS TO THE CONTRARY. IN THE END,
THE BEST DETERRENT WILL BE THE REBIRTH OF RESPONSIBLE
INTERNATIONAL BEHAVIOR IN IRAN ITSELF -- BUT THIS IS A
MEDIUM- TO LONG-TERM OBJECTIVE AT BEST, WITH SCANT
PROSPECT OF POSITIVE MOVEMENT WHILE IRAN'S LEADERSHIP IS
FEELING ISOLATED AND BESIEGED.


9. (S) ASSASSINATIONS -- UNEASY LIES THE TURBAN
ANOTHER SURVIVAL ISSUE, ALTHOUGH POSSIBLY NOT QUITE SO
LONG-TERM, IS THE USE OF ASSASSINATIONS AS STATE POLICY.
OVER THE YEARS, THE TEHRAN REGIME HAS BEEN IN THE HABIT OF
KILLING ITS OPPONENTS, WHETHER AT HOME OR ABROAD. THIS IS
ESPECIALLY TRUE FOR GROUPS SUCH AS THE IRAQ-SUPPORTED
MUJAHEDIN-E KHALQ, WHOM THE IRANIAN GOVERNMENT HOLDS
RESPONSIBLE FOR VARIOUS ASSASSINATIONS AND TERRORIST
BOMBINGS INSIDE IRAN. THE IRANIANS WE MEET HERE DO NOT
ENDORSE THE REGIME'S KILLINGS; MOST FIND THEM ABHORRENT.
BUT THEY SHRUG AND SAY IT'S IN THE NATURE OF THIS CLERICAL
REGIME. SOME GO ON TO ACCUSE THE U.S. OF SELECTIVE
INDIGNATION, AND POINTEDLY RECALL WHAT THEY CONSIDER THE
COMPARATIVELY MUTED OFFICIAL U.S. REACTION OVER THE YEARS
TO ASSASSINATIONS OF PALESTINIANS ALLEGEDLY AT THE HANDS
OF ISRAELI AGENTS IN EUROPEAN AND MIDDLE EAST COUNTRIES.


10. (S) EVEN IF THE MYKONOS TRIAL BRINGS THE U.S. AND
EUROPE CLOSER TO A MEETING OF THE MINDS ON IRAN, OUR
CONTACTS BELIEVE THE CURRENT SIEGE MENTALITY OF IRAN'S TOP
RULERS WILL MAKE THEM RELUCTANT TO LET GO OF THE VIEW THAT
ASSASSINATION IS A LEGITIMATE INSTRUMENT OF STATE POLICY.
THEY MAY REGRET GETTING CAUGHT. IT IS EVEN POSSIBLE THAT
THEY WILL SCALE BACK OR SHIFT SUCH OPERATIONS, E.G. FROM
EUROPE TO SOUTH ASIA, IN RESPONSE TO PUBLIC RELATIONS
PROBLEMS AND STRAINS IN KEY TRADING RELATIONSHIPS. BUT
THEY ARE ONLY LIKELY TO STOP WHEN THEY FEEL SUFFICIENTLY
SECURE IN THEIR SEATS TO CONSIDER THAT THEIR OPPONENTS NO
LONGER POSE A SERIOUS THREAT. AT THAT POINT, OF COURSE,
IT IS NO LONGER A SURVIVAL ISSUE. IF CHANGE COMES ON THIS
FRONT IT WILL BE A MATTER OF OUR KNOWING IT WHEN WE NO
LONGER SEE IT. IT WILL NEITHER BE ANNOUNCED OR
ACKNOWLEDGED, WHETHER IN PUBLIC OR PRIVATE CHANNELS.


11. (S) THE QUEST FOR RESPECT
IN CONTRAST TO THESE PERCEIVED SURVIVAL ISSUES, POLICIES
THAT ARE MAINLY MANIFESTATIONS OF THE IRANIAN QUEST FOR
INDEPENDENCE MAY BE NEGOTIABLE. THE IRANIAN REVOLUTION
WAS ABOUT RESPECT -- BOTH SELF-RESPECT, AND EARNING THE
RESPECT OF OTHERS FOR THE INDEPENDENCE OF IRANIAN
DECISIONMAKING. SINCE THE U.S. WAS FIRMLY IDENTIFIED WITH
THE SHAH, INDEPENDENCE FROM U.S. INFLUENCE BECAME, AND
REMAINS, A CRITICAL ELEMENT IN THE REGIME'S SEARCH FOR
LEGITIMACY. THIS IS WHY THE U.S. STATUS OF FORCES
AGREEMENT WITH IRAN BECAME SUCH AN ICON IN THE COURSE OF
AYATOLLAH KHOMEINI'S YEARS-LONG STRUGGLE WITH THE SHAH.
REFERRING TO IMMUNITY FROM PROSECUTION IN IRANIAN COURTS
FOR U.S. MILITARY AND CIVILIAN PERSONNEL, KHOMEINI
FULMINATED THAT THEY HAVE REDUCED THE IRANIAN PEOPLE "TO A
LEVEL LOWER THAN THAT OF AN AMERICAN DOG." ON THIS COUNT
-- ASSERTING IRANIAN INDEPENDENCE -- EVEN PRO-SHAH
IRANIANS GIVE THE ISLAMIC REGIME CREDIT. THEREFORE, A
PREEMINENT CONSIDERATION FOR IRAN'S RULERS ON ANY CONTACTS
WITH THE U.S., WILL BE HOW TO ENGAGE WITHOUT APPEARING TO
COMPROMISE THIS PRIZED INDEPENDENCE. FOR THAT REASON, NO
IRANIAN LEADERS CAN BE SEEN TO BE ACCEPTING "U.S.
PRECONDITIONS" FOR DIALOGUE, EVEN IF THEY WANT TO.


12. (S) BECAUSE THE INDEPENDENCE THEME HAS SO MUCH
RESONANCE WITH THE POPULATION AT LARGE, THE RULING CLERICS
PROBABLY FIND EXTERNAL PRESSURE BY THE U.S. AND OTHERS
QUITE USEFUL INTERNALLY. OUR IRANIAN CONTACTS FIND IT
INCREDIBLE THAT WE SEEM NOT TO SEE THIS. IN FACT, THEY
FIND IT SO INCREDIBLE THAT THEY BELIEVE WE ACTUALLY DO SEE
IT BUT ARE CHOOSING TO DELIBERATELY AND SUBTLY HELP THE
REGIME. THEREFORE, THE REASONING GOES, THE U.S. HAS SOME
NEFARIOUS PURPOSE IN MIND AND HAS STRUCK A FAUSTIAN
BARGAIN TO KEEP THE CURRENT REGIME IN POWER AT THE EXPENSE
OF THE IRANIAN PEOPLE. THIS MAKES THEM DESPAIR; ONCE
AGAIN, THEY SEE THEIR FATE AS IN THE HANDS OF MANIPULATIVE
GREAT POWERS OUTSIDE THEIR BORDERS. FROM HERE IT IS ONLY
A SHORT LEAP TO THE FERVENT STATEMENT THAT THE U.S. OUSTED
THE SHAH AND INSTALLED KHOMEINI BECAUSE IRAN WAS BECOMING
TOO POWERFUL IN THE REGION FOR OUR TASTE. ALTHOUGH THIS
MAY SOUND INCREDIBLE AND FAR-FETCHED TO AMERICAN EARS,
VARIANTS OF THIS BELIEF ARE AMAZINGLY WIDESPREAD AMONG THE
IRANIANS WE MEET. WE NOTE THAT THERE HAVE BEEN ECHOES OF
THE SAME THEME IN ANKARA'S REPORTING, AS WELL AS IN SOME
PRESS ACCOUNTS.


13. (S) IRANIAN OPPOSITION TO THE PEACE PROCESS -- THE
HOLE CARD
IT IS NOTEWORTHY THAT SEVERAL OF OUR IRANIAN SOURCES HAVE
SEPARATELY COMMENTED TO US THAT THEY SEE THE IRANIAN
GOVERNMENT'S POLICY VIS-A-VIS THE MIDDLE EAST PEACE
PROCESS (MEPP) IN TERMS OF THE INDEPENDENCE ISSUE. IT IS
STRIKING -- AND IN VERY DISTINCT CONTRAST TO OUR ARAB
CONTACTS -- THAT MOST IRANIANS WE MEET COULDN'T CARE LESS
ABOUT THE ARAB-ISRAELI CONFLICT. OUR CONTACTS, INCLUDING
FREQUENT AND WELL-CONNECTED VISITORS TO IRAN, INTERPRET
IRAN'S ACTIONS ON THE PEACE PROCESS AS CALCULATED TO SHOW
INDEPENDENCE OF DECISIONMAKING, ESPECIALLY VIS-A-VIS THE
U.S. THE SUBSTANCE OF THE ISSUE, HOWEVER, IS NOT A
SURVIVAL MATTER AND FALLS WELL OUTSIDE THE CORE DOMAIN OF
IRANIAN NATIONALIST CONCERNS. SO THEORETICALLY AT LEAST,
THIS POLICY IS SUSCEPTIBLE TO CHANGE.


14. (S) OUR CONTACTS BELIEVE THE REGIME CALCULATES THAT
THE ARAB-ISRAELI PEACE PROCESS, AND SPECIFICALLY SUPPORT
FOR ISRAEL, IS THE SINGLE MOST NEURALGIC BUTTON THEY CAN
PRESS WITH THE U.S. THAT MAKES IT AN EXTREMELY HIGH-VALUE
CARD, WHETHER FOR ASSERTING IRANIAN INDEPENDENCE OF THE
U.S. OR, EVENTUALLY, FOR BARGAINING. SINCE IT IS A BAZAAR
ISSUE, THOUGH, IT LIKELY WILL ONLY BE PLAYED IN THE
CONTEXT OF RELATIONS WITH THE U.S. AND EVEN THEN ONLY IN
THE CONTEXT OF A MAJOR QUID-PRO-QUO. UNTIL THEN, THERE IS
NOT MUCH CHANCE OF SIGNIFICANT MOVEMENT ON THIS IRANIAN
POLICY, INTERNATIONAL PRESSURE NOTWITHSTANDING. WHAT IS
AT STAKE IS NOT PRINCIPLE OR SURVIVAL, BUT THE PERCEPTION
OF INDEPENDENT DECISIONMAKING AND TRADING VALUE, BOTH OF
WHICH WILL BE WEIGHED CAREFULLY AGAINST PROSPECTIVE GAINS.


15. (S) IRANIAN QUIDS -- "B1" HAGUE CLAIM TOPS THE LIST
WHAT WOULD THE IRANIAN QUIDS BE? REPEATED STATEMENTS BY
IRANIAN PRESIDENT RAFSANJANI SUGGEST THAT THE MAIN QUID
IRAN SEEKS FROM THE U.S. IN ANY TALKS IS A LUMP-SUM
SETTLEMENT OF OUTSTANDING HAGUE TRIBUNAL CLAIMS,
ESPECIALLY THE "B1" FMS CLAIM. RAFSANJANI HAS SPOKEN OF
RELEASE OF THIS MONEY AS THE "GOOD WILL" GESTURE REQUIRED
EVEN TO START ANY SERIOUS DIALOGUE. AT THE SAME TIME, HE
KNOWS THE ISSUE HAS BEEN LITIGATED AT THE HAGUE FOR YEARS
AND IT IS DOUBTFUL HE WOULD REALLY EXPECT TO GET SUCH A
GESTURE FOR NOTHING. MORE LIKELY, HE IS SETTING UP A
CONDITION FOR TALKS HE KNOWS WE WON'T MEET AS A
SMOKESCREEN -- BECAUSE HE KNOWS THE IRANIAN SIDE ITSELF
HAS NO CONSENSUS YET FOR DISCUSSIONS WITH THE U.S.


16. (S) THE PUBLIC SIDE OF IRANPOLICY: LESS IS MORE
THE IRANIANS HATE BEING IGORED. THE MORE WE LAMBASTE THE
ISLAMIC REPUBLIC,THE BETTER THIS REGIME LIKES IT. U.S.
STATEMENT DON'T CHANGE IRANIAN POLICY, BUT THEY ARE
BIG-TME NEGATIVE ATTENTION, AND THIS IS PURE GOLD FOR TE
REGIME'S INTERNAL USE. WHAT THEY FIND TOUGH T FIELD ARE
THINGS LIKE FORMER ASSISTANT SECRETARYPELLETREAU'S
STATEMENT IN DUBAI LAST WINTER. THS KIND OF FACTUAL,
SENSIBLE RESTATEMENT OF POLIC REASSURES ALLIES AND PUTS
THE IRANIAN GOVERNMEN ON THE DEFENSIVE.


17. (S) LOOKING AHEAD -- IRAN AND THE U.S.
UNDERLYING ALL OF OUR DISCUSSIONSWITH IRANIANS IN THE UAE
IS THE ASSUMPTION THAT HERE IS NO BIGGER ISSUE IN IRAN
THAN RELATIONS WTH THE U.S. AT SOME POINT, REGIME
LEADERS KNOW IALOGUE AND RENEWED RELATIONS ARE
INEVITABLE. BUT OPINIONS ARE DIVIDED ON HOW AND WHEN THIS
SHOULD OCCUR. SOME IRANIAN LEADERS FEAR THE VERY ACT OF
ENGAGING US WILL UNDERMINE THEIR OWN POSITION. BEING
ANTI-U.S. IS PART OF THE COIN OF REGIME LEGITIMACY. THOSE
WHO SPEAK OF RENEWED DIPLOMATIC TIES WITH THE U.S. RISK
TARNISHING THEIR DOMESTIC POLITICAL CREDENTIALS. IT'S
LIKE WHAT BEING "SOFT ON COMMUNISM" USED TO BE IN THE U.S.
ANOTHER CONSIDERATION, ACCORDING TO SOME IRANIAN CONTACTS,
IS CONCERN ABOUT NOT BEING ABLE TO MEET THE HIGH
EXPECTATIONS FOR BETTER TIMES THAT CONTACTS WITH THE U.S.
WOULD GENERATE -- ESPECIALLY AFTER YEARS OF BLAMING US FOR
ALL THEIR PROBLEMS. STILL OTHERS, INCLUDING REGIME
OPPONENTS, BELIEVE THAT RESUMPTION OF RELATIONS WITH THE
U.S. WILL MARK THE FINAL GREENING OF THE REVOLUTION AND
SIGNAL THAT THE ISLAMIC REPUBLIC IS HERE TO STAY.


18. (S) FROM THE IRANIAN REGIME'S PERSPECTIVE, THE UNITED
STATES HAS CONTROL OVER THEIR DESTINY. THEY TRULY WORRY
THAT WE CAN UNSEAT THEM IF WE WISH. EVEN IF THEY
CALCULATE THAT WE HAVE NO PRESENT INTENTION TO DO SO, THEY
PROBABLY NURSE FEARS THIS COULD CHANGE, E.G., WITH THE
RESULTS OF THE KHOBAR INVESTIGATION. THUS, RELATIONS WITH
THE U.S. ARE AS MUCH A DOMESTIC AS A FOREIGN POLICY ISSUE
FOR IRAN. IT IS ALSO, FOR THIS REGIME, A SENSITIVE
BORDERLINE SURVIVAL ISSUE--THIS DESPITE THE FACT THAT THE
U.S. HAS NO PRESENCE AND LITTLE INFLUENCE IN IRAN. OF
COURSE, FROM OUR POINT OF VIEW, THIS ABSENCE OF DIRECT
CONTACTS PUTS US AT A DISADVANTAGE IN BRINGING DIRECT
PRESSURE TO BEAR TO ADVANCE OUR INTERESTS. THE IRANIANS
DON'T SEE IT THIS WAY.


19. (S) FOR ALL THESE REASONS, WE SHOULD EXPECT NO SUDDEN
MOVE IN RELATIONS WITH THE U.S. KEEPING UP APPEARANCES
WILL BE A MAJOR CONSIDERATION. WHEN CHANGE COMES, IT WILL
BE GRADUAL AND POSSIBLY ACCOMPANIED BY EFFORTS TO
EMPHASIZE IRANIAN INITIATIVES WHILE DOWNPLAYING THE
SIGNIFICANCE OF ANY STEPS TAKEN.


20. (S) SO, WHAT TO DO?
IT IS CLEAR FROM OUR CONTACTS THAT THE U.S. EMBARGO HAS
BEEN A SIGNIFICANT HEADACHE FOR THE IRANIAN GOVERNMENT,
NOTABLY IN DRIVING UP COSTS FOR SOME KEY ITEMS AND IN
LIMITING ACCESS TO OIL SECTOR INVESTMENT. BUT ON THE
TRADE SIDE GENERALLY, OUR IRANIAN INTERLOCUTORS CONSIDER
THE UNILATERAL U.S. EMBARGO MORE IN THE CATEGORY OF A
NUISANCE THAN A SERIOUS IMPEDIMENT TO BUSINESS. THIS IS
BECAUSE ITS BROAD GAUGE MAKES THE EMBARGO DIFFICULT TO
ENFORCE, AND SINCE NO OTHER COUNTRIES SUPPORT IT, U.S.
IMPORTS CAN USUALLY BE SUBSTITUTED. FOR THEIR PART,
AMERICAN BUSINESSMEN IN THE UAE ARE GENERALLY SCRUPULOUS
ABOUT ADHERING CAREFULLY TO U.S. LAW, BUT DISDAINFUL OF
THE POLICY AS BOTH INEFFECTIVE AND HARMFUL TO U.S.
COMMERCIAL INTERESTS. IF THE POLICY ACTUALLY WORKED, THEY
SAY, THEY WOULD BE A LOT MORE SUPPORTIVE, BUT WITH THE
U.S. ACTING UNILATERALLY THEY SEE THEMSELVES EXCLUDED FROM
AN IMPORTANT MARKET EVEN AS THEIR COMPETITORS TAKE
ADVANTAGE. BOTH IRANIAN AND U.S. BUSINESSMEN WILL BE
WATCHING TO SEE IF THE FALLOUT FROM THE MYKONOS VERDICT
LEADS TO MORE COMMON GROUND BETWEEN THE U.S. AND ITS
ALLIES.


21. (S) THE LIMITS OF ECONOMIC PRESSURE
THE ISSUE OF WHETHER SANCTIONS WORK OFTEN COMES UP IN
CONVERSATION HERE. THE JEWEL IN THE CROWN OF SANCTIONS IS
FINANCIAL PRESSURE, ESPECIALLY OUR SUCCESSFUL EFFORTS TO
LIMIT IRAN'S ACCESS TO INTERNATIONAL FINANCING FOR
DEVELOPMENT OF ITS OIL/GAS INDUSTRY. BUT WE SHOULD NOT
FORGET THAT THIS SUCCESS STEMS NOT JUST FROM OUR POLICY
BUT FROM PRACTICAL FINANCIAL CALCULATIONS. THE 1993 DEBT
CRISIS DEPRIVED IRAN OF OFFICIALLY-BACKED EXPORT CREDITS
AS CREDITORS WAITED TO SEE HOW IRAN WOULD MEET THE VARIOUS
RESCHEDULING OBLIGATIONS NEGOTIATED IN 1994. SO FAR, IT
HAS DONE SO.


22. (S) IN ADDITION, EVEN IF WE MANAGE TO KEEP THE
FINANCIAL LID ON, SOME INDUSTRY EXPERTS CAUTION THAT THE
EFFECTIVENESS OF THE PRESSURE WILL DIMINISH WITH TIME, AT
LEAST AS FAR AS OIL/GAS DEVELOPMENT GOES. IN THAT REGARD,
A SENIOR BRITISH PETROLEUM (BP) EXECUTIVE RECENTLY TOOK
ISSUE WITH CONSUL GENERAL'S SUGGESTION THAT IRAN WOULD
INCREASINGLY FEEL THE PINCH OF ITS LIMITED ACCESS TO
FINANCE FOR OIL/GAS SECTOR DEVELOPMENT. WHILE THE
EXECUTIVE READILY AGREED THAT MAJORS LIKE BP MAY STAY OUT
OF IRAN FOR NOW DUE TO U.S. PRESSURE, HE FELT THE EFFECT
WOULD BE SHORT-TERM -- NO MORE THAN FIVE YEARS OR SO. AND
EVEN IF THE MAJORS DO CONTINUE TO STAY OUT LONGER THAN
THAT DUE TO U.S. PRESSURE -- WHICH HE DOUBTED -- THE
TECHNOLOGY IS SUCH THAT IT WILL COST IRAN "MUCH LESS THAN
WE THINK" TO DEVELOP THEIR FIELDS. "IF THEY CAN'T GET THE
BIG GUYS," HE SAID, "THEY'LL BRING IN THE LITTLE GUYS, GET
SOME THINGS FROM ABROAD, LEARN OTHER THINGS THEMSELVES,
AND DEVELOP NEW, SMALL-SCALE FIELDS RATHER THAN FIX UP OLD
LARGE ONES." THE EXECUTIVE NOTED THAT THE IRANIANS ARE
EXPERT AT DRILLING. IF NECESSARY, HE SAID, THEY'LL JUST
SHUT IN SOME FIELDS AND DEVELOP NEW ONES. THAT MEANS THE
PRESSURE ON THE FINANCIAL SIDE MAY WORK SHORT-TERM, BUT
NOT FOR LONG. IRAN, HE SAID, WILL BE ABLE TO EXPAND ITS
PRODUCTION ONE WAY OR THE OTHER WITHIN FIVE YEARS, U.S.
PRESSURE OR NO.


23. (S) THE QUIET HUMILIATION FACTOR
A FORM OF PRESSURE THAT IS QUITE REAL AND HIGH-IMPACT, IF
LESS TANGIBLE, IS QUIET HUMILIATION. IT IS FELT WHEN
IRANIAN CITIZENS AND OFFICIALS HAVE THEIR VISA
APPLICATIONS REJECTED, WHEN THEY FACE EXTRA SECURITY
CHECKS WHILE TRAVELING, AND WHEN THEY HAVE DIFFICULTY
BUYING HIGH-TECH GOODS. AS A NATION WITH A LONG HISTORY
AND RICH CULTURE, MANY IRANIANS FIND SUCH INTERNATIONAL
ILL-REPUTE EXTREMELY GALLING.


24. (S) OUTLOOK
THE CONSENSUS THAT EMERGES FROM OUR IRANIAN CONTACTS IS
THAT THERE WILL BE NO REGIME CHANGE FOR AT LEAST A DECADE.
THEY SEE NO CHARISMATIC LEADER TO GALVANIZE OPPOSITION.
THEY POINT OUT THAT NO ONE WHO REMEMBERS THE LAST
REVOLUTION HAS ANY APPETITE FOR ANOTHER ONE. WHEN AND IF
CHANGE COMES, THEY BELIEVE, IT WILL COME FROM THE
GENERATION THAT GREW UP AFTER THE 1979 REVOLUTION. MOST
OF THESE YOUNG PEOPLE ARE NOW IN THEIR TEENS AND THE
PRESSURE FOR CHANGE WILL GROW AS THEY GRADUATE FROM
COLLEGE, ENTER THE JOB MARKET, AND SEEK HOMES AND SECURITY
FOR THEIR FAMILIES.


25. (S) THE LION IN THE CAGE
ALL THIS POINTS TO LITTLE PROSPECT OF IMMEDIATE POLICY
CHANGE IN IRAN. THIS DOES NOT IMPLY PRESSURE SHOULD NOT
BE MAINTAINED; ON THE CONTRARY, PRESSURE IS ESSENTIAL BUT
SHOULD BE FOCUSED IN ORDER TO HAVE THE DESIRED IMPACT.
THE IRANIAN REGIME, HOWEVER RESISTANT TO PRESSURE IT MAY
BE IN SOME AREAS, ALSO HAS REAL WEAKNESSES. SANCTIONS ARE
THEREFORE AN IMPORTANT ADJUNCT OF POLICY, IF NOT A POLICY
IN THEMSELVES. OUR CONTACTS CONCLUDE THAT THE REGIME
MIGHT BE OPEN TO CHANGE, BUT WILL NEVER GIVE THE
APPEARANCE OF SUCH. ANY TURNAROUND ON KEY ISSUES WILL BE
INCREMENTAL, AND POSSIBLY EVEN DISGUISED BY A FEINT IN THE
OPPOSITE DIRECTION TO DEMONSTRATE INDEPENDENCE. IN
EFFECT, THE U.S. HAS ATTEMPTED TO DESIGN A CAGE OF
SANCTIONS AND PRESSURE TO CONTAIN IRAN. BUT THERE IS
LITTLE POINT IN KEEPING THE PERSIAN LION IN A CAGE AND
JUST PRODDING HIM, GETTING HIM MADDER AND MADDER. IT DOES
NOT FOLLOW THAT THERE SHOULD BE NO PRODDING, BUT RATHER
THAT, AT SOME POINT, THE DOOR TO THE CAGE MUST BE OPENED
SO THE LION KNOWS WHICH WAY TO GO.


LITT