Understanding the Washington-Tehran Deals


Last fall the Bush administration was reportedly planning to bomb thousands of sites in Iran. Then, in December, Washington began granting Iran a number of concessions—though both the U.S. and Iran have chosen not to represent these as such. 

  • In early December a U.S. National Intelligence Estimate (NIE) declared that Iran had not pursued nuclear weapons development since 2003 though the next day, Bush, Merkle, Putin, and Sarkozy each asserted that Iran still must halt any enrichment of uranium.

  • Also in early December China signed a new multi-billion dollar oil contract with Iran. Even though U.S. and UN oil sanctions against dealing with Iran remained in force, the U.S. hardly blinked an eye over this—quite unlike after an earlier Iran-China deal in 2004.

  • In mid-December, Russia sent Iran a first-ever shipment of nuclear fuel rods for the Bushir power plant under the auspices of the IAEA. Unlike every other time over many years that Russia had threatened to do this, this time there was no hue and cry or dire warnings from Washington. Instead, the U.S. stated that this Russian fuel shipment had now removed any excuse for Iran to continue to enrich its own uranium—rather like the assertions made after the NIE was released.

  • At the end of December U.S. military leaders and the ambassador to Iraq, Ryan Crocker, allowed that somewhere “high” in the Iranian leadership there had obviously been a decision to rein in attacks by Shiite militia in Iran and that this was responsible for much of the substantial decrease in violence there.

  • On January 2, Ayatollah Ali Khamenei said, “Not having relations with America is one of our main policies but we have never said this relationship should be cut forever…. Certainly, the day when having relations with America is useful for the nation I will be the first one to approve this relationship.” 

What has happened to cause this sudden turn in the U.S. position toward Iran and of Iran towards the U.S.—if, in fact, that is what this is? 

In 2003 Iran had offered a “grand bargain” to the U.S. that would have addressed virtually any question over which the U.S. had ever clashed with Iran. The U.S. rejected it out of hand, willing to accept nothing short of a “regime change” for the Iranian leadership. There is no evidence that recent events are anything like a grand bargain, but there is clearly a partial deal evolving between Iran and the U.S. The big questions are, what does it mean for Iraq? And, what are the roadblocks to any grand bargain that would end the U.S.-Iran confrontation?  As long as any grand bargain remains elusive, the possibility, sooner or later, of a U.S. attack on Iran and a wider Middle East war remains a real possibility. 

The general outline of the answer to each of these questions has already become clear. But, before we delve into that story, the first thing one must be clear about is that this confrontation was never “really” about nuclear weapons—it’s about Iran’s oil. To be precise, it has been about how the U.S. does not trust the Iranian clerical government to develop and manage Iran’s vast oil and natural gas resources. For example, it does not trust what the present Iranian leadership might do, down the road, if sanctions on foreign investments in oil were lifted and it became flush with oil profits, able to build up a modern military force in the Persian Gulf (nuclear or otherwise) where 60 percent of the world’s oil reserves are found. This is one place the U.S. insists on hegemony. It has absolutely no intention of anyone else projecting power there. This is the crux of the matter: one U.S. Administration after another, not just the present one with its neo-cons, has not believed that the Iranian clerical leadership would function as “reasonable” and “business-like” players (from the U.S. perspective) in the oil market, or vis-à-vis America’s OPEC allies in the Gulf—Saudi Arabia, Kuwait, and the UAE.

The U.S. has maintained sanctions on Iran’s oil sector for almost 13 years precisely to keep it from becoming the major oil power it would naturally become otherwise. The result is that Iran’s oil and natural gas sector never recovered fully from either the revolution of 1979 or the Iran-Iraq War of 1980-88. Blocked since 1995 from the large amounts of foreign investment and oil technology it first tried to acquire in that year (even though that first big deal would have been with a U.S. oil company), and faced with a growing population consuming more oil at home, Iran now exports less than half as much oil as it did in the 1970s under the Shah. The result is that, even though Iran has the world’s third largest reserves of liquid oil, it now has no effective oil weapon. 

Today Iran exports only 2.4 million barrels per day, but Saudi Arabia alone can easily turn up its pumps by 2 million barrels a day, and U.S. and European strategic petroleum reserves also rather effortlessly replaced 2 million barrels per day during the Katrina emergency. In fact, the combined Strategic Petroleum Reserves (SPR) of the OECD states’ International Energy Agency (IEA) could maintain this level of pumping for well over four years if commercial stocks were also called upon. The psychological shock to oil markets of any Iranian cutoff of oil would cause, at least temporarily, a price spike; however, there would be no fundamental oil crisis or shortage. This is why Iran has pointedly backed away from any such threat, as it would only play into the hands of the U.S. to prepare public opinion for exercising military force against Iran. 

Sanctions have also put Iran’s refineries in such a state of disrepair that the country actually imports over 40 percent of its gasoline. Its national oil company is in such miserable shape it can extract only two-third’s as much oil from a given well as the world average. The reality of U.S., and now UN, sanctions is that Iran today only takes in roughly the same amount of money per capita on its oil exports as does Iraq—a country whose oil sector is hardly in tip-top shape. This state of affairs is undoubtedly assisted by clerical corruption and mismanagement of the economy, but sanctions on foreign investment in oil have become a grave problem for the Iranian economy and the future of the ruling circles. 

Faced with a U.S. regime-change policy, yet denied an oil weapon, and with an economy increasingly being squeezed by the effects of sanctions, Iran has cultivated two levers over the past four years to counter U.S. pressure: whatever nuclear threat it could muster, and, later, whatever influence it possesses inside Iraq to frustrate U.S. interests there. 

On the nuclear front, Iran’s very public efforts to produce enriched uranium and to develop missiles capable of delivering a nuclear warhead are two of the three elements needed for the ultimate development of a nuclear weapon capability. Although the third aspect, an Iranian effort to master the formation of weapons-grade uranium onto a nuclear device, has now been declared non-existent by the NIE, the other two aspects, and especially enrichment technology, remain anathema to the U.S., EU, and other big powers.  

Both the nuclear issue, and to a great extent the Iraq issue, have been nurtured by Iran as gambits to be exchanged for lifting U.S. oil sanctions and giving security guarantees against any further attempts at regime change. In this context, a security guarantee against regime change goes against Washington’s plan to put a pro-U.S. government in place as a prerequisite to lifting sanctions and Iran taking its natural place in the world of oil.

A Deal on Iraq 

The present change in U.S. hostility to Iran has to do with Iranian cooperation with the U.S. in the pacification of Iraq. It is clear from press reports that the Iranian leadership has decided to follow through on a deal struck with the U.S. during the their first publicly announced face-to-face negotiations held in Baghdad’s Green Zone on May 28, 2007 with the Iraqi foreign minister.  

First, a subcommittee consisting of both U.S. and Iranian second-tier diplomats, described as serious and non-political (i.e., technical), was formed to coordinate U.S. and Iranian efforts to stabilize Iraq. Reportedly the U.S. was to focus on working with its new Sunni tribal allies whose forces they had been arming and training, while the Iranians would work similarly with their Shia allies in the south of Iraq. In each case, the aim was to suppress and eliminate forces hostile to the central Iraqi government. A STRATFOR security analysis put it plainly enough: “Translation: The two countries will create a purge committee; the United States will kill any Iraqi Sunnis who do not cooperate, while the Iranians do the same to rebellious Iraqi Shia.”

Second, Iraq’s army would not be allowed to develop a capacity to project force outside the borders of Iraq; it would forever be restricted to being solely for the internal control of the country. To guarantee Iraq’s sovereignty, the U.S. would permanently station forces in Iraq. An attack on Iraq would be an attack on a U.S. protectorate, akin to Saddam’s attack on Kuwait in 1991, and would bring similar reaction. In short, Iraq is to join the ranks of Saudi Arabia, Kuwait, and the UAE as a U.S. oil-state protectorate. This is, of course, precisely what the U.S. and Britain wanted all along. 

In retrospect, at least, it should now be clear that the extremely intense back-and-forth dance of accusations and threats between Iran and the U.S. in the months before the May meeting were maneuvers that, on the one hand, were intended by the U.S. to bring Iran to the table on its terms and, on the other hand, were intended by Iran to get specific concessions from the U.S. before it would agree to help the U.S. in Iraq. 

On May 31, following the agreements about Iraq, President Bush publicly marked the U.S. commitment to this deal with Iran by saying to the press that he foresees the future role of the U.S. in Iraq to be like that of the U.S. in South Korea over the last 50 years. The significance of this seeming non sequitur makes sense only when one realizes that the U.S. has special military treaties with not only Saudi Arabia, Kuwait, the UAE, and Egypt, but also with South Korea, that make these states U.S. military protectorates. Bush preferred to use the example of South Korea where, in any case, U.S. forces have been stationed since the end of the Korean War to guarantee its sovereignty against any attack by North Korea or any other state. By November, the Iraqi government had formally requested such a treaty with the U.S. 

However, soon after a second and a third meeting in Iraq in July 2007, things began to unravel between the U.S. and Iran. The time came for General Petraeus to deliver his report to Congress. Two security assessments released just beforehand by U.S. intelligence services (not by Petraeus) were extremely pessimistic about any purported progress made by the U.S. surge in pacifying Iraq. This led to the strongest call ever by Democratic senators, joined now by a significant number of Republican senators, for a U.S. “withdrawal” from Iraq. The Senate mandate under consideration at that time was, as it has always been, not a mandate for a real withdrawal from Iraq and environs, but, rather, for a withdrawal to its borders, to a posture intended to isolate the country from the intervention of any of its neighbors while allowing the seemingly uncontrollable Iraqi sectarian warfare to exhaust itself without incurring any further “loss of U.S. lives or treasure.” The logic of this sort of “withdrawal” was that once the sectarian civil war was completed and all sides exhausted after however many months or years this might take, U.S. forces would then return from their “withdrawal to the borders” of Iraq and finally establish a U.S.-allied government in Baghdad. Representative Murtha, for example, had often described his earlier plan as such a “withdrawal to the borders,” to isolate it while the civil war raged. Then and only then, when the U.S. returned, would huge foreign investments in Iraqi oil begin, that is, under a trusted regime that would accept its fate as a U.S. protectorate like other oil-producing states around the Gulf. This has been the fundamental strategic aim of the U.S. in Iraq since after the First Gulf War—especially since the 2003 invasion. It is also the preferred U.S. strategic vision for Iran. 

It was at this point, sometime in August, that the Iranian leadership and most commentators made a serious misjudgment of the situation facing the U.S. It appeared to the Iranian leadership as though the Bush administration might actually be forced to withdraw (albeit in the aforementioned manner). Indeed, if that were to be the case, they reasoned, what was the need to continue to negotiate with the U.S. and make concessions over the future of Iraq? The Iranians quickly (one might say precipitously) cut off negotiations. What is more, President Ahmadinejad made a very public overture to Iraq’s Arab neighbors that they, together with Tehran, should step into the power vacuum that the expected U.S. withdrawal would create in Baghdad. 

On August 28, President Ahmadinejad in a live speech on Iranian television, said, “The political power of the occupiers (of Iraq) is being destroyed rapidly and very soon we will be witnessing a great power vacuum in the region. We, with the help of regional friends and the Iraqi nation, are ready to fill this void…. They are trapped in the swamp of their own crimes and have no choice but to accept the failure and accept the independence and rights of the Iraqi nation…. If you stay in Iraq for another 50 years nothing will improve, it will just worsen…. I want to officially announce to you that from our viewpoint the issue of Iran’s nuclear case has been closed. Today Iran is a nuclear Iran, meaning that it has the complete cycle for fuel production.”

Tehran simultaneously made overtures to Saudi Arabia to reassure it that, were Iran to become the dominant force in the region after a U.S. withdrawal, the new order in Iraq need not be seen as a danger for it and its Sunni allies. But two things occurred that pulled the rug out from under this bold change of course by the Iranian leadership. One was that it was based on a faulty assessment of what the U.S. Congress would do. The other was that the Iranian leadership misjudged the possibility that Washington would retaliate by demonstrating a brutal willingness to make a massive  military assault on Iran. 

On the first matter, General Petraeus’s report to Congress argued forcefully that the situation in Iraq was still retrievable from the brink of disaster. Most significantly, his report was sufficiently convincing to the majority of both Republican and Democratic senators to halt any serious mandated-withdrawal legislation in its tracks. It would seem that the U.S. success in rallying Sunni tribal forces, backed up by the show of U.S. commitment as embodied by the surge and, combined with the change in tactics enforced by Petraeus where the U.S. had moved from force protection to Iraqi-population protection, had begun to turn the tide for the U.S. In addition, it was very likely the case that Iran’s efforts to rein in attacks by Shia militia beginning in May 2007 (even though these efforts might have now been suspended or significantly lessened) had also greatly facilitated this turn in Iraq.  

Secondly, President Bush, speaking to the U.S. Veterans Association on August 28, the very same day President Ahmadinejad publicly called for a new Iranian-centered order in Iraq and the region in the wake of a U.S. withdrawal, asserted: “The attacks on our bases and our troops by Iranian-supplied munitions have increased in the last few months—despite pledges by Iran to help stabilize the security situation in Iraq. 

“Some say Iran’s leaders are not aware of what members of their own regime are doing. Others say Iran’s leaders are actively seeking to provoke the West. Either way, they cannot escape responsibility…. The Iranian regime must halt these actions. And until it does, I will take actions necessary to protect our troops. I have authorized our military commanders in Iraq to confront Tehran’s murderous activities.” 

Within a few days of Bush’s speech, Seymour Hersh wrote in the October 8, 2007 issue of the New Yorker of the new determination and planning by the U.S. administration and the Pentagon to bomb Iran. How could it be, most observers asked, in a situation where the U.S. is so overextended in Iraq that the Administration could possibly be considering a major attack on Iran for regime change there? However, the revealed preparations for bombing Iran were not, per se, intended for regime change in Tehran. This time it was a warning that, if the U.S. was forced to withdraw from Iraq, if its Iraqi regime-change adventure was going to fail, this failure would not present a strategic opening for Iran. Rather, any U.S. withdrawal would be what is known in military science as a “scorched earth” withdrawal.  

Bush’s August 28 warning to Iran, and the New Yorker‘s expose, should be taken together with another un-diplomatic statement by Bush at his next press conference on October 17: “We got a leader in Iran who has announced that he wants to destroy Israel. So I’ve told people that if you’re interested in avoiding World War III, it seems like you ought to be interested in preventing them from have the knowledge necessary to make a nuclear weapon. I take the threat of Iran with a nuclear weapon very seriously. And we’ll continue to work with all nations about the seriousness of this threat.”  

Such blunt talk of war, much less of world war, immediately following Hersh’s expose, was widely commented on in the press, as Washington had intended. Bush and the Pentagon were sending a warning to Iran that the U.S. was perfectly willing to engage Iran militarily. 

Nevertheless, there was a certain nuance in these preparations for a U.S. military assault on Iran. This newest threat to bomb Iran (as compared to the previous round exposed by Hersh) was not intended to be a massive, large-scale bombing of tens-of-thousands of economic infrastructure and military sites that would reduce the entire country to a state of utter economic and military ruin; rather, it was especially targeted at the facilities and personnel of the Iranian Revolutionary Guard (IRG). Recently, the IRG’s Quds Corps had been repeatedly accused by administration officials as being behind continued assistance to Shiia groups still fighting against U.S. forces and its allies in Iraq in violation of the May 2007 deal. Accordingly, the U.S. had now begun to de-emphasize the Iranian nuclear program as the key target for bombing attacks and focused on the IRG sites in Iran. Hersh wrote: “The revised bombing plan for a possible attack, with its tightened focus on counterterrorism, is gathering support among generals and admirals in the Pentagon. The strategy calls for the use of sea-launched cruise missiles and more precisely targeted ground attacks and bombing strikes, including plans to destroy the most important Revolutionary Guard training camps, supply depots, and command and control facilities.”

To target the country more broadly would be counter-productive, as it would likely rally the entire leadership and nation against the U.S., whereas a tightly focused (yet nonetheless devastating and pre-emptive) attack focused on IRG targets might instead heighten any internal exasperation in leading circles with the IRG and associated hard-line rightist groupings for having mishandled relations with the U.S.—in particular, with President Ahmadinejad for the abandonment of negotiations, and for making precipitous public threats to fill the political vacuum after an impending U.S. failure in Iraq. Accordingly, as Hersh wrote: “A Pentagon consultant on counterterrorism told me that, if the bombing campaign took place, it would be accompanied by a series of what he called ‘short, sharp incursions’ by American Special Forces units into suspected Iranian training sites. He said, ‘Cheney is devoted to this, no question’. ” 

Apparently, the campaign of highly credible U.S. threats and preparations for war with Iran had its desired effect. Soon, Tehran was giving the IAEA blueprints from its work on nuclear warheads in years past, and signaling its willingness to return to assisting the U.S. in Iraq. New negotiations were to resume sometime in January 2008. They were delayed from mid-December due to “scheduling issues,” although actual back-and-forth U.S.-Iranian quid pro quos continue to occur, as non-public discussions take place in some form. 

Actually, there may be more to the story of what was done to force Tehran back towards negotiations over Iraq, and it could have to do with an archetypal deal between Washington and Moscow, in return for which Defense Secretary Gates publicly allowed that the missile defense systems that the U.S. wants to set up in the Czech Republic and Poland, and which Russia strenuously objects to, could “go away” if “the Iranian threat” went away. Immediately after meeting with Secretaries Gates and Rice in Moscow, President Putin personally delivered a message to the Supreme Leader in Tehran under the cover of public smiles and back-slapping on the same day President Bush made his comment about “World War III.” Iran’s then-chief nuclear negotiator, Ali Larijani, said that “Russian President Vladimir Putin, in his trip to Tehran, had a special message for Iranian officials.” Asked if it involved Iran’s nuclear activities, Putin said: “Yes, Iran’s nuclear issue was also a part of it.” Supreme Leader A. Khamenei reportedly responded to Putin: “We will think about what you said and your proposal,” adding that Iran was “determined to provide our country’s need for nuclear energy.” 

The long and short of the story is this: if in fact the recent NIE findings that Iran has given up an explicit nuclear-weapon program are part of a quid pro quo between Washington and Tehran, then it is undoubtedly a quid pro quo for an Iranian return to cooperation in the pacification of Iraq. In this view, the NIE release is also a step to prepare the U.S. and Iranian public for a progression of increasingly public steps in cooperation between the two countries in Iraq. However, as I indicated at the start, neither the pacification of Iraq nor of Iran’s nuclear program are the fundamental issue driving the long-term U.S.-Iran crisis. The larger issue one has to keep in mind is that the U.S.-Iran confrontation is most fundamentally about oil—and Iranian and Persian Gulf oil is in turn very much about U.S. hegemony in the Gulf and its role as the sole superpower in the world beyond. There is still no evidence that the U.S. has accepted the present clerical leadership in Iran as trustworthy to be in charge of re-invigorated Iranian oil production. Iran’s exports could increase perhaps by two-to-three times over five-to-seven years if sanctions were lifted and massive foreign investment and technology allowed to flow in. 

Now, with an agreement that Iraq will be a U.S. protectorate, four of the five major oil-producing states around the Gulf would be U.S. protectorates, with Iran remaining the only one of the five not reduced to this state of affairs. The Iranian leadership is trading away its ability to disrupt U.S. efforts to pacify Iraq for improved relations and other concessions. But, what does the Iranian leadership now have remaining to bargain away to achieve its ultimate strategic requirement—lifting U.S. and UN oil sanctions without a regime change? It is doubtful that agreeing to not enrich uranium would be sufficient to satisfy Washington on this issue. What, short of conceding to also become a U.S. protectorate of some sort—a state unable to project power in its region and dependant on another for its defense—would satisfy Washington? There is no doubt that Saudi Arabia, Kuwait, and the UAE also have leaderships highly antagonistic to Iran projecting power in the region. For now, it seems the present deals being made are only partial deals, deals about Iraq, and as long as the fundamental deal over Iran’s oil remains elusive, U.S. forceful regime-change efforts will remain a very real threat for the Iranian people and world peace. 


Tom O’Donnell writes and lectures on the global oil order. He teaches at the New School graduate program in international affairs.