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I) Oil
II) Terrorism
III) Nuclear Proliferation
IV) Iraq
V) Democratization
Maps and Tables
Bibliography/Recommended Reading

Iran, once the key U.S. ally in the Middle East, today stands as America's most prominent adversary in the region. In terms of fundamental power indicators, Iran measures up, with almost four times the land and three times the population of Iraq, a country the U.S. is having a very difficult time controlling despite huge investments of blood and treasure for over four years. For those who see a military confrontation as an option, Iran is more daunting than was Iraq. Although the Iranian army is far from a fully modernized force, its potential size as well as the breadth and difficulty of the terrain it has to defend makes any potential invasion quite difficult. The potential addition of a nuclear arsenal would make direct assault and occupation all but unthinkable. Iran stands at the center of nearly all of the key challenges in the region: oil, terrorism, nuclear proliferation, Iraq, and democratization. It is unlikely that all of these problems will be satisfactorily resolved, in the American view, and any of them has the potential to initiate a crisis.

Iran's power stems from far more than simply its geography and demography. With the second largest oil reserves in the world, Iran will be a key player in the fierce resource competition that will intensify in the coming years. Iran's proximity to the Strait of Hormuz, universally recognized as the most important oil-shipping lane in the world, gives it further leverage over the global supply of oil.1 Incidents in the Strait In early 2008 that the U.S. Navy claims were sparked by provocative maneuvers by Revolutionary Guard speedboats against American ships, are a reminder of the high stakes and the potential for conflict.2 Beyond petroleum, Iran's position as a leader in the Muslim world, particularly among the Shi'ia, gives it significant influence outside of its own borders. Although its sponsorship of Hizballah in Lebanon puts it at the top of the U.S. State Department's list of state sponsors of terrorism, the group's position as the most powerful player in southern Lebanon gives Iran a further lever with which to exercise its power in the region.

Today, the nuclear issue finds itself at the forefront of U.S.-Iranian relations. As a party to the Nuclear Non-Proliferation Treaty (NPT), Iran is guaranteed access to nuclear energy for peaceful purposes. However, fears that the dual-use nature of such technology could enable Iran to build a nuclear arsenal in relatively short order have made America and its allies reluctant to allow Iran full access. Statements of Iran's leadership proclaiming the nation's right to possess nuclear weapons-although it insists it is not, a claim backed by U.S. intelligence estimates-and its challenge to Israel's legitimacy and security have given observers pause about Iran's foreign-policy goals. Negotiations over Iran's nuclear program are ongoing, and there is potential for a compromise that gives Iran access to nuclear technology, allows inspections to ensure that no nuclear weapons are produced, and enables all nations to walk away with some degree of national pride and assurances of security intact. However, the intense mistrust between America and Iran-the U.S. refuses to alter its "regime change" stance-and the lack of a united front among the major powers (particularly Russia and China) may derail a deal and put the stability of the entire region at risk.

The U.S. National Intelligence Estimate (NIE) released at the end of 2007 argued that Iran had shut down its nuclear weapons program in 2003 and that the program remained on hold.3 However, the NIE also notes that Iran continues to enrich uranium, and could produce a nuclear weapon by approximately 2015. Such predictions have often proved faulty in the past, typically predicting weapons capability could be achieved long before it could. If Iran goes nuclear, however, the potential for Saudi Arabia, Egypt, and/or Syria to do so as well could significantly exacerbate tensions-particularly because Israel already possesses a nuclear arsenal-in what is already the most politically unstable region in the world.

Interestingly enough, Iran also serves as a key player in Iraq, where sectors of the newly empowered majority Shi'ia population have strong ties to what many consider their spiritual and political leader. Iraq serves as the centerpiece of the Bush administration's efforts at democratization in the Middle East, and Iran, whose youth in particular provide a strong groundswell of support for democracy, plays a key role in further potential political changes. At this time, it is unclear how any of these issues-access to oil, terrorism, nuclear proliferation, Iraq, and democratization-will be resolved to America's liking. However, it is safe to say that however these challenges progress, Iran will play a major role in the ultimate outcome.

I. Oil

    1. Depending on the measure used, Iran has the second or third largest oil reserves in the world with 136 billion barrels of proven oil reserves (10% of the world's total). Saudi Arabia and Canada, if you count the oil sands, have larger reserves, see Figure 4.
      1. Iran produces around 3.8 million barrels of oil per day, and exports about 2.2 million of those barrels4
        1. With oil selling for over $90 per barrel at the end of 2007 and early 2008, it is little wonder that oil revenues make up 40-50% of the government's annual budget5
        2. The high price of oil has allowed the Iranian government to continue heavy subsidies for its population, fund military improvements, and more credibly claim that it can survive economic sanctions threatened by the West in response to its nuclear ambitions
      2. Iran has not returned to its pre-Islamic Revolution production high of 6 million barrels per day, but it has plans to reach 5 million barrels per day by 2010 and 8 million by 2015, although these goals require heavy foreign investment that would not arrive if economic sanctions are put in place6
    2. Strait of Hormuz
      1. The southern border of Iran happens to form the entire northern border of the Persian Gulf, which means that Iranian territory directly abuts the most important oil shipping lanes in the world
        1. The Strait of Hormuz is one such area where Iran is only separated from Oman by 34 miles of ocean at its narrowest point; see Figure 5
        2. The shipping lanes are only 2 miles wide in each direction with a 2-mile buffer zone due to rapidly decreasing ocean depth towards the coasts
          1. Further complicating the situation, Iran seized islands near the Strait in 1992, and has resisted attempts to cede control
        3. Although Iran itself would be severely harmed by a disruption of oil shipping through the Strait and/or the Gulf in general, its ability to all but stop shipping through the region gives it a significant card to play if negotiations with other nations lead to conflict
      2. The Strait of Hormuz may be the potential flashpoint for conflict between Iran and the U.S., as demonstrated in recent encounters between the two navies in January 2008.7 The U.S. Navy claims that Iranian boats sped towards them in international waters and issued radio warnings that the U.S. ships would be blown up. U.S. commanders nearly gave the order to fire on the Iranians, which would have marked a serious incident that could have been used a pretext for a wider conflict by either side.

II. Terrorism

    1. See Terrorism Section of the Foreign Policy Index
    2. Hizballah
      1. Hizballah was formed in response to the Israeli occupation of Lebanon in 1982 with the help of several thousand Iranian Revolutionary Guards sent to help train and equip the fighters from the "Party of God"
        1. Hizballah mainly operates in southern Lebanon, the Bekaa Valley, and the southern suburbs of Beirut; it also has cells in Africa, Europe, North America, South America, and Asia (see Figure 6 for a map of its main area of operation)
      2. Hizballah takes much of it ideological and political inspiration and objectives from Iran; Iran provides funding and weapons to Hizballah as well, including the thousands of rockets stockpiled by the group in recent years, many of which were used in the summer 2006 conflict with Israel
      3. Hizballah concluded a 33-day war with Israel the summer of 2006, which started after Hizballah fighters captured 2 Israeli soldiers and killed 8 others on July 12, 2006
        1. Israel surprised Hizballah with the intensity of its response, which included aerial assaults that led to infiltrations of increasing scale into Lebanon. A fragile cease-fire in place since mid-August 2006 arrived just before a major invasion by Israeli troops
          1. See Figure 7 for a map of Israeli airstrikes, which were concentrated on Hizballah's main strongholds in southern Lebanon
      4. The U.S. and Israel seek the disarming of Hizballah and the reassertion of the Lebanese government's control over all parts of its territory; Iran opposes such a move; Hizballah's political operations, however, make it a major and legitimate player in Lebanese politics
      5. The Bush administration views Hizballah as a major adversary in the "War on Terror," yet unlike Al-Qaeda, Hizballah has strong state ties (Iran, Syria) that offer new challenges and opportunities. Furthermore, although Hizballah sees the United States as an adversary, unlike Al-Qaeda, Hizballah is not actively targeting the U.S.
      6. Iran's support of Hizballah cements its position on the State Department's list of state sponsors of terrorism, meaning that under U.S. law, Iran faces "restrictions on U.S. foreign assistance; a ban on defense exports and sales; certain controls over exports of dual-use items; and miscellaneous financial and other restrictions."8
        1. Absent the severing of these ties, normalization of relations between the two nations seems unlikely
          1. It is important to note that the U.S. accuses Iran of providing funding and support to Hamas and Islamic Jihad, two of Israel's greatest enemies, in addition to Hizballah

>Nuclear Proliferation

    1. See Nuclear Weapons section of Foreign Policy Index
    2. Iran is seeking nuclear energy and technology, which guaranteed to it as a party to the Nuclear Non-Proliferation Treaty (NPT)
      1. However, the U.S. and others believe Iran is seeking to develop a nuclear arsenal, and the possession of such dual-use technology would make the creation of nuclear weapons much easier
      2. Negotiations are currently ongoing between Iran, the United States, and the other members of the UN Security Council
        1. Resolution 1696, passed 14-1 by the Security Council on July 31, 2006, called on Iran to suspend its nuclear program (specifically uranium enrichment and reprocessing) since it had not assured the international community that it did not have designs on nuclear weapons and would accept international inspectors in its facilities; the Security Council demanded that Iran do this by August 31 or face sanctions. (see Figure 8 for Iranian nuclear facilities)
        2. Iran failed to comply, which led to Resolution 1737 in December 2006, placing sanctions on Iran until it suspended uranium enrichment and submitted to inspections by the International Atomic Energy Agency (IAEA)
          1. These sanctions were strengthened with Resolution 1747, adopted unanimously by the UN Security Council on March 24, 2007, which banned armed sales in addition to the bans on nuclear materials and the freezing of Iranian assets.
      3. The U.S. has three main fears regarding Iran acquiring nuclear weapons 1) a nuclear arms race between Iran and Israel, the latter having a nuclear arsenal already; 2) Saudi Arabia, Egypt, and/or Syria subsequently pushing to acquire nuclear weapons in response; 3) Iran passing or threatening to pass nuclear technology or weapons on to other nations and/or terrorist groups9

IV. Iraq

    1. Over four years after the U.S. invasion of Iraq, the country continues to experience a brutal insurgency, a civil war, or both
      1. Iran, which fought a brutal war with Iraq after Iraq invaded Iran in 1980, has a significant interest in helping to shift the direction of the new Iraqi government its way, as well as weaken U.S. influence in the region
        1. The rise of the Iraqi Shi'ia and the current instability in the country can help Iran accomplish these goals, although it is unclear to what extent Iran has influence over the current Shi'ia leadership
        2. Iranian influence and agents in Iraq are hard to identify and harder to stop, especially in the current context; thus, it seems likely that both will continue to operate, further souring U.S.-Iranian relations
      2. It seems to many that any deal concerning the warring factions in Iraq will require some degree of assent or assistance from Iraq's neighbors, particularly Iran. However, little evidence exists that the current U.S. leadership is even willing to talk to Iran openly about such a prospect.

V. Democratization

    1. The Bush administration has made democracy promotion a centerpiece of its foreign policy, particularly in the Middle East
      1. Although Afghanistan and Iraq are examples where U.S. forces are directly involved in attempts to foster transitions to stable democracies, countries like Iran with significant portions of their populations supporting democratic reforms are potential states for future U.S. action (political, economic, and, possibly, military)
      2. The U.S. Congress pushed the State Department to spend $10 million on democracy and human rights programs in Iran in FY2006.10 President Bush requested $75 for such programs in 2007, although the U.S. Senate originally cut that to $25 million, arguing that American dollars are dangerous for Iranian dissident groups to receive, a claim with which many Iranian dissidents agree.11
        1. Although most Americans agree that a democratic Iran may be a good thing, a debate continues to rage over what role, if any, the U.S. should play in that process
      3. Iran now elects a parliament (the Majlis) and its president, as well as local officials, and enjoys universal suffrage. However, its 1989 constitution gives ultimate decision-making authority to the Supreme Leader, a Muslim cleric, and provides considerable authority to other unelected bodies that have significant control over the electoral process and legislation. The country's human rights record, by Western standards, is also found wanting, particularly with regard to freedom of expression and women's rights.12

Figure 1. Iran Political Map

Figure 2. Iran Ethno-Religious Distribution

Figure 3. Iran Petroleum

Figure 4. Total Oil Reserves By Country 200713

Figure 5. The Strait of Hormuz

Figure 6. Hizballah's Main Areas of Operational Control

Figure 7: Map of Israeli Strikes in 2006 Israeli-Hizballah War

Figure 8: Iran's Nuclear Facilities

Bibliography/Recommended Reading

Ali Ansari, Confronting Iran: The Failure of American Foreign Policy And the Next Great Crisis in the Middle East, (New York: Perseus Book Group, 2006).

Vali Nasr, "When the Shiites Rise," Foreign Affairs, July/August 2006,

Vali Nasr, The Shia Revival: How Conflicts with Islam Will Shape the Future (New York: W.W. Norton, 2006).

Ken Pollack, The Persian Puzzle: The Conflict Between Iran and America (New York: Random House, 2004).

Barry Posen, "We Can Live With a Nuclear Iran,"

Scott Sagan, "How To Keep the Bomb From Iran," Foreign Affairs, September/October 2006,

Jim Walsh, "Iran and the Nuclear Issue: Negotiated Settlement or Escalation?" Testimony Before U.S. Senate Committee on Homeland Security & Governmental Affairs, July 20, 2006,


1. 25% of the world's oil and 40% of the oil traded on the world market flows through the Strait of Hormuz each day.

2. "U.S. Describes Confrontation With Iranian Boats,"

3. "U.S. Finds Iran Halted Its Nuclear Arms Effort in 2003," The New York Times, A question remains, however, about Iran's nuclear-weapons intentions: see Farideh Farhi, "U.S.-Iran Relations After the NIE," Audit of Conventional Wisdom, MIT Center for International Studies, Dec. 2007.


5. For oil price see: For budget percentage see:


7. "U.S. Describes Confrontation With Iranian Boats,"


9. On why the U.S. can effectively deal with a nuclear Iran, see Barry Posen "We Can Live with a Nuclear Iran,"

10. "Update on Iran Democracy Promotion Funding,"

11. "Iran: U.S. Senator Discusses Democracy-Promotion Efforts,"; "Iran on Guard over U.S. Funds,"

12. For a discussion of governing structure, see Ali Mostashari, "Iran: Rogue State?" Audit of Conventional wisdom, MIT Center for International Studies, Sept. 2005. On human rights issues, see Human Rights Watch.

13. It is important to note that estimated oil reserves are notoriously unreliable due both to the difficulty of accurate measurement as well as the presence of significant incentives for countries to overestimate their reserves (particular OPEC countries where production limits are tied to reserve totals).

Massachusetts Institute of Technology