R 211411Z MAY 97
FM AMEMBASSY ABU DHABI
TO SECSTATE WASHDC 3732
INFO SECDEF WASHINGTON DC
COMUSNAVCENT //
USCINCCENT MACDILL AFB FL//
JCS WASHINGTON DC
IRAN COLLECTIVE

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