Iran: Regional Perspectives And U.S. Policy

Iran: Regional Perspectives and U.S. PolicyCasey L. Addis, CoordinatorAnalyst in Middle Eastern AffairsChristopher M. BlanchardAnalyst in Middle Eastern AffairsKenneth KatzmanSpecialist in Middle Eastern AffairsCarol MigdalovitzSpecialist in Middle Eastern AffairsJim NicholSpecialist in Russian and Eurasian AffairsJeremy M. SharpSpecialist in Middle Eastern AffairsJim ZanottiAnalyst in Middle Eastern AffairsJanuary 13, 2010Congressional Research Service7-5700www.crs.govR40849CRS Report for CongressPrepared for Members and Committees of Congress

Iran: Regional Perspectives and U.S. PolicySummaryAs the Administration and Congress move forward to pursue engagement, harsher sanctions, orboth, regional actors are evaluating their policies and priorities with respect to Iran. Iran’sneighbors share many U.S. concerns, but often evaluate them differently than the United Stateswhen calculating their own relationship with or policy toward Iran. Because Iran and otherregional concerns—the Arab-Israeli peace process, stability in Lebanon and Iraq, terrorism, andthe ongoing war in Afghanistan—have become increasingly intertwined, understanding thepolicies and perspectives of Iran’s neighbors could be crucial during the consideration of optionsto address overall U.S. policy toward Iran.Iran’s neighbors seek to understand and influence changes in the following areas: Iran’s regional influence, Iran’s nuclear program, Iran’s role as an energy producer, and Iran’s support for terrorism and non-state actors.Although the Obama Administration may share many goals of the previous administration onIran, it also sees the need for new strategies and approaches. The Obama Administration hasadvocated a policy of engagement with Iran to determine the nature of its nuclear program andaddress other subjects of international concern. While post-election turmoil in Iran delayed theseefforts temporarily, it appears that the Administration is committed to pursue engagement throughthe P5 1 framework. At the same time, some Members of Congress have called for increasedsanctions on Iran.The United States, Israel, and the EU proposed the end of 2009 as a deadline for Iran todemonstrate its willingness to cooperate on the nuclear issue. That deadline has lapsed with novisible progress toward a resolution and the Administration is now working with its P5 1 partnersto determine a course of action for 2010. Regardless of how they decide to proceed, any actionson the part of the Obama Administration, Congress, or the international community, and anydevelopments in or provocations by Iran, will have implications for U.S. interests in the region asIran’s neighbors react and reevaluate their policies accordingly.This report provides a description of Iran’s neighbors’ policies and interests, options forCongressional consideration, and an analysis of potential regional implications. For moreinformation on Iran and regional perspectives, see CRS Report RL32048, Iran: U.S. Concernsand Policy Responses, by Kenneth Katzman; CRS Report RL33476, Israel: Background andRelations with the United States, by Carol Migdalovitz; CRS Report RS20871, Iran Sanctions, byKenneth Katzman; CRS Report RL33533, Saudi Arabia: Background and U.S. Relations, byChristopher M. Blanchard; CRS Report RS22323, Iran's Activities and Influence in Iraq, byKenneth Katzman; and CRS Report R40653, Iran’s 2009 Presidential Elections, by Casey L.Addis.Congressional Research Service

Iran: Regional Perspectives and U.S. PolicyContentsIntroduction: U.S. and Regional Interests .1Iran’s Regional Influence .1Iran’s Nuclear Program .2Iran’s Role as an Energy Producer .2Iran’s Support for Terrorism .3Iran: Regional Perspectives and Policies.4Saudi Arabia .4Perspectives and Interests.4Policy Priorities .6Economic and Security Concerns .6Prospects .7Qatar.7Perspectives and Interests.7Policy Priorities .8Economic and Security Concerns .9Prospects .9Bahrain . 10Perspectives and Interests. 10Policy Priorities . 11Economic and Security Concerns . 11Prospects . 12The United Arab Emirates . 12Perspectives and Interests. 12Policy Priorities . 13Economic and Security Concerns . 14Prospects . 14Kuwait . 15Perspectives and Interests. 15Policy Priorities . 15Economic and Security Concerns . 16Prospects . 16Oman. 16Perspectives and Interests. 16Policy Priorities . 17Economic and Security Concerns . 17Prospects . 17Iraq. 18Perspectives and Interests. 18Policy Priorities . 18Economic and Security Concerns . 19Prospects . 20Turkey . 21Perspectives and Interests. 21Policy Priorities . 22Economic and Security Concerns . 23Prospects . 24Afghanistan . 24Congressional Research Service

Iran: Regional Perspectives and U.S. PolicyPerspectives and Interests. 24Policy Priorities . 25Economic and Security Concerns . 25Prospects . 26Egypt . 27Perspectives and Interests. 27Policy Priorities . 27Economic and Security Concerns . 28Prospects . 29Syria . 30Perspectives and Interests. 30Policy Priorities . 30Economic and Security Concerns . 31Prospects . 31Lebanon. 33Perspectives and Interests. 33Policy Priorities . 33Economic and Security Concerns . 33Prospects . 34Palestinians . 35Perspectives and Interests. 35Policy Priorities . 36Economic and Security Concerns . 37Prospects . 38Israel. 39Perspectives and Interests. 39Policy Priorities . 40Economic and Security Concerns . 41Prospects . 41Caspian Neighbors . 43Policy Priorities . 43Economic and Security Concerns . 46Prospects . 47Issues for Congressional Consideration . 47Possible Regional Implications. 48Of Increased Sanctions. 48Of a Preemptive Strike . 48Of a Nuclear Iran . 49FiguresFigure 1. Iran and its Neighbors .4ContactsAuthor Contact Information . 50Congressional Research Service

Iran: Regional Perspectives and U.S. PolicyIntroduction: U.S. and Regional Interests1As the Administration and Congress move forward to pursue engagement, harsher sanctions, orboth, regional actors are evaluating their policies and priorities with respect to Iran. Iran’sneighbors share many U.S. concerns, but often evaluate them differently than the United Stateswhen calculating their own relationship with or policy toward Iran. Because Iran and otherregional concerns—the Arab-Israeli peace process, stability in Lebanon and Iraq, terrorism, andthe ongoing war in Afghanistan—have become increasingly intertwined, understanding thepolicies and perspectives of Iran’s neighbors could be crucial during the consideration of optionsto address overall U.S. policy toward Iran.Iran’s neighbors seek to understand and influence changes in the following areas: Iran’s regional influence, Iran’s nuclear program, Iran’s role as an energy producer, and Iran’s support for terrorism and non-state actors.Iran’s Regional InfluenceThe United States and Iran’s neighbors have expressed concerns about Iran’s regional ambitions,its ability to influence the domestic political circumstances of its neighbors, and its ability to actas a spoiler in the peace process. Many analysts have cast events in the region as a power strugglebetween Sunni-ruled Arab states, led by Egypt and Saudi Arabia, and Iran and its allies andproxies, namely Syria, Hamas, and Hezbollah.2 Others reject this paradigm as overly simplistic,pointing to Iran’s physical and demographic attributes as an explanation for its regional role. Iranis a country of considerable size and resources3 and, as a result, exerts a natural level of influence,both in positive and negative ways, they argue. Some observers have argued that Iran’s soft powerhas diminished since the June 2009 presidential election and ongoing unrest.For some of Iran’s neighbors, Iran’s regional influence is a domestic political concern. Forexample, Bahrain and Kuwait—Gulf states with signification Shiite populations—often expressconcerns that Iran is fomenting unrest among Shiites, highlighting fears about their own internalstability. In recent years, Morocco, Egypt, and Yemen have expressed similar concerns. Iran alsouses proxies that at times are a destabilizing force, as is the case with Hezbollah in Lebanon.Others view Iran’s regional aspirations in a broader sense. Saudi Arabia, for example, criticizesIran’s interference in what it perceives as “Arab causes,” like the Israeli-Palestinian issue, andreportedly confronts Iran’s proxies in Lebanese politics with material support of Sunni politicalparties and candidates.12Prepared by Casey Addis, Analyst in Middle Eastern Affairs, January 2010.Some analysts also include Qatar on the side of Iran.3According to the CIA World Factbook, Iran has a population of over 66 million, ranking it 20th in the world, and anarea of 1.6 billion square kilometers, ranking it 25th in land mass. Iran also ranks in the top five when it comes toproven oil reserves and natural gas production.Congressional Research Service1

Iran: Regional Perspectives and U.S. PolicyIran’s Nuclear ProgramThe primary goal of U.S. and international engagement with Iran is to gain a clear understandingof Iran’s nuclear activities through inspections and safeguards, and to limit Iran’s uraniumenrichment capacity to mitigate future concerns about the nature of its program and its possibleweaponization. Some argue that uncertainty over Iran’s nuclear program centers on the regime’spolitical will to develop a nuclear weapon and are uncertain whether that will exists. Manyanalysts, however, perceive the weaponization of Iran’s nuclear program as a certainty unless theinternational community acts to stop it. The disclosure on September 21, 2009 of a seconduranium enrichment facility near Qom raised concerns on all sides (see “Caspian Neighbors”below). Iran’s intentions are difficult to discern, but most analysts and observers agree that if Iranwas seeking enriched fuel for nuclear energy and other civilian purposes, then it would not needto conceal an enrichment facility or restrict access of International Atomic Energy Agency(IAEA) inspectors to existing sites.Most of Iran’s neighbors share the concern of the United States and the international communityover the nature of Iran’s nuclear program, but some perceive it as a more imminent threat thanothers. Others recognize the threat but have competing economic and political interests that mayprevent them from publicly expressing their concerns. Almost all of Iran’s neighbors share theprimary concern that uncertainty over Iran’s nuclear program could lead to a regional arms raceor war that could spill over into their territories, complicate their relationships with the UnitedStates, and/or badly damage their economies.Iran’s Role as an Energy ProducerIran’s energy resources serve as both a source of funds for its nuclear program, support forterrorism, and other activities, and as leverage over international players who might otherwisecondemn those activities. According to the Energy Information Administration (EIA), Iran holdsan estimated 10% of proven global oil reserves, the third largest proven reserves following SaudiArabia

Iran’s neighbors seek to understand and influence changes in the following areas: Iran’s regional influence, Iran’s nuclear program, Iran’s role as an energy producer, and Iran’s support for terrorism and non-state actors. Although the Obama Administrati