Iran: U.S. Concerns and Policy Responses
Kenneth Katzman
Specialist in Middle Eastern Affairs
September 4, 2009
Congressional Research Service
7-5700
www.crs.gov
RL32048
CRS Report for Congress
P
repared for Members and Committees of Congress

Iran: U.S. Concerns and Policy Responses

Summary
President Obama has said his Administration shares the goals of the previous Administration to
contain Iran’s strategic capabilities and regional influence. The Administration has not changed
the previous Administration’s characterization of Iran as a “profound threat to U.S. national
security interests,” a perception generated not only by Iran’s nuclear program but also by its
military assistance to armed groups in Iraq and Afghanistan, to the Palestinian group Hamas, and
to Lebanese Hezbollah. However, the Obama Administration has formulated approaches to
achieve those goals that differ from those of its predecessor—in particular through expanded
direct diplomatic engagement with Iran. Prior to Iran’s disputed June 12, 2009 presidential
elections, this U.S. outreach was put into practice with messages to the Iranian people by
President Obama, and through invitations to and contact with Iranian diplomats at multilateral
meetings. Attempting to convince Iran that the Administration is not hostile to Iran, the
Administration also downplayed Bush Administration policies to add international sanctions on
Iran, to fund civil society activists there, and to openly discuss potential U.S. military action
against Iranian nuclear facilities.
The Administration’s Iran policy did not change significantly because of the Iranian crackdown
against protesters who alleged vast fraud in the June 12, 2009 presidential election, in which
incumbent President Mahmoud Ahmadinejad was declared the winner. The unrest has represented
the most serious challenge, to date, to the regime’s authority, although Iran’s Supreme Leader
appears to be succeeding in quelling the public outcry and intra-regime tension as of September
2009. President Obama has criticized Iran’s use of violence against protesters, but the President
apparently has sided with those in the Administration who want to take advantage of Iran’s
internal weakness to obtain a compromise that curbs Iran’s nuclear program. The Administration
has indicated that, if Iran refuses to return to the nuclear bargaining table by September 24, 2009
in earnest, it would return to working with allies to resume sanctioning and pressuring Iran. Those
threats may have contributed to Iran’s announcement in early September 2009 that it is ready to
return to the multilateral talks. Some in Congress believe that bills in the 111th Congress, such as
H.R. 2194 and S. 908, which would tighten U.S. sanctions on Iran by penalizing sales to Iran of
gasoline, could help pressure Iran into a nuclear settlement. Others believe new U.S. unilateral
sanctions would cause Iran to dig in its heels and resist compromise.
The multilateral process on Iran’s nuclear program remains as it has been since 2006 – attempting
to persuade Iran to limit its nuclear program by applying progressive multilateral economic
pressure on Iran while also offering it potential cooperation should it suspend its enrichment of
uranium. The pressure has taken the form of U.N. Security Council resolutions that ban weapons
of mass destruction (WMD)-related trade with Iran; freeze the assets of Iran’s nuclear entities and
personalities; prevent Iran from transferring arms outside Iran; ban international travel by some
Iranians; call for inspections of some Iranian sea and airborne cargo shipments; and call for
restrictions on dealings with some Iranian banks. Separate U.S. efforts to persuade European
governments to curb trade, investment, and credits to Iran; and to convince foreign banks not to
do business with Iran, are intended to weaken Iran’s economy and compound the U.N. pressure.
For further information, see CRS Report RS20871, Iran Sanctions , by Kenneth Katzman, CRS
Report RS22323, Iran’s Activities and Influence in Iraq, by Kenneth Katzman, and CRS Report
RL34544, Iran’s Nuclear Program: Status, by Paul K. Kerr.

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Contents
Political History .......................................................................................................................... 1
Regime Structure, Stability, and Elections ................................................................................... 2
The Supreme Leader, His Powers, and Other Ruling Councils ............................................... 2
The Presidency/Mahmoud Ahmadinejad ............................................................................... 5
Ahmadinejad’s Policies and Popularity............................................................................ 5
June 12, 2009, Presidential Elections............................................................................... 7
Election Dispute and Aftermath....................................................................................... 8
How Shaken and Divided Is the Regime? ........................................................................ 9
Human Rights and Dissent ........................................................................................................ 12
Dissident Activists .............................................................................................................. 12
Exiled Opposition Groups ................................................................................................... 13
People’s Mojahedin Organization of Iran (PMOI)/Camp Ashraf .................................... 13
Other Armed Groups ..................................................................................................... 14
The Son of the Former Shah.......................................................................................... 14
Other Outside Activists ................................................................................................. 15
Iran’s Strategic Capabilities and Weapons of Mass Destruction Programs .................................. 17
Conventional Military/Revolutionary Guard/Qods Force ..................................................... 17
Nuclear Program and Related International Diplomacy ....................................................... 19
Iran’s Arguments and the International Response........................................................... 20
Establishment of “P5+1” Contact Group/June 2006 Incentive Package.......................... 22
Resolution 1696 ............................................................................................................ 23
Resolution 1737 ............................................................................................................ 23
Resolution 1747 and Results ......................................................................................... 23
Resolution 1803 and Additional Incentives .................................................................... 24
Resolution 1835 ............................................................................................................ 24
The P5+1 Process Under President Obama .................................................................... 25
Chemical Weapons, Biological Weapons, and Missiles ........................................................ 26
Ballistic Missiles/Warheads........................................................................................... 26
Foreign Policy and Support for Terrorist Groups ....................................................................... 27
Relations with the Persian Gulf States ................................................................................. 28
Iranian Policy in Iraq........................................................................................................... 30
Supporting Palestinian Militant Groups ............................................................................... 31
Iran and Hamas ............................................................................................................. 31
Lebanese Hezbollah and Syria............................................................................................. 32
Syria ............................................................................................................................. 34
Central Asia and the Caspian............................................................................................... 34
Afghanistan and Pakistan .................................................................................................... 35
Pakistan ........................................................................................................................ 36
Al Qaeda............................................................................................................................. 36
Latin America ..................................................................................................................... 37
India ................................................................................................................................... 37
Africa ................................................................................................................................. 38
U.S. Policy Responses, Options, and Legislation ....................................................................... 38
Policy During the Clinton and George W. Bush Administrations.......................................... 38
George W. Bush Administration Policy ......................................................................... 39
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Overview of Obama Administration Policy ......................................................................... 39
Implementation of the Engagement Policy .................................................................... 40
Enhanced U.S. Interests Section .................................................................................... 41
Engagement Efforts During the George W. Bush Administration ................................... 41
“Grand Bargain Concept”.............................................................................................. 42
Containment and Possible Military Action........................................................................... 42
An Israeli Strike? .......................................................................................................... 43
Iranian Retaliatory Scenarios......................................................................................... 44
Containment and the Gulf Security Dialogue................................................................. 45
Presidential Authorities and Legislation......................................................................... 45
Regime Change................................................................................................................... 46
Democracy Promotion Efforts ....................................................................................... 46
Funding ........................................................................................................................ 48
Further International and Multilateral Sanctions .................................................................. 49
European/Japanese/Other Foreign Country Policy on Sanctions and Trade
Agreements................................................................................................................ 50
World Bank Loans ........................................................................................................ 51
U.S. Sanctions..................................................................................................................... 52
Terrorism/Foreign Aid Sanctions ................................................................................... 52
Proliferation Sanctions .................................................................................................. 53
Targeted Financial Measures by Treasury Department ................................................... 53
U.S. Ban on Trade and Investment with Iran.................................................................. 53
The Iran Sanctions Act (ISA) ........................................................................................ 53
Divestment.................................................................................................................... 54
Counter-Narcotics ......................................................................................................... 54
Travel-Related Guidance............................................................................................... 54
Status of Some U.S.-Iran Assets Disputes ...................................................................... 54
Conclusion................................................................................................................................ 54

Figures
Figure 1. Structure of the Iranian Government ........................................................................... 56
Figure 2. Map of Iran ................................................................................................................ 57

Tables
Table 1. Major Factions and Personalities.................................................................................... 3
Table 2. Factions in the Eighth Majles ......................................................................................... 6
Table 3. Selected Economic Indicators ...................................................................................... 11
Table 4. Human Rights Practices ............................................................................................... 15
Table 5. The Revolutionary Guard............................................................................................. 18
Table 6. Iran’s Conventional Military Arsenal............................................................................ 19
Table 7. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program (1737,
1747, and 1803) ..................................................................................................................... 26
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Table 8. Iran’s Ballistic Missile Arsenal..................................................................................... 27
Table 9. Iran Democracy Promotion Funding ............................................................................ 48

Contacts
Author Contact Information ...................................................................................................... 58
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uch of the debate over U.S. policy toward Iran has centered on the nature of the current
regime; some believe that Iran, a country of about 70 million people, is a threat to U.S.
M interests because hardliners in Iran’s regime dominate and set a policy direction
intended to challenge U.S. influence and allies in the region. President George W. Bush, in his
January 29, 2002, State of the Union message, labeled Iran part of an “axis of evil” along with
Iraq and North Korea.
Political History
The United States was an ally of the late Shah of Iran, Mohammad Reza Pahlavi (“the Shah”),
who ruled from 1941 until his ouster in February 1979. The Shah assumed the throne when
Britain and Russia forced his father, Reza Shah Pahlavi (Reza Shah), from power because of his
perceived alignment with Germany in World War II. Reza Shah had assumed power in 1921
when, as an officer in Iran’s only military force, the Cossack Brigade (reflecting Russian
influence in Iran in the early 20th century), he launched a coup against the government of the
Qajar Dynasty. Reza Shah was proclaimed Shah in 1925, founding the Pahlavi dynasty. The
Qajars had been in decline for many years before Reza Shah’s takeover. That dynasty’s perceived
manipulation by Britain and Russia had been one of the causes of the 1906 constitutionalist
movement, which forced the Qajars to form Iran’s first Majles (parliament) in August 1906 and
promulgate a constitution in December 1906. Prior to the Qajars, what is now Iran was the center
of several Persian empires and dynasties, but whose reach shrunk steadily over time. Since the
16th century, Iranian empires lost control of Bahrain (1521), Baghdad (1638), the Caucasus
(1828), western Afghanistan (1857), Baluchistan (1872), and what is now Turkmenistan (1894).
Iran adopted Shiite Islam under the Safavid Dynasty (1500-1722), which brought Iran out from a
series of Turkic and Mongol conquests.
The Shah was anti-Communist, and the United States viewed his government as a bulwark
against the expansion of Soviet influence in the Persian Gulf and a counterweight to pro-Soviet
Arab regimes and movements. Israel maintained a representative office in Iran during the Shah’s
time and the Shah supported a peaceful resolution of the Arab-Israeli dispute. In 1951, under
pressure from nationalists in the Majles (parliament) who gained strength in the 1949 Majles
elections, he appointed a popular nationalist parliamentarian, Dr. Mohammad Mossadeq, as Prime
Minister. Mossadeq was widely considered left-leaning, and the United States was wary of his
policies, which included his drive for nationalization of the oil industry. Mossadeq’s followers
began an uprising in August 1953 when the Shah tried to dismiss Mossadeq, and the Shah fled.
The Shah was restored in a successful CIA-supported uprising against Mossadeq.
The Shah tried to modernize Iran and orient it toward the West, but in so doing he also sought to
marginalize Iran’s Shiite clergy. He exiled Ayatollah Ruhollah Khomeini in 1964 because of
Khomeini’s active opposition, which was based on the Shah’s anti-clerical policies and what
Khomeini alleged was the Shah’s forfeiture of Iran’s sovereignty to the United States. Khomeini
fled to and taught in Najaf, Iraq, a major Shiite theological center that contains the Shrine of
Imam Ali, Shiism’s foremost figure. There, he was a peer of senior Iraqi Shiite clerics and, with
them, advocated direct clerical rule or velayat-e-faqih (rule by a supreme Islamic jurisprudent). In
1978, three years after the March 6, 1975, Algiers Accords between the Shah and Iraq’s Baathist
leaders, which settled territorial disputes and required each party to stop assisting each other’s
oppositionists, Iraq expelled Khomeini to France, from which he stoked the Islamic revolution.
Mass demonstrations and guerrilla activity by pro-Khomeini forces, allied with a broad array of
anti-Shah activists, caused the Shah’s government to collapse in February 1979. Khomeini
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returned from France and, on February 11, 1979, declared an Islamic Republic of Iran, as
enshrined in the constitution that was adopted in a public referendum in December 1979 (and
amended in 1989). Khomeini was strongly anti-West and particularly anti-U.S., and relations
between the United States and the Islamic Republic turned hostile even before the November 4,
1979, seizure of the U.S. Embassy by pro-Khomeini radicals.
Regime Structure, Stability, and Elections
About a decade after founding the Islamic republic, Ayatollah Ruhollah Khomeini died on June 3,
1989. The regime he established—enshrined in an Islamic republican constitution adopted in
October 1979 and amended in a national referendum of April 1989—consists of some elected and
some appointed positions. The regime has appeared relatively stable, but, even before the serious
unrest following the June 12, 2009, presidential election, faced periodic but much less serious
unrest from minorities, intellectuals, students, labor groups, and women. Iran’s is widely
considered to be an authoritarian regime, but there has traditionally been popular input and a
degree of checks and balances among power center. This degree of inclusiveness was called into
serious question by the events surrounding the June 2009 election. National elections under the
Islamic republic have always been held, and on time, even during the eight year Iran-Iraq war,
although there are limitations on who is allowed to run.
The Supreme Leader, His Powers, and Other Ruling Councils
Upon Khomeini’s death, one of his disciples, Ayatollah Ali Khamene’i, was selected Supreme
Leader by an elected 86-seat “Assembly of Experts.”1 Although he has never had Khomeini’s
undisputed authority, Khamene’i has vast formal powers as Supreme Leader that will likely allow
him to maintain his grip on power, despite the criticism emanating even from some clerics about
his handling of the dispute surrounding the June 2009 election.
He is Commander in Chief of the armed forces, giving him the power to appoint commanders and
to be represented on the highest national security body, the Supreme National Security Council,
composed of top military and civilian security officials. He appoints half of the twelve-member
Council of Guardians;2 and the head of Iran’s judiciary (currently Ayatollah Mahmoud Shahrudi).
Headed by Ayatollah Ahmad Jannati, the conservative-controlled Council of Guardians reviews
legislation to ensure it conforms to Islamic law, and it screens election candidates and certifies
elections results. The Supreme Leader also has the power, under the constitution, to remove the
elected President if either the judiciary or the elected Majles (parliament) say the President should
be removed, with cause. The Supreme Leader appoints members of the 42-member Expediency
Council
, set up in 1988 to resolve legislative disagreements between the Majles and the Council
of Guardians but its powers were expanded in 2006 to include oversight of the executive branch
(cabinet) performance. Expediency Council members serve five-year terms. The Council,
appointed most recently in February 2007, is still headed by Rafsanjani; its executive officer is
former Revolutionary Guard commander-in-chief Mohsen Reza’i.

1 The Assembly also has the power to amend Iran’s constitution.
2 The Council of Guardians consists of six Islamic jurists and six secular lawyers. The six Islamic jurists are appointed
by the Supreme Leader. The six lawyers on the Council are selected by the judiciary but confirmed by the Majles.
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The Assembly of Experts is empowered to oversee the work of the Supreme Leader and replace
him if necessary, as well as to amend the constitution. The Assembly serves a six-year term; the
fourth election for that Assembly was held on December 15, 2006. After that election, Akbar
Hashemi-Rafsanjani, still a major figure having served two terms as president himself (1989-
1997), was named deputy leader of the Assembly. After the death of the leader of the Assembly,
Rafsanjani was selected its head in September 2007, outpointing a harder line competitor,
Ayatollah Ahmad Jannati. (A chart on the Iranian regime is at the end of this paper.)

Table 1. Major Factions and Personalities
Conservatives
Supreme Leader Ali
Born in July 1939 to an Azeri (Turkic) family from Mashhad. Lost the use of his right
Khamene’i
arm in an assassination attempt in June 1981. Helped organize the Revolutionary
Guard and other post-revolution security organs. Served as elected president during
1981-1989 and was selected Khomeini’s successor in June 1989 upon the Ayatollah’s
death. Upon that selection, his religious ranking was advanced in the state-run press
and official organs to “Ayatollah” from the lower ranking “Hojjat ol-Islam.” Has all
the formal powers but not the undisputed authority of his predecessor, founder of
the revolutionary regime Ayatollah Ruhollah Khomeini. Like Khomeini, Khamene’i
general y stays out of day-to-day governmental business but saves his prestige to
resolve factional disputes or to quiet popular criticism of regime performance. Has
taken more interventionist role to calm internal infighting in wake of June 2009
election dispute. Considered moderate-conservative on domestic policy but hardline
on foreign policy and particularly toward Israel. Seeks to challenge U.S. hegemony
and wants Israel defeated but respects U.S. military power and fears military
confrontation with United States. Generally supports the business community
(bazaaris), and opposes state control of the economy. Senior aides in his office
include second son, Mojtaba, who is said to be acquiring increasing influence.
Expediency Council and
Long a key strategist of the regime, and longtime advocate of “grand bargain” to
Assembly of Experts
resolve all outstanding issues with United States, although on Iran’s terms. A mid-
Chair Ali Akbar Hashemi-
ranking cleric, now leads both Expediency Council and Assembly of Experts, although
Rafsanjani
general y perceived as waning in influence general y. Heads moderate-conservative
faction known as Executives of Construction. Was Majles speaker during 1981-89
and President 1989-1997. One of Iran’s richest men, family owns large share of Iran’s
total pistachio nut production. Supported Musavi in June 2009 election, purportedly
financed much of his campaign, and played behind-the-scenes role trying to persuade
Supreme Leader to nullify the June 2009 election. Arrest of five family members on
June 20, 2009, may have reflected Supreme Leader’s pressure on him to cease
supporting election chal enges.
President Mahmoud
Declared re-elected on June 12, 2009, and inaugurated August 5, but results still not
Ahmadinejad
accepted by his election chal engers and protesters. See box .
Majles Speaker Ali Larijani Overwhelming winner for Majles seat from Qom on March 14, 2008, and selected
Majles Speaker on May 25 (237 out of 290 votes). Former state broadcasting head
(1994-2004) and Minister of Culture and Islamic Guidance (1993) , was head of
Supreme National Security Council and chief nuclear negotiator from August 2005
until October 2007 resignation. Sought to avoid U.N. Security Council isolation.
Politically close to Khamene’i but highly critical of Ahmadinejad and criticized
election officials for the flawed June 12, 2009, election and crackdown. Brother of
new judiciary head.
Tehran Mayor
Former Revolutionary Guard Air Force commander and police chief, but a
Mohammad Baqer Qalibaf
moderate-conservative and ally of Larijani. Encourages comparisons of himself to
Reza Shah, invoking an era of stability and strong leadership, while also making use of
modern media tools. Lost in the 2005 presidential elections, but supporters won
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nine out of 15 seats on Tehran city council in December 2006 elections, propelling
him to current post as mayor of Tehran. Recruited moderate conservatives for
March 2008 Majles election.
Senior Clerics in Qom
The most senior clerics in Qom, including several Grand Ayatollahs, are generally
“quietist”—they believe that the senior clergy should refrain from direct involvement
in politics. These include Grand Ayatollah Nasser Makarem Shirazi, Grand Ayatollah
(former judiciary chief) Abdol Karim Musavi-Ardabili, and Grand Ayatollah Yusuf
Sanei. Others believe in political involvement, including Ayatollah Mohammad Taqi
Mesbah Yazdi. He is founder of the hardline Haqqani school, and spiritual mentor of
Ahmadinejad. Fared poorly in December 2006 elections for Assembly of Experts. An
assertive defender of the powers of the Supreme Leader and a proponent of an
“Islamic state” rather than the current “Islamic republic,” and advocates isolation
from the West. May seek to replace Khamene’i. Another politically active senior
cleric is Ayatollah Kazem Haeri, mentor of radical Iraqi faction leader Moqtada Al
Sadr.
Judiciary Chief/Ayatollah
Larijani named in late August 2009 as Judiciary head, replacing Ayatollah Mahmoud
Sadeq Larijani
Shahrudi, who had headed the Judiciary since 1999. Larijani is brother of Majles
Speaker Ali Larijani; both are close to the Supreme Leader. Was appointed primarily
to curb Ahmadinejad’s aggressive prosecutions of reformist leaders following June
2009 election dispute. Another Larijani brother, Mohammad Javad, was deputy
Foreign Minister during the 1980s.
Militant Clerics
Longtime organization of hardline clerics headed by Ayatollah Mohammad Mahdavi-
Association
Kani. Not to be confused with an organization with almost the same name, below.
Did not back Ahmadinejad in June 12 presidential elections.
Reformists
Mohammad Khatemi/Mir
Khatemi - reformist president during 1997-2005 and declared he would run again for
Hossein Musavi
President in June 2009 elections, but withdrew when allied reformist Mir Hossein

Musavi entered the race in late March 2009. Khatemi elected May 1997, with 69% of
the vote; re-elected June 2001with 77%. Rode wave of sentiment for easing social
and political restrictions among students, intellectuals, youths, and women that seeks
reform but not outright replacement of the regime, but became disillusioned with
Khatemi failure to stand up to hardliners on reform issues. Now heads International
Center for Dialogue Among Civilizations. Visited U.S. in September 2006 to speak at
Harvard and the Washington National Cathedral on “dialogue of civilizations.” Has
hewed to staunch anti-Israel line of most Iranian officials, but perceived as open to
accepting a Palestinian-Israeli compromise.
Musavi has views similar to Khatemi on political and social freedoms and on reducing
Iran’s international isolation, but supports strong state intervention in the economy
to benefit workers, lower classes. Khatemi supported Musavi chal enge to 2009
election legitimacy. Musavi revealed in July 2009 he would form a new “party,”
presumably to organize his supporters to compete in ongoing elections. Continued
to appear at some protests in late July 2009.
Society of Militant Clerics Reformist grouping once led by Mehdi Karrubi. Karrubi formed a separate “National
Trust” faction after losing 2005 election. Ran again in 2009, but received few votes
and continues to challenge election legitimacy. Society backed early election-related
protests. Karrubi’s newspaper closed in the wake of election protest.s.
Office of Consolidation
Staunch reformists. Originally strong Khatemi supporters, but turned against him for
Unity (Daftar Tahkim-e-
failing to challenge hardliners, particularly after July 1999 violent crackdown on
Vahdat)
student riots, in which four students were killed. Generally dispersed and repressed
under Ahmadinejad. General y supported Karrubi in 2009 elections and supports
protests.
Islamic Iran Participation
The most prominent and best organized pro-reform grouping. Its leaders include
Front (IIPF).
Khatemi’s brother, Mohammad Reza Khatemi (a deputy speaker in the 2000-2004
Majles) and Mohsen Mirdamadi. Backed Musavi in June 12 election; several IIPF
leaders detained in post-election dispute.
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Mojahedin of the Islamic
Composed mainly of left-leaning Iranian figures who support state control of the
Revolution Organization
economy, but want greater political pluralism and relaxation of rules on social
(MIR)
behavior. A major constituency of the reformist camp. Its leader is former Heavy
Industries Minister Behzad Nabavi, who supported Musavi in 2009 election and
remains in prison.


The Presidency/Mahmoud Ahmadinejad
The President, a position held since 2005 by Mahmoud Ahmadinejad, appoints and supervises the
work of the cabinet. Cabinet appointments are subject to confirmation by the Majles (parliament),
and the Supreme Leader is believed to have significant input into key security cabinet
appointments, including ministers of defense, interior, and intelligence. Although subordinate to
the Supreme Leader, the presidency is a coveted and intensely fought-over position which
provides vast opportunities for the President to empower his political base and to affect policy.
After suffering several election defeats at the hands of President Mohammad Khatemi and the
reformists in the 1997 and 2001 presidential elections, hardliners successfully moved to regain
the sway they held when Khomeini was alive. Conservatives won the February 20, 2004, Majles
elections (which are always held one year prior to each presidential election), although the
conservative win was the result of the Council of Guardians’ disqualification of 3,600 reformist
candidates, including 87 Majles incumbents. That helped conservatives win 155 out of the 290
seats. The George W. Bush Administration and the Senate (S.Res. 304, adopted by unanimous
consent on February 12, 2004) criticized the elections as unfair.
As the reformist faction suffered setbacks, the Council of Guardians narrowed the field of
candidates for the June 2005 presidential elections to 8 out of the 1,014 persons who filed.
Rafsanjani 3 was considered the favorite against several opponents more hardline than he is—
three had ties to the Revolutionary Guard: Ali Larijani (see Table 1); Mohammad Baqer Qalibaf
(see Table 1); and Tehran mayor Mahmoud Ahmadinejad. In the June 17, 2005 first round,
turnout was about 63% (29.4 million votes out of 46.7 million eligible voters). With 21% and
19.5%, respectively, Rafsanjani and Ahmadinejad, who did unexpectedly well because of tacit
backing from Khamene’i, moved to a run-off. Reformist candidates (Mehdi Karrubi and Mostafa
Moin) fared worse than expected. Ahmadinejad won in the June 24 runoff, receiving 61.8% to
Rafsanjani’s 35.7%. He took office on August 6, 2005.
Ahmadinejad’s Policies and Popularity
Ahmadinejad has been a consistently controversial figure for his inflammatory statements. He
attracted opprobrium at an October 26, 2005, Tehran conference entitled “A World Without
Zionism” by stating that “Israel should be wiped off the map.” He insisted on holding a
December 2006 conference in Tehran questioning the Holocaust, a theme he has returned to
several times since, including at a September 2007 speech at Columbia University. A U.N.

3 Rafsanjani was constitutionally permitted to run because a third term would not have been consecutive with his
previous two terms. In the 2001 presidential election, the Council permitted 10 out of the 814 registered candidates.
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Security Council statement and Senate and House resolutions (H.Res. 523 and S.Res. 292),
passed by their respective chambers, condemned the statement. On June 21, 2007, the House
passed H.Con.Res. 21, calling on the U.N. Security Council to charge Ahmadinejad with
violating the 1948 Convention on the Prevention and Punishment of the Crime of Genocide; the
Convention includes “direct and public incitement” to commit genocide as a punishable offense.
Even before the 2009 presidential election campaign, several Iranian leaders, and portions of the
population, were expressing concern that Ahmadinejad’s defiance of the international community
on the nuclear issue—as well as his frequent visits and meetings with such anti-U.S. figures as
Venezuela’s Hugo Chavez — was isolating Iran. These perceptions contributed to a split within
his conservative “Principalist” faction in the March 2008 Majles elections. On November 4, 2008,
the Majles impeached Interior Minister Ali Kordan for falsely claiming he had an Oxford
University degree. Sadeq Mahsouli, a former Revolutionary Guard official, was confirmed as
replacement on November 18, 2008, and his office oversaw the June 2009, presidential election.
Throughout Ahmadinejad’s first term, Supreme Leader Khamene’i issued public statements of
support for Ahmadinejad to rally the regime against international pressure. In August 2008, he
praised Ahmadinejad for refusing to bow to international demands on the nuclear issue and said
the cabinet should make plans for another four years. At other times, such as April 2009,
Khamene’i has upbraided Ahmadinejad—in this case for incorporating the position of coordinator
of the Hajj (major pilgrimage to Mecca) into the Tourism Ministry; the move was reversed.
Khamene’i was perceived as favoring Ahmadinejad’s re-election but, perhaps sensing that this
outcome was not assured, he was publicly neutral in the campaign.
Table 2. Factions in the Eighth Majles
(Elected March 14-April 25, 2008)
Pro-Ahmadinejad Conservatives (United Front of Principalists) 117
Anti-Ahmadinejad Conservatives (Coalition of Principalists)
53
Reformists (39 seats in seventh Majles)
46
Independents 71
Seats annulled or voided
3

On economic matters, many Iranians criticized Ahmadinejad for raising some wages and
lowering interest rates for poorer borrowers, cancelling some debts of farmers, and increasing
social welfare payments and subsidies. These moves fed inflation, but poorer Iranians saw
Ahmadinejad as attentive to their economic plight and this support appears to have been key to
his re-election. Iranian economists say that these programs began to deplete Iran’s reserve fund
(“Oil Stabilization Fund,” which had been as high as about $40 billion) even when oil prices were
high in mid-2008, leaving Iran now unable to cope with the fall in oil prices. Others say he has
not moved to curb the dependence on oil revenues, which account for about 20% of Iran’s gross
domestic product (GDP).
Major economic sectors or markets are controlled by the quasi-statal “foundations” (bonyads),
run by powerful former officials, and there are special trading privileges for them and the bazaar
merchants, a key constituency for some conservatives. The same privileges reportedly apply to
businesses run by the Revolutionary Guard, as discussed below.
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Ahmadinejad has generally been opposed by affluent and educated urbanites. Even before the
post June 2009 election unrest, urban sentiment against him was belied in several student protests
against him. The most recent of these, prior to the June 12 election, was in late February 2009,
when authorities tried to rebury on Amir Kabir University of Technology grounds the bodies of
some killed in the Iran-Iraq war.


Mahmoud Ahmadinejad
First non-cleric to be president of the Islamic republic since the assassination of then president Mohammad Ali Rajai in
August 1981. About 55, he asserts he is a “man of the people,” the son of a blacksmith who lives in modest
circumstances, who would promote the interests of the poor and return government to the original principles of the
Islamic revolution. Has burnished that image as president through regular visits to poor areas and through subsidies
directed at the lower classes. His official biography says he served with the “special forces” of the Revolutionary
Guard, and he served subsequently (late 1980s) as a deputy provincial governor. Has been part of the “Isargaran”
faction composed of former Guard and Basij (volunteer popular forces) leaders and other hardliners. U.S. intelligence
reportedly determined he was not one of the holders of the 52 American hostages during November 1979-January
1981. Other accounts say Ahmadinejad believes his mission is to prepare for the return of the 12th Imam—Imam
Mahdi—whose return from occultation would, according to Twelver Shiite doctrine, be accompanied by the
establishment of Islam as the global religion. Earned clerical criticism in May 2008 for again invoking intervention by
Imam Mahdi in present day state affairs. Regularly attends U.N. General Assembly sessions in New York each
September. In an October 2006 address, Ahmadinejad said, “I have a connection with God.” Sent letter of
congratulation to President-elect Barack Obama for his election victory, but has only tepidly responded to subsequent
Obama Administration outreach initiatives. Following limited recount, declared winner of June 12, 2009, election.

June 12, 2009, Presidential Elections
The reformists’ prospects in the 2009 presidential election seemed to brighten in February 2009,
when Khatemi—who is still highly popular among reform-minded Iranians—said that he would
run. However, on March 18, 2009, Khatemi withdrew from the race in favor of another reformist,
former Prime Minister Mir Hossein Musavi. Musavi was viewed as somewhat less divisive—and
therefore more acceptable to the Supreme Leader—because Musavi had served as Prime Minister
during the 1980-88 Iran-Iraq war. Khatemi backed Musavi enthusiastically.
A total of about 500 candidates for the June 12, 2009, presidential elections registered their names
during May 5-10, 2009. The Council of Guardians decide on the final candidates on May 20—
permitting only four to run: Ahmadinejad, Mir Hossein Musavi, Mehdi Karrubi, and Mohsen
Reza’i. The Interior Ministry, which runs the election, also instituted during this campaign season
a series of one-on-one debates among the candidates, which were acrimonious, including
Ahmadinejad’s accusations of corruption against Rafsanjani and against Musavi’s wife. If no
candidate received more than 50% of the vote on June 12, there would have been a runoff one
week later.
The challengers and their backgrounds and platforms were:
Mir Hosein Musavi. The main reformist candidate. Non-cleric. About 67. Architect and disciple
and aide of Ayatollah Khomeini, he served as Foreign Minister (1980), then Prime Minister
(1981-89), at which time he successfully managed the state rationing program during the
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privations of the Iran-Iraq war but often feuded with Khamene’i, who was then President. At that
time, he was an advocate of state control of the economy. His post was abolished in the 1989
revision of the constitution. Later moderated his views, including the need to avoid confrontation
with the international community, but publicly opposed U.N.-demanded curbs on Iran’s nuclear
program. Musavi was expected to benefit by having been out of politics since he left the prime
ministership in 1989, dissociating him from recent mismanagement. Musavi’s campaign made
extensive use of his high profile wife, Zahra Rahnevard, a well-known women’s activist and
professor. He continues to contest the election results, but, amid threats from security officials
that he might be arrested, he has attended—but refrained from openly calling for—new protests.
Mehdi Karrubi. Some feared he might split the reformist vote because of his attentiveness to
economic policies that favor the lower classes, but official results showed him a minor factor in
the voting. He continues to question the legitimacy of the election.
Mohsen Reza’i. As noted above, he was Commander in Chief of the Revolutionary Guard for
almost all of the Iran-Iraq war period. About 57 years old, he is considered an anti-Ahmadinejad
conservative. Reza’i dropped out just prior to the 2005 presidential election due to perceived
insufficient support, and he apparently did not build substantial support since then. He attended
Khamene’i’s June 19, 2009 speech and later dropped his formal challenge of the election results,
but has criticized elements of the government crackdown.
Election Dispute and Aftermath
The outcome of the election was always difficult to foresee. Polling results were inconsistent.
Musavi supporters held large rallies in Tehran and elsewhere, suggesting momentum, although
pro-Ahmadinejad rallies were large as well. During the campaign, Khamene’i met with Musavi
and, in mid-May 2009, visited Musavi’s father at his home, suggesting neutrality, although the
two were often at odds during the Iran-Iraq war, when Khamene’i was President and Musavi was
Prime Minister.
The vote turnout was unexpectedly high at about 85%: 39.1 million valid (and invalid) votes were
cast. The Interior Ministry announced two hours after the polls closed that Ahmadinejad had won,
although in the past results have been announced the day after. The totals were announced on
Saturday, June 13, 2009, as follows:
Ahmadinejad: 24.5 million votes—62.6%
Musavi: 13.2 million votes—33.75%
Reza’i: 678,000 votes—1.73%
Invalid: 409,000 votes—1%
Karrubi: 333,600 votes—0.85%
Almost immediately after the results were announced, Musavi supporters began protesting the
results on June 13, as he, Karrubi, and Reza’i, asserted outright fraud and called for a new
election, citing the infeasibility of counting 40 million votes so quickly; the barring of candidate
observers at many polling stations; regime shut-down of internet and text services; and repression
of post-election protests. Khamene’i declared the results a “divine assessment,” appearing to
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certify the results even though formal procedures require a three day complaint period. While
several outside analysts say the results appeared to represent widespread fraud.4, others said the
announced results tracked pre-election polls and reflected Ahmadinejad’s perceived strong
support in rural areas and among the urban poor. Those who take this view note that Musavi did
win in Tehran city where his popularity was purportedly centered, according to the Interior
Ministry’s province-by-province results released June 16.
Protests built throughout June 13-19, large in Tehran but spreading to other cities, exposing
regime divisions and posing the most significant threat to the regime’s grip on power to date.
Security forces used varying amounts of force to control them, causing 27 protester deaths to
date, according to official Iranian official statements (with figures from opposition groups
running to close to 100). However, the protest movement’s hopes of having Khamene’i annul the
election were dashed by his major Friday prayer sermon on June 19 in which he refuted
allegations of widespread fraud and implicitly threatened a crackdown on further protests. That
was evident on Saturday, June 20, with state media reporting at least ten protesters killed that day.
Protests lessened by June 22, but continued sporadically thereafter, including on the July 9
anniversary of the suppression of the 1999 student riots and the August 5, 2009 official
inauguration of Ahmadinejad. The regime’s attempts to black out international media and internet
access to Iran has continued, with mixed success, and it has arrested a total of about 2,500
persons, although claiming to have released all but 500 by July 9, 2009.
The regime, particularly the Supreme Leaders, has tried to at least appear to address complaints
about the election and the crackdown. On June 29, 2009, the Council of Guardians performed a
televised recount of 10% of the votes of Tehran’s districts and some provincial ballots and,
finding no irregularities, certified the results. Musavi and Karrubi, joined by Khatemi, have
continued to call the election fraudulent. In response to complaints even by hardline clerics about
the amount of force used against the protests, in late July Khamene’i ordered 140 more released
and a prison closed (Khazirak) where some protesters purportedly died or were beaten in custody.
How Shaken and Divided Is the Regime?
Some say that the most serious effects have been the exposure and widening of cracks within the
regime, the most serious internal rift in Iran since the early 1980s. Some believe the rifts are now
irreparable and will result in an indefinite all out power struggle indefinitely. Others believe that
the Supreme Leader has lost confidence in Ahmadinejad to the point that Ahmadinejad might not
finish out a four year term. Some of that confidence was eroded in July 2009 when Ahmadinejad
balked at an order by the Supreme Leader to rescind the appointment of Rahim Esfandiar
Masha’i—a relative by marriage of Ahmadinejad—as first Vice President. Masha’i had angered
conservatives a year ago by saying Iran is friends with all peoples, including Israelis.
Ahmadinejad ultimately carried out the directive, but then appointed Masha’i as an advisor.
Ahmadinejad further alienated the Supreme Leader, by firing a Khamene’i ally, Intelligence
Minister Gholam Hossein Mohsen-Ejei as Intelligence Minister, apparently for allowing the post-
election protests to grow before cracking down.

4 A paper published by Chatham House and the University of St. Andrews strongly questions how Ahmadinejad’s vote
could have been as large as reported by official results, in light of past voting patterns throughout Iran. “Preliminary
Analysis of the Voting Figures in Iran’s 2009 Presidential Election.” http://www.chathamhouse.org.uk.

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In an effort to calm protests and begin healing rifts, the Supreme Leader has been taking an
increasingly active role. In late August, the Supreme Leader undertook several steps to curb
Ahmadinejad’s efforts to outflank moderate-conservatives and to continue prosecuting reformist
leaders. The Supreme Leader changed the head of the Judiciary to Sadeq Larijani (brother of Ali
Larijani) and a presumed moderate-conservative. Within days, Sadeq Larijani fired Tehran
prosecutor-general Saeed Mortazavi and replaced him with a prosecutor believed less ideological
and less likely to continue to try reformist figures. At the same time, Khamene’i gave public
speeches indicating that the protest actions of reformist leaders (Musavi, Khatemi, Karrubi) were
likely not part of a conspiracy involving foreign countries (United States, Britain) – a signal that
Khamene’i would not back calls by Ahmadinejad and Revolutionary Guard leaders to arrest these
leaders.
As tensions receded, Ahmadinejad named a 21 person cabinet which leaned toward loyalists but
nominated staunch hardliners only in the security fields. Most prominent among them were:
Ahmad Vahidi, former Qods Force commander (1988-1995)as Defense Minister (see below for
more information on him); former Revolutionary Guard Mostafa Najjar as Interior Minister, and
Heydar Moslehi, a former Khamene’ representative to the Basij (see below) as Intelligence
minister. All three were approved on September 3, 2009, along with all but three of the other
nominees. Not approved were two of three women nominees, but one was approved and becomes
the first female minister in the Islamic Republic. The other nominee voted down was the energy
minister, on the grounds of insufficient experience.
Senior longtime regime stalwart Rafsanjani, discussed extensively above, backed the Musavi
challenge to the election, and he and others did not attend Ahmadinejad’s inauguration.
Rafsanjani’s support for the Musavi challenge caused several Rafsanjani children to be arrested
and detained on June 20. 2009. He later appeared to back down by signing on to an Expediency
Council statement on June 27, 2009 urging that challenges to the election pursue legal processes,
although his speech on July 17, 2009 again appeared to criticize the regime’s handling of the
post-election dispute. Larijani, Qalibaf, and several senior Ayatollahs in Qom, such as Grand
Ayatollah Yusuf Sanei, Grand Ayatollah Abdol Karim Musavi Ardabili, and the Association of
Researchers and Teachers of Qom Seminary, criticized the use of violence against the protesters.
On the other hand, Grand Ayatollah Nasser Makarem-Shirazi called on all sides to exercise
restraint but appeared to side with Khamene’i that the election was valid. Others of the most
senior clerics appeared to lean toward that position as well.
U.S. and Allied Reaction
The dispute has complicated policy for President Obama who has tried to balance non-
interference in Iranian affairs (a sensitive issue in Iran)—and preserve the core of policy toward
Iran which is to reach a nuclear deal and perhaps a broader rapprochement with Iran’s
government—with calls for him to focus entirely on pressuring the regime. He did not allege
wholesale fraud and, at least initially, indicated that U.S. policy would not change. As the
crackdown progressed, the statements of President Obama and other U.S. officials became
progressively more critical. The later Obama statements appeared to have been influenced, to
some extent by House and Senate passage of resolutions on June 19 (H.Res. 560 and S.Res. 193,
respectively), condemning violence against demonstrators and the government’s suppression of
independent electronic communication. Another resolution passed by the Senate that day, S.Res.
196, calling on the Iranian regime to permit freedom of expression, freedom of speech, and
freedom of the press.
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International opinion on issues of concern about Iran hardened as a result of the crackdown.
Several European governments, such as France, Britain, and Germany, have been highly critical
of Iran’s crackdown on protests. In early July, the European Union considering recalling its
ambassadors from Iran in solidarity with Britain, after Iran arrested eight Iranian employees of
the British Embassy in Tehran on charges of fomenting the protests. All but one was later
released. The joint statement of the July 8-9, 2009 G-8 summit meeting, held in Italy, deplored
Iran’s treatment of protesters but also renewed the call for diplomacy with Iran on the nuclear
issue, mentioning meetings in late September 2009 (G-20 meeting on September 24) as a time to
“take stock” of whether Iran would re-enter formal talks. More information on how the dispute
might affect Obama Administration policy is addressed in the section “Implementation of the
Engagement Policy,” below.
Table 3. Selected Economic Indicators
Economic Growth
6.4% (2008 est.)
Per Capita Income
$13,100/yr purchasing power parity
GDP
$842
billion purchasing power parity (2008)
Proven Oil Reserves
135 billion barrels (highest after Russia and Canada)
Oil
4.0 million barrels per day (mbd)/ 2.4 mbd exports. Exports could shrink to zero by
Production/Exports
2015-2020 due to accelerating domestic consumption.
Major Oil/Gas
China—300,00 barrels per day (bpd); about 4% of China’s oil imports; Japan—600,000
Customers
bpd, about 12% of oil imports; other Asia (mainly South Korea)—450,000 bpd; Italy—
300,000 bpd; France—210,000 bpd; Netherlands 40,000 bpd; other Europe—200,000
bpd; India—150,000 bpd (10% of its oil imports; Africa—200,000 bpd. Turkey—gas: 8.6
billion cubic meters/yr
Refined Gasoline
Imports were $5 billion value per year in 2006, but now about $4 billion per year after
Import/ Suppliers
rationing. Traders and suppliers include: Vitol (Switzerland), which supplies about 30% of
Iran’s gasoline; Total (France); Trafigura (Switzerland/Nethelands); Reliance Energy (India,
Jamnagar refinery); Russia’s Lukoil; Kuwait, UAE, Turkey, Venezuela (Petroleos de
Venezuela), Singapore, the Netherlands, China, Turkmenistan, and Azerbaijan. Iran
planning at least eight new or upgrade refinery projects to expand capacity to about 3
million barrels per day from 1.5 mbd.
Major Export
Japan ($9.9 billion); China ($9.2 billion); Turkey ($5.1 billion); Italy ($4.45 billion); South
Markets (2006)
Korea ($4 billion); Netherlands ($3.2 billion); France ($2.7 billion); South Africa ($2.7
billion); Spain ($2.3 billion); Greece ($2 billion)
Major Imports (2006) Germany ($5.6 billion); China ($5 billion); UAE ($4 billion); S. Korea ($2.9 billion); France
($2.6 billion); Italy ($2.5 billion); Russia ($1.7 billion); India ($1.6 billion); Brazil ($1.3
billion); Japan ($1.3 billion).
Export Credit
Germany $715 million, down from $2 billion in 2005; France—$3.8 billion, down from
Guarantees (2006)
$5.7 billion in 2005.
Major Non-Oil
Renault (France) and Mercedes (Germany)-automobile production in Karaj, Iran—valued
Investments
at $370 million; Renault (France), Peugeot (France) and Volkswagen (Germany)—auto
parts production; Turkey—Tehran airport, hotels; China—shipbuilding on Qeshm Island,
aluminum factory in Shirvan, cement plant in Hamadan; UAE financing Esfahan Steel
Company; India—steel plant, petrochemical plant; S. Korea—steel plant in Kerman
Province; S. Korea and Germany—$1.7 billion to expand Esfahan refinery.
Trade With U.S.
$785 million (trade is severely restricted by U.S. sanctions). Exports to U.S.—$102
(2008)
million (large categories: pomegranate juice, caviar, pistachio nuts, carpets, medicines,
artwork). Imports from U.S.—$683 million (wheat: - $535 million; medicines, tobacco
products, seeds).
“Oil Stabilization
$12.1 billion (August 2008, IMF estimate). Mid 2009 estimates by experts say it may have
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Economic Growth
6.4% (2008 est.)
Fund” Reserves
now been reduced to nearly zero.
External Debt
$19 billion (2007 est.)
Development
2003 (latest available): $136 million grant aid. Biggest donors: Germany ($38 million);
Assistance Received
Japan ($17 million); France ($9 million).
Inflation
15% + (May 2009), according to Iranian officials.
Unemployment Rate
11%+
Source: CIA World Factbook, various press, IMF, Iran Trade Planning Division, press, CRS conversations with
experts and foreign diplomats.

Human Rights and Dissent
Prior to the election unrest, the regime appeared to have a firm grip on power, in part because it
vigorously suppresses dissent and limits freedoms. The sections below discuss a number of
activists and dissident groups that have been repressed or exiled since long before the June 12,
2009 election and related unrest. The table below discusses the regime’s record on a number of
human rights issues and its repression of certain groups. The table is based largely on the latest
State Department human rights report (released February 25, 2009), the 2008 State Department
“religious freedom” report (released September 19, 2008), and a report by the U.N. Secretary
General on October 1, 2008. All cite Iran for widespread serious abuses, including unjust
executions, politically motivated abductions by security forces, torture, arbitrary arrest and
detention, and arrests of women’s rights activists. The State Department human rights reports said
the government’s “poor human rights record worsened” during 2008. The Secretary General’s
report later became the basis of a U.N. General Assembly resolution, finalized on December 18,
2008, by a vote of 69-54, calling on Iran to allow visits by U.N. personnel investigating the status
of human rights practices in Iran.
Dissident Activists
A number of dissidents have struggled against regime practices and repressiveness for many
years. The reformist politicians who have been arrested in connection with the election dispute,
but who previously have been part of Iran’s politics and election system, are not covered here as
“dissidents.” Still, several of these figures, such as former governor Mohsen Mirdamadai,
Mojahedin of the Islamic Revolution leader Behzad Nabavi, and former Vice President Ali
Abtahi, have been arrested for post-election incitement and have been part of the “show trials”
that have been held (but might now be winding down at the behest of the Supreme Leader).
One major longtime dissident and human rights activist is Nobel Peace Prize laureate (2003) and
Iran human rights activist lawyer Shirin Abadi. Subsequent to the passage of the U.N. General
Assembly resolution above, Iranian authorities raided the Tehran office of the Center for
Defenders of Human Rights, which she runs. She has often represented clients persecuted or
prosecuted by the regime. She reportedly has left Iran for Europe fearing arrest in connection with
the post-election dispute.
The regime has been particularly concerned about dissidents who previously held senior regime
positions; these dissidents have followings inside Iran. One figure, Ayatollah Hossein Ali
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Montazeri, was released in January 2003 from several years of house arrest, but he remains under
close watch and has issue statements highly critical of the post-election crackdown. Montazeri
was Khomeini’s designated successor until 1989, when Khomeini dismissed him for allegedly
protecting intellectuals and opponents of clerical rule. Other dissidents have sought to challenge
or expose the regime’s practices from inside Iran, mainly focused on human rights and free
speech. Journalist Akbar Ganji conducted hunger strikes to protest regime oppression; he was
released on schedule on March 18, 2006 after sentencing in 2001 to six years in prison for
alleging high-level involvement in 1999 murders of Iranian dissident intellectuals that the regime
had blamed on “rogue” security agents.
Exiled Opposition Groups
Some groups are committed to the replacement of the regime and remain mostly in exile.
People’s Mojahedin Organization of Iran (PMOI)/Camp Ashraf
Of the groups seeking to replace rather than moderate the regime, one of the best known is the
People’s Mojahedin Organization of Iran (PMOI).5 Secular and left-leaning, it was formed in the
1960s to try to overthrow the Shah of Iran and advocated Marxism blended with Islamic tenets. It
allied with pro-Khomeini forces during the Islamic revolution and supported the November 1979
takeover of the U.S. Embassy in Tehran but was later driven into exile. Even though it is an
opponent of Tehran, since the late 1980s the State Department has refused contact with the PMOI
and its umbrella organization, the National Council of Resistance (NCR). The State Department
designated the PMOI as a foreign terrorist organization (FTO) in October 19976 and the NCR was
named as an alias of the PMOI in the October 1999 re-designation. The FTO designation was
prompted by PMOI attacks in Iran that sometimes kill or injure civilians—although the group
does not appear to purposely target civilians. In August 14, 2003, the State Department designated
the NCR offices in the United States an alias of the PMOI, and NCR and Justice Department
authorities closed down those offices. The regime accuses the group of involvement in the post
June 2009 presidential election violence.
The State Department report on international terrorism for 2007 asserts that the organization—
and not just a radical element of the organization as the group asserts—was responsible for the
alleged killing of seven American defense advisers to the former Shah in 1975-1976. The report
again notes the group’s promotion of women in its ranks and again emphasizes the group’s “cult-
like” character, including indoctrination of its members and separation of family members,
including children, from its activists. The group’s alliance with Saddam Hussein’s regime in the
1980s and 1990s has contributed to the U.S. shunning of the organization.
Some advocate that the United States not only remove the group from the FTO list but also enter
an alliance with the group against Iran. The FTO designation was up for formal review in October
2008, and, in July 2008, the PMOI formally petitioned to the State Department that its
designation be revoked, on the grounds that it renounced any use of terrorism in 2001. However,

5 Other names by which this group is known is the Mojahedin-e-Khalq Organization (MEK or MKO) and the National
Council of Resistance (NCR).
6 The designation was made under the authority of the Anti-Terrorism and Effective Death Penalty Act of 1996 (P.L.
104-132).
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the State Department announced in mid-January 2009 that the group would remain listed; the next
review of the FTO list is in October 2009.
The group is trying to build on recent legal successes in Europe; on January 27, 2009, the
European Union (EU) removed the group from its terrorist group list; the group had been so
designated by the EU in 2002. In May 2008, a British appeals court determined that the group
should no longer be considered a terrorist organization on the grounds that the British government
did not provide “any reliable evidence that supported a conclusion that PMOI retained an
intention to resort to terrorist activities in the future.” In June 2003, France arrested about 170
PMOI members, including its co-leader Maryam Rajavi (wife of PMOI founder Masoud Rajavi,
whose whereabouts are unknown). She was released and remains based in France, and is
occasionally received by European parliamentarians and other politicians.
The issue of group members in Iraq is increasingly pressing. U.S. forces attacked PMOI military
installations in Iraq during Operation Iraqi Freedom and negotiated a ceasefire with PMOI
military elements in Iraq, requiring the approximately 3,400 PMOI fighters to remain confined to
their Ashraf camp near the border with Iran. Its weaponry is in storage, guarded by U.S.
personnel. In July 2004, the United States granted the Ashraf detainees “protected persons” status
under the 4th Geneva Convention, meaning they will not be extradited to Tehran or forcibly
expelled as long as U.S. forces have a mandate to help secure Iraq. Another 200 PMOI fighters
have taken advantage of an arrangement between Iran and the ICRC for them to return to Iran if
they disavow further PMOI activities; none are known to have been persecuted since returning.
The U.S.-led security mandate in Iraq was replaced on January 1, 2009, by a bilateral U.S.-Iraq
agreement that limits U.S. flexibility in Iraq. The group fears that, now that Iraqi forces have
taken control of the camp, Iraq will expel the group to Iran. The Iraqi government tried to calm
those fears in January 2009 by saying that it would adhere to all international obligations not do
so, but that trust was lost on July 27, 2009 when it set up a police post in the Camp, which was
resisted by PMOI residents. The PMOI says about a dozen were killed in the clashes. Some
observers say Iraq might move the camp to Iraq’s interior, away from the Iran border. The EU
“de-listing” might help resolve the issue by causing EU governments to take in those at Ashraf.
Other Armed Groups
Some armed groups are operating in Iran’s border areas, and are generally composed of ethnic or
religious minorities. One such group is Jundullah, composed of Sunni Muslims primarily from
the Baluchistan region bordering Pakistan. Since mid-2008, it has conducted several successful
attacks on Iranian security personnel, apparently including in May 2009, claiming revenge for the
poor treatment of Sunnis in Iran. An armed Kurdish group operating out of Iraq is the Free Life
Party, known by its acronym PJAK. PJAK was designated in early February 2009 as a terrorism
supporting entity under Executive order 13224, although the designation statement indicated the
decision was based mainly on PJAK’s association with the Turkish Kurdish opposition group
Kongra Gel, also known as the PKK. Another militant group, the “Ahwazi Arabs,” operates in the
largely Arab inhabited areas of southwest Iran, bordering Iraq.
The Son of the Former Shah
Some Iranian exiles, as well as some elites still in Iran, want to replace the regime with a
constitutional monarchy led by Reza Pahlavi, the U.S.-based son of the late former Shah and a
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U.S.-trained combat pilot. However, he does not appear to have large-scale support inside Iran. In
January 2001, the Shah’s son, who is about 50 years old, ended a long period of inactivity by
giving a speech in Washington, DC, calling for unity in the opposition and the institution of a
constitutional monarchy and democracy in Iran. He has since broadcast messages into Iran from
Iranian exile-run stations in California,7 and delivered a statement condemning the regime for the
post-2009 election crackdown.
Other Outside Activists
Numerous Iranians-Americans in the United States want to see a change of regime in Tehran.
Many of them are based in California, where there is a large Iranian-American community, and
there are about 25 small-scale radio or television stations that broadcast into Iran.
Some organizations, such as The National Iranian American Council (NIAC) and the Public
Affairs Alliance of Iranian-Americans (PAAIA), are not necessarily seeking change within Iran.
The mission of NIAC, composed largely of Iranian-Americans, is to promote discussion of U.S.
policy and the group has advocated engagement with Iran. PAAIA’s mission is to discuss issues
affecting Iranian-Americans, such as discrimination caused by public perceptions of association
with terrorism or radical Islam.

Table 4. Human Rights Practices
Group/Issue
Regime Practice/Recent Developments
Ethnic and
Persians are about 51% of the population, and Azeris (a Turkic people) are about 24%. Kurds are
Religious
about 7% of the population, and about 3% are Arab. Of religions, Shiite Muslims are about 90% of
Breakdown
the Muslim population and Sunnis are about 10%. About 2% of the population is non-Muslim,
including Christians, Zoroastrians (an ancient religion in what is now Iran), Jewish, and Baha’i.
Media
Since 2000, judicial hardliners have closed hundreds of reformist newspapers, although many have
tended to reopen under new names. Even before the election-related unrest, Iran blocked pro-
reform websites and blogs supportive of the reformist candidates. In August 2007, the government
closed a major reformist daily newspaper, Shargh, which had previously been suspended
repeatedly. In February 2008, the regime closed the main women’s magazine, Zanan (women in
Farsi) for al egedly highlighting gender inequality in Islamic law. In November 2008, the regime
arrested famed Iranian blogger Hossein Derakshan. Canadian journalist (of Iranian origin) Zahra
Kazemi was detained in 2003 for filming outside Tehran’s Evin prison and allegedly beaten to death
in custody. The intelligence agent who conducted the interrogation/beating was acquitted July 25,
2004.
Labor
Independent unions are technical y legal but not al owed in practice. The sole authorized national
Unions/Students/
labor organization is a state-controlled “Workers’ House” umbrella. However, some activists
Other Activists
show independence and, in 2007, the regime arrested labor activists for teachers’ associations, bus
drivers’ unions, and a bakery workers’ union. A bus drivers union leader, Mansur Osanloo, has
been in jail since July 2007. The regime reportedly also dissolved student unions and replaced
them with regime loyalists following student criticism of Ahmadinejad. In September 2008, Iran
arrested several HIV/AIDs researchers for alleged anti-government activities.
Women
Regime strictly enforcing requirement that women fully cover themselves in public, generally with
a garment called a chador, including through detentions. In March 2007, the regime arrested 31

7 Kampeas, Ron. “Iran’s Crown Prince Plots Nonviolent Insurrection from Suburban Washington.” Associated Press,
August 26, 2002.
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Iran: U.S. Concerns and Policy Responses

Group/Issue
Regime Practice/Recent Developments
women activists who were protesting the arrest in 2006 of several other women’s rights activists;
all but 3 of the 31 were released by March 9. In May 2006, the Majles passed a bill calling for
increased public awareness of Islamic dress, an apparent attempt to persuade women not to wear
Western fashion. The bill did not contain a requirement that members of Iran’s minority groups
wear badges or distinctive clothing. In April 2006, Ahmadinejad directed that women be allowed
to attend soccer matches, but the Supreme Leader reversed that move. Women can vote and run
in parliamentary and municipal elections. Iranian women can drive, and many work outside the
home, including owning their own businesses. There are 9 women in the 290-seat Majles.
Religious Freedom Each year since 1999, the State Department religious freedom report has named Iran as a
“Country of Particular Concern” under the International Religious Freedom Act. No sanctions
added, on the grounds that Iran is already subject to extensive U.S. sanctions. Continued
deterioration in religious freedom noted in the International Religious Freedom report for 2008
(September 19, 2008).
Baha’is
Iran repeatedly cited for repression of the Baha’i community, which Iran’s Shiite Muslim clergy
views as a heretical sect. The State Department cited Iran on February 13, 2009, for charging
seven Bahai’s with espionage; thirty other Bahai’s remain imprisoned. In the 1990s, several Baha’is
were executed for apostasy (Bahman Samandari in 1992; Musa Talibi in 1996; and Ruhollah Ruhani
in 1998). Another, Dhabihullah Mahrami, was in custody since 1995 and died of unknown causes in
prison in December 2005. A wave of Baha’i arrests occurred in May 2006 and two-thirds of
university students of the Baha’i faith were expel ed from university in 2007. Several congressional
resolutions have condemned Iran’s treatment of the Baha’is, including in 1982, 1984, 1988, 1990,
1992, 1994, 1996, 2000, and 2006. In the 110th Congress, H.Res. 1008 condemned Iran’s
treatment of the Baha’is (passed House August 1, 2008).
Jews
Along with Christians, a “recognized minority,” with one seat in the Majles, the 30,000-member
Jewish community (the largest in the Middle East aside from Israel) enjoys somewhat more
freedoms than Jewish communities in several other Muslim states. However, in practice the
freedom of Iranian Jews to practice their religion is limited, and Iranian Jews remain reluctant to
speak out for fear of reprisals. During 1993-1998, Iran executed five Jews al egedly spying for
Israel. In June 1999, Iran arrested 13 Jews (mostly teachers, shopkeepers, and butchers) from the
Shiraz area that it said were part of an “espionage ring” for Israel. After an April-June 2000 trial,
ten of the Jews and two Muslims accomplices were convicted (July 1, 2000), receiving sentences
ranging from 4 to 13 years. An appeals panel reduced the sentences, and all were released by April
2003. On November 17, 2008, Iran hanged businessman Ali Ashtari (a Muslim), who was arrested
in 2006, for allegedly providing information on Iran’s nuclear program to Israel.
Sunnis
The cited reports note other discrimination against Sufis and Sunni Muslims, although abuses
against Sunnis could reflect that minority ethnicities, including Kurds, are mostly Sunnis.
Human Trafficking The June 16, 2009, (latest annual), State Department “Trafficking in Persons” report continues to
place Iran in Tier 3 (worst level) for failing to take action to prevent trafficking in persons. Girls
are trafficked for sexual exploitation within Iran and from Iran to neighboring countries.
Juvenile
Iran executed six persons under the age of 18 in 2008, the only country to do so. As a party to
Executions
the International Covenant on Civil and Political Rights and the Convention on the Rights of the
Child, Iran is obligated to abolish such executions.
Stonings
In 2002, the head of Iran’s judiciary issued a ban on stoning. However, Iranian officials later cal ed
that directive “advisory” and could be ignored by individual judges. On December 2, 2008, Iran
confirmed the stoning deaths of two men in Mashhad who were convicted of adultery.
Azeris
Azeris are one quarter of the population, but they complain of ethnic and linguistic discrimination.
In 2008, there were several arrests of Azeri students and cultural activists who were pressing for
their right to celebrate their culture and history.
Arrests of Dual
An Iranian-American journalist, Roxanna Saberi, was arrested in January 2009 al egedly because
Nationals
her press credentials had expired; she was charged on April 9, 2009, with espionage, apparently
for possessing an Iranian military document. Sentenced to eight years in jail; she was released on
appeal on May 12, 2009, but barred from practicing journalism, and has left Iran. Another dual
national, Esha Momeni, arrested in October 2008, is unable to leave Iran. U.S. national, former FBI
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Iran: U.S. Concerns and Policy Responses

Group/Issue
Regime Practice/Recent Developments
agent Robert Levinson, remains missing after a visit in 2005 to Kish Island. Iran was given a U.S.
letter on these cases at a March 31, 2009, meeting in the Netherlands on Afghanistan.
Sources: Most recent State Department reports on human rights (February 25, 2009), trafficking in persons
(June 16, 2009), and on religious freedom (September 19, 2008). http://www.state.gov

Iran’s Strategic Capabilities and Weapons of Mass
Destruction Programs

Many in the Obama Administration share the Bush Administration’s assessment, encapsulated in
a March 16, 2006 “National Security Strategy” document, that the United States “may face no
greater challenge from a single country than from Iran.” This assessment is based largely on
Iran’s growing weapons of mass destruction (WMD) programs and its ability to exert influence in
the region counter to U.S. objectives.8 Many experts agree that Iran’s core national security goals
are to protect itself from foreign, primarily U.S., interference or attack, and to exert regional
influence that Iran believes is commensurate with its size and concept of nationhood.
Conventional Military/Revolutionary Guard/Qods Force
Iran’s armed forces are extensive but they are widely considered relatively combat ineffective
against a well-trained, sophisticated military such as that of the United States or a regional power
such as Turkey, and Iran lacks the logistical ability to project power much beyond its borders.
Still, Iranian forces could still cause damage to U.S. forces and allies in the Gulf region, and they
are sufficiently effective to deter or fend off conventional threats from Iran’s weaker neighbors
such as post-war Iraq, Turkmenistan, Azerbaijan, and Afghanistan. Iran’s armed forces have few
formal relationships with foreign militaries, but Iran and India have a “strategic dialogue” and
some Iranian naval officers reportedly have undergone some training in India. Iran and Turkey
have agreed in principle (April 2008) to jointly fight terrorism along their border. Most of Iran’s
other military-to-military relationships, such as with Russia, Ukraine, Belarus, North Korea, and a
few others, generally center on Iranian arms purchases or upgrades.
Iran’s armed forces are divided organizationally. The Islamic Revolutionary Guard Corps (IRGC,
known in Persian as the Pasdaran)9 controls the Basij (Mobilization of the Oppressed) volunteer
militia that enforces adherence to Islamic customs and has been the main instrument to repress
the post-election protests in Iran. The IRGC and the regular military report to a Joint
Headquarters, headed by Hassan Firuzabadi. A provision of the National Defense authorization
act for the House-passed FY2010 (H.R. 2647) calls for a report on Iran’s conventional military
strategy and power, in particular the capabilities of the IRGC.

8 See http://www.whitehouse.gov/nsc/nss/2006/.
9 For a more extensive discussion of the IRGC, see Katzman, Kenneth. “The Warriors of Islam: Iran’s Revolutionary
Guard,” Westview Press, 1993.
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Table 5. The Revolutionary Guard
The IRGC is generally loyal to Iran’s hardliners politically and is clearly more politically influential than is Iran’s regular
military, which is numerically larger but was held over from the Shah’s era. As described in a 2009 Rand Corporation
study, “ Founded by a decree from Ayatollah Khomeini shortly after the victory of the 1978-1979 Islamic Revolution,
Iran’s Islamic Revolutionary Guards Corps (IRGC) has evolved well beyond its original foundations as an ideological
guard for the nascent revolutionary regime. Today the IRGC functions as an expansive socio-political-economic
conglomerate whose influence extends into virtually every corner of Iranian political life and society. Bound together
by the shared experience of war and the socialization of military service, the Pasdaran have articulated a populist,
authoritarian, and assertive vision for the Islamic Republic of Iran that they maintain is a more faithful reflection of the
revolution’s early ideals. The IRGC’s presence is particularly powerful in Iran’s highly factionalized political system, in
which [many senior figures] hail from the ranks of the IRGC. Outside the political realm, the IRGC oversees a robust
apparatus of media resources, training activities, education programs designed to bolster loyalty to the regime,
prepare the citizenry for homeland defense, and burnish its own institutional credibility vis-a-vis other factional
actors. It is in the economic sphere, however, that the IRGC has seen the greatest growth and diversification—
strategic industries and commercial services ranging from dam and pipeline construction to automobile manufacturing
and laser eye surgery have fallen under its sway, along with a number of illicit smuggling and black market
enterprises.”
As further evidence of the IRGC pre-eminence in the conventional command structure, Chairman of the Joint Chiefs
of Staff Admiral Mike Mullen said on November 29, 2007, that the IRGC Navy was given responsibility to patrol the
entire Persian Gulf, and that the regular Navy is patrolling the Strait of Hormuz and Gulf of Oman.
Through its Qods (Jerusalem) Force, the IRGC has a foreign policy role in exerting influence throughout the region
by supporting pro-Iranian movements, as discussed further below. The Qods Force numbers approximately 10,000-
15,000 personnel who provide advice, support, and arrange weapons deliveries to pro-Iranian factions in Lebanon,
Iraq, Persian Gulf states, Gaza/West Bank, Afghanistan, and Central Asia. It also operates a worldwide intelligence
network to give Iran possible terrorist option and to assist in procurement of WMD-related technology. The Qods
Force commander, Brig. Gen. Qassem Soleimani, is said to have his own independent channel to Supreme Leader
Khamene’i, bypassing the IRGC and Joint Staff command structure. The Qods Force commander during 1988-1995
was Brig. Gen. Ahmad Vahidi, confirmed as Defense Minister on September 3, 2009. He led the unit during several
major initiatives such as its alleged assistance to two bombings of Israeli and Jewish targets in Buenos Aires (the 1994
bombing he is wanted by Interpol for a role in it; the buildup of Lebanese Hezbollah’s rocket capabilities; the
recruitment of Saudi Hezbollah activists later accused of the June 1996 Khobar Towers bombing; and the
assassination of Iranian dissident leaders in Europe in the early 1990s.
IRGC leadership developments are significant because of the political influence of the IRGC. On September 2, 2007,
Khamene’i replaced Rahim Safavi with Mohammad Ali Jafari as Commander In Chief of the Guard; Jafari is considered
a hardliner against political dissent and is reputedly close to the Supreme Leader and less so to Ahmadinejad. The
Basij is commanded by Hossein Taeb but reports to the IRGC Commander in Chief. It operates from thousands of
positions in Iran’s institutions. Command reshuffles in July 2008 that integrated the Basij more closely with
provincially-based IRGC units furthered the view that the Basij is playing a more active role in uncovering suspected
plotting by Iran’s minorities and others. More information on Iran’s military and how it might perform against the
United States is discussed under “military options” below.
As noted, the IRGC is also increasingly involved in Iran’s economy, acting through a network of contracting
businesses it has set up, most notably Ghorb (also called Khatem ol-Anbiya, Persian for “Seal of the Prophet”). Active
duty IRGC senior commanders reportedly serve on Ghorb’s board of directors. On October 21, 2007, the Treasury
Department designated several IRGC companies as proliferation entities under Executive Order 13382, as shown in
the table at the end of the paper. Also that day, the IRGC as a whole, the Ministry of Defense, several IRGC
commanders, and several Iranian banks were sanctioned under that same executive order. Simultaneously, the Qods
Force was named as a terrorism supporting entity under Executive Order 13224. Both orders freeze the U.S.-based
assets and prevent U.S. transactions with the named entities, but these entities are believed to have virtual y no U.S.-
based assets that could be frozen. The designations stopped short of concurring with provisions of bills in the 110th
Congress—H.R. 1400 (passed by the House on September 25), S. 970, and the FY2008 defense authorization bill (P.L.
110-181, Senate amendment adopted September 6, 2007, by vote of 76-22)—for the Revolutionary Guard to be
designated a foreign terrorist organization, or FTO.
Source: Frederic Wehrey et al. “The Rise of the Pasdaran.” Rand Corporation. 2009. Katzman, Kenneth. “The
Warriors of Islam: Iran’s Revolutionary Guard.” Westview Press, 1993.

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Table 6. Iran’s Conventional Military Arsenal
Defense
Surface-
Budget
Military
Air
Combat
(billions
Personnel
Tanks
Missiles
Aircraft
Ships
U.S. $)
545,000 (regular military and
1,693
150
280
200
6.6
Revolutionary Guard Corps
(incl.
I-Hawk plus
(incl. 25 MiG-
(incl. 10 Chinese-made
(IRGC). IRGC is about one-
480 T-
some Stinger 29 and 30 Su-
Hudong, 40 Boghammer,
third of total force.
72)
24)
3 frigates) Also has 3 Kilo
subs
Ship-launched cruise missiles. Iran is able to arm its patrol boats with Chinese-made C-802 cruise missiles. Iran
also has Chinese-supplied HY-2 Seerseekers emplaced along Iran’s coast.
Midget Subs. Iran is said to possess several, possibly purchased assembled or in kit form from North Korea. Iran
claimed on Nov. 29, 2007 to have produced a new smal sub equipped with sonar-evading technology.
Anti-aircraft missile systems. Russia has sold and now delivered to Iran (January 2007) 30 anti-aircraft missile
systems (Tor M1), worth over $1 billion. In September 2006, Ukraine agreed to sell Iran the Kolchuga radar system
that can improve Iran’s detection of combat aircraft. In December 2007, Russia agreed to sel the even more capable
S-300 (also known as SA-20 “Gargoyle”) air defense system, purportedly modeled after the U.S. Patriot system, which
U.S. officials say would greatly enhance Iran’s air defense capability. The value of the deal is estimated at $800 million.
Amid unclear or weak denials by Iranian and Russian officials, U.S. officials told journalists on December 11, 2008, that
Iran has indeed contracted for the missile. It is reportedly was due for delivery by March 2009 and to be operational
by June 2009, but Russian press reports in February 2009 about the visit of Iran’s Defense Minister to Moscow
indicate that Russia has placed delivery on hold due to “political considerations”—expectations of possible adverse
reaction by the Obama Administration. Delivery has not taken place to date, by al accounts, and Israel said in August
2009 that Russia had agreed not to deliver any equipment to Iran that would upset the regional balance of power.

Nuclear Program and Related International Diplomacy
Since 2005, Iran and the international community have been on a “collision course” over Iran’s
nuclear program. U.S. officials say they are operating under the assumption that Iran intends to
develop a nuclear weapon from that program. The outgoing International Atomic Energy Agency
(IAEA) Director Mohammad El Baradei10 said in a press interview on June 17, 2009, that “My
gut feeling is that Iran definitely would like to have the technology...that would enable it to have
nuclear weapons if they decided to do so.” In February 2009, the Director of National Intelligence
(DNI) Dennis Blair reiterated previous assessments that it is likely that Iran will eventually try to
develop a nuclear weapon.
The Obama Administration faces policy choices as the IAEA reports (February 19, 2009) that
Iran has now enriched enough uranium for a nuclear weapon, although only if enriched to 90%.
The IAEA report of June 5, 2009, reiterated that Iran’s enrichment thus far has been 5%, which is
a level that would permit only civilian uses, but added that Iran has now installed over 7,000
centrifuges, of which over 5,000 are being fed with uranium feedstock. There continues to be no
evidence that Iran has diverted any nuclear material for a nuclear weapons program, but the IAEA
asserts that it cannot verify that Iran’s current program is purely peaceful. Several of its reports

10 A new IAEA Director, Japanese official Yukiya Amano, has been selected in July and will take office September
2009.
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(January 31, 2006, February 27, 2006, May 26, 2008, and September 15, 2008) describe Iranian
documents that show a possible involvement of Iran’s military in the program.
Some Administration officials lean toward an alarmist view of Iran’s capabilities, while others,
including Secretary of Defense Gates, have signaled less urgency, saying on March 1, 2009, that
Iran is “not close” to a nuclear weapon. The George W. Bush Administration’s December 2007
NIE assessed that Iran will likely be technically capable of producing enough highly enriched
uranium for a nuclear weapon some time during 2010-2015. This time frame was reiterated in
February 12, 2009, testimony by Director of National Intelligence Dennis Blair and by him again
since then, although the DNI reiterated that Iran’s weaponization efforts appear to still be on hold
since 2003, as the 2007 NIE had said. 11
Iran’s Arguments and the International Response
International scrutiny of Iran’s nuclear program intensified in 2002, when Iran confirmed PMOI
allegations that Iran was building two facilities that could potentially be used to produce fissile
material useful for a nuclear weapon: a uranium enrichment facility at Natanz and a heavy water
production plant at Arak,12 considered ideal for the production of plutonium. It was revealed in
2003 that the founder of Pakistan’s nuclear weapons program, A.Q. Khan, sold Iran nuclear
technology and designs.13
Iranian leaders have addressed the scrutiny by saying that Iran’s nuclear program is for electricity
generation and that enrichment is its “right” as a party to the NPT. Iran professes that WMD is
inconsistent with its ideology and says that its leaders, including the late Ayatollah Khomeini,
have issued formal pronouncements (fatwas) that nuclear weapons are un-Islamic. Iran says its oil
resources are finite and that enriching uranium to make nuclear fuel is allowed under the 1968
Nuclear Non-Proliferation Treaty,14 to which Iran is a party. An analysis was published by the
National Academy of Sciences challenging the U.S. view that Iran is petroleum rich and therefore
has no need for a nuclear power program. According to the analysis, the relative lack of
investment could cause Iran to have negligible exports of oil by 2015.15 The United States and its
partners now accept Iran’s right to purely peaceful uses of nuclear energy. In the past, U.S.
officials have said that Iran’s gas resources make nuclear energy unnecessary.
There is widespread doubt within and outside the U.S. government that Iran’s intentions are
purely peaceful because Iran’s governing factions appear to agree on the utility of a nuclear
weapons capability as a means of ending its perceived historic vulnerability to invasion and
domination by great powers, and as a symbol of Iran as a major nation. Others believe a nuclear
weapon represents the instrument with which Iran intends to intimidate its neighbors and
dominate the Persian Gulf region. There are also fears Iran might transfer WMD to extremist

11 Text at http://www.dni.gov/press_releases/20071203_release.pdf.
12 In November 2006, the IAEA, at U.S. urging, declined to provide technical assistance to the Arak facility on the
grounds that it was likely for proliferation purposes.
13 Lancaster, John and Kamran Khan. “Pakistanis Say Nuclear Scientists Aided Iran.” Washington Post, January 24,
2004.
14 For Iran’s arguments about its program, see Iranian paid advertisement “An Unnecessary Crisis—Setting the Record
Straight About Iran’s Nuclear Program,” in the New York Times, November 18, 2005. P. A11.
15 Stern, Roger. “The Iranian Petroleum Crisis and United States National Security,” Proceedings of the National
Academy of Sciences of the United States of America
. December 26, 2006.
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groups or countries. On the other hand, some Iranian strategists maintain that a nuclear weapons
will bring Iran only further sanctions, military containment, U.S. attempted interference in Iran,
and efforts by neighbors to develop countervailing capabilities.
U.S. officials have generally been less concerned with Russia’s work, under a January 1995
contract, on an $800 million nuclear power plant at Bushehr. Russia insisted that Iran sign an
agreement under which Russia would provide reprocess the plant’s spent nuclear material; that
agreement was signed on February 28, 2005. The plant was expected to become operational in
2007, but Russia had insisted (including during President Putin’s visit to Iran in October 2007)
that Iran first comply with the U.N. resolutions discussed below. In December 2007, Russia began
fueling the reactor, and Iran says it expects the plant to become operational in 2009. Some
preliminary tests of the plant began in February 2009, but, possibly as a sign of Russian
cooperation with international pressure on Iran, Russia has not brought the plant to operational
status to date. As part of this work, Russia has trained 1,500 Iranian nuclear engineers.
Diplomatic Efforts in 2003 and 2004/Paris Agreement
In 2003, France, Britain, and Germany (the “EU-3”) opened a separate diplomatic track to curb
Iran’s program. On October 21, 2003, Iran pledged, in return for peaceful nuclear technology, to
(1) fully disclose its past nuclear activities, (2) to sign and ratify the “Additional Protocol” to the
NPT (allowing for enhanced inspections), and (3) to suspend uranium enrichment activities. Iran
signed the Additional Protocol on December 18, 2003, although the Majles has not ratified it. Iran
discontinued abiding by the Protocol after the IAEA reports of November 10, 2003, and February
24, 2004, stated that Iran had violated its NPT reporting obligations over an 18-year period.
In the face of the U.S. threat to push for Security Council action, the EU-3 and Iran reached a
more specific November 14, 2004, “Paris Agreement,” committing Iran to suspend uranium
enrichment (which it did as of November 22, 2004) in exchange for renewed trade talks and other
aid.16 The Bush Administration did not openly support the track until March 11, 2005 when it
announced it would drop U.S. objections to Iran applying to join the World Trade Organization (it
applied in May 2005) and to selling civilian aircraft parts to Iran. The Bush Administration said it
would not participate directly in the talks.
Reference to the Security Council
The Paris Agreement broke down just after Ahmadinejad’s election; Iran rejected as insufficient
an EU-3 offer to assist Iran with peaceful uses of nuclear energy and provide limited security
guarantees in exchange for Iran’s (1) permanently ending uranium enrichment; (2) dismantling
the Arak heavy water reactor;17 (3) no-notice nuclear inspections; and (4) a pledge not to leave the
NPT (it has a legal exit clause). On August 8, 2005, Iran broke the IAEA seals and began uranium
“conversion” (one step before enrichment) at its Esfahan facility. On September 24, 2005, the
IAEA Board declared Iran in non-compliance with the NPT and decided to refer the issue to the
Security Council,18 but no time frame was set for the referral. After Iran resumed enrichment

16 For text of the agreement, see http://www.iaea.org/NewsCenter/Focus/IaeaIran/eu_iran14112004.shtml. EU-3—Iran
negotiations on a permanent nuclear pact began on December 13, 2004, and related talks on a trade and cooperation
accord (TCA) began in January 2005.
17 In November 2006, the IAEA, at U.S. urging, declined to provide technical assistance to the Arak facility.
18Voting in favor: United States, Australia, Britain, France, Germany, Canada, Argentina, Belgium, Ghana, Ecuador,
(continued...)
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activities, on February 4, 2006, the IAEA board voted 27-319 to refer the case to the Security
Council. On March 29, 2006, the Council agreed on a presidency “statement” setting a 30-day
time limit (April 28, 2006) for ceasing enrichment.20
Establishment of “P5+1” Contact Group/June 2006 Incentive Package
Taking a multilateral approach, the George W. Bush Administration offered on May 31, 2006, to
join the nuclear talks with Iran if Iran first suspends its uranium enrichment. Such talks would
center on a package of incentives and possible sanctions—formally agreed on June 1, 2006—by a
newly formed group of nations, the so-called “Permanent Five Plus 1” (P5+1: United States,
Russia, China, France, Britain, and Germany). EU representative Javier Solana formally
presented the P5+1 offer to Iran on June 6, 2006. (The package is Annex I to Resolution 1747.)
Incentives:
• Negotiations on an EU-Iran trade agreements and acceptance of Iran into the
World Trade Organization.
• Easing of U.S. sanctions to permit sales to Iran of commercial aircraft/parts.
• Sale to Iran of a light-water nuclear reactor and guarantees of nuclear fuel
(including a five year buffer stock of fuel), and possible sales of light-water
research reactors for medicine and agriculture applications.
• An “energy partnership” between Iran and the EU, including help for Iran to
modernize its oil and gas sector and to build export pipelines.
• Support for a regional security forum for the Persian Gulf, and support for the
objective of a WMD free zone for the Middle East.
• The possibility of eventually allowing Iran to resume uranium enrichment if it
complies with all outstanding IAEA requirements.
Reported Sanctions:21
• Denial of visas for Iranians involved in Iran’s nuclear program and for high-
ranking Iranian officials.
• A freeze of assets of Iranian officials and institutions; a freeze of Iran’s assets
abroad; and a ban on some financial transactions.
• A ban on sales of advanced technology and of arms to Iran; and a ban on sales to
Iran of gasoline and other refined oil products.

(...continued)
Hungary, Italy, Netherlands, Poland, Portugal, Sweden, Slovakia, Japan, Peru, Singapore, South Korea, India. Against:
Venezuela. Abstaining: Pakistan, Algeria, Yemen, Brazil, China, Mexico, Nigeria, Russia, South Africa, Sri Lanka,
Tunisia, and Vietnam.
19 Voting no: Cuba, Syria, Venezuela. Abstaining: Algeria, Belarus, Indonesia, Libya, South Africa.
20 See http://daccessdds.un.org/doc/UNDOC/GEN/N06/290/88/PDF/N0629088.pdf?OpenElement.
21 One source purports to have obtained the contents of the package from ABC News: http://www.basicint.org/pubs/
Notes/BN060609.htm.
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• An end to support for Iran’s application to the WTO.
Resolution 1696
Iran did not immediately respond to the incentive offer. On July 31, 2006, the Security Council
voted 14-1 (Qatar voting no) for U.N. Security Council Resolution 1696, giving Iran until August
31, 2006, to fulfill the longstanding IAEA nuclear demands (enrichment suspension, etc).
Purportedly in deference to Russia and China, it was passed under Article 40 of the U.N. Charter,
which makes compliance mandatory, but not under Article 41, which refers to economic
sanctions, or Article 42, which would authorize military action. It called on U.N. member states
not to sell Iran WMD-useful technology. On August 22, 2006, Iran responded, but Iran did not
offer enrichment suspension, instead proposing broader engagement with the West and guarantees
that the United States would not seek regime change.
Resolution 1737
With the backing of the P5+1, chief EU negotiator Javier Solana negotiated with Iran to try
arrange a temporary enrichment suspension, but talks ended on September 28, 2006, without
agreement. The Security Council adopted U.N. Security Council Resolution 1737 unanimously
on December 23, 2006, under Chapter 7, Article 41 of the U.N. Charter. It prohibits sale to Iran—
or financing of such sale—of technology that could contribute to Iran’s uranium enrichment or
heavy-water reprocessing activities. It also required U.N. member states to freeze the financial
assets of 10 named Iranian nuclear and missile firms and 12 persons related to those programs. It
called on—but did not mandate—member states not to permit travel by these persons. In
deference to Russia, the Resolution did not apply to the Bushehr reactor.
Resolution 1747 and Results
Resolution 1737 demanded enrichment suspension by February 21, 2007. With no Iranian
compliance, on March 24, 2007, after only three weeks of P5+1 negotiations, Resolution 1747
was adopted unanimously, which:
• added 10 military/WMD-related entities; 3 Revolutionary Guard entities; 8
persons, and 7 Revolutionary Guard commanders. Bank Sepah is among the
entities sanctioned.
• banned arms transfers by Iran, a provision targeted at Iran’s alleged arms supplies
to Lebanese Hezbollah and to Shiite militias in Iraq.
• required all countries to report to the United Nations when sanctioned Iranian
persons travel to their territories.
• called for (but did not require) countries to avoid selling arms or dual use items
to Iran and to avoid any new lending or grants to Iran.
Resolution 1747 demanded Iran suspend enrichment by May 24, 2007. Iran did not comply, but,
suggesting it wanted to avoid further isolation, in August 2007, Iran agreed to sign with the IAEA
an agreement to clear up outstanding questions on Iran’s past nuclear activities by the end of
2007. On September 28, 2007, the P5+1 grouping—along with the EU itself—agreed to a joint
statement pledging to negotiate another sanctions resolution if there is no progress reported by the
IAEA in implementing the August 2007 agreement or in negotiations with EU representative
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Javier Solana. The IAEA and Solana indicated that Iran’s responses fell short; Solana described a
November 30, 2007, meeting with Iranian negotiator Sayid Jallili as “disappointing.”
Resolution 1803 and Additional Incentives
After several months of negotiations, Resolution 1803 was adopted by a vote of 14-0 (Indonesia
abstaining) on March 3, 2008. It: (1) bans sales of dual use items to Iran; (2) authorizes, but does
not require, inspections of cargo, carried by Iran Air Cargo and Islamic Republic of Iran Shipping
Line, suspected of shipping WMD-related goods; (3) imposes a firm travel ban on five Iranians
named in Annex II to the Resolution and requires reports on international travel by 13 individuals
named in Annex I; (4) calls for, but does not impose, a prohibition on financial transactions with
Iran’s Bank Melli and Bank Saderat; and (5) adds 12 entities to those sanctioned under Resolution
1737. (On June 23, 2008, the EU, acting under Resolution 1803, froze the assets of Bank Melli
and several IRGC entities and commanders.)
Resolution 1803 also stated the willingness of the P5+1 to consider additional incentives to
resolve the Iranian nuclear issue through negotiation “on the basis of their June 2006 proposals.”
Trying to preserve a unified front, the Bush Administration agreed to expand the June 2006
incentive package at a meeting in London on May 2, 2008. There, the P5+1 agreed on additional
incentives, reportedly including political cooperation with Iran, and enhanced energy cooperation.
EU envoy Solana presented the package (which included a signature by Secretary of State Rice)
on June 14, 2008, but Iran was non-committal.
Sensing increasing pressure, Iranian Foreign Minister Mottaki indicated on July 2, 2008, that Iran
might be ready to negotiate on the June 2008 incentive package by first accepting a six week
“freeze for freeze”— the P5+1 would freeze further sanctions efforts and Iran would freeze any
expansion of uranium enrichment (though not suspend outright). To try to take advantage of what
seemed to be divisions within Iran on whether to negotiate a settlement, the Administration sent
Undersecretary of State for Political Affairs William Burns to join Solana and the other P5+1
representatives at a meeting in Geneva on July 19, 2008, to receive Iran’s response to the “freeze
for freeze” idea. Iran did not supply a direct answer either then, or by an extended deadline of
August 2, 2008, instead focusing on what would be contained in a final nuclear settlement.
Resolution 1835
As a result of the lack of progress, the P5+1 began discussing another sanctions resolution. Ideas
reportedly considered included adding more Iranian banks to those sanctioned, or banning
insurance for Iran’s tanker fleet. On August 7, 2008, the EU implemented the sanctions specified
in Resolution 1803, including asserting the authority to inspect suspect shipments, and called on
its members to refrain from providing new credit guarantees on exports to Iran. However, the
August 2008 crisis between Russia and Georgia set back U.S.-Russia relations, and Russia
opposed new U.N. sanctions on Iran. In an effort to demonstrate to Iran continued unity, the
Council did adopt (September 27, 2008) Resolution 1835, calling on Iran to comply with previous
resolutions, but restating a willingness to negotiate and imposing no new sanctions.
With Iran still not complying, the P5+1 met again in October and in November of 2008.
However, with U.S. partner officials uncertain about what U.S. policy toward Iran might be under
a new U.S. Administration, there was no consensus on new sanctions.
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The P5+1 Process Under President Obama
After President Obama was inaugurated, the P5+1 met in Germany (February 4, 2009), reportedly
focusing on the new U.S. Administration’s approach on Iran. The group issued a statement
recommitting to the “two track” strategy of incentives and sanctions.22 Another P5+1 meeting was
held in London on April 8, 2009, during which Undersecretary Burns told the other members of
the group that, henceforth, a U.S. diplomat would attend all of the group’s meetings with Iran.
This was viewed as a major step in the Obama Administration strategy of trying to engage Iran in
a settlement of the nuclear issue. Iran responded by saying that any new meetings would have to
await the Iranian June 12, 2009 election.23 In order to try to show good faith to Iran, and amid
reports that the Administration considered dropping the objective of halting all uranium
enrichment outright, the Obama Administration did not, at these meetings or since, press for new
sanctions.
As far as a time frame for an Iranian response, on May 18, 2009, in the context of a meeting with
visiting Israeli Prime Minister Benjamin Netanyahu, President Obama said he expect a positive
response by Iran to the U.S. outreach “by the end of [2009],” but that the United States would not
entertain the idea of endless talks that yield no result. Most observers say the Iranian election
dispute hardened the P5+1 position on Iran somewhat, and, as noted above, the July 9, 2009 G-8
summit statement, which included Russian concurrence, mentioned late September 2009 (G-20
summit on September 24) as a time by which the P5+1 would expect Iran to come to new talks
and offer constructive proposals for a settlement. If Iran does that, some say the P5+1 would give
the talks about six months to yield fruit or not, after which time “crippling sanctions” would be
considered. If Iran does not meet that condition, P5+1 negotiations on crippling sanctions are
expected to start immediately after that deadline. What might comprise “crippling sanctions” is
discussed later. With no prior response, and amid an August 27, 2009 warning by France and
Germany to impose major new sanctions if Iran does not cooperate, the P5+1 planned a
September 2, 2009 meeting in Frankfurt, Germany to discuss possible new sanctions.
Perhaps sensing the pressure and to head off such moves, on September 1, 2009, Iran’s senior
negotiator, Syed Jallili, said Iran would come to new talks and offer long delayed new proposals
for a nuclear settlement. The statement came a week after an IAEA report was completed
reportedly indicating Iran had slowed its uranium enrichment, although it continued to build
capacity for enrichment, and after Iran offered the IAEA expanded access to Natanz enrichment
facility and unprecedented access to Iran’s nearly completed heavy water reactor at Arak. No date
for a P5+1 meeting with Iran has been set, but the Iranian statement apparently succeeded in
preventing any consensus at the September 2, 2009 P5+1 meeting in Germany to add sanctions
on Iran.
Former senior U.S. diplomat Thomas Pickering and other experts said in April 2008 that U.S. and
Iranian former officials and academics have been meeting to discuss formulas under which Iran
might continue to enriched uranium to non bomb-grade levels under strict monitoring. Many
believe that ideas like this represent the most likely solution acceptable to all sides.


22 Dempsey, Judy. “U.S. Urged to Talk With Iran.” International Herald Tribune, February 5, 2009.
23 CRS conversations with European diplomats in July 2009.
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Table 7. Summary of Provisions of U.N. Resolutions on Iran Nuclear Program
(1737, 1747, and 1803)
Require Iran to suspend uranium enrichment
Prohibit transfer to Iran of nuclear, missile, and dual use items to Iran, except for use in light water reactors
Prohibit Iran from exporting arms or WMD-useful technology
Freeze the assets of 40 named Iranian persons and entities, including Bank Sepah, and several Iranian front companies
Require that countries exercise restraint with respect to travel of 35 named Iranians and ban the travel of 5 others
Cal s on states not to export arms to Iran or support new business with Iran
Calls for vigilance with respect to the foreign activities of all Iranian banks, particularly Bank Melli and Bank Saderat
Calls on countries to inspect cargoes carried by Iran Air Cargo and Islamic Republic of Iran Shipping Lines if there are
indications they carry cargo banned for carriage to Iran.

Chemical Weapons, Biological Weapons, and Missiles
Official U.S. reports and testimony continue to state that Iran is seeking a self-sufficient chemical
weapons (CW) infrastructure, and that it “may have already” stockpiled blister, blood, choking,
and nerve agents—and the bombs and shells to deliver them. This raises questions about Iran’s
compliance with its obligations under the Chemical Weapons Convention (CWC), which Iran
signed on January 13, 1993, and ratified on June 8, 1997. These officials and reports also say that
Iran “probably maintain[s] an offensive [biological weapons] BW program ... and probably has
the capability to produce at least small quantities of BW agents.”
Ballistic Missiles/Warheads
At the 2009 Annual Threat Assessment of the Intelligence Community, Director of National
Intelligence, Dennis Blair, testified “although many of their statements are exaggerations, Iranian
officials throughout the past year have repeatedly claimed greater ballistic missile capabilities that
could threaten U.S. and allied interests.”24 Tehran appears to view its ballistic missiles as an
integral part of its strategy to deter or retaliate against forces in the region, including U.S. forces.
To reinforce that message, during July 9-10, 2008, Iran conducted several highly publicized test
launches of a variant of the Shahab missile that Iran says has a 1,250 mile range, putting most key
U.S. allies in the region at risk; other missiles were tested on those days as well. Some analyses
suggested Iran might have falsified photos of some of the missiles.
However, Iran’s technical capabilities are a matter of some debate among experts. As of August
19, 2008, the George W. Bush Administration has reached agreements with Poland and the Czech
Republic to establish a missile defense system to counter Iranian ballistic missiles. These
agreements were reached over Russia’s opposition, which was based on the belief that the missile
defense system would be used to neutralize Russian capabilities. The Obama Administration has
de-emphasize this program in the context of efforts to improve relations with Russia.

24 Annual Threat Assessment of the Intelligence for the Senate Select Committee on Intelligence, Dennis C. Blair,
Director of National Intelligence, February 12, 2009.
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Table 8. Iran’s Ballistic Missile Arsenal
Shahab-3
800 mile range. Two of first three tests (July 1998, July 2000, and September 2000) reportedly
(“Meteor”)
unsuccessful. After successful test in June 2003, Iran called missile operational (capable of hitting
Israel). Despite claims, some U.S. experts say the missile not completely reliable—some observers
said Iran detonated in mid-flight a purportedly more accurate version on August 12, 2004. On May
31, 2005, Iran announced it had tested a solid-fuel version.
Shahab-4 /
1,200 - 1,500 mile range. In October 2004, Iran announced it had extended range of the Shahab-3
to 1,200 miles, and it added in early November 2004 that it is capable of “mass production” of it.
Sijjil
Agence France Presse report (February 6, 2006) said January 2006 test succeeded. Related missiles
claimed by Iran to have 1,200 mile range, include the “Ashoura” (claimed in November 2007); the
“Ghadr” (displayed at military parade in September 2007); and the “Sijil,” tested on November 12,
200, (solid fuel). “Sijil 2” tested successfully on May 20, 2009, but Secretary Gates said the range is
likely closer to 1,200 miles than to 1,500. Still, this test potentially puts large portions of the Near
East and Southeastern Europe in range, including U.S. bases in Turkey.
BM-25
1,500 mile range. On April 27, 2006, Israel’s military intelligence chief said that Iran had received a
shipment of North Korean-supplied BM-25 missiles. Missile said to be capable of carrying nuclear
warheads. The Washington Times appeared to corroborate this reporting in a July 6, 2006, story,
which asserted that the North Korean-supplied missile is based on a Soviet-era “SS-N-6” missile.
ICBM
U.S. officials believe Iran might be capable of developing an intercontinental ballistic missile (3,000
mile range) by 2015. In February 2008 Iran claimed to have launched a probe into space, suggesting
its missile technology might be improving to the point where an Iranian ICBM is realistic.
Other
On September 6, 2002, Iran said it successfully tested a 200 mile range “Fateh 110” missile (solid
Missiles
propel ent), and Iran said in late September 2002 that it had begun production. Iran also possesses a
few hundred short-range ballistic missiles, including the Shahab-1 (Scud-b), the Shahab-2 (Scud-C),
and the Tondar-69 (CSS-8). In January 2009, Iran claimed to have tested a new air-to-air missile.
Space
Following an August 2008 failure, in early February 2009, Iran successfully launched a small, low-
Vehicle
earth satellite on a Safir-2 rocket (range about 155 miles). The Pentagon said the launch was
“clearly a concern of ours” because “there are dual-use capabilities here which could be applied
toward the development of long-range missiles.”
Warheads
Wall Street Journal report of September 14, 2005, said that U.S. intelligence believes Iran is working
to adapt the Shahab-3 to deliver a nuclear warhead. Subsequent press reports say that U.S.
intelligence captured an Iranian computer in mid-2004 showing plans to construct a nuclear
warhead for the Shahab.25 The IAEA is seeking additional information from Iran.

Foreign Policy and Support for Terrorist Groups
Iran’s foreign policy is a product of the ideology of Iran’s Islamic revolution, blended with long-
standing national interests. Some interpret Iran’s objectives as the overturning of the power
structure in the Middle East that Iran believes favors the United States, Israel, and their
“collaborators”—Sunni Muslim regimes such as Egypt, Jordan, and Saudi Arabia. The State
Department report on international terrorism for 2008 released April 30, 2009, again stated (as it
has for more than a decade) that Iran “remained the most active state sponsor of terrorism” in
2008, and it again attributed the terrorist activity primarily to the Qods Force of the Revolutionary
Guard. The report focused particular attention on Iran’s lethal support to Shiite militias in Iraq as

25 Broad, William and David Sanger. “Relying On Computer, U.S. Seeks to Prove Iran’s Nuclear Aims.” New York
Times
, November 13, 2005.
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well as on shipments to and training of “selected” Taliban fighters in Afghanistan.26 On October
27, 2008, the deputy commander of the Basij became the first top Guard leader to publicly
acknowledge that Iran supplies weapons to “liberation armies” in the region, a reference to pro-
Iranian movements discussed below. The appointment of Brig. Gen. Ahmad Vahidi, the former
Qods Forces commander, as Defense Minister in September 2009 could indicate Iran will re-
emphasize efforts to interfere in neighboring countries.
Some experts believe that Iran is ascendant in the region because of the installation of pro-Iranian
regimes in Iraq and Afghanistan, and the strength of Hezbollah in Lebanon and Hamas in Gaza.
Iran might, according to this view, seek to press its advantage to strengthen regional Shiite
movements and possibly drive the United States out of the Gulf. During a visit to the Middle East
in March 2009, Secretary of State Clinton said, after meeting with several Arab and Israeli leaders
in the region, that “There is a great deal of concern about Iran from this whole region ... ”
Others reach an opposite conclusion, stating that Iran now feels more encircled than ever by pro-
U.S. regimes. Recent elections in Lebanon, U.S. engagement with Syria, stability in Iraq, and an
influx of U.S. troops to Afghanistan have rendered Iran weaker than it has been in recent years.
Some reports say that countries in the region privately welcome Iran’s post-election turmoil
because it means that Iran might be strategically weakened and consumed by internal infighting.
Others say Iran is more likely to assert itself in the region to focus public attention on foreign and
regional threats.
Relations with the Persian Gulf States
The Persian Gulf monarchy states (Gulf Cooperation Council, GCC: Saudi Arabia, Kuwait,
Bahrain, Qatar, Oman, and the United Arab Emirates) fear the growing strategic influence of Iran
but they do not openly support U.S. conflict with Iran that might cause Iran to retaliate against
Gulf state targets. At the same time, since the mid-1990s, Iran has tried to blunt Gulf state fears of
Iran by curtailing activity, conducted during the 1980s and early 1990s, to sponsor Shiite Muslim
extremist groups in these states, all of which are run by Sunni governments. Iran found, to its
detriment, that subversion caused the Gulf states to ally closely with the United States. In part to
counter Iran’s perceived growing influence in the Gulf, in December 2006 the summit of the GCC
leaders announced that the GCC states might jointly study their own development of “peaceful
nuclear technology.” On the other hand, seeking to avoid further tensions with Iran, the GCC
leaders invited Ahmadinejad to speak at the December 2-3, 2007, summit of the GCC leaders in
Doha, Qatar, marking the first time an Iranian president has been invited since the GCC was
formed in 1981. His speech reiterated a consistent Iranian theme that the Gulf countries, including
Iran, should set up their own security structure without the help of “outside powers” but also
called for a “new chapter” in Iran-GCC relations.
Saudi Arabia. Many observers closely watch the relationship between Iran and
Saudi Arabia because of Saudi alarm over the emergence of a pro-Iranian
government in Iraq and Iran’s ascendancy in Lebanon. Saudi Arabia sees itself as
leader of the Sunni Muslim world and views Shiite Muslims as heretical and
disloyal internally. The Saudis, who do not want a repeat of Iran’s sponsorship of
disruptive and sometimes violent demonstrations at annual Hajj pilgrimages in

26 U.S. Department of State. Country Reports on Terrorism 2007. Released April 30, 2008. http://www.state.gov/s/ct/
rls/crt/2007/103711.htm.
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Mecca in the 1980s and 1990s—or an increase in Iranian support for Saudi Shiite
dissidents—are receptive to easing tensions with Iran. They hosted Ahmadinejad
in the Kingdom in March 2007 and again for the Hajj in December 2007. The
Saudis continue to blame a pro-Iranian movement in the Kingdom, Saudi
Hezbollah, for the June 25, 1996, Khobar Towers housing complex bombing,
which killed 19 U.S. airmen.27 After restoring relations in December 1991 (after a
four-year break), Saudi-Iran ties progressed to high-level contacts during
Khatemi’s presidency, including Khatemi visits in 1999 and 2002.
United Arab Emirates (UAE) concerns about Iran never fully recovered from the
April 1992 Iranian expulsion of UAE security forces from the Persian Gulf island
of Abu Musa, which it and the UAE shared under a 1971 bilateral agreement. (In
1971, Iran, then ruled by the U.S.-backed Shah, seized two other islands, Greater
and Lesser Tunb, from the emirate of Ras al-Khaymah, as well as part of Abu
Musa from the emirate of Sharjah.) The UAE (particularly the federation capital,
Abu Dhabi, which takes a harder line than Dubai, which has an Iranian-origin
resident community as large as 300,000 and business ties to Iran) wants to refer
the dispute to the International Court of Justice (ICJ), but Iran insists on resolving
the issue bilaterally. The UAE has not pressed the issue vigorously in recent
years, although it formally protested Iran’s setting up of a maritime and ship
registration office on Abu Musa in July 2008. The UAE insists the islands dispute
be kept on the agenda of the U.N. Security Council (which it has been since
December 1971). The United States supports UAE proposals but takes no formal
position on sovereignty. As an indicator of the degree to which the issue has
faded, in May 2007 the UAE received Ahmadinejad (the highest level Iranian
visit since the 1979 revolution) and allowed him to lead an anti-U.S. rally of a
reported several hundred Iranian-origin residents of Dubai at a soccer stadium
there. On the other hand, tensions have flared since late 2008 over UAE’s policy
of fingerprinting of Iranian visitors.
Qatar, like most of the other Gulf states, does not seek confrontation and seeks to
accommodate some of its interests, yet Qatar remains wary that Iran might
eventually seek to encroach on its large North Field (natural gas). It shares that
field with Iran (called South Pars on Iran’s side) and Qatar earns large revenues
from natural gas exports from it. Qatar’s fears were heightened on April 26,
2004, when Iran’s deputy Oil Minister said that Qatar is probably producing
more gas than “her right share” from the field and that Iran “will not allow” its
wealth to be used by others. These concerns might have prompted Qatar to invite
Ahmadinejad to the December 2007 GCC summit in Qatar.
Bahrain is about 60% Shiite, many of whom are of Persian origin, but its
government is dominated by the Sunni Muslim Al Khalifa family. In 1981 and
again in 1996, Bahrain publicly accused Iran of supporting Bahraini Shiite
dissidents (the Islamic Front for the Liberation of Bahrain, Bahrain-Hezbollah,
and other Bahraini dissident groups) in efforts to overthrow the ruling Al Khalifa

27 Walsh, Elsa. “Annals of Politics: Louis Freeh’s Last Case.” The New Yorker, May 14, 2001. The June 21, 2001,
federal grand jury indictments of 14 suspects (13 Saudis and a Lebanese citizen) in the Khobar bombing indicate that
Iranian agents may have been involved, but no indictments of any Iranians were announced. In June 2002, Saudi
Arabia reportedly sentenced some of the eleven Saudi suspects held there. The 9/11 Commission final report asserts
that Al Qaeda might have had some as yet undetermined involvement in the Khobar Towers attacks.
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family. Bahraini fears that Iran would try to interfere in Bahrain’s November 25,
2006, parliamentary elections by providing support to Shiite candidates did not
materialize, although the main Shiite opposition coalition won 18 out of the 40
seats of the elected body. Tensions have flared several times since July 2007
when Iranian editorialists asserted that Bahrain is part of Iran—that question was
the subject of the 1970 U.N.-run referendum in which Bahrainis opted for
independence. The issued flared again after a February 20, 2009, statement by Ali
Akbar Nateq Nuri, an adviser to Khamene’i, that Bahrain was at one time an
Iranian province. The statement caused major criticism of Iran throughout the
region, and contributed to a decision by Morocco to break relations with Iran.
Still, Bahrain has sought not to antagonize Iran and has apparently allowed Iran’s
banks to establish a presence in Bahrain’s vibrant banking sector. On March 12,
2008, the Treasury Department sanctioned the Bahrain-based Future Bank under
Executive order 13382 that sanctions proliferation entities. Future Bank
purportedly is controlled by Bank Melli.
Oman. Of the GCC states, the Sultanate of Oman is closest politically to Iran and
has refused to ostracize or even harshly criticize Iranian policies. Some press
reports say local Omani officials routinely turn a blind eye to or even cooperate
in the smuggling of western goods to Iran. Sultan Qaboos made a state visit to
Iran in early August 2009, coinciding with the inauguration of Ahmadinejad.
Iranian Policy in Iraq
The U.S. military ousting of Saddam Hussein benefitted Iran strategically,28 and during 2004-
2008, U.S.-Iran differences in Iraq widened to the point where some were describing the
competition as a U.S.-Iran “proxy war” inside Iraq. The acute source of tension was evidence,
detailed by U.S. commanders in Iraq, that the Qods Force was providing arms (including highly
lethal “explosively forced projectiles,” EFPs, that have killed U.S. soldiers in Iraq), training,
guidance, and financing to “special groups” of Shiite militias involved in sectarian violence.
However, recent Defense Department reports on Iraq stability corroborate a widespread
perception that Iranian interference in Iraq has lessened, including fewer Iranian weapons
shipments. This interference is likely to lessen further if Iranian leaders become embroiled in a
long term power struggle stemming from the disputed election in Iran. In Iraq itself, the Shiite
militias and political parties that benefit most from Iranian support fared poorly in the January 31,
2009, provincial elections in Iraq, and the results were viewed as a setback for Iran’s influence in
Iraq. Iran also was unable to derail the U.S.-Iraq defense pact (which took effect January 1, 2009).
In January 2009, Iraqi Prime Minister Nuri al-Maliki visited Iran for the fourth time since he
became Prime Minister, reportedly to assure Iran that the pact did not threaten Iran.
Iran also has signed a number of agreements with Iraq on transportation, energy cooperation, free
flow of Shiite pilgrims, border security, intelligence sharing, and other cooperation; several more
agreements, including a $1 billion credit line for Iranian exports to Iraq, were signed during
Ahmadinejad’s March 2-3, 2008, visit to Iraq; implementing agreements were signed in April
2008. The two countries now do about $4 billion in bilateral trade. Additional Iranian credits and

28 This issue is covered in greater depth in CRS Report RS22323, Iran's Activities and Influence in Iraq, by Kenneth
Katzman.
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trade issues were reportedly discussed during a March 2009 visit to Iran by Iraqi President Jalal
Talabani.
After at first rejecting dialogue with Iran on the Iraq issue, the George W. Bush Administration
supported and attended several regional conferences on Iraq, attended by Iran, and undertook
bilateral talks with Iran on the Iraq issue. Several meetings were held in Baghdad in 2007, with
no concrete results, according to former Ambassador to Iraq Crocker, who led the U.S. side at the
talks. A round of talks was tentatively scheduled for December 18, 2007, but Iran repeatedly
postponed them because of differences over the agenda and the level of talks (Iran wanted them
to be at the ambassador level). On May 5, 2008, Iran indefinitely suspended this dialogue, and, in
February 2009, Iran said there was no need to resume it.
A provision of the FY2008 defense authorization bill (P.L. 110-181) required a report to Congress
on Iran’s interference in Iraq. On several occasions since January 2008, the Treasury Department
has taken action against suspected Iranian and pro-Iranian operatives in Iraq by designating
individuals and organizations as a threat to stability in Iraq under the July 17, 2007 Executive
Order 13438, which freezes the assets and bans transactions with named individuals. The named
entities, which includes a senior Qods Forces leader, are in the tables on sanctioned entities in
CRS Report RS20871, Iran Sanctions , by Kenneth Katzman. On July 2, 2009, a pro-Iranian
militia offshoot, Asa’ib Hezbollah (Hezbollah Battalions) was named under the order, and was
also designated a Foreign Terrorist Organization (FTO) under the Immigration and Naturalization
Act. On July 9, 2009, the United States military turned over to Iraqi custody five Iranian Qods
Forces operatives (Iran claims they are diplomats) arrested in 2007 in Irbil, northern Iraq. The
men returned to Iran.
Supporting Palestinian Militant Groups
Iran’s support for Palestinian militant groups has long concerned U.S. Administrations, as part of
an apparent effort by Tehran to obstruct an Israeli-Palestinian peace that Iran believes would
strengthen the United States and Israel. Ahmadinejad’s various statements on Israel were
discussed above, although Supreme Leader Khamene’i has repeatedly called Israel a “cancerous
tumor.” He used that term again during a March 4, 2009, press conference in Tehran. In
December 2001, purported “moderate” Rafsanjani said that it would take only one Iranian nuclear
bomb to destroy Israel, whereas a similar strike against Iran by Israel would have far less impact
because Iran’s population is large. Iran has hosted numerous conferences to which anti-peace
process terrorist organizations were invited (for example: April 24, 2001, and June 2-3, 2002).
During his presidency, Khatemi also issued sharp criticisms and recriminations against Israel, but
he also conversed with Israel’s president at the 2005 funeral of Pope John Paul II. The formal
position of the Iranian Foreign Ministry, considered a bastion of moderates, is that Iran would not
seek to block an Israeli-Palestinian settlement but that the peace process is too weighted toward
Israel to result in a fair settlement.
Iran and Hamas
The State Department report on terrorism for 2007 (mentioned above) again accused Iran of
providing “extensive” funding, weapons, and training to Hamas, Palestinian Islamic Jihad (PIJ),
the Al Aqsa Martyr’s Brigades, and the Popular Front for the Liberation of Palestine-General
Command (PFLP-GC). All are named as foreign terrorist organizations (FTO) by the State
Department for their use of violence to undermine the Arab-Israeli peace process. Some saw
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Iran’s regional policy further strengthened by Hamas’s victory in the January 25, 2006,
Palestinian legislative elections, and even more so by Hamas’s June 2007 armed takeover of the
Gaza Strip. The Hamas gains potentially positioned it to block any peace settlement with Israel.
Hamas activists downplay Iranian influence on them, asserting that Iran is mostly Shiite, while
Hamas members are Sunni Muslims.29 Hamas was reputed to receive about 10% of its budget in
the early 1990s from Iran, although since then Hamas has cultivated funding from wealthy
Persian Gulf donors and supporters in Europe and elsewhere.
Still, it was evident from the December 27, 2008, - January 17, 2009, Israel-Hamas war in Gaza,
that Iran provides material support to Hamas. Joint Chiefs Chairman Adm. Mike Mullen said on
January 27, 2009, that the United States boarded but did not seize a ship carrying light arms to
Hamas from Iran; the ship (the Monchegorsk) later went to Cyprus. On March 11, 2009, a U.N.
committee monitoring Iran’s compliance with Resolution 1747, which bans Iranian arms exports,
said Iran might have violated that resolution with the alleged shipment. Hamas appeared to
corroborate allegations of Iranian weapons supplies when its exiled leader, Khaled Meshal, on
February 1, 2009, publicly praised Iran for helping Hamas achieve “victory” over Israel in the
conflict.30 On December 29, 2008, Khamene’i said that Muslims worldwide were “duty-bound”
to defend Palestinians in the Gaza Strip against the Israeli offensive against the Hamas-run
leadership there, but the Iranian leadership did not attempt to send Iranian volunteers to Gaza to
fight on Hamas’ behalf. Iranian weaponry might also have been the target of a January 2009 strike
on a weapons delivery purportedly bound for Gaza in transit via Sudan (presumably via Egypt).
Sunni Arab leaders in Egypt, Jordan, Saudi Arabia, and throughout the region apparently fear
Iran’s reported attempts to discredit these leaders for what Iran considers insufficient support for
Hamas in its recent war with Israel. Some Iranian efforts reportedly involve establishing
Hezbollah cells in some of these countries, particularly Egypt, purportedly to stir up opposition to
these governments and build public support for Hezbollah and Hamas. 31 These countries are also
said to fear that President Obama’s outreach to Iran might lead the United States to downplay
their concerns about Iran—a sentiment that Secretary of Defense Gates tried to allay during his
visit to the Middle East in May 2009.
Lebanese Hezbollah and Syria
Iran has maintained a close relationship with Hezbollah since the group was formed in 1982 by
Lebanese Shiite clerics who were sympathetic to Iran’s Islamic revolution and belonged to the
Lebanese Da’wa Party. Hezbollah was responsible for several acts of anti-U.S. and anti-Israel
terrorism in the 1980s and 1990s.32 Hezbollah’s attacks on Israeli forces in southern Lebanon

29 CNN “Late Edition” interview with Hamas co-founder Mahmoud Zahar, January 29, 2006.
30 Hamas Leader Praises Iran’s Help in Gaza ‘Victory.’ CNN.com. February 1, 2009.
31 Slackman, Michael. “Egypt Accuses Hezbollah of Plotting Attacks in Sinai and Arms Smuggling to Gaza.” New
York Times, April 14, 2009
32 Hezbollah is believed responsible for the October 1983 bombing of the U.S. Marine barracks in Beirut, as well as
attacks on U.S. Embassy Beirut facilities in April 1983 and September 1984, and for the hijacking of TWA Flight 847
in June 1985 in which Navy diver Robert Stetham was killed. Hezbollah is also believed to have committed the March
17, 1992, bombing of Israel’s embassy in that city, which killed 29 people. Its last known terrorist attack outside
Lebanon was the July 18, 1994, bombing of a Jewish community center in Buenos Aires, which killed 85. On October
31, 2006, Argentine prosecutors asked a federal judge to seek the arrest of Rafsanjani, former Intelligence Minister Ali
Fallahian, former Foreign Minister Ali Akbar Velayati, and four other Iranian officials for this attack.
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contributed to an Israeli withdrawal in May 2000, but, despite United Nations certification of
Israel’s withdrawal, Hezbollah maintained military forces along the border. Hezbollah continued
to remain armed and outside Lebanese government control, despite U.N. Security Council
Resolution 1559 (September 2, 2004) that required its dismantlement. In refusing to disarm,
Hezbollah says it was resisting Israeli occupation of some Lebanese territory (Shib’a Farms).
Although Iran likely did not instigate Lebanese Hezbollah to provoke the July-August 2006 war,
Iran has long been its major arms supplier. Hezbollah fired Iranian-supplied rockets on Israel’s
northern towns during the fighting. Reported Iranian shipments to Hezbollah prior to the conflict
included the “Fajr” (dawn) and Khaybar series of rockets that were fired at the Israeli city of
Haifa (30 miles from the border), and over 10,000 Katyusha rockets that were fired at cities
within 20 miles of the Lebanese border.33 Iran also supplied Hezbollah with an unmanned aerial
vehicle (UAV), the Mirsad, that Hezbollah briefly flew over the Israel-Lebanon border on
November 7, 2004, and April 11, 2005; at least three were shot down by Israel during the conflict.
On July 14, 2006, Hezbollah apparently hit an Israeli warship with a C-802 sea-skimming missile
probably provided by Iran. (See above for information on Iran’s acquisition of that weapon from
China.) Iran also purportedly provided advice during the conflict; about 50 Revolutionary Guards
Qods Force personnel were in Lebanon (down from about 2,000 when Hezbollah was formed,
according to a Washington Post report of April 13, 2005) when the conflict began; that number
might have increased during the conflict to help Hezbollah operate the Iran-supplied weaponry.
Even though Hezbollah reduced its overt military presence in southern Lebanon in accordance
with the conflict-related U.N. Security Council Resolution 1701 (July 31, 2006), Hezbollah was
perceived as a victor in the war for holding out against heavy Israeli air-strikes and some ground
action. Iran supported Hezbollah’s demands and provided it with leverage by resupplying it, after
the hostilities, with 27,000 rockets, more than double what Hezbollah had at the start of the 2006
war.34 Among the post-war deliveries were 500 Iranian-made “Zelzal” (Earthquake) missiles with
a range of 186 miles, enough to reach Tel Aviv from south Lebanon. Iran also made at least $150
million available for Hezbollah to distribute to Lebanese citizens (mostly Shiite supporters of
Hezbollah) whose homes were damaged in the Israeli military campaign.35 The State Department
terrorism report for 2008, referenced above, specifies Iranian aid to Hezbollah as exceeding $200
million in 2008, and says that Iran trained over 3,000 Hezbollah fighters in Iran during the year.
Neither Israel nor the United States opposed Hezbollah’s progressively increased participation in
peaceful Lebanese politics. In March 2005, President George W. Bush indicated that the United
States might accept Hezbollah as a legitimate political force in Lebanon if it disarms. In the
Lebanese parliamentary elections of May—June 2005, Hezbollah expanded its presence in the
parliament to 14 out of the 128-seat body, and it gained two cabinet seats. In mid May 2008,
Hezbollah, for the first time ever, used its militia wing for domestic purposes. Its fighters took
over large parts of Beirut in response to an attempt by the U.S. and Saudi-backed Lebanese
government to curb Hezbollah’s media and commercial operations. The success of its fighters
contributed to a Qatar-brokered settlement on May 21, 2008, in which the majority coalition
agreed to give Hezbollah and its allies enough seats in a new cabinet to be able to veto
government decisions. Hezbollah agreed to the compromise candidate of Lebanese Army

33“Israel’s Peres Says Iran Arming Hizbollah.” Reuters, February 4, 2002.
34 Rotella, Sebastian. “In Lebanon, Hezbollah Arms Stockpile Bigger, Deadlier.” Los Angeles Times, May 4, 2008.
35 Shadid, Anthony. “Armed With Iran’s Millions, Fighters Turn to Rebuilding.” Washington Post, August 16, 2006.
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commander Michel Suleiman to become the new president. The cabinet, in which Hezbollah had
one cabinet seat but its allies had seven others, gave Hezbollah its long-sought veto power.
Based on the strength, Hezbollah was viewed as a likely winner in June 7, 2009 parliamentary
elections in Lebanon. However, its coalition won 57 seats in the elections, failing to overturn the
majority of the pro-U.S. factions led by Sa’d al-Hariri, son of assassinated leader Rafiq Hariri,
which won 71 seats (one more than they had previously). The defeat for Hezbollah allies set back
Tehran’s regional influence. As a matter of policy, the United States does not meet with any
Hezbollah members, even those in the parliament or cabinet. Hezbollah is a designated FTO, but
that designation bars financial transactions by the group and does not specifically ban meeting
with members of the group.
Syria
Iran’s support for Hezbollah is linked in many ways to its alliance with Syria. Syria is the transit
point for the Iranian weapons shipments to Hezbollah and both countries see Hezbollah as
leverage against Israel to achieve their regional and territorial aims. In order to preserve its links
to Syria, which is one of Iran’s few real allies, Iran purportedly has acted as an intermediary with
North Korea to supply Syria with various forms of WMD and missile technology. Some see
Israel-Syria negotiations—and recent Obama Administration engagement with Syria—as means
to wean Syria away from its alliance with Iran. However, Iran is a major investor in the Syrian
economy, which attracts very little western investment, and some believe the Iran-Syria alliance
is not easily severed.
Central Asia and the Caspian
Iran’s policy in Central Asia has thus far emphasized Iran’s rights to Caspian Sea resources,
particularly against Azerbaijan. That country’s population, like Iran’s, is mostly Shiite Muslim,
but its leadership is secular. In addition, Azerbaijan is ethnically Turkic, and Iran fears that
Azerbaijan nationalists might stoke separatism among Iran’s large Azeri Turkic population, which
demonstrated some unrest in 2006. These factors could explain why Iran has generally tilted
toward Armenia, which is Christian, even though it has been at odds with Azerbaijan over
territory and control of ethnic Armenians. In July 2001, Iranian warships and combat aircraft
threatened a British Petroleum (BP) ship on contract to Azerbaijan out of an area of the Caspian
that Iran considers its own. The United States called that action provocative, and it is engaged in
border security and defense cooperation with Azerbaijan directed against Iran (and Russia). The
United States successfully backed construction of the Baku-Tblisi-Ceyhan oil pipeline, intended
in part to provide alternatives to Iranian oil. Along with India and Pakistan, Iran has been given
observer status at the Central Asian security grouping called the Shanghai Cooperation
Organization (SCO — Russia, China, Kazakhstan, Kyrgyzstan, Uzbekistan, and Tajikistan). In
April 2008, Iran applied for full membership in the organization, which opposes a long-term U.S.
presence in Central Asia.
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Afghanistan and Pakistan36
Iran is viewed by U.S. officials as pursuing a multi-track strategy—attempting to help develop
Afghanistan and enhance its influence there, while also building leverage against the United
States by arming anti-U.S. militant groups. Iran is particularly interested in restoring some of its
traditional sway in eastern, central, and northern Afghanistan where Persian-speaking Afghans
predominate.
The State Department terrorism report for 2008 again accuses the Qods Force of supplying
various munitions, including 107mm rockets, to Taliban and other militants in Afghanistan; some
Taliban commanders openly say they are obtaining Iranian weapons. The 2008 reports also, and
for the first time, accuses Iran of training Taliban fighters in small unit tactics, small arms use,
explosives, and indirect weapons fire. Among specific shipments noted by the United States: on
April 17, 2007, U.S. military personnel in Afghanistan captured a shipment of Iranian weapons
that purportedly was bound for Taliban fighters. On several occasions in 2007, NATO officers
said they directly intercepted Iranian shipments of heavy arms, C4 explosives, and advanced
roadside bombs (explosively forced projectiles, or EFPs, such as those found in Iraq) to Taliban
fighters in Afghanistan. U.S. commanders in Afghanistan maintain that the intercepted shipments
are large enough that the Iranian government would have to have known about them. U.S. and
Afghan officials say the shipments continue, but are not consistent or necessarily decisive in the
Afghanistan war.
These shipments and contacts have caused debate over Iran’s goals because Iran long opposed the
regime of the Taliban in Afghanistan on the grounds that it oppressed Shiite Muslim and other
Persian-speaking minorities. Iran nearly launched a military attack against the Taliban in
September 1998 after Taliban fighters captured and killed nine Iranian diplomats based in
northern Afghanistan, and Iran provided military aid to the Northern Alliance factions. During the
major combat phase of the post-September 11 U.S.-led war in Afghanistan, Iran offered search
and rescue of any downed service-persons and the trans-shipment to Afghanistan of humanitarian
assistance. Iran and U.S. diplomats were in continuous contact in forging a post-Taliban
government in Afghanistan at the December 2001 “Bonn Conference.” In March 2002, Iran
expelled Gulbuddin Hikmatyar, an Afghan militant leader; it froze his assets in January 2005.
After 2004, Iran’s influence waned somewhat as Northern Alliance figures were marginalized in
Afghan politics. To build financial and alternative political influence in Afghanistan, Iran has
funded projects that total about $1.2 billion million since 2001 (close to a pledged amount in
international donors conferences), mostly in neighboring Herat but also in Kabul (Shiite
theological seminaries there). Iran’s construction of Shiite mosques and seminaries could indicate
Iran is trying to support Afghanistan’s Shiite (Hazara tribe) minority, and Iran has funded several
media outlets in Afghanistan catering to Shiites.
At the same time, some commanders, including CENTCOM Commander Gen. David Petraeus,
have said that U.S. engagement with Iran on Afghanistan might help U.S. stabilization efforts
there. Others say that working with Iran on Afghanistan might help build a broader understanding
with Iran on other issues, including the nuclear issue. Some press reports say that, despite Iran’s
assistance to the Taliban, Defense Department planners might even be evaluating the feasibility of
using an Iranian route to ship U.S. equipment into Afghanistan as an alternative to the frequently

36 See CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy, by Kenneth Katzman.
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attacked route through Pakistan. Other accounts say an Iranian supply route might be used by
non-U.S. partners of NATO for their missions in Afghanistan.
Perhaps in recognition of Iran’s role in Afghanistan, or as part of a broader effort to build
dialogue with Iran, the United States invited Iran to an international conference on Afghanistan
held in the Netherlands on March 31, 2009. Iran’s representatives there had a brief side exchange
there with U.S. special representative for Afghanistan and Pakistan Ambassador Richard
Holbrooke. At the meeting, Iran pledged cooperation on preventing drug smuggling out of
Afghanistan and in helping economically develop that country.
Pakistan
Iran’s relations with Pakistan have been partly a function of events in Afghanistan. Iran had a
burgeoning military cooperation with Pakistan in the early 1990s, and as noted Iran’s nuclear
program benefitted from the A.Q. Khan network. However, Iran-Pakistan relations became
strained in the 1990s when Pakistan was supporting the Taliban in Afghanistan, which committed
alleged atrocities against Shiite Afghans (Hazara tribe), and which seized control of Persian-
speaking areas of Afghanistan. Currently, Iran remains suspicious that Pakistan might want to
again implant the Taliban in power in Afghanistan—and Iran itself is aiding the Taliban to some
extent—but Iran and Pakistan now have a broad agenda that includes a potential major gas
pipeline project, discussed further below.
Al Qaeda
Iran is not a natural ally of Al Qaeda, largely because Al Qaeda is an orthodox Sunni Muslim
organization. The 9/11 Commission report said several of the September 11 hijackers and other
plotters, possibly with official help, might have transited Iran, but the report does not assert that
the Iranian government cooperated with or knew about the plot. Another bin Laden ally, Abu
Musab al-Zarqawi, killed by U.S. forces in Iraq on June 7, 2006, reportedly transited Iran after
the September 11 attacks and took root in Iraq, becoming an insurgent leader there.
However, Iran might see possibilities for tactical alliance with Al Qaeda, and U.S. officials have
said since January 2002 that Iran has not prosecuted or extradited senior Al Qaeda operatives
(spokesman Sulayman Abu Ghaith, top operative Sayf Al Adl, and Osama bin Laden’s son,
Saad37). All have been believed to be in Iran,38 although some U.S. officials said in January 2009
that Saad bin Laden might have left Iran and could be in Pakistan. That information was
publicized a few days after the Treasury Department (on January 16, 2009) designated four Al
Qaeda operatives in Iran, including Saad bin Laden (and three lesser known figures) as terrorist
entities under Executive Order 13224. (U.S. officials blamed Saad bin Laden, Adl, and Abu
Ghaith for the May 12, 2003, bombings in Riyadh, Saudi Arabia against four expatriate housing
complexes on these operatives, saying they have been able to contact associates outside Iran.39)
Iran asserted on July 23, 2003, that it had “in custody” senior Al Qaeda figures. However, some
experts believe that hardliners in Iran might want to use Al Qaeda activists as leverage against the

37 Gertz, Bill. “Al Qaeda Terrorists Being Held by Iran.” Washington Times, July 24, 2003.
38 Keto, Alex. “White House Reiterates Iran Is Harboring Al Qaeda.” Dow Jones Newswires, May 19, 2003.
39 Gertz, Bill. “CIA Points to Continuing Iran Tie to Al Qaeda.” Washington Times, July 23, 2004.
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United States and its allies. Some say Iran might want to exchange them for a U.S. hand-over of
PMOI activists under U.S. control in Iraq. Possibly attempting to show that it is an adversary and
not an ally of Al Qaeda, on July 16, 2005, Iran’s Intelligence Minister said that 200 Al Qaeda
members are in Iranian jails.40
Latin America
A growing concern has been Iran’s developing relations with countries and leaders in Latin
America considered adversaries of the United States, particularly Cuba and Venezuela’s Hugo
Chavez. In February 2006, Secretary of State Rice referred to Venezuela and Cuba as “sidekicks”
of Iran because of their votes in the IAEA against referring Iran to the Security Council. On
January 27, 2009, Secretary of Defense Gates said Iran was trying to build influence in Latin
America by expanding front companies and opening offices in countries there. On October 30,
2007, then Secretary of Homeland Security Michael Chertoff said that Iran’s relationship with
Venezuela is an emerging threat because it represents a “marriage” of Iran’s extremist ideology
with “those who have anti-American views.”
Chavez has visited Iran on several occasions, offering Iran additional gasoline during Iran’s fuel
shortages in 2007 as well as joint oil and gas projects. The two countries have established direct
air links, and 400 Iranian engineers have reportedly been sent to Venezuela to work on
infrastructure projects there. Recent State Department terrorism reports have said that Cuba
maintains “close relationships with other state sponsors of terrorism such as Iran.” Iran is also
trying to extend its influence in Latin America by offering Bolivia $1 billion in aid and
investment, according to an Associated Press report of November 23, 2008.
India
Iran and India have cultivated good relations with each other in order to enable each to pursue its
own interests and avoid mutual conflict. The two backed similar anti-Taliban factions in
Afghanistan during 1996-2001 and have a number of mutual economic and even military-to-
military relationships and projects, discussed further in CRS Report RS22486, India-Iran
Relations and U.S. Interests
, by K. Alan Kronstadt and Kenneth Katzman.
One aspect of the relationship involves not only the potential building of a natural gas pipeline
from Iran, through Pakistan, to India, but also the supplies of gasoline to Iran. A key supplier is
Reliance Industries Ltd., which by some accounts supplies up to 40% of Iran’s imports of
gasoline. In December 2008, some Members of Congress expressed opposition to a decision by
the Export-Import Bank to provide up to $900 million in loan guarantees to Reliance, because of
its gasoline sales to Iran. A provision of H.R. 3081, a FY2010 foreign aid appropriation, would
end provision of such export credits to companies that sell gasoline to Iran. Another source of
U.S. concern has been visits to India by some Iranian naval personnel.

40 “Tehran Pledges to Crack Down on Militants.” Associated Press, July 18, 2005.
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Africa
Some Members of Congress are concerned that Iran is support radical Islamist movements in
Africa. In the 111th Congress, H.Con.Res. 16 cites Hezbollah for engaging in raising funds in
Africa by trafficking in “conflict diamonds.” Iran also might have supplied Islamists in Somalia
with anti-aircraft and anti-tank weaponry. The possible transfer of weaponry to Hamas via Sudan
was discussed above.
U.S. Policy Responses, Options, and Legislation
The February 11, 1979 fall of the Shah of Iran, a key U.S. ally, opened the long and deep rift in
U.S.-Iranian relations. On November 4, 1979, radical “students” seized the U.S. Embassy in
Tehran and held its diplomats hostage until minutes after President Reagan’s inauguration on
January 20, 1981. The United States broke relations with Iran on April 7, 1980 (just after the
failed U.S. military attempt to rescue the hostages) and the two countries had only limited official
contact thereafter.41 The United States tilted toward Iraq in the 1980-1988 Iran-Iraq war, including
U.S. diplomatic attempts to block conventional arms sales to Iran, providing battlefield
intelligence to Iraq42 and, during 1987-1988, direct skirmishes with Iranian naval elements in the
course of U.S. efforts to protect international oil shipments in the Gulf from Iranian mines and
other attacks. In one battle on April 18, 1988 (“Operation Praying Mantis”), Iran lost about a
quarter of its larger naval ships in a one-day engagement with the U.S. Navy, including one
frigate sunk and another badly damaged. Iran strongly disputed the U.S. assertion that the July 3,
1988, U.S. shoot-down of Iran Air Flight 655 by the U.S.S. Vincennes over the Persian Gulf
(bound for Dubai, UAE) was an accident.
In his January 1989 inaugural speech, President George H.W. Bush laid the groundwork for a
rapprochement, saying that, in relations with Iran, “goodwill begets goodwill,” implying better
relations if Iran helped obtain the release of U.S. hostages held by Hezbollah in Lebanon. Iran
reportedly did assist in obtaining their releases, which was completed in December 1991, but no
thaw followed, possibly because Iran continued to back groups opposed to the U.S.-sponsored
Middle East peace process, a major U.S. priority.
Policy During the Clinton and George W. Bush Administrations
Upon taking office in 1993, the Clinton Administration moved to further isolate Iran as part of a
strategy of “dual containment” of Iran and Iraq. In 1995 and 1996, the Clinton Administration and
Congress added sanctions on Iran in response to growing concerns about Iran’s weapons of mass
destruction, its support for terrorist groups, and its efforts to subvert the Arab-Israeli peace
process. The election of Khatemi in May 1997 precipitated a U.S. shift toward engagement; the
Clinton Administration offered Iran official dialogue, with no substantive preconditions. In

41 An exception was the abortive 1985-1986 clandestine arms supply relationship with Iran in exchange for some
American hostages held by Hezbollah in Lebanon (the so-called “Iran-Contra Affair”). Iran has an interest section in
Washington D.C. under the auspices of the Embassy of Pakistan; it is staffed by Iranian-Americans. The U.S. interest
section in Tehran has no American personnel; it is under the Embassy of Switzerland.
42 Sciolino, Elaine. The Outlaw State: Saddam Hussein’s Quest for Power and the Gulf Crisis. New York: John Wiley
and Sons, 1991. p. 168.
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January 1998, Khatemi publicly agreed to “people-to-people” U.S.-Iran exchanges as part of his
push for “dialogue of civilizations, but he ruled out direct talks. In a June 1998 speech, then
Secretary of State Albright called for mutual confidence building measures that could lead to a
“road map” for normalization. Encouraged by the reformist victory in Iran’s March 2000 Majles
elections, Secretary Albright, in a March 17, 2000, speech, acknowledged past U.S. meddling in
Iran, announcing some minor easing of the U.S. trade ban with Iran, and promised to try to
resolve outstanding claims disputes. In September 2000 U.N. “Millennium Summit” meetings,
Albright and President Clinton sent a positive signal to Iran by attending Khatemi’s speeches.
George W. Bush Administration Policy
The George W. Bush Administration policy priority was to prevent Iran from obtaining a nuclear
weapons capability, believing that a nuclear Iran would be even more assertive in attempting to
undermine U.S. objectives in the Middle East than it already is. The George W. Bush
Administration undertook multi-faceted efforts to limit Iran’s strategic capabilities through
international diplomacy and sanctions—both international sanctions as well as sanctions enforced
by its allies, outside Security Council mandate. At the same time, the Administration engaged in
bilateral diplomacy with Iran on specific priority issues, such as Afghanistan and Iraq. The policy
framework was supported by maintenance of a large U.S. conventional military capabilities in the
Persian Gulf and through U.S. alliances with Iran’s neighbors.
At times, the George W. Bush Administration considered or pursued harder options. Some
Administration officials, reportedly led by Vice President Cheney, believed that policy should
focus on using the leverage of possible military confrontation with Iran or on U.S. efforts to
change Iran’s regime.43 Legislation in the 110th Congress indicated support for increasing U.S.
sanctions and for steps to compel other foreign companies to curtail business dealings with Iran.44
Overview of Obama Administration Policy
President Obama said in his inauguration and since that the United States would be responsive to
an Iranian “unclenched fist,” and that the Administration has a “new approach” that attempts
consistent and broad direct diplomacy with Iran. In concert with that approach, Obama
Administration officials have not indicated support for military action should Iran continue to
pursue its nuclear program—although that option was not explicitly taken “off the table.” No
Administration official has publicly supported “regime-change” in Iran to accomplish U.S. goals,
even at the height of the election-related protests. Administration officials have told U.S. partners
that U.S. diplomacy with Iran is intended to complement, not supplant, joint multilateral
diplomacy with Iran.
Some Obama Administration officials, including Secretary of State Clinton and Secretary of
Defense Gates, well before the unrest in Iran, expressed public skepticism that engagement would
yield changes in Iran’s policies. Others, including Dennis Ross, who was named in late February

43 Cooper, Helene and David Sanger. “Strategy on Iran Stirs New Debate at White House.” New York Times, June 16,
2007.
44 The FY2007 defense authorization law (P.L. 109-364) called for a report by the Administration on all aspects of U.S.
policy and objectives on Iran (and required the DNI to prepare a national intelligence estimate on Iran, which was
released on December 3, 2007 as discussed above).
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2009 as an adviser to Secretary of State Clinton for “Southwest Asia” (a formulation understood
to center on Iran), believe that the United States and its partners need to present Iran with clearer
incentives and clearer punishments if Iran continues to refuse cooperation on the nuclear issue. At
the same time, in June 2009, Ambassador Ross was reassigned from State Department to a
coordinating role at the White House on policy toward Iran, as well as on the Arab-Israeli peace
process. If accurate, this could suggest White House support for the Ross approach on Iran.
The election related unrest in Iran has not, to date, substantially altered Obama Administration
goals—to prevent Iran from acquiring a nuclear weapons capability, as well as to curtail Iran’s
meddling in the affairs of its neighbors and trying to frustrate some regional U.S. initiatives.
However, the Administration’s eagerness to enter into talks with Iran to accomplish those goals
diminished in response to the unrest, and the benchmarks for measuring Iranian responsiveness
were made more strict.
Implementation of the Engagement Policy
Prior to the June 12 election in Iran, the steps to engage Iran included:
• The message to the Iranian people by President Obama on the occasion of
Nowruz (Persian New Year), March 21, 2009. Experts noted particularly the
President’s reference to “The Islamic Republic of Iran,” a formulation that
appears to suggest that the United States fully accepts the Islamic revolution in
Iran and is not seeking “regime change.”
• President Obama reportedly sent a letter to Iran’s leadership expressing the
Administration’s philosophy in favor of engagement with Iran. (According to
Iran’s “Tabnak” website that is close to the Revolutionary Guard, a second letter
was sent to Iran in August 2009.)
• The major speech to the “Muslim World” in Cairo on June 4, 2009, in which
President Obama said the United States had played a role in the overthrow of
Mossadeq, and said that Iran had a right to peaceful nuclear power if it complies
with its responsibilities under the NPT.
• The public invitation for Iran to attend the March 31, 2009, conference on
Afghanistan in the Netherlands, discussed above.
• The U.S. announcement on April 8 that it would attend all future P5+1 meetings
with Iran, and suspension of seeking new P5+1 agreement on additional U.N.
sanctions, pending the outcome of the Administration outreach to Iran.
• The loosening of restrictions on U.S. diplomats to meet their Iranian counterparts
at international meetings, and the message to U.S. embassies abroad that they can
invite Iranian diplomats to upcoming celebrations of U.S. Independence Day.
(The July 4 invitations did not get issued because of the Iran unrest.)
• On the other hand, President Obama issued a formal one year extension of the
U.S. ban on trade and investment with Iran on March 15, 2009, (see “U.S. Ban
on Trade and Investment with Iran,” below).
Supreme Leader Khamene’i, in his Nowruz message to Iran, answered the Obama message by
saying that the United States needs to take “concrete steps” to show sincerity, such as unfreezing
Iranian assets, lifting U.S. sanctions, and resolving the case of the 1988 downing of an Iranian
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airliner (see below for further information on these issues). President Ahmadinejad’s position has
been that Iran is ready for dialogue with the United States if it is part of a fundamental change in
the U.S. stance from what Iran sees as hostility and is “honest.” However, these did not constitute
the unambiguous, positive response to the overtures sought by the Administration.
As noted above in the section on nuclear issues, in light of the unrest in Iran, the United States
and its partners now foresee an early turn to discussion of new U.N. sanctions against Iran if Iran
does not return to nuclear talks, with constructive proposals, by the September 24, 2009 G-20
summit. If talks do restart, as Iran has now agreed they should, it is possible that any return to
discussions of new sanctions would have to wait until early 2010, in order to give new talks time
(about six months) to either succeed or stall. If the talks do not start or do fail, there is now a
broad inclination to push for what Administration officials say are “crippling sanctions”—
sanctions that bite into Iran’s civilian economy—if and when international discussion of sanctions
resumes. Such steps could include a worldwide ban on sales to Iran of gasoline or on new
investment in Iran’s energy sector. Administration officials told Israeli leaders in late July 2009
that they will back strict sanctions, and might even back unilateral U.S. sanctions such as those
proposed in the 111th Congress, possibly in an effort to calm Israeli fears of Iran’s nuclear
progress.
Enhanced U.S. Interests Section
On specific future steps toward greater engagement, the George W. Bush Administration said in
late 2008 that it would leave to the Obama Administration a decision on whether to staff the U.S.
interests section in Tehran with U.S. personnel, who would mostly process Iranian visas and help
facilitate U.S.-Iran people-to-people contacts. The current interests section is under the auspices
of the Swiss Embassy. The Obama Administration appeared inclined toward that step as well but
no decision has been announced, to date, and is likely delayed or derailed outright by the Iranian
response to the post-election protests. A potential factor in the interests section decision could be
a storming of a British diplomatic facility by 50 Iranian students on December 30, 2008,
protesting what they said was Britain’s bias toward Israel.
Engagement Efforts During the George W. Bush Administration
Prior to 2008, the George W. Bush Administration directly engaged Iran on specific regional
priority (Afghanistan and Iraq) and humanitarian issues. The United States had a dialogue with
Iran on Iraq and Afghanistan from late 2001 until May 2003, when the United States broke off the
talks following the May 12, 2003, terrorist bombing in Riyadh. At that time, the United States and
Iran publicly acknowledged that they were conducting direct talks in Geneva on those two
issues,45 the first confirmed direct dialogue between the two countries since the 1979 revolution.
The United States briefly resumed some contacts with Iran in December 2003 to coordinate U.S.
aid to victims of the December 2003 earthquake in Bam, Iran, including a reported offer—
rebuffed by Iran—to send a high-level delegation to Iran including Senator Elizabeth Dole and
reportedly President George W. Bush’s sister, Dorothy.
Prior to the July 2008 decision to have Undersecretary Burns attend the July 19, 2008 P5+1
nuclear negotiations with Iran, the George W. Bush Administration maintained it would join

45 Wright, Robin. “U.S. In ‘Useful’ Talks With Iran.” Los Angeles Times, May 13, 2003.
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multilateral nuclear talks, or even potentially engage in direct bilateral talks, only if Iran
suspended uranium enrichment. Some believe the Administration position was based on a view
that offering to participate in a nuclear dialogue with Iran would later increase international
support for sanctions by demonstrating U.S. willingness to negotiate.
The George W. Bush Administration did indicate that it considers Iran a great nation and respects
its history; such themes were prominent in speeches by President George W. Bush such as at the
Merchant Marine Academy on June 19, 2006, and his September 18, 2006, speech to the U.N.
General Assembly. Then Secretary of State Rice said in January 2008 that the United States does
not consider Iran a “permanent enemy.” An amendment by then Senator Biden (adopted June
2006) to the FY2007 defense authorization bill (P.L. 109-364) supported the Administration’s
offer to join nuclear talks with Iran.
“Grand Bargain Concept”
The George W. Bush Administration did not offer Iran an unconditional, direct U.S.-Iran bilateral
dialogue on all issues of U.S. concern: nuclear issues, Iranian support of militant movements,
involvement in Iraq, and related issues. Some argue that the issues that divide the United States
and Iran cannot be segregated, and that the key to resolving the nuclear issue is striking a “grand
bargain” on all outstanding issues. The Obama Administration outreach appears to suggest a
willingness to consider such a comprehensive agreement, if such agreement could be reached.
Some say the George W. Bush Administration “missed an opportunity,” saying that U.S. officials
rebuffed a reported comprehensive overture from Iran just before the May 12, 2003, Riyadh
bombing, along the lines of a so-called “grand bargain.” The Washington Post reported on
February 14, 2007 (“2003 Memo Says Iranian Leaders Backed Talks”), that the Swiss
Ambassador to Iran in 2003, Tim Guldimann, had informed U.S. officials of a comprehensive
Iranian proposal for talks with the United States. However, State Department officials and some
European diplomats based in Tehran at that time question whether that proposal represented an
authoritative Iranian communication. Others argue that the offer was unrealistic because an
agreement would have required Iran to abandon key tenets of its Islamic revolution.
Containment and Possible Military Action
The George W. Bush Administration consistently maintained that military action to delay or halt
Iran’s nuclear program was an option that was “on the table.” The Obama Administration has not
ruled this option out but has not indicated any inclination toward it. Although some oppose most
forms of military action against Iran, others fear that military action might be the only means of
preventing Iran from acquiring a working nuclear device. A U.S. ground invasion to remove
Iran’s regime has not, at any time, appeared to be under serious consideration in part because of
the likely resistance an invasion would meet in Iran.
Proponents of U.S. air and missile strikes against suspected nuclear sites argue that military
action could set back Iran’s nuclear program because there are only a limited number of key
targets, and these targets are known to U.S. planners and vulnerable, even those that are hardened
or buried.46 Estimates of the target set range from 400 nuclear and other WMD-related targets, to

46 For an extended discussion of U.S. air strike options on Iran, see Rogers, Paul. Iran: Consequences Of a War. Oxford
(continued...)
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potentially a few thousand targets crucial to Iran’s economy and military. At least 75 targets are
underground or hardened. Those who take an expansive view of the target set argue that the
United States would need to reduce Iran’s potential for retaliation by striking not only nuclear
facilities but also Iran’s conventional military, particularly its small ships and coastal missiles.
Still others argue that there are military options that do not involve air or missile strikes. Some
say that a naval embargo or related embargo is possible that could pressure Iran into
reconsidering its stand on the nuclear issue. Such action was “demanded” in H.Con.Res. 362 (see
below). Others say that the imposition of a “no-fly zone” over Iran might also serve that purpose.
Either action could still be considered acts of war, and could escalate into hostilities.
Most U.S. allies in Europe, not to mention Russia and China, oppose military action. These states
tend to agree with experts who maintain that any benefits would be temporary, and are not
justified by the risks. Some believe that a U.S. strike would cause the Iranian public to rally
around Iran’s regime, others say a strike would provoke a new regional war. On the other hand,
some European and other diplomats say that France and Britain might back or even join a military
strike if Iran were to begin an all-out drive toward a nuclear weapon.
An Israeli Strike?
Israeli officials view a nuclear armed Iran as an existential threat and have repeatedly refused to
rule out the possibility that Israel might strike Iran’s nuclear infrastructure. Speculation about this
possibility increased in March and April 2009 with statements by Israeli Prime Minister Benjamin
Netanyahu to The Atlantic magazine stating that “You don’t want a messianic apocalyptic cult
controlling atomic bombs,” which generated testimony in Congress by CENTCOM commander
General Petraeus indicating that Israel has become so frightened by a prospect of a nuclear Iran
that it might decide to launch a strike on Iran’s nuclear facilities. Adding to the prospects for this
scenario, in mid-June 2008, Israeli officials confirmed reports that Israel had practiced a long
range strike such as that which would be required. In 2008, the George W. Bush Administration
reportedly strongly discouraged an Israeli plan to conduct such a strike, and it denied Israel’s
requests for certain equipment useful to that operation. The issue was again highlighted in
comments on July 5, 2009 by Vice President Biden when he indicated Israel had the right, as a
sovereign country, to decide when its own national security was threatened to the point where it
felt military action was the only viable option. Several senior U.S. officials (Secretary of Defense
Gates, and National Security Advisor James Jones) visited Israel in late July 2009 to express the
view that the Obama Administration is committed to strict sanctions on Iran—with the
implication that Israeli or U.S. military action should not be undertaken, at least as of this time.
Although Israeli strategists say this might be a viable option, several experts doubt that Israel has
the capability to make such action sufficiently effective to justify the risks. U.S. military leaders
are said by observers to believe that an Israeli strike would inevitably draw the United States into
a conflict with Iran but without the degree of planning that would be needed for success.

(...continued)
Research Group, February 2006.
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Iranian Retaliatory Scenarios47
Some officials and experts warn that a U.S. military strike on Iran could provoke unconventional
retaliation. At the very least, such conflict is likely to raise world oil prices significantly out of
fear of an extended supply disruption. Others say such action would cause Iran to withdraw from
the NPT and refuse any IAEA inspections. Other possibilities include firing missiles at Israel—
and Iran’s July 2008 missile tests could have been intended to demonstrate this retaliatory
capability—or directing Lebanese Hezbollah or Hamas to fire rockets at Israel. Iran could also try
to direct anti-U.S. militias in Iraq and Afghanistan to attack U.S. troops.
Iran has developed a strategy for unconventional warfare that partly compensates for its
conventional weakness. Then CENTCOM commander Gen. John Abizaid said in March 2006
that the Revolutionary Guard Navy, through its basing and force structure, is designed to give
Iran a capability to “internationalize” a crisis in the Strait of Hormuz. On January 30, 2007, his
replacement at CENTCOM, Admiral William Fallon, said that “Based on my read of their
military hardware acquisitions and development of tactics ... [the Iranians] are posturing
themselves with the capability to attempt to deny us the ability to operate in [the Strait of
Hormuz].” (General David Petraeus became CENTCOM commander in September 2008.) In July
2008 Iran again claimed it could close the Strait in a crisis but the then commander of U.S. naval
forces in the Gulf, Admiral Kevin Cosgriff, backed by Joint Chiefs Chairman Mullen, said U.S.
forces could quickly reopen the waterway.
Iran has nonetheless tried to demonstrate that it is a capable force in the Gulf. It has conducted at
least five major military exercises since August 2006, including exercises simultaneous with U.S.
exercises in the Gulf in March 2007. Iran has repeatedly stated it is capable of closing the Strait
of Hormuz and would do so, if attacked. In early 2007, Iranian ships were widening their patrols,
coming ever closer to key Iraqi oil platforms in the Gulf. In February 2007, Iran seized 15 British
sailors that Iran said were patrolling in Iran’s waters, although Britain says they were in Iraqi
waters performing coalition-related searches. They were held until April 5, 2007. On January 6,
2008, the U.S. Navy reported a confrontation in which five IRGC Navy small boats approached
three U.S. Navy ships to the point where they manned battle stations. The IRGC boats veered off
before any shots were fired. In October 2008, Iran announced it is building several new naval
bases along the southern coast, including at Jask, indicating enhanced capability to threaten the
entry and exit to the Strait of Hormuz.
If there were a conflict in the Gulf, some fear that Iran might try to use large numbers of boats to
attack U.S. ships, or to lay mines, in the Strait. In April 2006, Iran conducted naval maneuvers,
including test firings of what Iran claims are underwater torpedoes that can avoid detection,
presumably for use against U.S. ships in the Gulf, and a surface-to-sea radar-evading missile
launched from helicopters or combat aircraft. U.S. military officials said the claims might be an
exaggeration. The Gulf states fear that Iran will fire coastal-based cruise missiles at their oil
loading or other installations across the Gulf, as happened during the Iran-Iraq war.

47 See also, Washington Institute for Near East Policy. The Last Resort: Consequences of Preventive Military Action
Against Iran, by Patrick Clawson and Michael Eisenstadt. June 2008.
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Containment and the Gulf Security Dialogue
The Obama Administration is continuing the efforts of its predecessor to strengthen containment
of Iran by enhancing the military capabilities of U.S. regional allies. The policy may have been
enhanced somewhat in May 2009 when France inaugurated a small military base in UAE, its first
in the region, and which was clearly a signal that France is committed to containing Iran.
An assertive military containment component of George W. Bush Administration policy was
signaled in the January 10, 2007, Iraq “troop surge” statement by President George W. Bush. In
that statement, he announced that the United States was sending a second U.S. aircraft carrier
group into the Gulf,48 extending deployment of Patriot anti-missile batteries in the Gulf,
reportedly in Kuwait and Qatar, and increasing intelligence sharing with the Gulf states. Secretary
of Defense Gates said at the time that he saw the U.S. buildup as building leverage against Iran
that could bolster diplomacy.
The U.S. Gulf deployments built on a containment strategy inaugurated in mid-2006 by the State
Department, primarily the Bureau of Political-Military Affairs (“Pol-Mil”). It was termed the
“Gulf Security Dialogue” (GSD), and represented an effort to revive some of the U.S.-Gulf state
defense cooperation that had begun during the Clinton Administration but had since languished as
the United States focused on the post-September 11 wars in Afghanistan and Iraq.
One goal of the GSD is to boost Gulf state capabilities through new arms sales to the GCC states.
The emphasis of the sales is to improve Gulf state missile defense capabilities, for example by
sales of the upgraded Patriot Advanced Capability-3 (PAC-3),49 as well as to improve border and
maritime security equipment through sales of combat littoral ships, radar systems, and
communications gear. Several GSD-inspired sales include: PAC-3 sales to UAE and Kuwait, and
Joint Direct Attack Munitions (JDAMs) to Saudi Arabia and UAE (notified to Congress in
December 2007 and January 2008). A sale to UAE of the very advanced “THAAD” (Theater
High Altitude Area Defense) has also been notified.
Presidential Authorities and Legislation
A decision to take military action might raise the question of presidential authorities. In the 109th
Congress, H.Con.Res. 391, introduced on April 26, 2006, called on the President to not initiate
military action against Iran without first obtaining authorization from Congress. A similar bill,
H.Con.Res. 33, was introduced in the 110th Congress. An amendment to H.R. 1585, the National
Defense Authorization Act for FY2008, requiring authorization for force against Iran, was
defeated 136 to 288. A provision that sought to bar the Administration from taking military action
against Iran without congressional authorization was taken out of an early draft of an FY2007
supplemental appropriation (H.R. 1591) to fund additional costs for Iraq and Afghanistan combat
(vetoed on May 1, 2007). Other provisions, including requiring briefings to Congress about
military contingency planning related to Iran’s nuclear program, is in the House-passed FY2009
defense authorization bill (H.R. 5658). In the 111th Congress, H.Con.Res. 94 calls for the United
States to negotiate an “Incidents at Sea” agreement with Iran.

48 Shanker, Thom. “U.S. and Britain to Add Ships to Persian Gulf in Signal to Iran,” New York Times, December 21,
2006.
49 “New Persian Gulf Security Effort Expected to Fuel Arms Sales in FY-07.” Inside the Pentagon, November 9, 2006.
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Regime Change
A major early feature of George W. Bush Administration policy—promotion of “regime
change”—receded in the latter stages of the Administration. The Obama Administration has
clearly distanced itself from the prior Administration’s attraction to this option, for example by
explicitly referring to Iran by its formal name — “the Islamic Republic of Iran.” There are no
indications, to date, that the Obama Administration sees the post-election protests in Iran as
providing the United States an opportunity to change the regime.
There has been some support in the United States for regime change since the 1979 Islamic
revolution; the United States provided some funding to anti-regime groups, mainly pro-
monarchists, during the 1980s.50 The George W. Bush Administration’s belief in this option
became apparent after the September 11, 2001, attacks, when President George W. Bush
described Iran as part of an “axis of evil” in his January 2002 State of the Union message.
President George W. Bush’s second inaugural address (January 20, 2005) and his State of the
Union messages of January 31, 2006 stated that “... our nation hopes one day to be the closest of
friends with a free and democratic Iran.” Other indications of affinity for this option included
increased public criticism of the regime’s human rights record and the funding of Iranian pro-
democracy activists. However, the George W. Bush Administration shifted away from this option
as a strategy employing multilateral sanctions and diplomacy took form in 2006, in part because
U.S. partners believe regime change policies harm diplomacy.
Although it was clearly hoping for opportunities to change the regime, the George W. Bush
Administration said that the democracy promotion programs discussed below were intended to
promote political evolution in Iran and change regime behavior, not to overthrow the regime. A
few accounts, such as “Preparing the Battlefield” by Seymour Hersh in the New Yorker (July 7
and 14, 2008) say that President George W. Bush authorized U.S. covert operations to destabilize
the regime,51 involving assistance to some of the ethnic-based armed groups discussed above.
CRS has no way to confirm assertions in the Hersh article that up to $400 million was
appropriated and/or used to aid the groups mentioned. In January 2009, Iran tried four Iranians on
charges of trying to overthrow the government with U.S. support.
Democracy Promotion Efforts
The George W. Bush Administration’s efforts to promote democracy in Iran began in FY2004 and
were supported by many in Congress. Clear congressional sentiment in favor of this effort came
in the 109th Congress with enactment of the Iran Freedom Support Act (P.L. 109-293, signed

50 CRS conversations with U.S. officials responsible for Iran policy. 1980-1990. After a period of suspension of such
assistance, in 1995, the Clinton Administration accepted a House-Senate conference agreement to include $18-$20
million in funding authority for covert operations against Iran in the FY1996 Intelligence Authorization Act (H.R.
1655, P.L. 104-93), according to a Washington Post report of December 22, 1995. The Clinton Administration
reportedly focused the covert aid on changing the regime’s behavior, rather than its overthrow.
51 Ross, Brian and Richard Esposito. Bush Authorizes New Covert Action Against Iran. http://blogs.abcnews.com/
theblotter/2007/05/bush_authorizes.html.
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September 30, 2006, which authorized funds (no specific dollar amount) for Iran democracy
promotion and modified the Iran Sanctions Act.52
The Obama Administration has not announced a discontinuation of the democracy promotion
efforts, but has appeared to shift the emphasis to the people-to-people exchange component of
these programs. To date, the State Department has sponsored exchanges with about 150 Iranian
academics, professionals, athletes, artists, and doctors. Another part of the effort is broadcasting
to Iran. As noted below, the Voice of America and Radio Free Europe/Radio Liberty have been
expanding broadcasts to Iran of information about Iran and about the United States. The
Department has also formed a Persian-language website.
Many question the prospects of U.S.-led Iran regime change through democracy promotion
because of the weakness of opposition groups. Providing overt or covert support to anti-regime
organizations, in the view of many experts, would not make them materially more viable or
attractive to Iranians. The regime purportedly also conducts extensive regime surveillance of
democracy activists or other internal dissidents. Iran has been arresting civil society activists by
alleging they are accepting the U.S. democracy promotion funds, while others have refused to
participate in U.S.-funded programs, fearing arrest. 53 In May 2007—Iranian-American scholar
Haleh Esfandiari, of the Woodrow Wilson Center in Washington, DC, was imprisoned for several
months, on the grounds that the Wilson Center was part of this effort. The Center has denied
being part of the democracy promotion effort in Iran.
The State Department has been the implementer of U.S. democracy promotion programs. The
Department has used funds in appropriations (see below) to support pro-democracy programs run
by 26 organizations based in the United States in Europe; the Department refuses to name
grantees for security reasons. In 2006, the George W. Bush Administration also began increasing
the presence of Persian-speaking U.S. diplomats in U.S. diplomatic missions around Iran, in part
to help identify and facilitate Iranian participate in U.S. democracy-promotion programs. The Iran
unit at the U.S. consulate in Dubai has been enlarged significantly into a “regional presence”
office, and new “Iran-watcher” positions have been added to U.S. diplomatic facilities in Baku,
Azerbaijan; Istanbul, Turkey; Frankfurt, Germany; London; and Ashkabad, Turkmenistan, all of
which have large expatriate Iranian populations and/or proximity to Iran.54 An enlarged (eight
person) “Office of Iran Affairs” has been formed at State Department, and it is reportedly engaged
in contacts with U.S.-based exile groups such as those discussed earlier. Iran asserts that funding
democracy promotion represents a violation of the 1981 “Algiers Accords” that settled the Iran
hostage crisis and provide for non-interference in each others’ internal affairs.

52 This legislation was a modification of H.R. 282, which passed the House on April 26, 2006, by a vote of 397-21, and
S. 333, which was introduced in the Senate.
53 Three other Iranian Americans were arrested and accused by the Intelligence Ministry of actions contrary to national
security in May 2007: U.S. funded broadcast (Radio Farda) journalist Parnaz Azima (who was not in jail but was not
allowed to leave Iran); Kian Tajbacksh of the Open Society Institute funded by George Soros; and businessman and
peace activist Ali Shakeri. Several congressional resolutions called on Iran to release Esfandiari (S.Res. 214 agreed to
by the Senate on May 24; H.Res. 430, passed by the House on June 5; and S.Res. 199). All were released by October
2007.
54 Stockman, Farah. “‘Long Struggle’ With Iran Seen Ahead.” Boston Globe, March 9, 2006.
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Funding
As shown below, $67 million has been appropriated for Iran democracy promotion ($19.6 million
through DRL and $48.6 million through the Bureau of Near Eastern Affairs/USAID). (Of these
amounts, $58 million has been obligated as of July 2009). Additional funds, discussed in the chart
below, have been appropriated for cultural exchanges, public diplomacy, and broadcasting to Iran.
The Obama Administration requested funds for Near East regional democracy programs in its
FY2010 budget request, but no specific request for funds for Iran were delineated. This could be
an indication that the new Administration views this effort as inconsistent with its belief in
dialogue with Iran. No U.S. assistance has been provided to exile-run stations. (The conference
report on the FY2006 regular foreign aid appropriations, P.L. 109-102, stated the sense of
Congress that such support should be considered.)
Table 9. Iran Democracy Promotion Funding
FY2004
Foreign operations appropriation (P.L. 108-199) earmarked $1.5 million for “educational, humanitarian
and non-governmental organizations and individuals inside Iran to support the advancement of
democracy and human rights in Iran.” The State Department Bureau of Democracy and Labor (DRL)
gave $1 million to a unit of Yale University, and $500,000 to National Endowment for Democracy.
FY2005 $3
million from FY2005 foreign aid appropriation (P.L. 108-447) for democracy promotion. Priority
areas: political party development, media, labor rights, civil society promotion, and human rights.
FY2006
$11.15 for democracy promotion from regular FY2006 foreign aid appropriation (P.L. 109-102). $4.15
million administered by DRL and $7 million for the Bureau of Near Eastern Affairs.
FY2006
Total of $66.1 million (of $75 million requested) from FY2006 supplemental (P.L. 109-234): $20 million
supp.
for democracy promotion ($5 million above request); $5 million for public diplomacy directed at the
Iranian population (amount requested); $5 million for cultural exchanges (amount requested); and
$36.1 million for Voice of America-TV and “Radio Farda” broadcasting ($13.9 million less than
request). Of all FY2006 funds, the State Department said on June 4, 2007 that $16.05 million was
obligated for democracy promotion programs, as was $1.77 million for public diplomacy and $2.22
million for cultural exchanges (bringing Iranian professionals and language teachers to the United
States). Broadcasting funds provided through the Broadcasting Board of Governors; began under Radio
Free Europe/Radio Liberty (RFE/RL), in partnership with the VOA, in October 1998. Farda
(“Tomorrow” in Farsi) received $14.7 million of FY2006 funds; now broadcasts 24 hours/day. VOA
Persian services (radio and TV) combined cost about $10 million per year. VOA-TV began on July 3,
2003, and now is broadcasting to Iran 12 hours a day. (Farda began when Congress funded it at $4
million in the FY1998 Commerce/State/Justice appropriation, P.L. 105-119. It was to be called Radio
Free Iran but was never formal y given that name by RFE/RL.)
FY2007
FY2007 continuing resolution provided $6.55 million for Iran (and Syria) to be administered through
DRL. $3.04 million was used for Iran. No funds were requested.
FY2008
$60 million (of $75 million requested) is contained in Consolidated Appropriation (H.R. 2764, P.L. 110-
161), of which $21.6 million is ESF for pro-democracy programs, including non-violent efforts to
oppose Iran’s meddling in other countries. $7.9 million is “Development Funds” for use by DRL.
Appropriation also fully funds additional $33.6 million requested for Iran broadcasting: $20 million for
VOA Persian service; and $8.1 million for Radio Farda; and $5.5 million for exchanges with Iran.
FY2009
Request was for $65 million in ESF “to support the aspirations of the Iranian people for a democratic
and open society by promoting civil society, civic participation, media freedom, and freedom of
information.” H.R. 1105 (P.L. 111-8) provides $15 million for democracy promotion programs in Iran
and several other countries.
FY2010
No specific democracy promotion request, but some funds (out of $40 million requested for Near East
democracy programs) likely to fund continued people-to-people exchanges with Iran.
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Further International and Multilateral Sanctions
If and when the Obama Administration and its partners attempts to increase international pressure
on Iran, they have a number of options. U.S. officials have said that sanctions such as those below
might also be considered by a “coalition” of countries, outside Security Council authorization. On
the other hand, some U.S. allies, such as Germany, oppose sanctions outside Council action on
the grounds that doing so would undermine the Security Council process. Among the further U.N.
or multilateral sanctions widely discussed (and some of these ideas are appearing in U.S.
legislation to increase U.S. sanctions on Iran) are:
Mandating Reductions in Diplomatic Exchanges with Iran or Prohibiting Travel
by Iranian Officials. As noted above, Resolution 1803 imposes a ban on travel by
some named Iranian officials. One option is to further expand that list of Iranian
officials. A further option is to limit sports or cultural exchanges with Iran, such
as Iran’s participation in the World Cup soccer tournament. However, many
experts oppose using sporting events to accomplish political goals.
Banning International Flights to and from Iran. Bans on flights to and from
Libya were imposed on that country in response to the finding that its agents
were responsible for the December 21, 1988, bombing of Pan Am 103 (now
lifted). There are no indications that a passenger aircraft flight ban is under
consideration among the P5+1. As noted above, inspections of Iranian
international cargo flights and shipping is authorized in Resolution 1803.
A Ban on Exports to Iran of Refined Oil Products or of Other Products. Some
members of the U.N. Security Council oppose this sanction as likely to halt
prospects for a diplomatic solution to Iran’s nuclear program. However, the
sanction does appear to be under P5+1 and Security Council consideration
because such a ban might seriously hurt Iran’s economy and thereby meet the
definition of a “crippling” sanction. Iran imports about 30% of its gasoline needs
due to a lack of domestic refining capacity. Some experts believe Iran would be
able to circumvent this sanction by offering premium prices to suppliers willing
to defy such a U.N. resolution or by raising prices to discourage consumption by
Iranian drivers.
Financial and Trade Sanctions, Such as a Freeze on Iran’s Financial Assets
Abroad. Existing U.N. resolutions do not freeze all Iranian assets abroad, and
such a broad freeze does not appear to be under Security Council consideration at
this time. A future resolution could add more Iranian banks to those under
sanction, or even entirely ban transactions with any Iranian banks. Fearing that
possibility, Iran moved $75 billion out of European banks in May 2008.
Limiting Lending to Iran by Banks or International Financial Institutions.
Another option is to ban lending to Iran by international financial institutions, or
to mandate a reduction of official credit guarantees. British Prime Minister
Brown indicated British support a limitation of official credits on November 12,
2007. As discussed below, EU countries and their banks have begun taking these
steps, even without a specific U.N. mandate.
Banning Worldwide Investment in Iran’s Energy Sector. This option would
represent an “internationalization” of the U.S. “Iran Sanctions Act,” which is
discussed in CRS Report RS20871, Iran Sanctions , by Kenneth Katzman. On
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November 12, 2007 comments, British Prime Minister Brown expressed support
for a worldwide financing of energy projects in Iran as a means of cutting off
energy development in Iran, and British officials have told CRS in August 2009
that the British government continues to favor this option. A version of this
option would prevent companies of U.N. member states from shipping to Iran
parts or technology needed to construct oil refineries or related installations.
Banning Insurance for Iranian Shipping. One option, reportedly under
consideration by the P5+1, is to ban the provision of insurance for Iran’s tanker
fleet. Shipments of Iranian oil require insurance against losses from military
action, accidents, or other causes. A broad ban on provision of such insurance
could make it difficult for Iran to Islamic Republic of Iran Shipping Lines
(IRISL) to operate and force Iran to rely on more expensive shipping options.
Iran said in September 2008 that it would have ways to circumvent the effect of
this sanction if it is imposed. (The United States has imposed sanctions on IRISL,
as noted in the table below.)
Imposing a Worldwide Ban on Sales of Arms to Iran. Resolution 1747 called
for—but did not require—U.N. member states to exercise restraint in selling
arms to Iran. A future resolution might mandate an arms sales ban. Another
option under discussion is to eliminate the Resolution 1737 exemption from
sanctions for the Bushehr nuclear reactor project.
Imposing an International Ban on Purchases of Iranian Oil or Other Trade. This
is widely considered the most sweeping of sanctions that might be imposed, and
would be unlikely to be considered in the Security Council unless Iran was found
actively developing an actual nuclear weapon. Virtually all U.S. allies conduct
extensive trade with Iran, and would oppose sanctions on trade in civilian goods
with Iran. A ban on oil purchases from Iran is unlikely to be imposed because of
the potential to return world oil prices to the high levels of the summer of 2008.
European/Japanese/Other Foreign Country Policy on Sanctions and Trade
Agreements

Most U.S. allies still favor incentives—not just economic or political punishments—as tools to
change Iran’s behavior. In this, U.S. allies might identify with the Obama Administration
approach more so than the George W. Bush Administration approach that was perceived as
primarily punitive. During 1992-1997, when the United States was tightening its own sanctions
against Iran, the European Union (EU) countries maintained a policy of “critical dialogue” with
Iran, and the EU and Japan refused to join the 1995 U.S. trade and investment ban on Iran. The
European dialogue with Iran was suspended in April 1997 in response to the German terrorism
trial (“Mykonos trial”) that found high-level Iranian involvement in killing Iranian dissidents in
Germany, but resumed in May 1998 during Khatemi’s presidency.
With Iran defiant on nuclear issues, the European countries, Japan, and other countries moved
closer to the U.S. position since 2005. The EU is no longer negotiating new trade agreements and
other economic interaction with Iran, but rather it has begun to implement some sanctions that
exceed those mandated in Security Council resolutions. For example, several EU countries are
discouraging their companies from making any new investments in or soliciting any new business
with Iran. In addition, several EU countries report that civilian trade with Iran is down because
Iran’s defiance on the nuclear issue is introducing more perceived risk to trading with Iran. As
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noted above, some EU countries say they have reduced credit guarantee exposure to Iran since
Resolution 1737 was passed, as shown in the table above. Previously, the EU countries and their
banks maintained that financing for purely civilian goods is not banned by any U.N. resolution
and that exporters of such goods should not be penalized.
Negotiations with Iran on a “Trade and Cooperation Agreement” (TCA) are not currently being
held; such an agreement would have lowered the tariffs or increased quotas for Iranian exports to
the EU countries.55 Similarly, there is insufficient international support to grant Iran membership
in the World Trade Organization (WTO) until there is progress on the nuclear issue. Iran first
attempted to apply to join the WTO in July 1996. On 22 occasions after that, representatives of
the Clinton and then the George W. Bush Administration blocked Iran from applying
(applications must be by consensus of the 148 members). As discussed above, as part of an effort
to assist the EU-3 nuclear talks with Iran, at a WTO meeting in May 2005, no opposition to Iran’s
application was registered, and Iran formally began accession talks.
In the 1990s, European and Japanese creditors—over U.S. objections—rescheduled about $16
billion in Iranian debt. These countries (governments and private creditors) rescheduled the debt
bilaterally, in spite of Paris Club rules that call for multilateral rescheduling. Iran’s improved
external debt led most European export credit agencies to restore insurance cover for exports to
Iran. In July 2002, Iran tapped international capital markets for the first time since the Islamic
revolution, selling $500 million in bonds to European banks.
World Bank Loans
The EU and Japan appear to have made new international lending to Iran contingent on Iran’s
response to international nuclear demands. This represents a narrowing of past differences
between the United States and its allies on this issue. Acting under provisions of successive
foreign aid laws (which require the United States to vote against international loans to countries
named by the United States as sponsors of international terrorism), in 1993 the United States
voted its 16.5% share of the World Bank against loans to Iran of $460 million for electricity,
health, and irrigation projects, but the loans were approved. To block that lending, the FY1994-
FY1996 foreign aid appropriations (P.L. 103-87, P.L. 103-306, and P.L. 104-107) cut the amount
appropriated for the U.S. contribution to the Bank by the amount of those loans. The legislation
contributed to a temporary halt in new Bank lending to Iran.
During 1999-2005, Iran’s moderating image had led the World Bank to consider new loans over
U.S. opposition. In May 2000, the United States’ allies outvoted the United States to approve
$232 million in loans for health and sewage projects. During April 2003-May 2005, a total of
$725 million in loans were approved for environmental management, housing reform, water and
sanitation projects, and land management projects, in addition to $400 million in loans for
earthquake relief.

55 During the active period of talks, which began in December 2002, there were working groups focused not only on
the TCA terms and proliferation issues but also on Iran’s human rights record, Iran’s efforts to derail the Middle East
peace process, Iranian-sponsored terrorism, counter-narcotics, refugees, migration issues, and the Iranian opposition
PMOI.

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U.S. Sanctions
Any additional international or U.S. sanctions would add to the wide range of U.S. sanctions in
place since the November 4, 1979, seizure of the U.S. hostages in Tehran.56 Some experts believe
that, even before U.S. allies had begun to impose some sanctions on Iran, U.S. sanctions alone
were slowing Iran’s economy.57 However, the Obama Administration is said to oppose new U.S.
unilateral sanctions because of their potential to offend U.S. allies whose companies would be the
likely targets of such sanctions. Supporters of some new U.S. sanctions believe that allied firms
should be compelled to choose between business with Iran and business with the United States
and there are expected to be congressional efforts to push forward on proposed sanctions
legislation if Iran does not meet the September 24, 2009 deadline to return to multilateral talks.
The U.S. sanctions below are discussed in far greater depth in CRS Report RS20871, Iran
Sanctions
, by Kenneth Katzman.
A report on U.S. sanctions by the Government Accountability Office (GAO), published
December 2007 (GAO-08-58: Iran Sanctions: Impact in Furthering U.S. Objectives Is Unclear
and Should Be Reviewed
) found that the extent of the impact on Iran is “difficult to determine.”
The GAO report said that, despite the U.S. sanctions, Iran’s global trade has continued to expand
from 1987 (when sanctions first began to be imposed) to 2006, and that Iran had signed $20
billion in energy investment deals with foreign firms.
Section 7043 of P.L. 111-8 (March 11, 2009), the FY09 omnibus appropriation, requires, within
180 days, an Administration report on U.S. sanctions, including which companies are believed to
be violators, and what the Administration is doing to enforce sanctions. The provision appears to
apply primarily to the Iran Sanctions Act. Possible additional legislation in the 111th Congress
focuses on denying U.S. government contracts to telecommunications firms that sell to Iran
equipment that Iran could use to track internet use by its citizens, which Iran has done to crack
down on protesters against the June 2009 election.
Terrorism/Foreign Aid Sanctions
Several U.S. sanctions are in effect as a result of Iran’s presence on the U.S. “terrorism list.” The
list was established by Section 6(j) of the Export Administration Act of 1979, sanctioning
countries determined to have provided repeated support for acts of international terrorism.
Sanctions imposed as a consequence include: a ban on U.S. foreign aid to Iran; restrictions on
U.S. exports to Iran of dual use items; and requires the United States to vote against international
loans to Iran.
The separate, but related, Executive Order 13224 (September 23, 2001) authorizes the President
to freeze the assets of and bar U.S. transactions with entities determined to be supporting
international terrorism.

56 On November 14, 1979, President Carter declared a national emergency with respect to Iran, renewed every year
since 1979.
57 “The Fight Over Letting Foreigners Into Iran’s Oilfields.” The Economist, July 14, 2001.
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Proliferation Sanctions
Iran is prevented from receiving advanced technology from the United States under relevant and
Iran-specific anti-proliferation laws58 and by Executive Order 13382 (June 28, 2005). The laws
include: The Iran-Iraq Arms Nonproliferation Act (P.L. 102-484), and The Iran Nonproliferation
Act (P.L. 106-178, now called the Iran-Syria-North Korea Non-Proliferation Act). These
sanctions impose penalties on foreign firms that sell equipment to or assist Iran’s WMD
programs.
Targeted Financial Measures by Treasury Department
U.S. officials, particularly Undersecretary of the Treasury Stuart Levey (who has remained in the
Obama Administration), say the United States is having substantial success in separate unilateral
efforts (“targeted financial measures”) to persuade European governments and companies to stop
financing commerce with Iran on the grounds that doing so entails financial risk and furthers
terrorism and proliferation.
U.S. Ban on Trade and Investment with Iran
On May 6, 1995, President Clinton issued Executive Order 12959 banning U.S. trade and
investment in Iran.59 This followed an earlier March 1995 executive order barring U.S.
investment in Iran’s energy sector. The provisions of the trade and investment ban, exemptions,
and the debate over its application to foreign subsidiaries are discussed in substantial depth in
CRS Report RS20871, Iran Sanctions , by Kenneth Katzman.
The Iran Sanctions Act (ISA)
The Iran Sanctions Act penalizes foreign (or U.S.) investment of more than $20 million in one
year in Iran’s energy sector.60 No projects have actually been sanctioned under ISA, and
numerous investment agreements with Iran since its enactment have helped Iran slow
deterioration of its energy export sector. This Act is discussed in substantial depth in CRS Report
RS20871, Iran Sanctions , by Kenneth Katzman, which contains a chart on foreign energy
investments in Iran, and discusses recent and pending legislation to expand ISA’s authorities to
include sanctions on companies that sell gasoline to Iran.
In one recent development, the Senate version of H.R. 3183, a FY2010 energy appropriation,
would prevent any U.S. purchases by the Strategic Petroleum Reserve from companies that sell
more than $1 million worth of gasoline to Iran.

58 Such laws include the Atomic Energy Act of 1954 and the Energy Policy Act of 2005 (P.L. 109-58).
59 An August 1997 amendment to the trade ban (Executive Order 13059) prevented U.S. companies from knowingly
exporting goods to a third country for incorporation into products destined for Iran.
60 Originally called the Iran-Libya Sanctions Act, or ILSA; P.L. 104-172, August 5, 1996. It was renewed by P.L. 107-
24, August 3, 2001; renewed again for two months by P.L. 109-267; and renewed and amended by P.L. 109-293.
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Divestment
A growing trend not only in Congress but in several states is to require or call for or require
divestment of shares of firms that have invested in Iran’s energy sector (at the same levels
considered sanctionable under the Iran Sanctions Act).61 For a discussion of pending legislation
on this issue, see CRS Report RS20871, Iran Sanctions , by Kenneth Katzman.
Counter-Narcotics
In February 1987, Iran was first designated as a state that failed to cooperate with U.S. anti-drug
efforts or take adequate steps to control narcotics production or trafficking. U.S. and U.N. Drug
Control Program (UNDCP) assessments of drug production in Iran prompted the Clinton
Administration, on December 7, 1998, to remove Iran from the U.S. list of major drug producing
countries. This exempts Iran from the annual certification process that kept drug-related U.S.
sanctions in place on Iran. According to several governments, over the past few years Iran has
augmented security on its border with Afghanistan in part to prevent the flow of narcotics from
that country into Iran. Britain has sold Iran some night vision equipment and body armor for the
counter-narcotics fight.
Travel-Related Guidance
Use of U.S. passports for travel to Iran is permitted. Iranians entering the United States are
required to be fingerprinted, and Iran has imposed reciprocal requirements. In May 2007, the
State Department increased its warnings about U.S. travel to Iran, based largely on the arrests of
the dual Iranian-American nationals discussed earlier.
Status of Some U.S.-Iran Assets Disputes
Iranian leaders continue to assert that the United States is holding Iranian assets, and that this is
an impediment to improved relations. This is discussed in CRS Report RS20871, Iran Sanctions ,
by Kenneth Katzman.
Conclusion
Mistrust between the United States and Iran’s Islamic regime has run deep almost three decades
and many argue that it is unlikely to be quickly overcome, even if the Obama Administration
initiates—and Iran accepts—comprehensive direct talks with Iran. As noted, that possibility
might have been made more remote by the violent dispute over the June 12 presidential election
in Iran. Despite the internal power struggle, many experts say that all factions in Iran are united
on major national security issues and that U.S.-Iran relations might not improve unless or until
the Islamic regime is removed or moderates substantially, even if a nuclear deal is reached and
implemented. Others say that, despite Ahmadinejad’s presidency, the United States and Iran have
a common long term interest in stability in the Persian Gulf and South Asia regions in the

61 For information on the steps taken by individual states, see National Conference of State Legislatures. State
Divestment Legislation.
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aftermath of the defeat of the Taliban and the regime of Saddam Hussein and that major
diplomatic overtures might now yield fruit.
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Figure 1. Structure of the Iranian Government



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Iran: U.S. Concerns and Policy Responses

Figure 2. Map of Iran

Source: Map Resources. Adapted by CRS (April 2005).





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Author Contact Information
Kenneth Katzman
Specialist in Middle Eastern Affairs
kkatzman@crs.loc.gov, 7-7612



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