“Iran’s supreme leader does not want political accommodation with the United States. His rule is predicated on sustained enmity with America and flagrant disregard of popular will. A strategic shift in this paradigm will destabilize his regime.” This is the argument proffered by those skeptical of or opposed to sustained U.S.-Iran diplomacy. To be sure, Ayatollah Khamenei’s repression against his own people is well documented, but history contradicts the skeptics of his willingness to bargain. Khamenei is a cunning authoritarian, but he is not opposed to the right deal.
Over the past two decades, efforts by all three Iranian presidents to mend relations with the United States have failed. Former president Rafsanjani recently reiterated that during his presidency in 1990s, he pushed to repair relations with America but Khamenei was against it: “Perhaps if we treated the U.S. like Europe . . . we would have had fewer problems.” A displeased Khamenei responded by reiterating his thesis about the United States: “Whenever we take a step back and are more laid back in our behavior, they become more brazen.”
This seeming hostility notwithstanding, it is a mistake to conclude that Khamenei is against any opening in relations. On this point, what’s past is prologue. During his presidency in the 1980s, Khamenei was involved in the Iran-Contra scandal. In the 1990s, he did not oppose Rafsanjani’s $1 billion oil-contract offer to American company Conoco. In 2001, he allowed Tehran to provide Washington with intelligence during the invasion of Afghanistan. In 2003, he approved a proposal to the U.S. Department of State outlining the contours of a U.S.-Iran agreement on issues of mutual interest.
In 2007, Khamenei backed three rounds of talks over Iraq between Iranian and American officials. Mahmoud Ahmadinejad congratulated Barack Obama on his election victory in 2008 without being admonished by the supreme leader. Most recently, Khamenei allowed Iranian authorities to negotiate directly with American officials over Iran’s nuclear program. Years of unsuccessful negotiations with Europe have convinced him that a reliable agreement cannot be reached without U.S. participation and acquiescence.
Khamenei has resisted compromise or retreat in the face of U.S. pressure, but his steadfastness is neither ideological nor intransigent. Two years ago, Iran negotiated a nuclear agreement with Brazil and Turkey, but political constraints prevented America from being able to take “yes” for an answer. Instead, Iran was hit with new UN sanctions. For Khamenei, this again validated his thesis: “The Americans reneged on their promises, . . . they wanted to bully and score more.”
Since then, Washington has pressured other countries to embargo or reduce oil imports from Iran, cut Iran from international financial and shipping processes, and blacklist major Iranian banks. Against this backdrop, Khamenei sees little reason for compromise because he knows Iran will enjoy few immediate benefits. Lifting UN and U.S. sanctions is a lengthy process laden with red tape. Khamenei also knows America has a hostile Congress and a president who cannot lift sanctions unilaterally.
Despite U.S. insistence that sanctions will change Iran's strategic calculus, Khamenei sees U.S. pressure as a sign of Iran’s ascent and America’s decline. He cites U.S. officials flying around the world offering concessions for adherence to Iran sanctions—rather than offering concessions directly to Iran. Last week, Khamenei told his army commanders: “the escalation of threats demonstrates that the Islamic regime has become more powerful, otherwise our enemies wouldn’t agitatedly venture out into the blizzard.”
How to Make a Deal
Without an approach that offers face-saving solutions on a range of issues beyond Iran’s nuclear program, the supreme leader will likely prefer the status quo. But if Khamenei is presented with the makings of a deal that he perceives as addressing the Islamic Republic’s core interests, historical precedent suggests he will pursue it.
Iranian politicians that favor relations with the U.S. refer to a poignant analogy when describing Khamenei’s decision-making process on this issue: Iran’s former supreme leader, Ayatollah Khomeini, “drank from the chalice of poison” and accepted a ceasefire with Iraq after eight years of war, despite falling far short of his original goals. Ayatollah Khamenei must also drink from the chalice of poison—with regards to America. This analogy sheds light on the circumstances in which Khamenei may well drink from the chalice.
In 1982, when Iran gained a military advantage over Iraq, differences at the top emerged. Some advocated for ending the war while Iran was in a position of strength, while others convinced Ayatollah Khomeini that Iran could achieve its stated objective—full victory and the overthrow of Saddam Hussein—through military superiority. In 1988, Khomeini accepted a ceasefire with Iraq when Iran had reached its most vulnerable position.
According to Rafsanjani, Iran had a 51 percent budget deficit and “the other 49% was just words and it did not materialize, and the Central Bank just printed money.” The price of Iran’s oil reached an all-time low of roughly $5 per barrel. Its annual oil revenues stood at approximately $7 million. Many Iranian officials realized that it could not win the war—but it took six years to reach this conclusion.
Twenty-four years later, the advantages differ but the argument is the same. Iran’s international standing has emboldened the hardliners advising Khamenei. His stance toward the United States since 2003 has been based on a simple equation: “We won’t compromise as long as you threaten us.” Sanctions on Iranian oil and banks have hardened this doctrine. In a graduation ceremony at Imam Ali Military Academy last November, Khamenei made it clear: “We threaten in response to your threats.”
The View from Tehran
Sanctions are hurting Iran’s middle-class and private sector, but its overall economic health far exceeds Khomeini’s war-ridden economy of 1988. In 2011, Iran’s oil revenues stood at approximately $100 billion. Optimistic assessments of sanctions foresee cutting these revenues by 50 percent in 2012. However, Iran’s 2012 budget plans for roughly $57 billion in oil revenues and $85 per barrel. 20 percent of revenues are marked for saving, thereby basing Iran’s public budget on roughly $68 per barrel.
Despite repeated threats of crippling sanctions and military strikes, Iran’s concern remains low. Unprecedented regional instability, high oil prices combined with limited supply and a global financial crisis increase its ability to resist foreign pressure with the help of non-Western players.
Iranian hard-liners argue that these factors will ultimately force the United States to accept Iran’s nuclear program, abandon its desire for regime change and recognize Iran’s regional clout. More pragmatic-minded officials acknowledge these factors are in Iran’s favor but caution that Iran is repeating its 1982 mistake, when it should have maximized its gains and sought an earlier end to the war with Iraq before the tide turned. Khamenei’s response is telling: unlike 1982, there is no good offer on the table for Iran to consider.
This internal debate often goes unnoticed outside of Iran. However, it demonstrates an important principle: Khamenei is not opposed to negotiations, but he will not drink from the chalice of poison without a quid pro quo. For Khamenei, drinking from the chalice means reaching a deal under circumstances in which Iran gets little in return and invites more U.S. pressure. Khamenei is the final arbiter in Iran, but the notion that he is unwilling to negotiate runs contrary to history. He negotiates when his regime’s interests are addressed.
With a new round of negotiations forthcoming, Washington and Tehran will once again test if compromise is possible. Before talks commence, both sides will leak competing narratives to the media in an effort to maximize leverage. Various concepts and demands have already been floated: enrichment to the 5 percent and 20 percent level; sanctions relief; fuel swaps; accepting Iran’s right to enrich on its soil; Khamenei’s nuclear fatwa, the Fordo facility in Qom; and unprecedented safeguards and inspection requirements.
A Way Forward
There is no quick fix to the U.S.-Iranian standoff. Both mutual interests and points of divergence exist, and the only way to peacefully bridge the gap is through sustained negotiations over a period of months, rather than days or weeks. To that end, the United States and Iran should engage in a phased, multilevel diplomatic strategy over the next six months. It is through this long, difficult bargaining process that realism, hard truths and tough-minded recognition of interests will sharpen the choices of both sides at the table.
America’s starting point is clear: Closing Iran’s Fordo facility; halting Iranian enrichment at the 20 percent level, and removing Iran’s stockpile of 20 percent-enriched uranium from the country. To defuse the crisis diplomatically, the United States will need to consider the political, economic and security incentives sought by Iran—and the protection of human rights sought by the Iranian people—that any negotiated solution would have to address.
This does not imply that concessions must be made to Iran on each of these three fronts. Only sustained diplomacy can determine whether it is in America's interest to address Iranian concerns. But if Iran's interests are not addressed in negotiations—and to date, they have not been—Khamenei will deem the process one-sided, it will fail without being executed in good faith and he will take comfort in another affirmation of his thesis on America.