Mullah moola: the U.S. is trying to maintain a firm policy toward Iran, but European loans and trade are undermining it - The Islamic Threat: Part 2

AMID all the brickbats the Clinton Administration is receiving for its foreign policy, it deserves credit when it gets something right. Its policy toward Iran and Iraq is a case in point.

In notable contrast to its three predecessors, the Clinton Administration seems so far to have no illusions about the nasty intentions of either Iran or Iraq. It has resisted the temptation to chase after supposed "moderates" in either regime. "Containment," in the sense of firm resistance to their encroachments, is the line of the day (as we've just seen in the case of Iraq).

Secretary of State Warren Christopher, not usually known as a hardliner, put forward an important initiative on June 9, 1993, at a meeting of European Community foreign ministers in Luxembourg. Christopher singled out Iran as the "most worrisome" of a number of "dangerous states" fueling regional tensions. He appealed to the Europeans to join us in a policy of firm containment and economic pressure on Iran, including denial of militarily useful technologies. In parallel with this microeconomic pressure, the U.S. has tried to build macroeconomic pressure: for the last year it has been striving mightily to block the rescheduling of Iran's external debt.

Iran is some $30 billion in hock, and much of this was short-term debt coming due this year. With the recent softness of oil prices, Iran was in a severe financial bind, which the U.S. saw as a heaven-sent restraint on its military build-up and foreign ambitions. Multilateral rescheduling in the Paris Club was blocked, as was World Bank lending. But in February, ignoring U.S. pressure and bending Paris Club rules, Germany reached a bilateral accord with Iran to stretch out some $2.7 billion in short-term debt. Nine Japanese banks followed suit in March, rescheduling another $2 billion. Deals were then struck with Austria, Switzerland, Italy, France, Denmark, Sweden, Spain, Belgium, and the Netherlands. Overall, about $10 billion has been or is being rescheduled this year, which Iran has naturally trumpeted as a great victory over the Americans.

The Europeans explained to the Administration that most of their short-term loans to Iran were government-guaranteed, so default would have meant taking a massive budgetary hit. They assured us that no new loans would be made, but the rescheduling went ahead. Meanwhile, Japan in 1993 had pledged a half-billion-dollar development loan for a hydroelectric project in Iran; the U.S. has so far managed to delay disbursement but not to gain cancelation of the loan. In the wake of the European reschedulings, the World Bank is under pressure to resume lending to Iran.

The Administration's rare display of strategic insight stems mostly from its deepening concern about Iran's gradual but inexorable expansion of both its conventional and nuclear capabilities, including the purchase of submarines from Russia and the attempted purchase of missiles from North Korea. The U.S. Navy is not amused by the prospect of Iranian subs in the Gulf. The CIA estimates that Iran could have a nuclear weapon in six to eight years if it gets the needed technology; the next few years, when Iran will be desperately seeking that technology, will be the critical time: if it gets what it needs, our ability to block its nuclear progress will rapidly diminish. Hence Mr. Christopher's sense of urgency. The U.S. Central Command's 1994 Posture Statement identifies Iran in no uncertain terms as "the single greatest threat to peace and stability in the Central Region."

Assessing Iran

THE U.S. sees Iran as a revolutionary regime still in its militant phase, its hostility to us grounded in a baldly anti-Western ideology and manifested daily in its external actions. Iran's internal situation is harder to assess. President Rafsanjani is commonly said to represent a "moderate" trend since Khomeini's death in 1989. But whatever "moderation" or ferment there may be in Iran's internal politics, foreign policy still seems to be the plaything of the radicals. This is apparent not only in the military build-up but in the bullying of Gulf neighbors over territorial disputes, the open mobilization against the Arab--Israeli peace process, the continuing death threat against Salman Rushdie, and the active organization of subversion and terrorism.

CIA Director James Woolsey calls Iran "the world's leading state sponsor of terrorism." Iran's intimate connection with Hezbollah in Lebanon is well known; the Sudan has become a nest of Iranian agitation against Egypt and the rest of North Africa. Three Iranians were arrested in Bangkok on charges of planting a ton of explosives in March outside the Israeli Embassy. The British government charged last April that the Iranians were linked to terrorist groups as far afield as the IRA and the Japanese Red Army. Bomb attacks last July in Buenos Aires and London and against a commuter plane in Panama have all been linked to Iran. This is not moderation.

The Europeans have a different attitude from the Americans toward this pattern of Iranian behavior. After Mr. Christopher's initiative in June 1993, a U.S.--EC working group chewed on the issue for several months. Then, on September 28, 1993, at a news conference in New York, EC Commissioner Hans van den Broek and Belgian Foreign Minister Willy Claes announced the formal EC reply: a polite brush-off. Instead of following the U.S. approach of containing Iran, the Europeans would continue their strategy of a "critical dialogue"--meaning that they would occasionally urge Iran to behave itself but that the expansion of normal political and economic ties would continue. (Similarly, Japan's development loan was, in theory, conditioned on Iran's good conduct.) But these countries' trade with Iran is increasing, notwithstanding Iran's abominable international behavior. Germany's exports to Iran in 1993 were about $6 billion. Japan's exports have been about $3 billion a year, Italy's $2 billion, and Britain's $1 billion.