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Extending a hand to Satan

The Economist
September 23, 2000

T E H R A N -- There are intriguing signs of a thaw in Iran's relations with the United States. What do they add up to?

WHEN one of the walls of the old American embassy in central Tehran was sandblasted recently and made sparkling clean, rumour ran wild. The Americans were coming back, Iranians predicted. Nonsense, said officialdom: the embassy, now used as a training base for the elite Revolutionary Guards, is about to be leased commercially.

That was true, as it turned out. But behind the misleading whiff of smoke there was at least some fire. In recent weeks, high-ranking Iranian and American dignitaries have begun to meet in intriguing ways. A number of Iranian MPs, including Mehdi Karroubi, the speaker of the parliament, ran into several American congressmen earlier this month at a reception at the Metropolitan Museum of Art in New York. Both groups were there for a conference of world parliamentarians. Coincidence, said Mr Karroubi, a veteran revolutionary cleric who tries to maintain ties to both the reformist and conservative camps. He just happened to bump into the congressmen, he told Iran's hardline newspapers, while touring the museum. Few believed him.

That was only the first of a series of "accidental encounters". At about the same time as Mr Karroubi was appreciating art in the Met, a band of accredited American diplomats managed to slip in and out of Iran for an agricultural conference. A small news item appeared in one Iranian newspaper. When officials were formally questioned, no one seemed to be aware that American officials had touched Iranian soil.

Then, last week, Madeleine Albright, the American secretary of state, attended a United Nations conference on Afghanistan with Iran's foreign minister, Kamal Kharrazi. It was one of the few high-level contacts between the two sides since the 1979 Islamic revolution. An Iranian spokesman played down the meeting, saying that Mrs Albright and Mr Kharrazi sat on opposite sides of the table and did not speak. But they got close, relatively speaking.

What all this posturing and gesturing reveals is that both sides in Iran, reformist and conservative, would like to see an end to the 21-year rift in relations. For the first time, the conservative establishment has admitted what it once acknowledged only in private: that Iran can no longer afford to snub the Great Satan. The public also takes that view. An opinion poll published last week showed that 55% of Iranians surveyed would support restored ties with the United States.

The reasons are economic. First, Iran's merchant class, who are firm supporters of the clerical establishment, are losing lucrative import-export contracts. The United States announced in March that it was easing sanctions against Iran by allowing the import of three luxury items: carpets, pistachios and caviar. But these items entered European markets long ago, and the gains from discerning American nibblers are unlikely to mean any sharp increase in profits for Iranians.

Second, and more important, the vital oil sector needs America as a source of both technology and investment. American oil firms were shut out of the Iranian market five years ago when President Bill Clinton imposed a unilateral embargo. Since then, they have been obliged to cool their heels while European companies have lined up to sign contracts for lucrative Iranian oil and gas projects. Although there have been rampant rumours that American oil firms are continuing to do business with Iran through middlemen and front companies, the firms are putting increasing pressure on Washington to lift the sanctions officially. While he was in New York, Mr Karroubi also held meetings with representatives of Conoco, Chevron and Exxon Mobil.

Pro-reform Iranian economists estimate that American sanctions and their ripple effects-the drag on inward investment, the reliance on black-market and grey-market suppliers, the higher cost of capital and the lack of easy access to spare parts for the large installed base of American-made infrastructure-are slowing the Iranian economy by 10-15% a year. This comes at a time when Iran must grow, and must produce at least 750,000 new jobs each year, to keep pace with its surging population.

The United States will not lift sanctions completely, it insists, until Iran ends its support for Islamic militant groups such as Hizbullah, which waged a 18-year resistance against the Israeli occupation of southern Lebanon. America continues to accuse Iran of backing Hizbullah, despite Iran's insistence that it halted such funding years ago. The United States also claims, against strong Iranian denials, that Iran is seeking to develop nuclear weapons and long-range missile technology.

For its part, the United States has offered more than gestures. Last March, in the most conciliatory speech to date, Mrs Albright said the United States regretted the Central Intelligence Agency's involvement in the 1953 coup that overthrew Prime Minister Mohammad Mossadegh and brought back the Shah. Mrs Albright's statement may have been a big step for the Americans, but Iran wants an official apology-for that, and quite a few other things as well. If and when that day comes, the graffito covering an adjoining wall of the former American embassy-"Down with the USA"- may fall victim to the sandblaster too.


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