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Reassessing U.S. Policy Toward Iran

Speaker: Lee H. Hamilton
April 15, 1998
Foreign Affairs


Note: Remarks as prepared for delivery


My remarks this morning are premised on three propositions.

First, no country has caused the United States more anguish or more trouble over the past two decades than has Iran. Problems with Iran contributed to the downfall of one President, and tarnished the record of another. Emotions have run high. The rhetoric has been hot, and mutual recriminations frequent.

Second, confrontation between the United States and Iran—between two peoples and two countries that were once close friends and partners—has benefited neither country. Years without dialogue have served the interests neither of the United States nor Iran.

Third, important changes are underway inside Iran. It is a society in transition. President Khatami wants to promote civil society and the rule of law. He wants to end Iran’s isolation. He wants to improve the life of the Iranian people. He is reaching out to Iran’s neighbors—and he is reaching out to the United States. He is also engaged in a fierce power struggle inside Iran.

I believe we need to begin a policy of engagement with Iran. It will not be easy, and it will take time to produce results, but I am persuaded that such a policy serves the American national interest far better than our current posture of containment and isolation. The challenge is to find ways to begin talking with Iran, without preconditions, so that we can begin to address the many issues that divide us. No one can assume the success of such a dialogue. If we do not talk, we can assume that the current, unacceptable impasse will continue.

Iran Matters

The importance of Iran cannot be denied. Iranians are a proud people, with a long and distinguished history and a rich culture. With over 65 million people, Iran is the most populous country in a region of vital importance to the U.S. national interest, the Persian Gulf.

Iran has some of the world’s largest oil and natural gas reserves, and it is the second-largest oil producer in the region after Saudi Arabia. Iran controls half the coastline of the Persian Gulf and one side of the Straits of Hormuz, through which half of the world’s traded oil moves. Iran borders the Caspian Sea, the Caucasus, and Central Asia, where huge reserves of oil and gas are now being tapped. Poor U.S. ties with Iran harm the competitive position of U.S. companies in Central Asia, and make it more difficult to bring new energy supplies to world markets. Iran has a 900 mile border with Iraq. A poor relationship between the United States and Iran complicates considerably the effectiveness of American policy toward Iraq.

Differences over Iran have caused tension between the U.S. and its closest European allies; transfers of missile technology to Iran have caused some of the most protracted and difficult disputes between Russia and the United States.

Iran’s statements and actions have made the Middle East peace process more difficult. In short, poor relations with Iran immensely complicate American foreign policy. Improved relations with Iran could lead to comparable benefit. An Iran that rejoins the family of nations and follows its rules could make a major contribution to regional prosperity and stability. A better relationship with Iran would serve the strategic interests of the United States, and improve the climate for the Middle East peace process.

U.S. Policy Today

Current U.S. policy is straightforward: to contain Iran because of its opposition to the Middle East peace process, its support for terrorism, and its development of weapons of mass destruction. Supporters of that policy point to certain accomplishments: Iran’s revolution has not spread; the Gulf is stable, and oil continues to flow out of it; Iran’s economy is in trouble; foreign investment in Iran has slowed; and arms purchases and oil production by Iran are less than Iran intended.

But no one who looks at U.S. policy toward Iran since 1979 can be satisfied with this situation. Our central problems with Iran’s foreign policy remain unaddressed. Our policy has been static. Our animosity toward Iran is as deeply ingrained as is Iran’s animosity toward us. Our policy toward Iran consists of:

  • a sound bite that we want Iran “to change not just words, but deeds”;
  • a slogan called “dual containment”; and
  • a sledgehammer in the form of the Iran-Libya Sanctions Act, known as ILSA.

We want a government-to-government dialogue with Iran, but, over the years, we have been unwilling to take steps to help make that dialogue happen. We want Iran to change its policies, but we have been unwilling to pursue a strategy likely to promote changes in those Iranian policies that threaten our interests.

Our past policy toward Iran might have sufficed at one time, but today it is inadequate—and harmful to the American national interest.

Let me spell out the problems with U.S. policy. First, we want changes by Iran in “deeds, not words.” We can all agree with that. We want an authoritative dialogue with Iran. We know—and the Iranians know—what we want to talk about. And we know what the Iranians want to talk about. But that dialogue isn’t happening. That is because there is a fundamental lack of trust between us. Iranians, even those interested in dialogue, are deeply fearful that somehow the United States will use such a dialogue to humiliate or weaken Iran.

More important than repeating our many complaints about Iran—valid as they are—is trying to foster the minimal level of confidence necessary to get a dialogue started, so that we can address our complaints, not just repeat them.

Second, the policy of “dual containment” of Iran and Iraq is not working, and is not sustainable. Seven years after the Gulf War, friends and allies have little enthusiasm for open-ended U.N. sanctions against Iraq. At least with Iraq, the international community agreed to impose those sanctions. On Iran, there is no such basis for agreement, and no prospect that we can persuade our allies to accept broad-based sanctions. No country in the world has followed the U.S. lead in sanctioning Iran.

Our efforts to isolate and contain Iran have not only been unsuccessful, they have been counterproductive. They have caused great strains with our allies in Europe, and our Arab friends in the Gulf.

Key Arab states boycotted the U.S.-backed economic summit in Qatar, but all Arab states attended the Islamic summit in Iran. The Saudis sent no one to the Qatar meeting, but they just hosted former President Rafsanjani for two weeks in the Kingdom. Our policy is not isolating Iran—it is isolating the United States.

Third, the Iran-Libya Sanctions Act is harmful to U.S. interests. Given the politics of an election year, it was easy in the summer of 1996 for the Congress to vote to impose sanctions on foreign companies that invest in the energy sectors of Iran and Libya. ILSA passed the House on a unanimous, recorded vote—including mine. I supported the bill with many reservations, which I explained at the time, and I now believe that my vote was a mistake. The administration also had strong reservations about this sanctions bill. It secured some improvements, but the bill was still bad. In a political season, the president signed the bill into law. Now he is struggling mightily to avoid applying it.

Because of last September’s announced investment in Iran’s South Pars gas field—involving the French firm Total, the Russian firm Gazprom, and the Malaysian firm Petronas—the president now confronts a series of unacceptable choices. If he decides to impose sanctions on these firms, he takes an enormous gamble. A decision to sanction will:

  • Create a huge fight with our European allies;
  • Undermine the already difficult effort to maintain international support for U.S. policy toward Iraq;
  • Weaken international support for efforts to contain Iran;
  • Harm our efforts to draw Iran’s democratically elected president into a dialogue;
  • Jeopardize our ongoing efforts to persuade Russia to shut down missile cooperation with Iran;
  • Make it more difficult to gain access to Caspian oil;
  • Force the European Union to take disputes on ILSA and Helms-Burton back to the World Trade Organization, threatening the integrity of that vital organization; and
  • Provoke retaliation against U.S. exports and investment—costing U.S. jobs.

But, if the U.S. decides to impose and waive sanctions, the costs are also high:

  • The president would face a firestorm of public criticism, especially from the Congress;
  • Even if waived, the impact of sanctions on U.S. relations with the EU and Iran would be almost as harmful;
  • An improvement in policy toward Iran would be even more difficult than it is; and
  • U.S. energy firms would complain bitterly. Foreign competitors would be allowed to go forward with investments in Iran, while U.S. firms could not.

Right now, the administration is carrying out the most rational policy: to study the question, and to do nothing. But the job of the president is to carry out the law, and ILSA puts him—and keeps him—in a terrible box. In our effort to isolate and sanction Iran, we are harming a wide range of other U.S. interests. Our current policy toward Iran is deeply flawed. But we now have a new opportunity before us.

Chance for a Fresh Start

For the first time since 1979—when Iranian students seized and held American hostages at the U.S. Embassy in Teheran for 444 days—there is the possibility of improved U.S.-Iran relations. Much of the rhetoric and some actions from Teheran are changing. The Iranian presidential elections last May were a political earthquake. The ruling clerics allowed President Khatami to run, because they sensed dissatisfaction in society. But they were shocked by his sweeping victory. 69 percent of Iranians voted for change.

President Khatami is dedicated to opening up society, relaxing political, social, and cultural rules, and repairing fences abroad. Iran is becoming more pluralistic and more flexible. But Khatami is not abandoning its Islamic and revolutionary values. There are still human rights concerns in Iran and concern about the treatment of religious minorities—including the Baha’i. And there is still the death fatwa on the writer Salman Rushdie.

The pressure is now on President Khatami to deliver—on jobs and economic growth, strengthening the rule of law, and ending Iran’s international isolation. His task is not made any easier by oil prices hovering in the low teens per barrel.

The most dramatic change Khatami can deliver is better relations with the United States—a step with enormous symbolic power. When Iranians publicly cheered the display of an American flag during the recent wrestling matches, they were expressing open defiance of two decades of policy that had made anti-Americanism a core value of the Islamic Republic.

President Khatami has taken an important first step. He has changed the terms of debate from the United States as the “Great Satan” and “mother of corruption” to the United States as the possessor of a great civilization that shares many values with Islamic Iran. By himself, Khatami is not going to reverse two decades of strident anti-Americanism. Iran remains bitterly divided between hard-line conservatives and reformers, with the issue of relations with the United States perhaps the most contentious of all.

What we do, what we say, and how we treat Iranians can matter a great deal, and can affect the debate in Iran. Some in the United States will argue that Iran is coming our way, that current policy is working. They will point out that now is not the time to adjust our approach—that we should continue to insist on our demands and isolate Iran until they are met. The alternative approach is to put markers down on the key issues of importance to us and to respond reciprocally to Iranian gestures, overtures, positive statements, and actions.

In the current dynamic situation, I favor the latter approach. We have plenty of sticks in our policy already. Now we need some carrots and some flexibility in our use of sticks. It is time for a policy change.

What Should the United States Do?

There is no simple road map for U.S. policy on Iran. But we can and should respond to positive signs from Tehran. Change will come slowly, and we should be patient and ready for setbacks, bumps, and detours. The road map I want to propose should include several signposts:

Steps Leading Toward an Official Dialogue

First, the U.S. should begin now to take steps that will lead to a direct, official dialogue with the government of Iran. This state-to-state dialogue cannot be forced. Both sides will move cautiously to overcome 19 years of rhetoric and neglect. We will need to be realistic. The leaders of the Islamic Republic are not about to become Jeffersonian democrats. Progress lies in small steps—some official and some not—toward ending the mistrust and estrangement cited by both presidents.

Getting our message across.

To begin, the U.S. should use several avenues for outreach to Iran and its people. Just as President Khatami chose CNN to send his message to the U.S.,

President Clinton—or another senior official—can talk directly to the Iranian people through interviews on Iranian radio and TV, or on the Persian service of VOA.

U.S. officials should also engage the (1-to-2 million strong) expatriate Iranian community, where the message will certainly reach Iran. All officials, when speaking about Iran to groups like this one—to foreign affairs groups, to business and oil industry associations, to ethnic organizations concerned with the Middle East, or to academic groups—can send the message that we are interested in serious dialogue.

Calibrating the message.

How do we calibrate that message? We should end references to Iran as a “rogue” or “renegade” state. Those terms suggest no interest in serious dialogue.

We should end references to Iranian “behavior.” This term connotes dogs and children. We should not be gratuitously offensive. We should talk about “policies” or “actions.” We should emphasize the positive and use symmetry in public statements. U.S. officials can refer to “excellent relations between peoples,” and to Iran’s great civilization. Such language makes a great impression on a people who are proud of their rich culture and heritage. We should also acknowledge grievances without admitting or assigning blame. In official statements or speeches, we can express “regret” over the state of our relations. In so doing, we demonstrate a willingness to end 20 years of mutual recrimination and finger-pointing.

Changing our visa policy.

The U.S. should also change its visa policies for Iranians. We should end the current rules that collectively punish Iranians through long delays for entire categories of visa applicants. These rules add weeks to visa processing and catch no bad guys. To change visa rules is not symbolic. It has real meaning for real people. It would be welcomed by the Iranian people and the Iranian-American community as well.

When a U.S. wrestling team traveled to Tehran in February, they were treated respectfully by the Iranian government. The U.S. reciprocated 10 days ago by treating Iranian wrestlers like common criminals, delaying them for two hours at the airport, so they could be fingerprinted and photographed. This was humiliating to them, insulting to Iran, and directly contrary to our interest in signaling a willingness to develop better relations.

While we should take necessary precautions for security reasons and for full observance of immigration laws, we should no longer subject Iranians otherwise entitled to visas to long delays, expenses, and humiliation.

Bringing Experts Together.

We should take up President Khatami’s offer to increase unofficial exchanges as a step toward restoring civil discourse between Iran and the United States. The U.S. should send a U.S. Information Agency officer to the Swiss Embassy, to initiate and coordinate exchange programs with Iran. Former policymakers, professors, journalists, scientists, artists, writers, and representatives of non-profit organizations should meet to discuss subjects of mutual interest. These meetings will help break down the misperceptions and prejudices that stand in the way of future dialogue. They can address immediate practical issues, such as the medical impact of chemical warfare—which the Iranian people know only too well—or the role of religion in public life.

To build up mutual trust to address the issues that divide us, we must begin by working together to solve the problems we share.

Addressing the Past.

Bygones will never be bygones until we can deal directly with them. Iranians and Americans, in a neutral setting, need to address the grievances both sides are carrying. These include: the 1953 coup; the U.S. role in the revolution of 1978-79; and the 1979-81 hostage crisis. These are emotional issues for the people of both countries; but if we do not address them, they will continue to poison our relationship.

We need not restrict our review to unpleasant events. In examining the past, we will find much positive interaction that both sides have chosen to forget in the rhetorical barrage of recent decades. We can focus on the contributions made by many Americans to the history of modern Iran, and by many Iranians to U.S. technological and academic advances.

Dealing with the Central Issues.

This step-by-step approach will take us to the second major marker along the road map of a new relationship with Iran: establishing sufficient mutual trust and confidence to address those issues that concern each state the most. Words and deeds are both important—words flow into deeds, and words help create deeds. For too long, “No” has been the best word to characterize this relationship. Both Iran and the United States need to get beyond “just saying no.”

Middle East Peace Process.

The U.S. is concerned about Iran’s attitude toward the peace process. But we should not simply say Iran is totally against the peace process. We hear that the Iranians have told Yasser

Arafat that they will support any settlement the Palestinian Authority and Arafat can support. President Clinton was reportedly very impressed by President Khatami’s letter to Arafat. We should let the Iranians know that we welcome such private statements, and we should work to get

Iran’s officials to reiterate those remarks openly, publicly, and frequently.

Support for Terrorism.

Second, we are deeply concerned about Iran’s support for international terrorism. Yet as President Khatami knows, Iran, too has paid a price for terrorism. It has paid in isolation from Europe, deep suspicion from its neighbors, and sanctions from the United States. It is clear that Iran now seeks to end its isolation: that is the mandate of President Khatami’s election. To assess whether Iran is pulling back from its support for terrorist groups, we should ask ourselves three key questions:

  • Is Iran imposing constraints on the military activities of groups it has supported? Hezbollah in Lebanon has talked about pulling back from the border with Israel if Israel withdraws from Lebanon. We should test the Iranians’ willingness to change words into deeds.
  • Have military shipments through the Damascus Airport diminished? It may be too early to get definitive answers, but we should be communicating to Iran specific, doable achievable steps that we want it to accomplish, on the way toward cutting off all support for political violence.
  • Is the declaratory policy of the Organization of Islamic Conference (OIC), which condemned terrorism by all member states, holding and being honored by Iran, the Chairman of the OIC for the next three years?

Weapons of Mass Destruction.

There is also the issue of Iran’s programs to develop weapons of mass destruction. We must get beyond simply criticizing Iran’s programs. We should put forward specific proposals for addressing our concerns. On the nuclear issue, the United States should propose talks, under U.N. or IAEA auspices, for a North Korea-style solution to the question of the Bushehr reactor. The U.S. should make clear that we will not block Iran’s purchase of nuclear power reactors for civilian purposes, so long as all nuclear facilities in Iran are under safeguards, and so long as Iran responds to all special inspections and requests for information about its nuclear activities.

On chemical weapons, Iran has now ratified the Chemical Weapons Convention, which requires Iran to provide detailed information about its chemical weapons programs. We should push for full Iranian compliance with the convention, and we should stress openly that our goal here is not an attempt to interfere in Iran’s internal affairs. We will be in a better position to push Iran on this score once we complete our own implementing legislation and come into compliance with the convention.

On biological weapons, our best bet in addressing programs in Iran is to promote greater verification and enforcement provisions under the existing Biological Weapons Convention, which both Iran and the United States have ratified.

On missiles, we are working hard to cut off Russian suppliers and others who are helping Iran. We are also working with our allies to tighten up on technology transfers. These are important steps, but we can take others.

On all of Iran’s weapons programs, we should work to revive the Middle East multilateral arms control talks, and gain Iran’s participation in them. Those talks are now on hold, because of the deep difficulty in the Middle East peace process. But we should make clear to Iran’s

leaders that we welcome their participation, and that we see these talks as a good way to enhance regional security. Some call such talks glorified seminars. But they can reduce misunderstanding and increase transparency, even if they do not lead soon to signed agreements.

Building Confidence.

Moving beyond U.S. concerns about Iran’s policies, we should also make clear—publicly and privately—that we have no intention of using an authoritative dialogue to denigrate Iran or its revolution. The purpose of dialogue is to build confidence and to seek policy changes, not to reverse Iran’s revolution.

We should make clear: that we support the sovereignty and territorial integrity of Iran; that we have no animosity toward Islam, one of the world’s great religions; that we do not seek to overthrow the Iranian government, and we are not engaged in covert activity to do so; and that we are willing to deal expeditiously on outstanding claims and asset issues, dating from the 1979 revolution and hostage crisis.

Since 1981, in business-like talks at The Hague, we have resolved all but 16 of over 3800 commercial claims, and all but 17 of 107 government-to-government claims. There are still tough, unresolved disputes relating to Iran’s past military purchases from the United

States, but a changed political climate can help bring this process to closure.

We should not implement a program to create a Radio Free Iran. Our purpose today should not be to beam hostile propaganda into Iran. We should reprogram those funds for USIA exchanges.

Change U.S. Economic Policy

The third major step in U.S.-Iran relations must be to pursue an economic opening.

The President’s Executive Order. The prime obstacle is the president’s own Executive Order banning trade with Iran. The United States should signal to Iran that, once an authoritative dialogue begins and progress is made, the United States is prepared to ease that Executive Order, step-by-step.

A first step—a step we should take soon—is to license U.S companies to resume discussions in Iran. Right now, U.S. firms—especially energy firms—are falling behind not only in the Iran market, but in efforts to develop Caspian energy resources. U.S. firms are penalized because they can’t even hold talks with their Iranian counterparts. Third countries are sewing up contracts and markets from which we have excluded ourselves.

We should not treat U.S. firms worse than we treat foreign firms. We should allow U.S. firms to talk to Iran, so they can be ready to go—if and when U.S. sanctions against Iran are lifted.

MENA Conference.

We should also invite Iran to join the Middle East North Africa (MENA) economic conference. Iran may choose not to attend, but Iran should not be excluded by the United States.

ILSA. Perhaps the toughest challenge is the ILSA statute itself. As I noted earlier, imposing sanctions on foreign companies that invest in Iran would jeopardize a range of U.S. interests.

There are three ways to get our policy out of the ILSA box. The first, and best, solution to the ILSA problem would be a change in Iran’s policies on terrorism and weapons of mass destruction, so that ILSA and its sanctions would no longer apply. This, of course, is exactly what we would hope to accomplish in an authoritative dialogue with Iran.

But changes in policy will take time, and investments in Iran that appear to violate ILSA have already been made. The second best solution to the ILSA predicament is the one foreseen by the law itself: an agreement between the United States and other governments on steps toward Iran that would justify waiving sanctions. For several months now, the administration has been seeking to achieve such an agreement. Under the current British presidency of the European

Union, British Foreign Minister Cook is working hard to broaden U.S.-European agreement on non-proliferation policies toward Iran.

But we need to be clear about what we can achieve with the Europeans, and what we cannot. The Europeans will never—ever—accept the extraterritorial application of U.S. law. We agree on critical steps to contain weapons of mass destruction, but barring a dramatic change in Iranian behavior, the EU is unlikely ever to agree to impose broad economic sanctions on Iran.

Achieving changes in Iran, or agreement with our allies, will take time. The third best option on ILSA—as even some strong advocates of the statute now recognize—is to delay a decision on imposing sanctions. The statute does not dictate when the president must decide. He should not rush to impose sanctions that clearly will be harmful to other U.S. interests.

However, if increased political pressure makes it necessary for the administration to act, the decision that will be least damaging to our national interests will be to exercise a national interest waiver. If preventing damage to U.S. trade policy, to our relations with our most dependable European allies, and to a potential opening in our relations with Iran is not in the “U.S. national interest,” as the language of ILSA’s waiver puts it, then what would be?

ILSA has created an unfortunate clash between the requirements of a narrow, inflexible sanctions law and the constantly evolving, unpredictable demands of U.S. foreign policy. My hope is that this conflict will encourage Congress and the president not to reauthorize ILSA, when it expires in three years.

Maintain the U.S. Military Presence in the Gulf

The final component of U.S. policy must be a continuing, strong U.S. military presence in the Persian Gulf region. The United States, and the entire advanced industrial world, have a vital interest in the stable and secure flow of oil from the Gulf. So do the eight littoral states of the Gulf, including Iran.

The U.S. military presence in the Gulf contributes to the region’s stability. It helps to maintain the region’s military balance, and it helps to maintain peace.

On two decisive occasions during crises with Iraq—first in 1991 and again this winter—Iran quietly accepted U.S. action against Iraq, and the United States recognized complementary Iranian actions to help contain Iraq.

The U.S. military presence in the Gulf is not aimed at Iran. Indeed, the United States has a strong interest in engaging Iran on security issues if its actions toward us and toward its Gulf neighbors show restraint and conciliation.


I have outlined a careful, but ambitious road map this morning for U.S.-Iran relations. There are still some minefields out there.

First, there is the open case of the June, 1996 Khobar Towers bombing. Saudi Arabia has closed its case, and our own investigation has stalled because of a lack of Saudi cooperation. If Iran were shown to be the sponsor of the Khobar Towers bombing—or any other recent terrorist action, particularly one involving Americans—it would be very difficult to move forward on relations with Iran.

Second, there is the ILSA statute. If the President applies sanctions under ILSA, it would be a severe setback to U.S. foreign policy in general, and to the possibility of improved relations with Iran in particular. We would survive such a decision, but it would take much time and effort to unravel such a self-inflicted policy error.

Finally, there are developments in Iran itself. As we meet this morning, the reformist mayor of Teheran—one of President Khatami’s strongest supporters—sits in prison on politically motivated charges. There is still an ideological struggle underway in Iran. The vast majority of Iranians may be with President Khatami, but the old guard will not give up their power and position easily.

We will not control events in Iran. But we can, at least on the margins, influence them. There will be little risk to our national interests if we make clear to the people and government of Iran that: we are prepared to open a new chapter in our relations; we are prepared to end twenty years of trading insults; and we are prepared to listen and respond to positive signals from Iran.

Our policy toward Iran should serve America’s broadest national interests. We need a civil, respectful dialogue with an important country in a rich, and tough, neighborhood. We want to begin that dialogue, and we need a policy that gets us there.

Thank you.

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