Symposium on Iran and Policy Options for the Next Administration: Session Three: Policy Options and Recommendations for the Next Administration

Friday, September 5, 2008

Unlike George W. Bush, whose administration focused exclusively on containing Iran's nuclear program, the next U.S. president should broaden its bilateral relations with Tehran to include talks on sanctions, regional stability, and energy security, experts said during the third session of a CFR symposium on U.S. policy toward Iran. "Iran can go down two roads: Japan of the 1930s, or the road of India, " said Vali R. Nasr, Council on Foreign Relations adjunct senior fellow for Middle Eastern studies. "Part of the use of aggressive diplomacy should be to interject ourselves into that debate, to have a say in which way they go," Nasr said. The need for a reversal in strategy toward Iran is evidenced in the Bush administration's flawed strategy of containment, the speakers said. Ray Takeyh, a Council on Foreign Relations senior fellow for Middle Eastern studies, said the approach has left no regional Arab consensus on how to handle Iran, and attempting to craft a containment strategy similar to the one employed against the Soviets during the Cold War "is not practical. " The isolation approach has forced Tehran into closer ties with Europe and Asia, and especially China and Russia. "Iran is not a country that is isolated like North Korea," Takeyh said. "We might not have the keys to" isolate Iran with sanctions or economic pressure.

This was part of the Symposium on Iran and Policy Options for the Next Administration, which was made possible through the generous support of the Carnegie Corporation of New York.

RICHARD N. HAASS: Okay, why don't we get started. This is the third movement of the Iran concerto. I'm not sure it'll be allegro -- (laughter) -- but we will, we will see. With us are two of the leading thinkers -- just about anywhere, on the subject of Iran and U.S. policy toward Iran. We are fortunate to have them associated with the Council. We are fortunate to have them with us today -- Vali Nasr, Ray Takeyh. They need no introduction and, as a result, they will get none. (Laughter.)

The first session was on Iran's internal; and the second session, as you know, was on their nuclear programs, and all that. And when we get to the Q&A, I wouldn't be surprised if we returned to some of it -- obviously, there were questions on the Israeli angle, and all that.

But, what I really want to focus on in this last session is U.S. policy toward Iran, because early on in the new administration I would think that one of the first interagency processes of the 44th president will be to test this -- will look at the full range of our U.S. interest concerns, what have you, vis-a-vis Iran; and they will, basically say, do we want to change what we've been doing? If so, to what degree?

But if this were such a drill, or if this were a Council task, the first thing we'd want to do is at least make sure we understood what exactly was U.S. policy towards Iran. So, what I'd like to do is make that the first question, because it's -- I was part of the process for several years of trying to shape it, and so I know a little bit about it.

I wouldn't exaggerate what I know. But, let's just sort of posit what U.S. policy is before we then assess it; before we discuss ways we might change it.

So, Ray, How would you describe, now, U.S. policy?

RAY TAKEYH: Well, I would describe it as two policies. For some reason I don't think there was one. There's actually two. (Laughter)

First of all, there is what happens outside the region, and this has to be through a series of Security Council resolutions that, in and of themselves, don't have substantial coercive power. But they're supposed to convey to the Iranians a measure of international consensus and solidarity against a nuclear infractions, which establishes the basis for informal sanctions that have been inactive, outside the U.N., in cooperation between United --

HAASS: Can I just interrupt? I'm going to be really rude for a second. Before we start talking about the instruments of the policy, what do you think are the goals of U.S. policy towards Iran?

TAKEYH: I think, at this particular point, is to restrain Iranian power, constrain the nuclear program. But those are rather an amorphous aspect of this policy, so there's not that clear pronunciation of it.

And the instruments are, as I've said, they take place outside and within the region, trying to mobilize a regional consensus against expressions of Iranian power.

HAASS: That sounds then -- if the purpose of it is to put a ceiling on the nuclear enterprise, and to constrain or limit the spread of Iranian influence as a result of Iraq, that sounds a little bit like containment.

TAKEYH: Yeah. On the nuclear issue, I would suspect they would want Iraq to have no measurable enrichment capabilities, yeah. So, that's not restrained, that's --

HAASS: That's actually more than that.

TAKEYH: Yeah.

HAASS: That's actually a bit of roll-back in the nuclear area; and containment, if you will, in terms of -- would you buy that?

VALI NASR: I think actually it's rolled back everywhere. It's maybe only very recently that the administration has tried to calibrate its capability, vis-a-vis its goals, and it may have backed off to just try to constrain Iran. But the U.S. wants Iran out of Lebanon; wants it -- not only not come into the Arab-Israeli process, but eliminate all of its influence there.

The U.S. goal for much of the Iraq war was that the Iranians should leave. In fact, that probably was the tenor of the discussions between the U.S. and Iranian ambassadors. And, similarly, in Afghanistan, they quickly, after 2002 -- particularly after the Iraq war, the U.S. also wanted Iran out of Afghanistan as well. I would say -- (inaudible) -- sort of, a frame, is that for much of the past five years the U.S. has wished to go back to 2002. In other words, roll things back to before the Iraq war, as if the Iraq war didn't happen. Put Iran back in its cage; lock the door; and then hope that the regime would fall down. And then also take away their nuclear capability as well.

HAASS: Okay, so if one were going to posit that as the policy -- at the risk of asking a question to which I sense I know the answer, how well is it working? (Laughter.)

NASR: Well, I think -- if I may go first, I think that the main problem is that it was a completely unrealistic policy to begin with. It's a policy of maximal goals with minimal means. And the more -- very quickly, we overreached to a point that even the credibility of getting some modest results began to falter.

And we became very focused, if you would, on whether we were progressing on the nuclear issue -- whether the Europeans and the Russians were helping, et cetera, but in reality, we never managed to change Iran's position in Lebanon. In fact, after 2006, they became much more important

The Annapolis conference failed to eliminate Iran's role in the Arab-Israeli process. In fact, Iran now holds a lot of the cards, at least in the Arab domain. We never were able to force Iran out of Iraq. We've made some gains because of the new stability post-surge, but Iran is not gone. And, similarly, in Afghanistan Iran's presence is there.

And, in fact, the idea of even trying to build a united Arab front that is willing not to deal with Iran -- a Dubai that is willing to cut banking with Iran, a Saudi Arabia that's willing to cut ties with Iran -- none of that has worked. So I think, in some ways, I think the -- the first thing the interagency process has to do is exactly to, sort of, back away and calibrate 'what are our goals, with what are our means?'

HAASS: I assume you're not going to say the policy has been strikingly successful?

TAKEYH: The problem is there's -- as he was saying, there's no regional consensus on Iran. There has never been an Arab consensus on Iran. There was no Arab consensus on Iran during the war -- I mean, you know, Qatar was dealing with them, and so forth. So, attempting to craft a sort of a regional consensus, similar to the one that was done with the Soviet Union during the Cold War, is just impractical.

That has to do something with the way the U.S. allies in the Gulf behave, and so forth. And then we had tried to balance, and hedge, and so on and so forth, as opposed to take unequivocal sides.

HAASS: So, yeah, just to interrupt, to just -- a little bit of a detour; I didn't want to go here yet, but let me just do it. So, when people talk about the idea of Iran, in a kind of anti-Iranian -- to some extent, anti-Shiite, but more anti-Iranian power projection glue to U.S. policy in the region, animating everything from what we used to call "the peace process," to everything else, you'd basically think that's a nonstarter?

TAKEYH: I think it's possible to limit Iran's influence in the Arab East, in the Palestinian-Israeli-Lebanese context. If you have a successful peace process and some sort of mediation diplomacy, it is possible to eliminate the ingredients that lead to Iran to project its influence there. It's possible for Iran not to be a Mediterranean power, but I don't know if it's possible to make sure that Iran is not a Gulf power.

NASR: If I may add to that, I think the Iranians have calculated correctly that the peace process will not go forward sufficiently to really change the dynamic in the Arab world. And, in fact, the U.S. made a big mistake trying to hang its Iran policy on success of the Annapolis conference, and success of the Arab-Israeli issue.

Secondly, I think the Iranians have found out that this anti-Israeli, anti-Holocaust rhetoric plays really well on the Arab street, and it's the best way of blunting the anti-Iranian sentiment on the ground level.

And, thirdly, I think the Arab governments, particularly after 2006 and the NIE report, don't trust -- it's not that they don't trust our policy, they don't trust our competence. They don't think -- they don't want to bet their future, and the future of their relationship with Iran, on an administration who they don't trust can formulate an -- (inaudible) -- policy.

So, they're hedging their bets. It's not that they don't want to contain Iran, it's not that they're favorable to Iran, it's just that they don't trust that we're able to get what we want.

HAASS: Given what we heard in the first session this morning, to what extent should regime change play a part in U.S. policy? Or, ought this to, essentially, be jettisoned either because it's not going to succeed, or it gets in the way of what limited cooperation there could be in other realms?

TAKEYH: I'm not quite sure if there is -- if the problems that United States is experiencing with Iran are subject, or susceptible, to easy diplomatic solutions. Therefore, I think to make the U.S. policy one of -- sort of, ostentaciously a change of the regime, it defeats the purpose of any diplomacy.

However, I would actually differentiate between changing regime, democratization and human rights. I think any sort of a negotiation with Iran should have a human rights component to it, as was the case with the Soviet Union with the Helsinki process.

In that particular sense, what you say to Iran is 'You want to be part of the international community, there are certain norms of behavior that you have to concede to. One is civil society, activities, and so on and so forth; monitoring behavior of your human rights abuses.' I would think that's an important part of an equation to have -- and then sort of a negotiated settlement. For no other reason than it would drive them crazy, because they would object to that because of interference with their domestic affairs, and so on.

But, I don't believe that the United States can have negotiations with Iran without taking into consideration the character of the regime. That's different than the change of regime.

HAASS: But if the United States did that, two questions: Imagine we did that publicly. One, how would that play inside Iran? Second of all, would that cause problems in the region, because we would be holding Iran to some standards we, perhaps, couldn't hold some of our Arab friends to?

TAKEYH: Well, I mean, those human rights discussions take place with other countries as well. It's part of the negotiations we have with Egypt, the Saudis, and so on; and the Europeans who have just negotiated with Iran -- far more successfully than we have, have made human rights a part of the dialogue with the Iranians. And they have actually made some head-ways with that -- inspection of Iranian prisons, demanding the end of certain torture practices, and so forth.

The Europeans, who get sort of a blame for being mercantile and amoral, have actually been far more effective in pressing the human rights with the Iranians than the United States ever has. And in any negotiations that the United States has contemplated, human rights weren't part of it.

HAASS: Let me -- I got a lot of questions, let me keep going here. I'm on a roll.

A lot of the conversation assumes that the United States and Iran approach things adversarially; there's a -- please turn off your cell phones -- antithetically, that there's no overlap. Let's challenge that for a second, because I was involved in some of the exchanges between the United States and Iran in Afghanistan. And actually there was some limited common cause.

And when I look at the situation in Iraq, for all of the differences between us, I also see that neither of us should oppose a -- more positive, neither of us want to see a country that hemorrhages; neither of us wants to see a country that fails. The United States favored elections. Those elections happened to bring Shiite politicians to power. I would assume, sitting in downtown Tehran, that was not an outcome that they had real problems with.

So, when one looks around the region, are there areas where the United States and Iran can and should cooperate?

NASR: I think, you know, what you say is very important in the sense that even if these areas of common interest are short-run, they provide the trust-building first steps that you would need in order to get to somewhere better with the Iranians. I think Iraq still is a place where Iran and the United States, by and large, are -- by and large, I would say, are on the same page, because they're both supporting the same government.

The Iranians are also hedging their bets, within the Shiite community, by supporting the Sadrists, et cetera. But the Iranians --

HAASS: Have they reduced that support recently?

NASR: Well, they don't have an option, because the Sadrists have been clearly downsized significantly. And that provides an opening. In other words, the only game in town for the Iranians, realistically, is the Iraqi government. It's the government that we're also banking on. Both the Iranians and the United States would want the Maliki government, or some version of it under a different leader, to succeed.

Our interests are the same as Iran in Northern Iraq, about which we don't talk. In other words, the stability of the Talabani-Barzani regime, and their -- and at least some kind of a agreement about the shape of Northern Iraq that would be conducive to Iranian interests.

Around the corner, when the next administration comes out, the big issue would be the Taliban. And Iran was the one country in this region that supported the Northern Alliance, along with India, as you know, against the fight with the Taliban. Again, a strategy of dealing with Afghanistan's stability -- working with the Karzai government, dealing with the drug issue, invariably, Iran and the United States are going to find their points of common interest.

And the third issue is the whole issue of the Caucasus, energy, gas pipelines and Russia. In other words, the way the United States is beginning to think about that region -- namely, how to create energy independence for Europe from Russia, cannot work without Iranian cooperation and participation. And, so you know we may not have enough to think of a fruitful, long-run relationship, but we have enough to at least begin to think of a different kind of engagement.

TAKEYH: The issue of Afghanistan is a peculiarity, because Iranian-American interests in Afghanistan have always coincided, since 1979. And they have never led to a larger cooperation between the two states. They cooperated -- they had the same objective in expelling the Soviet Union in the 1980s, preventing the consolidation of power by Taliban in the 1990s, and the displacement of Taliban in 2001-2003 period. That has never led to a larger cooperation between the two countries. That's one of the diplomatic peculiarities of Afghanistan-Iran-U.S. nexus.

On issue of Iraq, there's a larger agreement between the two powers preventing Iraq from being territorially dismembered; having a diplomatic process -- democratic process that leads to a rise of the (Shiites ?). But between that, and below that, there's all disagreements. Iranians want American forces out of Iraq -- not as precipitously, but out of Iraq. Iranian goal of emerging as preeminent power in the Gulf cannot be sustained so long as there's a sizeable contingent of American forces in the Gulf, whatever their preoccupation.

The relationship with the Sadrist movement is changing. They have a relationship now directly with the militias, or the breakaway militias, special groups, whatever they're called. So there is some degree of disagreement and friction at the ground level, which tends to undermine the larger conceptual agreement between the two powers and the direction -- overall direction that Iraq should go.

HAASS: Has there been, though -- or has there not been some backsliding, if that's the word, between -- involving Iran and the Taliban? My own sense is, whereas in the past the Iranians were quite -- if not unalterable opposed, overwhelmingly opposed to the Taliban, one gets the sense that, somewhat cynically, they've decided the Taliban are a useful instrument?

TAKEYH: Yeah. Sufficiently empowered, but not dramatically so, they can be used as an instrument of inflicting pressure on the United States.

NASR: But I also think that the Iranians are also hedging their bets with the Taliban. I mean, it's the saying that, you know, Ahmed Rashid used to -- liked to say that every shopkeeper in Kabul believes the Taliban are winning. I think the Iranians don't want to end up in the same situation with the Taliban as they were in 1997-98.

It's -- the best time now is to buy their friendship, so you don't have to see the short end of the stick when they arrive in Kabul. Which I think, again, goes back to not just our friends, but also even Iran. There is a belief in that region the U.S. is incapable, essentially, of seeing its policies to fruition. And that allows people, or pushes people to hedge against us, which is not very useful.

HAASS: Which tends to be self-fulfilling.

What is current Iranian thinking vis-a-vis terrorism as an instrument? And has there been any evolution or change?

TAKEYH: Iranian terrorism, it's customary to suggest Iran is the most ardent supporter of terrorism. But, if you look at their terrorism portfolio over the years, it actually has shrank. Part of the Iranian terrorism portfolio was assassination of dissidents abroad. That has stopped. Now, maybe that's because there's not that many dissidents left abroad -- (laughter) -- but still, that has stopped.

So their principal expressions of terrorism, as we call it, would be a support Hezbollah, would be support of Hamas, and whatever they're doing within Iraq. Within that, I think their relationship with Hezbollah is so organic, and is so fundamental to the character, and identity and foreign policy of the country that I don't see that changing. Hamas may be a little different.

HAASS: Why is that -- for a second?

TAKEYH: Hezbollah -- Iranian -- the relationship between the Iranian Shi'a community -- clerical community, and Lebanese Shi'a community, actually predates the revolution. Their relationship that has been mended through seminaries, consolidated through marriage, and Hezbollah has emerged as a successful protege of Iran, particularly in the aftermath of the 2006 war. So, in that particular sense, Hezbollah gives Iran a reach into the Arab piece.

HAASS: Why, when we talk about the Israeli-Palestinian process, or Lebanon, and so forth, why are we talking about Iran? It has no borders. It has no ability to project power in that region. It's because it has these proxies, particularly in terms of Hezbollah, that it can gain it.

Second of all, Hezbollah --

HAASS: Just so I understand, though. When the Iranians deal with proxies such as Hezbollah, is that then because they are seen as useful instruments of projecting and expanding Iranian power? Or is it seen more, because of the Shiite dimension -- it almost reminds me of the debate we used to have about Soviet power versus the spread of communism.

TAKEYH: The reason why that relationship is so important is because it's a marriage of strategy and values. It serves both ideology and tactics. But also, Hezbollah allows Iran to leapfrog over the sectarian divide.

I mean, Vali talks about the, sort of, the rise of Shi'ism, and the Sunni-Shi'a divide. I mean, what is a Sunni-Shi'a divide when Hezbollah flags are flying in Cairo? So it gives you an appeal, to a larger Arab public -- "the street" that he's talking about.

NASR: If I may recite an anecdote. In the morning Ali Ansari was talking about the growth of hand-kissing in Iran. Hand-kissing began with Hassan Nasrallah kissing Khamenei's hand. He's the only Shi'a leader around the world who actually kisses Khamenei's hand. So, that has value too, you know. (Laughter)

HAASS: Hard to quantify. (Laughter.)

There's lots of people that think -- or some people think that, whereas Israeli-Palestinian talks are, shall we say, problematic in the extreme -- for a whole raft of reasons, including the weakness and divisions on the Palestinian side, but Israeli-Syrian talks have slightly better prospects. Would Iran try to stop that when -- and could they? Imagine you did have a situation where the next Israeli government was prepared to try to strike a peace deal with Syria, and Assad was as well. How would Iran approach that?

NASR: Well, I mean, so far the Iranians have not been favorable to the talks, and have publicly criticized Syria. And I think the main sign of the breach is the assassination of the Hezbollah terrorist Imad Mughniyeh, which both Hezbollah and Iran believe was the olive branch that the Syrian intelligence gave to Israel as a sign of goodwill. There's a lot of bitterness about that.

But the Iranians probably figure that it's going to be awhile before there is a peace treaty. And for Iran, I think everything right now is about the next quarter, not the next quarter century. And, you know, the Israelis probably -- they have elections, they're not likely to give enough to Syria to seal the deal.

Iran also has enormous amount of direct foreign investment in Syria. Some say upwards of $8 billion have been invested in Syria. You have a lot of common ground in Lebanon. Syria cannot manage Hezbollah without Iranian help. Israel cannot turn Syria on a dime. At best, you know, the idea of a peace treaty between Israel and Syria is a backing away from war, and probably a, sort of, a cold peace between them.

But even that, I think the Iranians think is not in the immediate future. So, they don't see the real strategic map of this region changing dramatically -- say, in the next six to eight months, which is really critical for them in terms of whether or not they're going to be somewhere else with the United States.

HAASS: Only in the Middle East is facilitating an assassination seen as a sign of goodwill. (Laughter.) But, I will let you all ponder that for some time.

Okay, so you have a new administration in Washington in place. It's the spring of 2009. People at the senior level have been confirmed. Some of the initial reviews have been launched. And when one looks at the question of U.S. policy toward Iran, for a second, what is the relationship between our previous session -- the emphasis on nuclear, and everything else, to what extent does that -- should that dominate?

And even beyond that, to what extent should the United States try to impose linkage in its relationship with Iran? Or should it basically say, every boat on its own bottom. If we can make progress in the nuclear, great, and if we can't make progress, at the same time, on terrorism, so be it. How should the United States approach its relationship with Iran?

TAKEYH: I mean, Ash touched on this in the previous session. I think when you were talking about limited negotiations over arms controls issues, or larger negotiations where arms control would be a component of a larger context between the two countries, I suspect, that's the best way of approaching it, because I think there is a conceptual divide between Iran and the United States on the nuclear issue.

And Iran and the international community on the nuclear issue. Iranians look at negotiations as a means of offering confidence-building measures so they can proceed with a nuclear program. The United States looks at negotiations as a means of stopping their nuclear program. So, that conceptual divide, I don't know how it's going to be bridged.

But perhaps in the larger context of negotiations between the two countries that deal with stability of Iraq -- Gulf security, diplomatic and economic sanctions, frozen assets, Hezbollah, and so forth, maybe you can make some progress. Now, if all these issues are linked, then that's the formula for paralysis.

HAASS: But just so -- but just so I understand, does that mean the United States has two baskets of sanctions? One is a basket of sanctions we'd either raise or lower, depending upon the nuclear issue; and the other is a basket of sanctions we keep in reserve for everything else?

TAKEYH: No, I'm not suggesting that. What you're trying to do -- essentially, some of those sanctions will have to be modified over time anyways.

One of the easiest things the United States to do is to deal with the frozen assets issue, which would be, symbolically, even very powerful; the diplomatic recognition issues, or moving towards establishment of diplomatic recognition. But that's the complexity of these negotiations, is how much of your grievances with Iran are you willing to live we?

At the end of negotiations, you should be prepared to enter a period of ambiguity, where none of these issues are resolved conclusively to anybody's satisfaction. How much of a Iranian nuclear program can you live with? How much of Iranian influence are you willing to concede in Lebanon? How much of an Iranian presence is acceptable in Iraq?

And if the answer to all those questions is "none of the above," then I wouldn't actually suggest negotiations, because then you're trying to get to negotiations what you couldn't get through containment and coercion.

NASR: I would not disagree with Ray, but I would think that with a new administration there is a framework problem, in a number of ways. One is that we have an Iran problem, and we see it essentially just as a nuclear problem. Every discussion begins and ends about, 'what are we going to do with that.'

But I think it's a much bigger problem. And I think it's -- I went back to your introduction this morning, that it's not possible for us to get the greater Middle East right unless we properly understand the role of Iran in the region. Then, you know, we have to sort of approach this thing completely differently.

And I think the Iranians look at it this way; in other words, the nuclear issue, for them, is a lever to changing their whole status in the region. I think one of their strategists said that either this issue will solve absolutely everything between the United States and Iran, or there's no point even talking about it.

And I think, you know, it might be the case that it's too late. That, for so long, the United States has made this only about suspending enrichment and ending the program; that we, sort of, have gone so far down this road it's very difficult to come back from. But unless we find a way to broaden the Iran issue, in the context of our understanding what's happening in that region, I think we're not going to get it right.

HAASS: But, let me just sort of, play that out for you, just so I understand. If you thought of the U.S.-Iranian negotiation as one of, for want of a better word, "multiple baskets" -- you have a basket called "nuclear," you have a basket called "human rights inside Iran," you had a basket called "Iraq," one called "Afghanistan," one called "Lebanon," one called "Hamas," whatever, "Hezbollah," "terrorism." If you had 10 baskets from, you know -- and maybe "assets," and some of the baggage, if you will, left over from the last three decades.

Imagine you started talks on the nuclear, and couldn't make any progress there. Do we deny ourselves leverage? Is that the right way to think about it, if we still go ahead on the other baskets as best we can? How is it we ought to structure these talks, because it seems to me we have to think about leverage; we've got to think about priorities; we've got to think about what might influence Iranian behavior, more so before we do something about flying out assets.

What do we link? The flowing out of assets? Or do we simply say, here, have it. We're going to flow out some assets in the hopes that, therefore, you reciprocate? How do we structure? How do we think about this?

NASR: Well, you know the way it's been figured is that the nuclear issue is on the forefront. First of all, it's been there; secondly, because there is a very tight timeline attached to it. You want the Iranians -- if we can intervene in the program before they get too far ahead, as both Ash and Gary mentioned.

But I think, you know, the idea of talking with the Iranians about everything at the same time may not be the best approach, right. I mean, they might have to sequence it. There are things that we are closer with, and it's possible to get at least a certain modicum of agreement on faster, and build trust that then would be parlayed into the --

HAASS: For example, what do you see as some the lower hanging fruit?

NASR: I would say still Iraq, Afghanistan and the Caucasus as probably lowest hanging fruits. I mean, it's possible for us to have a different kind of a discussion on Iraq. I don't think we've been talking to Iran in Iraq at all. The two ambassadors meet to give each other demarches. You know, a list --

HAASS: They're not even meeting.

NASR: -- they don't meet anymore at all. But there isn't -- there is no fruitful engagement of looking at what are each other's interests, and how they can have a constructive view of supporting the same goal in Iraq.

We could have a similar kind of a framework about Afghanistan. We actually had it. Not only at the Bonn conference, but actually for the one year or so after Ambassador Khalilzad was in Baghdad he would meet with his Iranian counterpart and it wasn't worth beans. And they got a lot of things done before they went to Loya Jirga.

One of the dilemmas we have is that, actually, the most difficult issues, that we are farthest apart, are the ones that are on the forefront of the Publican (ph) and the policymakers in the United States. And they completely overshadow where we could actually be gaining things.

And I think, you know, we also have to have a long-run game plan. I mean, is the aim only to mitigate Iran's worst behaviors in multiple arenas, and then leave it alone? Or, do we have -- as it was the case with China, a grander strategy of bringing Iran in from the cold? But if our aim is really to -- is not just fixing one, two, three, four things, but really changing the profile of that country, then I think we need to think about the sequence of things that get us there a bit faster.

HAASS: Do you think what you were describing -- to use my language -- I'd say integrating Iran?

NASR: Exactly.

HAASS: Is that -- what's your sense of it? Is that a pipe dream? Do you think that's a real option? Are you thinking in terms of years, decades, generations? And if you are thinking about it, is there a sequence that you would say here's how to do it or how not to do it? I mean, is this a -- I mean, because it was the U.S. policy, in some ways, towards China. There's been elements of it towards the old Soviet Union, to some extent with Russia. Is this a realistic option, given the nature of the Iranian regime and its own foreign policy goals?

NASR: I think it's a difficult process and it's not going to be quick, but I think at least beginning the process and setting the mechanisms in place is not that unrealistic. And I think, in fact, if anything the sanctions are probably the single biggest negative here, because closing Iran to the world economy, reducing the leverage that Europeans, Americans have within Iran, reducing relationships between Western and even regional business communities with the areas in Iranian government, civil society, business community that would be supportive of that change is not actually beneficial.

So I think a policy of isolating Iran is not going to help integration. In fact, one of the most important outcomes of the sanctions has been a much more aggressive turning towards China within varieties of economic sectors in Iran. And that only will in the long run make this much more difficult.

TAKEYH: Let me say something about integration, because I don't know what you're talking about.

Iran is deeply integrated into the Middle East structure. It has security projections all over the place. Its trade with Europe has gone up -- 17 percent with Italy, 30 percent in France, Germany. The only country whose trade has declined with Iran in European countries is actually Britain.

The level of trade with China and Russia is deeply increasing. I don't know what -- the United States -- does the United States have a key to Iranian integration in the era of global economies? So Iran is not a country that's isolated like North Korea is. I mean, you can't a bank loan from UBS, but they seem to be doing okay nevertheless.

So it's important to recognize that we might not have the keys to preventing a country whose principal export is a commodity that international economy desires and relies on can be integrated or disaggregated from the international community at our will. That is not potentially a leverage that we possess.

The leverage that we possess is having an understanding of the Iranian government that has, in my view, re-conceptualized its national interests. It doesn't even use national interests as necessary economic gain, but security advantage. It's a security driven -- its principal goal is to increase its power and influence in the Middle East. And that is potentially a leverage that you possess in terms of integration of Iran into a security structure of the Middle East.

HAASS: Well, let me just press you on that. What is the --

TAKEYH: Please don't! (Laughter.) I don't understand you, really.

HAASS: Since you don't understand what I mean, I don't understand what you mean. And one of the interesting things you've got to do in diplomacy is figure out not just how much things matter to you, but the value you believe they have for the other side. And usually in negotiations, the marketplaces are not equal.

TAKEYH: Yeah.

HAASS: There's a dis-equilibrium between, if you will, between the two marketplaces.

So what is it that Iran would value most? Is it, for example, some sort of an American security insurance -- conditionalized it might be. What is it the Iranians are looking for -- or is it the assets, is it diplomatic?

If they were having this conversation, how would they structure their list and what is it that they care most about from us?

TAKEYH: I don't believe they're looking for security assurances. As a matter of fact, they openly scoff at the idea of security assurances. No country predicates its security on assurance of its adversary. France and Britain achieved independent nuclear capability irrespective of security assurance from an allied country. Nobody bought the idea that we'll put New York at risk to save Berlin.

So if an ally country doesn't believe in that, how do two countries with deep-seated --

HAASS: Actually, the Soviets did, but that's okay.

MR. TAKYEH: So how did that affect countries which are adversarial to one another? So let's put that aside.

Security assurances is different from a security dialogue between the two countries. I would say, at this point, there's a debate within Iranian security establishment, as I understand it. And the debate on one side are those who believe that Iranian preeminence in the region can only come about as a result of confrontation with the United States. It's a prize to be achieved through confrontation and defiance and what they call confrontational diplomacy.

And then there are those who essentially actually subscribe to Shah's ideology, that the only way Iran can become a leading power in the Gulf is through a different relationship with the United States. That American power might be declining, but they can still be a potential barrier to Iranian resurgence. That is the debate.

Now, the way you impact this particular debate is for the United States to become more active diplomatically. It may not work, but I think that's where it -- that's where I would situate the debate.

NASR: I agree. And I think you can also partially, for sure, what price -- what is the value of what Iran has gained since 2003 to the regime and this issue of security. I think, you know, ultimately the only assurance we can give in security is an American embassy in Tehran.

HAASS: So they can take it over! (Laughter.)

NASR: No, I mean -- but in reality, in other words, the security assurance will not come in terms of any kind of a guarantee. It means when you have a relationship with another country, you would feel more secure than when you don't.

So I think, you know, that's why exactly that's where Iran ultimately could give up the nuclear power. It's not a matter of just a few carrots and a few sticks. It wants a completely different kind of relationship with the United States.

Secondly, I do think there is a lot of value to what Iran has gained in this region for it -- whether or not it intended to make these gains; whether or not it's the U.S.'s fault -- but Iran is staking a lot of its political capital in the region and domestically on maintaining its position in Iraq, in Afghanistan. The entire risk they're running by a very aggressive anti-Israeli policy in order to pacify the Arab world or to have Ahmadinejad the number one in a poll by Al-Ahram in Cairo.

These all suggest that they look at this very -- as something they want to keep. And you can see it even among the most pragmatics in Iran would say, look, the only country that's ever invaded Iran is Iraq. And the only aggressive attack against Iran in modern times has come from that neighbor. Iran has to be in Iraq in order to protect itself. The defense of Iran begins in a forward position in Basra, in a sense. And therefore, even they are arguing that Iran cannot be excluded from Iraq. It wants to maintain that position.

So I think, you know, if there was absolutely successful negotiations between Iran and the United States and they really solve all the problems, I think where I would differ with the Bush administration -- the Bush administration thought that the result would look like 2002 and Iran would agree to leave Lebanon/Palestinian issues, Iran and Afghanistan.

I think if we're really successful, the result would be a recognition of Iran's position in this region, that they will be invited to the next Palestinian conference; they will have a say in who's going to be the president of Lebanon; they will -- you know, one of the reasons they want us to leave the region is because that's part of this reality -- that they will actually have a say in the future of Iraq, formerly, and also of Afghanistan. That they will look a lot more like the Brazil or the China or the India of this region than merely one of the 20-some countries in the Middle East.

So I think that's something to negotiate with them.

HAASS: What'd be in it for us, then?

NASR: Well, what would be in it for us is the facts -- we've begun this discussion by believing that the fact of Iranian power is something bad. Iranian power in this region is not bad in and of itself. It's only bad if it's working against us. In other words, we didn't have a problem with the shah owning the Persian Gulf when we didn't have a problem with the shah.

Our position's very different from the Arab world. The Arab world really doesn't care about the Iranian regime. It cares about Iran. It's inherently anti-Iran. It would have a problem with a democratic Iran asserting hegemony; it would have a problem with an Islamic republic asserting hegemony.

I think if the United States can arrive -- the end result of this discussion would be that the United States ends up getting many things that it wants; that Iran's presence in this region would not be disruptive; that if it gets a role in Lebanon and Palestinian issues and Iraq and Afghanistan, it wouldn't be standing out there throwing stones; that it will not destabilize governments around it; it would not support subversive regimes; it will not promote and export revolution. And potentially, even, it will sort of solve the security functions around the Persian Gulf so we won't have to have 180,000 troops and two aircraft carriers for an indefinite time period in order to deal with this region.

I mean, the main gain for us is reducing a very expensive and undesirable security footprint in the region. And also being able to bring Iran from where it now to a different base. The price for it is the price of a much more influential Iran. Now, the dilemma we have is that the Arabs won't go along go with this.

HAASS: To say then on your statement -- to deconstruct, though, what you said, which is in some ways accepting -- I don't know if the word is the institutionalization of Iranian power -- something along those lines -- implicit in that, to use Kissinger's writing about Germany in a very different context in the late 19th century, that Iran is conceivably not a revolutionary power; otherwise, why would we want in any accept it or institutionalize it? And that any conversation with Iran cannot be narrowly nuclear only.

But implicit in what you're saying, it seems to me, is an Iran -- the project of Iranian power is not only bad; and second of all -- indeed, to some extent could be good; and secondly, we are looking, if not a grand bargain, at least at a very broad conversation with Iran.

NASR: Exactly. I mean, Iran -- I agree with Ray. Iran can go down different roads. It can go around the road of Japan of 1930 or it can go around the road, which is much more constructive: the road of India. And I know even we had this discussion that, you know, if Iran goes with -- gets the capability, even short of ever using it, it can become a far more aggressive country.

That, I think, is a very distinct possibility. But it's also possible that Iran may behave a lot more like India after it got the bomb. It relaxed; it began to turn its attention to other things. And the key question is that some of these issues are fluid at this point in time. And I think Ray's absolutely right that these debates within Iran are very -- are ongoing. And part of the whole use of aggressive diplomacy by the United States should be to try to somehow interject ourselves in that debate, to have a say in which direction Iran would lead.

HAASS: Let me sort of ask, then, one last question to get operational for a second.

As I listen to you then, one of the outcomes of the inter-agents review about what happened in the spring 2009, I would assume would be that you would want to see is quite possibly a more active American diplomacy with Iran, even an Iran coordinator or envoy, but one who had a very large set of issues in his or her pocket -- not a nuclear-only envoy, but essentially a nuclear-plus envoy that would be free to raise virtually any bilateral or regional or even global issue. So is that about right?

TAKEYH: Currently, that's only the political directors for Europeans and Iranians. So it comes, you know, technically it comes to that office. So if you want to begin with an envoy, you have to disturb that configuration.

What Vali was trying to suggest is can you -- and I don't know the answer to that -- can you concede to an Iranian hegemony and turn it into a force with begin power, which essentially was the U.S. policy during the shah of Iran? Was that right, to some extent?

HAASS: Why would it have to be hegemony? Why couldn't it simply be significant Iranian influence? Hegemony -- the idea that the United State would concede hegemony over this, by the way, seems to me a nonstarter. It may not, however, be possible to exclude Iranian power.

So the real question is on what terms should the United States be prepared to countenance Iranian power?

MR. TAKYEH: There's a differentiation I would make between different parts of the lease, is the policy can probably work in terms of having greater cooperation or security issues in the Gulf and Iraq -- although that comes at the price of intense allied management, but there'd be some Gulf security and Gulf countries that will object to that.

I think in terms of the Arab peace, in terms of the Lebanon and the Palestinian area, our interests are divergent, because the actors that we want to disarm and marginalize -- Hamas and Hezbollah -- are those that Iran sees as necessary for its influence to their power. So I don't know how you bring Iran into a discussion on the Israeli-Palestinian-Lebanese peace process over vociferous objections to begin with of the Israelis. The invitation of Iran to Annapolis would be kind of difficult, given the fact that they came on the heels of a country that held a conference denying the Holocaust.

I mean, that's -- you know, I can see -- in Lebanon -- I can see a discussion between three powers in Lebanon. You know, Iranians had a diplomacy toward Lebanon. They wanted to mediate the civil war in Lebanon in conjunction with the Saudis and two countries objected to that: Syrians and the Americans for different reasons.

(Cross talk.)

NASR: No, let me put it this way: This is why I think the word "hegemony" and the way we look at it, by the way, is very important. The Iranians may want to go in this to protect hegemony, but in a successful negotiation they will come out with something far less. And I think the model is probably India.

I mean, we at some point tacitly accepted that India will be the prima center part of the dominant source in South Asia, and that the United States will stop trying to prop up Pakistan to continue to challenge India's position. And you know, by and large, India's not hegemonizing the region, but it's a recognized fact that, you know, it's the dominant force in the region.

I think, you know, the points that Ray raises are correct, but that's all because we cannot come to these issues without having a framework to begin with. We cannot all of a sudden invite them to Annapolis or begin a discussion with Lebanon when it's not part of an overall framework of where we're going with Iran.

And I think, you know, before getting into -- I mean, the first thing I think in a new administration, if it's serious about such a vision, is not to come up with mechanics. But it has to be sort of a declaration from the stop -- a statement of intent that, you know, that is where American position on the Middle East and American view of Iran is going.

And I think, you know, that's not going to come without having to have serious back channel discussions with Iranians to sound them out; to, you know, to have also elicit, if you would, sense of whether you were going to have a partner in figuring out these negotiations. The negotiations are going to be difficult enough.

HAASS: I would think, for what it's worth, the most you're going to get is a statement that indicated American conditional readiness -- emphasis on the word "conditional" -- to accept certain projections of Iranian power, dependent upon how Iran were to exercise that power, whether we saw it as constructive or destructive.

And I think the biggest intellectual question for the new administration won't be mechanical. It will be conceptual, as it always is, which deal a lot with the question of linkage and to what extent the United States is prepared to disaggregate, if you will, the Iranian challenge; or to what extent, in particular, we would require that the nuclear issue be settled as a -- I don't want to say precondition, but as a necessary element of a larger relationship.

Put another way, whether it's possible to conceive of a better U.S.-Iran relationship absent satisfactory progress in the nuclear realm.

MR. TAKYEH: Well, you have to define what "settled" means.

HAASS: Well, exactly. And that's, you know, one of the questions and obviously, there's a range of views.

Okay, since we resolved everything, we're going to open it up now. And again, this is the last of the sessions, so I think a lot is fair game, whether it's narrowly on what I've been trying to pry these two gentlemen are or not.

Sure, Ken.

QUESTIONER: Thank you.

First of all --

HAASS: Introduce yourself.

QUESTIONER: My name is Kenneth Bialkin.

First of all, I'd like to say this has been a fascinating discussion. I'd like to congratulate you, Richard, for provoking a discussion that has helped many of us focus ourselves on issues that we've been thinking about. Perhaps the discussion has been very helpful in helping us direct our long views and I thank you very much for that.

In listening to the discussion, however -- and you raised the question of interagency review in the next administration to see what the policy toward Iran ought to be -- I'd like to start with the abiding question of do you think the approach to that interagency review would precede from the same basic assumptions, irrespective of which candidate, McCain or Obama, gets elected? Is that review likely to be independent of expressions so far seen at this stage of the campaign by each of the campaigns, or will that review be preordained by policies already in place?

I took it from the debate that both speakers, to a greater or lesser extent, advocate diplomacy, engagement and discussions with Iran on trying to find those areas where you can find a middle ground, while at the same time ignoring their fundamental precept -- namely that it's an Islamic republic; it is run by a theocracy; it is an absolute policy, grounded in certain radical views of the Koran, which is sustained by the forces of terror.

And the present administration --

HAASS: That's -- you've got to --

Q -- takes that view and the present administration would follow the advocacy of the two of you in various forms, with the label of a appeasement.

HAASS: They call it -- (inaudible).

QUESTIONER: I would call it appeasement. (Laughter.) And maybe a different view is proper, but isn't your advocacy of engaging Iran, as though they did not have the fundamental precepts expressed by Ahmadinejad and the supreme leader -- can we afford to ignore those statements and make believe it's business as usual and is that appeasement?

NASR: First of all, I think, you know, even the policy of not talking to our enemies, we already got over that in Iraq. We talk to plenty of people, you know, who are shooting at us and we renamed a lot of the terrorists as sheikhs and they're not on our pay.

Certainly I would say that, you know, the Iranian regime, without a doubt, has an ideological component in it. And in many ways this is not unfamiliar to us. We dealt with the Soviet Union as well in periods in which its leadership -- or with China -- had very, very restricted and ideological views of the world. When the United States engaged China, the Chinese were hardly a moderate leadership then. They had killed millions of their own population in a cultural revolution.

Diplomacy does not mean throwing the towel in with the Iranians. If you looked at the current situation, war doesn't look good. As we saw in the last panel, it may not even get us what we want. It's very clear that in all quarters of the United States, the current situation is unacceptable as well. In other words, that the Iranians would continue to build centrifuges and snub their nose at the United States.

Well, the only alternative really remains is that how can you -- you need to try something that you haven't seriously tried. And I think that diplomacy off the bat has a game-changing quality, because if nothing else, it will throw the Iranian game plan into a tizzy. The Iranians have been operating on the basis of assumption of the past -- on the past six years. That this administration is not serious about talking; it will not talk. There's no point talking to it. And at the same time, it's increasingly toothless. It cannot do anything militarily either.

And if there is a serious engagement with Iran, which doesn't mean giving in, but is a serious engagement, the Iranians would have to calculate things differently. I mean, there are voices in Iran which often say, you know, put something on the table that will create a breach between the Iran people and its regime; put a deal on the table that would actually much more open up the debate that Ray talked about.

None of that we have tried. I mean, we have not really seriously contemplated what uses diplomacy can have for all purposes -- not to please the Iranians, but to get suspension, to get to getting a change of behavior in arenas that matter to us.

HAASS: We've got lots -- Ambassador Murphy.

QUESTIONER: I'm wondering what do you believe has survived of Ayatollah Khomeini's interest in Islamic world leadership? And what the present leader -- what priority the present leaders give to the Shi'ite-Sunni rivalries, and in that connection, what has been their reaction to Rafsanjani turning up with King Abdullah in an interfaith conference and hands across the Shi'ite-Sunni divide? How seriously do they take that sort of activity?

MR. TAKYEH: The Iranian policy since 1979 was never to describe themselves as a Shi'a power. It was always an Islamic power. The Iranian model of governance had relevance beyond the Shi'as. It was the Saudis and others that called them Shi'a in order to (ghettoize ?) them, put them in a corner and prevent their influence. So there's always been a more of a pan-Islamic aspiration and that has sustained itself.

I have a different view of the Iranian leadership, maybe than Vali and others do. Mainly, I think the number of people that are involved in actual decision-making has lessened over the years. That's what Ali Ansari was saying this morning. I would differentiate between a governing elite and a political elite. And the governing elite have lessened and there is a lot of political elites.

And what the governing elite brings to power is a combination of ultra-nationalism or what Ali would call vulgar nationalism and still a tinge Islamism. And the Islamism is what defines and actuates your opposition to Israeli-Palestinian accord or leads you to cast aspersions or deny the legitimacy of the state of Israel. So there's an Islamic component that still conditions Iran's international relations. I don't believe the Islamic Republic's international relations can be entirely similar to that of the Shah, which was not necessarily dealing with the religious complexion of its antagonists and so forth.

So it's always going to be a state that is somewhere between pragmatic definition of national interests and revolutionary values and it's always going to have that dispersive component to it, which makes it an infuriating negotiating partner.

HAASS: I've got about a dozen people. So if you'll be succinct, and I'll ask my two colleagues here to be succinct, we'll get as many of you as we can.

Jeff Laurenti.

QUESTIONER: Thank you, Richard. Jeff Laurenti, the Century Foundation.

Given the picture you've already given us of U.S. interests and U.S. policy, what do you think U.S. policymakers think they will be accomplishing for both an overt Iran democracy fund set of activities and through what are reported to be the covert operations that supposedly secret presidential findings have begun stepping up? To what extent is there something of a "hail Mary" pass to regime change in is? Or is it simply a way of trying to get leverage? To what extent can it be productive or counterproductive?

MR. TAKYEH: You know, I have to confess, I don't know about the covert stuff. I read what I read, unless you have the ethnic -- Iran is an ancient nation whose boundaries are largely intact. It is not an amalgamation of kind of ethnic groups put together by British mpireans. So it's a different country in that sense.

I don't know at this particular point. I mean, Condoleezza Rice has said many time that our policy is not regime change, it's regime behavior. The problem is they don't believe it. And will they believe the successor as easily? This is a political leadership, as Vali was saying, that lives its conspiracies. So to some extent there is a degree of mistrust that they bring to the table which has to do with their own experiences and their own upbringings and their own kind of calculations that are unlikely to be mitigated by American pronouncements.

HAASS: Liz Chatter (ph).

QUESTIONER: (Off mike.)

HAASS: The microphone up front.

QUESTIONER: I was struck by the comparison that you made in terms of the India model. And I would suggest that there were decisive shifts in India's policy, without which a good relationship between India and the United States would not have been possible. And there were really, you know, serious compromises besides structural changes. You know, the collapse of the Soviet Union, rise of China, created very compelling reasons to see certain kinds of convergence.

So I was just wondering where is it that Iran can shift its policies to come some distance to meet the United States to make such a positive -- (inaudible)?

HAASS: And in particular, could it happen with oil at $120 a barrel or would we need to see oil at $80 or $60 a barrel to see the Iranians maybe rethink their worldview?

NASR: Well, I mean, it's useful to talk about India or China, et cetera, as sort of general ways in which we can imagine the future. They're not identical in anyway.

Just as, you know, India began to shift its position requiring economic changes that came after a period of economic downturn, it also had a major change internally when the DJP came to power with a very different idea about foreign policy. And also, you had the collapse of the Soviet Union. There's no doubt that the neighborhood in the Middle East has drastically change. And that in itself has opened certain possibilities. Oil is, obviously, a very important factor.

But I think, you know, thinking about this issue, you have to think that the Iranian leadership looks at everything in a cost-benefit analysis. The problem, I think, is not so much of, you know, whether or not to make a shift, it's that the cost of the very first handshake with the United States is extremely expensive for Iran. It loses all of its position in the Muslim world as the leader of the rejection front; all of the political capital that it has on the Muslim street. And therefore, it evaluates the policy shifts that it makes in light of what it's going to gain as a consequence of what it's going to give up.

And in the mind of that leadership, I think, it's so vested in this entire political capital that it gets from it being the bad boy of the Muslim world and the Middle East, that it has to think that it's going to get something that is very fruitful.

And in fact, going back to that first question, if the United States wants to think, what is the one of the major benefits that it gets from brining Iran into some kind of an engagement, is that it would have a major impact on that aspect of politics in the Muslim world and the role that Iran plays with it.

HAASS: Bob Nisan (sp).

QUESTIONER: In this interagency discussion and back channels and all the rest, and what Ray said, how do you know to whom to go to start this discussion? Who has the power to deliver? If you talk about the political front doesn't and the religious front does, and to whom do you go and how do you start and which backchannels do you go to?

MR. TAKYEH: Javier Solana negotiates regularly with the secretary of Supreme National Security Council, which at this point is Saeed Jalili. He was recently elevated as not just a presidential appointment to that council, but also a representative of the supreme leader. That's a port of call. And he's sort of way out there in terms of his ideology. So that's the port of call.

HAASS: Allan Gerson.

QUESTIONER: Allan Gerson.

You may have answered the question when you talked about the costs that Iran calculates that would be involved in a handshake with the United States, but at the end of the last session there was an intriguing point made for the floor. It was suggested by an individual that watches Iran closely that what the Iranian leadership really wants is recognition by the United States -- or they it's on the top of its list -- and the opening of diplomatic relationships, not withstanding its commitment to confrontational diplomacy in certain quarters.

So my question is how important is it to the Iranians to have recognition by the United States and diplomatic relations; and if it is important, how does U.S policy leverage that?

HAASS: That's almost the opposite of the argument that its less of a cost for the Iranians than it is, if you will, a benefit to have an open dialogue with the United States. Which is it?

NASR: Well, every policy or every decision the Iranians make involve giving up something and gaining something. What they give up is the political capital that they have in the Muslim world in terms of their being the rejection front. And also, if we think even in some of the exercise of Iranian power in the region, it is essentially poised against U.S., Israel and the moderate governments.

Now, the benefit, obviously, is security, opening to the world, et cetera. But the question is that so far, the Iranians have not had a roadmap to that. In fact, the very last proposal that Solana gave to the Iranians, the response that they got is that everything the United States wants from Iran is immediate; everything that it offers Iran is potential and conditional and is not concrete.

And there has not been, if you would, any kind of an engagement with Iran that shows a roadmap as to how this relationship's going to get normalized. The Bush administration, for much of its past years, has wanted Iran to suspend enrichment, but then that's the end of it. There is no talk about normalization of relations. In fact, the Iranians have said more about it recently than the Americans have when the supreme leader, in fact, said that it's not a given that Iran and the United States would not have relations ever. It's just that I will decide when that's the case and they cannot have an embassy right now, because all they want to do is to send, quote-unquote, "spies to overthrow the regime", which gives you a sense of how they're thinking in terms of what is the cost and benefit of each step.

MR. TAKYEH: Let me just say one thing: I think in terms of recognition, they're talking about recognition of Iranian power -- recognition of Iranian prerogatives, recognition to some degree of Iranian preeminence.

I don't believe that the current Iranian leadership, led by Ali Khamenei, is looking for normalization of relations between the two countries. That doesn't preclude tactical dealings on the issues of common concern -- our concern and their concern -- which could be very broad. But I think that if you look at the history of the supreme leader -- I'm not talking about Ahmadinejad. If you look at the history of the supreme leader, he views relationship with the United States as undermining the essential pillars of the Islamic Republic, and that's I don't believe there will be normalization of relations so long as that mentality, which is deeply entrenched in the governing elite, persists.

It is often said that conservatives can do things that the reformers and liberals don't do. That's not the case in terms of Iran. The current conservative counter in Iran is the least actor susceptible to a fundamental transformation of U.S.-Iran relations. That doesn't necessarily mean that you can't have sporadic tactical dealings on issues of importance to both parties.

HAASS: Sounds like the Iranian Nixon is not ready to go to China.

The gentleman in the green shirt on the back row.

QUESTIONER: Of course, a smiling journalist.

On the question of isolating Iran and the possibility, I believe, to isolate Iran -- the isolation of Iran -- I just want to say something and it leads to a question.

HAASS: (Inaudible.)

QUESTIONER: Okay. Isolating Iran somehow means, if the U.S. chooses to isolate Iran it can. What that actually has done in Iran is to create the idea that isolationists in Iran aren't' about "let's go back into our borders", they're about creating another alternative to joining the WTO, for example, which was one of the supported goals of the Rafsanjani period was to join the world markets.

Now, the isolationists in Iran are about how do we actually create a market on our own with China, with Russia, with Venezuela and they're doing so. So that's why isolation is a means and I think that's sort of what America has to get used to -- that isolating Iran means, in a way, isolating America. And for Iran to sort of play this role of building a pole for itself or bringing multiple -- a polar world.

In that context, I guess the question really is, is it possible? Is the world -- with the decline in American power, political and economic, is it possible for Iran -- because that's the way Iranian leaders are thinking. Is it possible to actually create a world where they can -- they don't want you in the -- (inaudible) -- anymore. They want to create their little market.

The question for us is, is that possible? And what role does sanctions play in that? The sanctions are emboldening the isolationists in Iran who are actually advocating that line and I think we're helping them in doing that through a sanction.

HAASS: This is coming back to your point. It's almost an anti-integrationist with our definition of integration.

MR. TAKYEH: Yeah, I mean, WTO has never been that big for them -- for particularly, the current cast of leadership. And you're quite right, they're trying to create their own -- what is often called, and one of the first individuals that articulate that, who's very popular in Aman Babel's (ph) circle, was Khaliboss (sp), who would talk about an Eastern orientation. And they're talking about Eastern orientation in terms of having relationship with Russia, India, China and so on and so forth -- Venezuela's one.

And that obviates the necessity of dealing with certainly the Americans, but quite possibly the Europeans.

NASR: I would put the caveat that the relationship with the East can solve many of the economic problems for Iran, but not some key ones. The Chinese and the Russians do not have the technology to rebuild Iran's energy sector and solve the larger problems that Iran has ultimately would require an opening to the West.

HAASS: Mr. Gelb, you get the last quick question, if you still want it. You don't have to have it.

QUESTIONER: Because everything we've heard all day ahs basically had a component in it of let's say as a minimum 50 percent chance that there's going to be some kind of military action. And underlying all of the conversations that, for a lot of people, raises big questions.

Having heard for the last two years and watching the council take quite a bit of time talking about the subject of soft power and the issue of the publics, rather than diplomacy only at the Ali Khamenei level and Condoleezza Rice level.

Is there any possibility that soft power is useful, productive or possible in a country where, as you put it, there is no interest in anything that would even remotely change the attitude toward the existing Islamic form of government?

MR. TAKYEH: Yeah. I mean, I always thought that one of the ways you can spend the democracy money, which has to be spent -- by congressional mandate it has to be spent in the year it was appropriated, I think -- is to have scholarships and so forth to bring people together outside nuclear science classes. I mean, that's normally bringing cultural exchanges, scholarships and so forth, as opposed to giving it to radio broadcasts. I know what radio broadcasts meaning the Europe-global communications systems -- satellites and so on and so forth.

That's one of the ways of bringing the two countries together. Is it going to solve your immediate problems on the nuclear issue, with terrorism and so forth? No. But it perhaps could help Iranians have a better understanding with the United States and Americans have a better understanding of Iran.

It's very difficult -- at this point, it's very difficult for Americans to go to Iran, because this is a country that has criminalized research. It equates research with espionage. So it's very difficult to do that at this point, but perhaps we can have greater number of citizens of Iran and in various American universities. That may have a good effect, it may have bad effect. Sayeeb Gott (sp) was here and he went back and became an inflamed Islamist. So I mean, you've got to watch who you're sending then.

NASR: I would just add one thing that, you know, the soft power -- in another sense, not just about Iran -- it's also about the region in which Iran is playing it's hand. First of all, there is the issue of Iranian soft power in an area that is of America's interest. And it's -- you could also think of, forget about Iran itself. We have to think much more smartly about what do we do about our soft power in the Arab world and the Middle East, in Pakistan and Afghanistan, which is the arena in which the Iranians are also playing and trying to exert influence.

And you know, the decline of American influence, the rise of anti-Americanism in the Middle East has not benefitted our policies -- not just toward the Arab world, but also towards Iran. And that's exactly why the Iranians can leverage this kind of bad behavior and translate it into political capital.

HAASS: With that, let me just do a couple of things. Let me thank these two gentlemen. As you can see now, I was not exaggerating when I said all those positive things about them.

Let me thank you all for your interest and your perseverance. Perseverance and interest, however, will be rewarded. There is a buffet lunch that is available precisely now. And I expect there'll be some hard food and soft food there for all of you. So thank you all very much. (Applause.)
.STX

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THIS IS A RUSH TRANSCRIPT.
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This was part of the Symposium on Iran and Policy Options for the Next Administration, which was made possible through the generous support of the Carnegie Corporation of New York.

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