Michael Levi asks what security guarantees might be persuasive to Iran and yet be responsible for us?  I’ve already proposed that the U.S. work with its friends to wage a small cold war against the current leadership in Iran.  So, the first and most immediate answer to Michael Levi’s question would be to offer one of the types security guarantees we observed with the Soviets – a freedom of naval passage or a prevention of incidents at sea agreement.  The first security offer might be a Lausanne- Montreaux -like understanding to assure both freedom of passage of all ships through and demilitarization of the Strait of Hormuz.  The second would be a naval and air rules of the road agreement for the Gulf similar to the ones that the U.S. reached with the Soviets in 1972 and 1988 and with China in 1998.  

By far the best analysis of such understandings and their possible application in the case of Iran was written by Douglas E. Streusand in an essay commissioned by my center entitled “Managing the Iranian Threat to Sea Commerce Diplomatically” in Getting Ready for a Nuclear-Ready Iran, pp. 257-84 available at http://www.npec-web.org/Books/Book051109GettingReadyIran.pdf.  What follows is drawn from this analysis.

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We’ve been having an interesting conversation about what sort of Iranian enrichment capability, if any, would be acceptable. But regardless of our exact goal, we’re going to have to do a better job of sorting out our carrots and sticks. I also suspect this group largely agrees on what sticks, perhaps aside from military options (which I hope we’ll discuss later) make sense.

So I’ve got a question for the group (to which I don’t have a good answer). When we talk about carrots that haven’t been adequately explored, one of the key things we often talk about is offering “security guarantees”, which in theory could remove Iran’s perceived need for nuclear arms. It’s hard for me to understand, though, what a persuasive (to Iran) and responsible (for us) security guarantee would look like. (As Bruno notes, we may try to switch our rhetoric from “regime change” to “regime behavior change”, but the distinction is lost on the other end.)

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I’m pretty pessimistic about the possibility of rolling back the Iranian nuclear program. The more interesting challenge, it seems, is constraining the growth of the program in any meaningful way. That leads me to focus on one of Gary’s last questions first: Should we be prepared to accept arrangements that allow Iran to maintain a limited enrichment program under enhanced international monitoring?

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Welcome to the Iran nuclear forum. We’ve convened some of the world’s best experts to discuss the Iranian nuclear issue, which is certain to be one of the most important and most difficult security challenges facing the next U.S. President.

I’d like to start by setting the technical baseline. Since January 2006, when Iran resumed enrichment activities at Natanz, Iran has made significant progress towards mastering P-1 centrifuge technology and is proceeding with plans to install and operate a substantial number of P-1 centrifuge machines at the Natanz enrichment plant. Iran plans to install a total of 16 units at the Natanz plant, with each unit containing approximately 3,000 centrifuges (18 cascades of 164 machines each) for a total of approximately 48,000 centrifuges for the entire plant. According to the most recent IAEA report of 15 September 2008, a single unit of 3,000 centrifuges has been fully operational since November 2007, a second unit is about one-third completed (i.e., around 1,000 machines operating), and “installation work” is proceeding on three additional units of 3,000 machines each.  Thus, when the current phase of construction is complete, Iran will have five units or approximately 15,000 P-1 centrifuges in operation at the Natanz enrichment plant. In addition to the centrifuge machines at the Natanz enrichment plant, Iran is operating a much smaller number of P-1 machines – as well as research and development on more advanced centrifuge designs – at the Natanz pilot enrichment facility.

Based on an analysis of uranium hexafluoride (UF6) feed rates as reported by the IAEA, David Albright (who is participating in this forum) estimates that Iran is now operating the P-1 machines at the Natanz enrichment plant at about 85 percent of their design capacity, which is a significant improvement over previous performance.  Thus, it appears that Iran has overcome many of the technical problems that it experienced in the early stage of operating the P-1 machines, when performance was less than 50 percent of design capacity. According to the IAEA’s September report, the Natanz enrichment plant is producing about 2-3 kilograms of low enriched UF6 (i.e., less than 5.0% U-235) per day, for a total stock of about 480 kilograms of low enriched UF6.

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There are two dimensions to the crisis — immediate crisis managment and long-term systemic reform. 

On the first, both stock market and credit market responses to the seemingly endless string of “fixes” have been uniformly negative. Why? Because the leadership of the Treasury and Fed appeared panicked in warning of immense danger if something is not done immediately. But then when given the authority and money to act, the US Treasury does not act. “We’ll be ready in a few weeks.”  Hardly reassuring.  Were they incapable of forward planning?  In the meantime, the original scare talk coming from Washington has made investors predisposed to believe the worst and nothing has happened to alleviate that concern.  Lesson: Don’t say the sky is falling without acquiring a sturdy umbrella — and then opening it.

 The second is the important issue of what happens after the crisis simmers down, which it eventually will.  There are two diametrically opposite points of view, call them the Greenspan doctrine and the Volcker view. The Greenspan doctrine is that free markets overshoot and there is nothing anybody can do about that. But the good that they do during booms in creating new businesses, houses, etc. outweighs the damage done in the crashes.  So don’t re-regulate the financial system.

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