A Less-Confident Iran May Become Even more Dangerous By Ian Bremmer

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February 9, 2010

A Less-Confident Iran May Become Even more Dangerous

By Ian Bremmer

For those worried over its nuclear ambitions, Iran's defiant and self-confident government created plenty of trouble. But in 2010, a wounded and more isolated Iranian regime will become more dangerous and less predictable.

Until 2009, the regime had grown steadily stronger and more assertive. The rise in oil prices from $29 per barrel in November 2003 to $147 per barrel in July 2008 provided enough revenue to sharply boost state spending on social services, state subsidies, and more efficient repression. In 2005, a reformist president who fed public appetite for change, Mohammad Khatami, gave way to populist conservative Mahmoud Ahmadinejad. Aggressive advocacy of the country's right to enrich uranium rallied many Iranians to their government.

Things also went well for Iran's regional influence. In 2001, U.S. forces removed its antagonist to the east, the Taliban government in Afghanistan. In 2003, they took care of its archenemy to the West, Saddam Hussein. Iran extended its reach via closer ties with Syria's government, with Hezbollah in Lebanon, and with Shiite powerbrokers inside Iraq. With crucial backing from Supreme Leader Ayatollah Ali Khamenei, Ahmadinejad pushed full speed ahead with construction of a nuclear program in defiance of much of the international community.

In 2009, things took a sharp turn south. The financial crisis and global recession burst the oil-price balloon. A government grown used to windfall profits found itself with a lot less revenue. In June, its ally Hezbollah suffered a stinging defeat in Lebanon's parliamentary elections. Syrian President Bashar al-Assad, looking to diversify his regional risks, made overtures to Iran's main regional rival, Saudi Arabia. A more assertive government in Baghdad now threatens Iran's influence in southern Iraq.

Even the recent shift in the balance of power within the United Arab Emirates has Iran worried. The financial crisis has taken a toll on Dubai, where Iran's government has executed many a banking transaction beyond international scrutiny. As Abu Dhabi, much less friendly with Iran, uses Dubai's misfortune to increase its authority within the UAE, Ahmadinejad's government will lose access to an important conduit for capital.

But the most frightening problems are at home. In June, presidential balloting alternated between tragedy and farce as a nakedly rigged election provoked confrontation in the streets. Crucially, Ayatollah Khamenei fundamentally compromised his domestic authority by siding publicly with an increasingly unpopular government. Replacing a president is a problem. Replacing a supreme leader threatens the entire show.

Adding to the anxiety, the recent death and funeral of Grand Ayatollah Hossein Ali Montazeri -- a vocal critic of Iran's government and this summer's elections who happened to be of higher clerical rank than Khamenei himself -- provoked opposition rallies involving hundreds of thousands of people. Never has it been more obvious that 70 percent of Iranians aren't old enough to remember the revolution from which the regime still draws its legitimacy.

Ahmadinejad and Iranian state officials proved willing to defy UN Security Council resolutions and Western-sponsored sanctions when things were going well. Embattled at home and with fewer options abroad, the regime will likely move from predictably aggressive to unpredictably belligerent.

How else to explain the sudden Iranian decision in December to send troops into Iraq to claim ownership of a small Iraqi oil well? The troops have been withdrawn, though the dispute over territory apparently continues.

The move never had any impact on oil production. It was probably intended to accomplish three goals. First, Tehran wanted to undermine Iraqi Prime Minister Nouri al-Maliki just before parliamentary elections scheduled for March. By sticking a thumb in Maliki's eye, Iran hoped to prove that he's not the strongman he claims, shifting Iraqi public support toward someone less resistant to Iran's influence.

Second, Ahmadinejad's government may have hoped to divert attention from opposition protests at home by triggering a manageable confrontation abroad. The size of the Montazeri funeral protests suggests that's unlikely to work.

Most importantly, the regime probably wanted to show the world that adversity has not weakened its nerve. As threats of sanctions grow louder, we'll see more such flashes of defiance. That's why three American hikers charged with illegal entry into Iranian territory will likely face a trial and tough sentences instead of early release. That's why Iran test-fired another high-speed medium-range missile on Dec 16.

It's also why Ahmadinejad made a show on Dec. 22 of his announcement that Iran would ignore an American-imposed, year-end deadline to accept a UN-drafted compromise on uranium enrichment. Now Ahmadinejad says Iran will produce higher enriched uranium and build 10 new enrichment facilities. Iran's right to a nuclear program may be the last thing left that Ahmadinejad and all those young protesters can agree on.

And that's why 2010 will be a year of intensified confrontation. In the past few days, the British and American governments have agreed that nuclear negotiations have been given long enough to succeed, and that it's time for a "two-track approach," one that includes both more diplomacy and additional sanctions. It will be spring before initial sanctions are in place. The Security Council will produce the broad, "optional" sanctions that China and Russia won't veto. The United States and its European allies will then coordinate on tougher, more targeted measures.

Sanctions won't be tough enough to force Iran to renounce its nuclear ambitions, but they'll be harsh enough to encourage an increasingly anxious Iranian government to lash out. It'll be more difficult in 2010 to predict how, when and where that will happen.

Bremmer is the president of the Eurasia Group and author of The Fat Tail and The J Curve.

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