After a three-month hiatus, Iran seems set to re-emerge near the top of the US agenda. Last week, the Iranian government congratulated US President-elect Barack Obama on his November 4 electoral victory. This marks the first time since the Iranian Revolution that such greetings have been sent.

While it seems trivial, the gesture is quite significant. It represents a diplomatic way for the Iranians to announce that they regard Obama’s election as offering a potential breakthrough in 30 years of US relations with Iran. At his press conference, Obama said he does not yet have a response to the congratulatory message, and reiterated that he opposes Iran’s nuclear programme and its support for terrorism. The Iranians returned to criticizing Obama after this, but without their usual passion.

The warming of US-Iranian relations

The warming of US-Iranian relations did not begin with Obama’s election; it began with the Russo-Georgian War. In the weeks and months prior to the August war, the United States had steadily increased tensions with Iran. This process proceeded along two tracks.

On one track, the United States pressed its fellow permanent members of the UN Security Council (Russia, China, France and the United Kingdom) and Germany to join Washington in imposing additional sanctions on Iran. US Undersecretary for Political Affairs William J. Burns joined a 19 July meeting between EU foreign policy adviser Javier Solana and Iranian national security chief Saeed Jalili, which was read as a thaw in the American position on Iran. The Iranian response was ambiguous, which is a polite way of saying that Tehran wouldn’t commit to anything. The Iranians were given two weeks after the meeting to provide an answer or face new sanctions.

A second track consisted of intensified signals of potential US military action. Recall the carefully leaked report published in The New York Times on 20 June regarding Israeli preparations for air strikes against Iran. According to US - not Israeli - sources, the Israeli air force rehearsed for an attack on Iran by carrying out a simulated attack over Greece and the eastern Mediterranean Sea involving more than 100 aircraft.

At the same time, reports circulated about Israeli planes using US airfields in Iraq in preparation for an attack on Iran. The markets and oil prices - at a high in late July and early August - were twitching with reports of a potential blockade of Iranian ports, while the Internet was filled with lurid reports of a fleet of American and French ships on its way to carry out the blockade.

The temperature in US-Iranian relations was surging, at least publicly. Then Russia and Georgia went to war, and Iran suddenly dropped off the US radar screen. Washington went quiet on the entire Iranian matter, and the Israelis declared that Iran was two to five years from developing a nuclear device (as opposed to a deliverable weapon), reducing the probability of an Israeli air strike. From Washington’s point of view, the bottom fell out of US policy on Iran when the Russians and Georgians opened fire on each other.

The Georgian Connection

There were two reasons for this. First, Washington had no intention of actually carrying out air strikes against Iran. The United States was far too tied down in other areas to do that. Nor did the Israelis intend to attack. The military obstacles to what promised to be a multi-day conventional strike against Iranian targets more than a thousand miles away were more than a little daunting. Nevertheless, generating that threat of such a strike suited US diplomacy. Washington wanted not only to make Iran feel threatened, but also to increase Tehran’s isolation by forging the UN Security Council members and Germany into a solid bloc imposing increasingly painful sanctions on Iran.

Once the Russo-Georgian War broke out, however, and the United States sided publicly and vigorously with Georgia, the chances of the Russians participating in such sanctions against Iran dissolved. As the Russians rejected the idea of increased sanctions, so did the Chinese. If the Russians and Chinese weren’t prepared to participate in sanctions, no sanctions were possible, because the Iranians could get whatever they needed from these two countries.

The second reason was more important. As US-Russian relations deteriorated, each side looked for levers to control the other. For the Russians, one of the best levers with the Americans was the threat of selling weapons to Iran. From the US point of view, not only would weapon sales to Iran make it more difficult to attack Iran, but the weapons would find their way to Hezbollah and other undesirable players. The United States did not want the Russians selling weapons, but the Russians were being unpredictable. Therefore, while the Russians had the potential to offer Iran weapons, the United States wanted to reduce Iran’s incentive for accepting those weapons.

The Iranians have a long history with the Russians, including the occupation of northern Iran by Russia during World War II. The Russians are close to Iran, and the Americans are far away. Tehran’s desire to get closer to the Russians is therefore limited, although under pressure Iran would certainly purchase weapons from Russia, just as it has purchased nuclear technology in the past. With the purchase of advanced weapons would come Russian advisers - something that might not be to Iran’s liking unless it were absolutely necessary.

The United States did not want to give Iran a motive for closing an arms deal with Russia, leaving aside the question of whether the Russian threat to sell weapons was anything more than a bargaining chip with the Americans. With Washington rhetorically pounding Russia, pounding Iran at the same time made no sense. For one thing, the Iranians, like the Russians, knew the Americans were spread too thin. Also, the United States suddenly had to reverse its position on Iran. Prior to 8 August, Washington wanted the Iranians to feel embattled; after 8 August, the last thing the United States wanted was for the Iranians to feel under threat. In a flash, Iran went from being the most important issue on the table to being barely mentioned.

Iran and a formal US opening

Different leaks about Iran started to emerge. The Bush administration posed the idea of opening a US interest section in Iran, the lowest form of diplomatic recognition (but diplomatic recognition nonetheless). This idea had been floated 23 June, but now it was being floated after the Russo-Georgian War. The initial discussion of the interest section seemed to calm the atmosphere, but the idea went away.

Then, just before US presidential elections in November, the reports re-emerged, this time in the context of a new administration. According to the leaks, US President George W. Bush intended to open diplomatic relations with Iran after the election regardless of who won, in order to free the next President from the burden of opening relations with Iran. In other words, if Obama won, Bush was prepared to provide cover with the American right on an opening to Iran.

If we take these leaks seriously - and we do - this means Bush has concluded that a formal opening to Iran is necessary. Indeed, the Bush administration has been operating on this premise ever since the US troop surge in Iraq. Two things were clear to the Bush administration in 2007: first, that the United States had to make a deal with the Iraqi Sunni nationalist insurgents; and second, that while the Iranians might not be able to impose a pro-Iranian government in Baghdad, Tehran had enough leverage with enough Iraq Shiite factions to disrupt Iraq, and thus disrupt the peace process. Therefore, without an understanding with Iran, a US withdrawal from Iraq would be difficult and full of potentially unpleasant consequences, regardless of who is in the White House.

The issue of Iran’s nuclear programme was part of this negotiation. The Iranians were less interested in building a nuclear weapon than in having the United States believe they were building one. As Tehran learned by observing the US reaction to North Korea, Washington has a nuclear phobia. Tehran thus hoped it could use the threat of a nuclear programme to force the United States to be more forthcoming on Iranian interests in Iraq, a matter of fundamental importance to Iran. At the same time, the United States had no appetite for bombing Iran, but used the threat of attacks as leverage to get the Iranians to be more tractable.

The Iranians in 2007 withdrew their support from destabilizing elements in Iraq like Muqtada al-Sadr, contributing to a dramatic decline in violence in Iraq. In return, Iran wanted to see an American commitment to withdraw from Iraq on a set timetable. Washington was unprepared to make that commitment. Current talks over a Status of Forces Agreement (SOFA) between Washington and Baghdad revolve around just this issue. The Iraqi Shia are demanding a fixed timetable, while the Kurds and Sunnis -  not to mention foreign governments like Saudi Arabia - seem to be more comfortable with a residual US force in place to guarantee political agreements.

The Shia are clearly being influenced by Iran on the SOFA issue, as their interests align. The Sunnis and Kurds, however, fear this agreement. In their view, the withdrawal of US forces on a fixed timetable will create a vacuum in Iraq that the Iranians eventually will fill, at the very least by having a government in Baghdad that Tehran can influence. The Kurds and Sunnis are deeply concerned about their own security in such an event. Therefore, the SOFA is not moving toward fruition.

The Iraqi stumbling block

There is a fundamental issue blocking the agreement. The United States has agreed to an Iraqi government that is neutral between Washington and Tehran. That is a major defeat for the United States, but an unavoidable one under the circumstances. But a US withdrawal without a residual force means that the Iranians will be the dominant force in the region, and this is not something United States - along with the Iraqi Kurds and Sunnis, the Saudis and Israelis - wants. Therefore the SOFA remains in gridlock, with the spectre of Russian-Iranian ties complicating the situation.

Obama’s position during the election was that he favoured a timed US withdrawal from Iraq, but he was ambiguous about whether he would want a residual force kept there. Clearly, the Shia and Iranians are more favourably inclined toward Obama than Bush because of Obama’s views on a general withdrawal by a certain date and the possibility of a complete withdrawal. This means that Obama must be extremely careful politically. The American political right is wounded but far from dead, and it would strike hard if it appeared Obama was preparing to give Iran a free hand in Iraq.

One possible way for Obama to proceed would be to keep Russia and Iran from moving closer together. Last week, Obama’s advisers insisted their camp has made no firm commitments on ballistic missile defense (BMD) installations in Poland and the Czech Republic, repudiating claims by Polish President Lech Kaczynski that the new US President-elect had assured him of firm support during a November 8 phone conversation. This is an enormous issue for the Russians.

It is not clear in how broad of a context the idea of avoiding firm commitments on BMD was mentioned, but it might go a long way toward keeping Russia happy and therefore making Moscow less likely to provide aid - material or psychological - to the Iranians. Making Iran feel as isolated as possible, without forcing it into dependence on Russia, is critical to a satisfactory solution for the United States in Iraq.

Complicating this are what appear to be serious political issues in Iran. Iranian President Mahmoud Ahmadinejad has been attacked for his handling of the economy. He has seen an ally forced from the Interior Ministry and the head of the Iranian central bank replaced. Ahmadinejad has even come under criticism for his views on Israel, with critics saying that he has achieved nothing and lost much through his statements. He therefore appears to be on the defensive.

The gridlock in Baghdad is not over a tedious diplomatic point, but over the future of Iraq and its relation to Iran. At the same time, there appears to be a debate going on in Iran over whether Ahmadinejad’s policies have improved the outlook for Iran’s role in Iraq. Finally, any serious thoughts the Iranians might have had about cozying up to the Russians have dissipated since August, and Obama might have made them even more distant. Still, Obama’s apparent commitment to a timed, complete withdrawal of US forces poses complexities. His advisers have already hinted at flexibility on these issues.

We think that Bush will - after all his leaks - smooth the way for Obama by opening diplomatic relations with Iran. From a political point of view, this will allow Bush to take some credit for any breakthrough. But from the point of view of US national interest, going public with conversations that have taken place privately over the past couple of years (along with some formal, public meetings in Baghdad) makes a great deal of sense. It could possibly create an internal dynamic in Iran that would force Ahmadinejad out, or at least weaken him. It could potentially break the logjam over the SOFA in Baghdad, and it could even stabilize the region.

The critical question will not be the timing of the US withdrawal. It will be the residual force - whether an American force of 20,000 to 40,000 troops will remain to guarantee that Iran does not have undue influence in Iraq, and that Sunni and Kurdish interests are protected. Obama promised to end the war in Iraq, and he promised to withdraw all US troops. He might have to deal with the fact that he can have the former only if he compromises on the latter. But he has left himself enough room for maneuver that he can do just that.

It seems clear that Iran will now return to the top of the US foreign policy agenda. If Bush re-establishes formal diplomatic relations with Iran at some level, and if Obama responds to Iranian congratulations in a positive way, then an interesting dynamic will be in place well before Inauguration Day. The key will be the 10 November meeting between Bush and Obama [now over].

Bush wants to make a move that saves some of his legacy; Obama knows he will have to deal with Iran and even make concessions. Obama also knows the political price he will have to pay if he does. If Bush makes the first move, it will make things politically easier for Obama. Obama can afford to let Bush take the first step if it makes the subsequent steps easier for the Obama administration. But first, there must be an understanding between Bush and Obama. Then can there be an understanding between the United States and Iran, and then there can be an understanding among Iraqi Shia, Sunnis and Kurds. And then history can move on.

There are many understandings in the way of history.

Courtesy www.stratfor.com