Khatami Holds an Olive Branch: Beginning of a Change in US-Iran Ties?

-Chintamani Mahapatra, Research Fellow, IDSA

 In a rare Press conference on a Sunday on December 14, 1997, Iranian President Hojtasalam Sayyed Mohammad Khatami held out an olive branch to the United States--a "Great Satan" in the eyes of many Ayatollahs of Iran--and declared: "I would hope for a thoughtful dialogue with the American people and through this thoughtful dialogue we could get closer to peace, and security and tranquility...I hope the American politicians would understand their time better, understand the realities, and move forward."1

The Clinton Administration officials had been watching carefully since the May Iranian election, which led to the victory of a moderate leader, Khatami, for signs of a change in the new leadership's orientation and attitude towards the United States. The election of a moderate leader as the Iranian President and the defeat of a candidate, sponsored by the religious establishment, for the same post itself had generated hope in the Clinton Administration officials that Iran was inching forward towards a rapprochement with the West in general and the United States in particular.

While Khatami had not spoken much about his foreign policy agenda since he assumed office in August last, the United States had been sending feelers that it was ready for a dialogue with Tehran to break from about eighteen years of deadlock in the bilateral relationship. Such feelers were indicated in the participation of American and Iranian representatives in meetings and conferences aimed at resolving the continuing crisis in Afghanistan. Although the US State Department categorically denied reports in the Israeli Press that Iran and the US were involved in secret talks in a certain European location, spokesman James Foley admitted that representatives from both countries had engaged in multilateral discussions in New York to try to resolve conflicts between warring factions in Afghanistan and that the two sides might have participated in other international meetings too.2

Moreover, in the midst of the Tehran Conference of the Organisation of Islamic Countries (OIC), US officials were making conciliatory gestures towards Iran. James Foley reportedly stated that the United States had "no quarrel with the Iranian people" and was not seeking to change the nature of Iran's "fundamentalist Islamic government." President Bill Clinton and Secretary of State Madeleine Albright, on the other hand, had remarked that a dialogue could be possible with the new Iranian leadership headed by Khatami under the right circumstances.3

It was, however, not clear until Khatami spoke at the Press conference that Iran would express its desire for a dialogue with the United States. Only a week earlier, Ayatollah Ali Khamenei had made vituperative remarks against the US in his opening address to the OIC conference. Once Khatami expressed his desire for a dialogue, Clinton promptly replied: "I would like nothing better than to have a dialogue with Iran, as long as we can have an honest discussion of all the relevant issues" such as "sponsorship of terrorism, violent attacks on the Middle East peace process and acquisition of nuclear, chemical or biological weapons."4 Clinton also spoke of Iran as "a country with a great history" and said: "We are all of us discussing here how to proceed now. No decision has been made. But I have always said, from the beginning, that I thought it was tragic that the United States was separated from the people of Iran."5

By calling for "an honest dialogue" on the issues that concern the US, President Clinton was basically giving the outer line of the bargaining and soon he instructed his foreign policy advisors to review the country's Iran policy to find out opportunities for fresh relations. In fact, Khatami himself had given hints about the outer line of the bargaining from the Iranian perspective. He said that the United States had to change its overall attitude towards Iran and halt its accusations, including branding it as a state sponsoring terrorism, against Iran. He stressed that Iran, far from being a terrorist rogue state, was itself a victim of terrorism through the exiled Opposition Mujaheedin Khalq organisation which was recently included in the US State Department's black list of international terrorist groups. Moreover, he openly expressed his opinion against the current peace process in the Middle East on the ground that "it is not just."6

As far as Iran is concerned, Khatami has to gain the blessings of the religious establishment to go ahead with his plan to establish a channel of communication with Washington with a view to reorient its relations with the US. As of today, a voluble and influential constituency in Iran, which is deeply hostile to the US, is in existence. The reaction of these groups to the idea of a rapprochement with the US was reflected in some of the commentaries in the Iranian media. The Persian daily Jomhuri Eslami, for instance, commented: "America is still Iranian nation's number one enemy. America is not a in a superior position and cannot dictate (to) other nations what they should do and how they should choose their friends and foes. Put explicitly, there are no grounds for the improvement of relations with America, and Iranian authorities as a whole have a unified stand in confronting the all-out hostility of America towards Iran." Kayhan International, a newspaper that supports the hard-liners in Iran, including Ayatollah Ali Khamenei, commented: "...He (Clinton) should prove Washington's sincerity and seriousness by accepting Tehran's repeated demand that the US must release billions of dollars in assets which remain frozen in the US banks since about two decades." The Tehran Times remarked: " would not be out of place to remind the American officials that the ball is in reality in their court. In order to prepare the ground for reciprocal talks, the US must in the first instance stop its nonsensical accusations against Iran. As a sign of goodwill, the Clinton Administration should release Iran's frozen assets...It should also try to recognise the values of the Islamic Revolution instead of confronting Iran hopelessly."

A close examination of the comments would reflect that Iran in general seems ready for a change in its foreign policy orientation and that various views setting the contours of the bargaining and negotiations are being made. Under the given governmental structure in Iran, Khatami cannot unilaterally act upon significant foreign and national security areas. He would have to seek the support of those who have been the target of US rhetoric as well as US policies. The time, however, appears to have come that may lead to an inexorable push for an Iranian-American dialogue for renewing the bilateral relationship. What are the American motivations behind the Clinton Administration's move towards renewing ties with Iran? And what are the factors that might have induced the Iranian leadership to re-think the country's attitude and policy towards the United States?

The primary motivation of the United States appears to be an assessment that the "dual containment" strategy in the Gulf has not brought the desired results and that any further continuation of the policy of isolating Iran could be counter-productive. Ever since the success of the Islamic Revolution in Iran, the overthrow of the pro-American Shah regime and the closing down of all American military and commercial activities in Iran, the successive US Administrations have taken steps to weaken the Iranian regime through various means. While the 444-days long hostage crisis, where 52 US citizens were kept hostage in the US Embassy compound by the Islamic student revolutionaries, had left a deep scar in the American hearts, the frozen $11 billion worth of Iranian assets in the US banks continued to annoy the Iranian people and the leadership alike. The whole Iran-Contra affair in the 1980s, on the other hand, shook the domestic political processes in the US to an extent that has left a negative mark in the long American history of democracy and openness.

Unlike in the case of the Indochina experience of the US, where the US withdrawal from that country created a "Vietnam syndrome" in the American psyche, there was no "Iran syndrome" as such, but Iran has been haunting the American public and politicians since the Islamic Revolution of 1979. It is reflected in the series of US sanctions against Iran in the 1980s and the 1990s.

-- In 1983, the US imposed a unilateral embargo against Iran to prevent arms, weapons and dual-use equipment from reaching Iran.

-- In March 1984, certain chemicals were banned for export to Iran due to the fear that these could assist that country in the manufacture of chemical weapons.

-- In 1987, a trade embargo was imposed, particularly with a view to ban fourteen different items with possible military usage from being exported to Iran.7

And all these steps were taken in the midst of the Iran-Iraq war. When President Bill Clinton assumed the Presidential power, Iran came to haunt his Administration even more, partly due to the fact that the previous democratic Administration of Jimmy Carter was especially affected by the hostage crisis. During the Clinton Administration, the US Congress with full cooperation from the White House and the State Department, enacted a series of legislation aimed at hurting Iran economically and militarily. Since Bill Clinton started his Presidency in the aftermath of the Gulf war of 1991 and the disintegration of the Soviet Union in December 1991, it was relatively easy to impose sanctions against Iran with domestic political support as well as international support from the US allies.

-- In 1993, the Iran-Iraq Arms Non-Proliferation Act, an amendment to the 1993 Defence Authorisation Act, was passed providing for "sanctions against persons or countries that supply Iran any goods or technology that contribute to its conventional weapons programme." The Foreign Operations Bill of the same year sought to bar assistance to Russia unless the President entered into a serious discussion with his counterpart in Moscow to reduce exports of sophisticated conventional weapons to Iran.

-- In 1994, the US Foreign Aid Appropriations Act cut the Clinton Administration's request for contribution to the World Bank by the same amount the Bank had earmarked for loan to Iran in the previous year.

-- In 1995, President Clinton issued an executive order banning US trade and investment in Iran, including the trading of Iranian oil overseas by US companies and their foreign affiliates.8

-- In 1996, the Iran-Libya Oil Sanctions Act was passed calling for sanctions against persons who, with the knowledge of US legislation, make an investment of $40 million or more (or any combination of investment of at least $10 million each, which in aggregate equals or exceeds $40 million in any 12-month period) that directly and significantly contributes to the enhancement of Iran's ability to develop its petroleum resources. This law applies to non-US companies and thus has extra-territorial applications.9

The United States took all these measures in the context of a "dual containment strategy," articulated by the Clinton Administration officials. Anthony Lake, Assistant to the President for National Security Affairs, made a case for the "dual containment" of Iraq and Iran in an article published in the Foreign Affairs in 1994. He wrote:

"The basic strategic principle in the Persian Gulf region is to establish a favourable balance of power, one that will protect critical American interests in the security of our friends and in the free flow of oil at stable prices. In previous administrations, this was pursued by relying on one regional power to balance the other...The Clinton Administration's strategy toward these two backlash states begins from the premise that today both regimes pursue policies hostile to our interests. Building up one to counter the other is, therefore, rejected in favour of a policy of 'dual containment.' In adopting this approach, we are not oblivious to the need for a balance of power in this vital region. Rather, we seek with our regional allies to maintain a favourable balance without depending on either Iraq or Iran...

"'Dual containment' does not mean duplicate containment. The basic purpose is to counter the hostility of both Baghdad and Tehran, but the challenges posed by the two regimes are distinct and, therefore, require tailored approaches."10

The containment of Iran policy was based on the US perception that "Iran is actively engaged in clandestine efforts to acquire nuclear and other unconventional weapons and long-range missile delivery systems. It is the foremost sponsor of terrorism and assassination worldwide. It is violently and vitriolically opposed to the Arab-Israeli peace process. It seeks to subvert friendly governments across the Middle East and in parts of Africa. It is attempting to acquire offensive conventional capabilities to threaten its smaller Gulf neighbours. Its record on treatment of its own citizens--especially women and religious minorities--is deeply disturbing."11

While Iran has denied most of these allegations, the Clinton Administration from the beginning had not closed the option to hold dialogues with Iran to sort out the issues and normalise relations. Anthony Lake wrote: "More normal relations with the government in Tehran are conceivable, once it demonstrates its willingness to abide by international norms and abandon policies and actions inimical to regional peace and secuirty...The American quarrel with Iran should not be misconstrued as a 'clash of civilisations' or opposition to Iran as a theocratic state. Washington does not take issue with the 'Islamic' dimension of the Islamic Republic of Iran."12

American policy makers were aware of the fact that Iran, being a revolutionary state, harboured "a deep sense of grievance" over the close ties of the US with the Shah's regime. But while keeping its own option open for a dialogue and saying that Iran "had the choice" to attempt reconciliation with the US, the Clinton Administration's action, as has been mentioned earlier, did not show that America was ready for any reconciliation. There were supporters of the "dual containment" policy in the Congress and elsewhere. These supporters went a step ahead of Anthony Lake and even proposed the idea of overthrowing the Islamic government in Tehran. House Speaker Newt Gingrich, for instance, once remarked that "Iran will be the most dangerous country in the next twenty years" and he called for the overthrow of the Islamic government in December 1995. Former Secretary of State Warren Christopher suggested that the US "must isolate Iran and Iraq so as to bring about a change in their government and leadership." Former Defence Secretary of Defence Caspar Weinberger opined that "Iran must have a completely different government. We cannot deal with the irrational and extremist government that they have."13 Former Defence Secretary William Perry, Senator D'Amato and Representative Gilman were other votaries of the "dual containment" strategy. Among the American academics, Patrick Clawson and Peter Rodman supported the "dual containment" strategy of the Clinton Administration.14

In the midst of containment of Iran policies and actions by the Clinton Administration, several influential personalities within the US began to plead for a "constructive engagement" strategy towards Iran. Many former US officials--both Republican and Democrat--from the country's National Security Council, State Department and Central Intelligence Agency--publicly urged for the abandonment of the containment strategy and adoption of the engagement strategy.15

Zbigniew Brzezinski, Brent Scowcroft and Richard Murphy have argued: "Several areas of Iran's behaviour are frequently cited as sources of concern: its conventional military buildup, its opposition to the peace process, its promotion of Islamic militancy, its support of terrorism and subversion, and its quest for nuclear weapons. Terrorism and nuclear weapons, especially the latter, directly threaten US national interests. Both issues, however, can be addressed by specific policy instruments, rather than the current crude and counterproductive attempt to cordon off the entire country. A more nuanced approach could yield greater benefits at lower cost."16 Moreover, several US officials have challenged the US allegation that Iran was involved in supporting international terrorism. Gary Sick, a former National Security Council aide, once commented that "if you read the report (the State Department report on terrorism in 1994 regarding Iran) is remarkably silent on evidence."17 The International Atomic Energy Agency (IAEA) officials, on the other hand, have challenged Washington's contention that Iran is involved in clandestine activities to acquire nuclear weapons capability. According to Hans Blix, the head of the IAEA, "Iran is more an open society than Iraq was before the (Persian Gulf) war. A number of declared nuclear power plants are regularly visited in Iran by IAEA inspectors, without any problem. Iran has also promised that the inspectors can visit 'what place they want whenever they want.' At two different occasions, one has asked, based on this promise, to visit non-declared establishments--however, without finding anything remarkable."18

There were opponents of this strategy in the academic world as well. Professor Michael Hudson's views in this regard may be cited as an example. He wrote: "If history is any guide, hegemony by the United States or any other party in the Middle East tends to produce resistance...wisdom suggests that the hegemon adopt a low profile by involving other outside players such as the European countries, Japan and even Russia, in regional issues. Wisdom suggests pursuing less confrontational and more balanced policies. It suggests that instead of 'dual containment' in the Gulf, 'multilateral engagement' would provide more security...Instead of mobilising against a so-called threat, vigorous initiatives to promote dialogue would reduce mutual fear and antagonisms."19 The debate over a rapprochement with Iran became more intense after the May 1997 elections in Iran and victory of a moderate leader such as Khatami for the Presidential post.

However, more than such academic opposition, it is the realisation of the limits of the containment strategy that has finally influenced decision making towards a renewal of US interests in establishing normal ties with Iran. After all, Iran is a country that has the second largest natural gas reserves in the world and significant oil reserves. The US was one of the top three trading partners of Iran before the Islamic Revolution. It has a huge market for US goods and technology even now.20 Its geo-strategic location gives enormous opportunities to US companies to explore the possibility of joint activities in marketing the Central Asian gas and oil through Iran. Clearly, a great opportunity cost, involved in the containment of Iran policy of the Clinton Administration, could have been avoided.

Moreover, unlike in the case of Iraq, there is no domestic or international consensus over the Clinton Administration's containment of Iran policy. When the Clinton Administration prevented the US company Conoco from entering into a $1 billion deal with Iran, it was the French company which entered the Iranian market.21 The United States is also faced with intense international opposition to the Iran-Libya Oil Sanctions Act which aspires to extend US jurisdiction to non-US companies and persons. One Iranian scholar, Saeed Taeb, argues that Europe rather than Iran is the main target of sanctions under this law. According to him, Washington wants to preserve the Iranian technological dependence on the US in the oil and gas industry and thus seeks to prevent European and Russian companies from entering the Iranian market. The entry of the non-US companies in any big way into Iran would not only enhance foreign influence in Iran but also reduce Iranian dependence on the US. (Even today, the US is dominant in the upstream and downstream activities of the oil and gas industries in the Persian Gulf, including Iran) Moreover, Taeb argues, by citing the opinion of oil experts, that $40 million is the minimum amount necessary for the expansion of oil and gas fields and related industries. The Iran-Libya Oil Sanctions Act has specifically kept this limit on foreign investment in Iran.22

It is no wonder that the European Union strongly opposed the Iran-Libya Oil Sanctions Act. Even the Non-Aligned Movement, the Group of 77 and the UN General Assembly gave a call for the repeal of this law. In the face of growing international opposition to US unilateralism, Iraqi strongman Saddam Hussein through his occasional defiance of the US and the UN has induced the US policy makers to alter the US policy towards Iran. The international anti-Iraq coalition, so diligently and carefully built by the United States, is showing signs of crumbling down. From the beginning the Clinton Administration was less critical of Iran than Iraq. It was also aware that no international consensus over containing Iran existed. Unless the right steps are taken to turn the policy of containment into a strategy of engagement, as far as Iran is concerned, the US strategy in the Gulf faces the chances of a collapse.

One may wonder about the reasons that have encouraged Iran to seek a renewal of ties with the United States. However, it is not very difficult to discern these. First of all, the United States may not have been able to completely isolate Iran in international affairs. But the fact remains that Iran would have been much better off in the absence of such a US policy. Secondly, the Iranians are well aware of the opportunity cost of not engaging in economic activities with the United States. Although the Iranian state has successfully demonstrated its resilience in the face of American pressure, its economic situation could have recovered from the almost decade-long war-induced problems much earlier than is the case now. Thirdly, the new geo-economic advantages of offering the Iranian territory as a transit point for Central Asian Republics cannot be realised, unless a rapprochement with the United States is in place. For all these reasons, the Iranian ruling elite appear to be prepared for a dialogue to normalise the bilateral relationship.

There is no doubt that it will be a long way before Iran and the US are able to completely normalise their relationship. While one may believe that the Iranian President must be making conciliatory gestures towards the US with the indirect support of the ruling elite in the country, there is strong opposition to normalising relations with the US in Iran.

President Bill Clinton likewise will have to swim through the turbulent waters of the US Congress before he succeeds in his efforts towards a rapprochement with Iran. However, there is a general belief all around the globe that sooner or later, US-Iran relations are going to be back on the rails. The smaller countries in the Persian Gulf, which have entered into bilateral defence and security arrangements with the US, are cautiously watching the process. Until recently, they were fed with the idea that Iraq and Iran were expansionist or interventionist powers. They probably do not know what to do if one of the interventionist powers enters into cordial relations with their extra-regional protector. However, one has to wait and see the emerging process before making definitive conclusions about the consequences of the US-Iran rapprochement.


1. International Herald Tribune, December 15, 1997.

2. Reuter, December 16, 1997.

3. United Press International News, December 16, 1997.

4. Times of India, December 17, 1997.

5. United Press International News, December 16, 1997.

6. Ibid.

7. For details, see M. Zaved Zarif and Saeid Mirzaee, "US Unilateral Sanctions Against Iran," Iranian Journal of International Affairs, vol. 9, no. 1, Spring 1997.

8. Ibid.

9. Farideh Farhi, "Economic State Craft or Interest Group Politics: Understanding US Sanctions Against Iran," Iranian Journal of International Affairs, vol. 9, no. 1, Spring 1997, p. 58.

10. Anthony Lake, "Confronting Backlash States," Foreign Affairs, vol. 73, no. 2, March-April 1994, pp. 47-49.

11. Ibid., pp. 52-53.

12. Ibid., p. 52.

13. Dariush Akhavan Zanjani, "The Role and Position of Sanctions in US Foreign Policy," Iranian Journal of International Affairs, vol. 9, no. 1, Spring 1997, pp. 35.

14. See Sayed Mohammad Sajjadpur, "Assessing the Policy of Dual Containment: Four Different Perspectives," Iranian Journal of International Affairs, vol. 9, no. 1, Spring 1997, p. 78.

15. Robin Wright and Shaul Bakhash, "The US and Iran: An Offer They Can't Refuse?," Foreign Policy, no. 108, Fall 1997, p. 128.

16. Zbigniew Brzezinski, Brent Scowcroft and Richard Murphy, "Differentiated Containment," Foreign Affairs, vol. 76, no. 3, May/June 1997, pp. 26-27.

17. Zarif and Mirzaee, n. 7, pp. 13-14.

18. Quoted in Ibid., p. 14.

19. Michael Hudson, "To Play the Hegemon: Fifty Years of US Policy Toward the Middle East," Middle East Journal, vol. 50, no. 3, Summer 1996, p. 341.

20. Wright and Bakhash, n. 15, pp. 125.

21. Brzezenski, Scowcroft and Murphy, n. 16, p. 29.

22. For details, see Saeed Taeb, "The D'Amato Law: Sanctions Against Iran or Europe?" Iranian Journal of International Affairs, vol. 9, no. 1, Spring 1997.