Rajan Menon: Why Iran Won't Cave on Nuclear Enrichment

The plunge of the rial, Iran's currency, has been breathtaking. In 2010, it traded for about 10,000 for one U.S. dollar. Now, the Iranian government, its dollar earnings halved by the economic sanctions the United States and its allies imposed (supplementing those adopted in the United Nations) to end its uranium enrichment program, is rationing dollars, selling them for about 12,264 to the dollar, and for essential imports only.

Iranians, panicked by the plummeting of their currency, have turned to the bustling black market.

"Now, the Iranian government, its dollar earnings halved by the economic sanctions the United States and its allies imposed (supplementing those adopted in the United Nations) to end its uranium enrichment program, is rationing dollars, selling them for about 12,264 to the dollar, and for essential imports only"But they have to pay a steep price for the trade: this week, about 39,000 rials for a dollar. The government could try to put black marketers out of business, but to do that it would have to close the gap between the official rate and the black market price, in favor of the latter. Not a good choice.

The currency crisis has created big problems for ordinary Iranians. It's not just that the dollars they need when they go abroad are hard to get (not many of them can afford such outings in any event); it's that the price of any item made, in whole or part, with imported materials costs a whole lot more now.

For the business and commercial class, a politically important segment of the population, the rial's plight means shrinking profits.

So that's the economic side of things.

But it's the political angle that's getting the most attention in the United States. That's because the goal of the sanctions is to pressure Iran to dismantle its enrichment program so that the Obama administration can avoid resorting to a military strike, which it has insisted remains an option. Quite apart from the question of whether it would destroy Iran's enrichment installations (especially the underground complex at Fordow), bombing Iran risks setting off a chain of dangerous events in a part of the world that's already violent or unstable.

The urgency of finding a non-violent way to change Iran's mind on enrichment stems in large part from the administration's fear that Israel might give up on the diplomacy-plus-sanctions approach and attack Iran's nuclear installations unilaterally, a move that would unavoidably draw the United States into the fray.

"The government could try to put black marketers out of business, but to do that it would have to close the gap between the official rate and the black market price, in favor of the latter"

Given this context, the question being debated in newspapers and on the airwaves now is this: Does the rial's precipitous fall prove that sanctions have hurt Iran's economy to the point that Tehran is now willing to talk about dismantling its enrichment program?

The other political element of the currency drama is what Wednesday's street protests in Tehran, generated by public anger over the rial's loss of value and economic dissatisfaction more generally, mean. The question raised by the demonstrations is this: Are we witnessing the beginning of an Arab-Spring-like revolution in Persian Iran that will convince the leadership to shift its position on nuclear enrichment?

The answers to both question is "No."

Why? No matter how hard the sanctions have hit Iran, Tehran doubtless understands that it would communicate its weakness and panic by shifting its position on enrichment now. It no doubt anticipates that the United States in particular will stick even more doggedly to its position, which is that sanctions will be lifted only once there's verifiable evidence that enrichment has been terminated. By contrast, Iran has proposed a series of steps, the last of which would be putting activity at the Fordow facility on hold. But it wants sanctions to be eased at the outset and to be lifted fully before it moves on Fordow.

The two positions -- Tehran's presented formally, Washington's evident from the Obama administration's myriad statements -- are diametrically opposed. Tehran will doubtless assume that moving toward the U.S. position amidst a currency crisis accompanied by internal unrest will surely encourage calls for more concessions because the Obama administration will conclude that Iran's leadership is desperate.

It doesn't take a genius to understand that it's a bad idea to enter a bargaining process when the other side thinks it has you on the run. And the Iranian leadership knows a thing or two about bargaining.

Quite apart from Tehran's reluctance to come to the table with an even weaker hand than it's been holding, there's the problem of achieving consensus among the various institutions and political groups that have a say on the nuclear program.

"It's not just that the dollars they need when they go abroad are hard to get (not many of them can afford such outings in any event); it's that the price of any item made, in whole or part, with imported materials costs a whole lot more now"Achieving harmony will be even harder when the heat is on because the advocates of compromise risk being tagged by hardliners as sellouts. It's not a simple matter of Supreme Leader Ayatollah Ali Khamenei snapping his fingers (even assuming that he would do so) to break a deadlock.

What about the effect of Wednesday's demonstrations? Here there are three things to keep in mind. First, it's unclear whether they betoken the beginning of bigger protests that could shake the regime's roots. Maybe yes, maybe no, but the Iranian leadership is not going to change course on uranium enrichment just because of what occurred on the streets this week. Second, even if more protests erupt, the government will use intimidation and force as its first line of defense; and it has plenty of resources with which to instill fear and use violence.

Third, hawks with the leadership will argue that concessions on enrichment at a time of internal instability will embolden not just the United States, but worse, the protesters as well.

Paradoxically, there's a way in which the rial's nosedive and the public protests ease the pressure on Tehran. President Obama's case that sanctions are working and should be given more time is stronger now, and Israeli Prime Minister Binyamin Netanyahu's refrain that they are not and that it's time to consider a military attack is weaker.

The bottom line? Don't expect big changes in Iran's position on nuclear enrichment anytime soon.