Impervious Iran

Why America is powerless to stop Tehran’s nuclear ambitions.

Ahmadinejad: He’s all about the rials

For all those out there trying to coax Iran into abandoning its nuclear program, here’s a suggestion: Wander down a leafy side street in north Tehran and drop in on the Petroleum Engineering and Development Co., which is charged with implementing international energy mega-deals for the Iranian government.

That’s what I did earlier this year, and here’s how it went: The company’s deputy managing director, Ali Akhbar Vahidi Aleagha, rushed into his office late for our appointment, explaining that he’d been locked in talks all day with executives from the Chinese petroleum company Sinopec. He sounded like a man who had just come home from his dream date. “China and Iran are perfectly matched for each other,” he gushed in almost accentless English, honed while studying engineering at Imperial College London. China needs energy and has lots of hard cash to spend, he said; Iran needs hard cash and has plenty of energy to sell. “It’s a win-win situation.”

Anyone within driving distance of a Wal-Mart knows that the customers who get the most attention are those with bulging wallets and a list of things they urgently need for the house. So, think of Iran as the world’s energy Wal-Mart. It controls roughly 14 trillion cubic meters of natural-gas reserves in the biggest natural-gas field on Earth, South Pars in the Persian Gulf. Its proven oil reserves are about 130 billion barrels, behind only Saudi Arabia and Canada. (With oil at more than $65 a barrel, you do the math.) There are outlets on the Caspian Sea as well as the Gulf. Hundreds of talented engineers work in sprawling Tehran, many trained by U.S. oil companies before President Clinton imposed sanctions on Iran a decade ago, driving out U.S. oil companies. And unlike oil-rich neighbor Iraq, there is no war being fought on its soil and no insurgents blowing up pipelines in the desert.

Now enter customer China, whose soaring growth could create one of the worst energy shortages in history. Less than a year ago, China inked a deal with Iran that will last through the next generation, well after Iran’s new conservative, populist president, Mahmoud Ahmadinejad, has quietly faded into retirement. Over the next 30 years, Beijing will spend $70 billion buying about 270 million tons of natural gas from Iran. Chinese oil companies will spend another $100 billion or so drilling amid mammoth oil reserves—about 17 billion barrels—in the newly discovered oil fields in southwest Iran. And meanwhile, another hungry Asian customer, India, has also been shopping in Tehran, agreeing to buy 5 million tons of gas annually for the next several years—worth about $22 billion in all. No wonder Aleagha seemed pleased.

The deal-making also helps explain why President Ahmadinejad breezed into Manhattan earlier this month for his United Nations debut with a cocky self-assuredness that has left U.S. and European diplomats seriously off-kilter. In August, he abandoned Iran’s agreement with European negotiators to stop his uranium-enrichment program. In New York, he told the U.N. General Assembly that he had no intention of yielding to Western demands that Iran freeze its nuclear program—which he says is purely for peaceful purposes and is needed to solve Iran’s own energy problems—and then he strode into a conference room to preside over his first truly international press conference. Rakishly thin in his open-necked shirt, he was so relaxed that it was hard to remember that few people outside Iran had even heard of the Tehran mayor until he was elected three months ago, let alone thought he’d be president of a country of 68 million people. When I was in Tehran earlier this year, as the election campaign kicked off, he wasn’t even mentioned as a contender.

But Ahmadinejad could be tailor-made for Iran these days. As the first non-cleric president in decades, he seems a lot less concerned with fighting the usual Middle East ideological duels. He steered clear of them with journalists in New York, although the insult was clear when he ignored a question from the Israeli reporter sitting behind me at the press conference, about whether Iran still supported Israel’s destruction. Ahmadinejad is all about money—that could be one reason why millions of Iranians who’ve spent years praying for salvation from poverty voted for him in June.

That is not to say we can trust Iran not to develop long-range nuclear missiles—we can’t. Despite signing the Non-Proliferation Treaty, many Iranians, even those who want reform at home, see the nuclear program as their sovereign right in a region with nukes in Pakistan, India, and Israel, and most are sick of being lectured to by the West. Abandoning the nuclear program is “a redline that we won’t cross,” Hussein Shariatmadari, a publisher of the mouthpiece newspaper for Iran’s Supreme Leader Ayatollah Ali Khamenei and a close ally of the mullahs, told me when I visited his office in Tehran earlier this year. “In fact, I believe we should get out of the NPT.” Meanwhile, U.S. sanctions have had very patchy effects in Iran. U.S. law bans American companies from operating in Iran and threatens sanctions against non-American companies investing more than $20 million a year in the country’s oil industry. But since Europe has no similar sanctions, European companies—including oil majors like Total and Royal Dutch/Shell—have picked up much of the slack. “This is the 21st century,” says Aleagha. “We can get anything we want.”

President Bush seems ill-prepared to talk business with Ahmadinejad, although they have quite a bit in common: They both went from being local political executives to presidents, and they certainly both know about oil. But Bush is committed to U.S. sanctions against Iran and the war on global terror, and many Americans remain haunted by images of the 1979 Islamic revolution and the taking of U.S. hostages. So, Bush has depended for months on France, Britain, and Germany to cut a deal to end to Iran’s uranium-enrichment program and enforce nuclear inspections by the International Atomic Energy Agency.

With that plan seriously frayed, Bush now hopes for a rebuke by the U.N. Security Council—realizing he cannot hope to sell an Iraq-style military offensive to Americans these days. But this could also backfire—perhaps as badly as Bush’s failure to get the Security Council to support an invasion in Iraq back in 2002. As long as Aleagha is locked in meetings with Sinopec and other companies, support for tough action against Iran will be thin. China—Aleagha’s dream date—will block any hostile move against Iran, using its veto powers on the Security Council. So, too, will Russia—another permanent Security Council member—which is building a reactor for the Iranians in southern Iran. With Bush hobbled by Iran’s defiance, Tony Blair last week offered a watered-down proposal to send Iran’s noncompliance to the Security Council after the IAEA board meetings in November. Iran has hinted it could expel the nuclear inspectors or restart its uranium enrichment if they face punishment in New York.

It’s time for Plan B. Bush could find himself having to back away from his Security Council pursuit and live with permanent nuclear monitors in Iran. And for a close-up look at the real Iran, I’d suggest a visit to Aleaghar’s office in north Tehran. Any other suggestions out there?