The governments of Russia and Iran have been unable to resolve their financial dispute concerning the Russian built (and International Atomic Energy Agency [IAEA] monitored) nuclear energy reactor in Bushehr, Iran. As a result, Moscow has ceased nuclear fuel shipments to the facility and delayed the start-up date of the 95 percent completed project for months, if not longer. This decision came days before a normally hesitant Russia quickly joined the remaining P-5 members plus Germany in approving a draft of heightened sanctions against Iran for their failure to cease uranium enrichment and cooperate fully with the IAEA.

These developments in addition to Moscow’s increasingly strong rhetoric indicate a growing frustration with Tehran. In turn, the potential loss of its most crucial ally on the Security Council (Previous Report) is exacerbating the pre-existing tensions within Iran over the nuclear issue. After years of diplomatic maneuvering, Western powers may have backed Iran into a corner. Iran can either defy the Security Council and face effective economic sanctions or accede to the demands of the international community.

Conflicting Positions inside Iran

The Iranian government believes Russia has manufactured the Bushehr halt in funding to the facility to apply pressure on Iran for its defiance of Security Council Resolution 1737 (Previous Report).

The hard-line majority within the government interprets Russia’s actions as blatant political extortion. From this viewpoint, Russia’s exploitation of Iran’s dependence on external technology and nuclear fuel validates the need for an autonomous nuclear program. The hard-line contingent views the crisis with Russia as emblematic of the historical lessons that have shaped contemporary Iranian identity and motivated the creation of a likely nuclear weapons program. Iranian policy-makers exhibit a paranoia of foreign intervention in internal affairs stemming from the colonial machinations of European powers (including Russia) in the 19th and 20th century; and a deep distrust of the international community and its representative bodies for condoning Iraq’s use of chemical weapons on Iran during the 1980-1988 war.

Conversely, former Iranian President Muhammad Khatami leads an apparent minority contingent that advocates the regime “pay a certain price” to de-escalate the nuclear crisis (source). Khatami’s unnamed price is the cessation of uranium enrichment to stem off ever-strengthening economic sanctions enforced by a unanimous Security Council. The effect of current sanctions is having an impact on the Iranian economy. Backed by US and European pressure, the international private sector is heeding the call to end the flow of financial aid to Iran excluding funds for “humanity and development purposes.” Some financial institutions are declining letters of credit to Iranian companies, foreign companies are evaluating new business ventures inside Iran, and many in the Iranian capital is in turn fleeing to Persian Gulf banks (source). The effect of sanctions will grow increasingly dramatic on an economy already suffering from high rates of unemployment and inflation.

Conclusion

Russia’s new-found frustration with Iran’s behavior has changed the dynamics of the nuclear crisis, forcing a subtle but important change of leverage in favor of the international community. While the Iranian government’s reaction is uncertain, it now seems clear that its current stance – uranium enrichment and feigned negotiations – will carry significant consequences for the Iranian economy, and thereby exert political pressure on the Iranian government.