European foreign policy chief Javier Solana is due in Iran this weekend to peddle a revised package of European Union and American incentives aimed at convincing Iran to rein in its nuclear ambitions.
On offer are promises of ending Iran's isolation, boosting trade ties, and assisting a peaceful nuclear power effort. But Iran dismissed a similar offer in 2006 and has all but rejected this one, which, as a precondition, requires Iran to first give up enriching uranium – a process that can make nuclear fuel or material for bombs.
Not on the list of incentives is a security guarantee from the United States that it won't attack, despite growing speculation mixed with shrill rhetoric that the US or Israel might strike Iran's nuclear facilities in coming months.
Along with the EU-US carrot, sticks under consideration include tougher sanctions against Iran. But sanctions as a tool have had mixed success globally in recent decades. And analysts say record oil prices give Iran an advantage, even enabling a "counter-sanction" against the West by limiting oil production to further drive up prices.
"So long as we are selling the oil, nothing will work" to force Iran to give up its nuclear efforts, says a senior Iranian banker interviewed recently in Tehran, who asked not to be named.
"We could survive in this country with $15 billion per year, and now we're making $100 billion, $90 billion," says the banker, whose operational costs have "increased tremendously" under current sanctions, though his bank is not a target. "There is no way we should give in under pressure."
That economic gusher has helped President Mahmoud Ahmadinejad mask an array of problems, from overspending and inflation near 25 percent to high unemployment. Strategically, it has also enabled Iran to lock in its anti-Western and anti-Israel stance, even while 160,000 US troops are in neighboring Iraq and Afghanistan.
"In the past two, three years, they employed all their might, resorted to propaganda … and sanctions," Mr. Ahmadinejad said in a speech on Wednesday. "If the enemy thinks they can break the Iranian nation with pressure, they are wrong…. Today, they know their plans have failed."
How to deal with Iran topped the agenda in Europe during President Bush's farewell visit this week for an EU-US summit. He said his "first choice" was to solve the Iran-US standoff diplomatically, though "all options are on the table."
He said a nuclear-armed Iran "would be incredibly dangerous for world peace" and warned Iran of new sanctions "if you continue to deny the just demands of a free world." Bush won more EU support for sanctions.
Israeli officials sounded their own alarms, with cabinet minister and former military chief Shaul Mofaz telling Yediot Aharanot newspaper a week ago that "the window of opportunity has closed. The sanctions are not effective. There will be no choice but to attack Iran to stop its nuclear program."
The government and pundits quickly downplayed the comments of a likely challenger to Prime Minister Ehud Olmert, which caused a 9 percent spike in the price of oil. But such comments are focusing attention on what impact, if any, sanctions might have.
Iran is already subject to three sets of UN sanctions and a Security Council resolution demanding that it stop enriching uranium. The Islamic Republic is also the target of a growing number of US sanctions, the first imposed 25 years ago.
"Cuba has been going for 48 years and [sanctions] haven't met their core objectives" of overthrowing the regime of Fidel Castro, says Jeffrey Schott, co-author of an exhaustive survey titled "Economic Sanctions Reconsidered" at the Peterson Institute for International Economics in Washington.
"Often, when sanctions are imposed, it's easy for the targeted regime to deflect the real pain from the elites to the general public," he says. "The people able to survive that the best are in leadership positions … where they can command the available resources."
One example is Panama in the late 1980s, where Manuel Noriega successfully resisted US pressure. "We had the perfect conditions to impose sanctions and to get him to crumble in the late 1980s," says Mr. Schott. "Even [then], we had to send in the Marines to achieve our goals. Sanctions failed to contribute to the solution."
Likewise, Hussein survived 12 years of sanctions, and even bolstered his power by manipulating them. Regime stalwarts were driven in flashy cars and shopped in markets that boasted 11 different brands of mayonnaise.
"Iraq's forces steadily declined [after 1991]," says Mr. Cordesman, noting that years of sanctions meant a far easier fight in the 2003 invasion. "We had tremendous success in restricting Iraq's military development [and] a massive impact on their WMD programs. But the broader sanctions … that impacted the Iraqi people were far less effective and had significant negative impact."
Indeed, by 1996, the UN reported that infant mortality due to malnutrition-related problems jumped to 5,750 per month, nearly double the highest monthly toll from insurgent and sectarian violence in the post-Hussein era.
In 1998, the UN humanitarian coordinator for Iraq, Denis Halliday, resigned after 34 years at the UN, saying sanctions were "totally bankrupt. We are in the process of destroying an entire society. It is as simple and terrifying as that."
US officials say they want more "targeted" sanctions that would have little impact on ordinary Iranians. But Iraq is an example of how a regime can sustain severe treatment. "The Iraq sanctions are instructive because we had the most comprehensive set of sanctions since World War II, and yet Saddam found a way to smuggle billions of dollars worth of [oil]," says Schott.
Are targeted sanctions "decisive on changing the policy of the regime? I don't see any evidence of that so far," says Schott. "There is some hardship imposed, but a lot of things get better at $135 per barrel when you are a big oil exporter."
Efforts to embargo gasoline imports to refinery-starved Iran might hurt drivers, but "my fear would be that before it got to be a big problem for Iran, they would cause a big problem for us," he adds. "Iran has the ability to countersanction us, by withholding some [oil] from export markets [so] the price goes up, they sell less, and make more money," he says. It would be the first time "the target country could bite us back."