Box: The Americans on board the bus were not spies, but neither were they tourists.
Several weeks ago, in an upscale neighborhood of north Tehran, Iranian radicals stormed a tourist bus carrying 13 Americans, pounding on its sides with iron bars and smashing the windows. Although the attackers backed off without seriously harming anyone, the Americans feared they were about to be kidnapped in a deadly repeat of the 1979-1981 hostage crisis. The attack was adumbrated several hours before it occurred in a pro-regime Tehran daily, Jomhouri Eslami, which announced the arrival in Iran of a U.S. government delegation full of CIA "spies."
As it turns out, the Americans on board the bus were not spies, but neither were they tourists: they were American businessmen come in search of new commercial opportunities in the Islamic Republic of Iran. They had been invited by a former head of the Iranian Interests Section in Washington, DC, Ali Sabzalian, who for the past five years has run a series of entities in New York aimed at promoting U.S.-Iranian trade. Since the imposition of a unilateral trade embargo on Iran by President Clinton in 1995, and the Iran-Libya Sanctions Act (ILSA) signed into law in 1996, Mr. Sabzalian has been forced to work somewhat less openly - at least, in the U.S. In a letter to a Tehran newspaper explaining why he had sponsored the American businessmen and had introduced them to top-ranking Iranian government officials, Sabzalian claimed they were part of a group of 500 U.S. companies "taking measures against U.S. economic sanctions. They have even had some success in this field."
This was by no means the first trip to Iran by American businessmen. Representatives from major oil companies, including Mobil, Amoco, and CONOCO, attended an oil and gas conference in Isfahan last year, and have had periodic discussions with Iranian government officials on future investment projects. "They go there to keep their contacts warm," said Dan O'Flaherty, a spokesman for the Washington, DC-based lobbying group, USA*Engage, which includes all three among its more than 500 corporate members. "But they know they cannot conduct any actual business."
What's new is not the interest of U.S. oil companies in Iran, or their willingness to lobby the U.S. government against the sanctions; but the reaction of the Iranian government. According to press accounts in Tehran, the November 21 attack was carried out by the Fedayeen Eslam, a terrorist group that is closely tied to the dominant government faction led by the Supreme Leader, Ayatollah Ali Khamene'i. By attacking the Americans, they were attempting to embarrass the rival faction of President Mohammad Khatami, who has advocated a limited opening of Iran to foreign investment and foreign influence.
According to the Kayhan daily, which is published by Mr. Khamene'i's office, the Americans met with President Khatami and with other high-level officials. "The Americans were moved around the city with a full official escort," the paper claimed. This version was given credence by Foreign Ministry spokesman Hamid Reza Asefi, who acknowledged that the Foreign Ministry had granted visas to the Americans in an effort to increase pressure against U.S. trade sanctions. "Iran will use all possible means to increase public awareness, as it welcomes the activities of foreign companies, including American companies, against the U.S. sanctions," Asefi told the official Islamic Republic News Agency six days after the attack.
Mr. Khatami has made abundantly clear that he has no intention of renewing diplomatic relations with the United States at any time in the future. Instead, he remains narrowly focused on getting U.S. economic sanctions lifted, and until that happens, he has encouraged U.S. companies to skirt them through oil swaps and trade through third countries, such as Dubai. After years of dismissing the sanctions for having "isolated the United States, not Iran," Iranian officials now admit that the sanctions have done serious damage to their economy, already weakened by low oil prices and widespread government mismanagement. Just last month, the Islamic Republic lodged an official complaint with the United Nations, claiming that U.S. sanctions have "led to the disruption of Iran's economy... a decline in the growth of the country's gross national product... [and] a scarcity of essential goods needed for the improvement of the nutritional and health care standards of the Iranian people." Officials at the National Iranian Oil Company, NIOC, now admit publicly that they are finding no takers for scores of oil and gas investment projects they have put out for tender on the international market. While some Western companies might have been willing to risk U.S. sanctions, given that President Clinton has waived them for Total CFP of France and Russia's Gazprom, few are tempted by Iran's commercial terms, which oil industry sources say offer a maximum rate of return of 15% on their investment - far too low, given the risks involved.
Without massive foreign investment, Iran will become a net importer of oil by 2005, the CIA predicts, as production declines from Iran's on-shore oil fields. Iranian government economists forecast recently that with continued low oil prices GDP would continue to contract by several percentage points a year for the next five years, with unemployment reaching twenty million - fully one third of the population. Just last month, Iran was offering to pre-sell oil at $5.80 per barrel - half the market price today - because it desperately needed $3 billion in cash to avoid defaulting on its foreign debt.
For Mr. Khatami, getting the U.S. economic sanctions repealed has become a top priority - indeed, his only real hope for reviving a moribund economy. But for his rivals, attracting foreign investment presents the risk of opening Iranian society to foreign influence, and in turn, allowing young Iranians, who comprise more than 60% of the population, to gain first-hand experience of alternative life-styles to the austere, closed society of the Islamic Republic. This is why the radicals in Parliament continue to reject legislation that would provide legal guarantees to foreign investment in Iran. Without such guarantees, foreign firms face potential expropriation, summary legal action, extortion, and kidnapping, as several European businessmen have discovered recently to their surprise.
If the bus attack against the American businessmen were an isolated event, one might be tempted to dismiss it as a rear-guard action aimed at protecting a radical breed of Islamic fundamentalism that is otherwise on the verge of extinction. Some analysts make precisely this claim. Former CIA case officer Rueul Gerecht, who has written a book about a brief, clandestine trip he made to Iran in the early 1990s, has argued in these pages that the U.S. should abandon sanctions and allow U.S. businessmen to "undermine cherished tenets and myths of the revolution." ["The Iranian-American Confrontation," WSJ 5/23/97]. After a trip to Tehran in June of this year, Stanley A. Weiss, the chairman of Business Executives for National Security, chimed in, saying the Iranian officials he met were all geared up to do business with the U.S.
But there is much more going on than meets the eye. The same group that attacked the American businessmen on November 21 threatened to kill any American who visited Iran one week later. Earlier in the month, they vowed to kill any former U.S. hostages who accepted a recent invitation from their former captors to visit Iran.
Inside Iran, the radical faction within the ruling clergy has taken off its gloves. On November 24, the leading secular opponent to the regime, Darioush Forouhar, was brutally murdered inside his heavily-guarded Tehran home, along with his wife, Parvaneh Eskandiari, a well-known feminist and political leader in her own right. Since then, dissidents in Tehran say an opposition journalist, Majid Sharif, has been killed under mysterious circumstances, while three other well-known dissidents have disappeared without explanation.
A battle royal for the future of Iran is under way. The parties include the radical faction led by Mr. Khamene'i, which seeks to revive the revolutionary fervor of the late 1970s, and the reformist wing of the clergy led by President Khatami, who seeks to strengthen the Islamic Republic with an infusion of Western cash and Western technology, so it can become the dominant military and political power in the Middle East. Even more important, in the long run, are their secular opponents who would like to see an end to clerical rule. Although they remain virtual outlaws under today's system, they are steadily gaining in strength. As Iran's domestic political battles heat up, the risk of increased violence is great. With no compelling economic need for Iranian oil, it seems a curious time for Western firms to wade into Iran's dangerous domestic scene.
Mr. Timmerman is an investigative reporter for the Reader's Digest, and publishes The Iran Brief, a monthly investigative newsletter in Washington, DC