Iran/Iraq

The London-based "Al-Zaman" newspaper reported on April 13 that both Iran and Iraq have redeployed their troops along their common border. This is reportedly the first time that either country has done so since the 1991 Gulf War. The newspaper's sources stated that the situation along the Iran-Iraq border has been tense since the Iranian opposition group, the Mojahedin-e Khalq Organization (MKO), claimed responsibility for the assassination of Lieutenant-General Ali Sayyad-Shirazi. Sayyad- Shirazi, Iran's Deputy Chief of General Staff and advisor to Iran's supreme leader, Ayatollah Ali Khamenei, was assassinated in Tehran on April 10.

On April 11, the MKO issued a statement claiming responsibility for the assassination of Sayyad-Shirazi. The group said it killed the general as revenge for his role as commander of Iranian ground forces during the 1980-88 Gulf War and attacks against MKO bases in Iraq. The last known such attack occurred on March 17, when a large explosion was reported at MKO headquarters west of Baghdad.

On the same day that the MKO claimed responsibility for the attack, the Iranian Foreign Ministry summoned the Iraqi charge d'affaires to receive Iran's "strong protest against the Iraqi government's support for terrorist activities of the terrorist Mojahedin-e Khalq Organization." The Director-General of the Iranian Foreign Ministry's Persian Gulf Department, Ali-Asghar Khaji, told the Iraqi diplomat, "Such events would leave negative and irreparable impacts on Tehran-Baghdad relations." Khaji then demanded that the Iraqi government offer its explanations on the issue.

Iraq issued its reply on April 12 in the London-based newspaper, "Al-Hayat." Quoting "an Iraqi diplomatic in Amman," the newspaper reported, "Iraq confirmed its willingness to stop the Iranian opposition from performing any activities on its territory if it encounters from the Iranians a similar commitment to stop their support for the Iraqi opposition present on Iranian territory." The diplomat then allegedly denied that the murderers of the Iranian general had launched their attack from Iraqi territory and said Iraq "hopes that Iran will devote attention to the issue of stopping the actions carried out by a hireling group that is assassinating officials, citizens and clerics."

This statement was almost certainly a direct reference to the Iranian-backed Supreme Council of the Islamic Revolution in Iraq (SCIRI). SCIRI has been stepping up its attacks on Iraqi forces in the past month, and reports of unrest in southern Iraq continue to pour in. Iraq has blamed SCIRI for the deaths of Shiite clerics in Iraq, a charge the group ahs both denied and denounced as an attempt to divide Iraq's Shiite opposition.

The National Council of Resistance of Iran (NCRI), the political wing of the MKO, apparently issued a reply as well. After an eight-day meeting of 542 of the council's 570 members in Baghdad, the NCI issued a statement declaring that the Tehran regime is "in the process of being overthrown." The MKO is reported to have placed their bases in Mansuriyat al-Jabal, near the Iranian border, and Abu Ghurayb, near Baghdad, on alert in anticipation of an Iranian retaliatory strike.

Relations between Iran and Iraq have deteriorated recently, with increasing unrest in southern Iraq spurred on by a series of murders of leading Iraqi Shiite clerics -- most recently Ayatollah Mohammad Sadeq al-Sadr. Iraqi Shiites suspect Baghdad is behind the killings, and spontaneous civil unrest has been bolstered by targeted attacks by SCIRI. Among these attacks, SCIRI reported that Saddam's son, Qusay, was wounded in the head during an SCIRI attack on Radwaniyah Palace on March 20. Operation Desert Fox was accompanied by a limited Shiite uprising as well, and the U.S. has stated its intention to financially support the Iraqi opposition.

Neither Iraq nor Iran are likely to abandon their proxy armies, and Iran may even retaliate directly for the assassination of Sayyad-Shirazi. Iran has, in the past, used planes to strike MKO bases within Iraqi territory. As well, SCIRI has been known to attack MKO convoys and bases in Baghdad with rockets and mortars, and possibly Iranian commandos. With troops being deployed on both sides of the border and proxy strikes raising tensions dramatically, risk of Iranian-Iraqi confrontation is rising.

The official Iraqi Baath party newspaper, Ath-Thawra, reacted on May 10 to an accusation from Iranian Foreign Minister Kamel Kharazi that Iraq lacked the political will for a rapprochement with Iran, saying that Iraq "rejects opportunist behavior... and flagrant political hypocrisy." Iraq does not "attack the Great Satan (the U.S.) in public while reaching out to this Satan and normalizing relations with it under the table. Iraq acts in the same manner in public as it does in secret, and when it declares its readiness for dialogue and to normalize relations with a certain country, it does not then betray that country and stab it in the back."

The newspaper accused the U.S. and its allies -- presumably Britain, Kuwait and Saudi Arabia -- of being behind the Iranian foreign minister's comments, which included a warning that Baghdad's behavior was "not predictable." The paper added that, "it seems that some of them (the allies) who recently traveled to Iran repeated such things in front of Mr. Kharazi for him to use in his statement." The British Foreign Minister Robin Cook did indeed hold talks with Kharazi early in the Kosovo crisis on April 2. As well, the Saudi Defense Minister Prince Sultan bin Abd al Aziz al Saud traveled to Tehran last week, for a meeting lauded by the Tehran as a watershed in Iranian-Saudi relations.

While Washington in all probability enlisted Iranian support in containing Iraq prior to launching the Kosovo campaign, the future of U.S. policy toward both Iraq and Iran is very much in question in the waning days of the Kosovo crisis. The U.S.-led NATO military campaign against Yugoslavia has failed to achieve its goals, and collateral damage has mounted as NATO has searched for an effective target set. Washington has been able to keep the NATO coalition together, though barely, and Moscow has adroitly exploited the cracks forming in NATO, playing the Greeks, Germans, and Italians off against their NATO allies. The Kosovo crisis has been anything but a showcase of U.S. military and diplomatic prowess, and its aftermath may lead to still further U.S. foreign policy deterioration. Coming out of Kosovo, the U.S. may either become more belligerent -- seeking a clear victory to cover for the ambiguous Kosovo outcome -- or, with the election campaign approaching, the U.S. could sink into political infighting and introspection. The last thing that the Iranians want is an unpredictable and distracted U.S. involved in the Gulf, and so may be reconsidering collusion with the U.S. in dealing with Iraq.

The Iranians themselves are internally divided when it comes to the presence of the U.S. in the region. Some Iranians would welcome a U.S. retreat, even at the cost of being more vulnerable to Russian pressure. Others recognize that the U.S. has played a significant, if oscillating, role in containing the Iraqis. The current Iranian regime has been trying to moderate U.S. policies by opening itself up slowly to European investment, thereby creating a situation in which American businesses demand that the U.S. government will allow them to compete for lucrative Iranian contracts. So far, the U.S. has only eased restrictions on some exports, whereas the Europeans seemed to have opened their markets up almost completely. There has also been some evidence to suggest that Iran and the U.S. have quietly, at least to a limited extent, coordinated policies in the region. Still, considering the legacy of U.S. policy toward Iran, and the deterioration of U.S. political and military leadership in the wake of the Kosovo crisis, this rapprochement effort may be fading.

In its place, Tehran may be pursuing its own goal of emerging as a leading player in a regional Arab-Persian politico-military alliance. By keeping pressure on Iraq, Iran can still be in a position to exploit U.S. gratitude, should Washington actually turn the situation around in Kosovo. It also serves its own longstanding security interests by keeping iraq weakened and off balance. And finally it can exercise leadership of a nascent anti-Iraqi coalition, and to break out of its own isolation in the Muslim world. Iran has been hinting at the creation of a regional Arab-Persian security mechanism, which we have discussed in earlier GIUs. With U.S. resolve appearing to be on the wane, this idea may gain steam.

Therefore, while Ath-Thawra is referring to an expanding Iranian- U.S. cooperative agreement aimed at containing Iraq, instead, what may be going on is a form of damage control by the Iranians. Iran has relied, albeit indirectly, on the predictability of U.S. resolve in dealing with Iraq. The tide has changed. Now, Iran may be unilaterally pressuring Iraq in order to avert a U.S. led rampage or a complete U.S. pullout. This strategy, if implemented in a pragmatic fashion -- keeping the pressure on Iraq while not totally closing itself from U.S. overtures -- may actually serve to bolster Iran's prestige and to keep stability in region. If it does not work, the possibility is real that the skirmishes over the skies of Iraq between U.S. aircraft and Iraqi air defense artillery may grow into something more.

The UN mandated "oil for food program," which allows Iraq to sell $5.2 billion worth of crude oil every six months to pay for humanitarian supplies, expires on May 24. The UN Security Council is scheduled to meet on May 21 to discuss extending the program an additional six months, as well as two alternative proposals that have been recently floated. Russia has put forward a plan, backed by China and France, that would suspend sanctions on Iraq for a period of 100 days. The suspension would only be extended if Iraq verifiably cooperated in disarmament efforts. The Russian plan also calls for unfreezing Iraq's overseas assets. A competing proposal put forward by Britain and the Netherlands would maintain the sanctions against Iraq, but would lift the ceiling on Iraqi oil exports and allow foreign companies to invest in Iraq's oil sector if Baghdad allowed UN weapons inspectors to return to Iraq.

Russia has said that it will not support any new resolution that does not involve at least a partial lifting of sanctions against Iraq. The U.S., in turn, rejects any plan involving suspension or lifting of the sanctions. Interestingly, however, an anonymous U.S. official told the Associated Press that the U.S. did not rule out the British-Dutch proposal, depending on how it was implemented. While the U.S. reportedly rejects a major overhaul of Iraq's oil industry, U.S. officials are reportedly receptive to a plan in which foreign investment would help Iraq meet its "oil for food" sales quota. U.S. Secretary of State Madeleine Albright two weeks ago called on Security Council members to consider and develop an earlier draft of the plan.

Iraq has reportedly rejected the British-Dutch plan as nothing more than an excuse to maintain sanctions on Iraq, while simultaneously reducing Iraq to "an entity under the trusteeship of the United Nations." Iraqi Foreign Minister Mohammad Said al- Sahhaf sent a letter to UN Secretary General Kofi Annan on May 19, charging that the "oil for food" program had failed and that the humanitarian crisis in Iraq had worsened. Al-Sahhaf said that Iraq was unable to sell enough oil even to reach the UN mandated maximum, due to the deterioration of Iraq's oil infrastructure and low international crude oil prices. Moreover, al-Sahhaf and Iraq's Oil Ministry on May 19 charged that the United States and Britain had blocked 208 contracts Baghdad had signed for repairs of Iraq's oil infrastructure. Under the "oil for food" program, Iraq is allowed to import $300 million worth of spare parts and equipment to repair and maintain its oil infrastructure.

Al-Sahhaf concluded that, in the face of U.S. and British hostile interference in the "oil for food" program, the only logical, legal, and moral solution would be for the UN to lift the embargo on Iraq. Al-Sahhaf was echoed by the official Iraqi newspaper Al-Iraq, which on May 19 wrote, "There is no point continuing with this game of oil for food, which amounts to a hemorrhage of Iraqi resources." The newspaper claimed that the program "only serves the imperialist interests of the criminals keeping in place the embargo."

As the UN Security Council debates Iraqi sanctions and the possible renewal of the "oil for food" program, Iraq's neighbors may be stepping up efforts to take Iraqi containment into their own hands. On May 19, at the conclusion of a four day visit to Saudi Arabia by Iranian President Mohammad Khatami that marked a major milestone in the two countries' rapprochement, Saudi Foreign Minister Prince Saud al-Faisal declared, "The results of the visit... will have a positive impact on the whole region, with the two countries able to play a key role in resolving conflicts in the region." During the visit, Iranian Foreign Minister Kamal Kharrazi announced that he and his Saudi counterpart had "formulated a long-term mechanism for resolving problems in the Muslim world."

According to the Iranian news agency IRNA, during a meeting with Saudi Crown Prince Abdullah bin Abd al-Aziz al-Saud, Khatami noted it was "disturbing to imagine that the big regional states and their nations may have to depend on others to provide security in the region." Khatami reportedly added that Iran and Saudi Arabia, "had the potential to safeguard the security of this vital region."

The first portion of the Abdullah-Khatami meeting, during which Khatami put forward Iranian-Saudi security cooperation as a substitute for U.S. meddling in the region, was attended by Second Deputy Prime Minister and Defense Minister Prince Sultan bin Abd al-Aziz al-Saud, who is close to the U.S. and whose son is the Saudi Ambassador to the U.S. The second half of the meeting occurred behind closed doors, and it was not reported whether Prince Sultan was involved. Prince Sultan later held a banquet for Khatami and the Iranian delegation. In a separate though potentially related development, Iran and the UK announced on May 18 that they were upgrading diplomatic relations, exchanging ambassadors for the first time in 20 years. Still, despite the apparent nod being given to Iranian diplomacy by the U.S. and the UK, the Saudi-Iranian official joint statement at the conclusion of Khatami's visit condemned foreign interference in Iraq's internal affairs.

Khatami's stay in Saudi Arabia also included a visit to the headquarters of Saudi Aramco in Dhahran. There, Saudi Oil Minister Ali Ibrahim Naimi stressed that the recent upturn in oil prices was due in large part to the cooperation and leadership efforts of Saudi Arabia and Iran. At a separate meeting with Khatami in Jeddah, Naimi declared that Saudi Arabia and Iran "have reached an agreement," though he did not elaborate. Naimi and his Iranian counterpart Namdar Zangheneh vowed that the two countries would continue to cooperate to maintain and improve oil prices. Khatami and Saudi Crown Prince Abdullah also discussed oil issues in depth.

So, Iran and Saudi Arabia appear to have reached agreements to collaborate in resolving regional conflicts and to collaborate in attempting to control oil production and prices. Iraq is a source of regional conflict and a potentially unsettling force affecting oil prices. Despite their condemnation of foreign interference in Iraq, the two countries' rapprochement and joint endeavors appear to have the blessing of the U.S. and the UK. Kuwait, too, has called for closer relations between Iran and the GCC. Additionally, judging by Iraqi allegations and Iranian military maneuvers, "foreign interference" in Iraq can apparently be translated to read "European and American interference."

Whether the Iranian-Saudi movement toward regional security cooperation -- evidently focused first on replacing he U.S.-UK effort in Iraq -- is occurring as a result of or in spite of the stumbling NATO campaign in Yugoslavia is unclear. Whether it is occurring at the urging of the U.S. and the UK or with only their grudging acceptance is also unclear. And just how Saudi Arabia and Iran plan to deal with Iraq is downright opaque.

Nevertheless, Iraq seems seriously concerned. In recent days, Baghdad has condemned Iran for secretly conspiring with the United States to stab Iraq in the back. Baghdad has also accused Iran of fomenting an uprising in the south in March and of courting the U.S. by training and arming infiltrators of southern Iraq. And Saddam Hussein has reportedly begun to warn his troops and supporters of an impending cataclysmic battle. If Iraq needed more reason to worry, Iran's Revolutionary Guards have launched major military exercises in Khuzestan province, near the southern Iraqi border. The 8,000 troop exercises, which commemorate the liberation of Khorramshahr from Iraqi occupation, include airborne operations and live fire exercises with artillery and tanks. Additionally, a new coalition of Iraqi opposition groups will reportedly travel to the U.S. next week, allegedly with Iran's blessing, to seek U.S. support for another uprising.

According to Iraqi opposition sources, cited in the London based newspaper Al-Hayat, Syria too is concerned about Iranian intentions in Iraq, and has requested clarification from Tehran. Interestingly, Khatami visited Syria immediately prior to visiting Saudi Arabia, and Saudi Crown Prince Abdullah has departed on a multi-country trip that will take him to Syria as well.

Clearly, Iran is pushing its idea of a regional security grouping to deal with regional unrest without foreign interference. It appears to have received a positive response from Saudi Arabia and Kuwait, and to have at least the tacit support of the U.S. And the proposal is far enough along to have the Iraqis and Syrians concerned. Now it remains to be seen if the traditional forces driving Iran and the Arab states apart can be kept in check long enough to operationalize the Iranian proposal.

Citing anonymous witnesses who had recently arrived in London from Baghdad, the London-based newspaper Al-Zaman reported that a military force comprised of the "Adnan" Republican Guard Tank Battalion and a company from Iraq's 33rd Special Forces Brigade attempted to leave the Suwayrah camp at 0300 hours local time on May 24. This camp is strategically located 60 kilometers south of Baghdad along the two main routes from southern Iraq to the capital city. The paper claimed that clashes erupted when an intelligence officer, on guard at the time, informed the camp commander that the units were attempting to leave the camp without the required permit from the intelligence department, which is headed by Iraqi President Saddam Hussein's son and named successor -- Qusay Hussein.

When the camp commander, Lieutenant-Colonel Muhammad Ulwan al- Dulaymi, asked the tank battalion commander, Colonel Sabir Aziz al Shati, why the units were leaving the camp, Sabir reportedly aimed his tank's gun at Ulwan's residence. Ulwan then ordered two Republican Guard infantry battalions to confront the armored battalion and the Special Forces company. It was not reported which side started shooting first, but in the end a number of officers and troops from both sides were reportedly killed, including both Sabir and Ulwan.

Qusay Hussein immediately arrived at the camp with other high ranking military officials to question the guards who were on duty at the time. A number of officers were then arrested and taken away for questioning. The upshot of these events was that security was tightened in some military districts of Baghdad and at the checkpoints located between Baghdad and the camp, suggesting that the incident was deemed to be part of a larger threat to the regime.

Iraqi President Saddam Hussein has shown considerable skill over the years, fending off as many plots against him from within his country as from outside. At the height of last December's Operation Desert Fox air strikes, Hussein launched a purge of Iraq's Third Army Corps in Basra, while skirmishes reportedly broke out at camps inside Baghdad. Since then, reports of armed incidents within the Iraqi military and purges in the officer corps have continued to emerge, particularly in units stationed around Basra in the south and Mosul in the north -- both places plagued by opposition activity. At the same time, there have been several assassinations and attempted assassinations of military officers and Baath Party officials loyal to the regime, and Iraq has charged Iran with infiltrating agents into southern Iraq to foment unrest. Over the past month, Hussein has been marshaling and redeploying his forces, though it is unclear whether this is in preparation for offensive action, defensive action against Kurdish or Shiite forces, or defensive action against other military units.

The reported clash in Suwayrah, though still unconfirmed, is potentially extremely significant, as it involved Republican Guard forces. Last December, Hussein interposed Republican Guard forces between regular army units and Baghdad, an indication of his trust in the Guard and distrust of the army. If dissent has now permeated the Republican Guard, Hussein has very few assets left to rely on to defend his regime. And whether in response to real or only imagined threats, the ongoing purges are certain to have a tremendous impact on the morale and the effectiveness of the Iraqi military. While Hussein has displayed an uncanny ability to thwart attempted coups, with an increasing number of apparent threats emerging ever closer to his inner circle, time may be running out for the Iraqi leader. And as Hussein is not one to go down without a fight, he may attempt one last dramatic maneuver to salvage his regime.

According the Iraqi government run newspaper Al-Iqtisadi and Iraqi legislators, Iraqi Oil Minister Lt. Gen. Amer Mohammed Rashid has given Russian and Chinese companies "a few weeks" to begin work on developing Iraqi oil fields, despite the current UN embargo, or have their contracts terminated. Rashid reportedly issued the ultimatum when he was questioned in parliament about the companies' failure to meet their contract obligations.

In 1997, Baghdad signed a contract with a consortium of Russian oil companies led by Lukoil for the development of the Qurna oil field in southern Iraq, and another with China National Petroleum Company for the development of the Ahdad field, also in southern Iraq. Additionally, a Russian delegation is scheduled to visit Baghdad this month to discuss a number of other contracts signed before the imposition of UN sanctions. Iraq has also signed letters of intent with the French oil companies Total and Elf, though Rashid refrained from making similar threats toward them.

UN sanctions, in place since Iraq's 1990 invasion of Kuwait, ban investment in Iraq. And while both Lukoil and China National Petroleum Company initially agreed to carry out their contracts regardless of the embargo, they have since decided to abide by the sanctions until Russia and China succeed in convincing the UN Security Council to lift the embargo. However, it is not simply a matter of independent companies trying to avoid overstepping their respective governments' foreign policies. Both Lukoil and China National Petroleum Company -- with controlling interest held by their respective governments -- are willing agents of their governments' foreign policy. In April of this year, Russia used Lukoil to pressure Lithuania, which has been moving to free itself from dependence on Russia for energy. Rashid's comments, therefore, were not directed at Russian and Chinese businessmen, but at the Russian and Chinese governments -- ostensibly Iraq's supporters in the UN Security Council but apparently, in Baghdad's view, insufficiently enthusiastic backers.

The UN Security Council met June 21 to discuss the embargo against Iraq, though it made little progress on the issue. Russia and China have submitted a draft proposal, calling for all sanctions against Iraq to be lifted if Iraq submits to a new arms monitoring commission. France, which initially backed the Russian-Chinese proposal, has submitted a variation on the plan. Talks are deadlocked, however, as the U.S. and Britain support a British-Dutch draft proposal that would lift the embargo on Iraqi oil exports provided Iraq submits to stringent disarmament and revenue control measures. Iraqi Foreign Minister Mohammed Saeed al-Sahhaf has rejected the British-Dutch plan, charging that it would effectively render Iraq a colony.

With little hope of a resolution of the Security Council's deadlock, Iraq has decided to test the anti-Western mettle demonstrated by Russia and China during the Kosovo crisis. Baghdad is gambling that Moscow and Beijing, having established a precedent by opposing U.S. and NATO action against Yugoslavia, are now prepared to deepen their rift with the West by opposing the U.S. led campaign against Iraq. That is a big gamble. While Russia and China are unequivocal in their opposition to U.S. global hegemony, they are not set in their strategy or timetable for opposing the U.S. They will get plenty of diplomatic miles out of the confrontation over Kosovo, as they extract concessions in return for "moderating" their policies. To force the issue in Iraq actually limits the options available to Moscow and Beijing, as it solidifies their diametrical opposition to the U.S., perhaps earlier than they are able to fully perform this role.

Baghdad may have assumed too much in attempting to force the Russian and Chinese hands, but it still has options. First, Iraq is unlikely to completely lose the backing of either country, but particularly Russia, by presenting this ultimatum. Moscow needs a portal to the Middle East, and with Iran competing with Russia for influence in Central Asia and the Caucasus, Iraq is a prime candidate. Furthermore, Iraq still has European countries -- and their oil companies -- eager to do business. France may still be able to cut a worthwhile deal with the UN.

Still, Baghdad's attempt to exploit the post-Kosovo political climate is interesting, and likely will not be the last such attempt. Russia and China, who have talked about opposing the U.S. for the last few years, now appear nearly ready to actually do something about it. Within this evolving dynamic, a host of peripheral countries will attempt to position themselves, build alliances, and extract concessions. Let the wheeling and dealing begin.

Over 10,000 student demonstrators and an unknown number of riot police continued to clash in downtown Tehran on July 12 for the fifth straight day, in what many analysts are calling the worst unrest since the 1979 Islamic Revolution. The demonstrations began as small, peaceful student protests calling for press freedom after the closure of several liberal newspapers on July 8. They later transformed into widespread riots after riot police, sent in to breakup the demonstrations, injured dozens of students and arrested several dozen others. Pledges to allow press freedom and other liberal-minded reforms rallied the student vote behind moderate president Mohammad Khatami and helped to boost him to power in 1997. However, many of his moves since then to institute these reforms have been blocked by the powerful hardline conservative factions under the direction of Supreme Leader Ayatollah Khamenei. Not this time.

In the past, the students have dispersed at the site of riot police or Revolutionary Guards, which are both controlled by Khamenei. However, this time the students did not flee. In fact, the student protests grew over the anger of police brutality in breaking up the demonstrations. Ordinary Iranians joined the ranks of the students, and the protests have spread to Tabriz -- where one student was killed by security forces over the weekend -- and to Yazd, Khorramabad, Hamadan and Sharud. In an attempt to rein in the protests, President Khatami appealed to the students to keep the demonstrations peaceful.

However, on July 11, the Supreme National Security Council, headed by Khamenei, issued a statement against holding "illegal rallies" and stressed that the police were "trying to avoid clashes and restore calm." Meanwhile, policemen and Revolutionary Guards blocked off access to central Tehran's Val-e-Asr square and arrested at least 20 stone-throwing demonstrators and injured another dozen when policemen moved in to disperse the crowd. The next day, July 12, President Khatami again appealed for calm and warned students to be wary of "provocations" from opponents of reform. "There are those who want to create provocations and clashes," IRNA quoted Khatami as saying. Khatami appealed to students "not to fall into this dangerous trap," saying, "We must be the first to oppose tensions and violence." The students have not complied with Khatami's requests, and have reportedly included him as a target of their demonstrations.

Shocked by the students' defiance, Khamenei has moderated his stance and condemned last week's use of force by the police against protestors as "unacceptable." However, his speech, broadcast over loudspeakers at Tehran University, was met with boos from the crowd. Khamenei stressed that those responsible would be dealt with even if they are "in the garb of law enforcement forces." Indeed the two police officers who were deemed responsible for calling in the initial July 8 raid on the students were arrested. The Supreme Leader's remarks, quoted by the official IRNA news agency, are his first public reaction to the pro-democracy protests, and follow allegations by the students that he was complicit in the police action.

The student demonstrations began as part of the ongoing struggle between Iran's moderates and conservatives -- launched in support of the reforms backed by Khatami and the moderates, and against the press restrictions imposed by Khamenei's conservatives. Predictably, Khamenei used the tools at his disposal -- the police -- to counter Khatami's student allies. But the situation now appears to be getting out of hand. Both Khatami and Khamenei are now reportedly the targets of the demonstrators' slogans -- slogans borrowed from 1979, but with a new twist. Whereas in 1979 their parents chanted: "Independence, Freedom, Islamic Republic," now, the demand of today's protestors is no longer an "Islamic" but an "Iranian Republic."

Regardless of their differences, Khatami and Khamenei are both veterans of the Iranian Revolution, and recognize that there is a point at which protest takes on a life and momentum of its own. These demonstrations may not be near that point, but they are nearer than either side in Tehran's power struggle is comfortable with. Not even Khatami wants to see another revolution, and so both he and Khamenei are working to deescalate this situation.

It is now clear that Khatami has a very powerful but very dangerous weapon at his disposal. Provided the student demonstrators are not so dangerous a weapon as to be merely an implement of mutually assured destruction, Khatami may be able to move forward with reforms. However, if Khatami cannot show that he is able to bring the students under control, Khamenei will have the ammunition he needs to halt Khatami's reforms on the grounds that they are too destabilizing to the regime. Who ends the demonstrations and by what means could say as much about the future of reform as the demonstrations themselves.

Qatar's Al-Jazeera satellite television on August 16, citing other press reports, said that Hussein will form a new government within the next few days composed primarily of technocrats. The television station added that he plans to choose current Finance Minister Hikmat al-Azzawi, who was appointed deputy prime minister two weeks ago, as Iraq's new prime minister. It also reported that Azzawi has held talks with a number of university professors - some of whom are from outside the Baath Party - to seek their help in running technology and economic ministries. The reported goal of the new government is to solve Iraq's economic and social problems and to improve relations with other Arab states. The most startling part of the report, however, was the claim that most of the ministers in the new government will be new, with veteran members, such as Deputy Prime Ministers Tariq Aziz and Muhammad Hamzah al-Zubaydi playing no part in the new government.

While there is no confirmation of the report out of Iraq, it does come on top of multiple reports that Saddam has been shuffling top security positions [ http://www.stratfor.com/MEAF/commentary/m9908112100.htm ] and grooming his youngest son Qusay to replace him [ http://www.stratfor.com/MEAF/commentary/m9908062000.htm ]. This could be nothing more than an ongoing and massive U.S. psychological operation (PSYOP) aimed at unnerving the Iraqi leadership. The Qatari report did accompany a denial, by the Iraqi Culture and Information Minister, that a recent uprising in the Iraqi military had been forcefully put down, with a number of officers killed. Reports that Qusay is now heir apparent were denounced by Saddam's older son, Uday, though he was notably alone in that denial. However, despite Uday's denials and yet another in a string of rumored coup attempts, it seems that Saddam is pursuing a new strategy to break the impasse in Iraq's international relations. Evidence is building that Saddam may just be serious about stepping aside.

In 1997, Al-Azzawi, in what even the Iraqi News Agency (INA) described as a rare public appearance, announced a new Iraqi policy of opening up unofficial trade channels, based on the fact that there seemed to be no end in sight to the UN-imposed sanctions. Apparently, this policy seems to have worked. Since mid-1998, there have been numerous reports of rampant sanctions busting. Iraq has recently announced a plan to massively increase oil exports, something impossible without substantial foreign investment in oil production and infrastructure development. But Iraq has already apparently received aid on the infrastructure- development front [ http://www.stratfor.com/MEAF/commentary/m9908170057.htm ], and is pushing ahead with negotiations with prospective production partners as though the UN sanctions were already lifted.

The UN cannot lift sanctions on Iraq without the approval of the U.S. Washington, in turn, cannot allow the sanctions to be lifted because - regardless of the status of Iraqi arms production - it has so demonized Saddam Hussein that it simply cannot normalize relations with the Iraqi leader. As far as Saddam is concerned, there is no problem. He can still export all the oil he can produce, and can import anything he needs, albeit with a surcharge. Sure, he wants the sanctions-busting surcharge lifted, but otherwise he really has little reason to step aside.

Iraq's would-be partners, however, would prefer to do business without repercussions from the U.S. India was already forced to withdraw a loan offer to Iraq under pressure from the U.S. and its allies, and Russia and China have had to put off open investment in Iraq. Saddam's allies may therefore be pushing him to take a cozy retirement and let his son and a politically-correct cabinet take over. Washington might even give this one a nod, as it would prefer to deploy its military assets in more pressing venues, such as East Asia and the Balkans. In return, Washington could offer to accept Qusay and give up its support for the Iraqi opposition. For now, we only have rumors, but the rumors keep adding up. The only thing that remains is for Saddam to find a way to paint this as a final victory over Iraq's oppressors, and not a final surrender to sanctions.

A report by the London-based Arabic newspaper Al-Sharq al-Awsat on August 22, citing diplomatic sources, confirmed an earlier report that Qusay Hussein, Saddam's son, has been appointed deputy commander of the Iraqi army and commander of the Northern Military Region. The posts were previously held by Izzat Ibrahim, one of Saddam's most trusted aids. Vice President Taha Yashin Ramadan took over Ibrahim's position as deputy chairman of the Revolutionary Command Council.

Saddam may have divided up Ibrahim's posts due to his poor health. Ibrahim was rushed to Austria for emergency cancer treatment but had to flee before the treatment was administered. Reports indicate that Ibrahim was about to be "Pinocheted," arrested for human rights abuses committed in his own country while abroad to receive medical attention. Unwilling to face the international legal process, he fled. At last report, he was at a Baghdad hospital continuing his cancer treatment.

The attempt to present a new face to the world began with the appointment of a new Iraqi ambassador to the UN in February. Since then, Iraq has moved to solidify support for lifting sanctions in the UN, working to enlist international investment in its oil infrastructure as soon as sanctions are lifted. These changes were made in the hopes that the international community would discuss the Iraqi sanctions regime in a new light. A light that shows Saddam is willing to share power.

The UN Security Council is currently debating the future of sanctions against Iraq, which cost the country up to $20 billion annually. [ http://www.stratfor.com/SERVICES/GIU/081799.ASP ]. China and Russia want to immediately lift the sanctions without ensuring that the UN resurrect its monitoring of Baghdad's suspected weapons of mass destruction. France has called for a similar plan but will likely support a token weapon monitoring team. Both the U.S. and Britain have called for only a partial lifting of sanctions - after Iraq agrees to a reformed UN monitoring team.

Saddam's maneuvers do not imply that he is preparing to retire to one of his many elegant palaces. What they do imply, however, is that Saddam wants the sanctions lifted with him still in power while appearing to prepare a transition. We do not believe he needs them lifted to export oil. As we have said before, in almost every sense the sanctions are virtually irrelevant at this point [ http://www.stratfor.com/MEAF/commentary/m9908170057.htm ]. Additionally, Iraq is currently pumping oil at close to its capacity, although the lifting of sanctions would allow Saddam to use the Saudi pipeline to increase exports.

Saddam's goal in this apparent redistribution of power, and the real reason he wants sanctions lifted, is to be able to receive direct foreign investment. He cannot do that with sanctions in place. He needs them lifted in order to develop new wells and rebuild his military, whose conventional might has suffered since the 1991 Gulf War. Many units are suffering for lack of spare parts. Iraqi armored divisions have been slashed in their effectiveness. And the daily battering by the U.S. Air Force - while lacking any larger strategic impact - is taking its toll on the country's air defense network.

The U.S. and Great Britain have held up the sanctions debate by continually underscoring Saddam's leadership. Their argument, though, is increasingly falling on deaf ears in the international community. European companies are regularly breaking the sanctions while black market trade allows Iraq to continue to export oil along both overland and Persian Gulf routes.

Washington and London are in precarious positions. They have essentially given up on UN-led arms regime inspections; Operation Desert Fox in December effectively ended the work of the United Nations Special Commission on Iraq (UNSCOM). The United States has taken half-hearted steps this year to increase enforcement of economic sanctions. But even increased Maritime Intercept Operations (MIO) by Special Operations Forces and the U.S. Navy have yielded only moderate results.

Instead of changing the nature of his government, Saddam is merely trying to undercut the final U.S. and British-led support for the final set of sanctions - the economic ones - in the hope of reviving his economy on a broader scale, and rebuilding his military might.

Odai Hussein, eldest son of Iraqi President Saddam Hussein, won a seat in the National Assembly (parliament) by a sweeping 99.99 percent of the vote. Saddam controls Iraq's parliamentary elections, which are neither free nor fair. Every candidate is a member of either Saddam's Baath party or one of the few parties that exist because they have pledged loyalty to Saddam's regime. Odai, who was once regarded as Iraq's heir apparent, now poses a new threat to his younger brother Qusai - and ultimately his father Saddam.

Odai will also likely win the position of Assembly speaker in April. While the National Assembly is not a powerful body, the speaker has considerable influence in the regime and attends meetings of the Revolutionary Command Council, the all-powerful decision making body led by Saddam.

A December 1996 assassination attempt left Odai partially paralyzed, prompting Saddam to focus on grooming the younger Qusai to be Iraq's next leader. If Odai becomes parliamentary speaker, it will be his first position of governmental power since before the attempt on his life.

Odai, 35, has always played a public role in Iraq and currently publishes the influential Iraqi daily Babel, which often functions as a government mouthpiece. He heads Iraq's Olympic Committee and the Iraqi Football Federation, making him popular among Iraqis. The younger Qusai, 33, has worked behind the scenes for years gaining power and support in Iraq's security services. He heads the elite Republican Guards as well as the special security agency in charge of protecting the president. As deputy commander of the army, Qusai also commands the northern military region, which oversees Kurdish areas and is intended to respond to Turkish invasions. Qusai also has significant influence and support in the Iraqi intelligence service, Mukhabarat.

Now, Odai will be able to use his election victory as the first big step in a campaign to challenge his brother's pre-eminence in the Iraqi succession struggle. In the past year, Qusai has solidified his power base and chipped away at Odai's while he struggled to return to the spotlight. In July, shortly after walking without assistance for the first time since the assassination attempt, Odai publicly made comments suggesting he was ready to return to the state's security and political apparatus. Qusai responded by purging the military and security apparatus of officers loyal to Odai.

Saddam has not prevented Odai's resurgence, indicating tacit approval. If Odai wins parliamentary speaker - a likely possibility - he may try to rally support in the powerful Revolutionary Command Council away from his brother, who also attends the meetings. He may also try to regain influence in the military and security apparatus as well.

If this occurs, it will undoubtedly spark a significant response from Qusai. Odai's mere comments in July were enough to set off purges by his younger brother. If Odai does have ambitions of edging out Qusai, he will have to be tactful. Qusai clearly has more power and resources at his disposal, as well as the apparent support of his father.

It seems clear that Saddam has chosen Qusai as his successor. Saddam appointed Qusai to all of the high posts he now holds and has, in the past, had to rein in Odai who has a reputation as a short-tempered trouble-maker. In 1995, Saddam briefly jailed Odai after he shot an uncle in the leg during an argument. In December 1999, Saddam decorated Qusai with three prestigious military awards. Then in January, Saddam gave Odai a single medal of valor, one of the three awards Qusai received a month earlier.

Saddam relies heavily on the highly efficient security agencies, commanded by Qusai, to keep him alive and in power. Odai must be careful not to undermine his brother so much that it affects Qusai's ability to control the agencies he heads. Any attempt by Odai to weaken Qusai or those agencies will not be taken lightly by a ruler known to execute family members. Saddam may well have set up the conflict to ensure that neither son is able to become too ambitious for the presidency.

While Qusai controls the military and security apparatus, Odai enjoys widespread popular support. If both sons play to their strength, they exploit the already tense rift between the government and the people. If Odai undermines his brother - at the expense, or perceived expense, of the Iraqi regime's security - he may also undermine his father, which could result in his own demise.

The marine patrol of Iran's Revolutionary Guard Corps (IRGC) seized an Iraqi oil tanker on April 1, according to the Islamic Republic News Agency. Iranian Foreign Ministry spokesman Hamid-Reza Asefi told Agence France Presse that the ship was seized because "it is our policy to forbid and prevent all smuggling." Asefi added, "it is also a sign of Iran's respect for the resolutions of the United Nations."

The vessel, registered under a Honduran flag, was smuggling 2,500 tons of Iraqi crude oil when it was intercepted and impounded. Honduras is a common flag of convenience for older and smaller vessels, because the country has one of the most liberal open Ship Registries in the world.

According to the Energy Information Administration, Iraq smuggles about 100,000 barrels per day (bpd) of crude oil via several routes. One common smuggling route out of the Persian Gulf follows the Iranian coast until entering international waters near the Strait of Hormuz. By utilizing Iranian waters, ships illegally carrying Iraqi crude can avoid detection by the U.S. and British Maritime Interception Force (MIF), which enforces U.N. sanctions against Iraq.

Iran is certainly not known for policing smugglers of Iraqi oil, and the tanker seizure could simply have been an isolated incident involving money. According to the BBC, the Iranian navy reportedly charges a toll of $50 per ton of smuggled Iraqi oil, a sum that secures right of passage and buys smugglers false papers hiding the origin of their cargo. This is the least plausible explanation, though, since the Iranian Foreign Ministry used the incident to publicly state its policy of being anti-smuggling and pro-United Nations.

A more probable explanation is that Iran is pursuing its own multi- faceted agenda of keeping oil prices high and pressuring Iraq, while giving a nod to the United States. Iran saw that U.S. overtures toward Tehran had diminished because the two were at odds over short-term oil price concerns. This threatened Iran in two ways. First, it risked the United States opening more to Iraq - evidenced by the UAE and Bahrain re-opening embassies in Baghdad - to the detriment of Iran. Second, a U.S. easing of sanctions on Iraq threatened to lower oil prices too much for Iran's long-term interests.

Iran's crackdown on Iraqi smuggling cleverly forwarded the country's dual agenda. It enforced U.S. imposed sanctions, thus undermining U.S. short-term oil policy in favor of U.S. long-term Iraq policy. And it aided the attempt to keep oil prices up.

At the recent OPEC meeting, Iran refused to agree with its fellow members on how far to raise the production quotas. Iran's oil infrastructure is running at near full capacity. Thus, the country gains little from an increase in production, which will ultimately drive the price of oil downward. By cracking down on Iraqi smuggling, Iran can potentially take a reasonable amount of oil off the world market - or at least delay it - by forcing Iraq to look for new smuggling routes.

At the same time, Iran is giving a political nod toward the United States following Washington's recent relaxation of Iranian import restrictions and its lenience on Iraqi sanctions. In mid-February, the chairman of the U.S. Joint Chiefs of Staff "approached" Iran about the growing amount of illegal Iraqi oil being smuggled through the Gulf. Iran appears to be cooperating, and Washington's response is clear. U.S. State Department spokesman James Rubin said on April 5 that if the reports are true, "we are pleased to see that Iran is taking measures against this illegal traffic."

Iran's move also comes amid increased tension between Iran and Iraq. Last month, Iraq accused Iran of staging a mortar attack in Baghdad that killed four people. Iraq also claimed to have shot down two Iranian unmanned reconnaissance aircraft. Baghdad also harbors the armed Iranian opposition group, the People's Mujahadeen Khalq (MKO), which claimed responsibility for a recent mortar attack in Tehran. But, Iran can threaten Iraq's oil smuggling routes without an increased Iraqi military threat since Iraq's military has been largely kept at bay by U.N. sanctions and enforcement of no-fly zones.

The seizure also gains significance in light of the history of Iran-Iraq tanker wars during the 1980-88 war. Iran would not have made the move if it were not confident that the United States would keep the Iraqis from retaliating against its ships. Tehran either gambled that the United States would be forced by its own sanctions to condone the move, or it had back-channel assurances of U.S. cooperation. The first possibility suggests an opening for better relations, and the latter would indicate that there has already been a major breakthrough in U.S.-Iranian relations.

Either way, Iran just made a major move to shake the United States out of its political daze. The real test will be whether or not Iran continues its tacit cooperation with the United States. If so, it will be a big step forward for U.S.-Iranian relations. Strategically, Iran has everything to gain.