By Laura Rozen, National Journal
© National Journal Group Inc.
Tuesday, June 12, 2007

Late last month, ABC News reported that the administration had notified congressional intelligence committees of a covert action authorized by President Bush against Iran. "The CIA has received secret presidential approval to mount a covert 'black' operation to destabilize the Iranian government," ABC reported. "The sources ... say President Bush has signed a 'nonlethal presidential finding' that puts into motion a CIA plan that reportedly includes a coordinated campaign of propaganda, disinformation, and manipulation of Iran's currency and international financial transactions."

	Washington tries to gain leverage over the Islamic Republic even as it pursues diplomacy.

The report sent ripples through Persian Gulf policy circles, suggesting that in the long running battle between hawks in the administration who favor "regime change" in Tehran and doves who favor "behavior change," the regime-changers were gaining the upper hand. And it came just as the United States was about to sit down to talks in Iraq with Iranian representatives -- one of the few times that diplomats from the two countries have met since relations were sundered after the Iranian hostage crisis 27 years ago.

There's just one problem. Interviews with numerous current and former Iran hands in the U.S. government indicate that the Bush administration has not decided to try to foment regime change in Iran. On the contrary, the policy is moving in the other direction, away from confrontation and toward expanded diplomacy, multiple sources and signs suggest. The reported covert action, these sources say, should be understood as part of an effort by Washington, now hobbled by the war in Iraq, to gain leverage vis-a-vis Iran as it moves deeper along a diplomatic track.

Among the continuing signs that it is actually State Department pragmatists who are gaining the upper hand over regime-change hard-liners, Undersecretary of State Nicholas Burns informed a member of the Senate Foreign Relations Committee in writing in May of the closing down of a shadowy U.S. interagency group, the Iran-Syria Policy Operations Group, that had been meeting weekly over the past year to find ways to poke at the Iranian regime. Sources at the State Department and on Capitol Hill say that Burns had wanted the group closed for months, believing it was leading to confusion -- and turf battles -- over the thrust of U.S. policy toward Iran. "The policy of the U.S. government is behavior change," sighed one U.S. official involved with Iran policy, who asked not to be further identified. "We're on the record [saying that], a million times."

The official would not confirm or deny the covert action, but said it needed to be understood in the context of keeping pressure on Iran even as talks go forward. "We need to make clear to Iran that they cannot act with impunity," the official said. "There is very clearly in place and being implemented a policy of ratcheting up the pressure on the Iranian regime in response to what they're doing."

The Iran-Syria Policy Operations Group "started with a more robust expanse and aim ... but it had become somewhat irrelevant," says a congressional staffer knowledgeable about U.S. policy toward Iran. "Once regime change was taken off the table, the raison d'etre of ISOG was somewhat removed. People were meeting for the sake of meeting, and it lost its salience."

A government intelligence official who asked not to be identified also would not directly comment on any covert finding, but he suggested that should one exist, its purpose was to keep Iran "off balance." The implication was that the U.S. was moving to keep the Iranian regime nervous without pursuing full-scale regime change. Washington has accused Iran of trying to destabilize Iraq, Lebanon, and Afghanistan, an Iranian policy that some officials have described as "managed chaos." During his trip to Afghanistan this week, Defense Secretary Robert Gates said that Iranian-made weapons were turning up in the hands of Taliban rebels in Afghanistan, although he pointedly said he could not say that the Iranian government was behind the arms shipments. The new U.S. covert operation against Iran can be seen as a tit for tat to remind the Iranians that the U.S. is not without capabilities in destabilizing their country.

Bruce Riedel, a former senior CIA and National Security Council official who dealt with Iran, said that the behavior-changers in the Bush administration clearly are winning. "I think that there certainly is a group within the administration which would love to pursue regime change, and they are centered in the vice president's office," Riedel said. "But I think overall they appear to have lost the battle on this. And the biggest reason they lost the battle is that the military option, which is essential to regime change, has just got so many downsides that it's become obvious even to hard-liners opposed to the clerical regime that there is no military option available to us as long as we have 150,000 soldiers in Iraq."

Riedel, now a senior fellow at the Brookings Institution, added, "The most important line in the ABC report, which people have not focused on, is that this is a nonlethal finding.... You can't provide arms in a nonlethal finding -- arms are by definition lethal."

He continued, "The one part of the covert action that is probably worth looking at the most is the business of going at Iranian financial transfers," especially those involving the Iranian Revolutionary Guard Corps. The Revolutionary Guard is believed to be behind Iranian operations to destabilize Iraq and Lebanon. United Nations sanctions, imposed against Iran for its nuclear program, call for cutting off financial transactions to the corps or its members.

The Treasury Department has been doing a lot of work in the past five or six years to make these financial sanctions more successful, Riedel said, and that requires good intelligence. The problem has been getting the intelligence agencies to surrender information to their financial counterparts. Late last year, The Washington Post reported that State Department officials had been forced to resort to Google searches to identify Iranian officials in the nuclear program who could face financial sanctions and travel bans. Riedel said that the covert authorization may give financial authorities greater access to intelligence.

Middle East experts were divided on whether Washington's numerous moves during the past year to improve its bargaining position with Iran were having any effect. "The test is whether their behavior continues to stay the same," says Peter Rodman, the recently retired assistant Defense secretary for international security affairs who is now at the Brookings Institution. "If we saw changes [in Tehran's behavior], I would take note of it: It would tell us something."

Rodman said he will be looking for additional pressures that the West can place on Tehran. "There are a lot of economic pressures that haven't been used yet, in the context of nuclear diplomacy," he said. "Unilaterally, the United States has done as much it can. It would be great to have multilateral sanctions that would really impose some costs on the Iranian economy, which would limit investment in the oil and gas sector."

Daniel Byman, director of Georgetown University's Security Studies Program, said that it is risky for the U.S. to say it is trying to destabilize Iran, and riskier to say so if Washington is just bluffing. "I actually think we have the worst of all worlds. Washington is convincing [Tehran] that our intentions are fundamentally hostile. But the flip side is, the United States is in a relatively weak position in Iran; it has relatively limited options for regime change or to destabilize them.

"There's a constant back and forth," Byman continued. "The United States is taking small measures to contain Iran in different ways. Some measures just proceed, however, on bureaucratic momentum, and, to some degree, they are actually deliberately done to offset U.S. policy. If you're sending an olive branch [to Iran] on Iraq, you still go after them because of their support for terrorism and nuclear weapons."

Washington isn't alone in sending mixed signals about its intentions. Even as American diplomats were meeting with Iranians in late May, Iran was arresting several Iranian-American scholars studying or traveling in Iran, including Haleh Esfandiari, director of Middle East programs at the Woodrow Wilson International Center for Scholars in Washington. Iran accuses Esfandiari of supporting a "velvet revolution" in Iran. Esfandiari and the center, however, have been at the forefront of those U.S. think tanks encouraging expanded U.S.-Iranian dialogue. And the center's director, former Rep. Lee Hamilton, co-chaired the Iraq Study Group report, which also encouraged the Bush administration to pursue dialogue with Iraq's neighbors, including Iran -- a course that the Bush administration increasingly seems to be adopting.

This is "the way Iranians tend to negotiate," Byman noted. "They say, 'Here are some nice things, and, by the way, I just took your cat.' "

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