Obama's Dangerous Game With Iran

This nuclear site at Bushehr looks like an open target; a new site near Qum is underground and heavily fortified. Digital Globe-Reuters-Landov

Well before he moved into the White House, Barack Obama began talking to Israel about Iran's nuclear program, and even then there was mistrust. He met in 2008 with several leading Israelis, including Benjamin Netanyahu—before Netanyahu was elected prime minister—and impressed everyone with his determination to stop Iran from going nuclear. Netanyahu liked much of what he heard, according to a source in his inner circle. What troubled him, however, was that Obama didn't talk specifically about Israel's security.

Rather, he discussed Iran in the context of a broader non-proliferation policy. "He showed much command of the issues, even though it was months before he got elected," says the Netanyahu source. "It was clear that he read and internalized things. But when he spoke about Iran and his opposition to the nuclearization of Iran ... the Israeli factor did not play prominently."

That discomfort has continued through a series of meetings and conversations since both men took office. On Jan. 12 of this year, Obama called Netanyahu to clarify again, in part, the national interest and policies of the United States in dealing with Iran's nuclear program. The message has been conveyed repeatedly, via many channels: the administration is asking for "the time and the space for the sanctions to work," says a senior administration official. "Not only have we put in place the most robust economic sanctions ever, but we've just started to move on the energy sector." Above all, the White House doesn't want Israel to start a war—not yet, anyway.

For Obama, grappling with Iran policy is like playing a particularly high-stakes match of three-dimensional chess. The game requires the president to achieve several goals: keep nuclear weapons out of the hands of the mullahs, prevent the oil-based global economy from tipping into the abyss, and manage the wild card that is Israel. He would also like to get reelected this year.

Achieving one goal can undermine another. Obama's advisers most concerned about the economy, for instance, have been at odds with allies in Congress most focused on preventing Iran from going nuclear. (It would take much less than an oil crisis to restoke panic about Greece and other feeble European economies.) Israel's national interests are not always in line with Washington's. And a messy war—or perceived weakness on Iran—could tip the election for the Republicans in November.

The risks are growing as the game progresses. It's hard to overstate the impact on Iran of a new round of sanctions that is just beginning. The Iranian currency, the rial, plunged even in anticipation of Obama's decision to back the sanctions. The United States has ordered a freeze on all Iranian-government assets in the U.S., Britain has cut off relations with Iran's central bank, and the European Union has announced that it will end existing oil contracts with Iran by July. Iran could lose a quarter or more of its oil revenue, and has no comparable industry to help make up for the loss in hard currency. Prices for basic foods like rice and meat are already soaring.

Meanwhile, mysterious assassins killed yet another Iranian scientist last month—just a day before Obama's phone call to Netanyahu—and Washington's top intelligence official warned that Tehran, already feeling under attack, may be spurred to lash out violently inside the United States. Only a few months ago, the U.S. Justice Department unveiled an alleged Iranian plot to kill the Saudi ambassador in Washington—a possible precursor of things to come.

It's hardly surprising, then, that the head of Israel's Mossad spy agency was recently in Washington for top-level meetings on Iran. According to an American official who was involved, Tamir Pardo wanted to take the pulse of the Obama administration and determine what the consequences would be if Israel bombed Iranian nuclear sites over American objections. Pardo raised many questions, according to this source: "What is our posture on Iran? Are we ready to bomb? Would we [do so later]? What does it mean if [Israel] does it anyway?" As it is, Israel has stopped sharing a significant amount of information with Washington regarding its own military preparations.

Brinksmanship may be one formula to force Iran's leaders to negotiate in earnest. But it can cut both ways. In January, just as sanctions pressure intensified, Iran allowed nuclear inspectors into the country for the first time in many months. Yet it also began producing 20 percent enriched uranium—one step short of the 90 percent stuff used in weapons—at its underground facility near the holy city of Qum. If cornered, Iran may become more unpredictable. And if Israel attacks, the United States may get drawn into a war that could set the Middle East further aflame and send global markets into a terrified frenzy. So which will it be? How much influence does Obama have over Israel, and how committed is the United States to preventing a nuclear Iran at any cost? To answer that question, it helps to understand the game as Obama sees it—and to appreciate how we got to this dangerous brink in the first place.

Obama and Netanyahu have different red lines on Iran, and a sometimes prickly relationship. Jim Watson / AFP-Getty Images

Until recently, when it came to Iran, Obama followed the Teddy Roosevelt maxim: speak softly and carry a big stick. Even before he came to office, Obama sought a new era in American-Iranian relations. Hillary Clinton and others called him "naive" during the 2008 campaign for suggesting unconditional talks with Tehran. That didn't deter him: in one of his first acts as president, Obama wrote a conciliatory letter to Supreme Leader Ali Khamenei, and appeared in a YouTube video on the occasion of the Persian New Year offering to repair relations. Obama understood the need "to develop a kind of concrete test of their intentions," says a senior White House official.

At the same time, Obama made clear that if reconciliation didn't work, Iran would suffer painful consequences. Iranian leaders were suspicious: President Mahmoud Ahmadinejad responded to Obama's overtures by saying that "change should be fundamental, not tactical." He and other Iranians shrugged off threats, and with good reason. The White House and Congress had imposed round after round of sanctions for many years without significant effect—largely because American leaders couldn't get much international support and were wary of launching a trade war. In Obama's thinking, this was yet another reason to offer an "extended hand" to Tehran: he had to make a sincere effort at engagement in order to convince other countries that tougher measures were necessary if engagement failed.

The American intelligence and security establishment had worries of its own about Iran—and about Obama. The generals and spies fretted that the new president might put an end to an elaborate shadow war they had been waging. The Bush administration, together with Israeli counterparts, had engaged in a supersecret campaign to set back Iran's nuclear development. The program involved what are known in the spy world as "delaying actions" or "foiling operations." Agents posing as black-market vendors would sell to Iranian buyers nuclear-use items designed to fail under high stress, or items with tracking devices to reveal the locations of secret labs. Software engineers worked to develop sophisticated cyber-warfare programs that could penetrate the computers in Iran's nuclear plants and cause harm to vital equipment like centrifuges. The spies didn't want any of that put on hold, and the CIA was particularly worried that Iranian assets they'd worked so hard to cultivate would fade away.

In the first days of the administration, deputy CIA Director Steve Kappes and Gen. James Cartwright, vice chairman of the Joint Chiefs, went to see Tom Donilon, one of Obama's most trusted aides. They knew the National Security Council was reviewing all presidential covert findings in light of Obama's promises on the campaign trail, and wanted to know what the president's intentions were. They asked Donilon not to stop the covert program. Donilon responded that he was not yet fully "read into" the covert files, so Cartwright took his request up the chain—directly to the new president.

Obama listened intently. He understood Cartwright's concern, and yet his diplomatic strategy hinged on the Iranians believing that American outreach was genuine. The president mulled the question of whether covert activities might compromise his nascent effort to engage with Iran's leaders. "He was trying to weigh the slowing down of our covert activities—when that meant Iran would be able to reprocess [uranium] faster—against the risk to the outstretched-hand policy," recalls one adviser. "That was the tricky balance."

In the end, Obama concluded that he could pursue both—the covert and diplomatic tracks—simultaneously. He told his advisers that a successful campaign to disrupt Iran's nuclear plans, in fact, would buy more time for diplomacy.

There was a separate complication in the shadow war, however: while the U.S. relationship with Israel is generally strong on security and intelligence matters, there is disagreement on both methods and strategy. Israel has no qualms about assassinating Iranians involved in nuclear research, for instance; U.S. law forbids it. (Drone strikes against jihadist leaders are considered acts of war.) "The Israelis handled everything that was kinetic, and we did the nonkinetic activities, sometimes along with the Israelis," says a Pentagon source who was involved. A senior U.S. intelligence official says that both sides performed a kind of "Kabuki dance" on the assassinations and industrial "accidents" that have increased in Iran during the past year: "The Israelis don't want to say and we don't want to know."

Iranians praying outside a uranium-conversion facility in protest of military threats by Israel. AFP-Getty Images

The United States, moreover, has conducted regular reviews of cooperation with Israel to make sure that American intelligence does not leak into operations that violate U.S. law. "We were always careful about what we said to the Israelis in meetings, and they knew why," says the Pentagon source. "They knew that if we gave them certain kinds of information we'd run the risk of breaking the law. We often held things back from them—satellite imagery and other kinds of intelligence that could have helped them with their activities."

From the get-go, Obama had a frosty relationship with Israeli Prime Minister Netanyahu. "There's no question that tension grew between the two, because we felt like ... they had a different estimation [of the timeline for Iran to get nuclear-weapons capability]," says the Pentagon source, "and we felt like some of their [kinetic] activities undermined what we were trying to do. Obama's view was, why would you remove the opportunity for a diplomatic solution for something that was so incrementally significant [as killing a scientist]?"

That trust deficit was exacerbated in May of last year when Obama delivered a landmark speech outlining his wider Middle East policy. Netanyahu was preparing to fly to Washington at the time and was surprised when he heard the president state that the 1967 borders should be a basis for negotiating the final frontiers of a Palestinian state. Netanyahu believed he had an understanding with Obama that some Jewish settlements built in areas occupied by Israel in the 1967 war would remain inside Israel, a position detailed in a 2004 letter from President Bush to then–prime minister Ariel Sharon. When Netanyahu finally arrived at the Oval Office, he was furious. At a photo op with the two leaders, Netanyahu began to lecture the president on Israel's security needs before the gathered journalists.

That incident was treated as a small blip in U.S.-Israel relations at the time. Obama soon clarified his position at the annual conference of the American Israel Public Affairs Committee, the most powerful pro-Israel lobby in Washington, emphasizing that a negotiated border between Israel and a new Palestinian state would by definition be "different than the one that existed on June 4, 1967." But resentment persisted. In June Israeli intelligence and military officers stopped discussing any details of their planning, analysis, and training cycles for a possible attack on Iran. Until then cooperation had been close: a regular video teleconference between U.S. and Israeli national-security advisers to discuss Iran was established during the first Netanyahu visit to Washington, in 2009. As one senior Israeli official puts it, "We ... both wanted no surprises."

For about four months, however, the Israelis went mum. Meetings continued, but they weren't substantive. "I knew they were upset; when they stopped talking, we said, 'We got a problem,'?" a senior U.S. intelligence official tells Newsweek. (This was confirmed by a military officer working on the Iran file.) The blackout was mostly lifted by Israel in October. But by that time the Obama administration had already been spooked, and with good reason: it's possible that Israel could start a war with Iran that the United States would be compelled to finish. (As it is, Israel continues to withhold a "top layer of information" regarding Iran, says the U.S. intelligence official.)

Israeli officials now insist that Obama has undergone what they regard as a positive evolution in his views on Iran. "The rhetoric from the United States today is different from what it was a year ago," says an Israeli in Netanyahu's inner circle. "Today, when you listen to Obama ... you get the feeling the Americans are ready to attack if worse comes to worst." Another official privy to discussions on Iran at the highest levels in Israel says, "It becomes clearer and clearer that America is on the course of a growing conflict, growing friction, growing risk of a big conflict with Iran."

American and Israeli officials attribute Obama's toughening stance to several factors, among them the Iranian regime's crackdown on pro-democracy protesters in June 2009. The discovery the same year of a secretly constructed underground nuclear facility near Qum "was the real turning point," says former assistant secretary of state P.J. Crowley, who was in office at the time. "Whereas prior to 2009 there was hope that there could be dialogue, after Qum significant action shifted toward the pressure track. We've never closed the door to engagement, but clearly after September 2009 there was acceleration of other activities." Then came the news in January of this year that the facility near Qum was being used to process 20 percent enriched uranium. That announcement, combined with intelligence about weapons development detailed in a November 2011 report by the U.N.'s International Atomic Energy Agency, led many to see the danger as increasingly clear and present.

Obama is also thinking more broadly—about a possible nuclear-arms race in the region and the reputation of the United States. One of the senior Israeli officials interviewed for this article says he has heard U.S. counterparts express concern that a failure to stop Iran could lead to an eclipse of American power in the Middle East. "You stand to lose a very wide area of influence that was yours for 60 years," says the official. "If Iran did [develop nukes] in spite of America, how would Obama look? How would America look?"

Obama's calculus, however, has to take in other factors as well—from the fate of Amir Mirza Hekmati, a former U.S. Marine sentenced to death in Iran last month for alleged spying, to the fate of every American and Iranian who would be involved in waging an overt war. Iran is a country of 80 million people, compared with about 30 million in Afghanistan or Iraq. Its territory of 1.65 million square kilometers, including deserts and rugged mountains, gives it impressive strategic depth. (Israel, by contrast, exists on 20,000 square kilometers.) Iran is a major oil producer and looms in perilous proximity to the most critical petroleum and gas supply lines in the world, from the Strait of Hormuz in the south to the Caspian Sea in the north. The United States would certainly aim to avoid a land war, but once bombs and missiles start flying, the endgame is hard to predict. What happens if Iran manages to sink an American warship? Or, more likely, what happens if an air assault only consolidates support for the regime while the nuclear program, only partly hidden today, becomes entirely secret? Is there a war of attrition? An all-out invasion? Yet another long, wasting war for America in the Middle East? Already many commentators are pointing out apocalyptic risks. Mike Lofgren, for decades a Republican staffer on the Hill, recently warned of a toxic mix of international tensions and American domestic politics analogous to Europe in 1914, when a relatively small and unexpected event triggered the first war to engulf the world.

Even the prospect of severe Iran sanctions is enough to cause tremors in some quarters. Sanctions could force a spike in petroleum prices or prompt Iran to disrupt shipping in the Persian Gulf, where tankers carry roughly a third of the world's oil. When Congress was preparing a bill last year to punish any financial institution doing business with Iran's central bank, Treasury Secretary Timothy Geithner wrote a letter to Sen. Carl Levin, the Democratic chairman of the Armed Services Committee, arguing against the measure: "Rather than motivating these countries to join us in increasing pressure on Iran, [such countries] are more likely to resent our actions and resist following our lead—a consequence that would serve the Iranians more than it harms them."

The White House was concerned that Obama, in the end, might have to issue a presidential waiver on sanctions to protect the American economy, making the United States look like a paper tiger in the eyes of the mullahs. In a November meeting on Capitol Hill—in a special office fortified to withstand electronic surveillance—deputy national-security adviser Denis McDonough and other White House aides pleaded with key legislators. They were worried that the bill did not allow enough time to find alternative sources of oil and keep global markets stable. "If you force us to issue national-security waivers on these sanctions, this will undercut everything we're trying to do," McDonough said, according to one of the participants.

The Saudis and other Gulf states, meanwhile, gave assurances that they could make up for any Iranian oil taken off the market and keep prices stable. (This is one of those rare cases where Gulf Arab and Israeli leaders are largely in agreement.) In the end, the amendment mandating sanctions against institutions dealing with Iran's central bank passed by a 100–0 vote. Still, the White House won some wiggle room, including a softening of the language that provides an option for placing severe restrictions on banks instead of banning them outright from the U.S. financial system.

The key question now is how much time is left to achieve a negotiated solution. Israeli officials say that the United States thinks it can afford to wait until Iran is on the very verge of weaponizing, because U.S. forces have the capacity to carry out multiple bombing sorties and cripple the Iranian program at that point. Israel, however, would not be able to carry out such a sustained attack and would need to hit much sooner to be effective—before Iran could shelter much of its program deep underground. One former Israeli official tells Newsweek he heard this explanation directly from Defense Minister Ehud Barak. "If Israel will miss its last opportunity [to attack], then we will have to lean only on the United States, and if the United States decides not to attack, then we will face an Iran with a bomb," says the former Israeli official. This source says that Israel has asked Obama for assurances that if sanctions fail, he will use force against Iran. Obama's refusal to provide that assurance has helped shape Israel's posture: a refusal to promise restraint, or even to give the United States advance notice.

Critics might say this is an example of Obama "leading from behind." What his record shows more clearly, however, is that he is willing to come at the Iran problem from every possible angle: from behind, from the sides, overtly, covertly, diplomatically, and economically. That record also suggests that if a war is in the offing—perhaps ignited by an Israeli attack on Iran's nuclear installations, with or without American approval—Obama will continue to pursue policies that are multifaceted, restrained, and, if possible, short of full-scale conflagration.

Correction: The print version of this story said President Obama clarified his position on Middle East policy by stating that negotiated borders should be based on 1967 lines "with mutually agreed swaps." In fact, he had made the point about "mutually agreed swaps" in an earlier speech.

With Christopher Dickey in Paris and R.M. Schneiderman in New York