The Iraq Study Group (ISG) has issued its long-awaited — and by now, much-criticized — report to the White House, and has met with a lukewarm reception. President George W. Bush is now seeking input from a cadre of other agencies and officials as he attempts to formulate a new Iraq strategy, which will be announced in January 2007. Presumably, the perspectives and ideas being gathered from the Pentagon, the State Department and others will be placed alongside the ISG’s 79 recommendations, which did more to address the United States’ diplomatic challenges in the Middle East than to articulate a rational course of action for the U.S. military.

Politically speaking, it is obvious why the administration has balked at suggestions that the United States should openly extend the hand of diplomacy to Iran, which — chiefly through the mouthpiece of Iranian President Mahmoud Ahmadinejad — has said and done little to endear itself to the world, and much to spotlight the weakness of the U.S. position. Geopolitically speaking, it is equally obvious why the United States has no real choice in the matter. Washington’s best option is to combine diplomacy with a military strategy (which we have discussed elsewhere) that can open the door to a substantial drawdown. But engaging Iran on some level — however unpalatable it seems — is an unavoidable part of the equation.

It is useful, then, to consider the situation from Iran’s point of view. The straitjacket the United States now finds itself in was not created overnight, but through years of careful manipulation. The Islamic Republic now is drawing the world’s attention to its position of strength in the region, but there also are some internal issues that weigh on the minds of regime leaders and must be carefully managed if this strength is to be maintained.

The Iranian Strategy

Tehran has been maneuvering for years to secure certain interests in the region. First and foremost, of course, is the country’s own national security, for which the toppling of Saddam Hussein’s regime in Baghdad was a prerequisite. With the establishment of a friendly (or at least neutral), Shiite-controlled government in Baghdad, Iran would be able to both secure the primary goal of security and be well down the path toward a secondary and equally desirable goal: regional hegemony.

Therefore, an Iranian strategy began emerging almost from the moment the statue of Saddam Hussein in Baghdad fell in April 2003. The strategy has revolved around shaping events in the region and, crucially, external perceptions of Iran and its leadership. The chief tactics employed have been manipulation of political events in Iraq, a vocal emphasis on Iran’s nuclear program, skillful use of politically incorrect (at times, seemingly maniacal) statements by Ahmadinejad, the activation of regional proxies and, above all, patience. Stratfor has explored many of these tactics in detail before, but we will recap them here briefly as the strategy, viewed in full, is quite something to behold.

Nuclear Weapons and Image Control
Let’s begin with the most potent part of the strategy (both politically and militarily): the nuclear program.

Iran clearly has used this as a bargaining chip in the back channel dealings over Iraq. Rather than pursuing a covert nuclear program — which has been the logical course if obtaining nuclear weapons were truly Iran’s primary goal in the beginning — the Iranians made a conscious decision to tout their nuclear advances publicly. Their political and energy partners in Moscow and Beijing routinely have played defense, ensuring that the nuclear issue languishes in the U.N. Security Council. And Tehran has made sure to crank up the rhetoric whenever political developments in Iraq take an unfavorable turn — while always staying clear of the red line (beyond which the United States or Israel could be expected to mount pre-emptive strikes). This tactic has helped shape perceptions of Iran as a force to be reckoned with, while keeping Washington and its allies off balance in negotiations over Iraq. And, significantly, nuclear weapons no longer appear to be a red herring tactic, but an end of themselves for Tehran.

Closely related to this has been the image campaign for Ahmadinejad, who has been carefully and purposely branded in the public mind as an utter lunatic. The nearly unknown, populist mayor from Tehran was captured in the public spotlight during Iran’s 2005 summer election season. Before the world could even begin to form an opinion of him, he began threatening to wipe Israel off the map, labeling the Holocaust an enormous lie and so forth. As North Korea’s experiments with the "crazy fearsome cripple gambit" have showed, an otherwise weak state — headed by a seemingly wild-eyed leader who just might be mad enough to launch some of the nukes that the state may or may not actually possess — can gain useful concessions, if not respect, from the rest of the world. And in Iran’s case, it certainly made Israel and the United States to think twice about whether to attempt any military adventures concerning the Islamic Republic.

Regional Proxies
Tehran has shown itself equally effective in its use of militant proxies in the region.

The financial, ideological, political and military support of Iran has helped Hezbollah build a strong following among the mostly poor Shiite population of southern Lebanon. Since Israel’s withdrawal from Lebanon in 2000, the Shiite militant group was left languishing — provoking the occasional border skirmish with Israel as a way of maintaining its credibility. But over the summer, while the world was focused on Iraq, Hezbollah roared back to life in a conflict that went well beyond a border skirmish.

There is reason to believe Iran had a hand in igniting that conflict. In early July, when long-range missiles began raining down on Haifa, sources within Hezbollah hinted to Stratfor that the launch had taken them by surprise — indicating something more than a routine kidnapping of Israeli soldiers that garnered unintended consequences. Hezbollah forces certainly took a beating during the 34-day conflict, but the important point is that the militant group successfully resisted the Israeli military.

This outcome has purchased long-term benefits for both Hezbollah and Iran. On the micro level, it has attracted new levels of support for Hezbollah and engendered a new sense of confidence within the movement — which is now moving to expand its political clout through massive street demonstrations in Beirut, designed to bring down the government controlled by its opponents. On the macro level, the outcome of the conflict left Israel in military and political paralysis — providing Iran with even more room to maneuver politically within the region.

In addition to Hezbollah, Iran has kept in close touch with its Shiite proxies in Bahrain and Kuwait — a quiet reminder to Sunni Arab states in the region that Tehran retains the means to destabilize their neighborhoods, as it did Israel’s, should circumstances compel it. Iran’s rising influence in the region has put the Arab regimes on a defensive footing, and some are now questioning the wisdom of strategies that rely on U.S. military strength to secure their interests. It is for this reason, then, that Saudi Arabia is now hinting it will step up support for Sunni insurgents in Iraq, and the members of the Gulf Cooperation Council have announced plans to launch a joint nuclear program (ostensibly for civilian energy purposes). The Sunni states lack strong military capabilities of their own, but will shout as loudly as possible to make it clear to the United States that they will not sit idly by while Iran recasts the region’s balance of power in favor of the Shia.

Iraq: The Center of Gravity
All of these tactics, of course, hit around the periphery of what is really the first and most crucial issue: Iraq. It is there that Iran’s political manipulations, its use of proxies and its great patience — as the poor position of U.S. troops and of the U.S. president both grew increasingly evident — have come into play. And with its growing confidence in the region, Iran seemingly has become less inclined to settle for merely a friendly or neutral government in Baghdad. Instead, it wants control.

In keeping with the strategy, Washington now is feeling pressure from all sides to engage Tehran — and, crucially, the Iranians have had to sacrifice nothing to achieve this position.

The Domestic Situation
That is not to say that the Iranians are invulnerable, of course — and the political situation inside the country is particularly worthy of consideration.

For the first time since Ahmadinejad came to power in June 2005, student protests over his presidency broke out Dec. 6, Dec. 8 and Dec. 11 in Tehran. Though the number of protesters dwindled from around 4,000 to about 50 over the course of a week, the fact that the demonstrations occurred at all is significant. Such demonstrations are rare inside Iran, and they speak to the fact that an undercurrent of opposition to the hard-line clerical regime still exists. Political moderates have been without a voice in the government since former president Ali Akbar Hashemi Rafsanjani lost his bid for election last year, and they now appear ready to make their presence felt once again.

Meanwhile, the government faces opposition from a variety of ethnic minorities — including Ahwazi Arabs in the southwest, Kurds and Azerbaijanis in the northwest, Balochis in the southeast and Turkmen in the north. Iranian leaders are well aware of the risk that these dissident groups could be utilized by foreign intelligence agencies seeking to destabilize the Iranian regime.

With such considerations in mind, it is little wonder that Iran’s maneuvers during the past six months or so have been particularly obvious. The regime not only has been moving adroitly to contribute to and exploit a period of relative U.S. weakness, but also acting with the recognition that it cannot play this game indefinitely. The clock is ticking, and the time for Iran to capitalize on its gains in the region is now.

Next Steps

Obviously, the ethnic makeup of the government in Baghdad is a crucial consideration for both Washington and Tehran.

One of the options the Bush administration currently is entertaining would involve revamping the Iraqi government leadership — meaning the removal of Iraqi Prime Minister Nouri al-Maliki and the exclusion of Shiite figures loyal to al-Sadr. Though Bush has insisted publicly that al-Maliki is the "right man" to govern Iraq (much as he insisted Donald Rumsfeld was the "right man" to lead the Defense Department), al-Maliki has been losing favor among U.S. political and military leaders, who see him as an ineffective leader who is unwilling to disband the Shiite militias. The leak of a memo by national security adviser Stephen Hadley, which harshly criticized al-Maliki just ahead of his meeting with Bush in Amman, Jordan, could be an indication that the administration is pursuing a good-cop, bad-cop strategy to introduce the idea that al-Maliki is the wrong man for the job after all.

Al-Maliki is a member of Hizb al-Dawah, which ranks second in terms of influence within Iraq’s Shiite political bloc — behind the Supreme Council for Islamic Revolution in Iraq (SCIRI), the most staunchly pro-Iranian party. Thus, to counter SCIRI’s influence, al-Maliki has had to play various Shiite factions against each other in order to shore up his own party’s standing.

If al-Maliki were to be sacked, the heir apparent would seem to be SCIRI leader Abdel-Aziz al-Hakim, who met with Bush on Dec. 5 at the White House. However, should al-Hakim choose to retain his position as kingmaker among the Iraqi Shia and avoid the challenges that a prime minister inevitably would face, Adel Abdel Mahdi — also a senior SCIRI member and one of Iraq’s two vice presidents — very well could take the job.

Installing a prime minister from SCIRI clearly would root the Iraqi government in the pro-Iranian camp, but this is not necessarily something Washington would dismiss out of hand. With someone like al-Hakim or Mahdi in power, the government could be expected to bring the largest and most sophisticated Shiite militia — SCIRI’s own Badr Brigade — under control. And both Washington and Tehran have an interest in putting an effective Shiite leader at the helm who can actually keep the level of sectarian violence propagated by Shiite militias under control.

But this plan has its drawbacks. Unlike the al-Sadr bloc, SCIRI has an insurance plan for its militant arm: With government control, it could more easily integrate the Badr Brigade into Iraq’s security forces — and effectively sideline al-Sadr’s Mehdi Army, which has been a major contributor to the lawlessness in Baghdad. The Mehdi militants would be sure to mount violent resistance to any deals that would sideline al-Sadr’s supporters in government.

If a bid to displace the al-Sadrites should succeed, however, some Iraqi and U.S. leaders are looking to strengthen Sunni standing in the government through Vice President Tariq al-Hashimi — the No. 2 leader of the Iraqi Accord Front, the largest Sunni party in the government. Sunni participation in the government remains a prerequisite if the government is to clamp down on the non-Shiite insurgency in Iraq. And as the pressure grows for the United States to shift strategy, pull away from day-to-day security responsibilities and engage in serious talks with Iran, the Sunni bloc in Iraq might see this is as their best chance to consolidate their position in the government before the Iranians get more control of the situation. It is no coincidence, then, that al-Hashimi traveled to Washington earlier this week for a meeting with Bush — three weeks ahead of schedule — as the rumors of a new power-sharing agreement involving SCIRI spread.

The diplomatic problem the United States now is facing brings to mind the words of President John F. Kennedy: "Let us never negotiate out of fear. But let us never fear to negotiate." At this point, Bush knows he cannot negotiate with Iran out of fear, and so he is delaying negotiations by shopping for recommendations on military strategy and mulling over ways to revamp the political leadership in Baghdad.