As the Administration and Congress move forward to pursue engagement, harsher sanctions, or both, regional actors are evaluating their policies and priorities with respect to Iran. Iran's neighbors share many U.S. concerns, but often evaluate them differently than the United States when calculating their own relationship with or policy toward Iran. Because Iran and other regional concerns—the Arab-Israeli peace process, stability in Lebanon and Iraq, terrorism, and the ongoing war in Afghanistan—have become increasingly intertwined, understanding the policies and perspectives of Iran's neighbors could be crucial during the consideration of options to address overall U.S. policy toward Iran. Iran's neighbors seek to understand and influence changes in the following areas: Iran's regional influence, Iran's nuclear program, Iran's role as an energy producer, and Iran's support for terrorism and non-state actors. The United States and Iran's neighbors have expressed concerns about Iran's regional ambitions, its ability to influence the domestic political circumstances of its neighbors, and its ability to act as a spoiler in the peace process. Many analysts have cast events in the region as a power struggle between Sunni-ruled Arab states, led by Egypt and Saudi Arabia, and Iran and its allies and proxies, namely Syria, Hamas, and Hezbollah. Others reject this paradigm as overly simplistic, pointing to Iran's physical and demographic attributes as an explanation for its regional role. Iran is a country of considerable size and resources and, as a result, exerts a natural level of influence, both in positive and negative ways, they argue. Some observers have argued that Iran's soft power has diminished since the June 2009 presidential election and ongoing unrest. For some of Iran's neighbors, Iran's regional influence is a domestic political concern. For example, Bahrain and Kuwait—Gulf states with signification Shiite populations—often express concerns that Iran is fomenting unrest among Shiites, highlighting fears about their own internal stability. In recent years, Morocco, Egypt, and Yemen have expressed similar concerns. Iran also uses proxies that at times are a destabilizing force, as is the case with Hezbollah in Lebanon. Others view Iran's regional aspirations in a broader sense. Saudi Arabia, for example, criticizes Iran's interference in what it perceives as "Arab causes," like the Israeli-Palestinian issue, and reportedly confronts Iran's proxies in Lebanese politics with material support of Sunni political parties and candidates. The primary goal of U.S. and international engagement with Iran is to gain a clear understanding of Iran's nuclear activities through inspections and safeguards, and to limit Iran's uranium enrichment capacity to mitigate future concerns about the nature of its program and its possible weaponization. Some argue that uncertainty over Iran's nuclear program centers on the regime's political will to develop a nuclear weapon and are uncertain whether that will exists. Many analysts, however, perceive the weaponization of Iran's nuclear program as a certainty unless the international community acts to stop it. The disclosure on September 21, 2009 of a second uranium enrichment facility near Qom raised concerns on all sides (see " Caspian Neighbors " below). Iran's intentions are difficult to discern, but most analysts and observers agree that if Iran was seeking enriched fuel for nuclear energy and other civilian purposes, then it would not need to conceal an enrichment facility or restrict access of International Atomic Energy Agency (IAEA) inspectors to existing sites. Most of Iran's neighbors share the concern of the United States and the international community over the nature of Iran's nuclear program, but some perceive it as a more imminent threat than others. Others recognize the threat but have competing economic and political interests that may prevent them from publicly expressing their concerns. Almost all of Iran's neighbors share the primary concern that uncertainty over Iran's nuclear program could lead to a regional arms race or war that could spill over into their territories, complicate their relationships with the United States, and/or badly damage their economies. Iran's energy resources serve as both a source of funds for its nuclear program, support for terrorism, and other activities, and as leverage over international players who might otherwise condemn those activities. According to the Energy Information Administration (EIA), Iran holds an estimated 10% of proven global oil reserves, the third largest proven reserves following Saudi Arabia and Canada. It is the fourth largest exporter of crude oil by volume, behind Saudi Arabia, Russia, and Norway. Perhaps just as valuable is Iran's strategic location along the Strait of Hormuz, a narrow chokepoint through which more than 40% of the world's traded oil transits. In addition to its oil reserves, Iran holds an estimated 15% of the world's natural gas reserves, the second largest globally. (Russia is first.) Iran's vast energy resources, some argue, are underexploited and with continued investment could become more vital as world demand also grows. This fact is increasingly relevant to regional and U.S. approaches to Iran, as nations n Asia develop stronger energy partnerships with Iran as a means of capitalizing on its potential. For some of Iran's neighbors, economic and security concerns are in conflict when it comes to their relationships with Iran, and their policy priorities are shaped by whether they perceive potential economic benefits to outweigh security concerns. While almost all of Iran's neighbors share the view that a nuclear Iran is not desirable, especially if its development leads to a regional arms race or military conflict, some likely are unwilling to publicly challenge Iran on the issue because of their economic dependence on or relationships with Iran. The United States and Iran's neighbors are concerned about Iran's support for terrorism in the region. According to the U.S. State Department Country Reports on Terrorism, Iran supports an array of U.S.-designated terrorist organizations and militant groups, including Lebanese Hezbollah, Hamas, Palestinian terrorist groups, Iraqi militants, and Taliban fighters in Afghanistan. This support has at times undermined the political stability of Iran's neighbors, like Iraq, and poses direct military threats to others, like Israel and Lebanon. It also directly challenges U.S. efforts to advance the peace process, stabilize Iraq and Afghanistan, and promote regional stability. Terrorist groups supported by Iran have perpetrated attacks in the Middle East, Europe, and Central Asia. While these attacks have targeted U.S. or Israeli interests, the presence of terrorist groups often limits the options available to Iran's neighbors to act together to address other regional concerns. By creating internal divisions and exploiting existing political and sectarian discord in places like the Palestinian territories and Lebanon, and by maintaining a proxy military presence on Israel's northern border (Hezbollah), Iran can perpetuate conflict without directly involving its own troops while using continued Arab-Israeli strife to justify its own militant, revolutionary rhetoric at home to shore up domestic support. As the two most politically and religiously influential states in the Gulf region, Saudi Arabia and Iran have long maintained a binary balance of power, with each seeking to maximize its position relative to the other and relative to important outside players. Knit together by a common Islamic history but divided by sectarian, ethnic, and linguistic differences, the two Gulf energy giants leverage their economic resources and political power competitively to shape policy outcomes across the region and around the world. During the Cold War, the shared anti-Communist positions of the late King Faisal bin Abdul Aziz Al Saud and the late Shah Mohammed Reza Pahlavi made each a key regional ally of the United States under the so-called Twin Pillar policy, in spite of their latent rivalry. Iran's Islamic revolution accentuated core strategic tensions between the two regional powers by bringing religious and ideological differences into sharp contrast. In the 1980s, Iran's revolutionary clerical regime produced anti-Al Saud propaganda that questioned Saudi custodianship of the holy cities of Mecca and Medina, while official Saudi clerics and Salafi activists amplified their anti-Shiite rhetoric. Sectarian clashes in Saudi Arabia's Eastern Province and the holy city of Mecca underscored Saudi fears of potential subversion from Iran, and Saudi Arabia led other Gulf Arab states in supporting Iraq in its eight year war against Iran. In the 1990s, Saudi Arabia served as the key hub for the implementation of the U.S. "dual containment" strategy, which was designed to maintain United Nations sanctions and no-fly zones in Iraq and to deter potential Iranian or Iraqi aggression. During this period Saudi Arabia viewed Iran in less hostile terms in light of Iraq's invasion of neighboring Kuwait. The U.S.-led invasion of Iraq in 2003 and the subsequent empowerment of Iraqi Shiites via the ballot box upended the prevailing security balance in the Gulf: in Saudi Arabia's view, Iran was the main beneficiary of the removal of Saddam Hussein. The potential for insecurity and sectarian violence in Iraq to draw Saudi Arabia and Iran into proxy warfare appears to have subsided at present. However, the fundamental reorientation of Iraq's political scene has created a new field of competition that continues to shape the views of Iranian and Saudi leaders about regional dynamics. The outcome of the pending national elections in Iraq will affect the relative interests of Saudi Arabia and Iran and the prospects for future engagement or competition among them. Elsewhere, Iran and Saudi Arabia remain engaged in a direct competition for influence, at times pursuing diametrically opposed policies with regard to Lebanon and the Israeli-Palestinian peace process. Whereas Saudi Arabia previously placed great emphasis on positioning itself as the spiritual, if not political defender, of Sunni Islamic orthodoxy and a transnational Muslim community, its leaders' current focus appears to be on strengthening national and pan-Arab solidarity in an attempt to undercut domestic extremist threats and contain Iran. While sectarian rhetoric continues to enflame Saudi-Iranian relations, the dynamic between the two governments has reverted to basic strategic competition, overlaid with official assurances of mutual respect and periodic consultation. Saudi authorities have become less wary about asserting a leadership role in the Arab world and have asked Iranian leaders not to unduly interfere in what the Saudi Arabian government now considers to be strictly "Arab causes," including Palestinian political disputes. Iran's nuclear program is a source of concern for Saudi Arabia, as is the potential for regional conflict resulting from the international community's confrontation with Iran. More recently, Saudi Arabia's military campaign against the Shiite Al Houthi rebel group in northern Yemen has brought fears of proxy conflict back into focus. Yemeni and Saudi sources have alleged that Iran has provided material support to the Houthis, while Iranian figures have condemned Saudi and Yemeni military operations as anti-Shiite. Iran may no longer be working overtly to destabilize or overturn neighboring governments, but Iranian politicians nevertheless advocate for and support actors that have opposed Saudi policy and disrupted regional security in recent years, such as Hamas and Hezbollah. Combined with the perceived influence Iran has gained in Iraq and from its nuclear program, these trends have led the Saudi government to adopt a cautious policy approach that seeks to avoid direct confrontation while limiting the further spread of Iranian influence through coordination with other Arab governments and, to a lesser extent, with the United States. In general, Saudi officials have pursued limited engagement with their Iranian counterparts and have avoided exacerbating sectarian tensions with official public statements. Saudi media outlets, including government owned television channels and newspapers, have taken a more critical line toward Tehran, and have capitalized on controversies such as the early 2009 flare-up over Bahrain (see below) and the ongoing confrontation with the Al Houthi rebels in Yemen to fan popular opposition to perceived Iranian interference in the region. On the nuclear issue, Saudi Foreign Minister Prince Saud Al Faisal said in April 2009 that Saudi Arabia welcomed, "the US Government's positive approach of wishing to deal with the Iranian nuclear dossier crisis diplomatically and through dialogue. We are very hopeful that the Iranian Government will respond to these efforts for solving the crisis in a way that spares the Arab Gulf region and the Middle East the dangers of the proliferation of nuclear weapons and ensures the right of all the region's countries to the peaceful use of nuclear energy in accordance with the International Atomic Energy Agency's standards." At the United Nations General Assembly in September 2009, Prince Saud linked Israel's nuclear program to Iran's in arguing that the international community's response to Israel's presumed nuclear capabilities "has motivated some states to push ahead with the development of nuclear capabilities, using the pretext of double standards to justify non-compliance with international resolutions in this regard." The value of Saudi-Iranian trade remains relatively limited, estimated by the International Monetary Fund at $1.42 billion in 2007 and $1.87 billion in 2008. The limits imposed on the productivity of Iran's oil sector by U.S. and international sanctions and the difficulties foreign firms have found working in Iran benefit Saudi Arabia by helping to preserve its global market share. As an oil producer with significant excess production capacity, Saudi Arabia is able to exert some pressure on global oil prices and thereby has the power to affect the potential oil export revenue available to its fellow OPEC member Iran. Economic and security concerns are linked for both parties, as regional security disruptions have the potential to threaten the viability of oil exports and necessary imports. Saudi Arabia's military forces possess more sophisticated modern equipment than those of Iran, in spite of the Iranian military's larger overall manpower. Saudi military spending also far outpaces that of Iran. However, Iran's ballistic and cruise missile forces, the unconventional capabilities of Iranian naval forces, and Iran's relationships with non-state actors like Hezbollah are thought by many experts to pose a credible and dangerous threat in the minds of Saudi security officials. Saudi Arabia, as a longstanding military ally of the United States, is likely viewed by Iranian policy makers as a potential staging ground or facilitator for attacks on Iran and a potential target for retaliation against Iran's enemies by virtue of the international community's dependence on Saudi oil exports. As such, Saudi officials reportedly fear that Iran could attack in the event Iran were to face a military confrontation with the United States or Israel, even if Saudi Arabia had not been involved in the planning or execution of a military operation. The rivalry inherent to the Iranian-Saudi relationship appears natural given that the two states are emerging powers seeking to maximize their interests in a volatile, economically important region and on the world stage. The vulnerability of both countries' energy assets and the unique constraints imposed by religious factors may help mitigate the likelihood of direct conflict, in spite of economic competition and apparent sectarian tensions between the two. Saudi-Iranian political tensions have flared in the past to the point of sparking limited military engagements, but over time Saudi and Iranian leaders consistently have found means of defusing their disagreements before these crises have escalated into broader conflict. To the extent that political developments in Iran empower figures intent on asserting Iranian influence in Iraq, the Gulf, and the Levant without regard for the views or interests of Arab states, Saudi Arabia can be expected to use its considerable economic and political influence to resist Iranian encroachment. To the extent that more accommodating, pragmatic figures prevail, Saudi leaders can be expected to continue limited engagement with Iran, in light of persistent concerns about Iran's regional ambitions. Developments in Iraq will shape Saudi and Iranian leaders' decision making about their own bilateral relationship. Saudi Arabia's prospective response to the acquisition of a nuclear weapon by Iran has long been a matter of intense debate and conjecture among observers and policy makers. Speculative predictions aside, history and recent policy statements suggest that if Saudi leaders decide that a Iranian nuclear weapon would have a significant deterrent effect on the United States or otherwise intolerably alter the balance of power in the Gulf, then Saudi Arabia would take decisive action to secure its national interests as it has in the past, whether unilaterally or in cooperation with other governments. Most Gulf experts expect that Saudi Arabia's response would be a critical factor in other regional actors' decisions about a possible Iranian nuclear weapon's capability. Since the Iranian revolution, Iran and Qatar have maintained positive relations, in spite of periods when Iran's relationships with the Arab Gulf states otherwise foundered, such as during the Iran-Iraq war and tanker war of the 1980s. Qatari officials have met frequently with members of Iran's government in Iran and in Qatar in recent years, and the Qatari government regularly advocates for increased dialogue between the GCC states, other Arab states, and Iran. Iranian President Mahmoud Ahmedinejad attended the December 2007 GCC summit in Doha at the invitation of Qatari Emir Hamad bin Khalifa Al Thani. He also attended a January 2009 summit on Gaza sponsored by the emir. The emir in turn visited Iran in November 2009 for consultations on bilateral and regional issues. In a March 2009 interview with a German newspaper, the emir explained Qatar's current perspective on the region and on Iran by saying, "We are a small country and we can live with anything around us. We will not be an enemy to anybody, but of course we will not allow anybody to use us against others. We will not, for example, stand with America against Iran. For sure. Iran never bothered us, it never created a problem for us... It will be hard for the Gulf countries to be with Iran against the United States. And I believe Iran knows this." These remarks, coupled with Qatari decisions to host Iranian leaders and to encourage Arab solidarity with Hamas during the January 2009 Gaza war have led some observers to argue that Qatar is working in opposition to the efforts of Saudi Arabia and Egypt and in favor of Iran. Qatari officials largely reject analyses that divide the region into opposing camps and argue that engagement, dialogue, and collective approaches to regional security problems between Arab states and Iran may offer opportunities to avert further tension and conflict. These arguments and positions are consistent with the Qatar' government's reputation for favoring independent policies and attempting to assert a leadership role consistent with its growing economic clout, in spite of its small population and very limited military capabilities. Qatar's foreign policy priorities reflect its leaders' desire to maintain their country's independence, security, and freedom of action among more powerful competing regional and international actors, including the United States. Like other Arab Gulf states, Qatar's economic growth and diversification is in many ways dependent on the maintenance of stability in the Gulf region. Thus it views potential conflict, whether initiated by Iran or by others, as undesirable. Statements from Qatari leaders suggest that Doha views Iran as an ascendant regional power that cannot be ignored or fully contained by non-military means, and thus Qatar prioritizes engagement with Iran and its potential adversaries. Qatar's recent diplomatic activities, including its mediation of Lebanon's political deadlock in early 2008 and its advocacy on behalf of Hamas in January 2009, have been viewed by many regional observers as consistent with Iran's priorities, although Qatari leaders have described their regional diplomacy as driven by traditional Arab nationalist concerns. In July 2006, Qatar was the sole member of the United Nations Security Council to oppose Security Council Resolution 1696, which called on Iran to "suspend all enrichment-related and reprocessing activities, including research and development, to be verified by the IAEA," and proposed potential sanctions should Iran refuse. According to the IMF, the value of Iranian-Qatari trade was estimated at $57 million in 2007 and $75 million in 2008. Iran and Qatar share the large North Field/South Pars natural gas deposit off the Qatari coast. Most of the gas in the field lies in Qatar's territorial waters (approximately 900 trillion cubic feet), with Iran's waters possessing the remainder (approximately 280 trillion cubic feet). Qatar's share of the field is the basis for the country's status as holding the third largest natural gas reserves in the world. Qatari liquefied natural gas exports brought an estimated $35.6 billion in export revenue to the country in 2008. With small and lightly equipped armed forces, Qatar effectively relies upon the U.S. armed forces stationed in the country for its defense. However, the presence of U.S. forces also creates a potential flashpoint vis-à-vis Iran; in the event of U.S.-Iranian hostilities, U.S. military facilities in Qatar would be critical for U.S. command and control purposes and thus could be likely targets of Iranian attack. The Chief of Staff of the Qatari Armed Forces Major General Hamad bin Ali al Attiyah travelled to Iran in July 2009 and held security talks with Iranian defense officials, including the commander of the Iranian Revolutionary Guard Corps. Unlike the other GCC states, Qatar has an enduring economic and security linkage to Iran, by virtue of the shared energy resources in the countries' contiguous waters. Without access to the shared gas deposit or under conditions where gas production facilities created with massive state investments were threatened with attack, Qatar's economy and fiscal position could suffer greatly. Qatar has maintained a policy of engagement with Iran and has strengthened bilateral ties as Iran's influence relative to other regional actors has grown in recent years. Absent a change in the nature and senior clerical leadership of the Iranian government, political changes among Iran's elected leadership are unlikely to jeopardize or significantly alter Iranian-Qatari relations. In late June 2009, Qatari Prime Minister and Foreign Minister Sheikh Hamad bin Jassem bin Jabr Al Thani characterized Iran's post-election disputes as "an internal matter because we must respect the right of each state to solve its own problems. The Iranians will decide how to resolve their problems among themselves, and I am certain that they will bypass this crisis." A more moderate government in Tehran could empower Qatari efforts to promote GCC engagement with as a means of preventing conflict. Qatari officials have simultaneously pursued a policy of rapprochement with Saudi Arabia, bringing an end to a series of long running political and boundary disputes, and with other Gulf states, building transportation and energy linkages to Bahrain, the United Arab Emirates, and Oman. Qatar's policy of attempting to "not be an enemy to anybody" appears sustainable unless drastic changes in security conditions compel Qatari leaders to choose among friends. As the rulers of a small state among larger regional and international powers, Bahrain's Sunni Arab monarchy historically has depended on good relations with external actors as the ultimate guarantee of its stability and security. Bahrain's current foreign relations reflect dynamics common to the country's history: the government of Bahrain seeks to maintain the country's security and independence through alliances with fellow Arab states, through a policy of engagement and non-antagonism toward Iran, and through the support of a powerful extra-regional actor, the United States. As an international hub for business and banking, Bahrain's economic success depends upon its image as a secure environment for investment and commerce. The potential for disruptive regional developments or conflict and the island's perennially disgruntled Shiite majority are the two principal concerns of Bahrain's ruling elite. Bahrain's ruling family, the Al Khalifa, first established control over Bahrain and its predominantly Shiite population in the 1780s, after overcoming and expelling Persian outposts on the island. The Al Khalifa family subsequently sought alliances to secure itself from the predations of several regional powers, including Persia, until ultimately agreeing to make Bahrain a British protectorate in 1861. Persian officials contested Bahrain's sovereignty repeatedly during the 19 th and 20 th centuries, most notably in the early 1930s, when Reza Shah contested the right of Bahraini officials to grant oil concessions to U.S. and British interests, and in 1957, when a bill was submitted to the Iranian Majlis (legislature) to make Bahrain a province of Iran. Prior to Bahrain's independence from Britain in 1971, Iran reasserted its claim to Bahrain, and the United Nations Secretary General dispatched a representative to determine the views of Bahrainis, who found that the island's residents overwhelmingly favored independence from all outside powers, including Iran. The findings were endorsed by the United Nations Security Council in Resolution 278 and Iran's legislature ratified the resolution, in effect relinquishing all claims to Bahrain. While these issues were formally settled nearly forty years ago, concerns that the claims will be revived have arisen from time to time based on comments by officials and clerics associated with the Islamic Republic of Iran. The most recent example occurred in February and March 2009, when media reports that a former speaker of the Iranian parliament and then-aide to Iran's Supreme Leader had referred to Bahrain as Iran's 14 th province sparked a regional controversy. In response, the Iranian Foreign Ministry repeatedly reasserted Iran's respect for Bahrain's sovereignty and independence alongside Bahraini officials, amid condemnations from a number of other Arab states. In spite of Iranian government assurances, the remarks were seized upon by Arab governments and observers who are convinced that Iran harbors hostile intentions toward its neighbors and have been concerned about perceived Iranian interference in Arab affairs in recent years. Bahrain's leaders, like those of other Arab Gulf states, have responded cautiously to Iran's nuclear program and the sectarian tension that has accompanied conflict in Iraq and rise of the Shiite Arab political parties since the fall of Saddam. Bahrain's limited resources and large Shiite population, some of whom are of Persian ethnicity, create unique challenges for the country's leaders as they view their relationship with Iran and events in the region. In the past, Bahrain's rulers have accused Iran of supporting pro-Iranian proxy groups against the Bahrain government, and Bahraini concerns about the potential for Iranian-supported unrest have been amplified in recent years amid sectarian violence in Iraq and resurgent protests by Shiite groups in Bahrain. Riots in 2009 mirrored similar events in the mid-1990s that produced accusations of Iranian interference, although reporting suggests the political disputes driving the more recent unrest are based on long-standing unresolved domestic grievances and government reactions rather than widespread pro-Iranian sentiment. Bahrain's leading Shiite opposition party, Al Wefaq, remains engaged in the political process and expressed concern about Iranian comments concerning Bahrain's sovereignty in early 2009. The party also played a mediating role following the December 2008 arrests of Shiite activists accused of plotting bombing attacks on Bahrain's national day, helping to secure the release of rival Shiite leader Hassan Mushaima. In November 2009, Sunni politicians criticized Al Wefaq after the Shiite party's members in the lower house of parliament refused to support a resolution endorsing Saudi Arabia's military campaign against the Al Houthi fighters accused of infiltrating the kingdom from northern Yemen. The controversy reignited concerns about sectarian divisions among Bahrainis, although both the royal court and Al Wefaq have issued statements underscoring the linkage between Saudi and Bahraini security. Al Wefaq and Mushaima's hard-line Al Haq movement will compete for influence among Bahrain's Shiite majority in the run-up to parliamentary elections scheduled for 2010, although it remains unclear whether Al Haq will formally participate or seek to put pressure on Al Wefaq to reinstate its boycott in light of continuing disillusionment among Shiites. Al Wefaq has delayed confirming that it will participate in the election, citing concerns about the overall effectiveness of the parliamentary system and continued allegations of sectarian discrimination. Bahrain's monarchy and Sunni community are likely to continue to closely monitor developments among leading Shiites for signs of Iranian influence or agitation. Iranian-Bahraini trade is limited; the IMF estimated its 2007 value at $166 million and $177 million in 2008. Negotiations for a potential natural gas agreement for Bahrain to import Iranian gas to meet growing domestic energy demand was temporarily placed on hold following the sovereignty controversy in early 2009. Under the terms of the agreement, Bahrain and Iran would build a pipeline to enable Bahrain to import 28 million cubic meters per day of gas over 25 years. As stated above, Bahrain's primary security concerns are domestic and relate to Iran only to the extent that Iranian leaders may seek to exacerbate existing tensions between Bahrain's Sunni monarchy and its majority Shiite population. Bahrain relies on its relations with the United States and Saudi Arabia for its external security. Like Qatar, Bahrain hosts major U.S. military facilities, specifically the forward headquarters for the U.S. Navy component of U.S. Central Command, and may fear a potential retaliatory attack in the case of hostilities involving the United States or Israel and Iran. Suspicions of Iran among Bahrain's leaders appear deeply ingrained, and are amplified in instances where Bahrain's leaders perceive Iran to be pursuing hegemonic or sectarian policies. Political changes in Iran as a result of the disputed 2009 election could mitigate some, but not all of Bahrain's concerns. Acquisition of a nuclear weapon by Iran would likely deepen Bahrain's reliance on the United States, although trends and reactions among the Gulf Cooperation Council states would also exert significant influence on Bahrain's response. Iran appears poised to continue its efforts "to consolidate and deepen relations with all nations in the Persian Gulf, especially Bahrain," as a means of minimizing the prospects for collective GCC action that could harm its interests. Like the other Gulf states, the individual emirates of the United Arab Emirates (UAE) have had complex relationships with Iran historically, marked by changing alliances and, in some cases, contested sovereignty. On a national basis, the UAE government has viewed Iran simultaneously both as a potentially hostile neighbor and as an important commercial partner since the formation of the UAE in 1971. The seven constituent emirates' relations with Iran have proven complex, with some, such as Ras Al Khaymah and Abu Dhabi, having long held more negative views of Iran and its intentions, and others, such as Dubai and Sharjah, taking more accommodating positions based on shared commercial and demographic ties. Persian and Iranian interaction with the Arab Trucial States, as the emirates were collectively known prior to the formation of the UAE in 1971, was critical in their early economic and political development and shaped interactions and rivalries between the emirates as the new state emerged. In 1971, Iran, then ruled by U.S.-backed Shah Mohammed Reza Pahlavi, seized two islands, Greater and Lesser Tunb, from the emirate of Ras Al Khaymah, and established a military outpost on the largely uninhabited island of Abu Musa under a bilateral agreement with the emirate of Sharjah. In April 1992, Iran exerted control of the remainder of Abu Musa. The dispute over the sovereignty of the islands has persisted over the last nearly 40 years, and frequently has enflamed tensions between the UAE, Arab states, and Iran. In October 2008, the UAE and Iran signed an agreement to establish a joint commission to resolve the islands dispute; that agreement came two months after the UAE protested Iran's opening in August 2008 of administrative and maritime security offices on Abu Musa. The United States is concerned about Iran's control over the islands, but takes no position on the sovereignty of the islands. In a March 2009 interview, UAE President Sheikh Khalifa bin Zayed Al Nahyan explained the UAE government's views on the islands dispute and the Iranian nuclear program: "As a matter of principle, we do not condone the use of force in solving international disputes no matter how far away the location of this dispute may be. How much more so, when it is next door! We always stress the need to listen to the sense of reason in resolving the differences on Iran's nuclear program, which should be by peaceful means. We still hope these efforts will succeed. We also hope that all parties will exercise self-restraint and meet the demands of the international community on this issue... We hope that our brothers and neighbors [sic] Iranians will respond to our demands by handing over the Islands to the UAE. Our request is not an impossible one (to accept), since we are only asking that our legitimate rights to the three islands of Abu Musa, Greater Tunb Greater and Tunb Lesser be restored. We are looking forward to retrieving our sovereignty over the Islands through peaceful approach and dialogue. We have said repeatedly that the UAE will accept any ruling by the International Court of Justice, whether in our favor or not." In December 2009, the leaders of the GCC states reiterated their support for UAE sovereignty over the islands and called for Iran to accept mediation or ICJ adjudication of the islands dispute. Iran's Foreign Ministry responded by asserting Iran's ownership of the islands "forever." On December 23, UAE Foreign Minister Sheikh Abdullah bin Zayed al Nahyan stated that "They [Iran] call the [islands] issue a misunderstanding and we call it occupation. However, we should not view Iran's continuous occupation of the UAE islands as a barrier for developing economic ties between the two countries. We even hope that such ties will reach a level through which we can resolve the dispute, not the other way around." Like Saudi Arabia, the UAE's policy priorities wih regard to Iran are multifaceted. In general, Emirati officials stress that they are seeking to avoid circumstances that would lead to regional conflict in which Iran could attack UAE territory. Specifically, they are seeking to engage with Iran on key disputes and cooperate with international partners to stem the advance of Iranian regional influence. The UAE's economic potential and planned growth depends on security and regional stability, and UAE leaders accordingly promote peaceful resolutions to regional disputes, even as they prepare to minimize the threat that regional security disruptions and military threats could post to the UAE. Tangible expressions of these priorities are visible in UAE support for the Obama Administration's outreach to Iran and calls for a mediated resolution to the islands dispute. These initiatives are paired with UAE political and financial support for the Palestinian Authority, endorsement of the Arab League peace proposal to Israel, and the UAE's diplomatic engagement and debt forgiveness toward Iraq, all of which attempt to balance countervailing Iranian efforts. Iran-UAE economic relations are well developed. The IMF estimates the value of bilateral trade at $5.9 billion in 2007 and $7.74 billion in 2008. Dubai has long served as a particularly important commercial center for Iranian traders and businessmen, and Iranian merchants make significant profits bringing goods back and forth across the Gulf to Emirati ports. A number of Iranian banks operate branches in Abu Dhabi and Dubai, which U.S. officials suspect have become increasingly important nodes for the Iranian banking system as it seeks to maintain access to international financial markets amid tightening multilateral banking sanctions. It remains unclear what impact, if any, Dubai's debt challenges and subsequent financial bailouts by Abu Dhabi will have on political relations within the federation or what effect any changes could have on the UAE's relations with Iran. The UAE, under the auspices of the Abu Dhabi Executive Authority, also has begun to move forward with plans to build nuclear power stations, and has sought to position its program as a counterexample to Iran's by agreeing to forego the development of indigenous uranium enrichment and fuel reprocessing capabilities. Ironically, the willingness of international partners to support the UAE nuclear program has been undermined by instances in which Iran and other nuclear proliferation customers and suppliers have used the UAE as a transit, shipping, and financial hub. The UAE, particularly Abu Dhabi, has long feared that the large Iranian-origin community in Dubai emirate (est. 400,000 persons) could pose a "fifth column" threat to UAE stability. Military cooperation and arms sales form a key pillar of U.S.-UAE relations. The UAE hosts frequent port calls and shore visits for U.S. naval vessels and allows the U.S. military to use Al Dhafra air base in support of a variety of missions in the U.S. Central Command (CENTCOM) area of operations. In 2007 and 2008, the Bush Administration notified Congress of over $19.4 billion in potential arms sales to the UAE, including what would be the first overseas sale of the Terminal High Altitude Air Defense system, an anti-missile system well suited for responding to potential Iranian threats. UAE-Iranian relations are shaped by tensions inherent to interactions between a small, heterogeneous federation and a more powerful, ambitious, ideologically motivated neighbor. Each side views the bilateral relationship through the lenses of their economic interdependence, their open territorial disputes, their ethnic differences, and sectarian divisions. Emirati authorities allowed public protests at the Iranian consulate in Dubai in relation to post-election disputes in Iran, and subsequent political changes in Iran as a result of the election dispute have the ability to amplify or reduce the extent to which the UAE views Iran as a threat. The UAE strongly opposes the militarization of Iran's nuclear program and would likely seek greater security coordination with the Gulf Cooperation Council or a clear commitment of protection from the United States. The prospect remains that the UAE could alter its decision to forego domestic uranium enrichment or plutonium reprocessing technology at some time in the future, which could signal pursuit of a more independent option, although doing so would risk harming UAE-U.S. relations. Refined petroleum product sanctions legislation pending in the U.S. Congress (see H.R. 2194 , S. 908 , and S. 2799 ) could affect firms operating in the UAE, as well as proposed U.S.-UAE nuclear cooperation. Kuwait's relationship with and perceptions of Iran have generally been a function of Kuwait's core concerns about Iraq, Kuwait's larger neighbor which invaded and occupied it from August 1990 until February 1991. During the rule of Saddam Hussein in Iraq, Kuwait considered Iran a counterweight to Iraqi power in the Gulf region, and most strategists in Kuwait did not view Tehran as the potential regional hegemon that some of its Gulf allies have. Some of its Gulf neighbors criticized Kuwait for attempting to use Iran and Iranian-supported movements to weaken Saddam Hussein. During the 1990s, Kuwait often hosted pro-Iranian Iraqi Shiite oppositionists against Saddam, including those of the Supreme Council for the Islamic Revolution in Iraq (SCIRI), which is now a major Shiite party in Iraqi politics and has changed its name to the Islamic Supreme Council of Iraq (ISCI). In keeping with Kuwait's overall perceptions and strategy, Iran-Kuwait relations are relatively normal. High level visits are routine, including parliamentary exchanges. In early 2008, the two formed an Iran-Kuwait Higher Committee to continue building relations. Kuwaiti refineries supply gasoline to Iran, which must import about 30% of its gasoline needs. The two are attempting to resolve their common maritime border, a pre-requisite for the proposed joint development of the disputed Durra offshore oil field, which also straddles the Saudi maritime border. Kuwait has also taken a moderate approach to Iran's nuclear program. While the Kuwaiti government has stated that it is committed to complying with all U.N. Security Council Resolutions, including resolution 1801 which includes sanctions on Iran , it has also cautioned against an escalation to conflict. Speaker of the Kuwaiti National Assembly Jassem al Kharafi stated that "there are provocative Western statements, and Iran responds in the same way...I believe that a matter this sensitive needs dialogue not escalation." So acute were Kuwait's fears of Saddam Hussein that it curried favor with pro-Iranian Iraqi Shiite parties even though these same Shiite groups had conducted attacks in Kuwait in the 1980s. The December 1983 bombings of the U.S. and French embassies in Kuwait and an attempted assassination of the Amir in May 1985 were attributed to the Iraqi Da'wa (Islamic Call) Party, the Shiite party of Iraqi Prime Minister Nuri al-Maliki. Seventeen Da'wa activists were arrested for these attacks. Da'wa activists also hijacked a Kuwait Airlines plane in 1987. These acts in the 1980s were perceived by many as an effort by Tehran – using these Iraqi allies – to pressure Kuwait into ending its support of Iraq during the Iran-Iraq war. At that time, Iran was viewed by Kuwait and the other Gulf states as the larger threat in the Gulf. During 1987-88, the United States protected Kuwaiti oil tankers against Iranian attack. Kuwait's perception changed when Saddam turned against the Gulf states by invading Kuwait in August 1990. In May 2001, Kuwait publicly apologized for supporting Iraq during the Iran-Iraq war. Iran and Kuwait also have limited trade, approximately $43 million in 2008. Some Kuwaiti strategists, such as former Ambassador to the United States Shaykh Saud al Nasser Al Sabah, have questioned Kuwait's stance as naive and potentially dangerous. These observers question Iran's motives and believe that Kuwaiti leaders mistakenly do not perceive that Iran is slowly seeking to establish hegemony in the Gulf. Kuwait has not publicly accused Iran of attempting to support Kuwaiti Shiites (who are about 30% of Kuwait's population) as a potential internal opposition in Kuwait, but some believe Iran is looking for opportunities to strengthen Shiites in Kuwait to ensure that Kuwait maintains a relatively friendly posture towards Iran. Others say that Iran has no opportunity to support Shiites in Kuwait as an opposition movement because Kuwaiti Shiites are relatively well integrated into Kuwait's society and economy, and have fewer grievances than do Shiites in other states of the Gulf. On July 18, 2008, Kuwait named its first ambassador to Iraq since the 1990 Iraqi invasion—Ali al Momen, a retired general. Momen is a Shiite Muslim, and his appointment signaled Kuwait's acceptance that Iraq is now dominated politically by Shiites. Of the Gulf states, Oman is perceived as politically closest to and the least critical of Iran. Its leader, Sultan Qaboos bin Said Al Said, has often pursued foreign policies outside an Arab or Gulf consensus, and Qaboos sees no inconsistency between Oman's alliance with the United States and its friendship with Iran. This relationship has proved useful to the United States in the past; Oman was an intermediary through which the United States returned Iranian prisoners captured during U.S.-Iran skirmishes in the Persian Gulf in 1987-88. Oman's attempts to steer a middle ground caused problems for Oman in April 1980 when, within days of signing an agreement allowing the United States military to use several Omani air bases, the United States used these facilities—reportedly without prior notification to Oman—to launch the abortive mission to rescue the U.S. Embassy hostages seized by Iran in November 1979. The question many observers ask is why is Oman not as wary of Iran as are the other GCC states. Oman has no sizable Shiite community with which Iran could meddle in Oman, so the fear of Iranian interference is less pronounced. There are also residual positive sentiments pre-dating Iran's Islamic revolution. Oman still appreciates the military help the Shah of Iran provided in helping end a leftist revolt in Oman's Dhofar Province during 1964-1975. Others attribute Oman's position on Iran to its larger concerns that Saudi Arabia has sought to spread its Wahhabi form of Islam into Oman, and Oman sees Iran as a rival to and potential counterweight to Saudi Arabia. Oman reportedly is discussing a security pact with Iran, although the scope is as yet undefined. In addition, Oman's government is said to turn a blind eye to the smuggling of a wide variety of goods to Iran from Oman's Musandam Peninsula territory. The trade is illegal in Iran because the smugglers avoid paying taxes in Iran, but Oman's local government collects taxes on the goods shipped. Bilateral trade between Oman and Iran was approximately $1.45 billion in 2008, and consists mostly of natural gas exports from Iran to Oman. Oman's position on Iran's nuclear program is consistent with the general trend of Oman-Iran relations. On October 1, 2009, Omani Foreign Minister Yusuf bin Allawi bin Abdallah stated that "the Arabs and any Arab have no interest in being hostile to Iran," adding that "the entire world calls for a peaceful solution" to the international dispute over the nature of Iran's nuclear program. Some accounts say that Oman is in the process of drawing closer to Iran than it has previously. Oman, as do the other GCC states, publicly opposes any U.S. attack on Iran's nuclear facilities, and has rebuffed efforts by the other Gulf states to persuade Oman to distance itself from Iran politically. Since the fall of Saddam Hussein, Iran has sought to shape and influence the post-Saddam political structure to Iran's advantage. Iran succeeded in that strategy during 2004-2007, when Iraq was highly unstable and when it appeared, at times, that the U.S. effort to secure and democratize Iraq were failing. As Iraq stabilized during 2008, Iraqi nationalism strengthened and Iran came to be seen by many Iraqis, both Sunni and Shiite, as contributing to sectarian conflict. Iraqi leaders continue to take Iran's interests into account, but they no longer reflexively support Iranian positions. Several of Iran's interests have been served by post-Saddam Iraqi leaders. This continuing Iranian influence might be reflected in Iraq's announcement in December 2009 that it would relocate the 3,000 Iranian oppositionists who live at "Camp Ashraf," near the Iran border, to a detention center in southern Iraq. These oppositionists had been invited to set up camp in Iraq in 1986, from where they could launch incursions into Iran, but the current, relatively pro-Iranian central government does not want to host this group any longer. Iran attempted, but failed, to derail a U.S.-Iraq Status of Forces Agreement (SOFA) that authorizes the U.S. military presence beyond December 31, 2008. Senior Iranian leaders publicly opposed the pact as an infringement of Iraq's sovereignty—criticism that masked Iran's fears the pact is a U.S. attempt to consolidate its "hold" over Iraq and encircle Iran militarily. This criticism did not derail the accord, but might have contributed to insistence by Iraqi leaders on substantial U.S. concessions to a final draft agreement. In the end, Iran's concerns were attenuated by a provision in the final agreement (passed by Iraq's parliament on November 27, 2008 and now in force as of January 1, 2009) that U.S. forces could not use Iraqi territory as a base for attacks on any other nation. This provision is perceived by some as a statement that Iraq does not support military action against Iran's nuclear program. During exchanges of high-level visits in July 2005, Iraqi officials took responsibility for starting the 1980-1988 Iran-Iraq war, indirectly blamed Saddam Hussein for using chemical weapons against Iranian forces during the war, signed agreements on military cooperation, and agreed to open Iranian consulates in Basra, Karbala, Irbil, and Sulaymaniyah. In response to U.S. complaints, Iraqi officials subsequently said that any Iran-Iraq military cooperation would not include Iranian training of Iraqi forces. On May 20, 2006, Iraq's Foreign Minister, Hoshyar Zebari, supported Iran's right to pursue "peaceful" nuclear technology. On the other hand, Iran has not returned the 153 Iraqi military and civilian aircraft flown to Iran at the start of the 1991 Gulf War, and Iraqi leaders demand their return. Iraqi officials also have refused to expel the Party for a Free Life in Kurdistan (PJAK), an Iranian Kurdish separatist group, which Iran says is staging incursions into Iran from Iraqi territory. On February 5, 2009, that group was named by the U.S. Treasury Department as a terrorism supporting entity under Executive Order 13224. Most territorial issues that have contributed to past disputes were resolved as a result of an October 2000 rededication to recognize the thalweg , or median line of the Shatt al Arab waterway as the water border (a provision of the 1975 Algiers Accords between the Shah of Iran and the Baathist government of Iraq, abrogated by Iraq prior to its September 1980 invasion of Iran.) The water border is subject to interpretation, but the two sides agreed to renovate water and land border posts during the March 2008 Ahmadinejad visit to Baghdad. In February 2009, Foreign Minister Zebari urged Iran to move forward with these demarcations, suggesting Iranian foot-dragging to resolve an issue whose ambiguity now favors Iran. The key concern of the central government is Iran's separate relationship with Shiite factions and militias. These factions are political opponents of the government of Prime Minister Nuri al-Maliki and their serve militias serve as a limitation on full government security control, particularly in the south. The most prominent such faction is that of Moqtada Al Sadr. His political ties to Iran were initially limited because his family remained in Iraq during Saddam's rule. Still, the Sadr clan has ideological ties to Iran; Moqtada's cousin, Mohammad Baqr Al Sadr, founded the Da'wa Party and was a political ally of Ayatollah Khomeini when Khomeini was in exile in Najaf (1964-1978). Iran came to see political value and potential leverage in Sadr's faction—which has 30 total seats in parliament, a large and dedicated following among lower-class Iraqi Shiites, and which built a 60,000 person "Mahdi Army" (Jaysh al-Mahdi, or JAM) militia after Saddam's fall. Perceiving the JAM as useful against the United States in the event of a U.S.-Iran confrontation, in 2005, Iran began arming it through the Revolutionary Guard's "Qods (Jerusalem) Force," the unit that assists Iranian protégé forces abroad. During 2005-6, the height of sectarian conflict in Iraq, Badr fighters in and outside the ISF, as well as JAM militiamen, were involved in sectarian killings of Sunnis, which accelerated after the February 2006 bombing of the Al Askari Mosque in Samarra. The sectarian conflict empowered Shiite militias such as the JAM, but the arbitrary administration of justice and sense of constant conflict created by the militias triggered a popular backlash against them and against Iran. This was demonstrated in the January 31, 2009 provincial elections, which represented a clear setback for Iran and its interests. The Islamic Supreme Council of Iraq (ISCI), traditionally close to Iran politically and formerly an ally of Maliki's Da'wa Party, was hoping to sweep the elections in the Shiite south, but it did not come in first in any Shiite province. Sadrist candidates also fared generally poorly. In most of the Shiite provinces, the slate of Prime Minister Nuri al-Maliki—who is relatively pro-Iranian but whose party does not have a militia and whose slate ran on a platform of rule of law—came in first. The Sadrist faction and ISCI have forged a coalition with several other parties ("Iraqi National Alliance") to compete against Maliki in the March 7, 2010 national elections that will determine the next four year government. The Defense Department's latest "Measuring Stability and Security in Iraq" report, dated September 2009, appears to reflect a continued U.S. concern about Iran's support for Shiite militias in Iraq. The report reiterates previous assessments that Iran "poses a significant challenge to Iraq's long-term stability and political independence" and says that Iran can influence Iraqi elections through its "sponsorship of Iraqi [Shiite] militant groups." However, the report did not repeat previous assertions that Tehran is also improving the training and weapons systems received by the proxy militants. Suggesting the degree to which the Iraqi government still views Iran as a benefactor, Maliki has visited Iran four times as Prime Minister to consult on major issues and to sign agreements. On March 2-3, 2008, Iranian President Ahmadinejad visited Iraq, a first since the 1979 Islamic revolution. In conjunction, Iran announced $1 billion in credits for Iranian exports to Iraq (in addition to $1 billion in credit extended in 2005, used to build a new airport near Najaf, opened in August 2008, which helps host about 20,000 Iranian pilgrims per month who visit the Imam Ali Shrine there). Suggesting Iran's earlier generosity is being reciprocated, in February 2009, the Iraqi government awarded a $1 billion contract to an Iranian firm to help rebuild Basra, and to repair ancient Persian historical sites in southern Iraq. The the two countries now conduct about $4 billion annually in bilateral trade, according to Iraq's Trade Minister , and the February 2009 visit of Iranian Foreign Minister Mottaki resulted in a plan to increase that trade to $5 billion annually through increases in oil and electricity-related trade. Iran's influence in Iraq remains substantial, but might be beginning to wane. The Shiite militias that Iran has supported are far weaker than they were two years ago. Iran's influence could fall further if Maliki's coalition prevails in the March 7, 2010 election and he continues to assert Iraq's independence and sovereignty from all influences, including U.S. and Iranian. Some experts have long predicted that Iran's influence would fade as Iraq asserts its nationhood, as the security situation has improved, and as Arab-Persian differences reemerge. Many experts point out that Iraqi Shiites generally stayed loyal to the Iraqi regime during the 1980-1988 Iran-Iraq war. Najaf, now relatively secure and prosperous, might eventually meet pre-war expectations that it would again exceed Iran's Qom as the heart of the Shiite theological world. On the other hand, U.S. forces will be drawing down to about 50,000 by August 2010, and some fear that this will expose vulnerabilities among government forces that allow Shiite militias and Sunni insurgent groups to flourish again and challenge stability. If the security situation deteriorates sharply as the U.S. withdraws, Iranian influence could experience a resurgence – assuming the current government in Iran fends off a major challenge by its own opposition. Turkey and Iran share an almost 500 kilometer (310 mile) border that was established in the 17 th century, and they have not been to war since then. Over the years, however, their bilateral relations have been characterized by both conflict and collaboration. Tensions sometimes surfaced from the neighbors' competing regional ambitions and from their rival forms of Islam: most Turks are Sunnis, while most Iranians are Shiites. After Iran declared itself an Islamic Republic in 1979, some predicted a worsening of relations because the Turkish Republic established in 1923 had abolished the caliphate, the office of the Prophet Muhammad's successors, and adopted a constitution that guaranteed secularism as a basic principle of the state. However, Ankara's pragmatic policy of accepting and officially recognizing the new Islamic Republic speedily and focusing on economic relations proved the forecasters wrong. The ruling Justice and Development Party (AKP) in Turkey has Islamist roots and a foreign policy doctrine of seeking "zero problems" with neighbors and of nurturing beneficial relations with all, including Iran. Powered by a robust economy, the AKP government has continued the realistic pragmatism or pronounced self-interest of its predecessors toward Iran. Since AKP came to power in 2002, Turkish-Iranian relations have expanded markedly. Officials have exchanged numerous visits, culminating in Iranian President Mahmud Ahmadinejad's visit to Turkey in August 2008. The AKP government hosted him in Istanbul, thereby working around Ahmadinejad's antipathy to Turkish secularism by enabling him to avoid a usually obligatory visit in the capital of Ankara to the mausoleum of Mustafa Kemal Ataturk, the founder of the Turkish Republic. Turkish President Abdullah Gul reciprocated by visiting Iran for a regional summit in March 2009, when he met both Supreme Leader Ayatollah Ali Khamene'i and President Ahmadinejad. Turkey's pragmatism or realpolitik was evident in official reactions to Iran's June 12, 2009, presidential election as President Gul and Prime Minister Recep Tayyip Erdogan were among the first international leaders to congratulate Ahmadinejad on his re-election. Foreign Minister Ahmet Davutoglu later declared controversies over the outcome to be an internal Iranian affair. AKP's domestic critics charged that these "reflexive and premature" actions may have undermined Turkey's stature and credibility as an interest in stability embodied in the status quo appeared to trump values. Prior to visiting Iran in October 2009, Prime Minister Erdogan told the British newspaper, The Guardian , "There is not doubt he (Ahmadinejad) is our friend…. As a friend, so far we have good relations and have no difficulty at all." Turkey seeks to further regional stability and its own national interests in its relations with Iran. Ankara has made common cause with Tehran in seeking to preserve the territorial integrity of Iraq in order to prevent its division into ethnic states that might serve as a model for separatists. Both Turkey and Iran have separatist/terrorist foes who attack them from safe havens in northern Iraq—the Kurdistan Workers Party (PKK) and the Party for a Free Life in Kurdistan (PJAK), respectively— and both place a high priority of combating these threats. At the same time, Turkish officials have encouraged Iraqi Kurds to play a greater role in Baghdad to help counter what the Turks fear might become excessive Iranian influence over a Shiite-led Iraqi government. Ankara also may believe that greater involvement in the central government might moderate the Iraqi Kurds' separatist inclinations. Turkish officials state that Iran has the right to develop nuclear energy for peaceful purposes and have called on Tehran to cooperate with the International Atomic Energy Agency (IAEA) in order to demonstrate that its nuclear program has peaceful intentions. Prime Minister Erdogan has criticized the international community for its "double standards" in targeting Iran's nuclear program while ignoring Israel's nuclear arsenal. He almost always mentions Israel (if not by name, then as "the country in the region with nuclear arms") when defending Iran, which he does frequently. For example, after discussing Iran with President Obama at the White House on December 7, 2009, the Prime Minister said, "We do not want to see a country in our region possessing nuclear weapons and we want the countries in the region who have nuclear weapons to be rid of them." Turkey seeks to have the dispute between Iran and the international community solved diplomatically. Erdogan considers the idea of a military attack on Iran to be "an insanity" and has warned Israel of "a response equal to an earthquake" if it used its relationship with Turkey, referring to Turkish airspace to "wage aggression on a third party," i.e., Iran. In October 2009, Turkey cancelled Israel's participation in an annual NATO military exercise in Turkey ostensibly because of continuing public anti-Israel sentiment resulting from the December 2008-January 2009 Gaza conflict. Some analysts suggested that, in addition, Turkey did not want to give Israel an opportunity to rehearse flying in Turkish airspace near the Iranian border. Turkey also opposes the imposition of sanctions on Iran which might harm Turkey's interests because it is a neighbor and economic partner of Iran. It is likely to abstain should the U.N. Security Council vote on sanctions as in November 2009, when the IAEA passed a resolution demanding that Iran immediately freeze operations at a previously secret uranium enrichment plant. These misgivings or disagreements concerning approaches to thwart Iran's nuclear ambitions aside, Turkey still does not want Iran to develop nuclear weapons and thereby upset the regional balance of power. Finally, access to Iran's energy resources is a high priority for Turkey, which imports 70% of all the energy it consumes. Turkey depends on Russia for 68% of its gas supplies and wants retain access to Iran for much of the rest and to lessen that dependence. Turkish-Iranian relations have a very strong economic component. About 1.5 million Iranian tourists visit Turkey annually, visa-free. Trade is growing and reached $10 billion annually in 2008, with Iranian exports of oil, oil products, and gas to Turkey accounting for $7.2 million of the total. Officials of both governments have said that they hope to increase trade to $30 billion a year in the next few years. A pipeline commissioned in 2001 carries natural gas from Tabriz to Ankara. In 2007, Turkey and Iran signed a memorandum of understanding (MOU) for the state-run Turkish Petroleum Corporation (TPAO) to be granted the right to develop natural gas fields in South Pars, to extract up to 20 billion cubic meters (bcm) of additional gas, and to transport it via a new 1,850 kilometer pipeline to Turkey. Turkey is to invest an estimated $3.5 billion and receive 50% of the gas produced. Both governments hope that the new pipeline will eventually link with the planned 3,300-kilometer Nabucco pipeline. Scheduled to be completed in 2014, Nabucco is intended to carry natural gas from the Caspian/Central Asian region via Georgia and Turkey to Austria, bypassing Russia. Iranian gas has the potential to make Nabucco more viable especially if Russia dissuades the Central Asian states from using it and China competes for their resources as well. Turkey and Iran have formed a joint company to transfer the gas to Europe. However, the European partners in Nabucco (Hungary, Bulgaria, Romania, Germany, and Austria) have declared, "No Iranian gas will be accepted unless the nuclear problem is solved" and U.S. Special Envoy for Eurasian Energy Ambassador Richard Morningstar has stated, "At present, we do not support Iran's participation in the project." Turkey opposes all energy-related sanctions on Iran mainly because of its energy needs. In addition, in 2007, Turkey signed an MOU to build three natural gas-fired power plants in Iran and to import 3 to 6 billion kilowatt hours of electricity annually. The two neighbors also have plans for an ambitious new road and rail transportation network to link the Turkish Black Sea port of Trabzon and the Iranian Persian Gulf port of Bandar Abbas, and to establish a free industrial zone on their border. In private, Turkish officials have voiced some security concerns about a nuclear-armed Iran and about the impact that such a development would have on the regional balance of power. They note that Turkey is Iran's closest neighbor and easily within range of its missiles -- even though Iran has not threatened Turkey. These concerns may have prompted Turkey's possible purchase of U.S. Patriot air defense missiles. As noted above, Prime Minister Erdogan and President Gul have criticized the West's policy on the issue and charged it with "double standards," suggesting that Iran is being judged more harshly than presumed nuclear power Israel. In November 2008, Erdogan told a Brookings Institution audience, "We do not find it correct to tell just one country to scrap nuclear weapons. We do not think this is an honest approach. Whoever has nuclear weapons should scrap them first then let us all be rid of them." The two leaders have repeatedly put Turkey forward as a possible mediator between Iran and the United States and Turkey accepted an IAEA suggestion that it act as a repository for Iran's uranium, but Iran rejected the idea. Ahmadinejad has said that there is no need for Turkish or any other mediation. President Gul noted "the need for the Western world to understand Iran's security apprehensions about its regime" as well as Iran's "need to persuade the Western world that it is not seeking the nuclear weapon and that all its researches are within the peaceful framework." Due to their common security concerns about Kurdish separatists, the Turkish and Iranian armed forces have conducted joint operations against the PKK and PJAK in northern Iraq. Prime Minister Erdogan has said that cooperation with Iran in dealing with terrorism will continue. Turkey is likely to consult closely with like-minded Arab Sunni powers, such as Saudi Arabia and the United Arab Emirates, concerning the impact of Iran's nuclear weapons' ambitions on the regional balance of power. Should Iran acquire nuclear arms, Turkey could, as a NATO member, rely on NATO defense guarantees if it believes them to be credible. If it does not have that belief, Turkey could develop its own nuclear weapons program. Turkey already has plans for nuclear power plants, the technical abilities needed for a weapons program, and some uranium resources. At the same time as it pursues this path, Ankara is likely to continue to cultivate good relations with Tehran in line with its "zero problems" approach to foreign policy and because of its energy needs and economic interests. As it attempts to stabilize Afghanistan, nearly eight years after the United States helped Afghan militias overthrow the Taliban, the Obama Administration has seen Iran as potentially helpful – or at least not an obstruction -- to its strategy for Afghanistan. The U.S. Special Representative for Afghanistan and Pakistan, Ambassador Richard Holbrooke, has advocated a "regional" component of the strategy, which focuses primarily on Pakistan but also envisions cooperation with Iran to help keep Afghanistan calm. Still, Iran and U.S. interests in Afghanistan, while in many ways coincident, are not identical. Iran perceives its key national interests in Afghanistan as exerting its traditional influence over western Afghanistan, which Iran borders and was once part of the Persian empire, and to protect Afghanistan's Shiite minority. Iran's assistance to Afghanistan has totaled about $1.164 billion since the fall of the Taliban, mainly to build roads and schools and provide electricity and shops to Afghan cities and villages near the Iranian border. This makes Iran among the top financial donors to Afghanistan and is in many ways supportive of the U.S. policy of attempting to stabilize Afghanistan in part through economic development. Iran did not oppose Karzai's firing of Iran ally Ismail Khan as Herat governor in September 2004, although Iran has opposed the subsequent U.S. use of the Shindand air base, located in Herat Province, which Iran fears the United States might use to attack or conduct surveillance against Iran. During his visit to the United States in May 2009, Karzai said he had told both the United States and Iran that Afghanistan must not become an arena for the broader competition and disputes between the United States and Iran. In public statements, in part because of the economic development work done by Iranian firms, President Hamid Karzai has, at times, called Iran a "friend" of Afghanistan. In June 2009, Karzai congratulated Iranian President Mahmoud Ahmadinejad for his re-election at a time when many Iranians took to the streets to dispute his victory. Similarly, Karzai's August 2009 re-election bid was flawed by charges of widespread fraud, yet Ahmadinejad congratulated him for a victory on September 19, 2009 – long before it was clear that a second round election run-off would not be held. The two leaders, along with the President of Pakistan, have formed a tripartite summit process to discuss regional issues; the last meeting was in May 2009, hosted in Tehran by Ahmadinejad. At other times, the two countries have had disputes over Iran's efforts to expel Afghan refugees. About 1.2 million remain, mostly integrated into Iranian society, and a crisis erupted in May 2007 when Iran expelled about 50,000 into Afghanistan. About 300,000 Afghan refugees have returned from Iran since the Taliban fell. The United States has reserved its strongest objections to Iran's shipment of weapons into Afghanistan. This could represent an Iranian attempt to build influence with armed opposition factions in Afghanistan, through which Iran might be able to retaliate against the United States in the event of U.S.-Iran conflict. The State Department report on international terrorism for 2008, released April 30, 2009, said Iran continues to provide some training to and ships arms to "selected Taliban members" in Afghanistan. Weapons provided, according to the State Department report, include mortars, 107mm rockets, rocket-propelled grenades, and plastic explosives. Several shipments of such weapons were captured by the U.S. military in Afghanistan in 2007. Secretary of Defense Gates testified before the Senate Armed Services Committee in late January 2009 that the Defense Department had seen a slight increase in Iranian shipments of arms into Afghanistan in the few preceding months. On December 17, 2009, U.S. Ambassador to Afghanistan Karl Eikenberry said that "Iran or elements within Iran have provided training assistance and some weapons to the Taliban." Iranian aid to Taliban fighters puzzle some experts since these shipments would appear to jeopardize Iran's relations with the Karzai government. Iran actively helped put together that government, in cooperation with the United States – at the December 2001 "Bonn Conference." In addition, Iran has traditionally supported Persian-speaking non-Pashtun factions in Afghanistan, who would presumably be suppressed and marginalized by any new Taliban-led regime in Afghanistan. Iran saw the Taliban regime, which ruled during 1996-2001, as a threat to its interests in Afghanistan, especially after Taliban forces captured Herat (the western province that borders Iran) in September 1995. Iran subsequently drew even closer to the ethnic minority-dominated Northern Alliance than previously, providing its groups with fuel, funds, and ammunition. In September 1998, Iranian and Taliban forces nearly came into direct conflict when Iran discovered that nine of its diplomats were killed in the course of the Taliban's offensive in northern Afghanistan. Iran massed forces at the border and threatened military action, but the crisis cooled without a major clash, possibly out of fear that Pakistan would intervene on behalf of the Taliban. Iran offered search and rescue assistance in Afghanistan during the U.S.-led war to topple the Taliban, and it also allowed U.S. humanitarian aid to the Afghan people to transit Iran. Others see Iran as a marginal player in Afghanistan, because it is identified primarily with non-Pashtuns and its links to Taliban fighters are tenuous and sporadic. Those who take this view question whether U.S. engagement with Iran would contribute much to solving the core problems plaguing the U.S. mission there. Still others believe that talks with Iran on Afghanistan could lead to broader U.S.-Iran talks, or potentially even open up the possibility of using Iran as a supply line for non-U.S. NATO forces in Afghanistan. Secretary of State Clinton made a point of inviting Iran to the U.N.-led meeting on Afghanistan at the Hague on March 31, 2009. However, since then, Iran has been faced with a growing and increasingly strong democratic opposition movement and the Obama Administration might be re-thinking its degree of engagement with the current regime. In addition, Iranian leaders have not accepted U.S. and partner country proposals to formulate a mechanism to ensure that Iran's nuclear program is for purely civilian and peaceful purposes. Throughout history, Egypt and Iran have, at times, been fierce rivals, a natural outgrowth of the region's balance of power. Egypt envisions itself as the standard-bearer of Arab nationalism, and Persian Iran serves as a foil. During the Cold War, Egypt was militarily aligned with the Soviet Union while Iran was a U.S. client state. Then, in the late 1970s, as a result of the Camp David Peace Accords and the Iranian revolution, Egypt and Iran essentially traded places in their regional allegiances. Egypt's peace treaty with Israel resulted in a much closer relationship with the United States, while Iran's revolutionary theocratic government perceived the United States, its moderate Arab allies, and Israel as its primary adversaries in the Middle East, and Iran developed a closer relationship with Russia. For over 30 years, this pattern has persisted and, in recent years, new dimensions have been added to the Egyptian-Iranian rivalry. Iran and Egypt severed diplomatic ties in 1980, a year after the Iranian revolution. Iran not only objected to Egypt's peace treaty with Israel, but also to its hosting of the deposed Shah and its support for Iraq during the 1980-1988 Iran-Iraq war. As a provocation, Iran applauded the assassination of former Egyptian President Anwar Sadat, naming a street after the assassin (Khalid Islambouli). The Egyptians have insisted that this street be renamed and the mural of Islambouli along side it be removed before normal ties can be restored. Currently, Egypt is concerned about Iran's support for Palestinian militants, particularly Hamas, Iran's influence in Iraq, and Iran's nuclear program. Hamas's control of the Gaza Strip poses a challenge for neighboring Egypt. Hamas's call for armed resistance against Israel and its alleged Iranian financial and military support runs counter to Egypt's foreign policy, which is largely based on its peace treaty with Israel and friendly relations with the United States. A nuclear-armed Iran and its effect on the regional balance of power is a pressing security concern. Egypt firmly opposes Iran's nuclear ambitions, and, as is the case with its stance toward Israel's clandestine nuclear program, Egypt has called for a "nuclear-free zone" in the Middle East. Egypt is a signatory to the Nuclear Non-Proliferation Treaty (NPT) and has pledged not to develop weapons programs of its own. It also has rebuffed U.S. talks of a nuclear shield protecting Gulf states and possibly Egypt from an Iranian attack. In 2006, the Mubarak government announced its own intention to develop a civilian nuclear energy program. To date, progress on its development has been slow, and most experts expect that it will be at least a decade before the construction of nuclear power plants will be completed. Although Egypt may have legitimate energy shortfalls that are driving the pursuit of nuclear energy, most analysts suspect that concern over Iran's quest for nuclear weapons is behind the Egyptian initiative. Between 2007 and 2008, for reasons not entirely clear, Egypt and Iran began a dialogue to tentatively explore improving bilateral relations. During that period, Iran had been reaching out to a number of Sunni Arab states, as some commentators called it a charm offensive designed to assuage fears of its regional ambitions and nuclear program. Egypt may also have been looking to raise eyebrows in U.S. policymaking circles, hoping that its independent initiative with Iran might draw more Bush Administration attention and political support at a time when relations had been strained due to U.S. concerns about human rights in Egypt. In December 2007, former Iranian National Security Council Chief Ali Larjani, a close aide to Ali Khamanei, visited Egypt and held talks with President Mubarak. As a follow up, on January 30, 2008, Mubarak held talks with Iran's then Majles (parliament) Speaker Gholam Ali Haddad Adel in Cairo. Adel was the first senior Iranian parliamentary official to conduct high-level talks with Egyptian counterparts in three decades. At the end of March 2008, Former Iranian President Mohammed Khatami visited Cairo for additional discussions. However, the supposed Egypt-Iran rapprochement was short-lived, as neither side appeared ready to reconcile differences. In July 2008, an Iranian group, the Committee for Commemoration of Martyrs of Global Islamic Movement, re-edited an old Al Jazeera documentary on the murder of former Egyptian President Anwar Sadat and released it publicly as a new documentary entitled, "Execution of a Pharaoh." The film positively portrayed Sadat's assassin as a martyr. Although Iran attempted to distance itself from the film, relations again soured. In October 2008, Egyptian Foreign Minister Ahmad Abu-al Ghayt warned Iran that anyone "who intervenes in Egypt's internal affairs will not be happy with the response they receive. The Iranians cannot interfere in our internal affairs." Although Egyptian-Iranian relations have been cool for decades, tensions remained relegated to the diplomatic and cultural spheres. Iran and Egypt maintain a limited economic relationship, with bilateral trade estimated at $99 million in 2008. However, in April 2009, the discovery of an alleged Hezbollah military cell in Egypt significantly heightened tensions. On April 8, 2009, the Egyptian government declared that it had uncovered a 49-person Hezbollah "cell" clandestinely operating in Egypt. According to authorities, cell members had been monitoring ship traffic at the Suez Canal and were planning terrorist attacks against Sinai tourist resorts, particularly those frequented by Israelis. Egypt also accused Hezbollah of smuggling weapons to Hamas along the Egypt-Gaza border and spreading "Shi'ite ideology" inside Egypt. On April 10, Hezbollah chief Sheikh Hassan Nasrallah acknowledged that one of the plotters in custody had been dispatched to Egypt to conduct "reconnaissance" for Hezbollah. The revelation of a Hezbollah cell serves Egyptian interests in several ways. First, it draws a sharp contrast between it and Iran, the primary U.S. and Israeli adversary in the region. By demonstrating that Egypt is a direct target of Iran's regional meddling, Egypt may hope to rally other moderate Arab states behind it, while placing Iran's Arab allies (such as Hezbollah, Hamas, Syria, and Qatar) on the defensive. Second, Egyptian leaders had been eager to retaliate against Iranian-backed Hezbollah after the Lebanese Shiite organization called for the overthrow of the Mubarak regime for its alleged lack of support to Palestinians in Gaza during Israel's Operation Cast Lead between December and January 2009. Nevertheless, by the end of 2009, tensions in the Egyptian-Iranian relationship had eased, as evident by the December 2009 meeting between Iranian Parliament Speaker Ali Larijani and President Mubarak in Cairo. In a news conference following their meeting, Larijani said that "As for the economic relationship, there is a positive tone from the two sides." According to one report, he also remarked that "Israel was the Islamic world's main enemy, and that Iran and Egypt had the same strategy with regard to the Palestinian cause but different ways of implementing the strategy." One unnamed Egyptian official claims that during their meeting, Larijani proposed to improve Iranian-Arab relations, saying "the message is offering a new Iranian approach to resolve outstanding issues." Most analysts remain skeptical of the Iranian proposal, suggesting that it may be another "charm offensive" similar to previous attempts mentioned above. Overall, so long as Iran pursues a nuclear program and continues to strongly back Hamas and Hezbollah, Egypt will feel threatened and will work to counterbalance Iranian policy. However, a direct confrontation appears highly unlikely. For now, Iran will use non-state actors to provoke and pressure Egypt, while the Mubarak government will continue to rally other Sunni Arab states around its mantle of leadership to keep Iran in check. Egypt also will continue to demand that Israel and the United Sates prioritize the Arab-Israeli peace process in order to reduce the allure of Iran's so-called axis of resistance. For over 30 years, close Syrian-Iranian relations have been a mainstay of Middle East power politics. Starting with the 1979 Iranian revolution and spanning the 1980-1988 Iran-Iraq war, the arming and training of Shiite militias in Lebanon after Israel's invasion in 1982, and the maturation of Palestinian militant groups such as Hamas over the last decade, Syria-Iran ties have grown stronger, as both governments have built an alliance based on shared strategic interests rather than shared cultural and religious affinities. Though their partnership has changed over the years, with Syria now serving as the junior partner, both sense that their self-described "axis of resistance" is becoming more powerful, as their non-state proxies, Hezbollah and Hamas, exercise more influence on the politics of the region. Nevertheless, many observers continue to question the permanence of a Syrian-Iranian alliance, as some analysts assert that Syrian foreign policy is essentially pragmatic rather than revolutionary. They argue that should a solution to the Israeli-Palestinian conflict emerge, Syria would end its policy of resistance and join other Arab states in making peace with Israel. Other experts suggest the foundation of the Syrian-Iranian relationship—a shared concern over Iraq, support for Hezbollah in Lebanon, and countering Israel—is deeply rooted in the geopolitics of the region and cannot be easily overturned. From a military and economic standpoint, Syria is a weak state, but its active support of Palestinian, Lebanese, and Iraqi militants/terrorist groups gives it a disproportionate regional role. Syria is surrounded by powerful U.S-allied neighbors (Israel and Turkey and Iraq) whom Syria seeks to counter through its own alliances. Though Syria's self image is pan-Arab and the majority of its citizens are Sunni Arabs, predominantly Persian Shiite Iran has a similar foreign policy outlook, creating the foundation for close relations. The Asad regime's primary policy priority is to control Lebanon either directly or indirectly. Many hard-line Syrian nationalists consider their smaller, weaker neighbor to be an appendage of a greater Syrian nation and an artificial French colonial creation. In order to wield substantial influence in the byzantine world of Lebanese confessional politics, Syria needs allies, particularly now that it no longer occupies the country. Iranian-backed Hezbollah, the Lebanese Shiite terrorist group/militia/political party/charitable organization, serves as Syria's primary local partner. Without Hezbollah, Syria would have far more difficulty influencing Lebanese politics. The Syrian-Hezbollah partnership also is valuable to Iran. According to the U.S. State Department's 2008 Country Reports on Terrorism, Syria allowed Iran to use its territory as a transit point for weapons bound for Hezbollah. Hezbollah provides Iran with an entree into the Levant, allowing it to project power far beyond its immediate borders and to threaten Israel by proxy. As long as Israel still occupies the Golan Heights, Syrian leaders apparently believe that this serves Syrian interests as well. In 2009, Israeli and other foreign governments accused Syria of continuing to serve as an Iranian conduit for weapons shipments to Hezbollah. In November 2009, Israeli forces siezed a freighter named the Francop en route from Iran to the Syrian port of Latakia which contained, according to reports, thousands of medium-range 107- and 122-millimeter rockets, armor-piercing artillery, mortar bombs, hand grenades, and ammunition for Kalashnikov rifles. Though the Syrian-Iranian relationship is primarily a diplomatic alliance, Iranian trade with and investment in Syria (or at least the appearance of them) have somewhat expanded in recent years, perhaps partially in response to Western policymakers' attempts to woo Syria away from Iran. In the financial sector, Iran has stated its intention to establish a joint Iranian-Syrian bank, possibly involving Bank Saderat and the Commercial Bank of Syria – entities which have been sanctioned by the U.S. Treasury Department. In the manufacturing and industrial sectors, the Iran Khodro Industrial Group has established two car assembly plants in Syria. Iranian companies also have invested in concrete production, power generation, and urban transportation. In the energy sector, Syria, Iran, Venezuela, and Malaysia established a joint petroleum refinery in Homs, Syria. In addition, Iran, Turkey, and Syria reached a new natural gas deal that would allow Iran to export 105 billion cubic feet of natural gas annually to Syria via Turkey. Despite increased Iranian investments, the overall volume of Iranian-Syrian trade remains low. According to the Economist Intelligence Unit , bilateral trade may total between just $160 and $400 million. Barring a major change in Lebanese affairs or a breakthrough in Israeli-Palestinian peace negotiations, Syrian-Iranian relations will most likely remain strong. As an indication of their enduring ties, both countries signed a defense cooperation agreement in December 2009, despite many Arab and Western attempts to divide them. Nevertheless, some experts suggest that the alliance has its weak points, and that Western and moderate Arab governments should try to exploit them. In October 2009, King Abdullah of Saudi Arabia paid an historic visit to Syria that was interrupted by many as a return to somewhat normal Saudi-Syrian relations. As a result of the king's visit, some observers anticipate that Saudi investment in Syria may resume or even increase. Although it is difficult to discern the true state of Iranian-Syrian relations due to the opaque nature of both regimes, tensions may have developed over the issue of Syrian peace talks with Israel. After Syria attended the November 2007 U.S.-sponsored Annapolis peace conference, one Syrian media outlet asserted that it was Syria's right to pursue its own interests, stating that it was "fine for Syria to knock at doors that appear closed, as there is often someone inside to open [them]." According to a report by the Washington Institute for Near East Policy, "Iranian officials have likewise issued public warnings to the Assad regime not to go too far in these discussions. In June 2008, a senior advisor to Supreme Leader Ayatollah Khameini cautioned Syria of the consequences of peace on its relations with Tehran." The Saudi media has focused on exploiting tensions in Iranian-Syrian relations. In 2008, the London-based, Saudi-owned Al Hayat pan-Arab daily noted that Syrian President Bashar al Asad's recent visit to Tehran had been a "failure" in reassuring Iran of his intentions regarding indirect Syrian-Israeli peace talks. According to the report, "sources told Al Hayat that these reports contain information, not sheer speculation or analysis, that Syrian President Bashar al Asad's recent visit to Tehran was not successful with regard to the stand on the Syrian-Israeli negotiations.... The same reports added that the Iranian concerns prompted Iran to ask the Syrian side a lot of questions during al Asad's visit, which did not end in an agreement. In fact, these reports used the phrase 'the failure of the visit.'" The future direction of Hezbollah may hold the key to the strength of the Syrian-Iranian alliance. The group has multiple aims, as it seeks to balance an anti-Israel, pro-Iranian revolutionary regional agenda while appearing to uphold both Lebanese national interests and the independent interests of its Shiite constituents. Sometimes it succeeds in merging these agendas, as when Hezbollah claims it is acting as a national liberation movement struggling to free Lebanon from Israeli occupation, even after Israel's 2000 withdrawal from the south. Other times, particularly after its 2006 war with Israel, critics of Hezbollah have been successful in blaming it for wreaking havoc on the state itself and serving as a pawn of foreign, in this case Iranian and Syrian, interests. Although many analysts charge that Hezbollah's ties to Iran are immutable, others believe that Hezbollah seeks greater independence from its Iranian and, to a lesser extent, Syrian patrons. According to one RAND study, "Hezbollah statements suggest that it does not consider its interests to be in perfect alignment with those of Iran, and its behavior reaffirms this assessment—Hezbollah continues to focus its energies on internal Lebanese politics." For now, Hezbollah remains a hybrid organization with a militia, an intelligence apparatus, terrorist capabilities, charities, private companies, religious institutions, and a political party. For Hezbollah to evolve into a strictly non-violent movement, a Lebanese-Israeli peace treaty would have to be signed. Should that occur, however unlikely, some experts assert that without a common enemy (Israel) binding them together, Iran, Syria and Hezbollah's interests would diverge, and Syria would perceive Hezbollah more as a competitor for control over the Lebanese political scene. In this scenario, Syria and Iran would find themselves without a common proxy advancing their mutual interests. Lebanon, and in particular Lebanon's Shiite population, have looked to Iran for financial support and political backing since (at least) 1982. At the time of the Iranian Revolution, Lebanon was engulfed in a civil war (1975-1990). As part of his policy to export the revolution, the founder of the Islamic Revolution of Iran, Ayatollah Ruhollah Khomeini, reached out to Lebanon's Shiites, who had long felt underserved and underrepresented in Lebanon. During the Israeli invasion of Lebanon in 1982, Iran sent a contingent of Pasdaran security forces into Lebanon. The force armed and trained Shiite militia groups that later formed the terrorist organization Hezbollah, and provided medical attention and other services to Lebanese affected by the Israeli invasion. Iran's support for Lebanese Shiites during the civil war cemented a partnership that both sides consider mutually beneficial. Hezbollah requires outside funding and military support and Iran requires a proxy to pressure Israel and the United States. Iran is one of a number of regional actors vying for influence in Lebanon, and Lebanon's policy priorities reflect this reality. During the Syrian occupation of Lebanon (1976-2005), Lebanese-Iranian relations paralleled Syria's relationship with Iran. Since Syrian withdrawal from Lebanon in 2005, Lebanon's politics have reflected the sectarian realities in Lebanese politics and Lebanon's policy toward Iran has changed little. Iranian support for Shiites in Lebanon (and Hezbollah in particular) serves as a counterpoint to Saudi Arabian support for Sunni groups. This foreign patronage, when considered along with Lebanon's consensus government, requires that any Lebanese government maintain a friendly relationship with all regional actors to avoid upsetting the delicate political balance among its religious sects and political parties. Some analysts argue that Syria's withdrawal from Lebanon left a power vacuum that has been filled by Iran via its proxy Hezbollah. Others argue that, despite initial concerns following Hezbollah's 2008 siege of Beirut, the outcome of the June 2009 parliamentary elections represented a setback for Iranian influence in Lebanon and in the Levant. Regardless, as long as Lebanese politics includes a stake for Shiites and, most of all, Hezbollah, the Lebanese government, whatever its composition, will likely maintain a friendly orientation toward Iran. The Lebanese government has supported Iran's right to peaceful nuclear energy and has not articulated any official concerns about a possible Iranian nuclear weapons program. Trade between Iran and Lebanon is limited. The International Monetary Fund (IMF) estimated it at $192 million in 2007 and $247 million in 2008. Iran and Lebanon also established a joint economic commission to expand economic cooperation and bilateral ties. During a meeting in March 2009, then-Lebanese Prime Minister Fouad Siniora stated that "There are lots of grounds for the growth and expansion of commercial, industrial, infrastructure, and tourism cooperation between the two countries, and our relations have to expand on a daily basis, therefore." Official trade statistics do not include Iranian support for Hezbollah, which many analysts expect is substantial. Prior to Lebanon's June 7, 2009 parliamentary elections, Iran announced that it would provide Hezbollah and its allies with $600 million in aid, heightening concerns about Iran's material support for Hezbollah. Other events indicate that Iran might also aim to increase its influence among non-Shiites in Lebanon. Lebanon's primary security concern is Israel. In spite of efforts on the part of the Lebanese government and the international community to strengthen the Lebanese Armed Forces, many Lebanese perceive Hezbollah as the best line of defense against possible Israeli attacks along Lebanon's southern border. In what appeared to be an attempt to improve the standing of Hezbollah and its allies ahead of the parliamentary elections, Iran reportedly offered to provide arms and financial support to the Lebanese Armed Forces "without conditions." No official agreement materialized. Since the civil war ended in 1990, Hezbollah, backed by Iranian largesse, has expanded its role in Lebanese politics. Many analysts, and some among Lebanon's non-Shiite groups, argue that Hezbollah's 2006 war with Israel and 2008 siege of Beirut demonstrate its growing strength in Lebanese domestic politics and its ability to act as a spoiler of Western interests in the region. These analysts have expressed concerns about the future of stability in Lebanon and the region if Hezbollah were backed by the promise of an Iranian nuclear device. In Lebanon, Sunnis and some Christians have expressed similar fears. As the regional influence of Iran grows, so does Hezbollah's strategic depth. Lebanese politics and policies are built around the national memory of the civil war, and any prospect for a change in Lebanese politics or a shift of power balance in the region underscores fears that Lebanon could again become a theater of regional conflict, especially if international efforts to curb Iran's nuclear program fail, or if Israel decides to take military action against Iran. Since its 1979 Islamic Revolution, Iran has at least rhetorically, and at times materially, supported the Palestinian national cause. Because Iran and its population were relatively remote from the Arab-Israeli conflict—Iran does not border Israel or the Palestinian territories, it had not been a party to any of the Arab-Israeli wars, and most Iranians are not Arab—many analysts believe that the Islamic Republic's adoption of the Palestinian cause after the 1979 revolution was calculated to persuade Sunni and Shiite Arab populations throughout the region that the Iranian regime more truly embodies the principles of Islamic leadership than the traditional Sunni Arab states of the region. Other reasons—geopolitical competition with Israel and the United States, sympathy for the Palestinians as "victims of neo-colonialism" (given Iran's sensitivity to foreign involvement in its own affairs), religious and civilizational opposition to a Jewish/Zionist stronghold in a predominantly Muslim region—also are possible. Dating back to when the late Yasser Arafat and the Palestine Liberation Organization (PLO) were in exile, the Palestinians have been historically ambivalent about openly accepting Iranian support for their national cause. While Arafat courted Ayatollah Khomeini's support at times, he preferred to associate himself publicly with fellow Sunni Arab leaders (including Iran's enemy Saddam Hussein), and later developed greater ties with the West and engaged Israel through the Oslo "peace process." Arafat's engagement of Israel led Iran to refocus its efforts on influencing Palestinian groups that rejected Oslo—particularly Hamas, but also Palestinian Islamic Jihad and others—and that sought to derail efforts to forge peace with Israel on terms that they and Iran found objectionable. Since then, Hamas has grown significantly in influence—from the political margins to rivaling Arafat's Fatah movement in preeminence. Mahmoud Abbas, Arafat's successor as PLO Chairman, Palestinian Authority (PA) President, and the head of Fatah, is clearly opposed to Iranian influence in Palestinian politics. From the viewpoint of Abbas and his allies, Iran has sowed factional and geographical division among Palestinians at a time when assembling credible, unified leadership to deal with Israel is vitally important. Analysts might conclude that the threat Iran poses to Israel—with its nuclear program and its support of militant groups such as Hamas and Hezbollah—has greatly increased the difficulty of Abbas's task of marshaling and sustaining international political will sufficient to persuade Israel to (1) abandon its control over Palestinian territory and (2) agree to Palestinian statehood in both principle and fact. Official representatives of the PLO and PA limit their statements on Iran to its role in internal Palestinian affairs, and thus have not taken a public position on the nuclear issue. Some Palestinians who are skeptical of the Arab-Israeli peace process, however, believe that Iranian support for Palestinian militants and Hezbollah provides needed leverage with Israel that the United States and Europe are unlikely to deliver to Abbas. Yet, even though Hamas welcomes Iranian assistance, and even though Iran's reputation among Arab populations has arguably been bolstered in recent years by its anti-Western and anti-Israel positions and rhetoric, many believe that Hamas and Iran intentionally maintain a measure of distance from one another. An alternate interpretation is that they merely understate the extent of their ties. They appear to understand the importance of Hamas maintaining an image among its domestic constituents as an authentic Palestinian offshoot of the Muslim Brotherhood, instead of as an Iranian proxy—owing to the ethnic, sectarian, and linguistic differences between Palestinians (who are predominantly Sunni Arabs) and Iranians (who are mostly Shiite and non-Arab). Iran's future influence over the Palestinian political scene seems tied to Hamas's fortunes, which have been on the rise since Hamas's political emergence in the late 1980s (and were accentuated by its victory in Palestinian Legislative Council elections in 2006). By consolidating its control over Gaza and pursuing popular support through resistance to Israel, Hamas appears to seek legitimacy by establishing its indispensability to any Arab-Israeli political arrangement. Many analysts believe that Hamas hopes to leverage this indispensability into sole or shared leadership of the PA in both the West Bank and Gaza—either through a unity arrangement with Abbas and his Fatah movement, or through presidential and legislative elections (which were supposed to take place in January 2010 under PA law, but have been postponed pending factional agreement on conditions for holding them)—and to gain membership in or somehow supplant the PLO, which remains internationally recognized as the legitimate representative of the Palestinian people. Since its takeover of Gaza, however, some polls indicate that Hamas's popularity has suffered. Some analysts attribute this to doubts among Palestinians that Hamas is as incorruptible or as committed to ordinary people's best interests as was thought in 2006, partly due to the realities of governing and to certain of Hamas's practices (i.e., enabling/profiting from the smuggling of goods through tunnels from Egypt, provoking harm to Gazan civilians by firing on Israeli targets from dense urban populations during the 2008-2009 Gaza conflict). Abbas and Fatah hope to regain influence in Gaza and to neutralize Hamas's ability to act as a peace process spoiler. To that end, they have alternated between, and sometimes have simultaneously pursued, (1) mobilization of international support for a Palestinian state to undercut Hamas's appeal to Palestinian peace process skeptics and (2) engagement in intermittent, Egyptian-brokered national unity discussions with the aims of integrating Hamas more fully into PA institutions and of ending or reducing Hamas's dependence on Tehran. Various U.S. and international policymakers, including Secretary of State Hillary Rodham Clinton, have said or implied that organizational fissures may exist, particularly between Hamas's Gaza-based leadership and its leadership-in-exile—viewed as more closely tied to Iran—in Damascus, Syria. Some believe that these potential fissures could be exploited by promising Gazan Hamas leaders greater engagement and other incentives in return for moderating their goals and tactics. Others have said that Hamas is more united than it seems, and that it benefits from the portrayal of its leadership as divided because this perception provides Hamas with greater flexibility in dealing with both Western actors who hold out hope of its moderation and its Syrian and Iranian allies who are reminded not to take its rejectionist stance for granted. The Gaza Strip is at the epicenter of economic and security concerns over Iranian influence on Palestinian life. Because Gaza and the West Bank are part of a customs union controlled by Israel, the Palestinians do not conduct formal trade with Iran. Nevertheless, possible Iranian-supported smuggling of weapons, cash, and other contraband into the Gaza Strip, along with Iranian training for Hamas militants, is believed by many to reinforce both Hamas's ability to maintain order and control over Gaza and its population, and Palestinian militants' ability to fire mortars and rockets into Israel. Some reports say that contributions from Iran range from $20-30 million annually, supplementing the funds Hamas receives from private individuals and organizations from the Palestinian diaspora and greater Arab and Muslim worlds (particularly in Saudi Arabia and other Gulf states). The deputy leader of the Iran-backed Hezbollah movement in Lebanon told the Financial Times in May 2009 that Hezbollah has been providing "every type of assistance" to Palestinians in Gaza, including military assistance, for some time. In addition, Hezbollah has acted in some ways as a mentor or role model for Hamas, which has sought to emulate the Lebanese group's political and media success. During a December 2009 visit to Tehran, Hamas politburo chief Khaled Meshaal (who is based in Damascus) said, "Other Arab and Islamic states also support us ... but the Iranian backing is in the lead, and therefore we highly appreciate and thank Iran for this." The situation in Gaza came to a head with the December 2008-January 2009 conflict between Hamas and Israel, leading to the death and injury of hundreds of Gazan civilians, the displacement of thousands more, massive destruction of public and private infrastructure, and a general deterioration in quality of life. In the conflict's aftermath, dilemmas remain over how to reconstruct Gaza, support the recovery of its people, weaken Hamas's control, and end smuggling. Some advocate opening Gaza's border crossings for commerce to ease the economic pressures that may encourage smuggling; some advocate internationally coordinated anti-smuggling operations; some advocate both. In January 2009, the U.S interdiction of the Cypriot-flagged ship Monchegorsk in the Red Sea after it reportedly left Iran with weapons-related equipment and the Israeli bombing of an apparent arms-smuggling convoy in Sudan moving in the direction of the Egypt-Gaza border were signs of possible Iranian involvement in smuggling—perhaps in collusion with other states and non-state actors. Although construction materials are generally not being allowed into Gaza through the border crossings, Iran has proposed its own reconstruction plans and claims to be distributing funds to Gazans affected by the conflict. These plans may reflect Iranian ambition to compete—in concert with Hamas—against the PA, Gulf Arab states, and the international donor community for patronage and public support among Palestinians and other Arabs in the region. How Iranian influence on the Palestinians is likely to play out could depend in large part on events over the next several months. It is unclear how the popular unrest in Iran that has followed its June 2009 presidential elections might affect the Iranian regime's willingness and ability to exercise influence in the wider region and the strategic approach taken toward the Iranian-Palestinian linkage by the United States and Israel. Thus far, the Obama Administration has suggested that progress in the Arab-Israeli peace process (with the Palestinians and perhaps also with Syria and Lebanon) could improve the prospects of both countering Iran's nuclear threat and reducing its support of Hamas and Hezbollah, while Israel seems less inclined to pursue Arab-Israeli peace until the Iranian problems are addressed directly. Iran's internal political discord has complicated prospects for direct U.S.-Iran diplomacy aimed at resolving the nuclear issue. As a consequence, the U.S. focus on advancing the Arab-Israeli peace process could intensify. Alternatively, concerns about Iran's unpredictability might foster more of a "wait-and-see" attitude by the United States and other key actors with respect to the peace process and other diplomatic or strategic options in the region—possibly ceding the initiative to Palestinian militants, Hezbollah, or other potential spoilers. Some claim that a conciliatory tone that some detect from Hamas, particularly since Barack Obama became President, may be due to the movement's calculation that cultivating an image of reasonableness presently serves its interests in light of (1) the diplomatic climate following President Obama's inauguration, (2) Israeli deterrence of Hamas-generated violence in the aftermath of the Gaza conflict, and/or (3) geopolitical changes affecting Hamas's principal benefactors in the region—Syria, Hezbollah, and Iran. Those who are more skeptical of Hamas's intentions have countered that nothing of substance has changed in Hamas's existing positions, and that any reasonable-sounding statements are best explained as a ploy to give the impression of moderation. From its founding in 1948 until the fall of Mohammed Reza Shah Pahlavi in 1979, Israel had good relations with Iran as, in the 1950's, it pursued a policy of trying to surround its Arab enemies with friends in the "periphery," including Iran, Turkey, and Ethiopia. Israel provided the Shah with weapons and trained his secret police, the infamous SAVAK, and Iran provided Israel with oil, even during the Arab oil embargo after the October 1973 War. Ayatollah Ruhollah Musavi Khomeini, founder of the Islamic Republic of Iran in 1979, rejected Israel's right to exist and ended all bilateral cooperation. In the early years of the Republic, Israel generally ignored Khomeini's rhetoric because it viewed Saddam Hussein in Iraq as the greater threat. Moreover, Israel indirectly served Iran's interests in 1981, when it bombed Iraq's Osirak nuclear reactor, and is said to have secretly supported Iran briefly in the mid-1980's during the Iran-Iraq War (1980-1988). Yet, also in the 1980's, Israel began to perceive Iran as a threat as Tehran provided ideological inspiration and military support for the founding of the Lebanese Hezbollah, which later attacked Americans and Israelis in the region, and Jews abroad. This threat perception grew as Israel increasingly confronted Iranian-supported violent Palestinian terrorist groups (Hamas and Palestine Islamic Jihad) which rejected the existence of Israel and sought to sabotage the peace process. In October 2005, shortly after taking office, Iranian President Mahmud Ahmadinejad is said to have called for Israel to be "wiped off the map," and he has since repeatedly expressed virulently anti-Israel sentiments. Israel perceives an existential threat from an Iran whose officials have these views plus an intent to develop nuclear weapons. Israeli officials believe that a nuclear Iran could pose a direct threat to Israel, provide a nuclear shield for terrorists, and possibly provide them with a nuclear weapon. In a November 15, 2009, speech, Israeli Prime Minister Binyamin Netanyahu laid out his views regarding Iran's nuclear potential. He said Iran's pursuit of nuclear weapons threatens our security, peace in the Middle East, and global stability. With nuclear weapons, its powers of destruction, already considerable, would grow immensely. The moderates in the Middle East would be weakened and extremists strengthened. Other countries in the region would join the race for nuclear weapons. An Iranian regime that pledges to wipe Israel off the map would work day and night to undermine any attempt to advance peace between Israel and its neighbors – whether it is peace with the Palestinians, with Syria, and with anyone else. In contrast, if Iran's nuclear ambitions are thwarted, peace would be given a dramatic boost. Hezbollah and Hamas would be considerably weakened and moderate forces within the region would quickly become ascendant. That is why the fate of Iran's nuclear program is a true turning point in history. It would significantly influence our ability to achieve a stable and secure peace in the Middle East. Stopping Iran from acquiring nuclear weapons is Israel's number one foreign policy priority. The Israeli government insists that Iran is an international, not just an Israeli problem. Like his predecessors, Prime Minister Netanyahu said that he intended to enlist an international front to increase sanctions on Iran and preserve Israel's security interests. His government is trying to prod the United States and other Western governments to progress from dialogue, to harsher sanctions, to military action if Iran continues to refuse to abandon uranium enrichment. Israel also hopes to influence Russia and China in order to end their obstruction of harsher U.N. sanctions against Iran. It particularly seeks to dissuade Russia from selling advanced S-300 anti-aircraft missiles to Iran, thereby enabling it to thwart an attack on its nuclear installations. As an interim measure, on October 31, 2009, Netanyahu endorsed a U.S. proposal to have Iran move enriched uranium outside of Iran as "a positive first step" in the effort "to unite the international community to address the challenge of Iran's attempts to become a nuclear military power." Israel's Defense Minister Ehud Barak opined that the agreement would set Iran back by about a year, but added "there is a drawback" in that it "recognized that Iran enriches uranium, on a low level, on its soil for peaceful purposes. This is problematic for us." He insisted, "what is required is a halt to enrichment in Iran, not just an export of the enriched material to build fuel rods." His views reflect those of other Israelis who regarded the proposed agreement as a retreat from the demand that Iran stop all uranium enrichment. In the end, the views of Israeli officials did not matter as Iran rejected the proposal. Israeli officials have been skeptical about the Obama Administration's outreach toward and possible engagement with Iran. Defense Minister Barak said, "if there is an engagement, we believe it should be short in time, well-defined in objectives, followed by sanctions." Many times, he has reaffirmed that Israel is taking "no options off the table," signaling that a military strike is among its policy choices. The priority that Israel gives to Iran lowers the priority it accords to the Arab-Israeli peace process. Because of the perceived Iranian threat, Israeli officials are wary of the possible establishment of a Palestinian state that would be vulnerable to takeover by Iranian-supported Hamas – thereby creating what Prime Minister Netanyahu calls "Hamastan," an Iranian proxy, on Israel's borders. Israeli leaders link movement on the Syrian-Israeli peace track partly to Syria's distancing itself from its ally Iran, again noting that it is essential to keep Iran away from Israel's northern border. Israel has no economic relations with Iran and, therefore, has few, if any, direct economic concerns. It is aware, however, that should Iran block the Straits of Hormuz and interfere with oil shipments from the Gulf in retaliation for an attack, then Israel's Western allies would be harmed, and Israel could be affected as a result. Israel's security concerns are more immediate. Iran's ongoing arming of Hamas, Palestine Islamic Jihad, and Hezbollah is a threat to Israel's security. Israel wants Egypt and the United Nations to impede the smuggling of Iranian arms into Gaza and Lebanon, respectively. On at least five occasions, Israel has seized ships that it says were smuggling Iranian weapons. Foremost, as noted above, Israel believes that an Iran possessing nuclear arms would threaten its security and existence. Israel is keeping "all options on the table." It has been willing to give the United States and others in the international community a chance to engage in a dialogue with Tehran to see if incentives would induce Iran to stop enriching uranium or to enrich it outside of the country so that nuclear fuel could be monitored and not diverted from peaceful purposes to a weapons program. If dialogue does not work within a limited period of time, however, Israel expects the international community to impose rapidly escalating sanctions on Iran. As 2009 drew to a close, Israeli officials and commentators noted that President Obama said that he would give Tehran until the end of the year to comply with international demands regarding its nuclear program. Since Iran has not complied, the Israelis expect the United States and the other members of the P5+1 (United Kingdom, France, Russia, China, and Germany) to ask the U.N. Security Council to endorse harsher sanctions in January 2010. Should sanctions not work, Israel has indicated that it is preparing/prepared to take armed action. Israel already may have signaled its readiness to thwart Iran's nuclear ambitions by military means if diplomacy fails. On September 6, 2007, the Israeli Air Force carried out an air raid against a site in northeastern Syria. U.S. officials later confirmed that it was a nuclear reactor. Then, on June 20, 2008, the New York Times reported that the Israeli Air Force had conducted a major exercise about 900 miles west of Israel, comparable to the distance planes would have to fly to strike Iran's uranium enrichment plant at Natanz. In June and July 2009, Israel sent a submarine capable of launching a nuclear missile and several missile class warships through the Suez Canal into the Red Sea, in deployments that some observers suggested were preparation for a possible attack on Iran's nuclear facilities. While displaying its ability to attack Iran, Israel also has been reinforcing its defenses against an Iranian attack. It has proceeded with development, improvement, and successful testing of the Arrow anti-ballistic missile. In October 2009, Israel and the United States held one of their regular joint biennial military exercises, called Juniper Cobra, to work on integrating their weapons, radars, and other systems. This time, it was a large exercise, involving 17 U.S. naval ships, one of which was armed with the Aegis Ballistic Missile Defense System, 1,400 U.S. European Command (EUCOM) servicemen and an equal number of IDF forces, and it tested the U.S. and Israeli air-defense systems and their interoperability. Juniper Cobra was considered yet another signal to discourage Tehran. Experts appear to agree that an Israeli strike on Iran would be a complicated undertaking and carry a risk of asymmetric retaliation against both Israel and the United States, its closest ally, by Iranian-allied non-state actors. There is some question as to whether it would be possible for Israel to attack Iran without U.S. permission, given U.S. control of Iraqi airspace which Israeli planes might have to transit en route to Iran, and possibly without more sophisticated U.S. weaponry than Israel now possesses. Furthermore, because Iranian nuclear facilities are dispersed, multiple air raids would be required, perhaps diminishing the chances of success. Some analysts believe that a successful strike would set back Iran's nuclear program for only a few years. Given the closeness of U.S.-Israeli relations and reported warnings by CIA Director Leon Panetta of U.S. expectations of advance notice, it is likely that Israel would inform and consult Washington before attacking Iran. Finally, there are those who contend that the danger to Israel from a nuclear-armed Iran is overstated because Iran would not want to risk a response from Israel's own unacknowledged nuclear arsenal -- a powerful deterrent. Some conclude that Israel and the international community should become reconciled to the possibility of a nuclear-armed Iran and put aside other concerns. It is uncertain if the Netanyahu government would heed this advice. Iran's neighbors in the Caspian Sea region include Russia, the South Caucasian states of Armenia and Azerbaijan, and the Central Asian states of Kazakhstan and Turkmenistan. Russia is the dominant player in relations with Iran. Armenia and, to a lesser degree, Kazakhstan, have aligned themselves with Russian policy toward Iran. A major proportion of the world's Azerbaijanis (estimates range from 6-12 million), and about 200,000 Armenians reside in Iran. Ethnic Azerbaijanis are Iran's largest ethnic minority, constituting almost one-third of its population. More ethnic Turkmen reside in Iran and Afghanistan—over three million—than in Turkmenistan. The leaders of Kazakhstan, Turkmenistan, and Azerbaijan publicly embrace Islam but display hostility toward Islamic fundamentalism. Most of the people in Kazakhstan and Turkmenistan are Sunni Muslims. About three-fourths of the population of Azerbaijan is Shiia, and about one-fourth is Sunni. Among the Russian citizens living in the Caspian region, most are Russian Orthodox Christians, although a large proportion are Sunni or Sufi Muslims. Iran has traditionally had friendly relations with Armenia and both have at times joined in opposing Turkish and Azerbaijani interests in the region. Armenia's relations with Iran are focused on trade, since its borders with Turkey and Azerbaijan are closed as a result of the unresolved Armenia-Azerbaijan conflict over Azerbaijan's breakaway Nagorno Karabakh (NK) region. As a result of the conflict, Armenian NK forces occupy areas along the border with Iran. Iran has an official policy of neutrality regarding the NK conflict and has offered to mediate the conflict. Islamic Shiite fundamentalists in Iran have urged Iran's government to forego its policy of neutrality in the NK conflict and to embrace solidarity with Shiites in Azerbaijan. Energy security has been one of Armenia's main concerns, since it has been dependent on gas shipments from Russia through a pipeline that transits Georgia. Russia's fractious relations with Georgia have often jeopardized these shipments, causing Armenia to look to Iran for gas supplies. Iran and Azerbaijan have differed on such issues as border delineation in the Caspian Sea, Iran's objections to Azerbaijani security ties with the United States, and Azerbaijan's objections to Iranian trade ties with Armenia. Some observers have suggested that Iran's increased acrimony with the United States in recent years may have been a spur to its efforts to improve official relations with Azerbaijan, in order either to encourage Azerbaijan to be a mediator or to urge it not to permit U.S. basing. Azerbaijan and Iran have normal ties at the official level, but some in Azerbaijan have questioned whether Iran really supports the continued sovereignty and independence of the country. As an independent country, Azerbaijan stirs the aspirations of ethnic cohorts residing in Iran for greater rights or even secession. Iran has limited trans-Azerbaijani contacts to discourage the spread of ethnic consciousness among its "Southern Azerbaijanis," and has heavily criticized politicians in Azerbaijan who advocate separatism in Iran. The example of the assertion of Kurdish ethnic rights in post-Saddam Iraq in 2003 has galvanized some Azerbaijanis who propagandize for greater rights for "Southern Azerbaijanis." Alternatively, officials in Azerbaijan at times have alleged that elements in Iran have fostered Islamic fundamentalism among the Shiia population or have sponsored terrorism. Since 2006, many in Azerbaijan increasingly have been concerned about Iran's arrests of ethnic Azerbaijani civil rights advocates and alleged separatists, including Abbas Lisani. Azerbaijani-Iranian relations were roiled at the end of 2007 by the conviction in Azerbaijan of fifteen individuals on charges of collaborating with the Islamic Revolution Guards Corps to plan a coup and carry out terror operations. After the Azerbaijani National Security Ministry released details of the case, the Iranian Foreign Ministry denied any Iranian involvement and termed the case a scheme by Israel and the United States to harm Azerbaijani-Iranian relations. In mid-2008, relations were further strained after the arrest of six individuals on charges of collaborating with the Islamic Revolution Guards Corps and Lebanon's Hizballah to attack the Israeli embassy in Baku. Movement in 2009 toward rapprochement between Armenia and Turkey may have contributed to some countervailing moves by Azerbaijan to improve relations with Iran, although Turkey has reassured Azerbaijan that such rapprochement will not make headway until Armenian forces withdraw from areas around the disputed Nagorno Karabakh region. Although a disagreement with Turkey over prices and transit fees for gas appeared to be the primary motive, the Armenia-Turkey rapprochement may have been a factor in Azerbaijan's agreement in November 2009 to boost gas exports to Iran. At the same time, Iran announced that it would lift visa requirements for Azerbaijani visitors (Turkey immediately made a similar offer to Baku). Russia's ties with Iran have been both cooperative and competitive, and are grounded in Russia's drive to regain a prominent, if not superpower, status in international relations, to establish trade and transport links to the Persian Gulf, to coordinate oil and gas export policies as a cartel, and to counter U.S. influence in the Middle East. Russia's sizeable arms sales and nuclear technology transfers to Iran have raised regional concerns among such countries as Azerbaijan, Iraq, and Saudi Arabia, as well as wider international concern. Russia and Iran also want to limit Turkey's role in the region, which they view as an avatar of U.S. and NATO interests. Russian perceptions of the Iranian nuclear threat and its policies toward Iran are driven by a number of different and sometimes competing factors. In January 1995, Russia signed an agreement to build a nuclear power plant at Bushehr and to provide other assistance for an Iranian civilian nuclear program. Moscow has maintained that its cooperation with Iran's civilian nuclear program is legal, proper, and poses no proliferation threat.After Iran's clandestine program to master the entire nuclear cycle became public in 2002 with an announcement by Iranian dissidents that Tehran had built an underground enrichment plant, Russia withheld delivery of nuclear fuel for the Bushehr reactor until the two sides agreed in 2005 that spent reactor fuel would be returned to Russia for reprocessing. Following further revelations about Iran's nuclear enrichment program, Russia joined in approving a series of limited U.N. Security Council sanctions on trade with Iran's nuclear infrastructure and a freeze on trade with and the assets of certain Iranian entities and individuals. The delivery of Russian fuel for the Bushehr reactor was completed in January 2008, but the reactor has not yet begun to operate. On September 21, 2009, Iran informed the IAEA that it had been building a second uranium enrichment plant near the city of Qom. Many observers raised fears that the disclosure was further evidence that Iran intended to build nuclear weapons. In a meeting with concerned nations on October 1, 2009 (the so-called P-5 plus one, consisting of the United States, United Kingdom, France, Russia, China, and Germany), Iran agreed to a late October IAEA inspection of the Qom enrichment site and initially appeared positive toward a plan to export most of its low-enriched uranium to other countries to be further enriched to fuel the Tehran Research Reactor. After inspecting the enrichment plant, the IAEA concluded that the plant was in the advanced stage of completion and that Iran's efforts to hide the plant for years heightened IAEA concerns that other nuclear facilities were being hidden. Russia reportedly mediated with Iran to urge it to accept the research reactor fuel deal. In mid-November 2009, Russia announced that it was further delaying the start-up of the Bushehr reactor, perhaps indicating some Russian pressure on Iran to accept the research reactor fuel deal. On November 18, however, Iran rejected the research reactor fuel deal. In December 2009, Russia rejected international calls for added U.N. sanctions on Iran, with Prime Minister Putin declaring that Russia had no evidence that Iran intended to produce nuclear weapons. Since the early 1990s, Iran and Russia have used the issue of the status of the Caspian Sea to hinder Western oil development efforts. With Russia's adoption of a more conciliatory stance regarding Caspian seabed development, Iran in 2001 became isolated in still calling for the Sea to be held in common, or alternatively for each of the littoral states to control 20% of the Sea (and perhaps, any assets). In 2007, Iran declined Russia's call for forming a Russia-dominated joint Caspian naval task force, but joined Russia in opposing any naval presence by non-littoral states. Among other recent differences of viewpoint between Iran and Russia, Iran objected to then-President Putin's offer to the United States in June 2007 to make the Gabala radar site in Azerbaijan available for tracking missile launches from Iran. Some observers suggest that one reason Iran has opposed a settlement of the legal status of the Caspian Sea has been its opposition to the construction of trans-Caspian oil and gas pipelines from Kazakhstan and Turkmenistan to Azerbaijan that would not transit Iranian territory. While Russia also opposes such pipelines, it has joined other littoral states in calling on Iran to resolve the legal status of the sea. Kazakh President Nursultan Nazarbayav has urged Iran to agree to a median-line delineation of Caspian Sea borders rather than demand territorial concessions (Kazakhstan claims the largest area of seabed), and dangles prospects for energy pipelines through Iran and enhanced trade as incentives to an agreement. Turkmenistan may seek to settle on sea borders as part of its seemingly increased interest in a possible trans-Caspian gas pipeline. In October 2009, Iran lodged strong diplomatic protests following a meeting between the littoral states on energy cooperation that excluded it. Iranian Foreign Minister Manuchehr Mottaki warned the littoral states that "before the final decision on the legal regime of the Caspian Sea is made, Iran will not permit the exploration and exploitation of energy sources in the 20 percent section belonging to other countries." This statement was viewed by observers as referring to future energy development, since all the littoral states except Iran have offshore energy projects underway. Iran maintains bilateral trade with each of its Caspian neighbors, but trade with Russia, valued at $4.33 billion in 2008, is more developed than the other relationships. On March 19, 2007, Armenia's then-President Robert Kocharyan and Iranian President Mahmoud Ahmadinejad inaugurated an 88-mile gas pipeline from Tabriz in Iran to Kadjaran in Armenia. Work was completed on the second section of the pipeline, a 123 mile section from Kadjaran to Ararat, in December 2008. The Russian-controlled ArmRosGazprom joint venture built this second section and operates the pipeline. Initial deliveries reportedly are 10.6-14.1 billion cubic feet of gas per year, with plans for more gas deliveries in future years. Some of this gas will be used to generate electricity for Iran and Georgia, but the remainder eventually may satisfy all Armenia's consumption needs, alleviating its dependence on Russian gas transported via Georgia. Iran has argued for some time that Azerbaijan would most benefit financially by cooperating in building energy pipelines to Iran. At the end of 2005, Azerbaijan began sending up to about 35 million cubic feet of gas per day through a section of Soviet-era pipeline to the Iranian border at Astara in exchange for Iranian gas shipments to Azerbaijan's Nakhichevan exclave. In November 2009, Azerbaijan and Iran signed an agreement to boost Azerbaijani gas exports. In late March 2009, Azerbaijan's state-owned SOCOR energy firm announced that it was holding talks with Russia's state-controlled Gazprom gas firm on the refurbishment of the gas pipeline from Russia to Astara (including the part now used by Azerbaijan), in order to facilitate a Russian gas swap arrangement with Iran. In October 2009, however, Azerbaijan and Russia signed a gas supply agreement that would use a section of this pipeline, but would reverse its flow to permit exports from Azerbaijan to Russia. Seeking alternatives to pipeline routes through Russia, in December 1997 Turkmenistan opened the first pipeline from Central Asia to the outside world beyond Russia, a 125-mile gas pipeline linkage to Iran. Turkmenistan provided 282.5 bcf of gas to Iran in 2006 and reportedly a larger amount in 2007. At the end of 2007, however, Turkmenistan suddenly suspended gas shipments, causing hardship in northern Iran. Turkmen demands for higher payments were the main reason for the cut-off. Gas shipments resumed in late April 2008 after Iran agreed to a price boost. In July 2009, the two countries agreed to build a second pipeline to increase gas shipments. According to many observers, Iran appears likely to continue to build good relations with the Caspian regional states, and to not permit the export of Islamic extremism to damage correct state-to-state relations. All the Caspian littoral states have pledged not to permit the establishment of airbases that could be used for operations against any other littoral state, and the Collective Security Treaty Organization (to which all Iran's northern neighbors belong except Azerbaijan) forbids the presence of non-member state bases. On other issues, it is possible that Iranian-Azerbaijani relations might become more fragile if civil dissent increases among some ethnic Azerbaijanis in Iran. According to analyst Mark Katz, Iran and Russia are likely to continue their uneasy "contentious cooperation" in regional affairs as long as both countries view the United States as a major opponent. In the wake of the August 2008 Russia-Georgia conflict, several observers suggest that Russia is accelerating its efforts to reduce or eliminate U.S. influence in the wider Caspian region. Greater Russian influence in the region could contribute in the future to greater contention in Russian-Iranian relations over energy routes, regional security, nuclear technology-sharing, and other issues. More broadly, a possibly deteriorating security situation in Afghanistan might contribute to rising cross-border terrorism and trafficking in weapons, drugs, and weapons of mass destruction in the Caspian region. Although the Obama Administration may share many goals of the previous administration on Iran, it also sees the need for new strategies and approaches. The Obama Administration advocated a policy of engagement with Iran to determine the nature of its nuclear program and address other subjects of international concern. While post-election turmoil in Iran delayed these efforts temporarily, the Administration pursued engagement through the P5+1 framework. The first meeting took place on October 1, 2009 and President Obama called it a "constructive beginning." As the talks continued, however, prospects for an agreement appeared to diminish. The United States, Israel, and the EU proposed the end of 2009 as a "firm" deadline for Iran to demonstrate its willingness to cooperate on the nuclear issue. That deadline has lapsed with no visible progress toward a resolution and the Administration is now working with its P5+1 partners to determine a course of action for 2010. It is widely expected that the group will pursue a fourth round of sanctions through the U.N. Security Council with the goal of targeting the ruling elite in Tehran. U.S. Secretary of State Hillary Clinton said on January 12, 2010 that "It is clear that there is a relatively small group of decision makers inside Iran…They are in both political and commercial relationships, and if we can create a sanctions track that targets those who actually make the decisions, we think that is a smarter way to do sanctions. But all that is yet to be decided upon." Clinton also said the administration's thinking developed as part of consultations with a wide range of other countries and that the U.S. remains interested in engaging with Iran, even as it considers ways to pressure Tehran through sanctions. Regardless of how they decide to proceed, any actions on the part of the Obama Administration, Congress, or the international community, and any developments in or provocations by Iran, will have implications for U.S. interests in the region as Iran's neighbors react and reevaluate their policies accordingly. Questions remain about the course of U.S. and international efforts to resolve the issue of Iran's uranium enrichment program: Will the U.N Security Council pass additional sanctions? Will member states enforce those sanctions? Can sanctions be effective to deter Iran from pursuing a nuclear weapons program? How will sanctions affect engagement with Iran and how might they increase or diminish the prospects for a negotiated resolution to Iran's nuclear program? How should the international community evaluate the effectiveness of sanctions? Is there a deadline for sanctions to yield results? What are the options of sanctions and continued engagement fail? Regardless of the answers to these questions, most analysts agree that sanctions are the logical next step and that if they fail the U.S. and the international community could be forced to weigh the costs of a preemptive strike against the implications of a nuclear Iran. In any case, the policies pursued by the United States and the international community will continue to affect regional approaches toward Iran, and could have implication for other U.S. and international interests in the Middle East. While attention in the United States tends to focus on the response of European countries to expanded unilateral sanctions or the likelihood that Russia and China would join an international effort to impose sanctions on Iran, many of Iran's neighbors would also be affected. Iran has strong economic relations and shared economic interests with many of its neighbors that could be complicated by efforts to further isolate it. It is unclear whether Iran's neighbors would stop trade or forgo plans to cooperate in the area of resource exploitation in the face of international condemnation. The United Arab Emirates (UAE), for example, is among Iran's major gasoline suppliers by virtue of the fact that much of the refined petroleum products that Iran imports transit storage facilities in the UAE en route to Iran. Turkey and Armenia depend on cooperation with Iran to reduce their dependence on Russia for energy resources. Expanded sanctions could force Iran's neighbors to choose between cooperating with the international community and their own economic well-being. Engagement and sanctions are both aimed at alleviating tensions over Iran's nuclear program, but many also view them as the best hope for preventing a new war in the Middle East. Israeli Prime Minister Binyamin Netanyahu has made it clear that "all options remain on the table" for dealing with Iran, including the military option. So far, the Obama Administration has as well. They have also both referred to the end of 2009 as a deadline for Iran to demonstrate its willingness to cooperate with the international community on the nuclear issue. As the deadline fast approaches, Iran's Arab neighbors, the Gulf States in particular, appear nervous, weighing the cost of a regional war against the danger of a nuclear Iran, while calculating the long term political viability of the Iranian regime in light of continuing domestic protests. Some argue that tension between Iran and Israel could bring Israel and/or the United States and Iran's Arab neighbors closer together, perhaps even to some level of cooperation. Others caution that any Israeli strike could outrage Iran's Arab neighbors, and that the conflict would become regional and factious. The security of U.S. military personnel, facilities, and material in neighboring countries is also of concern to U.S. decision makers and regional leaders. Most regional states (with a few noteworthy exceptions) are concerned primarily with avoiding potential conflicts with Iran that could lead to military action or regional instability. Some might even prefer to learn to live with a nuclear Iran than to endure a regional war to prevent one. The primary concern among policy makers is the potential for a nuclear arms race in the Middle East, which would under undermine regional stability and run counter to the Obama Administration's long term vision of a world without nuclear weapons and its shorter term strategy to reduce the number of strategic warheads and missiles and to end the production of fissile material. U.S. Secretary of State Hillary Clinton's remark about possibly protecting the Gulf states under a "defense umbrella" was perceived by some as a tacit acceptance of the prospect of a nuclear Iran. Others saw it as an effort to mitigate the risk of a nuclear arms race—highlighting concerns that some of Iran's neighbors might pursue their own nuclear programs if they become convinced that Iran's nuclear aspirations cannot be checked. In the interim others have highlighted the dangers of a de facto regional conventional arms race, as Iran's Gulf Arab neighbors take steps to upgrade and expand their military forces as a deterrent and Iraq continues its efforts to reconstitute and reequip its military.

Summary: As the Administration and Congress move forward to pursue engagement, harsher sanctions, or both, regional actors are evaluating their policies and priorities with respect to Iran. Iran's neighbors share many U.S. concerns, but often evaluate them differently than the United States when calculating their own relationship with or policy toward Iran. Because Iran and other regional concerns—the Arab-Israeli peace process, stability in Lebanon and Iraq, terrorism, and the ongoing war in Afghanistan—have become increasingly intertwined, understanding the policies and perspectives of Iran's neighbors could be crucial during the consideration of options to address overall U.S. policy toward Iran. Iran's neighbors seek to understand and influence changes in the following areas: Iran's regional influence, Iran's nuclear program, Iran's role as an energy producer, and Iran's support for terrorism and non-state actors. Although the Obama Administration may share many goals of the previous administration on Iran, it also sees the need for new strategies and approaches. The Obama Administration has advocated a policy of engagement with Iran to determine the nature of its nuclear program and address other subjects of international concern. While post-election turmoil in Iran delayed these efforts temporarily, it appears that the Administration is committed to pursue engagement through the P5+1 framework. At the same time, some Members of Congress have called for increased sanctions on Iran. The United States, Israel, and the EU proposed the end of 2009 as a deadline for Iran to demonstrate its willingness to cooperate on the nuclear issue. That deadline has lapsed with no visible progress toward a resolution and the Administration is now working with its P5+1 partners to determine a course of action for 2010. Regardless of how they decide to proceed, any actions on the part of the Obama Administration, Congress, or the international community, and any developments in or provocations by Iran, will have implications for U.S. interests in the region as Iran's neighbors react and reevaluate their policies accordingly. This report provides a description of Iran's neighbors' policies and interests, options for Congressional consideration, and an analysis of potential regional implications. For more information on Iran and regional perspectives, see CRS Report RL32048, Iran: U.S. Concerns and Policy Responses, by [author name scrubbed]; CRS Report RL33476, Israel: Background and Relations with the United States, by [author name scrubbed]; CRS Report RS20871, Iran Sanctions, by [author name scrubbed]; CRS Report RL33533, Saudi Arabia: Background and U.S. Relations, by [author name scrubbed]; CRS Report RS22323, Iran's Activities and Influence in Iraq, by [author name scrubbed]; and CRS Report R40653, Iran's 2009 Presidential Elections, by [author name scrubbed].