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.