Risk #8: Iran

Note: Today is the eighth in a series of posts that detail Eurasia Group’s Top Risks for 2013

The dangers emanating from the ongoing shadow war with Iran are greater than many observers believe. This struggle has consisted of several components, including a cycle of mutual killings and cyber attacks. While there is no hard proof, it is a reasonable assumption that Israel and Iran (or at least some officials in Iran) are responsible. The final theater is the ongoing proxy war in Syria.

In early 2013, the West will also become engaged in an effort to negotiate a solution to the standoff over Iran’s nuclear program. Western countries, led by the U.S., would very much like a peaceful resolution, while Iran sorely needs relief from stiff economic sanctions. Talks will be intensive but on balance the talks will probably fail by late spring. The Iranian elite have an almost existential commitment to the nuclear program, while Supreme Leader Ali Khamenei possesses a deep seated enmity for the U.S.

As a result, the West and Iran will probably return to escalating sanctions and shadow war, with two drivers boosting the ferocity of that struggle. First, the Iranian regime will feel compelled to show resolve and retaliate in the face of new sanctions. Second, the regime faces a period of profound economic weakness, though it will not collapse. But weak governments are prone to lashing out, both to rally domestic support and to portray an image of strength.

These new drivers will likely intensify the shadow war and could lead to new fronts. The chance of miscalculation and overreaction on both sides would rise, especially in the face of provocations such as a successful assassination plot in the U.S. similar to the alleged attempt against the Saudi ambassador in October 2011 or an episode such as the 2008 swarming of U.S. Navy frigates by Revolutionary Guard boats.

Iran’s nuclear program is the second area of concern in 2013. Israeli rhetoric will remain at a high pitch, but is intended to increase diplomatic leverage and economic sanctions. Still, the probability of an Israeli attack in 2013 is low because Iran’s nuclear program is unlikely to pose an imminent threat this year. Also, Israel can inflict only limited damage on Iran’s nuclear facilities and there will be a lack of consensus among its political leaders about the wisdom of a strike. Polling also shows the Israeli public firmly opposes unilateral action. Finally, the U.S. would likely attack only if Iran tries to acquire a nuclear weapon and that is unlikely.

There are, however, a number of worrying scenarios. Developments at the Fordo enrichment facility make up one. Iran will have enough medium-enriched uranium to make a bomb by early summer, but weekly IAEA inspections leave enough time for detection and action. The central question is whether the Israeli government will trust the U.S. or strike on its own. Israel is unlikely to attack, but this dilemma slightly boosts the chance of Israeli strikes during 2013 (to roughly 20 percent).

A scenario involving a detectable Iranian breakout would probably elicit a U.S. attack. Yet Tehran has been very cautious and slow. Iran probably wants to become a latent nuclear power; that is, the world knows it could develop a bomb quickly. But Iran’s threat perception will become more dire this year,  making an irrational dash to a bomb, and a U.S. attack, slightly more likely.

Next week, we’ll profile Risk #9: India