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I'm Carla Robbins. I'm the deputy editorial page editor of The New York Times. And we are very lucky today to have Trita Parsi, who is the author of "Treacherous Alliance: The Secret Dealings of Iran, Israel and The United States". And Dr. Parsi has a long bio, which I think you all have in here. But one of the questions -- I'm not going to ask him about it, but for which I'm totally intrigued -- is how anyone could both have served as an advisor to Congressman Bob Ney and worked for the Swedish permanent mission to the U.N. (Laughter.) So that's what we call intriguing balance. And we're also very lucky to have my dear friend and old colleague -- not old, but long-standing colleague -- Barbara Slavin, who is currently the Jennings Randolph Senior Fellow -- which is not the William Jennings Bryan Senior Fellow -- at the United States Institute of Peace; and author of "Bitter Friends, Bosom Enemies: Iran, the U.S. and the Twisted Path to Confrontation". Barbara's been a senior diplomatic reporter for USA Today since -- for 11 years? Eleven. Eleven -- 11 years. She's been a foreign correspondent in the Middle East and in Asia. And both, obviously, know an enormous amount about Iran so we're both very lucky to have them. You all know what the drill is. I'm going to ask questions for a while and then we'll throw it open to you all. I'm also supposed to note that both authors' books are for sale out there. And since you're all hedge fund managers, you should buy three or four of them -- (laughter). Please. Anyway, I'm waiting for my review copy, actually. Anyway, I suppose because I'm in the news business, I did want to start with a news question. I don't know if you all have seen this, but there was a very bizarre confrontation, apparently -- according to the Pentagon, the Iranians haven't commented on it -- in which several Iranian, I suppose, small attack ships approached U.S. ships in the Straits and threatened them -- said that they were going to explode them. And it apparently came very close to the U.S. shooting, and then the Iranians turned around and went away. So the puzzling question -- and we'll just do this one both really quickly for both of you -- the present question is: What's the game and why would they possibly want to do something like this? Trita, do you want to start? I think there's probably two possibilities -- to simplify. First of all, I would like to say that we don't know enough yet, particularly when we take a look at the quote that AP has run that they were radioing the U.S. ship and saying that you're about to die or explode in a couple of minutes. It sounds very strange to me. I would like to see some additional reporting to see if they can verify that. Because if you look at the pattern of Iranian confrontation with the United States, they've actually been very, very cautious. It's one thing to take a couple of British sailors -- I think they have the stomach to be able to do so. But they're very careful about not unnecessarily provoking the United States, particularly with a gentleman like George Bush in the White House. So I'm a little bit curious to find out a little bit more what has happened -- if the original reporting was accurate or not. But then there's another element, which is that they have been -- and there probably still is -- elements in the Revolutionary Guards that are even more radical than Ahmadinejad, and may not be very happy about what seems to be going on behind the scenes: some maneuvering between the United States and potential for some sort of a diplomatic breakthrough -- however small it yet may be, there's some indications. And this is an excellent way of being able to derail that. We've seen that pattern in the past that whenever the United States and Iran have gotten a little bit closer to each other there are elements on all sides that have tried -- and often times successfully been able to derail that. So that may very well be what is going on. Barbara? I think the timing has to be connected to President Bush's trip to the Middle East, which starts tomorrow. What better way to remind the United States, what better way to remind the nations of -- the Arab nations of the Persian Gulf that Iran has tremendous ability to create havoc? Iran is an important power. President Bush may be spending a good bit of his time talking about containing Iran and isolating Iran, and so this is a great way to show that Iran cannot be contained; Iran cannot be isolated. Barbara, you're such an experienced watcher of the Bush administration. A few puzzling things have happened in the last few months, and maybe you can interpret them for us. One, of course, is the National Intelligence Estimate. Although, personally something that I do write about, I didn't find it as comforting as some people thought it was. I think they've probably just figured the game out, which is that you can do this publicly. Why do you have to hide it? I mean, Japan is a perfect example of that. There's that. There's also the Pentagon's suggestion that there's been a decline in these very powerful IEDs -- the EFPs -- coming across the border. Other suggestions -- you know, the Iranians have canceled one meeting, but they have gone to some other meetings. Are the Iranians behaving better? Are the Iranians looking for some sort of accommodation with the U.S.? Is there some sort of secret thing going on that we don't know about? I wish there were. I don't think there is. I think the Iranians are simply being very clever. I mean, they keep all their options on the table. It's suits their purposes now, I think, to tone things down a bit in Iraq, because the United States has already begun to withdraw. Their Shi'ite allies are doing extremely well. One of the reasons I think the Iranians acted to tone it down a bit is because there was some very dangerous infighting going on between its Shi'ite allies in Iraq, and Iran wanted to calm that down. They read Muqtada al-Sadr the riot act. I think that's one of the reasons that he imposed a ceasefire on his forces in Iraq. On the National Intelligence Estimate, you know, a lot of us thought it really was the intelligence community staging a preemptive strike on those few members of the Bush administration who still did think that it might be advisable to mount a military strike against Iran before Bush leaves office. But you're absolutely right: Iran has continued its overt program, which is really the most dangerous aspect of it; however, it has opened -- it's opened the debate in Iran. And we can talk about this a little bit more. You know, Iran has parliamentary elections in March. And one of the reasons, perhaps, that these Revolutionary Guard types in the Straits of Hormuz maybe wanted to shake things up a bit is because tension and conflict would help Ahmadinejad and his side in the upcoming parliamentary elections; whereas the NIE kind of pulled the rug out from under him. You know, no one could say the U.S. was about to attack anymore and so he couldn't, you know, benefit from this atmosphere of tension. Lots of games within games that are being played, I think, in that system -- as Trita pointed out. So are there more games within games being played in Washington or in Tehran? You know -- They're better at it. I wish. I just don't think that this Bush administration -- we can talk -- my book, Trita's book talks a lot about missed opportunities in the last six, seven years. And at this late stage, I think the best we can hope for is a bit of a toning down of tension. I just don't see any grand reconciliation. Trita, what's the story on their nuclear program? What do you think's really going on? Well, I think they definitely are looking for a nuclear option, being -- as you mentioned -- like Japan or Sweden or Belgium -- having the capability to be able to go for a nuclear weapon, but stopping short of that. And that is exactly the same approach that the Shah took during the 1970s. He wanted to have the option, but he also recognized the strategic disadvantage for Iran to actually go for a weapon. Iran has been able to play a strong leadership role in the region for the last 3,000 years more often than not because of its strategic conventional superiority. If Iran, however, as a large state goes for nuclear weapons, sparks a nuclear race in the region, causes smaller countries such as Bahrain and Kuwait to either get one or buy one, then Iran will have put itself at strategic parity with these much, much smaller states and they would have eliminated its national conventional superiority. So the Iranians do have strong incentives not going for a nuclear weapon, but because of them living in a very tough neighborhood, they definitely want to have the option. And I think that's what they're aiming for now. I don't think they have made a strategic decision to go for a weapon, but if tensions between the United States and Iran were to increase further, then that decision would probably be reassessed. You know, it's -- for those of us who've covered these things for years, we've all -- everybody's decided the NIE is absolute truth after we swore after Iraq we were never going to consider an NIE absolute truth. (Laughter.) But let's just for a moment -- because it lessens the possibility that we will have World War III on George Bush's watch -- knowing what you know about Iran, Barbara, if they dropped the clandestine program in 2003, why? I mean, that's not all that long after 2002, when the Israelis using the MEK made their announcement about the existence of Natanz. One could say that the second they got caught with their hand in the cookie jar that they decided to go for the public option. They just couldn't hide it anymore. Or was it the war in Iraq that did it? I mean, what's -- we, of course, all believed that the war in Iraq would have the exact opposite effect on Iran and it would make them want to rush faster toward a nuclear weapon. What's the difference between, you know, North Korea and Iran? The North Koreans already had the weapon. So what's your interpretation for that timing, keeping in mind that perhaps the intelligence community doesn't have a clue what it's saying? True. No, I think you're right. I think they got caught with their hand in the cookie jar. The centrifuge facility at Natanz was exposed by the Mujaheddin-e Khalq -- perhaps with help from the Mossad, we don't know -- and another facility. And so they were caught. They didn't want to be kicked out of the NPT. They didn't want to lose that option, so they realized they would have to open their facilities, at least to some extent, to the IAEA. I think the U.S. invasion of Iraq was also a factor. Certainly for a couple of months there in the spring and early summer of 2003, the Iranians were nervous that they might indeed be next. But I think that fear dissipated rather rapidly after the U.S. got bogged down in Iraq. There was another National Intelligence Estimate that I wrote about in my book that came in January of 2003 -- it was a National Intelligence Assessment, excuse me, not an estimate; so I guess that's a peg down -- that by toppling Saddam Hussein, this would spur both Iran and North Korea to accelerate their nuclear programs. So they did -- they did stop for a while. They even halted the Iranian program for awhile, but of course, long term they have accelerated the uranium-enrichment program, which is the one that will give them the capacity to make a bomb if they so choose. Trita, how much is the Iranian economy hurting from outside economic pressure? And you know, there was this time about -- I suppose a year ago, or maybe it was two years ago, I suppose, when it started -- when banks -- it was after Vice President Cheney gave his interview, his radio interview the day of the second inauguration, I suppose, in 2004 when he said that -- suggested that there might be a dust-up with the Iranians. And then the banks started rethinking. And this was not the result of an organized Security Council push, but more the fact that people began to worry about it. And of course, Secretary Rice went to Europe and said, I'm shocked that anyone could possibly imagine we'd be considering military action. But it was -- I think even the sort of saber rattling did have an effect in European banks and some other companies. I mean, how much of an effect is that having on the Iranian economy and is it just totally offset by the price of oil? In general, the sanctions that have been imposed on Iran actually have been effective in inflicting a cost on the Iranian economy. But none of the sanctions that have been imposed in the past -- and I would venture to think that none of the ones that feasibly could be imposed in the future -- will be able to translate that economic cost into a change into Iranian policy. We have not seen that in any single case with Iran so far. On the contrary, whenever they've been put under more sanctions, they've actually even become more aggressive in their policies. The additional financial sanctions have, again, created cost for their policies, but it's not changed their policies. And in fact, what we've seen on the Iranian side is, particularly after the missed opportunities -- and both Barbara and I write extensively about the 2003 proposal that was sent that the Bush administration rejected. The effect of rejected offers from Iran has been that those in Tehran who argued that you cannot make friends with the United States by offering goodwill gestures or offering negotiations, you can only do so by making it as costly as possible for the United States not to negotiate. And I think that's what we've seen in the last couple of years. We're saying we're going to make it costly for them to pursue a nuclear program. They're thinking, we're going to make it costly for the United States not to negotiate. And that means that wherever they can be problematic against U.S. policies in the region, they've taken the opportunity to be so. And I do want to get into the 2003 offer, and a little bit about the personalities and all the different players in this, but before we do that -- just really, quick, Barbara -- how fragile is their economy? We hear a lot about capital flight to Bahrain and to the Gulf, hear a lot about high inflation level itself. Ahmadinejad was elected by promising domestic issues, by promising an improvement in the domestic quality of life and an end to corruption -- neither which seems to have taken place. Is it a fragile economy itself or is, as long as oil prices hover in the 90s, are they fine? They're not fine. And I think we'll get a better sense of how important this issue is in March, because the economy is really the -- one of the key issues in the parliamentary elections that are coming up. Inflation is definitely over 20 percent. Unemployment is still really high. The other side of it, though, is that they have been able to take a lot of this oil money and spread it around, particularly in the rural areas and the provinces. So this is where Ahmadinejad still has some support. It's a policy of handouts, so it's not going to work in the long run. It's not creating productive investment. It's not creating jobs for Iranian youth, but they can limp along. I think Iranian businessmen are complaining. The people in the bazaar are complaining. It's very hard to get letters of credit. The banking sanctions have been the most effective - - really cumbersome and difficult. People are having to travel with suitcases full of cash now in order to do business. So this could boomerang against the regime. I'm a little less -- you know, I think it has had an effect. I think it could have an effect on their nuclear policy on the margins, but we'll have to wait and see how it plays out in their political contest coming up. Can you give us just -- can you give us a very quick summary of the 2003 offer, for those of us who haven't read your book yet? Well, both Trita and I have it printed in the back of our book. I have a version that shows the final edits that were made by Javad Zarif -- who many here know was the Iranian ambassador to the U.N. -- and Trita has it without the final edits. But it was a trial balloon. It was an agenda for talks between the United States and Iran. It listed Iran's concerns. It listed U.S. concerns, and then it had a mechanism for announcing the beginning formal negotiations. And it listed all of the issues that are of concern to both sides -- including the nuclear program, Iran's policy on Israel. It suggested that Iran would be willing to talk about the two-state solution, the Arab League proposal that Iran would scale back its support from Hezbollah and Hamas. But of course, in return, Iran wanted economic sanctions considered, U.S. protection for the Mujaheddin-e Khalq. All of their concerns were listed as well. I mean, it was a very sensible document and unfortunately, it never got a response from Washington. It simply was ignored. Trita, who was behind this and what was going on there? Well, just different stories about who was behind it. The Iranian side of the story is that it was actually an American proposal that they just responded to. And it may be, because politically those individuals who were involved in it need to protect themselves. They're the same individuals who are arguing in Tehran that we need to help the United States in Afghanistan, and if we help the U.S. in Afghanistan, the United States will have a more favorable view of Iran. That ended up not happening. Instead, Iran got into the Axis of Evil. So they needed some protection, perhaps, to be able to pursue this by saying, well, this is an American response. It would be rude not to respond to this proposal. And that's where these edits are coming in from. There is an element there that actually may be true, because some of the individuals in the Bush administration had been attending various conferences and talking to various Iranian officials. And there had been an order by Colin Powell to prepare a contingency peace plan with Iran, right after 9/11. And it may very well have ended up being so that the Iranians got wind of this proposal, because the individuals who drafted it were intimately involved in negotiating with the Iranians in Afghanistan. And as a result, the Iranians thought, well, if we propose something that they themselves had already prepared, how can they possibly say no? Well, they did say no. So there's still a lot to be found out about what the origins of this proposal was. But I would say one thing: I think the proposal should be read from the back to the front, not from the front to begin. If you read it from the back to the front, you see that there is a process of how to go from stage one to stage three in which at the end, you would achieve what is on the first page of that proposal, which are the different aims. Basically, they have put the pie in the sky on the table and then a mechanism of how to reach it. So I wouldn't read the proposal as saying, well, they were just willing to talk about it. This was the pie in the sky on the table. And if the process was gone the right way, it was only about finding a way to reaching that pie in the sky. At the end of the day, even today, if there is some sort of a deal to be made, I think the contours are still going to be the contours of what we see in that document. The price, however, is going to be different, because we have spent three years making more mistakes and the Iranian position as grown stronger. Can I just add, I was told that it was actually -- the initiative came from Sadegh Kharazi, who was the Iranian ambassador in France at the time, the nephew of Iran's then-foreign minister, and the brother-in-law of Ayatollah Khamenei's son. This is the supreme leader. And it was put together also with the help of Tim Guldimann, who was the Swiss ambassador in Teheran at the time. And the Swiss represent U.S. interests in Iran in the absence of diplomatic relations, and I think a lot of the wording came from Guldimann. The Iranians claimed, some of them claimed to me that Richard Armitage was the one who had put together a proposal for engagement and that they were responding to Armitage's overture. But Armitage denied this and, you know, I don't think his role was necessarily crucial in it. I mean, I think the Iranians knew quite well what the issues were and, as Trita points out, they're the same issues that remain on the table today and would remain on the table. Well, when you think about it, it doesn't really matter where it started, because if there is a common language and a common sense of what the agenda is and a willingness to discuss an agenda, then it really didn't matter -- as it doesn't matter, ultimately, if it was embraced -- but just within the Bush administration itself, what happened? Did this thing come by mail? Did it come by fax? You know, did it get lost? (Laughter.) It was sent from the Swiss Embassy in Teheran to the Swiss Embassy in Washington by secure fax, which is the way that all these messages are passed from the Swiss. And then it was hand-delivered by a Swiss diplomat to the State Department's Department of Near East Affairs. This is the way such things would be transmitted. It isn't some mysterious thing that popped up, you know, that was thrown over the transom, as it's been described by some. It was absolutely delivered in the normal way, and was a regular Iranian communication to the United States. I might add one other thing, and I think one of the reasons -- there was a lot going on during this period. I mean, there were U.S. talks with Iran from the fall of 2001 through May 2003. The date is May of 2003? May 3rd. This popped up -- this popped up May 3rd, early May. And it was just at the same time that, as luck would have it, I had a front-page story in USA Today, writing about the high-level, authorized, secret talks that had gone on between the U.S. and Iran from the fall of 2001 through May 2003, which came out as -- I don't know how embarrassing it was for the Iranians, but it was extremely embarrassing for the Bush administration. Because here they were, they'd been caught actually having these kinds of discussions with a member of the axis of evil, and so there was a lot of fluster and bluster. And they cancelled these talks. They used as a pretext bombings in Saudi Arabia by members of al Qaeda; they claimed there was some connection between these people and al Qaeda detainees in Iran. Anyway, this offer pops up, you know -- comes in just at the same time that all of this is happening, so I think it made it more difficult for the Bush administration to grab hold of this offer. But it was seen all the way up the chain of command in the State Department. Powell saw it. Condoleezza Rice says she does not remember seeing it. Other members of the National Security Council do. But do we know -- I mean, the people in the State Department, of course -- at the time this would be, you know, it would have been Powell and Armitage and Burns -- Armitage, Bill Burns, right. Bill Burns, yeah. -- who were all the people who were very much -- Bill Burns is now the ambassador in Moscow -- people who would be interested in the word "engagement," a word that I gather the secretary of State told you she doesn't like. Yes. Ms Rice told me she doesn't like the word "engagement." (Chuckles.) So, do you -- do we know what happened when it got to the White House? I mean, did Dave Wormser tear it up in Cheney's office? I mean, what happened? The same day or the day after that Ambassador Guldimann delivered the proposal to the State Department he also visited the office that I was active in at the time. I was advising Congressman Bob Ney. Ney had lived in Iran for about nine months before the revolution, and he spoke Farsi. And Tim used to come -- or the Swiss ambassadors tend to come every six months to give a briefing at the State Department on what the situation in Iran is. At the end of the day, they're supposed to be America's eyes and ears in Iran, absence of an American embassy. And he always tried to pass by Congress as well, because he knew of Ney's deep interest in Iran and his knowledge about it. And I saw a copy of that proposal at that visit and remember being very, very surprised and shocked. Didn't really expect something like that, although there had been conversations, dinners on Capitol Hill in which Zarif had come and they had arranged it in which elements of this actually had been discussed. And I write about it extensively in the book. Ney knew Karl Rove since about 20 years before, and he immediately sent a staffer over to the White House to deliver it to Rove. Rove called back within, I think, two hours. They had a brief, five-minute conversation. He said that the proposal was intriguing; he wanted to know about the authenticity of it, and he promised to show it to the president. The next thing we hear back is in the Financial Times. Guy Dinmore has a story saying that the Swiss ambassador got reprimanded for having played a part in delivering the proposal. From what we heard elsewhere is that basically within the administration there was a debate -- not necessarily very high, not necessarily serious, but the argument basically came down to whatever the United States can achieve by negotiating with Iran, it can achieve even more by simply removing the government in Teheran. And again, mind you, three weeks earlier Saddam had been removed. So there was a tremendous amount of confidence in the White House at the time. There's one other aspect of this that I think is very important. About two or so months prior to the proposal being sent to the United States, the Iranians had Mohsen Rezai, who is the former head of the Iranian Revolutionary Guard Corps attend a conference in a southern European capital sponsored by an American university, funded by the Pentagon, that brings together about two (hundred) or three hundred people from the region, as well as Europe and America. It's an excellent, recurring arena for track two and behind-the- scenes diplomacy, and it's a place that the Israelis tend to visit in very large numbers. Rezai deliberately went there, had a closed session with several of the Israelis as well as Palestinians, presenting not a peace plan to Israel, but a proposal on how the United States and Iran could improve their relations. But the key audience in the room were the Israelis. And the signal that was intended to be sent was that if this deal is made between Iran and the United States, it would not come at the expense of Israel, because Iran recognized that it needed to change its position on Israel in order to improve its relations with the United States. I spoke to several of the people who were in the room, including Ze'ev Schiff, one of Israel's most respected journalists, who passed away last year. His sense was that he had heard similar things very recently prior to that. He felt that it was a genuine indication of policy. He didn't trust the Iranians; I don't think anyone in Israel would. But he agreed that it was a mistake not to pursue it further to see where it possibly could lead. So we have a -- what we would put on a list of gross diplomatic negligence on the part of the Bush administration. This has all been past -- talking about the past. And my time is up, so I will throw this open to you all. I hope you -- we have many things that could be spoken about, including the upcoming elections, Ahmadinejad's future, and the future for what could the next president of the United States do to try to recoup this situation. So those are just some of the things that like -- could continue. Let me just say that --