Research and Briefings

CFI Briefing
The Iranian Nuclear Threat 
11 October 2010

Written by Benjamin Jackson (CFI intern)

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Contents:
1) Introduction
2) Iran’s Nuclear Ambitions
3) Evidence Iran is Producing a Nuclear Weapon
4) Iran’s Resistance to Mediation and Negotiation
5) Current Sanctions Against Iran’s Nuclear Programme
6) Ramifications of a Nuclear Iran
7) Conclusion  

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Introduction

This briefing outlines the threat of Iran’s nuclear programme. It analyses Iran’s nuclear ambitions and outlines how Iran may be using a civilian nuclear programme to disguise it efforts to research and ultimately acquire a nuclear device.

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Iran's Nuclear Ambitions

In 2010 Iranian President Mahmoud Ahmadinejad declared Iran a “nuclear state”. Ahmadinejad has repeatedly referred to Iran’s “inalienable right” to a nuclear programme and stated the process is both “unstoppable” and “non-negotiable”.

• Iran has already constructed several nuclear sights and publically outlined plans to build 10 new uranium enrichment plants in secret mountainous locations.
• The US, supported by western intelligence agencies including the UK, France and Germany, suspect Iran is trying to use civilian nuclear technology as a façade for producing nuclear weapons.
• Former British PM Gordon Brown accused Iran of: “serial deception” regarding its pursuit of nuclear power.
• Tehran has declared it will not negotiate on nuclear enrichment despite repeated calls by the international community to engage in talks designed to curb its nuclear portfolio. 
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Evidence Iran is Producing a Nuclear Weapon

Iran’s Secrecy:

• Iran has signed the Non Nuclear Proliferation Treaty (NPT) and insists its nuclear programme is for civilian use only.
• Despite these actions, officials in Tehran continue to be evasive about its nuclear programme.
• In 2002 an Iranian exile group obtained documents revealing a clandestine nuclear programme.
• Secret nuclear facilities have been revealed in Natanz and Qom, in violation of International Atomic Energy Agency (IAEA) rules.
• The IAEA Director Yukiya Amano stated in September 2010 that the nuclear watchdog could not verify Iran’s assertion that it is not attempting to produce weapons grade material because of the limited access to information and visits to Iran’s nuclear facilities.
• Iran has denied inspectors access to information regarding proposed new enrichment facilities it plans to build. It has also denied inspectors access to a heavy water production plant.

IAEA Report

• In September 2010 the IAEA issued a detailed report highlighting that Iran is on the brink of developing an atomic weapon.
• Iran has continued to enrich uranium despite repeated calls from the Atomic Energy association and the UN Security Council to stop whilst claims about its Nuclear Programme are investigated.
• The report bluntly states that the IAEA “remains concerned about the possible existence in Iran of past or undisclosed nuclear related activities involving military organizations”, which includes the possible “development of a nuclear payload for a missile”.
• The report detailed that Iranian scientists have overcome the most significant technical hurdle to producing weapons-grade uranium, since it has made at least 22 kg of enriched uranium with at least 20 per cent purity.
• Whilst the uranium will need to reach 90 per cent purity before it becomes weapons-grade, experts have indicated that this is a relatively easy process and the 22kg it possesses is already enough to arm a warhead.
• The announcement that Iran has enriched uranium to 20 per cent caused considerable alarm as Iran had not managed to enrich to levels higher than 5 per cent as recently as February 2010. 
• The same report also recorded that Iran's stockpile of low-enriched uranium, the feedstock of both civilian and military nuclear programmes, has risen by around 15 per cent since May 2010 to reach 2.8 tons.
• This is some of the strongest evidence yet that Tehran has defiantly moved ahead with its nuclear portfolio irrespective of economic sanctions implemented in May 2010 and diplomatic pressure from across the international community.

Non Co-Operation with IAEA Inspectors and the UN Security Council:
 
• Iran’s co-operation with IAEA inspectors is selective with Iran barring inspectors from various facilities at its nuclear plants and refusing to present documentary evidence at others.
• IAEA inspectors are consistently barred from entering Iran, and in some cases expelled. In 2007 Iran expelled 38 inspectors and in June 2010 it barred 2 IAEA inspectors from the country after they reported undeclared nuclear activity by scientists.
• The IAEA has rebuked Iran for denying information about plans for new enrichment facilities that Iran has said it intends to build, as well as being denied access to a heavy-water production plant, forcing it to rely solely on satellite imagery to assess the plant's operations. 
• Heavy water production is a vital element in converting nuclear fuel to a suitable form to be used in nuclear weapons.
• The IAEA’s September 2010 report notes that, “the agency is ... concerned that the repeated objection to the designation of experienced inspectors hampers the inspection process and detracts from the agency's ability to implement safeguards in Iran”.
• Iran also continues to test machinery that can be used to make weapons based uranium.

Iran’s Energy Independence:

• Iran has no need for Nuclear power. It has the world’s third largest proven oil reserves and 30% of global oil.
• Iran has 16% of the world’s natural gas.
• Nuclear power currently generates less than 1% of Iran’s energy needs.

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Iran's Resistance to Negotiation and Mediation 

• Iran continues to remain intransigent over the issue of its nuclear programme, refusing negotiation or any mediation.
• The UN Security Council has ordered Iran to stop uranium enrichment and halt all activities related to its nuclear programme; especially enrichment of uranium.
• Technology used to enrich uranium for civilian purposes can also be used to enrich uranium for a level needed for a nuclear explosion.
• In return the UN Security Council is offering Iran help in cultivating civilian nuclear power, trade concessions and the lifting of independent US sanctions.
• In 2009 former IAEA Director General Mohamed El Baradei described negotiations with Iran over its nuclear programme as: “a dead end”.
• Iran has repeatedly scuppered deals designed to help it obtain nuclear fuel for civilian purposes.
• In February 2010 Iran rejected a deal with France and Russia that would greatly advance its civilian nuclear programme and ensure it was fit for civilian purposes only.
• This involved all Iran’s nuclear fuel-rods being sent to France and Russia in one shipment. France and Russia would then process the uranium and send them back as fuel rods fit for civilian purposes only.
• Senior Iranian officials consistently snub IAEA negotiators and recently failed to attend an agreed meeting with then IAEA chief Mohamed El Baradei.
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Current Sanctions Against Iran's Nuclear Programme

• Iran is currently in breach of six Security Council Resolutions regarding its nuclear activities: Resolution 1696, Resolution 1737, Resolution 1747, Resolution 1803, Resolution 1805, and Resolution 1929.
• The latest UN SC Resolution 1929, demands cessation of all Iranian nuclear activities including; enriching to 20%, cessation of construction of the facility in Qom and full cooperation with IAEA investigation into the military aspect of its nuclear programme.
• Current UN sanctions against Iran include a travel ban for certain officials connected with its nuclear program, a complete arms embargo and a freeze on all assets of its Revolutionary Guard which controls Iran’s nuclear programme.
• The US and EU have bolstered these with unilateral measures; most notably the blacklisting of certain Iranian banks and insurance firms as well as separate travel bans for members of the Iranian regime.
• The US has designated Iran’s Revolutionary Guard as a supporter of terrorism and imposed separate sanctions on all its commercial and military activities.
• Germany refuses to export nuclear fuel or technology to Iran or refund any money Iran has already paid it.
• Canada has invoked additional sanctions, extending travel bans on Iranian nuclear scientists and freezing some assets from proscribed Iranian banks.
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Ramifications of a Nuclear Iran

• A nuclear armed Iran is a threat to both regional and global security, not least the security of Israel.

• Threat to Israel
o Israel has good grounds to feel threatened since Iran was internationally condemned in 2005 after President Ahmadinejad threatened to “wipe Israel off the map”, and has repeatedly spoken of the need to “remove Israel from the Middle East”.
 

• Threat to Britain
o Iran does not act as a responsible state within the International community and poses a direct threat to British interests.
o Former Foreign Secretary Jack Straw has previously detailed that in 2006 Iran privately offered to stop aiding the insurgency in Iraq if the UK would ignore Iran’s nuclear programme.
 

• International terrorism
o Iran is a leading state sponsor of state terrorism, financing and training the insurgency in Afghanistan, Iraq and provides support to extremist Islamist terrorist groups across the Middle East.
o A nuclear armed Iran would be difficult to deter from providing support to terrorists and equally difficult to hold to account.
o Iran has been rebuked by the IAEA for its failure to cooperate with inspectors to ensure nuclear material is held securely at plants, raising the prospect that nuclear material is being secretly exported to unknown entities.
o A nuclear Iran could provide nuclear weapons to terrorist organisations or other states who oppose the West and Israel.
 

• Regional power struggle
o A nuclear armed Iran could unleash a potentially catastrophic power struggle throughout the Middle East. Arab states including Saudi Arabia and Kuwait have already requested IAEA help to harness nuclear power.
o As of 2006 Morocco, Tunisia and Algeria and Egypt entered into detailed discussions with the IAEA designed to intensify their research into nuclear power.
 

• Energy crisis
o Iran could provoke a major international energy and trade crisis if it were to act on its threat to blockade the Strait of Hormuz if it felt “threatened”. This would trigger an energy crisis as much of the US and European oil and other goods flow through this area.
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Conclusion

The evidence indicates Iran is trying to produce a nuclear device, using a civilian nuclear programme as a cover. It is in serious violation of six UN Security Council resolutions regarding its nuclear programme. It refuses to suspend uranium enrichment and continues to hamper IAEA access to its nuclear activities. Thus far, Iran has been resistant to negotiations and confidence building measures.

Most western countries are sufficiently worried about Iran’s nuclear programme to implement sanctions through the UN, with many others unilaterally imposing harsher penalties.

The repercussions of a nuclear armed Iran are potentially disastrous. Not least has it threatened to obliterate the sovereign state of Israel, but it remains a premier financer of terrorism and has the potential to provoke a major regional power struggle and arms race.

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CFI Briefing
Palestinian Economy  
11 October 2010

Contents:
1) Introduction
2) State of the West Bank Economy
3) State of Gaza Economy
4) Factors for Future Growth
5) Conclusion
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Introduction
 

This briefing will discuss the overall health of the Palestinian economy. The first two sections utilise recent statistics to examine the current state of the Palestinian economy in both Gaza and the West Bank. These sections will include an assessment of the role of external actors, namely Israel and the international community, in the involvement and support of the territories economy. The final section will explore the future factors required for growth.
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State of the West Bank Economy
 

• The economy of the West Bank has shown a course of development entirely distinct from that of the Gaza Strip. Indeed, economic growth has outpaced both Israel and the West for the last four consecutive years. Economic growth in 2006-2007 for the territory reached about 4-5 per cent and unemployment dropped about 3 per cent. Growth has continued at a consistent pace with GDP rising 8 per cent in 2008, 7 per cent in 2009 and a further 9 per cent expected growth for 2010 (source IMF).
• Critical to economic growth according to the IMF has been the Palestinian Authority’s successful economic reforms of the financial sector. The PA in the past 12 months has established a modern credit scoring system enabling Palestinians to borrow money more easily as well as changed its banking sector making it in accordance with international standards. Complementing growth in GDP has been a rise of more than 20 per cent in average wages and a rise of 35 per cent in internal trade since 2008.
• Leading the economic surge has been the tourism, sales and construction sectors. Tourism in Bethlehem increased to about twice its previous levels (in 2009 1.5 million tourists visited the city as compared to 700,000 in 2007).  Jericho has seen a similar tourist’s boom experiencing a 50 per cent increase in the last year alone. Figures recently published by the Palestinian Central Bureau of Statistics following a survey on domestic tourism show that around 40 per cent of Palestinian took a local trip in 2009, spending a total of $10.5m ($7.7m in the West Bank and $2.8m in Gaza). The number of guests staying in hotels rose by 13.7 per cent between June 2009 and March 2010, and occupancy rates increasing by 10.6 per cent, to 32.7 per cent.
• Growing wealth and greater access to international capital have led to a construction boom. Rawabi, the first planned Palestinian city, will be built north of Ramallah with funding provided in part by Qatar. Other major building projects include a series of new shopping malls opened in Jenin and Nablus in the past year as well as the construction of two luxury hotels - a five star hotel in Ramallah city centre and a four star hotel in its outskirts. In 2010 Jenin opened its first cinema complex in 20 years; the facilities include a 400 seat film house, an open air cinema and small guest house on site. Ramallah also opened a commercial centre in July 2010. The new $400m project covers an area of 50,000m2 and includes commercial houses, entertainment facilities, shops and hotels. There are 13 commercial towers in total and the project has provided thousands of jobs.
 

a) Israeli and International Support for West Bank Growth
• Israel has supported the growth of the West Bank economy by taking a series of measures to foster economic activity, including improving movement and increasing financial support.
• Movement restrictions have been eased in order to help facilitate increased Palestinian business activity. Since 2007 the Israeli military has dramatically reduced the number of checkpoints, from 41 in July 2007 to 16 today, with all operating as “normally open”. Israel has also removed 409 roadblocks throughout the West Bank. The Crossings Management Authority recorded a 57 per cent increase in the number of entries of Palestinian pedestrians into Israel in 2009, reaching 6,825,247 in 2009, compared to 4,340,362 in 2008. During the first half of 2010 the daily average of pedestrians entering Israel from the West Bank numbered 17,350 and the daily average of vehicles entering Israel numbered 21,420.
• Israel continues to transfer financial packages to the PA and supports international donor conferences which have produced substantial financial commitments to the West Bank. Israel provided 2,299 million NIS in the first half of 2010, compared to 2,029 million NIS in the parallel period of 2009.
• According to the World Bank in 2001, $929m were given by the international community to the PA. This number declined in subsequent years due to violence and instability in the territories; however, since 2007 global aid has reached record amounts.
• The European Union announced in July 2010 a new financial aid package of €71m for the Palestinian Territory. This is in addition to the existing EU commitment of €158.5m for 2010, of which €120m contributes towards the salaries and pensions of PA civil servants and €38.5m is provided in support of the most vulnerable Palestinian families.
• In December 2007, during the Paris Donor Conference, which followed the Annapolis Conference, the international community pledged over $7.7 billion for 2008–2010. Financial aid to the Palestinians is among the highest in the world and represents over 50 per cent of the Palestinian budget.
• A stable security situation combined with growing international financial support and a burgeoning domestic economic situation is positively transforming the West Bank.
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State of the Gaza Economy

• The Gaza Strip, a costal enclave south west of Israel has been controlled since 2007 by the Palestinian extremists group Hamas.
• The economy of the Gaza Strip is severely limited by high population density, limited land access, strict internal and external security controls, and restrictions on labour and trade access across the border.
• Although the economy is in a difficult state and growth has been limited in recent years, the territories per capita income was estimated at $3,100 in 2009 placing it above Morocco and neighbouring Egypt. The United Nations Development Programme’s Human Index Rankings (which takes into account life expectancy and education in addition to economic wellbeing) found that Gaza - ranked 110th in the world - ranks higher than many neighbouring Arab states including Egypt (123), South Africa (129) Morocco (130) and India (134).
• Estimated growth for 2010 according to the IMF is a remarkable 16 per cent.
Such impressive growth can be attributed to the loosening of Israel’s embargo as well as the maintenance of ceasefire. A significant rise in the flow of goods since 2009 has resulted in a substantial drop in prices of commodity goods - most Gazan goods are currently cheaper than in neighbouring Egypt.
• The chairman of the National Islamic Bank in Gaza has stated that, a “liquidity crisis” in the Strip’s bank is over. The enclave’s banks currently run a large surplus of liquid cash.  
 
a) Israeli and International Support For Gaza economy
• Israel has continued to transfer since 2007 funds to Gaza to pay for the salaries of Palestinian Authority employees in the Strip.
• Israel has loosened the economic blockade against Gaza despite Hamas remaining in firm control of the territory.
• Israel continues to receive over 10,500 patients in critical need from Gaza providing health care free of charge.
• Foreign donors have pledged $1.6m billion to help reconstruct Gaza - this includes over $200m from the United Nations and $300m from the United States. This number is equivalent to 7.5 times more per head ($579.95) than aid allocated to Haiti ($77.47) following the countries devastating earthquake.
• Alongside the EU’s financial aid package for the Palestinian Territories, the EU, with the Palestinian Authority, has launched a €22m programme to help reconstruct the private sector in Gaza in July 2010. The programme aims to repair the machinery and equipment that was damaged during Operation Cast Lead in January 2009. Over 1,000 companies are eligible for support through the programme. In the first phase, 203 companies will benefit from €4.8m of support.

 
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Factors for Future Growth

• Continued economic growth in both territories is largely dependent upon continued economic reform - currently undermined in Gaza by Hamas policies - and continued amelioration in the security situation.

a) Implementing economic reforms:
• In the West Bank additional reforms are needed to maintain high growth rates, with particular focus needed in changes to the public sector pension system and access to credit for small businesses.
• Absence of market reforms in Gaza will curb any long term high growth rates.

b) Stabilising the security situation:
• With the end of the intifada, foreign direct investment has increased significantly following years of decline. Successful peace negotiations promise a further significant windfall in foreign aid and investment.
• Improved security situation will prompt Israel to further remove its restrictions on traffic movement and exports from the territories which will fuel additional growth.

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Conclusion
 

While the Palestinian territories remain underdeveloped and face severe constraints towards long term growth, the economic situation when contrasted with neighbouring regional states appears to be less dire than expected. Both territories are currently undergoing an economic boom which places the living standards of Palestinians above many of its larger neighbours, including Egypt.
 

Despite the economic stabilisation of the Palestinian territories a concern has been the distinct and separate economic development occurring between Gaza and the West Bank attributed in large part to the different regime types in the two territories. In the Hamas held Gaza Strip much needed economic reforms are simply not taking place. Furthermore, given the nature of the organisation the international community has been reluctant to provide direct funds for fear that it will divert economic resources for terrorist and military activities directed at Israel.
 

The West Bank, in contrast, under the moderate leadership of Abbas has worked to de-escalate violence and concentrated political efforts on stability and economic growth. The results of such polices has been an upsurge in foreign direct investment, a marked diminishment of Israeli restrictions on movement and border closures, as well as a marked improvement in the livelihood of Palestinians in the territories.