WarSclerotic

Israeli leaders remain intent on acting to degrade Iran’s nuclear capabilities, probably within six to eight months, and Israel believes it has the capability to succeed in such a mission, an envoy of Prime Minister Benjamin Netanyahu told Foreign Policy’s The Cable on Friday.

Israel’s former ambassador to the U.S. and Israel Hayom columnist Zalman Shoval, who is considered close to the prime minister, told the publication that the recent tensions between Washington and Jerusalem over “red lines” over Iran’s nuclear program have been “dialed down.”

But the basic disagreement over what the threshold should be for striking Iran remains, as does the disagreement over how to communicate that threshold to the Iranian regime, he told The Cable.

“The good news is that war didn’t break out between Israel and America. Things have abated a little bit, the verbal part of it, which is good,” Shoval said. “But the basic strategic view of Israel has not changed. We still believe that setting a red line, in terms of benchmarks, is the important step right now.”

He also said that the Obama administration’s red line — that Iran would not be allowed to possess a nuclear weapon — was insufficient as far as Israel’s security was concerned.

“Israel doesn’t set dates, but if by a certain point the sanctions have not achieved the desired results, then other measures will have to be very practically considered,” he said. “We talk in terms of six to eight months.”

The red line for Israel is when the Iranians have produced enough fissionable material from which they can produce at least a dirty bomb within a short time, he told The Cable.

Israel is confident it can achieve success in a solo strike on Iran’s nuclear program, Shoval said, as long as the term “success” is correctly defined.

“Israel doesn’t pretend that it can totally eliminate Iran’s nuclear program,” he said. “But the general view in Israel is that we could stop the Iranian effort for three to five years. Well, in the Middle East three to five years is not such a short time, as we have seen. And the Americans could get into the game if they want to, within that delay.”

Meanwhile, Tehran’s Grand Bazaar reopened under close police supervision on Saturday, traders said, days after it was shut by clashes between riot police and protesters blaming the government for the collapse of the Iranian currency.

U.S. Defense Secretary Leon Panetta on Saturday said the international community will impose more economic sanctions on Iran if the country does not resolve concerns over its nuclear program, while Democratic Senator Robert Menendez, a member of the Senate Banking and Foreign Relations committees, said he plans to push for new penalties on foreign banks that handle any significant transactions with Iran’s central bank. Only oil-related transactions are now covered by sanctions.

Existing sanctions “are having a significant impact on the economy in Iran, as evidenced by some of the demonstrations that have taken place within the last few days,” Panetta told a news conference in Lima with Peru’s defense minister.

“The United States will continue to work with the other countries in the international community to see if additional steps need to be taken,” Panetta added.

The European Union also has begun discussing the possibility of a broad trade embargo against Iran, moving beyond the energy, business and financial restrictions imposed so far.

Prime Minister Benjamin Netanyahu, meanwhile, is planning to meet with several European leaders and press them to stiffen their punitive measures, The Washington Post reported over the weekend.

“We are closer now probably than we’ve ever been” to convincing Iran to alter its nuclear policies, an Israeli government official told The Post.

Over the weekend, Iran’s government remained locked in a test of wills with currency dealers as it tried unsuccessfully to impose a stronger exchange rate for the rial, which lost about a third of its value in 10 days.

Merchants in the bazaar, one of the capital’s main shopping areas, said uncertainty over whether authorities could stabilize the currency was making business planning difficult.

“The dominant thing on every merchant’s mind is concern for tomorrow,” one shop owner told Reuters by telephone, declining to be named because of the political sensitivity of speaking to foreign media.

The involvement of the Grand Bazaar in the protests is politically significant because merchants from the area were key supporters of Iran’s Islamic revolution in 1979. Some traders said they shut their shops this week as part of the protests, while others cited fears over their safety.

Authorities attempted to revive trade on Saturday by dictating a rate. The Iranian Money Changers Association, a state-licensed body, instructed its members to sell dollars at 28,500 rials, Mehr news agency quoted a trader as saying. That was much stronger than the record low of 37,500 early this week.

But dealers in Tehran and Dubai told Reuters there was almost no trade because the rates indicated by state bodies were not commonly accepted in the market.

Money changers in Tehran “tell us not even to call them to ask the price of currency. They say they are not giving rates,” a merchant in the capital said.

If the currency market stays frozen, many Iranians may become unable to conduct businesses that involve imports, while foreign travel and study abroad may be curtailed. This could increase discontent with the government.

Some analysts believe that despite the sanctions, which have slashed Iran’s oil earnings, the government still has enough foreign currency to flood the free market with dollars and engineer a sharp rebound of the rial if it chooses.

At the end of last year, Iran’s official foreign reserves totaled $106 billion, according to the International Monetary Fund. Analysts estimate reserves may now have dropped by several tens of billions of dollars, but that would still allow Iran to pay for roughly a year of merchandise imports.

So far however, the central bank has been unwilling to release large amounts of dollars into the market to support the rial. Instead, authorities have been rationing hard currency through official channels such as a new foreign exchange center, which was set up last month to serve importers of basic goods.

Meanwhile, U.N. Secretary-General Ban Ki-moon said in a report to the General Assembly released Friday that Iran’s general population was feeling the brunt of international sanctions as inflation and unemployment continue to rise and lifesaving medicines are in short supply.

“The sanctions imposed on the Islamic Republic of Iran have had significant effects on the general population, including an escalation in inflation, a rise in commodities and energy costs, an increase in the rate of unemployment and a shortage of necessary items, including medicine,” Ban said in his report.

U.S. officials in Washington say the rial’s plunge is due to both Iranian government mismanagement and the bite from tighter sanctions.

In his report to the General Assembly, Ban also noted his concern over Iran’s human rights situation, though he said the regime had taken some “positive steps,” such as eliminating stoning as a method of execution.

The U.N. chief said he remained “deeply troubled by reports of the increasing number of executions, including in public; continuing amputations and flogging; arbitrary arrest and detention, unfair trials, torture and ill treatment; and the severe restrictions targeting media professionals, human rights defenders, lawyers and opposition activists.”

Iran denied on Saturday a U.S. media report that it had offered a “nine-step plan” aimed at solving its stand-off with the West over its disputed nuclear program.

“No new offer outside of the framework of the P5+1 negotiations during the last meeting of the United Nations has been made, and the claims of some American news organizations in this regard are baseless,” Mehr news agency on Saturday quoted Iran’s chief nuclear negotiator, Saeed Jalili, as saying.

The New York Times reported on Thursday that Iran had proposed a plan to European officials that required the West to lift harsh oil and economic sanctions in return for the eventual suspension of uranium enrichment by Tehran.

It reported Iranian officials tried to gather support for the proposal during a visit last month to the United Nations.

The Iranian plan described by The New York Times would likely be a non-starter, as the six powers have demanded Tehran halt its 20 percent enrichment of uranium; ship any stockpile out of the country; close down an underground enrichment facility, Fordo; and permit more intrusive U.N. inspection of its work.

Tehran has refused to meet those demands unless economic sanctions choking its oil exports are lifted first, and denied on Saturday that it had made any new offers to the West to break an impasse that has lasted nearly a decade.