The following are excerpts from the prepared remarks by Patrick Clawson, deputy director at The Washington Institute, on "Iran's Motives and Strategies: The Role of the Economy" delivered at a Senate Committee on Foreign Relations hearing on May 17, 2006. Click here to access his full testimony.

The Limitations of Economic Instruments

Economic instruments alone are unlikely to be sufficient to persuade Iran to freeze its nuclear program. The principal levers of power in Iran are in the hands of revolutionaries who are not motivated primarily by economic concerns, while those who care about the state of the economy do not have sufficient influence on their own to persuade the real power-holders to change policies. Success at influencing Iranian policy is much more likely if action on the economic front is combined with action on other fronts...

Much as pressure should be applied on several fronts rather than just on the economy, so inducements offered Iran should take multiple forms rather than only being trade and investment incentives. Indeed, economic inducements look suspiciously like bribes paid for bad behavior. Besides being odious, such bribes give the impression that bad behavior is more profitable than good behavior...

A much more appropriate form of inducement would be security inducements. Such security inducements should be designed to counter the argument that Iran needs nuclear weapons for its defense. There are many confidence- and security-building measures and arms control measures that would provide gains for both Iran and the West, similar to the way such steps reduced tensions between the old Warsaw Pact and NATO during the Cold War. One example would be an agreement to reduce the risk of incidents at sea between the U.S. and Iranian navies.

A further security inducement which the United States could offer would be to address the reported concern that the Bush administration's real goal is regime change in Iran and that the Bush administration will use force to that end. Such complaints sound peculiar coming from an Iranian government whose president lectures President Bush on why the United States should abandon its liberal democracy and who sponsored a conference last fall on theme "The World Without Zionism and America"...

It would of course be inappropriate for the U.S. government to offer any security guarantees to the Iranian or any other government; what government is in power in another country is up to the people of that country to decide. But what Washington could offer Tehran would be a "conditional security assurance" -- jargon for the simple proposition, "We will not attack you if you do not attack us." To clarify what that means, the U.S. government should spell out:

• "Just as you criticize us for our liberal democracy, we will remain free to criticize you for your undemocratic violations of human rights.

• “Just as you spend tens of millions on radio and television broadcasting to our country to propagate your views, so we will remain free to support broadcasts to Iran.

• “Just as you tightly restrict trade with America, we will remain free to restrict trade with Iran.”

Such a conditional security assurance might not be all that Iranian hardliners want, but at the very least, it would help in the battle to influence European and Middle Eastern opinion that the United States is being reasonable and Iran is not. Since Iran's main objective in pursuing its nuclear program is to gain influence and prestige, Washington's strategy should be to show that Tehran's obstinate nuclear stance is undermining Iran's influence.

Patrick Clawson is deputy director for research at The Washington Institute.