The Daily Telegraph
By Tim Shipman in Washington
02/09/2007

In a nondescript room, two blocks from the American Capitol building, a group of Bush administration staffers is gathered to consider the gravest threat their government has faced this century: the testing of a nuclear weapon by Iran.

The United States, no longer prepared to tolerate the risk that Iranian nuclear weapons will be used against Israel, or passed to terrorists, has already launched a bombing campaign to destroy known Iranian nuclear sites, air bases and air defence sites. Iran has retaliated by cutting off oil to America and its allies, blockading the Straits of Hormuz, the Persian Gulf bottleneck, and sanctioned an uprising by Shia militias in southern Iraq that has shut down 60 per cent of Iraq's oil exports.

The job of the officials from the Pentagon, the State Department, and the Departments of Homeland Security and Energy, who have gathered in an office just off Massachusetts Avenue, behind the rail terminus, Union Station, is to prevent a spike in oil prices that will pitch the world's economy into a catastrophic spin.

The good news is that this was a war game; for those who fear war with Iran, the less happy news is that the officials were real. The simulation, which took four months, was run by the Heritage Foundation, a conservative think tank with close links to the White House. Its conclusions, drawn up last month and seen by The Sunday Telegraph, have been passed on to military and civilian planners charged with drawing up plans for confronting Iran.

News that elements of the American government are working in earnest on how to deal with the fallout of an attack on Iran come at a tense moment.

On Tuesday, President Bush dramatically stepped up his war of words with the Iranian president Mahmoud Ahmadinejad, whom the US government accuses of overseeing a covert programme to develop nuclear weapons. In a speech to war veterans, Mr Bush said: "Iran's active pursuit of technology that could lead to nuclear weapons threatens to put a region already known for instability and violence under the shadow of a nuclear holocaust."

He went on to condemn Iranian meddling in Iraq, where America increasingly blames the deaths of its soldiers on Iranian bombs and missiles. Mr Bush made clear that he had authorised military commanders to confront "Iran's murderous activities".

This was widely taken to mean that he is set on a confrontation with Iran that will culminate in a bombing campaign to destroy Iranian nuclear facilities, just as Israel bombed Saddam Hussein's Osirak reactor in 1981.

The president's intervention came just weeks after leaks from a White House meeting suggested that Vice-President Dick Cheney, who is understood to favour the use of force, has regained the upper hand over the Secretary of State Condoleezza Rice and Defence Secretary Robert Gates, who both advocate diplomacy and sanctions to isolate Iran. Mr Cheney reacted with fury when the State Department suggested that negotiations might continue past January 2009, when Mr Bush leaves the White House.

So the question is: did Mr Bush last week set America inexorably on a path to the next war?

Washington officials, with close links to the Pentagon, the State Department and the National Security Council, say that the speech was designed as a threat not just to Iran, but to America's Western allies, along with Russia and China, who have been slow to support - or who have opposed - UN sanctions against Iran. James Phillips, a Middle East expert at the Heritage Foundation, who helped devise the war-game scenario, said: "It is simultaneously a shot across Iran's bows and an appeal for the international community to do more to stop or slow Iran's nuclear programme."

A former White House aide added: "If this creates in the Iranians' mind a state of fear such that they back off, that helps your diplomacy. Bush is a political poker player. To play poker, you have to know when to bluff."

Mr Bush had another reason for speaking out, too. With General David Petraeus due before Congress on September 11 to report on progress on his "surge" in Iraq, Mr Bush wanted to make the case that a withdrawal from Iraq would boost Iranian influence there - in the hope that this would increase domestic support for his policies.

In Teheran, Mr Ahmadinejad was also quick to make the Iraq connection, but as an impediment, not impetus, to American adventurism. "We have an expression in Farsi which says, 'Bring up the one that you have given birth to first, then go for another one'," he said. "Let them do what they started in Afghanistan and Iraq then think of other countries." He dismissed threats of military action as "more of a propaganda measure than factual".

But European observers, and some in the American government, believe that Mr Bush has resolved to "do something" about Iran before he leaves office. A State Department source said: "If we get closer to the end of this administration and we are not seeing suitably tough diplomatic action at the UN, and other members of the P5 [the five permanent members of the Security Council] are still resistant to anything amounting to more than a slap on the wrist to the Iranians, then people will start asking the question: how do we stop our legacy being a nuclear-armed Iran?"

Mr Bush's escalation of the rhetoric was deliberate. A former White House aide said that the reference to a "nuclear holocaust" was a precise attempt to bracket Mr Ahmadinejad's quest for nuclear weapons and stated desire to wipe Israel off the map with Hitler's destruction of the Jews.

"By using that word 'holocaust', Mr Bush has provided a moral reason to allow the Jewish state to do what it needs to do," said the former aide.

"He is reinvoking the notion of 'never again'. If you believe that there could be another Holocaust, it becomes morally indefensible to stand back. It is a powerful and loaded term. Those people in Europe who believed that the neo-cons have gone away and shrunk under a rock had better wise up fast."

British and American military officials believe that Mr Bush's ideal scenario is to bring about regime change in Iran, whose mullahs humiliated the US government during the hostage crisis, 28 years ago. "Unless you live here, it is difficult to understand how much the hostage crisis - is burnt into the psyche of Washington," said a Western diplomat in Washington. "They were made to look weak and the people who did it are still in power."

There are credible reports that the US has stepped up clandestine activities in Iran over the past 18 months, using special forces to gather intelligence about military targets - nuclear infrastructure and air bases, and Revolutionary Guard command centres from which Iran could coordinate attacks in Iraq.

The Pentagon has made contact with a Kurdish group called the Party for Free Life in Kurdistan, which has been conducting cross-border operations in Iran, and with Azeri and Baluchi tribesmen in northern and south-eastern Iran, who oppose the theocratic regime. By using military special forces, rather than the CIA, the administration does not have to sign a Presidential Finding, required for covert intelligence activity, or report to oversight committees in Congress.

Information on US targets has leaked from the Pentagon. B2 bombers and cruise missiles would strike up to 400 sites, only a few dozen of which are linked to the nuclear programme. B61-11 bunker-busting tactical nuclear weapons would be the ultimate weapon against the heavily fortified installations; first in the crosshairs would be the main centrifuge plant at Natanz, 200 miles south of Teheran.

A Pentagon source said: "We have a targeting list and there are plans, but then there are also plans for repelling an invasion from Canada. We don't know where everything is but we do know where enough is to cause them enough damage to set back the programme."

But there are grave doubts that bombing would work. Davoud Salhuddin, a US dissident and Muslim convert living in Iran, said: "The US will not have the ability to change the regime here. Iran's supreme leader Ayatollah Seyyed Ali Khamenei has been preparing himself for a US attack for the past 30 years. If they attack Iran, the problem of terrorism that they are trying to solve will get 100 times bigger than it is now… Americans will not feel safe in their own homes."

The other problem is that the CIA, apparently, does not have enough intelligence to guarantee that the nuclear programme could be permanently crippled, and little way of knowing after the event how much time they have bought with a raid. International estimates of how long it would take Iran to get a bomb vary between a year and 10 years.

The latest polls show that just one in five Americans would support the bombing of Iran now, but about half would do so if their government considered it necessary: clearly a position from which Mr Bush could build a case for war. Three out of four voters want to prevent Iran from acquiring nuclear weapons.

Just as crucially, US government officials say that the CIA has failed to come up with a "smoking gun" that would persuade the international community to back military action. Last autumn, the CIA told the White House that while it believes Iran is running a clandestine nuclear weapons programme, it does not have conclusive proof. Radioactivity detection devices placed near suspect facilities did not find the expected results. Stung by criticism of their performance over Saddam Hussein's weapons programmes, CIA bosses warned Mr Bush and Mr Cheney that this did not prove that Iran had successfully concealed the programme from inspectors.

The diplomatic case against Iran suffered another blow when the International Atomic Energy Agency last week gave an upbeat assessment of Iranian co-operation with weapons inspectors. It found that Iran continued to enrich uranium - necessary for a bomb, but also for civil nuclear power - in violation of UN Security Council demands, but at a slower rate than was expected.

A State Department source said a new push would be made to advance the case for sanctions this autumn, but the hopes of progress were mixed. "The Russians and Chinese are still stonewalling, and the Europeans don't want to get involved," he said.

The one bright light for American hawks was a speech from the French President Nicolas Sarzoky, fast becoming Washington's favourite European, who, while ruling out French involvement in air strikes, did warn that Iran could face military action unless it abandoned the enrichment programme, presenting the world with a "catastrophic choice" between "an Iranian bomb or the bombing of Iran".

Complicating everything is President Bush's weak ratings in public opinion and on Capitol Hill, and the fact that some of his closest allies, including the political strategist Karl Rove and Attorney General Alberto Gonzales, have jumped ship.

Only Congress has the power to declare war, and Mr Bush would need Congressional approval for military action against Iran within 60 days. Some think he might struggle to win that approval. "I don't think there is any real fight left in this White House. And no one in Congress wants to help them," said one Republican.

But critics fear that if Mr Bush cannot advocate confrontation with Iran, he might yet seek to provoke it. Joseph Cirincione, of the Centre for American Progress, accuses Mr Bush of "taunting Iran". He said: "Like the similar campaign for war with Iraq, this effort seems to be designed to find a casus belli, perhaps by provoking Iran into some action that could justify a military assault."

In the meantime, administration officials are studying the lessons of the recent war game, which was set up to devise a way of weathering an economic storm created by war with Iran. Computer modelling found that if Iran closed the Straits of Hormuz, it would nearly double the world price of oil, knock $161 billion off American GDP in a single quarter, cost one million jobs and slash disposable income by $260 billion a quarter.

The war gamers advocated deploying American oil reserves - good for 60 days - using military force to break the blockade (two US aircraft carrier groups and half of America's 277 warships are already stationed close to Iran), opening up oil development in Alaska, and ending import tariffs on ethanol fuel. If the government also subsidised fuel for poorer Americans, the war-gamers concluded, it would mitigate the financial consequences of a conflict.

The Heritage report concludes: "The results were impressive. The policy recommendations eliminated virtually all of the negative outcomes from the blockade."

James Carafano, a former lecturer at West Point, the American military academy, who led the war game, said: "It's not about making the case for war. I have yet to meet a government official who says: 'I've just come from a fierce debate about whether to bomb Iran'."

But in Teheran they are waiting. Abbas Abdi, one of the US embassy hostage takers in 1979, now a reformist political activist, said: "The style of the Americans is that they go forward with the political dialogues, get a couple of resolutions and then they wait to see what the circumstances are. They have no problems in attacking Iran, for sure."

Additional reporting by Kay Biouki in Teheran

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