Iran The transfer of uranium enrichment processes to hardened facilities invulnerable to bombing increases the likelihood of an Israeli strike in 2012.
KEY JUDGMENT
We assess that the probability of a unilateral Israeli strike will increase from unlikely (10% probability) to likely (50% plus) between about March and June 2012 onwards, giving time for the latest sanctions to take effect (and to be seen to have failed to produce a change in Iranian policy) and for Israeli covert disruption operations to be intensified. The key Israeli consideration is likely to be the narrowing window of opportunity for a strike before uranium enrichment processes are transferred to hardened underground facilities, where they will be invulnerable to air strike.
The US is unlikely to participate in a deliberately-mounted strike operation, unless Israel is first attacked or convinces the US it is under imminent threat. If forewarned, the US will, however, likely provide targeting intelligence and other enabling support, including defensive missile cover against Iranian missile retaliation.
EXECUTIVE SUMMARY
• The Israeli desired end-state of a fully transparent and monitored Iranian civil nuclear programme would require concessions that Iran shows no sign of making. Iran sees US and EU sanctions targeting oil exports and Iran's Central Bank as precursors to military action.
• Before resorting to the air strike option, we expect Israel to step up the more cost-effective and targeted use of intensifying its covert operations to inflict delay on Iran's nuclear programme.
• A unilateral Israeli strike would require an all-out effort but be limited in both targets and duration, as Israel cannot risk its aircraft in a sustained air campaign in which surprise would be lost. We expect Israel to avoid use of Saudi airspace, but to use the shorter attack/egress routes over Turkey/Syria and Jordan/Iraq.
• In the event of a unilateral Israeli strike, in which Iran judged the Gulf Arab countries had taken no part, the Iranian response would be focused on Israel, with widespread, but sustainable, damage to population centres incurred by Scud-derived ballistic missiles and mass rocket attacks from Iran's proxies in south Lebanon and Gaza. Israeli diplomats and tourists in the region and beyond would be singled out for attack.
• In the coming months we expect Iran to talk up the threat of closure of the Strait of Hormuz, resulting in short-lived spikes in oil prices. This is, however, a card that Iran is unlikely to play unless first subjected to a sustained US-led campaign and it perceives the Islamic Republic's survival to be at risk. Closure would risk precipitating an all-out US-led attack, and Iran's defeat in a matter of weeks, rather than achieve the Iranian aim of internationalising the issue in Iran's favour.
• In the event of an Israeli attack, there would be an increased risk that Iran would halt oil production for up to a week, in order to cause a spike in the oil price, but it would not do so for a longer period given its dependence on oil revenues and its likely desire not to antagonise its most valued Asian customers (China, South Korea and Japan).
TRIGGER EVENTS
Events that would trigger an increase in war risks include:
• Iran's expulsion of International Atomic Energy Agency (IAEA) inspectors.
• Iran's formal withdrawal from the Non-Proliferation Treaty (NPT).
• Iranian closure of the Straits of Hormuz.
• An Iranian attack on shipping in the Gulf or other retaliation to a successful Israeli disruption operation.
• Discovery of a hitherto clandestine uranium enrichment site.
INDICATORS OF INCREASED RISK
• Netanyahu receives overwhelming support in the Likud primaries in January 2012 and sees this as endorsement for his readiness to take military action against Iran.
• Israel steps up its programme of civil defence exercises, ostensibly aimed at improving Israel's preparedness to counter a future WMD threat or mass rocket attacks from south Lebanon and Gaza.
• Israel concludes successful ballistic missile defence exercise with US participation.
• Reduced Iranian cooperation with IAEA inspectors and public criticism of the IAEA's alleged bias.
• Iran accelerates transfer of uranium enrichment processes underground at Fardow.
• The EU imposes sanctions on the Central Bank and an oil embargo.
• Iran's air defence capability is enhanced by the planned supply of new radars or weaponry, most likely from Russia or North Korea, which would complicate Israeli strike planning.
• Non-routine US military deployments, including retention of two carrier groups in the Gulf at a scheduled handover time and activation of Diego Garcia air base.
• The Israeli government ceases public comment on the Iranian nuclear programme and the military strike option.
INDICATORS OF DECREASED RISK
• Further unexplained killings of Iranian nuclear scientists and defence procurement officials and 'accidents' at nuclear programme and ballistic missile-related sites. (But this would also have the likely consequence of provoking Iranian-sponsored asymmetric attack on an Israeli target.)
