Iran is worried that it ships uranium overseas to be processed, it will simply be stolen. The Obama administration is worried that Iran is playing the Charles Grassley strategy. Grassley dragged along health care negotiations, hoping “death panel” furor would explode and bring the whole enterprise to an end. Iran might want to drag along negotiations while it secretly expands uranium production behind the scenes. There is a kind of joint hold-up problem and it brings to mind an old paper of Oliver Williamson’s – Credible Commitments: Using Hostages to Support Exchange.
In Williamson’s model, a seller makes an investment to sell a product to a buyer. If the buyer cancels the order, the seller is held up and his investment is wasted. Knowing this, he may underinvest. One way for the buyer to guarantee payment is to give the seller an asset that he values but the seller does not. If the buyer should cancel payment, he loses the hostage. And the seller has no incentive just to keep the hostage as it is useless to him, unlike say a monetary hostage. Williamson offers a cute interpretation where the buyer is a king and he has two daughters whom he loves equally but one is uglier than the other. The ugly one should be sent as a hostage to the seller according to Williamson.
We can do the same thing with Iran. They are giving us a hostage, uranium, and we must give them a hostage in return. It should be something we value but they do not. If we take their uranium, they keep our hostage. This gives us good incentives to return the uranium. If we value the hostage, Iran will be willing to transfer the uranium and we will have profitable exchange.
Malia and Sascha are out of the question of course: Dick Cheney would suggest we take the uranium and let Iran keep the Obama daughters. Well actually, if we really have no intention of keeping the uranium – after all we are refining it so it is useless in weapons production, we can hand over a valuable hostage to facilitate the transfer. They’ve got to be seen an asset for those of all political persuasions. The answer is obvious: Dick Cheney and Jimmy Carter have to live in Tehran while the uranium is being processed in Russia.
Cheap Talk 
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October 27, 2009 at 12:58 am
Alex
I would argue that they have a certain amount of Obama’s political future held hostage. Obama has staked a lot of his credibility on the idea that negotiating with states such as Iran will work. If they leave the talks and go back to working on their nuclear program then it is a big blow to the President. Taking their uranium would almost inevitably trigger this outcome.
One reason it would not, however, is that they have a certain amount of value in an Obama presidency as well and that value is enough that they would continue the talks. And while they may prefer Obama to a Republican President (or they may prefer him less than a Republican for all I know) the amount is probably not sufficient to risk their credibility by continuing to talk if we take their uranium.
It could also be argued that fear of Israeli preemptive strikes on their nuclear facilities could give them reason to remain in the talks. But I don’t believe that they really fear Israeli air strikes on their nuclear facilities for a number of reasons, chief among them that air strikes would not really threaten the Mullahs’ hold on power.
In short, I think Obama has a lot more to lose if the talks break down than the Iranian leaders have to lose if the talks break down. Therefore he has every incentive not only to hold up his end of any bargain he makes but also to give them a sufficient amount of payoff that it is worth it for them to stay in the talks.
October 27, 2009 at 1:17 am
hass
I think you’re missing the point — which is to ultimately deprive Iran not only of this enriched uranium but also the technology as well as the legal right to enrich uranium. This is a long-standing conflict between developing and developed nations which goes beyond Iran. If it was simply a matter of ensuring nuclear weapons non-proliferation, Iran had already submitted compromise offers that would have met that criteria (ie: they offered to open their nuclear program to joint US participation, and impose additional restrictions on their program that went well beyond their legal obligations) but those offers have been consistently ignored, since nuclear weapons non-proliferation is just a pretext.