Iran is trying to acquire nuclear weapons.  What impact does U.S. intervention in Libya have on Iran’s incentives to go nuclear?  Obama said that Gaddafi had lost the support of the citizens of Libya and hence should step down.  Deciding not to intervene after this statement might signal weakness and encourage nuclear proliferation by Iran.  This is an argument that has some support in the administration:

The mullahs in Tehran, noted Thomas E. Donilon, the national security adviser, were watching Mr. Obama’s every move in the Arab world. They would interpret a failure to back up his declaration that Col. Muammar el-Qaddafi had “lost the legitimacy to lead” as a sign of weakness — and perhaps as a signal that Mr. Obama was equally unwilling to back up his vow never to allow Iran to gain the ability to build a nuclear weapon.

But equally,

“You could argue it either way,” said one official who was involved in the Libya debate and spoke on the condition of anonymity. “Maybe it would encourage them to do what they have failed to do for years: come to the negotiating table. But you could also argue that it would play to the hard-liners, who say the only real protection against America and Israel is getting a bomb, and getting it fast.”

We have to incorporate several other examples to deduce Iran’s interpretation os U.S. strategy. Libya agreed to give up is nascent WMD program after the invasion of Iraq in return for a normalization of relations with the U.S.  Although Colonel Gaddafi was not able to pitch his tent at the U.N., his son was allowed to visit American firms, military schools, the creme de la creme of its educational institutions and enjoy the best aspects of its culture (the Broadway show “Mama Mia”).  At that point we were trying to signal “If you play ball with us, we play ball with you” (e.g. Libya) but “If you have or might have WMDs, we will get you” (e.g. Iraq).  In addition, our approach to North Korea signals “If you are actually nuclear, we pretty much leave you alone”.  In fact, the North Kora example undercuts any signaling impact of being tough on Libya: Why would the Iranians leadership believe the U.S. would attack them if they have WMDs when North Korea has survived because (not despite) of being nuclear?

So, will all this information at hand, the Iranians can draw a simple graph.  On the x-axis, the mullahs can plot the level of WMD development; on the y-axis the can plot the probability of U.S. intervention.  For high level of WMD development,  the probability of intervention is low (the North Korea example); for medium, the probability of intervention is high (the Iraq example) and for low level of WMDs it is high when circumstances dictate (the Libya example).  What is a mullah who values his independence going to deduce with this data?  Simple: Proliferate and acquire nuclear weapons.

To reduce incentives to proliferate, some part of the graph (if not all) must be upward sloping.  A threat to attack a country with nuclear weapons seems incredible.  That part of the graph is then downward sloping.  All the U.S. has left to play with to design incentives is the part of the graph at the low to medium level of WMD activity.  If this part is flat or downward sloping, it will maximize incentives to acquire WMDs.