The decision by the Obama administration to drop the missile defense plan in Eastern Europe was based on a revised perception of Iran's long-range missile threat. The move is bound to have multiple and contradictory effects on the thorny issue of Iran's nuclear program, which is slated to be a central subject of multilateral discussions at the opening of the U.N.'s General Assembly this week, as well as at the G-20 gathering in Pittsburgh days later.
Diminishing the threat perception of Iran's missile program from previous assessments under the Bush administration is certainly conducive to the IAEA -- that is, the diplomatic -- option for resolving the current impasse. Given the direct link between Iran's nuclear capability and its means of delivery in any threat assessment, a reduction in the latter gives more breathing room for a negotiated settlement, whereby in exchange for full nuclear transparency, Iran's adoption of the intrusive Additional Protocol, caps on its enrichment program, and other measures, the international community would consent to Iran's possession of a peaceful nuclear fuel cycle.
At the same time, reducing Iran's "threat prestige" makes it harder for Iran to compromise. Although Tehran has officially welcomed Obama's decision as a sound one, the fact is that it has debilitating consequences for Iran's prestige. As a result of the downgrade, Iran is now reduced to a regional power, incapable of intercontinental strategic projection, at least for the foreseeable future. This, in turn, reduces the flexibility of Iran's nuclear negotiators at the upcoming nuclear talks set for Oct. 1 in Turkey, since agreeing to a compromise on its nuclear fuel cycle -- a source of national pride -- would be another major blow to Iran's image, one it can ill afford.