Interview with Former CIA Case Officer Robert Baer

— -- Q: President Bush said today that the ball is now in Iran's court, how do you think the Iranian government will react?

A: The Iranians believe they are winning in Iraq. They now see themselves as an equal with the Unites States in the region. They now have no reason to agree to preconditions imposed by the United States. Iran's Ahmedinajad sees this as a unique opportunity for Shia domination in the Gulf. He does not intend to give up this chance. It's also a classic situation where he thinks that he can use an external enemy to solve problems he faces within Iran, like problems with Sunni Iranians and disenchanted students, and a divided leadership.

Q. Were you surprised by Secretary Rice's announcement yesterday to change US policy and do you think it will work?

A. My new book "Blow The House" down is loosely based on Ahmedinajad. Those of us who have followed his career know he is a person who has in the past and will again take on the US. He's a formidable opponent. In order to employ military force against him we definitely will need the assent of the international community, especially Russia and China, who right now do not want war. In fact, the Bush Administration would prefer economic sanctions doing the job.

Q. Will sanctions work?

A. Probably not. If we understand Ahmedinajad, he welcomes a confrontation. He is feeling supremely confident he could win it. He wants to right Shiite grievances that go back hundreds of years.

Q. What do you think will happen next?

A. Look, the Israelis are coming to us and saying that they are vulnerable. Iran can hit Israel with a Shahab missile -- one day armed with a nuclear warhead -- and destroy Tel Aviv. The Israelis are saying that they will take care of Iran if the US does not. This would be worse than an international coalition taking care of the problem. I don't know for sure what Bush will do. But there are many smart people in DC who say that armed conflict is inevitable. As for the Arab states, they are saying the current Iranian regime has to be decapitated. An Arab head of state told me last week that Ahmedinajad has directly threatened to destroy Arab governments' oil supply and facilities in retaliation for a U.S. strike.