With the looming intensification of Western sanctions against Iranian oil and Iran's central bank, which went into effect July 1, 2012 due to Iran's refusal to comply with the demands of the 5+1 to stop enriching uranium and due to the fact that the diplomatic track has reached a dead end and the positions of the sides are irreconcilable, Tehran responded in two ways. It took a dismissive and arrogant attitude towards the sanctions, stating, and convincing itself, that they would have little effect and assessing publicly that the West does not want a military escalation. At the same time, recognizing the magnitude of the sanctions' impact on it, it demonstrated its might with a controlled threat in the form of the "Great Prophet 7" missile exercise, and issued conditional threats against Western interests in the Gulf, Western targets worldwide, and Israel.
A separate report on Iran's terror threats and Iran's preparedness for the sanctions will be published soon.
Additional elements stepping up the pressure in recent weeks on Tehran are:
1. The drop in world oil prices
2. The announcement by U.S. and E.U. officials of their intent to unilaterally increase sanctions against Iran if the Istanbul talks, now underway, fail
3. The Western effort to push Syrian President Bashar Al-Assad out of power
4. The concentration of Western forces in the Gulf, which was recently increased.
In MEMRI's assessment, Iran is trying, with the show of missiles in its territory, to bolster its standing at the talks, and to present itself to the West as a nuclear and missile power of equal standing. In addition, it appears that the missile exercise is aimed at pushing up oil prices in the world markets.
It should be emphasized that Iran aims not to escalate the struggle and push it in a military direction, but to prove to the West that it is not a weak power and that its policies cannot be dictated. It must also be clarified that Tehran has announced that in Great Prophet 7 it is choosing to launch missiles only to a distance of 1,300 km – sufficient to reach Israel and the Gulf states – but not to the full 2,000 km – which would reach Europe – of which it claims it is capable. This is apparently an effort to impart the sense that its actions are defensive only, but also deterrent.
Under these conditions, in which it is limited in its ability to respond, Iran has an ever-greater need to create a provocation or terrorist acts in the region – both to make the 5+1 pay dearly for its sanctions, and to divert public attention from its nuclear issue (see MEMRI Inquiry and Analysis No. 845, "In Advance Of Moscow Talks, Tehran-Damascus Axis, In Fight For Survival, Threatens Conflagration In Region And Beyond," June 13, 2012, In Advance Of Moscow Talks, Tehran-Damascus Axis, In Fight For Survival, Threatens Conflagration In Region And Beyond.)
As mentioned, Iran's aim in its handling of its nuclear issue is to gain the international community's recognition of its nuclear might, in order to assure the survival of the regime of Iranian Supreme Leader Ali Khamenei (see MEMRI Inquiry and Analysis No. 837, "Khamenei's Aim at the Nuclear Talks – Securing the Survival of His Regime," May 15, 2012, Khamenei's Aim at the Nuclear Talks – Securing the Survival of His Regime).
* A. Savyon is director of MEMRI's Iranian Media Project.
 Just before the increased sanctions came into force, Iranian Supreme Leader Ali Khamenei expressed his regime's determination not to compromise to meet the demands of the West. He declared: "The primary target of the sanctions of the arrogant powers [i.e. the West, headed by the U.S.] is the Iranian people. They want the pressure to cause the Iranian people to lose their patience and to cut themselves off from the regime. This plot too shall fail, because they still do not know the people or the regime officials... Despite comprehensive efforts to besiege Iran, the U.S. itself is today experiencing serious and insoluble problems, while Iran has all necessary means at its disposal." (Jamejamonline.ir, June 27, 2012)
 Along with their arrogant statements towards the world, Iranian political figures turned to the Iranian public, exhorting them to show steadfastness, perseverance, and understanding in light of the anticipated economic difficulties of the sanctions (Vice President Rahimi, IRNA, Iran, July 1, 2012; Culture Minister Hosseini, IRNA, Iran, July 1, 2012; senior ayatollah Makaram Shirazi, Rasanews, Iran, July 1, 2012). Also, Mohammad Ali Vakili, managing director of the Iranian daily Ebtekar, called on the regime to launch a public information campaign explaining the importance of maintaining steadfastness under the sanctions, in light of what he called "the state of war" in which Iran found itself (Ebtekar, Iran, June 30 2012).
 In Great Prophet 7, Iran said that it had launched dozens of short-, medium-, and long-range missiles, including Shihab 1 and Shihab 2 (medium range, up to 500 km) and Shihab 3 (capable of a range of 1,300 km), and also Fath, Qayyam, and Zilzal missiles at mockups of air bases of countries surrounding Iran (Fars, Iran, July 3, 2012). The commander of the air force of Iran's Islamic Revolutionary Guards Corps (IRGC), Amir Ali-Hajizadeh, said that Iran has missiles capable of a range of 2,000 km, but that in this exercise it would launch only missiles with ranges 300, 500, 800, and 1,300 km (Mehr, Iran, July 3, 2012). He added that the West would not attack Iran because of its missile strength (IRNA, Iran, July 3, 2012).
 IRGC deputy commander Hossein Salami said that the exercise was aimed at showing Tehran's political determination to protect its national interests, and that it was the response to those who said that "all options are on the table" (IRNA, Iran, July 3, 2012).
 See, for example, statements by Iranian Foreign Minister Salehi regarding Tehran's desire to arrive at a peaceful settlement and to avoid escalation into military conflict, but at the same time stressing that it would not hesitate to defend its rights and its regime. Salehi added that he did not believe that the conflict would reach the point of military confrontation, following regional and international developments and the upcoming elections in the U.S. (Jomhouri-e Eslami, Press TV, Iran, July 3, 2012)