Oil to the flames: will the Iran-US spat escalate to war?
WHAT’S HAPPENING?
With Iran’s recent seizure of a UK-flagged oil tanker in the Strait of Hormuz, there are genuine fears that war is on the horizon.
KEY INSIGHTS
– In the short term, both the US and Iran have enough reasons to avoid a protracted war, but low-level military confrontations cannot be ruled out
– While there is increasing momentum towards negotiations, the litany of issues dividing the two sides means that the best that can be hoped for is de-escalation of tensions rather than a comprehensive diplomatic settlement
– Over the long-term, war cannot be ruled out, especially if both the Trump administration and Iranian hardliners win their respective elections in 2020 and 2021
THE STORY SINCE APRIL: NEVER A DULL MOMENT
The current tensions in the Gulf region can be traced back to US President Donald Trump’s April 22 decision not to reissue waivers for significant importers of Iranian oil. Oil revenue, which forms a vital part of Iran’s economy, has plummeted. Trump’s April decision followed the US withdrew from the Joint Comprehensive Plan of Action (JCPOA), known as the Iran nuclear deal, in May last year. The JCPOA had promised Iran sanctions relief in exchange for curtailments to its nuclear program.
The issue of oil sales has long been a red-line for Iran and Tehran has not taken Trump’s decision lightly. Although no conclusive evidence has yet been produced, it seems likely that Iran was responsible for a series of attacks on oil tankers in the Persian Gulf and the Gulf of Oman. The seizure of a UK-flagged tanker on July 19 in the Strait of Hormuz is the latest escalation and likely comes as a reprisal for the UK’s seizure of an Iranian tanker off the coast of Gibraltar earlier this month.
Meanwhile, Iranian-backed proxies in Yemen have launched multiple rockets into Saudi Arabia, and several rockets have caused minor damage to US bases in Iraq. On June 21, the shooting down of a US drone that allegedly crossed into Iranian airspace very nearly precipitated a US airstrike; Trump claims that he only pulled back at the last minute. Significantly, Iran has also made good on its promise to stop abiding by certain JCPOA provisions by enriching uranium beyond the 3.67% threshold and breaching the low-enriched uranium stockpile limit.
On the diplomatic front, fierce tit-for-tat rhetorical exchanges have flown in a way redolent of Trump’s 2017 exchanges with North Korean leader Kim Jung-un. The US has deepened sanctions on Iran and, in a highly provocative and symbolic move, sanctioned the country’s supreme leader, Ayatollah Khamenei.
IRAN’S STRATEGY
Trump’s withdrawal from the JCPOA and progressive implementation of sanctions has had far-reaching consequences for Iran’s economy. US sanctions have caused a significant decrease in exports, which in turn has precipitated unemployment, widened government deficits, and increased inflation by up to 60%. The worst is yet to come and the IMF estimates that the economy will shrink by 6% in 2019 as Iran enters a period of ‘stagflation’ — simultaneous recession and inflation.
Unsurprisingly, the worsening state of the economy has had drastic political effects. Moderate President Hassan Rouhani — who staked his political credibility on JCPOA’s success — has approval ratings hovering around 10%. Khamenei has taken the highly unusual move of openly criticising Rouhani and his ally, Foreign Minister Mohammed Zarif, for their handling of the deal. Whilst it is in Khamenei’s interests to assign blame to other parties for the JCPOA’s failure, his words have emboldened hardliners, who have lambasted Rouhani for his perceived naivety in trusting the West and blamed him for the country’s economic woes.
Knowing that he must show defiance to save his plummeting political stocks, Rouhani has seemingly acquiesced to hardliner voices that advocated for violating the JCPOA and harassing oil shipments in the Gulf. Iran’s moves seem to be designed to strongarm the US to reconsider its sanctions and to force the JCPOA’s remaining signatories — Russia, China, Germany, France and the UK — to keep the country’s economy afloat.
WHAT TRUMP WANTS
Even before Trump pulled back from striking Iran, there were many signs pointing to his aversion for war. Trump has repeatedly called for negotiations with Iran — and recently authorised Republican senator and avowed isolationist Rand Paul to act as his emissary. Owing to Iran’s extensive proxy presence throughout the region, Trumps likely knows that any hypothetical US–Iran clash would not be contained to Iran.
Nor would war be short-lived, and the US would find itself in another Middle Eastern quagmire — at the same time as Trump is trying to extricate the US from Syria and Afghanistan. A war would also anger Trump’s base ahead of the 2020 election and distract from higher priorities like the China trade war.
Trump appears to be applying his North Korea playbook, where a combination of sanctions, brinkmanship and diplomatic pressure brought Pyongyang to the table. With Trump’s initiatives in North Korea and Venezuela stalling and with the outcome of US–Taliban talks far from certain, the President must feel that he urgently needs a foreign policy win before election season.
NO PEACE, NO WAR
Iran seems to be deeply reluctant to get involved in any kind of conventional war. Given the state of its economy, the overwhelming conventional military superiority of the US and its regional allies and its overextended overseas presence, war is something that Tehran can ill-afford.
The Israel factor is key: Israelis will again go to the polls in September. Incumbent Prime Minister Benjamin Netanyahu — a notoriously fierce critic of Iran — is fighting for his political survival. Tehran would be loath to give him an excuse to strike Iran to boost his re-election prospects.
Iran also knows that several frontrunners for the Democratic nomination, including Senators Elizabeth Warren and Bernie Sanders, have pledged to re-join the JCPOA if elected. Hence, Iran is more likely to adopt a ‘wait and see’ approach before adopting any drastic measures.
Iran’s elite Islamic Revolutionary Guard Corps (IRGC), which answers directly to Khamenei and is most prone to hawkish attitudes, appears intent on actively downplaying the risk of war. If Iran were to strike the US, it would likely do so via its proxies in Iraq, where the US has a large military presence. But Iranian proxies have their own priorities and appear reluctant to become deeply involved in a fight with the US. Iran will likely tread carefully, as any major strike on US forces risks inviting an attack on Iran.
IN SEARCH OF A CIRCUIT BREAKER
Zarif and former hardline president Mahmoud Ahmadinejad have expressed interest in negotiations and staked out positions in the hopes of precipitating talks. The leverage provided by the capture of the British tanker could provide Iranian leaders with a face-saving way of entering into talks, where previously negotiations had been publicly ruled out as long as US sanctions were in place.
However, it is uncertain how much sway either Zarif or even Ahmadinejad have with Iran’s clerical elite. For negotiations to go anywhere, they would have to have the imprimatur of Khamenei, which remains somewhat unlikely as long as he personally sanctioned. Even if sanctions on Khamenei were lifted, other obstacles to a breakthrough remain, not least the severe trust deficit caused by Washington’s abrogation of the JCPOA.
Moreover, the negotiations wishlist of Trump and US Secretary of State Mike Pompeo is seen as an unacceptable violation of Iran’s sovereignty — its conditions that range far beyond the nuclear deal to Iran’s conventional military arsenal and foreign policy. The best that can be hoped for is probably informal talks that could lower current tensions.
A GAME OF PATIENCE
For their own reasons, the EU, Russia and China are unlikely to come up with enough financial support mechanisms to incentivise Iran to adhere to the JCPOA. Therefore, expect Iran to continue to enrich and stockpile uranium beyond the deals limit, as well as move to breach the JCPOA’s requirements on centrifuges and limitations on the Arak heavy-water facility. Seeking to avoid outright war or trigger ‘snapback’ EU sanctions, Iran is likely to refrain from more provocative moves. Withdrawal from the Nuclear Non-Proliferation Treaty or enriching uranium to anywhere near the nuclear breakout stage would likely to be a step too far and would probably invite US or Israeli strikes.
Harassments of ships in the Gulf and low-level attacks on US allies — especially Saudi Arabia and possibly also Israel — via proxy forces will also probably continue unless Khamenei believes negotiations have a chance of success. US efforts to beef-up the international naval presence in the Gulf — which the Pentagon describes as a ‘surveillance’ rather than a military initiative — could precipitate low-level military confrontations. However, the hesitance of US allies to contribute to this initiative, Washington’s reluctance to go at it alone, and the underlying aversion of both parties to war may see a shaky peace prevail.
How then, does this situation end? A Democratic victory in 2020 would give both sides a window of opportunity to come to a renewed understanding before Iran’s 2021 elections, scheduled for May or June. Another moderate victory in Iran would give diplomacy a more realistic timeframe. However, even if this occurs, Ayatollah Khamenei would have the final say on any deal and may be reluctant to trust the US — or at least the Republican Party — ever again. If both Trump and the hardliners win their respective elections, war would become a much more possible scenario.
