The 2018 withdrawal of the United States from the nuclear deal with Iran set the two countries on a collision course. Iran has employed covert proxy attacks, threats to close oil routes and renewed uranium enrichment above acceptable levels.
In a nutshell
- The U.S. withdrawal from the nuclear deal has left Iran struggling
- Tehran has pursued economic and military retaliation
- Outright war is unlikely, but proxy attacks will continue
On May 8, 2018, when the United States announced its withdrawal from the Joint Comprehensive Plan of Action (JCPOA), it was clear that the American superpower was on a collision course with Iran. One year later, Washington imposed further economic sanctions, announced that all waivers on the purchase of Iranian oil would be canceled, and labeled Iran elite Islamic Revolutionary Guard Corps (IRGC) a “terror group.”
On May 21, 2019, Turkey, a significant oil client, closed down its ports to Iranian supplies – an ominous portent for Tehran. By then, sanctions against Iran had become much more onerous than any from before 2015. Between November 2018 and May 2019, the American assessment was that Iran had already lost 10 billion dollars in revenue. Iran had been in severe economic straits since the U.S. pulled out of the nuclear deal, but the further restrictions in April-May 2019 and the singling out of the IRGC seem to be the triggers for the Iranian reaction.
The withdrawal of the U.S. from the agreement in 2018 reversed its few positive aspects. Iran’s GDP fell again in the subsequent year, and inflation shot up; between early 2018 and early 2019, the Iranian dinar lost some 65 percent of its value. Oil and gas exports fell by around 60 percent and are set to decrease further, and metals exports are falling steeply. Unemployment is about 15 percent and twice as high among the younger generation. On top of all that, recent floods have devastated the country, the product of decades of neglect of Iranian water resources.
The social and economic plight of the Iranian people represents a real threat to the regime and its praetorian guard. Every Iranian is aware that much of the national economy – anywhere between 35 and 75 percent – is controlled by the IRGC. To a large extent, the failure of the economy is their failure.
However, they have the guns, and they can put down any mass protest as they and the Basij did in 2009. Yet Iran’s history is replete with widescale popular demonstrations, like those against corruption and economic plight that brought Khomeini into power in 1979. This history is a powerful incentive for the IRGC to push for compromise with the U.S.
However, precisely because it is already suffering from a decline in its popularity, the IRGC is reluctant to humiliate themselves by returning to the negotiating table. They are already being embarrassed in Syria, where Israel has resumed its attacks against Iranian weapons caches and factories there. Russia is limiting some Israeli operations, but not all, and Iran’s retaliations have failed. Any escalation can lead to an all-out war, but due to its vulnerability in Syria, Iran has so far been reluctant.
Furthermore, as often happens with war allies, the alliance is fraying after the victory. Russian-Iranian relations in Syria are in trouble. Occasional small-scale indirect clashes between the two are not rare, mainly between the Syrian, IRGC-controlled Fourth Division (under Maher al-Assad, Bashar’s brother) and the Syrian, Russian-controlled Fifth Corps. Also worrisome for Iran was a late June meeting nowhere else but in Israel, between the national security advisors of Israel, Russia and the U.S. None of the issues at hand were resolved, but it is the first of its kind, and it should worry Tehran. More generally, the Russians are not unhappy about the American embargo against Iran.
The IRGC is reluctant to allow a return to the negotiating table.
The Iranian response to U.S. actions in May 2019 was threefold: threatening to close the Straits of Hormuz, to leave the 2015 nuclear agreement, and to annihilate any force that will attack them. To begin, Iran declared the U.S. as a “state sponsor of terrorism” and U.S. forces in the region as a terror organization, implying that they were a legitimate target. Assuming that the closure of the straits and/or leaving the nuclear agreement would bring about an American attack, Iranian spokesmen promised a devastating response.
As for the nuclear agreement, Iran announced on July 7 that it had raised the level of uranium-235 beyond the allowed 3.67 percent. Every 60 days, Foreign Minister Javad Zarif promised, this level will be raised further. “One cannot expect an economic war to continue against the Iranian people and that those waging this war and those supporting it remain safe,” as Mr. Zarif had warned in a June meeting with Germany’s foreign minister.
At the same time, Iranian foreign ministry spokesman Abbas Mousavi, while rejecting any discussions on Iran’s missiles and activities in Syria and Yemen, declared that “Tehran will not discuss any issue beyond the nuclear deal.” This may be a hint that Tehran might, in the end, agree to renegotiate the nuclear agreement. At least until early July, Iran also avoided any open military steps against the U.S. or its Gulf allies. (On June 20 it shot down a U.S. military drone but insisted that it had entered Iranian territory.)
Closer to a kinetic reaction, Iran was reported to have ordered its Iraqi proxies to prepare for attacks against the U.S. troops in Anbar, Iraq. One of them even lobbed a rocket against the U.S. embassy but made sure it would miss by a very wide margin. The only direct military steps they are believed to have taken were attacks on oil tankers in the Gulf of Oman, as was recently reaffirmed by the chief of the Israeli Mossad: “Iran was behind these attacks…[approved] by the Iranian leadership and executed…by the IRGC and its proxies.”
On May 12, there was sabotage by well-trained frogmen who used magnetic charges against four oil tankers (one Norwegian, two Saudi, one Emirati) in the economic water of the Emirates, off Fujairah. The operation was professionally-performed, there were no casualties or oil leaks. On June 13, when Japan’s prime minister was in Tehran with a mediation mission, two other tankers (one of them Japanese) were hit in the Gulf of Oman. This time, the damage was extensive, but evidence that Iran was behind the attack was circumstantial.
Another front was opened when, on May 14, Houthi armed drones attacked two oil pumping stations connecting the Saudi oilfields on the Gulf shore with the Red Sea, leaving no casualties. The signal was that Iran’s Navy can shut down the Persian Gulf and that by getting the Houthis to attack the cross-land Saudi pipeline, they can close even this alternative route.
The latest piece of Iran’s proxy strategy was a June 1 speech by Hassan Nasrallah, leader of Hezbollah. “Any war on Iran,” he promised, “would mean that the whole region will be set ablaze […] all American forces and interests in the region will be annihilated and Israel and Saudi Arabia will pay the price.” In another part of his speech, though, he warned Israel against initiating an attack on Lebanon, leaving some doubt that he would attack first if Iran is being attacked.
Iran’s spokesmen have said that if the country cannot export its oil, no one will.
By mid-June 2019, the U.S. response to the Iranian threats was to send a second carrier strike group to the Indian Ocean or the Gulf and additional B-52 bombers and 1500 troops. The deployment may have helped the pragmatists in Tehran to at least postpone further Iranian attacks; but not for long, as the June 13 attack in the Gulf of Oman showed. Iran denies any connection, but it would seem that they are pushing the envelope. Publicly closing the straits and altogether leaving the nuclear agreement may lose EU support and the hope to find a way to defeat the U.S. embargo.
Likewise, publicly opening fire or mining the Gulf will force the U.S. to attack. Is this possible? If Iran’s institutional memory is good – and it may well not be – they will remember the lessons of 1984 and 1987. In both cases, Iran attacked many Gulf targets, on land and sea, until the U.S. Navy joined the fray and the Iranian losses forced them to desist. Even though today they have new proxies in Syria, Iraq and Yemen, the balance of power in the Gulf is still against them. And yet, before we consider the much more likely Iranian options, it is necessary to look at the worst-case scenario briefly.
The worst-case scenario
Iran’s spokesmen have said that if the country cannot export its oil, no one will. If Iran follows through on that threat, and this leads to war, it will create havoc in the Gulf. If Iran mines the straits, it will stop all shipping for weeks. Less dangerous for Iran will be anonymous attacks against civilian ships by Iranian frogmen and submarines; even then, oil prices and insurance fees will go up.
The Iranian Navy belongs to the IRGC, and during Khomeini’s era they have been the most trigger-happy unit. As long as the U.S. cannot prove Iranian fingerprints on an attack, the Iranians will feel safe. In a fully-fledged conflict, in which Iran chose to attack Arab Gulf oil facilities directly, it could use its huge short-to-medium range missiles arsenal that would render existing anti-missile systems ineffective. Iran’s small, fast boats could attack shipping and present the U.S. Navy with a significant challenge. It can use its submarines to attack the U.S. and other war vessels, as well as civilian shipping. The Iranian Navy cannot defeat the U.S. Navy, but it is professional and can be deadly.
Iran can also ask the Houthis to destroy the Saudi cross-land pipeline and in the Red Sea. The Houthis can mine the Red Sea and attack shipping there, closing the Strait of Bab al-Mandab – this is what they are there for. Iran could order the most loyal Shia militias in Iraq to attack U.S. targets in Iraq and Syria. They can transport Iranian missiles of 800 km range to western Iraq, with trained Iranian crews dressed in Iraqi uniforms, to target Israel and Saudi Arabia, just as Saddam Hussein did in 1991. If the U.S. forces in western Iraq leave, dislodging those batteries will be difficult. The Iraqi government will be split over it, but most of the Iraqi Shia militias answer to Tehran, not Baghdad. This will drag Israel into operations in Iraq, something the Israelis have been able to avoid so far.
The Americans, for their part, will have to destroy a large number of Iranian military targets, starting with the Iranian Navy and its bases, the missile batteries and infrastructure and the Iranian air bases. The U.S. may also decide to destroy the IRGC bases and Iran’s nuclear sites with military potential.
All of this is a very extreme scenario and, bearing in mind Iran’s history with the U.S. Navy, not a very likely one. However, in a moment of great crisis for the regime, they may hope that war will unite the nation around them. They may be encouraged by the fact that the international community (and even public opinion in the U.S.) are not supportive of the Trump administration, and that President Trump himself is averse to sending troops to the Middle East or even to retaliate for the downing of the drone. So far, however, Tehran has been cautious. Cyberattacks are still to be expected, as they were before the recent kinetic attacks.
The less aggressive options
Short of running toward war, Iran could continue with its intimidation tactics. Since last May, Iran has already stepped up its threats. For example, Hossein Salami, the new commander of the Iranian Revolutionary Guards, declared that “the American presence in the Gulf is not a threat but, rather, an opportunity. If it (the U.S.) will make one step, Iran will hit it on the head.” Such declarations may reflect an Iranian intoxication with the power they believe they have.
Iranian spokesmen, from the Supreme Leader down, have also occasionally demonstrated political flexibility. President Hassan Rouhani opined that his country would be ready to talk to the U.S. but not before they “abide by the JCPOA.” Last May, Mr. Zarif seemed to have gone one step forward by just demanding “respect,” likely meaning a return to the original agreement. But o June 10, he returned to threats, arguing that an economic war is war. Supreme Leader Khamenei explained that while negotiations with the U.S. are out of the question, Iran is ready to talk to anyone else, including the Europeans.
Indeed, on June 10, Germany’s foreign minister visited Baghdad and met with Foreign Minister Zarif. On June 12, the Japanese prime minister landed in Tehran after a visit to the White House with the explicit intention of mediating. For Japan, like for Europe, an oil price hike will be a disaster. Oman’s Sultan Qaboos bin Said is a highly-effective mediator and his foreign minister has already begun a shuttling mission, but they are still far from a compromise solution.
In the U.S., the secretary of state and the national security advisor are playing the role of the “bad cops” by bringing up a host of demands in addition to the nuclear issue. Meanwhile, the president is posing as the “good cop,” assuring Tehran that he is not supporting a regime change, that he is interested in a dialogue, that he is against war and that he admires the Iranian nation. Mr. Trump may be implying that he may be lenient on many demands except for the nuclear one.
If these efforts fail, the best option for Iran is to increase the pressure by beginning a slow, incremental withdrawal from the JCPOA. Such a tactic will give the EU, China and Russia time to sound the alarm and canvas in Washington for more flexibility. The pressure on the Trump administration will grow at home as well. At first, Washington would be under pressure to single out the nuclear issue and declare that all other demands of Iran will be abandoned. This will, at least for a few decades, free Iran from the pressure to limit the range of its missiles and to abandon its proxies.
A proxy and secret war
Even before negotiations fail, Iran still has a powerful option to apply pressure: the mini-demonstrations by its proxies and its navy can be repeated or escalated. Eventually, they can reach the level of full-fledged terrorist activities. Rather than U.S. naval targets, the easy option at first would be to continue with civilian vessels, mainly oil tankers.
Iran may seek to increase pressure by slowly withdrawing from the JCPOA.
Proxy attacks against the U.S. Navy and troops in the Middle East or American allies will come next. Most proxies will not hesitate to carry out the Iranian instructions because they will not expect any punishment. Pro-Iranian Shi’a Iraqi, Afghan and Lebanese militias in Iraq and Syria will not be punished for such operations because they have support in Baghdad and Damascus has no control. It is difficult to imagine that the Russians will prevent Shia militias from attacking American forces in Syria, and Americans will be reluctant to send more troops to these countries.
The most likely result will be an evacuation of all the American troops from Syria and Iraq – a net win for Iran. The smuggling of Iranian missiles and crews into Western Iraq will be easy and they can harass Israel, the Saudis and the Emirates at a low cost. Training Iraqi militias to operate those missile batteries may come next. If Iran has any terrorist sleeper cells in Saudi Arabia and the Emirates, this will be the time to activate them. The Houthis in Yemen proved resilient and can sow havoc in the Red Sea. They can also sabotage the Saudi cross-land oil pipeline.
Iran is capable of micromanaging its proxies’ terrorist activities and if the international reaction to these kinds of attacks is unexpectedly fierce, Iran can easily calibrate its operations to a level at which the economic pain will still be there, but that provokes a less dangerous response. Without clear fingerprints, there will be no U.S. reaction.
All the support Hassan Nasrallah has been receiving from Tehran is provided precisely for such a moment. Unlike the Houthis and the Shia militias in Iraq and Syria, however, Hezbollah will be punished for opening fire. Israel has warned that, unlike the war of 2006, a war today would mean the destruction of Lebanon’s infrastructure. Whatever they can inflict on Israel will be a small consolation when Hezbollah is seen as the destroyer of Lebanon.
Also, at long last Israel agreed to negotiate the border between the Israeli and Lebanese economic waters, which would pour money into Hezbollah’s coffers. Bearing all this in mind, there is no certainty that Nasrallah will fully join the fray. Likely, he will find a way to harass Israel below the threshold of an all-out war. At the moment of truth, the proxy tool in which Iran invested the most will prove unreliable.
The most reasonable strategy for Iran is to bide their time and hope that Mr. Trump loses the 2020 presidential elections. If he wins, they will have to compromise. In the meantime, they can continue using their proxies, carrying out anonymous attacks and moderately crossing the nuclear red lines. Economically, they can ride out the storm through the usual combination of smuggling, keeping the EU, China and Russia on their side, and tightening security and government budgets. The question remains whether the IRGC and the Supreme Leader can contain their humiliation and outrage.