The U.S., Iran, And Maximum Pressure

https://ecp.yusercontent.com/mail?url=http%3A%2F%2Ffiles-eu.clickdimensions.com%2Fiissorg-awjcv%2Ffiles%2Fiiss-logo-207x85.jpg&t=1559103577&ymreqid=c86b9303-3f17-7fc3-2f58-c4000c010000&sig=_2xoWrWha52ZcDpusbXIOg--~C

Strategic Comment

The U.S., Iran And ‘Maximum Pressure’

Tensions between the United States and Iran have risen sharply in recent weeks. The Iran nuclear deal may collapse permanently in the coming months. While the leader of neither country appears to want war, conflict remains possible due to misperception and miscalculation.

https://ecp.yusercontent.com/mail?url=http%3A%2F%2Ffiles-eu.clickdimensions.com%2Fiissorg-awjcv%2Ffiles%2Firan-us-graffit-866x486.jpg&t=1559103577&ymreqid=c86b9303-3f17-7fc3-2f58-c4000c010000&sig=U1_Xlx3dZy5zCbUNts_zHw--~C

A year after United States President Donald Trump withdrew his country from the 2015 nuclear deal known as the Joint Comprehensive Plan of Action (JCPOA), tensions between the US and Iran have sharply escalated. Iran has announced that it will stop honouring certain restrictions unless European partners provide economic benefits expected under the deal. It is highly improbable that European companies can be persuaded not to comply with US sanctions. The accord may therefore be dead within months.

Trump claims that mounting US pressure will force Iran to negotiate a ‘better deal’ to replace the JCPOA, but there is little indication that Iran will do so. Meanwhile, military tensions are overshadowing diplomatic engagement. It remains unclear whether the Iranian actions that have supposedly prompted alarm in Washington were offensive or defensive in nature. Senior US officials have described recent US military deployments as intended to deter conflict, rather than provoke it. While neither Trump nor Iran’s Supreme Leader Ayatollah Ali Khamenei appear to desire war, the possibility remains that misperceptions and miscalculations could produce conflict in the Gulf.

Maximum Pressure

In line with Trump’s policy of ‘maximum pressure’ on Iran, in April and May the US imposed several new sanctions. On 8 April, it designated Iran’s Islamic Revolutionary Guard Corps (IRGC) as a ‘foreign terrorist organization’, putting anyone worldwide who deals with the IRGC at risk of US criminal charges. While the Trump administration had already sanctioned more than 970 Iranian entities and individuals, never before has Washington sought to outlaw a portion of a sovereign nation’s armed forces.

On 22 April, the US announced that it would seek to eliminate Iran’s oil exports entirely. Those exports were already down to about one million barrels per day (b/d), a sharp decline from the 2.5m b/d that Iran had been exporting before Trump’s JCPOA withdrawal in May 2018. On 2 May, the US ceased to issue sanctions waivers to seven states plus Taiwan that had allowed them to purchase a gradually reduced amount of oil from Iran, and channel the payments into escrow accounts to be used to purchase humanitarian goods. Among those affected, Greece, Italy and Taiwan had already ceased buying Iranian crude oil, and Japan and South Korea were also cutting back. Iran’s largest remaining oil customers – China, India and Turkey – reacted negatively, but those of their oil companies that are active in the US will probably comply to avoid exclusion from that larger market.

‘The US announced that it would seek to eliminate Iran’s oil exports entirely’

On 3 May, the US revoked two other waivers that had permitted limited civilian nuclear cooperation with Iran under the JCPOA. One had allowed Iran to export heavy water to Oman for temporary storage prior to sale, as a means of keeping below a 130 tonne stockpile limit set by the deal. A second waiver had allowed Iran to send low-enriched uranium (LEU) to Russia in exchange for unenriched uranium, an arrangement that had helped Iran keep its stockpile of LEU below the JCPOA-imposed 300 kilogram limit.

Three other nuclear-related waivers remain in place, to be reviewed every 90 days (compared to 180 days previously). One permits efforts led by China and the United Kingdom to convert Iran’s heavy-water moderated research reactor at Arak so that it cannot produce significant quantities of weapons-grade plutonium. A second allows Russian-assisted efforts to convert the Fordow enrichment facility for use as a centre for peaceful nuclear activity. A third allows Russian cooperation with the Bushehr nuclear power reactor to continue, but not for two other reactors on the site that Rosatom, the Russian state-run energy agency, has contracted to build, and which henceforth ‘will be exposed to sanctions’.

On 8 May, the one-year anniversary of Washington’s withdrawal, the US surpassed the pre-JCPOA sanctions by imposing new measures targeting Iran’s metal industry, Tehran’s largest source of non-petroleum-related export revenue. Trump warned that any country that imports Iranian iron, steel, aluminium or copper will be sanctioned. Meanwhile, the US promised further measures unless Iran ‘fundamentally’ changes its behaviour. Petrochemicals may be the next sector targeted.

Military Movements

Complementing the terrorist designation and economic sanctions, the US also flexed its military muscles. On 5 May, National Security Advisor John Bolton announced that the USS Abraham Lincoln Carrier Strike Group and a bomber force would be deployed to the US Central Command (CENTCOM) region, citing ‘troubling and escalatory indications and warnings’. On 10 May, the Pentagon announced that a Patriot missile-defence battery and the Arlington, an amphibious ship designed to carry Marines and combat helicopters, were being sent to augment US CENTCOM forces.

Iranian officials called the deployment announcements ‘psychological warfare’. They indeed had a large rhetorical element. The carrier-force deployment was long-planned, to replace another carrier group that recently departed the region. Sending one Patriot battery is insignificant, given that the US moved four such batteries out of Bahrain, Kuwait and Jordan late in 2018. Reports emerged that, on 9 May, Acting Secretary of Defense Patrick Shanahan presented an updated military plan, supposedly ordered by Bolton, in which as many as 120,000 troops would be sent to the Middle East to respond to any Iranian attack on US forces or to a resumption of work on a nuclear-weapons option. Yet this force would probably be insufficient for a land invasion, and it seems more likely that this information was leaked to demonstrate US resolve.

The deployment announcements were made in the context of supposed Iranian threats. On 7 May, US Secretary of State Mike Pompeo referred to a ‘very specific’ threat of ‘imminent’ Iranian attacks, and on 15 May the order was issued to partially evacuate the US embassy in Baghdad. A CENTCOM spokesperson said there were ‘indications that Iranian and Iranian proxy forces were making preparations to possibly attack US forces in the region’. Reports emerged that the commander of the IRGC’s Quds Force, Qassem Soleimani, had supposedly instructed Shia militias in Iraq to prepare to attack US interests. Last year, anonymous Iranian officials claimed that the transfer of several dozen short-range ballistic missiles to southern Iraq was a ‘backup plan’ to maintain a deterrent if Iran were attacked. Recent satellite photos showed Iran loading missiles onto dhows in several ports, which US officials cited as evidence that Iran was targeting US ships, although it was later disclosed that at least some of these missiles had been unloaded. A Democratic congressional official who saw the summary of intelligence reports did not dispute their media characterisations but said the Trump administration’s response ‘seem[ed] wildly out of proportion’. In recent remarks that appeared designed to reassure Congress, among other audiences, Shanahan claimed that the administration was ‘not about going to war’, that Washington’s ‘repositioning of assets’ had ‘deterred attacks’, and that ‘we’ve put on hold the potential for attacks on Americans’.

‘Shanahan claimed that the administration was “not about going to war”’

Iran’s Response

Tehran has responded to Washington’s economic and diplomatic actions in a calibrated fashion. On 8 April, immediately after the US designated the IRGC as a terrorist organisation, Iran’s Supreme National Security Council applied the same designation to US CENTCOM and its forces. On 22 April, General Alireza Tangsiri, commander of the IRGC Navy, said Iran would shut down the Strait of Hormuz if it were barred from selling its oil. Foreign minister Mohammad Javad Zarif declared that Iran had a ‘PhD in sanctions busting’, would continue to sell oil and would not be brought to its knees by US actions.

In the nuclear realm, on 8 May Iranian President Hassan Rouhani and Iran’s Supreme National Security Council said Iran would begin abandoning some of the JCPOA limitations. It would no longer respect the stockpile limits on heavy water and LEU and – unless other JCPOA parties ‘fulfil[ed] their obligations’ in the banking and oil sectors – after 60 days would resume construction of the Arak research reactor under its original design and enrich uranium above the 3.67% limit.

These moves did not immediately put Iran in violation of the deal. The stockpile limits will not be exceeded for a few weeks, even with the increased production levels made public on 20 May, and other parties – meaning Europe in particular – were offered a path to keep Iran in compliance. The threat is serious, however. Keeping more than 300 kg of LEU or increasing the enrichment level would be egregious violations of the accord. Before the JCPOA, Iran had maintained stockpiles of uranium enriched to 20%. At this stage of enrichment, around nine-tenths of the work required to produce weapons-grade highly enriched uranium has already been completed, which would in theory have allowed Iran to convert its stockpile of uranium enriched to 20% into material for a nuclear weapon in short order.

For the past two years, Iran has employed what Rouhani calls ‘strategic patience’ in the face of increasing US pressure. Even before the latest sanctions hit, US pressure had already produced a decline in the value of the national currency by two-thirds and a downturn in the economy – the IMF expects a 6% fall in GDP in 2019. Iran assessed that the Trump administration was trying to provoke it to violate the JCPOA and incur European sanctions, and therefore bided its time. Iranian leaders assumed that Iran could stay in the JCPOA while waiting to see if the next US presidential election in November 2020 produced a change in US administration and policy.

As the pressure accumulated over the past month, however, Iranian leaders decided they needed to change their JCPOA partners’ strategic calculus. If there were no pushback, they judged, Washington would continue relentlessly to apply more pressure. More immediately, Iran needed to persuade not just the Europeans, but also Russia and China, that the nuclear accord would die unless these partners found ways to compensate for the sanctions relief that Trump had ended. Iran also needed to create leverage for dealing with a future Democratic administration which may have conditions for resuming US adherence to the JCPOA. Many Iranian strategists also believe that if a confrontation with the US is inevitable, it is better to have it before Iran’s strength is further sapped by sanctions. Iran’s leadership has no intention of surrendering to US pressure.

‘Iran’s leadership has no intention of surrendering to US pressure’

European Calculations

European states’ rhetorical response was firm, rejecting Iranian ‘ultimatums’. A joint statement on 9 May by the French, German and UK foreign ministers and European Union foreign-policy chief Federica Mogherini (the E3 and EU parties to the JCPOA) expressed ‘great concern’ about Iran’s comments regarding its commitments to the deal and strongly urged continued implementation of the commitments. French Minister of the Armed Forces Florence Parly warned of sanctions if Iran breached the deal. Yet French Minister for Foreign Affairs Jean-Yves Le Drian stated bluntly that ‘the American position to increase pressure and sanctions [on Iran] doesn’t suit us’. Europeans blame both the US and Iran for an increasingly fraught situation.

The E3/EU joint statement expressed a determination ‘to continue pursuing efforts to enable the continuation of legitimate trade with Iran’, including through the operationalisation of the special-purpose vehicle the parties established in January, the Instrument in Support of Trade Exchanges (INSTEX). In the absence of any actual trade, however, such words mean little to Iran. In March, Khamenei dismissed INSTEX as a ‘bitter joke’. It is technically complicated and commercially challenging to arrange a central clearing house that relies on indirect barter rather than payments to Iran that could be subject to US sanctions, even though the humanitarian trade involved is supposed to be exempt from penalties. The delay is also partly due to Iran’s failure so far to conform to global rules on money laundering and terrorist financing. Nevertheless, E3 officials hope the first transactions under INSTEX will take place before Rouhani’s 60-day deadline.

Yet it is unlikely that a few low-value humanitarian transactions will suffice to keep Iran from violating JCPOA limits. Iranian leaders say that what they need is resumed oil transactions with Europe and for China to maintain its purchases. The latter is likely, at least to some degree, but for the time being Europe will avoid any involvement in the Iran oil trade. Rouhani indicated that Iran might be satisfied with negotiations ‘to meet Iran’s interests’ rather than concrete outcomes by the 60-day deadline. The Europeans are trying to find a way to persuade Iran that they are serious about bucking US sanctions without actually incurring them. It may be impossible for them to square this circle, as they cannot compel private firms to do business with Iran.

A Negotiating Tactic?

Trump has demonstrated interest in negotiations, inviting Iran’s leadership to call him and ostentatiously providing his phone number to Switzerland, which acts as the protecting power for the US in Iran. While some of his national-security team, including Bolton, have previously called for regime change in Tehran, recent reports suggest that Trump has instructed close aides that he does not want the current confrontation with Iran to cause a war. It is possible that, as with North Korea and the North American Free Trade Agreement (NAFTA), Trump has sought to raise tensions in the hope that this will offer him additional leverage in future negotiations for a ‘better deal’.

Iran has so far dismissed Trump’s gestures about dialogue. ‘If Washington really wants to negotiate with Tehran,’ Iranian deputy foreign minister Abbas Araghchi has said, ‘they should correct their policy on Iran; there is no need for mediators or telephone numbers.’ Pompeo and other US officials have repeatedly said that Iran would need to meet the 13 demands laid out last year concerning Iran’s regional behavior, nuclear and missile development, human rights and other US concerns. While negotiations over prisoner swaps are possible, Iran has no interest in renegotiating a ‘better deal’ that addresses the 13 US demands: it wants the current deal to be honored.

Conflict in the Gulf?

Other developments in the Gulf could overshadow any prospect of negotiations. On 12 May, the United Arab Emirates announced that four commercial vessels were ‘sabotaged’ in waters close to its tanker-refueling hub at Fujairah, near the Strait of Hormuz. Damage to their hulls at the waterline indicated an attack by floating mines. Two days later, the Saudi Arabian minister of energy, industry and mineral resources reported that two pump stations on the East–West pipeline were attacked by armed aerial uninhabited aerial vehicles (UAVs). Houthi rebels in Yemen, who are supported by Tehran, boasted of launching the UAV attacks but no party has yet claimed responsibility for the light damage to the tankers. Denying any involvement in the attacks, Zarif accused US officials of trying to drag Iran into a war.

https://ecp.yusercontent.com/mail?url=http%3A%2F%2Ffiles-eu.clickdimensions.com%2Fiissorg-awjcv%2Ffiles%2Firanstratcom.jpg&t=1559103577&ymreqid=c86b9303-3f17-7fc3-2f58-c4000c010000&sig=keALNzF.s0DQVqY7pgGUDQ--~C

Iran has a long record of training and arming non-state actors and the IRGC has repeatedly threatened to disrupt global energy supplies by closing the Strait of Hormuz. IISS analysis suggests that Iran might struggle to close the strait entirely, or for anything more than a brief period, but it could impose significant disruption on maritime traffic, which would require a considerable response. The Fujairah port and the East–West pipeline were designed to reduce Abu Dhabi and Riyadh’s exposure to Iranian interference in the strait. The recent attacks on them therefore appear designed to demonstrate the continuing vulnerability of Saudi Arabia and the UAE. Thanks to the shale revolution, the US itself no longer depends on Gulf oil to the extent that it did in previous decades. Yet around one-third of all the oil transported by sea travels through the Strait of Hormuz. Preventing or delaying the passage of oil through the strait, especially if combined with disruptions to alternative transit paths, could seriously affect large East Asian economies such as China and Japan that are still heavily dependent on Gulf oil. Along with an increase to the global oil price due to diminished supply, this could have significant worldwide economic consequences.

Beyond the risks posed to energy markets and the global economy, attempts by Iran or its partners to harass, interdict or attack energy flows in the region would entail the more significant risk of military escalation and a broader conflagration. Both Trump and Khamenei have said that they do not seek war. Shanahan and Pompeo echoed this sentiment on 21 May, with Shanahan claiming that US deployments were intended to maintain deterrence, that the US aimed to avoid escalation and ‘to prevent Iranian miscalculation’, and implying that US resolve had reduced the probability of imminent Iranian aggression. It is still easy to envisage, however, how a series of tit-for-tat actions in the Gulf could escalate into a wider conflict, especially if Iranian-linked forces succeeded in damaging or sinking a US vessel. It remains possible that the US administration and public could tolerate the deaths of hundreds of their forces, as they did when almost 250 US personnel, including Marines, were killed by Iranian proxy forces in Beirut in 1983. It seems more likely that such a loss would prompt the Trump administration to retaliate in dramatic fashion. As UK foreign secretary Jeremy Hunt put it on 13 May, ‘we are very worried about the risk of a conflict happening by accident, with an escalation that is unintended really on either side’.

Outlook

Recent reports have alluded to the possibility that, while US intelligence was correct to identify heightened Iranian activity in the region, this activity may have revealed less an intent to attack the US than Iranian fears of a US attack. Even if immediate military tensions subside, it seems likely that the cycle of US–Iranian misperceptions and possibly miscalculations will continue. There appears to be little chance in the near term that US economic pressure will cause Iran to concede. Nor is it likely that European firms will continue to transact meaningful trade with Iran in the face of US sanctions. Instead, it is probable that Iran will proceed to violate the terms of the JCPOA later this year, opening the door to additional economic retaliation and the deal’s possible permanent collapse.

Volume 25, Comment 14 – May 2019

Editor: Benjamin Rhode

Leave a Reply

Your email address will not be published. Required fields are marked *