Current Situation
In Washington, Jerusalem, and Riyadh a victory of sorts is being claimed in Operation Epic Fury, after 33 days the job is nearly done; or so the party line goes. Meanwhile, multiple carrier strike groups, the USS Tripoli - accompanied by the 31st Marine Expeditionary Unit, US strike bombers, and, for good measure, the 82nd Airborne, are moving into position around the Strait of Hormuz, with another escalation seemingly inevitable. President Trump has oscillated between declaring victory outright and preemptively claiming the conflict will end after the United States ‘blows Iran back to the stone ages’. For their part the Iranian regime has responded by claiming outright sovereignty over the strait, and that it is closed to America and her allies, which tells us that they have no intention of allowing any sort of peace with honour. The need to declare victory is born of domestic political calculus, Hormuz transits are down 95%, and none of the ships that passed were friendly to the United States, Brent crude is trading at around $105, having surged 60% during the conflict, the United States, and in particular President Trump, cannot survive that level of economic disruption happily. However, the key here is that there is more than one conflict taking place within the Iran war, there are four; to answer how bad this is going to get, how long it is going to last, and how wide its going to go we need to understand that.
The Four Conflicts
There are four conflicts running simultaneously, each with its own logic and its own definition of victory. The US-Israeli air campaign to degrade and decapitate the Iranian regime. Iran’s asymmetric economic campaign against America and her allies. Saudi Arabia’s opportunistic campaign to reshape the Gulf order in its own image, with Iran weakened and Israel’s parallel war to permanently destroy Iran’s nuclear program and proxy network, particularly in Lebanon. The last two matter as they don’t involve the United States, severely limiting American agency in ending the conflict as a whole, and with Iran’s economic war being as successful as it is, and the growing energy crisis there seems to be little reason for them to accept America’s terms.
HOW BAD IS IT GOING TO GET?
The headline numbers surrounding the energy crisis are important. Somewhere around 15 million barrels a day are being removed from the global market, meaning half a billion barrels and counting, and the IEA’s 400 million barrel emergency release across 32 member states; the largest in the agency’s history, is very rapidly running out. Beyond gas prices, the impact on other industries like fertiliser production, aluminium, and anything that moves through a Gulf port, is going to ensure that no matter what happens next there are going to be long lasting consequences. In particular, the fact that the geopolitical fragility of the oil trade has finally been exposed, and that fragility is going to be reflected in the price of oil long after the guns fall silent.
The Phantom Tollbooth
Iran have effectively weaponized this fragility by imposing a toll on ships transiting the Strait of Hormuz. Crucially this toll is Yuan-denominated, Chinese, Russian and non-aligned vessels move while western allies are stuck. A key point here is that 84% of Hormuz transiting oil goes to the Asian markets, the US can’t stop the ships without catastrophically damaging multiple allies. The Hormuz tollbooth not only economically benefits Iran, but using the Yuan as the backing currency directly attacks the Petrodollar architecture and shows that Iran, and others, are willing to operate outside the the American dominated system. The Petrodollar has been the backbone of American financial dominance, based on a 1974 agreement that priced and settled Gulf oil contracts exclusively in US dollars. It being challenged could end up being the most significant thing that happens. However, this isn’t the only assumption that is being challenged by Iran weaponizing the strait.
Interceptor Degradation
The Iranian drone strategy to rapidly erode the Gulf States’ and America’s stockpile of interceptors has shown the weaknesses in the American defence industry. The American arsenal was built for a specific kind of war; limited engagement where overwhelming technological superiority brings about a swift and comprehensive victory, even against a peer power. The systems it has are incredibly expensive and complex and so are not produced in great numbers. The Patriot PAC-3 is $4m a unit and 600 per year are produced, the THAAD is $15.5m and 96 per year are produced, these are remarkably effective systems, capable of stopping almost anything thrown at it. However, a Shahed drone costs about $20k, and there are far more of them, and they are being replaced at a much faster rate. Iranian targeting of major cities, military bases, and civilian infrastructure has forced a heavy burn rate of interceptors in the early stages of the conflict, and this leaves the US missile shield severely depleted. Iran have also demonstrated an unsettling reality for the Gulf States, and the rest of the world, that the risk premium from the coercive threat their drones pose is enough to allow them to continue exerting pressure no matter how degraded their command structure and conventional military becomes.
Abqiaq and Kharg Island
The progression of this conflict depends on what decision the United States makes next. Iran have escalated the conflict in lockstep with the United States, they call but they don’t raise, keeping things in reserve so they have room to keep up. Last week President Trump threatened to strike Iranian energy assets and gave them a ticking clock, he then extended it, twice. The walk back was not because Iran opened negotiations or offered concessions, it was because if the United States put energy assets in play, Iran could do damage to the markets that would be measured not in months but in years. Iran have also held off from striking two facilities, Abqiaq - 7% of global supply and Ras Tanura - 6 million barrels per day. If the United States escalates the conflict by seizing the Kharg Island oil terminal or one of the outlying islands in the strait such as Abu Musa, these facilities would be natural targets. A handful of drones finding their mark at Abqaiq or Ras Tanura would leave the United States, with troops on the ground and vulnerable at Kharg or Abu Musa, contemplating their next move, either a humiliating withdrawal or a genuine ground war with a country whose terrain makes Afghanistan look inviting. Any escalation in the next few days puts us closer to truly damaging scenarios than most people realise.
HOW LONG IS IT GOING TO LAST?
Clausewitz’s maxim ‘War is the extension of politics by other mean’ is a cliche quoted far too often, but centuries later it still holds true; in a limited war it means that the aim is to make it so the enemy is better off complying with you rather than carrying on. One of the structural issues with the Iran war, and in fact American wars in the Middle East in general, is that you cannot conduct a limited war against an enemy for whom the war is a matter of survival, Total War must be met with Total War. The same is true for Operation Epic Fury, relying on air power alone to enact regime change had absolutely no chance of working in Iran, because they failed to understand that fundamental truth of modern warfare. Nobody with any skin in the game benefits from the war ending now, so it won’t.
The United States' dilemma
For the United States, the domestic political calculus is the primary consideration in ending the conflict. President Trump’s domestic position is difficult to say the least; with the midterm elections rapidly approaching. The Iran War has almost no domestic support, it is driving gas prices up rapidly, and perhaps most importantly it is eroding his image of projecting American power. The ‘Donroe’ doctrine which worked in Venezuela, a form of gunboat diplomacy using short sharp bursts of force to extract specific concessions to tie a regime to the United States and remove it from the Chinese sphere of influence, has not borne the same fruit in the Middle East. It worked in Venezuela because the regime actors cared about themselves more than the regime, it has failed in Iran because the actors believe the regime is more important than themselves. Another problem is that decisions are being made with a gutted State Department and a hollowed out intelligence branch, the failures don’t just represent overreach, it reflects degraded analytic capacity. It is in this context that President Trump is faced with the decision to either escalate the conflict to achieve his original goals or claim victory under very tenuous circumstances, against an enemy who may continue to fight on, whatever the White House claims.
Iran and the IRGC
The Iranian Revolutionary Guard (IRGC) has seized control of Iran, transforming it into a Praetorian state from the ashes of the airstrikes that killed the Ayatollah. Their legitimacy now is built on war and a secular revanchism that necessitates an ongoing conflict with the West to build the foundations of the new regime. The new leader of Iran, Mojtaba Khamanei, is not dictating the war effort, he is the Claudius to the IRGC’s Praetorian guard, elected emperor while hiding in a bunker rather than behind a curtain. Meanwhile operational command has been decentralised in order to counter the US/Israeli decapitation strikes. The confirmation that the IRGC have taken control is the resignations of, or even open dissents from, the reformist figures in the theocratic regime. Iran is now run by a junta whose domestic credibility comes from defeating the United States. A junta whose insurgent economic warfare is yielding incredibly effective results and frustrating a superpower. The IRGC have absolutely no incentive to end the conflict now even if doing so would inflict a humiliating defeat on the ‘Great Satan’ as they would not get enough concessions to guarantee the long term survival of the new order.
Israel
Israel also have limited interest in ending the conflict immediately. Israel entered this conflict for far broader reasons than the United States did, and purportedly were the instigators of the operation. Their goals are consistent and are still being executed: destroying the Iranian nuclear program, decapitating the IRGC, and dismantling the Shia proxy network. Israel are far less affected by the economic warfare being waged by Iran. A skyrocketing Brent price is a Western issue, an Iranian nuke is an Israeli issue. With the United States underwriting Israeli actions as the senior partner in the relationship, Israel have minimal incentive to refrain from escalating until their goals have been achieved. The issue with this is that, like Austro-Hungary in 1914, and the blank cheque written by their senior partner, in this case the US, could very well lead them to overreach and trigger escalations that extend this war in some form for months or years, including economic warfare with nations supporting Iran, a ground war, or endemic pressures on the Suez Canal from the Houthis and in the Strait of Hormuz.
The Escalation Trap
This is a prime example of Professor Robert Pape’s Escalation Trap. The United States strikes Iranian military infrastructure, Iran expands the theater horizontally and raises the cost to America’s Gulf partners. America responds, Iran calls and doesn’t raise, keeping enough in reserve to match the next move. Each attempt to restore American dominance creates the conditions for the next Iranian escalation, and each Iranian escalation creates domestic pressure, and creates the conditions where the United States have to up the ante. The trap isn’t an endless spiral to nuclear war, it’s how what starts as airstrikes could end with the 82nd Airborne fighting a rearguard action in the Zagros Mountains. It is a conflict with more actors, wider geography, and higher stakes, in which the party with the most to lose financially is also the one with the least coherent exit strategy. There is no de-escalation ladder available, because the United States does not control all the players. Trump can declare victory tonight. The Strait of will still be closed tomorrow, unless you pay the toll.
HOW WIDE WILL IT GET?
As Otto Von Bismarck once said ‘waging a preventative war is like committing suicide out of fear of dying’. The central irony of Operation Epic Fury is that, in combination with the strikes last year, it has accelerated the transition of power from the theocracy to the IRGC. The IRGC already controlled 20-40% of the economy, and held the ‘monopoly on violence’, and by removing the Ayatollah the United States have empowered this Praetorian class, one which is far less likely to accept a return to the status quo. Many of the IRGC commanders have been battle forged in Syria, Iraq and Yemen alongside their Shia proxies, they are hardened, uninterested in concession and have different ambitions to the old regime. The issue is that rather than seeing these proxies as allies in an idealogical struggle against the ‘Great Satan’, the IRGC commanders likely see their proxies as tools of nationalism. Once you strip away the theology, you are left with a militaristic nationalist state using religion as a means of control, and one that has absorbed the full power of American and Israeli airpower, and regardless of outcome, will be emboldened by their resilience.
TP-AJAX
The anti-western nature of this nationalism is perhaps informed by the trauma of 1953; Operation TP-AJAX, the CIA operation to depose Mohammed Mossadegh’s secular, but left leaning, government in Tehran. The primary drivers of this Cold War intervention were Anglo-American oil interests, and the usual American concerns over Soviet influence. The regime installed by the United States presided over a liberal and modern Iran, but was toppled by the theocratic Islamic Republic 26 years later, primarily as a backlash against imperialism. The internal lessons drawn from Ajax seem to have been to retain control of the oil flow at all costs, and to build in anti-coup resilience, such as the IRGC’s parallel governance structure, and the decentralisation of command. What is important to realise about the changing nature of the opposition, is that the Islamic Republic was one generations expression of that nationalism, the current elite in Iran seems to have a more militaristic vision of that same notion. The Islamic Republic was a legible enemy, its goals were clear and it could be planned around, Praetorian Iran is something different. They are willing to strike widely at neighbours and nations uninvolved in their current conflict, it is less containable as it is not hiding behind fundamentalist proxies. This new threat calculus is shown by the delay in utilising their Houthi proxy force, they are treated as an asset to be activated as part of an escalation as opposed to a perennial insurgency.
Echoes of Suez
The strategic model of using economic chokepoints to defeat a greater power is nothing new, for example Nasser’s seizure of the Suez Canal in 1956. Nasser never had to defeat Britain, France and Israel militarily, the economic and political conditions surrounding the seizure forced a ceasefire as the intervening powers were unable to live with the consequences. Similarly, Iran do not need to defeat the United States militarily, but while Nasser’s leverage was partly ideological and Iran’s is purely geographical, they will attempt to make the Hormuz tollbooth a structural part of the global economy in the same manner as Nasser.
The Petroyuan
Both Ajax and the Suez crisis have to be placed in their Cold War context, but they do have echoes in the current conflict. This is great power competition using regional conflicts as an arena, the American intervention is in part aimed at excluding China from the region and seizing control of the energy architecture. The issue is that it has not been successful, Beijing is benefiting from American strategic overreach. Since 84% of Hormuz oil goes to Asian refineries, it has an outsize impact on that region, control over the strait gives leverage over China, Japan, Korea and the rest. For the United States a friendly Iran would be a useful tool in their competition over resources with China, however the creation of the Petro-yuan tollbooth means that China have asserted a measure of control over the Asian energy infrastructure, denominated in Yuan, while the United States burns through interceptors and political credibility. Washington won the Cold War by winning more than they lost in these regional amphitheaters, they appear to be losing in this one so far.