The clouds of war are looming high Middle East. US and Iran have locked horns here, leading to a possibility of direct confrontation. Research Intern Subirthana argues how the possible conflict will have implications not only for the region but also for the global economy.

Image source: Press TV

By Subirthana M S

On 12th and 14th May, 2019, four commercial vessels were sabotaged outside the Strait of Hormuz, near Fujairah emirate. Two of the vessels were identified as Saudi, one as a Norwegian and the other an Emirati.

The Houthi rebels in Yemen claimed responsibility for the attack. A Houthi spokesman, Mohammed Abdul Salam tweeted saying that this is a response to Saudi aggression and genocide in Yemen. The UAE however has not blamed anyone for the attack so far but both the Saudi and the UAE governments have decided to open alternate oil export routes. This is to avoid the Strait of Hormuz which is vulnerable to possible Iranian disturbance. The attack appears to be a deliberate attempt to disturb oil transit routes that Saudi Arabia and the UAE established in the Strait of Hormuz.

The United States on the other hand has pointed fingers at Iran, the Houthis and other Iranian proxies, but has not provided with any concrete proof for the alleged claim. The allegation has been vehemently denied by Iran. John Bolton, the US National Security Adviser, said that any attack on America or even its allies “will be met with unrelenting force”. The United States’ escalating campaign against Iran is supported by Israel Prime Minister Benjamin Netanyahu openly when every other country is keeping quiet. It is believed that it was indeed him who persuaded President Donald Trump to abandon Barack Obama’s nuclear deal with Iran. The US navy has conducted a series of exercises in the Arabian Sea, with an aircraft carrier US Abraham Lincoln strike group being sent to the Persian Gulf to counter an alleged threat from Iran.

Analysts in the oil rich region warn that this could cause tensions between the United States, its Gulf Allies and Iran. The attack on the tankers and oil pipelines of the Gulf allies of the United States is believed to be an act of retort by Iran to the United States’ withdrawal from the Joint Comprehensive Plan of Action (JCPOA) or the “Iran Deal”. The relationship between both the countries saw a decline when the United States withdrew from the deal and imposed sanctions on Iran last year. The Trump administration argues that the JCPOA was a terrible deal that was framed to serve as Obama’s foreign policy legacy rather than to ensure nuclear-free Iran.

However, the European Union (EU) sees JCPOA as a successful multilateral effort that could help reach non-proliferation and other agreements with Iran in the future. The EU feels that by walking away from the deal and disrespecting those who honour the deal, the United States is alienating its allies in the region.

Iran on the other hand released a statement saying that it is going to withdraw from certain commitments it made to the nuclear deal of 2015 if Europe, China and Russia fail to deliver on sanction relief. It has given June 30 as an ultimatum to the countries of Europe for persuading the US to soften its stands. Leaders of the EU along with the foreign ministers of France, Germany and the United Kingdom released a responsive statement asking Iran to adhere to the nuclear deal’s commitments.

On being questioned regarding this, the US President Donald Trump responded saying that “We’ll see what happens with Iran. If they do anything, it would be a very bad mistake”. Trump’s remark has sparked tensions amongst the Iranian citizens who fear for their future amid renewed tensions. The issue with the United States is viewed as a geopolitical one that might lead to conflict between both the countries. Iran’s Supreme Leader Ali Khamenei assured people saying that the US “does not want war”. However, his statement has failed to persuade everyone into believing it.

Imad Harb, Research and Analysis director at the Arab Center think-tank in Washington, DC, described the attack as a caution of how vulnerable Saudi Arabia and the UAE are to such attacks and how much their economies can be affected.

The whole issue is viewed as a wrong call made by Donald Trump, when he decided to withdraw from the deal and impose sanctions on Iran. Under the 2015 accord, Tehran had agreed to control its nuclear activity in exchange for sanctions relief. Some analysts say that the Trump administration is making reckless moves. It seems like Washington is using the “smoke and mirrors” tactics. The Houthi attacks on Saudi have been continuing for a long time. The Trump administration is suddenly reframing this as a matter of grave concern in the region; however, this does not excuse Iran’s strategic ambitions in the region.

The Iranian side believes that the United States as well as its allies has much to lose from a potential conflict. “We have a lot of capabilities”, said Hossein Kanani Moghadam, a former Commander of Iran’s elite Islamic Revolutionary Guard Corps. In case of a confrontation, Iran can disrupt major water routes such as the Strait of Hormuz, which are used for some of the world’s biggest oil supplies.

Russia on the other hand is benefitting from the stringent US sanctions on the Iranian oil sale. With Japan, India, Korea and Italy reducing their oil imports from Iran, Russia has gained additional market share as a customer. With Iran under sanctions, Russia can re-emerge as the supplier of last resort. Iran is also Russia’s major military equipment importer. Although Russia and Iran are believed to be allies, there is no defined binding defence agreement between Tehran and Moscow. Thus, if the US declares war against Iran, Russia has nothing to lose.

Countries would be affected directly by the escalating tensions between the US and Iran and will be keeping a cautious eye on the unfolding dynamics in the region. India, being Iran’s second largest buyer and Tehran being India’s third largest supplier of oil, has stopped buying its oil after renewed sanctions imposed by the US on Iran. This may have a huge impact on the Indian economy. Importing oil from Iran was easier for India economically and geographically. Maintaining a good relation with Iran is crucial for India as it serves as an alternate access to Central Asia and Europe bypassing Pakistan. Especially now with India developing the Chabahar Port with Iran, it is important for India to balance its relations with both Iran and the United States. The US however has said that the Project will not be affected by its refusal to renew sanction waivers. India has stated that it wants all parties to resolve the issues “peacefully and through dialogue.”

Though, both sides act like they are ready for a conflict escalation in the region, Iran as well as the United States has a lot to lose in case of a potential war. For Iran, there will be a huge impact on its economy which will in turn take a toll on oil economy of the world. Another important aspect that has to be looked into here is the fact that if America wages war against Iran, it will have to concentrate completely on Iran which will force them to leave the Far East (South China Sea, East China Sea). Calling off the US troops from the Far East is quite dangerous for them as this will give China an opportunity against Taiwan. Therefore, it would be wise for the Trump administration to act with caution in the region considering the potential damage Iran can cause in case of a war over the oil routes and the oil economy of the world.

Thus, the conflict between the US and Iran should be viewed as a global conflict, considering the potential damages it can cause to the entire globe. The confidence and preparedness projected by Iran towards US intent of waging war shows that the regime in Iran is quite stable. If Iran, the world’s second largest oil producer, comes under war it will have a huge impact on the global economy. Therefore, the US and Iran need to act with responsibility and resolve issues in a much more peaceful manner.

Subirthana M S is a Research Intern at CPPR Centre for Strategic Studies. Views expressed by the author are personal and need not reflect or represent the views of Centre for Public Policy Research


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