The dust has settled in the wake of the killing of Saudi journalist Jamal Khashoggi; to no one’s surprise, the U.S.-Saudi strategic relationship survived. The business case for foreign direct investment in the Kingdom, however, is likely irretrievably damaged; but it was never in good shape, even before the killing.
- The real winner in all of this Middle East dust-up - at least over the near-term - has been Iran. President Trump’s efforts to forge a “counter-Iran” strategy, like the business case for investment in the Kingdom, suffered significant body blows; it will take months of patient U.S. Middle East diplomacy to create agreement on the strategy Trump envisioned a year ago to force Iranian concessions. The "snap-back" of sanctions on Tehran last week hasn’t changed this calculus.
- Saudi Crown Prince Mohammed bin Salman's foreign policy misadventures also, unfortunately, aren't helping the president.
What’s happened, to put the brakes on the president's high-profile push-back against the Iranian theocracy? It's not unreasonable to believe that the carefully crafted re-imposition of sanctions against Tehran - announced jointly by Secretary of State Mike Pompeo and Secretary of the Treasury Steve Mnuchin - represents a significant setback for Iran. The oil, banking, and individual sanctions will hurt the faltering Iranian economy for sure; but by themselves, they will not force Tehran back to the negotiating table, the clear expectation of the White House. Why not?
- First, Iran has already dusted off its "sanctions-evading playbook" from earlier this decade - tankers sailing with no navigation transponders, barter agreements for new oil contracts, rampant smuggling. Despite the new sanctions, Iran's leaders are confident they'll get by.
- Further, and related, Iran was also counting on Trump doing exactly what he announced in his effort to keep oil prices from skyrocketing: granting six-month partial waivers from the sanctions policy for selected countries - including especially, India and China. Iranian oil exports will drop, but these customers, at least well into 2019, will still be major purchasers of Iranian oil.
- Third, Tehran feels that time is on their side; mirroring the recent sentiment of one Chinese diplomat, the Iranians know that "Trump is not forever."
- Finally, and perhaps most obviously, the Iranians have faced far worse: in the Iraq-Iran war of the 1980's, they lost as many as 750,000, including many to poison gas. The current stand-off is minor by comparison.
On top of all this, MBS's mistakes - the directed assassination against Khashogghi being amongst the most damaging - have fractured an already tenuous regional anti-Iran coalition. The Saudis need Qatar, and especially the Turks, to back their strategy; MBS's actions have ensured that backing won't be forthcoming.
Bottom Line: the tragic demise of Jamal Khashogghi may be in our foreign policy rear view mirror. But Iran and its theocratic leaders are now squarely in our headlights. And the foreign policy road ahead is not only unpaved; it's littered with diplomatic and national security land mines.
- Next to China, resolving an Iranian crisis of his own making will be Trump's most important - and most complicated - security challenge as we enter the new year.
