The U.S. combatant commander for the Middle East, General Kenneth McKenzie, warned last week that an Iranian military attack against Americans in the region remains "imminent." Now, with yet another strike against oil tankers in the region, and economic sanctions imposed on Iran biting even more severely, the question is: what is the likelihood of an all-out war between Iran and the U.S.?
- A deliberate decision by either Washington or Tehran to launch a military strike directly on the forces of the other side is unlikely. The much greater possibility is continued, deniable attacks on assets of U.S. regional allies - or a miscalculation by on-scene commanders - that quickly escalate.
- Both President Trump and Iran's Supreme Leader, Ali Khamenei, have, over the last month, publicly ruled out war; Trump distanced himself from John Bolton, his National security Advisor, and long-time Iran hawk; and Khamenei stated that Iran "does not seek war."
- But Khamenei also stated that Iran will seek the "path of resistance" to the U.S. sanctions and not negotiate over the nuclear deal which the U.S. abandoned.
It is, of course, negotiations that Trump apparently seeks with Tehran; the president has employed crippling oil sanctions, in particular, to force Iran back to the table to repair what he and his team view as fatal flaws in the deal negotiated by President Obama. But Trump's trade and tariff policies elsewhere in the globe are undermining the clout of his oil leverage.
- The president clearly wants to drive Iranian oil exports to zero. And the sanctions policy announced by Secretary of State Mike Pompeo is impacting exports significantly -- reductions estimated at more than 70% from 2015 levels.
- But the key destinations for Iranian crude and refined product exports going forward are China and India; and both countries are now embroiled in increasingly intense tariff spats with the U.S. Expecting these two countries to help the U.S. in bringing Iran to heel is beyond unrealistic.
- The U.S.-China trade tiff has now acquired deep nationalistic overtones in the PRC, with diplomatic off-ramps quickly disappearing.
- And Trump has just canceled a long-established preferential trading relationship with India (the so-called "GSP" program), a move likely to harden India's resolve to push back on U.S. oil sanctions.
In the end, while Iran's economy suffers, they'll get by. They won't return to the negotiating table (despite efforts by Japanese Prime Minister Shinzo Abe to broker talks), and they won't go to war either, because they know that would be economically disastrous. At the same time, Tehran is determined to show that the U.S. economic squeeze can have global consequences.
- Iran will continue to work its militias and proxies to strike at U.S. interests - principally those of our friends in the Middle East; Tehran has long been a master at calibrating attacks - with plausible deniability - to keep U.S. responses largely sidelined.
Such a strategy is not without risk. As tensions rise with proxy attacks, and perhaps, in the coming days, U.S. Navy tanker escort missions in the Gulf, so does the likelihood of miscalculation. Tragically, this happened in July 1988, when a U.S. guided missile cruiser, during another escort mission, mistakenly shot down an Iranian passenger jet with the loss of nearly 300 civilians. That mistake haunts U.S. regional commanders to this day.
Bottom Line: there won't be a U.S.-Iran War that closes the Straights of Hormuz and spikes oil prices. But, regional friends who conclude they can't tolerate Iranian transgressions any longer? Or blunders by local commanders? Those risks continue to ramp.
