Tehran has stepped up its bellicose warnings of conflict in the Persian Gulf as potentially crippling new European Union and American sanctions have been approved on Iran's oil exports and central bank.

The US defied the warning of a top Iranian general this week and sent the USS Abraham Lincoln – flanked by British and French warships – through the Strait of Hormuz at the mouth of the Gulf. A senior Iranian lawmaker scoffed that the US "did not dare" to send its ship alone, because of the danger posed by the Islamic Republic. If Iran were to close the strategic waterway, as it has threatened to do, the American aircraft carriers "will become the war booty of Iran," he declared.

Such bluster is not all talk. The US may outspend the Islamic Republic nearly 90-to-1 on defense. But Iran, heir to ancient Persia's naval innovation, has a well-honed asymmetric strategy designed to reverse that advantage.

A 2002 US military exercise simulating such a conflict proved devastating to American warships.

Indeed, Iran can cause immense harm, analysts say, without ever directly facing off against far superior conventional US forces. Even a few incidents – like mines laid in the Gulf, or Iran's small-boat swarming tactics against oil tankers or a US Navy ship – could raise fears of insecurity to unacceptably high levels.

It could also have far-reaching economic consequences, including a spike in oil prices, since roughly a third of all seaborne oil shipments pass through the Strait of Hormuz – making it the single most important choke point for oil tankers in the world.

"[Iran's] final aim is not to physically close [the strait] for too long, but to drive up shipping insurance and other costs to astronomical heights – which is just as good, in terms of economic damage, as the physical closing of the strait," says a former senior European diplomat who recently finished a six-year tour in Tehran.

"If you are not sure whether you will get hit, or if you get hit not by conventional force but some wild boat that might float around in the sea – or a mine or two – that will create far more insecurity than a battle line where the strait is closed," he says.

And Iranian harassing tactics are just the start, he adds. Other layers include artillery and rockets stationed at the Strait of Hormuz, Kilo submarines, and mini-submarines from which divers can be sent out to damage ships.

Many options short of full-blown war

Iran's conventional military forces are often aging and of limited capability. Iran spent just $7 billion on defense compared to America's $619 billion defense budget in 2008, the latest year for which Iran's data was available, according to the Stockholm International Peace Research Institute's database.

Iran's strategy of asymmetric warfare recognizes that, since the 1979 Islamic Revolution, Iran has little chance of winning any face-to-face military contest with powerful enemies like the United States.

Instead, Iran aims to "exploit enemy vulnerabilities through the used of 'swarming' tactics by well-armed small boats and fast-attack craft, to mount surprise attacks at unexpected times and places" which will "ultimately destroy technologically superior enemy forces," writes Iranian military expert Fariborz Haghshenass in a 2008 study based on published doctrines of the Islamic Revolutionary Guard Corps (IRGC).

In any future fight, Iran would likely "avoid escalating the conflict in a way that would play to US strengths in waging mid- to high-intensity warfare – by employing discreet tactics such as covert mine-laying, limited submarine options, and occasional mobile shore-based attacks," writes Mr. Haghshenass, in the study for the Washington Institute for Near East Policy.

In fact, Iran has many options short of a direct challenge in the Persian Gulf.

"Iran could seek to create perpetual, low-grade instability in the strait, mostly through asymmetric means, with the objective of making it an aquatic 'no-man's land,' " says Reza Sanati, in an analysis published by the Tehran Bureau/PBS Frontline website. "For Iran, the choice is not 'to close' or 'not to close,' but rather to clog. A major global choke point, once considered safe, would no longer be so."

The US "would be drawn into providing the manpower and bearing the exorbitant cost for removing the impediments," adds Mr. Sanati, while the risk of inadvertently sparking a war would "vastly multiply."

Devastating result for US in war game

Iran's asymmetric focus is no secret. It has sought to enhance deterrence by claiming repeated triumphs during large military exercises, and by fielding new hardware, from super-fast torpedoes and to kamikaze drones.

During the "Great Prophet V" exercise in April 2010, for example, the IRGC Navy trumpeted the launch of a new "ultra-fast" watercraft that it claimed was less detectable by radar. Across the shimmering Gulf waters, Iran fielded 300 boats in a swarming attack, with commandos landing on one of the target warships.

"The Strait of Hormuz belongs to the region and foreigners must not intervene in it," military spokesman Ali Reza Tangsiri said at the time.

That warning echoed the words of a ranking Iranian cleric in 2008 that the "first shot" fired against Iran would turn the Israeli capital Tel Aviv and the US fleet in the Persian Gulf into "the targets that would be set on fire in Iran's crushing response."

More than a decade earlier, in 1997, then-IRGC commander Mohsen Rezaei said "Iran will never start any war," but if the US attacked first "we will turn the region into a slaughterhouse for them. There is no greater place than the Persian Gulf to destroy America's might."

Could Iran do it?

It would seem so, in light of a $250 million classified US war game called Millennium Challenge 2002. The gaming scenario hypothetically pitted the Blue Team (representing US warships) against a Red Team that launched a coordinated assault using swarming boats and missiles – the kind of tactics Iran might employ.

In the game, 16 American ships, including an aircraft carrier and most of its strike group, were sunk before the exercise was suspended and the parameters controversially changed to ensure a US victory.

The Red Team commander, Lt. Gen. Paul K. Van Riper, told the New York Times in 2008, "The sheer numbers involved overloaded their ability, both mentally and electronically, to handle the attack.” He said he had been inspired by Marine Corps studies of the natural world, where everything from ant colonies to wolf packs took on larger prey.

"It is not a matter of size or of individual capability, but whether you have the numbers to come from multiple directions in a short period of time," said Van Riper.

Since then, American naval strategists have worked to overcome the vulnerabilities of conventional warships to swarm tactics. One solution has been a US Navy project to build a “littoral combat ship” (LCS), designed to operate at high speeds and close-to-shore, with shallow draft and capable of launching helicopters, assault boats and submarines. Only two have been built, the project plagued by delays and cost overruns.

The LCS fits Iran's coastal waters and its methods, and is designed "to counter growing potential 'asymmetric' threat of coastal mines, quiet diesel submarines, and the potential to carry explosives and terrorists on small, fast, armed boats," according to the website www.naval-technology.com.

Iranian units given great independence

Iran also appears to have learned from the 2002 US exercise, just as it learned from a 1988 incident during the Tanker War in the Persian Gulf, when US forces sunk or damaged three Iranian warships in a single day, to retaliate for an American ship hitting a mine.

Part of Iran's strategy includes decentralized decisionmaking.

"The entire [IRGC] structure – if you look at how air defense is organized, the land forces, the combination of the Basij [militia] and the [IRGC] – this is all geared toward what they call the Mosaic Strategy, where you have individual military units who have a great deal of independence to decide what they can do without referring back to the center," says the former European diplomat.

Haghshenass explains one way this could play out in the Gulf.

"In the naval arena, speedboats will be taken out of camouflaged coastal or inland hide sites and bunkers, hauled on trailers to coastal release points, and given mission-type orders that will not require them to remain in contact with their chain of command," he writes.

But Iran's retaliation would not likely be limited to the strait.

"This is only one aspect of their deterrent strategy. Threats about Iraq and Afghanistan ... there is Hezbollah and Hamas they could activate," says the diplomat, referring to the militant groups active on Israel's borders. "There is a whole array of deterrent strategies they have put into place, and the Strait of Hormuz is just one aspect. [T]hey have made it very clear the last few years that they have this whole portfolio, and will use it all in case of a military attack."

Labyrinth of ports and 'spiritual' superiority

Historically, the fleets of ancient Persia sailed far afield, and in the Mediterranean used "spy ships, disguised as foreign merchantmen and small warships for clandestine operations," notes Haghshenass's analysis. Ancient Persians, during the reign of Xerxes, "invented the concept of naval infantry."

The geography of Iran's southern coastline hasn't changed, and with 10 large ports and 60 small ones – and an endless labyrinth of fishing villages, inlets, and coves – it is ideal for staging the kind of hit-and-run and stealth operations envisioned by the Iranian strategy.

With a daily transit rate of 3,000 boats and ships in the strait, US forces could have trouble differentiating friend from foe, providing Iran with an upper hand.

And Iranian commanders believe they have another advantage, if the rhetoric about the Strait of Hormuz ever turns into a real conflict.

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"The IRGC places religious belief at the core of the Iranian concept of asymmetric warfare," writes Haghshenass. "In Iran's concept of asymmetric warfare, the ideological or 'spiritual' superiority of the community of believers is considered as important as any other factor."

That means, he adds, that Iran's Revolutionary Guard believes that "its chain of command extends through Supreme Leader Ali Khamenei to God, thereby investing military orders with transcendent moral authority..."