The confrontation between the U.S. and Iran in West Asia could snowball with damaging economic consequences

On July 7, Iran announced that it would begin enriching uranium above a concentration of 3.67% permitted under the nuclear deal, known as the Joint Comprehensive Plan of Action (JCPOA), reached by Iran and the P5+1 (China, France, Germany, Russia, the United Kingdom, and the United States) on July 14, 2015.

This followed its July 1 announcement that it had breached the limit of the 300 kg of enriched uranium stockpile that was allowed by the JCPOA. It appears Iran’s patience is wearing out.

These steps come in the wake of increasing tensions between the U.S. and Iran following the shooting down of an unmanned U.S. drone over the Strait of Hormuz in June. The circumstances surrounding this event and the locale of the downing are contested. However, it led to the U.S. President, Donald Trump, first ordering a retaliatory strike on Iran and then rescinding it at the last minute. It is possible that had this strike taken place it would have become the first act in a major military confrontation between the U.S. and Iran.

The mayhem could have spread to the entire West Asian region with Iran attacking strategic American, Saudi and Emirati targets around the Gulf and attempting to block the Strait of Hormuz in an effort to choke off the supply of Gulf oil to the international market. Further, Iranian allies in Lebanon, Iraq and Syria might have launched attacks against American troop concentrations as well as against U.S. ally Israel, thus inviting further American and Israeli counter-retaliation and dragging the U.S. into its third major war in the region.

The downward spiral in U.S.-Iran relations started with Mr. Trump’s decision (announced in May 2018) to withdraw from the JCPOA against the advice of the U.S.’s European allies France, Germany, and the U.K. that are parties to the deal. The Trump administration followed it up with the re-imposition of stringent economic sanctions against Iran that were being gradually dismantled following the 2015 nuclear deal. These included sanctions against foreign companies doing business with Iran and against countries buying Iranian oil.

List of demands

Finally, the U.S. announced in April this year that it would not extend waivers granted earlier to eight countries (China, India, Japan, South Korea, Taiwan, Turkey, Italy and Greece) which had been the largest importers of Iranian oil. This decision was aimed at totally choking off the export of Iranian oil — the primary foreign exchange earner for Tehran — in order to bring Iran to its knees and force it to accept American demands spelt out by U.S. Secretary of State, Mike Pompeo. These included further curbs on Iran’s nuclear programme including total stoppage of uranium enrichment even at low levels permitted by the JCPOA and monitored by the International Atomic Energy Agency.

Further, Mr. Pompeo demanded that Iran stop all support to Hezbollah and Hamas which the U.S. considers to be “terrorist” groups, permit the disarming of Shia militias in Iraq, and stop aiding Houthis in Yemen fighting Saudi and Emirati forces in that country. Above all, Mr. Pompeo demanded that Iran end building of ballistic missiles and halt further launching or development of nuclear-capable missile systems.

All these demands went far beyond the limits placed on Iran by the JCPOA and most were unrelated to Iran’s nuclear programme. Iran’s government rejected these demands while still keeping the door open for negotiations, hoping against hope to draw the U.S. back into the nuclear deal. However, persisting and escalating moves by the U.S. during the past year now seem to have made it impossible for Tehran to simultaneously maintain the contradictory position of resisting American demands while continuing to comply with restrictions imposed on its nuclear programme by the JCPOA.

The stance of Iran’s Hassan Rouhani government became increasingly untenable in the light of recent American actions. The latter provided the hardline opposition in Iran, composed of right-wing factions and the Islamic Revolutionary Guard Corps, the opportunity to attack the government for conforming to an agreement that had been rejected by the U.S. and that had provided no economic relief to the Iranian people, the primary selling point in favour of the JCPOA. Moreover, the Iranian Supreme Leader, Ayatollah Ali Khamenei, whose support for the JCPOA was crucial, has for all practical purposes withdrawn his endorsement of the agreement in turn leaving the duo of President Rouhani and Iran’s Foreign Minister Mohammad Javad Zarif without any protective political cover.

Tit-for-tat measures

Therefore, the Iranian government, in order to maintain its standing with the populace, has been left with no option but to undertake tit-for-tat measures, further heightening the political temperature in the Persian Gulf. This has turned the U.S.-Iran standoff into a game of chicken in which either one of the parties to the game blinks and concedes victory to the other or a “crash” becomes inevitable. The American-Iranian confrontation seems to be inexorably heading towards the latter outcome. If taken to its logical conclusion this scenario can turn out to be catastrophic for the entire West Asian region as well as for the international economy. Oil supplies from the Persian Gulf are likely to be greatly reduced if not totally eliminated sending oil prices sky-rocketing, especially threatening the vulnerable economies of the global South.

Mohammed Ayoob is University Distinguished Professor Emeritus of International Relations, Michigan State University and Non-Resident Senior Fellow, Center for Global Policy, Washington DC