The Security Studies Group (SSG) has always advocated viewing the Iranian regime as the key problem in the Middle East, and has backed strong measures including reprisals for Iranian mischief. SSG President Jim Hanson recently spoke with State Department officials, however, who persuaded him that their increased sanctions might be the better move at this time. President Trump seems committed to giving peace a chance, though he remains open to a military option according to his remarks yesterday.
The United Nations (UN), and broad multi-lateral diplomacy generally, has relatively few successes under its belt. Mostly this is due to structural issues, in the case of the UN especially the veto provided to the permanent members of the Security Council. It is typically too easy for competing powers to block progress, especially when — as has been the case almost constantly since the beginning of the Cold War — the permanent members have opposing interests in the outcome.
The stars are unusually aligned today, however. Peace and diplomacy might work this time. There are no guarantees, and the opposition of American interests versus Chinese interests remains strong. However, there are forces at work that suggest that a deal might come together to align our interests sufficiently to press Iran for better behavior. I’ll run through some of the forces at work and how I think they work together.
All of this is happening within the bigger and more significant context of the US-China trade war. China has so far made the decision to suffer intense economic pain in that trade war, in the hope that the smaller but still substantial pain felt in the United States may cause the end of the Trump administration in next year’s elections. The trade war is hurting China much more, but so far they have decided to endure the disproportionate pain they are suffering.
Just as the trade war is hurting China more than the United States, however, the instability in oil supplies from the Middle East is a much bigger problem for China than for America. Iran’s moves here are creating big problems for China. For the United States, the rise in energy prices is matched by a fracking-rich energy strategy that makes those higher prices a net positive for us. Thus, Iran’s moves redouble the leverage that the Trump administration was already wielding against China’s economy. China may well be motivated by this redoubled pain to try to exert pressure on Iran.
Second, the UN General Assembly happens to be this week. The United States thus has an opportunity to make its case to world leaders directly and immediately. This includes presenting evidence of Iran’s role in the recent strike on Saudi oil facilities, which China has asked to have probed with some care. The US, the UK, France, and Germany have already endorsed Iran’s culpability. Like China, the Europeans are much more exposed to the pain of unstable (or simply higher) energy prices than either the US or Russia. The Europeans may well be persuadable that energy instability is not in their interest. If the United States and China can come to a moment of agreement on restraining Iranian mischief, Europe is likely to go along.
Third, although China and Iran have been negotiating a massive agreement to allow China to buy oil in their own currency rather than in US dollars, China also has to be motivated by the costs it is sinking into Iranian and Iraqi oil fields. Both the purchase agreement and the shipping of oil from these Iranian/Iraqi oil fields requires shipment through the very Strait of Hormuz that the current conflict threatens to close. The United States does not need to win such a conflict to do crippling damage to China’s economy. It needs only to allow Iran to close the strait, and then prolong the conflict in such a way as to keep the strait close to oil tankers. While this would cause massive economic chaos in Europe and for China, as well as for America’s Asian allies, the United States itself would profit as we transition into a net energy exporter, as we have already become a net oil exporter.
Fourth, Iran itself is suffering already from the maximum pressure sanctions campaign. Just as the United States could profit from simply prolonging a crisis in the Strait of Hormuz, we also advance the ball against Iran simply by letting time continue to pass under the current sanctions regime. The Chinese/Iranian deal to sell oil in Chinese renminbi rather than petrodollars is intended as a lifeline to Iran as much as a bonus to China, but that deal depends on the very security in Hormuz that Iran is threatening. Iran is losing investment capital from abroad, and has had to slap tariffs on steel component exports to try to stay afloat. Those tariffs hurt China, though, which has responded by cutting back on purchases — thus further damaging Iran’s own economy. There is good reason for Iran as well as China to want to find a way out of this hole.
For now, Iran remains defiant, and continues to express confidence that both China and Russia will remain on its side. Russia is likely to back them — sharing with America an interest in higher international energy prices — but China is subject to some powerful countervailing pressures right now. The Trump administration can use those pressures to create progress at the tables of diplomacy. They may not succeed, but there’s reason to think that the odds are as good as they’ve ever been for peace and diplomacy to work this time.