The financial windfall from oil and gas exports may boost regional officials’ ambitious economic diversification plans but doesn’t make them foolproof.
On June 20, Iran and the United States came perilously close to a direct armed conflict, with President Donald J. Trump reportedly ordering and then canceling retaliatory strikes against Tehran after the downing of a high-tech U.S. drone near the Strait of Hormuz. The Gulf Arab countries find themselves already caught in the crossfire between the two parties, repeatedly targeted by low-intensity and deniable attacks by Iran or its allies in recent weeks. There is virtually no scenario whereby Gulf Arab states, particularly Saudi Arabia and the United Arab Emirates, would not be prime targets for additional Iranian attacks should the confrontation intensify.
Iran says the drone was shot down in its own airspace, but the United States insists it was well off the coast of Iran. Iranian officials also claim Trump sent them a warning through Omani officials of an imminent attack and demanded negotiations. Administration officials have repeatedly said that one clear redline for a robust military response would be the death of any U.S. service personnel. U.S. forces in the Gulf region, including warships that serve as key cruise missile launching vessels, are reportedly on a 72-hour standby.
Trump is caught between several competing impulses, including a desire to restore U.S. deterrence by striking back, a disinclination to be drawn into the kind of Middle East conflict he campaigned against in 2016, and due caution about being baited into an overreaction by Iran. Tehran seems to be attempting to escalate a regional crisis while avoiding a full-blown war with the United States, to convince U.S. allies in Europe, the Middle East, and Asia to pressure Washington to ease the crippling sanctions that have brought the Iranian economy to its knees.
The Gulf countries may be experiencing a degree of analogous ambivalence, pleased by Iran’s predicament while deeply anxious about the consequences of further armed confrontation. Most of the incidents thus far in Iran’s low-intensity escalation campaign have involved attacks on Gulf Arab interests, which are in many ways Tehran’s most vulnerable potential targets. As always, the interests, reactions, and engagement by Gulf Arab countries vary greatly given their different perspectives. However, there is one area of generalized agreement: The Gulf region and Middle East do not need or want a U.S.-Iranian conflict. The Gulf Arab countries can, and would much prefer to, secure their interests without a dangerous and unpredictable conflagration. This solid regional opposition to a rush into conflict is one of several restraining factors that could help to de-escalate the current tensions and create an opening for new dialogues to avoid conflict and stabilize the region.
A Trajectory of Intensifying Tensions
U.S.-Iranian relations reached their high point with the signing of the Joint Comprehensive Plan of Action in 2015 but began to notably deteriorate by 2016 during the final months of the Obama administration. President Barack Obama had hoped that the nuclear deal and international engagement would moderate other aspects of Iran’s behavior, including support for destabilizing militia activity in the region, development of its missile program, and human rights abuses inside Iran. Not only did that not happen, but Iran if anything intensified its interference in the Arab world and refused to negotiate moderating its behavior with the United States beyond the nuclear agreement.
Trump campaigned against the JCPOA and in May 2018 announced the withdrawal of the United States from the nuclear agreement. The administration began applying “maximum pressure” against Tehran, mainly in the form of economic sanctions to reduce or eliminate Iran’s international oil sales. Washington’s actions were rejected not only by Iran but by the other JCPOA signatories, including Russia, China, and even key U.S. European allies the United Kingdom, France, and Germany. Indeed, the Europeans proposed setting up a special purpose vehicle, the Instrument in Support of Trade Exchanges or Instex, to facilitate payments to Iran in currencies other than the U.S. dollar to continue providing Iran with sanctions relief benefits from the agreement.
However, this effort proved ineffective, and Instex has remained essentially unused. Iran’s economy entered freefall, with more than 4 percent negative growth, surging inflation and unemployment, and a plummeting currency. Not only was Iran’s economy profoundly wounded, its ability to financially underwrite its regional proxies, including core allies such as Hezbollah in Lebanon and Shia militias in Iraq, was significantly reduced. The final straw for the Iranian regime appears to have been an effort to extend new sanctions to cover Iranian petrochemical products as well as oil sales. Between the effectiveness of the existing sanctions and the threat of an even more comprehensive sanctions regime, including the very kind of petrochemical products sanctions that drove the Iranians to enter into the negotiations with European countries that ultimately led to the JCPOA, Iranian leaders concluded that the situation was intolerable.
Their initial strategy of attempting to keep the JCPOA functional, work with Europeans and others to find ways around U.S. sanctions, and essentially wait the Trump administration out in hopes of a less hostile U.S. administration after the 2020 elections, proved unsuccessful. Iran repeated threats to close the Strait of Hormuz or otherwise disrupt shipping in Gulf waters in the face of U.S. pressure, even declaring that if Iran could not sell its oil, no one else could export their oil through the Gulf either. Meanwhile, Iran indicated that it would soon begin to violate restrictions on its stockpiles of low-enriched uranium, effectively abrogating the JCPOA. Senior Iranian leaders have even hinted Iran might withdraw from the Nuclear Non-Proliferation Treaty, as North Korea did in 2003, which would be a clear prelude to the development of a nuclear weapon.
Islamic Revolutionary Guard Corps Major General Qassim Suleimani, chief of Iran’s Quds Force that manages its nonstate proxies in the Arab world, reportedly summoned the leaders of Iranian-aligned Iraqi militias to urge them to prepare for a “proxy war” against the United States. U.S. and other intelligence services issued warnings, met with widespread skepticism, that Iranian-backed groups were preparing attacks on U.S. interests in the region. In response, the United States dispatched additional naval and other military forces to the region.
Those Iranian attacks have seemingly begun, but in a calibrated, low–intensity manner and with considerable deniability. On May 12, four oil tankers were attacked off the coast of Fujairah in the United Arab Emirates and on May 14, Iranian-backed Houthi rebels in Yemen attacked Saudi oil installations. This was followed by an additional attack on June 13 on two additional oil tankers in the Gulf of Oman near the Iranian coast. There have also been a number of rocket attacks against U.S.-related targets in Iraq, allegedly conducted by Iranian-backed militia groups. In response, the United States has shifted more military personnel and resources to the region, committed to protecting oil tankers in Gulf waters, and explicitly warned Iran that the death of any U.S. service personnel at the hands of Tehran or any of its allies would result in a military response.
A Game of Chicken
The U.S. withdrawal from the JCPOA returned the United States and Iran to a path of confrontation from which the agreement appeared to offer at least temporary respite. Neither side seems to want war, but both appear unwilling to engage in the compromises needed to move away from a collision course. Washington and Tehran, rather, have been pursuing measured confrontation and both seem to believe they are operating from positions of relative strength. Yet both may be underestimating the difficulties they face and are potentially misreading the signals and intentions of the other side.
While the United States is much the stronger party, its options are limited by self-imposed restraints stemming from war fatigue and skepticism due to long military engagements in Iraq and Afghanistan and from a lack of international support. There seems to be little appetite in Congress and among the public for any major armed confrontation with Iran and Trump insists he does not want a war. Key U.S. allies are even less enthusiastic. But the ultimate goals of the Trump administration are not clear. The administration has said that it seeks a new agreement with Iran that deals with issues not covered by the JCPOA. Secretary of State Mike Pompeo issued a more far-reaching 12-point agenda for change in Iranian behavior that ruling circles in Tehran regard as tantamount to regime change. At the same time, Trump has said that simply, “We don’t want them to have nuclear weapons – not much to ask.” So, the core U.S. demand of Iran is not completely clear, inviting critics to conclude that the administration cannot agree on or prioritize specific changes in Iranian behavior, or that “maximum pressure” is an end in itself. Worse, if the administration does want to avoid a major armed conflict, it is running out of plausible nonmilitary options.
Iran clearly feels cornered. Its carefully calibrated campaign of violence and sabotage seems designed to send a message of defiance, inflict some pain on regional and international actors, but avoid forcing Trump to take military action that he has made clear he would prefer to avoid.
While Iran’s calibrated strategy has not provoked a conflict, it also has not succeeded in panicking global oil markets, international shippers, U.S. Gulf Arab allies, or Washington. Trump dismissed the latest attacks on shipping as “very minor” and stated that the United States no longer needed Gulf oil, indicating that he was not going to be baited into an ill-advised overreaction or allow Tehran to dictate the agenda. The deeper message to Tehran is that the United States and its allies, as well as global oil markets, can easily shrug off Iran’s attacks on its neighbors’ infrastructure. Iran attempted to call Trump’s bluff regarding the use of force. But Trump appears, in turn, to be calling Tehran’s bluff regarding low–intensity, deniable attacks.
The game of chicken in the Gulf is now fully engaged. What is needed to avoid additional conflict is an off-ramp from the path of confrontation in which “maximum pressure,” for the most part crippling economic sanctions, is being met by “maximum resistance,” mainly low–intensity and deniable sabotage and terrorist attacks. Tehran may conclude that it must increase the pressure in order to bait Trump more effectively. The rocket attacks in Iraq and the downing of the U.S. Navy drone may indicate just such a further escalation.
Gulf Arab Countries in the Crossfire
While they frequently express support for the U.S. “maximum pressure” campaign, there is little evidence that any of the Gulf Arab countries relish the prospect of a military confrontation. They would be among the first targets of Iranian military action. Indeed, apart from the attacks in Iraq and, allegedly, Afghanistan, Iranian maritime actions have been largely aimed at Saudi and UAE exports of oil and petrochemical products and their infrastructure to demonstrate a real international cost to the U.S. strategy. Whether Houthi missile attacks aimed at Saudi Arabia are specifically instigated, or merely supported, by Iran is beside the point: Gulf Arabs know that they can be, and are already being, attacked where they live. The prospect that this could get much worse is obvious.
Saudi Arabia has been clear in expressing outrage and maintaining its right of self-defense, but it has also insisted that it does not want a conflict in its neighborhood. The UAE has declined to explicitly blame Iran for the May maritime attacks and referred the matter to the United Nations. None of that suggests an effort to fan the flames of conflict.
Bahrain is exceptionally anxious about Iran’s intentions and generally defers to Riyadh on matters of defense and national security. The other three Gulf Cooperation Council countries are even more unnerved by the U.S.-Iranian standoff. Oman and Kuwait maintain the most cordial relations with Tehran in the Gulf and can only lose from any confrontation. Oman hosted the conversations through which the United States joined the European-Iranian conversation that ultimately led to the nuclear agreement, and Kuwait in the past has been the channel of some Gulf Arab-Tehran messaging.
The Qatari position is particularly delicate in the confrontation between Washington and Tehran. Doha must maintain reasonable relations with Iran because most of its income comes from the natural gas field the two countries share. The boycott that began in 2017 by Saudi Arabia, the UAE, Bahrain, and Egypt forced Qatar to seek stronger relations with Iran to secure several key interests, including civilian aviation overflight routes. Yet Qatar is a close ally of the United States and hosts the forward operating headquarters of U.S. Central Command and one of the most significant U.S. military bases in the region. Therefore, any major alteration in the status quo between the United States and Iran threatens to undo the delicate balance Qatar has created in its relations with both.
A Gulf Role in an Off-Ramp?
Saudi Arabia, the UAE, and Bahrain joined the other Gulf Arab countries in reluctantly endorsing the nuclear negotiations with Iran and, after it was signed, the JCPOA. Although initially they advised the United States to stick with the agreement and use it as leverage with Tehran to modify its behavior, they ultimately expressed satisfaction with the U.S. withdrawal. That said, for months key Gulf Arab foreign policy leaders have been counseling Washington to translate the leverage generated by the new sanctions into a political path for gaining concessions from Iran. There is at most a small constituency in Gulf Arab countries for “maximum pressure” as an aim in itself.
Given that “maximum pressure” sanctions have probably achieved what they can, the quiet Gulf Arab call for a political or diplomatic path with Iran may now begin to resonate. U.S. Special Representative for Iran Brian Hook seemed to speak to this point during a press conference in Riyadh June 21 following a meeting with Saudi Crown Prince Mohammed bin Salman, when he said: “Iran needs to meet our diplomacy with diplomacy and not military force. It’s important we do everything we can do to de-escalate.”
Oman and Kuwait are potential mediators, and, despite widespread misapprehensions, Saudi Arabia and the UAE are likely keen to see a more modulated U.S. policy. Dialogue among the Arab and Iranian parties could begin with more concrete steps by all sides to de-escalate the war in Yemen, possibly expanding to discussions of maritime security.
Internationally, this sequence could be reversed, beginning with a U.S.-Iranian agreement that some sanctions relief would be met with concomitant Iranian concessions in Syria and possibly western Iraq – concessions that would undercut the IRGC’s regional agenda but lead to economic benefits for Iranians and provide the Iranian government with incentives to help it curb the IRGC’s destabilizing activities. And as Suzanne Maloney notes, “Iran’s political establishment has quietly speculated for months about the possibilities for devising a diplomatic pathway out of the country’s current predicament, and there has been a flurry of Iranian engagement with would-be intermediaries.”
The Trump administration should prioritize its fundamental demands on Iran and make them consistent and clear. An Iranian capitulation or regime change seems highly unlikely but the “maximum pressure” campaign, and even the current impasse, could yield compromises by Tehran if the United States – especially in coordination with its European, Gulf Arab, and Israeli allies – presents well-defined, stable, and reasonable terms for sanctions relief. Iran could then rationally decide whether to explore a compromise or insist on continued conflict. And the United States‘ Gulf Arab allies could formulate policies best designed to help Washington achieve their shared goals without a devastating conflict that everybody wishes to avoid.
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