The heightened interest in cryptocurrencies across the Gulf is taking place alongside global efforts to both regulate digital assets and attract cryptocurrency firms.
U.S. President Donald J. Trump’s rhetoric toward Tehran reached the “fire and fury” stage with a tweet on May 19 warning of “the official end of Iran” in the case of a conflict. Meanwhile, low-intensity attacks on U.S. and allied interests by Iranian-backed militias proliferated. These developments have increased fears of a looming, possibly inadvertent, drift toward all-out conflict. Yet, at the same time, a flurry of diplomatic activity, much of it involving Gulf Arab countries, seems aimed at forestalling such a development even as tensions mount.
Iran’s Low-Intensity “Proxy War” Heats Up
A telling aspect of the intensification of confrontation is the growing list of attacks conducted by Iranian-linked armed groups against U.S. interests and those of U.S. allies in the Arab world. Warnings in recent weeks of the potential for such proxy assaults and evacuations of, and warnings to, U.S. personnel in countries including Iraq and Lebanon increasingly appear to be validated. On May 12, there were sabotage attacks reported on oil tankers off the coast of the United Arab Emirates followed by a drone strike on two Saudi oil pumping stations on May 14. Recent major developments include a rocket attack on the Green Zone near the U.S. Embassy in Baghdad and Saudi Arabia reported it intercepted two missiles over Mecca province it said were launched by Iranian-back Houthi rebels in Yemen.
While no group has claimed responsibility for the Baghdad rocket attack, and several notable pro-Iranian militia groups in Iraq denounced it, the strike appears consistent with previous conduct by such groups. Iraqi government sources said the attack was conducted by the Iranian-backed Kataib Hezbollah militia. Last week U.S. officials said they had intercepted increased communications between the Iranian Islamic Revolutionary Guard Corps and various Iranian-backed militias in Iraq and other Arab countries about potential attacks on U.S. troops and diplomats, as well as commercial shipping and other targets. Alarm was further stoked by reports from U.S. officials of aerial photographs of fully assembled missiles on small boats in the Gulf off the coasts of Iraq and Iran.
It has been widely reported that about a month ago IRGC Major General Qassim Suleimani assembled the leaders of pro-Iranian militia groups in Iraq and told them to “prepare for proxy war” against the United States and its allies. The IRGC was recently labeled a foreign terrorist organization by the State Department, the first official part of another government to be so designated. The recent spate of asymmetrical attacks on U.S. and allied interests by pro-Iranian militia groups seems to correspond to the beginning of a “proxy war” and to confirm the validity of intelligence warnings about the potential for such attacks.
Iran has repeatedly threatened to close the Strait of Hormuz, but seems to want to demonstrate it has less drastic but still effective options. Norwegian shipping insurers reportedly concluded that the IGRC was “highly likely” responsible for the attacks on the tankers off the UAE coast. According to the report, the attacks were “highly likely intended to send a message to the United States and its allies that Iran did not need to block the Strait to disrupt freedom of navigation in the region” and it suggested more such attacks are likely.
Trump Seems Sure Tehran Will Fold
The drift toward a potential conflict seems to be driven by the perceptions on both sides that they are operating from positions of relative strength. The Trump administration is buoyed by the effectiveness of the “maximum pressure” sanctions campaign against Tehran, which was recently compared by Iranian leaders to the devastating Iran-Iraq War. The administration says it wants Iran to negotiate a “better deal” than the Joint Comprehensive Plan of Action nuclear pact from which the United States withdrew in 2018, and apparently feels that Tehran will soon buckle under the strain. On May 15, Trump tweeted that he is “sure that Iran will want to talk soon.” And, if nothing else, administration sources say that Iran now has much less money to lavish on its regional proxies, and this appears to be confirmed by the deep financial woes of Hezbollah in Lebanon. So the United States appears set to continue to ratchet up the pressure on Iran, for instance by imposing additional sanctions, while, as officials put it, waiting “by the phone.”
Yet it seems clear that Trump wants to avoid a war with Iran if he can, and apparently has been passing messages and “phone numbers” to Tehran through Swiss intermediaries, according to White House officials. Iranian officials appear to believe that this creates a potential opening for them, and that their best option is carefully calculated brinksmanship. This explains the recent spate of attacks and also why, as many experts have noted, they appear to be carefully calibrated to avoid provoking a massive U.S. retaliation. Iran seems to be testing U.S. resolve and willingness to use force, as Trump has reportedly told his advisors he doesn’t want an all-out conflict and even suspects some of them may be “getting ahead of themselves” and thereby “annoying” him.
Tehran’s Policy of “Strategic Recklessness”
Therefore, several key analysts argue that Iran has calculated that its best bet under the circumstances is to force the United States to confront the limitations of a maximum pressure policy that does not include a large-scale conflict option. The veteran Arab analyst and journalist Raghida Dergham has written two articles for the UAE newspaper The National arguing that Iran is pursuing a policy of “strategic recklessness” by pressing the confrontation and testing the United States’ will.
The Iranian-American analyst Trita Parsi, who is generally sympathetic to the government in Tehran, has reached the same conclusions, writing that “Tehran’s plan appears to be to accelerate matters toward the point at which Trump will have to decide whether he is truly willing to go to war with Iran.” More ominously, he warns that “having planned to thwart a U.S. military attack on Iran ever since the mid-1990s, Tehran also appears ready for this plan not to work” and Iran is prepared for its brinksmanship policy to fail and to end up actually provoking a major U.S. attack.
Additionally, the sudden fluctuations in Trump’s messaging toward Iran have had the, possibly intentional, effect of befuddling and disorienting friend and foe alike. The atmosphere of uncertainly generated by this brinksmanship could increase the risks of misinterpretation or miscalculation and raise the prospects of an armed clash.
Gulf Arab Countries Brace for Conflict or Diplomacy
All this adds up to an increasingly dangerous situation for the Gulf Arab countries, which would inevitably be caught in the middle of any Iranian-U.S. conflict and have already been the site of several of the low-intensity Iranian provocations in recent weeks. This largely accounts for the caution with which Gulf Arab governments are proceeding, and a growing flurry of Gulf and Arab diplomatic activity. The UAE, for example, has been careful not to directly blame Iran or its proxies for the attacks on commercial shipping off its coast and instead has referred the matter to the United Nations. Saudi Arabia has repeatedly said it does not want war, while emphasizing its determination to defend itself.
However, mixed messages have been emerging from Saudi Arabia on the conflict. The Minister of State for Foreign Affairs Adel al-Jubeir stressed that “We don’t want a war in any way” and that “We want peace and stability.” And Saudi academic Abdulaziz Sager co-authored an article in the New York Times with former Iranian official Hossein Mousavian calling for urgent dialogue between the two countries. On the other hand, the state-owned Arab News urged a U.S. (but not Saudi) “calculated surgical strike” against Iran and columnist Hassan al-Said of Okaz dismissed any possibility of reconciling with Iran or trusting it to adhere to any commitments it makes. But there is hardly an outpouring of calls for action or conflict in the Saudi media and rather a pervasive sense of alarm about the threats of both Iranian policy and the prospect of a war.
Oman may be at the center of Arab efforts to create a channel of communication to Tehran, possibly also on behalf of the United States. Omani Foreign Minister Yusuf bin Alawi visited Iran on May 20, after U.S. Secretary of State Mike Pompeo called Oman’s Sultan Qaboos bin Said on May 15 and, according to the State Department, discussed “Iranian threats to the Gulf region,” among other things. It’s almost certain that the Omanis will be carrying messages from both Gulf Arabs and Americans directly to Iran and could, yet again, serve as a crucial back channel of communication if the parties are willing to seriously de-escalate.
As things stand, however, the situation remains volatile and extremely dangerous for the Gulf Arab countries. This helps to explain the caution of many Gulf governments and the Saudi moves to consolidate support. Riyadh has organized “emergency” Arab League and Gulf Cooperation Council summits before the next scheduled Organization of Islamic Cooperation meeting on May 31 in Mecca. Saudi Arabia appears to be leading an effort to circle the wagons in much of the Arab and Sunni-majority Muslim worlds to prepare for either intensified diplomacy or confrontation, depending on which direction Washington and Tehran decide to go in the coming weeks. The Arab world may, as it has in the past, find itself in a largely reactive mode as others take the key steps that will shape the immediate future of their region.
The regulations introduced to travel and civil status laws will limit the state’s ability to intervene in the private sphere.
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