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Maximum Pressure on Iran Hurts Everyone

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As for the messenger, there was little to go on as of yesterday, other than assertions from parties with vested interests, none of whom have complete credibility: Trump officials (Iran); Trump (it looks like Iran, but still investigating); Saudi Arabia (not sure, but the weapons were Iranian); Iran (not Iran); and Yemen’s Houthi rebels, who are aligned with Iran and are being bombed in a Saudi-backed air campaign (themselves).

Regardless, the attack demonstrates in dramatic fashion just how vulnerable the region’s energy infrastructure is, which has unmistakable implications for America’s Iran policy. For the first year of Washington’s so-called maximum-pressure campaign against the Islamic Republic, the Iranians bore escalating sanctions with barely a peep of direct retaliation, creating the temporary illusion that the U.S. could use its own financial power to virtually cripple another country’s economy at no cost to itself.

The illusion persisted even when the U.S. moved to cut off all of Iran’s oil exports, which in May numbered more than a million barrels a day. The move did not appreciably raise oil prices despite the supply disruption, but the policy’s cost became clear in other ways. Iran appeared to change its strategy and stepped up its confrontations. If Iran couldn’t export its own oil, it was going to try making it very difficult for others to do so.

At least in geographic terms, the circle of retaliation was small, confined mainly to Iran’s immediate neighborhood—most notably through Houthi strikes from Yemen into Saudi Arabia, and tanker explosions (for which Iran denied responsibility despite U.S. accusations) and drone shootdowns near the Strait of Hormuz over the summer. But the circle was never as small as it looked. Saudi Arabia, the United Arab Emirates, Norway, and Japan were all embroiled in tankers hit over the summer; Singapore and Taiwan had some imports disrupted; China, India, and South Korea are among the other major destinations for oil passing through the Strait of Hormuz. Other than Iran’s regional Saudi and Emirati rivals, none of those other countries sucked into the summer’s escalation had much to do with the U.S.-Iran confrontation otherwise.

Over the weekend, the circle expanded further still. Global oil prices had surged about 15 percent yesterday afternoon, the largest one-day increase in about a decade, according to The Wall Street Journal. Even as Perry was condemning the attacks and Trump was warning darkly of consequences, both also simultaneously tried to sound reassuring for the rest of the world. Oil markets remain well-supplied—OPEC declined yesterday to increase production, and unnamed Saudi officials told The Wall Street Journal that they feared a production increase would cut into their market share. The 15 percent jump is a big one in relative terms, but oil prices remain well below where they were five years ago, when Barack Obama was pursuing his own sanctions campaign against Iran in pursuit of the nuclear deal. In the summer of 2014, for example, oil prices went above $100 a barrel; yesterday they hit about $66 a barrel.



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Thanks !

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