01 Apr 2020
The wheels are in motion on a number of economic, domestic, and geopolitical fronts that point toward military conflict between the U.S. and Iran by the end of the summer 2020. This article summarizes the drivers of such a conflict. CONFLICT IS CURRENTLY IN THE AIR In January 2020, the U.S. killed the head of Iran's Islamic Revolutionary Guard Corps, Quds Force (IRGC-QF), General Qasem Soleimani. Some observers claimed that this U.S. attack initiated a conflict between the U.S. and Iran, and that Iran would need to "retaliate." In truth, Soleimani had been killing Americans for more than 15 years, mostly during the peak insurgency periods in Iraq, 2005-2007. Further, the IRGC-QF has been killing Americans for nearly 40 years, starting with the attack on the U.S. Marine Corps barracks in Lebanon in 1982. This history of aggression between Iran and the U.S. is not the reason behind my assessment, but it will provide ammunition to each side as leaders on both sides attempt to rally their constituencies behind their personal 2020, do-or-die, political objectives.
ECONOMIC AND SOCIAL INSTABILITY Iran’s economy was failing before the coronavirus (COVID-19) pandemic, in large part due to U.S. sanctions and Iran's dysfunctional dictatorship. Iran's economy is even worse now for several reasons. First, the COVID-19 virus is doing meaningful damage in Iran, with Iran suffering among the world's highest infection and death rates. The U.S. State Department has claimed that Iran is hiding the extent of its COVID-19 infections. Even if the State Department is wrong, the odds that Iran's infection rate is higher than reported is very high, as testing limitations hinder our visibility into the real-world scope of the virus. Second, oil prices were already low before Saudi Arabia and Russia started an oil price war and COVID-19 lowered global demand for energy. Some analysts conclude that the world's oil producers are pumping 12 million barrels more per day than is needed by the markets. Supply vastly exceeds demand. As such, the world's ability to store excess oil is reaching its maximum. This daily glut will have a lasting impact on oil markets, as demand, once restored, will not likely exceed the world's daily production capacity enough to make use of restored oil supplies while also drawing down today's increasing glut of oil stores. Oil and natural gas are Iran’s primary financial resources. A severe, and likely prolonged, glut in oil and natural gas markets means that Iran will increasingly struggle both economically and socially. Iran is being hit by a two-fold economic punch: significant downward pressure on oil and gas prices and its limited access to oil markets due to U.S. sanctions. All of this is aggravated by the COVID-19 epidemic. Unemployment and other societal pressures on the Iranian people will increase the chance of domestic unrest, threatening the survival of its already unpopular dictatorship. How will the Iranian leadership respond?
IRAN'S STRATEGY FOR HANDLING INSTABILITY Unless the U.S. eases sanctions, the COVID-19 pandemic subsides, and international energy markets return to some sense of normalcy, then Iran's economic challenges will remain, and probably increase. None of these alleviating events seem likely to occur any time soon. So, Iran will need to pursue other strategies to mitigate domestic unrest, if and when it occurs. Iran has one tried-and-true, go-to strategy on which it is able and inclined to rely. The Iran regime's primary tactic for unifying its citizens is scapegoating the U.S. and Israel, which Iranian leaders call Great Satan and Little Satan. When things in Iran get rough, Iran quickly deflects responsibility and blames Great Satan and Little Satan. Iran is even blaming the U.S. for the coronavirus, claiming it is a U.S. biological weapon. This behavior is similar in form and effect to U.S. politicians rallying their base by demonizing the other party. Republicans blame the Democrats and vice versa, which has a unifying effect within their respective coalitions. Whenever you hear a politician say that they "are fighting for you" against "them," then you are witnessing scapegoating in action. As Iran's economy weakens toward a breaking point, its leaders will reach into their playbook and scapegoat the U.S. and Israel. A verbal blame game, however, will not be sufficient. Iranian leaders will need to demonstrate to their citizens that they are taking action to mitigate the threat posed by the U.S. Toward this end, Iran's leaders will use their proxy terrorist organizations to conduct attacks on U.S. interests, as they have done numerous times before. This is Iran's playbook. How will President Trump respond? Given that the Iranian-backed attack on the U.S. Embassy in Baghdad in 2019 prompted the U.S. attack that killed General Soleimani, Trump seems to have a low tolerance for such Iranian activities. Trump greets attacks that threaten his personal reputation with a quick and vicious counter-attack. This is Trump's playbook. An attack by Iran might well be seen as an attack on Trump's personal fortitude in the lead-up to the 2020 U.S. election. Thus, any sizable attack by an Iranian proxy terrorist group will likely produce a visible U.S. retaliation. Trump will not be inclined to show any signs of weakness during the final month's of the 2020 campaign. Further, I judge that Iranian leaders will attempt to provoke such a U.S. retaliation, as it will allow them to play the victim and further their scapegoating agenda. A strong U.S. response will be Iran's near-term goal. Regional stability and friendly relations with the U.S. are counter to the interests of Iran’s leadership, as both conditions would delegitimize Iran’s often stated overarching objective, which is to further its anti-Western "revolution" in the Muslim world. Iranian leaders may pay lip-service to diplomacy with the West, but regional stability and friendly relations are actually counter-productive to Iran's unequivocal long-term objectives. To reach these objectives, Iran aims 1) to weaken its regional competitors through instability, as seen in Yemen, Iraq, and the Levant, 2) to remove external competitors from the region, such as the U.S., and 3) to attain regional political-military control from Tehran to Jerusalem.
TRUMP'S STRATEGY FOR GALVANIZING HIS ELECTORAL BASE If an Iranian attack occurs before the 2020 U.S. presidential election, then Trump will have the opportunity to energize his conservative base, and to improve his "presidential" credentials, by responding aggressively to Iran's provocation. Trump’s odds of reelection have taken a hit during the COVID-19 pandemic. COVID-19 has allowed his opponents to attack his crisis-management decisions in a no-win situation, and it has caused a likely U.S. recession, which, historically, is harmful to an incumbent president. As Bill Clinton's advisors reminded his campaign staff during Clinton's successful efforts to unseat the incumbent George H. W. Bush, "It's the economy stupid." Like Iran, Trump is also facing an economic crisis and might welcome the distraction that an Iranian conflict could bring. Both sides, Iran and U.S., will be incentivized to lean toward more aggressive actions. Trump needs a Commander in Chief victory, and Iran's leadership needs an external enemy to fight and blame. With both sides leaning forward in pursuit of self-preservation, the risk of miscalculation is high.
SPIRALING ESCALATION; FROM CONFLICT TO WAR? Once conflict initiates, neither side will be eager to show weakness to their constituents. This stubbornness increases the likelihood that they will double-down on their efforts, which will further escalate the conflict. If Iranian leadership judges the regime's survival to be threatened, then all bets are off and military conflict is a near-certainty. It is Iran that will decide if and when the conflict begins, and it is an oil glut and a pandemic that will drive when Iran makes that decision. TRACKING THE LIKELIHOOD OF CONFLICT If I had to guess an outcome of all of this, I'd give two-to-one odds that the U.S. and Iran will be engaged in interactive military conflict before the November 2020 election. The status quo points in this direction and will only be altered by unexpected good news. Given legal constraints on Trump's war fighting authorities, it is too early to suggest that an all-out war is probable. Yet, it is certainly possible. The following factors will reveal whether conflict is becoming more or less likely.
U.S. sanctions. If U.S. sanctions on Iran remain unchanged or are increased, then conflict is more likely. If they are lessened, then conflict becomes less likely.
Oil prices. If oil prices remain low, probably below $35 per barrel, then conflict is more likely. If they rise to pre-price war levels, then conflict becomes less likely.
COVID-19 crisis. If global infections continue to rise, forcing businesses around the world to operate at low capacity, then conflict is more likely. If the COVID-19 crisis begins to dissipate, then conflict is less likely.
COVID-19 economic hardship. If economic recovery from the COVID-19 crisis remains unforeseeable, then conflict is more likely. If an economic recovery has begun in earnest, then conflict is less likely. The U.S. recovery is dependent on a global recovery, generally. The Iran recovery can be more isolated, but the likelihood of conflict is especially sensitive to Iran's dwindling economic prospects.
Trump's approval ratings. If Trump's approval ratings drop and his re-election becomes threatened, then the likelihood of conflict is more likely.
Social instability in Iran. If Iranian citizens, through protests or other social movements, begin to threaten the safety of the Iranian dictatorship, then the likelihood of a conflict increases significantly.