Iran v Trump: Is war about to break out - again?

LONDON – The Gulf is back on the brink of a full-scale war after Iran launched several cruise missiles and drone attacks on oil installations in the United Arab Emirates (UAE), and US President Donald Trump threatened to blow Iran “off the face of the earth” if it expands its attacks against US vessels.

This is the most serious flare-up since a fragile ceasefire between the US and Iran began on April 8. Although both sides are interested in avoiding further escalation, the latest skirmishes indicate that maintaining the current blockage of the Strait of Hormuz is not a viable option for either the US or Iran.

It could, therefore, be a matter of only a few more days before one side blinks and accepts a compromise, or both sides return to high-intensity warfare. Time is in short supply, and the strategic options have seldom been narrower.

The Strait of Hormuz has remained largely blocked since the US and Israel launched air strikes on Iran in late February. The Iranians responded by blocking the crucial international waterway through which a fifth of the world’s oil and liquefied natural gas usually passes. In April, the US responded by imposing its own blockade on Iranian ports and maritime traffic.

Both sides are gambling on exploiting each other’s economic vulnerabilities. The Iranians hope that global oil and gas shortages will force Mr Trump to give up his military offensive, while the US believes that its own blockade will deprive Iran of oil revenues and bring the Islamic republic to its knees.

The confrontation, therefore, boils down to a test of wills, as each side aims to wear the other out with time and determination. Meanwhile, Pakistan’s availability as a mediator worked as a safety valve, allowing both protagonists to test political solutions.

The snag is that this fragile strategic balancing game is now breaking down fast, for at least two reasons.

The first is that it is becoming clear in Washington that Iran’s negotiating stance is too far removed from any feasible diplomatic agreement and that, far from coalescing, the negotiating positions of Iran and the US are diverging.

On April 11, when US Vice-President J.D. Vance met Iran’s delegation led by Parliament Speaker Mohammad Bagher Ghalibaf in Pakistan’s capital Islamabad, the key topic of discussion was the future of Iran’s nuclear programme, with the question of the strait being just a secondary matter.

Now, however, Iran’s official position is that it is prepared to negotiate only about the strait, but not about its nuclear capabilities. This is a complete non-starter for the US and, as American diplomats see it, a warning that the current stalemate is only hardening Iranian intransigence.

A second reason why the current ceasefire is breaking down is that the Iranian economy is hurting badly as a result of the US blockade of the strait and is fast approaching a crunch point.

The problem is not so much the loss of oil export revenues, estimated at US$4.8 billion (S$6.1 billion) for April alone, but the lack of storage space for Iran’s unsold oil. Without storage facilities, Iran may be forced to close down its extraction wells, a costly process that can permanently damage oil installations.

Critics of Mr Trump’s war have seized on reports from various Western energy consultants claiming that Iran may have far more storage capacity than currently assumed.

Meanwhile, other sceptics of US action argue that after decades of US-led sanctions, the Iranians are masters at managing their oil industry without halting production. There are claims that the Iranians can ship oil to their neighbours by rail.

Yet, many of the assessments of Iran’s oil storage capacities do not consider the fact that US and Israeli air raids have destroyed much of Iran’s heavy industry and two of its key refineries in Mahshahr and Asaluyeh. So, not only are the Iranians deprived of selling their oil, but they are also increasingly unable to consume it domestically.

The claim that oil could be exported in great quantities by rail is not convincing. Even the most optimistic assessments accept that Iran will run out of oil storage capacity by mid-May.

What can be said with certainty is that the Iranians are scrambling to bring into use any rusty tanker they can find, and that most of the Iranian attempts to get past the US naval blockade now consist of empty tankers rushing back home.

Meanwhile, inflation in Iran now stands at 70 per cent; one US dollar – the only currency Iranians now take seriously – is worth around two million Iranian rials, double the 2025 exchange rate. It seems that outsiders have more confidence in Iran’s resilience than the Iranians themselves.

Either way, both the US and Iran have concluded that the current situation no longer serves their purpose and must be broken through some military initiative.

Mr Trump’s announcement on May 3 that the US Navy will help “guide” ships stranded inside the Gulf under what Washington calls “Project Freedom” is deliberately vague.

Nobody knows whether the US offer is to escort stranded ships that now make their own decision to brave the strait, or whether the US Navy will actively encourage such movements through Hormuz. What is clear, however, is that the US action is designed to insert fresh military muscle and prise open Iran’s hold over the waterway.

The same logic applies in reverse to Iran’s latest decision to fire missiles and drones at the UAE. Iran has few good options for directly targeting US naval vessels operating at the edge of the Gulf of Oman and beyond. The Islamic Revolutionary Guard Corps (IRGC) has limited access to the low-latency data needed to track maritime targets or the anti-ship cruise missiles required to hit them.

What the IRGC can do, however, is to hit at its Gulf neighbours, in the hope that their plight would make the US position untenable.

It is noticeable that the IRGC’s key target in the UAE was the Fujairah Petroleum Industries Zone, the port meant to provide the UAE with an alternative oil export route bypassing the Strait of Hormuz.

The message from Tehran is unmistakable: If Iran cannot export oil, none of the other Gulf states would be allowed to do so either.

Iranian Foreign Minister Abbas Araghchi claims that the attack on the UAE was just a response to US action and that the events merely “make clear that there’s no military solution to a political crisis”.

But if the current impasse does not quickly give way to some fast and substantial diplomatic progress, a military solution will be precisely what both the US and Iran will seek. Other Gulf neighbours – particularly the UAE – are unlikely to remain silent either.