Regional Risks of Rising U.S.-Iran Rivalry

The re-imposition of U.S. sanctions against Iran’s banking and energy sectors on 5 November is a key element of Washington’s “maximum pressure” campaign against Tehran. President Donald Trump’s decision to pull out of the 2015 Joint Comprehensive Plan of Action (JCPOA) in May presaged a more ambitious strategic objective: to substantially recast not only Tehran’s nuclear activities, but its domestic and regional policies as well. The result arguably is one of the most audacious U.S. policy plays toward Iran since the 1979 revolution, playing out across a fractured and fragile region.

President Trump’s hostility to the JCPOA was evident on the campaign trail, and his administration adopted a hard stance against Iran from its early days: National Security Adviser Michael Flynn put Iran “on notice” in February 2017, and Trump himself castigated Iran during his May 2017 visit to Saudi Arabia. But the contours of his administration’s Iran policy only became clearer at the start of 2018, when the president announced an ultimatum that the U.S. would withdraw from the JCPOA unless its “disastrous flaws” were remedied. Months of negotiations with European allies failed to satisfy the White House, and so in May the president followed through on his threat to pull Washington out of the nuclear agreement.

Yet the JCPOA withdrawal was only the starting point for a broader and more aggressive campaign whose stated objective is to compel Iran’s return to the negotiating table, but whose likelier goal is to heighten pressure on Tehran to cede perceived regional gains and contend with growing unrest at home. Secretary Pompeo articulated specific (and probably unrealistic) objectives on 21 May: a dozen demands encompassing Iran’s nuclear and missile programs, its support for an array of hostile proxies from Afghanistan to Yemen and its detention of dual nationals.

If those are the aims, sanctions – not merely those reinstated in August and next week, but scores of additional designations against both Iranian and Iran-linked individuals and entities as far afield as Bangkok and Kuala Lumpur – are the primary means: they underscore in no uncertain terms that foreign firms will encounter little leniency if found in breach of unilateral U.S. restrictions. They are not the only means: over the past several months, U.S. officials have sharpened their public information campaign against the Islamic Republic, convinced that internal discontent, manifested in protests and labour strikes inside Iran, can be amplified through wider messaging on elite corruption, human rights abuses and environmental malpractice. Secretary Pompeo has pledged that a new U.S.-sponsored Persian-language media initiative “will span not only television, but radio, digital and social media format, so that ordinary Iranians inside of Iran and around the globe can know that America stands with them”. 

European leaders share Washington’s concerns over much of Iran’s behaviour, notably its missile program and role in Syria and Yemen, but diverge with the U.S. over how to change it and, in particular, over the future of the nuclear agreement. So long as Iran lives up to its end of the nuclear bargain, they say, the deal’s remaining members will do the same. The approval of blocking statutes to shield European firms from extraterritorial U.S. penalties and creation of a “special purpose vehicle” that provides financial channels for Iran-related transactions aim to offset U.S. sanctions and facilitate some of the trade Iran expects for its JCPOA compliance. These measures have done little to halt the departure of dozens of European and other international firms. Nevertheless, they provide the Rouhani administration with a diplomatic fig leaf – and perhaps, once implemented, enough of an economic fig leaf – to hold the line against domestic voices urging Iran’s own JCPOA withdrawal.

For the moment, the Iranians are willing to face attrition– in which both sides try to wear each other down – rather than capitulate, in part or in whole, to U.S. demands. They feel that while Washington brands Iran as an “outlaw regime”, successive developments – the P4+1’s continued support of the JCPOA, the 3 October ruling of the International Court of Justice in Iran’s sanctions lawsuit against the U.S., even the Financial Action Task Force’s decision last month to hold off on the re-imposition of countermeasures – put Iran firmly on the diplomatic high ground. They argue that efforts to bring Iran’s oil exports down to zero are doomed to fail, and that the sanctions web the U.S. is spinning on its own may be sticky, but gives enough room to wiggle. They assess that in Syria and Iraq, political and military developments favour their local allies and bode well for maintaining Iranian influence. And they believe that despite U.S. protestations to the contrary, Washington’s real end game is regime change, not shifts, however substantial, in behaviour; hence no concession on Tehran’s part will make a difference. “In the last 40 years… the current administration is the most vengeful government toward Iran”, President Rouhani remarked in October. “De-legitimisation of the system is their ultimate goal”.

Neither Washington nor Tehran is seeking to directly engage the other militarily at this stage. Across the region, however, are numerous flashpoints where the zero-sum logic of U.S.-Iran rivalry plays out from the Persian Gulf to the Mediterranean; Crisis Group last year launched a Trigger List platform to monitor these nodes of tension. While some worst-case scenarios have been avoided so far – the Syrian regime retaking the country’s southwest, for example, did not yield the feared overt Israeli-Iranian confrontation – there are three main concerns in the months ahead.

The first is that each side will pursue incremental escalation. In Iran’s case, this could take place either within the nuclear realm (minor but nonetheless real violations of the JCPOA in response to the U.S.’s withdrawal) or in the region. Given that Tehran’s hope for economic lifelines rely in significant measure on the P4+1’s continued willingness to counter U.S. sanctions, which in turn depends on Iran’s compliance with the deal, a likelier Iranian response to U.S. pressure in the short to medium term will be through regional activism. Reports that Iran may have transferred ballistic missiles into Iraq are one indication, as are (unverified) U.S. accusations that Iranian-backed forces targeted the U.S. presence in Basra. The U.S. also seems intent on targeting Iran’s regional presence: statements by U.S. officials that it will remain in Syria so long as any Iranian-controlled force remains there suggest a focus on reducing Tehran’s reach and a growing tendency to view regional developments through an Iran-centric lens.

The second concern is that the actions of local actors may deliberately or inadvertently draw their backers into a clash. Both of the U.S.’s main allies in the region are already pursuing their own campaigns against Iran. In Yemen, Saudi Arabia has, since 2015, spearheaded a costly campaign to oust Huthi forces, with U.S. support. For Riyadh, the 200-odd missiles fired in their direction from Yemeni territory may have been launched by the rebels, but bear Iranian fingerprints. Meanwhile Israel, concerned that Iran is already present in its southwest (Gaza) and north (Lebanon), is fighting Tehran’s efforts to cultivate Syria as a new front to the northeast. Israeli officials recently tallied more than 200 strikes against Iranian and Iran-linked targets in Syria since 2016, ramping up a campaign that began in 2013.

For its part, Iran dismisses culpability for the Huthi missile strikes and has so far largely refrained from directly responding to the Israelis. As a senior Iranian official told Crisis Group last month, “Israel has tried to provoke… [but we are] not falling into a trap”, and adding bluntly about Iran’s role in Yemen: “We don’t need it”. Yet future hostilities between Iranian or Iran-backed forces and U.S. allies could produce an escalation that neither side necessarily seeks. In Yemen, a Huthi strike causing significant casualties or damage inside Saudi Arabia could pull the U.S. directly into the Yemen war or in confrontation with Iran. And in Syria, the Netanyahu government, sensing Iranian reluctance to strike back and a U.S. carte blanche for its actions, could continue to expand its sights: as Defence Minister Avigdor Lieberman asserted, “We are not limiting ourselves just to Syrian territory… Israel’s freedom is total”.

That sense of freedom, to which Iran may eventually feel compelled to respond, was on display in June, when Israel reportedly carried out airstrikes near the border between Iraq and Syria. The operation, which killed Syrian regime forces as well as Iran-backed Iraqi paramilitaries, highlights how the various regional fault lines increasingly converge and are interconnected: the area around al-Bukamal, which anchors the southern tip of the Euphrates River Valley and is the de facto line of separation between pro-Syrian regime forces and U.S.-backed Syrian Democratic Forces (SDF), has seen Israeli airstrikes, Iranian missile and drone strikes, Iraqi air force sorties and U.S.-led coalition bombardments. The continued degradation of ISIS is perhaps the only interest these disparate forces might share.

All this is sobering enough, but even if Iran and the U.S. were to settle into an uneasy standoff – Washington waiting for Iran’s government to succumb to the impact of sanctions, Iran calculating that it can weather the storm – and even if auxiliary conflicts in the region also remain on low boil, a third concern is that the combination of mutual distrust and high friction could see a minor incident spiral dangerously. For example, Iran’s threats to block the Strait of Hormuz may be hyperbolic, and U.S. forces report Iran has stopped interfering with their vessels in the Gulf over the past year. But a miscommunication could be all it takes for a naval incident to escalate into a confrontation.

Washington may hope that its pressure campaign will crack the Islamic Republic. The risk, however, is that their standoff will further fracture a region already on the verge of breaking apart.