Ref: AD-3026
Summary: following the killings of US service members in Jordan and Iraq, a major military escalation between the United States and Iran has collapsed their previous ceasefire agreement, threatening to spark a comprehensive, multi-front war that could devastatingly target civilian infrastructure and choke global energy supplies.
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Another interesting piece, for which thank you.
I’m slightly less pessimistic than you for several reasons.
The U.S. is running out of stand-off weapons and Air Defence missiles, which will make it more dangerous for the U.S. to attack Iran, and make defending U.S. bases and Israel less sure. (There is also concern over the global depletion of stocks of those weapons which would be needed to counter any attempt by the PRC to retake Taiwan, which Xi ordered the PLA to be ready to achieve in 2027. The cost of an Iranian toll on Hormuz would be irrelevant in comparison to the loss of Taiwan’s semi-conductors.) That may be why the U.S. deployed hyper-sonic missiles to Guam.
There was also a report today that the Pentagon is running out of cash, and will have to go to Congress to appropriate more funds. Congress may be less compliant than before, particularly with petrol at $4/gal at the start of the driving season, and less than 16 weeks until the mid-terms (if Trump allows free and fair elections.)
Without a credible U.S. invasion force, the Iranian regime probably remains confident that most of them can survive U.S./ Israeli air attacks. While the U.S. attacking civilian infrastructure may be photogenic, it is unlikely to change the Iranian regime’s mind (it’s also possibly war criminal.) They will merely increase the size of their demand for reparations (and the contracts will be let to IRGC-linked companies.)
There was a report yesterday that “Mediators propose 10-day ceasefire to revive Iran-U.S. interim deal, senior Iranian official tells Reuters“. That may be the off-ramp that Trump needs, although he is likely to send the same real estate developers back to try their hand again at a diplomatic solution that have so far failed to achieve in several theatres.
If today’s Newsletter is not sufficiently apocalyptic for your liking, keep in mind that it makes no mention of the third major actor in the conflict, ie Israel. In a note along similar (if slightly less apocalyptic) lines circulated to my (mainly financial market) clients yesterday I started with a 14 July quote from The Economist’s Anshel Pfeffer as follows:
“More than anything [Binyamin Netanyahu] hopes that in the three months and two weeks until the election, Donald Trump will allow him to launch a third war on Iran and that this time, just somehow, the regime in Tehran will collapse”.
At that time (and he may have modified his assessment in the light of events since), Mr Pfeffer doubted that Bibi would succeed in persuading Mr Trump (let alone bringing about regime collapse). But my own assessment yesterday read as follows:
“Just as I am confident that the Iranians want to see Mr Trump’s party suffer in the midterms I am equally sure that they are hoping that Binyamin Netanyahu’s Likud — and, ideally, other parties in his coalition — take sufficient a pounding in Israel’s 27 October Knesset elections to see him finally gone from office.
Perversely, this might even encourage the Iranians to strike a deal with the US if it was one which would further damage Mr Netanyahu’s standing with the Israeli electorate. But we can be absolutely certain that Bibi will do whatever he can to prevent this from happening even if it means escalating not only in Lebanon but also directly against Iran to the point where Mr Trump — further frustrated by his failure to nail down a deal — is more or less forced to follow suit.
It was always my intention that the concluding paragraph of this note would reference the possibility not only of the Houthis being brought seriously into play for the first time since 28 February but also, as Professor Michael Clarke warned on Sky News on 18 July, their al-Shabaab allies in Somalia attacking shipping at the western end of the Arabian Sea. Even as I have been writing, the Houthis have announced that they are imposing a naval blockade on Saudi Arabia. If strictly enforced this will cut global oil supply by around seven percent, reminding investors that it is Tehran, not Washington, which has escalation dominance and which will decide if there is to be a deal and, if so, when.”
A link to Michael Clarke’s assessment was included in the comment I posted on yesterday’s Newsletter and can be found again here.
As something of a footnote (albeit a significant one) I would additionally flag, in the light of the today’s Newsletter, his assertion that, overall, Iran is nothing like as dependent on desalination as the GCCs are. If this is indeed the case – and coupled with ‘ordinary’ Americans’ aversion to body bags (noting that approval for the war in the US stands at minus 30 percent already) – it reinforces my belief that Iran continues to have escalation dominance and that the US, in escalating itself, is heading up a blind and very dangerous alley.