Over the months of April and May, the US took multiple measures as part of its “maximum pressure” campaign vis-a-vis Iran, including the revocation of sanction waivers to importers of Iranian oil and deployment of US military assets to the Middle East.
As a response to the perceived provocations, on May 8, Iran announced its decision to partially halt its commitments to the Joint Comprehensive Plan of Action (JCPOA) and set a 60-day deadline for European states to renegotiate the financial terms of the agreement, marking a highly significant development since the ratification of the nuclear deal in 2015.
The purported involvement of Iran and its affiliates in the recent uptick in attacks against US allies, particularly the May 12 attack against four naval vessels, including two Saudi oil tankers, off the coast of the UAE, has further fueled tensions in the region.
Iran has resisted direct negotiations with the US thus far, which indicates the high level of influence wielded by hardliners on the country’s foreign policy. Tensions are liable to remain high as both Iran and the US are likely to continue their strategic posturing in the region over the short term, in order to eventually coerce each other onto the negotiating table.
Western nationals operating or residing in Iran are advised to regularly review emergency and contingency protocols as a basic security precaution due to the risk of limited hostilities between Iran, the US, and its Gulf allies. Those operating in Lebanon, Iraq, and Syria are advised to maintain a low profile due to threat of attacks by Iranian-linked elements.
On May 8, Iran’s SCNS released a statement announcing Tehran’s decision to partially halt its commitments to the JCPOA and setting a 60-day deadline for European states to take steps to counteract the negative effects of US sanctions.
The US President Donald Trump subsequently issued an executive order to impose sanctions on Iran’s metal industry.
On May 11, the US sent Patriot air defense systems to US CENTCOM based in Qatar’s al-Udeid Air Base.
On May 12, the US Embassy in Baghdad issued a security alert advising “all US citizens of heightened tensions in Iraq” and the “requirement to remain vigilant.”
On May 12, Saudi Arabia’s official news agency stated that two out of the four civilian commercial cargo ships that were subject to a “sabotage attempt” near UAE territorial waters in the Gulf of Oman, off the eastern coast near Fujairah, were Saudi oil tankers.
On May 14, the Yemeni Houthis claimed unmanned aerial vehicle (UAV) attack against an oil pipeline belonging to the official Saudi Arabian Oil Company in Riyadh Province’s towns of al-Duwadimi and Afif.
On May 15, the US ordered the departure of all non-emergency US government employees stationed at the US Embassy in Baghdad and the US Consulate in Erbil from Iraq.
On May 18, the Federal Aviation Authority (FAA) issued an advisory warning of risks to civil aviation over the Persian Gulf and the Gulf of Oman.
On May 19, a rocket landed in the vicinity of Baghdad’s Green Zone, less than two kilometers away from the US Embassy.
On May 20, the Spokesperson of the Atomic Energy Organization of Iran (AEOI), Behrouz Kamalvandi stated that Iran’s 3.67 percent production capacity of enriched uranium had increased by four-fold.
On May 20, two ballistic missiles were reportedly intercepted over Mecca Province’s Taif and Jeddah. Yemeni Houthis denied involvement in the attack.
On May 24, the US announced additional deployment of 1,500 military personnel to the Middle East.
In May 2018, the US President Donald Trump unilaterally withdrew from the JCPOA, also known as the Iran nuclear deal, which was negotiated between Iran and P5 +1 (US, UK, France, Russia, China and Germany) countries in 2015. Subsequently, the US re-imposed sanctions related to Iran’s export of oil in November 2018, but granted sanction waivers to eight countries including India, China, South Korea, Taiwan, Japan, Italy, and Turkey for a period of 180 days. On April 8, 2019, the US designated the Iranian Revolutionary Guard Corps (IRGC) as a Foreign Terrorist Organisation (FTO). This was followed by the US’s decision to end sanction waivers to importers of Iranian oil starting on May 2, 2019. Out of the seven sanctions related to Iran’s uranium enrichment and civilian nuclear energy cooperation, the US revoked two sanction waivers related to Iran’s uranium enrichment process under the JCPOA – one that allowed Iran to store excess heavy water produced in the uranium enrichment process in Oman and one that allowed Iran to swap enriched uranium for raw yellowcake with Russia. On May 5, US officials announced their decision to deploy an aircraft carrier and bomber task force to the Middle East citing indications of Iranian threat, but provided no further details. This prompted Tehran’s decision to partially halt its commitments to the JCPOA on May 8, 2019.
Assessments & Forecast
Impact of IRGC’s designation as an FTO:
The designation of the IRGC in its entirety, including its extraterritorial wing, the Quds Force, as a “terrorist entity” marks a highly significant development, as it constitutes the first ever instance wherein the US has labelled a country’s military organization as an FTO. Such a designation comes amid the US’s continued policy to apply “maximum pressure” on the Iranian government to end its alleged role in destabilization activities across the regional as well as the international stage. It forms part of the US’s efforts to depict the Iranian administration as “rogue” or an “outlaw”, and is aimed at further isolating Iran on the international stage.
The move is largely symbolic, given the fact that US sanctions already target the IRGC and its leaders, affiliates, and subsidiaries such the Basij Resistance and the Quds Force and the US had already designated the IRGC as a “Specially Designated Global Terrorist” in 2017. However, the latest step will likely augment the existing pressure on Iran. Any individual or entity knowingly providing material support to the IRGC will now face the possibility of a 20-year US prison sentence. It will also impose immigration restrictions on members of the IRGC who attempt to travel to the US simply by virtue of their membership or affiliation to the organization. FORECAST: Given that the IRGC has significant stake in the Iranian economy, through this measure, the US likely intends to make it further difficult for foreign entities to conduct business with Iran, which, in turn, would have a negative impact upon the Islamic Republic’s economy. However, the fact that a large extent of the IRGC’s business dealings are known to be carried out through illicit channels, such dealings are unlikely to be significantly affected by the recent designation.
FORECAST: Moreover, such a move is also unlikely to alter Iran’s policies on the regional setting, like its involvement in supporting proxies such as the Lebanese Hezbollah, the Yemeni Houthis, and Shiite militias in Iraq such as the Harakat al-Nujaba (HNA). Rather, given the increased restraints faced by the IRGC, the recent move is liable to increase Iran’s motivation to expand its regional footprint through the above-mentioned proxies as well as other sponsored militias. To this effect, the Iranian government will continue to divert large funds, at the expense of its domestic population, in order to sustain its influence in neighboring countries. This, in turn, is likely to inflame already existing local grievances, which may result in further instances of widespread civil unrest in the country. However, on a broad basis, given Iran’s history of strategic culture and great power rhetoric, a majority of the Iranian populace views the US sanctions as the source of their economic hardship, as compared to the Iranian government’s policies. While this is partly aided by the intensive propaganda campaigns in the country, it nevertheless galvanizes unity in the face of a “foreign aggression”. Thus, it is likely that the Iranian administration will attempt to placate the inherent domestic concerns related to the government’s regional activities and support for its proxies amidst an economic crisis, by attempting to project strength vis-a-vis the US. This may take place through the continued portrayal of strength through military exercises, display of new defense equipment, such as the unveiling of the new domestically produced “Khordad 15” air defense system on June 9. Moreover, the Islamic Republic will seek to counteract the US’s measures by maintaining a relatively belligerent posture, given the influence wielded by hardliners on the country’s foreign policy.”
FORECAST: By continuing, or rather increasing support for its proxies, the IRGC may be able to effectively target its adversaries, namely the US, Israel, and Saudi Arabia-aligned countries in the Gulf over the coming months. In this regard, given that much of the recent attacks in the region, such as the May 19 rocket landing in Baghdad’s Green Zone near the US Embassy, the June 1 rocket attack into Israel’s Mount Hermon from Syria, or the spate of attacks against Saudi targets have consistently targeted Iran’s adversaries, it is likely that they were encouraged by Tehran in an effort to destabilize the region. Moreover, the fact that some of the attacks were carried out against energy-related targets, such as the May 12 targeting of Saudi oil tankers off the coast of UAE’s Fujairah in the Gulf of Oman and the May 14 Houthi-claimed UAV attack on the oil pipeline in Riyadh Province, suggests that Iran may be attempting to weaken the economies of Saudi-aligned countries, given their significant dependence on oil revenues. This would align with Tehran’s strategy of preventing its rival, Saudi Arabia, from expanding its influence in the region and subsequently positioning itself as the dominant regional power in the Middle East. This, in turn, would allow Iran to prevent the regional balance of power from significantly shifting away from itself, particularly in light of the reimposition of US sanctions.
Potential Ramifications of the imposition of various sanctions on Iran:
A) Oil-related sanctions:
The US’s refusal to extend the 180-day sanctions exemptions for importers of Iranian oil (China, India, South Korea, Turkey and Japan) from May 2 constitutes a core segment of the US’s “maximum pressure” campaign, as it aims to completely diminish Iran’s oil revenue. Although India and China, the two top importers of Iranian oil, were envisaged to face significant setbacks to its energy security policy due to the US move, it appears that both countries have planned for this eventuality and are effectively looking at alternate sources to fulfill their energy requirements. In this scenario, while neither of the two countries have officially announced their position on the future of Iranian crude imports, it is likely that imports from other key energy players such as Iraq, Saudi Arabia, and the UAE will feature on a higher side, specifically in the case of India. This will put further strain on Iran’s revenues from its oil sector, which, in turn, will have a significant adverse impact upon its national economy.
FORECAST: Given that the move has been anticipated since the reinstatement of US sanctions on Iran in November 2018, early indications suggests that apart from the initial shock, the decision has not drastically impacted the global oil market, despite fears of an oil price surge and supply disruptions. This is primarily due to a boost in Saudi Arabia’s oil production in May to fill the gap of Iranian crude, along with similar boosts in production by Iraq and Libya. However, Iran may resort to illegal trade of its oil in the black market, particularly in countries such as Yemen, where the Houthis have been reportedly deriving a majority of its income by selling Iranian oil. Furthermore, Iran may also attempt to export its oil through the use of “switch-off-the-transponder” tactics, which makes tracking ships increasingly difficult.
B) Uranium enrichment-related sanctions:
The May 8 statement released by the SNSC, which was reiterated by Iranian President Rouhani in a televised address, represents a pronounced effort by the Islamic Republic to project strength in response to perceived US provocations in recent years. The decision to halt its partial commitments under the JCPOA regarding enriched uranium and heavy water reserves follows the US’s May 4 revocation of the two sanction waivers, which practically forces Iran to completely overhaul its production of heavy water and uranium enrichment or continue production and find itself in breach of the JCPOA. Moreover, the five sanction waivers that were extended were also reduced from 180 days to 90 days, in which the remaining adherents of the JCPOA are allowed to cooperate with Iran on the sites of Bushehr, Arak, and Fordow without facing US sanctions.
This was followed by the May 20 announcement from the Spokesperson of the Atomic Energy Organization of Iran (AEOI), Behrouz Kamalvandi according to which, Iran’s 3.67 percent production capacity of uranium had increased by four-fold. However, Iranian officials reportedly stressed that the uranium would be enriched only to the 3.67 percent limit set under the JCPOA. Thus, although Tehran still remains party to the JCPOA, its increased capacity to produce enriched uranium suggests that Iran is likely to soon exceed the 300 kg uranium stockpile limitation set by the accord. FORECAST: However, as indicated in Rouhani’s speech, Tehran will likely retain its enriched uranium (upto 300 kg) and heavy water (upto 130 tons) rather than selling them to other nations while remaining within the limits prescribed in the nuclear deal over the short term, at least until July 8. This would allow Iran to project its adherence to the terms set under the JCPOA.
FORECAST: However, as per the joint statement released by France, Germany, and the UK on May 9, while the European states expressed “regret” over the reinstatement of US sanctions and continued to pledge their willingness to support alternate trade mechanisms such as the Instrument in Support of Trade Exchanges (INSTEX), they also categorically rejected Tehran’s 60-day ultimatum for negotiations. While this highlights their unwillingness to publicly be strong armed onto the negotiation table, it is also indicative of their reluctance to oppose US policies. Furthermore, the reimposition of the US sanctions has increased the risk of conducting business with Tehran for foreign companies, several of whom have already ceased their operations in the Islamic Republic. This is likely to have a significant adverse impact upon Iran’s economy over the coming months.
C) Metal industry-related sanctions:
The US President Donald Trump’s May 8 decision to impose new sanctions on Iran’s metal industry are aimed at undermining Iran’s revenue from the export of industrial metals, the country’s largest non-oil sector, which reportedly accounts for approximately ten percent of its export economy. While Iran’s mining industry was already facing severe setbacks due to shipping and payment restrictions, the recent move is liable to inherently impact employment provided by the metal as well as the automotive industry, which reportedly constitutes almost six percent of Iran’s total labor force. This is liable to significantly exacerbate domestic workers’ grievances, which have manifested in the form of persistent localized demonstrations across Iran over the recent months.
FORECAST: In this context, public protests surrounding employment, pensions, inflation, increase in the prices of basic commodities and other economic-related issues are liable to continue in a significant manner over the coming weeks and months. Such demonstrations will likely take place across Iran, including in major cities such as Tehran, as well as in outlying provinces such as Khuzestan and Kordestan, where the locals comprising of an Arab-majority or Kurdish population perceive themselves as marginalized by the Shiite Iranian government’s policies. This will not only increase the threat of civil unrest in the country as a whole, but also exacerbate sectarian tensions between the countries minority communities and the Shiite-led government.
Lack of direct engagement, continued strategic posturing liable to prolong tensions in the region:
The Iranian administration’s current position to resist direct negotiations with the US, albeit agreeing to mediation talks with Japan, highlights the high degree of influence wielded by hardliners on the country’s foreign policy at this juncture. Such elements continue to criticize the Rouhani administration’s moderate approach towards dealing with the US and aspire to correct the perceived weakness with which the terms of the JCPOA were negotiated in 2015. FORECAST: This, combined with the relative lack of tangible economic benefits from JCPOA, is liable to further embolden segments of hardliners and conservative elements within Iran’s political sphere. This may result in further appointments of such elements in key leadership posts, which is liable to significantly hinder the popularity of more moderate officials, consisting of figures such as President Hassan Rouhani and Foreign Minister Javad Zarif. This is underscored by the appointment of General Hossein Salami, a prominent hardliner within Iran’s military establishment as the IRGC’s Commander-in-Chief on April 21. Such appointments are not only liable to increase the anti-US rhetoric emanating from the Islamic Republic but also significantly hamper the potential for backchannel negotiations with the US, which are generally conducted by more moderate officials.
FORECAST: On a regional level, tensions are liable to remain high due to the strategic posturing of the two countries, in order to eventually coerce each other onto the negotiating table. The deployment of US warships, including an aircraft carrier and a bomber task force on May 5, the sending of Patriot missile systems on May 11, as well as the decision to deploy an additional 1500 US military personnel to the region, is likely to significantly increase tensions in the Persian Gulf waters and the Strait of Hormuz over the coming weeks and months. This is particularly in light of Tehran’s persistent effort to assert its authority as the legitimate custodian of security across its territorial waters. These tensions may manifest in the form of limited confrontation between the naval forces of the two sides, which constitutes a general risk to shipping through the critical energy choke point.
FORECAST: Tensions are also likely to increase between Saudi-aligned countries and Israel on one side and Iran on the other. Iran may encourage its backed elements, particularly the Yemeni Houthis, to increase their attacks against targets in Saudi Arabia and the UAE. This would also align with the Houthis’ aim of weakening the economies of countries that are part of the Saudi-led Coalition in Yemen in order to reduce their ability to engage in the ongoing civil war in the country. Iran may also use its proxies and backed elements in Syria and Lebanon, such as the Lebanese Hezbollah, to put pressure on the US by using them as leverage against Israel, the US’s closest ally in the Middle East. This may manifest in the form of attacks against Israel by Iranian-backed elements in Syria, as witnessed on June 1, when a rocket was launched from Syria towards Israel’s Mount Hermon. However, such attacks are likely to remain limited and constrained to areas within close proximity to the Syria-Israel border. This is because an attack deep inside Israeli territory would trigger a large-scale conflict between Israel on one side and Syria and Lebanon on the other, and Syria is currently not interested in such a scenario given its preoccupation in hostilities with rebel forces.
FORECAST: Overall, as tensions between the US and Iran get prolonged, the risk of a military confrontation between the two countries will increase. Such a military confrontation is likely to be limited at least in the short term, with Iran attempting to use its proxies as a means to put pressure on the US and its Gulf allies and the US retaliating with a further increase in military presence in the Persian Gulf. While Iran is currently not interested in a broad conflict with the US given that its economy is unlikely to be able to sustain such a cost, as previously assessed, the influence of hardliners on the country’s foreign policy reduces the possibility of backchannel negotiations. This combined with the fact that the US is unlikely to agree to any terms that do not significantly diminish Iran’s nuclear and military capabilities, further reduces the possibility of successful negotiations. Therefore, as these tensions persist over a long period of time, the risk of a full scale conflict between the US and Iran cannot be ruled out.
Travelers are advised to regularly review their emergency and contingency procedures as a basic security precaution, as the current tensions between Iran on one side and the US and its Gulf allies on the other may manifest in some form of cold war or even a limited or full military confrontation.
Western nationals operating or residing in Iran are advised to remain cognizant to prevailing negative sentiment toward the United States and other North American and Western European countries.
US citizens and other Western nationals operating or residing in other countries in the Middle East with sizeable Iranian-backed elements are advised to keep a low profile and maintain heightened vigilance, given the potential for attacks by such groups.
Those operating vital infrastructure, particularly in the oil sector, in Saudi Arabia are advised to review security protocols in light of the threat posed by Yemeni Houthi-perpetrated attacks, particularly through the use of UAVs.
Those planning to operate commercial aircraft over the Persian Gulf and the Gulf of Oman are advised to exercise heightened caution and remain apprised of further FAA notices regarding the increased threat to aviation in this region.