11◼ REMARKS Bloomberg Businessweek September 23, 2019PHOTO ILLUSTRATION BY 731; PHOTO: AP
● Desperate and battered by
sanctions, Iran is weakened—and
more dangerous than ever● By Benjamin Harvey
Holding the
World Economy
Hostage
Sun Tzu, the author of the 2,500-year-oldThe Art of War, is
overquoted, but even in ancient China he knew the value of
asymmetrical warfare—how smaller forces, such as guerrillas or
today’s drones, possess advantages over huge ones, like stand-
ing armies or zillion-dollar fighter jets. He also knew to provide
a battered opponent an escape, advising the conquering side
to “leave an outlet free. Do not press a desperate foe too hard.”
Both of those lessons are on display in Iran. President
Trump’s “maximum pressure” strategy has weakened Iran
and hobbled its economy as intended. But it’s also made that
country more dangerous, pushing it to strike back in uncon-
ventional and hard-to-counter ways, with its leaders reject-
ing a return to talks while their backs are up against the wall.
Since Trump withdrew from the 2015 agreement meant
to contain Iran’s military ambitions and curb its nuclear pro-
gram, the Islamic republic and its proxies have been hinting
at their capacity to play spoiler. They’ve seized tankers, inter-
fered with oil-shipping lanes, and hit archnemesis Saudi Arabia
with repeated drone and missile strikes. But the attack on the
world’s biggest refinery on Sept. 14—blamed by many on Iran,
which denied it—prompted a panic and record increase in oil
prices. While prices fell in the following days, the attack still
disrupted markets from Tokyo to New York because of the
prospect of a disruption to global energy supplies.
The upshot is that a weakened Iran is in a better negotiating
position than ever, holding the world economy hostage as it
faces down an effort led by Trump, Saudi Arabia, and Israel to
force it into submission. Conflict-averse nations in Europe and
Asia are responding by trying to pull Iran back from the brink
with diplomacy and credit lines. And countries that stand to be
roped into a war, such as the United Arab Emirates, are getting
cold feet about their investment in the campaign against Iran.
“This is how Iran practices deterrence,” says Thomas
Juneau at the University of Ottawa’s Graduate School of Public
and International Affairs. “A key pillar of Iran’s defense doc-
trine is to continually send signals and reminders to the U.S.and its regional allies and partners that it has the means to
hurt them. The global economy is vulnerable. By sending
this powerful signal, Iran is reminding everyone that a war
would be very costly.”
The attack on the world’s largest oil-processing plant, which
halved Saudi production, knocked out about 5% of global sup-
ply and sparked doubt about what’s been billed as potentially
the largest stock listing in history: that of Saudi Arabian Oil Co.,
the state oil company known as Saudi Aramco. It was also proof
of how profitable Iran’s investment in asymmetrical warfare
has been. While Saudi Arabia put money into conventional
weaponry, becoming the third-largest spender on military
equipment worldwide after the U.S. and China, Iran invested
in forces of disruption—in Yemen, Iraq, Syria, and elsewhere.
Tehran’s strategy seems to be paying off. As the U.S. disen-
gaged from Iraq, Iran became that country’s dominant exter-
nal influence. It has armed proxies in Syria and Lebanon and
through them plays a decisive role in those countries’ politics,
threatening neighbors like Saudi Arabia, the U.A.E., and Israel.
Yemen has raised the risk of a broader Middle East confla-
gration in the Arabian Peninsula and the Gulf. The impover-
ished nation with a population of 30 million and an economy
smaller than that of Boise, Idaho, has been reduced to rubble in
an all-out battle for supremacy between Iran and Saudi Arabia.
Yemen’s troubles deepened in 2015, when an Iranian-backed
tribal group called the Houthis seized the presidential com-
pound in the capital Sanaa, prompting the resignation of the
government. The proxy war between Riyadh and Tehran then
took a step closer toward direct warfare when Saudi Arabia
and the U.A.E. intervened, setting off a conflict and humani-
tarian catastrophe that’s left more than half of Yemen’s people
on the brink of starvation, according to the United Nations. In
strategic terms, Iran, through the Houthis, had gained a foot-
hold in Saudi Arabia’s backyard.
From the start of the fighting, the Houthis warned they’d
respond to Saudi involvement with attacks on the kingdom—
and indeed they claimed responsibility for the Sept. 14 strike on
the oil facilities. There are other theories: The attack may have
originated in southern Iraq (which has elements friendly to
Iran) or even parts of Iran. U.S. Secretary of State Mike Pompeo
has rejected the Houthi claim and holds Iran directly responsi-
ble. But the debate is almost beside the point. The Houthis get
their increasingly sophisticated weapons from Iran.
“The Iranian strategy of using proxies to give itself a degree
of plausible deniability and to avoid direct retaliatory attacks
on itself is well-established,” says Emily Hawthorne, a Middle
East analyst at Austin-based risk consultant Stratfor Enterprises
LLC. “It could be that sanctions-burdened Iran sees pushing to
the edge of war as the only route to a de-escalation.”
It’s hard to say how bad the economic impact of such attacks
could be without knowing how long it will take to fix the dam-
age. Aramco has promised to insulate customers by supply-
ing them with oil held in reserve and said it would return to
pre-attack production—4.9million barrels a day—by the end
of September. But even when output is fully restored, there