Once Upon a Time in Iran

Iranians are loath to be classified as Arabs. They had built massive cities, state-of-the-art (for that time) infrastructure, and created a deep and most sophisticated system of urbanization and governance, an agricultural policy that insure that the nation would be fed and cherished academic subjects and learning to the highest levels… long, long before the Islamic invasion. They see themselves as Persians. To this day, Persians (Iranians) cherish education, a hard work ethic and intellectual achievement more than any Arab state.

The father of Islam, Muhammad, sought the counsel of a Persian insider, Moid Salman (descendant of a very noble family), who was captured, enslaved, and then converted to Islam. Salman passionately believed that Muhammad was indeed the messenger of God and proceeded to instruct the Muslim armies on Persian weapon systems and tactics. The Islamic armies deployed their lessons well, and by 651 AD, the Persian Sasanian Empire ended, and Islam rapidly replaced the local Zoroastrian religion.

Persians adopted sly ways to rebel against their new Arab masters, adopting a break-away sect of Islam that, unlike Sunni literal interpretation of the Qur’an, insisted on a mystical vision that could only be interpreted by the highest cleric in the land. Such was the Shiite faith which accounts for about 20% of all of modern Islam but 95% of contemporary Iran. Since the 1979 revolution, Iran has been vehemently anti-Western, particularly anti-American, and has slowly rebuilt itself to be a regional Islamic power hell bent on pushing to the top of the Middle East.

Sunni powers, notably Saudi Arabia, have funded Sunni causes all over the Middle East to stand in opposition of Iranian ambitions, especially opposing Iran’s surrogate Hezbollah fighting force across the region. The debacle in Yemen, pitting pro-Iranian rebel Houthis against the “legitimate” government has turned that nation into a failed state with some of the worst death and destruction on earth.

Sanctions against Iran’s nuclear program hammered a fragile economy that spent too much of its GDP in funding Iranian expansionism in the Middle East and building towards a nuclear weapons capability. Iran watched consumer prices rise and its currency fall. The economy was in shambles, and consumer confidence non-existent. Iran cracked and entered into the 2015 six-party nuclear stand-down accord (the “Joint Comprehensive Plan of Action Regarding the Islamic Republic of Iran's Nuclear Program” or JCPOA), forsaking further development toward nuclear weapons for many years.

Yet after most sanctions were lifted, Iran’s shaky economy did not explode. Oh sure, she sold some more oil and was able to restore and upgrade her fleet of commercial airliners through strategic purchases of planes from Boeing ($17B) and Airbus ($19B), and secure vital manufacturing parts for machines long in disrepair.

But the promised economic resurgence did not happen; most international financial institutions and vendors were still skeptical about dealing with this still very-anti-Western Islamic theocracy, where any policy, any law, and any agreement could be overruled by the leading Ayatollah. Stability was elusive, and local discontent was beginning to bubble to the surface with open protests. To exacerbate a bad economic situation, the seemingly now-permanent drought that decimated large swaths of Iraq and Syria was settling in across very significant parts of Iran as well. Iran’s currency was anything but strong and stable.

Once Donald Trump pulled the United States out of the JCPOA on May 8^th, announcing that sanctions (at least from the United States) would resume, the Iranian currency sputtered and rapidly began to erode, falling to half its value against the dollar in a matter of months. Ayatollah Khamenei dug his heels in, but economic protests mounted. Sabre rattling responded to the usual threatening Trump-tweets. Iran began to flex its muscle, threatening to spike the global price of oil into unaffordability, by mining the Strait of Hormuz.

Meanwhile, the European Union, with its key members (UK, France and Germany) still very much JCPOA signatories, was also beginning to balk at U.S. threats against European companies who continue to do business with Iran, ignoring the American sanctions. “The European Union’s foreign policy chief Tuesday [8/7] encouraged companies to do more business with Iran despite new U.S. sanctions, saying Tehran had upheld its commitments under the deal to limit its nuclear program.

“Federica Mogherini told reporters during her trip to Wellington [New Zealand] that it’s up to Europeans to decide whom they want to trade with… ‘We are doing our best to keep Iran in the deal, to keep Iran benefiting from the economic benefits that the agreement brings to the people of Iran because we believe this is in the security interests of not only our region, but also of the world,’ she said. ‘If there is one piece of international agreements on nuclear nonproliferation that is delivering, it has to be maintained.’” Los Angeles Times, August 8^th.

Trump’s position on enforcing U.S. sanctions on allies who still adhere to their trading commitments under the JCPOA. “We urge all nations to take such steps to make clear that the Iranian regime faces a choice: Either change its threatening, destabilizing behavior and reintegrate with the global economy, or continue down a path of economic isolation.” The U.S. would enforce those sanctions against European companies defying the American will.

Iran was likewise sending a defiant message, perhaps unsustainable. The August 6^th The Cipher Brief noted: “Iran’s naval exercises in the Strait of Hormuz received close attention in Washington [at the end of July], as U.S. officials saw it as a show of strength signaling that Tehran could shut down the waterway if it wanted to do so.  Iranian officials said the exercise was merely part of an annual training program. The waterway is the most significant oil transport waterway in the world, with 20% of the world’s oil moving through the narrow passage.”

Trump recently suggested he would meet with Iran’s leaders (notably Iran’s President, Hassan Rouhani) with no preconditions but was rapidly contradicted by his Secretary of State (Mike Pompeo), who promptly laid out 12 pre-conditions for such a meeting that everyone knew Tehran could never accept. Who knows what Trump would really do. But Trump made it clear that he would extend the revised sanctions – which began on August 7^th – to any Western company or nation that defied these restrictions.

An American company, Boeing, promptly asked the Department of the Treasury for a waiver of these restrictions, trying desperately to preserve its $17B sale of aircraft. Lots of American jobs. European vendors got in line as well. The Trump administration was anything but encouraging, noting that in November, the export of Iranian oil would be embargoed as well. Despite Tehran’s threats to resist this American malevolence, Iran’s economy continued its downward slide, and local consumer confidence plunged to its lowest level.

Trump may have a moment, just moment, after letting the Iranian economy self-destruct, to step in and force Rouhani’s hand. But Ayatollah Khamenei continues to push back, threatening even Rouhani that he must stand firm against these evil Americans. Will this result in a military solution? Is Russia’s new set of agreements with Iran a concern that the West could be brought into direct military confrontation with Russia? Is there a peaceful solution? The Iranian people do not want conflict. While they hate America, they also know that their government has simply failed to counter American moves, that their lives are almost uniformly hopeless and miserable. Now is the time for something good to happen, if the rhetoric can cool and calmer heads address real solutions.

Closing the Strait, which the US Navy believes it can counter (but a couple of mistakes and….) could easily trigger a massive spike in oil prices and spark a global recession, already leaning heavily toward that possibility with Donald Trump’s ever-escalating trade war. Mid-terms are coming Donald. What’s your plan? What’s your timing? Can you do this alone?

I’m Peter Dekom, and what could be a moment for triumph will fade quickly into a difficult-to-break recession if the cards are not well-played.