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Risk Profile – Middle East Iran-USA Tensions: What Next?

Following the attack on commercial vessels off the coast of Fujairah, UAE, on 12 May 19, there has been a renewed focus upon the wider geopolitical situation in the Middle East, and the risk that these variables could pose to commercial operations in the region. As events continue to evolve, it remains vital that commercial entities within the region understand and are able to interpret events in a manner that allows for appropriate due diligence and contingency planning.

There has been a gradual ratcheting up of tensions between the US and Iran in recent weeks. The source of which has been President Trump’s longstanding hostility to the Iran nuclear deal and renewed efforts to exert maximum economic pressure on the Iranian government. It is believed and indeed widely reported that the end goal of the Trump administration is to effect regime change in Iran.

The US has been quick to assert that Iran was responsible for the attack near Fujairah. In response to what the US claims are material Iranian threats to US assets in the region, a strike group including the aircraft carrier USS Abraham Lincoln is expected to complete a passage through the Strait of Hormuz. As at 15 May 19, the USS Abraham Lincoln is reported to have entered the Gulf of Oman. The US continued with escalatory measures on 15 May 19, when non-emergency staff were pulled from positions in Iraq, due to a ‘credible and imminent threat’ emanating from Iran centred upon US personnel in the country. In a further sign of an increased state of anxiety regarding events in the region, the British Foreign office is reported to have moved into a ‘crisis mode’.

Iran has geostrategic ambitions within the Middle East which date back decades and are largely shaped by their adversarial relationships with Saudi Arabia and Israel. As well as being the likely instigator of the attack at Fujairah, Iran also provides material support to several groups including the Houthi rebels in Yemen, who as recent as 14 May 19 were reported to have conducted a drone attack upon Saudi oil infrastructure.
On this basis, it would be incorrect to state that Iran does not pose a threat to the broader security outlook in the Middle East, or to commercial activity in the region. However, the Iranian threat must be contextualised, and should be seen within the broader balance of threats which vessels and infrastructure face. Despite the pronouncements of more prominent hawks in the Trump administration, such as John Bolton, who have long advocated for a US intervention in Iran, it is not yet clear that Iran intends to decisively threaten US or commercial assets in the region. It is likely that Iran will continue to project its power in isolated and limited ways which adhere to its pre-existing foreign policy goals, but this must not be taken to imply that Iran has become an existential threat over and above what has been the norm in recent years. Furthermore, despite US declarations of an imminent Iranian threat, senior British military personnel have been quick to indicate that they do not perceive there to be an increased risk from Iran, highlighting a split of opinion within NATO.

Whilst the likelihood for escalation remains present, especially as Iran is likely to perceive the imminent presence of the USS Abraham Lincoln in the Strait of Hormuz as a provocation, escalation of a serious and tangible nature is unlikely. Traditional hard power options for Iran are limited, costly and unlikely to serve any purpose other than to legitimise a strike against Iran itself. Other options include further inflammatory statements concerning blockading the Strait of Hormuz, as well as direct assaults on US vessels / interests within the region.

Iran’s economy is experiencing severe strain as result of US sanctions and is ill prepared for any form of conflict. Iranian attempts to re-stablish their oil trade and secure access to global financial markets through the EU were resolutely rebuffed. However, the EU was cautious to state that it remained committed to the Iranian nuclear deal. In the near future, discussions between the two parties are likely to be a key avenue for Iranian dialogue going forward. Simultaneously, the US is likely to be acutely aware of its fragile economic position as the uncertainty over a trade war with China continues. The corresponding fiscal impact on both states is not served in any way by military options. It is therefore more likely that both sides will continue to attempt to save face, portray a ‘robust’ image and conduct limited asymmetrical activities, without disrupting the overall state of play.

The Iranian Revolutionary Guard Corps (Navy) (IRGC(N), has historically been the ‘go-to’ option for Iran to assert its presence throughout the region. With the arrival of the US naval task force, the freedom of movement for these vessels is likely to be significantly curtailed. The recent designation of the IRGC as a terrorist organisation by the US remains a potential flashpoint between the two sides as the rules of engagement governing interactions under international law are significantly altered by this recent announcement. Although both sides have reaffirmed their commitment to continue with normal interaction protocol.

The risk of Iranian interference with wider commercial vessels and infrastructure is also reduced by the arrival of US naval forces. Thus far, incidents have been used by Iran to signal to the US that its presence within the Persian Gulf is deemed antagonistic; however, further incidents increase the risk of direct attribution and retaliatory action. It is far more likely that Iran will continue to target US interests in regions it deems to be permissive environments like Syria and Iraq and crucially via 3rd party involvement as seen with its sponsoring of Houthi rebels in Yemen.

It is assessed that the operators of commercial vessels in the region should not be dissuaded by increasingly bellicose media reports which do not contextualise the threat present. It is certainly true that key ‘pinch points’ already identified in Dryad’s reporting (such as the Bab-el-Mandeb strait), remain vulnerable to kinetic activity. It is also true that isolated incidents, such as those seen at Fujairah, will continue to play a role in the threat dynamics of the region, but are likely to be less frequent and with little focus on wider commercial vessels and infrastructure.

Commercial sea lanes within the region remain open, and it is assessed that operations will remain within acceptable risk profiles for most operators with the addition of precautionary measures and increased reporting where required.

Dryad shall continue to monitor the situation and shall update accordingly. For complete peace of mind, we recommend subscribing to our Global Security Index and Transit and Port Risk Assessment products.
Source: Dryad Global

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