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Iran, a Regional Power in Dire Straits

The government in Tehran is starting to get desperate.

|July 5, 2018

By Xander Snyder

In Iran, every time one problem seems to go away, another one takes its place. Recent protests are a case in point. Just as the demonstrations over economic grievances in Tehran had died down, new ones began in Khuzestan. People throughout the region have taken to the streets to decry how the government is mishandling the ongoing water shortage. (Protesters claim Iran continues to sell potable water to Iraq and Kuwait, even as 230 Iranians were allegedly poisoned by contaminated drinking water.) Unrest related to water issues has been simmering in Khuzestan since March, but officials just can’t seem to get a handle on it. Social media posts from Wednesday suggest Iran has deployed more forces to the cities of Khorramshahr and Abadan to quell the unrest.

Meanwhile, President Hasan Rouhani is in Europe desperately trying to salvage the Iran nuclear deal by encouraging France, Germany and the United Kingdom to abide by their prior trade and investment commitments, saying that “if the remaining signatories can guarantee Iran’s benefits, Iran will remain in the nuclear deal without the U.S.” Given the threats the U.S. has made against any country that continues to work with Tehran, and the willingness shown by the Trump administration to impose economic hardship even on its allies, it’s highly unlikely that Europe is willing to run afoul of the U.S., especially when Washington is already starting a trade war with Europe. Put simply, the U.S. can hurt Europe more than Iran can help Europe, so Rouhani’s calls for help will probably go unheeded.

With the U.S. trying to force every customer to stop buying Iranian oil, the government in Tehran will have a hard time making up lost revenue. Losing oil revenue is bad enough, but it comes at an especially bad time for Iran – the government budget is already stretched thin in support of military operations in Iraq, Syria and Yemen, and the Iranian public claims that government spending on social programs is already inadequate. Eliminating the demand for Iranian oil, moreover, would hasten the decline of the Iranian rial, which has been plunging in recent months and was the proximate cause of the most recent bout of protests in Tehran.

Rouhani is no doubt aware of the futility of his mission to Europe, so he has raised the stakes. On July 2, during his strip to Switzerland, angry that other countries would be able to ship oil from the region but Iran would not, Rouhani threatened to shut down the Strait of Hormuz, through which as much as 30 percent of all daily seaborne hydrocarbons pass. Shortly thereafter, Qassem Soleimani, the head of the Quds Force, the expeditionary arm of the Islamic Revolutionary Guard Corps, stood behind Rouhani’s statement, signaling that the military was ready to close the strait in defense of Iran’s national interest. The failure of the Iran nuclear deal aggravated the divisions between Iran’s reformist camp, of which Rouhani is a member, and the hard-line camp, of which Soleimani is a member. It’s possible that the cancellation of oil imports will be the issue that unites them. (It’s also possible that the reformers, having staked so much of their credibility on the nuclear deal, have lost face and are now subordinated to the security establishment.)

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Unsurprisingly, the U.S. didn’t appreciate Rouhani’s threat. Closing the strait would send oil prices skyrocketing and hurt the economy of Saudi Arabia, Washington’s stalwart ally in the region. Washington responded by vowing to keep the Persian Gulf open – a response that necessarily requires the direct use of force, which would obviously mark a change in how the U.S. deals with Iran. Iran’s navy could never beat the U.S. Navy in open combat, but it’s hard to imagine the U.S. public has much of an appetite for another military conflict in the Middle East. Iran isn’t especially interested in a conflict either, but the government is getting desperate. With less to lose, Iran will be willing to take bigger risks.