The sanctions known as “Operation Economic Outcast” have been the latest pressure campaign imposed by the U.S. government on Iran. However, reaching a deal in exchange for sanctions relief between the U.S. and Iran is highly unlikely because the pressure on Iran to accept a peace settlement on terms more favorable to U.S. interests is more preferable to the Trump administration than sanctions relief.
The war between the United States and Iran heated up on Oct. 22 when seven oil tankers caught fire or were damaged in the Strait of Hormuz. Mines placed by the Iranian military in the Persian Gulf were a likely cause of the damage to the tankers. The next day, a multilateral forum was held in Istanbul focusing on Iran’s Strait of Hormuz blockade and Persian Gulf regional security. The diplomats at the meeting shared concerns about a variety of security risks, particularly regarding food because the Persian Gulf region is a leading supplier of oil, natural gas, and fertilisers. Turkish representatives hosting the meeting put food and fertiliser security at the top of the agenda for the newly formed R4+E3: Turkey, Saudi Arabia, Egypt, and Pakistan (R4) and the United Kingdom, France, and Germany (E3). Germany Federal Minister for Foreign Affairs Johann David Wadephul spoke about global security at the meeting and accused Yemen’s Houthis and Iran of blackmailing world trade and continuing to stranglehold supplies of energy and fertiliser. The U.S. State Department ordered some diplomats and their families to leave Saudi Arabia as Iranian attacks escalated. It is in this context that Atlas Broadcasting interviewed Jack Roush for his insights on the broader impacts of the U.S.-Iran War on geopolitical events, including the role of the Houthis in the Red Sea and China’s influence on Iran’s decision-making. Roush, a doctoral student in the Department of International History at the London School of Economics and Political Science, frequently provides his insights on Iranian foreign policy and Iran-U.S. relations to the media, including Time magazine, War on the Rocks, The Diplomat, and The Hill.
On the current situation of U.S. sanctions on Iran
“The United States is using sanctions to first and foremost intensify Iran’s economic isolation and restrict the resources available to the Iranian regime and its military,” Roush said, but the move is also “intended to increase the pressure on the Islamic Republic to accept a settlement on terms more favorable to U.S. interests.”
Roush pointed to the U.S. Treasury Department’s enforcement action against Bank of America on Oct. 13 to illustrate how the U.S. sanctions against Iran are expanding to the U.S. banking and financial sector. The Treasury imposed $1.21 billion in penalties against Bank of America for violations of anti-money laundering and sanctions under U.S. law.
This, according to Roush, shouldn’t be mistaken for any potential sanctions relief deal with Iran in the future.
“Limited sanctions relief on Iran appears unlikely in the near term, as the United States increases economic pressure. I would not expect the United States to offer substantial sanctions relief simply as an inducement to begin negotiations, especially after the poor reception of the MOU [Memo of Understanding] earlier this year, which offered Iran financial incentives to end the conflict,” Roush said.
It seems relevant to point out that the U.S. government has reached deals for potash fertilisers and diesel fuel in recent months to relieve sanctions on both Russia and Belarus in exchange for negotiations on the war in Ukraine. Even as that conflict has continued, the deals being made by the U.S. government have broader ramifications for the geopolitical situation. The United States needs to import both potash fertilisers and crude oil to offset economic disruptions caused by the war with Iran, with crude oil particularly vital during the ongoing blockade of the Strait of Hormuz as a direct result of the U.S. military presence in the region.
“[U.S.] sanctions could eventually become an important bargaining instrument with Iran,” Roush said, “but probably only after more substantial dialogue and an easing of tensions as we have seen with Belarus.”
Houthis’ Red Sea attacks
Roush also explained what the escalation of attacks by the Iran-backed Houthi rebels in the Red Sea means for Tehran, especially since China is one of Iran’s most important trading partners. He referred to the Houthis as a “cat’s paw” for Iran during this escalation of attacks.
The Houthis’ “ability to threaten shipping through the Bab el-Mandeb does give Iran another indirect means of imposing costs on its adversaries,” Roush said, adding that this “has become particularly important as the war has placed much greater pressure on Iran’s traditional source of maritime leverage in the Strait of Hormuz.”
Although it is possible to draw parallels between the attacks by Houthis and the military objectives of Iran, Roush cautioned against viewing the Red Sea and the Strait of Hormuz as similar situations. He pointed out that “this still remains something of a blunt instrument, as it is unclear to what extent Iran is able to control the Houthis and their actions. Though Yemen is tied to the broader regional confrontation, it remains in many ways its own conflict, and the Houthis have their own interests and intentions.”
On China’s oil trade leverage with Iran
There is a mutually overhanging concern from the Red Sea and Strait of Hormuz: global oil shipments from the world’s largest producers and exporters in the Middle East. Saudi Arabia has switched its crude oil export routes from the Persian Gulf to Red Sea ports, putting the risk of Houthi attacks on Saudi oil-carrying vessels as a new dynamic. Global crude oil prices have spiked to over $110 per barrel as of this publication time.
All of China’s imports of Iranian oil supplies go through the Strait of Hormuz, so the Red Sea dynamic isn’t directly going to impact China’s ability to purchase crude oil supplies from Iran. However, the price of crude oil is rising with the escalation of attacks, and China might want to start rethinking how it uses leverage against the U.S. and Saudi Arabia due to the close economic relationship between Beijing and Tehran.
Roush said the situation in the Red Sea doesn’t give China any leverage over the global oil trade. This is reinforced by the idea that China will have to continue paying higher prices for crude oil along with the rest of the world. “China has little control over the situation. China has even reportedly leaned on Iran to prevent the Houthis from threatening maritime traffic and has expressed concern over disruptions to Saudi energy production,” Roush said.
Oil flows through the Strait of Hormuz would represent a short-term normalisation of trade, while Yemen will remain a geopolitical crisis in the long term, he pointed out.
A calm before the storm is ending
The U.S. and Israel have been coordinating intelligence and planning for another possible escalation of attacks between Iran and its neighbors. This calm before the storm is quickly shifting to another escalation of attacks in the Persian Gulf region as Roush’s insights on the regional security risks and broader geopolitical situation indicate.
Should Iran’s military attack neighbors outside of the Persian Gulf region, such as Turkey, this could expand the war between the U.S. and Iran to outside of the Strait of Hormuz.
China could rethink its relationship with the U.S. to protect interests for oil and gas trade in Strait of Hormuz, and this could change the balance of power in the Middle East going forward. China’s influence in the Middle East ultimately depends on the outcome of the U.S.-Iran war.
