{"id":163168,"date":"2020-01-13T09:00:43","date_gmt":"2020-01-13T14:00:43","guid":{"rendered":"https:\/\/www.countingpips.com\/?p=163168"},"modified":"2020-01-13T05:47:30","modified_gmt":"2020-01-13T10:47:30","slug":"the-story-of-trumps-perilous-iran-escalation","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2020\/01\/the-story-of-trumps-perilous-iran-escalation\/","title":{"rendered":"The Story of Trump\u2019s Perilous Iran Escalation"},"content":{"rendered":"
January 13, 2020<\/div>
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By Dan Steinbock<\/b><\/strong><\/p>\n

The Trump assassination of major general <\/b><\/strong>Qasem Soleimani<\/b><\/strong>\u00a0reflects regime change efforts – withdrawal from Iran nuclear deal, new sanctions, covert operations, undermined de-escalation, plunging oil production and diminished economic prospects – that have taken a perilous turn. <\/b><\/strong><\/p>\n

On January 3, 2020, the plane of Qasem Soleimani, major general of the Islamic Revolutionary Guard Corps (IRGC) and commander of its elite Quds Force, arrived at Baghdad International Airport. At the same time, the US MQ-9 Reaper, a prime assassination drone, was loitering in the area with other military aircraft.<\/p>\n

At the Airport, Soleimani left with Abu Mahdi al-Muhandis, the deputy head of the Iran-backed Iraqi Popular Mobilization Forces. As they entered two vehicles, the convoy headed toward downtown Baghdad. At 1 am local time, the Reaper launched several missiles on Baghdad Airport Road. The two cars exploded in flames killing some 10 people, including Soleimani and al-Muhandis.<\/p>\n

After the devastation, whatever was left of Soleimani could be identified only by his ring. Ironically, several perished Iranian and pro-Iranian commanders had been instrumental in the defeat of Islamic State.<\/p>\n

Secretary of State Mike Pompeo said\u00a0Washington had made an \u201cintelligence-based assessment\u201d that Soleimani was \u201cactively planning in the region\u201d to attack US interests. In turn, President Donald Trump declared Soleimani was behind \u201cimminent attacks\u201d on US diplomatic facilities and personnel across the Middle East.<\/p>

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That\u2019s the official story.<\/p>\n

Undermining de-escalation \u00a0\u00a0\u00a0\u00a0<\/b><\/strong><\/p>\n

Afterwards, Trump\u2019s team got caught offering mixed messages about Iran\u2019s \u201cimminent\u201d attacks as a justification for Soleimani assassination. National security adviser Robert O\u2019Brien says Trump authorized eliminating Soleimani who cooperated with his allies \u201cto kill American diplomats and soldiers in significant numbers.\u201d Defense Secretary Mark T. Esper claims there was \u201cexquisite intelligence\u201d indicating Soleimani was \u201cconducting preparing military operations\u201d akin to \u201cterrorist activities\u201d against the US. In turn, Pompeo seized Iran\u2019s past behavior as justification.<\/p>\n

None of these reasons, which stress attributed intentions rather than hard evidence, seem credible in the light of Iran\u2019s efforts at multilateral diplomacy, its challenging economic conditions and the behind-the-fa\u00e7ade attempt at de-escalation with Saudi Arabia. However, the mixed messages do reflect a longstanding US effort to justify \u201cpermanent war\u201d in the Middle East and certain other hot spots. The House resolution to limit Trump\u2019s war powers against Iran is a move in the right direction but it can neither reverse the past policy mistakes nor halt the current escalation.<\/p>\n

In the subsequent TV address, Trump delivered his Orwellian soundbite. \u201cWe took action last night to stop a war\u2026 We did not take action to start a war.\u201d And yet, several US planes were taking off from bases in the eastern United States toward the Middle East as Pentagon sent 3,500 members of the 82nd<\/sup>\u00a0Airborne Division, one of the largest deployments in decades.<\/p>\n

Amid mega rallies for Soleimani and Iraqi parliament calling for the expulsion of US troops from the country, Iran\u2019s Supreme Leader Ali Khamenei spoke about the impending \u201cretaliation.” Trump warned Tehran that any retaliation would result in US targeting 52 Iranian significant sites, including cultural sites. The allusion was to the number of American hostages during the Iran hostage crisis some 40 years ago.<\/p>\n

Then came the bomb shell. Two days after the assassination, Iraq\u2019s Prime Minister Adil Abdul-Mahdi addressed his country\u2019s parliament suggesting that Soleimani was on a peace mission. According to Abdul-Mahdi, he had planned to meet Soleimani on the morning the general was killed to\u00a0discuss a diplomatic rapprochement\u00a0that Iraq was brokering between Iran and Saudi Arabia. Abdul-Mahdi said Trump personally\u00a0thanked him\u00a0for the efforts creating the impression that Soleimani could safely travel to Baghdad, even as the White House was busy planning a hit.<\/p>\n

Subsequently, Pompeo rushed to defend the assassination, again. \u201cWe know that [the report about Soleimani\u2019s peace mission] wasn\u2019t true,\u201d he said. \u201cWe got it right.\u201d Once again, he presented no hard evidence.<\/p>\n

In reality, the US assassination appears to have been the latest effort to preempt de-escalation plans in the region, to reinforce Iran\u2019s destabilization. It follows years of misguided covert operations. Here\u2019s how it happened.<\/p>\n

From Trump\u2019s U-turn to new Iran sanctions <\/b><\/strong><\/p>\n

Only a few years ago, there was still great hope in Iran. After years of diplomacy, the comprehensive nuclear accord (JCPOA, July 2015) was achieved between Tehran and the so-called P5+1 nations; that is, the five permanent members of the UN Security Council \u2013 China, France, Russia, UK, and the US, plus Germany together with the European Union (EU). Under the deal, Iran agreed to eliminate its stockpile of medium-enriched uranium, while the International Atomic Energy Agency (IAEA) gained access to all Iranian nuclear facilities.<\/p>\n

To Iran, the deal offered relief from US, UN and multilateral sanctions on energy, financial, shipping, automotive and other sectors. These primary<\/i><\/em>\u00a0sanctions were lifted after the International Atomic Energy Agency\u2019s (IAEA) certification in January 2016 that Iran had complied with the agreement. Yet, secondary<\/i><\/em>\u00a0sanctions on firms remained in place, along with sanctions applying to US companies, including banks.<\/p>\n

After the 2016 US election, the Congress with its Democratic majority \u2013 not president-elect Trump – paved the way for a U-turn. Following the House of Representatives, the Senate in late 2016 unanimously<\/i><\/em>\u00a0extended the Iran Sanctions Act (ISA) for a decade. Stunningly, the deal that President Obama had portrayed as his legacy in the region was shot down surprisingly fast. Intriguingly, most Democrats reversed their positions regarding the nuclear deal.<\/p>\n

As Trump arrived in the White House, he began developing a far more muscular policy against Iran to benefit from Saudi economic and geopolitical support. In May 2017, Trump and Saudi Arabia\u2019s then-king Salman bin Abdulaziz Al Saud signed a historical arms deal, which totaled $110 billion immediately and $350 billion over a decade. Widely perceived as a \u201ccounterbalance\u201d against the Iranian influence in the region, it cemented the ties between Saudi Arabia and the US. However, Crown Prince Mohammed bin Salman\u2019s reform efforts have been tarnished by harsh measures against members of his family and opposition, the Khashoggi murder and dismemberment, and the devastating war and famine in Yemen.<\/p>\n

In return for the Saudi deal, the White House began a concerted push to counter Iran\u2019s regional and strategic weapons programs, which had been excluded from the Iran deal. In May 2018, Trump signed National Security Presidential Memorandum 11, \u201cceasing U.S. participation in the [Iran nuclear deal]” and taking additional action to counter Iran\u2019s “influence and deny Iran all paths to a nuclear weapon.\u201d<\/p>\n

That’s when the US effectively nullified a decade-long unified, multilateral approach to Iran\u2019s activities, while setting in motion unilateral<\/i><\/em>\u00a0economic sanctions, which have affected not just U.S. businesses but targeted commerce from other major economies, particularly China, France, Russia, UK, Germany and the EU.<\/p>\n

Even after Iran\u2019s missile attacks against two bases of American troops, which seem to have purposefully shunned human targets, Trump promised further ratcheting up of economic sanctions against Iran. The use of sanctions is predicated on a purposeful effort to overthrow the Iranian government.<\/p>\n

From Bolton’s “Shah scenario” to regime change<\/b><\/strong><\/p>\n

The Trump administration has greenlighted clandestine efforts to weaken Iran’s \u201cmoderates\u201d hoping to incite \u201chawks\u201d into strategic moves that could be used as a pretext for regime change. In April 2018, Trump hired the neoconservative uber-hawk John Bolton as US National Security Advisor (he was booted less than a year and half later). A relic of the Bush era, Bolton had engaged in the \u201cweapons of mass destruction\u201d pretense that led to the Iraq War. Now he advocated regime change in Iran and other countries.<\/p>\n

By November 2017, Bolton urged the US to have a contingency plan for a \u201cShah of Iran scenario\u201d and regime change before February 2019; the 50th<\/sup>\u00a0anniversary of the Iranian revolution. His change agent was Mojahedin-e Khalq (MEK), an Iranian opposition group which advocates a violent coup in Iran. In the early 2010s, the UK, EU and the US considered MEK a terrorist organization until then-State Secretary Hillary Clinton de-listed the group, to exploit it in US-led destabilization.<\/p>\n

To support his economic sanctions with clandestine operations, Trump named Michael D\u2019Andrea as the head of CIA\u2019s Iran operations. Nicknamed “Ayatollah Mike,\u201d he inspired the character of The Wolf in the Oscar-awarded movie Zero Dark Thirty<\/i><\/em>\u00a0(2012). Although D\u2019Andrea failed to track Nawaf al-Hazmi, one of the hijackers who crashed American Airlines flight 77 into the Pentagon on September 11, 2001, he was made head of the CIA\u2019s Counterterrorism Center few years later. With President Obama\u2019s blessing, he also presided over hundreds of US drone strikes in Pakistan and Yemen. His operatives oversaw several interrogations, which a US Senate report has described as torture. And he has been blamed for the Camp Chapman attack in Afghanistan in which seven CIA operatives were killed.<\/p>\n

When the then-CIA chief Mike Pompeo became Secretary of the State, his deputy Gina Haspel took charge of CIA. Following 9\/11, Haspel oversaw a secret CIA prison in Thailand, which housed suspected Al-Qaeda operatives. Relying on \u201cenhanced interrogation techniques,\u201d she, like D\u2019Andrea, was deeply involved in the detention and interrogation program condemned by the 2014 Senate report.<\/p>\n

Worse, Haspel played a key role in the destruction of 92 interrogation videotapes that showed the torture of detainees in black sites. While the Bush and Obama era CIA leaders supported her CIA nomination, more than 100 retired US generals and admirals expressed \u201cprofound concern,\u201d due to her record.<\/p>\n

Plunging oil production \u00a0\u00a0\u00a0<\/b><\/strong><\/p>\n

D\u2019Andrea and Pompeo favor regime change in Iran and some observers see their covert-operation influence in the 2019-20 Iranian protests in many cities. As Iranians have greatly suffered from US efforts at domestic destabilization and international insulation, some demonstrators are obviously motivated by economic woes. But it also seems that Bolton\u2019s Shah scenario and its variations remain on the table, as evidenced by the role of the US-sponsored Pahlavi loyalists among some protesters.<\/p>\n

In contrast, Iranians see oil as the main reason to US interest in the Middle East. Iran and Iraq hold some of the world\u2019s largest deposits of proved oil and natural gas reserves. Combined, their reserves exceed those of Venezuela, which has the world\u2019s largest proved reserves.<\/p>\n

Between 2010 and 2013, the sanctions hurt Iran\u2019s economy contributing to the fall of crude oil exports from 2.5 million barrels per day to 1.1 million by mid-2013. That, in turn, was compounded by the plunge in oil prices since early 2014. Following the nuclear deal, Iran\u2019s production soared back to 4 million barrels. With Trump\u2019s efforts at regime change, the capacity steadily decreased to 3.7 million barrels per day (Figure 1<\/b><\/strong>). Recent OPEC estimates suggest it has plunged to 2.8 million barrels.<\/p>\n

Figure 1 \u00a0Iran\u2019s Petroleum Production and Consumption, 2011-2018<\/b><\/strong><\/p>\n

\"\"<\/a>Sourc<\/i><\/em>e: EIA; Difference Group.<\/i><\/em><\/p>\n

If Iran\u2019s production capacity takes a further hit, that will penalize particularly its biggest importers China, India, South Korea and Turkey.<\/p>\n

Diminished Prospects<\/b><\/strong><\/p>\n

Since Russia and China were expected to stay behind the Iran nuclear deal, the real question was whether the European powers – Germany, France, the UK, and the EU itself – would defend it. Unsurprisingly, the Trump administration targeted European businesses that did business in and with Iran after the nuclear deal. In June 2019, the EU created a mechanism (INSTEX) that allows European countries to trade with Iran despite US sanctions. But it was too little, too late. Brussels failed to sustain the Iran nuclear deal against Trump\u2019s unilateral moves.<\/p>\n

Before 2015, Iran\u2019s economy shrank by 9% two years, due to sanctions. After stabilization, sanctions relief enabled Iran\u2019s oil exports to return to nearly pre-sanctions levels, permitted Tehran to regain access to funds held abroad, boosting 7% overall economic growth in 2016. Foreign energy firms made new investments in the energy sector and major aircraft manufacturers sold Iran\u2019s commercial airlines new passenger aircraft. The relief contributed to the victory of Iran\u2019s President Hassan Rouhani in the 2017 presidential election. Growth broadened to the non-oil sector. Real GDP growth was projected to rise toward 4.5% over the medium-term as financial sector reform was anticipated to take hold.<\/p>\n

But then came the Trump U-turn. In May 2018, he had the U.S. withdraw from the nuclear deal, while secondary sanctions drove Iran\u2019s economy into mild recession as major companies exited the country rather than risk being penalized by the US. The value of Iran\u2019s currency declined sharply. Even before the US escalation, Iran\u2019s economy was expected to undergo a second consecutive year of recession and contract by 8.7% in 2019\/20. Inflation was estimated to reach 38% annually with mounting fiscal pressures. Economic expansion, which began after the nuclear deal, has been undermined. Neither is stagnation enough for the Trump administration. What the White House is fostering is progressive contraction (Figure 2<\/b><\/strong>).<\/p>\n

Figure 2 \u00a0\u00a0Iran: GDP Growth and Supply Side Components, 2011-22<\/b><\/strong><\/p>\n

\"\"<\/a>Source: World Bank; Difference Group<\/i><\/em><\/p>\n

Following the drastic re-escalation, Iran\u2019s economy will have to cope with even more challenging downward risks. And if oil exports were to be curtailed further, the economy could enter into a steeper recession and suffer from high inflation rates. In such a status quo, the challenge of protecting the vulnerable households would put additional pressure on the government finances and potentially the rial. Unfortunately, that may be precisely the White House’s objective.<\/p>\n

\u201cThe challenges highlight the crucial role of further economic diversification by focusing on non-oil sources of growth and government revenues,\u201d the World Bank stated in a recent update. In reality, economic diversification can only be built on peaceful conditions and political stability, which allow governments to proceed with a medium-term diversification. Such preconditions predate Trump\u2019s Iran policy that has undermined years of international, multilateral diplomacy.<\/p>\n

The net effect is the most dangerous escalation in the Middle East in decades and possibly the last nail in the fragile global economic prospects that could cause a synchronized global contraction in the course of 2020.<\/p>\n

About the Author:<\/i><\/em><\/strong><\/p>\n

Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and <\/i><\/em>the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see <\/i><\/em>https:\/\/www.differencegroup.net<\/i><\/u><\/em><\/a><\/p>\n

The original commentary was published by the UK-based World Financial Review on January 10, 2020.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By Dan Steinbock The Trump assassination of major general Qasem Soleimani\u00a0reflects regime change efforts – withdrawal from Iran nuclear deal, new sanctions, covert operations, undermined de-escalation, plunging oil production and diminished economic prospects – that have taken a perilous turn. On January 3, 2020, the plane of Qasem Soleimani, major general of the Islamic Revolutionary […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-163168","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/163168","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=163168"}],"version-history":[{"count":1,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/163168\/revisions"}],"predecessor-version":[{"id":163171,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/163168\/revisions\/163171"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=163168"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=163168"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=163168"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}