For the past few weeks, the US has fought the Iranian war on the economic front more than on the military one. The president announced an “Economic D-Day,” tightening sanctions on Iran even more. While the image of the 2nd Certified Public Accountants Division landing on the beaches of Iran is amusing, it underscores just how feeble economic sanctions are. One cannot point to a single instance in history where sanctions alone have had any effect on a nation’s government. In tandem with military force, they can create bargaining chips to be cashed in, but they need support and take time. In this instance, there has been neither. So, the US bombed two missile launchers on Larak Island in the Persian Gulf, and Iran attack sites in Jordan.
Both sides seem to have made serious mistakes about the position of the other. America is convinced that the Iranian economy is collapsing and that it is just a matter of time before the mullahs are either brought to their senses or are overthrown. The Iranian economy has been crap for almost 50 years, and the regime sells martyrdom as a genuine life-goal. It is hard to see the regime falling now.
For their part, the Iranians think that they have the US over an (oil) barrel and that the Great Satan is going to give in if they just stay the course. The calculation is that when other nations, like China, start to hurt, they will pressure America into changing its policy. It is just as likely that China et. al. will blame Iran, too. There will be pressure on both sides.
That said, time does seem to be on Iran’s side. They do not have elections coming up in Iran, but they are aware of the American mid-terms. They will make damn sure that something bad happens to the Trump administration just ahead of election day. One recalls their toying with Jimmy Carter as the 1980 election approached. In the end, the Iranians did release the American hostages they held on Day 444 of their captivity. Not coincidentally, that was Inauguration Day, and the flight they were on did not leave Iranian airspace until Mr. Carter was no longer president. They will do the same thing to Mr. Trump, and it could be January 2029 before they are even ready to make peace.
As the sands of the hourglass shift, America gets deeper and deeper in trouble militarily. The stupidity of the USS Lincoln’s record-setting deployment and the huge drawdown of anti-missile/drone interceptors demonstrate just how badly the war has gone. Munitions have reached a point where some are saying the US cannot meet its defense obligations in other theatres. If so, that is a truly awful thing for a superpower.
While the panic about oil prices has been muted (because the markets are dumb enough to believe Mr. Trump when he says ships can pass through the Strait of Hormuz), the US is getting into a danger zone. The current Strategic Petroleum Reserve is 290 million barrels. Last week, Fortune magazine noted:
According to the Department of Energy, the absolute physical minimum crude oil inventory is approximately 70 million barrels. This cushion is required at the very top of the caverns to keep the extraction pipes safely submerged in oil rather than the underlying water. But while 70 million barrels is the structural floor where the salt rock might physically hold together, the practical operational floor is much higher, around 250 million barrels.
That is 40 million barrels of room for error. Because the administration has been drawing down the supply, it has more or less run out of ways to affect oil prices. Defence Security Asia estimates the US has 41 days of supply in the reserve, and that was published a week ago.
If Mr. Trump is going to win this war in the next few weeks, all will be well. His track record suggests that such a success will not occur. It may well be that the oil price starts to climb just as winter arrives in the northern hemisphere.
The decline under the Trump administration continues to accelerate.