Cost of conflict over Iran
Weekly Pulse
January 6-12, 2012
Last month, Iran threatened to close the strategic Strait of Hormuz in the Persian Gulf in case international sanctions against it were further tightened. For over a week, Iranian navy also carried out naval War Games in a 3,000-kilometer wide area to the east of the Strait up to the Gulf of Eden in the Arabian ocean, with plans to do so again. The period also saw an American aircraft carrier along with a guided-missile cruiser crossing the 50-km wide Strait, a naval manoeuver that did not cause open conflict but added significantly to the rhetorical war of words between Tehran and Washington.

Committed to do whatever it takes to prevent Iran from gaining nuclear weapons capability, the United States can be expected not to overrule a military showdown with Iran if it tried to close the strategic Strait of Hormuz, through which nearly one-third of global supplies of crude oil pass daily. But Iran’s recalcitrant leadership refuses to budge. On January 9, Supreme leader Ayatollah Ali Khamenei vowed Tehran will “not to falter in the face of Western-imposed sanctions.” Iran also decided to execute a US national, who was earlier awarded death penalty after being accused of spying in the country.

Tensions in US-Iran times have mounted since the International Atomic Energy Agency (IAEA) released its latest report on Iran’s nuclear quest in early November. The report disclosed that “Iran had been carrying out experiments aimed at designing a bomb on a substantial scale until late 2003, and might have continued work on a lower level after that time.” On January 9, the UN watchdog also confirmed that Iran had begun uranium enrichment at a heavily fortified site near the holy city of Qom.

Impact of Sanctions

In response to the IAEA report, the United States, Britain and Canada decided to impose additional sanctions against, which had already faced four successive rounds of UN Security Council sanctions for its refusal to halt uranium enrichment. France has called for a European Union boycott of Iranian oil. The additional sanctions aim to economically squeeze Tehran by limiting its ability to export oil, the main source of state revenue, to global market and prevent foreign business to deal with the Iranian State Bank.

The sanctions will deny access to U.S. markets to any firm that engages in financial transactions with the ICB. Since Iran’s commercial banks have already been targeted by similar sanctions, the focus on the ICB amounts to a blockade of Iran’s entire financial and banking sector, with potentially severe implications for Iran’s international trade. The additional sanctions have started to bite Iran. The country’s exchange rate is experiencing unusual volatility, with the U.S. dollar and the euro both ris¬ing by more than 25 per cent against the Iranian Rial over the past three weeks.

If Iran’s revolutionary leaders continued to up the ante in response to deteriorating economic impact of international sanctions on the country, then its consequences for a region already fraught with conflict and a global economy that is still facing multiple recessionary pressures would most certainly be grave.

An Iranian move to close the Strait of Hormuz for international shipping—besides increasing the risk of military confrontation with the United States—has the potential to temporarily choke off oil exports from the Middle East, drive up international energy prices and damage the global economy. It is estimated that the close of the Strait for just 30 days, for instance, could send the price of crude racing up to US$300 to $500 a barrel, a level that would trigger global economic instability.

Old Rivalry

Issues in US-Iran ties are of long-standing nature with their origin going back to the 1979 revolution in Iran. Whatever irritants have emerged in these relations during the last three decades should be of least concern to Pakistan, as they have peculiar connections to accusations and counter-accusations, actions and counter-actions by Iran’s revolutionary regime and successive US administrations during the period.

The principal cause of a potential US-Iran showdown must be seen within the broader, post-1979 hostile ties between Washington and Tehran. The United States does not seem to have forgotten the humiliation it suffered at the hands of Iranian revolutionaries when they took the entire staff of the US embassy in Tehran hostage for full 444 days after the February 1979 Revolution.

The Americans did make an unsuccessful bid to release these hostages, which led to top-level rifts and resignations in the Carter Administration. The disastrous happening also led to the electoral demise of the Democrats in the 1980 elections, brining the hawkish Republican President Ronald Reagan into power.

The 1980’s saw recurrent rounds of Iran-US hostility—with the US backing the Saddam-led Iraq in its eight-year war with Iran, and Iran’s spiritual leader Ayatollah Khomeni declaring America as a “great Satan” of the world, to name only a few. The rise to power of moderates such as Presidents Rafsanjani and Khatami did provide avenues of accommodation in ties between Washington and Tehran in the 90s.

However, the Bush administration’s pursuit of unilateralism in the post-9/11 era, and the ascent to power of an equally hawkish Mahmood Ahmadinejad dimmed all hopes for a compromise. The situation under the current US Administration has been no different, despite initial overtures made by President Obama in the famous Cairo speech three years ago.

Thus, the conflict between Iran and the US is beyond Iran’s recent nuclear ambitions. There is a long history of 30s years behind it. We simply cannot ignore this reality. Both countries have equally contributed to raising the stakes in their hostile relationship. Iran’s nuclear issue is just the latest episode in this relationship. The difference this time is that the issue is becoming a means for the long-awaited direct showdown between them.

Averting Conflict

With the impact of one recent war, in Iraq, and an ongoing conflict, in Afghanistan, far from over, the Southwest Asian region can hardly afford the conflict over Iran. Preventing another regional conflict is, therefore, in the national interest of every state that lies in the immediate and proximate vicinity of Tehran.

However, as clear from Wikileaks expose, Iran’s alleged development of nuclear weapons capability is a concern not just limited to Israel or the US and its Western allies. Iran’s Persian Gulf neighbours, the Sunni Sheikhdoms—Saudi Arabia, the UAE, Bahrain and Qatar in particular—are all equally concerned about the regional consequences of Iran becoming a nuclear weapons state.

All of these Sheikhdoms are staunch US allies, and enjoy very close relations with Pakistan as well. Thus, while trying to defuse tension over Iranian nuclear issue, being current manifested in the US-Iran row over the Strait of Hormuz, Pakistan’s options are limited.

Iran is one of the world’s richest countries in terms of hydrocarbon resources, including both natural gas and crude oil. Therefore, it does not as such face an energy crisis that its other neighbours to the east or the north, like Pakistan, Afghanistan and India, face. Unlike Israel, India and Pakistan, it is signatory to the nuclear Non-Proliferation Treaty (NPT), and, therefore, cannot develop a nuclear weapons capability under international law.

Since the current crisis over the Strait of Hormuz is rooted broadly in the Iranian nuclear question—more specifically, reflecting an offensive Iranian response to a tightening global sanctions regime on the nuclear question—the diplomatic efforts, regional or international, must concentrate on defusing it by reaching out to Iran to convince its leadership for re-thinking the country’s nuclear approach.

For if Iran continues to pursue the alleged nuclear option, then not only will it be difficult for the international community to dissuade hawkish Israel from contemplating its threatened preemptive or preventive strike on Iran’s nuclear facilities, at last two of Iran’s Persian Gulf neighbours, Saudi Arabia and the UAE, might also be forced to walk the nuclear path to alleviate their respective insecurity in the region caused by Iran’s nuclear pursuits in recent years.

Two big regional players, China and Russia, which have contributed to the development of Iran’s defense and nuclear capabilities during the period, can play an important role in motivating Iran towards a more responsible stance on the nuclear question. Their engagement with Iran in coming months will be crucial for its revolutionary regime to mitigate the negative impact of additional economic sanctions on the country.

However, an international diplomatic bid to dissuade Iran from the nuclear path, pursued preferably within the ambit of the UN, can only work if the US and its Western allies are willing to soften their positions on the matter as a reciprocity gesture and unwilling to be carried away by an offensive Israeli campaign that at least partly targets Iran because of its unwavering support to the Palestinians—in this case, the Hamas—for their just fight to self-determination.

Pakistani Options

If an open international conflict over Iran ever occurs, no other country but Pakistan will face its gravest repercussions in the region. This is the last thing Pakistanis can wish—as they are already faced with horrible fallout from over a decade-old war in Afghanistan. Tens of thousands of innocent people and security personnel have become a victim of this war, which has also devastated Pakistan economically.

If this is not enough, the country’s crucial relations with the United States have recurrently deteriorated in the past year to rock bottom in recent weeks, thereby narrowing down its diplomatic ability to prevail upon its international allies to avert another potential regional disaster. Even otherwise, when it comes to Iran’s revolutionary junta, Pakistan’s ability to convince it—for being a next-door neighbor with relations rooted in history and common ethnic, religious and sectarian bonds—has been limited.

The Iranians, for instance, refused Pakistani mediation during the eight-year Iran-Iraq war in the 80s, which eventually caused irreparable human and material loss to both countries. Then, in the 90s, the Iranians sided with India in a proxy war with Pakistan inside Afghanistan that eventually led to the Taliban’s rise in the war-torn country with Pakistani support. But this is an old story. In the last half a decade, Islamabad and Tehran have once again moved closer. One reason for the renewed friendly ties is that both countries want Afghanistan issue to have a far-reaching regional solution.

More importantly, Iran and Pakistan perceive mutual prosperity through cooperation in the energy sector. For the purpose, the two countries have successfully negotiated a natural gas pipeline agreement. Reportedly, the Iranian leg of the ‘pipeline of peace’, as it is commonly called, is complete—and its Pakistani section remains to be completed. The pressure from America and Pakistan’s inability muster financial resources to complete the project, are a couple of reasons usually cited for the lack of progress on the project.

The energy crisis facing Pakistan is extremely acute, and the natural gas pipeline from Iran is its best bet—until, of course, any other viable alternative, such as the Turkmenistan-Afghanistan-Pakistan-India (TAPI) is available. Pakistan can also not afford an accentuation in the current security quagmire resulting from continuing Afghan war. Pakistan’s core disputes with India such as Kashmir remain unresolved and the Balochistan strife also shows no sign of disappearing.

Given then, Pakistan can ill afford to have another crisis on its western border, and the only option, however limited its scope may be, left for the country is to muster whatever regional and international support it can to avert the conflict over Iran. If Islamabad cannot convince the Americans under existing circumstances to move away from an offensive approach towards Iran, it can at least strive to calm down the Iranians and dissuade its Persian Gulf allies away from a potentially catastrophic course.

The commentary can be accessed at