Background:

The U.S. – Iranian relationship has been strained for decades. However, the U.S. and Iran have only had direct military conflict once (Iran-Iraq War). Today, armed conflict between the U.S. and Iran more often involves proxies and asymmetric warfare. As we’ve discussed in recent weeks, tensions with Iran are already high and continue to escalate. We believe that it is crucial to understand how Iran’s government is run and how its military operates to properly evaluate the threat.  Below we describe Iran’s military capabilities and its historical use of proxy forces in the region.

 

The IRGC and the Ayatollah Rule Iran:

• Islamic Revolutionary Guard Corps – Born out of the 1979 revolution, the IRGC is the principal defender of the revolution and its ideals. It has evolved to possess enormous political, economic, and military power, and it is Iran’s primary instrument for spreading the ideology of the Islamic Revolution worldwide.
• The IRGC is the main link to its terrorist proxies, which the regime uses to increase Iran’s global influence. In April 2019, President Trump designated the IRGC as a foreign terrorist organization, saying that it “participates in, finances, and promotes terrorism as a tool of statecraft.”
• The Ayatollah is in complete control of the IRGC, though they have their own combatant commanders within the organization. The IRGC’s mission has expanded over the years – imagine a special forces unit nearly 150k strong that acts at the direction of a single leader. The IRGC patrols the Gulf but also is responsible for commanding the proxy forces in Lebanon, Syria, Iraq, and Yemen – very capable and very dangerous elements.
• Iranian cyber command works with IRGC-affiliated businesses on military and commercial espionage, as well as propaganda distribution.
• On May 15^th, the IRGC released a statement claiming Iran was now working at maximum capacity in preparation for a “full confrontation” with its “enemy” – referencing rising tensions with the U.S.
• Iran’s conventional forces number about 400,000 and IRGC forces approximately 150,000. Within the IRGC are the Basij militia and the Quds Force.

Basij militia

• The Basij provides defensive military training to protect the regime against foreign invasion and to suppress domestic anti-regime activity through violence and intimidation.
• They are the eyes and ears of the regime.

Quds Force

• The Quds Force is a branch of the IRGC that provides training and weapons to Iranian extremist proxies around the globe.
• The Quds Force uses violence and bribes to heavily influence the politics in Iraq.
• The Quds Force has established offices near Islamic holy sites to attract devout Muslims from Saudi Arabia, Syria, and Iraq.

IRGC Activity in the Region:

Operations in Lebanon

• The IRGC leverages non-state armed organizations throughout the Middle East (such as Hezbollah in Lebanon) to help compensate for Iran’s generally weak conventional military capabilities.
• Through its close ties with Hezbollah, Iran seeks to export its revolution and ultimately maintain a deterrent against Israeli aggression. Hezbollah shares Iran’s hostility towards the U.S. and Israel, and the 1983 bombings of the U.S. Embassy and U.S. Marine barracks in Beirut were attributed to Iranian forces.

Operations in Iraq

• The IRGC’s activity in Iraq (post-2003 U.S. Invasion) became a significant point of contention between Tehran and Washington. The Bush administration identified Iran as part of the “axis of evil” and accused the Quds Force of providing weapons to Shia militias targeting U.S. convoys. Most recently, the Trump administration attributed more than 600 deaths of U.S. troops in Iraq to the IRGC.

Operations in Syria

• Following the 2011 Arab Spring, the Quds Force deployed to Syria.  At first, Iranian officials only acknowledged its forces were carrying out a limited mission – defending Shiite shrines. However, later it became clear the Quds Force was supporting Syrian President Bashar al-Assad in his efforts to suppress protests. As the uprising turned to civil war, the IRGC became heavily involved in the fighting. Interestingly, many of those fighting with the Quds Force in Syria are not Iranian, but rather militants from Lebanon’s Hezbollah or Afghan refugees recruited by the IRGC.

Operations in Yemen

• In Yemen, Iranian and U.S. allies face off.  The four-year civil war, currently under a cease-fire agreement, demands a Houthi (Iranian back rebel group) withdrawal of Hodeidah, followed by a withdrawal of forces fighting for the Yemeni (Saudi/U.S. backed) government from the outskirts of Hodeidah.

What are the Risks to the U.S. and its interests now?

There are reports that Iran felt the U.S. would strike first in the past few weeks and the IRGC was preparing for counter attacks throughout the region. Academy’s Geopolitical Intelligence Group does not view the current threat environment as one where the U.S. would strike preemptively, though the risk remains for miscalculation and escalation.

The most likely escalation would result from a proxy attack on an ally or non-U.S. shipping, where Iran would attempt to deny responsibility to garner global support, while the U.S. would deem it necessary to respond.

This attack could be conventional, but we can’t underestimate the possibility that Iran will use its cyber warfare capabilities.  Academy’s Geopolitical Intelligence Group has often discussed Iran’s ability to destroy and not just disrupt with their cyber-attacks.  While the U.S. has hardened its defense against cyber-attacks, some of our allies could be more vulnerable to the real and present cyber threat.

Additionally, a mistake could happen at sea as small armed Iranian boats constantly harass U.S. forces. In this heightened threat environment, if one of our ships feels threatened, they may act first in self-defense.

This heightened state and the attention paid to U.S. mobilization may, however, ultimately reduce the risk of direct conflict between the U.S. and Iran.

“With the extensive media coverage of the situation, IRGC understands the consequences of direct action against U.S. forces—that decreases the probability of a direct assault and increases the probability of covert action on the part of Iran.”

General David Deptula

 

Original Post 5/22/2019

Don’t Poke the Bear

While it may be difficult to prove with certainty, it seems highly likely that Iran was behind the attacks on Saudi ships yesterday. This morning, Saudi pumping stations were hit by a drone attack. Two stations were hit and a pipeline capable of transporting as much as 5 million barrels a day was down temporarily. According to a Bloomberg news story, the perpetrators were “Iran-backed rebels in neighboring Yemini”.

It seems that the intended threat of our carrier movements, meant to deter Iran, is not working. Please see last week’s report on Tensions Rising but Not at Boiling Point for more detailed analysis.

What Our Geopolitical Team Is Saying

Rachel Washburn has been getting constant updates from our geopolitical advisory team.

Army General (ret.) Kearney suspects, “Iran would like to provoke a US or KSA response to deniable sabotage likely directed by them”. The next thing to watch out for from our perspective is if we send a Carrier Battle Group through the straits – which would be designed to “amp up tensions”.

Air Force General (ret.) Deptula goes on to say:

The language emanating from Tehran is not encouraging and is clearly an escalation play. This should not come as a surprise as the regime desperately needs a large-scale distraction to divert the public from its self-inflicted domestic policy woes. This regime does not have a good track record of objectively assessing the reactions of its opponents and has an ideological obsession with martyrdom.  Russia will encourage Iran to pursue a full-scale conflict as it desperately needs to drive up the price per BBL of crude oil.

There is thus a real prospect the regime may attempt to fight a full-scale conflict with the US and its allies in the Gulf. With a major investment in TBMs, ASCMs, armed speedboats and recently delivered Russian S-300PMU2 / SA-20 SAMs it may believe it can win, especially if it focuses its firepower on soft civilian targets, i.e. oil terminals, tanker traffic etc.

The market does not seem to view recent provocation as likely to result in a significant escalation as General Deptula sees it.

While we have stated that deterrence is our first and best option, we are accumulating the forces necessary to accomplish any mission determined to be necessary.

The questions we are trying to answer next, led by General (ret.) Marks are:

• Is Iran just poking the bear, or do they really intend to wake us up?
• Is Iran miscalculating their strength, or our resolve? Have we let acts of aggression go by with a slap on the wrist for so long that they don’t fear our willingness to respond?
• Are we miscalculating their strength?
  • That seems highly unlikely on the traditional military front where our threat assessment and intelligence make our generals universally comfortable.
  • Could Iran believe they have a cyber capability that we aren’t prepared for? This seems more plausible given their activity as one of the worst Nation-State perpetrators of cyberattacks.

One wildcard on our side is, as General (ret) Tata points out, Bolton is known to be hawkish and he and Pompeo are front and center in D.C. right now while the acting Secretary of Defense has had little visibility. Could this tip us toward being more aggressive than the market is pricing in?

Bottom Line

The water still isn’t boiling, but it is starting to bubble.

 

Original Post 5/14/2019

Carrier Strike Group and Bomber Group Deployed to U.S. Central Command

The USS Lincoln Carrier Strike Group is being deployed to the region from the Mediterranean Sea, where it has been conducting operations with the USS John C. Stennis Carrier Strike Group for the past few weeks. Currently, there are no U.S. carriers in the 5th Fleet Area of Operations.   While this deployment is new, it is not as much of an escalation as it may seem. The Stennis will be heading to Norfolk, VA for mid-life refueling and the Lincoln will be changing homeports and moving to San Diego, which would make its transit through the 5th Fleet Area of Operations part of its voyage to Southern California. Additionally, the U.S. will deploy a Bomber Task Force to the region. The U.S. withdrew its B-1 bombers from the Middle East in March as part of a maintenance rotation, but it is unclear whether the B-1s would return, or another group, such as B-52 bombers, would be sent instead.

The Lincoln Carrier Group will be initially stationed outside the Gulf, because it doesn’t need a high level of proximity to execute its mission. However, the Group will likely continue to ensure safe passage and transit through the Strait to demonstrate our presence and capability.  In April 2019, President Trump announced the U.S. would not provide any exemptions from U.S. sanctions for countries purchasing Iranian oil. Iran quickly denounced this action as illegal, as it became clear that the United States’ goal was to drive Iranian oil exports to zero.

As we discussed in our April 24th Podcast, Iran has a history of causing trouble in the Strait and the rest of region. Of concern, however, is that U.S. intelligence has been picking up “chatter” about Iranian-backed Shia militias in Iraq preparing to attack Americans on land or at sea. The intelligence assessment late Friday also noted U.S. forces may be in danger in other nations such as Syria and Kuwait as well. The specificity of these threats drove Central Command’s request for additional forces to send a message to Iran that it is best not to even think about targeting our forces in the region.

Priority #1 – Deterrence

The Lincoln Strike Group is there to project power and remind Iran of the dangers they face if they risk escalation.  This carrier Group has sufficient firepower for any mission that it could be tasked with (from protection, to a full aerial and cruise missile strike on Iran). That said, the goal is deterrence.

Strait of Hormuz – Disruption? Maybe. Blocking? No.

Iran does not have the capability to block the Strait of Hormuz.  They do not possess the firepower or equipment necessary to block the Strait, especially with the U.S.’ ability to intervene and impede them from any such attempt.  Freedom of Navigation is key. The Strait will be kept open for safe passage by the U.S.

Any provocative action by Iran will be met with a response (or pre-emptive action) from the U.S. that is proportional to the threat. There are three potential ways the current situation could escalate:

• The first scenario, and the most likely point of escalation, would be an exercise in precaution, shipping routes are shifted, ships travel more slowly, or military escorts are provided, slowing the flow of oil, but not stopping it.  Again, the concept of disruption as opposed to blockage. We are not even at this stage yet.

• A second scenario, more likely to be a progression of the scenario above, but that could occur at any time, is action or threat of imminent action by Iran.  This immediate threat or attack will be dealt with by the U.S. and will ensure ongoing access to the Strait – with some possibility of delays and re-routing, but not closure.

• A third scenario, a more difficult one to analyze, is the case where the U.S. intelligence community gains knowledge of a potential threat to American forces or interests in the region by Iranian or proxy forces that must be addressed.  This is more difficult as the U.S. would need to act quickly but would also want to assure our allies (before or after the fact) that the action was necessary.

We are watching for any signs that the escalation scenarios above may be occurring. 
 
Iranian Oil – Sanctions are Against the Buyers, Not the Oil Itself

The U.S. sanctions are a threat against those who buy Iranian oil, or aid and abet them in selling or distributing their oil.

Iran has ships that they use to sell oil to those buyers who are willing to purchase it and face the risk of U.S. sanctions.  Unless those ships were in some way being weaponized, the U.S. would not inhibit their movement.  This is important as the U.S. won’t initiate the risk of escalation in an attempt to stop Iranian oil sales.

It is unlikely, that away from the Iranian tankers, they will find other ways to transport oil -limiting their potential sales. Iraq, a “frenemy” of Iran, will continue to sell some amount of Iranian oil products.

China is an issue.  China, which had a waiver, will in all likelihood continue to buy Iranian oil.  How will we respond to this?  Can we sanction them as they are still allegedly trying to strike a trade deal?  Or, is this another reason that President Trump has suddenly come out with a tougher stance on China?  Of all the discussions surrounding Iran and oil, this might have the biggest impact near-term on markets if it becomes intertwined with trade deal negotiations.

Turkey should support the sanctions.  There is no obvious reason for Turkey to support Iran and many reasons why it should use this as an opportunity to enhance relations with the U.S. and signal its continued desire to be in NATO.  We don’t expect Turkey to do anything against the sanctions and would take any sign of it supporting Iran as a clear indication of further movement from the West and faster than previously thought.

Hamas and Hezbollah 

While tensions and violence have increased, the U.S. will not directly intervene.  We will support our ally, Israel, but it is an Israeli battle and it is capable of handling that on its own from a military standpoint.

Iran’s Nuclear Threat

The U.S. is no longer part of JCPOA, but still has credible intelligence on the status of Iran’s nuclear progress.  At this point the threat of a ‘nuclear’ war, in terms of nuclear weapons is non-existent.

CYBER

Given Iran’s expertise and history of cyber warfare and state-sponsored hacking, this domain of war cannot be ignored as we discuss in our podcast with General (ret.) Tata.

“I think it is rhetoric at this point and not as dangerous as other times in the past.  The carrier battle group is enroute and we will see an escalation of words as it gets near.  If we transit the strait, then the threat goes up and miscalculations can occur on either side.  I would be shocked by a preemptive strike by the U.S. but retaliation for any Iranian small boat attack is probable.  Iraq and Turkey will watch and as long as there is no U.S. provocation, they will be fine as we have done this before, and it is likely that the Department of State will tell them if we will transit the strait – showing freedom of navigation.”

Lieutenant General Frank Kearney

 

Original Post 5/9/2019