Iran Update – Tensions rising but not near boiling point

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