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