(Bloomberg) -- Iran and the U.S. stepped back from the brink of open military conflict this week, but underlying tensions that led to a spate of violence in the past month aren’t going away and sanctions pressure on Tehran is climbing even higher.
Despite a modest easing of tensions -- President Donald Trump said “Iran appears to be standing down” -- the Islamic Republic won’t back down from its goal of making the U.S. pay for killing a top general and for the crippling sanctions imposed since 2018, according to a senior Western diplomat.
Instead, current and former diplomats and senior Pentagon officials predict the conflict is likely to return to a more common historic pattern: strikes by proxies on the U.S. and allies, cyber attacks and harassment of ships in the Persian Gulf. Actions like those can muddle Iran’s role and make it harder to justify a direct military response from the U.S.
“Iran wants to avoid an all-out war with the United States it cannot win,” said William Burns, a former U.S. deputy secretary of state who’s now president of the Carnegie Endowment for International Peace. “Its leadership is eager to move off the overt tit-for-tat cycle to the murkier world of proxy-led, asymmetric attack in which it feels more comfortable and where it feels it has the advantage.”
The absence of American casualties from Iran’s missile attack on a joint U.S.-Iraqi base early Wednesday morning also allowed Trump to declare his decision to kill General Qassem Soleimani last week a success. Instead of responding with military action, Trump imposed fresh sanctions targeting Iran’s metals, construction and textile industries as well as eight senior officials.
The step back has eased concerns in global markets for now. But it wouldn’t take much for the Iranians -- at very little expense, whether directly or through their proxies -- to renew those worries by disrupting shipping routes in the Persian Gulf, targeting Saudi Arabia or stirring up trouble in Middle East countries like Bahrain, where the Shiite-led Islamic Republic can appeal to sizable Shiite populations.
Nervous Clerks
“All the Iranian navy has to do to achieve its strategic goals is to make insurance clerks in London nervous,” David Des Roches, an associate professor at the National Defense University, said Thursday during an event in Washington organized by the National Council on U.S.-Arab Relations. “Their military approach of asymmetric proxy warfare allows them to stir the pot at a relatively low cost to themselves and occupy a disproportionate amount of their adversaries’ resources.”
Top Pentagon officials are already warning that the threat hasn’t gone away. General Mark Milley, chairman of the Joint Chiefs of Staff, said Wednesday that his commanders expect militias with “substantial links” to Iran to “conduct terrorist operations” against U.S. and coalition forces in Iraq and perhaps elsewhere.
Iran’s Supreme Leader Ayatollah Ali Khamenei said it’s now the Iraqi militias’ turn to act, given that Abu Mahdi al-Muhandis, who led Iran-backed proxy forces in Iraq, was killed in the same drone strike that took Soleimani. Hezbollah leader Hassan Nasrallah has also pledged a response.
The U.S. accuses Iran of orchestrating the September attack on Saudi oil processing facilities, which marked the first time multiple drones were launched from a long distance in a targeted assault. It temporarily took out a portion of Saudi Arabia’s oil production and spooked energy markets.
“A year ago, we would never have estimated that Iran could carry out the kind of precise, focused strikes it did against Saudi oil facilities, with the effectiveness it did,” said Anthony Cordesman, who holds the Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies in Washington. “You are watching major shifts taking place in the weapons and in the technology that will shape asymmetric warfare in the future.”
The Iranians understand this.
They’ve provided missile and drone technology to Yemen’s Houthi rebels, who are fighting Saudi Arabia in an indecisive war that started in March 2015. The transfer of technology to the Houthis has prolonged the conflict, frustrated the kingdom’s leadership and allowed the Houthis to attack airports and military bases inside the kingdom.
Back-Channel Talks
The Iranians also use more traditional tactics. They coerce and threaten Shiite officials in Iraq who don’t fall in line with their policies, according to an Arab diplomat who spoke on condition of anonymity. They run inexpensive but sophisticated and effective propaganda campaigns that aim to influence opinion in their favor in countries with Shiite majorities, the diplomat said.
One sliver of optimism: Analysts say the pullback by both Iran and the U.S. could also reopen space for back-channel diplomacy, either at the United Nations or through a third country. The Swiss, who have diplomatic ties with Tehran, serve as an intermediary for the U.S. in Iran.
Joseph Westphal, a former U.S. ambassador to Saudi Arabia and undersecretary of the Army, said the chances for diplomacy are now greater because both sides realize that an all-out confrontation is in neither of their interests.
“Both countries will ramp up their effort at back-channeling as they see there’s nothing to gain from a major escalation,” said Westphal, who now teaches international affairs at the Wharton School at the University of Pennsylvania. “This may not happen within days, but diplomatic efforts will increase over time. There’s a higher chance they will at least communicate a message to each other to reduce the aggression on both sides.”
But wary of the threat of terrorist reprisals linked to the pressure on Iran, the top Democrats on the Senate and House foreign relations committees, Senator Bob Menendez and Representative Eliot L. Engel, have asked Secretary of State Michael Pompeo for details on the department’s plan to protect U.S. diplomatic missions.
Trump told Fox News that Soleimani was killed because the U.S. learned he was “looking to blow up” the American embassies in Baghdad and four other locations.
Iran’s “proxies are capable of attacking Americans and our interests across the globe, including military installations, diplomatic personnel and facilities, oil infrastructure, and our allies, and have not hesitated to do so in the past,” Menendez and Engel wrote.
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