The stable flow of Gulf petroleum, product, and gas exports throughout the world affects the cost of energy throughout the global economy. This flow is critical to key Asian and European manufacturers, the global economy, and U.S. imports and jobs. The U.S. may be approaching energy independence in terms of oil and gas, but EIA reports that it still had net imports of 4.9 million b/d of petroleum and products in 2016. Total U.S. imports equaled 10.1 million b/d at a cost of some $44 billion—offset in part by 5.2 million b/d in exports.
What is far more important to the U.S. economy is that the stable flow of Gulf and other MENA petroleum exports affects key U.S. trading partners in ways that have far more impact, and steadily increase in impact over time. In terms of direct energy costs, U.S. prices will rise to match world prices in any major energy crisis, and this has an immediate critical impact on the U.S. economy.
The most serious impact, however, will be on the overall structure of U.S. trade. The U.S. is becoming steadily more interdependent with other economies. The U.S. Census Bureau estimates that the U.S. GDP grew to $18.56 trillion in 2016, but some $2.2 trillion or nearly 12% of this GDP was sustained by U.S. imports of goods and services. Some $463 billion—largely in manufactured goods—came from China, $132.2 billion came from Japan, $69.9 billion came from South Korea, $46 billion came from India, and $39.3 billion came from Taiwan. This is a total flow of some $750 billion worth of specialized manufactures and goods to the U.S. alone from only five of the countries that are largely dependent on the stable flow of petroleum exports from the Gulf.
Iran has exploited the "game of thrones" between Arab states and factions, and taken advantage of their self-inflicted wounds. Iran has taken advantage of the consistent self-destructiveness of the Arab world, its failure to check religious discrimination, and the civil wars and conflicts in Arab states. It is actively exploiting the reality that Arab unity is a strategic myth, Arab alliances are largely a strategic fiction, and serious tensions exist even within the Gulf Cooperation Council (GCC) between key states like Qatar and Oman versus Saudi Arabia and the UAE.
It has steadily expanded its regional influence over key neighboring countries and their security forces, and/or key sources of instability within them. These countries include Lebanon, Syria, Iraq, Afghanistan, Bahrain, and Yemen. Iran threatens to create a corridor of lasting strategic influence that divides the Arab world from Iran through Iraq, Syria to the Mediterranean. Its Islamic Revolutionary Guard Corps (IRGC) and Al Quds force, train and assist efforts, use of Iranian volunteers and ties to Lebanon's Hezbollah, shipments of arms, and funding of non-state actors all give it broad, strategic leverage to intervene in other states.
Iran's ties to the Houthi and other elements in Yemen include the supply of land attack and anti-ship missiles and missile components, some of which are now being smuggled through Oman. Iran presents a potential threat to shipping through the Bab el Mandab at the entrance to the Red Sea, where an Iranian-dominated facility could threaten virtually all shipping through the Suez Canal, including some 3.9 million b/d worth of petroleum and other liquids (crude oil and refined products) and LNG—which accounted for 17% and 6% of total Suez cargoes. In addition, the EIA estimates that 1.6 million b/d of crude oil was transported through the Red Sea to the SUMED Pipeline that runs parallel to the Suez Canal to the Mediterranean Sea, and then loaded onto tankers for seaborne trade. Total oil flows via SUMED and the Suez Canal were 5.5 million b/d in 2016, 100,000 b/d more than in 2015.
Iran had moved to the breakout point in terms of the development of nuclear weapons before it agreed to the Joint Comprehensive Plan of Action (JCPOA). It now has all of the technology needed to develop fission weapons, and possibly boosted weapons. Its nuclear agreement with the 5+1—the JCPOA—has led to the dismantling or modification of most of its major facilities. However, Iran can continue some key dual-use activities like centrifuge development, has shown it will continue its missile developments, and may be able to arm its missiles and aircraft with chemical and biological weapons.
Iran seems to be making significant gains in its relations with Russia, China, and Turkey that will expand its ability to acquire advanced arms and exploit the many divisions within the Arab world. The Russian sale of S300 advanced surface-to-air missiles may only be the first example of advanced arms transfer to Iran, and the JCPOA would eventually allow transfers of virtually any advanced weapon—or its related technologies—to Iran.
Iran exploits the serious strategic mistakes of the United States. The U.S. invasion of Iraq removed a dangerous dictator, but also left Iraq deeply divided, with limited military and security capability to provide either internal security or deter and contain. The U.S. military has developed good working relations with its Arab strategic partners, but broader U.S. policymaking has not provided convincing security guarantees, and has been erratic in dealing with crises in countries like Libya, Iraq, Syria, and Yemen. U.S. efforts to aid Egypt or help create a stronger and more unified GCC have had mixed success at best, and the U.S. has no clear regional strategy for Iraq or the more fragile states in the region that extends beyond the defeat of ISIS. Despite U.S. success in helping Iraq defeat ISIS, it has no credible strategy designed to help Iraq recover from war and develop. More broadly, it has no credible strategy to help bring both security and civilstability to the MENA region and key strategic partners within it.
Similarly, Iran is able to take advantage of the fact that "Europe"—like the "International Community"—is a strategic myth with no known real-world address. Individual European countries—and other countries like Canada and Australia—have contributed forces to the fight against ISIS and terrorism in Iraq and other MENA states, but Europe has failed to take any meaningful cohesive action to deal with instability and conflict in any MENA state, and cuts in defense spending has steadily reduced to power projection capabilities of key European states like Britain and France.
These are all reasons to keep U.S. military forces in the Gulf and realize that they will remain a vital strategic interest indefinitely into the future. They are reasons to do everything possible to unite America's Arab strategic partners, to create a strong level of U.S. and Arab deterrence to all of Iran's military efforts and adventures, and to ensure that there will be no further clashes by Israel and the Arab states. They are reasons to closely monitor the JCPOA and ensure that Iran honors it, and to try to work with Russia, China, and Turkey to limit their ties to Iran and advanced arms transfers.
They are also reasons to try to do as much as possible to end the level of pointless feuds and tensions between America's Arab strategic partners, and to focus on helping them develop, diversify their economies, and strengthen their civil stability and security—as well as their military capabilities and defense. Strategic stability in dealing with Iran and the other threats in the MENA region has two critical dimensions: The military is one such dimension, but the events of 2011 have shown that the civil dimension is equally and sometimes more important.
But, there is another side to dealing with Iran. Iran did give up many critical aspects of its nuclear program before the JCPOA's Implementation Day on January 16, 2016. It had to modify its Arak heavy water reactor so it could not produce weapons grade plutonium. It had to accept tight controls on its stocks and use of heavy water and its other reactors. It had to accept 15 years of limits on its spent fuel reprocessing and on its centrifuge enrichment capacity. It had to accept limits to its centrifuge production, research and development. It had to cease all uranium enrichment activity at its mountain facility, Fordow, for 15 years. It had to accept nationwide limits on all enrichment activity and on the size and level of enrichment of all its uranium holdings, as well as 25 years of limits on its uranium ore concentrates. It had to accept a new inspection protocol, accept more inspectors and new electronic seals, guarantee access for inspections, provide transparency in other areas like centrifuge manufacturing components. It had to address all of the areas of concern in past International Atomic Energy Agency (IAEA) reports, and agree to not carry out a wide range of weapons design related research and test activities.
The JCPOA agreement is not perfect and some forms of cheating are always a possibility, but no arms control arrangement can ever be perfect. The current U.S. crisis in dealing with North Korea should be a warning that it is far better to have a JCPOA that requires constant effort and presents some risks than help create a structure in which Iran goes openly nuclear and seeks to develop anything like a meaningful ICBM. Adding and enforcing sanctions that effectively mean Iran does not get the promised economic benefits from the JCPOA is far more likely to lead to a renewal of Iran's nuclear efforts, and/or a major increase in tension and its other military efforts, than add to U.S. and regional security.
The U.S. also needs to recognize that the Iranian insistence on continuing missile development was almost inevitable—given the near obsolescence of much of Iran's air force and the problems in keeping it operational at high sortie rates in an actual conflict. There is no meaningful way to have a conventionally armed missile program that will not mean testing and deploying missiles with enough range payload to allow a missile to carry a nuclear weapon. This is why the U.S. and Russia set a standard based on the actual arming of a missile, and why a separate UN resolution that only dealt with the theoretical range payload of all missiles was not a practical choice for an Iran whose combat aircraft were vastly outclassed by Arab, U.S. and European air forces.
There are practical limits to what Iran will do to change this part of its military development—given the history of the Iran-Iraq War, and the fact it only has a small fraction of the arms import capability and access of the Arab Gulf states. For all the reasons listed earlier, the JCPOA is not the answer to many aspects of Gulf security. No meaningful arms control agreement in history has ever been perfect, endured without modification or change, or been self-policing. But, it is equally clear that forcing an end to the JCPOA in a way that leads to a nuclear Iran—and increases the risk of war—would make things far worse.
Reinforcing the U.S. strategic posture in the region should not mean needlessly alienating the Iranian people, or assuming that every element of Iran's political elite is hostile and will not trade its efforts to gain military power and influence for more economic development and political security. One has to be careful about calling given elements of Iran's leadership "moderate," or putting too much faith in reformers that may or may not be sincere, and often are arrested or deprived of influence when they show they are serious. Being careful, however, is no reason to reject second track diplomacy. It is better to give the benefit of the doubt when there is minimal risk in doing so, while constantly making it clear that the U.S. is willing to deal with Iran on a far more mutually productive basis if Iran choses a more moderate course.
The U.S. needs to make it clear that rather than relying on deterrence and containment, it would greatly prefer a different relationship with Iran that would bring about a more stable and peaceful Gulf and MENA region. The U.S. needs to show Iran's leadership that there is always a better option than an arms race and confrontation. It needs to be careful with how it criticizes actions of the Iranian government, focusing on Iranian leaders who are responsible for Iran's provocative actions, rather than referring to all of Iran as a nation—or all of Iran's people—as responsible.
The U.S. should not create pointless problems for ordinary Iranians who want to study, visit, or do business in the U.S. Quite the reverse. Such visits and contacts are a key element in creating Iranian confidence and expectations that America can be a friend. Similarly, the U.S. should not confuse real enemies or hostile figures with the vast majority of Iranians and other Shi'ites. It should make it clear to its Arab partners that the care with which they treat their Shi'ite population—like every religious element in their society—does matter to the U.S.
There should be no illusions about—or tolerance of—Iranian arms transfers, military missions, volunteers, and use of movements like the Hezbollah. The U.S. should openly warn about such activities, and show it will react accordingly. It should not, however, tolerate cases where its Arab allies exaggerate Iran's role, or use it to justify mistreating their own people. The U.S. should work with its Arab partners to give them the assurances, security, deterrence, and war fighting capabilities they need to be secure. But again, it should strongly encourage them to take every step possible to make it clear to Iran that better relations and far less dangerous approaches to security can be negotiated if Iran's leadership changes its behavior.
The JCPOA meets an acid test: It is better than any credible present alternative. Letting the current cycle of growing confrontation, military build-up, and hostility continue is an equally bad option and alternative. It risks locking the U.S. and the region into what has already been a decades long arms race and creating steadily worse possibilities for future conflict. Iran does present real risks, and its leadership may leave the U.S. and its Arab allies with little future choice, but taking a bad case as a given and reacting by making things even worse makes no sense at all.