By Alastair Crooke
The 60-day MoU has expired. The framework of Iranian pre-conditions for any start to negotiations nonetheless lingers on in its comatose state.
Instead of the endlessly touted ‘Iran deal’, the picture is almost the complete opposite of what President Trump sought to create when he adopted the MoU framework (even if it is not clear whether he really intended to pursue the framework through to some sort of real agreement, or whether the framework was simply a device that Trump sought to leverage out as a platform for full American hegemonic pressure on Iran in order to compel Iran to open Hormuz on American terms.)
But talks are not happening. There are zero negotiations. The Strait of Hormuz remains – as at the outset – at the centre of the conflict, and effectively shut. Meanwhile the possibility of escalation has become much closer – one might say almost inevitable – as Iran have indicated its intent to pro-actively escalate against American and Gulf infrastructure targets unless Trump abides over the next 3-4 weeks by the well-known Iranian preconditions.
One early Iranian precondition is no longer implicit, but explicit: The Iranians have specified that the Palestinian arena that must be covered by the ‘the ceasefire for all, or ceasefire for no-one’ precondition. Of course, Israel won’t do this. They are escalating violently – a veritable “land grab” – against Palestinian refugee camps and villages in the West Bank.
Plainly, Iran’s preconditions are unlikely to be accepted by Trump. For, combined, they represent an unmistakable Iranian demand for the wholesale dismantlement of the U.S. military infrastructure of the siege surrounding Iran – effectively U.S. capitulation in West Asia.
Trump, more than anything, detests to be viewed as a ‘loser’.
Worse, from Trump’s perspective, his war on Iran, far from making the Middle East a sea of tranquillity and peace ‘after a thousand years of conflict’, as he claimed, his war on Iran has precisely ignited the regions’ many underlying tensions, setting them on fire. The region today is a tinderbox, rather than an exemplar of peaceful co-existence. Even his erstwhile allies have turned against him.
The most serious bush-fire is that in the Palestinian arena. Primary elections have been held by Likud. And General Elections are set to take place in Israel on 27 October. But already, it’s clear that elements of the political Right in Israel are planning to set the West Bank alight in order to ensure their polling victory – or at least to eliminate the possibility that any other government can be formed. A provocation centred on Al-Aqsa Mosque has been hinted at by Israeli politicians.
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| One of many mosques in Gaza already destroyed by the IDF |
The Palestinian arena, of course, remains the combustible detonator which can set the region afire. As Ben Caspit outlines:
“The fanatics’ plan … is to create chaos, to bring about a biblical Gog and Magog war, at the end of which it will be possible to fulfil Smotrich’s “decision plan” and expel the Palestinians … or push them out by definition … The end of this plan will be the end of those who dream of a Riviera in Gaza and of crowds of Gazans leaving in buses for “voluntary immigration” … This will not happen. What will happen is bloodshed in commercial quantities and a greater, more real and threatening danger than anything we have encountered so far …”.
An angry and frustrated Trump called a team meeting last Saturday at Camp David to consider next steps in the wake of the expiry of the 60-day MoU de-escalation period.
Credible reporting from Marjory Taylor Green states categorically that Trump again expressed great frustration that he had not achieved his objective in Iran – to force it to surrender, to capitulate.
Trump is bemused and angry that Iran is proving so difficult to bring to capitulation, and so is toying with other ways of achieving their surrender. And so, we read Marjorie Taylor Greene leaking that Trump again discussed the possibility of using tactical non-strategic nuclear weapons against Iran.
This is not the first occasion that Trump has raised such a possibility. Reportedly, he has raised the question on two earlier occasions, the first in April, during the conflict with Iran. Trump’s preoccupation with this question however has older roots. Reportedly, it lay at the crux to his dispute with Rex Tillerson and James Mattis.
Tillerson, at the time, was Secretary of State, and Mattis was Defence Secretary. During the Trump 1.0 mandate, he kept contending that the U.S. should be able to use tactical nuclear weapons more freely. ‘Why not?’, he would ask. Why should we [the U.S.] be held back, or debarred from using them, Trump questioned. And the answer always came back from Tillerson and Mattis too, that nuclear weapons were only for strategic deterrence. They were not to be deployed willy-nilly, as an alternative to other forms of munitions.
Trump was not happy with this answer, reportedly. Well, now we’re back to the same argument, because not only did Trump raise it again at last week’s meeting (this is probably the third time that he suggested it in the context of the Iranian conflict) – but the issue is returning in a new context.
Elbridge Colby, Under-Secretary at the Pentagon, responsible for defence policy, and who played a significant part in the drafting of the National Security Statement, apparently advocates for tactical weapons to be re-categorised as ‘tactical weapons’, and not simply confined to their place as strategic deterrence. Colby argues that U.S. failure in the conventional military arena (i.e. in Iran), could justify the use of tactical nuclear weapons – to compensate for the loss of U.S. conventional deterrence.
This debate that has not finally been settled.
And it is into this context that Netanyahu has been lying about the imminence of a nuclear threat from Iran for which there is no evidence; nor is there solid evidence that Iran is preparing a weapon, Israeli Military Intelligence avers. Netanyahu produced no evidence to support this case during discussions of the 28 February attack on Iran, Israeli journalist investigators collectively believe.
AMAN, Israel’s military intelligence arm, supplied to the Israeli cabinet a completely contradictory opinion. There had been a number of investigations by very senior journalists on which they all agree that the military intelligence indicated there was no evidence that Iran was moving towards a weapon, no intelligence that they were intending so to do, and no intelligence to suggest that something was happening on the ground that might be taken to assume there was a move towards starting a weapons programme.
In short, there is no evidence that would support a preventive tactical nuclear attack by the U.S. ‘to prevent Iran having a bomb’. It would be false to suggest otherwise – shades of the Iraq war.
This comprises the background to the talk about the possibility of the U.S. dropping a nuclear device on Iran. It remains a possibility, but there are several voices in the Trump circle that are adamantly opposed, believing its use would constitute a grave war crime.
So, for now, the Trump strategy has turned to compelling Iran’s defeat by economic means. U.S. Treasury Secretary Bessent insists that Iran’s economic circumstances are catastrophic and that (paraphrased) he’s going to put ‘the mother and father’ of all sanctions on Iran.
How feasible is this strategy? Is Iran in as desperate straits as Bessent suggests, or is it not? If you were to take the Tehran Stock Exchange as a good ‘bell-weather’ for the Iranian economy, then since May, it has risen by 58.7%. There is high inflation in Iran, that is true. But the rate of increase of inflation has declined from 7.2% in June to 3.2% today. The loss of value in the Iran Rial, though continuing, is happening at a much slower rate.
Iran had 140 million barrels of oil exports at sea at the outset of the conflict, which brought them resources of about $1 billion. In February between 23rd, February to the 13th April Beesent temporarily lifted oil sanctions. During that period of 66 days, Iran sold some 80 million barrels of oil, as well.
So yes, Iran’s oil export volumes are down, but the price at which they are being sold is higher.
This is not to say that the economic situation in Iran is rosy, but more significantly, in response to Bessent’s assertions of desperation, there is no evidence to date, nor of public unrest because of the economic situation.
The U.S. can attempt to block the sea corridors, but the land corridors from Iran through Pakistan and the Caspian to Russia still function.
So perhaps the Iranian economy may be more resilient than Bessent assumes. Then what likely is Bessent’s plan? He doesn’t say. But the most obvious targets would be to put sanctions on the Chinese ‘teapot refiners’ that have traditionally heavily bought Iranian oil. And possibly to sanction Chinese banks that finance such trade. That seems to be a possible first resort. The second resort might be to expropriate Iran’s crypto and digital assets, wherever possible. And to ask allies to seize any and all Iranian assets in their jurisdiction.
Taken together, this may sound very impressive and threatening for Iran. But circumstances today are very different from 2015 when the JCPOA was first implemented. At that time, the JCPOA was embedded into a UN Security Council resolution, and therefore its provisions were binding on Russia and China.
Largely, Russia and China did observe the JCPOA sanctions, until the latter’s demise following Trump’s pull-out from the agreement in 2018. Now, however, circumstances are very changed. Russia and China are no longer so supportive of sanctions on Iran. On the contrary, they have become transformed into co-belligerents with Iran in this war (co-belligerents in the sense of providing intelligence, providing the technical means by which real-time intelligence can be provided to missile sites and to base stations in Iran, and other support, perhaps in facilitating payment systems that bypass the dollar).
Bessent may have it in mind to target the purchasers of Iranian oil in China, and Chinese banks, too. But this would bring the U.S. into direct conflict with both countries. The last time the U.S. applied sanctions on the ‘teapots’, China activated an Act making it illegal for Chinese entities, domestic and foreign, to comply with American sanctions.
Would they do the same again? Well, in all likelihood, yes. It is a different world from that of 2015 – the U.S. dollar may be still be the most used medium of exchange for settling trade transactions, but it is no longer the world’s main reserve asset. That is now gold.
And today, the reasons why historically the dollar became dominant are slipping away (just as they did for Sterling, where the transformation from its earlier standing occurred unexpectedly fast).
The utility of holding U.S. Treasuries as rainy-day assets plainly vanishes if Bessent prohibits their sale in his desperation to preserve the dollar’s FX value, leaving holders stranded (which is currently the case). Of course, debt-repayment needs will continue to serve as a demand for dollars, but essentially the basis to the dollar’s huge global position lay in the issuance of cheap dollar credit.
That advantage is over. Ten-year Chinese bonds are now 3% cheaper. No surprise then that European Banks now are lending to customers in Chinese Panda Bonds in an ever-deepening renminbi debt market.
And if all Iran’s assets, including crypto, are to be arbitrarily seized by the U.S., whose assets will be safe? Trust in the U.S. currency is already withering as the dollar exchange value falls and volatility seizes hold.
Bessent’s ‘Iran initiative’ may turn out to be self-defeating, both by further weakening the dollar and by effectively persuading states to turn to China’s low-key roll out of its alternative financial super highway for security and stability.
Today, Iran’s allies – although not in full military alliance, but in strategic partnerships of different degrees – undoubtedly have helped Iran and will likely continue to help Iran bypass the U.S. dollar plumbing by opening the door into the evolving ‘global plumbing’ system. They have no interest in seeing Iran defeated.
~ Alastair Crooke is a former British diplomat, founder and director of the Beirut-based Conflicts Forum.
