Tehran Goes to the Mattresses

Prepare for a Long, Tedious Fight

Of the grab bag of memorable quotes from The Godfather one of the best is the concept of “going to the mattresses” – scrapping business as usual and hunkering down for a long fight. It isn’t something you want to announce, even to yourself. Yet it’s also the clearest message to draw from Iran’s chatter about a self-serving deal with Oman to reopen the Strait of Hormuz… mostly. The IRGC is hunkering down for a long and tedious fight over the future of hydrocarbons.

The deal, Iran insists, opens the strait to the world but keeps it closed to Israel, the US and other “hostile” nations - a slippery definition that is entirely in the eye of the mullah. It’s also just theater, but it’s theater with a purpose. Presumably, Oman is looking after the Sunni side of things, but it’s hard to stay neutral when you shift from mediator to active participant in a potentially lucrative, short-term arrangement that will put it at odds with Washington. To fully reopen, Iran is calling for hefty concessions from sanctions relief, unfreezing billions in assets, regional withdrawal including lifting the blockade and laying off Iran’’s beleaguered 3H Club proxies: Hezbollah, Hamas and the Houthis.

The chances of the US agreeing to any of this is next to nonexistent, but to emphasis the point, Tehran has appointed a IRGC commander as the top security official. Which gives us insight into who is running the place and likely what they are up to next… namely that Tehran is going to the mattresses.

Diminishing Assets

Iran’s strategy was never to take on American might head-on, it simply hasn’t got the military or economic heft. What Iran can do is erode the system that supports US power. With it’s nuclear option off the table - or at least buried under it – Iran’s playbook begins with critical hydro-carbon supply chains for economic pain. Next will be undersea cables for chaos. The endgame will be to isolate actors in the US alliance network and make them think the US is an expensive ally.

The Gulf States, wary of a long American war may agree to a testy modus vivendi with Iran to get the shop open, but the solution is temporary at best. We can assume that Iran’s definition of “hostile nations” will be shifting and jealous. In the meantime, the petro-states are fast at work on new and existing pipeline build-outs to avoid around the strait altogether. Before the closure, some 15mm barrels a day went through the strait. The proposed build-outs take about 10m b/d, reducing what must go through the strait to 5mm by 2030. Most of these project are transnational so, we can assume, won’t be ready on time. And even that still leaves the Houthis sitting on the choke at the Bab el-Mandeb strait.

My guess is that Iran doesn’t really think that the current White House will accept any of this foolishness. Tehran’s move in announcing a deal, without the US, is to exploit the opportunity to make President Trump a lame duck after the mid-terms. So don’t expect Iran to play anything but hardball until next year. So they’ve hunkered down for a longer fight.

Will It Work?

In the short term, it isn’t a bad play, but time is not on Iran’s side: that the chokepoint is now a diminishing asset. On the other hand, American politics don’t lend themselves to anything other than the short term. With the mid-terms in November, congress is sniffing about reigning in the President’s ability to wage war from the White House - which is Tehran’s light at the end of the tunnel. Or so it thinks.

If Iranian politics is a black-box to the US, then American politics are absurdist theater to Iran. The IRGC can’t see the Democrats squandering their “Trump fatigue” advantage. The odds on the House going blue are about even, and the odds of a blue Senate aren’t that good. With more energy supply coming online, prices may stay elevated, but they aren’t likely to spike in the way Tehran needs them to keep the whip hand.

As for the US alliance structure that Tehran wants to unravel, they might want to be careful what they ask for. Saudi Arabia, Pakistan and Turkey signed a defense pact signaling that an attack on one is an attack on all - which boxes the regime in pretty well. In The Godfather, fat Clemenza explains to Michael Corleone that things could get worse if the “other families move against us.” Right now, there no strong indication that they are. The Gulf States might pay Iran’s toll as the price for keeping the shop open, they aren’t abandon the US in the short term, even if they’d like to.

Is there an upside to any of this? Maybe. “These things gotta happen…” Clemenza – wise as he is portly – explains philosophically, “helps to get rid of the bad blood.”