For the past two weeks Iran has committed a sizable portion of its military to rehearsing how it would go about closing the Hormuz Strait. For the most part, strategic analysts yawned, and declared Iranian blustering to be an empty threat. Judging from the oil markets’ relatively muted reaction, it appears that most of the folks who bet big money on what happens in the Persian Gulf share this opinion. So what is this consensus based on? First and foremost, it relies on the belief that the Iranian leadership will make a number of rational calculations and decisions concerning their own and their country’s future. Personally, I am not sure of the wisdom of betting on the rationality of Mahmoud Ahmadinejad and a few globally disconnected mullahs.
As the “Iran is bluffing” crowd sees it, Iran does not the possess the military wherewithal to close the strait: disrupt traffic, yes; close it, no. Everyone also assumes that Iran’s leaders understand that closing the strait would mean that Iran’s own oil shipments would cease. As Iran’s oil exports account for a almost a fifth of its GDP and fund 60 percent of its national budget, even a temporary closing of the strait would be an economic catastrophe. Moreover, as Iran still relies on imports for much of its refined fuel, any closure of the strait would rapidly shut down huge segments of its non-oil economy.
As the Wall Street Journal pointed out last week, however, these Iranian exercises closely coincide with “the U.S. and Europe at last mustering the gumption to target [with sanctions] Iran’s multibillion-dollar oil industry.” If sanctions do put a serious crimp in Iran’s oil and gas exports, the mullahs may decide there is little difference between the West’s closing off their access to export revenues and their doing it themselves — except that in the latter circumstance the rest of the world would share Iran’s pain. As the political and economic situation in Iran moves from dismal to catastrophic, one can easily envision internal scenarios where closing the Strait of Hormuz begins to appears as a rational option.
It may be true that, even if Iran wanted to close the strait, its military, when confronted by the U.S. Fifth Fleet, would be incapable of doing so. One should not, however, be sanguine about this being the case. Iran has hundreds of ballistic missiles, three Kilo-class submarines, and a host of fast attack boats (armed with anti-ship missiles). There is no end to the mischief a clever opponent can make with such an arsenal. For instance, in the 2002 Millennium Challenge war game, retired Marine lieutenant general Paul Van Riper, playing the Iranian side’s commander, caused so much damage to the U.S. and allied fleet that the game had to be stopped. Only after the fleet was resurrected from the bottom of the sea was the game able to continue.
Even this, however, misses the point. To create massive global economic dislocation, the Iranians do not have to keep the strait closed or even close it at all. All they have to do is make it difficult for ships to transit. On a daily basis approximately 15 supertankers make their way through the strait, carrying over 15 million barrels of oil — a sixth of the world’s supply. Any real threat to these shipments would see insurance rates skyrocket, assuming that shipping companies, captains, and crews even wanted to risk the trip.
Moreover, if the Iranians did try to close the strait, it is unlikely they would limit themselves to just that action. Rather, we could expect Iran to sow mines throughout the Persian Gulf, particularly just outside ports and within the shipping lanes. Saudi Arabia would probably have to endure a barrage of hundreds of missiles, most of them aimed at oil-shipment chokepoints, such as the stabilization plant at Abqaiq. These would be closely followed by as many air sorties as Iran’s 100-plus attack aircraft could launch before they were overwhelmed by U.S. airpower. All of this would be catastrophic to the global economy, and we have not even considered what damage Iran’s special forces or its sponsored terrorist groups might do. It is also worth noting that most of Saudi Arabia’s oil-rich areas are populated by Shias, who may have some sympathy for their co-religionists in Iran. Finally, we have not even considered the possibility that Iranian conventional forces, taking advantage of our withdrawal from Iraq, might move into Basra to interrupt Iraqi, and possibly Kuwaiti, oil shipments.
So, what happens if Iran does strike with its entire arsenal of options? For one thing, oil immediately spikes to $200 a barrel, and the price of gas tops $15 or $20 a gallon. This, in turn, will snuff out the nascent global economic recovery, and we can count on a sharp recession. How fast and decisively U.S. and other world leaders react will decide the deepness and length of this recession. A rapid release of the strategic petroleum reserves would soon bring down oil prices. Moreover, the world has enough oil in strategic reserves to make up expected losses from Iranian attacks for a little over a year. The United States, therefore, has that long to both demolish Iranian offensive capabilities and repair the damage. In short, if the world acts decisively, an Iranian attack would cause a severe, but short-lived, economic dislocation.
Of course, everything becomes harder if Iran possesses a nuclear weapon. On the other hand, everything becomes much easier if the West strikes first.
— Jim Lacey is the professor of strategic studies at the Marine Corps War College. He is the author of The First Clash and Keep from All Thoughtful Men. The opinions in this article are entirely his own and do not represent those of the Department of Defense or any of its members.