On January 3, 2020, the plane of Qasem Soleimani, major general of the Islamic Revolutionary Guard Corps (IRGC) and commander of its elite Quds Force, arrived at Baghdad International Airport. At the same time, the US MQ-9 Reaper, a prime assassination drone, was loitering in the area with other military aircraft.
At the Airport, Soleimani left with Abu Mahdi al-Muhandis, the deputy head of the Iran-backed Iraqi Popular Mobilization Forces. As they entered two vehicles, the convoy headed toward downtown Baghdad. At 1 am local time, the Reaper launched several missiles on Baghdad Airport Road. The two cars exploded in flames killing some 10 people, including Soleimani and al-Muhandis.
After the devastation, whatever was left of Soleimani could be identified only by his ring. Ironically, several perished Iranian and pro-Iranian commanders had been instrumental in the defeat of the Islamic State.
Secretary of State Mike Pompeo said Washington had made an “intelligence-based assessment” that Soleimani was “actively planning in the region” to attack US interests. In turn, President Donald Trump declared Soleimani was behind “imminent attacks” on US diplomatic facilities and personnel across the Middle East.
That’s the official story.
Afterwards, Trump’s team got caught offering mixed messages about Iran’s “imminent” attacks as a justification for Soleimani assassination. National security adviser Robert O’Brien says Trump authorized eliminating Soleimani who cooperated with his allies “to kill American diplomats and soldiers in significant numbers.” Defense Secretary Mark T. Esper claims there was “exquisite intelligence” indicating Soleimani was “conducting preparing military operations” akin to “terrorist activities” against the US. In turn, Pompeo seized Iran’s past behavior as justification.
None of these reasons, which stress attributed intentions rather than hard evidence, seem credible in the light of Iran’s efforts at multilateral diplomacy, its challenging economic conditions and the behind-the-façade attempt at de-escalation with Saudi Arabia. However, the mixed messages do reflect a longstanding US effort to justify “permanent war” in the Middle East and certain other hot spots. The House resolution to limit Trump’s war powers against Iran is a move in the right direction but it can neither reverse the past policy mistakes nor halt the current escalation.
In the subsequent TV address, Trump delivered his Orwellian soundbite. “We took action last night to stop a war… We did not take action to start a war.” And yet, several US planes were taking off from bases in the eastern United States toward the Middle East as Pentagon sent 3,500 members of the 82nd Airborne Division, one of the largest deployments in decades.
Amid mega rallies for Soleimani and Iraqi parliament calling for the expulsion of US troops from the country, Iran’s Supreme Leader Ali Khamenei spoke about the impending “retaliation.” Trump warned Tehran that any retaliation would result in US targeting 52 Iranian significant sites, including cultural sites. The allusion was to the number of American hostages during the Iran hostage crisis some 40 years ago.
Then came the bomb shell. Two days after the assassination, Iraq’s Prime Minister Adil Abdul-Mahdi addressed his country’s parliament suggesting that Soleimani was on a peace mission. According to Abdul-Mahdi, he had planned to meet Soleimani on the morning the general was killed to discuss a diplomatic rapprochement that Iraq was brokering between Iran and Saudi Arabia. Abdul-Mahdi said Trump personally thanked him for the efforts creating the impression that Soleimani could safely travel to Baghdad, even as the White House was busy planning a hit.
Subsequently, Pompeo rushed to defend the assassination, again. “We know that [the report about Soleimani’s peace mission] wasn’t true,” he said. “We got it right.” Once again, he presented no hard evidence.
In reality, the US assassination appears to have been the latest effort to preempt de-escalation plans in the region, to reinforce Iran’s destabilization. It follows years of misguided covert operations. Here’s how it happened.
From Trump’s U-turn to new Iran sanctions
Only a few years ago, there was still great hope in Iran. After years of diplomacy, the comprehensive nuclear accord (JCPOA, July 2015) was achieved between Tehran and the so-called P5+1 nations; that is, the five permanent members of the UN Security Council—China, France, Russia, UK, and the US, plus Germany together with the European Union (EU). Under the deal, Iran agreed to eliminate its stockpile of medium-enriched uranium, while the International Atomic Energy Agency (IAEA) gained access to all Iranian nuclear facilities.
To Iran, the deal offered relief from US, UN and multilateral sanctions on energy, financial, shipping, automotive and other sectors. These primary sanctions were lifted after the International Atomic Energy Agency’s (IAEA) certification in January 2016 that Iran had complied with the agreement. Yet, secondary sanctions on firms remained in place, along with sanctions applying to US companies, including banks.
After the 2016 US election, the Congress with its Democratic majority—not president-elect Trump—paved the way for a U-turn. Following the House of Representatives, the Senate in late 2016 unanimously extended the Iran Sanctions Act (ISA) for a decade. Stunningly, the deal that President Obama had portrayed as his legacy in the region was shot down surprisingly fast. Intriguingly, most Democrats reversed their positions regarding the nuclear deal.
As Trump arrived in the White House, he began developing a far more muscular policy against Iran to benefit from Saudi economic and geopolitical support. In May 2017, Trump and Saudi Arabia’s then-king Salman bin Abdulaziz Al Saud signed a historical arms deal, which totaled $110 billion immediately and $350 billion over a decade. Widely perceived as a “counterbalance” against the Iranian influence in the region, it cemented the ties between Saudi Arabia and the US. However, Crown Prince Mohammed bin Salman’s reform efforts have been tarnished by harsh measures against members of his family and opposition, the Khashoggi murder and dismemberment, and the devastating war and famine in Yemen.
In return for the Saudi deal, the White House began a concerted push to counter Iran’s regional and strategic weapons programs, which had been excluded from the Iran deal. In May 2018, Trump signed National Security Presidential Memorandum 11, “ceasing U.S. participation in the [Iran nuclear deal]” and taking additional action to counter Iran’s “influence and deny Iran all paths to a nuclear weapon.”
That’s when the US effectively nullified a decade-long unified, multilateral approach to Iran’s activities, while setting in motion unilateral economic sanctions, which have affected not just U.S. businesses but targeted commerce from other major economies, particularly China, France, Russia, UK, Germany and the EU.
Even after Iran’s missile attacks against two bases of American troops, which seem to have purposefully shunned human targets, Trump promised further ratcheting up of economic sanctions against Iran. The use of sanctions is predicated on a purposeful effort to overthrow the Iranian government.
From Bolton’s “Shah scenario” to regime change
The Trump administration has greenlighted clandestine efforts to weaken Iran’s “moderates” hoping to incite “hawks” into strategic moves that could be used as a pretext for regime change. In April 2018, Trump hired the neoconservative uber-hawk John Bolton as US National Security Advisor (he was booted less than a year and half later). A relic of the Bush era, Bolton had engaged in the “weapons of mass destruction” pretense that led to the Iraq War. Now he advocated regime change in Iran and other countries.
By November 2017, Bolton urged the US to have a contingency plan for a “Shah of Iran scenario” and regime change before February 2019; the 50th anniversary of the Iranian revolution. His change agent was Mojahedin-e Khalq (MEK), an Iranian opposition group which advocates a violent coup in Iran. In the early 2010s, the UK, EU and the US considered MEK a terrorist organization until then-State Secretary Hillary Clinton de-listed the group, to exploit it in US-led destabilization.
To support his economic sanctions with clandestine operations, Trump named Michael D’Andrea as the head of CIA’s Iran operations. Nicknamed “Ayatollah Mike,” he inspired the character of The Wolf in the Oscar-awarded movie Zero Dark Thirty (2012). Although D’Andrea failed to track Nawaf al-Hazmi, one of the hijackers who crashed American Airlines flight 77 into the Pentagon on September 11, 2001, he was made head of the CIA’s Counterterrorism Center few years later. With President Obama’s blessing, he also presided over hundreds of US drone strikes in Pakistan and Yemen. His operatives oversaw several interrogations, which a US Senate report has described as torture. And he has been blamed for the Camp Chapman attack in Afghanistan in which seven CIA operatives were killed.
When the then-CIA chief Mike Pompeo became Secretary of the State, his deputy Gina Haspel took charge of CIA. Following 9/11, Haspel oversaw a secret CIA prison in Thailand, which housed suspected Al-Qaeda operatives. Relying on “enhanced interrogation techniques,” she, like D’Andrea, was deeply involved in the detention and interrogation program condemned by the 2014 Senate report.
Worse, Haspel played a key role in the destruction of 92 interrogation videotapes that showed the torture of detainees in black sites. While the Bush and Obama era CIA leaders supported her CIA nomination, more than 100 retired US generals and admirals expressed “profound concern,” due to her record.
Plunging oil production
D’Andrea and Pompeo favor regime change in Iran and some observers see their covert-operation influence in the 2019-20 Iranian protests in many cities. As Iranians have greatly suffered from US efforts at domestic destabilization and international insulation, some demonstrators are obviously motivated by economic woes. But it also seems that Bolton’s Shah scenario and its variations remain on the table, as evidenced by the role of the US-sponsored Pahlavi loyalists among some protesters.
In contrast, Iranians see oil as the main reason to US interest in the Middle East. Iran and Iraq hold some of the world’s largest deposits of proved oil and natural gas reserves. Combined, their reserves exceed those of Venezuela, which has the world’s largest proved reserves.
Between 2010 and 2013, the sanctions hurt Iran’s economy contributing to the fall of crude oil exports from 2.5 million barrels per day to 1.1 million by mid-2013. That, in turn, was compounded by the plunge in oil prices since early 2014. Following the nuclear deal, Iran’s production soared back to 4 million barrels. With Trump’s efforts at regime change, the capacity steadily decreased to 3.7 million barrels per day. Recent OPEC estimates suggest it has plunged to 2.8 million barrels.
Iran’s Petroleum Production and Consumption, 2011-2018 (Source: EIA, Difference Group)
Iran’s Petroleum Production and Consumption, 2011-2018 (Source: EIA, Difference Group)
If Iran’s production capacity takes a further hit, that will penalize particularly its biggest importers China, India, South Korea and Turkey.
Since Russia and China were expected to stay behind the Iran nuclear deal, the real question was whether the European powers—Germany, France, the UK, and the EU itself—would defend it. Unsurprisingly, the Trump administration targeted European businesses that did business in and with Iran after the nuclear deal. In June 2019, the EU created a mechanism (INSTEX) that allows European countries to trade with Iran despite US sanctions. But it was too little, too late. Brussels failed to sustain the Iran nuclear deal against Trump’s unilateral moves.
Before 2015, Iran’s economy shrank by 9% two years, due to sanctions. After stabilization, sanctions relief enabled Iran’s oil exports to return to nearly pre-sanctions levels, permitted Tehran to regain access to funds held abroad, boosting 7% overall economic growth in 2016. Foreign energy firms made new investments in the energy sector and major aircraft manufacturers sold Iran’s commercial airlines new passenger aircraft. The relief contributed to the victory of Iran’s President Hassan Rouhani in the 2017 presidential election. Growth broadened to the non-oil sector. Real GDP growth was projected to rise toward 4.5% over the medium-term as financial sector reform was anticipated to take hold.
But then came the Trump U-turn. In May 2018, he had the U.S. withdraw from the nuclear deal, while secondary sanctions drove Iran’s economy into mild recession as major companies exited the country rather than risk being penalized by the US. The value of Iran’s currency declined sharply. Even before the US escalation, Iran’s economy was expected to undergo a second consecutive year of recession and contract by 8.7% in 2019/20. Inflation was estimated to reach 38% annually with mounting fiscal pressures. Economic expansion, which began after the nuclear deal, has been undermined. Neither is stagnation enough for the Trump administration. What the White House is fostering is progressive contraction.
Following the drastic re-escalation, Iran’s economy will have to cope with even more challenging downward risks. And if oil exports were to be curtailed further, the economy could enter into a steeper recession and suffer from high inflation rates. In such a status quo, the challenge of protecting the vulnerable households would put additional pressure on the government finances and potentially the rial. Unfortunately, that may be precisely the White House’s objective.
“The challenges highlight the crucial role of further economic diversification by focusing on non-oil sources of growth and government revenues,” the World Bank stated in a recent update. In reality, economic diversification can only be built on peaceful conditions and political stability, which allow governments to proceed with a medium-term diversification. Such preconditions predate Trump’s Iran policy that has undermined years of international, multilateral diplomacy.
The net effect is the most dangerous escalation in the Middle East in decades and possibly the last nail in the fragile global economic prospects that could cause a synchronized global contraction in the course of 2020.
This article was originally published by the UK-based World Financial Review on January 10, 2020.
By Dan Steinboc, World Financial Review