Iran left to ponder its next move in the Arabian Gulf

Tehran's fractious leadership is locked in a vigorous internal debate over whether to stoke tensions in the Arabian Gulf in response to ever-tightening western sanctions.

Iran's fractious leadership is locked in a vigorous internal debate over whether to stoke tensions in the heavily-militarised Arabian Gulf in response to ever-tightening western sanctions choking its vital oil sector.

Those urging caution clearly have the upper hand – at least for now.

Many Iran experts doubt it will be a "hot summer", despite military posturing and strident rhetoric from Iran and the United States.

Iran, significantly, did not carry out earlier incendiary threats to close the Strait of Hormuz when a slow-burning European Union embargo on Iranian oil imports to the bloc came fully into effect at the beginning of the month.

Nor has Tehran withdrawn from stalemated nuclear negotiations with six world powers, led by the US.

“At this particular moment, given the signals that are coming out of Iran, it doesn’t look like they’re going to push it to a confrontation this summer,” said Gary Sick, an Iran expert at Columbia University in New York.

“On the other hand, they can up the ante very quickly if they decide that’s the way to go,” added Mr Sick, the chief White House aide on Iran during the 1979 Islamic revolution.

The private deliberations in Tehran are reflected in conflicting public statements. Military commanders and hardline
parliamentarians are issuing blustery new threats over the Strait of Hormuz – the jugular vein for global oil exports – while senior Iranian diplomats send conciliatory messages.

The naval commander of Iran’s elite Revolutionary Guards, Ali Fadavi, warned on Saturday that Iran could prevent even “a single drop of oil” passing through the Strait if its security was threatened.

But days earlier, Iran’s US-educated foreign minister, Ali Akbar Salehi, said Tehran had no intention of closing the Strait unless his country is denied access to the Persian Gulf, adding: “I don’t think such a time will ever come”.

Diplomacy was the only way to resolve the nuclear impasse, he said on another occasion.

Tehran's strategy is to keep desultory nuclear talks ticking over until the US elections in November, hoping Barack Obama, the US president, will win a second term. Then, presumably less restrained by Republican and
Israeli pressure, Tehran hopes he can offer it a better deal.

The US and its Western allies also seem content to play a waiting game, relying on the growing pain of sanctions to force an Iranian compromise on its nuclear programme, which Tehran insists is solely peaceful in nature.

What is questionable, however, is how much punishment Iran can passively soak up before November without looking weak at home and abroad.

Iran’s oil exports are estimated to have plummeted by 40 to 50 per cent in the past year because of EU and US sanctions, costing Tehran about US$3.4bn (Dh12.4bn) each month.

“There are folks in Iran who believe some sort of escalation may be needed to remind the Obama administration of the costs of escalating sanctions,” said Farideh Farhi, a Iran expert at the University of Hawaii.

“Keeping them at bay will depend on the Iranian government’s assessment of the extent to which the Obama administration will be willing to show flexibility after the election.

"Since this is occurring in the midst of a fluid political environment, there's no guarantee that Iran's current desire for
diplomacy will last until November," Ms Farhi warned.

Any Iranian retaliation, however, will be calibrated not to trigger devastating American military retaliation but enough to rattle global oil markets.

"Iran will be careful not to provoke the West because, economically and diplomatically, it would be difficult for them to afford any
escalation," Meir Javedanfar, a Tehran-born lecturer on Iranian politics at the Interdisciplinary Centre in Herzliya in Israel, said.

Trita Parsi, a leading Iran expert in the US, agreed Tehran was keen to “de-escalate” tensions but would find it “very hard” not to respond to mounting pressure, especially after the US announced a raft of new sanctions on Thursday. These targeted companies and individuals suspected of involvement in furthering Iran’s nuclear programme or circumventing existing sanctions.

“We will continue to ratchet up the pressure,” David Cohen, the US Treasury’s under secretary for terrorism and financial intelligence, said.

Mr Parsi, author of a new book on Mr Obama's diplomacy with Iran, A Single Roll of the Dice, said: "One could make the argument, as the Europeans have, that the oil embargo was decided six months ago, so it's not an escalation. But you can't make that argument regarding the new round of sanctions."

The latest round of nuclear negotiations, which kicked off in April, is bedevilled by mutual mistrust and demands that the other side make the first concession. The next round of talks is scheduled for 24 July in Istanbul.

“Iran in a sense playing a double game, with military types playing tough while diplomats take a softer line,” Mr Sick said. That was a “perfectly sensible negotiating strategy: to threaten on the one hand and show signs of accommodation on the other”.

But, he added: “At this point Iran seems very much to be sticking to the negotiating track, saying ‘give us a better price and we can talk about it.’”

Equally, apart from Israel, the West is loath for a military showdown.

“The Obama administration is interested in diplomacy because it’s afraid that otherwise the price of oil and gasoline will go up dramatically in an election year,” said Muhammad Sahimi, an Iran expert at the University of Southern California. “Europe is also afraid that Israel will attack Iran, setting the region on fire, so they are also interested in at least the show of diplomacy.”

Mr Sahimi believes Iran is interested in a “real deal” but argues the US has “scuttled the possibility of a breakthrough” by setting the bar too high.

Mr Sick had warned of possible Iranian escalation when the new EU and US sanctions were implemented two weeks ago “if only to raise the price of oil and make life more difficult for the rest of the world”.

Oil prices have risen in the past few weeks but “not as high or fast” as they might have done.

Even so, he would still be surprised if “Iran were to sit back and accept a 40 to 50 per cent loss of their national revenues”. “That’s a very, very hard hit on any country.”

Radically different narratives are simultaneously at play, he added, with the West arguing Iran is suffering pain "beyond endurance", while Tehran apparently believes it can survive the sanctions "without undue effort" until the US elections.
"I really can't tell what the outcome is going to be."