Middle East Regional Instability

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By: Matthew McQuillen
Senior Associate, Merletti Gonzales

Tensions between the West and Iran are on the rise. Should this quarrel heat up further, there could be security implications for international companies working in the Middle East. While the primary objective would most likely be to strike U.S. government, military assets or allies. International companies could possibly become a target of opportunity as well. Even short of a significant escalation, Iran has the will and the capability to send a message to Western Governments, including the U.S., by taking unconventional action to include terrorism and cyber-attacks, against civilians and commercial entities. Iran may not limit itself to striking U.S. interests and allies; Iran believes that striking any entity will put pressure on Washington and its allies.

The January 2, 2020 killing of Iranian Revolutionary Guard Corps (IRGC) General Qassim Soleimani with a U.S. missile strike in Baghdad, is the best example of how this conflict is escalating. Soleimani was the most powerful General in Iran, operating at the highest levels of the Iranian Government. He was involved in planning lethal operations against American troops in Iraq. So, the Americans took the extraordinary decision to kill a high-ranking Iranian Government official. Both sides are taking high risks and this is ratcheting up the confrontation.

Experience shows that Iran believes in retaliation and that it is willing to go after targets from any nation. Tehran has engaged in a wide range of unconventional operations, including terrorism, and it has the tools to conduct such operations. Iran’s intelligence services and the IRGC are capable and they have near global reach. In addition, Iran can call on the services of multiple proxies, including Lebanese Hizballah and several Palestinian groups, who also have wide reach throughout the Middle East. Based on past experience, Soleimani’s death meets Iran’s threshold for special retaliation.

By ways of example, Lebanese Hizballah kidnapped multiple U.S. officials and civilians in Beirut during the 1980s. Many died in captivity. Hizballah also conducted the suicide bombing of the U.S. Marine barracks, the U.S. Embassy, and the French military barracks in Beirut, killing hundreds. In June 1996, Iranian supported terrorists exploded a massive truck bomb outside the Khobar Tower military barracks in Saudi Arabi, killing 19 Americans. In June 2018, France blamed Iranian Intelligence for an advanced bomb plot in Paris (they made several arrests). In October 2018, an Iranian operative was arrested in Denmark for planning an assassination. In early July, Iraqi security expert Hisham al-Hashami, who worked for a U.S. think tank, was assassinated by an Iranian supported militia in Baghdad.

In retaliation for U.S. actions, Iran has also engaged in cyber-attacks against commercial facilities. Iran has targeted financial institutions, a Las Vegas casino, and a dam in New York. They have also cyber-targeted the water supply in Israel. Iran’s cyber capabilities are sophisticated and they regularly deploy them to damage their enemies and to collect intelligence.

Both sides have come perilously close to direct military action in the last two years. In June 2019, the U.S. seriously considered military retaliation after Iran shot down a U.S. military drone. In September 2019 military operations were again considered after Iran was thought to be behind an attack on Saudi oil infrastructure. After the killing of General Soleimani, Iranian supported militias in Iraq fired a barrage of rockets into a U.S. military base. The U.S. has threatened to take action on Iranian gunboats in the Persian Gulf if they continued to hassle U.S. warships. Any of these incidents could have led to military action or war. That both sides have stopped short of such action is certainly a positive and evidence that neither side actively seeks a full-out military conflict. However, misadventure is never far away.

Right now, another flash point is in play. In early July, Iran dispatched four oil tankers to Venezuela in violation of U.S. sanctions that limits the sale of oil. The U.S. vowed that the four tankers would not be allowed to offload the oil. To this end, the U.S. obtained a forfeiture order through the U.S. courts to seize the oil. On August 12th, the U.S. took control of the tankers and 1.116 million barrels of Iranian oil. Undoubtedly the Iranians will respond to some degree.

The Iranian leadership is on the defensive and they blame most of their problems on the Americans. With U.S. economic sanctions biting and the low price of oil, Iran’s economy is in dire straits; leading to the risk of internal instability. The new Iraqi Prime Minister, Mustafa al-Khadami, has clearly decided to rebuild relations with the U.S., putting at risk Iran’s long dominance of Iraq.

More troubling for the Iranian leadership, since June 26th, a series of unexplained explosions and fires have occurred in and around Tehran, cutting off power to areas of the city. Incidents have occurred at an IRGC missile warehouse and the Natanz nuclear facility, which has been linked to their Uranium enrichment program. Kurdish Iranian separatist insurgents have become more active, ambushing Iranian security and military patrols. Naturally, the Iranian leadership attributes these incidents to either the U.S., Israel, or Saudi Arabia. Or perhaps all three.

After mid-July negotiations, Iran and China are on the cusp of a significant security and economic deal. If this comes to pass, the U.S. may be facing an emboldened Iran. Tehran will have a powerful political and military ally, access to Chinese military equipment, and an economic lifeline.

Impact: We can expect tension to be a persistent feature of the relationship between Iran and the U.S. This tension has security implications for international companies working in the Middle East.

The Iranian leadership is on the defensive and under pressure on multiple fronts. They attribute the bulk of their difficulties to the Americans and Israelis. The Americans consider Iran to be expansionist, with designs on much of the region. They also suspect Iran continues to pursue a nuclear weapon.

We can expect this tension to ebb and flow unpredictably, however, the trend is generally up. As Iran looks at its options to push back against the U.S., acting against western assets is a realistic option. Tehran fondly remembers that the 1979 U.S. Embassy hostage crisis in Tehran paralyzed a U.S. President.

It is prudent to consider how to mitigate these risks as Iran and the U.S. continue to confront each other politically, economically, and militarily.

Merletti Gonzales is well seasoned in operating in the Middle East region and can provide a wide array of services from intelligence briefings to comprehensive security programs and associated planning. Contact us today to find out more.